<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
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 July 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-21448
NATIONAL HOME CENTERS, INC.
(Exact name of registrant as specified in its charter)
ARKANSAS 71-0403343
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
HIGHWAY 265 NORTH
SPRINGDALE, ARKANSAS 72765
(Address of principal executive offices, including zip code)
(501) 756-1700
(Registrant's telephone number, including area code)
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
As of September 14, 1998 National Home Centers, Inc. had 7,142,251 shares
of $0.01 par value Common Stock outstanding.
- --------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
NATIONAL HOME CENTERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
==================================================================================================
JULY 31, JANUARY 31,
1998 1998
ASSETS (Unaudited) (1)
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash $ 82,083 111,543
Accounts Receivable 9,587,708 9,970,843
Income Tax Refunds Receivable 0 517,118
Inventories 12,701,318 19,173,468
Other 523,613 593,901
- --------------------------------------------------------------------------------------------------
Total Current Assets 22,894,722 30,366,873
- --------------------------------------------------------------------------------------------------
Property, Plant and Equipment 19,886,165 42,030,892
Less Accumulated Depreciation 10,600,358 12,745,131
- --------------------------------------------------------------------------------------------------
Net Property, Plant and Equipment 9,285,807 29,285,761
- --------------------------------------------------------------------------------------------------
Other Assets, Net of Amortization 2,775,362 2,137,770
- --------------------------------------------------------------------------------------------------
$ 34,955,891 61,790,404
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------
Current Liabilities:
Current Installments of Long-Term Debt $ 1,243,574 9,113,391
Accounts Payable 8,989,278 13,200,065
Accrued Expenses 3,242,465 4,003,643
- --------------------------------------------------------------------------------------------------
Total Current Liabilities 13,475,317 26,317,099
- --------------------------------------------------------------------------------------------------
Long-Term Debt, Excluding Current Installments 10,854,604 23,323,447
Stockholders' Equity 10,625,970 12,149,858
- --------------------------------------------------------------------------------------------------
$ 34,955,891 61,790,404
==================================================================================================
</TABLE>
(1) January 31, 1998 balances are condensed from the audited consolidated
balance sheet.
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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<TABLE>
<CAPTION>
NATIONAL HOME CENTERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
==========================================================================================================================
THREE MONTHS ENDED SIX MONTHS ENDED
JULY 31, JULY 31,
---------------------------------------------------------------------------
(Unaudited) 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 31,322,213 43,667,104 60,508,026 79,882,830
COST OF SALES 24,533,781 33,681,775 47,535,426 61,343,712
- --------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 6,788,432 9,985,329 12,972,600 18,539,118
- --------------------------------------------------------------------------------------------------------------------------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Salaries and Benefits 4,222,869 5,946,128 8,716,893 11,478,281
Rent 461,108 557,490 898,286 1,137,647
Depreciation and Amortization 518,021 815,094 1,061,162 1,633,543
Other 794,972 2,261,344 2,371,019 3,810,969
- --------------------------------------------------------------------------------------------------------------------------
TOTAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,996,970 9,580,056 13,047,360 18,060,440
- --------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 791,462 405,273 (74,760) 478,678
Interest Expense 672,219 977,799 1,449,128 1,874,136
- --------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Before Income Taxes 119,243 (572,526) (1,523,888) (1,395,458)
Income Taxes 0 (194,658) 0 (474,456)
- --------------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 119,243 (377,868) (1,523,888) (921,002)
==========================================================================================================================
EARNINGS (LOSS) PER SHARE $ 0.02 (0.05) (0.21) (0.13)
==========================================================================================================================
Weighted Average Number of
Common Shares Outstanding 7,142,251 7,142,251 7,142,251 7,142,251
==========================================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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<TABLE>
<CAPTION>
NATIONAL HOME CENTERS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
=======================================================================================================
SIX MONTHS ENDED
JULY 31,
---------------------------------------
(Unaudited) 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,523,888) (921,002)
Adjustments to Reconcile Net Loss to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 1,061,162 1,633,543
Gain on Disposal of Property, Plant and Equipment (431,055) (81,854)
Increase in Cash Surrender Value of Life Insurance (77,960) (12,000)
Deferred Income Tax Benefit 0 (220,937)
Changes in Assets and Liabilities:
Accounts Receivable 383,135 (3,424,454)
Inventories 6,472,150 1,307,556
Other Current Assets 587,406 1,062,613
Accounts Payable (4,210,787) 1,732,292
Accrued Expenses (761,178) 296,338
- -------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 1,498,985 1,372,095
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment (32,841) (166,193)
Proceeds from Sale of Property, Plant and Equipment 19,484,453 65,814
Increase in Other Assets (641,397) (187,539)
- -------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used in) Investing 18,810,215 (287,918)
Activities
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Long-Term Debt 8,966,337 3,057,257
Repayments of Long-Term Debt (29,304,997) (4,142,759)
- -------------------------------------------------------------------------------------------------------
Net Cash Used In Financing Activities (20,338,660) (1,085,502)
- -------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH (29,460) (1,325)
Cash at Beginning of Period 111,543 134,086
- -------------------------------------------------------------------------------------------------------
Cash at End of Period $ 82,083 132,761
=======================================================================================================
SUPPLEMENTAL DISCLOSURES:
Interest Paid $ 1,610,833 1,860,855
Accounts Receivable for Sale of Other Assets 0 337,662
Issuance of Notes Payable for Payment of Account Payable 0 200,000
=======================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
NATIONAL HOME CENTERS, INC. ("THE COMPANY") AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JULY 31, 1998
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X of the Securities and Exchange Commission.
Accordingly, the financial statements do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Results of operations for the three
months and six months ended July 31, 1998, are not necessarily indicative
of the results to be expected for the fiscal year ending January 31, 1999.
For further information, refer to the consolidated financial statements and
related notes thereto included in the Company's Annual Report on Form 10-K
filed with the Commission on April 30, 1998, as amended on May 28, 1998.
2. Income Taxes
As a result of the uncertainty associated with the future realization of
deferred tax assets, which include the tax effects of net operating loss
(NOL) and other tax carryforwards, no income tax benefit has been recorded
for the three months and six months ended July 31, 1998.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
National Home Centers, Inc. ("the Company") is a full line retailer of home
improvement products and building materials, with eight locations in Arkansas.
The Company serves retail consumers and professional contractors primarily in
Arkansas and also in Oklahoma, Missouri and Kansas.
Over the past several years, the Company has experienced increased competition
in its markets from other national and/or regional chains which are seeking to
gain or retain market share by reducing prices. This has continued to place
pressure on all of the Company's stores and their respective sales, gross
margins and operating income. During 1997, the Company announced plans to
restructure its operations which included closing several stores. During 1997,
the Company closed stores in Conway and Rogers. During the first quarter of
1998, the Company closed two stores in Little Rock and Fayetteville and closed
the west Rogers store during the second quarter of 1998. In addition, management
has announced plans to reduce the home center
5
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portion of the Russellville store. Closing these stores has eliminated the
continued losses which these stores have incurred and provided cash as a result
of selling the related assets, including real estate.
The significant decreases in inventories, fixed assets, long-term debt and
accounts payable as of July 31, 1998, compared to January 31, 1998, reflect the
results of these restructuring steps. Certain real estate and equipment
associated with the closed stores, and certain other real estate, were sold,
providing cash of approximately $19 million. In addition, inventory levels have
been reduced by approximately $6.5 million, primarily as a result of closing
stores. Cash generated by the restructuring has been used primarily to reduce
long-term debt and accounts payable, which have decreased approximately $20.0
million and $4.2 million, respectively, at July 31, 1998, compared to January
31, 1998.
RESULTS OF OPERATIONS
Three Months Ended July 31, 1998 and 1997
Net sales for the second quarter of fiscal 1998 were down 28% to $31.3 million,
compared to $43.6 million for the second quarter of fiscal 1997. Comparable
store sales in the second quarter of fiscal 1998 were down 14 % over the same
period of fiscal 1997. Net income for the second quarter of fiscal 1998 was
$119,000 or $0.02 per share, compared with net loss for the second quarter of
fiscal 1997 of $378,000, or $0.05 per share. The decrease in sales and increase
in net income was primarily due to increased competition and the closing of the
five stores discussed above.
Gross profit as a percentage of net sales for the second quarter of fiscal 1997
decreased to 21.7% from 22.9% for the same period last year. Increased
competition and a change in customer mix led to the decrease in gross margin. As
a result of the closing of the supercenters, the customer mix has shifted to a
higher percentage of contractor sales versus retail sales. Generally,
contractor sales tend to have a lower gross profit than retail sales.
Selling, general and administrative expenses decreased to 19.1% of net sales for
the second quarter of fiscal 1998 compared to 21.9% of net sales for the same
period last year. This decrease in expenses is primarily a result of the store
closings discussed above.
Net interest expense as a percentage of net sales was 2.1% for the quarter ended
July 31, 1998, compared to 2.2% for the same period last year.
Six Months Ended July 31, 1998 and 1997
Net sales for the six months ended July 31, 1998 were down 24% to $60.5 million,
compared to $79.9 million for the same period of fiscal 1997. Comparable store
sales for the six months ended July 31, 1998 were down 12% over the same period
of fiscal 1997. Closing of the stores discussed above has decreased sales
volume, along with increased competition.
Gross profit as a percentage of net sales for the first six months of fiscal
1998 decreased to 21.4% from 23.2% for the same period last year. Increased
competition and a change in customer mix led to the decrease in gross margin.
As a result of the closing of the supercenters, the customer mix has shifted to
a higher percentage of contractor sales versus retail sales. Generally,
contractor sales tend to have a lower gross profit than retail sales.
6
<PAGE>
Selling general and administrative expenses decreased to 21.5% of net sales for
the first six months of fiscal 1998, compared to 22.6% of net sales for the same
period last year. This decrease is primarily from the closing of the stores and
a continual effort to reduce operating expenses.
Net interest expense as a percentage of net sales was 2.4% for the six months
ended July 31, 1998, compared to 2.3% for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at July 31, 1998 increased to $9.4 million from
$4.0 million at January 31, 1998, primarily due to decreases in current
installments of long-term debt as a result of early retirement of debt.
The Company's primary capital needs are to finance operations. During the six
months ended July 31, 1998, operating activities provided net cash of $2.0
million. Primary sources of cash from operating activities included
approximately $6.5 million from decreases in inventories. The primary uses of
cash were the net loss for the period, adjusted for depreciation and
amortization, of $0.4 million and decreases in accounts payable of $4.2 million.
Net cash provided by investing activities for the first six months of fiscal
1998 was approximately $18.8 million, principally due to sales of real estate
and equipment of the closed stores. Net cash used in financing activities
during the first six months of fiscal 1998 totaled approximately $20.3 million,
primarily from net repayments of long-term borrowings.
On July 15, 1998, the Company entered into a loan and security agreement for a
new $20 million revolving credit agreement, which expires in July, 2002. The
agreement provides for interest to be charged at .50% per annum in excess of the
Prime Rate. The agreement limits availability to a borrowing base of 85% and
65% of eligible accounts receivable and inventory, respectively, with each
capped at $10 million. The facility does not contain any financial covenants.
The Company had additional available borrowing capacity of approximately $6.7
million under the revolving credit agreement as of July 31, 1998.
Also as of July 31, 1998, the Company is generally current with all accounts
payable vendors and began utilizing discounts on payments made to vendors which
supply inventory to the Company.
YEAR 2000 COMPLIANCE
The efficient operation of the Company's business is dependent in part on its
computer software programs and operating systems. These programs and systems
are used in several key areas of the Company's business, including merchandise
purchasing, inventory management, pricing, sales, shipping and financial
reporting, as well as in various administrative functions. The Company has been
evaluating its programs and systems to identify potential year 2000 compliance
problems. These actions are necessary to ensure the programs and systems will
recognize and process the year 2000 and beyond. It is anticipated that
modification or replacement of most of the Company's programs and systems will
be necessary to make such programs and systems year 2000 compliant. The Company
is communicating with suppliers and others to coordinate year 2000 conversion.
Based on present information, the Company believes that it will be able to
achieve year 2000 compliance by upgrading its key programs and systems to those
that are already year 2000 compliant. However, no assurance can be given that
these
7
<PAGE>
efforts will be successful. The Company does not expect expenditures associated
with achieving year 2000 compliance to have a material effect on its financial
results in 1998.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Form 10-Q are made pursuant to the safe
harbor provision of the Private Securities Litigation Reform Act of 1995. There
are various factors that could cause results to differ materially from those
anticipated by some statements made in this Form 10-Q. investors are cautioned
that all forward-looking statements involve risks and uncertainty. The Company
does not undertake to publicly update or revise its forward-looking statements
even if experience or future changes make it clear that any projected results
expressed or implied therein will not be realized. Factors that could cause
actual results to differ materially include, but are not limited to the
following: the strength and extent of new and existing competition; the
Company's ability to maintain competitive pricing in its markets; the Company's
ability to make its management information systems year 2000 compliant; the
Company's ability to maintain adequate levels of vendor support; the Company's
ability to maintain adequate levels of lender support; the ability of the
Company to increase sales; the Company's ability to attract, train and retain
experienced, quality employees; the Company's ability to dispose of excess real
estate and other assets; general economic conditions; housing turnover; interest
rates; weather; and other factors described from time to time in the Company's
Securities and Exchange Commission filings.
IMPACT OF INFLATION AND CHANGING PRICES
Although the Company cannot accurately determine the precise effect of inflation
on its operations, it does not believe inflation has had a material effect on
sales or results of operations.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has not entered into any transactions using derivative financial
instruments or derivative commodity instruments and believes that its exposure
to market risks associated with other financial instruments (such as
investments) are not material.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is not a party to any material pending legal proceedings. The
Company at times does have routine litigation incidental to its business.
In the opinion of the Company's management, such proceedings should not,
individually or in the aggregate, have a material adverse effect on the
Company's results of operations or financial condition. The Company
maintains insurance in such amounts and with such coverage and deductibles
as management believes are reasonable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on June 4, 1998. For
purposes of voting for the election of Directors and upon such other
business as may have properly come before the meeting, there were 7,465,958
shares of outstanding Common Stock entitled to vote at the meeting. Of
those outstanding shares, 6,653,352 were represented either in person or by
proxy at the meeting. The stockholders voted on the following items:
Election of Directors:
Name For Authority Withheld
Larry C. Chumley 6,626,311 27,041
Richard D. Denison 6,627,711 25,641
Danny R. Funderburg 6,625,389 27,963
Brent A. Hanby 6,626,611 26,741
Roger A. Holman 6,626,711 26,641
Dwain A. Newman 6,624,889 28,463
David W. Truetzel 6,627,618 25,734
No other matters to be voted upon were brought before the meeting.
ITEM 5. OTHER INFORMATION.
On July 15, 1998 the Company sold the real property and improvements associated
with its closed Fayetteville, Arkansas supercenter to Home Depot, Inc. for $6.5
million. On July 30, 1998, the Company sold the real property, improvements and
fixed assets associated with its closed west Rogers, Arkansas supercenter to
Lowe's Companies, Inc. for $10.85 million. Proceeds of the sales were used to
reduce indebtedness associated with the properties and for general working
capital.
The SEC requires a registrant to provide stockholders notice of deadlines for
timely submission of certain types of stockholder proposals that stockholders
wish to present for a vote at a registrant's annual meeting. These deadlines
are set based on certain SEC rules as they relate to
9
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the registrant's annual meeting date and relevant provisions of its charter and
by-laws. Set forth below are the deadlines applicable to the Company's
stockholders. The Company's Board of Directors has not yet acted to set a 1999
annual meeting date, thus the following dates are based on an assumed annual
meeting date of June 3, 1999 and assumed proxy statement mailing date of April
30, 1999 for the Company's 1999 annual meeting.
Stockholder proposals submitted outside the process of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended, must be received by March 3, 1999,
or they will be considered untimely. In the event a stockholder does not timely
notify the Company concerning stockholder proposals, the Company will have the
right to exercise its discretionary authority (through the right conferred upon
its proxies) to vote against such stockho lder proposal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K.
(a) Exhibits Description of Exhibit Sequentially
Exhibits No. Numbered Page
10.1 Loan and Security agreement with 12-60
NationsCredit Commercial Funding
10.2 Real Property Purchase Agreement between 61-71
National Home Centers, Inc. and Home
Depot U.S.A., Inc.
10.3 Agreement to Sell and Purchase Real 72-92
Estate between National Home Centers,
Inc. and Lowe's Home Centers, Inc.
27.1 Financial Data Schedule 93-94
(b) Reports on Form 8-K.
Not applicable.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
NATIONAL HOME CENTERS, INC.
---------------------------
Date: September 14, 1998 /s/ Dwain A. Newman
---------------------------
Dwain A. Newman
Chief Executive Officer and
Chairman
Date: September 14, 1998 /s/ Brent A. Hanby
---------------------------
Brent A. Hanby
Executive Vice President and
Chief Financial Officer
11
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EXHIBIT 10.1
NATIONSCREDIT COMMERCIAL FUNDING
- -------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (as it may be amended, this "AGREEMENT")
is entered into on July __, 1998 between NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION ("LENDER"), having an
address at 1177 Avenue of the Americas, 36th Floor, New York, New York 10036 and
NATIONAL HOME CENTERS, INC. ("BORROWER"), whose chief executive office is
located at Highway 265 North, P.O. Box 789, Springdale, Arkansas 72765-0789
("BORROWER'S ADDRESS"). The Schedules to this Agreement are an integral part of
this Agreement and are incorporated herein by reference. Terms used, but not
defined elsewhere, in this Agreement are defined in Schedule B.
1. LOANS AND CREDIT ACCOMMODATIONS.
1.1 AMOUNT. Subject to the terms and conditions contained in this
Agreement, Lender will:
(a) REVOLVING LOANS AND CREDIT ACCOMMODATIONS. From time to time
during the Term at Borrower's request, make revolving loans to Borrower
("REVOLVING LOANS"), and make letters of credit, bankers acceptances and other
credit accommodations ("CREDIT ACCOMMODATIONS") available to Borrower, in each
case to the extent that there is sufficient Availability at the time of such
request to cover, dollar for dollar, the requested Revolving Loan or Credit
Accommodation; PROVIDED, that after giving effect to such Revolving Loan or
Credit Accommodation, (x) the outstanding balance of all monetary Obligations
(INCLUDING the principal balance of any Term Loan and, solely for the purpose of
determining compliance with this provision, the Credit Accommodation Balance)
will not exceed the Maximum Facility Amount set forth in Section 1(a) of
Schedule A and (y) none of the other Loan Limits set forth in Section 1 of
Schedule A will be exceeded. For this purpose, "AVAILABILITY" means:
(i) the aggregate amount of Eligible Accounts (less maximum
existing or asserted taxes, discounts, credits and allowances)
multiplied by the Accounts Advance Rate set forth in Section 1(b)(i)
of Schedule A but not to exceed the Accounts Sublimit set forth in
Section 1(c) of Schedule A;
PLUS
(ii) the lower of cost or market value of Eligible Inventory
multiplied by the Inventory Advance Rate(s) set forth in Section
1(b)(ii) of Schedule A, but not to exceed the Inventory Sublimit(s)
set forth in Section 1(d) of Schedule A;
MINUS
(iii) all Reserves which Lender has established pursuant to
Section 1.2 (including those to be established in connection with the
requested Revolving Loan or Credit Accommodation);
1
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NATIONSCREDIT COMMERICAL FUNDING LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
MINUS
(iv) the outstanding balance of all of the monetary Obligations
(EXCLUDING the Credit Accommodation Balance and the principal balance
of the Term Loan); and
PLUS
(v) the Overadvance Amount, if any, set forth in Section 1(g)
of Schedule A.
(b) TERM LOAN. On the date of this Agreement, make (i) an advance to
Borrower computed with respect to the value of Borrower's Eligible Equipment
(the ("EQUIPMENT ADVANCE") in the principal amount, if any, set forth in Section
2(a)(i) of Schedule A, and (ii) an advance to Borrower computed with respect to
the value of Borrower's Eligible Real Property (the "REAL PROPERTY ADVANCE") in
the principal amount, if any, set forth in Section 2(a)(ii) of Schedule A. The
Equipment Advance and the Real Property Advance are collectively referred to as
the "TERM LOAN."
1.2 RESERVES. Lender may from time to time establish and revise such
reserves as Lender deems appropriate in its sole discretion exercised in good
faith ("RESERVES") to reflect (i) events, conditions, contingencies or risks
which affect or may affect (A) the Collateral or its value, or the security
interests and other rights of Lender in the Collateral or (B) the assets,
business or prospects of Borrower or any Obligor, (ii) Lender's good faith
concern that any Collateral report or financial information furnished by or on
behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect, (iii) any fact or circumstance
which Lender determines in good faith constitutes, or could constitute, a
Default or Event of Default or (iv) any other events or circumstances which
Lender determines in good faith make the establishment or revision of a Reserve
prudent. Without limiting the foregoing, Lender shall (x) in the case of each
Credit Accommodation issued for the purchase of Inventory (a) which meets the
criteria for Eligible Inventory set forth in clauses (i), (ii), (iii), (v) and
(vi) of the definition of Eligible Inventory, (b) which is or will be in transit
to one of the locations set forth in Section 9(d) of Schedule A, (c) which is
fully insured in a manner satisfactory to Lender and (d) with respect to which
Lender is in possession of all bills of lading and all other documentation which
Lender has requested, all in form and substance satisfactory to Lender in its
sole discretion, establish a Reserve equal to the cost of such Inventory (plus
all duties, freight, taxes, insurance, costs and other charges and expenses
relating to such Credit Accommodation or such Eligible Inventory) multiplied by
a percentage equal to 100% minus the Inventory Advance Rate applicable to
Eligible Inventory and (y) in the case of any other Credit Accommodation issued
for any purpose, establish a Reserve equal to the full amount of such Credit
Accommodation plus all costs and other charges and expenses relating to such
Credit Accommodation. In addition, (x) Lender shall establish a permanent
Reserve in the amount set forth in Section 1(f) of Schedule A, and (y) if the
outstanding principal balance of the Term Loan advance with respect to Eligible
Equipment exceeds the percentage set forth in Section 2(a)(i) of Schedule A of
the appraised
2
<PAGE>
NATIONSCREDIT COMMERICAL FUNDING LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
value of such Eligible Equipment, Lender may establish an additional Reserve in
the amount of such excess (and, for this purpose, if payments of principal on
the Term Loan advances against Eligible Equipment and Real Property are not
calculated separately, payments of principal of the Term Loan made by Borrower
shall be deemed to apply to the Term Loan advance with respect to Eligible
Equipment and Real Property, respectively, in proportion to the original
principal amounts of such advances). Lender may, in its discretion, establish
and revise Reserves by deducting them in determining Availability or by
reclassifying Eligible Accounts or Eligible Inventory as ineligible. In no event
shall the establishment of a Reserve in respect of a particular actual or
contingent liability obligate Lender to make advances hereunder to pay such
liability or otherwise obligate Lender with respect thereto.
1.3 OTHER PROVISIONS APPLICABLE TO CREDIT ACCOMMODATIONS. Lender may, in
its sole discretion and on terms and conditions acceptable to Lender, make
Credit Accommodations available to Borrower either by issuing them, or by
causing other financial institutions to issue them supported by Lender's
guaranty or indemnification; provided, that after giving effect to each Credit
Accommodation, the Credit Accommodation Balance will not exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable, in the same manner as a Revolving Loan. Borrower agrees to execute
all documentation required by Lender or the issuer of any Credit Accommodation
in connection with any such Credit Accommodation.
