<PAGE>
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 10-Q
( MARK ONE)
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 27, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-22480
DM MANAGEMENT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 04-2973769
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
25 RECREATION PARK DRIVE 02043
HINGHAM, MA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (781) 740-2718
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Shares outstanding of the Registrant's common stock (par value $0.01)
at April 29, 1999: 9,910,647
- --------------------------------------------------------------------------------
<PAGE>
DM MANAGEMENT COMPANY
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 27, 1999
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Consolidated Financial Statements..........................................................................3-8
Consolidated Balance Sheets at March 27, 1999, March 28, 1998 and December 26, 1998..........................3
Consolidated Statements of Operations for the three months ended March 27, 1999 and March 28, 1998 ..........4
Consolidated Statements of Cash Flows for the three months ended March 27, 1999 and March 28, 1998 ..........5
Notes to Consolidated Financial Statements ................................................................6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ...................9-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk .................................................12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................................................13
Signatures....................................................................................................................14
</TABLE>
2
<PAGE>
DM MANAGEMENT COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
March 27, March 28, December 26,
ASSETS 1999 1998 1998
--------- --------- ------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ................................................ $ 773 $ 19,023 $ 19,996
Marketable securities, net of unrealized loss ............................ -- 3,886 --
Inventory ................................................................ 31,503 24,104 26,847
Prepaid catalog expenses ................................................. 7,739 3,477 5,254
Deferred income taxes .................................................... 6,934 5,295 6,934
Other current assets ..................................................... 5,478 1,641 3,156
--------- --------- ---------
Total current assets .................................................. 52,427 57,426 62,187
Property and equipment, net .................................................... 48,927 19,917 47,485
Deferred income taxes .......................................................... 4,520 4,479 4,520
Other non-current assets ....................................................... 1,733 -- 1,300
--------- --------- ---------
Total assets .......................................................... $ 107,607 $ 81,822 $ 115,492
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................................... $ 11,822 $ 11,356 $ 12,057
Accrued expenses ......................................................... 7,624 3,569 8,571
Accrued customer returns ................................................. 7,454 3,838 8,333
Short-term borrowings .................................................... -- 9,571 21,300
Current portion of long-term debt ........................................ 1,939 1,017 1,735
--------- --------- ---------
Total current liabilities ............................................. 28,839 29,351 51,996
Long-term debt, less current portion ............................................ 23,139 7,296 9,900
Commitments
Stockholders' equity:
Special preferred stock (par value $0.01) 1,000,000 shares authorized .... -- -- --
Common stock (par value $0.01) 15,000,000 shares authorized,
9,776,164, 6,298,007, and 9,631,401 shares issued and outstanding as of
March 27, 1999, March 28, 1998 and December 26, 1998, respectively ... 98 63 96
Additional paid-in capital ............................................... 60,674 58,900 59,953
Unrealized loss on marketable securities ................................. -- (108) --
Accumulated deficit ...................................................... (5,143) (13,680) (6,453)
--------- --------- ---------
Total stockholders' equity ............................................ 55,629 45,175 53,596
--------- --------- ---------
Total liabilities and stockholders' equity ............................ $ 107,607 $ 81,822 $ 115,492
--------- --------- ---------
--------- --------- ---------
</TABLE>
3
<PAGE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
DM MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MARCH 27, MARCH 28,
1999 1998
--------- ---------
<S> <C> <C>
Net sales .................................................................. $ 64,719 $ 44,792
Costs and expenses:
Product ............................................................... 28,598 20,441
Operations ............................................................ 15,386 8,707
Selling ............................................................... 13,804 10,364
General and administrative ............................................ 4,335 3,537
Interest, net ......................................................... 412 (184)
-------- --------
Income before income taxes ................................................. 2,184 1,927
Provision for income taxes ................................................. 874 752
-------- --------
Net income ................................................................. $ 1,310 $ 1,175
-------- --------
-------- --------
EARNINGS PER SHARE:
Basic ................................................................. $ 0.14 $ 0.13
Diluted ............................................................... $ 0.13 $ 0.11
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ................................................................ 9,688 9,287
Diluted .............................................................. 10,471 10,303
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
4
<PAGE>
DM MANAGEMENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 27, MARCH 28,
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................. $ 1,310 $ 1,175
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation ........................................................... 1,130 618
Changes in assets and liabilities:
Increase in inventory .................................................. (4,656) (3,525)
(Increase) decrease in prepaid catalog expenses ........................ (2,485) 2,998
Increase in other current assets ....................................... (2,322) (412)
Decrease in accounts payable and accrued expenses ...................... (489) (3,352)
Decrease in accrued customer returns ................................... (879) (941)
-------- --------
Net cash used in operating activities ....................................... (8,391) (3,439)
Cash flows used in investing activities:
Investment in cash surrender value ..................................... (433) --
Additions to property and equipment .................................... (3,265) (6,361)
-------- --------
Net cash used in investing activities ....................................... (3,698) (6,361)
Cash flows provided by (used in) financing activities:
Borrowings under debt agreements ....................................... 14,200 18,731
Payments of debt borrowings ............................................ (22,057) (10,029)
Proceeds from stock transactions ....................................... 723 861
-------- --------
Net cash provided by (used in) financing activities ......................... (7,134) 9,563
Net decrease in cash and cash equivalents ................................... (19,223) (237)
Cash and cash equivalents at:
Beginning of period ..................................................... 19,996 19,260
-------- --------
End of period ........................................................... $ 773 $ 19,023
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
5
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements included herein have been prepared by DM
Management Company (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and in the opinion of
management contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented. The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations. Accordingly, although the Company believes that the
disclosures are adequate to make the information presented not misleading, these
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report to Stockholders for the fiscal year ended December 26, 1998.
A. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. Intercompany balances and transactions have
been eliminated.
B. DEBT:
The Company's credit facilities at March 27, 1999 consisted of (i) a
$12,000,000 real estate loan (the "Tilton Facility Loan"); (ii) a $9,500,000
equipment loan (the "Equipment Loan"); (iii) a $3,600,000 term loan (the "Term
Loan"); (iv) a $1,650,000 real estate loan (the "Meredith Facility Loan"); and
(v) a $15,910,000 revolving line of credit (the "Revolver").
The Tilton Facility Loan is collateralized by a mortgage lien on the new
operations and fulfillment center in Tilton, New Hampshire (the "Tilton
facility"). The Tilton facility is owned by DM Management Company's wholly owned
subsidiary, Birch Pond Realty Corporation ("Birch Pond") and leased to DM
Management Company. During the first quarter of 1999, Birch Pond entered into
the Tilton Facility Loan with a third party financial institution. The Equipment
Loan is collateralized by substantially all of the Company's materials handling
equipment. The remaining credit facilities are collateralized by substantially
all of the Company's remaining assets. All of these credit facilities contain
various lending conditions and covenants including restrictions on permitted
liens and certain credit facilities also require compliance with certain debt
coverage ratios.
Payments on the Tilton Facility Loan are due monthly through its maturity
on March 1, 2009 with the interest rate fixed at 7.3% per annum. The Equipment
Loan requires monthly payments through its maturity on December 1, 2005 with the
interest rate fixed at 7.5% per annum. The Term Loan requires quarterly payments
through its maturity on June 1, 2002 and provides for several interest rate
options (6.44% per annum at March 27, 1999). Payments on the Meredith Facility
Loan are due monthly, based on a 15-year amortization, with the remaining
balance payable on July 30, 2002. Interest on the Meredith Facility Loan is
fixed at 6.81% per annum until August 31, 1999, at which time the Company may
select from several interest rate options. The Revolver is available for
borrowings and for letters of credit and matures on June 1, 1999. At March 27,
1999 there were $1,950,000 in borrowings and $4,375,000 in letters of credit
outstanding under the Revolver. At March 27, 1999 the Revolver bore interest at
7.75% per annum. The outstanding letters of credit do not bear interest.
6
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
A summary of the Company's outstanding long-term debt follows (in
thousands):
<TABLE>
<CAPTION>
MARCH 27, MARCH 28, DECEMBER 26,
1999 1998 1998
------- ------- ------------
<S> <C> <C> <C>
Real estate loans ....................... $13,476 $ 1,586 $ 1,503
Term loans .............................. 2,340 3,240 2,520
Equipment loans ......................... 7,293 -- 7,590
Revolving credit facilities ............. 1,950 3,460 --
Capitalized lease obligations ........... 19 27 22
------- ------- -------
Total long-term debt ............... 25,078 8,313 11,635
Less current maturities ................. 1,939 1,017 1,735
------- ------- -------
Long-term debt, less current portion $23,139 $ 7,296 $ 9,900
------- ------- -------
------- ------- -------
</TABLE>
Subsequent to March 27, 1999, the Company obtained $1,841,000 of additional
financing and provided additional collateral under its Equipment Loan. The
interest rate on this additional financing is fixed at 8.08% per annum. The
Company also entered into a $980,000 furniture loan (the "Furniture Loan"). The
Furniture Loan is collateralized by certain workstations and office furniture
and is payable in monthly installments of principle and interest through its
maturity on March 30, 2002. The interest rate on the Furniture Loan is fixed at
6.25% per annum. Additionally, the Company amended the terms of the Revolver to
extend its maturity date to June 1, 2001 and provide for a $14,090,000 increase
in availability. In connection with this amendment, the Company paid off
the Term Loan.
C. STOCK SPLIT:
On May 29, 1998, the Company announced a three-for-two stock split effected
in the form of a stock dividend payable on June 30, 1998 to shareholders of
record on June 12, 1998. All historical earnings per share information has been
restated to include the effects of the stock split. The consolidated balance
sheet as of March 28, 1998 has not been restated to include the effects of the
stock split.
7
<PAGE>
DM MANAGEMENT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
D. EARNINGS PER SHARE:
The Company calculates earnings per share ("EPS") in accordance with
Statement of Financial Accounting Standards Statement No. 128 ("SFAS
128"), "EARNINGS PER SHARE." EPS data for the quarter ended March 28, 1998 has
been restated to reflect the effects of the three-for-two stock split. A
reconciliation of the numerators and denominators of the basic and diluted EPS
computation follows (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MARCH 27, MARCH 28,
1999 1998
--------- ---------
Numerator:
<S> <C> <C>
Net income ................................ $ 1,310 $ 1,175
------- -------
------- -------
Denominator (shares):
Basic weighted average shares outstanding . 9,688 9,287
Assumed exercise of stock options ......... 783 1,016
------- -------
Diluted weighted average shares outstanding 10,471 10,303
------- -------
------- -------
Earnings per share:
Basic ..................................... $ 0.14 $ 0.13
Diluted ................................... $ 0.13 $ 0.11
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH
INVOLVE RISKS AND UNCERTAINTIES. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED
HEREIN OR INCORPORATED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE
DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE WORDS "ANTICIPATES," "PLANS," "EXPECTS" AND SIMILAR EXPRESSIONS
ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS
DISCUSSED IN OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT
CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO THE FOLLOWING: THE
SUCCESS OR FAILURE OF THE J. JILL RETAIL STORE INITIATIVE; SIGNIFICANT CHANGES
IN CUSTOMER RESPONSE RATES; CHANGE IN COMPETITION IN THE APPAREL INDUSTRY;
GENERAL ECONOMIC AND BUSINESS CONDITIONS; SUCCESS OR FAILURE OF OPERATING
INITIATIVES; THE ABILITY OF THE COMPANY TO EFFECTIVELY LIQUIDATE ITS OVERSTOCKED
MERCHANDISE; CHANGES IN CONSUMER SPENDING AND CONSUMER PREFERENCES; FAILURE OF
THE COMPANY OR ITS SIGNIFICANT VENDORS OR SUPPLIERS TO BECOME YEAR 2000
COMPLIANT; CHANGES IN BUSINESS STRATEGY; POSSIBLE FUTURE INCREASES IN EXPENSES;
THE EXISTENCE OR ABSENCE OF BRAND AWARENESS; THE EXISTENCE OR ABSENCE OF
PUBLICITY, ADVERTISING AND PROMOTIONAL EFFORTS; AVAILABILITY, TERMS AND
DEPLOYMENT OF CAPITAL; QUALITY OF MANAGEMENT; BUSINESS ABILITIES AND JUDGMENT OF
PERSONNEL; AVAILABILITY OF QUALIFIED PERSONNEL; LABOR AND EMPLOYEE BENEFIT
COSTS; CHANGES IN, OR THE FAILURE TO COMPLY WITH, GOVERNMENT REGULATIONS, AND
OTHER FACTORS.
RESULTS OF OPERATIONS
The following table sets forth the Company's consolidated statements of
operations expressed as a percentage of net sales and certain selected operating
data:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 27, MARCH 28,
1999 1998
--------- ---------
<S> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS:
Net sales ............................. 100.0% 100.0%
Costs and expenses:
Product .......................... 44.2 45.6
Operations ....................... 23.8 19.5
Selling .......................... 21.3 23.1
General and administrative ....... 6.7 7.9
Interest, net .................... 0.6 (0.4)
-------- --------
Income before income taxes ............ 3.4 4.3
Provision for income taxes ............ 1.4 1.7
-------- --------
Net income ............................ 2.0% 2.6%
-------- --------
-------- --------
SELECTED OPERATING DATA (IN THOUSANDS):
Catalog circulation (1) 21,400 14,800
Total twelve-month buyers (2) 1,156 749
</TABLE>
(1) In order to more closely match net sales to catalog circulation, the
Company calculates catalog circulation on a percentage of completion
basis. This calculation takes into account the total number of catalogs
mailed during all periods and the Company's estimate of the expected
sales life of each catalog edition. As used throughout this Form 10-Q,
the term "catalog circulation" refers to circulation of the Company's
catalogs calculated in such fashion.
(2) As used throughout this Form 10-Q, the term "twelve-month buyers" means
customers who have made a purchase from the Company within the previous
12 months.
