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: August 31, 1996
CROWLEY, MILNER AND COMPANY
(Exact name of registrant as specified in its charter)
Michigan 1-1594 38-0454910
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
2301 West Lafayette Boulevard, Detroit, Michigan 48216
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (313) 962-2400
Not applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 1. Changes in Control of Registrant.
Effective August 31, 1996, Crowley Milner and Company, a Michigan
corporation (the "Company") acquired from the several shareholders (the
"Steinbach Shareholders") of Steinbach Stores, Inc., an Ohio corporation
("Steinbach"), all of the issued and outstanding shares of the capital stock
of Steinbach, in exchange for 514,800 shares of the Common Stock of the
Company pursuant to the terms of an Agreement and Plan of Reorganization,
dated November 17, 1995, as amended by Amendment No. 1 thereto dated
December 29, 1995, Amendment No. 2 thereto dated May 14, 1996 and Amendment
No. 3 thereto dated July 26, 1996 (collectively, the "Acquisition
Agreement"), between the Company and the Steinbach Shareholders. As a
result of the foregoing, Steinbach, with its 15 retail department stores in
Connecticut, New Hampshire, New Jersey, New York and Vermont, became a
wholly-owned subsidiary of the Company as of August 31, 1996.
As of the date hereof, 1,472,678 shares of Common Stock of the
Company are issued and outstanding, after giving effect to the 514,800
shares issued to the Steinbach Shareholders pursuant to the Acquisition
Agreement (representing approximately 35.0% of such issued and outstanding
shares).
The remaining information responsive to this Item 1 has been
previously reported by the Company in its Proxy Statement, dated July 25,
1996, under the captions "Matters To Come Before The Meeting -- Proposal 2:
Approval of Stock Issuance" (on pages 5-23 thereof) and "Further Information
- -- Principal Shareholders" (on page 29 thereof), and such information is
hereby filed as Exhibit 99 hereto and is incorporated herein by reference.
Item 2. Acquisition or Disposition of Assets.
The information contained in Item 1 of this Current Report is hereby
incorporated herein by reference. In addition, the remaining information
responsive to this Item 2 has been previously reported by the Company in its
Proxy Statement, dated July 25, 1996, under the captions "Matters To Come
Before The Meeting -- Proposal 2: Approval of Stock Issuance" (on pages
5-23 thereof) and "Further Information -- Principal Shareholders" (on page
29 thereof), and such information is hereby filed as Exhibit 99 hereto and
is incorporated herein by reference.
Item 5. Other Items.
Loan and Security Agreement -- Congress Financial Corporation
(Central).
Effective as of September 5, 1996, Congress Financial Corporation
(Central), the Company and Steinbach entered into an Amended and Restated
Loan and Security Agreement (the "Amended Loan Agreement") pursuant to which
Congress is providing, on an aggregate basis to the Company and Steinbach, a
fully secured line of credit of up to $24 million and, included within such
line of credit, a facility for letters of credit of up to $5 million, with
the interest rate on the foregoing, subject to certain terms and conditions,
at 25 basis points above the prime rate of CoreStates Bank, N.A. The
Company and Steinbach have each granted Congress a security interest in and
general lien upon substantially all of their respective tangible and
intangible personal assets and property, whether now owned or hereafter
acquired, as security for all debts, liabilities and obligations of the
Company and Steinbach under the Amended Loan Agreement. The Amended Loan
Agreement shall continue for a term ending on November 4, 1999, and from
year to year thereafter unless sooner terminated pursuant to the terms
thereof.
The Amended Loan Agreement amends and restates the Loan and Security
Agreement (the "Original Loan Agreement"), dated November 4, 1994, between
Congress and the Company pursuant to which Congress was providing a fully
secured line of credit of up to $12 million and, included within such line
of credit, a facility for letters of credit of up to $2 million, with the
interest rate on the foregoing, subject to certain terms and conditions, at
<PAGE>
100 basis points above the prime rate of CoreStates Bank, N.A. or, at the
Corporation's option, subject to certain terms and conditions, 350 basis
points above the adjusted London Interbank Offered Rate ("LIBOR").
The information set forth in the Amended Loan Agreement attached
hereto as Exhibit 10.10 is hereby incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Steinbach.
The following financial statements of Steinbach, together with the
related notes thereto and the report thereon of Ernst & Young LLP, dated
February 8, 1996, has been previously reported by the Company in its Proxy
Statement, dated July 25, 1996, as part of Appendix C thereto, and such
information is hereby filed as Exhibit 99 hereto and is incorporated herein
by reference:
Balance Sheets as of December 30, 1995 and January 28, 1995.
Statements of Operations for the eleven months ended December 30,
1995 and the three months ended January 28, 1995.
Statements of Shareholders' Equity at October 30, 1994, January 28,
1995 and December 30, 1995.
Statements of Cash Flows for the eleven months ended December 30,
1995 and the three months ended January 28, 1995.
Notes to Financial Statements.
The following statements of operations and cash flows of Steinbach
Inc., the predecessor to Steinbach, together with the related notes thereto
and the report thereon of Ernst & Young LLP, dated February 8, 1996, has
been previously reported by the Company in its Proxy Statement, dated July
25, 1996, as part of Appendix C thereto, and such information is filed as
Exhibit 99 hereto and is hereby incorporated herein by reference:
Statements of Operations for the nine months ended October 29, 1994
and the year ended January 29, 1994.
Statements of Cash Flows for the nine months ended October 29, 1994
and the year ended January 29, 1994.
Notes to Statements of Operations and Cash Flows.
The unaudited financial statements of Steinbach, together with the
related notes thereto, has been previously reported by the Company in its
Proxy Statement, dated July 25, 1996, as Appendix E thereto, and such
information is filed as Exhibit 99 hereto and is hereby incorporated herein
by reference:
Balance Sheets as of May 4, 1996 and April 29, 1995.
Statements of Operations for the three months ended May 4, 1996 and
April 29, 1995.
Statements of Cash Flows for the three months ended May 4, 1996 and
April 29, 1995
Notes to Steinbach Financial Statements.
(b) Pro Forma Financial Information.
The following unaudited pro forma financial information of the
Company and Steinbach, together with the related notes thereto, has been
previously reported by the Company in its Proxy Statement, dated July 25,
<PAGE>
1996, as Appendix D thereto, and such information is filed as Exhibit 99
hereto and is hereby incorporated herein by reference:
Steinbach Stores, Inc. -- 15 Store Income Statement for the eleven
months ended December 30, 1995.
Crowley, Milner and Company/Steinbach Stores, Inc. -- Pro Forma
Income Statements for the fiscal year ended February 3, 1996.
The following unaudited pro forma financial information of the
Company and Steinbach, together with the related notes thereto, has been
previously reported by the Company in its Proxy Statement, dated July 25,
1996, as Appendix F thereto, and such information is filed as Exhibit 99
hereto and is hereby incorporated herein by reference:
Steinbach Stores, Inc. -- 15 Store Balance Sheet as of May 4, 1996.
Crowley, Milner and Company/Steinbach Stores, Inc. -- Pro Forma
Balance Sheets as of May 4, 1996.
Steinbach Stores, Inc. -- 15 Store Income Statement for the three
months ended May 4, 1996.
Crowley, Milner and Company/Steinbach Stores, Inc. -- Pro Forma
Income Statements for the three months ended May 4, 1996.
(c) Exhibits.
10.10 Amended and Restated Loan and Security Agreement, dated
September 5, 1996, among Congress Financial Corporation
(Central), Crowley, Milner and Company and Steinbach Stores,
Inc. (amends and restates Loan and Security Agreement
previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 31, 1994).
10.12 Agreement and Plan of Reorganization, dated November 17,
1995, as amended by Amendment No. 1 thereto dated December
29, 1995, Amendment No. 2 thereto dated May 14, 1996 and
Amendment No. 3 thereto dated July 26, 1996, between
Crowley, Milner and Company and the several shareholders of
Steinbach Stores, Inc. (previously filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995, with Amendment No. 1 thereto
previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended February 3, 1996 and
with Amendment No. 2 thereto previously filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 4, 1996, all of which are incorporated
herein by reference, except for Amendment No. 3 thereto
which is filed herewith).
10.13 Interim Operating Agreement, dated December 29, 1995, as
amended by Amendment No. 1 thereto dated as of August 31,
1996, among Crowley, Milner and Company, Steinbach Stores,
Inc. and the several shareholders of Steinbach Stores, Inc.
(previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended February 3, 1996
which is incorporated herein by reference, except for
Amendment No. 1 thereto which is filed herewith).
23 Consent of Ernst & Young LLP.
99 Crowley, Milner and Company definitive Proxy Statement,
dated July 25, 1996, but only with respect to the
information under the captions "Matters To Come Before The
Meeting -- Proposal 2: Approval of Stock Issuance" (on
pages 5-23 thereof) and "Further Information -- Principal
Shareholders" (on page 29 thereof) and with respect to the
information contained in Appendices C, D, E and F thereto
<PAGE>
(such Proxy Statement was previously filed and is
incorporated herein by reference).
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.
CROWLEY, MILNER AND COMPANY
September 16, 1996 /S/ John R. Dallacqua
---------------------------
John R. Dallacqua,
Vice President of Finance
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
10.10 Amended and Restated Loan and Security Agreement, dated
September 5, 1996, among Congress Financial Corporation
(Central), Crowley, Milner and Company and Steinbach Stores,
Inc. (amends and restates Loan and Security Agreement
previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 31, 1994).
10.12 Agreement and Plan of Reorganization, dated November 17,
1995, as amended by Amendment No. 1 thereto dated December
29, 1995, Amendment No. 2 thereto dated May 14, 1996 and
Amendment No. 3 thereto dated July 26, 1996, between
Crowley, Milner and Company and the several shareholders of
Steinbach Stores, Inc. (previously filed as an exhibit to
the Company's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995, with Amendment No. 1 thereto
previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended February 3, 1996 and
with Amendment No. 2 thereto previously filed as an exhibit
to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 4, 1996, all of which are incorporated
herein by reference, except for Amendment No. 3 thereto
which is filed herewith).
10.13 Interim Operating Agreement, dated December 29, 1995, as
amended by Amendment No. 1 thereto dated as of August 31,
1996, among Crowley, Milner and Company, Steinbach Stores,
Inc. and the several shareholders of Steinbach Stores, Inc.
(previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended February 3, 1996
which is incorporated herein by reference, except for
Amendment No. 1 thereto which is filed herewith).
23 Consent of Ernst & Young LLP.
99 Crowley, Milner and Company definitive Proxy Statement,
dated July 25, 1996, but only with respect to the
information under the captions "Matters To Come Before The
Meeting -- Proposal 2: Approval of Stock Issuance" (on
pages 5-23 thereof) and "Further Information -- Principal
Shareholders" (on page 29 thereof) and with respect to the
information contained in Appendices C, D, E and F thereto
(such Proxy Statement was previously filed and is
incorporated herein by reference).
Exhibit 10.10
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND AMONG
CONGRESS FINANCIAL CORPORATION (CENTRAL)
AS LENDER
AND
CROWLEY, MILNER AND COMPANY
AND
STEINBACH STORES, INC.
AS BORROWERS
DATED: SEPTEMBER 5, 1996
TABLE OF CONTENTS
SECTION 1. DEFINITIONS
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
2.2 Letter of Credit Accommodations
2.3 Availability Reserves
SECTION 3. INTEREST AND FEES
3.1 Interest
3.2 Amendment and Restatement Fee
3.3 Servicing Fee
3.4 Unused Line Fee
3.5 Joint and Several Obligations
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Revolving Loans and
Letter of Credit Accommodations
4.2 Conditions Precedent to All Revolving Loans and
Letter of Credit Accommodations
SECTION 5. GRANT OF SECURITY INTEREST
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Account
6.2 Statements
6.3 Collection of Accounts
6.4 Payments
6.5 Authorization to Make Revolving Loans
6.6 Use of Proceeds
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting
7.2 Accounts Covenants
7.3 Inventory Covenants
7.4 Equipment Covenants
7.5 Power of Attorney
7.6 Right to Cure
7.7 Access to Premises
SECTION 8. REPRESENTATIONS AND WARRANTIES
8.1 Corporate Existence, Power and Authority;
Subsidiaries
8.2 Financial Statements; No Material Adverse Change
8.3 Chief Executive Office; Collateral Locations
8.4 Priority of Liens; Title to Properties
8.5 Tax Returns
8.6 Litigation
8.7 Compliance with Other Agreements and Applicable
Laws
8.8 Employee Benefits
8.9 Environmental Compliance
8.10 Accuracy and Completeness of Information
8.11 Solvency
8.12 Survival of Warranties; Cumulative
SECTION 9. AFFIRMATIVE AND NEGATIVE
COVENANTS
9.1 Maintenance of Existence
9.2 New Collateral Locations
9.3 Compliance with Laws, Regulations, Etc.
9.4 Payment of Taxes and Claims
9.5 Insurance
9.6 Financial Statements and Other Information
9.7 Sale of Assets, Consolidation, Merger, Dissolution,
Etc.
