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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 10, 1998
CD Warehouse, Inc.
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
333-15139 73-1504999
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(Commission File Number) (I.R.S. Employer Identification No.)
1204 Sovereign Row, Oklahoma City, OK 73108
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(Address of principal executive offices) (Zip Code)
(405) 949-2422
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(Registrant's telephone, including area code)
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Item 5. Other Events.
On February 10, 1998, the Company activated two separate credit facilities
with Merrill Lynch Business Financial Services Inc. The first credit facility is
in the principal amount of $500,000.00, and is convertible to a 5-year term loan
commencing December 1, 1998. The second facility, also in the principal amount
of $500,000.00, matures on December 31, 1998. Amounts borrowed under both of the
facilities bear interest at a variable rate per annum equal to the sum of 3.10%
plus the 30-Day Commercial Paper Rate (as published in The Wall Street Journal).
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
The following documents are filed as part of this Report:
10.1 WCMA(R) Note, Loan and Security Agreement dated as of December 4,
1997, between CD Warehouse, Inc. and Merrill Lynch Business Financial
Services Inc.
10.2 Term WCMA(R) Loan and Security Agreement dated as of November 28,
1997, between CD Warehouse, Inc. and Merrill Lynch Business Financial
Services Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CD WAREHOUSE, INC.
(Registrant)
Date: March 6, 1998 BY: /s/ Jerry W. Grizzle
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Jerry W. Grizzle,
President and Chief
Executive Officer
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INDEX TO EXHIBITS
Appears at
Sequentially
Exhibit Numbered
Number Description Page
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10.1 WCMA(R)Note, Loan and Security Agreement dated as 5
of December 4, 1997, between CD Warehouse, Inc.
and Merrill Lynch Business Financial Services Inc.
10.2 Term WCMA(R) Loan and Security Agreement dated as of
November 28, 1997, between CD Warehouse, Inc.
and Merrill Lynch Business Financial Services Inc.
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Exhibit 10.1
[LOGO OF MERRILL LYNCH APPEARS HERE] No. 595-07T30
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WCMA(R) NOTE, LOAN AND SECURITY AGREEMENT
WCMA NOTE, LOAN AND SECURITY AGREEMENT NO. 595-07T30 ("Loan Agreement:) dated as
of December 4, 1997, between CD WAREHOUSE, INC., a corporation organized and
existing under the laws of the State of Delaware having its principal office at
1204 Sovereign Row, Oklahoma City, OK 73108 ("Customer") and MERRILL LYNCH
BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the
laws of the State of Delaware having its principal office at 83 West Monroe
Street, Chicago, IL 60603 ("MLBFS").
In accordance with that certain WORKING CAPITAL MANAGEMENT(R) ACCOUNT AGREEMENT
NO. 595-07T30 ("WCMA Agreement") between Customer and MLBFS' affiliate, MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED (MLPF&S"), Customer has subscribed to
the WCMA Program described in the WCMA Agreement. The WCMA Agreement is by this
reference incorporated as a part hereof. In conjunction therewith and as a part
of the WCMA Program, Customer has requested the MLBFS provide, and subject to
the terms and conditions herein set forth MLBFS has agreed to provide, a
commercial line of credit for Customer (the "WCMA Line of Credit").
Accordingly, and in consideration of the premises and of the mutual covenants of
the parties hereto. Customer and MLBFS hereby agrees as follows:
1. DEFINITIONS
(a) Specific Terms. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:
(i) "Account Debtor" shall mean any part who is or may become obligated with
respect to an Account or Chaffel Paper.
(ii) "Activation Date" shall mean the date upon which MLBFS shall cause the WCMA
Line of Credit to be fully activated under MLPF&S' computer system as part of
the WCMA Program.
(iii) "Additional Agreements" shall mean agreements, instruments, documents and
opinions other than this Loan Agreement, whether with or from Customer or any
other party which are contemplated hereby or otherwise reasonably required by
MLBFS in connection herewith, or which evidence the creation, guaranty or
collateralization of any of the Obligations or the granting or perfection of
liens or security interests upon the Collateral or any other collateral for the
Obligations.
(iv) "Bankruptcy Event" shall mean any of the following: (A) a proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt or
receivership law or statute shall be filed or consented to by Customer or any
Guarantor, of (B) any such proceeding shall be filed against Customer or any
Guarantor and shall not be dismissed or withdrawn within sixty (60) days after
filing; or (C) Customer or any Guarantor shall make a general assignment for
the benefit of creditors; or (D) Customer or any Guarantor shall become
insolvent or generally fail to pay or admit in writing its inability to pay its
debts as they become due; (E) Customer or any Guarantor shall be adjudicated a
bankruptcy or insolvent.
(v) "Business Day" shall mean any day other the Saturday, Sunday, federal
holiday or other day on which the New York Stock Exchange is regularly closed.
(vi) "Collateral" shall mean all Accounts, Chattel Paper, Contract Rights,
Inventory, Equipment, Fixtures, General Intangibles, Deposit Accounts, Documents
and Instruments of Customer, howsoever arising whether now owned or existing or
hereafter acquired or arising, and wherever located, together with all parts
thereof (including spare parts), all accessories and accessions thereto, all
books and records (including
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computer records) directly related thereto, all proceeds thereof (including,
without limitation, proceeds in the form of Accounts and Insurance proceeds),
and the additional collateral described in Section 9 (b) hereof.
(vii) "Commitment Expiration Date" shall mean December 28, 1997.
(viii) "Default" shall mean an "Event of Default" as defined in Section 8
hereof, or an event which with the giving of notice, passage of time, or both,
would constitute such an Event of Default.
(ix) "General Funding Conditions" shall mean each of the following conditions
to any WCMA Loan by MLBFS hereunder: (A) no Default shall have occurred and be
continuing or would result from the making of any WCMA Loan hereunder by MLBFS;
(B) there shall not have occurred and be continuing any material adverse change
in the business or financial condition of Customer or any Guarantor; (C) all
representations and warranties of Customer or any Guarantor herein or in any
Additional Agreements shall then be true and correct in all material respects;
(D) MLBFS shall have received this Loan Agreement and all of the Additional
Agreements, duly executed and filed or recorded where applicable, all of which
shall be in form and substance reasonably satisfactory to MLBFS; (E) MLBFS shall
have received evidence reasonably satisfactory to it as to the ownership of the
Collateral and the perfection and priority of MLBFS' liens and security
interests thereon, as well as the ownership of and the perfection and priority
of MLBFS' liens and security interests on any other collateral for the
Obligations furnished pursuant to any of the Additional Agreements; (F) MLBFS
shall have received evidence reasonably satisfactory to it of the insurance
required hereby or by any of the Additional Agreements; and (G) any additional
conditions specified in the "WCMA Line of Credit Approval" letter executed by
MLBFS with respect to the transactions contemplated hereby shall have been met
to the reasonable satisfaction of MLBFS.
(x) "Guarantor" shall mean a person or entity who has either guaranteed or
provided collateral for any or all of the Obligations.
(xi) "Initial Maturity Date" shall mean the first date upon which the WCMA
Line of Credit will expire unless it has been renewed in accordance with the
terms hereof; to wit: December 31, 1998.
(xii) "Interest Rate" shall mean a variable per annum rate of interest equal
to the sum of 3.10% and the 30-Day Commercial Paper Rate. The "30-Day Commercial
Paper Rate" shall mean, as of the date of any determination, the interest rate
from time to time published in the "Money Rates" section of The Wall Street
Journal for 30-day high grade unsecured notes sold through dealers by major
corporations. The Interest Rate will change as of the date of publication in The
Wall Street Journal of a 30-Day Commercial Paper Rate that is different from
that published on the preceding Business Day. In the event that The Wall Street
Journal shall, for any reason, fail or cease to publish the 30-Day Commercial
Paper Rate, MLBFS will choose a reasonably comparable index or source to use as
the basis for the Interest Rate.
(xiii) "Line Fee" shall mean the fee of $2,500.00 payable periodically by
Customer to MLBFS in connection with the WCMA Line of Credit, as provided
herein.
(xiv) "Location of Tangible Collateral" shall mean the address of Customer
set forth at the beginning of this Loan Agreement, together with any other
address or addresses set forth on an exhibit hereto as being a Location of
Tangible Collateral.
(xv) "Maturity Date" shall mean the date of expiration or termination of the
WCMA Line of Credit pursuant to the terms hereof.
(xvi) "Maximum WCMA Line of Credit " shall mean $500,000.00.
(xvii) "Obligations" shall mean all liabilities, indebtedness and other
obligations of Customer to MLBFS, howsoever created, arising or evidenced,
whether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary or joint or several,
and, without limiting the foregoing, shall include interest accruing after the
filing of any petition in bankruptcy, and all present and future liabilities,
indebtedness and obligations of Customer under this Loan Agreement.
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(xviii) "Permitted Liens" shall mean shall mean with respect to the Collateral:
(A) liens for current taxes not delinquent, other non-consensual liens arising
in the ordinary course of business for sums not due, and, if MLBFS' rights to
and interest in the Collateral are not materially and adversely affected
thereby, any such liens for taxes or other non-consensual liens arising in the
ordinary course of business being contested in good faith by appropriate
proceedings; (B) liens in favor of MLBFS; (C) liens which will be discharged
with the proceeds of the initial WCMA Loan; (D) existing liens, if any, upon new
Inventory comprised of new compact discs of Customer and (E) any other liens
expressly permitted in writing by MLBFS.
(xix) "Renewal Year" shall mean and refer to the 12-month period immediately
by following the initial Maturity Date and each 12-month period thereafter.
(xx) "WCMA Account" shall mean and refer to the Working Capital Management
Account of Customer with MLPF&S Identified as Account No. 595-07T30.
(xxi) "WCMA Loan" shall mean each advance made by MLBFS pursuant to this Loan
Agreement.
(b) Other Terms. Except as otherwise defined herein: (i) all terms used in this
Loan Agreement which are defined in the Uniform Commercial Code of Illinois
("UCC") shall have the meanings set forth in the UCC, and (ii) capitalized terms
used herein which are defined in the WCMA Agreement shall have the meanings set
forth in the WCMA Agreement.
2. WCMA PROMISSORY NOTE
FOR VALUE RECEIVED. Customer hereby promised to pay to the order of MLBFS, at
the times and in the manner set forth in this Loan Agreement, or in such other
manner and at such place as MLBFS may hereafter designate in writing, the
following: (a) on the Maturity Date, the aggregate unpaid principal amount of
all WCMA Loans (the "WCMA Loan Balance"); (b) interest at the Interest Rate in
the outstanding WCMA Loan Balance, from and including the date on which the
initial WCMA Loan is made until the date of payment of all WCMA Loans in full;
and (c) on demand, all other sums payable pursuant to this Loan Agreement,
including, but not limited to the periodic Line Fee and any late charges. Except
as otherwise expressly set forth herein, Customer hereby waives presentment,
demand for payment, protest and notice of protest, notice of dishonor, notice of
acceleration, notice of intent to accelerate and all other notices and
formalities in connection with this WCMA Promissory Note and this Loan
Agreement.
3. WCMA LOANS
(a) Activation Date. Provided that: (i) the Commitment Expiration Date shall not
then have occurred, and (ii) Customer shall have subscribed to the WCMA Program
and its subscription to the WCMA Program shall then be in effect, the Activation
Date shall occur on or promptly after the date, following the acceptance of this
Loan Agreement by MLBFS at its office in Chicago, Illinois, upon which each of
the General Funding Conditions shall have been met or satisfied to the
reasonable satisfaction of MLBFS. No activation by MLBFS of the WCMA Line of
Credit for a nominal amount shall be deemed evidence of the satisfaction of any
of the conditions herein set forth, or a waiver of any of the terms or
conditions hereof, Customer hereby authorizes MLBFS to pay out of and charge to
Customer's WCMA Account on the Activation Date any and all amounts necessary to
fully pay off any bank or other financial institution having a lien upon any of
the Collateral other than a Permitted Lien.
(b) WCMA Loans. Subject to the terms and conditions hereof, during the period
from and after the Activation Date to the Maturity Date: (i) MLBFS will make
WCMA Loans to Customer in such amounts as Customer may from time to time request
in accordance with the terms hereof, up to an aggregate outstanding amount not
to exceed the Maximum WCMA Line of Credit, and (ii) Customer may repay any WCMA
Loans in whole or in part at any time without premium or penalty, and request a
re-borrowing of amounts repaid on a revolving basis. Customer may request WCMA
Loans by use of WCMA Checks, FTS, Visa(R) charges, wire transfers, or such other
means of access to the WCMA Line of Credit as may be permitted by MLBFS from
time to time; it being understood that so long as the WCMA Line of Credit shall
be in effect, any charge or
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debit to the WCMA Account which but for the WCMA Line of Credit would under the
terms of the WCMA Agreement result in an overdraft, shall be deemed a request by
Customer for a WCMA Loan.
(c) Conditions of WCMA Loans. Notwithstanding the foregoing, MLBFS shall to be
obligated to make any WCMA Loan, and may without notice refuse to honor any such
request by Customer, if at the time of receipt by MLBFS of Customer's requests;
(i) the making of such WCMA Loan would cause the Maximum WCMA Line of Credit to
be exceeded; or (ii) the Maturity Date shall have occurred, or the WCMA Line of
Credit shall have otherwise been terminated in accordance with the terms hereof;
or (iii) Customer's subscription to the WCMA Program shall have been terminated;
or (iv) an event shall have occurred and be continuing which shall have caused
any of the General Funding Conditions to not then be met or satisfied to the
reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a
time when any one or more of said conditions shall not have been met shall not
in any event be construed as a waiver of said condition or conditions or of any
Default, and shall not prevent MLBFS at any time thereafter while any condition
shall not have been met from refusing to honor any request by Customer for a
WCMA Loan.
