SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 29, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission File Number 0-17871
EAGLE FOOD CENTERS, INC.
(Exact name of registrant as specified in the charter)
Delaware 36-3548019
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Rt. 67 & Knoxville Rd., Milan, Illinois 61264
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (309) 787-7730
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
The number of shares of the Registrant's Common Stock, par value one cent
($0.01) per share, outstanding at June 1, 1995 was 11,176,994.
Page 1 of 10 pages
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
April 29, 1995 April 30, 1994
<S> <C> <C>
Sales. . . . . . . . . . . . . . . . . $ 245,530 $ 250,097
Cost of goods sold . . . . . . . . . . 184,105 187,575
Gross margin. . . . . . . . . . . . 61,425 62,522
Operating expenses:
Selling, general & administrative . 55,939 53,587
Depreciation and amortization . . . 6,240 5,824
Operating income (loss). . . . . ( 754) 3,111
Interest expense . . . . . . . . . . . 3,966 3,494
Earnings (loss) before income taxes. . (4,720) (383)
Income taxes (benefit) . . . . . . . . (237) (22)
Net (loss) . . . . . . . . . . . . . . $ (4,483) $ (361)
Earnings (loss) per share. . . . . . . $ (0.41) $ (0.03)
Weighted average common shares
outstanding . . . . . . . . . . . . . 11,051,994 11,051,994
</TABLE>
See notes to consolidated financial statements.
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
April 29, January 28,
1995 1995
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . $ 5,136 $ 4,096
Restricted assets - marketable
securities, at market . . . . 6,177 5,239
Accounts receivable. . . . . . . 10,731 11,035
Income taxes receivable. . . . . 7,389 7,213
Inventories. . . . . . . . . . . 77,112 83,939
Prepaid expenses and other . . . 3,575 2,663
Total current assets. . . . . 110,120 114,185
Property and equipment (net) . . . 161,392 167,749
Other assets:
Deferred debt issuance costs . . 2,937 2,960
Excess of cost over fair value
of net assets acquired. . . . 2,629 2,650
Property held for
sale/leaseback. . . . . . . . 20,899 20,710
Other. . . . . . . . . . . . . . 3,838 3,230
Total other assets. . . . . . 30,303 29,550
Total assets. . . . . . . . . $301,815 $311,484
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable . . . . . . . . $ 42,523 $ 44,738
Payroll and employee benefits. . 15,433 14,678
Accrued liabilities. . . . . . . 18,494 20,185
Accrued taxes. . . . . . . . . . 8,957 8,117
Bank revolving credit loan . . . 21,000 22,000
Current portion of long-term
debt . . . . . . . . . . . . 3,688 3,667
Total current liabilities . . 110,095 113,385
Long-term debt:
Senior Notes . . . . . . . . . . 100,000 100,000
Capital lease obligations. . . . 17,293 18,216
Total long-term debt. . . . . 117,293 118,216
Other liabilities:
Reserve for closed stores
and warehouse. . . . . . . . 26,760 27,082
Other deferred liabilities . . . 9,521 10,316
Total other liabilities . . . 36,281 37,398
Shareholders' equity:
Preferred stock, $.01 par value,
100,000 shares authorized. . . -- --
Common stock, $.01 par value,
18,000,000 shares authorized,
11,500,000 shares issued . . . 115 115
Capital in excess of par value . 53,541 53,541
Common stock in treasury,
at cost, 448,006 shares. . . . (2,850) (2,850)
Other. . . . . . . . . . . . . . (243) (387)
Accumulated (deficit) . . . . . (12,417) (7,934)
Total shareholders' equity. . 38,146 42,485
Total liabilities and
shareholders' equity. . . . $301,815 $311,484
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
EAGLE FOOD CENTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Quarter Ended
April 29, 1995 April 30, 1994
<S> <C> <C>
Cash flows from operating activities:
Net (loss). . . . . . . . . . . . . . . . $ (4,483) $ (361)
Adjustments to reconcile net (loss) to
cash provided from operating activities:
Depreciation and amortization . . . . . . 6,240 5,824
LIFO charge . . . . . . . . . . . . . . . 250 100
Deferred charges and credits. . . . . . . 824 1,913
Loss (gain) on disposal of assets . . . . 152 (50)
Changes in assets and liabilities:
Receivables and other assets. . . . . . . (1,550) (279)
Inventories . . . . . . . . . . . . . . . 6,577 6,094
Accounts payable. . . . . . . . . . . . . (2,215) (3,638)
Accrued and other liabilities . . . . . . (891) (1,729)
Reserve for closed stores and warehouse . (832) (3,468)
Net cash provided by operating
activities. . . . . . . . . . . . . . 4,072 4,406
Cash flows from investing activities:
Additions to property and equipment . . . (366) (4,571)
Additions to property held for
sale/leaseback . . . . . . . . . . . . (190) (1,645)
Purchases of marketable securities. . . . (794) 0
Cash proceeds from dispositions of
property and equipment . . . . . . . . 351 591
Net cash used in investing
activities . . . . . . . . . . . (999) (5,625)
Cash flows from financing activities:
Retirement of debt. . . . . . . . . . . . 0 (15)
Net revolving credit borrowing
(repayment). . . . . . . . . . . . . . (1,000) 2,000
Principal payments of capital
lease obligations. . . . . . . . . . . (902) (670)
Deferred financing costs. . . . . . . . . (131) (44)
Net cash (used) provided by financing
activities . . . . . . . . . . . . (2,033) 1,271
Increase in cash and cash equivalents . . 1,040 52
Cash and cash equivalents at
beginning of period. . . . . . . . . . 4,096 8,056
Cash and cash equivalents at end
of period. . . . . . . . . . . . . . . $ 5,136 $ 8,108
Supplemental disclosures of cash flow information:
Cash paid for interest . . . . . . . . $ 5,962 $ 5,987
Cash paid for income taxes . . . . . . $ (68) $ (75)
Noncash investing and financing activities:
Unrealized (loss) gain on securities . $ 144 $ 0
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Accounting Policies
The accompanying unaudited financial statements have been
prepared in accordance with the summary of significant accounting
policies set forth in the notes to the audited financial statements
contained in the Company's Form 10-K filed with the Securities and
Exchange Commission on April 28, 1995.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments, of a normal recurring nature,
necessary for a fair statement of the results of operations and
financial position for the interim periods presented. Operating
results for the thirteen weeks ended April 29, 1995 are not
necessarily indicative of the results that may be expected for the
fiscal year ending February 3, 1996.
Subsequent Events
On May 25, 1995 the Company closed on a new $40.0 million
Revolving Credit Agreement with Congress Financial Corporation
(Central) which replaces the existing Revolving Credit Agreement.
The terms of the credit facility include i) a three year term, ii) one
financial covenant related to minimum net worth, iii) borrowing cost
comparable to the previous credit agreement, and iv) security in
inventory as collateral. As a result of such refinancing, the
Company will incur a charge of approximately $700,000 in the
second quarter to write off deferred financing costs.
On May 22, 1995 Robert J. Kelly was named President and Chief
Executive Officer. Mr. Kelly joins Eagle after a thirty-two year
career at The Vons Companies, Inc. where, for the last three years
he served as Executive Vice President, Retailing with profit and loss
responsibility for 340 store locations and $5.0 billion in annual sales
volume. He was also a member of The Von's five-person Executive
Committee.
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Sales for the Company's first fiscal quarter ended April 29, 1995
were $245.5 million, a decrease of $4.6 million or 1.8% from the
first quarter of 1994. Same store sales for the quarter declined
0.8%. There were 96 stores operating in the first quarter of fiscal
1995 compared to 102 in the first quarter of fiscal 1994.
Gross margin was 25.02% of sales for the quarter ended April 29,
1995 compared to 25.00% in the comparable quarter of 1994. Total
gross margins have returned to historical levels in the first quarter
after two quarters of substantial reductions for aggressive
promotional spending. The Company is funding its current
promotional spending with higher vendor allowances and better
shrink controls.
Selling, general and administrative expenses rose to 22.78% of sales
for the quarter ended April 29, 1995 compared to 21.43% in the
comparable quarter of fiscal 1994. The increase in expense rate was
primarily due to increased payroll, advertising and consulting
expenses.
Depreciation and amortization expenses increased to $6.2 million or
2.54% of sales compared to $5.8 million or 2.33% of sales in the
same quarter in 1994. The higher depreciation expenses are
primarily due to the four new stores opened in the past year and a
new capital lease for upgrading store computer systems.
Interest expense rose to 1.62% of sales for the quarter ended April
29, 1995 compared to 1.40% in the comparable quarter of fiscal
1994. The increased expense is due to increased borrowing levels
under the Revolving Credit Agreement and higher interest rates.
A net loss was incurred for the first quarter ended April 29, 1995 of
$4.5 million or $0.41 per share, compared to a 1994 first quarter net
loss of $361,000 or $0.03 per share. Lower sales and higher
expense levels, both on a dolllar basis and as a percentage of sales,
were responsible for the earnings decline in the first quarter of fiscal
1995.
Liquidity and Capital Resources
Cash provided by operating activities totaled $4.1 million for the
quarter ended April 29, 1995 compared to $4.4 million in the
comparable quarter of 1994. Cash was provided by a decrease in
inventory levels of $6.6 million, and partially offset by a decrease
in accounts payable of $2.2 million in the 1995 quarter.
Capital expenditures for the quarter ended April 29, 1995 were
$366,000 compared to capital expenditures of $4.6 million in the
first quarter of 1994. An additional $190,000 was invested in
property held for resale during the first quarter of fiscal 1995. No
stores were opened or closed during the first quarter of fiscal 1995.
On May 25, 1995 the Company closed on a new, three year, $40.0
million Revolving Credit Agreement with Congress Financial
Corporation (Central). This replaced the existing $35.0 million
Revolving Credit Agreement. There was $21.0 million outstanding
under the revolving credit agreement on April 29, 1995.
Working capital at April 29, 1995 was $25,000 and the current ratio
was 1.00 to 1 compared to $800,000 and 1.01 to 1 at January 28,
1995 and $27.1 million and 1.28 to 1 at April 30, 1994.
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
A. . . . . . . . . . . . . . . Exhibits
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized:
EAGLE FOOD CENTERS, INC.
Dated: June 9, 1995 /s/ Robert J. Kelly
Robert J. Kelly
President and Chief Executive
Officer
Dated: June 9, 1995 /s/ Herbert T. Dotterer
Herbert T. Dotterer
Sr. Vice President - Finance and
Chief Financial Officer
<PAGE>
Exhibit
Number Description
3.1-- Certificate of Incorporation of the Company (filed as
Exhibit 3.1 to the
Registration Statement on Form S-1 No. 33-29404 and
incorporated herein by reference).
3.2-- By-laws of the Company (filed as Exhibit 3.2 to the
Registration Statement on Form S-1 No. 33-29404 and
incorporated herein by reference).
4.1-- Form of Note (filed as Exhibit 4.3 to the Registration
Statement on Form S-1 No. 33-59454 and incorporated
herein by reference).
4.2-- Form of Indenture, dated as of April 26, 1993, between
the Company and First Trust National Association, as
trustee (filed as Exhibit 4.4 to the Registration
Statement on Form S-1 No. 33-59454 and incorporated
herein by reference).
10.1-- Transaction Agreement, dated as of October 9, 1987,
between EFC and Lucky Stores, Inc. (filed as
Exhibit 10.8 to the Registration Statement on Form S-1
No. 33-20450 and incorporated herein by reference).
10.2-- Assignment and Assumption Agreement, dated
November 10, 1987, among EFC, Lucky Stores, Inc.
and Pasquale V. Petitti regarding the Deferred
Compensation Agreement (filed as Exhibit 10.11 of the
Registration Statement on Form S-1 No. 33-20450 and
incorporated herein by reference).
10.3-- Trademark License Agreement, dated November 10,
1987, between Lucky Stores, Inc. and EFC (filed as
Exhibit 10.19 to the Registration Statement on Form S-
1 No. 33-20450 and incorporated herein by reference).
10.4-- Letter Agreement, dated June 10, 1988, between the
Company's predecessor and Lucky Stores, Inc.
amending the Trademark License Agreement (filed as
Exhibit 10.20 to the Company's Annual Report on
Form 10-K for the year ended January 28, 1989 (the
"1988 10-K") and incorporated herein by reference).
10.5-- Management Information Services Agreement, dated
November 10, 1987, between Lucky Stores, Inc. and
the Company's predecessor (filed as Exhibit 10.20 to
the Registration Statement on Form S-1 No. 33-20450
and incorporated herein by reference).
10.6-- Letter Agreement, dated June 10, 1988, between the
Company's predecessor and Lucky Stores, Inc. Stores,
Inc. amending the Management Information Services
Agreement (filed as Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the year ended
January 28, 1989 and incorporated herein by
reference).
10.7-- Non-Competition Agreement, dated November 10,
1987, between the Company's predecessor and Lucky
Stores, Inc. (filed as Exhibit 10.21 to the Registration
Statement on Form S-1 No. 33-20450 and
incorporated herein by reference).
10.8-- Credit Agreement, dated as of April 26, 1993, among
the Company, as borrower, the lenders party thereto
and Caisse Nationale de Credit Agricole, Chicago
Branch, and the First National Bank of Chicago as co-
agents; as amended by First Amendment to Credit
Agreement dated as of October 15, 1993, a Second
Amendment to Credit Agreement and Waiver dated as
of January 28, 1994, and a Third Amendment to Credit
Agreement dated April 29, 1994.
10.9-- Letter Agreement, dated April 28, 1988, among
American Stores Company, the Company's predecessor
and Odyssey Partners (filed as Exhibit 10.29 to the
Registration Statement on Form S-1 No. 33-20450 and
incorporated herein by reference).
10.10-- Eagle Food Centers, Inc. Stock Incentive Plan, adopted
in June 1990 (filed as Exhibit 19 to the Company's
Annual Report on Form 10-K for the year ended
February 1, 1992 and incorporated herein by
reference).
10.11-- Agreement, dated as of February 8, 1993, by and
between the Company and Oakridge Properties, Ltd.
(filed as Exhibit 10.17 to the Registration Statement on
Form S-1 No. 33-59454 and incorporated herein by
reference).
10.12-- Form of Irrevocable Trust Agreement, to be dated as of
April 26, 1993, among the Company, Eagle Capital
Corporation II and Shawmut Bank Connecticut,
National Association, as trustee (filed as Exhibit 10.18
to the Registration Statement on Form S-1 No. 33-
59454 and incorporated herein by reference).
10.13-- Performance Equity Plan of the Company as amended
March 12, 1992. (Filed as Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the year
ended January 30, 1993 and incorporated herein by
reference.)
10.14-- Fourth Amendment to the Credit Agreement and waiver
dated September 7, 1994. Fifth Amendment to the
Credit Agreement and waiver dated December 9, 1994.
Sixth Amendment to the Credit Agreement dated
January 27, 1995.
10.15*-- Seventh Amendment to the Credit Agreement and
waiver dated April 24, 1995.
10.16*-- Loan and Security Agreement, dated as of May 22,
1995, among the Company, as borrower and the lender
party thereto, Congress Financial Corporation
(Central).
12.1-- Computation of Ratio of Earnings to Fixed Charges
(filed as Exhibit 12.1 to the Registration Statement on
Form S-1 No. 33-59454 and incorporated herein by
reference).
22.-- Subsidiaries of the Registrant.
27*-- Financial Data Schedule (for SEC use only).