9.8 Encumbrances
9.9 Indebtedness
9.10 Revolving Loans, Investments, Guarantees, Etc.
9.11 Dividends and Redemptions
9.12 Transactions with Affiliates
9.13 Compliance with ERISA
9.14 Costs and Expenses
9.15 Further Assurances
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default
10.2 Remedies
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver
11.2 Waiver of Notices
11.3 Amendments and Waivers
11.4 Waiver of Counterclaims
11.5 Indemnification
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term
12.2 Notices
12.3 Partial Invalidity
12.4 Successors
12.5 Entire Agreement
12.6 No Novation
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement dated
September 5, 1996 is entered into by and among Congress Financial
Corporation (Central), an Illinois corporation ("Lender") and Crowley,
Milner and Company, a Michigan corporation ("Crowley") and Steinbach Stores,
Inc., an Ohio corporation ("Steinbach"). Crowley and Steinbach are
sometimes referred to herein individually as a "Borrower" and collectively
as "Borrowers".
W I T N E S S E T H:
WHEREAS, Crowley and Lender are parties to that certain Loan and
Security Agreement dated November 4, 1994 (the "Original Agreement")
pursuant to which Lender has agreed to make loans and other financial
accommodations to Crowley; and
WHEREAS, Crowley has agreed to purchase all of the issued and
outstanding stock of Steinbach (the "Acquisition") pursuant to the terms of
an Agreement and Plan of Reorganization dated November 17, 1995, as amended
(the "Acquisition Agreement"), by and between Crowley and the former
shareholders of Steinbach, and Lender has agreed to consent to said
Acquisition; and
WHEREAS, Crowley has requested that the Original Agreement be
amended in certain respects to permit the Acquisition, to add Steinbach as a
Borrower and to otherwise modify the terms and conditions of the Original
Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree to amend and restate the Original Agreement in its entirety as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1, Article 8 or
Article 9 of the Uniform Commercial Code shall have the meanings given
therein unless otherwise defined in this Agreement. All references to the
plural herein shall also mean the singular and to the singular shall also
mean the plural. All references to Crowley, Steinbach, Borrowers and Lender
pursuant to the definitions set forth in the recitals hereto, or to any
other person herein, shall include their respective successors and assigns.
The words "hereof", "herein", "hereunder", "this Agreement" and words of
similar import when used in this Agreement shall refer to this Agreement as
a whole and not any particular provision of this Agreement and as this
Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced. An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in
accordance with Section 11.3. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meanings customarily
given to such term in accordance with GAAP. For purposes of this Agreement,
the following terms shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of
either Borrower to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and
whether or not earned by performance.
1.2 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time establish and
revise in good faith reducing the amount of Revolving Loans and Letter of
Credit Accommodations which would otherwise be available to Borrowers under
the lending formula(s) provided for herein: (a) to reflect events,
conditions, contingencies or risks which, as determined by Lender in good
faith, do or may adversely affect either (i) the Collateral or its value,
(ii) the assets, business or prospects of either Borrower, provided, that
any such events, conditions, contingencies or risks have or may have (as
determined by Lender in good faith) a Material Adverse Effect on the assets,
business or prospects of such Borrower or (iii) the security interests and
other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof) or (b) to reflect Lender's good faith
belief that any collateral report or financial information furnished by or
on behalf of either Borrower to Lender is incomplete, inaccurate or
misleading in any material respect or (c) in respect of any state of facts
which Lender determines in good faith constitutes an Event of Default or
may, with notice or passage of time or both, constitute an Event of Default.
Without limiting the foregoing, Lender may, in its sole discretion,
establish Availability Reserves in respect of (i) sales taxes due and unpaid
by either Borrower, (ii) payables due and unpaid to any vendor that has a
lien on any Inventory or consigns Inventory to either Borrower, (iii) any
rental payments owed by either Borrower currently in arrears and (iv) an
amount equal to one (1) months rental payment for each facility leased by a
Borrower not subject to a waiver executed by the owner of such facility of
the type described in Section 4.1(f).
1.3 "Blocked Accounts" shall have the meaning set forth in
Section 6.3 hereof.
1.4 "Business Day" shall mean any day other than a Saturday,
Sunday, or other day on which commercial banks are authorized or required to
close under the laws of the State of Illinois or the Commonwealth of
Pennsylvania, and a day on which Lender is open for the transaction of
business.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as the
same now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.6 "Collateral" shall have the meaning set forth in Section 5
hereof.
1.7 "Eligible Inventory" shall mean Inventory consisting of
first quality finished goods held for resale in the ordinary course of the
business of a Borrower which are acceptable to Lender based on the criteria
set forth below. In general, Eligible Inventory shall not include (a) raw
materials for such finished goods; (b) work-in-process; (c) components which
are not part of finished goods; (d) spare parts for equipment; (e) packaging
and shipping materials; (f) supplies used or consumed in a Borrower's
business; (g) Inventory at premises other than those owned or leased by a
Borrower and listed as a location of Inventory for such Borrower in Exhibit
A; (h) Inventory subject to a security interest or lien in favor of any
person other than Lender except those permitted in this Agreement; (i) bill
and hold goods; (j) unserviceable, obsolete or slow moving Inventory, with
the foregoing determined by Lender in good faith; (k) Inventory which is not
subject to the first priority, valid and perfected security interest of
Lender; (l) returned, damaged and/or defective Inventory; (m) Inventory
purchased or sold on consignment; and (n) Inventory to be sold in department
store space leased or licensed by a Borrower to third parties. General
criteria for Eligible Inventory may be established and revised from time to
time by Lender in good faith. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
1.8 "Environmental Laws" shall mean all federal, state,
district, local and foreign laws, rules, regulations, ordinances, and
consent decrees relating to health, safety, hazardous substances, pollution
and environmental matters, as now or at any time hereafter in effect,
applicable to either Borrower's business and facilities (whether or not
owned by it), including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contamination, chemicals, or hazardous,
toxic or dangerous substances, materials or wastes into the environment
(including, without limitation, ambient air, surface water, ground water,
land surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or hazardous,
toxic or dangerous substances, materials or wastes.
1.9 "Equipment" shall mean all of either Borrower's now owned
and hereafter acquired equipment, machinery, computers and computer hardware
and software (whether owned or licensed), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and replacements
thereof, wherever located.
1.10 "ERISA" shall mean the United States Employee Retirement
Income Security Act of 1974, as the same now exists or may hereafter from
time to time be amended, modified, recodified or supplemented, together with
all rules, regulations and interpretations thereunder or related thereto.
1.11 "ERISA Affiliate" shall mean any person required to be
aggregated with a Borrower or any of its Subsidiaries under Sections 414(b),
414(c), 414(m) or 414(o) of the Code.
1.12 "Event of Default" shall mean the occurrence or existence of
any event or condition described in Section 10.1 hereof.
1.13 "Excess Availability" shall mean with respect to each
Borrower the amount, as determined by Lender, calculated at any time, equal
to: (a) the lesser of: (i) the amount of the Revolving Loans available to
that Borrower as of such time based on the applicable lending formulas set
forth in this Agreement (assuming solely for the purposes of such
calculation that no Revolving Loans are then outstanding) multiplied by the
Value of such Borrower's Eligible Inventory, as determined by Lender, and
subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder, and (ii) the Maximum Credit; minus (b) the
sum of: (i) the amount of all then outstanding and unpaid Obligations, plus
(ii) the aggregate amount of all trade payables of Borrowers which are more
than thirty (30) days past due as of such time, plus (iii) any taxes then
due.
1.14 "Financing Agreements" shall mean, collectively, this
Agreement and all notes, guarantees, security agreements and other
agreements, documents, instruments, confirmatory assignments and schedules
now or at any time hereafter executed and/or delivered by either Borrower or
any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.15 "GAAP" shall mean generally accepted accounting principles
in the United States of America as in effect from time to time as set forth
in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the statements
and pronouncements of the Financial Accounting Standards Boards which are
applicable to the circumstances as of the date of determination consistently
applied.
1.16 "Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or
any other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including, without limitation any that are or become
classified as hazardous or toxic under any Environmental Law).
1.17 "Information Certificate" shall mean collectively, the
Information Certificates of each Borrower constituting Exhibit A hereto
containing material information with respect to each Borrower, its business
and assets provided by or on behalf of each Borrower to Lender in connection
with the preparation of this Agreement and the other Financing Agreements
and the financing arrangements provided for herein.
1.18 "Interest Rate" shall mean a rate of one quarter of one
percent (0.25%) per annum in excess of the Prime Rate provided, that, the
Interest Rate shall mean the rate of two and one quarter of one percent
(2.25%) per annum in excess of the Prime Rate at Lender's option, without
notice, (a) for the period on and after the date of termination or non-
renewal hereof with respect to any outstanding Obligations, or the date of
the occurrence of any Event of Default or event which with notice or passage
of time or both would constitute an Event of Default, and for so long as
such Event of Default or other event described in this paragraph is
continuing as determined by Lender and until such time as all Obligations
are indefeasibly paid in full (notwithstanding entry of any judgment against
Borrower) and (b) on the Revolving Loans at any time outstanding in excess
of the amounts available to either one or both Borrowers under Section 2
(whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
1.19 "Inventory" shall mean all of either Borrower's now owned
and hereafter existing or owned raw materials, work in process, finished
goods and all other inventory of whatsoever kind or nature, wherever
located.
1.20 "Investment Property" shall mean all of either Borrower's
now owned and hereafter acquired investment property, including, without
limitation, all securities (certificated and uncertificated), securities
accounts, securities entitlements, commodity contracts and commodity
accounts.
1.21 "Letter of Credit Accommodations" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of either Borrower or
any Obligor or (b) with respect to which Lender has agreed to indemnify the
issuer or guaranteed to the issuer the performance by either Borrower of its
obligations to such issuer.
1.22 "Material Adverse Effect" shall mean with respect to either
Borrower an event which (i) would reasonably be expected to have a material
adverse effect on such Borrower's assets, business, financial conditions or
results of operations, or (ii) would reasonably be expected to materially
impair the ability of such Borrower to perform its obligations under any of
the Financing Agreements.
1.23 "Maximum Credit" shall mean the amount of $24,000,000.
1.24 "Obligations" shall mean any and all Revolving Loans, Letter
of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by either Borrower
to Lender and/or its affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, whether arising under this Agreement or
otherwise, whether now existing or hereafter arising, whether arising
before, during or after the initial or any renewal term of this Agreement or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Lender.
1.25 "Obligor" shall mean any guarantor, endorser, acceptor,
surety or other person liable on or with respect to the Obligations or who
is the owner of any property which is security for the Obligations, other
than a Borrower. Borrowers and Lender acknowledge and agree that as of the
date of this Agreement there is no Obligor in existence.
1.26 "Payment Account" shall have the meaning set forth in
Section 6.3 hereof.
1.27 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code
of 1986, as amended), business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or
any agency or instrumentality or political subdivision thereof.
1.28 "Prime Rate" shall mean the rate from time to time publicly
announced by CoreStates Bank, N.A., or its successors, at its office in
Philadelphia, Pennsylvania, as its prime rate, whether or not such announced
rate is the best rate available at such bank.
1.29 "Records" shall mean all of either Borrower's present and
future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping
evidence, statements, correspondence, memoranda, credit files and other data
relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including
any rights of either Borrower with respect to the foregoing maintained with
or by any other person).
1.30 "Revolving Loans" shall mean the loans now or hereafter made
by Lender to or for the benefit of Borrowers on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.31 "Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect from time to time in the State of Illinois.
1.32 "Value" shall mean, with respect to Inventory, the retail
market value of such Inventory as determined by Lender.