(d) Force Majeure. MLBFS shall not be responsible, and shall have no liability
to Customer or any other party for any delay or failure of MLBFS to honor any
request of Customer for a WCMA Loan or any other act or omission of MLBFS,
MLPF&S or any of their affiliates due to or resulting from any system failure,
error or delay in posting of other clerical error, loss of power, fire, Act of
God or other cause beyond the reasonable control of MLBFS, MLPF&S or any of
their affiliates unless directly arising out of the willful wrongful act or
active gross negligence of MLBFS. In no event shall MLBFS be liable to Customer
or any other party for any incidental or consequential damages arising from any
act or omission by MLBFS, MLPF&S or any of their affiliates in connection with
the WCMA Line of Credit or this Loan Agreement.
(e) Interest. The WCMA Loan Balance shall bear interest at the Interest Rate.
Interest shall be computed for the actual number of days elapsed on the basis of
a year consisting of 360 days. Notwithstanding any provision to the contrary in
this Agreement or any of the Additional Agreements, no provision of this
Agreement or any of the Additional Agreements shall require the payment or
permit the collection of any amount in excess of the maximum amount of interest
permitted to be charged by law ("Excess Interest"). If any Excess interest is
provided for, or is adjudicated as being provided for, in this Agreement or any
of the Additional Agreements, then: (a) Customer shall not be obligated to pay
any Excess Interest; and (b) any Excess Interest that MLBFS may have received
hereunder or under any of the Additional Agreements shall, at the option of
MLBFS, be; (i) applied as a credit against the then unpaid balance of the WCMA
Line of Credit, (ii) refunded to the payer thereof, or (iii) any combination of
the forgoing. Except as otherwise provided herein, accrued and unpaid interest
on the WCMA Loan Balance shall be payable monthly on the last Business Day of
each calendar month, commencing with the last Business Day of the calendar month
in which the Activation Date shall occur. Customer hereby irrevocably authorizes
and directs MLPF&S to pay MLBFS such accrued interest from any available free
credit balances in the WCMA Account, and if such available free credit balances
are insufficient to satisfy any interest payment due, to liquidate any
investments in the Money Accounts (other than any investments constituting any
Minimum Money Accounts Balance under the WCMA Directed Reserve program) in an
amount up to the balance of such accrued interest, and pay to MLBFS the
available proceeds on account thereof. If available free credit balances in the
WCMA Account and available proceeds of the Money Accounts are insufficient to
pay the entire balance of accrued interest and Customer otherwise fails to make
such payment when due, MLBFS may, in its sole discretion, make a WCMA Loan in an
amount equal to the balance of such accrued interest and pay the proceeds of
such WCMA Loan to itself on account of such interest. The amount of any such
WCMA Loan will be added to the WCMA Loan Balance. If MLBFS declines to extend a
WCMA Loan to Customer under these circumstances, Customer hereby authorizes and
directs MLPF&S to make all such interest payments to MLBFS from any Minimum
Money Accounts Balance. If there is no Minimum Money Accounts Balance, or it is
insufficient to pay all such interest. MLBFS will invoice Customer for payment
of the balance of the accrued interest, and Customer shall pay such interest as
directed by MLBFS within 5 Business Days of receipt of such invoice.
(f) Payments. All payments required or permitted to be made pursuant to this
Loan Agreement shall be made in lawful money of the Untied States. Unless
otherwise directed by MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customer's WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer
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hereby irrevocably authorizes and directs MLPF&S to apply available free credit
balances in the WCMA Account to the repayment of the WCMA Loan Balance prior to
application for any other purpose. Payments to MLBFS from funds in the WCMA
Account shall be deamed to be made by Customer upon the same basis and schedule
as funds are made available for investment in the Money Accounts in accordance
with the terms of the WCMA Agreement. All funds received by MLBFS from MLPF&S
pursuant to the aforesaid authorization shall be applied by MLBFS to repayment
of the WCMA Loan Balance. The acceptance by or on behalf of MLBFS of a check or
other payment for a lesser amount than shall be due from Customer, regardless of
any endorsement or statement thereon or transmitted therewith shall not be
deemed an accord and satisfaction or anything other than a payment on account,
and MLBFS or anyone acting on behalf or MLBFS may accept such check or other
payment without prejudice to the rights of MLBFS to recover the balance actually
due or to pursue any other remedy under this Loan Agreement or applicable law
for such balance. All checks accepted by or on behalf of MLBFS in connection
with the WCMA Line of Credit are subject to final collection.
(g) Exceeding the Maximum WCMA Line of Credit. In the event that the WCMA Loan
Balance shall at any time exceed the Maximum WCMA Line of Credit, Customer shall
within 1 Business Day of the first to occur of (i) any request or demand of
MLBFS, or (ii) receipt by Customer of a statement from MLPF&S showing a WCMA
Loan Balance in excess of the Maximum WCMA Line of Credit, deposit sufficient
funds into the WCMA Account to reduce the WCMA Loan Balance below the Maximum
WCMA Line of Credit.
(h) Statements. MLPF&S will include in each monthly statement it issues under
the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.
(i) Use of Loan Proceeds; Securities Transactions. The proceeds of each WCMA
Loan shall be used by Customer solely for working capital in the ordinary course
of its business, or, with prior written consent of MLBFS, for other lawful
business purposes of Customer not prohibited hereby. Customer agrees that
under no circumstances will funds borrowed from MLBFS through the WCMA Line of
Credit be used; (i) for personal, family or household purposes of any person
whatsoever, or (ii) to purchase, carry or trade in securities, or repay debt
incurred to purchase, carry or trade in securities, whether in or in connection
with the WCMA Account, another account of Customer with MLPF&S or an account of
Customer at any other broker or dealer in securities.
(j) Renewal at Option of MLBFS; Right of Customer to Terminate. MLBFS may at
any time, in its sole discretion and at its sole option, renew the WCMA Line of
Credit for one or more Renewal Years; it being understood, however, that no such
renewal shall be effective unless set forth in a writing executed by a duly
authorized representative of MLBFS and delivered to Customer. Unless any such
renewal is accompanied by a proposed change in the terms of the WCMA Line of
Credit (other than the extension of the Maturity Date), no such renewal shall
require Customer's approval. Customer shall, however, have the right to
terminate the WCMA Line of Credit at any time upon written notice to MLBFS.
(k) Line Fees. (i) In consideration of the extension of the WCMA Line of Credit
by MLBFS to Customer during the period from the Activation Date to the Initial
Maturity Date, Customer has paid or shall pay the Line Fee to MLBFS. If the
Line Fee has not heretofore been paid by Customer, Customer hereby authorizes
MLBFS, at its option, to either cause the Line Fee to be paid on the Activation
Date with a WCMA Loan, or invoice Customer for such Line Fee (in which event
Customer shall pay said fee within 5 Business Days after receipt of such
invoice). No delay in the Activation Date, howsoever caused, shall entitle
Customer to any rebate or reduction in the Line Fee or to any extension of the
Initial Maturity Date.
(ii) Customer shall pay an additional Line Free for each Renewal Year. In
connection therewith, Customer hereby authorizes MLBFS, at its option, to either
cause each such additional Line Fee to be paid with a WCMA Loan on or at any
time after the first Business Day of such Renewal Year or invoiced to Customer
at such time (in which event Customer shall pay such Line Fee within 5 Business
Days after receipt of such invoice). Each Line Fee shall be deemed fully earned
by MLBFS on the date payable by Customer, and no termination of the WCMA Line of
Credit, howsoever caused, shall entitle Customer to any rebate or refund of any
portion of such Line Fee.
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4. REPRESENTATIONS AND WARRANTIES
Customer represents and warrants to MLBFS that:
(a) Organization and Existence. Customer is a corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware and is
qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary.
(b) Execution, Delivery and Performance. The execution, delivery and
performance by Customer of this Loan Agreement and by Customer and each
Guarantor of such of the Additional Agreements to which it is a party: (i) have
been duly authorized by all requisite action, (ii) do not and will not violate
or conflict with any law or other governmental requirement or any of the
agreements, instruments or documents which formed or govern Customer or any
such Guarantor, and (iii) do not and will not breach or violate any of the
provisions of, and will not result in a default by Customer or any such
Guarantor under, any other agreement, instrument or document to which it is a
party or by which it or its properties are bound.
(c) Notices and Approvals. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by Customer or any
Guarantor of such of this Loan Agreement and the Additional Agreements to which
it is a party.
(d) Enforceability. This Loan Agreement and such of the Additional Agreements
to which Customer or any Guarantor is a party are the respective legal, valid
and binding obligations of Customer and such Guarantor, enforceable against it
or them, as the case may be, in accordance with their respective terms, except
as enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally or by general principles of equity.
(e) Collateral. Except for any Permitted Liens: (i) Customer has good and
marketable title to the Collateral, (ii) none of the Collateral is subject to
any lien, encumbrance of security interest, and (iii) upon the filing of all
Uniform Commercial Code financing statements executed by Customer with respect
to the Collateral in the appropriate jurisdiction(s) and/or the completion of
any other action required by applicable law to perfect its liens and security
interests. MLBFS will have valid and perfected first liens and security
interests upon all the Collateral.
(f) Financial Statements. Except as expressly set forth in Customer's financial
statements, all financial statements of Customer furnished to MLBFS have been
prepared in conformity with generally accepted accounting principles,
consistently applied, are true and correct, and fairly present the financial
condition of it as at such dates and the results of its operations for the
periods then ended; and since the most recent date covered by such financial
statements, there has been no material adverse change in any such financial
condition or operation. All financial statements furnished to MLBFS of any
Guarantor are true and correct and fairly represent such Guarantor's financial
condition as of the date of such financial statements, and since the most recent
date of such financial statements, there has been no material adverse change in
such financial condition.
(g) Litigation. No litigation, arbitration, administrative or governmental
proceedings are pending or, to the knowledge of Customer, threatened against
Customer or any Guarantor, which would, if adversely determined, materially and
adversely affect the liens and security interests of MLBFS hereunder or under
any of the Additional Agreements, the financial condition of Customer or any
such Guarantor or the continued operations of Customer.
(h) Tax Returns. All federal, state and local tax returns, reports and
statements, required to be filed by Customer and each Guarantor have been filed
with the appropriate governmental agencies and all taxes due and payable by
Customer and each Guarantor have been timely paid (except to the extent that any
such failure to file or pay will not materially and adversely affect either the
liens and security interests of MLBFS
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hereunder or under any of the Additional Agreements, the financial condition of
Customer or any Guarantor, or the continued operations of Customer).
(i) Collateral Location. All of the tangible Collateral is located at a
Location of Tangible Collateral.
Each of the foregoing representations and warranties: (i) has been and will be
relied upon as an inducement to MLBFS to provide the WCMA Line of Credit, and
(ii) is continuing and shall be deemed remade by Customer concurrently with each
request for a WCMA Loan.
5. FINANCIAL AND OTHER INFORMATION
Customer shall furnish or cause to be furnished to MLBFS during the term of this
Loan Agreement all of the following:
(a) Annual Financial Statements. Within 120 days after the close of each fiscal
year of Customer, Customer shall furnish or cause to be furnished to MLBFS: (i)
a copy of the annual audited financial statements of Customer, consisting of at
least a balance sheet as of the close of such fiscal year and related statements
of Income, retained earnings and cash flows, certified by its current
independent certified public accountants or other independent certified public
accountants reasonably acceptable to MLBFS, and (ii) the balance sheet of each
individual Guarantor as of said fiscal year-end, certified by such Guarantor.
(b) SEC Reports. Customer shall furnish to MLBFS a copy of each 10-K and 10-Q
Report filed with the SEC not later than 10 days after filing with the SEC.
(c) Interim Financial Statements. Within 45 days after the close of each fiscal
quarter of Customer, Customer shall furnish or cause to be furnished to MLBFS:
(i) its statement of profit and loss for the fiscal quarter then ended, and
(ii) a balance sheet as at the close of such fiscal quarter, all in reasonable
detail and certified by its chief financial officer.
(d) Other Information. Customer shall furnish or cause to be furnished to MLBFS
such other information as MLBFS may from time to time reasonably request
relating to Customer, any Guarantor or the Collateral.
6. OTHER COVENANTS
Customer further covenants and agrees during the term of this Loan Agreement
that:
(a) Financial Records; Inspection. Customer will: (i) maintain at its principal
place of business complete and accurate books and records and maintain all of
its financial records in a manner consistent with the financial statements
heretofore furnished to MLBFS, or prepared on such other basis as may be
approved in writing by MLBFS; and (ii) permit MLBFS or its duly authorized
representatives, upon reasonable notice and at reasonable times, to inspect its
properties (both real and personal), operations, books and records.
(b) Taxes. Customer and each Guarantor will pay when due all taxes, assessments
and other governmental charges howsoever designated and all other liabilities
and obligations, except to the extent that any such failure to pay will not
materially and adversely affect either the liens and security interests of MLBFS
hereunder or under any of the Additional Agreements, the financial condition of
Customer or any Guarantor or the continued operations of Customer.
(c) Compliance With Laws and Agreements. neither Customer nor any Guarantor
will violate any law, regulation or other governmental requirement, any judgment
or order of any court or governmental agency or authority, or any agreement,
instrument or document to which it is a party or by which it is bound, if any
such violation will materially and adversely affect either the liens and
security interests of MLBFS hereunder or under any of the Additional Agreements,
the financial condition of Customer or any Guarantor, or the continued
operations of Customer.
(d) Notification By Customer. Customer shall provide MLBFS with prompt written
notification of: (i) any Default; (ii) any materially adverse change in the
business, financial condition or operations of Customer, and
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(ii) any information which indicates that any financial statements of Customer
or any Guarantor fail in any material respect to present fairly the financial
condition and results of operations purported to be presented in such
statements. Each notification by Customer pursuant hereto shall specify the
event or information causing such notification, and, to the extent applicable,
shall specify the steps being taken to rectify or remedy such event or
information.
(e) Notice of Change. Customer shall give MLBFS not less than 30 days prior
written notice of any change in the name (including any fictitious name) or
principal place of business or residence of Customer or any Guarantor.