9
<PAGE>
COMPARISON OF THE THREE MONTHS ENDED MARCH 27, 1999 WITH THE THREE MONTHS ENDED
MARCH 28, 1998
NET SALES
During the three months ended March 27, 1999 ("first quarter 1999") net
sales increased by 44.5% to $64.7 million from $44.8 million during the three
months ended March 28, 1998 ("first quarter 1998"). This net sales increase was
primarily attributable to significant sales volume increases from J. JILL.
During first quarter 1999 J. JILL net sales and circulation increased by 75.6%
and 71.5%, respectively, as compared to first quarter 1998. J. JILL net sales
growth was primarily attributable to the aforementioned circulation growth.
During first quarter 1999 net sales for NICOLE SUMMERS decreased by 18.2% and
circulation remained relatively flat as compared to first quarter 1998. Total
Company catalog circulation increased by 44.6% to 21.4 million during first
quarter 1999 from 14.8 million during first quarter 1998. The number of
twelve-month buyers grew to 1,156,000 at March 27, 1999 from 749,000 at
March 28, 1998, an increase of 54.3%.
PRODUCT
Product costs consist primarily of merchandise acquisition costs (net of
term discounts and advertising allowances), including freight-in costs, and
provisions for markdowns. During first quarter 1999 product costs increased
by 39.9% to $28.6 million from $20.4 million during first quarter 1998. As a
percentage of net sales, product costs decreased to 44.2% during first
quarter 1999 from 45.6% during first quarter 1998. This decrease in product
costs as a percentage of net sales was primarily attributable to the shift in
the mix of the business toward J. JILL, which experiences lower product costs
as a percentage of net sales than NICOLE SUMMERS due to its higher
concentration of private label merchandise. The Company does not expect
product costs as a percentage of net sales to change significantly during the
remainder of 1999.
OPERATIONS
Operating expenses consist primarily of order processing costs, such as
telemarketing, customer service, fulfillment, shipping, warehousing and credit
card processing costs, and merchandising costs. During first quarter 1999
operating expenses increased by 76.7% to $15.4 million from $8.7 million during
first quarter 1998. As a percentage of net sales, operating expenses increased
to 23.8% during first quarter 1999 from 19.5% during first quarter 1998. This
increase was primarily attributable to inefficiencies and reduced employee
productivity associated with the transition and consolidation of the Company's
operations from three distribution facilities into one new operations and
fulfillment facility in Tilton, New Hampshire (the "Tilton facility"). In
addition, better-than-expected sales demand early in first quarter 1999 resulted
in further employee productivity loss and increased labor costs. The Company
expects operating costs as a percentage of net sales to improve during the
remainder of 1999, with further improvement expected in 2000.
SELLING
Selling expenses consist primarily of the cost to produce, print and
distribute catalogs. During first quarter 1999 selling expenses increased by
33.2% to $13.8 million from $10.4 million during first quarter 1998. As a
percentage of net sales, selling expenses decreased to 21.3% during first
quarter 1999 from 23.1% during first quarter 1998. This decrease was primarily
the result of improved catalog productivity during first quarter 1999 as
compared to first quarter 1998. The Company expects selling expenses as a
percentage of net sales to increase slightly during the remainder of 1999.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of executive,
marketing, information systems and finance expenses. During first quarter 1999
general and administrative expenses increased by 22.6% to $4.3 million from
$3.5 million during first quarter 1998. This increase was primarily
attributable to increased salaries and performance bonuses. As a percentage
of net sales, general and administrative expenses decreased to 6.7% during
first quarter 1999 from 7.9% during first quarter 1998.
INTEREST, NET
Interest expense increased to $0.6 million during first quarter 1999 as
compared to $0.1 million during first quarter 1998 primarily as a result of
increased use of the Company's credit facilities. Interest income decreased to
$0.2 million during first quarter 1999 from $0.3 million during first quarter
1998 primarily due to lower cash and cash equivalent balances. The Company
expects an increase in net interest expense in 1999 as a result of lower
invested balances and higher debt levels associated with the financing of the
Tilton facility.
INCOME TAXES
The Company provides for income taxes at an effective tax rate that
includes the full federal and state statutory tax rates. The Company's effective
tax rate for first quarter 1999 and first quarter 1998 was 40.0% and 39.0%,
respectively. The increased effective tax rate in first quarter 1999 reflects
the effect of an increased federal statutory tax rate due to expected annual
taxable income levels.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
DM Management's principal working capital needs arise from the need to
support costs incurred in advance of revenue generation, primarily inventory
acquisition and catalog development, production and mailing costs incurred prior
to the beginning of each selling season. The Company has two selling seasons
which correspond to the fashion seasons. The Fall season begins in July and ends
in January. The Spring season begins in January and ends in July. Capital needs
arise from capital expenditures related to expansions and improvements to the
Company's operating infrastructure. During first quarter 1999 these capital
expenditures included costs related to the construction of the Tilton facility.
During first quarter 1999 the Company funded its operating and capital needs
through its bank credit facilities, a new loan from a financial institution,
cash generated from operations, and proceeds from its 1997 public offering.
The Company's operating activities used net cash of $8.4 million and
$3.4 million during first quarter 1999 and first quarter 1998, respectively,
primarily to support sales growth with increased inventory purchases. Inventory
levels at March 27, 1999 were 30.7% higher than at March 28, 1998.
The Company's investing activities used net cash of $3.7 million and
$6.4 million during first quarter 1999 and first quarter 1998, respectively,
primarily for property and equipment additions related to the construction of
the new Tilton facility. Construction of the Tilton facility began in 1997 and
was completed as of December 26, 1998. The estimated total cost of this
facility, including land, construction, equipment and furniture is approximately
$41.0 million of which approximately $40.1 million had been spent as of
March 27, 1999.
The Company's financing activities used net cash of $7.1 million during
first quarter 1999. This usage was primarily the net result of a $21.3 million
paydown of short-term borrowings and a $12.0 million increase in long-term debt
in connection with the refinancing of the Tilton facility on a long-term basis.
During first quarter 1998, net cash of $9.6 million was provided by financing
activities, primarily as a result of borrowings used to finance the Tilton
facility construction.
The Company's credit facilities at March 27, 1999 consisted of (i) a
$12.0 million real estate loan (the "Tilton Facility Loan"); (ii) a $9.5
million equipment loan (the "Equipment Loan"); (iii) a $3.6 million term loan
(the "Term Loan"); (iv) a $1.7 million real estate loan; and (v) a $15.9
million revolving line of credit (the "Revolver"). The weighted average
interest rate for amounts outstanding under the Company's credit facilities
during first quarter 1999 was 6.86%. The Tilton Facility Loan is
collateralized by a mortgage lien on the Tilton facility. The Tilton facility
is owned by DM Management Company's wholly owned subsidiary, Birch Pond
Realty Corporation ("Birch Pond") and leased to DM Management Company. During
the first quarter of 1999, Birch Pond entered into the Tilton Facility Loan
with a third party financial institution. The Equipment Loan is
collateralized by substantially all of the Company's materials handling
equipment. The remaining credit facilities are collateralized by
substantially all of the Company's remaining assets. All of these credit
facilities contain various lending conditions and covenants including
restrictions on permitted liens and certain credit facilities also require
compliance with certain debt coverage ratios.
Subsequent to March 27, 1999, the Company obtained additional financing of
$1.8 million and provided additional collateral under its Equipment Loan. The
interest rate on this additional financing is fixed at 8.08% per annum. The
Company also entered into a $1.0 million furniture loan (the "Furniture Loan").
The Furniture Loan is collateralized by certain furniture and is payable in
monthly installments of principle and interest through its maturity on March 30,
2002. The interest rate on the Furniture Loan is fixed at 6.25% per annum.
Additionally, the Company amended the terms of the Revolver to extend its
maturity date to June 1, 2001 and provide for a $14.1 million increase in
availability. In connection with this amendment, the Company paid off the Term
Loan.
FUTURE CONSIDERATIONS
In an effort to continue to capitalize on the strength of the J. JILL
brand, the Company is expanding its channels of distribution to include
retail stores and the Internet. Currently, the Company plans to open five to
ten specialty retail stores by the end of 2000 and an additional 50 stores in
2001. The Company also plans to have a fully-transactional website in
operation in time for the 1999 holiday season. The Company expects to incur
costs in excess of revenues generated by these new opportunities during the
initial phases of their development. There can be no assurance that these new
opportunities will be successful.
NICOLE SUMMERS operates in a mature marketplace and is currently
experiencing negative growth. In an effort to respond to this negative
growth and focus on potential opportunities for NICOLE SUMMERS, the Company
hired a new Vice President of Merchandising for NICOLE SUMMERS with
experience in product development, planning and women's apparel
merchandising, and will be updating the NICOLE SUMMERS merchandising
assortment and circulation strategy beginning with the Fall 1999 catalogs.
This may result in a temporary decline in response rates and net sales for
NICOLE SUMMERS, however, the Company does not expect the effects to be
material to its consolidated results of operations.
11
<PAGE>
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue affects most companies that rely on computer systems
and involves the computer software and hardware changes necessary to handle the
transition from the year 1999 to the Year 2000. During 1997, the Company
formulated a plan to address the Year 2000 issue. The Company has assessed its
status regarding its Year 2000 compliance in three components: internal
information technology (IT) systems, internal non-information technology
(non-IT) systems, and external Year 2000 issues related to the Company's
vendors, suppliers and service providers ("third party providers").
As part of the Company's strategic business plan, the Company's major
internal IT and non-IT systems have been replaced or upgraded. The Company has
received assurances from the vendors of all of the Company's major internal IT
and non-IT systems indicating the new systems and upgrades are designed to be
Year 2000 compliant. Because these system improvements were primarily motivated
by the Company's growth and technology needs, they are not considered to be
costs directly attributable to the Year 2000 issue. Certain minor internal IT
and non-IT systems have also been upgraded or are planned to be upgraded by June
1999. The Company has received assurances from the vendors of these upgrades
indicating that the upgrades are designed to be Year 2000 compliant. These
upgrades are part of the Company's continuing maintenance plans and are not
considered to be costs directly attributable to the Year 2000 issue. The Company
has begun testing focused on verifying the assurances given by the vendors of
its internal IT and non-IT systems. At this time there can be no assurance that
all of the Company's internal IT and non-IT systems will be Year 2000 compliant.
The total historical and estimated future costs to address the Year 2000 issue
with respect to internal IT and non-IT systems is currently estimated to be less
than $500,000.
As part of the Company's plan to address the Year 2000 issue, the Company
has continued to contact and receive letters from its significant third party
providers either certifying that their company is currently Year 2000 compliant
or indicating a date that a compliance certificate is expected. The Company has
begun to develop contingency plans to deal with possible non-compliance by the
Company's significant third party providers. These plans include the possible
replacement of the non-complying third party providers. The current estimated
impact to the Company for these replacements is approximately $200,000. At this
time, there can be no assurance that all of the Company's third party providers
will be Year 2000 compliant. The Company intends to further develop its
contingency plans during the remainder of 1999.
The estimates mentioned above may change materially in the future as
further information is obtained. Any failure of the Company or its significant
third party providers to become Year 2000 compliant could have a material
adverse effect on the Company's financial condition, results of operations, or
cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's objective in managing its exposure to interest rate changes
and foreign currency rate changes is to limit the material impact of the changes
on cash flows and earnings and to lower its overall borrowing costs. To achieve
its objectives, the Company identifies these risks and manages them through its
regular operating and financing activities, including periodic refinancing of
debt obligations to lower financing costs and adjust fixed and variable rate
debt positions. The Company does not currently use derivative financial
instruments or enter into foreign currency denominated contracts. Management has
calculated the effect of a 10% change in interest rates over a month and
determined the effect to be immaterial. Management does not foresee or expect
any significant changes in the management of foreign currency or interest rate
exposures or in the strategies it employs to manage such exposures in the near
future.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(1) EXHIBITS
CERTIFICATE OF INCORPORATION AND BY-LAWS
3.1 Restated Certificate of Incorporation of the Company (included as
Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 25, 1993, File No. 0-22480, and incorporated
herein by reference)
3.2 By-Laws of the Company, as amended (included as Exhibit 3.2 to the
Company's Current Report on Form 8-K dated January 14, 1997, File No.
0-22480, and incorporated herein by reference)
MATERIAL CONTRACTS
10.1 Employment Letter Agreement, dated March 11, 1999, between the Company
and Dennis Adomaitis
10.2 Fifth Amendment to Second Amended and Restated Loan Agreement, dated
March 30, 1999, by and between the Company and Citizens Bank of
Massachusetts
10.3 Secured Promissory Note, dated March 30, 1999, between the Company and
Citizens Leasing Corporation
10.4 Secured Promissory Note, dated March 30, 1999, between the Company and
Citizens Leasing Corporation
10.5 Loan Agreement, dated March 30, 1999, between the Company and Belknap
County Economic Development Council, Inc.
10.6 Security Agreement, dated March 30, 1999, between the Company and
Belknap County Economic Development Council, Inc.
10.7 Note, dated March 30, 1999, between the Company and Belknap County
Economic Development Council, Inc.
10.8 Third Amended and Restated Loan Agreement, dated May 4, 1999, between
the Company and Citizens Bank of Massachusetts
10.9 Third Replacement Revolving Note, dated May 4, 1999, between the
Company and Citizens Bank of Massachusetts
FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule
(2) REPORTS ON FORM 8-K
The Company has not filed any reports on Form 8-K during the quarter
ended March 27, 1999.
13
<PAGE>
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 thereunto duly authorized.