SECTION 2. CREDIT FACILITIES
2.1. Revolving Loans.
a. Subject to, and upon the terms and conditions
contained herein, Lender agrees to make Revolving Loans to Borrowers from
time to time in amounts requested by either Borrower up to the amount equal
to thirty percent (30%) of the Value of Eligible Inventory of the Borrower
requesting the Revolving Loans, less any Availability Reserves applicable to
such Borrower.
b. Lender may, in its discretion, from time to time,
upon not less than five (5) days prior notice to Borrowers, reduce the
lending formula(s) with respect to Eligible Inventory to the extent that
Lender determines, in good faith, that: (A) the number of days of the
turnover of the Inventory for any period has changed in any material
respect, or (B) the liquidation value of the Eligible Inventory, or any
category thereof, has decreased, or (C) the nature and quality of the
Inventory has deteriorated. In determining whether to reduce the lending
formula(s), Lender may consider events, conditions, contingencies or risks
which are also considered in determining Eligible Inventory or in
establishing Availability Reserves.
c. Except in Lender's discretion, the aggregate amount
of the Revolving Loans and the Letter of Credit Accommodations outstanding
with respect to both Borrowers at any time shall not exceed the Maximum
Credit. In the event that the outstanding amount of Revolving Loans and
Letter of Credit Accommodations to either Borrower exceeds the lending
formula for that Borrower, or the aggregate amount of the outstanding
Revolving Loans and Letter of Credit Accommodations exceeds the amounts
available under the lending formulas, the sublimits for Letter of Credit
Accommodations set forth in Section 2.2(c) or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights
of Lender in that circumstance or on any future occasions and Borrowers
shall, upon demand by Lender, which may be made at any time or from time to
time, immediately repay to Lender the entire amount of any such excess(es)
for which payment is demanded.
2.2 Letter of Credit Accommodations.
a. Subject to, and upon the terms and conditions
contained herein, at the request of either Borrower, Lender agrees to
provide or arrange for Letter of Credit Accommodations for the account of
the requesting Borrower containing terms and conditions acceptable to Lender
and the issuer thereof. Any payments made by Lender to any issuer thereof
and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to the Borrower
for whose account the Letter of Credit Accommodation was provided or
arranged pursuant to this Section 2.
b. In addition to any charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrowers shall pay to Lender a letter of credit fee at a
rate equal to two percent (2.0%) per annum on the daily outstanding balance
of the Letter of Credit Accommodations for the immediately preceding month
(or part thereof), payable in arrears as of the first day of each succeeding
month. Such letter of credit fee shall be calculated on the basis of a
three hundred sixty (360) day year and actual days elapsed and the
obligation of Borrowers to pay such fee shall survive the termination or
non-renewal of this Agreement.
c. No Letter of Credit Accommodations shall be
available unless on the date of the proposed issuance of any Letter of
Credit Accommodations, the Revolving Loans available to the Borrower
requesting the Letter of Credit Accommodation (subject to the Maximum Credit
and any Availability Reserves) are equal to or greater than: (i) if the
proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, the sum of (A) seventy percent (70%) of the Value of
such Eligible Inventory, plus (B) freight, taxes, duty and other amounts
which Lender reasonably estimates must be paid in connection with such
Inventory upon arrival and for delivery to one of the requesting Borrower's
locations for Eligible Inventory within the United States of America and
(ii) if the proposed Letter of Credit Accommodation is for any other
purpose, an amount equal to one hundred percent (100%) of the face amount
thereof and all other commitments and obligations made or incurred by Lender
with respect thereto. Effective on the issuance of each Letter of Credit
Accommodation, the amount of Revolving Loans which might otherwise be
available to the requesting Borrower shall be reduced by the applicable
amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
d. Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other commitments and
obligations made or incurred by Lender in connection therewith, shall not at
any time exceed $5,000,000 in the aggregate for both Borrowers. At any time
an Event of Default exists or has occurred and is continuing, upon Lender's
request, Borrowers will either furnish cash collateral to secure the
reimbursement obligations to the issuer in connection with any Letter of
Credit Accommodations or furnish cash collateral to Lender for the Letter of
Credit Accommodations, and in either case, the Revolving Loans otherwise
available to Borrowers shall not be reduced as provided in Section 2.2(c) to
the extent of such cash collateral.
e. Borrowers shall indemnify and hold Lender harmless
from and against any and all losses, claims, damages, liabilities, costs and
expenses which Lender may suffer or incur in connection with any Letter of
Credit Accommodations and any documents, drafts or acceptances relating
thereto, including, but not limited to, any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation. Borrowers
assume all risks with respect to the acts or omissions of the drawer under
or beneficiary of any Letter of Credit Accommodation and for such purposes
the drawer or beneficiary shall be deemed Borrowers' agent. Borrowers
assume all risks for, and agree to pay, all foreign, Federal, State and
local taxes, duties and levies relating to any goods subject to any Letter
of Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrowers hereby release and hold Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by either Borrower, by
any issuer or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation. The provisions of this Section 2.2(e) shall
survive the payment of Obligations and the termination or non-renewal of
this Agreement.
f. Nothing contained herein shall be deemed or
construed to grant either Borrower any right or authority to pledge the
credit of Lender in any manner. Lender shall have no liability of any kind
with respect to any Letter of Credit Accommodation provided by an issuer
other than Lender unless Lender has duly executed and delivered to such
issuer the application or a guarantee or indemnification in writing with
respect to such Letter of Credit Accommodation. Borrowers shall be bound by
any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation
or any documents, drafts or acceptances thereunder, notwithstanding that
such interpretation may be inconsistent with any instructions of either
Borrower. Lender shall have the sole and exclusive right and authority to,
and neither Borrower shall: (i) at any time an Event of Default exists or
has occurred and is continuing, (A) approve or resolve any questions of non-
compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications
for steamship or airway guaranties, indemnities or delivery orders, and (ii)
at all times, (A) grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts, acceptances, or documents, and
(B) agree to any amendments, renewals, extensions, modifications, changes or
cancellations of any of the terms or conditions of any of the applications,
Letter of Credit Accommodations, or documents, drafts or acceptances
thereunder or any letters of credit included in the Collateral. Lender may
take such actions either in its own name or in either Borrower's name.
g. Any rights, remedies, duties or obligations granted
or undertaken by either Borrower to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement
in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by such
Borrower to Lender. Any duties or obligations undertaken by Lender to any
issuer or correspondent in any application for any Letter of Credit
Accommodation, or any other agreement by Lender in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Borrowers to Lender and to apply in all
respects to Borrowers.
2.3 Availability Reserves.
All Revolving Loans otherwise available to Borrowers
pursuant to the lending formulas and subject to the Maximum Credit and other
applicable limits hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves.
SECTION 3. INTEREST AND FEES
3.1 Interest.
a. Borrowers shall pay to Lender interest on the
outstanding principal amount of the non-contingent Obligations at the
Interest Rate. All interest accruing hereunder on and after the date of any
Event of Default or termination or non-renewal hereof shall be payable on
demand.
b. Interest shall be payable by Borrowers to Lender
monthly in arrears not later than the first day of each calendar month and
shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed. The interest rate on non-contingent Obligations shall
increase or decrease by an amount equal to each increase or decrease in the
Prime Rate effective on the first day of the month after any change in such
Prime Rate is announced based on the Prime Rate in effect on the last day of
the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrowers to Lender exceed the maximum
amount or the rate permitted under any applicable law or regulation, and if
any such part or provision of this Agreement is in contravention of any such
law or regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 Amendment and Restatement Fee.
Borrowers shall pay to Lender as an amendment and
restatement fee in the amount of $60,000, which fee shall be fully earned
and payable on the date hereof.
3.3 Servicing Fee.
Borrowers shall pay to Lender monthly a servicing fee in an
amount equal to $1,500 in the aggregate in respect of Lender's services for
each month (or part thereof) while this Agreement remains in effect and for
so long thereafter as any of the Obligations are outstanding, which fee
shall be fully earned as of and payable in advance on the date hereof and on
the first day of each month hereafter.
3.4 Unused Line Fee.
Borrowers shall pay to Lender monthly an unused line fee at
a rate equal to one-quarter of one percent (0.25%) per annum, in the
aggregate, calculated upon the amount by which $24,000,000 exceeds the total
average daily principal balance of the outstanding Revolving Loans and
Letter of Credit Accommodations for both Borrowers during the immediately
preceding month (or part thereof) while this Agreement is in effect and for
so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
3.5 Joint and Several Obligations.
All Obligations, including, without limitation, all payments
required to be made to Lender under this Section 3, shall be the joint and
several obligations of both Borrowers.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Revolving Loans and Letter
of Credit Accommodations.
Each of the following is a condition precedent to Lender
making the initial Revolving Loans and providing the initial Letter of
Credit Accommodations to Steinbach hereunder and to the continuation of
Revolving Loans and Letter of Credit Accommodations to Crowley hereunder
after the date hereof:
a. Lender shall have received evidence, in form and
substance satisfactory to Lender, that the Acquisition has been consummated
in accordance with the terms of the Acquisition Agreement and applicable
law;
b. Lender shall have received evidence, in form and
substance satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral, subject only
to the security interests and liens permitted herein or in the other
Financing Agreements;
c. all requisite corporate action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received
all information and copies of all documents, including, without limitation,
records of requisite corporate action and proceedings which Lender may have
requested in connection therewith, such documents where requested by Lender
or its counsel to be certified by appropriate corporate officers or
governmental authorities;
d. no material adverse change shall have occurred in
the assets, business or prospects of either Borrower since the date of
Lender's latest field examination and no change or event shall have occurred
which would impair the ability of either Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a
party or of Lender to enforce the Obligations or realize upon the
Collateral;
e. Lender shall have completed a field review of the
Records and such other information with respect to the Collateral as Lender
may require to determine the amount of Revolving Loans available to each
Borrower, the results of which shall be satisfactory to Lender.
f. Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable
in order to permit, protect and perfect its security interests in and liens
upon the Collateral or to effectuate the provisions or purposes of this
Agreement and the other Financing Agreements, including, without limitation,
acknowledgments by lessors, mortgagees and warehousemen of Lender's security
interests in the Collateral, waivers by such persons of any security
interests, liens or other claims by such persons to the Collateral and
agreements permitting Lender access to, and the right to remain on, the
premises to exercise its rights and remedies and otherwise deal with the
Collateral; provided, that, in lieu of such acknowledgments by lessors, the
Availability Reserves shall be adjusted in accordance with Section 1.3
hereof;
g. Lender shall have received evidence of insurance
and loss payee endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, and certificates
of insurance policies and/or endorsements naming Lender as loss payee;
h. Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrowers with
respect to the Financing Agreements and such other matters as Lender may
request;
i. Lender shall have received, in form and substance
satisfactory to Lender, a letter from National City Bank addressed to Lender
pursuant to which National City Bank agrees to terminate all liens and
security interests such corporation has, if any, in the assets of Steinbach
upon payment in full of all indebtedness owed to such financial institution
by Steinbach; and
j. the other Financing Agreements and all instruments
and documents hereunder and thereunder shall have been duly executed and
delivered to Lender, in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Revolving Loans and Letter of
Credit Accommodations.
Each of the following is an additional condition precedent
to Lender making Revolving Loans and/or providing Letter of Credit
Accommodations to either Borrower, including the initial Revolving Loans and
Letter of Credit Accommodations and any future Revolving Loans and Letter of
Credit Accommodations:
a. all representations and warranties contained herein
and in the other Financing Agreements shall be true and correct in all
material respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of each such
Revolving Loan or providing each such Letter of Credit Accommodation and
after giving effect thereto; and
b. no Event of Default and no event or condition
which, with notice or passage of time or both, would constitute an Event of
Default, shall exist or have occurred and be continuing on and as of the
date of the making of such Revolving Loan or providing each such Letter of
Credit Accommodation and after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, each
Borrower hereby grants to Lender a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to Lender as
security, the following property and interests in property, whether now
owned or hereafter acquired or existing, and wherever located (collectively,
the "Collateral"):
a. Accounts;
b. all of such Borrower's present and future contract
rights, general intangibles (including, but not limited to, tax and duty
refunds, registered and unregistered patents, trademarks, service marks,
copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether
as licensor or licensee, choses in action and other claims and, to the
extent consents are not required, or if required, to the extent received,
existing and future leasehold interests in equipment, real estate and
fixtures), chattel paper, documents, instruments, letters of credit,
bankers' acceptances and guaranties;
c. all of such Borrower's present and future monies,
securities, credit balances, deposits, deposit accounts and other property
of Borrower now or hereafter held or received by or in transit to Lender or
its affiliates or at any other depository or other institution from or for
the account of Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all present and future liens,
security interests, rights, remedies, title and interest in, to and in
respect of Accounts and other Collateral, including, without limitation, (a)
rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance related to the
Collateral, (b) rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or
secured party, (c) goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including, without limitation, returned,
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
d. Inventory;
e. Equipment;
f. Investment Property;
g. Records; and
h. all products and proceeds of the foregoing, in any
form, including, without limitation, insurance proceeds and all claims
against third parties for loss or damage to or destruction of any or all of
the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Account.