*Filed herewith.
Exhibit 10.15
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT
(this "Amendment"), dated as of this 24th day of April, 1995, is entered into
among EAGLE FOOD CENTERS, INC., a Delaware corporation (the
"Borrower"), CAISSE NATIONALE DE CREDIT AGRICOLE ("CNCA")
and THE FIRST NATIONAL BANK OF CHICAGO ("FNBC"), as co-agents
(the "Co-Agents"), the Banks (as hereafter defined), and CNCA, acting
through its Chicago Branch, as agent for the Banks (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, certain lenders (the "Banks"), the
Agent and the Co-Agents are parties to a Credit Agreement dated as of
April 26, 1993, as amended by a First Amendment to Credit Agreement
dated as of October 15, 1993, a Second Amendment to Credit Agreement and
Waiver dated as of January 28, 1994, a Third Amendment to Credit
Agreement dated as of April 29, 1994, a Fourth Amendment to Credit
Agreement dated as of September 7, 1994, a Fifth Amendment to Credit
Agreement dated as of December 9, 1994 and a Sixth Amendment to Credit
Agreement dated as of January 27, 1995 (the "Credit Agreement"), pursuant
to which the Banks established various credit facilities for the benefit of the
Borrower; and
WHEREAS, the parties hereto desire to amend the Credit
Agreement with respect to certain matters as hereafter specifically provided;
NOW, THEREFORE, the parties hereto agree as follows:
1. Unless otherwise specified herein, all capitalized terms used
herein shall have the meanings specified in the Credit Agreement.
2. Section 1.01 of the Credit Agreement is hereby amended by
adding the following definitions thereto in the appropriate alphabetical order:
"Sale and Leaseback Transaction" shall mean the transaction
described in Schedule 1 to the Seventh Amendment.
"Seventh Amendment" shall mean the Seventh Amendment to
Credit Agreement dated as of April 24, 1995 among the Borrower, the
Co-Agents, the Banks and the Agent.
"Seventh Amendment Effective Date" shall mean the effective
date of the Seventh Amendment.
3. Section 1.01 of the Credit Agreement is hereby amended by
adding the following proviso to the end of the "Borrowing Base" definition
contained therein:
; provided, that, (A) at all times after the Seventh Amendment
Effective Date, the Borrowing Base shall not include any items
consisting of fresh produce, frozen produce, restaurant food,
packaging materials and supplies, deli, floral or bakery supplies
or any public warehouse inventory, inventory in transit or
consignment goods and (B) at all times after May 31, 1995, (1)
the Borrowing Base shall not include any pharmacy items and
(2) the advance rate with respect to any eligible general
merchandise, domestics, health and beauty aids and housewares
(as classified in accordance with the Borrower's procedures in
effect on the Seventh Amendment Effective Date) will not
exceed 30%.
4. Section 2.08(a) of the Credit Agreement is hereby amended and
restated to read as follows:
SECTION 2.08. Interest on Loans. (a) Subject to the
provisions of Section 2.09, each Base Rate Loan shall bear interest on
the outstanding principal thereof, for each day from the date such Loan
is made until but excluding the date it becomes due, at a rate per
annum (computed on the basis of actual number of days elapsed over
a year of 365 or 366 days, as the case may be) equal to the sum of the
Base Rate plus 2.5%; provided, that such interest rate shall increase by
0.5% per annum on the first day of the fiscal quarter commencing July
30, 1995 and by an additional 0.5% on the first day of each fiscal
quarter thereafter. Such interest shall be payable on each applicable
Interest Payment Date.
5. Section 2.09 of the Credit Agreement is hereby amended and
restated to read as follows:
SECTION 2.09. Interest on Overdue Amounts. If the
Borrower shall default in the payment of the principal of or interest on
any Loan or any other amount becoming due hereunder, by scheduled
maturity, notice of prepayment, acceleration or otherwise, the
Borrower shall on demand from time to time from the Agent pay
interest, to the extent permitted by law, on such defaulted amount up
to (but not including) the date of actual payment (after as well as
before judgment) at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the
case may be) equal to the rate of interest then applicable under Section
2.08(a) plus 2% per annum.
6. Section 2.12 of the Credit Agreement is hereby amended by
adding the following paragraphs to the end of such Section:
(d) The Borrower agrees to pay to each Bank, through the
Agent, on each March 31, June 30, September 30, December 31 and
on the earlier of the Maturity Date and the termination of the
Commitment as provided herein, in same day funds, a facility fee (a
"Facility Fee") on such Bank's Percentage of 0.50% per annum on the
average daily amount of the Commitment. All Facility Fees shall be
computed on the basis of the actual number of days elapsed in a year
of 360 days.
(e) The Borrower agrees to pay each Bank, through the Agent,
in same day funds amendment fees with respect to the Seventh
Amendment in an amount equal to 0.25% of such Bank's Percentage
of the Commitment on the Seventh Amendment Effective Date, on each
of (i) the Seventh Amendment Effective Date and (ii) May 31, 1995;
provided, that the Borrower shall not be required to pay the fee
payable on May 31, 1995 if the Commitment is no longer in effect and
no Loan, accrued interest or other amount is outstanding hereunder on
such date.
7. Section 5.06(a) of the Credit Agreement is hereby amended by
deleting the phrase "for year-end audit adjustments" in the parenthetical at the
end of such paragraph.
8. Section 5.06 of the Credit Agreement is hereby amended by
adding the following clause to the end of such Section:
(1) By the end of the second Business Day of each week, the
Borrower shall deliver to the Agent a certificate in a form reasonably
acceptable to the Agent certifying as to the amount of the Borrowing
Base as of the end of the previous week.
9. Section 5.12 of the Credit Agreement is hereby amended and
restated to read as follows:
SECTION 5.12. Tangible Net Worth. Maintain a Tangible
Net Worth at the end of each fiscal quarter of not less than (a)
$39,720,000 at the end of the fourth fiscal quarter of the 1994 fiscal
year; (b) $34,500,000 at the end of the first fiscal quarter of the 1995
fiscal year; (c) $28,000,000 at the end of the second fiscal quarter of
the 1995 fiscal year (or, if the Sale and Leaseback Transaction has
been consummated, $27,700,000); (d) $24,800,000 at the end of the
third fiscal quarter of the 1995 fiscal year (or, if the Sale and
Leaseback Transaction has been consummated, $24,500,000); (e)
$23,800,000 at the end of the fourth fiscal quarter of the 1995 fiscal
year (or, if the Sale and Leaseback Transaction has been consummated,
$23,300,000); (f) $61,000,000, thereafter to and including the end of
the third fiscal quarter of the 1996 fiscal year; (g) $65,000,000,
thereafter to and including the end of the third fiscal quarter of the
1997 fiscal year; and (h) $69,000,000, at all times thereafter. For the
purposes hereof, (i) the 1994 fiscal year shall mean the fiscal year
ending on January 28, 1995 and (ii) Tangible Net Worth shall be
increased by up to $5,300,000 of the aggregate amount of all Employee
Buyout Expenses applicable to any period ending on or before the
Seventh Amendment Effective Date.
10. Section 5.14 of the Credit Agreement is hereby amended and
restated to read as follows:
SECTION 5.14. Fixed Charge Coverage Ratio. Maintain a
Fixed Charge Coverage Ratio at the end of each fiscal quarter of at
least (a) 1.27:1 for the fiscal quarter ending January 28, 1995; (b)
1.06:1 for the fiscal quarter ending April 29, 1995; (c) 1.00:1 for the
fiscal quarter ending July 29, 1995; (d) 1.03:1 for the fiscal quarter
ending October 28, 1995 (or, if the Sale and Leaseback Transaction
has been consummated, 1.00:1); (e) 1.08:1 for the quarter ending
February 4, 1996 (or, if the Sale and Leaseback Transaction has been
consummated, 1.02:1); and (f) 1.70:1 for all fiscal quarters ending
thereafter.
11. Section 6.15 of the Credit Agreement is hereby amended and
restated to read as follows:
SECTION 6.15. Leverage Ratio. Permit the Leverage Ratio
to equal or exceed (a) 5.75:1 at the end of the fiscal quarter ending
January 28, 1995; (b) 7.80:1 at the end of the fiscal quarter ending
April 29, 1995; (c) 8.40:1 at the end of the fiscal quarter ending July
29, 1995 (or, if the Sale and Leaseback Transaction has been
consummated, 7.48:1); (d) 7.40:1 at the end of the fiscal quarter
ending October 28, 1995 (or, if the Sale and Leaseback Transaction
has been consummated, 7.48:1); (e) 6.50:1 at the end of the fiscal
quarter ending February 4, 1996 (or, if the Sale and Leaseback
Transaction has been consummated, 7.11); and (f) 2.75:1 at the end of
any fiscal quarter thereafter.
12. In order to induce the Banks and the Agent to enter into this
Amendment, the Borrower represents and warrants that:
(a) The execution and delivery of this Amendment by the
Borrower and the performance of the Credit Agreement as amended by this
Amendment (the "Amended Agreement") (i) have been duly authorized by
all requisite corporate action and (ii) will not (A) violate (1) any provision
of the certificate of incorporation or by-laws of the Borrower or any of its
Subsidiaries or any provision of any applicable law, statute, rule or regulation
(including, without limitation, Regulations G, T, U or X), (2) any order of
any court, or any rule, regulation or order of any other agency of
government binding upon the Borrower or any of its Subsidiaries or (3) any
provisions of any indenture, agreement or other instrument to which the
Borrower or any of its Subsidiaries is a party, or by which the Borrower or
any of its Subsidiaries, or any of their respective properties or assets is or
may be bound, (B) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any indenture,
agreement or other instrument referred to in clause (ii)(A)(3) above or (C)
result in the creation or imposition of any Lien (other than in favor of the
Agent for the benefit of the Banks as contemplated by the Amended
Agreement) upon any property or assets of the Borrower or any of its
Subsidiaries.
(b) No registration with or consent or approval of, or other
action by, any Federal, state or other governmental agency, authority or
regulatory body is or will be required in connection with the execution and
delivery by the Borrower of this Amendment or the performance by the
Borrower of the Amended Agreement.
(c) This Amendment and the Amended Agreement constitute
legal, valid and binding obligations of the Borrower, enforceable against the
Borrower in accordance with their respective terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting creditors' rights generally).
(d) The representations and warranties set forth in Article III
of the Credit Agreement are true and correct in all material respects with the
same effect as though made on and as of the date hereof, except to the extent
that any such representation or warranty relates to an earlier date.
(e) The Borrower is in compliance with all the terms and
provisions contained in the Amended Agreement and in the other Loan
Documents and the Senior Note Indenture on its part to be observed or
performed and no Event of Default or Potential Default has occurred and is
continuing.
13. Except as amended, modified or waived by this Amendment,
the Credit Agreement shall continue in full force and effect.
14. This Amendment may be executed in one or more counterparts,
each of which shall constitute an original but all of which when taken
together shall constitute but one agreement.
15. This Amendment shall become effective when (a) copies hereof
which, when taken together, bear the signature of the Borrower and each
Bank shall be delivered or mailed to the Agent, (b) the Borrower shall have
paid to the Agent the amendment fee that is payable on the Seventh
Amendment Effective Date pursuant to Section 2.12(e) of the Credit
Agreement, (c) the Borrower shall have delivered to the Agent resolutions of
the Board of Directors of the Borrower approving and authorizing the
execution, delivery and performance of this Amendment, certified by the
Borrower's Secretary or an assistant secretary as being in full force and effect
without modification or amendment, (d) the Agent shall have received an
opinion of the Borrower's counsel with respect to this Amendment in form
and substance acceptable to the Agent and (e) the Agent has received such
other information, approvals, documents or instruments as the Agent may
reasonably request.
16. This Amendment shall be construed in accordance with and
governed by the laws of the State of Illinois without giving effect to choice
of law doctrine.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by their duly authorized officers, all as of
the day and year first written above.
EAGLE FOOD CENTERS, INC.
By:
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE, as Agent
By:
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE, as Co-Agent and a Bank
By:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agent and a Bank
By:
Title:
NATIONAL BANK OF CANADA
By:
Title:
BERLINER HANDELS-UND FRANKFURTER BANK
By:
Title:
NORWEST BANK IOWA, NATIONAL ASSOCIATION, f/k/a
DAVENPORT BANK AND TRUST COMPANY, NATIONAL
ASSOCIATION
By:
Title:
Exhibit 10.16
Loan and Security Agreement
by and between
CONGRESS FINANCIAL CORPORATION (CENTRAL)
as Lender
and
EAGLE FOOD CENTERS, INC.
as Borrower
Dated: May 25, 1995
<PAGE>
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . 9
2.1 Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Letter of Credit Accommodations. . . . . . . . . . . . . . . . . 9
2.3 Optional Reductions in Maximum Credit. . . . . . . . . . . . . . 11
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . 12
3.1 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Servicing Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Unused Line Fee. . . . . . . . . . . . . . . . . . . . . . . . . 14
3.4 Changes in Laws; Increased Costs of Loans; Breakage Fees . . . . 14
SECTION 4. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . 15
4.1 Conditions Precedent to Initial Loans and
Letter of Credit Accommodations . . . . . . . . . . . . . . . 15
4.2 Conditions Precedent to All Loans and
Letter of Credit Accommodations . . . . . . . . . . . . . . . 16
SECTION 5. GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . 17
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . 17
6.1 Borrower's Loan Account. . . . . . . . . . . . . . . . . . . . . 17
6.2 Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Collections. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Authorization to Make Loans. . . . . . . . . . . . . . . . . . . 18
6.6 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7. COLLATERAL REPORTING AND COVENANTS. . . . . . . . . . . . . 19
7.1 Collateral Reporting . . . . . . . . . . . . . . . . . . . . . . 19
7.2 Inventory Covenants. . . . . . . . . . . . . . . . . . . . . . . 19
7.3 Proceeds Covenants . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . . 20
7.5 Right to Cure. . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.6 Access to Premises . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . 21
8.1 Corporate Existence, Power and Authority; Subsidiaries . . . . . 21
8.2 Financial Statements; No Material Adverse Change.. . . . . . . . 22
8.3 Chief Executive Office; Collateral Locations.. . . . . . . . . . 22
8.4 Priority of Liens; Title to Properties; Ownership of Assets. . . 22
8.5 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.6 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.7 Compliance with Other Agreements and Applicable Laws . . . . . . 23
8.8 Environmental Compliance.. . . . . . . . . . . . . . . . . . . . 23
8.9 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . 24
8.10 Credit Cards.. . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.11 Accuracy and Completeness of Information.. . . . . . . . . . . . 24
8.12 Survival of Warranties; Cumulative . . . . . . . . . . . . . . . 25
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS. . . . . . . . . . . . . 25
9.1 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . 25
9.2 New Collateral Locations . . . . . . . . . . . . . . . . . . . . 25
9.3 Compliance with Laws, Regulations, Etc.. . . . . . . . . . . . . 25
9.4 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . . 26
9.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.6 Financial Statements and Other Information . . . . . . . . . . . 27
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. . . . . 28
9.8 Encumbrances . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.9 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.10 Loans, Investments, Guarantees, Etc. . . . . . . . . . . . . . . 30
9.11 Dividends and Redemptions. . . . . . . . . . . . . . . . . . . . 30
9.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 31
9.13 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . 31
9.14 Adjusted Net Worth . . . . . . . . . . . . . . . . . . . . . . . 32
9.15 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . 32
9.16 Landlord Agreements. . . . . . . . . . . . . . . . . . . . . . . 32
9.17 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . 32
9.18 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 10. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . 33
10.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . 33
10.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.3 Use of Intellectual Property. . . . . . . . . . . . . . . . . . 36
SECTION 11. JURY TRIAL WAIVER;
OTHER WAIVERS AND CONSENTS; GOVERNING LAW . . . . . . . . . 36
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver. . . . . . . . . . . . . . . . . . . . . . 36
11.2 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . 37
11.3 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . 37
11.4 Waiver of Counterclaims . . . . . . . . . . . . . . . . . . . . 37
11.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS. . . . . . . . . . . . . . 38
12.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
12.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.3 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . . . 39
12.4 Successors. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.5 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . 40
12.6 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 40
<PAGE>
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Form of Opinion
Exhibit C Form of Accountant Letter
Exhibit D Form of Officer's Certificate
Exhibit E Form of Letter from Accountants
Schedule 8.4 Existing Liens
Schedule 8.6 Litigation
Schedule 8.8 Environmental Matters
Schedule 8.9 Employee Benefits Matters
Schedule 8.10 Credit Cards Etc.