DM MANAGEMENT COMPANY
Dated: May 10, 1999 By:/s/ Olga L. Conley
------------------------------------------------
Olga L. Conley
Authorized Officer
Senior Vice President - Finance, Chief Financial
Officer and Treasurer (PRINCIPAL FINANCIAL
OFFICER)
Dated: May 10, 1999 By: /s/ Peter J. Tulp
------------------------------------------------
Peter J. Tulp
Authorized Officer
Vice President - Finance and
Corporate Controller
(PRINCIPAL ACCOUNTING OFFICER)
14
<PAGE>
DM MANAGEMENT COMPANY
FORM 10-Q
FOR THE QUARTER ENDED MARCH 27, 1999
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
MATERIAL CONTRACTS
10.1 Employment Letter Agreement, dated March 11, 1999, between the
Company and Dennis Adomaitis
10.2 Fifth Amendment to Second Amended and Restated Loan Agreement,
dated March 30, 1999, by and between the Company and Citizens
Bank of Massachusetts
10.3 Secured Promissory Note, dated March 30, 1999, between the
Company and Citizens Leasing Corporation
10.4 Secured Promissory Note, dated March 30, 1999, between the
Company and Citizens Leasing Corporation
10.5 Loan Agreement, dated March 30, 1999, between the Company and
Belknap County Economic Development Council, Inc.
10.6 Security Agreement, dated March 30, 1999, between the Company
and Belknap County Economic Development Council, Inc.
10.7 Note, dated March 30, 1999, between the Company and Belknap
County Economic Development Council, Inc.
10.8 Third Amended and Restated Loan Agreement, dated May 4, 1999,
between the Company and Citizens Bank of Massachusetts
10.9 Third Replacement Revolving Note, dated May 4, 1999, between
the Company and Citizens Bank of Massachusetts
FINANCIAL DATA SCHEDULE
27.1 Financial Data Schedule
</TABLE>
15
<PAGE>
Exhibit 10.1
March 11, 1999
Mr. Dennis Adomaitis
7432 Dorie Avenue
West Hills, CA. 91304
Dear Dennis:
On behalf of DM Management, I am pleased to offer you the position of President,
J Jill Retail, reporting directly to me, in accordance with the following:
COMMENCEMENT OF EMPLOYMENT. Your starting date is to be determined, but shall
not be after April 12, 1999.
SALARY. Your base salary will initially be at the rate of $300,000 per annum.
INCENTIVE COMPENSATION PLAN. You will be eligible to participate in the DM
Management Incentive Compensation Plan commencing with the Fall 1999 season.
Bonus payments for the Fall 1999 season (payable January 2000) and the Spring
2000 season (payable July 2000) will be paid to you whether or not the incentive
goals for such seasons are achieved, unless you voluntarily leave DM Management
or are terminated for just cause, at the end of the relevant season. Your bonus
percentage for the Fall 1999 and Spring 2000 seasons will be 80% (i.e., you will
receive a bonus of 80% of the base salary paid to you for the relevant season).
ADDITIONAL COMPENSATION. On the date you commence employment with DM Management
(the "Employment Date"), you will be paid a bonus of $60,000. If you voluntarily
leave DM Management or are terminated for just cause (as defined below) within
one year after the Employment Date, you will refund this bonus to DM Management.
OPTIONS. On the employment date you will be granted an option to purchase
150,000 shares of DM Management Common Stock at an exercise price per share
equal to the closing price per share on the employment date as reported by the
Nasdaq National Market. The option will vest, contingent upon your continued
employment with DM Management, at the rate of 20% on the first anniversary of
the shares subject to the option and an additional one thirty-sixth (1/36) of
the remaining 80% of the shares subject to the option each month thereafter. The
option will be granted under the DM Management 1993 Incentive and Nonqualified
Stock Option Plan and will be subject to the terms of the Plan. Your stock
options will cease to vest on the effective date of any termination of your
employment.
<PAGE>
CAR ALLOWANCE. You will be given a car allowance of $1200 per month
BENEFITS. You will be eligible to participate in the full range of company
benefits generally made available to other executive officers.
RELOCATION EXPENSES. DM Management will provide a reasonable relocation package
and will make arrangements with a national carrier to assist you and your family
during this transition. DM Management will also provide house-hunting trips for
you and your spouse. Moving expense reimbursement paid to or on behalf of an
employee must be included in the employee's taxable gross income. Therefore
reimbursed moving expense information will be included in W-2 earnings. Certain
payments may be subject to Federal, and State withholding taxes. If you
voluntarily leave DM Management or are terminated for just cause (as defined
below) within one year after the Employment Date, you will be responsible to
reimburse DM Management for all relocation expenses incurred.
FORM I-9 DOCUMENTATION. As required by federal law, your employment with DM
Management is dependent upon your providing documentation, which proves your
eligibility to work in the United States. Typically, this would include such
items as a driver's license birth certificate, social security card, etc.
TERMINATION OF EMPLOYMENT; SEVERANCE. It is understood and agreed that either
you or DM Management may terminate the employment relationship at any time and
for any reason upon giving thirty (30) days prior written notice. In the event
of such termination, you will be eligible to receive the salary and benefits
accrued up to the effective date of your termination. Additionally, if your
employment is terminated by DM Management for any reason other than for "just
cause" (as defined below), then DM Management will make severance payments to
you for a period of one year after the effective date of your termination in an
aggregate amount equal to your annual base salary at the time of termination,
such payments to be made at the same time and in the same amounts as your base
salary otherwise would have been paid; in addition to all guaranteed sign on and
seasonal bonuses and relocation expenses. During the period that such severance
payments are being made to you, you will continue to be available upon request
of the President/CEO to provide information and assistance to DM Management
concerning matters that were within the scope of your responsibilities as of the
date of termination or your employment, and no additional compensation should be
due to you for providing such information and assistance. "Just cause" for
termination
<PAGE>
shall be deemed to exist upon (a) your willful failure or refusal to perform
your designated responsibilities, or gross negligence or willful failure or
refusal to perform your designated responsibilities, or gross misconduct in the
performance of such responsibilities, or (b) your conviction of, or the entry of
a pleading of guilty or nolo contendere by you to, any crime involving moral
turpitude or any felony.
If this letter correctly sets forth our understanding, please sign one copy in
the space below and return it to me at your earliest convenience. The offer
contained in this letter will expire if you have not indicated your acceptance
of it by returning to me a copy of this letter, signed by you in the space
below, by 5:00 p.m., Eastern Standard Time, on Friday, March 12, 1999.
Very truly yours,
/s/ Gordon R. Cooke
-------------------
Gordon R. Cooke
President and CEO
Accepted and agreed:
/s/ Dennis Adomaitis
- --------------------
Dennis Adomaitis
<PAGE>
Exhibit 10.2
FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT
This Fifth Amendment to Second Amended and Restated Loan Agreement
dated as of March 30, 1999, by and between Citizens Bank of Massachusetts
(herein "BANK"), and DM Management Company, a Delaware corporation (herein
"BORROWER").
WITNESSETH:
WHEREAS, BANK and BORROWER are parties to that certain Loan Agreement
made as of June 5, 1997 by and between BANK and BORROWER, as the same has been
amended and restated in a certain Amended and Restated Loan Agreement dated as
of October 31, 1997, and in a certain Second Amended and Restated Loan Agreement
dated March 5, 1998, and as amended by a certain First Amendment to Second
Amended and Restated Loan Agreement dated as of June 30, 1998, and Second
Amendment to Second Amended and Restated Loan Agreement dated as of September 4,
1998, Third Amendment to Second Amended and Restated Loan Agreement dated
September 4, 1998 and Fourth Amendment to Second Amended and Restated Loan
Agreement dated as of December 31, 1998 (as so restated and amended, the "Loan
Agreement");
WHEREAS, BORROWER and the BANK wish to further amend the Loan Agreement
as more particularly hereafter set forth. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereby agree that the Loan Agreement is hereby amended as
follows:
1. The following definitions are hereby deleted, and replaced, as
the case may be:
(a) "ADVANCE FORMULA".
(b) "AVAILABILITY".
(c) "ELIGIBLE INVENTORY".
(d) "IN TRANSIT INVENTORY".
(e) "REVOLVING CREDIT COMMITMENT AMOUNT"
<PAGE>
and the following substituted in lieu
thereof:
"REVOLVING CREDIT COMMITMENT AMOUNT"
(sometimes the "REVOLVING COMMITMENT
AMOUNT") shall mean the sum of Fifteen
Million Nine Hundred Nine Thousand Six
Hundred Forty Dollars ($15,909,640.00)
unless BORROWER delivers written notice to
the BANK requesting a lesser amount and BANK
confirms same in writing.
2. Section 2.01 is hereby deleted and the following substituted
in lieu thereof:
"2.01 Subject to, and upon the terms and
conditions herein provided, during the AVAILABILITY
PERIOD, the BANK agrees to make ADVANCES to the
BORROWER including, without limitation, those
ADVANCES provided for in Section 3.06 hereof which
shall be deemed ADVANCES under this Section 2.01 so
long as (A) after giving effect to the making of each
ADVANCE, then the CREDIT BALANCE does not exceed the
REVOLVING CREDIT COMMITMENT AMOUNT and (B) at the
time of such ADVANCE the conditions specified in
Section 2.08 have been and remain fulfilled."
3. Section 2.10 is hereby deleted and the following substituted
in lieu thereof:
"2.10 If at any time the CREDIT BALANCE
exceeds the REVOLVING CREDIT COMMITMENT AMOUNT,
BORROWER shall forthwith pay to the BANK such amount
as may be necessary to reduce the CREDIT BALANCE to
the COMMITMENT AMOUNT."
4. Section 2.12 is hereby deleted and the following substituted
in lieu thereof:
"2.12 Notwithstanding the provisions of this
Article II, the BANK, in its discretion, may make
ADVANCES in excess of the REVOLVING CREDIT COMMITMENT
AMOUNT."
-2-
<PAGE>
5. Section 3.06 is hereby deleted and the following substituted
in lieu thereof:
"3.06 If a draft shall be presented under a LETTER OF CREDIT and the
BANK shall honor the same, the BANK shall charge any demand deposit account of
the BORROWER and if the balance(s) of such account(s) is not sufficient, such
presentation, up to the full amount of the LETTER OF CREDIT, shall be deemed to
be a request of the BANK for a PRIME RATE ADVANCE, pursuant to Section 2.01
hereof without any notice to or from BORROWER being required and the amount paid
by the BANK with respect to such draft shall be deemed to be a PRIME RATE
ADVANCE provided however that if by virtue of such ADVANCE, the CREDIT BALANCE
shall exceed the REVOLVING COMMITMENT AMOUNT, the excess shall be forthwith
repaid by the BORROWER."
6. Section 10.01(d) is hereby deleted.
7. Section 10.01(e) is hereby deleted.
8. Section 11.06 is hereby deleted and the following inserted
in lieu thereof:
11.06 Except with respect to the BANK as
provided herein, the BORROWER shall not grant or
suffer to exist, any mortgage, pledge, title
retention agreement, security interest, lien or
encumbrance with respect to any of its assets,
tangible or intangible, whether now owned or
hereafter acquired including, but not limited to, its
ownership interests, and any other of its interests,
in Birch Pond Realty Corporation, or subject any of
its assets to the prior payment of any indebtedness,
or transfer in any manner any of such assets with the
intent or purpose, directly or indirectly, of
subjecting such assets to the payment of INDEBTEDNESS
except (i) landlords', carriers', warehousemans',
mechanics' and other similar liens arising by
operation of law in the ordinary course of the
BORROWER'S businesses; (ii) liens arising out of
pledge or deposits under worker's compensation,
unemployment insurance, old age pension, social
security, retirement benefits or other similar
legislation; (iii) liens in favor of the BANK; (iv)
liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings
and the BORROWER maintain appropriate reserves
(reasonably approved by the BANK) in respect thereto;
(iv) judgment or prejudgment liens with respect to
which there has issued a stay of execution
-3-
<PAGE>
pending appeal or otherwise and as to which the
BORROWER maintain appropriate reserves in respect
thereto (reasonably approved by the BANK); (vi)
easements, rights of way, restrictions and other
similar charges or liens relating to real property
and not interfering in a material way with the
ordinary conduct of the BORROWER'S business; (vii)
liens securing the payment of INDEBTEDNESS permitted
under Section 11.01 hereof; and (viii) encumbrances
on the BORROWER'S property or assets created in
connection with the refinancing of INDEBTEDNESS
secured by liens on such property permitted hereunder
that do not extend to property and assets of the
BORROWER not encumbered prior to such refinancing.
9. Section 12.01 is hereby amended by adding the following
Section (k) thereto:
(k) Birch Pond Realty Corporation shall
grant or suffer to exist, any mortgage, pledge, title
retention agreement, security interest or, lien other
than a mortgage to John Hancock Real Estate Finance,
Inc. with respect to that real estate in Tilton, New
Hampshire originally subject to a mortgage to the
BANK under the Loan Agreement and subsequently
conveyed to Birch Pond Realty Corporation with the
consent of the BANK.
This Amendment shall take effect as of the date first above written.
Except as hereby amended, the Loan Agreement is hereby ratified,
confirmed and republished.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the date first above written.
Witness: DM MANAGEMENT COMPANY
/s/ Thomas K. Schou By: /s/ Peter J. Tulp
- --------------------------- -------------------------------------
Peter J. Tulp, Vice President Finance
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Lori B. Leeth
------------------------------------
Lori B. Leeth, Senior Vice President
-4-
<PAGE>
[CITIZENS LOGO]
Exhibit 10.3
One Citizens Plaza SECURED PROMISSORY NOTE
Providence, Rhode Island 02903
SECURED PARTY: CITIZENS LEASING CORPORATION DEBTOR: DM Management Company
One Citizens Plaza Address: 25 Recreation Park Drive
Providence, Rhode Island 02903 Hingham, MA 02043
(401) 456-7000 Telephone: (781)740-2718
1. Secured Party and Debtor have entered into a Master Security Agreement
dated as of DECEMBER 23, 1998, (the "Security Agreement"). To secure payment of
the indebtedness set forth below, including the Principal Amount set forth
below, and the performance of all obligations contained herein, Debtor hereby
grants to Secured Party, its successors and assigns, a security interest in the
property set forth in Schedule A hereto, together with all attachments,
accessories, additions and accessions thereto, whether now existing or hereafter
acquired, all replacements and substitutions therefor, and all proceeds thereof
(all hereinafter referred to collectively as the "Equipment").