Lender shall maintain one or more loan account(s) on its
books in which shall be recorded (a) all Revolving Loans, Letter of Credit
Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of each Borrower and (c) all other appropriate debits
and credits as provided in this Agreement, including, without limitation,
fees, charges, costs, expenses and interest. All entries in the loan
account(s) shall be made in accordance with Lender's customary practices as
in effect from time to time.
6.2 Statements.
Lender shall render to each Borrower each month a statement
setting forth the balance in such Borrower's loan account(s) maintained by
Lender for such Borrower pursuant to the provisions of this Agreement,
including principal, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Lender but shall,
absent manifest errors or omissions, be considered correct and deemed
accepted by such Borrower and conclusively binding upon such Borrower as an
account stated except to the extent that Lender receives a written notice
from such Borrower of any specific exceptions of such Borrower thereto
within thirty (30) days after the date such statement has been mailed by
Lender. Until such time as Lender shall have rendered to such Borrower a
written statement as provided above, the balance in such Borrower's loan
account(s) shall be presumptive evidence of the amounts due and owing to
Lender by such Borrower.
6.3 Collection of Accounts.
a. Borrowers shall establish and maintain, at their
expense, blocked accounts or lockboxes and related blocked accounts for each
Borrower (in either case, "Blocked Accounts"), as Lender and Borrowers shall
mutually agree upon, with such banks as are specified by Borrowers and are
reasonably acceptable to Lender and Borrowers into which Borrowers shall
promptly deposit and direct their respective account debtors to directly
remit all payments on Accounts and all payments constituting proceeds of
Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. The banks at which the
Blocked Accounts are established shall enter into an agreement, in form and
substance reasonably satisfactory to Lender (the "Blocked Account
Agreements"), providing that all items received or deposited in the Blocked
Accounts are the property of Lender, that the depository bank has no lien
upon, or right to setoff against, the Blocked Accounts, the items received
for deposit therein, or the funds from time to time on deposit therein and
that the depository bank will wire, or otherwise transfer, in immediately
available funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to such bank account of Lender as Lender may from time to
time designate for such purpose ("Payment Account"). Borrower agrees that
all payments made to such Blocked Accounts or other funds received and
collected by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the property of Lender for
application to the Obligations. Notwithstanding anything to the contrary in
this Section 6.3(a), upon the occurrence and during the continuance of any
Event of Default, Lender shall have the sole right (i) to determine the form
and content of any Blocked Account Agreements and (ii) to approve the banks
or other financial institutions party thereto.
b. For purposes of calculating interest on the
Obligations, such payments or other funds received will be applied
(conditional upon final collection) to the Obligations two (2) Business Days
following the date of receipt of immediately available funds by Lender in
the Payment Account. For purposes of calculating the amount of the
Revolving Loans available to a Borrower such payments will be applied
(conditional upon final collection) to the Obligations on the Business Day
of receipt by Lender in the Payment Account, if such payments are received
within sufficient time (in accordance with Lender's usual and customary
practices as in effect from time to time) to credit Borrowers' loan account
on such day, and if not, then on the next Business Day.
c. Each Borrower and each of its affiliates,
subsidiaries, shareholders, directors, employees or agents that receives any
monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts or other Collateral shall, acting as trustee for
Lender, receive, as the property of Lender, any such monies, checks, notes,
drafts or any other payment relating to and/or proceeds of Accounts or other
Collateral and immediately upon receipt thereof, shall deposit or cause the
same to be deposited in the Blocked Accounts, or remit the same or cause the
same to be remitted, in kind, to Lender. In no event shall the same be
commingled with either Borrower's own funds. Borrowers agree to reimburse
Lender on demand for any amounts owed or paid to any bank at which a Blocked
Account is established or any other bank or person involved in the transfer
of funds to or from the Blocked Accounts arising out of Lender's payments to
or indemnification of such bank or person. The obligation of Borrower to
reimburse Lender for such amounts pursuant to this Section 6.3 shall survive
the termination or non-renewal of this Agreement as the joint and several
obligation of Borrowers.
6.4 Payments.
All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from
time to time. Lender may apply payments received or collected from either
Borrower or for the account of either Borrower (including, without
limitation, the monetary proceeds of collections or of realization upon any
Collateral) to such of the Obligations, whether or not then due, in such
order and manner as Lender determines; provided, that so long as no Event of
Default then exists, Lender shall apply payments received or collected with
respect to each Borrower to the Obligations owing by such Borrower. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may
be charged directly to the loan account(s) of Borrowers. Borrowers shall
make all payments to Lender on the Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of
any payment of, or proceeds of Collateral applied to the payment of, any of
the Obligations, Lender is required to surrender or return such payment or
proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and
this Agreement shall continue in full force and effect as if such payment or
proceeds had not been received by Lender. Borrowers, shall be liable to pay
to Lender, and do hereby indemnify and hold Lender harmless for the amount
of any payments or proceeds surrendered or returned. This Section 6.4 shall
remain effective notwithstanding any contrary action which may be taken by
Lender in reliance upon such payment or proceeds. This Section 6.4 shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
6.5 Authorization to Make Revolving Loans.
Lender is authorized and directed to make the Revolving
Loans and provide the Letter of Credit Accommodations based upon telephonic
or other instructions received from anyone purporting to be an authorized
officer of a Borrower or other authorized person or, at the discretion of
Lender, if such Revolving Loans are necessary to satisfy any Obligations.
All requests for Revolving Loans or Letter of Credit Accommodations
hereunder shall specify the date on which the requested advance is to be
made or Letter of Credit Accommodations established (which day shall be a
Business Day) and the amount of the requested Revolving Loan. Requests
received after 11:00 a.m. Chicago time on any day shall be deemed to have
been made as of the opening of business on the immediately following
Business Day. All Revolving Loans and Letter of Credit Accommodations under
this Agreement shall be conclusively presumed to have been made to, and at
the request of and for the benefit of, a Borrower when deposited to the
credit of such Borrower or otherwise disbursed or established in accordance
with the instructions of such Borrower or in accordance with the terms and
conditions of this Agreement.
6.6 Use of Proceeds.
Borrowers shall use the initial proceeds of the Revolving
Loans provided by Lender to Borrowers hereunder only for: (a) payments to
each of the persons listed in an authorization to pay proceeds letter
furnished by Borrowers to Lender on or about the date hereof, (b) costs,
expenses and fees in connection with the Acquisition, and (c) costs,
expenses and fees in connection with the preparation, negotiation, execution
and delivery of this Agreement and the other Financing Agreements. All
other Revolving Loans made or Letter of Credit Accommodations provided by
Lender to Borrowers pursuant to the provisions hereof shall be used by
Borrowers only for general operating, working capital and other proper
corporate purposes of Borrowers (as determined from time to time by each
Borrower in accordance with applicable law) not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for any other purpose
which might cause any of the Revolving Loans to be considered a "purpose
credit" within the meaning of Regulation G of the Board of Governors of the
Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND
COVENANTS
7.1 Collateral Reporting.
Each Borrower shall provide Lender with the following
documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender in Lender's good faith determination, a schedule of
Accounts; (b) on a weekly basis or more frequently as Lender may request in
Lender's good faith determination, perpetual inventory reports (i.e., such
Borrower's retail stock ledger); (c) on a monthly basis or more frequently
as Lender may request in Lender's good faith determination, (i) inventory
reports by category and (ii) agings of accounts payable; (d) upon Lender's
good faith request, (i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank
statements, (ii) copies of shipping and delivery documents, and (iii) copies
of purchase orders, invoices and delivery documents for Inventory and
Equipment acquired by such Borrower; (e) agings of accounts receivable as
Lender may request in good faith; and (f) such other reports as to the
Collateral as Lender shall request from time to time in Lender's good faith
determination. If any of either Borrower's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, such Borrower hereby irrevocably authorizes such
service, contractor, shipper or agent to deliver such records, reports, and
related documents to Lender and to follow Lender's instructions with respect
to further services at any time that an Event of Default exists or has
occurred and is continuing.
7.2 Accounts Covenants.
a. Borrowers shall notify Lender promptly of: (i) any
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment
or compromise thereof and (ii) all material adverse information relating to
the financial condition of any account debtor. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Lender's consent, except in the
ordinary course of a Borrower's business in accordance with practices and
policies previously disclosed in writing to Lender. So long as no Event of
Default exists or has occurred and is continuing, each Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with
any account debtor. At any time that an Event of Default exists or has
occurred and is continuing, Lender shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or
dispute with account debtors or grant any credits, discounts or allowances.
b. Borrowers shall promptly report to Lender (i) any
returns of Inventory of common origin, design or type by one or more of a
Borrower's customers to such Borrower or by a Borrower to any single vendor
having an aggregate Value in excess of $50,000 during any two (2) month
period or (ii) any account debtor and/or retail customer claims with respect
to items of Inventory of common origin, design or type in an aggregate
amount in excess of $50,000 during any two (2) month period. In the event
any Inventory is returned when an Event of Default exists or has occurred
and is continuing, Borrowers shall, upon Lender's request, (iii) hold the
returned Inventory in trust for Lender, (iv) segregate all returned
Inventory from all of its other property, (v) dispose of the returned
Inventory solely according to Lender's instructions, and (vi) not issue any
credits, discounts or allowances with respect thereto without Lender's prior
written consent.
c. With respect to each Account: (i) the amounts shown
on any invoice delivered to Lender or schedule thereof delivered to Lender
shall be true and complete, (ii) no payments shall be made thereon except
payments immediately delivered to Lender pursuant to the terms of this
Agreement, (iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor except as
reported to Lender in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of
each Borrower's business in accordance with practices and policies
previously disclosed to Lender, (iv) there shall be no setoffs, deductions,
contras, defenses, counterclaims or disputes existing or asserted with
respect thereto except as reported to Lender in accordance with the terms of
this Agreement, (v) none of the transactions giving rise thereto will
violate any applicable State or Federal laws or regulations, all
documentation relating thereto will be legally sufficient under such laws
and regulations and all such documentation will be legally enforceable in
accordance with its terms.
d. Lender shall have the right at any time or times,
in Lender's name or in the name of a nominee of Lender, to verify the
validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
e. Borrowers shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full recourse to
Borrowers, all chattel paper and instruments which either Borrower now owns
or may at any time acquire immediately upon a Borrower's receipt thereof,
except as Lender may otherwise agree.
f. Lender may, at any time or times that an Event of
Default exists or has occurred and is continuing, (i) notify any or all
account debtors that the Accounts have been assigned to Lender and that
Lender has a security interest therein and Lender may direct any or all
accounts debtors to make payment of Accounts directly to Lender, (ii) extend
the time of payment of, compromise, settle or adjust for cash, credit,
return of merchandise or otherwise, and upon any terms or conditions, any
and all Accounts or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or parties in any
way liable for payment thereof without affecting any of the Obligations,
(iii) demand, collect or enforce payment of any Accounts or such other
obligations, but without any duty to do so, and Lender shall not be liable
for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or
has occurred and is continuing, at Lender's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to Lender and are payable directly and
only to Lender and Borrowers shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants.
With respect to the Inventory: (a) Borrowers shall at all
times maintain inventory records reasonably satisfactory to Lender, keeping
correct and accurate records itemizing and describing the kind, type,
quality (if applicable) and quantity of Inventory, Borrowers' cost therefor
and daily withdrawals therefrom and additions thereto; (b) Borrowers shall
conduct a physical count of the Inventory at least once each year, but at
any time or times as Lender may request on or after an Event of Default, and
promptly following such physical inventory shall supply Lender with a report
in the form and with such specificity as may be reasonably satisfactory to
Lender concerning such physical count; (c) Borrowers shall not remove any
Inventory from the locations set forth or permitted herein, without the
prior written consent of Lender, except for sales of Inventory in the
ordinary course of Borrowers' business and except to move Inventory directly
from one location set forth or permitted herein to another such location;
(d) upon Lender's request, Borrowers shall, at their expense, no more than
once in any twelve (12) month period, but at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Inventory in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender,
addressed to Lender or upon which Lender is expressly permitted to rely; (e)
Borrowers shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of
any insurance and in conformity with applicable laws (including, but not
limited to, the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto); (f)
Borrowers assume all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (g)
Borrowers shall not sell Inventory to any customer on approval, or any other
basis which entitles the customer to return or may obligate either Borrower
to repurchase such Inventory, except as otherwise described on Schedule 7.3
attached hereto; (h) Borrowers shall keep the Inventory in good and
marketable condition; and (i) Borrowers shall not, without prior written
notice to Lender, acquire or accept any Inventory on consignment or
approval, except as otherwise described on Schedule 7.3 attached hereto.