Schedule 9.9(e) Capital Leases
<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated May 25, 1995 is entered into by and
between Congress Financial Corporation (Central), an Illinois corporation
("Lender"), and Eagle Food Centers, Inc., a Delaware corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into certain
financing arrangements with Borrower pursuant to which Lender may
make loans and provide other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code as in effect in the State of Illinois shall have
the meanings given therein unless otherwise defined in this Agreement.
All references to the plural herein shall also mean the singular and to the
singular shall also mean the plural. All references to Borrower and Lender
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns. The
words "hereof", "herein", "hereunder", "this Agreement" and words of
similar import when used in this Agreement shall refer to this Agreement
as a whole and not any particular provision of this Agreement and as this
Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default
is cured to the satisfaction of Lender or waived in accordance with Section
11.3. Any accounting term used herein unless otherwise defined in this
Agreement shall have the meanings customarily given to such term in
accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:
1.1 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) determined by dividing (1)
the Eurodollar Rate for such Interest Period by (2) a percentage equal to:
(i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to
deposits of United States dollars in a non-United States or an international
banking office of Reference Bank used to fund a Eurodollar Rate Loan or
any Eurodollar Rate Loan made with the proceeds of such deposit, whether
or not the Reference Bank actually holds or has made any such deposits or
loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.
1.2 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below),
on a consolidated basis for such Person and its Subsidiaries (if any), the
amount equal to the sum of (a) the difference between (i) the aggregate net
book value of all assets of such Person and its Subsidiaries, calculating the
book value of inventory for this purpose on a first-in-first-out basis, after
deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) minus (ii) the aggregate amount of the
indebtedness and other liabilities of such Person and its Subsidiaries
(including tax and other proper accruals) plus (b) all losses (and minus all
gains) recorded after January 28, 1995 related to store closings, fixed asset
dispositions, lease terminations and/or any other significant charge (or
credit) which is not in the ordinary course of Borrower's business and,
without duplication, the effect of any write-off of previously incurred costs
of the Existing Credit Agreement.
1.3 "Affiliate" shall mean, with respect to a specified person, any other
person, directly or indirectly, controlling or controlled by or under direct
or indirect common control with such specified person. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used
with respect to any person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
or policies of such person, whether through the ownership of voting
securities, by agreement or otherwise; provided, that, beneficial ownership
of ten (10%) percent or more of the voting securities of a person shall be
deemed to be control.
1.4 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise
reducing and adjusting the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrower under
the lending formula(s) provided for herein: (a) to reflect events,
conditions, contingencies or risks which, as determined by Lender in its
Permitted Discretion, do or may affect either (i) the Collateral or any other
property which is security for the Obligations or its value, (ii) the assets,
business or prospects of Borrower or (iii) the security interests and other
rights of Lender in the Collateral (including the enforceability, perfection
and priority thereof) or (b) to reflect Lender's belief, in its Permitted
Discretion, that any collateral report or financial information furnished by
or on behalf of Borrower to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect of any
state of facts which Lender determines in its Permitted Discretion
constitutes an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default; provided, however, that the amount
of any Availability Reserve established hereunder shall be in an amount
reasonably related to Lender's perception of the event or circumstance
which gives rise to such Availability Reserve; provided, additionally, that
Lender will use good faith efforts to give Borrower notice at least two
days prior to establishing any Availability Reserve, but that Lender shall
not be liable for any failure to so notify Borrower, nor shall any such
failure (i) reduce any or all of Borrower's obligations to Lender or (ii)
alter Lender's ability to from time to time, establish and/or revise
Availability Reserves.
1.5 "Breakage Fees" shall mean with respect to any Eurodollar Rate
Loan which is at any time paid prior to the last day of its Interest Period,
regardless of the reason for such prepayment, the positive difference, if
any, between the total amount of interest that would have been due for the
balance of the scheduled Interest Period on such Eurodollar Rate Loan if
it had not been so prepaid and the amount of interest that would be earned
if the amount of the prepaid Eurodollar Rate Loan were invested for the
remaining balance of such Interest Period at the CD Rate in effect on the
first day of the month in which such prepayment occurs. As used herein,
"CD Rate" shall mean the rate quoted in the "Money Rates" section of The
Wall Street Journal for the average of the top rates paid by New York
banks on primary new issues of negotiable certificates of deposit in
amounts of $1 million and more having a 1-month maturity, as published
on the first Business Day of the month in which any prepayment of a
Eurodollar Rate Loan occurs.
1.6 "Business Day" shall mean (a) with respect to any borrowing,
payment or rate selection relating to Eurodollar Rate Loans, a day other
than Saturday or Sunday on which banks are open for business in the
States of New York and Illinois and the Commonwealth of Pennsylvania
and on which dealings in United States dollars are carried on in the
London interbank market or other applicable Eurodollar Rate market, and
(b) for all other purposes, a day other than Saturday or Sunday on which
banks are open for business in the States of New York and Illinois and the
Commonwealth of Pennsylvania.
1.7 "Capital Expenditures" shall mean, for any period, the sum of (i)
expenditures (except interest capitalized during construction) by Borrower
and its Subsidiaries during such period for the acquisition, construction or
improvement of property, plant and equipment or that otherwise have been
or should be classified as capital expenditures in conformity with GAAP,
plus (ii) all expenditures made by Borrower and/or its Subsidiaries during
that period under capital leases, minus (iii) the net cash proceeds received
by Borrower from assets disposed of as contemplated by the Turn Around
Plan.
1.8 "Change in Control" shall mean the occurrence of either (a) any
Person or any Persons (other than Odyssey or any Subsidiary of Odyssey,
so long as such Subsidiary remains a Subsidiary of Odyssey) acting
together that would constitute a "group" (for purposes of Section 13(d) of
the Securities Exchange Act of 1934, as amended, or any successor
provision thereto) (a "Group"), together with any affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended, or any successor provision thereto) at least 50%
of the Voting Stock of Borrower; or (b) any Person (other than Odyssey
or any Subsidiary of Odyssey, so long as such Subsidiary remains a
Subsidiary of Odyssey), or Group, together with any affiliates thereof, shall
succeed in having sufficient of its nominees elected to the Board of
Directors of the Borrower such that such nominees, when added to any
existing director remaining on the Board of Directors of the Borrower after
such election who is an affiliate of such Group, will constitute a majority
of the Board of Directors of the Borrower.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.10 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.11 "Consolidated Net Income" for any fiscal year of the Borrower
shall mean the net income of Borrower and its Subsidiaries on a
consolidated basis for such fiscal year, determined in accordance with
GAAP (excluding the effect of all gains or losses related to store closings,
fixed asset dispositions, lease terminations and/or any other significant
charge or credit which is not in the ordinary course of Borrower's
business).
1.12 "Congress Accounts" shall have the meaning set forth in Section
6.3 hereof.
1.13 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower
which are acceptable to Lender based on the criteria set forth below. In
general, Eligible Inventory at any time shall not include (a) work-in-
process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials and/or store
displays; (e) supplies used or consumed in Borrower's business; (f)
Inventory at premises other than those owned and controlled by Borrower,
except if (1) Lender shall have received an agreement in writing from the
person in possession of such Inventory and/or the owner or operator of
such premises in form and substance reasonably satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory
and permitting Lender access to, and the right to remain on, the premises
so as to exercise Lender's rights and remedies and otherwise deal with the
Collateral or (2) Borrower is current in all payments owing to the owner
and/or lessor of such premises, is not in default under the agreement
allowing Borrower to occupy or use such premises and is not in default
under Section 9.16 hereof; (g) Inventory subject to a security interest or
lien in favor of any person other than Lender except those permitted in this
Agreement; (h) bill and hold goods; (i) Slow Moving Inventory at such
time; (j) Inventory which is not subject to the first priority, valid and
perfected security interest of Lender; (k) returned, spoiled, damaged and/or
defective Inventory and/or salvage items; (l) Inventory purchased or sold
on consignment, (m) perishable items (including, without limitation,
produce, fresh fish, floral items, bakery goods and prepared foods) and (n)
in-transit goods not yet received by Borrower. General criteria for Eligible
Inventory may be established and revised from time to time by Lender in
its Permitted Discretion. Any Inventory which is not Eligible Inventory
shall nevertheless be part of the Collateral.
1.14 "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 environ-
mental matters, as now or at any time hereafter in effect, applicable to
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.
1.15 "Equipment" shall mean all of Borrower's now owned and
hereafter acquired equipment, machinery, computers, computer hardware,
owned and licensed computer software, vehicles, tools, furniture, fixtures,
all attachments, accessions and property now or hereafter affixed thereto
or used in connection therewith, and substitutions and replacements
thereof, wherever located.
1.16 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all
applicable rules, regulations and interpretations thereunder or related
thereto.
1.17 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
1.18 "Eurodollar Rate" shall mean, with respect to any Interest Period
for a Eurodollar Rate Loan requested by Borrower by not less than three
(3) Business Days' prior notice to Lender, the interest rate per annum
equal to the arithmetic mean of the rates of interest per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) at which Reference Bank
is offered deposits of United States dollars in the London interbank market
(or other Eurodollar Rate market selected by Borrower and approved by
Lender, which approval shall not be unreasonably withheld) at or about
9:00 a.m. (New York time) two (2) Business Days prior to the
commencement of such Interest Period in amounts substantially equal to
the principal amount of the Eurodollar Rate Loans requested by and
available to Borrower in accordance with this Agreement, with a maturity
of comparable duration to the Interest Period selected by Borrower. Upon
receipt of Borrower's request for a Eurodollar Rate Loan, Lender will, if
requested, provide Borrower with an indication of the prevailing Eurodollar
Rate on the Business Day of such request; provided, however, that the
actual Eurodollar Rate which is applicable to the requested Interest Period
shall be determined as provided above and may be higher or lower than
such indicative rate.
1.19 "Eurodollar Rate Loans" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in
accordance with the terms hereof.
1.20 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.21 "Excess Loan Availability" means, at any time, an amount equal
to the difference between (a) the lesser of (i) the amount calculated
pursuant to Section 2.1(a) hereof at such time and (ii) the Maximum Credit
at such time, minus (ii) the aggregate amount of the Loans and Letter of
Credit Accommodations outstanding at such time.
1.22 "Existing Credit Agreement" shall mean that certain Credit
Agreement dated as of April 26, 1993, as amended, among Borrower, the
lenders party thereto, Caisse Nationale de Credit Agricole, Chicago Branch,
and The First National Bank of Chicago, as co-agents and Caisse Nationale
de Credit Agricole, Chicago Branch, as agent for such lenders.
1.23 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements, and other agreements,
documents and instruments now or at any time hereafter executed and/or
delivered by Borrower in connection with this Agreement, as the same now
exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.24 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Boards which are
applicable to the circumstances as of the date of determination consistently
applied, except that, for purposes of Sections 9.13 and 9.14 hereof, GAAP
shall be determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the audited
financial statements delivered to Lender prior to the date hereof.
1.25 "Hazardous Materials" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, friable asbestos, urea formaldehyde
insulation, radioactive materials, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, and/or any other similar
substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental
Law (including, without limitation any that are or become classified as
hazardous or toxic under any Environmental Law).
1.26 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information
with respect to Borrower, its business and assets provided by or on behalf
of Borrower to Lender in connection with the preparation of this
Agreement and the other Financing Agreements and the financing
arrangements provided for herein.
1.27 "Interest Period" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2) or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance
with the customary practice in the applicable Eurodollar Rate market;
provided that Borrower may not elect an Interest Period which will end
after the last day of the then-current term of this Agreement.
1.28 "Interest Rate" shall mean: (a) as to Revolving Loans which are
Prime Rate Loans and all other non-contingent Obligations not expressly
covered in the following clause (b), a rate of one percent (1%) per annum
in excess of the Prime Rate and (b) as to Revolving Loans which are
Eurodollar Rate Loans, a rate of three and one half percent (3.50%) per
annum in excess of the Adjusted Eurodollar Rate for the applicable Interest
Period selected by Borrower in accordance with the terms hereof; provided
that the Interest Rate shall mean the rate of (i) three percent (3%) per
annum in excess of the Prime Rate as to Revolving Loans which are Prime
Rate Loans and all other non-contingent Obligations not expressly covered
in the following clause (ii) and (ii) five and one half percent (5.50%) per
annum in excess of the Adjusted Eurodollar Rate as to Revolving Loans
which are Eurodollar Rate Loans, in each case at Lender's option, without
notice, (a) for the period on and after the date of termination or non-
renewal hereof, or the date of the occurrence of any Event of Default for
so long as such Event of Default is continuing as determined by Lender
and until such time as such Event of Default has been cured to the
satisfaction of Lender or waived or all Obligations are indefeasibly paid in
full (notwithstanding entry of any judgment against Borrower) and (b) on
the Revolving Loans at any time outstanding in excess of the amounts
available to Borrower under Section 2 (if such excess(es) arise or are made
without Lender's consent); provided, however, that Lender reserves the
right to condition any consent to such excess(es) and/or waiver of an Event
of Default resulting therefrom, inter alia, on receiving the higher Interest
Rates set forth in the preceding proviso; provided, additionally, that in the
event that (i) Borrower shall at any time hereafter have Consolidated Net
Income for any fiscal year of Borrower greater than zero and (ii) Borrower
shall provide Lender with financial statements, certified as being in
accordance with GAAP by Deloitte & Touche or other certified public
accountants reasonably acceptable to Lender, confirming such fact, the
applicable margins set forth in clauses (a) and (b) above shall be reduced
to three quarters of one percent (0.75%) per annum and three and one
quarter percent (3.25%) per annum, respectively.
1.29 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.30 "Inventory Advance Rate" shall mean, at any time, the percentage
then being applied for advances against Eligible Inventory pursuant to
Section 2.1(a) hereof.
1.31 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of Borrower or (b)
with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by Borrower of its obligations to
such issuer.
1.32 "Letter of Credit Percentage" shall mean at any time, one hundred
percent (100%) minus the Inventory Advance Rate at such time.
1.33 "Loans" shall mean the Revolving Loans.
1.34 "Material Adverse Effect" shall mean a material adverse effect
upon (i) the business, operations, properties, assets or condition (financial
or otherwise) of Borrower, (ii) the ability of Borrower to perform, or of
Lender to enforce, any of the Obligations and/or (iii) any right of Lender
hereunder and/or under any other Financing Agreement.