(f) Continuity. Except upon the prior written consent of MLBFS, which consent
will not be unreasonably withheld: (i) Customer shall not be a party to any
merger or consolidation with or purchase or otherwise acquire all or
substantially all of the assets of, or any material stock, partnership, joint
venture or other equity interest in, any person or entity, or sell, transfer or
lease all or any substantial part of its assets, if any such action would result
in either. (A) a material change in the principal business, ownership or
control of Customer, or (B) a material adverse change in the financial
condition or operations of Customer, (ii) Customer shall preserve its existence
and good standing in the jurisdictions of establishment and operation, and shall
not operate in any material business substantially different from its business
in effect as of the date of application by Customer for credit from MLBFS: and
(iii) Customer shall not cause or permit any material change in its controlling
ownership.
(g) Notice. Customer shall give to MLBFS written notice on a quarterly basis,
of any newly opened, acquired, sold or closed locations.
7. COLLATERAL
(a) Pledge of Collateral. To secure payment and performance of the Obligations.
Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grants
to MLBFS first lien and security interests in and upon all of the Collateral,
subject only to Permitted Liens.
(b) Liens. Except upon the prior written consent of MLBFS, Customer shall not
create or permit to exist any lien, encumbrance or security interest upon or
with respect to any Collateral now owned or hereafter acquired other than
Permitted Liens.
(c) Performance of Obligations. Customer shall perform all of its obligations
owing on account of or with respect to the Collateral; it being understood that
nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or
otherwise, shall be deemed an assumption by MLBFS of any of Customer's said
obligations.
(d) Sales and Collections. So long as no Event of Default shall have occurred
and be continuing, Customer may in the ordinary course of its business: (i) sell
any Inventory normally held by Customer for sale, (ii) use or consume any
materials and supplies normally held by Customer for use or consumption, and
(iii) collect all of its Accounts. Customer shall take such action with respect
to protection of its inventory and the other Collateral and the collection of
its Accounts as MLBFS may from time to time reasonably request.
(e) Account Schedules. Upon the request of MLBFS, made now or at any reasonable
time or times hereafter, Customer shall deliver to MLBFS, in addition to the
other information required hereunder, a schedule identifying, for each Account
and all Chattel Paper subject to MLBFS' security interests hereunder, each
Account Debtor by name and address and amount, invoice or contract number and
date of each invoice or contract. Customer shall furnish to MLBFS such
additional information with respect to the Collateral, and amounts received by
Customer as proceeds of any of the Collateral, as MLBFS may from time to time
reasonably request.
(f) Alterations and Maintenance. Except upon the prior written consent of
MLBFS. Customer shall not make or permit any material alterations to any
tangible Collateral which might materially reduce or impair its market value or
utility. Customer shall at all times keep the tangible Collateral in good
condition and repair and shall pay or cause to be paid all obligations arising
from the repair and maintenance of such Collateral.
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as well as all obligations with respect to each Location of Tangible Collateral,
except for any such obligations being contested by Customer in good faith by
appropriate proceedings.
(g) Location. Except for movements required in the ordinary course of Customer's
business. Customer shall give MLBFS 30 days' prior written notice of the placing
at or movement of any tangible Collateral to any location other than a Location
of Tangible Collateral. In no event shall Customer cause or permit any material
tangible Collateral to be removed from the United States without the express
prior written consent of MLBFS.
(h) Insurance. Customer shall insure all of the tangible Collateral under a
policy or policies of physical damage insurance providing that losses will be
payable to MLBFS as its interests may appear pursuant to a Lender's Loss Payable
Endorsement and containing such other provisions as may be reasonably required
by MLBFS. Customer shall further provide and maintain a policy or policies of
comprehensive public liability Insurance naming MLBFS as an additional party
insured. Customer shall maintain such other insurance as may be required by law
or is customarily maintained by companies in a similar business or otherwise
reasonably required by MLBFS. All such insurance shall provide that MLBFS will
receive not less than 10 days prior written notice of any cancellation, and
shall otherwise be in form and amount and with an insurer or insurers reasonably
acceptable to MLBFS. Customer shall furnish MLBFS with a copy or certificate of
each such policy or policies and, prior to any expiration or cancellation, each
renewal or replacement thereof.
(i) Event of Loss. Customer shall at its expense promptly repair all repairable
damage to any tangible Collateral. In the event that any tangible Collateral is
damaged beyond repair, lost, totally destroyed or confiscated (an "Event of
Loss") and such Collateral had a value prior to such Event of Loss of
$25,000.000 or more, then, on or before the first to occur of (i) 90 days after
the occurrence of such Event of Loss, or (ii) 10 Business Days after the date on
which either Customer or MLBFS shall receive any proceeds of insurance on
account of such Event of Loss, or any underwriter of insurance on such
Collateral shall advise either Customer or MLBFS that it disclaims liability in
respect of such Event of Loss. Customer shall, at Customer's option, either
replace the Collateral subject to such Event of Loss with comparable Collateral
free of all liens other than Permitted Liens (in which event Customer shall be
entitled to utilize the proceeds of insurance on account of such Event of Loss
for such purpose, and may retain any excess proceeds of such insurance), or
consent to a reduction in the Maximum WCMA Line of Credit in an amount equal to
the actual cash value of such Collateral as determined by either the applicable
insurance company's payment (plus any applicable deductible) or, in absence of
insurance company payment, as reasonably determined by MLBFS. Notwithstanding
the foregoing, if at the time of occurrence of such Event of Loss or any time
thereafter prior to replacement or line reduction, as aforesaid, an Event of
Default shall have occurred and be continuing hereunder, then MLBFS may at its
sole option, exercisable at any time while such Event of Default shall be
continuing, require Customer to either replace such Collateral or, on its own
volition and without the consent of Customer, reduce the Maximum WCMA Line of
Credit, as aforesaid.
(j) Notice of Certain Events. Customer shall give MLBFS immediate notice of any
attachment, lien, judicial process, encumbrance or claim affecting or involving
$25,000.00 or more of the Collateral.
(k) Indemnification. Customer shall indemnify, defend and save MLBFS harmless
from and against any and all claims, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorney's fees and expenses) of any
nature whatsoever which may be asserted against or incurred by MLBFS arising out
of or in any manner occasioned by (i) the ownership, collection, possession, or
use or operation of any Collateral, or (ii) any failure by Customer to perform
any of its obligations hereunder; excluding, however, from said indemnity any
such claims, liabilities, etc. arising directly out of the willful wrongful act
or active gross negligence of MLBFS. This indemnity shall survive the expiration
or termination of this Loan Agreement as to all matters arising or accruing
prior to such expiration or termination.
8. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement:
(a) Failure to Pay. Customer shall fail to pay to MLBFS or deposit into the WCMA
Account when due any amount owing or required to be paid or deposited by
Customer under this Loan Agreement, or shall fail to
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pay when due any other Obligations, and any such failure shall continue for more
than five (5) Business Days after written notice thereof shall have been given
by MLBFS to Customer.
(b) Failure to Perform. Customer or any Guarantor shall default in the
performance or observance of any covenant or agreement on its part to be
performed or observed under this Loan Agreement or any of the Additional
Agreements (not constituting an Event of Default under any other clause of this
Section), and such default shall continue unremedied for ten (10) Business Days
after written notice thereof shall have been given by MLBFS to Customer.
(c) Breach of Warranty. Any representation or warranty made by Customer or any
Guarantor contained in this Loan Agreement or any of the Additional Agreements
shall at any time prove to have been incorrect in any material respect when
made.
(d) Default Under Other Agreement. A default or Event of Default by Customer or
any Guarantor shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed.
(e) Bankruptcy Event. Any Bankruptcy Event shall occur.
(f) Material Impairment. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of full payment or performance
by Customer or any Guarantor of any of their respective liabilities or
obligations under this Loan Agreement or any of the Additional Agreements to
which Customer or such Guarantor is a party has been materially impaired.
(g) Acceleration of Debt to Other Creditors. Any event shall occur which results
in the acceleration of the maturity of any indebtedness of $100,000.00 or more
of Customer or any Guarantor to another creditor under any indenture, agreement,
undertaking, or otherwise.
(h) Seizure or Abuse of Collateral. The Collateral, or any material part
thereof, shall be or become subject to any material abuse or misuse, or any
levy, attachment, seizure or confiscation which is not released within ten (10)
Business Days.
9. REMEDIES
(a) Remedies Upon Default. Upon the occurrence and during the continuance of any
Event of Default, MLBFS may at its sole option do any one or more or all of the
following, at such time and in such order as MLBFS may in its sole discretion
choose:
(i) Termination. MLBFS may without notice terminate the WCMA Line of Credit and
all obligations to provide the WCMA Line of Credit or otherwise extend any
credit to or for the benefit of Customer (it being understood, however, that
upon the occurrence of any Bankruptcy Event the WCMA Line of Credit and all such
obligations shall automatically terminate without any action on the part of
MLBFS); and upon any such termination MLBFS shall be relieved of all such
obligations.
(ii) Acceleration. MLBFS may declare the principal of and interest on the WCMA
Loan Balance, and all other Obligations to be forthwith due and payable,
whereupon all such amounts shall be immediately due and payable, without
presentment, demand for payment, protest and notice of protest, notice of
dishonor, notice of acceleration, notice of intent to accelerate or other notice
or formality of any kind, all of which are hereby expressly waived; provided,
however, that upon the occurrence of any Bankruptcy Event all such principal,
interest and other Obligations shall automatically become due and payable
without any action on the part of MLBFS.
(iii) Exercise Rights of Secured Party. MLBFS may exercise any or all of the
remedies of a secured party under applicable law, including, but not limited to,
the UCC, and any or all of its other rights and remedies under this Loan
Agreement and the Additional Agreements.
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(iv) Possession. MLBFS may require Customer to make the Collateral and the
records pertaining to the Collateral available to MLBFS at a place designated by
MLBFS which is reasonably convenient to Customer, or may take possession of the
Collateral and the records pertaining to the Collateral without the use of any
judicial process and without any prior notice to Customer.
(v) Sale. MLBFS may sell any or all of the Collateral at public or private sale
upon such terms and conditions as MLBFS may reasonably deem proper. MLBFS may
purchase any Collateral at any such public sale. The net proceeds of any such
public or private sale and all other amounts actually collected or received by
MLBFS pursuant hereto, after deducting all costs and expenses incurred at any
time in the collection of the Obligations and in the protection, collection and
sale of the Collateral, will be applied to the payment of the Obligations, with
any remaining proceeds paid to Customer or whoever else may be entitled
thereto, and with Customer and each Guarantor remaining jointly and severally
liable for any amount remaining unpaid after such application.
(vi) Delivery of Cash, Checks, Etc. MLBFS may require Customer to forthwith upon
receipt, transmit and deliver to MLBFS in the form received, all cash, checks,
drafts and other instruments for the payment of money (properly endorsed, where
required, so that such items may be collected by MLBFS) which may be received by
Customer at any time in full or partial payment of any Collateral, and require
that Customer not commingle any such items which may be so received by Customer
with any other of its funds or property but instead hold them separate and apart
and in trust for MLBFS until delivery is made to MLBFS.
(vii) Notification of Account Debtors. MLBFS may notify any Account Debtor that
its Account or Chattel Paper has been assigned to MLBFS and direct such Account
Debtor to make payment directly to MLBFS of all amounts due or becoming due with
respect to such Account or Chattel Paper; and MLBFS may enforce payment and
collect, by legal proceedings or otherwise, such Account or Chattel Paper.
(viii) Control of Collateral. MLBFS may otherwise take control in any lawful
manner of any cash or non-cash items of payment or proceeds of Collateral and of
any rejected, returned, stopped in transit or repossessed goods included in the
Collateral and endorse Customer's name on any item of payment on or proceeds of
the Collateral.
(b) Set-Off. MLBFS shall have the further right upon the occurrence and during
the continuance of an Event of Default to set-off, appropriate and apply toward
payment of any of the Obligations, in such order of application as MLBFS may
from time to time and at any time elect, any cash, credit, deposits, accounts,
securities and any other property of Customer which is in transit to or in the
possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or
affiliate of MLBFS or MLPF&S, including, without limitation, the WCMA Account
and any Money Accounts, and all cash, securities and other financial assets
therein or controlled thereby, and all proceeds thereof. Customer hereby
collaterally assigns and grants to MLBFS a continuing security interest in all
such property as additional Collateral.
(c) Power of Attorney. Effective upon the occurrence and during the continuance
of an Event of Default, Customer hereby irrevocably appoints MLBFS as its
attorney-in-fact, with full power of substitution, in its place and stead and in
its name or in the name of MLBFS, to from time to time at MLBFS' sole discretion
take any action and to execute any instrument which MLBFS may deem necessary or
advisable to accomplish the purposes of this Loan Agreement, including, but not
limited to, to receive, endorse and collect all checks, drafts and other
instruments for the payment of money made payable to Customer included in the
Collateral.
(d) Remedies are Severable and Cumulative. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Additional Agreements, at law or in equity, and any
one or more of such rights and remedies may be exercise simultaneously or
successively.
(e) Notices. To the fullest extent permitted by applicable law, Customer hereby
irrevocably waives and releases MLBFS of and from any and all liabilities and
penalties for failure of MLBFS to comply with any statutory or other requirement
imposed upon MLBFS relating to notices of sale, holding of sale or reporting of
any sale, and Customer waives all rights of redemption or reinstatement from any
such sale. Any notices
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required under applicable law shall be reasonably and properly given to Customer
if given by any of the methods provided herein at least 5 Business Days prior to
taking action. MLBFS shall have the right to postpone or adjourn any sale or
other disposition of Collateral at any time without giving notice of any such
postponed or adjourned date. In the event MLBFS seeks to take possession of any
or all of the Collateral by court process, customer further irrevocably waives
to the fullest extent permitted by law any bounds and any surety or security
relating thereto required by any stature, court rule or otherwise as an
incident to such possession and any demand for possession prior to the
commencement of any suit or action.