7.4 Equipment Covenants.
With respect to the Equipment: (a) upon Lender's reasonable
request, Borrowers shall, at their expense, at any time or times as Lender
may reasonably request on or after an Event of Default, deliver or cause to
be delivered to Lender written reports or appraisals as to the Equipment in
form, scope and methodology acceptable to Lender and by an appraiser
acceptable to Lender; (b) Borrowers shall keep the Equipment in good order,
repair, running and marketable condition (ordinary wear and tear excepted);
(c) Borrowers shall use the Equipment with all reasonable care and caution
and in accordance with applicable standards of any insurance and in
conformity with all applicable laws; (d) the Equipment is and shall be used
in Borrowers' business and not for personal, family, household or farming
use; (e) Borrowers shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any
Equipment repaired or maintained in the ordinary course of the business of
Borrowers or to move Equipment directly from one location set forth or
permitted herein to another such location and except for the movement of
motor vehicles used by or for the benefit of Borrowers in the ordinary
course of business; and (f) Borrowers assume all responsibility and
liability arising from the use of the Equipment.
7.5 Power of Attorney.
Each Borrower hereby irrevocably designates and appoints
Lender (and all persons designated by Lender) as such Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in such Borrower's or
Lender's name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default
exists or has occurred and is continuing (i) demand payment on Accounts or
other proceeds of Inventory or other Collateral, (ii) enforce payment of
Accounts by legal proceedings or otherwise, (iii) exercise all of such
Borrower's rights and remedies to collect any Account or other Collateral,
(iv) sell or assign any Account upon such terms, for such amount and at such
time or times as the Lender deems advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge and release any Account, (vii)
prepare, file and sign such Borrower's name on any proof of claim in
bankruptcy or other similar document against an account debtor, (viii)
notify the post office authorities to change the address for delivery of
such Borrower's mail to an address designated by Lender, and open and
dispose of all mail addressed to such Borrower, and (ix) do all acts and
things which are necessary, in Lender's determination, to fulfill such
Borrower's obligations under this Agreement and the other Financing
Agreements and (b) to the extent Lender determines, in good faith, that it
is necessary or appropriate to preserve, protect, insure or maintain its
rights hereunder, at any time to (i) take control in any manner of any item
of payment or proceeds thereof, (ii) have access to any lockbox or postal
box into which such Borrower's mail is deposited, (iii) endorse such
Borrower's name upon any items of payment or proceeds thereof and deposit
the same in the Lender's account for application to the Obligations, (iv)
endorse such Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account or any
goods pertaining thereto or any other Collateral, (v) sign such Borrower's
name on any verification of Accounts and notices thereof to account debtors
and (vi) execute in such Borrower's name and file any UCC financing
statements or amendments thereto. Each Borrower hereby releases Lender and
its officers, employees and designees from any liabilities arising from any
act or acts under this power of attorney and in furtherance thereof, whether
of omission or commission, except as a result of Lender's own gross
negligence or willful misconduct as determined pursuant to a final non-
appealable order of a court of competent jurisdiction.
7.6 Right to Cure.
Lender may, at its option, (a) cure any default by either
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against such Borrower, except where any such default or
non-payment would not have a Material Adverse Effect, (b) discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (c) pay any amount, incur any
expense or perform any act which, in Lender's good faith judgment, is
necessary or appropriate to preserve, protect, insure or maintain the
Collateral and the rights of Lender with respect thereto. Lender may add
any amounts so expended to the Obligations and charge Borrowers' account
therefor, such amounts to be repayable by Borrowers on demand. Lender shall
be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
either Borrower. Any payment made or other action taken by Lender under
this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.7 Access to Premises.
From time to time as requested by Lender, at the cost and
expense of Borrowers, (a) Lender or its designee shall have complete access
to all of each Borrower's premises during normal business hours and after
notice to Borrowers, or at any time and without notice to Borrowers if an
Event of Default exists or has occurred and is continuing, for the purposes
of inspecting, verifying and auditing the Collateral and all of Borrowers'
books and records, including, without limitation, the Records, and (b)
Borrowers shall promptly furnish to Lender such copies of such books and
records or extracts therefrom as Lender may request, and (c) use during
normal business hours such of Borrowers' personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of
Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrowers hereby represent and warrant to Lender the
following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of
the making of Revolving Loans and providing Letter of Credit Accommodations
by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries.
Each Borrower is a corporation duly organized and in good
standing under the laws of its state of incorporation and is duly qualified
as a foreign corporation and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it
or the ownership of assets makes such qualification necessary, except for
those jurisdictions in which the failure to so qualify would not have a
material adverse effect on such Borrower's financial condition, results of
operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's corporate powers, have been duly
authorized and are not in contravention of law or the terms of either
Borrower's certificate of incorporation, by-laws, or other organizational
documentation, or any indenture, agreement or undertaking to which a
Borrower is a party or by which a Borrower or its property are bound. This
Agreement and the other Financing Agreements constitute legal, valid and
binding obligations of each Borrower enforceable in accordance with their
respective terms. Neither Borrower has any subsidiaries except as set forth
on the Information Certificate for that Borrower.
8.2 Financial Statements; No Material Adverse Change.
All financial statements relating to either Borrower which
have been or may hereafter be delivered by a Borrower to Lender have been
prepared in accordance with GAAP and fairly present the financial condition
and the results of operation of the relevant Borrower as at the dates and
for the periods set forth therein. Except as disclosed in any interim
financial statements furnished by a Borrower to Lender prior to the date of
this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of either
Borrower, since the date of the most recent audited financial statements
furnished by each Borrower to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations.
The chief executive office of each Borrower and each
Borrower's Records concerning Accounts are located only at the address set
forth below and Borrowers' only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of each Borrower to establish
new locations in accordance with Section 9.2 below. The Information
Certificate correctly identifies any of such locations which are not owned
by a Borrower and sets forth the owners and/or operators thereof and to the
best of Borrowers' knowledge, the holders of any mortgages on such
locations.
8.4 Priority of Liens; Title to Properties.
The security interests and liens granted to Lender under
this Agreement and the other Financing Agreements constitute valid and
perfected first priority liens and security interests in and upon the
Collateral subject only to the liens indicated on Schedule 8.4 hereto and
the other liens permitted under Section 9.8 hereof. Each Borrower has good
and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of
any kind, except those granted to Lender and such others as are specifically
listed on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns.
Each Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed
in writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each
Borrower has paid or caused to be paid all taxes due and payable or claimed
due and payable in any assessment received by it, except taxes the validity
of which are being contested in good faith by appropriate proceedings
diligently pursued and available to the relevant Borrower and with respect
to which adequate reserves have been set aside on its books. Adequate
provision has been made for the payment of all accrued and unpaid Federal,
State, county, local, foreign and other taxes whether or not yet due and
payable and whether or not disputed.
8.6 Litigation.
Except as set forth on the Information Certificate, (a)
there is no present investigation by any governmental agency pending, or to
the best of Borrowers' knowledge threatened, against or affecting either
Borrower, its assets or business and (b) there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrowers'
knowledge threatened, against either Borrower or their respective assets or
goodwill, or against or affecting any transactions contemplated by this
Agreement, which, in the case of either (a) or (b), if adversely determined
against such Borrower would result in any material adverse change in the
assets, business or prospects of such Borrower or would impair the ability
of such Borrower to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Lender to enforce
any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
Neither Borrower is in default under, or in violation of any
of the terms of, any agreement, contract, instrument, lease or other
commitment to which it is a party or by which it or any of its assets are
bound, except where any such default or violation would not have a Material
Adverse Effect, and each Borrower is in compliance with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and
orders of any foreign, Federal, State or local governmental authority,
except where any such non-compliance would not have a Material Adverse
Effect.
8.8 Employee Benefits.
a. Neither Borrower has engaged in any transaction in
connection with which such Borrower or any of its ERISA Affiliates could be
subject to either a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Code, including any
accumulated funding deficiency described in Section 8.8(c) hereof and any
deficiency with respect to vested accrued benefits described in Section
8.8(d) hereof.
a. No liability to the Pension Benefit Guaranty
Corporation has been or is expected by either Borrower to be incurred with
respect to any employee pension benefit plan of such Borrower or any of its
ERISA Affiliates. There has been no reportable event (within the meaning of
Section 4043(b) of ERISA) or any other event or condition with respect to
any employee pension benefit plan of either Borrower or any of its ERISA
Affiliates which presents a risk of termination of any such plan by the
Pension Benefit Guaranty Corporation.
b. Full payment has been made of all amounts which
each Borrower or any of their respective ERISA Affiliates is required under
Section 302 of ERISA and Section 412 of the Code to have paid under the
terms of each employee pension benefit plan as contributions to such plan as
of the last day of the most recent fiscal year of such plan ended prior to
the date hereof, and no accumulated funding deficiency (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived,
exists with respect to any employee pension benefit plan, including any
penalty or tax described in Section 8.8(a) hereof and any deficiency with
respect to vested accrued benefits described in Section 8.8(d) hereof.
c. The current value of all vested accrued benefits
under all employee pension benefit plans maintained by Borrowers that are
subject to Title IV of ERISA does not exceed the current value of the assets
of such plans allocable to such vested accrued benefits, including any
penalty or tax described in Section 8.8(a) hereof and any accumulated
funding deficiency described in Section 8.8(c) hereof. The terms "current
value" and "accrued benefit" have the meanings specified in ERISA.
d. Neither Borrower nor any of Borrowers' respective
ERISA Affiliates is or has ever been obligated to contribute to any
"multiemployer plan" (as such term is defined in Section 4001(a)(3) of
ERISA) that is subject to Title IV of ERISA.
8.9 Environmental Compliance.
a. Except as set forth on Schedule 8.9 hereto, (i)
neither Borrower has generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on
or off its premises (whether or not owned by it) in any manner which at any
time violates any applicable Environmental Law or any license, permit,
certificate, approval or similar authorization thereunder and (ii) the
operations of each Borrower complies in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
b. Except as set forth on Schedule 8.9 hereto, there
has been no investigation, proceeding, complaint, order, directive, claim,
citation or notice by any governmental authority or any other person nor is
any pending or to the best of each Borrower's knowledge threatened, with
respect to any non-compliance with or violation of the requirements of any
Environmental Law by either Borrower or the release, spill or discharge,
threatened or actual, of any Hazardous Material or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or
safety matter, which materially and adversely affects either Borrower or its
business, operations or assets or any properties at which either Borrower
has transported, stored or disposed of any Hazardous Materials.
c. Except as described on Schedule 8.9 hereto, neither
Borrower has any material liability (contingent or otherwise) in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
d. Each Borrower has all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of such Borrower under any
Environmental Law, except where the failure to obtain or file any such
licenses, permits, certificates, approvals or similar authorizations would
not have a Material Adverse Effect, and all of such licenses, permits,
certificates, approvals or similar authorizations are valid and in full
force and effect.
8.10 Accuracy and Completeness of Information.
All information furnished by or on behalf of Borrowers in
writing to Lender in connection with this Agreement or any of the other
Financing Agreements or any transaction contemplated hereby or thereby,
including, without limitation, all information on the Information
Certificate is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material
fact known to Borrowers necessary in order to make such information not
misleading. No event or circumstance has occurred which has had or could
reasonably be expected to have a material adverse affect on the business,
assets or prospects of either Borrower, which has not been fully and
accurately disclosed to Lender in writing.
8.11 Solvency.
Each Borrower (a) owns and will own assets the fair saleable
value of which is (i) greater than the total amount of liabilities
(including contingent liabilities) of such Borrower and (ii) greater than
the amount that will be required to pay the probable liabilities of such
Borrower's then existing debts as they become absolute and matured
considering all financing alternatives and potential asset sales reasonably
available to such Borrower; (b) has capital that is not unreasonably small
in relation to its business as presently conducted or after giving effect to
any contemplated transaction; and (c) does not intend to incur and does not
believe that it will incur debts beyond its ability to pay such debts as
they become due.