1.4 REPAYMENT. Accrued interest on all monetary Obligations shall be
payable on the first day of each month. Principal of the Term Loan shall be
repaid as set forth in Section 2(b) of Schedule A. If at any time any of the
Loan Limits are exceeded, Borrower will immediately pay to Lender such amounts
(or provide cash collateral to Lender with respect to the Credit Accommodation
Balance in the manner set forth in Section 7.3), as shall cause Borrower to be
in full compliance with all of the Loan Limits. Notwithstanding the foregoing,
Lender may, in its sole discretion, make or permit Revolving Loans, the Term
Loan, any Credit Accommodations or any other monetary Obligations to be in
excess of any of the Loan Limits; PROVIDED, that Borrower shall, upon Lender's
demand, pay to Lender such amounts as shall cause Borrower to be in full
compliance with all of the Loan Limits. All unpaid monetary Obligations shall be
payable in full on the Maturity Date (as defined in Section 7.1) or, if earlier,
the date of any early termination pursuant to Section 7.2.
1.5 MINIMUM BORROWING. Not applicable.
2. INTEREST AND FEES.
2.1 INTEREST. All Loans and other monetary Obligations shall bear interest
at the Interest Rate(s) set forth in Section 3 of Schedule A, except where
expressly set forth to the contrary in this Agreement or another Loan Document;
PROVIDED, that after the occurrence of
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an Event of Default, all Loans and other monetary Obligations shall, at Lender's
option, bear interest at a rate per annum equal to two percent (2%) in excess of
the rate otherwise applicable thereto (the "DEFAULT RATE") until paid in full
(notwithstanding the entry of any judgment against Borrower or the exercise of
any other right or remedy by Lender), and all such interest shall be payable on
demand. Changes in the Interest Rate shall be effective as of the date of any
change in the Prime Rate. Notwithstanding anything to the contrary contained in
this Agreement, the aggregate of all amounts deemed to be interest hereunder and
charged or collected by Lender is not intended to exceed the highest rate
permissible under any applicable law, but if it should, such interest shall
automatically be reduced to the extent necessary to comply with applicable law
and Lender will refund to Borrower any such excess interest received by Lender.
2.2 FEES AND WARRANTS. Borrower shall pay Lender the following fees, and
issue Lender the following warrants, which are in addition to all interest and
other sums payable by Borrower to Lender under this Agreement, and are not
refundable:
(a) CLOSING FEE. A closing fee in the amount set forth in Section
6(a) of Schedule A.
(b) FACILITY FEES. Not applicable.
(c) SERVICING FEE. Not applicable.
(d) UNUSED LINE FEE. An unused line fee at a rate equal to the
percentage per annum set forth in Section 6(d) of Schedule A of the amount by
which the Maximum Facility Amount exceeds the average daily outstanding
principal balance of the Loans and the Credit Accommodation Balance during the
immediately preceding month (or part thereof), which fee shall be payable, in
arrears, on the first day of each month so long as any of the Obligations are
outstanding and on the Maturity Date.
(e) MINIMUM BORROWING FEE. Not applicable.
(f) SUCCESS FEE. Not applicable.
(g) WARRANTS. Not applicable.
(h) CREDIT ACCOMMODATION FEES. The fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A, payable, in arrears, on
the first day of each month so long as any of the Obligations are outstanding
and on the Maturity Date, plus all costs and fees charged by the issuer, payable
as and when such costs and fees are charged.
2.3 COMPUTATION OF INTEREST AND FEES. All interest and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number of days elapsed in a year of 360 days. For purposes of calculating
interest and fees, if the outstanding daily
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principal balance of the Revolving Loans is a credit balance, such balance shall
be deemed to be zero.
2.4 LOAN ACCOUNT; MONTHLY ACCOUNTINGS. Lender shall maintain a loan account
for Borrower reflecting all advances, charges, expenses and payments made
pursuant to this Agreement (the "LOAN ACCOUNT"), and shall provide Borrower with
a monthly accounting reflecting the activity in the Loan Account. Each
accounting shall be deemed correct, accurate and binding on Borrower and an
account stated (except for reverses and reapplications of payments made and
corrections of errors discovered by Lender), unless Borrower notifies Lender in
writing to the contrary within sixty days after such account is rendered,
describing the nature of any alleged errors or omissions. However, Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding nature of any of the Obligations. Interest, fees
and other monetary Obligations due and owing under this Agreement (including
fees and other amounts paid by Lender to issuers of Credit Accommodations) may,
in Lender's discretion, be charged to the Loan Account, and will thereafter be
deemed to be Revolving Loans and will bear interest at the same rate as other
Revolving Loans.
3. SECURITY INTEREST.
3.1 To secure the full payment and performance of all of the Obligations,
Borrower hereby grants to Lender a continuing security interest in all of
Borrower's property and interests in property, whether tangible or intangible,
now owned or in existence or hereafter acquired or arising, wherever located,
including Borrower's interest in all of the following, whether or not eligible
for lending purposes: (i) all Accounts, Chattel Paper, Instruments, Documents,
Goods (including Inventory, farm products and consumer goods), Investment
Property, General Intangibles, Deposit Accounts and money, (ii) all proceeds and
products of all of the foregoing (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties for loss or any
destruction of any of the foregoing) and (iii) all books and records relating to
any of the foregoing.
4. ADMINISTRATION.
4.1 LOCK BOXES AND BLOCKED ACCOUNTS. Borrower will, at its expense,
establish (and revise from time to time as Lender may require) collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks, wire transfers and other proceeds of Accounts ("ACCOUNT PROCEEDS"),
which may include (i) directing all Account Debtors to send all such proceeds
directly to a post office box designated by Lender either in the name of
Borrower (but as to which Lender has exclusive access) or, at Lender's option,
in the name of Lender (a "LOCK BOX") or (ii) depositing all Account Proceeds
received by Borrower into one or more bank accounts maintained in Lender's name
(each, a "BLOCKED ACCOUNT"), under an arrangement acceptable to Lender with a
depository bank acceptable to Lender, pursuant to which all funds deposited into
each Blocked Account are to be transferred to Lender in such
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manner, and with such frequency, as Lender shall specify or (iii) a combination
of the foregoing; PROVIDED, that, although Lender reserves the right to require
the establishment of Lock Boxes at a future date, (i) no Lock Boxes shall be
required at this time and (ii) it is Lender's present intention not to require
Lock Boxes in the absence of (A) a material adverse change in Borrower's
business or operations or in the condition or value of the Collateral or (B) the
occurrence of a problem involving the operation of the Blocked Accounts.
Borrower agrees to execute, and to cause its depository banks to execute, such
Lock Box and Blocked Account agreements and other documentation as Lender shall
reasonably require from time to time in connection with the foregoing.
4.2 REMITTANCE OF PROCEEDS. Except as provided in Section 4.1, all proceeds
arising from the sale or other disposition of any Collateral shall be delivered,
in kind, by Borrower to Lender in the original form in which received by
Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender, Borrower shall hold such proceeds separate and
apart from Borrower's other funds and property in an express trust for Lender.
Nothing in this Section 4.2 shall limit the restrictions on disposition of
Collateral set forth elsewhere in this Agreement.
4.3 APPLICATION OF PAYMENTS. Lender may, in its sole discretion, apply,
reverse and re-apply all cash and non-cash proceeds of Collateral or other
payments received with respect to the Obligations, in such order and manner as
Lender shall determine, whether or not the Obligations are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining Availability, such amounts will be credited to the Loan Account
and the Collateral balances to which they relate upon Lender's receipt of advice
from Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's account at Lender's Bank (or upon Lender's deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case subject to final payment and collection. However, for purposes of
computing interest on the Obligations, such items shall be deemed applied by
Lender one Business Day after Lender's receipt of advice of deposit thereof at
Lender's Bank.
4.4 NOTIFICATION; VERIFICATION. Lender or its designee may, from time to
time, whether or not a Default or Event of Default has occurred (except as
expressly provided below): (i) verify directly with the Account Debtors the
validity, amount and other matters relating to the Accounts and Chattel Paper,
by means of mail, telephone or otherwise, either in the name of Borrower or
Lender or such other name as Lender may choose; (ii) notify Account Debtors that
Lender has a security interest in the Accounts and that payment thereof is to be
made directly to Lender; PROVIDED, that if Lender does so prior to the
occurrence of an Event of Default, Lender shall use its best efforts to give
Borrower at least one Business Day's prior written or verbal notice thereof
(although Lender shall not be liable to Borrower for Lender's failure to give
such notice) and (iii) after the occurrence and during the continuance
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of a Default or Event of Default, demand, collect or enforce payment of any
Accounts and Chattel Paper (but without any duty to do so).
4.5 POWER OF ATTORNEY. Borrower hereby grants to Lender an irrevocable
power of attorney, coupled with an interest, authorizing and permitting Lender
(acting through any of its officers, employees, attorneys or agents), at any
time (whether or not a Default or Event of Default has occurred and is
continuing, except as expressly provided below), at Lender's option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise: (i) execute on
behalf of Borrower any documents that Lender may, in its sole discretion,
exercised in good faith, deem advisable in order to perfect and maintain
Lender's security interests in the Collateral, to exercise a right of Borrower
or Lender, or to fully consummate all the transactions contemplated by this
Agreement and the other Loan Documents (including such financing statements and
continuation financing statements, and amendments thereto, as Lender shall deem
necessary or appropriate) and to file as a financing statement any copy of this
Agreement or any financing statement signed by Borrower; (ii) execute on behalf
of Borrower any document exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or lease (as lessor or lessee) any real
or personal property which is part of the Collateral or, after the occurrence
and during the continuance of an Event of Default, in which Lender has an
interest; (iii) execute on behalf of Borrower any invoices relating to any
Accounts, any draft against any Account Debtor, any proof of claim in
bankruptcy, any notice of Lien or claim, and any assignment or satisfaction of
mechanic's, materialman's or other Lien; (iv) execute on behalf of Borrower any
notice to any Account Debtor; (v) receive and otherwise take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral except
as set forth in Section 4.1; (vi) endorse Borrower's name on all checks and
other forms of remittances received by Lender; (vii) pay, contest or settle any
Lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (viii) after the occurrence and during the
continuance of a Default or Event of Default, grant extensions of time to pay,
compromise claims relating to, and settle Accounts, Chattel Paper and General
Intangibles for less than face value and execute all releases and other
documents in connection therewith; (ix) pay any sums required on account of
Borrower's taxes or to secure the release of any Liens therefor; (x) pay any
amounts necessary to obtain, or maintain in effect, any of the insurance
described in Section 5.12; (xi) settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (xii) instruct any third party having custody or control of any
Collateral or books or records belonging to, or relating to, Borrower to give
Lender the same rights of access and other rights with respect thereto as Lender
has under this Agreement; and (xiii) after the occurrence of a Default or Event
of Default, change the address for delivery of Borrower's mail and receive and
open all mail addressed to Borrower. Any and all sums paid, and any and all
costs, expenses, liabilities, obligations and reasonable attorneys' fees
incurred, by Lender with respect to the foregoing shall be added to and become
part of the Obligations,
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shall be payable on demand, and shall bear interest at a rate equal to the
highest interest rate applicable to any of the Obligations. Borrower agrees that
Lender's rights under the foregoing power of attorney or any of Lender's other
rights under this Agreement or the other Loan Documents shall not be construed
to indicate that Lender is in control of the business, management or properties
of Borrower.
4.6 DISPUTES. Borrower shall promptly, and in any event, no later than five
calendar days from the time Borrower receives notice of such disputes or claims,
notify Lender of (i) all verbal disputes or claims relating to Accounts and
Chattel Paper if they aggregate in excess of $50,000 per month and (ii) written
disputes or claims relating to Accounts and Chattel Paper if they aggregate in
excess of $25,000 per month; PROVIDED, that nothing contained in this sentence
shall diminish Borrower's obligation to reflect any disputes or claims on any
reports required to be submitted to Lender pursuant to this Agreement. Borrower
will not, without Lender's prior written consent, compromise or settle any
Account or Chattel Paper for less than the full amount thereof, grant any
extension of time of payment of any Account or Chattel Paper, release (in whole
or in part) any Account Debtor or other person liable for the payment of any
Account or Chattel Paper or grant any credits, discounts, allowances,
deductions, return authorizations or the like with respect to any Account or
Chattel Paper; except that prior to the occurrence of an Event of Default,
Borrower may take any of such actions in the ordinary course of its business,
PROVIDED that Borrower promptly reports the same to Lender.
4.7 INVOICES. At Lender's request, Borrower will cause all invoices and
statements which it sends to Account Debtors or other third parties to be
marked, in a manner satisfactory to Lender, to reflect Lender's security
interest therein.
4.8 INVENTORY.
(a) RETURNS. Provided that no Event of Default has occurred and is
continuing, if any Account Debtor returns any Inventory to Borrower in the
ordinary course of its business, Borrower will promptly determine the reason for
such return and promptly issue a credit memorandum to the Account Debtor in the
appropriate amount (sending a copy to Lender upon Lender's request). After the
occurrence and during the continuance of an Event of Default, Borrower will not,
without Lender's prior written consent, accept any returns which are equal to or
greater than (i) $20,000 in the aggregate if such Inventory is unmerchantable
and (ii) $100,000 in the aggregate if such Inventory is merchantable. Regardless
of whether an Event of Default has occurred, Borrower will (i) hold the returned
Inventory in trust for Lender; (ii) segregate all returned Inventory from all of
Borrower's other property; (iii) conspicuously label the returned Inventory as
Lender's property; and (iv) immediately notify Lender of the return of such
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory and, at Lender's request, deliver such returned Inventory
to Lender at an address specified by Lender.
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(b) OTHER COVENANTS. Borrower will not, without Lender's prior
written consent, (i) store any Inventory with any warehouseman or other third
party other than as set forth in Section 9(d) of Schedule A or (ii) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis. All of the Inventory has been produced only in accordance with the Fair
Labor Standards Act of 1938 and all rules, regulations and orders promulgated
thereunder.
4.9 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on
one Business Day's notice, prior to the occurrence of a Default or an Event of
Default, and at any time and with or without notice after the occurrence of a
Default or an Event of Default, Lender or its agents shall have the right to
inspect the Collateral, and the right to examine and copy Borrower's books and
records. Lender shall take reasonable steps to keep confidential all information
obtained in any such inspection or examination, but Lender shall have the right
to disclose any such information to its auditors, regulatory agencies, attorneys
and participants, and pursuant to any subpoena or other legal process. Borrower
agrees to give Lender access to any or all of Borrower's premises to enable
Lender to conduct such inspections and examinations. Such inspections and
examinations shall be at Borrower's expense and the charge therefor shall be
$650 per person per day (or such higher amount as shall represent Lender's then
current standard charge), plus reasonable out-of-pocket expenses. Lender may, at
Borrower's expense, use Borrower's personnel, computer and other equipment,
programs, printed output and computer readable media, supplies and premises for
the collection, sale or other disposition of Collateral to the extent Lender, in
its sole discretion, deems appropriate. Borrower hereby irrevocably authorizes
all accountants and third parties to disclose and deliver to Lender, at
Borrower's expense, all financial information, books and records, work papers,
management reports and other information in their possession regarding Borrower.
Borrower will not enter into any agreement with any accounting firm, service
bureau or third party to store Borrower's books or records at any location other
than Borrower's Address without first obtaining Lender's written consent (which
consent may be conditioned upon such accounting firm, service bureau or other
third party agreeing to give Lender the same rights with respect to access to
books and records and related rights as Lender has under this Agreement).
5. REPRESENTATIONS, WARRANTIES AND COVENANTS.
To induce Lender to enter into this Agreement, Borrower represents,
warrants and covenants as follows (it being understood that (i) each such
representation and warranty will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation by, Lender, and (ii) the accuracy of
each such representation, warranty and covenant will be a condition to each Loan
and Credit Accommodation):
5.1 EXISTENCE AND AUTHORITY. Borrower is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
formation. Borrower
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is qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement and all of the
other Loan Documents have been duly and validly authorized, do not violate
Borrower's articles or certificate of incorporation, by-laws or other
organizational documents, or any law or any agreement or instrument or any court
order which is binding upon Borrower or its property, do not constitute grounds
for acceleration of any indebtedness or obligation under any agreement or
instrument which is binding upon Borrower or its property, and do not require
the consent of any Person. This Agreement and such other Loan Documents have
been duly executed and delivered by, and are enforceable against, Borrower, and
all other Obligors who have signed them, in accordance with their respective
terms. Sections 9(g) and 9(h) of Schedule A set forth the ownership of Borrower
and the names and ownership of Borrower's Subsidiaries as of the date of this
Agreement.
5.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names. Borrower shall
give Lender at least thirty days' prior written notice before changing its name
or doing business under any other name. Borrower has complied with all laws
relating to the conduct of business under a fictitious business name. Borrower
represents and warrants that (i) each trade name does not refer to another
corporation or other legal entity; (ii) all Accounts invoiced under any such
trade names are owned exclusively by Borrower and are subject to the security
interest of Lender and the other terms of this Agreement and (iii) all schedules
of Accounts, including any sales made or services rendered using any trade name
shall show Borrower's name as assignor.
5.3 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower has good and marketable
title to the Collateral. The Collateral now is and will remain free and clear of
any and all liens, charges, security interests, encumbrances and adverse claims,
except for Permitted Liens. Lender now has, and will continue to have, a
first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend Lender and the Collateral against all claims of others. None of the
Collateral which is Equipment is or will be affixed to any real property in such
a manner, or with such intent, as to become a fixture. Except for leases or
subleases as to which Borrower has delivered to Lender a landlord's waiver in
form and substance satisfactory to Lender, Borrower is not a lessee or sublessee
under any real property lease or sublease pursuant to which the lessor or
sublessor may obtain any rights in any of the Collateral, and no such lease or
sublease now prohibits, restrains, impairs or conditions, or will prohibit,
restrain, impair or condition, Borrower's right to remove any Collateral from
the premises. Whenever any Collateral is located upon premises in which any
third party has an interest (whether as owner, mortgagee, beneficiary under a
deed of trust, lien or otherwise), Borrower shall, whenever requested by Lender,
cause each such third party to execute and deliver to Lender, in form and
substance acceptable to Lender, such waivers and subordinations as Lender shall
specify, so
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as to ensure that Lender's rights in the Collateral are, and will continue to
be, superior to the rights of any such third party. Borrower will keep in full
force and effect, and will comply with all the terms of, any lease of real
property where any of the Collateral now or in the future may be located.
5.4 ACCOUNTS AND CHATTEL PAPER. As of each date reported by Borrower, all
Accounts which Borrower has reported to Lender as being Eligible Accounts comply
in all respects with the criteria for eligibility established by Lender and in
effect at such time. All Accounts and Chattel Paper are genuine and in all
respects what they purport to be, arise out of a completed, bona fide and
unconditional and non-contingent sale and delivery of goods or rendition of
services by Borrower in the ordinary course of its business and in accordance
with the terms and conditions of all purchase orders, contracts or other
documents relating thereto, to the best of Borrower's knowledge, each Account
Debtor thereunder had the capacity to contract at the time any contract or other
document giving rise to such Accounts and Chattel Paper were executed, and the
transactions giving rise to such Accounts and Chattel Paper comply with all
applicable laws and governmental rules and regulations.
5.5 INVESTMENT PROPERTY. Borrower will take any and all actions required or
requested by Lender, from time to time, to (i) cause Lender to obtain exclusive
control of any Investment Property in a manner acceptable to Lender and (ii)
obtain from any issuers of Investment Property and such other Persons as Lender
shall specify, for the benefit of Lender, written confirmation of Lender's
exclusive control over such Investment Property and take such other actions as
Lender may request to perfect Lender's security interest in such Investment
Property. For purposes of this Section 5.5, Lender shall have exclusive control
of Investment Property if (A) such Investment Property consists of certificated
securities and Borrower delivers such certificated securities to Lender (with
appropriate endorsements if such certificated securities are in registered
form); (B) such Investment Property consists of uncertificated securities and
either (x) Borrower delivers such uncertificated securities to Lender or (y) the
issuer thereof agrees, pursuant to documentation in form and substance
satisfactory to Lender, that it will comply with instructions originated by
Lender without further consent by Borrower, and (C) such Investment Property
consists of security entitlements and either (x) Lender becomes the entitlement
holder thereof or (y) the appropriate securities intermediary agrees, pursuant
to documentation in form and substance satisfactory to Lender, that it will
comply with entitlement orders originated by Lender without further consent by
Borrower.
5.6 PLACE OF BUSINESS; LOCATION OF COLLATERAL. Borrower's Address is
Borrower's chief executive office and the location of its books and records. In
addition, except as provided in the immediately following sentence, Borrower has
places of business and Collateral located only at the locations set forth on
Sections 9(d) and 9(e) of Schedule A. Borrower will give Lender at least thirty
days' prior written notice before opening any additional place of business,
changing its chief executive office or the location of its books and records, or
moving any of the Collateral to a location other than Borrower's Address or
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one of the locations set forth in Sections 9(d) and 9(e) of Schedule A, and will
execute and deliver all financing statements and other agreements, instruments
and documents which Lender shall require as a result thereof.
5.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements
delivered to Lender by or on behalf of Borrower have been prepared in conformity
with GAAP and completely and fairly reflect the financial condition of Borrower,
at the times and for the periods therein stated. Between the last date covered
by any such financial statement provided to Lender and the date hereof (or, with
respect to the remaking of this representation in connection with the making of
any Loan or the providing of any Credit Accommodation, the date such Loan is
made or such Credit Accommodation is provided), there has been no material
adverse change in the financial condition or business of Borrower. Borrower is
solvent and able to pay its debts as they come due, and has sufficient capital
to carry on its business as now conducted and as proposed to be conducted. All
schedules, reports and other information and documentation delivered by Borrower
to Lender with respect to the Collateral are, or will be, when delivered, true,
correct and complete as of the date delivered or the date specified therein.
5.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed all tax returns and reports required by applicable law, has timely paid or
accrued all applicable taxes, assessments, deposits and contributions owing by
Borrower and will timely pay all such items as they became due and payable.
Borrower may, however, defer payment of any contested taxes; PROVIDED, that
Borrower (i) in good faith contests Borrower's obligation to pay such taxes by
appropriate proceedings promptly and diligently instituted and conducted; (ii)
notifies Lender in writing of the commencement of, and any material development
in, the proceedings; (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a Lien upon any of the Collateral and (iv)
maintains adequate reserves therefor in conformity with GAAP. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay, all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency.
5.9 COMPLIANCE WITH LAWS. Borrower has complied in all material respects
with all provisions of all applicable laws and regulations, including those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, the payment and withholding of taxes, ERISA
and other employee matters, safety and environmental matters.
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5.10 LITIGATION. Section 9(f) of Schedule A discloses all claims,
proceedings, litigation or investigations pending or (to the best of Borrower's
knowledge) threatened against Borrower. There is no claim, suit, litigation,
proceeding or investigation pending or (to the best of Borrower's knowledge)
threatened by or against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) which may result,
either separately or in the aggregate, in any material adverse change in the
financial condition or business of Borrower, or in any material impairment in
the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Lender in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower.
5.11 USE OF PROCEEDS. All proceeds of all Loans will be used solely for
lawful business purposes.
5.12 INSURANCE. Borrower will at all times carry property, liability and
other insurance, with insurers acceptable to Lender, in such form and amounts,
and with such deductibles and other provisions, as Lender shall require, and
Borrower will provide evidence of such insurance to Lender, so that Lender is
satisfied that such insurance is, at all times, in full force and effect. Each
property insurance policy shall name Lender as loss payee and shall contain a
lender's loss payable endorsement in form acceptable to Lender, each liability
insurance policy shall name Lender as an additional insured, and each business
interruption insurance policy shall be collaterally assigned to Lender, all in
form and substance satisfactory to Lender. All policies of insurance shall
provide that they may not be cancelled or changed without at least thirty days'
prior written notice to Lender, shall contain breach of warranty coverage, and
shall otherwise be in form and substance satisfactory to Lender. Upon receipt of
the proceeds of any such insurance, Lender shall apply such proceeds in
reduction of the Obligations as Lender shall determine in its sole discretion.
Borrower will promptly deliver to Lender copies of all reports made to insurance
companies.