10. MISCELLANEOUS
(a) Non-waiver. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement or any of the Additional
Agreements shall operate as a waiver thereof, and no single or partial exercise
of any such right, power or remedy shall preclude any other or further exercise
thereof, or the exercise of any other right, power or remedy. Neither any
waiver of any provision of this Loan Agreement or any of the Additional
Agreements, not any consent to any departure by Customer therefrom, shall be
effective unless the same shall be in writing and signed by MLBFS. Any waiver
of any provision of this Loan Agreement or any of the Additional Agreements and
any consent to any departure by Customer from the terms of this Loan Agreement
or any of the Additional Agreements shall be effective only in the specific
instance and for the specific purpose for which given. Except as otherwise
expressly provided herein, no notice to or demand on Customer shall in any case
entitle Customer to any other or further notice or demand in similar or other
circumstances.
(b) Disclosure. Customer hereby irrevocably authorizes MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other
any and all financial and other information about Customer. In connection with
said authorization, the parties recognize that in order to provide a WCMA Line
of Credit certain information about Customer is required to be made available on
a computer network accessible by certain affiliates of MLBFS, including MLPF&S.
(c) Communications. All notices and other communications required or permitted
hereunder shall be in writing, and shall be either delivered personally, mailed
by postage prepaid certified mail or sent by express overnight courier or by
facsimile. Such notices and communications shall be deemed to be given on the
date of personal delivery, facsimile transmission or actual delivery of
certified mail, or one Business Day after delivery to an express overnight
courier. Unless otherwise specified in a notice sent or delivered in
accordance with the terms hereof, notices and other communications in writing
shall be given to the parties hereto at their respective addresses set forth at
the beginning of this Loan Agreement, or, in the case of facsimile transmission,
to the parties at their respective regular facsimile telephone number.
(d) Costs, Expenses and Taxes. Customer shall upon demand pay or reimburse MLBFS
for; (i) all Uniform Commercial Code filing and search fees and expenses
incurred by MLBFS in connection with the verification, perfection or
preservation of MLBFS' rights hereunder or in the Collateral or any other
collateral for the Obligations; (ii) any and all stamp, transfer and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery and/or recording of this Loan Agreement or any of the Additional
Agreements; and (iii) all reasonable fees and out-of-pocket expense (including,
but not limited to reasonable fees and expenses of outside counsel) incurred by
MLBFS in connection with the collection of any sum payable hereunder or under
any of the Additional Agreements not paid when due, the enforcement of this Loan
Agreement or any of the Additional Agreements and the protection of MLBFS rights
hereunder or thereunder, excluding, however, salaries and normal overhead
attributable to MLBFS employees. The obligations of Customer under this
paragraph shall survive the expiration or termination of this Loan Agreement and
the discharge of the other Obligations.
(e) Right to Perform Obligations. If Customer shall fail to do any act or thing
which it has covenanted to do under this Loan Agreement or any representation or
warranty on the part of Customer contained in this Loan Agreement shall be
breached, MLBFS may, in its sole discretion, after 5 days written notice is sent
to Customer (or such lesser notice, including no notice, as is reasonable under
the circumstances), do the same or cause it to be done or remedy any such
breach, and may expend its funds for such purpose. Any and all reasonable
amounts so expended by MLBFS shall be-repayable to MLBFS by Customer upon
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demand, with interest at the Interest Rate during the period from and including
the date funds are so expended by MLBFS to the date of repayment, and all such
amounts shall be additional Obligations. The payment or performance by MLBFS of
any of Customer's obligations hereunder shall not relieve Customer of said
obligations or of the consequences of having failed to pay or perform the same,
and shall not waive or be deemed a cure of any Default.
(f) Late Charge. Any payment required to be made by Customer pursuant to this
Loan Agreement not paid within ten (10) days of the applicable due date shall be
subject to a late charge in an amount equal to the lesser of: (i) 5% of the
overdue amount, or (ii) the maximum amount permitted by applicable law. Such
late charge shall be payable on demand, or, without demand, may in the sole
discretion of MLBFS be paid by a WCMA Loan and added to the WCMA Loan Balance in
the same manner as provided herein for accrued interest.
(g) Further Assurances. Customer agrees to do such further acts and things and
to execute and deliver to MLBFS such additional agreements, instruments and
documents as MLBFS may reasonably require or deem advisable to effectuate the
purposes of this Loan Agreement or any of the Additional Agreements, or to
establish, perfect and maintain MLBFS' security interests and liens upon the
Collateral, including, but not limited to: (i) executing financing statements or
amendments thereto when and as reasonably requested by MLBFS; and (ii) if in the
reasonable judgment of MLBFS it is required by local law, causing the owners
and/or mortgagees of the real property on which any Collateral may be located to
execute and deliver to MLBFS waivers or subordinations reasonably satisfactory
to MLBFS with respect to any rights in such Collateral.
(h) Binding Effect. This Loan Agreement and the Additional Agreements shall be
binding upon, and shall inure to the benefit of MLBFS, Customer and their
respective successors and assigns. Customer shall not assign any of its rights
or delegate any of its obligations under this Loan Agreement or any of the
Additional Agreements without the prior written consent of MLBFS. Unless
otherwise expressly agreed to in a writing signed by MLBFS, no such consent
shall in any event relieve Customer of any of its obligations under this Loan
Agreement or the Additional Agreements.
(i) Headings. Captions and section and paragraph headings in this Loan Agreement
are inserted only as a matter of convenience, and shall not affect the
interpretation hereof.
(j) Governing Law. This Loan Agreement, and, unless otherwise expressly provided
therein, each of the Additional Agreements, shall be governed in all respects by
the laws of the State of Illinois.
(k) Severability of Provisions. Whenever possible, each provision of this Loan
Agreement and the Additional Agreements shall be interpreted in such manner as
to be effective and valid under applicable law. Any provision of this Loan
Agreement or any of the Additional Agreements, which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
the remaining provisions of this Loan Agreement and the Additional Agreements or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(l) Term. This Loan Agreement shall become effective on the date accepted by
MLBFS at its office in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as the WCMA Line of Credit shall be
in effect or there shall be any Obligations outstanding.
(m) Counterparts. This Loan Agreement may be executed in one or more
counterparts which, when taken together, constitute one and the same agreement.
(n) Jurisdiction; Waiver. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS
BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION, IN
ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT AND THE ADDITIONAL
AGREEMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER JURISDICTION WHERE
CUSTOMER OR ANY COLLATERAL FOR THE OBLIGATIONS MAY BE LOCATED. CUSTOMER CONSENTS
TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN ANY STATE OR FEDERAL COURT
IN THE COUNTY OF COOK FOR SUCH PURPOSES, AND CUSTOMER WAIVES ANY AND ALL RIGHTS
TO
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CONTEST SAID JURISDICTION AND VENUE, CUSTOMER FURTHER WAIVES ANY RIGHTS TO
COMMENCE ANY ACTION AGAINST MLBFS IN ANY JURISDICTION EXCEPT IN THE COUNTY OF
COOK AND STATE OF ILLINOIS, MLBFS AND CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY
AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
BROUGHT BY EITHER OF THE PARTIES AGAINST THE OTHER PARTY WITH RESPECT TO ANY
MATTER RELATING TO, ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE WCMA LINE OF
CREDIT, THIS LOAN AGREEMENT, ANY ADDITIONAL AGREEMENTS AND/OR ANY OF THE
TRANSACTIONS WHICH ARE THE SUBJECT MATTER OF THIS LOAN AGREEMENT.
(o) Integration. THIS LOAN AGREEMENT, TOGETHER WITH THE ADDITIONAL AGREEMENTS,
CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS THE FULL AND FINAL AGREEMENT
BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN AGREEMENTS OR PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS OF THE PARTIES, WITHOUT LIMITING THE FOREGOING, CUSTOMER ACKNOWLEDGES
THAT EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN: (I) NO PROMISE OR COMMITMENT
HAS BEEN MADE TO IT BY MLBFS, MLPF&S OR ANY OF THEIR RESPECTIVE EMPLOYEES,
AGENTS OR REPRESENTATIVES TO EXTEND THE AVAILABILITY OF THE WCMA LINE OF CREDIT
OR THE MATURITY DATE, OR TO INCREASE THE MAXIMUM WCMA LINE OF CREDIT, OR
OTHERWISE EXTEND ANY OTHER CREDIT TO CUSTOMER OR ANY OTHER PARTY; (II) NO
PURPORTED EXTENSION OF THE MATURITY DATE, INCREASE IN THE MAXIMUM WCMA LINE OF
CREDIT OR OTHER EXTENSION OR AGREEMENT TO EXTEND CREDIT SHALL BE VALID OR
BINDING UNLESS EXPRESSLY SET FORTH IN A WRITTEN INSTRUMENT SIGNED BY MLBFS; AND
(III) THIS LOAN AGREEMENT SUPERSEDES AND REPLACES ANY AND ALL PROPOSALS, LETTERS
OF INTENT AND APPROVAL AND COMMITMENT LETTERS FROM MLBFS TO CUSTOMER, NONE OF
WHICH SHALL BE CONSIDERED AN ADDITIONAL AGREEMENT. NO AMENDMENT OR MODIFICATION
OF THIS AGREEMENT OR ANY OF THE ADDITIONAL AGREEMENTS TO WHICH CUSTOMER IS A
PARTY SHALL BE EFFECTIVE UNLESS IN A WRITING SIGNED BY BOTH MLBFS AND CUSTOMER.
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IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year
first above written.
CD WAREHOUSE, INC.
By: /s/ Jerry W. Grizzle /s/ Doyle Motley
------------------------------------------------------------------------
Signature (1) Signature (2)
JERRY GRIZZLE DOYLE MOTLEY
------------------------------------------------------------------------
Printed Name Printed Name
CEO CFO
------------------------------------------------------------------------
Title Title
STATE OF Oklahoma }
----------------
}SS.
COUNTY OF Oklahoma }
----------------
On the 18 day of December, 1997, before me personally came Jerry Grizzle known
to me to be the individual who executed the foregoing instrument, and who
being sworn by me, did depose and say that the individual is an officer of the
Customer herein, and that the individual executed the foregoing instrument for
the Customer herein, and that the individual had the authority to sign the same,
and acknowledged that the individual executed the same as the act and deed of
said Customer.
/s/ Clay Miller
------------------------------
Notary Public
(NOTARIAL SEAL)
Accepted at Chicago, Illinois:
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
By: /s/ Kathy Thomas
-------------------------------
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Exhibit 10.2
[LOGO OF MERRILL LYNCH APPEARS HERE] No. 9712340201
================================================================================
TERM WCMA(R) LOAN AND SECURITY AGREEMENT
TERM WCMA LOAN AND SECURITY AGREEMENT NO. 9712340201 ("Loan Agreement") dated as
of November 28, 1997, between CD WAREHOUSE, INC., a corporation organized and
existing under the laws of the State of Oklahoma having its principal office at
1204 Sovereign Row, Oklahoma City, OK 73108 ("Customer"), and MERRILL LYNCH
BUSINESS FINANCIAL SERVICES INC., a corporation organized and existing under the
laws of the State of Delaware having its principal office at 33 West Monroe
Street, Chicago, IL 60803 ("MLBFS").
In accordance with that certain WORKING CAPITAL MANAGEMENT(R) ACCOUNT AGREEMENT
NO. 595-07T31 ("WCMA Agreement") between Customer and MLBFS' affiliate, MERRILL
LYNCH, PIERCE, FENNER & SMITH INCORPORATED ("MLPF&S"), Customer has subscribed
to the WCMA Program described in the WCMA Agreement. The WCMA Agreement is by
this reference incorporated as a part hereof. In conjunction therewith, Customer
has requested that MLBFS make the Term WCMA Loan hereinafter described (the
"Loan"); and, subject to the terms and conditions herein set forth, MLBFS has
agreed to make the Loan to Customer.
The Loan combines the equivalent of five successive one-year term loans, each
equal to that portion of the Loan which will be fully amortized in the ensuing
year, with a line of credit under the WCMA Program ("WCMA Line of Credit") equal
to that portion of the Loan which will not be amortized in the ensuing year.
Subject to the terms thereof, each year after the initial funding there will be
an additional funding on account of the term portion of the Loan, with the
proceeds deposited into Customer's WCMA Account concurrently with a
corresponding reduction in the Maximum WCMA Line of Credit.
This structure provides Customer with substantially the same initial funding and
loan amortization as a conventional term loan. However, unlike most conventional
term loans, it permits both a prepayment in whole or in part at any time without
penalty, and, subject to the terms and conditions herein set forth, a
reborrowing on a revolving basis of any such amounts prepaid on account of the
WCMA Line of Credit portion of the Loan. The structure of the Loan therefore
enables Customer at its option to use any free cash balances that it may have
from time to time to reduce interest expense on the line of credit portion of
the Loan without impairing its working capital.
Accordingly, and in consideration of the premises and of the mutual covenant of
the parties hereto, Customer and MLBFS hereby agree as follows:
Article 1. DEFINITIONS
1.1 Specific Terms. In addition to terms defined elsewhere in this Loan
Agreement, when used herein the following terms shall have the following
meanings:
(a) "Account Debtor" shall mean any party who is or may become obligated with
respect to an Account or Chattel Paper.
(b) "Additional Agreements" shall mean all agreements, instruments, documents
and opinions other than this Loan Agreement, whether with or from Customer or
any other party, which are contemplated hereby or otherwise reasonably required
by MLBFS in connection herewith, or which evidence the creation, guaranty or
collateralization of any of the Obligations or the granting or perfection of
liens or security interests upon the Collateral or any other collateral for the
Obligations, and shall include, without limitation, the Term WCMA Note.