2. Principal Amount. The original Principal Amount of this Note is:
$1,543,393.50.
3. a. Term. The Term of this Note is 84 months commencing on the Term
Commencement Date as set forth in the Note Acceptance Certificate to this Note
plus any partial period between the Acceptance Date of the Equipment as set
forth in the Note Acceptance Certificate and the Term Commencement Date.
b. Payments. Debtor hereby promises to pay the Principal Amount to
Secured Party and Interest thereon as follows:
(i) Interest only on the Term Commencement Date in an amount equal to
$346.41 multiplied by the number of days between the Acceptance Date up to and
including the Term Commencement Date.
(ii) Thereafter, the Principal Amount, together with interest thereon
at the fixed rate of 8.08% per annum, shall be payable in (check one) [X]
advance/[ ] arrears in consecutive (check one) [X] monthly/[ ] quarterly
Installment Payments commencing on the 1ST day of APRIL, 1999 and thereafter on
the same day of each successive (check one) [X] month/[ ] quarter inclusive
until fully paid, provided that the final installment shall be in the amount of
the unpaid balance hereof together with any accrued interest and late charges.
Interest shall be calculated based on the actual number of days elapsed over
twelve (12) thirty (30) day months.
The amount of each Installment Payment hereunder is as follows:
Amount of Each
Installment Nos. Installment Payment
1 - 83 $23,955.92
84 All remaining principal
and accrued interest
c. Debtor agrees to pay Secured Party, in advance, the first
Installment Payment.
d. Secured Party acknowledges receipt from Debtor of a payment in the
amount of $ N/A to be held by Secured Party as a deposit to secure Debtor's
performance hereunder.
4. The Equipment will be located at the locations specified in Schedule A
hereto.
<PAGE>
5. This Note is secured by the Equipment, as set forth in Schedule A hereto
and as further defined in the Security Agreement, the terms and conditions of
which are incorporated herein by reference. This Note is one of the "Notes"
referred to in the Security Agreement.
Dated: March 30, 1999
------------------------------
SECURED PARTY: DEBTOR:
CITIZENS LEASING CORPORATION DM Management Company
By: /s/ John Young By: /s/ Peter J. Tulp
------------------------------ ------------------------------------
Title: Vice President Title: Vice President of Finance
--------------------------- ---------------------------------
<PAGE>
[CITIZENS LOGO]
Exhibit 10.4
One Citizens Plaza SECURED PROMISSORY NOTE
Providence, Rhode Island 02903
SECURED PARTY: CITIZENS LEASING CORPORATION DEBTOR: DM Management Company
One Citizens Plaza Address: 25 Recreation Park Drive
Providence, Rhode Island 02903 Hingham, MA 02043
(401) 456-7000 Telephone: (781)740-2718
1. Secured Party and Debtor have entered into a Master Security Agreement
dated as of DECEMBER 23, 1998, (the "Security Agreement"). To secure payment of
the indebtedness set forth below, including the Principal Amount set forth
below, and the performance of all obligations contained herein, Debtor hereby
grants to Secured Party, its successors and assigns, a security interest in the
property set forth in Schedule A hereto, together with all attachments,
accessories, additions and accessions thereto, whether now existing or hereafter
acquired, all replacements and substitutions therefor, and all proceeds thereof
(all hereinafter referred to collectively as the "Equipment").
2. Principal Amount. The original Principal Amount of this Note is:
$297,857.80.
3. a. Term. The Term of this Note is 81 months commencing on the Term
Commencement Date as set forth in the Note Acceptance Certificate to this Note
plus any partial period between the Acceptance Date of the Equipment as set
forth in the Note Acceptance Certificate and the Term Commencement Date.
b. Payments. Debtor hereby promises to pay the Principal Amount to
Secured Party and Interest thereon as follows:
(i) Interest only on the Term Commencement Date in an amount equal to
$66.85 multiplied by the number of days between the Acceptance Date up to and
including the Term Commencement Date.
(ii) Thereafter, the Principal Amount, together with interest thereon
at the fixed rate of 8.08% per annum, shall be payable in (check one) [X]
advance/[ ] arrears in consecutive (check one) [X] monthly/[ ] quarterly
Installment Payments commencing on the 1ST day of APRIL, 1999 and thereafter on
the same day of each successive (check one) [X] month/[ ] quarter inclusive
until fully paid, provided that the final installment shall be in the amount of
the unpaid balance hereof together with any accrued interest and late charges.
Interest shall be calculated based on the actual number of days elapsed over
twelve (12) thirty (30) day months.
The amount of each Installment Payment hereunder is as follows:
<TABLE>
<CAPTION>
Amount of Each
Installment Nos. Installment Payment
<S> <C>
1 - 80 $4,750.83
81 All remaining principal
and accrued interest
</TABLE>
c. Debtor agrees to pay Secured Party, in advance, the first Installment
Payment.
d. Secured Party acknowledges receipt from Debtor of a payment in the
amount of $ N/A to be held by Secured Party as a deposit to secure Debtor's
performance hereunder.
4. The Equipment will be located at the locations specified in Schedule A
hereto.
<PAGE>
5. This Note is secured by the Equipment, as set forth in Schedule A hereto
and as further defined in the Security Agreement, the terms and conditions of
which are incorporated herein by reference. This Note is one of the "Notes"
referred to in the Security Agreement.
Dated: March 30, 1999
------------------------------
SECURED PARTY: DEBTOR:
CITIZENS LEASING CORPORATION DM Management Company
By: /s/ John Young By: /s/ Peter J. Tulp
------------------------------ ------------------------------------
Title: Vice President Title: Vice President of Finance
--------------------------- ---------------------------------
<PAGE>
Exhibit 10.5
LOAN AGREEMENT
--------------
THIS AGREEMENT made this 30th day of March, 1999, between DM Management
Company of 25 Recreation Park Drive, Hingham, Massachusetts 02043 (the
"BORROWER") and Belknap County Economic Development Council, Inc., having its
principal office at 64 Court Street, Laconia, NH 03246 (the "LENDER").
WITNESSETH
----------
In consideration of the mutual covenants and agreements contained herein, the
parties agree as follows:
1. PURPOSE AND AMOUNT OF LOAN. LENDER agrees to lend to BORROWER, and the
BORROWER hereby agrees to borrow from LENDER and repay to LENDER or its
assigns the principal sum of $980,000.00 (hereinafter called the Loan)
for the purpose of purchasing specific equipment (the "Equipment") for
the facility located at 100 Birch Pond Drive, Tilton, New Hampshire.
2. INTEREST. Interest on the Loan shall be payable at the rate of 6.25%
per annum on the principal received. Interest shall be payable monthly,
beginning on April 30, 1999.
3. TERM. The term of the Loan shall be thirty six (36) months. All
payments shall be applied first to the payment of interest accrued to
the date of receipt thereof, and the balance, if any, to the reduction
of principal. The Loan may be prepaid at any time without premium or
penalty.
4. THE NOTE. The Loan shall be evidenced by a note in such form as the
LENDER shall require (the "NOTE") and shall be executed by the
BORROWER.
5. RIGHTS AND OBLIGATION. The holders of the Note, and BORROWER, hereby
expressly reserve all right to amend any provision of this Agreement,
to consent to or waive any departure from the provisions of this
Agreement, to amend or consent to or, waive departure from the
provision of the Note, and to release or otherwise deal with any
collateral security for payment of the Note.
6. CONDITIONS OF CLOSING. The obligation of LENDER to make the Loan as
provided in this Agreement is subject to the receipt by LENDER from
BORROWER of the Note in compliance with the terms hereof and, in
LENDER'S sole discretion, to the following additional conditions
precedent:
a. Subject to receipt of copies of Purchase Orders & canceled
checks confirming that at least $2,000,000 in non-CDBG funds
has been committed to the project, in accordance with CDBG
requirements.
b. The truth and accuracy, as of the closing date, of all
representations and warranties made herein by BORROWER and the
receipt by LENDER, of such documents, certificates of officers
of BORROWER, and such other evidence, as LENDER shall have
reasonably requested respecting the meeting of these
conditions.
<PAGE>
2
c. The receipt by the LENDER from BORROWER of copies of all
documents in connection with this Agreement and the
transactions contemplated hereby, or respecting the business
and affairs of BORROWER, that LENDER or its counsel may
reasonably have requested, satisfactory in form and substance
to LENDER and its counsel and certified, when appropriate, by
proper corporate officers and governmental authorities.
d. The payment by the Borrower of all closing costs and expenses
including but not limited to filing fees to perfect an
interest in the collateral for the loan.
7. APPLICATION OF PROCEEDS.
a. BORROWER agrees that it will apply the funds received by it
under this Agreement in accordance with the use of loan
proceeds specified in the loan request as approved by LENDER
and described in Section 1 above.
b. BORROWER agrees to provide additional equity funds to cover
additional project costs incurred as a result of overruns or
unanticipated expenses in financing the outfitting of the
facility (the "Project").
8. LOAN DISBURSEMENT. The LENDER has established for the BORROWER the Loan
amount for the purpose as set forth in Paragraph 1 herein. At the
closing, or shortly thereafter the LENDER will disburse to the BORROWER
the proceeds of the Loan.
9. SECURITY
a. BORROWER shall execute and deliver to LENDER at the closing of
the Loan a security agreement (the "Security Agreement") and
financing statements (the "Financing Statements") giving
LENDER security in all of the items (hereinafter the
"collateral") listed in Schedule A, attached hereto and hereby
made a part hereof, to secure payment of the principal of the
Note, the interest thereon, and any other sums payable by
BORROWER hereunder.
b.
(i) BORROWER represents that as of closing date LENDER
will have a valid first priority security interest in
the specific collateral listed in Schedule A.
(ii) The Security Agreement, Financing Statements, and
Note shall be in form satisfactory to LENDER and
shall provide, among other things, that in the event
of default by the BORROWER in any agreement, covenant
or condition contained in this Loan Agreement, or in
the Note or Security Agreement, LENDER may, at its
option, in addition to all other remedies, take
possession of the property given as security. LENDER
however, shall be under no obligation to exercise
this right and its action in this respect shall be
wholly at its option.
<PAGE>
3
(iii) BORROWER agrees to permit LENDER, until the Note has
been fully repaid with interest, at all reasonable
hours to inspect and audit all books, records,
contractual documents, and all other papers relating
to the business of Borrower; and BORROWER shall give
LENDER free access to the Facility for the purpose of
such inspection or audit and also for the purpose of
determining the condition of the Facility. In
addition, BORROWER shall provide to LENDER annual
financial statements within 120 days after the close
of the fiscal year.
10. INSURANCE. The collateral which is of insurable character will be kept
insured by financially sound and reputable insurers against loss or
damage by fire, explosion and other hazards customarily insured against
by extended coverage for the full insurable value of the property
insured and in any event an amount sufficient to prevent the owner
thereof from becoming a co-insurer, the proceeds thereof including
accrued interest, to be paid to LENDER to satisfy the balance owing on
the Note at the time of the loss, the remainder of the insurance
proceeds to be payable to BORROWER. If the proceeds of the insurance
together with such other funds as are available to BORROWER are
sufficient to pay for the restoration of the premises, BORROWER and
LENDER shall negotiate in good faith for the application of such funds
to such restoration. BORROWER will maintain, with financially sound and
reputable insurers, insurance against other hazards and risks as is
customarily maintained by other companies similarly situated and
operating like businesses including but not limited to Workmen's
Compensation Insurance, public liability and other risks.
All policies of insurance covering the equipment shall provide for
thirty days written minimum cancellation notice to Lender and at
request of Lender copies thereof shall be delivered to and held by it
and after an event of default and while it is continuing Lender may act
as attorney for BORROWER in obtaining, adjusting, settling and
canceling such insurance and endorsing any drafts.
11. REPRESENTATIONS. in order to induce the Lender to make the Loan
hereunder, BORROWER represents and warrants:
a. That BORROWER is not a party to any action, suit or proceeding
pending, or to the knowledge of the BORROWER, threatened at
law or in equity before any Court or administrative officer or
agency which brings into question the validity of the
transaction herein contemplated or is likely to result in any
adverse change in the business or financial condition of the
BORROWER.
b. That the BORROWER is not in default of any obligations,
covenants, or conditions contained in any bond, debenture,
note, or other evidence of indebtedness or any mortgages or
collateral instruments securing the same. The making of this
Agreement and the consummation of the transaction contemplated
herein will not violate any provision of law or result in a
breach or constitute a default under any agreement to which
BORROWER is a part or result in a creation of any lien, charge
or encumbrance upon any of its property or its assets.
c. BORROWER has filed all tax returns which are required to be
filed and has paid or made provision for the payment of all
material taxes which have or
<PAGE>
4
may become due pursuant to said returns or pursuant to any
assessments received by it. No tax liability has been asserted
by the Internal Revenue Service or other taxing agency,
federal, state or foreign, for taxes materially in excess of
those already provided for and the BORROWER knows of no basis
for any such deficiency assessment.
d. The BORROWER shall use all of the proceeds of this Loan for
the purposes stated in Section 1 hereof.
12. CONDITIONS OF LOAN. The making of the Loan hereunder shall be subject
to the following conditions precedent.
a. All loan provisions contained in ATTACHMENT III -REQUIRED LOAN
PROVISIONS are incorporated herein as Schedule B.
b. All of the representations and warranties contained in this
Agreement shall be true and correct on and as of the closing
date.
c. All proceedings taken in connection with the transaction
contemplated by this Agreement and all documents incidental
thereto shall be satisfactory in form, scope and substance to
LENDER'S counsel, and LENDER shall have received copies of all
documents which it or its counsel may reasonably request in
connection with the transaction in form, scope and substance
satisfactory to its counsel.
d. All necessary approvals or consents, if any such approvals or
consents be required of Governmental bodies having
jurisdiction with respect to any construction herein
contemplated, shall have been obtained, and failure to have
obtained such consents shall constitute a default hereunder.
e. There shall be delivered to LENDER a copy of the record of
minutes of the BORROWER's Board of Directors specifically
authorizing its officers to execute this Agreement and all
other documents necessary to the consummation of this
transaction. The record of the minutes of the Board shall be
certified to be true by the Secretary or Assistant Secretary
of BORROWER.
f. All necessary approvals or consents required with respect to
this transaction by any mortgagee or other party having any
interest in the specific collateral shall have been obtained,
and failure to have obtained such consents shall constitute a
default hereunder.