1.35 "Maximum Credit" shall mean $40,000,000, as such amount may
be reduced pursuant to Section 2.3 hereof.
1.36 "Obligations" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower to
Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under this Agreement or otherwise,
whether now existing or hereafter arising, whether arising before, during
or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would accrue
and become due but for the commencement of such case), whether direct
or indirect, absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, secured or unsecured, and
however acquired by Lender.
1.37 "Odyssey" shall mean Odyssey Partners, L.P., a Delaware limited
partnership.
1.38 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.39 "Permitted Discretion" means Lender's good faith judgment based
upon any factor which it believes in good faith: (i) will or could adversely
affect the value of any Collateral, the enforceability or priority of Lender's
liens and security interests with respect thereto or the amount which
Lender would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of such Collateral;
(ii) suggests that any collateral report or financial information delivered to
Lender by any person on behalf of Borrower is incomplete, inaccurate or
misleading in any material respect; (iii) materially increases the likelihood
of a bankruptcy, reorganization or other insolvency proceeding involving
Borrower or any of its Subsidiaries or any of the Collateral, or (iv) creates
or reasonably could be expected to create or result in an Event of Default.
In exercising such judgment, Lender may consider such factors already
included in or tested by the definition of Eligible Inventory, as well as any
of the following: (a) the financial and business climate of Borrower's
industry and general macroeconomic conditions, (b) changes in demand
for, and pricing of, Inventory, (c) changes in any concentration of risk with
respect to Inventory, and (d) any other factors that change the credit risk
of lending to Borrower on the security of the Inventory. The burden of
establishing lack of good faith shall be on Borrower.
1.40 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation, business trust, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or
any agency or instrumentality or political subdivision thereof.
1.41 "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.
1.42 "Prime Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the
terms thereof.
1.43 "Records" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of
Borrower with respect to the foregoing maintained with or by any other
person).
1.44 "Reference Bank" shall mean CoreStates Bank, N.A., or such other
bank as Lender may from time to time designate.
1.45 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.46 "Sales Tax Reserve" shall mean, at any time, an amount equal to
Borrower's good faith estimate of the accrued but unpaid (whether or not
yet due) sales tax collected from Borrower's customers.
1.47 "Slow Moving Inventory" shall mean, at any time, Inventory which
Borrower has purchased or received more than one hundred and eighty
days prior to such time, other than certain health and beauty aid products
specifically determined (which determination has not been revoked) and set
forth in writing by Lender as not being Slow Moving Inventory which
Borrower has purchased or received less than three hundred and sixty days
prior to such time.
1.48 "Subsidiary" shall mean, with respect to any Person (the "parent"),
any corporation, association or other business entity of which securities or
other ownership interests representing more than 50% of the ordinary
voting power are, at the time as of which any determination is being made,
owned or controlled by the parent or one or more Subsidiaries of the
parent or by the parent and one or more Subsidiaries of the parent.
1.49 "Turn Around Plan" shall mean that certain 1995 Operating Plan
dated March 23, 1995.
1.50 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
1.51 "Voting Stock" of any Person shall mean the capital stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times
or only so long as no senior class of securities has such voting power by
reason of any contingency.
SECTION 2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the sum of:
(i) the lesser of: (A) the sum of fifty-five percent (55%) of the
Value of Eligible Inventory or (B) the amount equal to: (1) the
Maximum Credit at such time minus (2) the then undrawn amounts of
the outstanding Letter of Credit Accommodations, less
(ii) the Sales Tax Reserve most recently reported to Lender by
Borrower, less
(iii) any Availability Reserves.
(b) Lender may, in its Permitted Discretion, from time to time,
reduce the lending formula with respect to Eligible Inventory. In addition,
if at any time an appraisal of the Inventory conducted by an appraiser
acceptable to Lender indicates that the quotient, expressed as a percentage,
of (i) eighty percent (80%) of the appraised value of the Eligible Inventory
on a "going out of business basis" divided by (ii) the Value of the Eligible
Inventory (the "Appraisal Advance Rate") at such time, is less than the
Inventory Advance Rate at such time, then the Inventory Advance Rate
shall, upon notice from Lender to Borrower, be reduced to the Appraisal
Advance Rate at such time (and if the Inventory Advance Rate at such
time is less than the Appraisal Advance Rate at such time, the Inventory
Advance Rate shall, upon notice from Lender to Borrower, be increased to
the lesser of the Appraisal Advance Rate or fifty-five percent (55%).
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of
the Loans, or the aggregate amount of the outstanding Loans and Letter of
Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in
Section 2.2 or the Maximum Credit, as applicable, such event shall not
limit, waive or otherwise affect any rights of Lender in that circumstance
or on any future occasions and Borrower shall, within three (3) Business
Days of demand by Lender, which may be made at any time or from time
to time, repay to Lender the entire amount of any such excess(es) for
which payment is demanded.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained herein,
at the request of Borrower, Lender agrees to provide or arrange for Letter
of Credit Accommodations for the account of Borrower containing terms
and conditions acceptable to Lender and the issuer thereof. Any payments
made by Lender to any issuer thereof and/or related parties in connection
with the Letter of Credit Accommodations shall constitute additional
Revolving Loans to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations,
Borrower shall pay to Lender a letter of credit fee at a rate equal to one
and one half percent (1.5%) per annum on the average daily outstanding
balance of the Letter of Credit Accommodations for the immediately
preceding month (or part thereof), payable in arrears as of the first day of
each succeeding month; provided, that at Lender's option, without notice,
after the occurrence and during the continuance of an Event of Default,
such rate shall be increased by two percent (2%) per annum. Such letter
of credit fee shall be calculated on the basis of a three hundred sixty (360)
day year and actual days elapsed and the obligation of Borrower to pay
such fee shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations,
the Revolving Loans available to Borrower (subject to the Maximum
Credit and any Availability Reserves) are equal to or greater than: (i) if
the proposed Letter of Credit Accommodation is for the purpose of
purchasing Eligible Inventory for which Lender has a first priority
perfected security interest in any and all document(s) of title related to
such Inventory, the sum of (A) the Letter of Credit Percentage of the cost
of such Eligible Inventory, plus (B) freight, taxes, duty and other amounts
which Lender estimates must be paid in connection with such Inventory
upon arrival and for delivery to one of Borrower's locations for Eligible
Inventory within the United States of America and (ii) if the proposed
Letter of Credit Accommodation is for any other purpose (including,
without limitation, for the purpose of purchasing Eligible Inventory for
which Lender does not have a first priority perfected security interest in
any and all documents of title related to such Inventory), an amount equal
to one hundred (100%) percent of the face amount thereof and all other
commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit
Accommodation, the amount of Revolving Loans which might otherwise
be available to Borrower shall be reduced by the applicable amount set
forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations shall not at any time exceed
$20,000,000. At any time an Event of Default exists or has occurred and
is continuing, upon Lender's request, Borrower will either furnish cash
collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash
collateral to Lender for the Letter of Credit Accommodations, and in either
case, the Revolving Loans otherwise available to Borrower shall not be
reduced as provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with
respect to any Letter of Credit Accommodation; provided, however, that
Borrower shall not be required to indemnify Lender for any claims,
damages, losses, liabilities, costs or expenses to the extent caused by (i) the
willful misconduct or gross negligence of Lender in determining whether
a request presented under any Letter of Credit Accommodation complied
with the terms of such Letter of Credit Accommodation or (ii) Lender's
failure to pay under any Letter of Credit Accommodation after the timely
presentation to it of a request for payment strictly complying with the
terms and conditions of such Letter of Credit Accommodation. Borrower
assumes all risks with respect to the acts or omissions of the drawer under
or beneficiary of any Letter of Credit Accommodation and for such
purposes the drawer or beneficiary shall be deemed Borrower's agent.
Borrower assumes all risks for, and agrees to pay, all foreign, Federal,
State and local taxes, duties and levies relating to any goods subject to any
Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder. Borrower hereby releases and holds Lender harmless from and
against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation. The provisions of this
Section 2.2(e) shall survive the payment of Obligations and the termination
or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any
Letter of Credit Accommodation provided by an issuer other than Lender
unless Lender has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect to
such Letter of Credit Accommodation. Borrower shall be bound by any
interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit
Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right
and authority to, and Borrower shall not: (i) at any time an Event of
Default exists or has occurred and is continuing, (A) approve or resolve
any questions of non-compliance of documents, (B) give any instructions
as to acceptance or rejection of any documents or goods, or (C) execute
any and all applications for steamship or airway guaranties, indemnities or
delivery orders, and (ii) at all times, (A) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents and (B) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit
included in the Collateral. After the occurrence and during the continuance
of an Event of Default, Lender may take such actions either in its own
name or in Borrower's name.
(g) Any rights, remedies, duties or obligations granted or undertaken
by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation,
shall be deemed to have been granted or undertaken by Borrower to
Lender. Any duties or obligations undertaken by Lender to any issuer or
correspondent in any application for any Letter of Credit Accommodation,
or any other agreement by Lender in favor of any issuer or correspondent
relating to any Letter of Credit Accommodation, shall be deemed to have
been undertaken by Borrower to Lender and to apply in all respects to
Borrower.
2.3 Optional Reductions in Maximum Credit.
(a) Borrower may, at its option, from time to time request in
writing that the Maximum Credit be reduced to any amount not less than
$20,000,000. Any such request shall be irrevocable, unless Lender shall
otherwise agree.
(b) Effective on the first Business Day which is fifteen (15) days
after the date of the receipt by Lender of such written request, the
Maximum Credit shall be reduced as requested by Borrower; provided,
that, each such reduction shall be in the aggregate amount of $5,000,000
or an integral multiple of $1,000,000 in excess thereof.
(c) Without limiting any of the other rights of Lender pursuant to
the terms hereof, effective on each date when any reduction is effective
pursuant to Section 2.3(b) above, Borrower agrees to automatically and
without demand make a payment to Lender in respect of the Loans in an
amount equal to the excess if any, of the aggregate principal amount of the
Loans and outstanding Letter of Credit Obligations then outstanding over
the amount of the Loans then available to Borrower pursuant to the
Maximum Credit as so reduced. All interest accrued on the principal
amount of the Loans paid pursuant to this Section 2.3(c) shall be paid, or
may be charged to any of the loan account(s) of Borrower maintained by
Lender, at Lender's option, on the date such payment of principal is due.
(d) In connection with each and every reduction in the Maximum
Credit pursuant to this Section 2.3, and at the time of each such reduction,
Borrower shall pay to Lender a reduction fee in the amount set forth below
if such reduction is effective in the period indicated:
Amount Period
1.5% of amount of reduction From the date hereof to the
first anniversary of the date
hereof
.75% of amount of reduction From the first anniversary of
the date hereof to the second
anniversary of the date hereof
.5% of amount of reduction From the second anniversary of
the date hereof to the then
scheduled termination date.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrower shall pay to Lender interest on the daily average
outstanding principal amount of the Loans and, to the extent permitted by
applicable law, the other non-contingent Obligations from and after the
date when actually paid by Lender, at the Interest Rate. All interest
accruing hereunder on and after the occurrence and during the continuance
of an Event of Default and/or after termination or non-renewal hereof shall
be payable on demand. Lender shall make a good faith effort to pay third-
party fees and expenses when due and not to charge Borrower's loan
account for reimbursement of such Obligations until actually paid by
Lender.
(b) Borrower may from time to time request that Prime Rate Loans
be converted to Eurodollar Rate Loans, that Eurodollar Rate Loans be
converted to Prime Rate Loans and/or that any existing Eurodollar Rate
Loans continue for an additional Interest Period. Such request from
Borrower shall specify the amount of the Prime Rate Loans which will be
converted to Eurodollar Rate Loans (subject to the limits set forth below)
and the Interest Period to be applicable to such Eurodollar Rate Loans on
not less than three (3) Business Days prior notice to Lender. Subject to
the terms and conditions contained herein, three (3) Business Days after
receipt by Lender of such a request from Borrower, such Prime Rate Loans
shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans
shall continue, as the case may be; provided that (i) no Event of Default,
or event which, merely with notice or passage of time or both, would
constitute an Event of Default, exists or has occurred and is continuing, (ii)
no party hereto shall have sent any notice of termination or non-renewal
of this Agreement, (iii) Borrower shall have complied with all reasonable
and customary procedures as are established by Lender and specified by
Lender to Borrower from time to time for requests by Borrower for
Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be
in effect at any one time, (v) the aggregate amount of the Eurodollar Rate
Loans must be in an amount not less than $5,000,000 or an integral
multiple of $1,000,000 in excess thereof, (vi) the maximum amount of the
Eurodollar Rate Loans at any time requested by Borrower shall not exceed
the amount equal to eighty-five percent (85%) of the daily average of the
principal amount of the Revolving Loans which it is anticipated will be
outstanding during the applicable Interest Period, in each case as
reasonably determined by Borrower pursuant to a good faith written
computation (but with no obligation of Lender to make such Revolving
Loans except as otherwise provided in this Agreement), and (vii) Lender
shall have determined that the Interest Period or Adjusted Eurodollar Rate
is available to Lender through the Reference Bank and can be readily
determined as of the Business Day following the date of the request for
such Eurodollar Rate Loan by Borrower. Any request by Borrower to
convert Prime Rate Loans to Eurodollar Rate Loans or to continue any
existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding
anything to the contrary contained herein, Lender and Reference Bank shall
not be required to purchase United States Dollar deposits in the London
interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply
as if Lender and Reference Bank had purchased such deposits to fund the
Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless
Lender has received a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in accordance with the
terms hereof. Any Eurodollar Rate Loans shall, at Lender's option, upon
notice by Lender to Borrower, convert to Prime Rate Loans in the event
that (i) an Event of Default shall exist, (ii) this Agreement shall terminate
or not be renewed, or (iii) the aggregate principal amount of the Prime
Rate Loans which have previously been converted to Eurodollar Rate
Loans or existing Eurodollar Rate Loans continued, as the case may be, at
the beginning of an Interest Period shall at any time during such Interest
Period exceed the sum of the then outstanding principal amount of the
Revolving Loans then available to Borrower under Section 2 hereof.
Borrower shall pay to Lender, upon demand by Lender (or Lender may,
at its option, charge any loan account of Borrower) any Breakage Fees and,
without duplication thereof, any other reasonable and customary amounts
required to compensate Lender, the Reference Bank or any Participant for
any loss (including loss of anticipated profits), cost or expense reasonably
incurred by such person, as a result of the conversion of Eurodollar Rate
Loans to Prime Rate Loans pursuant to any of the foregoing; provided,
however, that no such Breakage Fee or other costs shall be payable if such
conversion of Eurodollar Rate Loans to Prime Rate Loans prior to the end
of the applicable Interest Period results from Lender's establishment of
Availability Reserves, changes in criteria for Eligible Inventory, or
reduction of the lending formula set forth in Section 2.1(a).
(d) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first Business Day of each calendar month and
shall be calculated on the daily average principal balance of the non-
contingent Obligations outstanding on the basis of a three hundred sixty
(360) day year and actual days elapsed (including the date of borrowing
but excluding the date of payment if made in accordance with Section
6.3(b)). The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to
each increase or decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on the
Prime Rate in effect on the last day of the month in which any such
change occurs. In no event shall charges constituting interest payable by
Borrower to Lender exceed the maximum amount or the rate permitted
under any applicable law or regulation, and if any such part or provision
of this Agreement is in contravention of any such law or regulation, such
part or provision shall be deemed amended to conform thereto.