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(c) "Bankruptcy Event" shall mean any of the following; (i) a proceeding under
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt or
receivership law or statute shall be filed or consented to by Customer or any
Guarantor; or (ii) any such proceeding shall be filed against Customer or any
Guarantor and shall not be dismissed or withdrawn within sixty (60) days after
filing; or (iii) Customer or any Guarantor shall make a general assignment for
the benefit of creditors; or (iv) Customer or any Guarantor shall become
insolvent or generally fail to pay or admit in writing its inability to pay its
debts as they become due; or (v) Customer or any Guarantor shall be adjudicated
a bankrupt or insolvent.
(d) "Business Day" shall mean any day other than a Saturday, Sunday, federal
holiday or other day on which the New York Stock Exchange is regularly closed.
(e) "Closing Date" shall mean the date upon which all conditions precedent to
MLBFS' obligation to make the first advance on account of the Loan shall have
been met to the satisfaction of MLBFS.
(f) "Collateral" shall mean all Accounts, Chattel Paper, Contract Rights,
Inventory, Equipment, Fixtures, General Intangibles, Deposit Accounts, Documents
and Instruments of Customer, howsoever arising, whether now owned or existing or
hereafter acquiring or arising, and wherever indicated; together with all books
and records (including computer records) directly related thereto, all proceeds
thereof (including, without limitation, proceeds in the form of Accounts and
insurance proceeds), and the additional collateral described in Section 4.6 (b)
hereof.
(g) "Commitment Expiration Date" shall mean December 28, 1997.
(h) "Commitment Fee" shall mean a fee of $5,000.00 due to MLBFS in connection
with this Loan Agreement.
(i) "Conversion Date" shall mean November 30, 1998.
(j) "Default" shall mean an "Event of Default" as defined in Section 4.5 hereof,
or an event which with the giving of notice, passage of time, or both, would
constitute such an Event of Default.
(k) "General Funding Conditions" shall mean each of the following conditions to
any loan or advance by MLBFS hereunder; (i) no Default shall have occurred and
be continuing or would result from the making of such loan or advance hereunder
by MLBFS; (ii) there shall not have occurred and be continuing any material
adverse change in the business or financial condition of Customer or any
Guarantor; (iii) all representations and warranties of Customer or any Guarantor
herein or in any Additional Agreements shall then be true and correct in all
material respects; (iv) MLBFS shall have received this Loan Agreement and all
Additional Agreements, duly executed and filed or recorded where applicable, all
of which shall be in form and substance reasonably satisfactory to MLBFS; (v)
the Commitment Fee shall have been paid in full; (vi) MLBFS shall have received,
as and to the extent applicable, copies of invoices, bills of sale, loan payoff
letters and/or other evidence reasonably satisfactory to it that the proceeds of
the Loan will satisfy the Loan Purpose; (vii) MLBFS shall have received evidence
reasonably satisfactory to it as to the ownership of the Collateral and the
perfection and priority of MLBFS' liens and security interests thereon, as well
as the ownership of and the perfection and priority of MLBFS' liens and security
interests on any other collateral for the Obligations furnished pursuant to any
of the Additional Agreements; (viii) MLBFS shall have received evidence
reasonably satisfactory to it of the insurance required hereby or by any of the
Additional Agreements; and (ix) any additional conditions specified in the "Term
WCMA Approval" letter executed by MLBFS with respect to the transactions
contemplated hereby shall have been met to the reasonable satisfaction of MLBFS.
(l) "Guarantor" shall mean a person or entity who has either guaranteed or
provided collateral for any or all of the Obligations.
(m) "Interest Rate" shall have the meaning set forth in the Term WCMA Note.
(n) "Loan Amount" shall mean an amount equal to the lesser for (i) 100% of the
aggregate cost to Customer of satisfying or fulfilling the Loan Purpose, (ii)
the principal balance of the Loan outstanding on the Conversion Date, or (iii)
$500,000.00.
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(o) "Loan Purpose" shall mean the purpose for which the proceeds of the Loan
will be used; to wit; to finance new company owned store opening costs.
(p) "Location of Tangible Collateral" shall mean the address of Customer set
forth at the beginning of this Loan Agreement, together with any other address
or addresses set forth on an exhibit hereto as being a Location of Tangible
Collateral.
(q) "Maximum WCMA Line of Credit" shall mean the maximum aggregate line of
credit which MLBFS will extend to Customer subject to the terms and conditions
hereof, as the same shall be reduced from time to time in accordance with
the terms hereof.
(r) "Obligations" shall mean all liabilities, Indebtedness and other
obligations of Customer to MLBFS, howsoever created, arising or evidenced,
wether now existing or hereafter arising, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary or joint or several,
and without limiting the forgoing, shall include interest accruing after the
filing of any petition in bankruptcy, and all present and future liabilities,
indebtedness and obligations of Customer under this Loan Agreement and the Term
WCMA Note.
(s) "Permitted Liens" shall mean with respect to the Collateral; (i) liens for
current taxes not delinquent, other non-consensual liens arising in the ordinary
course of business for sums not due, and if MLBFS' rights to and interest in the
Collateral are not materially and adversely affected thereby, any such liens for
taxes or other non-consensual liens arising in the ordinary course of business
being contested in good faith by appropriate proceedings; (ii) liens in favor of
MLBFS; (iii) liens which will be discharged with the proceeds of the Loan; (iv)
existing liens, if any, upon new inventory comprised of new compact discs of
Customer; and (v) any other liens expressly permitted writing by MLBFS.
(t) "Term WCMA Note" shall mean and refer to the Term, WCMA Note executed by
Customer and dated as of the date hereof which incorporates both a WCMA Note
evidencing amounts owing on account of the WCMA Line of Credit portion of the
Loan, and a Term Note evidencing amounts owing on account of the term portion of
the Loan.
(u) "WCMA" Account" shall mean and refer to the Working Capital Management
Account of Customer with MLPF&S identified as WCMA Account No. 595-07T31.
(v) "WCMA Loan" shall mean advance made by MLBFS pursuant to the WCMA Line of
Credit.
(w) "WCMA Loan Balance" shall mean an amount equal to the aggregate unpaid
principal balance of all WCMA Loans.
1.2 Other Terms. Except as otherwise defined herein; (i) all terms used in this
Loan Agreement which are defined in the Uniform Commercial Code of Illinois
("UCC") shall have the meanings set forth in the UCC, and (ii) capitalized terms
used herein which are defined in the WCMA Agreement shall have the meanings set
forth in the WCMA Agreement.
Article II. THE LOAN
2.1 Commitment. Subject to the terms and conditions hereof, MLBFS hereby agrees
to make the Loan to Customer, and Customer hereby agrees to borrow the Loan from
MLBFS. The Loan will be funded in up to five separate advances as requested by
Customer prior to the Conversion Date provided, however, that the Customer shall
not request funding of, and MLBFS shall not be obligated to fund, any advances
on account of the Loan in an amount less than $100,000.00. Unless otherwise
hereafter agreed by MLBFS, each such advance will be disbursed either directly
to the applicable third party or parties on account of the Loan Purpose or to
reimburse Customer for amounts directly expended by it; all as directed by
Customer in an Advance Certificate to be executed and delivered to MLBFS prior
to the date of funding.
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<PAGE>
2.2 Operation of Loan.
(a) Term WCMA Note. The Loan will be evidenced by and shall be repayable in
accordance with the terms of the Term WCMA Note and this Loan Agreement. The
Term WCMA Note combines two promissory notes, one evidencing the term portion of
the Loan (the "Term Note") and the other evidencing the WCMA Line of Credit
portion of the Loan (the "WCMA Note"). The balance owing by Customer on account
of the Loan at any time shall be an amount equal to the sum of the then
outstanding balances under the WCMA Note and the Term Note included in the Term
WCMA Note. The Term WCMA Note is hereby incorporated as a part hereof.
(b) Term Note Principal. The principal balance owing under the Term Note at any
time shall be an amount equal to the unpaid portion of the amount funded from
time to time on account of the Term Note, as hereinafter provided. So long as
there shall be any moneys owing by Customer to MLBFS hereunder or there shall be
a WCMA Line of Credit, no reduction in the unpaid principal balance of the Term
Note to zero shall be deemed a payment of the Term Note in full or an
extinguishment of any of the obligations of Customer thereunder or hereunder.
(c) Term Note Funding. All advances on account of the Loan funded prior to the
Conversion Date will be funded out of and evidenced by the Term Note. On or
about the Conversion Date, an amount equal to four-fifths of the Loan Amount
will be paid to MLBFS out of the WCMA Line of Credit and applied on account of
the outstanding principal balance of the Term Note; leaving a principal balance
of the Term Note equal to one-fifth of the Loan Amount. Subject to the terms
hereof, the Term Note will be funded again by MLBFS in four subsequent annual
installments, each equal to one-fifth of the Loan Amount. Such installments will
be funded on a date chosen by MLBFS in its sole discretion which will be on or
within two weeks before or after each subsequent anniversary of the Conversion
Date (each, a "Subsequent Funding Date"). Each Term Note funding after the first
shall be deposited into Customer's WCMA Account.
(d) Activation of WCMA Line. On the Conversion Date, MLBFS will activate and
make available as an integral part of the Loan a WCMA Line of Credit equal to
four-fifths of the Loan Amount, all of which will be immediately disbursed to
MLBFS on account of the then Term Note principal balance, as aforesaid.
(e) Subsequent Fundings. On the first Subsequent Funding Date, concurrently with
MLBFS' funding of an additional installment of the debt evidenced by the Term
Note into the WCMA Account, the Maximum WCMA Line of Credit will be reduced to
an amount equal to three-fifths of the Loan Amount. On the second Subsequent
Funding Date, the Maximum WCMA Line of Credit will be reduced to an amount equal
to two-fifths of the Loan Amount; and on the third Subsequent Funding Date the
Maximum WCMA Line of Credit will be reduced to an amount equal to one-fifth of
the Loan Amount.
(f) WCMA Maturity Date. On the fourth Subsequent Funding Date (the "WCMA
Maturity Date"), the WCMA Line of Credit will be terminated and the WCMA
Account, at the option of Customer, will either be converted to a WCMA Cash
Account (subject to any requirements of MLPF&S) or terminated.
2.3 Conditions of MLBFS' Obligation. The Closing Date and MLBFS' obligation to
make each advance on account of the Loan prior to the Conversion Date are
subject to the prior fulfillment of each of the following conditions: (a) MLBFS
shall have received a written request from Customer that an advance on account
of the Loan be funded in accordance with the terms hereof, together with a
written direction from Customer as to the method of payment and payee(s) of the
proceeds of such advance, which request and direction shall have been received
by MLBFS not less than two Business Days prior to any requested funding date;
(b) the Conversion Date shall not then have occurred; and (c) each of the
General Funding Conditions shall then have been met or satisfied to the
reasonable satisfaction of MLBFS.
2.4 Conditions of Subsequent Fundings. The obligation of MLBFS to fund
installments of the term portion of the Loan on any Subsequent Funding Date
shall be subject to each of the conditions specified in Section 2.3(c) hereof
being met at such date, and the further condition that all payments due under
the Term Note on
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<PAGE>
or prior to any Subsequent Funding Date shall have been paid in full; provided,
however, that notwithstanding the failure of any such conditions to have been
met, MLBFS may in its sole discretion fund such installment and/or any other
installments, and no such funding shall constitute a waiver by MLBFS of any of
its rights hereunder or under any of the Additional Agreements. Without
limiting the foregoing, it is understood that no funding by MLBFS of any sum
hereunder while a Default shall have occurred and is continuing shall under any
circumstances be deemed a waiver by MLBFS of such Default, or a waiver of any of
MLBFS' rights hereunder.
2.5 Acknowledgments of Customer. Customer acknowledges, covenants and agrees
that:
(a) Payment of WCMA Interest; Additional Deposits. Under the terms of this Loan
Agreement, interest accrued on amounts outstanding on the WCMA Line of Credit
each month will, subject to the terms hereof, ordinarily be paid from the
proceeds of a borrowing of an additional sum under the WCMA Line of Credit.
Because all or substantially all of the Maximum WCMA Line of Credit will
ordinarily be drawn on the Conversion Date, Customer agrees that it will,
without demand, invoicing or the request of MLBFS, from tine to time make
sufficient deposits into the WCMA Account in order to assure that the Maximum
WCMA Line of Credit is not exceeded. Installments of principal and interest
under the Term Note shall be paid directly to MLBFS in accordance with the terms
of the Term Note.
(b) Additional Interest Charges. SUBJECT TO THE TERMS HEREOF, ON EACH
SUBSEQUENT FUNDING DATE MLBFS WILL DEPOSIT THE AMOUNT FUNDED INTO THE WCMA
ACCOUNT. DUE TO POSSIBLE DELAYS IN POSTING AS WELL AS CERTAIN DELAYS IN
RECOGNITION OF DEPOSITS INHERENT IN THE WCMA PROGRAM, CUSTOMER WILL NOT RECEIVE
CREDIT FOR THE AMOUNT DEPOSITED FOR UP TO SEVERAL DAYS THEREAFTER, RESULTING IN
AN INTEREST CHARGE FOR THAT PERIOD OF TIME ACCRUING AND CHARGED IN THE WCMA
ACCOUNT. ON THE OTHER HAND, BECAUSE MLBFS BORROWS ALL OR SUBSTANTIALLY ALL OF
THE FUNDS THAT IT LENDS ON THE DATE OF FUNDING, IT MUST CHARGE INTEREST ON THE
AMOUNT FUNDED ON EACH SUBSEQUENT FUNDING DATE FROM THE DATE OF ITS DEPOSIT INTO
THE WCMA ACCOUNT, WHETHER OR NOT SUCH DEPOSIT IS IMMEDIATELY RECOGNIZED. THE
TIMING DIFFERENCES BETWEEN THE DATE OF DEPOSIT AND DATE OF RECOGNITION OF THE
DEPOSIT IN THE WCMA ACCOUNT WILL THEREFORE RESULT IN EXTRA INTEREST CHARGES TO
CUSTOMER, WHICH CUSTOMER ACKNOWLEDGES ARE AN ADDITIONAL COST OF THE LOAN AND
HEREBY UNCONDITIONALLY AGREES TO PAY.