5.13 FINANCIAL AND COLLATERAL REPORTS. Borrower has kept and will keep
adequate records and books of account with respect to its business activities
and the Collateral in which proper entries are made in accordance with GAAP
reflecting all its financial transactions, and will cause to be prepared and
furnished to Lender the following (all to be prepared in accordance with GAAP,
unless Borrower's certified public accountants concur in any change therein and
such change is disclosed to Lender):
(a) COLLATERAL REPORTS. On or before the fifteenth day of each month,
an aging of Borrower's Accounts, Chattel Paper and notes receivable, weekly
summary Inventory reports and detailed monthly Inventory reports, all in such
form, and together with such additional certificates, schedules and other
information with respect to the Collateral or the business of Borrower or any
Obligor, as Lender shall request; PROVIDED, that Borrower's failure to execute
and deliver the same shall not affect or limit Lender's security interests and
other rights in any of the Accounts, nor shall Lender's failure to advance or
lend against a
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specific Account affect or limit Lender's security interest and other rights
therein. Together with each such schedule, Borrower shall furnish Lender with
copies (or, at Lender's request, originals) of all contracts, orders, invoices,
and other similar documents, and all original shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts, and Borrower warrants
the genuineness of all of the foregoing. In addition, Borrower shall deliver to
Lender the originals of all Instruments, Chattel Paper, security agreements,
guaranties and other documents and property evidencing or securing any Accounts,
immediately upon receipt thereof and in the same form as received, with all
necessary endorsements. Lender may destroy or otherwise dispose of all
documents, schedules and other papers delivered to Lender pursuant to this
Agreement (other than originals of Instruments, Chattel Paper, security
agreements, guaranties and other documents and property evidencing or securing
any Accounts) six months after Lender receives them, unless Borrower requests
their return in writing in advance and arranges for their return to Borrower at
Borrower's expense.
(b) ANNUAL STATEMENTS. Not later than ninety days after the close of
each fiscal year of Borrower, unqualified (except for a qualification for a
change in accounting principles with which the accountant concurs and a
going-concern qualification), audited financial statements of Borrower and its
Subsidiaries as of the end of such year, on a consolidated and consolidating
basis, certified by a firm of independent certified public accountants of
recognized standing selected by Borrower but acceptable to Lender, together with
a copy of any management letter issued in connection therewith and a letter from
such accountants acknowledging that Lender is relying on such financial
statements;
(c) INTERIM STATEMENTS. Not later than twenty days after the end of
each month hereafter, including the last month of Borrower's fiscal year,
unaudited interim financial statements of Borrower and its Subsidiaries as of
the end of such month and of the portion of Borrower's fiscal year then elapsed,
on a consolidated and consolidating basis, certified by the principal financial
officer of Borrower as prepared in accordance with GAAP and fairly presenting
the consolidated financial position and results of operations of Borrower and
its Subsidiaries for such month and period subject only to changes from audit
and year-end adjustments and except that such statements need not contain notes;
(d) PROJECTIONS, ETC. Such business projections, Availability
projections, business plans, budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time;
(e) SHAREHOLDER REPORTS, ETC. Promptly after the sending or filing
thereof, as the case may be, copies of any proxy statements, financial
statements or reports which Borrower has made available to its shareholders and
copies of any regular, periodic and special reports or registration statements
which Borrower files with the Securities and
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Exchange Commission or any governmental authority which may be substituted
therefor, or any national securities exchange;
(f) ERISA REPORTS. Upon request by Lender, copies of any annual report
to be filed pursuant to the requirements of ERISA in connection with each plan
subject thereto; and
(g) OTHER INFORMATION. Such other data and information (financial and
otherwise) as Lender, from time to time, may reasonably request, bearing upon or
related to the Collateral or Borrower's and each of its Subsidiary's financial
condition or results of operations.
5.14 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Lender with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Lender, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the extent that Lender may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.15 MAINTENANCE OF COLLATERAL, ETC. Borrower will maintain all of its
Equipment in good working condition, ordinary wear and tear excepted, and
Borrower will not use the Collateral for any unlawful purpose. Borrower will
immediately advise Lender in writing of any material loss or damage to the
Collateral and of any investigation, action, suit, proceeding or claim relating
to the Collateral or which may result in an adverse impact upon Borrower's
business, assets or financial condition.
5.16 NOTIFICATION OF CHANGES. Borrower will promptly notify Lender in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, or any material adverse change in the business
or financial affairs of Borrower or the existence of any circumstance which
would make any representation or warranty of Borrower untrue in any material
respect or constitute a material breach of any covenant of Borrower.
5.17 FURTHER ASSURANCES. Borrower agrees, at its expense, to take all
actions, and execute or cause to be executed and delivered to Lender all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees, subordination and intercreditor agreements and
other agreements, instruments and documents as Lender may request from time to
time, to perfect and maintain Lender's security interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.
5.18 NEGATIVE COVENANTS. Except as set forth in Section 13 of Schedule A,
Borrower will not, without Lender's prior written consent, (i) merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents; (iii)
enter into any transaction outside the ordinary course of business;
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(iv) sell or transfer any Collateral or other assets, except that Borrower may
sell finished goods Inventory in the ordinary course of its business; (v) make
any loans to, or investments in, any Affiliate or other Person in the form of
money or other assets; (vi) incur any debt outside the ordinary course of
business; (vii) guaranty or otherwise become liable with respect to the
obligations of another party or entity; (viii) pay or declare any dividends or
other distributions on Borrower's stock, if Borrower is a corporation (except
for dividends payable solely in capital stock of Borrower) or with respect to
any equity interests, if Borrower is not a corporation; (ix) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's capital
stock or other equity interests; (x) make any change in Borrower's capital
structure; (xi) dissolve or elect to dissolve; (xii) pay any principal or
interest on any indebtedness owing to an Affiliate, (xiii) enter into any
transaction with an Affiliate other than on arms-length terms; or (xiv) agree to
do any of the foregoing.
5.19 FINANCIAL COVENANTS.
(a) CAPITAL EXPENDITURES. Borrower will not expend or commit to
expend, directly or indirectly, for capital expenditures (including capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.
(b) NET WORTH. Borrower will at all times maintain a net worth of at
least the amount set forth in Section 8(b) of Schedule A.
(c) TANGIBLE NET WORTH. Borrower will at all times maintain a minimum
tangible net worth of at least the amount set forth in Section 8(c) of Schedule
A.
(d) WORKING CAPITAL. Borrower will at all times maintain working
capital of at least the amount set forth in Section 8(d) of Schedule A.
(e) NET LOSSES. Borrower will not permit its cumulative net loss to
exceed the amount set forth in Section 8(e) of Schedule A.
(f) NET INCOME. Borrower will not permit its cumulative net income to
be less than the amount set forth in Section 8(f) of Schedule A.
(g) LEVERAGE. Borrower will not permit the ratio of its total
liabilities to its net worth to exceed, at any time, the ratio set forth in
Section 8(g) of Schedule A.
(h) OTHER FINANCIAL COVENANTS. Borrower will comply with any
additional financial covenants set forth in Section 8(j) of Schedule A.
5.20 YEAR 2000 COMPLIANCE.
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(a) Borrower has (i) initiated a review and assessment of all areas
within its and each of its Affiliates' business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Borrower or any of its Affiliates may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to
date, implemented that plan in accordance with that timetable. Borrower
reasonably believes that all computer applications that are material to its or
any of its Subsidiaries' business and operations will on a timely basis be able
to perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a
failure to do so could not reasonably be expected to have a Material Adverse
Effect. For this purpose, "MATERIAL ADVERSE EFFECT" means a material adverse
effect on Borrower's business or operations or on the condition or value of the
Collateral.
(b) Borrower will promptly notify Lender in the event Borrower
discovers or determines that any computer application (including those of its
suppliers and vendors) that is material to its or any of its Affiliates'
business and operations will not be Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect.
6. RELEASE AND INDEMNITY.
6.1 RELEASE. Borrower hereby releases Lender and its Affiliates and their
respective directors, officers, employees, attorneys and agents and any other
Person affiliated with or representing Lender (the "RELEASED Parties") from any
and all liability arising from acts or omissions under or pursuant to this
Agreement, whether based on errors of judgment or mistake of law or fact, except
for those arising from gross negligence or willful misconduct. However, in no
circumstance will any of the Released Parties be liable for lost profits or
other special or consequential damages. Such release is made on the date hereof
and remade upon each request for a Loan or Credit Accommodation by Borrower.
Without limiting the foregoing:
(a) Lender shall not be liable for (i) any shortage or discrepancy in,
damage to, or loss or destruction of, any goods, the sale or other disposition
of which gave rise to an Account; (ii) any error, act, omission, or delay of any
kind occurring in the settlement, failure to settle, collection or failure to
collect any Account; (iii) settling any Account in good faith for less than the
full amount thereof; or (iv) any of Borrower's obligations under any contract or
agreement giving rise to an Account; and
(b) In connection with Credit Accommodations or any underlying
transaction, Lender shall not be responsible for the conformity of any goods to
the documents presented, the validity or genuineness of any documents, delay,
default or fraud by Borrower, shippers and/or any other Person. Borrower agrees
that any action taken by Lender, if taken in good
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faith, or any action taken by an issuer of any Credit Accommodation, under or in
connection with any Credit Accommodation, shall be binding on Borrower and shall
not create any resulting liability to Lender. In furtherance thereof, Lender
shall have the full right and authority to clear and resolve any questions of
non-compliance of documents, to give any instructions as to acceptance or
rejection of any documents or goods, to execute for Borrower's account any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances or documents, and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the Credit Accommodations or applications
and other documentation pertaining thereto.
6.2 INDEMNITY. Borrower hereby agrees to indemnify the Released Parties and
hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
the Released Parties may sustain or incur based upon or arising out of any of
the transactions contemplated by this Agreement or the other Loan Documents or
any of the Obligations, including any transactions or occurrences relating to
the issuance of any Credit Accommodation, the Collateral relating thereto, any
drafts thereunder and any errors or omissions relating thereto (including any
loss or claim due to any action or inaction taken by the issuer of any Credit
Accommodation) (and for this purpose any charges to Lender by any issuer of
Credit Accommodations shall be conclusive as to their appropriateness and may be
charged to the Loan Account), or any other matter, cause or thing whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Obligations (except any such amounts sustained or incurred as the result of
the willful misconduct or gross negligence of the Released Parties).
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement.
7. TERM.
7.1 MATURITY DATE. Lender's obligation to make Loans and to provide Credit
Accommodations under this Agreement shall initially continue in effect until the
Initial Maturity Date set forth in Section 7 of Schedule A (the "INITIAL TERM");
PROVIDED, that such date shall automatically be extended (the Initial Maturity
Date, as it may be so extended, being referred to as the "MATURITY DATE") for
successive additional terms of three years each (each a "RENEWAL TERM"), unless
one party gives written notice to the other, not less than sixty days prior to
the Maturity Date, that such party elects not to extend the Maturity Date. This
Agreement and the other Loan Documents and Lender's security interests in and
Liens upon the Collateral, and all representations, warranties and covenants of
Borrower contained herein and therein, shall remain in full force and effect
after the Maturity Date until all of the monetary Obligations are indefeasibly
paid in full.
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7.2 EARLY TERMINATION. Lender's obligation to make Loans and to provide
Credit Accommodations under this Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective thirty days after written
notice of termination is given to Lender or (ii) by Lender at any time after the
occurrence of an Event of Default, without notice, effective immediately;
PROVIDED, that if any Affiliate of Borrower is also a party to a financing
arrangement with Lender, no such early termination shall be effective unless
such Affiliate simultaneously terminates its financing arrangement with Lender.
If so terminated under this Section 7.2, Borrower shall pay to Lender (i) an
early termination fee (the "EARLY TERMINATION FEE") in the amount set forth in
Section 6(h) of Schedule A plus (ii) any earned but unpaid Facility Fee;
PROVIDED, that if any Affiliate of NationsBank repays the Obligations prior to
the Maturity Date, no such Early Termination Fee shall be due hereunder. Such
fee shall be due and payable on the effective date of termination and thereafter
shall bear interest at a rate equal to the highest rate applicable to any of the
Obligations. In addition, if Borrower so terminates and repays the Obligations
without having provided Lender with at least thirty days' prior written notice
thereof, an additional amount equal to thirty days of interest at the applicable
Interest Rate(s), based on the average outstanding amount of the Obligations for
the six month period immediately preceding the date of termination.
7.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay in full all Obligations,
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if, on the Maturity
Date or on any earlier effective date of termination, there are any outstanding
Credit Accommodations, then on such date Borrower shall provide to Lender cash
collateral in an amount equal to 110% of the Credit Accommodation Balance to
secure all of the Obligations (including estimated attorneys' fees and other
expenses) relating to said Credit Accommodations or such greater percentage or
amount as Lender reasonably deems appropriate, pursuant to a cash pledge
agreement in form and substance satisfactory to Lender.
7.4 EFFECT OF TERMINATION. No termination shall affect or impair any right
or remedy of Lender or relieve Borrower of any of the Obligations until all of
the monetary Obligations have been indefeasibly paid in full. Upon indefeasible
payment and performance in full of all of the monetary Obligations (and the
provision of cash collateral with respect to any Credit Accommodation Balance as
required by Section 7.3) and termination of this Agreement, Lender shall
promptly deliver to Borrower termination statements, requests for reconveyances
and such other documents as may be reasonably required to terminate Lender's
security interests in the Collateral.
8. EVENTS OF DEFAULT AND REMEDIES.
8.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "EVENT OF DEFAULT" under this Agreement, and Borrower shall give
Lender immediate written notice thereof: (i) if any warranty, representation,
statement, report or certificate made
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or delivered to Lender by Borrower or any of Borrower's officers, employees or
agents is untrue or misleading; (ii) if Borrower fails to pay any principal or
interest on any Loan or any other monetary Obligation when due (or within three
days thereafter in the case of interest and fees for which there is insufficient
Availability); (iii) if Borrower breaches any covenant or obligation contained
in this Agreement or any other Loan Document or fails to perform any other
non-monetary Obligation; (iv) if any levy, assessment, attachment, seizure, lien
or encumbrance (other than a Permitted Lien) is made or permitted to exist on
all or any part of the Collateral; (v) if one or more judgments aggregating in
excess of $100,000 not fully covered by insurance (other than the cases set
forth in Section 9(f) of Schedule A, so long as such cases are being appealed
and any judgment lien or payment of the judgment is stayed pending appeal, or
any injunction or attachment, is obtained against Borrower or any Obligor which
remains unstayed for more than ten days or is enforced; (vi) the occurrence of
any default under any financing agreement, security agreement or other
agreement, instrument or document executed and delivered by (A) Borrower with,
or in favor of, any Person other than Lender which, in Lender's sole judgment,
could have a Material Adverse Effect or (B) Borrower or any Affiliate of
Borrower with, or in favor of, Lender or any Affiliate of Lender, which default
or breach continues unwaived beyond any applicable grace period provided
therein; (vii) the dissolution, death, termination of existence in good
standing, insolvency or business failure or suspension or cessation of business
as usual of Borrower or any Obligor (or of any general partner of Borrower or
any Obligor if it is a partnership) or the appointment of a receiver, trustee or
custodian for all or any part of the property of, or an assignment for the
benefit of creditors by Borrower or any Obligor, or the commencement of any
proceeding by Borrower or any Obligor under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, or if Borrower
makes or sends a notice of a bulk transfer or calls a meeting of its creditors;
(viii) the commencement of any proceeding against Borrower or any Obligor under
any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; (ix) the actual or attempted revocation or termination of, or
limitation or denial of liability upon, any guaranty of the Obligations, or any
security document securing the Obligations, by any Obligor; (x) if Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement or hereunder, or if any Person who has subordinated such
indebtedness or obligations attempts to limit or terminate its subordination
agreement; (xi) if there is any actual or threatened indictment of Borrower or
any Obligor under any criminal statute or commencement or threatened
commencement of criminal or civil proceedings against Borrower or any Obligor,
pursuant to which the potential penalties or remedies sought or available
include forfeiture of any property of Borrower or such Obligor; (xii) if Dwain
Newman ceases to own, directly or indirectly, at least 51% of the capital stock
of Borrower; (xiii) if there is any change in the chief executive officer, chief
operating officer, or chief financial officer of Borrower, and, within sixty
(60) days of any such change, no replacement acceptable to Lender in its sole
discretion has been appointed; or
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(xiv) if an Event of Default occurs under any Loan and Security Agreement
between Lender and an Affiliate of Borrower.
8.2 REMEDIES. Upon the occurrence of any Default, and at any time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower under this Agreement or any other Loan Document. Upon the
occurrence of any Event of Default, and at any time thereafter, Lender, at its
option, and without notice or demand of any kind (all of which are hereby
expressly waived by Borrower), may do any one or more of the following: (i)
cease making Loans or otherwise extending credit to Borrower under this
Agreement or any other Loan Document; (ii) accelerate and declare all or any
part of the Obligations to be immediately due, payable and performable,
notwithstanding any deferred or installment payments allowed by any instrument
evidencing or relating to any of the Obligations; (iii) take possession of any
or all of the Collateral wherever it may be found, and for that purpose Borrower
hereby authorizes Lender, without judicial process, to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain (or cause a custodian
to remain) on the premises in exclusive control thereof, without charge for so
long as Lender deems it reasonably necessary in order to complete the
enforcement of its rights under this Agreement or any other agreement; PROVIDED,
that if Lender seeks to take possession of any of the Collateral by court
process, Borrower hereby irrevocably waives (A) any bond and any surety or
security relating thereto required by law as an incident to such possession, (B)
any demand for possession prior to the commencement of any suit or action to
recover possession thereof and (C) any requirement that Lender retain possession
of, and not dispose of, any such Collateral until after trial or final judgment;
(iv) require Borrower to assemble any or all of the Collateral and make it
available to Lender at one or more places designated by Lender which are
reasonably convenient to Lender and Borrower, and to remove the Collateral to
such locations as Lender may deem advisable; (v) complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Lender shall have the right to
use Borrower's premises, vehicles and other Equipment and all other property
without charge; (vi) sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Lender obtains possession of it or after further
manufacturing, processing or repair, at one or more public or private sales, in
lots or in bulk, for cash, exchange or other property, or on credit (a "SALE"),
and to adjourn any such Sale from time to time without notice other than oral
announcement at the time scheduled for Sale (and, in connection therewith, (A)
Lender shall have the right to conduct such Sale on Borrower's premises without
charge, for such times as Lender deems reasonable, on Lender's premises, or
elsewhere, and the Collateral need not be located at the place of Sale; (B)
Lender may directly or through any of its Affiliates purchase or lease any of
the Collateral at any such public disposition, and if permissible under
applicable law, at any private disposition and (C) any Sale of Collateral shall
not relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title, physical condition or otherwise at the time of sale);
(vii) demand payment of and collect any Accounts, Chattel Paper, Instruments and
General
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Intangibles included in the Collateral and, in connection therewith, Borrower
irrevocably authorizes Lender to endorse or sign Borrower's name on all
collections, receipts, Instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of Collateral or proceeds thereof and, in Lender's sole
discretion, to grant extensions of time to pay, compromise claims and settle
Accounts, General Intangibles and the like for less than face value; and (viii)
demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
relating thereto. In addition to the foregoing remedies, upon the occurrence of
any Event of Default resulting from a breach of any of the financial covenants
set forth in Section 5.19, Lender may, at its option, upon not less than ten
days' prior notice to Borrower, reduce any or all of the Advance Rates set forth
in Section 1(b) of Schedule A to the extent Lender, in its sole discretion,
deems appropriate. In addition to the rights and remedies set forth above,
Lender shall have all the other rights and remedies accorded a secured party
after default under the UCC and under all other applicable laws, and under any
other Loan Document, and all of such rights and remedies are cumulative and
non-exclusive. Exercise or partial exercise by Lender of one or more of its
rights or remedies shall not be deemed an election or bar Lender from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Lender to exercise any rights or remedies shall not operate as a waiver
thereof, but all rights and remedies shall continue in full force and effect
until all of the Obligations have been fully paid and performed. If notice of
any sale or other disposition of Collateral is required by law, notice at least
ten days prior to the sale designating the time and place of sale in the case of
a public sale or the time after which any private sale or other disposition is
to be made shall be deemed to be reasonable notice, and Borrower waives any
other notice. If any Collateral is sold or leased by Lender on credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment is collected by Lender.
8.3 APPLICATION OF PROCEEDS. Subject to any application required by law,
all proceeds realized as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
but Borrower shall remain liable to Lender for any deficiency. If Lender, in its
sole discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any Sale, Lender shall have the option,
exercisable at any time, in its sole discretion, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Lender of the cash
therefor.
9. GENERAL PROVISIONS.
9.1 NOTICES. All notices to be given under this Agreement shall be in
writing and shall be given either personally, by reputable private delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed to Lender or Borrower at the address shown in the heading to this
Agreement, or by facsimile to the facsimile number shown in
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NATIONSCREDIT COMMERICAL FUNDING LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
Section 9(i) of Schedule A, or at any other address (or to any other facsimile
number) designated in writing by one party to the other party in the manner
prescribed in this Section 9.1. All notices shall be deemed to have been given
when received or when delivery is refused by the recipient.
9.2 SEVERABILITY. If any provision of this Agreement, or the application
thereof to any party or circumstance, is held to be void or unenforceable by any
court of competent jurisdiction, such defect shall not affect the remainder of
this Agreement, which shall continue in full force and effect.
9.3 INTEGRATION. This Agreement and the other Loan Documents represent the
final, entire and complete agreement between Borrower and Lender and supersede
all prior and contemporaneous negotiations, oral representations and agreements,
all of which are merged and integrated into this Agreement. THERE ARE NO ORAL
UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.
9.4 WAIVERS. The failure of Lender at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
Loan Documents shall not waive or diminish any right of Lender later to demand
and receive strict compliance therewith. Any waiver of any default shall not
waive or affect any other default, whether prior or subsequent, and whether or
not similar. None of the provisions of this Agreement or any other Loan Document
shall be deemed to have been waived by any act or knowledge of Lender or its
agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, Instrument, Account, General Intangible, Document, Chattel
Paper, Investment Property or guaranty at any time held by Lender on which
Borrower is or may in any way be liable, and notice of any action taken by
Lender, unless expressly required by this Agreement, and notice of acceptance
hereof.
9.5 AMENDMENT. The terms and provisions of this Agreement may not be
amended or modified except in a writing executed by Borrower and a duly
authorized officer of Lender.
9.6 TIME OF ESSENCE. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement and the other Loan Documents.
9.7 ATTORNEYS FEES AND COSTS. Borrower shall reimburse Lender for all
reasonable attorneys' and paralegals' fees and all filing, recording, search,
title insurance, appraisal, audit, and other costs incurred by Lender, pursuant
to, in connection with, or relating to this Agreement, including all reasonable
attorneys' fees and costs Lender incurs to prepare and negotiate this Agreement
and the other Loan Documents, PROVIDED, that, so long as Borrower
23
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NATIONSCREDIT COMMERICAL FUNDING LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
has not engaged in protracted negotiations in connection with the preparation of
the Loan Documents, Borrower shall not be liable for such attorneys' fees of
Lender's counsel through the date hereof in excess of $25,000, exclusive of
out-of-pocket expenses; to obtain legal advice in connection with this Agreement
and the other Loan Documents or Borrower or any Obligor; to administer this
Agreement and the other Loan Documents (including the cost of periodic financing
statement, tax lien and other searches conducted by Lender); to enforce, or seek
to enforce, any of its rights; prosecute actions against, or defend actions by,
Account Debtors; to commence, intervene in, or defend any action or proceeding;
to enforce and protect, or to seek to enforce and protect, any of its rights and
interests in any bankruptcy case of Borrower, including, without limitation, by
initiating and prosecuting any motion for relief from the automatic stay and by
initiating, prosecuting or defending any other contested matter or adversary
proceeding in bankruptcy; to file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; to examine, audit (at the costs set
forth in Section 4.9), copy, and inspect any of the Collateral or any of
Borrower's books and records; to protect, obtain possession of, lease, dispose
of, or otherwise enforce Lender's security interests in, the Collateral; and to
otherwise represent Lender in any litigation relating to Borrower. If either
Lender or Borrower files any lawsuit against the other predicated on a breach of
this Agreement, the prevailing party in such action shall be entitled to recover
its reasonable costs and attorneys' fees, including reasonable attorneys' fees
and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to which Lender
may be entitled pursuant to this Section shall immediately become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
9.8 BENEFIT OF AGREEMENT; ASSIGNABILITY. The provisions of this Agreement
shall be binding upon and inure to the benefit of the respective successors,
assigns, heirs, beneficiaries and representatives of Borrower and Lender;
PROVIDED, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Lender, and any prohibited
assignment shall be void. No consent by Lender to any assignment shall release
Borrower from its liability for any of the Obligations. Lender shall have the
right to assign all or any of its rights and obligations under the Loan
Documents, and to sell participating interests therein, to one or more other
Persons, and Borrower agrees to execute all agreements, instruments and
documents requested by Lender in connection with each such assignment and
participation.