13. AFFIRMATIVE COVENANTS. Until payment in full of the Note and all of the
other payments due LENDER hereunder and the performance of all of the
terms, conditions and provisions of this Agreement, Borrower shall
cause the following to be done:
a. borrower will deliver to LENDER within fifteen (15) days after
any written request therefor from LENDER such information as
may be reasonably necessary to determine whether the BORROWER
is complying with its covenants and agreements contained in
this Loan Agreement or an Event of Default has occurred.
<PAGE>
5
b. BORROWER will punctually pay or cause to be paid the principal
and interest to become due in respect to the Note in
accordance with the terms thereof.
c. BORROWER will, upon demand, promptly pay and discharge all
taxes, assessments or other governmental charges which may
lawfully be levied or assessed on its income or profits or on
any property, real, personal or mixed, belonging to it or upon
any part thereof, and also all lawful claims for labor or
material and supplies, which, if unpaid, might become a lien
or charge upon any such property except that BORROWER shall
not be required to pay any such taxes, assessments, charges,
levies or claims so long as the validity thereof shall be
actively contested in good faith by proper proceedings,
provided that BORROWER shall establish reserves equal to any
such tax, assessment, charge, levy or claim during such
proceedings and such tax, assessment, levy or claim shall be
paid forthwith upon a final adjudication and order to pay from
any court of competent jurisdiction.
d. BORROWER will, upon demand, pay or cause to be paid the
principal and interest on all indebtedness to other lenders
heretofore or hereafter incurred or assumed by it when and as
the same shall become due and payable unless such indebtedness
be renewed or extended, and will observe, perform and
discharge all of the covenants, conditions and obligations
which are imposed on it by any and all agreements securing or
evidencing an encumbrance upon the collateral so as to prevent
an occurrence of any act or omission which under the
provisions thereof may be declared to be a default thereunder
which could result in a lien being placed upon the collateral.
e. BORROWER will at all times cause all of the collateral to be
maintained and kept in such condition and repair that LENDER'S
security will be adequately protected.
f. In the event that any provision of this Agreement or any other
instrument executed at closing or the application thereof to
any person or circumstances shall be declared unenforceable by
a Court of competent jurisdiction, the remainder of such
agreement shall nevertheless remain in full force and effect,
and to this end, the provisions of all covenants, conditions,
and agreements described herein are deemed separate.
g. BORROWER will give LENDER prior notice, in writing, of any
public hearing or meeting before any administrative or other
public agency which may, in any manner, affect the collateral.
h. The BORROWER agrees to diligently pursue the purposes of this
loan.
i. From time-to-time, BORROWER will execute and deliver any and
all further, or other instruments, and perform such acts, as
LENDER or its counsel may reasonably deem necessary or
desirable to confirm and secure to LENDER all rights and
remedies conferred upon LENDER by the terms of this Agreement
and by the Note.
<PAGE>
6
14. NEGATIVE COVENANTS. Until payment in full of the Note and performance of all
the obligations of this Agreement:
a. BORROWER will neither create nor suffer to exist any mortgage,
pledge, lien, charge, or encumbrance, including liens arising
from judgments, on the collateral (except for such liens as
are specifically set forth herein above as exceptions to
BORROWER'S title) which remain on the equipment for more than
ten days, except for taxes not delinquent or being contested
in good faith and by appropriate proceedings.
b. BORROWER will neither sell nor convey nor suffer to be
conveyed any of the equipment in a manner that is not in the
ordinary course of its business during the terms of its
obligation to LENDER.
15. ADDITIONAL COVENANTS.
a. EXPENSES. BORROWER agrees to pay all costs and taxes that
might be imposed or determined to be payable in connection
with the execution, issuance or delivery of the Note, or in
connection with any modification, amendment, or alteration of
the terms and provisions thereof, and to save LENDER and any
other holder of the Note harmless against any and all
liability with respect to the Note, all of which agreements of
BORROWER shall survive payment of the Note.
b. EXPENSES OF COLLECTION OR ENFORCEMENTS. If BORROWER shall at
any time default in making any payment of principal or
interest on the Note, BORROWER agrees that it will, to the
full extent permitted by law, pay to the holder of the Note,
in addition to any other amounts that may be due from BORROWER
to such holder, an amount equal to the costs and expenses of
collection or enforcement incurred by such holder in such
collection. In addition, the LENDER may impose upon the
BORROWER a delinquency charge at the rate of 5% per annum on
each installment of principal or interest not paid on or
before 10 days after such installment is due.
c. EXPENSES OF CORRECTION BY LENDER OF DEFAULT. In the event of
any default by BORROWER in full performance or observance of
any covenant or agreement contained herein or in the Note,
LENDER may, upon 10 days of written notice to BORROWER, and at
LENDER'S sole option (but without any obligation of LENDER to
do so) take such steps as may be necessary or appropriate to
correct or remedy such default in whole or in part, and all
costs and expenses incurred by LENDER in taking such steps
(including reasonable attorney's fee incurred by LENDER and
including any other sums paid or payable by LENDER to third
parties) shall forthwith upon written demand by LENDER be due
and payable by BORROWER to LENDER, with interest thereon
(payable on the first day of each calendar month) from the
time of incurrence thereof by LENDER at the rate of 10% per
annum until paid. In the event LENDER takes any action
provided for in the preceding sentence, the commencement or
taking of such action shall not be deemed to be a waiver by
LENDER of the default of BORROWER or a waiver of any other
available remedy of LENDER by reason of such default.
<PAGE>
7
d. EXPENSES OF AMENDMENTS, WAIVER, CONSENTS, ETC. In the event
BORROWER proposes to take or omit any act or action on the
part of BORROWER prohibited or required by any provision of
this Agreement or the Note, and BORROWER requests Lender to
consent thereto or waive compliance with any such provision,
or in the event BORROWER requests LENDER to consent to any
modification or amendment of this Agreement or the Note then,
in each such case, BORROWER agrees to reimburse or pay to
LENDER any expenses incurred by LENDER in connection with such
consent or waiver, or such modification or amendment, as the
case may be.
16. EVENTS OF DEFAULT. The principal indebtedness evidenced by the Note or
the unpaid balance thereof at the time outstanding shall be due and
payable at the election of the LENDER if any one or more of the
following events (herein called "events of Default") shall occur for
any reason whatsoever, and whether such occurrence shall be voluntary,
involuntary or come about or be effected by operation of law, or
pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or
government body.
a. Default shall be made in payment of any principal of or
interest on the Note when due and payable; or
b. Default shall be made in the performance or observance of any
of the covenants or agreements contained in Section 14 hereof;
c. Any representation or warranty made by the BORROWER herein or
any statement or representations made in any certificate,
statement, or opinion delivered pursuant to this Loan
Agreement shall prove to have been incorrect in any material
respect as of the date when made; or
d. Any obligations of the BORROWER for the payment of borrowed
money (other than its obligations hereunder or under the Note)
shall not be paid at its maturity or any such obligations
shall become or be declared, pursuant to its terms, to be due
and payable prior to the express maturity thereof by reason of
default or other violation of the terms thereof, or
e. Default shall be made in the performance or observance of any
of the other covenants or agreements of BORROWER herein
contained not covered by (a), (b), (c) or (d) above, and such
default shall have continued for a period of 10 days after
notice thereof to the BORROWER by LENDER; or
f. BORROWER shall admit in writing its inability to pay its debts
generally as they become due, make an assignment for the
benefit of creditors, file a petition in bankruptcy, be
adjudicated insolvent or bankrupt, petition or apply to any
tribunal for an appointment of any receiver or trustee thereof
or of any substantial part of its property or commence any
proceedings under any arrangement, readjustment of debt, or
statute of any jurisdiction, whether now of hereafter in
effect; or there is commenced against BORROWER any such
proceedings which remain undismissed for a period of 90 days;
or
<PAGE>
8
g. BORROWER by any act indicates its consent to, approval of, or
acquiescence in any such proceedings or in the appointment of
any receiver or of any trustee for BORROWER with respect to a
substantial part of its property.
h. If any final judgment for the payment of money that is not
fully covered by liability insurance and is in excess of
$100,000.00 shall be rendered against BORROWER and not
discharged within 30 days.
i. If the BORROWER during the term of this loan affects a change
in ownership or control of the business substantially all of
its assets without prior written consent of the LENDER.
17. WAIVER OF NOTICE. The BORROWER hereby expressly waives any requirement
for presentation, demand, protest, notice of protest or other notice or
dishonor of any kind, other than the notice specifically provided for
in this Agreement.
18. NOTICES. All notices, demands and communications provided for herein or
made hereunder shall be delivered, or sent by certified mail, return
receipt requested, addressed in each case as follows, until some other
address shall have been designated in a written notice to the other
party hereto given in like manner.
TO BORROWER:
DM Management Company
25 Recreation Park Drive
Hingham, Massachusetts 02043
TO LENDER:
Belknap County Economic Development Council, Inc.
64 Court Street
Laconia, New Hampshire 03246
and shall be deemed to have been given or made when so delivered or
mailed. Notification of change shall be delivered to LENDER and
BORROWER within ten days of any change affecting this provision.
19. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND OBLIGATIONS. All
representations and warranties contained herein shall survive the
execution and delivery of this Agreement and of the Note, Security
Agreement and Financing Statements, and any investigation at any time
made by the Note, Security Agreement and Financing Statements. All
obligations of the BORROWER under this Loan Agreement, and under the
Note, and the Security Agreement, which have not been fully performed,
paid and satisfied at the time of closing of the Loan, shall survive
the closing.
20. CONSTRUCTION AND AMENDMENT. This Loan Agreement constitutes the entire
agreement between the parties pertaining to the subject matter hereof
and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith. This Agreement
may not be changed, amended or terminated orally but only by agreement
in writing and signed by the party against whom enforcement of any
change, amendment or termination is sought.
<PAGE>
9
21. PAYMENT. The BORROWER will pay to LENDER at its address specified in
Section 18, or at such other address as it may designate in writing,
all amounts payable with respect to the principal of, and interest on,
the Note held by the LENDER.
22. SUCCESSORS AND ASSIGNS. All covenants, agreements, representations and
warranties made herein or in certificates delivered in connection
herewith shall, whether so expressed or not, bind and inure to the
benefit of successors and assigns of the BORROWER and LENDER.
23. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
24. NO WAIVER: REMEDIES CUMULATIVE. No exercise, partial exercise, failure
or delay on the part of the LENDER in exercising any power or right
hereunder, or under the Note, or Security Agreement, shall operate as a
waiver of the power or right, except as specifically provide herein. No
remedy conferred herein or in the Note, or Security Agreement is
intended to be exclusive, to any other remedy, and each and every other
remedy given hereunder or now hereafter existing at law or in equity or
by statute or otherwise, may be sought by the enforcing party.
25. GOVERNING LAW. This Agreement and the Note, the Security Agreement and
the Financing Statements shall be governed by and interpreted in
accordance with the laws of the State of New Hampshire.
LENDER: belknap county economic development council
by: /s/ Eliza Leadbeater Date: 3/30/99
------------------------------------ ------------------
Eliza Leadbeater, Executive Director
BORROWER: DM MANAGEMENT COMPANY
by: /s/ Peter J. Tulp Date: 3/30/99
------------------------------------ ------------------
Peter J. Tulp, VP Fianance,
Corporate Controller
<PAGE>
Page 1
SCHEDULE B
ATTACHMENT III
REQUIRED LOAN PROVISIONS
Belknap County ("Grantee") and Subrecipient Belknap County Economic
Develpment Corp. ("BCEDC") hereby warrant and agree that BCEDC, in its
loan agreement with DM Management, and in any future agreements conveying
or transferring interests in the DM facility, shall include the following
required minimum terms and conditions providing for the performance of
grant-related activities and commitments.
1. LOAN TERMS
1.1 The loan shall provide that BCEDC shall lend, and DM shall
borrow, $980,000 as part of financing package for the purchase of
equipment.
1.2 The loan payments shall be based on a three (3) year
amortization, with interest accruing at a rate not less than one half
of one percent below the interest established by bank financing,
currently existing and subsequently re-negotiated by DM. DM will notify
BCEDC and the NH office of State Planning ("OSP") of the terms of interest
of the company's renegotiated debt.
1.3 Loan payments shall be made in periodic intervals, to be
determined at loan closing, but must include principal and interest.
1.4 The loan shall be secured, at a mininum, by a second collateral
position on specific equipment, in an amount equal to the amount of the
loan extended to DM by BCEDC. Security will be evidenced by appropiate
UCC filings, enumerating the equipment secured.
1.5 DM shall enter into a Promissory Note wherein it agrees to pay to
BCEDC the principal and interest as provided above. It shall require DM
to pay on demand all reasonable costs of collection, including court
costs, service fees and attorneys fees, whether or not any foreclosure
or other action is instituted by the holder in its discretion; and late
charges in the event of any installment payment is not received within
the terms set by the BCEDC.
1.6 DM shall enter into a Security Agreement with BCEDC,
establishing the BCEDC's collateral position, as provided above.
2. EMPLOYMENT COMMITMENTS.
2.1 At the facility, DM will create at least one hundred
twenty-five (125) new full-time equivalent permanent jobs. At least
seventy-five (75) positions, or sixty percent (60%) said jobs created,
will be filled by low and moderate income persons. Said jobs will have
descriptions, entry level wages, and benefits as follows:
2.1.1 Jobs in the "Distribution center" will have entry
level wages of at least $7.25 per hour, with weekly incentive,
in the range of $25 to $65.