8.12 Survival of Warranties; Cumulative.
All representations and warranties contained in this
Agreement or any of the other Financing Agreements shall survive the
execution and delivery of this Agreement and shall be deemed to have been
made again to Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein
shall be cumulative and in addition to any other representations or
warranties which Borrowers shall now or hereafter give, or cause to be
given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE
COVENANTS
9.1 Maintenance of Existence.
Each Borrower shall at all times preserve, renew and keep in
full, force and effect its corporate existence and rights and franchises
with respect thereto and maintain in full force and effect all permits,
licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Each Borrower shall give Lender thirty (30) days prior written
notice of any proposed change in its corporate name, which notice shall set
forth the new name and such Borrower shall deliver to Lender a copy of the
amendment to the Articles of Incorporation of such Borrower providing for
the name change certified by the Secretary of State of the jurisdiction of
incorporation of such Borrower as soon as it is available.
9.2 New Collateral Locations.
Each Borrower may open any new location within the
continental United States provided the relevant Borrower (a) gives Lender
thirty (30) days prior written notice of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender
may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including, without limitation, UCC financing
statements.
9.3 Compliance with Laws, Regulations, Etc.
a. Each Borrower shall, at all times, comply in all
material respects with all laws, rules, regulations, licenses, permits,
approvals and orders applicable to it and duly observe all requirements of
any Federal, State or local governmental authority, including, without
limitation, the Employee Retirement Security Act of 1974, as amended, the
Occupational Safety and Hazard Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, and all statutes, rules, regulations,
orders, permits and stipulations relating to environmental pollution and
employee health and safety, including, without limitation, all of the
Environmental Laws.
b. Each Borrower shall establish and maintain, at its
expense, a system to assure and monitor its continued compliance with all
Environmental Laws in all of its operations, which system shall include
annual reviews of such compliance by employees or agents of each Borrower
who are familiar with the requirements of the Environmental Laws. Copies of
all environmental surveys, audits, assessments, feasibility studies and
results of remedial investigations shall be promptly furnished, or caused to
be furnished, by Borrowers to Lender. Each Borrower shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such response.
c. Each Borrower shall give both oral and written
notice to Lender immediately upon a Borrower's receipt of any notice of, or
a Borrower's otherwise obtaining knowledge of, (i) the occurrence of any
event involving the release, spill or discharge, threatened or actual, of
any Hazardous Material or (ii) any investigation, proceeding, complaint,
order, directive, claims, citation or notice with respect to: (A) any non-
compliance with or violation of any Environmental Law by a Borrower or (B)
the release, spill or discharge, threatened or actual, of any Hazardous
Material or (C) the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or
(D) any other environmental, health or safety matter, which affects either
Borrower or its business, operations or assets or any properties at which
either Borrower transported, stored or disposed of any Hazardous Materials.
d. Without limiting the generality of the foregoing,
whenever Lender reasonably determines that there is non-compliance, or any
condition which requires any action by or on behalf of either Borrower in
order to avoid any material non-compliance, with any Environmental Law,
except where any such non-compliance or condition would not have a Material
Adverse Effect, and after Borrowers shall have failed, in Lender's good
faith determination, to take prompt and appropriate action to respond to any
such non-compliance or condition, Borrowers shall, at Lender's request and
Borrowers' expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests of the site where the relevant
Borrower's non-compliance or alleged non-compliance with such Environmental
Laws has occurred as to such non-compliance and prepare and deliver to
Lender a report as to such non-compliance setting forth the results of such
tests, a proposed plan for responding to any environmental problems
described therein, and an estimate of the costs thereof and (ii) provide to
Lender a supplemental report of such engineer whenever the scope of such
non-compliance, or Borrowers' response thereto or the estimated costs
thereof, shall change in any material respect.
e. Borrowers shall, indemnify and hold harmless
Lender, its directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including
attorneys' fees and legal expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including, without limitation, the costs of any required
or necessary repair, cleanup or other remedial work with respect to any
property of Borrowers and the preparation and implementation of any closure,
remedial or other required plans. All representations, warranties,
covenants and indemnifications in this Section 9.3 shall survive the payment
of the Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims.
Each Borrower shall duly pay when due and discharge all
taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower and with respect to which adequate reserves
have been set aside on its books. Each Borrower shall be liable for any tax
or penalties imposed on Lender as a result of the financing arrangements
provided for herein and Borrowers agree to indemnify and hold Lender
harmless with respect to the foregoing, and to repay to Lender on demand the
amount thereof, and until paid by Borrowers such amount shall be added and
deemed part of the Revolving Loans, provided, that, nothing contained herein
shall be construed to require Borrowers to pay any income, franchise or
other applicable taxes attributable to (i) the income of Lender from any
amounts charged or paid hereunder to Lender and (ii) Lender's activities in
the States of Michigan, Connecticut, New Hampshire, New Jersey, New York or
Vermont unrelated to this Agreement or any other Financing Agreements. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
9.5 Insurance.
Each Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral
against loss or damage and all other insurance of the kinds and in the
amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and
similarly situated, including, without limitation, business interruption
insurance. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Each Borrower shall furnish certificates,
policies or endorsements to Lender as Lender shall reasonably require as
proof of such insurance, and, if such Borrower fails to do so, Lender is
authorized, but not required, to obtain such insurance at the expense of
Borrowers. All policies shall provide for at least thirty (30) days prior
written notice to Lender of any cancellation or reduction of coverage,
except in the case of non-payment of premiums, in which case such notice
shall be ten (10) days, and that Lender may, to the extent Lender determines
in good faith that it is necessary or appropriate to preserve, protect,
insure or maintain its rights hereunder, act as attorney for each Borrower
in obtaining, and at any time an Event of Default exists or has occurred and
is continuing, adjusting, settling, amending and canceling such insurance.
Each Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and each Borrower shall obtain non-contributory lender's
loss payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall
specify that the proceeds of such insurance shall be payable to Lender as
its interests may appear and further specify that Lender shall be paid
regardless of any act or omission by Borrowers or any of their respective
affiliates. At its option, Lender may apply any insurance proceeds received
by Lender at any time to the cost of repairs or replacement of Collateral
and/or to payment of the Obligations, whether or not then due, in any order
and in such manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations.
9.6 Financial Statements and Other Information.
a. Each Borrower shall keep proper books and records
in which true and complete entries shall be made of all dealings or
transactions of or in relation to the Collateral and the business of such
Borrower and its subsidiaries (if any) in accordance with GAAP and such
Borrower shall furnish or cause to be furnished to Lender: (i) within
thirty (30) days after the end of each fiscal month, monthly unaudited
unconsolidated financial statements, and, if either Borrower has any
subsidiaries, unaudited consolidating financial statements (including in
each case balance sheets, statements of income and loss and statements of
shareholders' equity), all in reasonable detail, fairly presenting the
financial position and the results of the operations of such Borrower and
its subsidiaries as of the end of and through such fiscal month and (ii)
within ninety (90) days after the end of each fiscal year, audited
consolidated financial statements and, if either Borrower has any
subsidiaries, audited consolidating financial statements of such Borrower
and its subsidiaries (including in each case balance sheets, statements of
income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail,
fairly presenting the financial position and the results of the operations
of such Borrower and its subsidiaries as of the end of and for such fiscal
year, together with the opinion of independent certified public accountants,
which accountants shall be an independent accounting firm selected by such
Borrower and reasonably acceptable to Lender, that such financial statements
have been prepared in accordance with GAAP, and present fairly the results
of operations and financial condition of such Borrower and its subsidiaries
as of the end of and for the fiscal year then ended.
b. Borrowers shall promptly notify Lender in writing
of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to the Collateral or any other property which
is security for the Obligations or which would result in any material
adverse change in either Borrower's business, properties, assets, goodwill
or condition, financial or otherwise and (ii) the occurrence of any Event of
Default or event which, with the passage of time or giving of notice or
both, would constitute an Event of Default.
c. Each Borrower shall promptly after the sending or
filing thereof furnish or cause to be furnished to Lender copies of all
reports which such Borrower sends to its stockholders generally and copies
of all reports and registration statements which such Borrower files with
the Securities and Exchange Commission, any national securities exchange or
the National Association of Securities Dealers, Inc.
d. Borrowers shall furnish or cause to be furnished to
Lender such budgets, forecasts, projections and other information respecting
the Collateral and the business of Borrowers, as Lender may, from time to
time, reasonably request. Subject to the provisions of Section 9.6(e)
hereof, Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrowers to
any court or other government agency or to any participant or assignee or
prospective participant or assignee. Each Borrower hereby irrevocably
authorizes and requests all accountants or auditors to deliver to Lender, at
such Borrower's expense, copies of the financial statements of such Borrower
and any reports or management letters prepared by such accountants or
auditors on behalf of such Borrower and to disclose to Lender such
information as they may have regarding the business of such Borrower. Any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrowers to Lender
in writing.
e. On October 24, 1994, Lender and Crowley entered
into a letter agreement regarding certain nondisclosure and confidentiality
matters (the "Confidentiality Agreement"). Crowley and Lender acknowledge
and agree that the Confidentiality Agreement shall remain in full force and
effect during and after the term of this Agreement. Notwithstanding
anything in this Agreement to the contrary, Lender shall not disclose any
information provided by or on behalf of Crowley hereunder to any third party
unless (i) such disclosure is permitted under the Confidentiality Agreement
or (ii) such third party has agreed to be bound by a confidentiality
agreement in substantially the form of the Confidentiality Agreement.
Lender hereby agrees to be bound by the same obligations with respect to
Steinbach as are currently binding upon Lender with respect to Crowley and
set forth in the Confidentiality Agreement.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
Neither Borrower shall, directly or indirectly, (a) merge
into or with or consolidate with any other Person or permit any other Person
to merge into or with or consolidate with it, or (b) sell, assign, lease,
transfer, abandon or otherwise dispose of any of its assets to any other
Person (except for (i) sales of Inventory in the ordinary course of business
and (ii) the disposition of worn-out or obsolete Equipment or Equipment no
longer used in the business of either Borrower so long as (A) if an Event of
Default exists or has occurred and is continuing, any proceeds are paid to
Lender and (B) such sales do not involve Equipment having an aggregate fair
market value in excess of $25,000 for all such Equipment disposed of in any
fiscal year of either Borrower), or (c) form or acquire any subsidiaries, or
(d) wind up, liquidate or dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances.
Neither Borrower shall create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and
security interests of Lender; (b) liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to either
Borrower and with respect to which adequate reserves have been set aside on
its books; (c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of either Borrower's
business to the extent: (i) such liens secure indebtedness which is not
overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith
by appropriate proceedings diligently pursued and available to either
Borrower, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been
set aside on its books; (d) zoning restrictions, easements, licenses,
covenants and other restrictions affecting the use of real property which do
not interfere in any material respect with the use of such real property or
ordinary conduct of the business of either Borrower as presently conducted
thereon or materially impair the value of the real property which may be
subject thereto; (e) purchase money security interests in Equipment
(including capital leases) and purchase money mortgages on real estate not
to exceed $200,000 in the aggregate at any time outstanding so long as such
security interests and mortgages do not apply to any property of either
Borrower other than the Equipment or real estate so acquired, and the
indebtedness secured thereby does not exceed the cost of the Equipment or
real estate so acquired, as the case may be; and (f) the security interests
and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness.
Neither Borrower shall incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the affected Borrower is contesting in good faith the
amount or validity thereof by appropriate proceedings diligently pursued and
available to such Borrower, and with respect to which adequate reserves have
been set aside on its books; (c) purchase money indebtedness (including
capital leases) to the extent not incurred or secured by liens (including
capital leases) in violation of any other provision of this Agreement; (d)
indebtedness owing by any Borrower to the other Borrower; provided, that,
(i) such indebtedness is unsecured; (ii) the aggregate amount of all such
indebtedness owing between both Borrowers does not at any time exceed
$3,000,000; and (iii) immediately prior and after giving effect to each loan
made by any Borrower to the other Borrower, the Borrower making such loan
has Excess Availability of at least $1,000,000 and (e) obligations or
indebtedness set forth on the Information Certificate; provided, that, (i)
Borrowers may only make regularly scheduled payments of principal and
interest in respect of such indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such indebtedness as in
effect on the date hereof, (ii) neither Borrower shall, directly or
indirectly, (A) amend, modify, alter or change the terms of such
indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof, or (B) redeem, retire, defease, purchase or
otherwise acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (iii) Borrowers shall furnish to
Lender all notices or demands in connection with such indebtedness either
received by a Borrower or on its behalf, promptly after the receipt thereof,
or sent by a Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.10 Revolving Loans, Investments, Guarantees, Etc.