9.9 HEADINGS; CONSTRUCTION. Section and subsection headings are used in
this Agreement only for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
Sections or subsections, and the headings shall not be used in any manner to
construe, limit, define or interpret any term or provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this
24
<PAGE>
NATIONSCREDIT COMMERICAL FUNDING LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
Agreement shall be construed strictly against Lender or Borrower under any rule
of construction or otherwise.
9.10 GOVERNING LAW; CONSENT TO FORUM, ETC. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED, AND SHALL BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK, NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF SUCH STATE. BORROWER HEREBY CONSENTS AND AGREES THAT THE STATE AND
FEDERAL COURTS IN NEW YORK, NEW YORK OR THE STATE IN WHICH ANY OF THE COLLATERAL
IS LOCATED SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT, ANY
OTHER LOAN DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE
TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND
WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. BORROWER ALSO AGREES THAT
ANY CLAIM OR DISPUTE BROUGHT BY BORROWER AGAINST LENDER PURSUANT TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY MATTER ARISING OUT OF THIS AGREEMENT
OR ANY OTHER LOAN DOCUMENT SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL
COURTS OF NEW YORK. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE IN THE MANNER
AND SHALL BE DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE
EXTENT PERMITTED BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
AFFECT THE RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO
ENFORCE THE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.
9.11 WAIVER OF JURY TRIAL, ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE
OBLIGATIONS OR THE COLLATERAL OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED
25
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NATIONSCREDIT COMMERICAL FUNDING LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
WITH LENDER OR BORROWER, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE; (ii)
NOTICE PRIOR TO LENDER'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY
BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER
TO EXERCISE ANY OF LENDER'S REMEDIES AND (iii) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS. BORROWER ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND
THAT LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH
BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
[Remainder of page intentionally left blank; signature page follows.]
26
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NATIONSCREDIT COMMERICAL FUNDING LOAN AND SECURITY AGREEMENT
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF, Borrower and Lender have signed this Agreement as of
the date set forth in the heading.
BORROWER: LENDER:
NATIONAL HOME CENTERS, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ LYNNE CIACCIA
----------------------------------
Its Authorized Signatory
By /s/ BRENT A. HANBY
-------------------------------
Brent A. Hanby
Chief Financial Officer
27
<PAGE>
SCHEDULE A
DESCRIPTION OF CERTAIN TERMS
This Schedule is an integral part of the Loan and Security Agreement
between NATIONAL HOME CENTERS, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
1. Loan Limits for Revolving
Loans:
(a) Maximum Facility
Amount: $20,000,000
(b) Advance Rates:
(i) Accounts 85%, PROVIDED, that if the
Advance Rate: Dilution Percentage exceeds 6%,
Lender may, in its sole
discretion, either (i) reduce
such advance rate by the number
of full or partial percentage
points of such excess, or (ii)
create a Reserve in the amount
of such excess
(ii) Inventory
Advance
Rate(s):
(A) Finished 65%, PROVIDED, that if Borrower
goods: generates a cumulative pretax
loss greater than $3,000,000
calculated from the date of the
Agreement, the Inventory Advance
Rate shall be decreased to 60%.
(B) Raw 65%, PROVIDED, that if Borrower
materials: generates a cumulative pretax
loss greater than $3,000,000
calculated from the date of the
Agreement, the Inventory Advance
Rate shall be decreased to 60%.
(C) Work in
process: Not applicable
(c) Accounts Sublimit: $10,000,000
A-1
<PAGE>
(d) Inventory
Sublimit(s):
(i) Overall sublimit $10,000,000
on advances
against Eligible
Inventory
(ii) Sublimit on Not applicable
advances
against finished
goods
(iii) Sublimit on Not applicable
advances
against raw
materials
(iv) Sublimit on Not applicable
advances
against work in
process
(e) Credit
Accommodation $1,000,000
Limit:
(f) Permanent Reserve
Amount: Not applicable
(g) Overadvance Amount: Not applicable
2. Loan Limits for Term Loan:
(a) Principal Amount: Not applicable
(i) Equipment Not applicable
Advance
(i) Real Property Not applicable
Advance:
(b) Repayment Schedule:
A-2
<PAGE>
(i) Equipment Not applicable
Advance:
(ii) Real Property Not applicable
Advance:
3. Interest Rates:
(a) Revolving Loans: .50% per annum in excess of the
Prime Rate
(b) Term Loan: Not applicable
4. Minimum Loan Amount: Not applicable
5. Maximum Days:
(a) Maximum days after
original INVOICE date
for Eligible
Accounts: 90 days
(b) Maximum days after
original INVOICE DUE
DATE for Eligible
Accounts: Not applicable
6. Fees:
(a) Closing Fee: $150,000, of which $40,000 has
been fully earned and paid upon
issuance of the commitment
letter and $110,000 of which
shall be fully earned and
payable on the date of the
Agreement
(b) Facility Fee:
(i) Initial Term: Not applicable
A-3
<PAGE>
(ii) Renewal
Term(s): Not applicable
(c) Servicing Fee: Not applicable
(d) Unused Line Fee: .25% per annum
(e) Minimum Borrowing
Fee:
(i) Applicable Not applicable
period:
(ii) Date payable: Not applicable
(f) Success Fee: Not applicable
(g) Warrants: Not applicable
(h) Early Termination 2% of the Maximum Facility
Fee: Amount if terminated during the
first year of the Initial Term,
2% of the Maximum Facility
Amount if terminated during the
second year of the Initial Term,
1% of the Maximum Facility
Amount if terminated during the
third year of the Initial Term,
and 0% of the Maximum Facility
Amount if terminated thereafter
and prior to the Maturity Date;
PROVIDED, that if Borrower is
sold at any time following the
first year of the Initial Term,
the early termination fee shall
not exceed $50,000; PROVIDED,
FURTHER, that if Borrower is
sold at any time during the
first year of the Initial Term,
the early termination fee shall
be $150,000.
(i) Fees for letters of credit .50% per annum of the face
and other Credit amount of each open Credit
Accommodations (or Accommodation
guaranties thereof by
Lender):
7. Initial Maturity Date: July 14, 2002
A-4
<PAGE>
8. Financial Covenants:
(a) Capital Expenditure
Limitation: Not applicable
(b) Minimum Net Worth
Requirement: Not applicable
(c) Minimum Tangible
Net Worth: Not applicable
(d) Minimum Working
Capital: Not applicable
(e) Maximum Not applicable
Cumulative Net Loss:
(f) Minimum Not applicable
Cumulative Net
Income:
(g) Maximum Leverage Not applicable
Ratio:
(h) Limitation on Not applicable
Purchase Money
Security Interests:
(i) Limitation on Not applicable
Equipment Leases:
(j) Additional Financial Not applicable
Covenants:
9. Borrower Information:
(a) Prior Names of
Borrower: National Lumber Company, Inc.
(b) Prior Trade Names of National Lumber Company, Inc.
Borrower: Cabinet Craft
A-5
<PAGE>
(c) Existing Trade
Names of Borrower: Cabinet Craft
(d) Inventory Locations: Highway 265 North, P.O. Box 789
Springdale, AR 72765
1901 S. Walton Blvd., P.O. Box 510
Highway 71 South
Bentonville, AR 72712
8410 Ball Road, P.O. Box 6065
Fort Smith, AR 72906
5500 Landers Road, P.O. Box 16115
North Little Rock, AR 72231
7420 Count Massie Road
North Little Rock, AR 72118
720 Garland
P.O. Box 2110 Conway, AR 72033
Hwy 64 East, P.O. Box 966
Russellville, AR 72811
507 North El Paso
Russellville, AR 72811
1304 West Main Street
Highway 64 West, P.O. Box 2016
Clarksville, AR 72830
430 Dyke Road
Rogers, AR 72757
Highway 65 North and Interstate 40
#1 Conway Center
Conway, AR 72032
300 N. 46th
NE Corner of Highways 71B and 71
Rogers, AR 72756
A-6
<PAGE>
(e) Other Locations: none
(f) Litigation: 1. David Jackson v. National Home
Centers, Inc., U.S. District
Court, Western District of
Arkansas, Fayetteville Division,
No. CIV 98-5009
2. Claim by the State of Arkansas
for unclaimed property tax in the
approximate amount of $400,000.
Claim has been made and accrued
for on Borrower's financial
statements but there has been no
litigation or pursuit of
collection of the claimed amount.
3. James Larson and Patricia
Larson, Husband and Wife v.
National Home Centers, Inc.,
Circuit Court of Washington
County, Arkansas, No. CIV 97-1553
(g) Ownership of Public company traded on Nasdaq
Borrower: National Market under symbol NHCI.
Dwain Newman currently
beneficially owns 62.9% of the
outstanding common stock.
(h) Subsidiaries (and
ownership thereof): Crystal Valley Properties, Inc.
(100%)
(i) Facsimile Numbers:
Borrower: (501) 756-9122
Lender: (212) 597-1666
10. Description of Real Not applicable
Property:
11. Lender's Bank: The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
A-7
<PAGE>
12. Other Covenants: (a) Borrower shall take all
necessary steps, including without
limitation, the execution of any
documents that Lender may, in its
sole discretion, require, to
assign to Lender all of its
rights, remedies and interests
which shall arise in connection
with the filing by Borrower of any
materialman's liens
(b) At the request of Lender,
Borrower agrees, at its expense,
to open an operating account with
the New York branch of a financial
institution acceptable to Lender
in its sole discretion and to
otherwise take all necessary steps
to comply with any other requests
by Lender and its counsel
regarding the application of New
York law
13. Exceptions to Negative (a) Notwithstanding clause (ii) of
Covenants: Section 5.18 of the Agreement,
Borrower may make bulk purchases
of merchantable Inventory of a
type consistent with Borrower's
current product lines.
(b) Notwithstanding clause (iv) of
Section 5.18 of the Agreement,
Borrower may sell (A) its real
property located in Branson,
Missouri (upon which Lender has a
mortgage), in which event the
proceeds of sale shall be applied
(concurrently with such sale) to
reduce the Obligations, which
reduction shall be permanent
(i.e., such proceeds may not be
reborrowed by Borrower) if at the
time such proceeds are so applied
(x) an Event of Default has
occurred and is continuing or (y)
Borrower has a cumulative pretax
loss of $3,000,000 or more,
calculated from the date of the
Agreement, and
A-8
<PAGE>
(B) equipment and other real
property in connection with the
closing of any of Borrower's
locations.
(c) Notwithstanding clause (v) of
Section 5.18 of the Agreement,
Borrower may obtain unsecured
loans from Dwain Newman or an
entity in which he has an
ownership interest, which are
fully subordinated to the
Obligations, such subordination to
be on terms and conditions, and
pursuant to documentation,
acceptable to Lender in its sole
discretion.
(d) Notwithstanding clause (xii)
of Section 5.18 of the Agreement,
Borrower may make payments of
principal and interest on the
indebtedness described in
paragraph (c) above in accordance
with the terms of the promissory
notes evidencing such indebtedness
as in effect on the date of
execution of the applicable
subordination agreement, so long
as (A) no Default or Event of
Default under the Agreement has
occurred and is then continuing or
would be caused by the making of
each such payment and (B) Borrower
will have excess Availability of
at least $1,000,000 after giving
effect to each such payment.
A-9
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule A as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
NATIONAL HOME CENTERS, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ LYNNE CIACCIA
-------------------------------------
Its Authorized Signatory
By /s/ BRENT A. HANBY
--------------------------------
Brent A. Hanby
Chief Financial Officer
A-10
<PAGE>
SCHEDULE B
DEFINITIONS
This Schedule is an integral part of the Loan and Security Agreement
between NATIONAL HOME CENTERS, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
As used in the Agreement, the following terms have the following meanings:
"ACCOUNT" means any right to payment for Goods sold or leased or for
services rendered which is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.
"ACCOUNT DEBTOR" means the obligor on an Account or Chattel Paper.
"ACCOUNT PROCEEDS" has the meaning set forth in Section 4.1.
"AFFILIATE" means, with respect to any Person, Dwain Newman, a
relative, partner, member, manager, director, officer, or employee of such
Person, any parent or subsidiary of such Person, or any Person controlling,
controlled by or under common control with such Person or any other Person
affiliated, directly or indirectly, by virtue of family membership, ownership,
management or otherwise.
"AGREEMENT" and "THIS AGREEMENT" mean the Loan and Security Agreement
of which this Schedule B is a part and the Schedules thereto.
"AVAILABILITY" has the meaning set forth in Section 1.1(a)
"BANKRUPTCY CODE" means the United States Bankruptcy Code
(11 U.S.C. ss. 101 et seq.).
"BLOCKED ACCOUNT" has the meaning set forth in Section 4.1.
"BORROWER" has the meaning set forth in the heading to the Agreement.
"BORROWER'S ADDRESS" has the meaning set forth in the heading to the
Agreement.
"BUSINESS DAY" means a day other than a Saturday or Sunday or
any other day on which Lender or banks in New York are authorized to close.
"CHATTEL PAPER" has the meaning set forth in the UCC.
"COLLATERAL" means all property and interests in property in or
upon which a security interest or other Lien is granted pursuant to this
Agreement or the other Loan Documents.
"CREDIT ACCOMMODATION" has the meaning set forth in Section 1.1(a).
B-1
<PAGE>
"CREDIT ACCOMMODATION BALANCE" means the sum of (i) the
aggregate undrawn face amount of all outstanding Credit Accommodations and (ii)
all interest, fees and costs due or, in Lender's estimation, likely to become
due in connection therewith.
"DEFAULT" means any event which with notice or passage of time,
or both, would constitute an Event of Default.
"DEFAULT RATE" has the meaning set forth in Section 2.1.
"DEPOSIT ACCOUNT" has the meaning set forth in the UCC.
"DILUTION PERCENTAGE" means the gross amount of all returns,
allowances, discounts, credits, write-offs and similar items relating to
Borrower's Accounts computed as a percentage of Borrower's gross sales,
calculated on a ninety (90) day rolling average.
"DOCUMENT" has the meaning set forth in the UCC.
"EARLY TERMINATION FEE" has the meaning set forth in Section 7.2.
"ELIGIBLE ACCOUNT" means, at any time of determination, an Account
which satisfies the general criteria set forth below and which is otherwise
acceptable to Lender (PROVIDED, that Lender may, in its sole discretion, change
the general criteria for acceptability of Eligible Accounts upon at least
fifteen days' prior notice to Borrower). An Account shall be deemed to meet the
current general criteria if (i) neither the Account Debtor nor any of its
Affiliates is an Affiliate, creditor or supplier of Borrower; (ii) it does not
remain unpaid more than the earlier to occur of (A) the number of days after the
original INVOICE DATE set forth in Section 5(a) of Schedule A or (B) the number
of days after the original INVOICE DUE DATE set forth in Section 5(b) of
Schedule A; (iii) the Account Debtor or its Affiliates are not past due on other
Accounts owing to Borrower comprising more than 50% of all of the Accounts owing
to Borrower by such Account Debtor or its Affiliates; (iv) all Accounts owing by
the Account Debtor or its Affiliates do not represent more than 20% of all
otherwise Eligible Accounts (PROVIDED, that Accounts which are deemed to be
ineligible solely by reason of this clause (iv) shall be considered Eligible
Accounts to the extent of the amount thereof which does not exceed 20% of all
otherwise Eligible Accounts); (v) no covenant, representation or warranty
contained in this Agreement with respect to such Account (including any of the
representations set forth in Section 5.4) has been breached; (vi) the Account is
not subject to any contra relationship, counterclaim, dispute or set-off
(PROVIDED, that Accounts which are deemed to be ineligible solely by reason of
this clause (vi) shall be considered Eligible Accounts to the extent of the
amount thereof which is not affected by such contra relationships,
counterclaims, disputes or set-offs); (vii) the Account Debtor's chief executive
office or principal place of business is located in the United States or
Provinces of Canada which have adopted the Personal Property Security Act or a
similar act, unless (A) the sale is fully backed by a letter of credit, guaranty
or acceptance acceptable to Lender in its sole discretion, and if backed by a
letter of credit, such letter of credit has been issued or confirmed by a bank
satisfactory to Lender, is sufficient to cover such Account, and if required by
Lender, the original of such letter of credit has been delivered to Lender or
Lender's agent and the issuer thereof notified of the assignment of the proceeds
of such letter of credit to Lender or (B) such Account is subject to credit
insurance
B-2
<PAGE>
payable to Lender issued by an insurer and on terms and in an amount acceptable
to Lender; (viii) it is absolutely owing to Borrower and does not arise from a
sale on a bill-and-hold, guarantied sale, sale-or-return, sale-on-approval,
consignment, retainage or any other repurchase or return basis or consist of
progress billings; (ix) Lender shall have verified the Account in a manner
satisfactory to Lender; (x) the Account Debtor is not the United States of
America or any state or political subdivision (or any department, agency or
instrumentality thereof), unless Borrower has complied with the Assignment of
Claims Act of 1940 (31 U.S.C. ss.203 et seq.) or other applicable similar state
or local law in a manner satisfactory to Lender; (xi) it is at all times subject
to Lender's duly perfected, first priority security interest and to no other
Lien that is not a Permitted Lien, and the goods giving rise to such Account (A)
were not, at the time of sale, subject to any Lien except Permitted Liens and
(B) have been delivered to and accepted by the Account Debtor, or the services
giving rise to such Account have been performed by Borrower and accepted by the
Account Debtor; (xii) the Account is not evidenced by Chattel Paper or an
Instrument of any kind and has not been reduced to judgment; (xiii) the Account
Debtor's total indebtedness to Borrower does not exceed the amount of any credit
limit established by Borrower (as modified by Borrower's authorized personnel in
accordance with Borrower's customary procedures) or Lender and the Account
Debtor is otherwise deemed to be creditworthy by Lender (PROVIDED, that Accounts
which are deemed to be ineligible solely by reason of this clause (xiii) shall
be considered Eligible Accounts to the extent the amount of such Accounts does
not exceed the lower of such credit limits); (xiv) there are no facts or
circumstances existing, or which could reasonably be anticipated to occur, which
might result in any adverse change in the Account Debtor's financial condition
or impair or delay the collectibility of all or any portion of such Account;
(xv) Lender has been furnished with all documents and other information
pertaining to such Account which Lender has requested, or which Borrower is
obligated to deliver to Lender, pursuant to this Agreement; (xvi) Borrower has
not made an agreement with the Account Debtor without Lender's prior written
consent to extend the time of payment thereof beyond the time periods set forth
in clause (ii) above; and (xvii) Borrower has not posted a surety or other bond
in respect of the contract under which such Account arose.
"ELIGIBLE EQUIPMENT"" means, at any time of determination, Equipment
owned by Borrower which Lender, in its sole discretion, deems to be eligible for
borrowing purposes.
"ELIGIBLE INVENTORY" means, at any time of determination, Inventory
(other than packaging materials and supplies) which satisfies the general
criteria set forth below and which is otherwise acceptable to Lender (PROVIDED,
that Lender may, in its sole discretion, change the general criteria for
acceptability of Eligible Inventory upon at least fifteen days' prior written
notice to Borrower). Inventory shall be deemed to meet the current general
criteria if (i) it consists of raw materials or finished goods, or
work-in-process that is readily marketable in its current form; (ii) it is in
good, new and saleable condition; (iii) it is not slow-moving, obsolete or
unmerchantable, (iv) it is not in the possession of a processor, consignee or
bailee, or located on premises leased or subleased to Borrower, or on premises
subject to a mortgage in favor of a Person other than Lender, unless such
processor, consignee, bailee or mortgagee or the lessor or sublessor of such
premises, as the case may be, has executed and delivered all documentation which
Lender shall require to evidence the subordination or other limitation or
extinguishment of such Person's rights with respect to such Inventory and
Lender's right to gain access thereto; (v) it meets all standards
B-3
<PAGE>
imposed by any governmental agency or authority; (vi) it conforms in all
respects to any covenants, warranties and representations set forth in the
Agreement; (vii) it is at all times subject to Lender's duly perfected, first
priority security interest and no other Lien except a Permitted Lien; (viii) it
is situated at an Inventory Location listed in Section 9(d) of Schedule A or
other location of which Lender has been notified as required by Section 5.6; and
(ix) it is not manufactured or distributed by General Electric Company and does
not bear a trademark of General Electric Company (including without limitation,
"General Electric," "Hotpoint" or "RCA").
"ELIGIBLE REAL PROPERTY" means, at any time of determination, Real
Property owned by Borrower which Lender, in its sole discretion, deems to be
eligible for borrowing purposes.
"EQUIPMENT" means all Goods which are used or bought for use primarily
in business (including farming or a profession) or by a Person who is a
non-profit organization or governmental subdivision or agency and which are not
Inventory, farm products or consumer goods, including all machinery, molds,
machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dies and jigs, and all attachments,
accessories, accessions, replacements, substitutions, additions or improvements
to, or spare parts for, any of the foregoing.
"EQUIPMENT ADVANCE" has the meaning set forth in Section 1.1(b).
"ERISA" means the Employee Retirement Income Security Act of
1974 and all rules, regulations and orders promulgated thereunder.
"EVENT OF DEFAULT" has the meaning set forth in Section 8.1.
"GAAP" means generally accepted accounting principles as in
effect from time to time, consistently applied.
"GENERAL INTANGIBLES" has the meaning set forth in the UCC, and
includes all books and records pertaining to the Collateral and other business
and financial records in the possession of Borrower or any other Person,
inventions, designs, drawings, blueprints, patents, patent applications,
trademarks, trademark applications (other than "intent to use" applications
until a verified statement of use is filed with respect to such applications)
and the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, causes of action and other rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, rights to purchase or sell real or personal property, rights as a
licensor or licensee of any kind, royalties, telephone numbers, internet
addresses, proprietary information, purchase orders, and all insurance policies
and claims (including life insurance, key man insurance, credit insurance,
liability insurance, property insurance and other insurance), tax refunds and
claims, letters of credit, banker's acceptances and guaranties, computer
programs, discs, tapes and tape files in the possession of Borrower or any other
Person, claims under guaranties, security interests or other security held by or
granted to Borrower, all rights to indemnification and all other intangible
property of every kind and nature.
B-4
<PAGE>
"GOODS" means all things which are movable at the time the security
interest attaches or which are fixtures (other than money, Documents,
Instruments, Investment Property, Accounts, Chattel Paper, General Intangibles,
or minerals or the like (including oil and gas) before extraction), including
standing timber which is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops.
"INITIAL TERM" has the meaning set forth in Section 7.1.
"INSTRUMENT" has the meaning set forth in the UCC.