2.1.2 Jobs in the "Call center" will have entry level
wages of at least $6.25 per hour, with weekly incentive, of
up to $40 per week.
<PAGE>
Page 2
2.1.3 Employee benefits include medical insurance paid at 75% of
total cost, three weeks combined company-paid vacation and sick leave, paid
disability and life insurance policies, and 401K and stock purchase plans.
2.2 To document DM's existing employees at the start of this Project,
DM shall provide certified payrolls documenting the number of full-time and
full-time equivalent employees and position titles in all of its U.S.
operations and facilities no earlier than May 19, 1998.
2.3 As documentation of and for purposes of monitoring Project
employment commitments, DM shall submit to BCEDC a list of all employees
hired to work at the Property, indicating positions, names, income and
minority or protected class status and date of hire. Documentation of
employees shall also be submitted which shall include copies of current
company payrolls listing job titles and names of employees; copies of family
income verifications signed by new employees; and designation of beneficiary
minority or protected class status of new employees. This documentation shall
be submitted as of the Grant Agreement Effective Date and periodically
thereafter as required by BCEDC.
2.4 For each new employee at time of hiring, DM shall verify and
document family income status and minority or protected class status in
accordance with the federal regulations set forth in Section 5 of the
Gerneral Provisions of the Grant Agreement.
2.5 In the event that DM fails to establish the minimum number of jobs
required to be filled with persons from Low and Moderate Income Families or
other employment commitment as provided in Section 2.1 herein, then DM shall
confer forthwith with BCEDC, the Grantee and OSP and develop a mutually
acceptable plan pursuat to which it will rectify any employment shortfalls
and maintain the required minimums. In such event, DM shall also provide
BCEDC with monthly updates containing information in a form reasonably
satisfactory to BCEDC in order for BCEDC to determine whether it is in
compliance with such plan and its employment obligations as provided herein,
said monthly reports to continue until the employment commitments are
achieved.
2.6 The continued failure of DM to achieve its employment commitments
as required herein for ninety (90) days following the date specified for such
requirment shall constitute an event of default under DM's loan, which shall
give rise to any of the remedies available to BCEDC as set forth therein.
2.7 The parties acknowledge that the obligation of DM to provide the
specified minimum number of jobs for Low and Moderate Income Persons is an
essential component of BCEDC's willingness to make a loan in the Project
Property to DM upon the terms and conditions set forth in such loan
conveyance, or other transfer document. DM agrees that it shall exercise good
faith at all in its hiring practices in order to achieve its job commitments.
2.8 In any loan, or other agreement entered into between BCEDC and DM,
BCEDC shall include, as an event of default, the failure to meet the
employment commitments and reporting requirements as provided herein. Upon
breach of the employment commitments or reporting requirements giving rise to
an event of default BCEDC shall undertake efforts to result in a cure of the
default or shall, where applicable, terminate the loan or other agreement and
seek damages or other relief as appropriate.
3. GENERAL INDEMNIFICATION.
<PAGE>
Page 3
3.1. DM shall indemnify, defend and hold harmless BCEDC, Grantee and OSP
against and from any and all claims, judgments, damages, penalties,
fines, assessments, costs and expenses, liabilities and losses (including
without limitation damages for the loss or restriction on the use of the
facility, sums paid in settlement of claims, attorneys' fees,
consultants' fees and experts' fees) resulting or arising during the term
of the loan:
(1) from any condition of the facility, including any building
structure or improvement thereon;
(2) from any breach or default on the part of DM in the performance
of any mortgage lien or agreement to be performed pursuant to the
terms of the loan, or from any act or omission of DM or any of its
agents, contractors, servants, employees, subloans, licensees or
invitees; or
(3) from any accident, injury or damage whatsoever caused to any
person occurring during the term of the loan, in the facility or
areas adjacent thereto.
4. ENVIRONMENTAL PROTECTION.
4.1 DM shall comply with all material provisions of federal, state and
local laws, regulations, and standards relating to protection or
preservation of the environment that are or may become applicable to its
activities at the facility.
4.2 DM, and any sublessee or assignee of DM, shall be solely
responsible for obtaining at their cost and expense any environmental
permits required for their operations.
4.3 DM shall indemnify, defend and hold harmless BCEDC, Grantee and OSP
against and from all claims, judgments, damages, penalties, fines, costs
and expenses, liabilities and losses (including, without limitation,
diminution in value of the premises, damages for the loss or
restriction on the use of the premises, and sums paid in settlement of
claims, attorney's fees, consultant's fees and experts' fees) resulting
or arising from discharges, emissions, spills, reloans, storage, or
disposal of any hazardous substances or any other action by DM or any
sublessee or assignee of DM, giving rise to BCEDC or Grantee or State
liability, civil or criminal, or responsibility under federal, state or
local environmental laws.
This indemnification includes, without limitation, any and all claims,
judgments, damages, penalties, fines, costs and expenses, liabilities
and losses incurred by BCEDC, Grantee or the State in connection with
any investigation or site conditions, or any remedial or removal action
or other site restoration work required by any federal, state or local
governmental unit or other person for or pertaining to any discharges,
emissions, spills, reloans, storage or disposal of hazardous substances
arising or resulting from any act or omission of BCEDC at the facility.
The provisions of this Section shall survive the expiration or
termination of the loan or other agreements.
5. THE BUSINESS REPRESENTATIONS AND WARRANTIES.
DM shall represent and warrant:
<PAGE>
Page 4
5.1 It has obtained or will obtain all necessary approvals of the plans and
all necessary permits for the operation of its business in Tilton from all
governmental authorities having jurisdiction over the Project;
5.2 Construction of any Improvements for the Project will not violate any
zoning, environmental, subdivision, or land use ordinance, regulation or law;
the Facility conforms and complies in all material respects with covenants,
conditions, restrictions, reservations and zoning, environmental land use, and
other applicable ordinances, laws, rules and regulations, federal, state or
local, affecting the Facility;
5.3 No litigation, claims, suits, orders, investigations or proceedings are
pending or threatened against DM or affecting the Facility or the Project at
law or in equity or before or by any federal, state, municipal or other
governmental instrumentality; there are no arbitration proceedings pending
under collective bargaining agreements or otherwise; and to the knowledge of
DM there is no basis for any of the foregoing;
5.4 DM has filed all federal, state and local tax returns required to be
filed and has paid or made adequate provision for the payment of all federal,
state and local taxes, charges and assessments;
5.5 DM is a duly organized and validly existing Corporation registered in
New Hampshire and in good standing under the laws of this state. DM has the
power and authority to own its properties and to carry on DM as now being
conducted and has the power to execute and deliver, and perform its
obligations under the Loan Documents;
5.6 The execution and delivery and performance of DM of its obligations
under the Loan Documents have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any court or
other agency of government, or any indenture, agreement or other instrument
to which DM is a party, or by which it is bound, or be in conflict with
result in a breach of, or constitute a default under, or, except as may be
provided therein, result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of
DM pursuant to any such indenture, agreement or instrument. DM is not
required to obtain any consent, approval or authorization form, or to file
any declaration of statement with, any governmental instrumentality or other
agency in connection with or as a condition to the execution, delivery or
performance of the Loan Documents;
5.7 DM is not contemplating either the filing of a petition under any state
or federal bankruptcy or insolvency laws or the liquidating of all or a major
portion of its property, and has no knowledge of any person contemplating the
filing of any such petition against it.
5.8 No statement of fact made by or on behalf of DM in any of the Loan
Documents or in any certificate, exhibit or schedule furnished to BCEDC
pursuant thereto, contains any untrue statement of a material fact or omits
to state any material fact necessary to make statements contained therein or
herein not misleading. There is no fact or circumstance presently known to DM
that has not been disclosed to BCEDC that when made materially affects
adversely, nor as far as DM can foresee, will materially affect adversely DM,
operations or considerations (financial or otherwise) of DM.
5.9 DM has complied in all material respects with all applicable statutes,
regulations and rules of federal, state and local governments in respect to
the conduct of its business and operations, including without limitation all
applicable environmental statutes, regulations and rules and all
<PAGE>
Page 5
statutes, regulations and rules and all statutes, regulations and rules
pertaining to the manufacturing of its products.
5.10 No Event of Default has occurred and is continuing under the Loan
Documents and no event or condition which would, upon notice of
expiration of any applicable cure, constitute an Event of Default has
occurred and is continuing; DM is not in default under any note or other
evidence of indebtedness or other obligations for borrowed money or any
mortgage, deed to trust, indenture, loan agreement or other agreement
relating thereto.
5.11 All representations, warranties and obligations of DM as provided
in any loan documents to include the employment commitments shall be
applicable to its successors and assigns.
Each of the foregoing representations and warranties is true and correct
as of the date of the loan Documents and DM shall indemnify and hold
harmless Grantee and OSP from and against any loss, damage, or liability
attributable to the breach thereof, including any and all fees and
expenses incurred in the defense or settlement of any claim arising
therefrom against Grantee or OSP.
6. ADDITIONAL EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an additional Event of Default under the Loan Documents:
6.1 DM's failure to comply with the employment reporting requirements
as specified herein;
6.2 DM's failure to meet the employment commitments as specified herein;
6.3 Any attempt by DM to assign its rights under the Loan Documents or
any advance made or to be made hereunder or any interest therein, or if
the Secured Property is conveyed or encumbered in any way without the
prior written consent of Grantee and OSP;
6.4 The facility is materially damaged or destroyed by fire or other
casualty or cause and the insurance proceeds therefrom are inadequate to
rebuild or restore the facility to its condition immediately prior to
such casualty;
6.5 Any representation or warranty made herein or in any report,
certification, or other instrument furnished in connection with the Loan
Documents or any advances of Grant funds made hereunder, by or in behalf
of DM shall prove to be false or misleading in any material respect when
made;
6.6 Any mechanics', laborers', materialmen's or similar statutory lien,
or any notice thereof, shall be filed against DM and shall not be
discharged within thirty (30) days of such filing;
6.7 DM shall (i) apply for or consent to the appointment of a receiver,
trustee or liquidator of it or any of its property, (ii) admit in
writing its inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated as
bankrupt or insolvent or (v) file a voluntary petition in bankruptcy, or
a petition or answer seeking reorganization or an arrangement with
creditors or to take advantage of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any
such law;
<PAGE>
Page 6
6.8 A petition, order, judgement or decree shall be entered, without the
application, approval or consent of DM by any court of competent
jurisdiction, approving a petition seeking reorganization or approving
the appointment of a receiver, trustee or liquidator of DM of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of thirty (30) days;
6.9 The dissolution, termination of existence, merger or consolidation
of DM or a sale of all or substantially all assets of DM out of the
ordinary course of business without the prior written consent of BCEDC;
and
6.10 Failure to remedy an ineligible expenditure of grant funds or to
reimburse BCEDC, Grantee or OSP for any ineligible costs which are paid
from Grant funds.
<PAGE>
Exhibit 10.6
SECURITY AGREEMENT
DATE: March 30, 1999
DM Management Company, of 25 Recreation Park Drive, Hingham,
Massachusetts (hereinafter called the DEBTOR), for valuable consideration,
receipt whereof is hereby acknowledged, hereby grants to Belknap County Economic
Development Council, Inc. , a non-profit corporation, organized and existing
under the laws of the State of New Hampshire and having a principal place of
business at 64 Court Street, Laconia, New Hampshire (hereinafter called the
SECURED Party), a security interest in the following property (including any
hereafter delivered to DEBTOR) and any and all additions, accessions, and
substitutions thereto or therefor and any or all proceeds thereof, viz: Specific
business assets located at: its Tilton, New Hampshire facility (the premises),
as set forth in SCHEDULE A attached and made a part hereof; to secure Debtors
obligations under the Loan Agreement between DEBTOR and SECURED PARTY of even
date herewith (the "Loan Agreement").
DEBTOR hereby warrants and covenants:
1. That except for the security interest granted hereby DEBTOR is, or to the
extent that this agreement states that the Collateral is to be acquired
after the date hereof, will be, the owner of the Collateral free from any
adverse lien, security interest or other encumbrance; and that DEBTOR will
defend the Collateral against all claims and demands of all persons, at any
time claiming the same or any interest;
2. That the Collateral is not used or bought primarily for personal, family or
household purposes;
3. That the Collateral will be kept at DEBTOR's place of business at 100 Birch
Pond Drive, Tilton, New Hampshire; that DEBTOR will promptly notify SECURED
PARTY of any change in the location of the Collateral within said State;
and that DEBTOR will not remove the Collateral from said State without the
written consent of SECURED PARTY;
4. That no Financing Statement covering any Collateral or any proceeds hereof
is on file in any public office, and at the request of SECURED PARTY,
DEBTOR will join with SECURED PARTY in executing one or more Financing
Statements pursuant to the Uniform Commercial Code in form satisfactory to
SECURED PARTY and will pay the cost of filing the same in all public
offices wherever filing is deemed by SECURED PARTY to be necessary or
desirable;
5. That DEBTOR will not sell or offer to sell or otherwise transfer the
Collateral or any interest therein without the written consent of SECURED
PARTY, except within the normal course of its business;
6. That DEBTOR will have and maintain insurance at all times with respect to
all Collateral against risks of fire (including so-called extended
coverage), theft, and other risks as SECURED PARTY may require, containing
such terms, in such form, for such periods and written by such companies as
may be satisfactory to SECURED PARTY, such insurance to be payable to
SECURED PARTY and DEBTOR as their interests may appear; that all policies
of insurance shall provide for ten days' written minimum
<PAGE>
2
cancellation notice to SECURED PARTY and at request of SECURED PARTY
copies of such policies shall be delivered to and held by it.