Neither Borrower shall, directly or indirectly, make any
loans or advance money or property to any person, or invest in (by capital
contribution, dividend or otherwise) or purchase or repurchase the stock or
indebtedness or all or a substantial part of the assets or property of any
person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
endorsement of instruments for collection or deposit in the ordinary course
of business; (b) investments in: (i) short-term direct obligations of the
United States Government, (ii) negotiable certificates of deposit issued by
any bank satisfactory to Lender, payable to the order of the a Borrower or
to bearer and delivered to Lender, and (iii) commercial paper rated A1 or
P1; provided, that, as to any of the foregoing, unless waived in writing by
Lender, Borrowers shall take such actions as are deemed necessary by Lender
to perfect the security interest of Lender in such investments; (c) the
guarantees set forth in the Information Certificate; (d) the transactions
permitted pursuant to Section 9.11 hereof and (e) loans made by one Borrower
to the other Borrower pursuant to Section 9.9(d).
9.11 Dividends and Redemptions.
Crowley shall not, directly or indirectly, declare or pay
any dividends on account of any shares of class of its capital stock now or
hereafter outstanding, or set aside or otherwise deposit or invest any sums
for such purpose, or redeem, retire, defease, purchase or otherwise acquire
any shares of any class of capital stock (or set aside or otherwise deposit
or invest any sums for such purpose) for any consideration other than common
stock or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to
do any of the foregoing, except as set forth on Schedule 9.11 hereto.
9.12 Transactions with Affiliates.
Except for loans made by one Borrower to the other Borrower
pursuant to Section 9.9(d), neither Borrower shall enter into any
transaction for the purchase, sale or exchange of property or the rendering
of any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's business and upon
fair and reasonable terms no less favorable to such Borrower than such
Borrower would obtain in a comparable arm's length transaction with an
unaffiliated person.
9.13 Compliance with ERISA.
Neither Borrower shall, with respect to any "employee
pension benefit plans" maintained by a Borrower or any of its ERISA
Affiliates:
a.(i) terminate any of such employee pension benefit plans
so as to incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any prohibited
transaction involving any of such employee pension benefit plans or any
trust created thereunder which would subject either Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any
such employee pension benefit plan any contribution which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
plan, (iv) allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such employee pension benefit
plan, (v) allow or suffer to exist any occurrence of a reportable event or
any other event or condition which presents a material risk of termination
by the Pension Benefit Guaranty Corporation of any such employee pension
benefit plan that is a single employer plan, which termination could result
in any liability to the Pension Benefit Guaranty Corporation or (vi) incur
any withdrawal liability with respect to any multiemployer pension plan.
b. As used in this Section 9.13, the term "employee
pension benefit plans," "employee benefit plans", "accumulated funding
deficiency" and "reportable event" shall have the respective meanings
assigned to them in ERISA, and the term "prohibited transaction" shall have
the meaning assigned to it in Section 4975 of the Code and ERISA.
9.14 Costs and Expenses.
Borrowers shall pay to Lender on demand all costs, expenses,
filing fees and taxes (exclusive of taxes described in the proviso in
Section 9.4 hereof) paid or payable in connection with the preparation,
negotiation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in
the Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to:
(a) all costs and expenses of filing or recording (including Uniform
Commercial Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) costs and expenses and fees for title insurance and other
insurance premiums, environmental audits, surveys, assessments, engineering
reports and inspections, appraisal fees and search fees; (c) costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together
with Lender's customary charges and fees with respect thereto; (d) charges,
fees or expenses charged by any bank or issuer in connection with the Letter
of Credit Accommodations; (e) costs and expenses of preserving and
protecting the Collateral; (f) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened
against Lender arising out of the transactions contemplated hereby and
thereby (including, without limitation, preparations for and consultations
concerning any such matters); (g) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrowers'
operations, plus a per diem charge at the rate of (1) $500 per person per
day for Lender's examiners in the field and office; and (2) $1,000 per
person per day for Lender's appraisers in the field and office; (h) the
reasonable fees and disbursements of counsel (including legal assistants) to
Lender in connection with any of the foregoing.
9.15 Further Assurances.
At the request of Lender at any time and from time to time,
each Borrower shall, at its expense, duly execute and deliver, or cause to
be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise
effectuate the provisions or purposes of this Agreement or any of the other
Financing Agreements. Lender may at any time and from time to time request
a certificate from an officer of each Borrower representing that all
conditions precedent to the making of Revolving Loans and providing Letter
of Credit Accommodations contained herein are satisfied. In the event of
such request by Lender, Lender may, at its option, cease to make any further
Revolving Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, and to the
extent Lender determines in good faith that it is necessary or appropriate
to secure the payment and performance of the Obligations, each Borrower
hereby authorizes Lender to execute and file one or more UCC financing
statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default.
The occurrence or existence of any one or more of the
following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
a. (i) Borrowers fail to pay when due any of the
Obligations, or (ii) Borrowers fail to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements (other than the failure to pay when due any of the
Obligations) and such failure shall continue for thirty (30) days; provided,
that, such thirty (30) day period shall not apply in the case of: (A) any
failure to observe any such term, covenant, condition or provision which is
not capable of being cured at all or within such thirty (30) day period or
which has been the subject of a prior failure within a six (6) month period,
or (B) an intentional breach by Borrowers of any such term, covenant,
condition or provision, or (C) the failure to observe or perform any of the
covenants or provisions contained in Section 6.3, 9.5, 9.7, 9.8, 9.11 or
9.12 of this Agreement or any covenants or agreements covering substantially
the same matter as such sections in any of the other Financing Agreements;
b. any representation, warranty or statement of fact
made by either Borrower to Lender in this Agreement or in any other
Financing Agreement shall when made or deemed made be false or misleading in
any material respect;
c. any Obligor revokes, terminates or fails to perform
any of the terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such party in favor of Lender;
d. any judgment for the payment of money is rendered
against Borrowers or any Obligor in excess of $250,000 in any one case or in
excess of $500,000 in the aggregate and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at
any time not be effectively stayed, or any judgment other than for the
payment of money, or injunction, attachment, garnishment or execution is
rendered against Borrowers or any Obligor or any of their respective assets;
e. any Obligor (being a natural person or a general
partner of an Obligor which is a partnership) dies or either Borrower or any
Obligor which is a partnership or corporation dissolves or suspends or
discontinues doing business;
f. Either Borrower or any Obligor becomes insolvent
(however defined or evidenced), makes an assignment for the benefit of
creditors, makes or sends notice of a bulk transfer or calls a meeting of
its creditors or principal creditors;
g. a case or proceeding under the bankruptcy laws of
the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against either Borrower or any
Obligor or all or any part of its properties and such petition or
application is not dismissed within thirty (30) days after the date of its
filing or either Borrower or any Obligor shall file any answer admitting or
not contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;
h. a case or proceeding under the bankruptcy laws of
the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at a law or equity) is filed by either Borrower or any Obligor or
for all or any part of its property;
i. any default by either Borrower or any Obligor under
any agreement, document or instrument relating to any indebtedness for
borrowed money owing to any person other than Lender, or any capitalized
lease obligations, contingent indebtedness in connection with any guarantee,
letter of credit, indemnity or similar type of instrument in favor of any
person other than Lender, in any case in an amount in excess of $250,000,
which default continues for more than the applicable cure period, if any,
with respect thereto, or any default by either Borrower or any Obligor under
any material contract, lease, license or other obligation to any person
other than Lender, which default continues for more than the applicable cure
period, if any, with respect thereto;
j. the indictment or threatened indictment of either
Borrower or any Obligor under any criminal statute, or commencement or
threatened commencement of criminal or civil proceedings against Borrowers
or any Obligor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the property of
Borrowers or such Obligor;
k. there shall be a change in the business, assets or
prospects of either Borrower or any Obligor after the date hereof which
change has a Material Adverse Effect; or
l. there shall be an event of default under any of the
other Financing Agreements.
10.2 Remedies.
a. At any time an Event of Default exists or has
occurred and is continuing, Lender shall have all rights and remedies
provided in this Agreement, the other Financing Agreements, the Uniform
Commercial Code and other applicable law, all of which rights and remedies
may be exercised without notice to or consent by any Borrower or any
Obligor, except as such notice or consent is expressly provided for
hereunder or required by applicable law. All rights, remedies and powers
granted to Lender hereunder, under any of the other Financing Agreements,
the Uniform Commercial Code or other applicable law, are cumulative, not
exclusive and enforceable, in Lender's discretion, alternatively,
successively, or concurrently on any one or more occasions, and shall
include, without limitation, the right to apply to a court of equity for an
injunction to restrain a breach or threatened breach by either Borrower of
this Agreement or any of the other Financing Agreements. Lender may, at any
time or times, proceed directly against any Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
b. Without limiting the foregoing, at any time an
Event of Default exists or has occurred and is continuing, Lender may, in
its discretion and without limitation, (i) accelerate the payment of all
Obligations and demand immediate payment thereof to Lender (provided, that,
upon the occurrence of any Event of Default described in Sections 10.1(g)
and 10.1(h), all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii)
require Borrowers, at Borrowers' expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize
upon any and all Collateral, (v) remove any or all of the Collateral from
any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any
other purpose, (vi) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering
into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such
prices or terms as Lender may deem reasonable, for cash, upon credit or for
future delivery, with the Lender having the right to purchase the whole or
any part of the Collateral at any such public sale, all of the foregoing
being free from any right or equity of redemption of Borrowers, which right
or equity of redemption is hereby expressly waived and released by Borrowers
and/or (vii) terminate this Agreement. If any of the Collateral is sold or
leased by Lender upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by Lender. If notice of disposition of Collateral is required by
law, five (5) days prior notice by Lender to Borrowers designating the time
and place of any public sale or the time after which any private sale or
other intended disposition of Collateral is to be made, shall be deemed to
be reasonable notice thereof and Borrowers waive any other notice. If
Lender institutes an action to recover any Collateral or seeks recovery of
any Collateral by way of prejudgment remedy, Borrowers waive the posting of
any bond which might otherwise be required.
c. Lender may apply the cash proceeds of Collateral
actually received by Lender from any sale, lease, foreclosure or other
disposition of the Collateral to payment of the Obligations, in whole or in
part and in such order as Lender may elect, whether or not then due. Each
Borrower shall remain liable to Lender for the payment of any deficiency
with interest at the highest rate provided for herein and all costs and
expenses of collection or enforcement, including attorneys' fees and legal
expenses.
d. Without limiting the foregoing, upon the occurrence
of an Event of Default or an event which with notice or passage of time or
both would constitute an Event of Default, Lender may, at its option,
without notice, (i) cease making Revolving Loans or arranging for Letter of
Credit Accommodations or reduce the lending formulas or amounts of Revolving
Loans and Letter of Credit Accommodations available to Borrowers and/or (ii)
terminate any provision of this Agreement providing for any future Revolving
Loans or Letter of Credit Accommodations to be made by Lender to Borrowers.
SECTION 11. JURY TRIAL WAIVER; OTHER
WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury
Trial Waiver.
a. The validity, interpretation and enforcement of
this Agreement and the other Financing Agreements and any dispute arising
out of the relationship between the parties hereto, whether in contract,
tort, equity or otherwise, shall be governed by the internal laws of the
State of Illinois (without giving effect to principles of conflicts of law).
b. Borrowers and Lender irrevocably consent and submit
to the non-exclusive jurisdiction of the Circuit Court of Cook County,
Illinois and the United States District Court for the Northern District of
Illinois, Eastern Division and waive any objection based on venue or forum
non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way
connected with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the other Financing Agreements
or the transactions related hereto or thereto, in each case whether now
existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall
be heard only in the courts described above (except that Lender shall have
the right to bring any action or proceeding against either Borrower or its
respective property in the courts of any other jurisdiction which Lender
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against either Borrower or its respective
property).
c. Each Borrower hereby waives personal service of any
and all process upon it and consents that all such service of process may be
made by certified mail (return receipt requested) directed to its address
set forth on the signature pages hereof and service so made shall be deemed
to be completed five (5) days after the same shall have been so deposited in
the U.S. mails, or, at Lender's option, by service upon such Borrower in any
other manner provided under the rules of any such courts. Within thirty
(30) days after such service, such Borrower shall appear in answer to such
process, failing which such Borrower shall be deemed in default and judgment
may be entered by Lender against such Borrower for the amount of the claim
and other relief requested.
d. EACH BORROWER AND LENDER HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING
UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS
OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE. EACH BORROWER AND LENDER EACH HEREBY AGREES AND CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT SUCH BORROWER OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL
BY JURY.
e. Lender shall not have any liability to either
Borrower (whether in tort, contract, equity or otherwise) for losses
suffered by such Borrower in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement,
or any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Lender, that the losses were the result of acts or omissions constituting
gross negligence or willful misconduct. In any such litigation, Lender shall
be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it
of the terms of this Agreement.