"INVENTORY" means all Goods held for sale or lease or furnished or to
be furnished under contracts of service, including all raw materials, work in
process, finished goods, goods in transit and materials and supplies which are
or might be used or consumed in a business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all products of the foregoing, and shall include interests in goods
represented by Accounts, returned, reclaimed or repossessed goods and rights as
an unpaid vendor.
"INVESTMENT PROPERTY" shall mean all of Borrower's securities,
whether certificated or uncertificated, securities entitlements, securities
accounts, commodity contracts and commodity accounts.
"LENDER" has the meaning set forth in the heading to the Agreement.
"LIEN" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on common law, statute or contract, including rights of
sellers under conditional sales contracts or title retention agreements and
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting property. For the purpose of this Agreement, Borrower shall be deemed
to be the owner of any property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes. "LOAN ACCOUNT" has the meaning set forth in Section 2.4.
"LOAN DOCUMENTS" means the Agreement and all notes, guaranties,
security agreements, certificates, landlord's agreements, Lock Box and Blocked
Account agreements and all other agreements, documents and instruments now or
hereafter executed or delivered by Borrower or any Obligor in connection with,
or to evidence the transactions contemplated by, this Agreement.
"LOAN LIMITS" means, collectively, the Availability limits and all
other limits on the amount of Loans and Credit Accommodations set forth in this
Agreement.
"LOANS" means, collectively, the Revolving Loans and any Term Loan.
"LOCK BOX" has the meaning set forth in Section 4.1.
B-5
<PAGE>
"MATERIAL ADVERSE EFFECT" has the meaning set forth in Section 5.20.
"MATURITY DATE" has the meaning set forth in Section 7.1.
"OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender, whether evidenced by this Agreement or any
other Loan Document, whether arising from an extension of credit, opening of a
Credit Accommodation, guaranty, indemnification or otherwise (including all
fees, costs and other amounts which may be owing to issuers of Credit
Accommodations and all taxes, duties, freight, insurance, costs and other
expenses, costs or amounts payable in connection with Credit Accommodations or
the underlying goods), whether direct or indirect (including those acquired by
assignment and any participation by Lender in Borrower's indebtedness owing to
others), whether absolute or contingent, whether due or to become due, and
whether arising before or after the commencement of a proceeding under the
Bankruptcy Code or any similar statute, including all interest, charges,
expenses, fees, attorney's fees, expert witness fees, audit fees, letter of
credit fees, Closing Fees, Facility Fees, Servicing Fees, Unused Line Fees,
Minimum Borrowing Fees, Success Fees, amounts owing under Warrants, Credit
Accommodation Fees and any other sums chargeable to Borrower under this
Agreement or under any other Loan Document.
"OBLIGOR" means any guarantor, endorser, acceptor, surety or other
person liable on, or with respect to, the Obligations or who is the owner of any
property which is security for the Obligations, other than Borrower.
"PERMITTED LIENS" means: (i) purchase money security interests in
specific items of Equipment in an aggregate amount not to exceed the limit set
forth in Section 8(h) of Schedule A; (ii) leases of specific items of Equipment
in an aggregate amount not to exceed the limit set forth in Section 8(i) of
Schedule A; (iii) Liens for taxes not yet due and payable; (iv) additional Liens
which are fully subordinate to the security interests of Lender and are
consented to in writing by Lender; (v) security interests being terminated
concurrently with the execution of this Agreement; (vi) Liens of materialmen,
mechanics, warehousemen or carriers arising in the ordinary course of business
and securing obligations which are not delinquent; (vii) Liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clause (i) or (ii) above; PROVIDED,
that any extension, renewal or replacement Lien is limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced does not increase; (viii) Liens in favor
of customs and revenue authorities which secure payment of customs duties in
connection with the importation of goods; (ix) security deposits posted in
connection with real property leases or subleases; and (x) Liens shown on
Schedule C to the Agreement. Lender will have the right to require, as a
condition to its consent under clause (iv) above, that the holder of the
additional Lien sign an intercreditor agreement in form and substance
satisfactory to Lender, in its sole discretion, acknowledging that the Lien is
subordinate to the security interests of Lender, and agreeing not to take any
action to enforce its subordinate Lien so long as any Obligations remain
outstanding, and that Borrower agree that any uncured default in any obligation
secured by the subordinate Lien shall also constitute an Event of Default under
this Agreement.
B-6
<PAGE>
"PERSON" means any individual, sole proprietorship, partnership,
joint venture, limited liability company, trust, unincorporated organization,
association, corporation, government or any agency or political division
thereof, or any other entity.
"PRIME RATE" means, at any given time, the prime rate as quoted in The
Wall Street Journal as the base rate on corporate loans posted as of such time
by at least 75% of the nation's 30 largest banks (which rate is not necessarily
the lowest rate offered by such banks).
"REAL PROPERTY" means the real property described in Section 10 of
Schedule A.
"REAL PROPERTY ADVANCE" has the meaning set forth in Section 1.1(b).
"RELEASED PARTIES" has the meaning set forth in Section 6.1.
"RENEWAL TERM" has the meaning set forth in Section 7.1.
"RESERVES" has the meaning set forth in Section 1.2.
"REVOLVING LOANS" has the meaning set forth in Section 1.1(a).
"SALE" has the meaning set forth in Section 8.2.
"SUBSIDIARY" means any corporation or other entity of which a Person
owns, directly or indirectly, through one or more intermediaries, more than 50%
of the capital stock or other equity interest at the time of determination.
"TERM" means the period commencing on the date of this Agreement and
ending on the Maturity Date.
"TERM LOAN" has the meaning set forth in Section 1.1(b).
"UCC" means, at any given time, the Uniform Commercial Code as adopted
and in effect at such time in the State of New York.
All accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. All other
terms contained in this Agreement, unless otherwise indicated, shall have the
meanings provided by the UCC, to the extent such terms are defined therein. The
term "including," whenever used in this Agreement, shall mean "including but not
limited to." The singular form of any term shall include the plural form, and
vice versa, when the context so requires. References to Sections, subsections
and Schedules are to Sections and subsections of, and Schedules to, this
Agreement. All references to agreements and statutes shall include all
amendments thereto and successor statutes in the case of statutes.
B-7
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule B as of
the date set forth in the heading to the Agreement.
BORROWER: LENDER:
NATIONAL HOME CENTERS, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ LYNNE CIACCIA
------------------------------------
Its Authorized Signatory
By /s/ BRENT A. HANBY
------------------------------
Brent A. Hanby
Chief Financial Officer
B-8
<PAGE>
SCHEDULE C
PERMITTED LIENS
This Schedule is an integral part of the Loan and Security Agreement
between NATIONAL HOME CENTERS, INC. and NATIONSCREDIT COMMERCIAL CORPORATION,
THROUGH ITS NATIONSCREDIT COMMERCIAL FUNDING DIVISION (the "AGREEMENT").
FAULKNER COUNTY
---------------
- -------------------------------------------------------------------------------
SECURED PARTY DATE FILE NUMBER
- -------------------------------------------------------------------------------
Clark Credit Corporation 12/3/92 92-1673
- -------------------------------------------------------------------------------
Clark Credit Corporation 12/3/92 92-1674
- -------------------------------------------------------------------------------
Clark Credit Corporation 12/3/92 92-1675
- -------------------------------------------------------------------------------
Datamax Office Systems 1/8/93 93-31
- -------------------------------------------------------------------------------
Datamax Office Systems 1/8/93 93-32
- -------------------------------------------------------------------------------
Clark Credit Corporation 1/15/93 93-80
- -------------------------------------------------------------------------------
Clark Credit Corporation 1/27/93 93-118
- -------------------------------------------------------------------------------
POPE COUNTY
-----------
- -------------------------------------------------------------------------------
SECURED PARTY DATE FILE NUMBER
- -------------------------------------------------------------------------------
Clark Credit Corporation 5/7/93 93-732
- -------------------------------------------------------------------------------
Associates Leasing, Inc. 7/26/93 93-1181
- -------------------------------------------------------------------------------
WASHINGTON COUNTY
-----------------
- -------------------------------------------------------------------------------
SECURED PARTY DATE FILE NUMBER
- -------------------------------------------------------------------------------
Clark Credit corporation 10/19/93 9203850
- -------------------------------------------------------------------------------
Clark Credit Corporation 1/13/93 9300087
- -------------------------------------------------------------------------------
Clark Credit Corporation 1/13/93 9300088
- -------------------------------------------------------------------------------
C-1
<PAGE>
- -------------------------------------------------------------------------------
SECURED PARTY DATE FILE NUMBER
- -------------------------------------------------------------------------------
Associates Commercial Corp. 2/16/93 9300439
- -------------------------------------------------------------------------------
Clark Credit Corporation 6/30/93 9302358
- -------------------------------------------------------------------------------
Clark Credit Corporation 10/8/93 9303727
- -------------------------------------------------------------------------------
Clark Credit Corporation 5/6/94 9401696
- -------------------------------------------------------------------------------
Clark Credit Corporation 5/12/94 9401775
- -------------------------------------------------------------------------------
Associates Commercial Corporation 12/28/95 9504587
- -------------------------------------------------------------------------------
Associates Commercial Corporation 12/28/95 9504588
- -------------------------------------------------------------------------------
IBM Credit Corporation 12/16/97 9704076
- -------------------------------------------------------------------------------
UCC FIXTURE FILINGS:
- -------------------------------------------------------------------------------
Clark Credit Corporation 3/29/93 9300984
- -------------------------------------------------------------------------------
NationsBanc Leasing Corporation 6/14/93 9302089
- -------------------------------------------------------------------------------
Phoenixcor, Inc. 11/1/96 9603790
- -------------------------------------------------------------------------------
Phoenixcor, Inc. 11/1/96 9603791
- -------------------------------------------------------------------------------
ARKANSAS SECRETARY OF STATE
---------------------------
- -------------------------------------------------------------------------------
SECURED PARTY DATE FILE NUMBER
- -------------------------------------------------------------------------------
Associates Commercial Corporation 5/10/91 753174
- -------------------------------------------------------------------------------
Whirlpool Financial Corporation 7/9/91 760390
- -------------------------------------------------------------------------------
Orix Credit Alliance, Inc. 2/9/93 834606
- -------------------------------------------------------------------------------
Clark Credit Corporation 7/1/93 856991
- -------------------------------------------------------------------------------
Clark Credit corporation 7/8/93 857865
- -------------------------------------------------------------------------------
General Electric Capital Corporation 7/12/93 858367
- -------------------------------------------------------------------------------
NationsBanc Leasing Corporation 7/13/93 858550
- -------------------------------------------------------------------------------
C-2
<PAGE>
- -------------------------------------------------------------------------------
SECURED PARTY DATE FILE NUMBER
- -------------------------------------------------------------------------------
Associates Leasing, Inc. 7/27/93 860830
- -------------------------------------------------------------------------------
Clark Credit Corporation 8/30/93 865553
- -------------------------------------------------------------------------------
Clark Credit Corporation 10/8/93 870861
- -------------------------------------------------------------------------------
MetLife Capital Corporation 10/25/93 873046
- -------------------------------------------------------------------------------
NationsBanc Leasing Corporation 1/10/94 882401
- -------------------------------------------------------------------------------
Clark Credit corporation 5/9/94 902210
- -------------------------------------------------------------------------------
Clark Credit Corporation 5/12/94 903123
- -------------------------------------------------------------------------------
NationsBanc Leasing Corporation 6/24/94 910618
- -------------------------------------------------------------------------------
MetLife Capital Corporation 12/9/94 935379
- -------------------------------------------------------------------------------
Citicorp Dealer Finance 9/29/95 982907
- -------------------------------------------------------------------------------
USL Capital Corporation 10/5/95 983973
- -------------------------------------------------------------------------------
Whirlpool Corporation 10/25/95 986815
- -------------------------------------------------------------------------------
USL Capital Corporation 10/26/95 987047
- -------------------------------------------------------------------------------
Sensormatic Electronics Corp. 11/20/95 990426
- -------------------------------------------------------------------------------
Citicorp Dealer Finance 11/27/95 990873
- -------------------------------------------------------------------------------
Associates Commercial Corporation 12/29/95 995542
- -------------------------------------------------------------------------------
Associates Commercial Corporation 12/29/95 995543
- -------------------------------------------------------------------------------
Phoenixcor, Inc. 10/3/96 1039777
- -------------------------------------------------------------------------------
NBD Bank, a Michigan banking corp. 10/8/96 1040564
- -------------------------------------------------------------------------------
IBM Credit Corporation 12/12/97 1106271
- -------------------------------------------------------------------------------
Pitney Bowes Credit Corporation 5/20/98 1132924
- -------------------------------------------------------------------------------
C-3
<PAGE>
IN WITNESS WHEREOF, Borrower and Lender have signed this Schedule C as
of the date set forth in the heading to the Agreement.
BORROWER: LENDER:
NATIONAL HOME CENTERS, INC. NATIONSCREDIT COMMERCIAL
CORPORATION, THROUGH ITS
NATIONSCREDIT COMMERCIAL FUNDING
DIVISION
By /s/ LYNNE CIACCIA
-------------------------------------
Its Authorized Signatory
By /s/ BRENT A. HANBY
--------------------------------
Brent A. Hanby
Chief Financial Officer
C-4
<PAGE>
EXHIBIT 10.2
REAL PROPERTY PURCHASE AGREEMENT
--------------------------------
THIS REAL PROPERTY PURCHASE AGREEMENT (hereinafter sometimes referred to
as the "Agreement") is hereby made and entered into as of the Effective Date (as
hereinafter defined) by and between NATIONAL HOME CENTERS, INC. (hereinafter
sometimes referred to as the "Seller") and HOME DEPOT USA, INC. (hereinafter
sometimes referred to as the "Purchaser").
WITNESSETH THAT:
----------------
WHEREAS, Seller desires to sell and Purchaser desires to purchase, upon
the terms and conditions hereinafter set forth, that certain tract or parcel of
land containing approximately 15.72 acres and lying and being in the City of
Fayetteville, Arkansas, as more particularly shown on Exhibit "A" attached
hereto and by this reference made a part hereof, together with all rights,
easements and appurtenances pertaining thereto and all improvements, trees,
bushes, landscaping and foliage thereon (the "Property") and subject only to the
Permitted Title Exceptions as defined in Paragraph 8 hereof,
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are all hereby acknowledged by each of the parties hereto,
the parties hereto agree as follows:
1. Purchase Price. Subject to and pursuant to the following terms
and conditions, Seller shall sell and transfer the Property to Purchaser and
Purchaser shall purchase the Property from Seller and pay to Seller the sum of
Six Million Five Hundred Thousand and No/l00 Dollars ($6,500,000.00)
(hereinafter sometimes referred to as the "Purchase Price"), by the delivery of
immediately available and collectible funds, less the Earnest Money (as
hereinafter defined) and subject to adjustment as provided herein.
2. Closing Costs. The premium for the issuance to Purchaser of a
standard form ALTA Owner's Policy of Title Insurance for the Property in the
amount of the Purchase Price, Seller's attorney's fees and one-half (1/2) of any
recording taxes or transfer taxes shall be paid by Seller. Purchaser shall be
responsible for all recording fees on recordable documents, one-half (1/2) of
the cost of any recording taxes or transfer taxes, the cost of any survey and
the payment of its own attorney's fees.
3. Prorations. All real property ad valorem taxes shall be prorated
(employing a 365-day year) between Purchaser and Seller as of the date of
Closing (as hereinafter defined) based upon the most recently available property
assessment. If such assessment is not available for the year in question, taxes
shall be reprorated when the amount thereof can be ascertained and the
provisions hereof shall survive the Closing and the delivery of Seller's general
warranty deed.
<PAGE>
All assessments levied against the Property shall be paid in full by Seller on
or before Closing even if said assessments are due in installments subsequent to
Closing.
4. Closing. The consummation of the purchase and sale of the Property
contemplated under this Agreement (the "Closing") shall be held on or before
thirty (30) days after the end of the Inspection Period (as hereinafter defined)
at an exact date and time designated by Purchaser to Seller in the local offices
of Commonwealth Title Insurance Company or such other title insurance agency
designated by Purchaser (the "Title Company") in Fayetteville, Arkansas, or at
such other location which may be designated by Purchaser. Seller agrees to
deliver possession of the Property to Purchaser at Closing in the same
unoccupied condition as it presently exists which is free of any right of
possession or claim to right of possession by any party other than Purchaser.
5. Inspections Prior to Closing. Purchaser, its agents and
representatives, shall at all times before the Closing have the privilege,
opportunity and right of entering upon the Property, including, without
limitation, the building and other improvements located thereon, in order to
inspect and examine same and perform topographical surveys, soil tests, borings,
percolation tests and other tests needed to determine surface, subsurface and
topographic conditions. In the event this Agreement shall not close, through no
fault of Seller, Purchaser shall restore the Property to its original condition,
if changed due to the tests and inspections performed by Purchaser, and shall
provide Seller with a copy of the results of any tests and inspections made by
Purchaser (excluding any market and/or economic feasibility studies), without
cost, charge; or expense to Seller. The feasibility study and inspection shall
be at Purchaser's expense. Seller agrees that within ten (10) days from the
Effective Date, Seller shall provide Purchaser with a copy of any title report,
survey, building plans, ad valorem tax statements or other materials in Seller's
possession relating to the Property and the improvements thereon.
6. Earnest Money. Within five (5) business days after the Effective
Date, Purchaser agrees to deposit in escrow with the Title Company an earnest
money deposit of Twenty-five Thousand and No/100 Dollars ($25,000.00)
(hereinafter sometimes referred to as the "Earnest Money"). In the event
Purchaser deposits the Earnest Money with the Title Company, Purchaser may, at
its option, direct the Tide Company to invest the Earnest Money in an interest
bearing account designated by Purchaser. The Earnest Money shall be held in
escrow to be applied for Purchaser's benefit against the Purchase Price at
Closing or as otherwise provided for by this Agreement. All interest which has
accrued on the Earnest Money shall, under all circumstances, belong to
Purchaser. Title Company shall make disbursements of the Earnest Money in
accordance with this Agreement and in reliance upon written directions of
Purchaser and Seller. In the event that a dispute arises with respect to the
distribution of any funds held, Title Company may apply to a court of competent
jurisdiction for an order determining the party or parties to whom such deposit
shall be paid. All costs of such proceedings together with all reasonable
attorney's fees and costs incurred by Title Company and the successful party or
parties in connection therewith shall be paid by the unsuccessful party or
parties to such proceeding.
2
<PAGE>
In performing its duties as escrow agent holding the Earnest Money as
provided in this Agreement, the Title Company shall not incur any liability to
anyone for any damages, losses or expenses, except for willful default or breach
of trust, and it shall accordingly not incur any such liability with respect
(a) to any action taken or omitted in good faith upon advice of its counsel, or
(b) to any action taken or omitted in reliance upon any instrument, including
written notice or instruction provided for in this Agreement, not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth and accuracy of any information contained therein, which Title
Company shall in good faith believe to be genuine, to have been signed or
presented by a proper person or persons, and to conform with the provisions of
this Agreement. In the event of a dispute between any of the parties hereto
sufficient in the discretion of Title Company to justify its doing so, Title
Company shall be entitled to tender into the registry or custody of any court of
competent jurisdiction, all Earnest Money held under this Agreement, together
with such legal pleadings as it deems appropriate, and thereupon be discharged
from all further duties and liabilities under this Agreement. Any such legal
action may be brought in such court as Title Company shall determine to have
jurisdiction thereof.
7. Inspection Period. Purchaser is granted the right to conduct an
engineering, and/or market and economic feasibility study of the Property, and
the physical inspection of all improvements and mechanical equipment, and
personal property being sold hereby. Purchaser shall have ninety (90) days from
the Effective Date (the "Inspection Period") to perform such feasibility study
and inspection and in this regard, Purchaser or his designated agents may enter
upon the Property for purposes of such analysis, or to conduct tests and
inspections which may be deemed necessary by Purchaser. If Purchaser determines,
in his sole judgment, that the Property is not suitable for any reason for
Purchaser's intended use or purpose, or is not in satisfactory condition, in the
sole judgment of Purchaser, then Purchaser may, on written notice to Seller on
or before the end of the Inspection Period, terminate this Agreement and it
shall be null and void for all purposes and the Earnest Money shall be returned
to Purchaser. If the written notice is not given to Seller within such period,
the condition of the Property and any and all objections with respect to the
feasibility study and inspection shall be deemed to have been waived by
Purchaser for all purposes. Purchaser's right to conduct a feasibility study and
inspection of the Property as provided above is supported by the payment and
delivery by and from Purchaser to Seller of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, which sum Purchaser and Seller hereby acknowledge and agree to be
Independent Contract Consideration for Seller granting to Purchaser the
exclusive and irrevocable option and right to conduct the feasibility study and
inspection. This Independent Contract Consideration is in addition to, and
independent of, the Earnest Money or any other consideration or payment made or
given by Purchaser to Seller under the terms of this Agreement and said sum is
nonrefundable, and shall be retained by Seller notwithstanding any other
provision of this Agreement.
In addition, Purchaser's obligation to close shall at all times be
conditioned upon the following (unless Purchaser waives such conditions):
3
<PAGE>
(a) Seller delivering fee simple title to the Property in accordance
with the provisions hereof.
(b) The truth and accuracy of Sellers warranties and representations
hereunder.
8. Conveyance of Title. Seller shall convey fee simple title to the
Property to Purchaser at Closing pursuant to a recordable general warranty deed.
The title to the Property to be conveyed by Seller to Purchaser will be
insurable by the Title Company under its standard ALTA Owner's Policy of Title
Insurance at standard rates, free and clear of all liens, encumbrances, and
other exceptions to title, except the Permitted Tide Exceptions (as hereinafter
defined). Seller shall deliver to Purchaser at Closing an affidavit acceptable
to Purchaser and the Title Company stating that Seller has sole and exclusive
possession of the Property subject to the Permitted Title Exceptions and stating
that either (i) there have been no improvements, additions, alterations, repairs
or any changes of any kind whatsoever made to the Property during the last
ninety (90) days immediately preceding Closing, or (ii) if there have been any
such improvements or repairs, that all lienors or potential lienors in
connection with such improvements or repairs have been paid in full. Seller
shall also supply to Purchaser at Closing such other documentation reasonably
required by Purchaser, including, a non-foreign affidavit, and evidence of
authority to consummate the sale, all in form and substance acceptable to
Purchaser. Seller covenants and agrees with Purchaser that Purchaser shall have
until the close of the Inspection Period to examine the survey of and title to
the Property and that Purchaser may notify Seller of any objectionable matter or
defect which affects the marketability or insurability of the title to the
Property or which adversely affects the use of the Property for the Project. In
the event Seller is notified of any such objectionable matters, Seller agrees to
promptly employ its good faith best efforts to procure a cure for same. In the
event, however, Seller is unable through the exercise of its good faith best
efforts (which shall include the payment of money with respect to any existing
deeds to secure debt, mortgages, deeds of trust, liens or other matters that can
be removed by the payment of money) to cure any objectionable matter prior to
Closing, then at Purchaser's option, Purchaser may either (i) take title to the
Property despite the existence of such matter or (ii) terminate this Agreement
in which event all Earnest Money paid by Purchaser shall be immediately refunded
by Title Company to Purchaser, and neither Purchaser nor Seller shall have any
further liabilities, obligations or rights with regard to this Agreement which
shall then become null and void and of no further force or effect. Any title
exceptions to the Property existing prior to the Effective Date hereof to which
Purchaser does not object, or to which Purchaser waives its objection, are
referred to herein as "Permitted Exceptions" or "Permitted Title Exceptions". In
the event that any title exceptions or survey matters arise after Purchaser's
initial title search that affect the marketability or insurability of the title
to the Property or which adversely affect the use of the Property for the
Project, Purchaser may after the discovery thereof notify Seller, in which event
Seller shall promptly employ its good faith best efforts to procure a cure for
same, as required above, and upon the failure of Seller to effectuate a cure,
then Purchaser may elect either of the options set forth in subclauses (i) or
(ii) above.