7. That DEBTOR will keep the Collateral free from any adverse lien, security
interest or encumbrance except those set forth on Exhibit A hereto
("permitted Encumbrances") and in good order and repair and will not waste
or destroy the Collateral or any part thereof; that DEBTOR will not use the
Collateral in violation of any statute or ordinance; that SECURED PARTY may
examine and inspect the Collateral at any time, wherever located; and that
the security interest set forth in this Security Agreement does not violate
the provisions of any prior security agreements;
8. That DEBTOR will pay promptly when due all taxes and assessments upon the
Collateral or for its use or operation or upon this agreement or upon any
note or notes evidencing the Obligations;
9. At all reasonable times, and with reasonable notice, the DEBTOR will permit
the SECURED PARTY, its accountants, auditors, or attorneys to make such
examination and inspection of the DEBTOR's books, accounts, orders,
correspondence and other records, relating to the collateral including the
making of copies thereof or extracts therefrom, as the SECURED PARTY may
request;
10. At the request of the SECURED PARTY, the DEBTOR will execute and deliver to
the SECURED PARTY such further documents and instruments of assurance and
will do such further acts as the SECURED PARTY may deem necessary or
advisable to assure to the SECURED PARTY all rights given or intended to be
given to the SECURED PARTY hereby or hereunder;
At its option, and upon five (5) days prior written notice to Debtor,
except for Permitted Encumbrances, SECURED PARTY may discharge taxes, liens or
security interests or other encumbrances at any time levied or placed on the
Collateral, and may pay for insurance on the Collateral and may pay for the
maintenance and preservation of the Collateral. DEBTOR agrees to reimburse
SECURED PARTY on demand for any payment made or any expense incurred by SECURED
PARTY pursuant to the foregoing authorization.
Until an event of default under the Loan Agreement shall occur and be
continuing, DEBTOR may have possession of the Collateral and use it in any
lawful manner not inconsistent with this agreement and not inconsistent with any
policy of insurance thereon.
DEBTOR shall be in default under this agreement upon the occurrence of
any event of default specified in the Loan Agreement.
Upon the occurrence and continuance of such an event of default SECURED
PARTY may declare all obligations secured hereby immediately due and payable and
shall have the remedies of a secured party under the Uniform Commercial Code.
SECURED PARTY may require DEBTOR to assemble the Collateral and make it
available to SECURED PARTY at a place to be designated by SECURED PARTY which is
reasonably convenient to both parties. Whenever notification with respect to the
sale or other disposition of the Collateral is required by law, such
notification of the time and place of public sale, or of the date after which a
private sale or other intended disposition is to be made, shall be deemed
reasonable if mailed, postage prepaid, addressed to DEBTOR at the mailing
address hereinabove given at least ten (10) days before the time of such public
sale or the date after which any such private sale or other intended disposition
is to be made, as
<PAGE>
3
the case may be. Expenses of retaking, holding, preparing for sale, selling or
the like shall include SECURED PARTY's reasonable attorneys' fees and legal
expenses.
No waiver by SECURED PARTY of any default shall operate as a waiver of
any other default or of the same default on a future occasion.
All rights of SECURED PARTY hereunder shall inure to the benefit of its
successors and assigns; and all obligations of the DEBTOR shall bind its
successors or assigns.
Schedule A may be amended hereafter by the submission from DEBTOR to
SECURED PARTY of a list of additional equipment purchased with proceeds of the
funds borrowed under the Loan Agreement.
This agreement shall become effective when it is signed by DEBTOR. This
agreement and all rights and obligations hereunder, including matters of
construction, validity and performance, shall be governed by the law of New
Hampshire.
Executed on the day and year first above written.
DEBTOR: DM Management Company
Steven D. Epstein /s/ Peter J. Tulp
- ------------------------ ---------------------------------------
witness Peter J. Tulp, VP Finance, Corporate
Controller
SECURED PARTY: Belknap County
Economic Development Council, Inc.
Steven D. Epstein /s/ Eliza Leadbeater
- ------------------------ ---------------------------------------
witness By: Eliza Leadbeater
Its: Executive Director
Hereunto Duly Authorized
<PAGE>
DM MANAGEMENT
BELKNAP CLY LOAN:
ASSETS SPECIFICALLY IDENTIFIED THRU 3/2/99
SCHEDULE A
<TABLE>
<CAPTION>
Asset Purchased From Invoice # Amount Total
----- -------------- --------- ------ -----
<S> <C> <C> <C> <C>
[ILLEGIBLE]
ergonomic workstations ergogenic technology quote 9807-03, invoice 4345,4348
26 PR 770 CD-2 workstations @ $1,197 each 4355 $ 31,122.00
14 (of 44 ttl) PR 770 CD-2 workstations @ $1,197 each quote 9807-00 add $ 16,758.00 [ILLEGIBLE]
delivery on above roberts white glove services 102058051 $ 1,406.00
-----------
$ 49,286.00 $ 49,288.00
-----------
-----------
$ 80,886.00
</TABLE>
<PAGE>
Exhibit A
i) Liens for taxes not yet due or liens for taxes being contested in
good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of DEBTOR in accordance with generally
accepted accounting principles;
ii) Liens on property or assets of DEBTOR that were incurred in the
ordinary course of business, such as landlords' and mechanics' liens and
other similar liens arising in the ordinary course of business and that (x)
do not in the aggregate materially detract from the value of the property or
assets subject thereto or materially impair the use thereof in the operation
of the business of DEBTOR or (y) that are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property or assets subject to such lien; and
iii) Subordinated liens of Citizens Bank of Massachusetts
<PAGE>
UNIFORM COMMERCIAL CODE -- FINANCING STATEMENT -- FORM UCC-1
IMPORTANT -- READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM.
This FINANCING STATEMENT is presented to a filing officer for filing pursuant
to the Uniform Commerical Code.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Debtor(s) (Last Name First) and 2. Secured Party(ies) Name(s) 3. For Filing Officer: Date, Time,
Address(es). and Address(es). No. Filing Office
DM Management Company Belknap County Economic
25 Recreation Park Drive Development Council
Hingham, MA 02043 64 Court Street
Laconia, NH 03246
/ / The Debtor is a Transmitting Utility
- -------------------------------------------------------------------------------------------------------------------------------
4. This Financing Statement covers the following types (or items) of property:
Equipment more particularly described in Schedule A attached and
located at:
100 Birch Pond Drive
Tilton, NH 03276
-------------------------------------------------------------------------------
/ / Products of the Collateral are 5. Name of a Record Owner: Birch Pond Realty Corporation
also covered.
- -------------------------------------------------------------------------------------------------------------------------------
6. (a) / / The described crops are 7. Describe Real Estate Here: 8. / / This Statement is to be indexed
growing or are to be grown on: - in the Real Estate Records
(b) / / The described goods are or are to
be fixtures on: -
(c) / / The lumber to be cut or minerals
or the like (including oil and gas)
is on: -
* Describe Real Estate in Box 7.
- -------------------------------------------------------------------------------------------------------------------------------
9. This Statement is filed without the debtor's signature to perfect a security interest in collateral (see instruction No. 9)
- -------------------------------------------------------------------------------------------------------------------------------
10. Filed with: NH Secretary of State 11. No. of Additional Sheets Presented: 1
- -------------------------------------------------------------------------------------------------------------------------------
DM Management Company Belknap County Economic Development Council
------------------------------------------- ------------------------------------------------------
By: /s/ Peter J. Tulp By: /s/ Eliza Leadbeder
---------------------------------------- ---------------------------------------------------
Signature(s) of Debtor(s) or Assignor(s) Signature(s) of Secured Party(ies) or Assignee(s)
STATE OF NEW HAMPSHIRE
(1) FILING OFFICER COPY -- ALPHABETICAL
DM Management Company Belknap County Economic
25 Recreation Park Drive Development Council
Hingham, MA 02043 64 Court Street
Laconia, NH 03246
/ / The Debtor is a Transmitting Utility
- -------------------------------------------------------------------------------------------------------------------------------
4. This Financing Statement covers the following types (or items) of property:
Equipment more particularly described in Schedule A attached and located at:
100 Birch Pond Drive
Tilton, NH 03276
-------------------------------------------------------------------------------
/ / Products of the Collateral are 5. Name of a Record Owner: Birch Pond Realty Corporation
also covered.
- -------------------------------------------------------------------------------------------------------------------------------
6. (a) / / The described crops are 7. Describe Real Estate Here: 8. / / This Statement is to be indexed
growing or are to be grown on: - in the Real Estate Records
(b) / / The described goods are or are to
be fixtures on: -
(c) / / The lumber to be cut or minerals
or the like (including oil and gas)
is on: -
* Describe Real Estate in Box 7.
- -------------------------------------------------------------------------------------------------------------------------------
9. This Statement is filed without the debtor's signature to perfect a security interest in collateral (see instruction No. 9)
- -------------------------------------------------------------------------------------------------------------------------------
10. Filed with: Belknap County Registry of Deeds 11. No. of Additional Sheets Presented: 1
- -------------------------------------------------------------------------------------------------------------------------------
DM Management Company Belknap County Economic Development Council
------------------------------------------- ------------------------------------------------------
By: /s/ Peter J. Tulp By: /s/ Eliza Leadbeder
---------------------------------------- ---------------------------------------------------
Signature(s) of Debtor(s) or Assignor(s) Signature(s) of Secured Party(ies) or Assignee(s)
STATE OF NEW HAMPSHIRE
</TABLE>
<PAGE>
UNIFORM COMMERCIAL CODE -- FINANCING STATEMENT -- FORM UCC-1
IMPORTANT -- READ INSTRUCTIONS ON BACK BEFORE FILLING OUT FORM.
This FINANCING STATEMENT is presented to a filing officer for filing pursuant
to the Uniform Commerical Code.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Debtor(s) (Last Name First) and 2. Secured Party(ies) Name(s) 3. For Filing Officer: Date, Time,
Address(es). and Address(es). No. Filing Office
DM Management Company Belknap County Economic
25 Recreation Park Drive Development Council
Hingham, MA 02043 64 Court Street
Laconia, NH 03246
/ / The Debtor is a Transmitting Utility
- -------------------------------------------------------------------------------------------------------------------------------
4. This Financing Statement covers the following types (or items) of property:
Equipment more particularly described in Schedule A attached and
located at:
100 Birch Pond Drive
Tilton, NH 03276
-------------------------------------------------------------------------------
/ / Products of the Collateral are 5. Name of a Record Owner: Birch Pond Realty Corporation
also covered.
- -------------------------------------------------------------------------------------------------------------------------------
6. (a) / / The described crops are 7. Describe Real Estate Here: 8. / / This Statement is to be indexed
growing or are to be grown on: - in the Real Estate Records
(b) / / The described goods are or are to
be fixtures on: -
(c) / / The lumber to be cut or minerals
or the like (including oil and gas)
is on: -
* Describe Real Estate in Box 7.
- -------------------------------------------------------------------------------------------------------------------------------
9. This Statement is filed without the debtor's signature to perfect a security interest in collateral (see instruction No. 9)
- -------------------------------------------------------------------------------------------------------------------------------
10. Filed with: Town of Tilton 11. No. of Additional Sheets Presented: 1
- -------------------------------------------------------------------------------------------------------------------------------
DM Management Company Belknap County Economic Development Council
------------------------------------------- ------------------------------------------------------
By: /s/ Peter J. Tulp By: /s/ Eliza Leadbeder
---------------------------------------- ---------------------------------------------------
Signature(s) of Debtor(s) or Assignor(s) Signature(s) of Secured Party(ies) or Assignee(s)
STATE OF NEW HAMPSHIRE
(1) FILING OFFICER COPY -- ALPHABETICAL
</TABLE>
<PAGE>
NOTE
Loan No.: CDBG9901
Date: March 30, 1999
Maturity Date: March 30, 2002
Loan Amount: $980,000.00
For Value received, the undersigned ("Maker") promises to pay to the
order of the Belknap County Economic Development Council, Inc. ("BCEDC") at its
offices at 64 Court Street, Laconia, New Hampshire or at holder's option, at
such other place as may be designated from time-to-time by the holder, the
principal sum of Nine hundred eighty thousand dollars ($980,000.00) with
interest on unpaid principal balance computed at the rate of 6.25% per annum,
payment to be made in installments as follows:
PRINCIPAL AND INTEREST, each in the amount of $29,924.63 payable
monthly, beginning one (1) month from date hereof, and the balance of
principal and interest payable three (3) years from date hereof, at
which time any accrued interest and principal shall be due and payable.
The aforesaid monthly payments are to be applied first to interest at
the rate specified on the unpaid amount of said loan, accrued to date
of receipt of said payment, and the balance of each monthly payment, if
any, shall be applied on account of principal. The Maker reserves the
right to prepay the principal and interest in full or in part without
penalty.
In addition, the Holder may impose on the Maker a delinquency charge at
the rate of 5% per annum on any installment of principal and interest not paid
on or before 10 days after such installment is due.
Default in any payment due hereunder, or in the occurrence of an event
of default under the Loan Agreement executed in connection herewith shall, at
the option of Holder, constitute a default under this note and should BORROWER
fail to cure any such default within ten days after written notice of default
from Holder, the entire unpaid principal sum and all unpaid accrued interest
shall immediately become due and payable. If suit is brought to collect this
note, Holder shall be entitled, upon final judgment in its favor, to collect all
reasonable costs and expenses of suite, including but not limited to reasonable
attorney's fees.
This note is issued pursuant to and is entitled to the benefits of a
Loan Agreement between BORROWER and LENDER dated this 30th day of March 1999, as
the same may be amended, or supplemented from time-to-time.
This note shall be governed by and construed in accordance with the
laws of the State of New Hampshire.
<PAGE>
DM Management Company
Loan No. CDBG9901
Page 2
This note is secured by a first security interest on specific assets
(the "Collateral") of the Maker as listed in Schedule A of the Security
Agreement between the Maker and BCEDC.