11.2 Waiver of Notices.
Each Borrower hereby expressly waives demand, presentment,
protest and notice of protest and notice of dishonor with respect to any and
all instruments and commercial paper, included in or evidencing any of the
Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on either Borrower which Lender may elect to
give shall entitle such Borrower to any other or further notice or demand in
the same, similar or other circumstances.
11.3 Amendments and Waivers.
Neither this Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but
only by a written agreement signed by authorized officers of Lender and
Borrowers. Lender shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its rights, powers
and/or remedies unless such waiver shall be in writing and signed by an
authorized officer of Lender. Any such waiver shall be enforceable only to
the extent specifically set forth therein. A waiver by Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to
or waiver of any such right, power and/or remedy which Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims.
Each Borrower waive all rights to interpose any claims,
deductions, setoffs or counterclaims of any nature (other then compulsory
counterclaims) in any action or proceeding with respect to this Agreement,
the Obligations, the Collateral or any matter arising therefrom or relating
hereto or thereto.
11.5 Indemnification.
Borrowers shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing
Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including, without limitation, amounts paid in
settlement, court costs, and the reasonable fees and expenses of counsel.
To the extent that the undertaking to indemnify, pay and hold harmless set
forth in this Section may be unenforceable because it violates any law or
public policy, Borrowers shall pay the maximum portion which it is permitted
to pay under applicable law to Lender in satisfaction of indemnified matters
under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
a. This Agreement and the other Financing Agreements
shall become effective as of the date set forth on the first page hereof and
shall continue in full force and effect for a term ending on November 4,
1999 (the "Renewal Date"), and from year to year thereafter, unless sooner
terminated pursuant to the terms hereof; provided, that, Borrowers shall pay
Lender an annual renewal fee in the amount of $60,000 in the aggregate,
which fee shall be paid in advance on each anniversary of this Agreement
commencing with the Renewal Date. Lender or Borrowers may terminate this
Agreement and the other Financing Agreements effective on the Renewal Date
or on the anniversary of the Renewal Date in any year by giving to the other
party at least sixty (60) days prior written notice; provided, that, this
Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of
the Financing Agreements, Borrowers shall pay to Lender, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to
Lender in such amounts as Lender determines are reasonably necessary to
secure Lender from loss, cost, damage or expense, including reasonable
attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to the
Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to a Borrower for such purpose.
Interest shall be due until and including the next Business Day, if the
amounts so paid by each Borrower to the bank account designated by Lender
are received in such bank account later than 12:00 noon, Chicago time.
b. No termination of this Agreement or the other
Financing Agreements shall relieve or discharge either Borrower of its
respective duties, obligations and covenants under this Agreement or the
other Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Lender's continuing security interest in the
Collateral and the rights and remedies of Lender hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all
such Obligations have been fully and finally discharged and paid.
c. If for any reason this Agreement is terminated
prior to the end of the then current term or renewal term of this Agreement,
in view of the impracticality and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable
calculation of Lender's lost profits as a result thereof, Borrowers agree to
pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is
effective in the period indicated:
Amount Period
------ ------
(i) Two percent (2.0%) of the On or prior to the first
difference between (i) the anniversary of this
Maximum Credit and (ii) the Agreement
average daily principal balance
of the outstanding Revolving
Loans and Letter of Credit
Accommodations for both
Borrowers
(ii) One percent (1.0%) of the After the first anniversary
difference between (i) the of this Agreement and on or
Maximum Credit and (ii) the prior to the second anniversary
average daily principal balance of this Agreement
of the outstanding Revolving
Loans and Letter of Credit
Accommodations for both Borrowers
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and each Borrower
agrees that it is reasonable under the circumstances currently existing.
The early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations.
12.2 Notices.
All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to each
Borrower at its chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made:
if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with
instructions to deliver the next Business Day, one (1) Business Day after
sending; and if by certified mail, return receipt requested, five (5) days
after mailing.
12.3 Partial Invalidity.
If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Agreement as a whole, but this Agreement shall be construed as though it did
not contain the particular provision held to be invalid or unenforceable and
the rights and obligations of the parties shall be construed and enforced
only to such extent as shall be permitted by applicable law.
12.4 Successors.
This Agreement, the other Financing Agreements and any other
document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers and their respective
successors and assigns, except that Borrowers may not assign their rights
under this Agreement, the other Financing Agreements and any other document
referred to herein or therein without the prior written consent of Lender.
Lender may, after notice to each Borrower, assign its rights and delegate
its obligations under this Agreement and the other Financing Agreements and
further may assign, or sell participations in, all or any part of the
Revolving Loans, the Letter of Credit Accommodations or any other interest
herein to another financial institution or other person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were the
Lender hereunder, except as otherwise provided by the terms of such
assignment or participation.
12.5 Entire Agreement.
This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
12.6 No Novation.
This Agreement shall not constitute a novation of the
"Obligations" under, and as defined in, the Original Agreement, but instead
this Agreement shall constitute an amendment and restatement of such
Obligations.
IN WITNESS WHEREOF, Lender and Borrowers have caused these
presents to be duly executed as of the day and year first above written.
LENDER
CONGRESS FINANCIAL CORPORATION
(CENTRAL)
By: /s/ Brett Mook
--------------------------
Brett Mook
Title: Vice President
Address:
100 South Wacker Drive
Chicago, Illinois 60606
BORROWERS
CROWLEY, MILNER AND COMPANY
By: /s/ Dennis P. Callahan
-------------------------
Dennis P. Callahan
Title: President
Chief Executive Office:
2301 West Lafayette
Detroit, Michigan 48216
STEINBACH STORES, INC.
By: /s/ Dennis P. Callahan
---------------------------
Dennis P. Callahan
Title: President
Chief Executive Office:
2301 West Lafayette
Detroit, Michigan 48216
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 7.3 Inventory Covenants
Schedule 8.4 Existing Liens
Schedule 8.9 Environmental Compliance
Schedule 9.11 Permitted Dividends and Other Distributions on Capital Stock
Exhibit 10.12
AMENDMENT NO. 3 TO AGREEMENT AND PLAN OF REORGANIZATION
This AMENDMENT NO. 3 TO AGREEMENT AND PLAN OF REORGANIZATION
("Amendment No. 3") is made as of July 26, 1996 between CROWLEY, MILNER AND
COMPANY, a Michigan corporation ("Crowley's"), and the shareholders of
STEINBACH STORES, INC., an Ohio corporation ("Steinbach"), listed on the
signature page hereof (collectively, the "Shareholders").
Recitals
1. Prior to the date hereof, the parties hereto entered into
that certain Agreement and Plan of Reorganization dated November 17, 1995 as
amended by Amendment No. 1 thereto dated December 29, 1995 and Amendment No.
2 thereto dated May 14, 1996 (collectively, the "Agreement and Plan of
Reorganization").
2. The parties hereto desire to further amend the Agreement and
Plan of Reorganization.
Agreement
NOW, THEREFORE, in consideration of these premises and subject to
the terms and conditions contained herein and for the other consideration
provided herein, the parties agree to amend the Agreement and Plan of
Reorganization as follows:
A. Termination -- Methods. Section 8.1(h) of the Agreement and
Plan of Reorganization is amended and restated in its entirety as follows:
(h) By either the Shareholders or Crowley's if the
Closing has not occurred on or before August 31, 1996.
B. Effective Date. The effective date of this Amendment No. 3
is as of the date first written above.
C. Continuation of Agreement. Except as expressly modified or
amended hereby, all of the terms and conditions of the Agreement and Plan of
Reorganization shall continue and remain in full force and effect.
D. Definitions. Capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Agreement and Plan of
Reorganization.
E. Counterparts. This Amendment No. 3 may be executed in any
number of counterparts, each of which shall be treated as an original but
all of which, collectively, shall constitute a single instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment No. 3 as of the day and year first above written.
CROWLEY, MILNER AND COMPANY, Crowley's
By: /s/ DENNY CALLAHAN
------------------------------
Denny Callahan
Its: CEO
JEROME SCHOTTENSTEIN SUB CHAPTER S TRUST
NOS. 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10,
each a Shareholder and collectively the
Shareholders
By: /s/ JAY L. SCHOTTENSTEIN
---------------------------------
Jay L. Schottenstein, Trustee for
each of the above-named Trusts
Exhibit 10.13
INTERIM OPERATING AGREEMENT - AMENDMENT NUMBER 1
This Amendment Number 1 to Interim Operating Agreement is entered
into as of August 31, 1996 among Crowley, Milner and Company ("Crowley"),
Steinbach Stores, Inc. ("Steinbach") and the shareholders (the
"Shareholders") of Steinbach. Capitalized terms used without definition are
used as defined in the Interim Operating Agreement referred to below.
RECITALS
A. The parties hereto entered into an Interim Operating
Agreement (the "Interim Agreement") dated as of December 29, 1995, with
respect to the operation of certain assets of Steinbach and the
determination and discharge of certain liabilities of Steinbach during the
Contract Period.
B. Section 3.2 of the Interim Agreement provided for the
payment and termination of the NCB Line of Credit. Said Section 3.2
provided, among other things, for the ability of Steinbach to continue to
make draws under the NCB Line of Credit in connection with the operation of
the Acquired Stores through the Closing, in addition, all advances made to
Steinbach under the NCB Line of Credit after December 30, 1995 relative to
the operation of the Acquired Stores shall be for Crowley's account. Said
Section 3.2 also contemplated that the NCB Line of Credit would be
terminated and all advances thereunder would be repaid on the date Closing
should occur.
C. The amount advanced under the NCB Line of Credit
attributable to the operation of the Acquired Stores is not precisely known
as of the Closing Date. Each of Crowley and the Shareholders intends to
advance funds to pay its estimated share of the advances under the NCB Line
of Credit at the Closing and each of the parties understands that the amount
of such advances is subject to adjustment.
Therefore, the parties agree as follows:
1. To the extent that advances made under Section 3.2 for the
account of either Crowley or the Shareholders, whether made before or after
the Closing Date, are determined by the final accounting contemplated by
Section 3.3 of the Interim Agreement to have been in excess of amounts
properly allocated to that party in accordance with the Interim Agreement,
the other party will pay the amount of such excess to that party promptly
after the final accounting, together with interest thereon to the date of
payment.
IN WITNESS WHEREOF, the parties have executed this Amendment Number
1 to Interim Agreement as of the date first written above.
CROWLEY, MILNER AND COMPANY
By: /s/ DENNY CALLAHAN
---------------------------
Denny Callahan
Its: President/CEO
STEINBACH STORES, INC.
By: /s/ JAY L. SCHOTTENSTEIN
---------------------------
Jay L. Schottenstein
Its:President and Chairman of the
Board
JEROME SCHOTTENSTEIN SUBCHAPTER S
TRUSTS NOS. 1 THROUGH 10,
SHAREHOLDERS
By: /s/ JAY L. SCHOTTENSTEIN
-----------------------------
Jay L. Schottenstein, Trustee
for each of the above-named
Trusts
Exhibit 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Current Report
on Form 8-K of Crowley, Milner and Company (the "Company") of our report
dated February 8, 1996 relating to the Financial Statements of Steinbach
Stores, Inc. as of December 30, 1995 and January 28, 1995 and the related
Statements of Operations, Stockholders' Equity and Cash Flows for the eleven
month period ended December 30, 1995 and the three month period ended
January 28, 1995 and of our report dated February 8, 1996 related to the
Statements of Operations and Cash Flows of Steinbach Inc. (the predecessor
to Steinbach Stores, Inc.) for the nine month period ended October 29, 1994
and the year ended January 29, 1994, both of which reports were filed with
and included in the Company's Proxy Statement dated July 25, 1996.
/s/ Ernst & Young LLP
New York, New York
September 16, 1996