3.2 Servicing Fee. Borrower shall pay to Lender monthly a servicing
fee in an amount equal to $7,500 in respect of Lender's services for each
full month (or pro rated for any partial month) while this Agreement
remains in effect and for so long thereafter as any of the Obligations are
outstanding, which fee shall be fully earned as of and payable in advance
on the date hereof and on the first day of each month hereafter.
3.3 Unused Line Fee. Borrower shall pay to Lender monthly an unused
line fee equal at a rate equal to one quarter of one percent (.25%) per
annum calculated upon the amount by which the Maximum Credit exceeds
the average daily principal balance of the outstanding Revolving Loans and
Letter of Credit Accommodations during the immediately preceding month
(or part thereof) while this Agreement is in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be
payable on the first day of each month in arrears.
3.4 Changes in Laws; Increased Costs of Loans; Breakage Fees.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert
to Prime Rate Loans in the event that any change in applicable law or
regulation (or the interpretation or administration thereof by a banking
authority or regulator) shall make it unlawful for Lender, Reference Bank
or any Participant to make or maintain Eurodollar Rate Loans or to comply
with the terms hereof in connection with the Eurodollar Rate Loans. In
the event that any change in applicable law or regulation (or the
interpretation or administration thereof by a banking authority or regulator)
shall (i) result in the increase in the costs to Lender, Reference Bank or
any Participant of making or maintaining any Eurodollar Rate Loans or (ii)
reduce the amounts received or receivable by Lender in respect thereof, by
an amount deemed by Lender to be material, Borrower shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrower) any amounts required to compensate Lender, the
Reference Bank or any Participant with Lender for any loss (including loss
of anticipated profits), cost or expense reasonably incurred by such person
as a result of the foregoing, including, without limitation, any such loss,
cost or expense reasonably incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such person to make
or maintain the Eurodollar Rate Loans or any portion thereof (but not
including any tax based upon the net income of Lender); provided that in
the event that Lender shall determine that the applicable Eurodollar Rate
does not adequately reflect the cost to Lender of making or maintaining the
Eurodollar Rate Loans, then, unless Borrower compensates Lender for
Lender's increased cost of funds, Lender may suspend generally the
prospective availability of the Eurodollar Rate option for new Interest
Periods and/or Loans until such condition no longer exists. A certificate
of Lender setting forth the basis for the determination of such amount
necessary to compensate Lender as aforesaid shall be delivered to
Borrower and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar
Rate Loans are received by Lender other than on the last day of the
applicable Interest Period (whether pursuant to acceleration, upon maturity
or otherwise), including any payments pursuant to the application of
collections under Section 6.3 or any other payments made with the
proceeds of Collateral, Borrower shall pay to Lender upon demand by
Lender (or Lender may, at its option, charge any loan account of
Borrower) Breakage Fees and, without duplication thereof, any other
reasonable and customary amounts required to compensate Lender, the
Reference Bank or any Participant with Lender for any additional loss
(including loss of anticipated profits), cost or expense reasonably incurred
by such person as a result of such prepayment or payment, including,
without limitation, any loss, cost or expense reasonably incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by
such person to make or maintain such Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid
shall be delivered to Borrower and shall be conclusive, absent manifest
error.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender
making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Lender shall have received evidence, in form and substance
reasonably satisfactory to Lender, that Lender has valid perfected and first
priority security interests in and liens upon the Collateral, subject only to
the security interests and liens permitted herein or in the other Financing
Agreements;
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be reasonably
satisfactory in form and substance to Lender, and Lender shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings which
Lender may have requested in connection therewith, such documents where
requested by Lender or its counsel to be certified by appropriate corporate
officers or governmental authorities;
(c) no material adverse change shall have occurred in the assets or
business of Borrower and its Subsidiaries since the date of Lender's latest
field examination and no change or event shall have occurred which would
impair the ability of Borrower and its Subsidiaries 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;
(d) 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 Borrower, the
results of which shall be reasonably satisfactory to Lender, not more than
three (3) Business Days prior to the date hereof;
(e) Lender shall have received an appraisal of Borrower's Inventory,
on a "going out of business basis," satisfactory to Lender, by Buxbaum,
Ginsberg and Associates or another independent firm acceptable to Lender;
(f) Borrower shall provide evidence satisfactory to Lender
demonstrating that after payment or provision for the payment of all fees
and expenses of the transactions contemplated by the Financing
Agreements and the disbursement of the proceeds of the initial Loans and
the issuance of the initial Letter of Credit Accommodations and after
application of the lending formula and all reserves as provided in this
Agreement, the Excess Loan Availability shall be greater than or equal to
$5,000,000;
(g) the accounts payable of Borrower shall be in an amount and in
a condition reasonably acceptable to Lender;
(h) Lender shall have established and be maintaining the Congress
Accounts;
(i) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem reasonably
necessary or desirable in order to permit, protect and perfect its security
interests in and liens upon the Collateral or to effectuate the provisions or
purposes of this Agreement and the other Financing Agreements, including,
without limitation, acknowledgements by landlords, mortgagees and
warehousemen of Lender's security interests in the Collateral, waivers by
such persons of any security interests, liens or other claims by such persons
to the Collateral and agreements permitting Lender access to, and the right
to remain on, the premises to exercise its rights and remedies and
otherwise deal with the Collateral; provided, however, if Lender has not
received appropriate documentation with respect to each such person, this
condition shall be satisfied if Borrower is current in all payments owing
to such Person, is not in default under the agreement allowing Borrower
to occupy or use the applicable premises and Borrower has delivered an
officer's certificate, in the form of Exhibit D hereto, setting forth the
information, as of April 30, 1995, required by Exhibit D.
(j) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing
Agreements, in form and substance reasonably satisfactory to Lender, and
certificates of insurance policies and/or endorsements naming Lender as
loss payee;
(k) Lender shall have received an opinion letter of Snyder &
Schwarz, counsel to Borrower, substantially in the form of Exhibit B
hereto;
(l) Lender shall have received, in form and substance reasonably
satisfactory to Lender, an agreement from each issuer of each credit card,
debit card, ATM card and each other form of payment accepted by
Borrower for the sale of Inventory, or if different, each Person which
makes payments with respect to each such card and/or other form of
payment, pursuant to which each such Person has agreed to transfer (in a
manner acceptable to Lender) to the Payment Account (or such other
account as is acceptable to Lender), in immediately available funds, any
and all payments due from such Person arising out of the sale or other
disposition of Inventory by or on behalf of Borrower; and
(m) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and
delivered to Lender, in form and substance reasonably satisfactory to
Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition
precedent to Lender making Loans and/or providing Letter of Credit
Accommodations to Borrower, including the initial Loans and Letter of
Credit Accommodations and any future Loans and Letter of Credit
Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties
had been made on and as of the date of the making of each such Loan or
providing each such Letter of Credit Accommodation and after giving
effect thereto (except to the extent any such representation or warranty
expressly by its terms relates only to an earlier date); 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 Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure the prompt payment and performance of all Obligations,
Borrower hereby grants to Lender a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to Lender as
security, all of the Borrower's right, title and interest in, to and under all
Inventory, whether now owned or hereafter acquired or existing, and
wherever located (collectively, together with all other property which is
now or hereafter security for the Obligations, the "Collateral").
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including, without
limitation, fees, charges, costs, expenses and interest. All entries in the
loan account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a
statement setting forth the balance in Borrower's loan account(s)
maintained by Lender for Borrower pursuant to the provisions of this
Agreement, including principal, interest, fees, costs and expenses. Each
such statement shall be subject to subsequent adjustment by Lender but
shall, absent manifest errors or omissions, be considered correct and
deemed accepted by Borrower and conclusively binding upon Borrower as
an account stated except to the extent that Lender receives a written notice
from Borrower of any specific exceptions of Borrower thereto within thirty
(30) days after the date such statement has been mailed by Lender. Until
such time as Lender shall have rendered to Borrower a written statement
as provided above, the balance in Borrower's loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by
Borrower.
6.3 Collections.
(a) Lender shall establish and maintain, at Borrower's expense, in the
name of Lender, deposit accounts (the "Congress Accounts") into which
Borrower shall promptly deposit all payments constituting proceeds of
Inventory in the identical form in which such payments are made, whether
by cash, check or other manner. The banks at which the Congress
Accounts are established shall wire, or otherwise transfer, in immediately
available funds, on a daily basis, all funds received or deposited into the
Congress Accounts to such bank account of Lender as Lender may from
time to time designate for such purpose ("Payment Account"). Borrower
agrees that all payments made to such Congress Accounts or other funds
received and collected by Lender, whether as proceeds of Inventory or
otherwise shall be the property of Lender. In addition, Borrower shall
cause each and every issuer of each credit card, debit card, ATM card and
each other form of payment accepted by Borrower or, if different, each
Person which makes payments with respect to each such card and/or other
form of payment, to transfer (in a manner acceptable to Lender) to the
Payment Account (or such other account as is acceptable to Lender), in
immediately available funds, any and all payments due from each such
Person as a result of the sale of Inventory by Borrower. Borrower shall
not accept any credit card, debit card, ATM card or other form of payment
unless the issuer thereof, or if different, each Person which makes
payments with respect to each such card and/or other form of payment,
has, pursuant to an agreement in form and substance reasonably
satisfactory to Lender, agreed to transfer (in a manner acceptable to
Lender) to the Payment Account (or such other account as is acceptable to
Lender), in immediately available funds, any and all payments due from
such Person as a result of the sale or other disposition of Inventory by
Borrower.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations one (1) Business Day 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 Borrower such payments will be applied (conditional upon final
collection) to the Obligations on the Business Day of receipt by Lender in
the Payment Account, if such payments are received within sufficient time
(in accordance with Lender's usual and customary practices as in effect
from time to time) to credit Borrower's loan account on such day, and if
not, then on the next Business Day.
(c) Borrower, as soon as is practicable after receipt thereof, shall
deposit or cause the same to be deposited in the Congress Accounts, or
remit the same or cause the same to be remitted, in kind, to Lender, as the
property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Collateral which come into their possession
or under their control. In no event shall the same be commingled with
Borrower's own funds. Borrower agrees to reimburse Lender on demand
for any amounts owed or paid to any bank at which a Congress Account
is established or any other bank or person involved in the transfer of funds
to or from the Congress Accounts arising out of Lender's payments to or
indemnification of such bank or person. The obligation of Borrower to
reimburse Lender for such amounts pursuant to this Section 6.3 shall
survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate
from time to time. Lender may apply payments received or collected from
Borrower or for the account of Borrower (including, without limitation, the
monetary proceeds of collections or of realization upon any Collateral) to
such of the Obligations, whether or not then due, in such order and manner
as Lender determines. At Lender's option, all principal, interest, fees,
costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s)
of Borrower. Borrower shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or
on account of, any setoff, counterclaim, defense, duties, taxes (other than
income or franchise taxes attributable to the net income of Lender which
Borrower is required by law to withhold and which requirement either can
not be avoided by the delivery of appropriate documentation or can be
avoided but Lender has failed to deliver such documentation after written
request therefor from Borrower), deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is
required to surrender or return such payment or proceeds to any Person for
any reason, then the Obligations intended to be satisfied by such payment
or proceeds shall be reinstated and continue and this Agreement shall
continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and
does hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4 shall
remain effective notwithstanding any contrary action which may be taken
by Lender in reliance upon such payment or proceeds. This Section 6.4
shall survive the payment of the Obligations and the termination or non-
renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon
telephonic or other instructions received from anyone purporting to be an
officer of Borrower or other authorized person or, at the discretion of
Lender, if such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder shall
specify the date on which the requested advance is to be made or Letter of
Credit Accommodations established (which day shall be a Business Day)
and the amount of the requested Loan. Requests received after 11:00 a.m.
Chicago time on any day shall be deemed to have been made as of the
opening of business on the immediately following Business Day. All
Loans and Letter of Credit Accommodations under this Agreement shall
be conclusively presumed to have been made to, and at the request of and
for the benefit of, Borrower when deposited to the credit of Borrower or
otherwise disbursed or established in accordance with the instructions of
Borrower or in accordance with the terms and conditions of this
Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) the
repayment of obligations owing to the agent, the co-agents and the lenders
under the Existing Credit Agreement and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or
Letter of Credit Accommodations provided by Lender to Borrower
pursuant to the provisions hereof shall be used by Borrower only for
working capital purposes or general corporate purposes of Borrower. None
of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing
or retiring any indebtedness which was originally incurred to purchase or
carry any margin security or for any other purpose which might cause any
of the Loans to be considered a "purpose credit" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System,
as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form reasonably satisfactory to Lender: (a) on
a weekly basis or, at any or all times that the Excess Loan Availability is
less than or equal to $10,000,000, more frequently (including, without
limitation, on a daily basis) as Lender may request, (i) an officer's
certificate setting forth the amount of the Sales Tax Reserve as of the day
immediately preceding the date of such officer's certificate, (ii) perpetual
inventory reports, (iii) inventory reports by category and (b) upon Lender's
request and to the extent practicable, (i) copies of customer statements and
credit memos, remittance advices and reports, and copies of deposit slips
and bank statements, (ii) copies of shipping and delivery documents, and
(iii) copies of purchase orders, invoices and delivery documents for
Inventory acquired by Borrower; and (c) such other reports as to the
Collateral as Lender shall reasonably request from time to time. If any of
Borrower's records or reports of the Collateral are prepared or maintained
by an accounting service, contractor, shipper or other agent, Borrower
hereby irrevocably authorizes such service, contractor, shipper or agent to
deliver such records, reports, and related documents to Lender and to
follow Lender's instructions with respect to further services at any time
that an Event of Default exists or has occurred and is continuing.
7.2 Inventory Covenants. With respect to the Inventory: (a) Borrower
shall at all times maintain Inventory records reasonably satisfactory to
Lender, keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, Borrower's cost therefor and
daily withdrawals therefrom and additions thereto; (b) Borrower shall cause
an independent firm acceptable to Lender to conduct a cycle count of the
Inventory in accordance with Borrower's existing practices with respect
thereto on the date hereof, but at any time or times as Lender may request
on or after an Event of Default, and promptly following such physical
inventory shall supply Lender with a report in the form and with such
specificity as may be reasonably satisfactory to Lender concerning such
physical count; (c) Borrower shall not remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of Borrower's
business and except to move Inventory directly from one location set forth
or permitted herein to another such location; (d) upon Lender's request,
Borrower shall, at its expense, no more than once in any twelve (12)
month period, but at any time or times as Lender may request on or after
an Event of Default has occurred and is continuing, deliver or cause to be
delivered to Lender written reports or appraisals as to the Inventory in
form, scope and methodology (including, without limitation, on a "going
out of business" basis) acceptable to Lender and by an appraiser acceptable
to Lender, addressed to Lender or upon which Lender is expressly
permitted to rely; (e) Borrower shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable
laws (including, but not limited to, the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and
orders related thereto); (f) Borrower assumes all responsibility and liability
arising from or relating to the production, use, sale or other disposition of
the Inventory; (g) Borrower shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate Borrower to repurchase such Inventory, other than in accordance
with Borrower's policies in existence on the date hereof; (h) Borrower
shall keep the Inventory in good and marketable condition (ordinary wear
and tear excepted); and (i) Borrower shall not, without prior written notice
to Lender, acquire or accept any Inventory on consignment or approval.