4
<PAGE>
9. Condemnation. In the event, at any time between the making of this
Agreement and Closing, all or any portion of the Property is condemned by any
legally constituted authority for any public use or purpose, then Purchaser may
elect to either: (i) terminate this Agreement, in which event all Earnest Money
paid by Purchaser shall be immediately refunded by Title Company to Purchaser,
and neither Purchaser nor Seller shall have any further liabilities, obligations
or rights with regard to this Agreement; or (ii) collect all proceeds from any
condemnation and have the terms of this Agreement remain in full force and
effect and binding on the parties hereto. In the event of a condemnation in
which Purchaser does not elect to terminate this Agreement pursuant to the
foregoing terms, then the term "Property" as used herein shall thereafter refer
to the Property less and except any portion thereof taken by such condemnation.
10. Agreement Assignable by Purchaser. This Agreement may be assigned or
transferred by Purchaser at any time provided the assignee agrees to be
specifically bound by the terms hereof. Seller shall not assign its interest
hereunder without the prior written consent of Purchaser.
11. Survival of Closing. All warranties, covenants and representations
made herein by either Seller or Purchaser shall survive Closing.
12. Seller's Representations and Warranties. Seller represents, warrants
and covenants to Purchaser that:
(a) Seller (i) has complete and full authority to execute this
Agreement and to convey to Purchaser good and marketable fee simple
title to the Property, in accordance with Paragraph 8 of this Agreement,
which is free and clear of all liens, encumbrances and other exceptions
to title except for the Permitted Title Exceptions, (ii) will execute
and deliver such other documents, instruments, agreements, including but
not limited to affidavits and certificates necessary to effectuate the
transaction contemplated herein, and (iii) will take all such additional
action necessary or appropriate to effect and facilitate the
consummation of the sale and purchase transaction contemplated herein.
(b) Seller will not further sell, encumber, convey, assign or
contract to sell, convey, assign, pledge, encumber or lease all or any
part of the Property, nor restrict the use of all or any part of the
Property, nor take or cause to be taken any action in conflict with this
Agreement at any time between the Effective Date and (i) Closing, or
(ii) the earlier termination of this Agreement pursuant to its terms.
Seller additionally hereby represents and warrants that no rights-of-
first refusal or similar agreements exist in connection with the
Property which would in any way interfere with Purchaser's ability to
purchase the Property as provided herein, or which is in any way in
contravention of the spirit and intent 6f this Agreement.
(c) Seller is not a "foreign person" as that term is defined in the
I.R.C., Section 1445 (F) (3), nor is the sale of the Property subject to
any withholding requirements imposed by the Internal Revenue Code,
including, but not limited to, Section 1445 thereof.
5
<PAGE>
13. Notices. All notices, requests, demands or other communications
hereunder shall be in writing and deemed given when delivered personally or when
sent by recognized overnight courier delivery service such as Federal Express,
when telefaxed or on the day said communication is deposited in the U.S. mail,
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Seller: National Home Centers, Inc.
Highway 265 North
Springdale, Arkansas 72764
Attention: Dwain Newman
Fax: 501/756-0981
If to Purchaser: Home Depot U.S.A., Inc.
2455 Paces Ferry Road
Atlanta, Georgia 30339
Attention: Legal Department
Fax: 770/384-2739
With a copy to: Home Depot U.S.A., Inc.
2800 Forest Lane
Dallas Texas 75234
Attention: Mr. David Cassman
Fax: 972/402-3868
With a copy to: Altman, Kritzer & Levick, P.C.
6400 Powers Ferry Road, N.W.
Suite 224
Atlanta, Georgia 30339
Attention: Benno G. Rothschild, Jr.
Fax: 770/303-1132
If to Title Company: Commonwealth Land Title Insurance Company
National Title Service Division
50 Federal Street
3rd Floor
Boston, Massachusetts 02110-2515
Attention: Terrance Miklas
Fax: 617/695-9612
or to such other address as the parties may from time to time designate by
notice in writing to the other parties.
6
<PAGE>
14. Amendment. Neither this Agreement nor any provision hereof may be
changed, amended, modified, waived or discharged orally or by any course of
dealing, but only by an instrument in writing signed by the party against which
enforcement of the change, amendment, modification, waiver or discharge is
sought.
15. Legal Fees. In the event legal action is instituted by any of the
parties to enforce the terms of this Agreement or arising out of the execution
of this Agreement, the prevailing party will be entitled to receive from the
other party or parties reasonable attorney's fees to be determined by the court
in which the action is brought.
16. Brokers. Each party represents and warrants to the other that no real
estate broker or agent other than Staubach Retail Services, Inc. and Commercial
Realty Company (the "Brokers") have been instrumental in the procurement of this
Agreement. Seller shall pay to Brokers a brokerage fee of Two Hundred Twenty
Thousand and No/100 Dollars ($220,000.00) at Closing which commission shall be
divided evenly between the Brokers. Seller shall not be liable for any
commission if this Agreement fails to close for any reason. Additionally,
Purchaser and Seller represent and warrant that no other real estate commission
or compensation shall be payable by such party with respect to the procurement
and execution of this Agreement or the sale of the Property contemplated hereby.
Each party shall indemnify and save the other party wholly harmless against any
loss, cost, or other expense, including reasonable attorney's fees, that may be
incurred by such other party by reason of any breach of the foregoing
warranties.
17. Default. In the event the purchase and sale is not consummated because
of the inability, failure or refusal, for whatever reason whatsoever, by Seller
to convey the Property in accordance with the terms and conditions provided
herein, or because of other fault of Seller or reason provided herein for
Purchaser's not consummating this transaction, all Earnest Money paid in
connection with this Agreement shall be returned by Title Company to Purchaser,
without prejudice to any other legal or equitable right or remedy of Purchaser
against Seller including, but not limited to, specific performance. In the event
the purchase and sale is not consummated because of the default of Purchaser,
then Title Company shall deliver the Earnest Money paid hereunder to Seller as
full, complete and final liquidated damages. Seller and Purchaser hereby agree
that it would be impossible to ascertain the damages accruing to Seller as a
result of a default by Purchaser under this Agreement. The payment of said
liquidated damages, therefore, shall constitute Seller's sole remedy against
Purchaser and shall be in lieu of the exercise by Seller of any other legal or
equitable right or remedy which Seller may have against Purchaser as a result of
Purchaser's default.
18. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Arkansas.
19. Waiver. Failure of either Purchaser or Seller to exercise any right
given hereunder or to insist upon strict compliance with regard to any term,
condition or covenant specified herein, shall
7
<PAGE>
not constitute a waiver of Purchaser's or Seller's right to exercise such right
or to demand strict compliance with any term, condition or covenant under this
Agreement.
20. Counterparts. This Agreement may be executed in several counterparts,
each of which may be deemed an original, and all of such counterparts together
shall constitute one and the same Agreement.
21. Captions. All captions, headings, paragraph and subparagraph numbers
and letters are solely for reference purposes and shall not be deemed to be
supplementing, limiting,or otherwise varying the text of this Agreement.
22. Severability. The invalidity or enforceability of a particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
23. Entire Agreement. Time is of the essence of this Agreement. This
Agreement constitutes the sole and entire agreement of the parties and is
binding upon Seller and Purchaser, their heirs, successors, legal
representatives and assigns.
24. Date of Agreement. In the event this Agreement is not signed
simultaneously by both parties, it shall be considered to be an offer made by
the party first executing it to the other party. In such event, said offer shall
expire at midnight on the seventh (7th) day following execution by the offering
party, unless by that time one copy executed by the party to whom the offer has
been made, shall have been placed in the mail or personally delivered to the
party making the offer. The "Effective Date" of this Agreement shall be the date
upon which it is accepted by the party to whom the offer is made.
(SIGNATURES ON FOlLOWING PAGE)
8
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal as of the day and year written below.
SELLER:
------
NATIONAL HOME CENTERS, INC.
By: /s/ DWAIN A. NEWMAN
------------------------------------
Its: Chairman & Chief Executive Officer
-----------------------------------
Attest: /s/ BRENT A. HANBY
--------------------------------
Its: Executive Vice President & C.F.O.
-----------------------------------
(CORPORATE SEAL)
Date of Execution by Seller: 1-29-98
---------
PURCHASER
HOME DEPOT U.S.A., INC.
By: /s/ KATHRYN E. LEE
-------------------------------
Its: Senior Corporate Counsel
------------------------------
Date of Execution by Purchaser: 2-2-98
--------
9
<PAGE>
EXHIBIT "A"
The Property
DESCRIPTION
PART OF THE NW1/4 OF THE NE1/4, SECTION 28, TOWNSHIP 17 NORTH, RANGE 30 WEST,
AND PART OF LOT 7, SPRING PARK SUBDIVISION PHASE 1, ALL LYING IN WASHINGTON
COUNTY, ARKANSAS, MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT
THE SOUTHWEST CORNER OF SAID NW1/4 OF THE NE 1/4; THENCE NORTH 89 DEGREES
21 MINUTES 04 SECONDS EAST 4.85 FEET TO THE POINT OF BEGINNING; THENCE NORTH
00 DEGREES 38 MINUTES 56 SECONDS WEST 160.00 FEET; THENCE NORTH 89 DEGREES
21 MINUTES 04 SECONDS EAST 80.00 FEET; THENCE NORTH 00 DEGREES 38 MINUTES
56 SECONDS WEST 661.63 FEET; THENCE EAST 259.53 FEET; THENCE NORTH 00 DEGREES
47 MINUTES 53 SECONDS WEST 300.35 FEET; THENCE ALONG A CURVE TO THE LEFT
HAVING A RADIUS OF 25.00 FEET, AN ARC DISTANCE OF 38.92 FEET AND A CHORD
WHICH BEARS NORTH 45 DEGREES 23 MINUTES 56 SECONDS WEST FOR A DISTANCE OF
35.11 FEET TO THE SOUTH RIGHT OF WAY LINE OF JOYCE BLVD.; THENCE ALONG SAID
RIGHT OF WAY LINE EAST 84.66 FEET; THENCE SOUTH 00 DEGREES 47 MINUTES 53
SECONDS EAST 325.00 FEET; THENCE SOUTH 87 DEGREES 40 MINUTES 56 SECONDS
EAST 341.81 FEET; THENCE SOUTH 01 DECREES 46 MINUTES 12 SECONDS WEST 200.08
FEET; THENCE SOUTH 00 DECREES 38 MINUTES 56 SECONDS EAST 171.00 FEET; THENCE
NORTH 89 DEGREES 21 MINUTES 04 SECONDS EAST 341.13 FEET; THENCE ALONG A
CURVE TO THE LEFT HAVING A RADIUS OF 25.00 FEET, AN ARC DISTANCE OF 35.44
FEET AND A CHORD WHICH BEARS NORTH 48 DEGREES 44 MINUTES 27 SECONDS EAST
FOR A DISTANCE OF 32.55 FEET TO A POINT ON THE WESTERLY RIGHT OF WAY LINE
OF U.S. HIGHWAY NO. 71; THENCE ALONG SAID RIGHT OF WAY LINE SOUTH 08 DEGREES
07 MINUTES 51 SECONDS WEST 101.19 FEET; THENCE ALONG A CURVE TO THE LEFT
HAVING A RADIUS OF 25.00 FEET, AN ARC DISTANCE OF 43.10 FEET AND A CHORD
WHICH BEARS NORTH 41 DECREES 15 MINUTES 33 SECONDS WEST FOR A DISTANCE OF
37.96 FEET; THENCE SOUTH 89 DEGREES 21 MINUTES 04 SECONDS WEST 389.82 FEET;
THENCE SOUTH 00 DEGREES 38 MINUTES 56 SECONDS EAST 265.89 FEET; THENCE NORTH
89 DEGREES 21 MINUTES 04 SECONDS EAST 24.30 FEET; THENCE SOUTH 73 DEGREES
59 MINUTES 04 SECONDS EAST 94.54 FEET; THENCE NORTH 89 DEGREES 21 MINUTES
04 SECONDS EAST 237.41 FEET; THENCE ALONG A CURVE TO THE LEFT HAVING A
RADIUS OF 25.00 FEET, AN ARC DISTANCE OF 35.44 FEET AND A CHORD WHICH BEARS
NORTH 48 DEGREES 44 MINUTES 27 SECONDS EAST FOR A DISTANCE OF 32.55 FEET
TO A POINT ON THE WESTERLY RIGHT OF WAY LINE OF U.S. HIGHWAY NO. 71; THENCE
ALONG SAID RIGHT OF WAY LINE SOUTH 08 DEGREES 07 MINUTES 51 SECONDS WEST
108.88 FEET; THENCE SOUTH 89 DEGREES 21 MINUTES 04 SECONDS WEST 1028.66
FEET TO THE POINT OF BEGINNING. SUCH TRACT OF LAND IS ALSO DESCRIBED AS LOT
3 TO THE SPRING PARK SUBDIVISION PHASE II, CITY OF FAYETTEVILLE, COUNTY OF
WASHINGTON, STATE OF ARKANSAS.
ALSO:
PART OF THE NORTHWEST QUARTER (NW1/4) OF THE NORTHEAST QUARTER (NE1/4)
AND PART OF THE NORTHEAST QUARTER (NE1/4) OF THE NORTHWEST QUARTER (NW1/4),
SECTION 26, T--17--N, R--30--W, WASHINGTON COUNTY, ARKANSAS, BEING MORE
PARTICULARLY DESCRIBED AS FOLLOWS, TO--WIT: COMMENCING AT THE SOUTHWEST
CORNER OF SAID NORTHEAST QUARTER (NE1/4) OF THE NORTHWEST QUARTER (NW1/4);
THENCE NORTH 89 DEGREES 20 SECONDS 57 SECONDS EAST, 1208.13 FEET TO THE
POINT OF BEGINNING; THENCE NORTH 00 DEGREES 38 MINUTES 56 SECONDS WEST, 160.00
FEET; THENCE NORTH 89 DEGREES 21 MINUTES 04 SECONDS EAST, 80.00 FEET; THENCE
NORTH 00 DECREES 38 MINUTES 56 SECONDS WEST, 662.91 FEET; THENCE EAST 112.51
FEET; THENCE SOUTH 00, DEGREES 38 MINUTES 56 SECONDS EAST, 661.63 FEET; THENCE
SOUTH 89 DEGREES 21 MINUTES 04 SECONDS WEST, 80.00 FEET; THENCE SOUTH 00
DEGREES 38 MINUTES 56 SECONDS EAST, 160.00 FEET; THENCE SOUTH 89 DEGREES 21
MINUTES 04 SECONDS WEST, 4.85 FEET; THENCE SOUTH 89 DEGREES 20 MINUTES 57
SECONDS WEST, 107.65 FEET TO THE POINT OF BEGINNING, CONTAINING 2.124 ACRES,
MORE OR LESS. THE ABOVE DESCRIBED LANDS BEING THE SAME AS LOT 3A OF THE
PROPOSED FINAL PLAT OF SPRING PARK SUBDIVISION PHASE II, A PROPOSED SUBDIVISION
TO THE CITY OF FAYETTEVILLE, ARKANSAS.
<PAGE>
[AK&L LETTERHEAD APPEARS HERE]
July 7, 1998
VIA FACSIMILE NO.: 501/756-9122
- -------------------------------
National Home Centers, Inc.
Highway 265 North
Post Office Box 72765
Springdale, Arkansas 72765
Attention: Blake Hanby
Re: Real Property Purchase Agreement (the "Contract") by and between
National Home Centers, Inc. (the "Seller") and Home Depot U.S.A., Inc.
(the "Purchaser") for property located in Fayetteville, Arkansas
AK&L File No. 1630.1080
Dear Blake:
In accordance with our conversation today, this letter shall serve to amend the
above-referenced Contract to provide that Purchaser may close the purchase of
the Property (as that term is defined in the Contact) on or before July 15,
1998. Purchaser agrees that from and after July 12, 1998 the Purchase Price
shall be increased on a per diem basis by the sum of $1,424.66 per day. This sum
represents an eight percent (8%) annual return on the total purchase price of
$6,500,000.00 for the period between July 12,1998 and the actual closing date.
Purchaser agrees to provide Seller immediate notice as soon as a closing date
is fixed. If you are in agreement with the foregoing, please sign and date this
letter in the space provided below and this letter agreement shall be deemed an
amendment to the Contract.
Sincerely,
/s/ BENNO G. ROTHSCHILD, JR.
Benno G. Rothschild, Jr.
ATTORNEY FOR HOME DEPOT U.S.A., INC.
BGR:mmf
cc: Mr. David Cassman
Ms. Debbie Brandon
Agreed to and accepted this 8th day of July, 1998
NATIONAL HOME CENTERS, INC.
By: /s/ DWAIN A. NEWMAN
--------------------------
Its: Chairman & C.E.O.
-------------------------
<PAGE>
05/15/98/Rogers,Arkansas/Agreement to Sell and Purchase Real Estate
EXHIBIT 10.3
AGREEMENT TO SELL AND PURCHASE REAL ESTATE
------------------------------------------
THIS AGREEMENT TO SELL AND PURCHASE REAL ESTATE, hereinafter referred to as
"the Agreement" is made and entered into this the 18 day of May, 1998, by and
between NATIONAL HOME CENTERS, INC., an Arkansas corporation having its
principal office and place of business in Washington County, Arkansas,
hereinafter referred to as "Seller", and LOWE'S HOME CENTERS, INC., a
corporation having its principal office and place of business in Wilkes County,
North Carolina, and hereinafter referred to as "Buyer".
W I T N E S S E T H
WHEREAS, Seller has offered to sell and Buyer has agreed to purchase the
Premises described hereinafter subject to the terms of this agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions contained herein, the sufficiency of which consideration is
acknowledged by all parties hereto, IT IS HEREBY AGREED AS FOLLOWS:
1. DESCRIPTION. The "Property" which is to be purchased by Buyer includes
the Real Property, the Tangible Personal Property and the Intangible Property
located in Rogers, Benton County, Arkansas and are particularly described as
follows:
(a) A tract of land containing approximately 14.77 acres in Benton
County, Arkansas, together with improvements thereon consisting of an
approximately 165,000 square foot building, plus an approximately 40,000 square
foot enclosed and attached greenhouse and lawn and garden area located at the
Northeast Corner of Highway 71B and U.S. Highway 71, Rogers, Benton County,
Arkansas, more particularly described upon the attached Exhibit A which is
incorporated herein by reference, and together with any other improvements and
personal property currently located thereon and all and singular the rights,
privileges, advantages, reversionary interests and appurtenances belonging or in
anywise appertaining to the Premises, as well as all easements in or upon the
Premises and all roads, alleys, waters, streets, or rights-of-way bounding the
Premises (to the centerline thereof), and rights of ingress and egress thereto,
as well as any and all utility capacity and usage rights and easements, if any
(and to the extent transferable), including, without limitation, water,
drainage, stormwater detention and sanitary sewer, and other utility capacities
and facilities and rights relating thereto, affecting or applicable to the
Premises currently owned by Seller, as well as Seller's right, title and
interest in and to all zoning and utility capacity applications, if any (and to
the extent transferable), made to any governmental authority and all other
inchoate rights affecting or applicable to the Premises (including, without
limitation, any fees relating thereto and the benefits resulting therefrom) and
one hundred percent (100%) of the use and control of the surface of the Premises
free and clear of the rights of the owners of any mineral interests or the
lessees of any surface lease relating to the Premises (hereinafter referred to
as the "Real Property" or the "Premises"). This description is subject to a
boundary survey to be obtained by Buyer pursuant to the terms hereof.
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05/15/98/Rogers,Arkansas/Agreement to Sell and Purchase Real Estate
(b) All of Sellers right, title and interest in all appliances,
fixtures, equipment, machinery, supplies, and furniture at the Premises,
including but not limited to that property described and listed on Exhibit B
attached hereto, and all other personal property located on or about the Land
and the Improvements or used exclusively in the operation and maintenance
thereof (the "Tangible Personal Property"). The Tangible Personal Property shall
not include however, the property and assets described and listed on Exhibit C
attached hereto (the "Excluded Personal Property").
(c) All of Seller's right, title and interest in all intangible
property (the ("Intangible Property"), if any, pertaining to the Land,
Improvements, or the Tangible Personal Property or the use thereof, including,
without limitation, all Contracts and Warranties, as such terms are defined in
Section 4.2 hereof, all transferable telephone exchange numbers, construction
plans and specifications, designs, engineering plans and studies, surveys,
transferable permits and licenses related to the use and operation of the
Premises, floor plans and landscape plans, to be inventoried and listed in
written form to be attached to the assignment document to be delivered by Seller
to Buyer at Closing.
2. SURVEY AND TITLE INSURANCE.
(a) Within thirty (30) days of the date hereof Buyer shall obtain,
with a copy to be delivered to Seller, at Buyer's cost, an on-the-ground,
staked, boundary survey map of the Premises drawn in accordance with Buyer's
Survey Requirements which are attached hereto and labeled Exhibit D and prepared
by a surveyor or surveyors approved by Buyer (the "Survey"). The metes and
bounds description of the Premises resulting from the Survey, if and as accepted
by Buyer, shall upon such acceptance supersede and replace the description of
the Premises set forth in Paragraph (1) hereof for all purposes hereunder and
shall be the description of the Premises used in the General Warranty Deed, the
Title Commitment (as hereinafter defined) and Owner Policy of Title Insurance to
be furnished hereunder. Additionally, said metes and bounds description should
appear on the survey plat and be incorporated therein. The area defined by the
Survey of the Premises shall contain a minimum of 14.77 acres as delineated on
the attached Exhibit A.
(b) Title Insurance: Buyer shall be under no obligation to purchase
the Premises and other property hereunder from Seller unless Buyer can obtain
from the Title Company as hereinafter designated in Paragraph 4 hereof, at
Buyer's cost, a commitment and policy for satisfactory title insurance for the
subject Premises and the results of a search (including copies of the
instruments referenced in such search and affecting the Premises and personalty)
of the U.C.C. records of the Secretary of State of Arkansas and the U.C.C.
records of the county in which the Premises is situated (the "Title
Commitment"). Buyer shall obtain and review the Commitment from the Title
Company within thirty (30) days following the execution hereof. The Commitment
shall identify the Premises and easements appurtenant thereto by the legal
description(s) set forth on the Survey (as defined in Paragraph 2[a] above). The
Title Commitment shall be accompanied by legible copies of all exceptions to
title referred to therein. Seller hereby agrees to provide to the Title Company
any abstracts of title covering the Premises and/or any other form of title
evidence it may have obtained, including any prior attorney's title opinion or
any prior
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05/15/98/Rogers,Arkansas/Agreement to Sell and Purchase Real Estate
owner's title insurance policy. Buyer's decision as to whether "satisfactory"
title insurance can be obtained shall be final and shall not be subject to
question by Seller.
Buyer shall have a period of fifteen (15) days from receipt of the
Title Commitment, Survey and the documents referred to therein, whichever is
later, in which to review such items and to deliver to Seller in writing such
objections as Buyer may have to the Title Commitment, Survey, or the other
documents referred to therein. Any matters in the Title Commitment, or the
documents referred to therein to which Buyer does not object within the fifteen
(15) day period shall be deemed approved by Buyer and shall constitute
"Permitted Exceptions" (herein so called). In the event Buyer does timely object
to the Title Commitment, or the documents referred to therein as hereinbefore
provided, then and in such event, Seller shall have the right, but not the
obligation, for a period of fifteen (15) days (the "Cure Period") following the
receipt by Seller of Buyer's objections to attempt to cure such objections. In
the event Seller fails or refuses to cure such objections within such Cure
Period, then, and in such event, Buyer may either (i) waive such objections and
proceed to close; or (ii) terminate this Agreement, whereupon, in the latter
event, the Deposit shall be refunded to Buyer by the Title Company and the
parties hereto shall have no further rights or obligations hereunder except as
may specifically survive under the express terms hereof. Buyer's election to
cure or waive such objections or terminate this Agreement must be exercised
within ten (10) business days following the expiration of the Cure Period, and
Buyer's failure to exercise such election within the said ten (10) business day
period shall be deemed a waiver of such objections by Buyer, in which event all
such objections shall additionally be deemed "Permitted Exceptions".