2.6 Commitment Fee. In consideration of the agreement by MLBFS to extend the
Loan to Customer in accordance with and subject to the terms hereof, Customer
has paid or shall, on or before the Closing Date pay, the Commitment Fee to
MLBFS. Customer acknowledges and agrees that the Commitment Fee has been
fully earned by MLBFS, and that it will not under any circumstances be
refundable.
Article III. THE WCMA LINE OF CREDIT
3.1 WCMA Note.
All amounts owing under the WCMA Line of Credit shall be deemed owing under and
evidenced by the WCMA Note included in the Term WCMA Note.
3.2 WCMA Loans.
(a) Loan Commitment and Requests. Subject to the Terms and conditions hereof;
(i) on the Conversion Date, MLBFS will make a WCMA Loan to Customer in an amount
equal to the Maximum WCMA Line of Credit, the entire proceeds of which will be
disbursed to MLBFS on account of the Term Note, as aforesaid; and (ii) during
the period from and after the Conversion Date to the WCMA Maturity Date; (x)
Customer may repay said WCMA Loan and any other WCMA Loans in whole or in part
at any time without premium or penalty, and request a re-borrowing of amounts
repaid on a revolving basis, and (y) MLBFS will make such additional WCMA Loans
as customer may from time to time request in accordance with the terms hereof.
Customer may request WCMA Loans by use of WCMA Checks, FTS, Visa(R) charges,
wire transfers, or such
<PAGE>
other means of access to the WCMA Line of Credit as may be permitted by MLBFS
from time to time; it being understood that so long as the WCMA Line of Credit
shall be in effect, any charge or debit to the WCMA Account which but for the
WCMA Line of Credit would under the terms of the WCMA Agreement result in an
overdraft, shall be deemed a request by Customer for a WCMA Loan.
(b) Conditions of WCMA Loans. Notwithstanding the foregoing, MLBFS shall not be
obligated to make any WCMA Loan, and may without notice refuse to honor any such
request by Customer, if at the time of receipt by MLBFS of Customer's request:
(i) the making of such WCMA Loan would cause the Maximum WCMA Line of Credit to
be exceeded; or (ii) the Maturity Date shall have occurred, or the WCMA Line of
Credit shall have otherwise been terminated in accordance with the terms hereof;
or (iii) an event shall have occurred and be continuing which shall have caused
any of the General Funding Conditions to not then be met or satisfied to the
reasonable satisfaction of MLBFS. The making by MLBFS of any WCMA Loan at a time
when any one or more of said conditions shall not have been met shall not in any
event be construed as a waiver of said condition or conditions or of any
Default, and shall not prevent MLBFS at any time thereafter while any condition
shall not have been met from refusing to honor any request by Customer for a
WCMA Loan.
(c) Force Majeure. MLBFS shall not be responsible, and shall have no liability
to Customer or any other party, for any delay or failure of MLBFS to honor any
request of Customer for a WCMA Loan or any other act or omission of MLBFS,
MLPF&S or any of their affiliates due to or resulting from any system failure,
error or delay in posting or other clerical error, loss of power, fire, Act of
God or other cause beyond the reasonable control of MLBFS, MLPF&S or any of
their affiliates unless directly arising out of the willful wrongful act or
active gross negligence of MLBFS. In no event shall MLBFS be liable to Customer
or any other party for any incidental or consequential damages arising from any
act or omission by MLBFS, MLPF&S or any of their affiliates in connection with
WCMA Line of Credit or this Loan Agreement.
(d) Interest. The WCMA Loan Balance shall bear interest at the Interest Rate.
Interest shall be computed for the actual number of days elapsed on the basis of
a year consisting of 360 days. Except as otherwise provided herein, accrued and
unpaid interest on the WCMA Loan Balance shall be payable monthly on the last
Business Day of each calendar month, commencing with the last Business Day of
the calendar month in which the Conversion Date shall occur. Customer hereby
irrevocably authorizes and directs MLPF&S to pay MLBFS such accrued interest
from any available free credit balances in the WCMA Account, and if such
available free credit balances are insufficient to satisfy any interest payment
due, to liquidate any investments in the Money Accounts (other than any
investments constituting any Minimum Money Accounts Balance under the WCMA
Directed Reserve program) in an amount up to the balance of such accrued
interest, and pay to MLBFS the available proceeds on account thereof. If
available free credit balances in the accrued interest, and Customer otherwise
fails to make such payment when due, MLBFS may, in its sole discretion, make
WCMA Loan in an amount equal to the balance of such accrued interest and pay the
proceeds of such WCMA Loan to itself on account of such interest. The amount of
any such WCMA Loan will be added to the WCMA Loan Balance. If MLBFS declines to
extend a WCMA Loan to Customer under these circumstances, Customer hereby
authorizes and directs MLPF&S to make all such interest payments to MLBFS
from any Minimum Money Accounts Balance. If there is no Minimum Money Accounts
Balance, or it is insufficient to pay all such interest, MLBFS will invoice
Customer for payment of the balance of the accrued interest, and Customer shall
pay such interest as directed by MLBFS within 5 Business Days of receipt of such
invoice.
(e) Payments. All payments required or permitted to be made pursuant to this
Loan Agreement shall be made in lawful money of the United States. Unless
otherwise directed by MLBFS, payments on account of the WCMA Loan Balance may be
made by the delivery of checks (other than WCMA Checks), or by means of FTS or
wire transfer of funds (other than funds from the WCMA Line of Credit) to MLPF&S
for credit to Customer's WCMA Account. Notwithstanding anything in the WCMA
Agreement to the contrary, Customer hereby irrevocably authorizes and directs
MLPF&S to apply available free credit balances in the WCMA Account to the
repayment of the WCMA Loan Balance prior to application for any other purpose.
Payments to MLBFS from funds in the WCMA Account shall be deemed to be made by
Customer upon the same basis and schedule as funds are made available for
investment in the Money Accounts in accordance with the terms of the WCMA
Agreement. The acceptance by or on behalf of MLBFS of a check or other payment
for a lesser amount than shall be due from Customer, regardless of any
endorsement or statement thereon or
<PAGE>
transmitted therewith, shall not be deemed an accord and satisfaction or
anything other than a payment on account, and MLBFS or anyone acting on behalf
of MLBFS may accept such check or other payment without prejudice to the rights
of MLBFS to recover the balance actually due or to pursue any other remedy under
this Loan Agreement or applicable law for such balance. All checks accepted by
or on behalf of MLBFS in connection with the Loan and WCMA Line of Credit are
subject to final collection.
(f) Exceeding the Maximum WCMA Line of Credit. In the event that the WCMA Loan
Balance shall at any time exceed the Maximum WCMA Line of Credit, Customer shall
within 1 Business Day of the first to occur of (i) any request or demand of
MLBFS, or (ii) receipt by Customer of a statement from MLPF&S showing a WCMA
Loan Balance in excess of the Maximum WCMA Line of Credit, deposit sufficient
funds into the WCMA Account to reduce the WCMA Loan Balance below the Maximum
WCMA Line of Credit.
(g) Statements. MLPF&S will include in each monthly statement it issues under
the WCMA Program information with respect to WCMA Loans and the WCMA Loan
Balance. Any questions that Customer may have with respect to such information
should be directed to MLBFS; and any questions with respect to any other matter
in such statements or about or affecting the WCMA Program should be directed to
MLPF&S.
Article IV. GENERAL PROVISIONS
4.1 Representations and Warranties.
Customer represents and warrants to MLBFS that:
(a) Organization and Existence. Customer is a corporation, duly organized and
validly existing in good standing under the laws of the State of Delaware and is
qualified to do business and in good standing in each other state where the
nature of its business or the property owned by it make such qualification
necessary.
(b) Execution, Delivery and Performance. The execution, delivery and performance
by Customer of this Loan Agreement and by Customer and each Guarantor of such of
the Additional Agreements to which it is a party; (i) have been duly authorized
by all requisite action, (ii) do not and will not violate or conflict with any
law or other governmental requirement, or any of the agreements, instruments or
documents which formed or govern Customer or any such Guarantor, and (iii) do
not and will not breach or violate any of the provisions of, and will not result
in default by Customer or any such Guarantor under, any other agreement,
instrument or document to which it is a party or by which it or its properties
are bound.
(c) Notices and Approvals. Except as may have been given or obtained, no notice
to or consent or approval of any governmental body or authority or other third
party whatsoever (including, without limitation, any other creditor) is required
in connection with the execution, delivery or performance by Customer or any
Guarantor of such of this Loan Agreement, the Term WCMA Note and the other
Additional Agreements to which it is a party.
(d) Enforceability. This Loan Agreement, the Term WCMA Note and such of the
other Additional Agreements to which Customer or any Guarantor is a party are
the respective legal, valid and binding obligations of Customer and such
Guarantor, enforceable against it or them as the case may be, in accordance with
their respective terms, except as enforceability may be limited by bankruptcy
and other similar laws affecting the rights of creditors generally or by general
principals of equity.
(e) Collateral. Except for any Permitted Liens: (i) Customer has good and
marketable title to the Collateral, (ii) none of the Collateral is subject to
any lien, encumbrance or security interest, and (iii) upon the filing of all
Uniform Commercial Code financing statements executed by Customer with respect
to the Collateral in the appropriate jurisdiction(s) and/or the completion of
any other action required by applicable law to perfect its liens and security
interests, MLBFS will have valid and perfected first liens and security
interests upon all of the Collateral.
(f) Financial Statements. Except as expressly set forth in Customer's financial
statements, all financial statements of Customer furnished to MLBFS have been
prepared in conformity with generally accepted
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<PAGE>
accounting principles, consistently applied, are true and correct, and fairly
present the financial condition of it as at such dates and the results of its
operations for the periods then ended; and since the most recent date covered by
such financial statements, there has been no material adverse change in any such
financial condition or operation. All financial statements furnished to MLBFS of
any Guarantor are true and correct and fairly represent such Guarantor's
financial condition as of the date of such financial statements, and since the
most recent date of such financial statements, there has been no material
adverse change in such financial condition.
(g) Litigation. No litigation, arbitration, administrative or governmental
proceedings are pending or, to the knowledge of Customer, threatened against
Customer or any Guarantor, which would, if adversely determined, materially and
adversely affect the liens and security interests of MLBFS hereunder or under
any of the Additional Agreements, the financial condition of Customer or any
such Guarantor or the continued operations of Customer.
(h) Tax Returns. All federal, state and local tax returns, reports and
statements required to be filed by Customer and each Guarantor have been filed
with the appropriate governmental agencies and all taxes due and payable by
Customer and each Guarantor have been timely paid (except that any such failure
to file or pay will not materially and adversely affect either the liens and
security interests of MLBFS hereunder or under any of the Additional Agreements,
the financial condition of Customer or any Guarantor, or the continued
operations of Customer).
(i) Collateral Location. All of the tangible Collateral is located at a
Location of Tangible Collateral.
Each of the foregoing representations and warranties: (i) has been and will be
relied upon as an inducement to MLBFS to make the Loan, and (ii) is continuing
and shall be deemed remade by Customer on the Closing Date, on the date of
funding of each additional advance on account of the Loan, on the Conversion
Date, on each Subsequent Funding Date and concurrently with each request for a
WCMA Loan.
4.2 Financial and Other Information.
Customer shall furnish or cause to be furnished to MLBFS during the term of this
Loan Agreement all of the following:
(a) Annual Financial Statements. Within 120 days after the close of each fiscal
year of Customer, Customer shall furnish or cause to be furnished to MLBFS: (i)
a copy of the annual audited financial statements of Customer, consisting of at
least a balance sheet as at the close of such fiscal year and related statements
of income, retained earnings and cash flows, certified by its current
independent certified public accountants or other independent certified public
accountants reasonably acceptable to MLBFS, and (ii) the balance sheet of each
individual Guarantor as of said fiscal year-end, certified by such Guarantor.
(b) SEC Reports. Customer shall furnish to MLBFS a copy of each 10-K and 10-Q
report filed with the SEC not later than 10 days after filing with the SEC.
(c) Interim Financial Statements. Within 45 days after the close of each fiscal
quarter of Customer, Customer shall furnish or cause to be furnished to MLBFS:
(i) its statement of profit and loss for the fiscal quarter then ended, and (ii)
a balance sheet as at the close of such fiscal quarter, all in reasonable detail
and certified by its chief financial officer.
(d) Other Information. Customer shall furnish or cause to be furnished to MLBFS
such other information as MLBFS may from time to time reasonably request
relating to Customer, any Guarantor or the Collateral.
4.3 Other Covenants. Customer further covenants and agrees during the term of
this Loan Agreement that:
(a) Financial Records; Inspection. Customer will: (i) maintain at its principal
place of business complete and accurate books and records, and maintain all of
its financial records in a manner consistent with the financial statements
heretofore furnished to MLBFS, or prepared on such other basis as may be
approved in
<PAGE>
writing by MLBFS; and (ii) permit MLBFS or its duly authorized representatives,
upon reasonable notice and at reasonable times, to inspect its properties (both
real and personal), operations, books and records.
(b) Taxes. Customer and each Guarantor will pay when due all taxes, assessments,
and other governmental charges, howsoever designated, and all other liabilities
and obligations, except to the extent that any such failure to pay will not
materially and adversely affect either the liens and security interests of MLBFS
hereunder or under any of the Additional Agreements, the financial condition of
Customer or any Guarantor or the continued operations of Customer.
(c) Compliance With Laws and Agreements. Neither Customer nor any Guarantor will
violate any law, regulation or other governmental requirement, any judgment or
order of any court or governmental agency or authority, or any agreement,
instrument or document to which it is a party or by which it is bound, if any
such violation will materially and adversely affect either the liens and
security interests of MLBFS hereunder or under any of the Additional Agreements,
the financial condition of Customer or any Guarantor, or the continued
operations of Customer.