7.3 Proceeds Covenants.
(a) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any proceeds of Inventory, by mail,
telephone, facsimile transmission or otherwise.
(b) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) extend the time of payment of,
compromise, settle or adjust for cash, credit, or otherwise, and upon any
terms or conditions, any and all proceeds of Inventory and thereby
discharge or release any party or parties in any way liable for payment
thereof without affecting any of the Obligations, (ii) demand, collect or
enforce payment of any amounts constituting proceeds of Inventory, but
without any duty to do so, and Lender shall not be liable for its failure to
collect or enforce the payment thereof nor for the negligence of its agents
or attorneys with respect thereto other than any such failure resulting from
Lender's or its agents' or attorneys' gross negligence or wilful misconduct
and (iii) take whatever other action Lender may reasonably deem necessary
or desirable for the protection of its interests.
7.4 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in Borrower's or
Lender's name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default
exists or has occurred and is continuing (i) demand payment on proceeds
of Inventory, (ii) enforce payment of proceeds of Inventory by legal
proceedings or otherwise, (iii) exercise all of Borrower's rights and
remedies to collect any proceeds of Inventory, (iv) sell or assign any
proceeds of Inventory upon such terms, for such amount and at such time
or times as Lender deems advisable, (v) settle, adjust, compromise, extend
or renew any claim representing proceeds of Inventory, (vi) discharge and
release any claim representing proceeds of Inventory, (vii) prepare, file and
sign Borrower's name on any proof of claim in bankruptcy or other similar
document against any party owing amounts representing the proceeds of
Collateral, (viii) notify the post office authorities to change the address for
delivery of Borrower's mail to an address designated by Lender, and open
and dispose of all mail addressed to Borrower, and (ix) do all acts and
things which are necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement and the other Financing Agreements and
(b) at any time to (i) take control in any manner of any item of payment
or proceeds thereof, (ii) have access to any lockbox or postal box into
which Borrower's mail is deposited, (iii) endorse Borrower's name upon
any items of payment or proceeds thereof and deposit the same in Lender's
account for application to the Obligations, (iv) endorse Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Inventory or any proceeds thereof and (v)
execute in Borrower's name and file any UCC financing statements or
amendments thereto, but only with respect to the Collateral. 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 wilful misconduct as determined
pursuant to a final non-appealable order of a court of competent
jurisdiction.
7.5 Right to Cure. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal
any judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with
respect to the Collateral (except those permitted by the terms of this
Agreement) and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with
respect thereto. Lender may add any amounts so expended to the
Obligations and charge Borrower's account therefor, such amounts to be
repayable by Borrower on demand. Lender shall be under no obligation
to effect such cure, payment or bonding and shall not, by doing so, be
deemed to have assumed any obligation or liability of Borrower. Any
payment made or other action taken by Lender under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and
to proceed accordingly.
7.6 Access to Premises. From time to time as reasonably requested by
Lender, at the cost and expense of Borrower, (a) Lender or its designee
shall have complete access to all of Borrower's premises during normal
business hours and after reasonable prior notice to Borrower, or at any
time and without notice to Borrower if an Event of Default exists or has
occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of Borrower's books and records, including,
without limitation, the Records, and (b) Borrower shall promptly furnish
to Lender such copies of such books and records or extracts therefrom as
Lender may reasonably request, and (c) use during normal business hours
such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or
has occurred and is continuing for the collection of the proceeds of
Inventory and realization of Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower
is a corporation duly organized and in good standing under the laws of its
state of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes
such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not be reasonable likely to have a Material
Adverse Effect. The execution, delivery and performance of this
Agreement, the other Financing Agreements and the transactions
contemplated hereunder and thereunder are all within Borrower's corporate
powers, have been duly authorized and are not in contravention of
applicable law or the terms of Borrower's certificate of incorporation,
by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which
Borrower or its property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms. Borrower
does not have any subsidiaries except as set forth on the Information
Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been or may hereafter be
delivered by Borrower to Lender have been prepared in accordance with
GAAP and present fairly in all material respects the financial condition and
the results of operation of Borrower as at the dates and for the periods set
forth therein (provided that monthly or quarterly statements are subject to
normal year-end adjustments and may not contain all footnote information
required by GAAP). Borrower has informed its auditors that a primary
intent of Borrower was for the professional services provided or to be
provided by its auditors to benefit or influence Lender. Except as
disclosed in any interim financial statements furnished by Borrower to
Lender prior to the date of this Agreement, there has been no material
adverse change in the assets, liabilities, properties and condition, financial
or otherwise, of Borrower, since the date of the most recent audited
financial statements furnished by Borrower to Lender prior to the date of
this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Inventory and the
proceeds thereof are located only at the address set forth below and its
only other places of business and the only other locations of Collateral, if
any, are the addresses set forth in the Information Certificate, subject to the
right of Borrower to establish new locations in accordance with Section 9.2
below. The Information Certificate correctly identifies any of such
locations which are not owned by Borrower and sets forth the owners
and/or operators thereof and to the best of Borrower's knowledge, the
holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties; Ownership of Assets. The
security interests and liens granted to Lender under this Agreement and the
other Financing Agreements constitute valid and perfected first priority
liens and security interests in and upon the Collateral subject only to
existing liens indicated on Schedule 8.4 hereto and, with respect to
Collateral other than Inventory, the other liens permitted under Section 9.8
hereof. Borrower has good and marketable title to all of its properties and
assets subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to Lender and
such others as are specifically listed on Schedule 8.4 hereto or permitted
under Section 9.8 hereof. All material assets employed in Borrower's
business are owned by Borrower or leased by Borrower under arms-length
transactions with unaffiliated third parties, unless consented to in writing
by Lender prior to the time such asset is placed into service. Borrower has
obtained and holds in full force and effect all patents, trademarks,
servicemarks, tradenames, copyrights and other such rights, free from
burdensome restrictions, which are necessary for the operation of its
business as presently conducted. No product sold by Borrower infringes
any patents, trademark, servicemark, tradename, copyright, license or other
right owned by any other Person. The Subsidiaries of Borrower, taken as
a whole, do not own inventory having a fair market value in excess of
$500,000.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all income and franchise and all material other tax returns, reports
and declarations which are required to be filed by it (without, other than
with respect to returns filed prior to the date hereof, any requests for
extension except as previously disclosed in writing to Lender). All
information in such tax returns, reports and declarations is complete and
accurate in all material respects. Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in
good faith by appropriate proceedings diligently pursued and available to
Borrower and with respect to which adequate reserves in accordance with
GAAP have been set aside on its books. Adequate provision has been
made in accordance with GAAP for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on Schedule 8.6, there is no present
investigation by any governmental agency pending, or to the best of
Borrower's knowledge threatened, against or affecting Borrower, its assets
or business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against
Borrower would reasonably be likely to have a Material Adverse Effect.
With respect to conditions or events arising after the date hereof, but
otherwise of a type required to be disclosed on Schedule 8.6 hereto,
Borrower may deliver to Lender, from time to time, in writing,
supplements to Schedule 8.6 and for purposes of the continuing
representation and warranty set forth in this Section 8.6 as of any future
date, such representation and warranty shall be deemed made as of such
date by Borrower subject to all such supplements delivered on or prior to
such date.
8.7 Compliance with Other Agreements and Applicable Laws.
Borrower is not in default in any material respect under, or in violation in
any material respect of any of the terms of, any agreement, contract,
instrument, lease or other commitment to which it is a party or by which
it or any of its assets are bound and Borrower is in compliance in all
material respects with all applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders of any foreign, Federal, State or
local governmental authority.
8.8 Environmental Compliance. Except as set forth on Schedule 8.8
hereto, or as could not reasonably be likely to have a Material Adverse
Effect:
(a) Borrower has not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials,
on or off its premises (whether or not owned by it) in any manner which
at any time violates any applicable Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder and the
operations of Borrower comply in all material respects with all
Environmental Laws and all required licenses, permits, certificates,
approvals and similar authorizations thereunder.
(b) There has been no investigation, proceeding, complaint, order,
directive, claim, citation or notice by any governmental authority or any
other person nor, or to the best of Borrower's knowledge, is any pending
or threatened with respect to (i) any non-compliance with or violation of
the requirements of any Environmental Law by Borrower or (ii) the
release, spill or discharge, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production
or disposal of any Hazardous Materials or any other environmental, health
or safety matter, which affects Borrower or its business, operations or
assets or any properties at which Borrower has transported, stored or
disposed of any Hazardous Materials.
(c) Borrower has no liability (contingent or otherwise) in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Borrower has all licenses, permits, certificates, approvals or
similar authorizations required to be obtained or filed in connection with
the operations of Borrower under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect.
8.9 Employee Benefits.
(a) Except as set forth on Schedule 8.9 hereto, Borrower has not
engaged in any transaction in connection with which Borrower or any of
its ERISA Affiliates could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of
the Code, including any accumulated funding deficiency described in
Section 8.9(c) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is reasonably expected by Borrower to be incurred with respect to
any employee pension benefit plan of Borrower or any of its ERISA
Affiliates. There has been no reportable event (within the meaning of
Section 4043(b) of ERISA for which the requirement of a 30-day notice
has not been waived under ERISA) or any other event or condition with
respect to any employee pension benefit plan of Borrower or any of its
ERISA Affiliates which is reasonably expected to result in a termination
of any such plan by the Pension Benefit Guaranty Corporation.
(c) Except as set forth on Schedule 8.9 hereto, full payment has been
made of all amounts which Borrower or any of its ERISA Affiliates is
required under Section 302 of ERISA and Section 412 of the Code to have
paid under the terms of each employee pension benefit plan as
contributions to such plan as of the last day of the most recent fiscal year
of such plan ended prior to the 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 8.9(a)
hereof.
(d) Except as set forth on Schedule 8.9 hereto, the current value of
all vested accrued benefits under all employee pension benefit plans
maintained by Borrower that are subject to Title IV of ERISA does not
exceed the current value of the assets of such plans allocable to such
vested accrued benefits. The terms "current value" and "accrued benefit"
have the meanings specified in ERISA.
(e) Except as set forth on Schedule 8.9 hereto, neither Borrower nor
any of its ERISA Affiliates is or has ever been obligated to contribute to
any "multiemployer plan" (as such term is defined in Section 4001(a)(3)
of ERISA) that is subject to Title IV of ERISA.
8.10 Credit Cards Etc. Schedule 8.10 hereto sets forth a true, accurate
and complete list of all of the credit cards, debit cards and ATM cards
(and the issuers thereof) which Borrower accepts for payment.
8.11 Accuracy and Completeness of Information. All information
furnished by or on behalf of Borrower in writing to Lender in connection
with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including, without limitation,
all information on the Information Certificate is true and correct in all
material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make
such information not misleading in light of the circumstances under which
made. No event or circumstance has occurred which has had or could
reasonably be expected to have a Material Adverse Effect which has not
been fully and accurately disclosed to Lender in writing.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing
Agreements shall survive the execution and delivery of this Agreement and
shall be deemed to have been made again to Lender on the date of each
additional borrowing or other credit accommodation hereunder, except to
the extent that such representation or warranty expressly by its terms
relates to an earlier date, and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein
shall be cumulative and in addition to any other representations or
warranties which Borrower shall now or hereafter give, or cause to be
given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Except permitted by Section 9.7 hereof,
Borrower shall at all times preserve, renew and keep in full, force and
effect its corporate existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to
carry on the business as presently or proposed to be conducted. Borrower
shall give Lender thirty (30) days prior written notice of any proposed
change in its corporate name, which notice shall set forth the new name
and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of
Borrower as soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location
within the continental United States provided Borrower (a) gives Lender
thirty (30) days prior written notice of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as
Lender may deem reasonably necessary or desirable to protect its interests
in the Collateral at such location, including, without limitation, UCC
financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrower shall, at all times, comply in all material respects with
all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including, without limitation, ERISA, the
Occupational Safety and Hazard Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, and all statutes, rules, regulations,
orders, permits and stipulations relating to environmental pollution and
employee health and safety, including, without limitation, all of the
Environmental Laws.
(b) Borrower shall monitor its continued compliance with all
Environmental Laws in all of its operations, including regular reviews of
such compliance by employees or agents of Borrower who are familiar
with the requirements of the Environmental Laws. Copies of all
environmental surveys, audits, assessments, feasibility studies and results
of remedial investigations shall be promptly furnished, or caused to be
furnished, by Borrower to Lender. Borrower shall take prompt and
appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such response.
(c) To the extent the circumstances could reasonably be expected to
give rise to liability under Environmental Laws in excess of $250,000,
Borrower shall give both oral and written notice to Lender immediately
upon Borrower's receipt of any notice of, or Borrower's otherwise
obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health
or safety matter, which affects Borrower or its business, operations or
assets or any properties at which Borrower transported, stored or disposed
of any Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is material non-compliance, or any
condition which requires any action by or on behalf of Borrower in order
to avoid any material non-compliance, with any Environmental Law,
Borrower shall, at Lender's request and Borrower's expense: (i) cause an
independent environmental engineer acceptable to Lender to conduct such
tests of the site where Borrower's non-compliance or alleged
non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Lender a report as to such non-
compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an
estimate of the costs thereof and (ii) provide to Lender a supplemental
report of such engineer whenever the scope of such non-compliance, or
Borrower's response thereto or the estimated costs thereof, shall change in
any material respect.
(e) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and
assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) (to the
extent they are not directly attributable to Lender's willful misconduct or
gross negligence) directly or indirectly arising out of or attributable to the
use, generation, manufacture, reproduction, storage, release, threatened
release, spill, discharge, disposal or presence of a Hazardous Material,
including, without limitation, the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrower
and the preparation and implementation of any closure, remedial or other
required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and
discharge all taxes, assessments, contributions and governmental charges
upon or against it or its properties or assets, except for taxes the validity
of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower and with respect to which
adequate reserves in accordance with GAAP have been set aside on its
books. Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to
the foregoing, and to repay to Lender on demand the amount thereof, and
until paid by Borrower such amount shall be added and deemed part of the
Loans; provided, that, nothing contained herein shall be construed to
require Borrower to be liable for, pay or to indemnify Lender for any
income or franchise taxes (including any interest or penalties thereon and
whether imposed directly upon Lender or required to be withheld from
payments to Lender) attributable to the income of Lender from any
amounts charged or paid hereunder to Lender. The foregoing indemnity
shall survive the payment of the Obligations and the termination or non-
renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral
against loss or damage and all other insurance of the kinds and in the
amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be reasonably
satisfactory to Lender as to form, amount and insurer. Borrower shall
furnish certificates, policies or endorsements to Lender as Lender shall
require as proof of such insurance, and, if Borrower fails to do so, Lender
is authorized, but not required, to obtain such insurance at the expense of
Borrower. All policies shall provide for at least thirty (30) days prior
written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time
an Event of Default exists or has occurred and is continuing, adjusting,
settling, amending and canceling such insurance. Borrower shall cause
Lender to be named as a loss payee and an additional insured (but without
any liability for any premiums) under such insurance policies and
Borrower shall obtain non-contributory lender's loss payable endorsements
to all insurance policies in form and substance reasonably satisfactory to
Lender. Such lender's loss payable endorsements shall specify that the
proceeds of such insurance shall be payable to Lender as its interests may
appear and further specify that Lender shall be paid regardless of any act
or omission by Borrower or any of its affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost
of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its Subsidiaries
(if any) in accordance with GAAP and Borrower shall furnish or cause to
be furnished to Lender: (i) within thirty (30) days after the end of each
fiscal month, monthly unaudited consolidated financial statements
(including a balance sheet, a statement of income and loss and a statement
cash flow), in reasonable detail, fairly presenting the financial position and
the results of the operations of Borrower and its Subsidiaries as of the end
of and through such fiscal month, subject to normal year-end adjustments,
and (ii) within ninety (90) days after the end of each fiscal year, audited
consolidated financial statements (including a balance sheet, a statement of
income and loss, a statement of cash flow and a statement of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of
Borrower and its Subsidiaries as of the end of and for such fiscal year,
together with (x) the opinion of independent certified public accountants,
which accountants shall be an independent accounting firm selected by
Borrower and reasonably acceptable to Lender, that such financial
statements have been prepared in accordance with GAAP, and present
fairly in all material respects the results of operations and financial
condition of Borrower and its Subsidiaries as of the end of and for the
fiscal year then ended (y) a letter from such accountants addressed to
Lender and in the form of Exhibit E hereto and (z) a copy of the
"management letter" received by Borrower with respect to such audit
(which shall be delivered to Lender as soon as it is available, but in no
event to exceed one hundred fifty (150) days after the end of the
applicable fiscal year).