In the event the Title Commitment is due to expire prior to, on, or
within then (10) days prior to the expiration date of such Title Commitment,
Buyer may obtain an updated Title Commitment which shall be identical to the
previously issued Title Commitment except with respect to its effective date. In
the event any additional matters appear in the updated Title Commitment which
were not contained in the original Title Commitment such matters shall
automatically be deemed to be unacceptable to Buyer unless Buyer expressly
accepts such additional matters.
The Title Commitment must not contain any exceptions for liens,
encumbrances, claims, easements or other matters that would adversely affect
Buyer's intended use and operation of the subject Premises.
3. SELLER'S WARRANTIES OF TITLE. Seller warrants and covenants that it is
seized of the Premises in fee and has or will have sufficient title to convey
the same in fee simple, subject only to easements and other matters of record
acceptable to Buyer and agreements to be negotiated and agreed upon between the
parties pursuant to Paragraph 6 of this Agreement, and any other matters
approved in writing by Buyer.
Seller agrees that it will convey the Premises to Buyer by general
warranty deed containing covenants of title satisfactory to Buyer, which
covenants of title shall state that Seller is seized of the Premises in fee, and
that Seller has bargained, sold and conveyed unto Buyer and its successors
and/or assigns in title the Premises in fee simple, that the Premises are free
from encumbrances (other
3
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05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
than matters approved by Buyer as Permitted Exceptions), and that Seller will
warrant and defend title against the claims of all persons or entities.
Seller further warrants and covenants that it is the owner and title holder
of the Tangible Personal Property and Intangible Property and shall convey the
same at Closing free of all liens or encumbrances.
4. TIME FOR PERFORMANCE. Seller shall convey the Premises to Buyer, for
the purchase price set forth in paragraph 5 below, at the earlier of:
(a) Sixty (60) days from the date of execution of this Agreement by
both parties; or
(b) Within five (5) business days after notification by Seller that
all of the inventory within the Premises has been sold and/or removed from the
Premises by Seller (the "Closing").
Seller shall have the right to extend the date of Closing for up to
thirty (30) additional days to effect the sale and/or removal of the inventory,
as necessary. Seller may exercise such extention right by giving Buyer written
notice thereof at least five (5) days prior to Closing.
As an inducement by Buyer to Seller to enter into this Agreement,
Buyer agrees to deposit in escrow with the Title Company, on or before the
expiration of the Inspection Period ( as hereinafter defined), the sum of
$1,500,000.00, which shall be an addition to and part of the Deposit (as defined
herein), but which shall apply to the purchase price set forth in Paragraph 5
below. This inducement is in exchange for Seller's agreement to immediately
begin liquidating its inventory at the Premises described in Paragraph 1 and to
use its best efforts in assisting Buyer in the transition period until Closing
in the process of disassembling Seller's fixtures presently in the facility, to
reasonably consolidate Seller's inventory to portions of the facility to
reasonably accommodate Buyer's fixturing and upfit of the facility for its own
use, and to make equipment, as it becomes available and no longer needed by
Seller during the liquidation process, available to Buyer for its use and
purchase.
Seller and Buyer shall each use their best efforts to effectuate a
mutually orderly transition.
5. PURCHASE PRICE.
(a) The total purchase price for the Premises and all other property
described in Paragraph 1 hereof shall be for the total consideration of TEN
MILLION EIGHT HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($10,850,000.00).
Within three (3) business days following the execution of this
Agreement by both parties, Buyer shall deposit in escrow with the Commonwealth
Land Title Insurance Company, Attention: Karen Moreau, 14643 Dallas Parkway,
Suite 100/LB-61, Dallas, Texas 75240 (the "Title Company"), as earnest money,
cash equal to or an irrevocable Letter of Credit in the amount of One Hundred
Thousand and No/100 Dollars ($100,000.00), said Letter of Credit to be in form
reasonably satisfactory to Seller that provides that if Buyer defaults under
this Agreement the Title Company may draw upon the Letter of Credit and deliver
the proceeds thereof or to Seller (the "Deposit").
The Deposit shall be returned (undrawn upon if in the form of a Letter
of Credit) to Buyer only in event Buyer rightfully elects to terminate this
Agreement within the Inspection Period or upon default of Seller as provided
under the terms and conditions defined herein or upon Buyer tendering to
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05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
Seller the purchase price and purchasing the Premises at Closing.
Notwithstanding anything contained in this Agreement to the contrary, upon
expiration of the Inspection Period a deposit of the additional $1,500,000.00 as
herein provided. All escrow Deposit funds shall be deemed to be non-refundable
to Buyer, except only in the event of default by Seller. All escrow Deposit cash
funds shall be placed in an interest bearing account by the Title Company and
all interest earned thereon shall be paid to Buyer.
Buyer agrees to additionally deposit with the Title Company for the
benefit of Seller the sum of ONE HUNDRED DOLLARS ($100.00) within three (3)
banking days after the Effective Date of this Agreement in consideration for
Seller's execution of this Agreement (herein called the "Additional Deposit").
The adequacy of the Additional Deposit is expressly acknowledged by Seller by
Seller's execution of this Agreement. If the transaction contemplated by this
Agreement closes in accordance with the provisions of this Agreement, the
Additional Deposit shall either be credited against the purchase price or
returned to Buyer, at Buyer's election. Notwithstanding any provision of this
Agreement permitting the Buyer to terminate this Agreement and to thereupon
receive a return of the Deposit, if the transaction contemplated by this
Agreement does not close in accordance with the provisions of this Agreement and
such event is not the result of Seller's default or breach of this Agreement,
the Additional Deposit shall be deemed nonrefundable to Buyer and immediately
upon the occurrence of such event the Additional Deposit shall be disbursed by
the Title Company to the Seller.
6. BUYER'S REQUIREMENTS AND INSPECTION. Buyer shall be under no
obligation to consummate this Agreement unless and until Buyer has made
satisfactory inquiry into the requirements and matters contained in this
Paragraph 6. The decision as to whether the following requirements and matters
are met satisfactorily shall be the sole decision of Buyer, in the absolute
discretion of Buyer, with the Buyer's decision being final and binding upon both
parties. Buyer shall have thirty (30) days from the last execution of this
Agreement to notify Seller of its cancellation of this Agreement due to Buyer's
inspection of the Demised Premises and its determination as to the satisfaction
of the following requirements (the "Inspection Period"). If Buyer so elects to
cancel, the Title Company shall be obligated to return to Buyer the Deposit,
with neither party having any other rights or obligations under this Agreement.
Failure of Buyer to notify Seller of its election to terminate this Agreement
pursuant hereto on or before the date which is thirty (30) calendar days from
the last execution of this Agreement shall be deemed to be equivalent to notice
by Buyer that Buyer is satisfied that all said requirements have been satisfied
as of such date and the Deposit shall thereupon become nonrefundable to Buyer
(except as to default by Seller) but shall be applied towards the Purchase
Price.
Once a requirement is satisfied in the determination of Buyer then its
status must remain unchanged until Closing, and if the status should change
unsatisfactorily to Buyer, then Buyer shall have the right to terminate this
Agreement.
Requirements to be Accomplished
-------------------------------
(a) Environmental Conditions. Buyer must be satisfied that the
Premises is free of any pollutants, contaminants, chemical or industrial, toxic
or Hazardous Substances as defined in
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05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
Paragraph 18. Seller must be willing to reaffirm and recertify as of the date of
Closing the matters set forth in Paragraph 18. Buyer shall order a Phase I
Environmental Survey, at Buyer's expense. Said Environmental Survey shall be
addressed to both Buyer and Seller, contain the legend on the first page
substantially the same as "COMPLIANCE REPORT: PRIVILEGED DOCUMENT".
(b) Zoning. The zoning classification of the Premises will have to
permit Buyer's intended use of the Premises and be satisfactory to Buyer as to
any zoning instructions.
7. DISCLOSURES BY SELLER.
(a) Documentation. Within ten (10) days of the date of last execution
of this Agreement, to the extent Seller has not already done so, Seller shall
make available to Buyer, for Buyer's review at either Seller's offices or at the
Premises, the Review Documents (as defined below), provided that Buyer provides
Seller with reasonable notice prior to the day Purchaser intends to conduct such
review. As used herein, the term "Review Documents" shall mean and refer to the
following:
(i) Contracts. Copies of all contracts pertaining to the
Premises, in Seller's possession as of the date of this Agreement (the
"Contracts"), if any, in the possession of Seller, including, but not limited
to, management contracts, service contracts, concession agreements, subleases,
equipment leases, maintenance contracts, security agreements and financing
statements regarding any personal property being conveyed to Buyer, and
regarding any transferable utility contracts.
(ii) Warranties. Copies of all warranties, guarantees and bonds
regarding the Premises and the Tangible Personal Property (the "Warranties"), if
any, in the possession of Seller as of the date of this Agreement.
(iii) Plans and Specifications. Copies of the construction plans
and drawings, architectural renderings, designs, as-built plans and
specifications for the Premises, if any, in the possession of Seller as of the
date of this Agreement.
(iv) Certificates of Occupancy, Permits and Licenses. Copies of
all permits, licenses or notices issued by any governmental authorities or
utility companies in connection with the occupancy and use of the improvements
(including certificates of occupancy or zoning notices), if any, in the
possession of Seller.
(v) Title Information. Copies of all title and survey
information pertaining to the Premises, and personal property if any, in the
possession of Seller, including title commitments, title policies, surveys, etc.
(vi) Environmental Site Assessments. Copies of all written
environmental site assessments, reports, letters and audits, if any, pertaining
to the Premises and prepared by independent consultants for or on behalf of
Seller.
(vii) Personal Property Inventory and Records. A verification of
the written inventory, and all maintenance records and other records relating
thereto, of all the Tangible Personal Property intending to be conveyed to Buyer
hereunder.
(viii) Insurance. Copies of all commercial property insurance
insuring the Premises and Tangible Personal Property for the past year.
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05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
(ix) Tax Statements. Copies of all tax certificates and
statements regarding the real and personal property of the Premises for the
preceding two (2) years.
(x) Stormwater Detention Documents. Copies of all documents
relating to Seller's rights and interests in and to the use of the 1.97 acres
encompassing the stormwater detention pond and related facilities together with
the "Liability Shield" area abutting the other detention pond(s) on adjoining
property. Copies of all documents reflecting Seller's interests in Scottsdale
Center, L.L.C.
(b) HVAC and Equipment. Seller shall have all or allow Buyer to
have all heating, ventilation, air conditioning equipment and systems inspected
to insure their proper and effective operational capability within thirty (30)
days prior to Closing. In the event Seller has such inspections performed Seller
shall deliver to Buyer copies of all inspection reports related thereto.
(c) Plant Closing Act Compliance. Seller shall timely comply with
all notice requirements and all other requirements of the WARN Act and all
similar federal, state or local plant closing acts, laws or statutes.
8. POSSESSION. Buyer shall be given sole and exclusive possession of the
Premises at such time as a General Warranty Deed reasonably satisfactory to
Buyer is delivered by Seller to Buyer conveying the Premises in fee simple to
Buyer together with the other Closing documents listed in Paragraph 10 hereof
and Buyer pays the Purchase Price as described in Paragraph Five (5) of this
Agreement. Possession of the Premises shall be tendered by Seller to Buyer at
Closing in a good broom clean condition with all inventory having been removed
by Seller.
9. NON-COMPETITION. Seller acknowledges, covenants, and agrees that for a
period of five (5) years commencing on the date of Closing, neither Seller nor
any person, firm or corporation, directly or indirectly controlling or
controlled by, or under common control with, Seller (and also, in the event
Seller is a corporation, if any officer or director thereof or shareholder
owning more than ten (10) percent of the outstanding stock thereof, or parent,
subsidiary or related or affiliated corporation) either directly or indirectly,
commences operation or operates any retail home improvement store or otherwise
sells or offers for sale the selection of merchandise and services to be sold
by Buyer at the Premises or in any manner competes with Buyer's home improvement
business to be conducted by Buyer at the Premises, which store or operation
shall be placed or operated within twenty (20) miles of the Premises.
This provision shall not apply to any existing store presently being
operated by Seller as of the date hereof nor to any store operated by Seller
selling or offering for sale building supply merchandise to commercial or
contractor customers.
Buyer and Seller hereby acknowledge that monetary damages may not be a
sufficient remedy for any breach of the foregoing agreement that such a breach
could cause irreparable injury to Buyer and that Buyer shall therefore be
entitled, without waiving any other rights or remedies, to obtain injunctive and
equitable relief against actions of Seller in violation of the foregoing
covenants. This provision shall expressly survive the Closing, notwithstanding
anything to the contrary herein.
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Notwithstanding the foregoing, Seller shall not be prohibited from
acquiring or starting a building material supply company or operation which
derives at least seventy-five percent (75%) of its revenue from commercial or
contractor customers.
10. CLOSING. Seller shall prepare at its cost, the General Warranty Deed
conveying the Premises to Buyer in fee simple. In addition, Seller shall have
the responsibility of paying all state or county transfer taxes and documentary
stamps, if any, occasioned by the conveyance of the Premises and other personal
property as well as any notary fees incurred. All unpaid ad valorem taxes for
the current year shall be prorated between Seller and Buyer as of the date of
Closing. Seller shall pay all rollback taxes, if any, recoupment fees or taxes
occasioned by a change in use of the Premises. Buyer shall pay all title
insurance costs and premiums and the cost of the survey required hereunder.
Seller and Buyer shall each be responsible for any and all Realtor commissions
incurred on their own behalf. Seller shall pay a commission to The Meara Company
of Dallas, Texas. Seller agrees to promptly forward to Buyer any Premises tax
statements on the Premises received by Seller after Closing and if Seller fails
to do so, Seller shall be liable for any penalties Buyer has to pay because of
Seller's failure.
At Closing Seller shall deliver or tender in escrow to the Title Company
tax certificates from all applicable taxing authorities having jurisdiction over
the Premises evidencing payment of all ad valorem taxes applicable to the
Premises through the calendar year immediately preceding the calendar year
during which the Closing occurs.
All rents, concession or license fees, derived from the Premises (if any),
utilities expenses with respect to the Premises (if utilities service is
transferred to Buyer) for the month in which the Closing occurs, and real estate
and personal property taxes and other assessments with respect to the Premises
for the year in which the Closing occurs, shall be prorated as of the date of
Closing.
Seller shall have final readings of utility meters made as of the date of
Closing and to cause the public utility companies to forward final billings to
Seller, which Seller shall promptly pay.
Seller shall execute and deliver to Buyer the following at Closing:
(a) Bill of Sale. A Bill of Sale and Assignment (the "Bill of Sale") as to
the Tangible Personal Property and Intangible Property, free and clear of all
liens and encumbrances, executed by Seller assigning to Purchaser the Tangible
Personal Property and the Intangible Property, in the form attached to this
Agreement as Exhibit E.
(b) Contracts. The originals of all of the contracts relating to the
Premises (including construction, improvement, repair or design thereof) listed
on Exhibit E attached hereto, if any, in the possession of Seller and an
assignment of such contracts as part of the Bill of Sale.
(c) Warranties and Guarantees. The originals of all warranties and
guarantees regarding the Premises (including construction, improvement, repair
or design thereof) and the Tangible Personal Property, if any, in the possession
of Seller, and an Assignment of Warranties and Guarantees in the form attached
to this Agreement as Exhibit F.
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(d) Liens. Evidence satisfactory to Buyer that there are no financing
statements on file in the U.C.C. Records of the Secretary of State of Arkansas
and in Benton County, Arkansas (the county in which the Premises is located) as
to any personal property or fixtures being conveyed to Buyer.
(e) Deed. Seller shall convey marketable title to the Premises in fee
simple by means of a General Warranty Deed, free and clear of any and all liens,
mortgages, deeds of trust, security interests, covenants, conditions,
restrictions, easements, right-of-way, licenses, encroachments, judgments or
encumbrances of any kind except:
(i) the lien of real estate taxes not yet due and payable; and
(ii) Permitted Exceptions previously approved by Buyer.
Any affidavit or lien waiver reasonably requested by Buyer's title insurer,
a non-foreign affidavit, and a certification restating Seller's representations
and warranties in this Agreement as of the date of Closing.
(f) Security. All keys, combinations, passwords, access cards or other
security access devices related to the Premises or other property to be conveyed
hereunder.
(g) Title Documents. All original documents of title for titled vehicles,
if any, conveyed as part of the Tangible Personal Property, free and clear of
all liens and encumbrances, duly endorsed and notarized by Seller.
(h) Stormwater Detention and Drainage Facilities Documents. Document(s)
duly executed and acknowledged by Seller and all other parties required to do
so, which are necessary and effective to convey, grant and transfer to Buyer
permanent easement and other related rights to use the stormwater detention pond
and related drainage facilities on the adjoining 1.97 acres of land, which land
was previously conveyed to Scottsdale Center, L.L.C. by Seller.
Seller and Buyer agree that Buyer may extend any Closing date set for up to
an additional ten (10) days if necessary to complete all documentation and title
examination necessary for Closing. This ten (10) day extension may extend beyond
the time set in Paragraph Four (4).
In the event of any discrepancies in the inventory of Tangible Personal
Property to be conveyed to Buyer hereunder, equitable adjustments to the
Purchase Price shall be made by Buyer and Seller at Closing.
Upon closing, Seller shall notify all its vendors and suppliers that had
provided goods, merchandise and services to the Premises that Seller no longer
does business at the Premises and of Seller's new address for deliveries. Seller
shall also provide to Buyer the names, addresses and telephone numbers of its
representatives to whom Buyer may refer issues and forward mail or deliveries
relating to the Seller or business transacted by Seller at or from the Premises.
11. ASSIGNMENT BY BUYER. This Agreement may not be assigned by Buyer
except that Buyer may freely assign this Agreement to a corporate, parent,
subsidiary or affiliate of Buyer.
12. NOTICES. All notices sent pursuant to this agreement shall be writing
and shall be sent by Certified Mail - Return Receipt Requested:
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05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
To Seller: National Home Centers, Inc.
Highway 265 North
Springdale, AR 72765
Attention: Dwain A. Newman
with a copy to: Jim Meara
The Meara Company
8150 N. Central Expressway
Suite 795
Dallas, Texas 75206
To Buyer: Lowe's Home Centers, Inc.
P.O. Box 1111
(1203 School Street, Wilkesboro, NC 28697)
North Wilkesboro, North Carolina 28656
Attention: Property Management Department (REO)
with a copy to: Lowe's Home Centers, Inc.
P.O. Box 1111
(1203 School Street, Wilkesboro, NC 28697)
North Wilkesboro North Carolina 28636
Attention: Legal Department (REO)
Notice shall be deemed given when deposited in the United States Postal Service
by Certified Mail - Return Receipt Requested, postage prepaid and properly
addressed as set forth above.
Rejection or other refusal to accept or inability to deliver because of
changed address of which no notice was given shall be deemed to be receipt of
the notice, request or other communication. By giving at least five (5) days
prior written notice thereof, any party may from time to time at any time change
its mailing address hereunder.
13. EMINENT DOMAIN. Prior to the Closing of this transaction, Seller will
be solely responsible for any and all damages sustained by the Premises as a
result of eminent domain proceedings. In the event that damage is sustained by
reason of eminent domain, Seller shall notify Buyer of the damage and Buyer will
then have the option of canceling or terminating this Agreement with the return
of the Deposit to Buyer. If Buyer elects not to terminate this Agreement, then
Buyer may proceed with its purchase of the Premises, with Seller being obligated
to pay to Buyer all consideration it has received or assign to Buyer any right
to consideration by virtue of eminent domain proceedings, provided that the only
consideration payable to Buyer shall be that consideration received by or due
Seller for the taking of the Premises which is the subject of this Agreement.
14. DAMAGES. One of the purposes of this Agreement is to bind Seller to
sell the Premises and other property described in Paragraph One (1). Buyer and
Seller agree that they are legally bound to comply with all terms and conditions
of this Agreement. If Buyer has not exercised its right to terminate this
Agreement within the time defined in Paragraph Six (6) or as elsewhere provided
in this Agreement, then, in the event Buyer fails to purchase the Premises and
other property under this Agreement, Seller shall be entitled to the Deposit as
liquidated and stipulated damages and Buyer shall have no further liability to
Seller for damages or performance under this Agreement.
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If the sale and purchase of the Premises and other property
contemplated by this Agreement is not consummated on account of Seller's default
hereunder, the Deposit shall be delivered back to Buyer (undrawn if in the form
of a Letter of Credit) on notice by Buyer to the Title Company holding such
Deposit and the Agreement shall be terminated and neither party shall have any
further obligation one to the other or Buyer may elect to enforce this Agreement
by specific performance.
15. COVENANTS TO SURVIVE CLOSING. Wherever in this Agreement Seller or
Buyer shall have agreed or promised to perform certain acts or grant certain
easements or other rights where the context of the agreement would require such
performance or grants to occur after the Closing of the purchase of the Premises
and other property, then those agreements and covenants expressed herein shall
survive Closing and continue to bind Seller and Buyer.
16. EASEMENTS AND RIGHT-OF-WAYS. Seller covenants and agrees that during
the term of this Agreement, that it shall not grant or enter into any liens,
easements, right-of-ways, contracts for work, or other Agreements affecting the
Premises, or the title thereto, which would adversely affect Buyer's intended
use and renovation of the Premises, without first obtaining the prior written
consent of Buyer. Seller shall use reasonable efforts to provide Buyer with
copies of all easements, right of ways and other encumbrances granted by Seller
affectiuig the Premises if and as the same are granted.
17. WARRANTIES, REPRESENTATIONS AND COVENANTS TO SURVIVE CLOSING. The
warranties, representations and covenants made by the parties shall survive the
Closing of this Agreement and the Closing date and shall continue in full force
and effect without termination. Also, wherever in this Agreement Seller or Buyer
shall have agreed or promised to perform certain acts or grant certain easements
or other rights where the context of the Agreement would require such
performance or grants to occur after the Closing, then those Agreements and
covenants expressed herein shall survive Closing and continue to bind Seller and
Buyer. In addition, the warranties, representations and covenants made by the
parties shall survive the Closing of the purchase of the Premises and other
property, and shall continue to bind Seller and Buyer, but shall be limited to a
period of one (1) year from the Closing date except for warranties of title for
which no limitation shall apply and except as specifically hereunder.
18. SELLER'S WARRANTIES, REPRESENTATIONS AND COVENANTS. As an inducement
to Buyer to enter into this Agreement and to purchase the Premises, Seller
warrants, represents and covenants to Buyer, to the actual knowledge and belief
of Seller, as follows:
(a) Authority. Seller, as of the Closing date, has the authority
and power to enter into this Agreement and to consummate the transactions
contemplated herein; and upon execution hereof will be legally obligated to
Buyer in accordance with the terms and provisions of this Agreement.
(b) Condemnation. Seller has received no notice of any pending,
threatened or contemplated action by any governmental authority or agency having
the power of eminent domain, which might result in any part of the Premises
being taken by condemnation or conveyed in lieu thereof.
(c) Litigation. There is no action, suit or proceeding pending (or,
to Seller's actual knowledge, suits or actions threatened by or against or
affecting Seller or the Premises and other property to be conveyed hereunder)
which does or will involve or affect the Premises and other property to be
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conveyed hereunder or title thereto. Seller will, promptly upon receiving any
such notice or learning of any such contemplated or threatened action, give
Buyer written notice thereof. There are no attachments, executions, assignments
for the benefit of creditors, or voluntary or involuntary proceedings in
bankruptcy or under any other debtor relief laws contemplated by or pending or
threatened against Seller or the Premises and other property to be conveyed
hereunder.