(d) Use of Loan Proceeds; Securities Transactions. The proceeds of the Loan
(including the initial WCMA Loan) shall be used by Customer solely for the Loan
Purpose, or, with the prior written consent of MLBFS, for other lawful business
purposes of Customer not prohibited hereby. The proceeds of each WCMA Loan other
than the initial WCMA Loan shall be used by Customer solely for working capital
in the ordinary course of Customer's business, or, with the prior written
consent of MLBFS, for other lawful business purposes of Customer not prohibited
hereby. Customer agrees that under no circumstances will the Loan or funds
borrowed from MLBFS through the Term WCMA Line of Credit be used: (i) for
personal, family or household purposes of any person whatsoever, or (ii) to
purchase, carry or trade in securities, or repay debt incurred to purchase,
carry or trade in securities, whether in or in connection with the WCMA Account,
another account of Customer with MLBF&S or an account of Customer at any other
broker or dealer in securities.
(e) Notification By Customer. Customer shall provide MLBFS with prompt written
notification of: (i) any Default; (ii) any materially adverse change in the
business, financial condition or operations of Customer; and (iii) any
information which indicates that any financial statements of Customer or any
Guarantor fail in any material respect to present fairly the financial condition
and results of operations purported to be presented in such statements. Each
notification by Customer pursuant hereto shall specify the event or information
causing such notification, and, to the extent applicable, shall specify the
steps being taken to rectify or remedy such event or information.
(f) Notice of Change. Customer shall give MLBFS not less than 30 days prior
written notice of any change in the name (including any fictitious name) or
principal place of business or residence of Customer or any Guarantor.
(g) Continuity. Except upon the prior written consent of MLBFS, which consent
will not be unreasonably withheld: (i) Customer shall not be a party to any
merger or consolidation with, or purchase or otherwise acquire all or
substantially all of the assets of, or any material stock, partnership, joint
venture or other equity interest in, any person or entity, or sell, transfer or
lease all or any substantial part of its assets, if any such action would result
in either: (A) a material change in the principal business, ownership or control
of Customer, or (B) a material adverse change in the financial condition or
operations of Customer; (ii) Customer shall preserve its existence and good
standing in the jurisdictions or establishment and operation, and shall not
operate in any material business substantially different from their respective
business in effect as of the date of application by Customer for credit from
MLBFS; and (iii) Customer shall not cause or permit any material change in its
controlling ownership.
(h) Notice. Customer shall give MLBFS written notice, on a quarterly basis, of
any newly opened, acquired, sold or closed locations.
-9-
<PAGE>
4.4 Collateral
(a) Pledge of Collateral. To secure payment and performance of the Obligations,
Customer hereby pledges, assigns, transfers and sets over to MLBFS, and grants
to MLBFS first liens and security interests in and upon all of the Collateral,
subject only to Permitted Liens.
(b) Liens. Except upon the prior written consent of MLBFS, Customer shall not
create or permit to exist any lien, encumbrance or security interest upon or
with respect to any Collateral now owned or hereafter acquired other than
Permitted Liens.
(c) Performance of Obligations. Customer shall perform all of its obligations
owing on account of or with respect to the Collateral; it being understood that
nothing herein, and no action or inaction by MLBFS, under this Loan Agreement or
otherwise, shall be deemed an assumption by MLBFS of any of Customer's said
obligations.
(d) Sales and Collections. So long as no Event of Default shall have occurred
and be continuing, Customer may in the ordinary course of its business: (i) sell
any Inventory normally held by Customer for sale, (ii) use or consume any
materials and supplies normally held by Customer for use or consumption, and
(iii) collect all of its Accounts. Customer shall take such action with respect
to protection of its inventory and the other Collateral and the collection of
its Accounts as MLBFS may from time to time reasonably request.
(e) Account Schedules. Upon the request of MLBFS, made now or at any reasonable
time or times hereafter, Customer shall deliver to MLBFS, in addition to the
other information required hereunder, a schedule identifying, for each Account
and all Chattel Paper subject to MLBFS' security interests hereunder, each
Account Debtor by name and address and amount, invoice or contract number and
date of each invoice or contract. Customer shall furnish to MLBFS such
additional information with respect to the Collateral, and amounts received by
Customer as proceeds of any of the Collateral as MLBFS may from time to time
reasonably request.
(f) Alterations and Maintenance. Except upon the prior written consent of
MLBFS, Customer shall not make or permit any material alterations to any
tangible Collateral which might materially reduce or impair its market value or
utility. Customer shall at all times keep the tangible Collateral in good
condition and repair and shall pay or cause to be paid all obligations arising
from the repair and maintenance of such Collateral, as well as all obligations
with respect to each Location of Tangible Collateral, except for any such
obligations being contested by Customer in good faith by appropriate
proceedings.
(g) Location. Except for movements required in the ordinary course of Customer's
business, Customer shall give MLBFS 30 days' prior written notice of the placing
at or movement of any tangible Collateral to any location other than a Location
of Tangible Collateral. In no event shall Customer cause or permit any material
tangible Collateral to be removed from the United States without the express
prior written consent of MLBFS.
(h) Insurance. Customer shall insure all of the tangible Collateral under a
policy or policies of physical damage insurance providing that losses will be
payable to MLBFS as its interests may appear pursuant to a Lender's Loss Payable
Endorsement and containing such other provisions as may be reasonably required
by MLBFS. Customer shall further provide and maintain a policy or policies of
comprehensive public liability insurance naming MLBFS as an additional party
insured. Customer shall maintain such other insurance as may be required by law
or is customarily maintained by companies in a similar business or otherwise
reasonably required by MLBFS. All such insurance shall provide that MLBFS will
receive not less than 10 days prior written notice of any cancellation, and
shall otherwise be in form and amount and with an insurer or insurers reasonably
acceptable to MLBFS. Customer shall furnish MLBFS with a copy or certificate of
each such policy or policies and, prior to any expiration or cancellation, each
renewal or replacement thereof.
(i) Event of Loss. Customer shall at its expense promptly repair all repairable
damage to any tangible Collateral. In the event that any tangible Collateral is
damaged beyond repair, lost, totally destroyed or confiscated (an "Event of
Loss") and such Collateral had a value prior to such Event of Loss of $25,000.00
or more, then, on or before the first to occur of (i) 90 days after the
occurrence of such Event of Loss, or (ii)
-10-
<PAGE>
Business Days after the date on which either Customer or MLBFS shall receive any
proceeds of insurance on account of such Event of Loss or any underwriter of
insurance on such Collateral shall advise either Customer or MLBFS that it
disclaims liability in respect of such Event of Loss, Customer shall, at
Customer's option, either replace the Collateral subject to such Event of Loss
with comparable Collateral free of all liens other than Permitted Liens (in
which event Customer shall be entitled to utilize the proceeds of insurance on
account of such Event of Loss for such purpose, and may retain any excess
proceeds of such insurance), or prepay the Term Loan by an amount equal to the
actual cash value of such Collateral as determined by either the insurance
company's payment (plus any applicable deductible) or, in absence of insurance
company payment, as reasonably determined by MLBFS; it being further understood
that if such actual cash value is in excess of the balance then outstanding
under the Term Loan, any excess shall be deposited into the WCMA Account
concurrently with a like reduction in the Maximum WCMA Line of Credit.
Notwithstanding the foregoing, if at the time of occurrence of such Event of
Loss or any time thereafter prior to replacement or line reduction, as
aforesaid, an Event of Default shall have occurred and be continuing hereunder,
then MLBFS may at its sole option, exercisable at any time while such Event of
Default shall be continuing, require Customer to either replace such Collateral
or prepay the Term Loan and/or reduce the Maximum WCMA Line of Credit, as
aforesaid. Any partial prepayment of the Term Loan shall be applied to
installments due in inverse order of maturity.
(j) Notice of Certain Events. Customer shall give MLBFS immediate notice of any
attachment, lien, judicial process, encumbrance or claim affecting or involving
$25,000.00 or more of the Collateral.
(k) Indemnification. Customer shall indemnify, defend and save MLBFS harmless
from and against any and all claims, liabilities, losses, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses) of any
nature whatsoever which may be asserted against or incurred by MLBFS arising out
of or in any manner occasioned by (i) the ownership, collection, possession, use
or operation of any Collateral, or (ii) any failure by Customer to perform any
of its obligations hereunder; excluding, however, from said indemnity any such
claims, liabilities, etc. arising directly out of the willful wrongful act or
active gross negligence of MLBFS. This indemnity shall survive the expiration or
termination of this Loan Agreement as to all matters arising or accruing prior
to such expiration or termination.
4.5 Events of Default.
The occurrence of any of the following events shall constitute an "Event of
Default" under this Loan Agreement:
(a) Failure to Pay. Customer shall fail to MLBFS or deposit into the WCMA
Account when due any amount owing or required to be paid or deposited by
Customer under this Loan Agreement or the Term WCMA Note, or shall fail to pay
when due any other Obligations, and any such failure shall continue for more
than five (5) Business Days after written notice thereof shall have been given
by MLBFS to Customer.
(b) Failure to Perform. Customer or any Guarantor shall default in the
performance or observance of any covenant or agreement on its part to be
performed or observed under this Loan Agreement, the Term WCMA Note or any of
the other Additional Agreements (not constituting an Event of Default under any
other clause of this Section), and such default shall continue unremedied for
ten (10) Business Days after written notice thereof shall have been given by
MLBFS to Customer.
(c) Breach of Warranty. Any representation or warranty made by Customer or any
Guarantor contained in this Loan Agreement, the Term WCMA Note or any of the
other Additional Agreements shall at any time prove to have been incorrect in
any material respect when made.
(d) Default Under Other Agreement. A default or Event of Default by Customer or
any Guarantor shall occur under the terms of any other agreement, instrument or
document with or intended for the benefit of MLBFS, MLPF&S or any of their
affiliates, and any required notice shall have been given and required passage
of time shall have elapsed.
(e) Bankruptcy Event. Any Bankruptcy Event shall occur.
<PAGE>
(f) Material Impairment. Any event shall occur which shall reasonably cause
MLBFS to in good faith believe that the prospect of full payment of performance
by Customer or any Guarantor of any of their respective liabilities or
obligations under this Loan Agreement, the Term WCMA Note of any of the other
Additional Agreements to which Customer or such Guarantor is a party has been
materially impaired.
(g) Acceleration of Debt to Other Creditors. Any event shall occur which results
in the acceleration of the maturity of any indebtedness of $100,000 or more of
Customer or any Guarantor to another creditor under any indenture, agreement,
undertaking, or otherwise
(h) Seizure or Abuse of Collateral. The Collateral, or any material part
thereof, shall be or become subject to any material abuse or misuse, ordinary
levy, attachment, seizure or confiscation which is not released within ten (10)
Business Days.
4.6 Remedies.
(a) Remedies Upon Default. Upon the occurrence and during the continuance of any
Event of Default, MLBFS may at its sole option do any one or more or all of the
following, at such time and in such order as MLBFS may in its sole discretion
choose:
(i) Termination. MLBFS may without notice terminate its obligation to make any
further advances on account of the Loan (if any portion of the Loan has not then
been funded),), or fund any further amount on account of the Term WCMA Note or
make or continue to make the WCMA Line of Credit available to Customer, or
otherwise extend any credit to or for the benefit of Customer (it being
understood, however, that upon the occurrence of any Bankruptcy Event the WCMA
Line of Credit and all such obligations shall automatically terminate without
any action on the part of MLBFS); and upon any such termination MLBFS shall be
relieved of all such obligations.
(ii) Acceleration. MLBFS may declare the principal of and interest on the Term
Note and WCMA Note included in the Term WCMA Note, and all other Obligations to
be forthwith due and payable, whereupon all such amounts shall be immediately
due and payable, without presentment, demand for payment, protest and notice of
protest, notice of dishonor, notice of acceleration, notice of intent to
accelerate or other notice of formality of any kind, all of which are hereby
expressly waived; provided, however, that upon the occurrence of any Bankruptcy
Event all such principal, interest and other Obligations shall automatically
become due and payable without any action on the part of MLBFS.
(iii) Exercise Rights of Secured Party. MLBFS may exercise any of all of the
remedies of a secured party under applicable law, including, but not limited to,
the UCC, and any or all of its other rights and remedies under this Loan
Agreement and the Additional Agreements.
(iv) Possession. MLBFS may require Customer to make the Collateral and the
records pertaining to the Collateral available to MLBFS at a place designated by
MLBFS which is reasonably convenient to Customer, or may take possession of the
Collateral and the records pertaining to the Collateral without the use of any
judicial process and without any prior notice to Customer.
(v) Sale. MLBFS may sell any or all of the Collateral at public or private sale
upon such terms and conditions as MLBFS may reasonably deem proper. MLBFS may
purchase any Collateral at any such public sale. The net proceeds of any such
public or private sale and all other amounts actually collected or received by
MLBFS pursuant hereto, after deducting all costs and expenses incurred at any
time in the collection of the Obligations and in the protection, collection and
sale of the Collateral, will be applied to the payment of the Obligations, with
any remaining proceeds paid to Customer or whoever else may be entitled thereto,
and with Customer and each Guarantor remaining jointly and severally liable for
any amount remaining unpaid after such application.
(vi) Delivery of Cash, Checks, Etc. MLBFS may require Customer to forthwith on
receipt, transmit and deliver to MLBFS in the form received, all cash, checks,
drafts and other instruments for the payment of money (properly endorsed, where
required, so that such items may be collected by MLBFS) which may be received by
Customer at any time in full or partial payment of any Collateral, and require
that Customer not
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<PAGE>
commingle any such items which may be so received by Customer with any other of
its funds or property but instead hold them separate and apart and in trust for
MLBFS until delivery is made to MLBFS.
(vii) Notification of Account Debtors. MLBFS may notify any Account Debtor that
its Account or Chattel Paper has been assigned to MLBFS and direct such Account
Debtor to make payment directly to MLBFS of all amounts due or becoming due
with respect to such Account or Chattel Paper and MLBFS may enforce payment and
collect, by legal proceedings or otherwise, such Account or Chattel Paper.