(b) Borrower shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which,
with the passage of time or giving of notice or both, would constitute an
Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which
Borrower sends to its stockholders generally and copies of all reports and
registration statements which Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency pursuant to any order,
request or demand or to any participant or assignee or prospective
participant or assignee to the extent such participant or assignee (or
prospective participant or assignee) agrees to keep information confidential
in a manner consistent with its customary practices. Borrower hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Lender, at Borrower's expense, copies of the financial statements of
Borrower and any reports or management letters prepared by such
accountants or auditors on behalf of Borrower and to disclose to Lender
such information as they may have regarding the business of Borrower.
Any documents, schedules, invoices or other papers delivered to Lender
may be destroyed or otherwise disposed of by Lender one (1) year after
the same are delivered to Lender, except as otherwise designated by
Borrower to Lender in writing.
(e) Not later than January 1 of each year hereafter during the term
of this Agreement, Borrower shall deliver to Lender an updated letter
addressed to Borrower's auditors substantially in the form of Exhibit C
hereto. In addition, on or about January 1 of each year Borrower shall
inform its auditors that a primary intent of Borrower is for the professional
services provided or to be provided by its auditors to benefit or influence
Lender.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or
consolidate with it, or (b) sell, assign, lease or transfer to any other Person,
abandon or otherwise dispose of any stock or indebtedness or any of its
assets to any other Person (except for (i) sales of Inventory in the ordinary
course of business and (ii) the disposition of worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower so
long as such sales do not involve Equipment having an aggregate fair
market value in excess of $5,000,000 for all such Equipment disposed of
in any fiscal year of Borrower, (iii) the sale of Borrower's Westville,
Indiana warehouse facility in consideration for the release of all associated
liabilities and, (iv) any sale and leaseback transaction (x) which relates
solely to a new store acquired, opened or constructed after the date hereof
and is entered into on or before the expiration of 24 months after such
store is first opened for business to the general public and (y) other than
those referred to in clause (x), where the aggregate fair market value of all
property subject to such transactions occurring on or after the date hereof
would not exceed $45,000,000, (v) the sale of the assets related to
Borrower's bakery business being engaged in by The Eagle Bakery
division of the Borrower, (vi) the sale of Borrower's closed stores, and
(vii) the sale of Borrower's real property not used in the Borrower's
business, or (c) form or acquire any Subsidiaries, or (d) wind up, liquidate
or dissolve or (e) agree to do any of the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including, without limitation, the Collateral, except: (a) liens and security
interests of Lender; (b) liens securing the payment of taxes, either not yet
overdue or the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower and
with respect to which adequate reserves in accordance with GAAP have
been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which
is not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith
by appropriate proceedings diligently pursued and available to Borrower,
in each case prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set
aside on its books; (d) zoning restrictions, easements, licenses, covenants
and other restrictions affecting the use of real property (and with respect
to leasehold interests, mortgages, obligations, liens and other encumbrances
incurred, created, assumed or permitted to exist and arising by, through or
under a landlord or owner of the leased property, with or without the
consent of the lessee) which do not interfere in any material respect with
the use of such real property or ordinary conduct of the business of
Borrower as presently conducted thereon or materially impair the value of
the real property which may be subject thereto; (e) purchase money
security interests in Equipment (including capital leases) and purchase
money mortgages on real estate not to exceed $10,000,000 in the aggregate
at any time outstanding so long as such security interests and mortgages
do not apply to any property of Borrower other than the Equipment or real
estate so acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or real estate so acquired, as the case may be;
and (f) the security interests and liens set forth on Schedule 8.4 hereto; (g)
liens incurred and pledges and deposits made in the ordinary course of
business in connection with workmen's compensation, unemployment
insurance, old-age pensions and other social security benefits; (h) liens
securing the performance of bids, tenders, leases, contracts (other than for
the repayment of borrowed money), statutory obligations, surety, customs
and appeal bonds and other obligations of like nature, incurred as an
incident to and in the ordinary course of business; (i) liens created in
connection with capital leases permitted by Section 9.7(b)(iv) hereof as
long as such liens relate solely to the property subject to such capital
leases; (j) liens on equipment or other property (other than Inventory)
existing at the time such property is acquired by Borrower; provided, in
each case, that such liens were not created in contemplation of such
acquisition by Borrower; (k) mortgages upon real property owned by
Borrower on the date hereof or hereafter acquired by Borrower, provided
that (i) the principal amount of the indebtedness secured by such lien does
not exceed the fair market value of the real property to which such lien
relates and (ii) the incurrence of such indebtedness is permitted by Section
9.9 hereof; and (l) extensions, renewals and replacements of liens referred
to in paragraphs (a) through (k) of this Section 9.8; provided, however,
that any such extension, renewal or replacement lien shall be limited to the
property or assets covered by the lien extended, renewed or replaced and
that the principal amount of the obligations secured by any such extension,
renewal or replacement lien shall be in an amount not greater than the
principal amount of the obligations secured by the lien extended, renewed
or replaced.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations
or indebtedness, except (a) the Obligations; (b) trade obligations and
normal accruals in the ordinary course of business not yet due and payable,
or with respect to which Borrower is contesting in good faith the amount
or validity thereof by appropriate proceedings diligently pursued and
available to Borrower, and with respect to which adequate reserves in
accordance with GAAP have been set aside on its books; (c) purchase
money indebtedness (including capital leases) to the extent not incurred or
secured by liens (including capital leases) in violation of any other
provision of this Agreement; (d) obligations or indebtedness set forth on
the Information Certificate; (e) obligations in respect of capital leases
outstanding on the date hereof set forth on Schedule 9.9(e) hereto; (f)
indebtedness arising under the Indenture (as in effect on the date hereof)
governing Borrower's 8-5/8% Senior Notes due April 15, 2000; (g)
indebtedness incurred with respect to capital leases as long as Borrower is
not in violation of Section 9.13 hereof; (h) indebtedness incurred with
respect to the mortgages permitted by Section 9.8(e) and indebtedness
incurred hereafter in an amount not to exceed $10,000,000 in any fiscal
year of Borrower with respect to mortgages permitted by Section 9.8(k);
and (i) other unsecured indebtedness of Borrower having an aggregate
outstanding principal amount of not more than $2,000,000; provided, that,
Borrower covenants and agrees that (i) Borrower shall only make regularly
scheduled payments of principal and interest in respect of such obligations
and indebtedness in accordance with the terms of the agreement or
instrument evidencing or giving rise to such obligations or indebtedness as
in effect on the date hereof, (ii) Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of any such obligations or
indebtedness or any agreement, document or instrument related thereto as
in effect on the date hereof, or (B) redeem, retire, defease, purchase or
otherwise acquire any such obligations or indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) Borrower
shall furnish to Lender all notices or demands in connection with all such
obligations and indebtedness either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly
or indirectly, make any loans or advance money or property to any person,
or invest in (by capital contribution, dividend or otherwise) or purchase or
repurchase the stock or indebtedness or all or a substantial part of the
assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of
the foregoing, except: (a) the endorsement of instruments for collection or
deposit in the ordinary course of business; (b) investments in: (i) short-
term direct obligations of the United States Government, (ii) negotiable
certificates of deposit issued by any bank reasonably satisfactory to Lender,
payable to the order of Borrower or to bearer and delivered to Lender, and
(iii) commercial paper rated A1 or P1, (iv) repurchase agreements and
reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States of America or
issued by any governmental agency thereof and backed by the full faith
and credit of the United States of America, in each case maturing within
one (1) year or less from the date of acquisition, and (v) investments in
money market funds and mutual funds which invest substantially all of
their assets in securities of the types described in clauses (i) through (iv)
above; and (c) the guarantees set forth in the Information Certificate; (d)
loans from Borrower to Borrower's Subsidiary BOGOs, Inc. in the
ordinary course of business in an amount not to exceed $3,000,000 at any
one time outstanding; (e) loans to landlords in the ordinary course of
business in connection with improvements made to property leased to
Borrower, not to exceed an aggregate amount of $3,000,000 at any time
outstanding; (f) loans to Borrower by Borrower's Subsidiary, Talon
Insurance Company, Inc., (g) loans in an amount not to exceed $300,000
at any time outstanding by Borrower to its chief executive officer to
finance the purchase of shares of Borrower's common stock by such chief
executive officer and (h) loans, in an amount not in excess of $300,000 in
any fiscal year of Borrower, to employees of Borrower for moving costs
incurred or to be incurred by such employees.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of class
of capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital
stock (or set aside or otherwise deposit or invest any sums for such
purpose) for any consideration other than common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the
foregoing; provided, however, that Borrower may make any such payment
as long as (i) immediately after giving effect to such payment, Borrower
has Excess Loan Availability of at least $10,000,000 and (ii) no Event of
Default, or event or circumstance which with the giving of notice or the
passage of time, or both, would constitute an Event of Default, shall exist
and be continuing.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering
of any service to or by any Affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon
fair and reasonable terms no less favorable to Borrower than Borrower
would obtain in a comparable arm's length transaction with an unaffiliated
person; provided, however, that this Section 9.12 shall not restrict the
ability of any Subsidiary of Borrower to (i) pay, directly or indirectly,
dividends or make any other distributions in respect of its capital stock or
pay any indebtedness or other obligation owed to Borrower or any other
Subsidiary of the Borrower; (ii) make loans or advances to Borrower or
any Subsidiary of Borrower; (iii) transfer any of its property or assets to
Borrower; or (iv) enter into employment agreements with its senior
executives or make loans to its chief executive officer in connection with
his purchase of Borrower's common stock.
9.13 Capital Expenditures. Borrower shall not, and shall not permit its
Subsidiaries to, make or incur (or commit to make or incur) any Capital
Expenditures, except Capital Expenditures of Borrower and its Subsidiaries
in any of the periods set forth below not in excess of the amount set forth
below opposite such period:
Period Maximum Amount
Borrower's fiscal year 1995 $10,000,000
Borrower's fiscal year 1996 $10,000,000 or such greater
amount as agreed to by
Lender in writing prior to
the first day of such fiscal
year
Borrower's fiscal year 1997 $10,000,000 or such greater
amount as agreed to by
Lender in writing prior to
the first day of such fiscal
year
Borrower's fiscal year 1998 $10,000,000 or such greater
amount as agreed to by
Lender in writing prior to
the first day of such fiscal
year
; provided, that if the maximum amount set forth above exceeds
the aggregate amount of Capital Expenditures made and/or
incurred and/or committed to be made and/or incurred during
the applicable period (the "Earlier Period"), then the maximum
amount set forth above for the period immediately following
such Earlier Period shall be increased by the lesser of (i) the
amount of such excess and (ii) the dollar amount set forth above
with respect to such Earlier Period.
9.14 Adjusted Net Worth. Borrower shall, at all times, maintain
Adjusted Net Worth of not less than $15,000,000.
9.15 Compliance with ERISA. Borrower shall not with respect to any
"employee pension benefit plans" maintained by Borrower or any of its
ERISA Affiliates:
(a) (i) terminate any of such employee pension benefit plans so as
to incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any prohibited
transaction involving any of such employee pension benefit plans or any
trust created thereunder which would subject Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any
such employee pension benefit plan any contribution which it is obligated
to pay under Section 302 of ERISA, Section 412 of the Code or the terms
of such plan, (iv) allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such employee
pension benefit plan, (v) allow or suffer to exist any occurrence of a
reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any
such employee pension benefit plan that is a single employer plan, which
termination could reasonably be expected to result in any liability to the
Pension Benefit Guaranty Corporation or (vi) incur any withdrawal liability
with respect to any multiemployer pension plan which singly or in the
aggregate could reasonably be expected to result in a payment by the
Borrower and/or a liability of the Borrower in excess of $100,000.
(b) As used in this Section 9.15, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in
ERISA, and the term "prohibited transaction" shall have the meaning
assigned to it in Section 4975 of the Code and ERISA.
9.16 Landlord Agreements. Borrower shall use reasonable best efforts
to obtain agreements, in form and substance reasonably satisfactory to
Lender, from each owner of real property leased from time to time by
Borrower, and each mortgagee with respect to real property owned from
time to time by Borrower, pursuant to which each such Person, among
other things, acknowledges Lender's interest in the Collateral, waives any
and all claims such Person has or may have to all or any portion of the
Collateral and permits Lender access to and the right to remain on the
applicable premises to exercise Lender's rights and remedies and to
otherwise deal with the Collateral. Borrower covenants and agrees that
Borrower shall, within ten (10) days of the end of each calendar month,
deliver an officer's certificate, in the form of Exhibit D hereto or such
other form as is agreed to by Lender, setting forth the information, as of
the last day of such calendar month, required by Exhibit D. Lender shall
have the right at any time or times, in Lender's name or in the name of a
nominee of Lender, to verify, by mail, telephone or otherwise, any or all
of the information set forth on one or more officer's certificates delivered
pursuant to this Section.