(d) Assessments and Taxes. No assessments have been made against
any portion of the Premises or other property to be conveyed hereunder which are
unpaid (except ad valorem taxes for the current year), whether or not they have
become liens; and Seller shall notify Buyer of any such assessments which are
brought to Seller's attention after the execution of this Agreement. Seller will
pay or cause to be paid promptly all city, state and county ad valorem taxes and
similar taxes and assessments, all sewer and water charges and all other
governmental charges levied or imposed upon or assessed against the Premises or
other property to be conveyed hereunder and due on or prior to the Closing date
with the exception of customary, permit and impact fees related specifically to
Buyer's intended use.
(e) No Violations. Seller has received no notice (oral or written)
that any municipality or governmental or quasi-governmental authority has
determined that there are violations of state or federal law, municipal or
county ordinances, or other legal requirements with respect to the Premises or
other property to be conveyed hereunder. In the event Seller receives notice of
any such violations prior to the Closing affecting the Premises, or other
property to be conveyed hereunder, Seller shall promptly notify Buyer thereof,
and shall promptly and diligently defend any prosecution thereof and take any
and all reasonable actions to eliminate said violations.
(f) Foreign Ownership. Seller is not a "foreign person" as that
term is defined in the U.S. Internal Revenue Code of 1986, as amended, and the
regulahons promulgated pursuant thereto, and Buyer has no obligation under
Section 1445 of the U;S. Internal Revenue Code of 1986, as amended, to withhold
and pay over to the U. S. Internal Revenue Service any part of the "amount
realized" by Seller in the transaction contemplated hereby (as such term is
defined in the regulations issued under said Section 1445).
(g) Prior Options. No prior options or rights of first refusal have
been granted by Seller to any third parties to purchase or lease any interest in
the Premises, or other property to be conveyed hereunder or any part thereof,
which are effective as of the execution date.
(h) Mechanics and Materialman. On the Closing date, neither Seller
nor Seller's contractors will not be indebted to any contractor, laborer,
mechanic, materialmen, architect or engineer for work, labor or services
performed or rendered, or for materials supplied or furnished, in connection
with the Premises for which any person could claim a lien against the Premises
and shall not have done any work on the Premises within one hundred eighty (180)
days prior to the Closing date without the consent of Buyer.
(i) Future Operations. From the date of this Agreement until the
Closing or earlier termination of this Agreement, Seller will (a) keep and
maintain the Premises, and all Tangible Personal
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Property in substantially the same condition as of the date of this Agreement,
(excluding casualty occurrences and damage resulting therefrom, and excluding
reasonable wear and tear), and (b) promptly advise Purchaser of any litigation,
arbitration or administrative hearing concerning the Property, Tangible Personal
Property, or Intangible Property arising or threatened of which Seller shall
receive written notice.
(j) Insurance Notices. No notice has been given by any insurance
company which has issued a policy with respect to any portion of the Premises or
by a board of fire underwriters (or other body exercising similar functions)
requesting the performance of any repairs, alterations, or other work with which
Seller has not complied or relating to an increase in the insurance premiums
applicable to the Premises.
(k) Building Defects. The Improvements, including, but not limited
to, the foundation, roof, walls, superstructure, plumbing, air-conditioning,
heating, and mechanical equipment, electrical wiring, boilers, hot water
heaters, etc., are structurally sound, do not have material defects, latent or
patent, which would render the Premises unfit for use as a first class retail
facility, are in good working order and are in a state of good repair. In the
event that medical deficiencies or defects to any of the above are discovered by
Buyer during the Inspection Period, Seller shall, prior to Closing, have repairs
made which are necessary to correct the same.
(l) Equipment. At the time of Closing all heating, ventilation, air
conditioning, water heaters and other mechanical equipment shall be in a good
properly functioning condition. Seller will maintain all mechanical equipment,
exhaust fans, heating and air conditioning systems, hot water heaters, windows,
doors, locks, glass panes, mail boxes, window screens, plumbing and electrical
equipment, etc. in the normal manner of a normal owner through the date of
Closing. Any such equipment failing to function properly and effectively prior
to or at the time of Closing will be repaired by Seller.
(m) Operation Liabilities. All obligations of Seller arising from
the ownership and operation of the Subject Property and business operated
thereon, including, but not limited to salaries, taxes, leasing commissions, and
the like, have been paid as they became due or will be paid at or prior to the
date of Closing. Except for obligations for which provisions are herein made for
proration or other adjustment at Closing and the indebtedness evidenced by the
Prior Note, there will be no obligations or liabilities of Seller with respect
to the other property to be conveyed hereunder outstanding as of the date of
Closing.
19. ENVIRONMENTAL REPRESENTATIONS. Seller shall provide to Buyer within
fifteen (15) days of the execution of this Agreement, copies of any and all
Phase I or Phase II environmental audits performed on behalf of Seller or any
Lender of Seller which Seller may have in his possession. Seller further
warrants that it has not received any notice or information from any official
governmental agency or other persons such as consulting engineers regarding any
existing contamination on or pollution of the Premises nor any notice of any
violation of, or pending or threatened investigation or inquiry by any
governmental authority or to any remedial obligations under any applicable
federal, state or local laws, regulations or ordinances pertaining to health or
the environmental, including without limitation CERCLA and RCRA.
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In the event Buyer notifies Seller, prior to Closing, that any
contamination or pollution exists and such notice is accompanied by a report
from an engineering company with experience in evaluating such matters, then
Buyer shall have the option of: (i) proceeding with the Closing; or (ii)
canceling this Agreement and receiving a return of the Deposit.
For purposes of this Paragraph 18, the term "contamination" shall mean the
presence of Hazardous Substances at the Premises or any improvements thereon
that requires any remedial action under any of the Environmental Statutes. As
used in this Agreement, the term "Hazardous Substance" shall mean any substance
which: (a) constitutes a hazardous waste or substance under any applicable
federal, state or local law, rule, order or regulation now adopted; (b)
constitutes a "hazardous substance" under the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. 6991) and the regulations
promulgated thereunder; (c) constitutes a pollutant, contaminant, chemical or
industrial, toxic or hazardous substance or waste; (d) exhibits any of the
characteristics enumerated in 40 C.F.R. Sections 261.20-261.24 inclusive; (e)
those extremely hazardous substances listed in 302 of the Superfund Amendments
and Reauthorization Act of 1986 (Public Law 99-499, 100 Stat. 1613) which are
present in threshold planning or reportable quantities as defined under such
act; (f) toxic or hazardous chemical substances which are present in quantities
which exceed exposure standards as those terms are defined under Sections 6 and
8 of the Occupational Safety and Health Act, as amended (29 U.S.C. 655 and 657
and 29 C.F.R. Part 1910 subpart 2); and (g) any asbestos, petroleum-based
products or underground or above ground storage tanks. As used herein, the term
"Environmental Statutes" shall mean the statutes, laws, rules, order and
regulations referred to in (a) through (g) inclusive, in the preceding sentence.
As used herein, contamination by a Hazardous Substance shall include
contamination arising from the presence, creation, production, collection,
treatment, disposal, discharge, release, storage, transport or transfer of any
Hazardous Substance.
20. ENVIRONMENTAL DISCLOSURE AND INVESTIGATION. The parties expressly
confirm and agree that having been given the opportunity to inspect the land and
improvements comprising the Premises, if Buyer does not terminate this Agreement
under the provisions of this Paragraph 6 or as elsewhere provided herein, Buyer
shall be conclusively deemed to have satisfied itself as to the land and
improvements comprising the Premises and to have accepted the Land in its
present "As Is" condition. BUYER SPECIFICALLY REPRESENTS AND AGREES THAT IT
HAVING BEEN GIVEN THE OPPORTUNITY TO CONDUCT SUCH TESTS, STUDIES AND
INVESTIGATIONS AS BUYER DEEMS NECESSARY AND APPROPRIATE, IS RELYING SOLELY UPON
ITS OWN INVESTIGATION OF THE PHYSICAL CONDITION OF THE REAL PROPERTY AND NOT ON
ANY INFORMATION PROVIDED BY SELLER. BUYER FURTHER AGREES THAT IN THE EVENT BUYER
FAILS TO TERMINATE THE AGREEMENT AS PROVIDED HEREIN, BUYER HAS AGREED TO
PURCHASE THE REAL PROPERTY IN ITS CURRENT "AS IS" CONDITION, AND TO HAVE ASSUMED
THE RISK OF ANY MATTER OR CONDITION THAT COULD HAVE BEEN REVEALED BY ITS
INVESTIGATIONS. EXCEPT FOR THE SPECIAL WARRANTIES OF TITLE CONTAINED IN THE
DEED, BILL OF SALE AND ASSIGNMENT DOCUMENTS AND AS OTHERWISE EXPRESSLY SET FORTH
HEREIN, SELLER HAS NOT MADE
14
<PAGE>
05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
(AND IS SELLING THE PROPERTY WITHOUT) ANY REPRESENTATIONS OR WARRANTIES, AS TO
THE CONDITION, SUITABILITY, OR FITNESS OF THE REAL PROPERTY, OR COMPLIANCE OF
THE REAL PROPERTY.
Buyer agrees to pay all of the costs and expenses associated with any
environmental investigation and testing undertaken by or on behalf of Buyer and
to repair and restore any damage to the Premises caused by Buyer's
investigations or testing, at Buyer's expense. Buyer also agrees to defend and
hold Seller harmless from all costs, expenses and liabilities arising out of
Buyer's negligence or willful misconduct or that of its employees, agents,
consultants or contractors in performing its evaluation of the Premises, except
that Buyer shall have no responsibility to Seller and Seller hereby releases
Buyer and agrees to defend and hold Buyer harmless from all costs, expenses and
liabilities arising in connection with environmental conditions, Hazardous
Materials Release or underground structures or utilities that were not disclosed
to Buyer.
Soil, rock, water, asbestos, and other samples taken from the Premises
shall remain the property of Seller. At Seller's request and expense, Buyer will
assist in making arrangements for the lawful disposal of any contaminated
samples and will pay any related transportation of disposal fees, but only if
Seller signs the manifest and any other documents required in connection with
the disposal of contaminated samples. If Seller is not willing to sign the
required documentation, Buyer's only obligation shall be to return the
contaminated samples to Seller.
21. EMPLOYEES. Following the expiration of the Inspection Period, or as
may be earlier agreed by the parties, and with the cooperation of and
coordination with the Seller, Buyer shall have the right to contact and
communicate with Seller's employees at the Premises for the purpose of
initiating discussions involving their potential future employment with the
Buyer.
In fact, it is expressly agreed by the parties hereto that, upon
announcement of this Agreement to the public, Buyer shall immediately dispatch
at least two (2) of its representatives from Buyer's human resources department
to assist Seller in explaining and discussing the transition contemplated by
this Agreement with Seller's employees, and shall initiate procedures for
interviewing Seller's employees at the facility regarding their potential future
employment with Buyer.
However, Buyer expressly makes no representation or warranty, express
or implied, that any of Seller's current employees may or may not be offered
positions with Buyer.
22. POST CLOSING MATTERS. Seller shall be responsible for all the
merchandise return, repair, service and product or service warranties relating
to goods, merchandise or services purchased by its customers at or from the
premises from the Seller.
23. BUYER'S PREMISES FIXTURING. As Seller sells down or removes its
inventory from the Premises thereby creating empty or available space within the
building, Seller shall allow Buyer to enter the building prior to Closing for
the purpose of commencing its fixturing and upfit to ready the premises for use
by Buyer following the Closing. In conjunction therewith, Seller agrees, from
time to time prior to Closing, to consolidate remaining inventory into specific
areas of the building in order to
15
<PAGE>
05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
facilitate Buyer's fixturing and upfit of as much of the building as possible.
In undertaking such work Buyer agrees to not interfere with Seller's sales or
removal activities.
24. DATE FOR PERFORMANCE. If the time period by which any right, option or
election provided under this Agreement must be exercised, or by which any act
required hereunder must be performed, or by which the Closing must be held,
expires on a Saturday, Sunday or legal or bank holiday, then such time period
will be automatically extended through the close of business on the next
following business day.
25. AUTHORITY. The undersigned officers of Seller and Buyer, if any,
hereby represent, covenant and warrant that all actions necessary by their
respective Board of Directors and shareholders and partners will have been
obtained and that they will have been specifically authorized to enter into this
Agreement and that no additional action will be necessary by them in order to
make this Agreement legally binding upon them in all respects. Buyer and Seller
covenant to provide written evidence of compliance with this Paragraph 24
acceptable to Title Company prior to or at Closing.
26. SUCCESSORS AND ASSIGNS. The designations Seller and Buyer as used
herein shall include said parties, their heirs, successors and assigns, and
shall include singular, plural, masculine, feminine or neuter as required by
context. Notwithstanding the foregoing, except for assignments made to a
corporate parent, subsidiary or affiliate, Buyer shall be required to obtain
Seller's written consent prior to any assignment of this Agreement by Buyer.
27. WHOLE AGREEMENT. This agreement shall constitute the entire agreement
between the parties and no prior verbal or written agreement shall survive the
execution of this Agreement. In the event of an alteration of this Agreement,
the alteration must be in writing and must be signed by all the parties or their
agents in order for the same to be binding upon the parties.
(SIGNATURES ON FOLLOWING PAGE)
16
<PAGE>
05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
IN WITNESS WHEREOF, the parties hereto have acknowledged this agreement
under seal as of the date first above written.
ATTEST SELLER:
NATIONAL HOME CENTERS, INC.
By:/s/ BRENT A. HANBY By:/s/ DWAIN A. NEWMAN
------------------------------- -------------------------------
Brent A. Hanby Dwain A. Newman
Executive Vice President and Chairman and Chief Executive Officer
Chief Financial Officer
(CORPORATE SEAL)
ATTEST: BUYER:
LOWE'S HOME CENTERS, INC.
By:/s/ KEVIN D. BENNETT By:/s/ DAVID E. SHELTON
------------------------------ ------------------------------
Kevin D. Bennett David E. Shelton
Assistant Secretary Senior Vice President
(CORPORATE SEAL)
(ACKNOWLEDGMENTS ON FOLLOWING PAGE)
<PAGE>
05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
STATE OF ARKANSAS
COUNTY OF WASHINGTON
On this 18 day of MAY, 1998, before me BELLE REED, a Notary Public duly
commissioned, qualified and acting, within and for the said County and State,
appeared in person the within named Dwain A. Newman and Brent A. Hanby to me
personally well known, and who stated that they were the Chairman and Chief
Executive Officer and Executive Vice President and Chief Financial Officer of
NATIONAL HOME CENTERS, INC., a corporation, and were duly authorized in their
respective capacities to execute the foregoing instrument for and in the name
and behalf of said corporation, and further stated and acknowledged that they
had so signed, executed and delivered said foregoing instrument for the
consideration, uses and purposes therein mentioned and set forth.
In Testimony Whereof I have hereunto set my hand and official seal this
18 day of MAY, 1998.
My commission expires: 4-26-2000 /s/ BELLE REED
-----------------------------------
Notary Public
[NOTARY SEAL APPEARS HERE]
STATE OF NORTH CAROLINA
COUNTY OF WILKES
On this 18th day of MAY, 1998, before me JACKIE K. HUFFMAN,a Notary Public
duly commissioned, qualified and acting, within and for the said County and
State, appeared in person the within named David E. Shelton and Kevin D.
Bennett to me personally well known, and who stated that they were the Senior
Vice President and Assistant Secretary of LOWE'S HOME CENTERS, INC., a
corporation, and were duly authorized in their respective capacities to
execute the foregoing instrument for and in the name and behalf of said
corporation, and further stated and acknowledged that they had so signed,
executed and delivered said foregoing instrument for the consideration, uses
and purposes therein mentioned and set forth.
In Testimony Whereof, I have hereunto set my hand and official seal this
18th day of MAY, 1998.
My commission expires:____________ /s/ JACKIE K. HUFFMAN
------------------------------------
Notary Public
[NOTARY SEAL APPEARS HERE]
18
<PAGE>
05/15/98/Rogers, Arkansas/Agreement to Sell and Purchase Real Estate
EXHIBIT A
Legal Description
19
<PAGE>
EXHIBIT A - LEGAL DESCRIPTION
LOT 2A DESCRIPTION
A PART OF TRACT 2 OF THE TRACT SPLIT FOR NATIONAL HOME CENTER RECORDED IN
PLAT RECORD BOOK 21L AT PAGE 31 DESCRIBED AS:
FROM THE NORTHEASTERLY MOST CORNER OF SAID TRACT 2 ON THE SOUTHEASTERLY
RIGHT-OF-WAY LINE OF NORTH 46th. STREET RUN 155.01 FEET ALONG A CURVE TO
THE RIGHT WITH A 310.00 FOOT RADIUS AND A S 42 DEGREES 36'34" W 153.40 FOOT
CHORD ALONG SAID RIGHT-OF-WAY LINE TO THE POINT OF BEGINNING;
THENCE S 80 DEGREES 58'39" E 33.50 FEET;
THENCE S 02 DEGREES 32'26" W 278.26 FEET;
THENCE N 86 DEGREES 21'02" W 277.61 FEET;
THENCE S 02 DEGREES 34'50" W 12.00 FEET;
THENCE S 02 DEGREES 34'50" W 278.48 FEET;
THENCE 23.15 FEET ALONG A CURVE TO THE RIGHT WITH A 25.00 FOOT RADIUS AND A
N 23 DEGREES 59'03" W 22.36 FOOT CHORD TO THE SAID SOUTHEASTERLY RIGHT-OF-
WAY LINE OF NORTH 46th. STREET;
THENCE ALONG SAID RIGHT-OF-WAY LINE THE NEXT 4 COURSES:
N 02 DEGREES 34'50" E 258.45 FEET;
THENCE 269.61 FEET ALONG A CURVE TO THE RIGHT WITH A 250.00 FOOT RADIUS AND
A N 33 DEGREES 28'33" E 256.73 FOOT CHORD;
THENCE N 64 DEGREES 22'15" E 100.00 FEET;
THENCE 40.24 FEET ALONG A CURVE TO THE LEFT WITH A 310.00 FOOT RADIUS AND A
N 60 DEGREES 39'09" E 40.21 FOOT CHORD TO THE POINT OF BEGINNING CONTAINING
(61,350 SQ.FT.) 1.41 ACRES MORE OR LESS. SUBJECT TO ANY AND ALL LEGAL
EASEMENTS AND OR RIGHTS-OF-WAY.
TRACT 3 DESCRIPTION
A PART OF THE E1/2 OF THE NW 1/4 OR SECTION 9, T-19-N, R-30-W, BENTON COUNTY,
ARKANSAS, DESCRIBED AS:
FROM THE NORTH 1/4 CORNER OF SAID SECTION 9, RUN S 02 DEGREES 12'58" W 1311.19
FEET; THENCE N 85 DEGREES 42'24" W 29.84 FEET TO A POINT ON THE WESTERLY RIGHT
OF WAY LINE OF NORTH 46TH STREET FOR THE POINT OF BEGINNING; THENCE S 02 DEGREES
52'11" W 444.60 FEET ALONG SAID RIGHT OF WAY LINE; THENCE ALONG SAID RIGHT OF
WAY LINE 268.35 FEET WITH A CURVE TO THE RIGHT HAVING A 250.00 FOOT RADIUS AND A
S 33 DEGREES 37'13" W 255.65 FOOT CHORD; THENCE S 64 DEGREES 22'15" W 100.00
FEET ALONG SAID RIGHT OF WAY LINE; THENCE ALONG SAID RIGHT OF WAY LINE 334.32
FEET WITH A CURVE TO THE LEFT HAVING A 310.00 FOOT RADIUS AND A S 33 DEGREES
28'33" W 318.35 FOOT CHORD; THENCE LEAVING SAID RIGHT OF WAY LINE N 85 DEGREES
44'51" W 199.28 FEET; THENCE N 85 DEGREES 1O'56" W 202.95 FEET; THENCE N 01
DEGREES 17'46" E 96,49 FEET; THENCE N 01 DEGREES 21'26" E 410.32 FEET; THENCE N
07 DEGREES 35'15" E 302.06 FEET; THENCE N 13 DEGREES 31'28" E 191.79 FEET;
THENCE S 85 DEGREES 42'24" E 736.24 FEET TO THE POINT OF BEGINNING, CONTAINING
15.330 ACRES (667764.53 SQ.FT.), MORE OR LESS, BEING SUBJECT TO ANY AND ALL
EASEMENTS AND RIGHTS OF WAY OF RECORD OR OF FACT.
BASIS OF BEARING
BASIS OF BEARINGS IS THE ARKANSAS STATE PLANE CORDINATE SYSTEM, NORTH ZONE,
NAD-83, FROM THE ARKANSAS STATE HIGHWAY AND TRANSPORTATION DEPARTMENTS
MONUMENTS 9304009 & 9304009A, GPS CONTROL.
<PAGE>
EXHIBIT A-1: (WATER RETENTION POND)
LESS AND EXCEPT:
TRACT 2: A PART OF TRACT 3 OF THE TRACT SPLIT FOR NATIONAL HOME CENTER RECORDED
IN PLAT RECORD BOOK 21L AT PAGE 31 DESCRIBED AS:
BEGINNING AT THE NORTHEAST CORNER OF SAID TRACT 3 ON THE WESTERLY
RIGHT-OF-WAY LINE OF NORTH 46TH STREET: THENCE S 02 DEGREES 52' 11" W
20.00 FEET ALONG SAID RIGHT-OF-WAY LINE; THENCE N 85 DEGREES 42'24" W
255.66 FEET; THENCE S 04 DEGRESS 17'36"W 125.91 FEET; THENCE S 12
DEGREES 43'44" W 21.01 FEET; THENCE N 86 DEGREES 59'21" W 211.68
FEET; THENCE N 75 DEGREES 37'48" W 96.28 FEET; THENCE N 86 DEGREES
59'21" W 197,47 FEET TO THE EASTERLY RIGHT-OF-WAY LINE OF U.S.
HIGHWAY 71; THENCE N 13 DEGREES 31'28" E 161.08 FEET ALONG SAID
EASTERLY RIGHT-OF-WAY LINE TO THE NORTHWEST CORNER OF SAID TRACT 3;
THENCE S 85 DEGREES 42'24" E 736.24 FEET ALONG THE NORTH LINE THEREOF
TO THE POINT OF BEGINNING CONTAINING (85,715 SQ. FT.) 1.97 ACRES MORE
OR LESS, SUBJECT TO ANY AND ALL LEGAL EASEMENTS AND-OR RIGHTS-OF-WAY.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JAN-31-1999 JAN-31-1999
<PERIOD-START> MAY-01-1998 FEB-01-1998
<PERIOD-END> JUL-31-1998 JUL-31-1998
<CASH> 82,083 82,083
<SECURITIES> 0 0
<RECEIVABLES> 9,587,708 9,587,708
<ALLOWANCES> 0 0
<INVENTORY> 12,701,318 12,701,318
<CURRENT-ASSETS> 22,894,722 22,894,722
<PP&E> 19,886,165 19,886,165
<DEPRECIATION> 10,600,358 10,600,358
<TOTAL-ASSETS> 34,955,891 34,955,891
<CURRENT-LIABILITIES> 13,475,317 13,475,317
<BONDS> 0 0
0 0
0 0
<COMMON> 74,660 74,660
<OTHER-SE> 10,551,310 10,551,310
<TOTAL-LIABILITY-AND-EQUITY> 34,955,891 34,955,891
<SALES> 31,322,213 60,508,026
<TOTAL-REVENUES> 31,322,213 60,508,026
<CGS> 24,533,781 47,535,426
<TOTAL-COSTS> 24,533,781 47,35,426
<OTHER-EXPENSES> 5,996,970 13,047,360
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 672,219 1,449,128
<INCOME-PRETAX> 119,243 (1,523,888)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 119,243 (1,523,888)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 119,243 (1,523,888)
<EPS-PRIMARY> 0.02 0
<EPS-DILUTED> 0 0
</TABLE>