(viii) Control of Collateral. MLBFS may otherwise take control in any lawful
means of any cash or non-cash items or payment or proceeds of Collateral and of
any rejected, returned, stopped in transit or repossessed goods included in the
Collateral and endorse Customer's name on any item of payment on or proceeds of
the Collateral.
(b) Set-Off. MLBFS shall have the further right upon the occurrence and during
the continuance of an Event of Default to set-off, appropriate and apply toward
payment of any of the Obligations, in such order of application as MLBFS may
from time to time and at any time elect, any cash, credit, deposits, accounts,
securities and any other property of Customer which is in transit to or in the
possession, custody or control of MLBFS, MLPF&S or any agent, bailee, or
affiliate of MLBFS or MLPF&S, including, without limitation, all securities
accounts with MLPF&S and all cash and securities and other financial assets
therein of controlled thereby, and all proceeds thereof. Customer hereby
collaterally assigns and grants to MLBFS a continuing security interest in all
such property as additional Collateral.
(c) Power of Attorney. Effective upon the occurrence during the continuance of
an Event of Default, Customer hereby irrevocably appoints MLBFS as its
attorney-in-fact, with full power of substitution. In its place and stead and
in its name or in the name of MLBFS, to from time to time, is MLBFS' sole
discretion take any action and to execute any instrument which MLBFS may deem
necessary or advisable to accomplish the purposes of this Loan Agreement,
including, but not limited to, to receive, endorse and collect all checks,
drafts and other instruments for the payment of money made payable to Customer
included in the Collateral.
(d) Remedies are Severable and Cumulative. All rights and remedies of MLBFS
herein are severable and cumulative and in addition to all other rights and
remedies available in the Term, WCMA Note, the other Additional Agreements, at
law or in equity, and any one or more of such right and remedies may be
exercised simultaneously or successively.
(e) Notices. To the fullest extent permitted by applicable law, Customer hereby
irrevocably waives and releases MLBFS of and from any and all liabilities and
penalties for failure of MLBFS to comply with any statutory or other requirement
imposed upon MLBFS relating to notices of sale, holding of sale or reporting of
any sale, and Customer waives all rights of redemption or reinstatement from any
such sale. Any notices required under applicable law shall be reasonably and
properly given to Customer if given by any of the methods provided herein at
least 5 Business Days prior to taking action. MLBFS shall have the right to
postpone or adjourn any sale or other disposition of Collateral at any time
without giving notice of any such postponed or adjourned date. In the event
MLBFS seeks to take possession of any and all of the Collateral by court
process, Customer further irrevocably waives to the fullest extent permitted by
law any bonds and any surety or security relating thereto required by any
statute, court rule or otherwise as an incident to such possession, and any
demand for possession prior to the commencement of any suit or action.
4.7 Miscellaneous.
(a) Non-Waiver. No failure or delay on the part of MLBFS in exercising any
right, power or remedy pursuant to this Loan Agreement, the Term WCMA Note or
any of the other Additional Agreements shall operate as a waiver thereof, and
no single or partial exercise of any such right, power or remedy shall preclude
any other or further exercise thereof, or the exercise of any other right, power
or remedy. Neither any waiver or any provision of this Loan Agreement, the Term
WCMA Note or any of the other Additional Agreements, nor any consent to any
departure by Customer therefrom, shall be effective unless the same shall be in
writing and signed by MLBFS. Any waiver of any provision of this Loan Agreement,
the Term WCMA Note or any of the other Additional Agreements and any consent to
any departure by Customer from the terms thereof shall be
<PAGE>
effective only in the specific instance and for the specific purpose for which
given. Except as otherwise expressly provided herein, no notice to or demand on
Customer shall in any case entitle Customer to any other or further notice or
demand in similar or other circumstances.
(b) Disclosure. Customer hereby irrevocably authorizes MLBFS and each of its
affiliates, including without limitation MLPF&S, to at any time (whether or not
an Event of Default shall have occurred) obtain from and disclose to each other
any and all financial and other information about Customer.
(c) Communications. All notices and other communications required or permitted
hereunder or in connection with any of the Additional Agreements shall be in
writing, and shall be either delivered personally, mailed by postage prepaid
certified mail or sent by express overnight courier or by facsimile. Such
notices and communications shall be deemed to be given on the date of personal
delivery, facsimile transmission or actual delivery of certified mail, or one
Business Day after delivery to an express overnight courier. Unless otherwise
specified in a notice sent or delivered in accordance with the terms hereof,
notices and other communications in writing shall be given to the parties hereto
at their respective addresses set forth at the beginning of this Loan Agreement,
or, in the case of facsimile transmission, to the parties at their respective
regular facsimile telephone number.
(d) Costs, Expenses and Taxes. Customer shall upon demand pay or reimburse
MLBFS for: (i) all Uniform Commercial Code and other filing and search fees and
expenses incurred by MLBFS in connection with the verification, perfection or
preservation of MLBFS' rights hereunder or in the Collateral or any other
collateral for the Obligations; (ii) any and all stamp, transfer and other taxes
and fees payable or determined to be payable in connection with the execution,
delivery and/or recording of this Loan Agreement or any of the Additional
Agreements: and (iii) all reasonable fees and out-of-pocket expenses (including,
but not limited to, reasonable fees and expenses of outside counsel) incurred by
MLBFS in connection on with the collection of any sum payable hereunder or under
any of the Additional Agreements not paid when due, the enforcement of this Loan
Agreement or any of the Additional Agreements and the protection of MLBFS'
rights hereunder or thereunder, excluding, however, salaries and normal overhead
attributable to MLBFS' employees. The obligations of Customer under this
paragraph shall survive the expiration or termination of this Loan Agreement and
the discharge of the other Obligations.
(e) Right to Perform Obligations. If Customer shall fail to do any act or thing
which it has covenanted to do under this Loan Agreement or any representation or
warranty on the part of Customer contained in this Loan Agreement shall be
breached, MLBFS may, in its sole discretion, after 5 Business Days written
notice is sent to Customer (or such lesser notice, including no notice, as is
reasonable under the circumstances), do the same or cause it to be done or
remedy any such breach, and may expend its funds for such purpose. Any and all
reasonable amounts so expended by MLBFS shall be repayable to MLBFS by Customer
upon demand, with Interest at the Interest Rate during the period from and
including the date funds are so expended by MLBFS to the date of repayment, and
all such amounts shall be additional Obligations. The payment or performance by
MLBFS of any of Customer's obligations hereunder shall not relieve Customer of
said obligations or of the consequences of having failed to pay or perform the
same, and shall not waive or be deemed a cure of any Default.
(f) Late Charge. Any payment required to be made by Customer pursuant to this
Loan Agreement or any of the Additional Agreements not paid within ten (10) days
of the applicable due date shall be subject to a late charge in an amount equal
to the lesser of: (i) 5% of the overdue amount, or (ii) the maximum amount
permitted by applicable law. Such late charge shall be payable on demand, or,
without demand, may in the sole discretion of MLBFS be paid by a WCMA Loan and
added to the WCMA Loan Balance in the same manner as provided herein for accrued
interest with respect to the WCMA Line of Credit.
(g) Further Assurances. Customer agrees to do such further acts and things and
to execute and deliver to MLBFS such additional agreements, instruments and
documents as MLBFS may reasonably require or deem advisable to effectuate the
purposes of this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements, or to establish, perfect and maintain MLBFS security
interests and liens upon the Collateral, including, but not limited to: (i)
executing statements or amendments thereto when and as reasonably requested by
MLBFS; and (ii) if in the reasonable judgement of MLBFS it is required by local
law, causing the owners and/or mortgagees of the real property on which any
Collateral may be located
-14-
<PAGE>
to execute and deliver to MLBFS waivers or subordinations reasonably
satisfactory to MLBFS with respect to any rights in such Collateral.
(h) Binding Effect. This Loan Agreement, the Term WCMA Note and the other
Additional Agreements shall be binding upon, and shall inure to the benefit of
MLBFS, Customer and their respective successors and assigns. Customer shall not
assign any of its rights or delegate any of its obligations under this Loan
Agreement, the Term WCMA Note or any of the other Additional Agreements without
the prior written consent of MLBFS. Unless otherwise expressly agreed to in a
writing signed by MLBFS, no such consent shall in any event relieve Customer of
any of its obligations under this Loan Agreement, the Term WCMA Note or any of
the other Additional Agreements.
(i) Headings. Captions and section and paragraph headings in this Loan Agreement
are inserted only as a matter of convenience, and shall not affect the
interpretation hereof.
(j) Governing Law. This Loan Agreement, the Term WCMA Note and, unless otherwise
expressly provided therein, each of the other Additional Agreements, shall be
governed in all respects by the laws of the State of Illinois.
(k) Severability of Provisions. Whenever possible, each provision of this Loan
Agreement, the Term WCMA Note and the other Additional Agreements shall be
interpreted in such manner as to be effective and valid under applicable law.
Any provision of this Loan Agreement, the Term WCMA Note or any of the other
Additional Agreements which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective only to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Loan Agreement, the Term WCMA Note and the other Additional Agreements or
affecting the validity or enforceability of such provision in any other
jurisdiction.
(l) Term. This Loan Agreement shall become effective on the date accepted by
MLBFS at its office in Chicago, Illinois, and, subject to the terms hereof,
shall continue in effect so long thereafter as either MLBFS shall be obligated
to make the Loan, or, after the Closing Date, there shall be any moneys
outstanding under the Term Note or WCMA Note included in the Term WCMA Note or
under this Loan Agreement, or there shall be any other Obligations outstanding.
(m) Counterparts. This Loan Agreement may be executed in one or more
counterparts which, when taken together, constitute one and the same agreement.
(n) Jurisdiction; Waiver. CUSTOMER ACKNOWLEDGES THAT THIS LOAN AGREEMENT IS
BEING ACCEPTED BY MLBFS IN PARTIAL CONSIDERATION OF MLBFS' RIGHT AND OPTION, IN
ITS SOLE DISCRETION, TO ENFORCE THIS LOAN AGREEMENT, THE TERM WCMA NOTE AND THE
OTHER ADDITIONAL AGREEMENTS IN EITHER THE STATE OF ILLINOIS OR IN ANY OTHER
JURISDICTION WHERE CUSTOMER OR ANY COLLATERAL FOR THE OBLIGATIONS MAY BE
LOCATED. CUSTOMER CONSENTS TO JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN
ANY STATE OR FEDERAL COURT IN THE COUNTY OF COOK FOR SUCH PURPOSES, AND CUSTOMER
WAIVES ANY AND ALL RIGHTS TO CONTEST SAID JURISDICTION AND VENUE. CUSTOMER
FURTHER WAIVES ANY RIGHTS TO COMMENCE ANY ACTION AGAINST MLBFS IN ANY
JURISDICTION EXCEPT IN THE COUNTY OF COOK AND STATE OF ILLINOIS. MLBFS AND
CUSTOMER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES AGAINST
THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO, ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THE LOAN, THIS LOAN AGREEMENT, THE TERM WCMA NOTE, ANY OTHER
ADDITIONAL AGREEMENTS AND/OR ANY OF THE TRANSACTIONS WHICH ARE THE SUBJECT
MATTER OF THIS LOAN AGREEMENT.
(o) Integration. THIS LOAN AGREEMENT, TOGETHER WITH THE TERM WCMA NOTE AND THE
OTHER ADDITIONAL AGREEMENTS, CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS
THE FULL AND FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN
AGREEMENTS OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
-15-
<PAGE>
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS OF THE PARTIES. WITHOUT LIMITING
THE FOREGOING, CUSTOMER ACKNOWLEDGES THAT: (I) NO PROMISE OR COMMITMENT HAS BEEN
MADE TO IT BY MLBFS, MLPF&S OR ANY OF THEIR RESPECTIVE EMPLOYEES, AGENTS OR
REPRESENTATIVES TO MAKE THE LOAN ON ANY TERMS OTHER THAN AS EXPRESSLY SET FORTH
HEREIN AND IN THE TERM WCMA NOTE, OR TO MAKE ANY OTHER LOAN OR OTHERWISE EXTEND
ANY OTHER CREDIT TO CUSTOMER OR ANY OTHER PARTY; AND (II) EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, THIS LOAN AGREEMENT SUPERSEDES AND REPLACES ANY AND
ALL PROPOSALS, LETTERS OF INTENT AND APPROVAL AND COMMITMENT LETTERS FROM MLBFS
TO CUSTOMER, NONE OF WHICH SHALL BE CONSIDERED AN ADDITIONAL AGREEMENT. NO
AMENDMENT OR MODIFICATION OF THIS AGREEMENT OR ANY OF THE ADDITIONAL AGREEMENTS
TO WHICH CUSTOMER IS A PARTY SHALL BE EFFECTIVE UNLESS IN A WRITING SIGNED BY
BOTH MLBFS AND CUSTOMER.
IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year
first above written.
CD WAREHOUSE, INC.
By: /s/ Jerry Grizzle /s/ Doyle Motley
----------------------------------------------------------------------
Signature (1) Signature (2)
Jerry Grizzle Doyle Motley
- -------------------------------------------------------------------------
Printed Name Printed Name
Chief Executive Officer Chief Financial Officer
- -------------------------------------------------------------------------
Title Title
STATE OF Oklahoma }
} ss.
COUNTY OF Oklahoma }
On the 18th day of December, 1997, before me personally came Jerry Grizzle
known to me to be the individual who executed the foregoing instrument, and who
being sworn by me, did depose and say that the individual is an officer of the
Customer herein, and that the individual executed the foregoing instrument for
the Customer herein, and that the individual had the authority to sign the same,
and acknowledged that the individual executed the same as the act and deed of
said Customer.
/s/ Clay Miller
-------------------------------------
Notary Public
(NOTARIAL SEAL)
Accepted at Chicago, Illinois:
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES INC.
By:
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-16-