9.17 Costs and Expenses. Borrower shall pay to Lender on demand all
reasonable out-of-pocket costs, expenses, filing fees and taxes (other than
income taxes payable on the income of Lender or franchise taxes payable
by Lender) paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in the
Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or
not executed) or entered into in respect hereof and thereof, including, but
not limited to: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees and
documentary taxes); (b) costs and expenses and fees for title insurance and
other insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees; (c)
costs and expenses of remitting loan proceeds, collecting checks and other
items of payment, and establishing and maintaining the Congress Accounts,
together with Lender's customary charges and fees with respect thereto; (d)
charges, fees or expenses charged by any bank or issuer in connection with
the Letter of Credit Accommodations; (e) costs and expenses of preserving
and protecting the Collateral; (f) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon
the Collateral, and otherwise enforcing the provisions of this Agreement
and the other Financing Agreements or defending any claims made or
threatened against Lender arising out of the transactions contemplated
hereby and thereby (including, without limitation, preparations for and
consultations concerning any such matters); and (g) the reasonable fees and
disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.18 Further Assurances. At the request of Lender at any time and
from time to time, Borrower shall, at its expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts
as may be necessary or proper to evidence, perfect, maintain and enforce
the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any
of the other Financing Agreements. Lender may at any time and from
time to time request a certificate from an officer of Borrower representing
that all conditions precedent to the making of Loans and providing Letter
of Credit Accommodations contained herein are satisfied. In the event of
such request by Lender, Lender may, at its option, cease to make any
further Loans or provide any further Letter of Credit Accommodations
until Lender has received such certificate and, in addition, Lender has
determined that such conditions are satisfied. Where permitted by law,
Borrower hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations or fails
to perform any or all of the terms, covenants, conditions or provisions
contained in any or all of Sections 9.1, 9.2, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10,
9.11, 9.12, 9.13, 9.14, 9.15 or 9.16 hereof;
(b) Borrower fails to perform any or all of the terms, covenants,
conditions or provisions (i) contained in any or all of Sections 9.3, 9.4,
9.18 hereof and such failure shall continue unremedied for ten (10) or
more days or (ii) arising under or pursuant to this Agreement and/or any
other Financing Agreement (other than those described in any or all of
Section 10.1(a) or 10.1(b)(i) hereof) and such failure shall continue
unremedied for twenty (20) or more days;
(c) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or
any other agreement, schedule, confirmatory assignment or otherwise shall
when made or deemed made be false or misleading in any material respect;
(d) one or more judgments for the payment of money is rendered
against Borrower or any Subsidiary of Borrower in excess of $1,000,000
in the aggregate and shall remain undischarged or unvacated for a period
in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money,
or injunction, attachment, garnishment or execution is rendered against
Borrower or any Subsidiary of Borrower or any of their assets;
(e) Borrower or any Subsidiary of Borrower (other than Eagle
Pharmacy Co., Milan Distributing Co. or Eagle Country Markets, Inc.)
which is a partnership or corporation, dissolves or suspends or discontinues
doing business;
(f) Borrower or any Subsidiary of Borrower becomes Insolvent (as
defined under the bankruptcy laws of the United States of America now or
hereafter in effect), makes an assignment for the benefit of creditors,
makes or sends notice of a bulk transfer or calls a meeting of its creditors
in their capacity as creditors, one of the purposes of which is to restructure
or reorganize indebtedness of Borrower or principal creditors in their
capacity as creditors, one of the purposes of which is to restructure or
reorganize indebtedness of Borrower;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law
or in equity) is filed against Borrower or any Subsidiary of Borrower or
all or any material part of its properties and such petition or application is
not dismissed within sixty (60) days after the date of its filing or Borrower
or any Subsidiary of Borrower shall file any answer admitting or not
contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a
law or equity) is filed by Borrower or any Subsidiary of Borrower or for
all or any part of its property; or
(i) any default by Borrower, any Subsidiary of Borrower under any
agreement, document or instrument relating to any indebtedness for
borrowed money owing to any person other than Lender, or any capitalized
lease obligations, contingent indebtedness in connection with any
guarantee, letter of credit, indemnity or similar type of instrument in favor
of any person other than Lender, in any case in an amount in excess of
$1,000,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by Borrower under any
material (given the specific circumstances) contract lease, license or other
obligation (including, without limitation, Borrower's obligation to pay sales
tax) to any person other than Lender, which default continues for more
than the applicable cure period, if any, with respect thereto;
(j) any Change in Control shall have occurred;
(k) the indictment of Borrower under any criminal statute, or
commencement of criminal or civil proceedings against Borrower or any
Subsidiary of Borrower, pursuant to which statute or proceedings the
penalties or remedies sought or likely to be available include forfeiture of
any of the Collateral or any material amount of other property of
Borrower.
(l) any event or circumstance shall occur or exist and such event or
circumstance is likely, in the Lender's reasonable judgment, to have a
Material Adverse Effect; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial
Code and other applicable law, all of which rights and remedies may be
exercised without notice to or consent by Borrower, any Subsidiary of
Borrower or any other Person, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies
and powers granted to Lender hereunder, under any of the other Financing
Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions,
and shall include, without limitation, the right to apply to a court of equity
for an injunction to restrain a breach or threatened breach by Borrower of
this Agreement or any of the other Financing Agreements. Lender may,
at any time or times, proceed directly against Borrower or any other Person
to collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and
demand immediate payment thereof to Lender (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and/or
10.1(h), all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may
be located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii)
require Borrower, at Borrower's expense, to assemble and make available
to Lender any part or all of the Collateral at any place and time designated
by Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize
upon any and all Collateral, (v) remove any or all of the Collateral from
any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of
any and all Collateral (including, without limitation, entering into contracts
with respect thereto, public or private sales at any exchange, broker's
board, at any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery,
with Lender having the right to purchase the whole or any part of the
Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of Borrower, which right or equity of
redemption is hereby expressly waived and released by Borrower and/or
(vii) terminate this Agreement. If any of the Collateral is sold or leased
by Lender upon credit terms or for future delivery, the Obligations shall
not be reduced as a result thereof until payment therefor is finally collected
by Lender. If notice of disposition of Collateral is required by law, five
(5) days prior notice by Lender to Borrower designating the time and place
of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the
event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition
of the Collateral to payment of the Obligations, in whole or in part and in
such order as Lender may elect, whether or not then due. Borrower shall
remain liable to Lender for the payment of any deficiency with interest at
the highest rate provided for herein and all costs and expenses of collection
or enforcement, including attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice,
(i) cease making Loans or arranging for Letter of Credit Accommodations
or reduce the lending formulas or amounts of Revolving Loans and Letter
of Credit Accommodations available to Borrower and/or (ii) terminate any
provision of this Agreement providing for any future Loans or Letter of
Credit Accommodations to be made by Lender to Borrower.
10.3 Use of Intellectual Property. Borrower hereby irrevocably grants
Lender a license to use any and all of Borrower's right, title and interest
in, to and under any and all trademarks, tradenames, copyrights (and
materials subject to one or more copyrights) and other intellectual property,
without cost to Lender, to the extent Lender reasonably deems it necessary
to assist Lender in any and all liquidations of Collateral or for the practical
realization of the benefits intended to be granted to Lender hereunder.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Illinois
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-
exclusive jurisdiction of the courts of the State of Illinois located in
Chicago, Illinois and the United States District Court for the Northern
District of Illinois and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way
connected with or related or incidental to the dealings of the parties hereto
in respect of this Agreement or any of the other Financing Agreements or
the transactions related hereto or thereto, in each case whether now
existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall
be heard only in the courts described above (except that Lender shall have
the right to bring any action or proceeding against Borrower or its property
in the courts of any other jurisdiction which Lender reasonably deems
necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the
U.S. mails, or, at Lender's option, by service upon Borrower in any other
manner provided under the rules of any such courts. Within thirty (30)
days after such service, Borrower shall appear in answer to such process,
failing which Borrower shall be deemed in default and judgment may be
entered by Lender against Borrower for the amount of the claim and other
relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY
WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS
OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING,
AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.
BORROWER AND LENDER EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE
AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions
or relationships contemplated by this Agreement, or any act, omission or
event occurring in connection herewith, unless it is determined by a final
and non-appealable judgment or court order binding on Lender, that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, Lender shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with
the exercise of ordinary care in the performance by it of the terms of this
Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and commercial paper, included in or
evidencing any of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are
expressly provided for herein. No notice to or demand on Borrower which
Lender may elect to give shall entitle Borrower to any other or further
notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any
provision hereof shall be amended, modified, waived or discharged orally
or by course of conduct, but only by a written agreement signed by an
authorized officer of Lender. Lender shall not, by any act, delay, omission
or otherwise be deemed to have expressly or impliedly waived any of its
rights, powers and/or remedies unless such waiver shall be in writing and
signed by an authorized officer of Lender. Any such waiver shall be
enforceable only to the extent specifically set forth therein. A waiver by
Lender of any right, power and/or remedy on any one occasion shall not
be construed as a bar to or waiver of any such right, power and/or remedy
which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom
or relating hereto or thereto.
11.5 Indemnification. Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any
and all losses, claims, damages, liabilities, costs or expenses imposed on,
incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing
Agreements, or any undertaking or proceeding related to any of the
transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including, without limitation, amounts paid in
settlement, court costs, and the reasonable fees and expenses of counsel,
other than any losses, claims, damages, liabilities, costs or expenses
directly resulting from Lender's or its directors', agents' employees' or
counsel's gross negligence or wilful misconduct. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section
may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion which it is permitted to pay
under applicable law to Lender in satisfaction of indemnified matters under
this Section. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect for a term ending on the date three (3)
years from the date hereof (the "Renewal Date"), with the Renewal Date
being extended on each Renewal Date to the date one year from the date
of the then current Renewal Date unless this Agreement and the other
Financing Agreements have been terminated prior to the then current
Renewal Date pursuant to the terms hereof. On each extension of the
Renewal Date Borrower shall pay Lender a renewal fee of $100,000, which
fee shall be fully earned and payable on each applicable Renewal Date.
Lender or Borrower may terminate this Agreement and the other Financing
Agreements effective on the Renewal Date or on the anniversary of the
Renewal Date in any year by giving to the other party at least sixty (60)
days prior written notice; provided, that, this Agreement and all other
Financing Agreements must be terminated simultaneously. Upon the
effective date of termination or non-renewal of the Financing Agreements,
Borrower shall pay to Lender, in full, all outstanding and unpaid
Obligations and shall furnish cash collateral to Lender in such amounts as
Lender determines are reasonably necessary to secure Lender from loss,
cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any or all issued and outstanding Letter of Credit
Accommodations and checks or other payments provisionally credited to
the Obligations and/or as to which Lender has not yet received final and
indefeasible payment. Such cash collateral shall be remitted by wire
transfer in Federal funds to such bank account of Lender, as Lender may,
in its discretion, designate in writing to Borrower for such purpose.
Interest shall be due until and including the next Business Day, if the
amounts so paid by Borrower to the bank account designated by Lender
are received in such bank account later than 12:00 noon, Chicago time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations have been fully and finally discharged and
paid, and Lender's continuing security interest in the Collateral and the
rights and remedies of Lender hereunder, under the other Financing
Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's
lost profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount
set forth below if such termination is effective in the period indicated:
Amount Period
(i) 3% of Maximum Credit from the date hereof to
the first anniversary of
the date hereof
(ii) 2% of Maximum Credit from the first anniversary
of the date hereof to the
second anniversary of the
date hereof
(iii) 1% of Maximum Credit from the second
anniversary of the date
hereof to the termination
of this Agreement.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower
agrees that it is reasonable under the circumstances currently existing. The
early termination fee provided for in this Section 12.1 shall be deemed
included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be
in writing and (a) made to Lender at its address set forth below and to
Borrower at its chief executive office set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or
made: if delivered in person, immediately upon delivery; if by telex,
telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier
service with instructions to deliver the next Business Day, one (1) Business
Day after sending; and if by certified mail, return receipt requested, five
(5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be
construed as though it did not contain the particular provision held to be
invalid or unenforceable and the rights and obligations of the parties shall
be construed and enforced only to such extent as shall be permitted by
applicable law.
12.4 Successors. This Agreement, the other Financing Agreements
and any other document referred to herein or therein shall be binding upon
and inure to the benefit of and be enforceable by Lender, Borrower and
their respective successors and assigns, except that Borrower may not
assign its rights under this Agreement, the other Financing Agreements and
any other document referred to herein or therein without the prior written
consent of Lender. Lender may, after notice to Borrower and with
Borrower's consent (which consent shall not be unreasonably withheld or
delayed), assign its rights and delegate its obligations under this Agreement
and the other Financing Agreements and, with Borrower's consent (which
consent shall not be unreasonably withheld or delayed) in the case of an
assignment, further may assign, or sell participations in, all or any part of
the Loans, the Letter of Credit Accommodations or any other interest
herein to another financial institution or other person, in which event, the
assignee or participant shall have, to the extent of such assignment or
participation, the same rights and benefits as it would have if it were
Lender hereunder, except as otherwise provided by the terms of such
assignment; provided, however, that in the case of any participation (i)
Lender's obligations under this Agreement shall remain unchanged, (ii)
Lender shall remain solely responsible to Borrower for the performance of
such obligations, (iii) no such grant of a participation shall, without the
consent of Borrower, require Borrower to file a registration statement with
the Securities and Exchange Commission or apply to qualify the Loans
under the blue sky laws of any State, (iv) Borrower shall continue to deal
solely and directly with Lender in connection with Lender's rights and
obligations under this Agreement and (v) Lender shall retain the sole right
to enforce the obligations of Borrower relating to the Loans and to approve
any amendment, modification or waiver of any provision of this
Agreement (other than a modification, alteration or amendment hereof in
any "material respect" (within the meaning of such term in any or all
applicable participation agreements) or a waiver or release of any "material
rights" (within the meaning of such term in any or all applicable
participation agreements)).
12.5 Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or
documents delivered or to be delivered in connection herewith or therewith
represents the entire agreement and understanding concerning the subject
matter hereof and thereof between the parties hereto, and supersede all
other prior agreements, understandings, negotiations and discussions,
representations, warranties, commitments, proposals, offers and contracts
concerning the subject matter hereof, whether oral or written.
12.6 Confidentiality. Lender shall use good faith efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-
public information supplied to it by Borrower pursuant to this Agreement,
provided, that, nothing contained herein shall limit the disclosure of any
such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators,
auditors and/or accountants, (iii) in connection with any litigation with
Borrower to which Lender is a party or in connection with any other
litigation, provided, that, Lender shall notify Borrower of Lender's receipt
of a request for any information from any third party in connection with
any such litigation, (iv) to any assignee or participant (or prospective
assignee or participant) which shall have agreed to treat such information
as confidential or (v) to counsel for Lender or any participant or assignee
(or prospective participant or assignee).
IN WITNESS WHEREOF, Lender and Borrower have caused these
presents to be duly executed as of the day and year first above written.
LENDER
CONGRESS FINANCIAL
CORPORATION
(Central)
By:_____________________________
Title:___________________________
Address:
100 South Wacker Drive
Suite 1940
Chicago, Illinois 60606
BORROWER
EAGLE FOOD CENTERS, INC.
By:_____________________________
Title:___________________________
Chief Executive Office:
Route 67 & Knoxville Road
Milan, Illinois 61264
Exhibit D
I, ________________________________________ certify that (i) I am the
duly elected _________________________ of Eagle Food Centers, Inc. and (ii)
the information set forth on Schedule I hereto is true, correct and complete
as of _____________________.
By:__________________________
Name:________________________
Title:_________________________
Schedule I
Store # Contact Monthly Rent Amount Paid this Month % Rent Accrual
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000030938
<NAME> EAGLE FOOD CENTERS, INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-END> APR-29-1995
<CASH> 5,136,000
<SECURITIES> 6,177,000
<RECEIVABLES> 18,120,000
<ALLOWANCES> 578,000
<INVENTORY> 77,112,000
<CURRENT-ASSETS> 110,120,000
<PP&E> 287,593,000
<DEPRECIATION> 126,201,000
<TOTAL-ASSETS> 301,815,000
<CURRENT-LIABILITIES> 110,095,000
<BONDS> 100,000,000
<COMMON> 115,000
0
0
<OTHER-SE> 38,031,000
<TOTAL-LIABILITY-AND-EQUITY> 301,815,000
<SALES> 245,530,000
<TOTAL-REVENUES> 245,530,000
<CGS> 184,105,000
<TOTAL-COSTS> 184,105,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 31,000
<INTEREST-EXPENSE> 3,966,000
<INCOME-PRETAX> (4,720,000)
<INCOME-TAX> (237,000)
<INCOME-CONTINUING> (4,483,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,483,000)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