The security rights of Holder and its assigns hereunder shall not be
impaired by Holder's sale, hypothecation or rehypothecation of any item of the
Collateral, or by any indulgence, including but not limited to (1) any renewal,
extension or modification which Holder may grant with respect to the
indebtedness under this note or any part thereof, (b) any surrender, compromise,
release, renewal, extension, exchange, or substitution which Holder may grant in
respect of the Collateral, or (c) any indulgence granted in respect of any
endorser, guarantor, or surety. The purchaser, assignee, transferee, or pledgee
of this Note, the Collateral, and any other document (or any of them), sold
assigned, transferred, pledged, or repledged, shall forthwith become vested with
and entitled to exercise all the powers and rights given by this Note to Holder
as if said purchaser, assignee, transferee, or pledgee were originally named as
Payee in the Note.
DM MANAGEMENT COMPANY
BY: /s/ PETER J. TULP
-------------------------------------
Peter J. Tulp
ITS: VP Finance, Corporate Controller
Duly Authorized
<PAGE>
Exhibit 10.8
THIRD AMENDED AND RESTATED LOAN AGREEMENT
This Third Amended and Restated Loan Agreement made as of May 4, 1999,
by and between Citizens Bank of Massachusetts (herein "BANK"), and DM Management
Company, a Delaware corporation (herein "BORROWER").
Reference is made to that certain Loan Agreement made as of June 5,
1997 by and between BANK and BORROWER, as the same has been amended and restated
in (i) a certain Amended and Restated Loan Agreement dated as of October 31,
1997, as amended, and (ii) a certain Second Amended and Restated Loan Agreement
dated March 5, 1998, as amended by a certain First Amendment to Second Amended
and Restated Loan Agreement dated as of June 30, 1998, a certain Second
Amendment to Second Amended and Restated Loan Agreement dated as of September 4,
1998, a certain Third Amendment to Second Amended and Restated Loan Agreement
dated September 4, 1998, a certain Fourth Amendment to Second Amended and
Restated Loan Agreement dated as of December 31, 1998 and a certain Fifth
Amendment to Second Amended and Restated Loan Agreement dated as of March 30,
1999. (Collectively the 'LOAN AGREEMENT")
WITNESSETH:
WHEREAS, BORROWER wishes to borrow additional sums from the BANK and
wishes certain other accommodations; and
WHEREAS, the BANK is willing, on the terms, provisions and conditions
contained herein, to extend additional credit and accommodations subject to the
terms, conditions and provisions herein set forth;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereby agree that effective as of the date hereof, the
Loan Agreement is hereby further amended and restated as follows:
ARTICLE I
DEFINITIONS
1.01 Capitalized words and phrases in this Agreement shall have the
meanings ascribed to them in this Article.
"ACCOUNTANTS" shall mean the independent certified public accountants
of recognized national standing, who are selected and engaged by the BORROWER
and who are reasonably satisfactory to the BANK. Any one of the so-called "Big
5" national accounting firms shall be satisfactory to the BANK.
<PAGE>
"ADJUSTED LIBOR RATE" shall mean, for any INTEREST PERIOD, an interest
rate per annum determined by the BANK pursuant to the following formula:
ADJUSTED LIBOR RATE = LIBOR BASE RATE
-------------------
1.00 - RESERVE RATE
"ADVANCE(S)" shall mean the amounts loaned by the BANK to the BORROWER
under Section 2.01 which shall be either LIBOR RATE ADVANCES or PRIME RATE
ADVANCES.
"AVAILABILITY PERIOD" shall mean the period commencing on the CLOSING
DATE and ending on the TERMINATION DATE.
"BANK" shall mean Citizens Bank of Massachusetts and is successors and
assigns.
"BANK DEPOSITS" shall mean all sums of money on deposit to the credit
of the BORROWER at any bank, trust company, national banking association,
savings bank, savings and loan association or similar institution.
"BANKING DAY" shall mean any BUSINESS DAY on which banks are open for
business in Boston, Massachusetts.
"BANK'S OFFICE" shall mean the office of the BANK located at 28 State
Street, Boston, Massachusetts 02109 or such other office of the BANK as the BANK
shall, from time to time, designate by notice to the BORROWER.
"BORROWER" is defined in the Recitals.
"BORROWING" shall mean the making of an ADVANCE.
"BORROWING DATE" shall mean that date on which an ADVANCE is made.
"BORROWING REQUEST" shall mean a request by the BORROWER for a
BORROWING.
"BUSINESS DAY" shall mean a calendar day other than (a) a Saturday,
Sunday or legal holiday in The Commonwealth of Massachusetts, and (b) a calendar
day on which banks are not authorized to be open for business in Boston,
Massachusetts.
"CAPITALIZED LEASE OBLIGATION(S)" shall mean all rental obligations
which, under GAAP, are required to be capitalized on the books of the BORROWER
in each case taken at the amount thereof accounted for as indebtedness (net of
interest expense) in accordance with GAAP.
-2-
<PAGE>
"CATALOG(S)" shall mean the CATALOGS and other written offerings of
INVENTORY made by the BORROWER to the general public from time to time and all
rights therein.
"CLOSING" is defined in Article XVI.
"CLOSING DATE" shall mean April 22, 1999.
"CODE" shall mean the Internal Revenue Code of 1986, as amended,
supplemented or modified from time to time, and all regulations issued
thereunder.
"COLLATERAL" shall mean all of BORROWER'S personal property, tangible
or intangible, including without limitation all accounts, BANK DEPOSITS,
DOCUMENTS, INVENTORY, GENERAL INTANGIBLES, contracts, CUSTOMER LISTS, INVESTMENT
PROPERTY, LEASES, EQUIPMENT, CATALOGS, rights to the trademarks "Nicole Summers"
and "J. Jill, Ltd.", and other property described in the SECURITY AGREEMENT,
whether now existing or hereafter arising or acquired and wherever located, and
all proceeds thereof, including, without limitation, all proceeds of fire and
other insurance.
"CONTINGENT OBLIGATIONS" shall mean any undertaking by the BORROWER
guaranteeing or in effect guaranteeing any indebtedness, leases, dividends or
other obligations for borrowed money ("PRIMARY OBLIGATIONS") of any other PERSON
in any manner, whether directly or indirectly, including, without limitation,
any obligations, whether or not contingent: (a) to purchase any such PRIMARY
OBLIGATION or any property constituting direct or indirect security therefor;
(b) to advance or supply funds(i) for the purchase or payment of any such
PRIMARY OBLIGATIONS; or (ii) to maintain working capital or equity capital of
such PERSON or otherwise to maintain the net worth or solvency of such PERSON;
(c) to purchase property, securities or services primarily for the purpose of
assuring the owner of any such PRIMARY OBLIGATION of the ability of such PERSON
to make payment of such PRIMARY OBLIGATION; or (d) otherwise to assure or hold
harmless the owner of such PRIMARY OBLIGATION against loss in respect thereof;
provided, however, that the term "CONTINGENT OBLIGATION" shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business.
"CONVERSION DATE" shall mean any date on which pricing of the REAL
ESTATE LOAN shall change by reason of an election by the BORROWER or a provision
of this Agreement.
"COST OF FUNDS REDEPLOYMENT is defined in Section 7.23.
"CREDIT BALANCE" shall mean the aggregate unpaid amount of ADVANCES
under Article II and L/C BALANCE outstanding from time to time.
-3-
<PAGE>
"CURRENT FINANCIALS" are described in Section 9.10 hereof.
"CUSTOMER LISTS" shall mean each and all of the mailing lists to which
CATALOGS are sent from time to time which BORROWER represents to BANK are
proprietary to it regardless of the media on which the same are stored.
"DEBT SERVICE COVERAGE" shall hereafter mean the ratio of (A) the
aggregate of the net earnings of BORROWER before interest expense, taxes,
depreciation, amortization and rent and lease expense, but specifically
including interest income; less (i) UNFINANCED CAPITAL EXPENDITURES, less (ii)
SHAREHOLDER PAYMENTS, less (iii) taxes paid in cash; to (B) the aggregate of (i)
interest paid and (ii) the amounts of all maturities of long-term debt falling
due in the twelve (12) month period succeeding the calculation date, including
principal payments due on the REAL ESTATE LOAN plus (iii) rent and lease
expense. Long Term Debt is amounts due in whole or in part more than 12 months
after the incurring thereof; however, for the purposes of calculating this
covenant the REVOLVING LOANS are specifically excluded from Long Term Debt.
"DEFAULT" shall mean the occurrence of an event which with the passage
of time or the requiring of the giving of notice, or both, may become an EVENT
OF DEFAULT.
"DOCUMENTS" shall mean a document of title as defined in the UCC.
"DOLLARS" or "$" shall mean lawful currency of the United States of
America.
"ENVIRONMENTAL LAW(S)" shall mean any and all present and future
federal, state and local laws, rules and regulations, and any orders and
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic (all as
defined in such applicable laws, rules and regulations) or HAZARDOUS MATERIAL
into the environment.
"EQUIPMENT" shall mean and include, without limitation, all of
BORROWER'S tangible personal property utilized in the conduct of BORROWER'S
business, all replacements and substitutions therefor, and all accessions
thereto, and including, without in any way limiting the generality of the
foregoing, all of BORROWER'S machinery, equipment, furniture, trade fixtures and
motor vehicles, but excluding therefrom INVENTORY, as said term is defined in
the CODE.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, supplemented or modified from time to time, and all regulations
issued thereunder.
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"EVENT OF DEFAULT" is defined in Article XII.
"EXCESS CASH FLOW" shall mean funds obtained from sources other than
BORROWINGS.
"FINANCING AGREEMENTS" shall mean, collectively, this Third Amended and
Restated Loan Agreement, the THIRD REPLACEMENT REVOLVING NOTE, the REAL ESTATE
NOTE, the REAL ESTATE MORTGAGE, each L/C APPLICATION, and the SECURITY
AGREEMENT, all as amended from time to time and all other agreements executed
and delivered by the BORROWER hereunder, including any additional agreements
granting a LIEN, and all other agreements of every kind and nature now or
hereafter in force between the BANK and the BORROWER relating to the
OBLIGATIONS, as the same may have been or may, from time to time, be amended or
supplemented.
"FISCAL YEAR" shall mean the fiscal year of the BORROWER.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time and applied with respect to the preparation of financial
statements.
"GENERAL INTANGIBLES" shall mean the BORROWER'S general intangibles, as
defined in the CODE, and all proceeds thereof, and shall also include goodwill,
trade secrets, computer programs, CUSTOMER LISTS, trade names, trademarks,
patents, rights to tax refunds of every kind and nature and proceeds of each of
the foregoing.
"HAZARDOUS MATERIAL" shall mean any chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any ENVIRONMENTAL LAW.
"INDEBTEDNESS" shall mean, at any time, all items which would, in
conformity with GAAP, be classified as liabilities on a consolidated balance
sheet of BORROWER as at such time, and in any event including (a) indebtedness
arising under acceptance facilities, (b) CAPITALIZED LEASE OBLIGATIONS, (c)
CONTINGENT OBLIGATIONS and (d) liabilities secured by any LIEN on any property
even though the owner of such property has not assumed or otherwise become
liable for the payment thereof.
"INTEREST PAYMENT DATE" shall mean:
(a) With respect to PRIME RATE ADVANCES, the last day of each month,
commencing with the last day of the month in which the first PRIME RATE ADVANCE
is made.
(b) With respect to LIBOR RATE ADVANCES:
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(i) the last day of each INTEREST PERIOD; and
(ii) if the applicable INTEREST PERIOD is more than three
months, the last day of each three-month period during such INTEREST PERIOD.
(c) With respect to the REAL ESTATE LOAN, the last day of each monthly
payment of principal, commencing with the first such payment.
"INTEREST PERIOD" shall mean:
(a) With respect to each LIBOR RATE ADVANCE: (i) initially, the period
(A) commencing on the BORROWING DATE of such ADVANCE, and (B) ending one, two,
three or six months thereafter, as the case may be, as determined in accordance
with the provisions of this Agreement; and (ii) thereafter, each subsequent
INTEREST PERIOD for such LIBOR RATE ADVANCE shall begin on the last day of the
immediately preceding INTEREST PERIOD and shall end one, two, three or six
months thereafter, as the BORROWER may select pursuant to Section 2.01; provided
that (A) any INTEREST PERIOD which would otherwise end on a day which is not a
BANKING DAY shall end and the next INTEREST PERIOD shall commence on the next
preceding day which is a BANKING DAY as determined conclusively by the BANK in
accordance with the then current bank practices in London, England, and (B) any
INTEREST PERIOD for a LIBOR RATE ADVANCE that would otherwise extend beyond the
TERMINATION DATE shall end on the TERMINATION DATE.
(b) With respect to each PRIME RATE ADVANCE: the entire period during
which such advance is unpaid.
(c) With respect to the REAL ESTATE LOAN with respect to any period
when LIBOR RATE PRICING is not in effect, the entire period during which any
pricing other than LIBOR RATE PRICING is in effect.
(d) With respect to the REAL ESTATE LOAN with respect to any period
that LIBOR RATE PRICING is in effect: (i) initially, the period (A) commencing
on the BORROWING DATE of such period, and (B) ending one, two, three or six
months thereafter, as the case may be, as determined in accordance with the
provisions of this Agreement; and (ii) thereafter, each subsequent INTEREST
PERIOD for such LIBOR RATE PRICING shall begin on the last day of the
immediately preceding INTEREST PERIOD and shall end one, two, three or six
months thereafter, as the BORROWER may select pursuant to Section 2.01; provided
that (A) any INTEREST PERIOD which would otherwise end on a day which is not a
BANKING DAY shall end and the next INTEREST PERIOD shall commence on the next
preceding day which is a BANKING DAY as determined conclusively by the BANK in
accordance with the then current bank practices in London, England, and (B) any
INTEREST PERIOD during which
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LIBOR RATE PRICING is in effect that would otherwise extend beyond the MATURITY
DATE of said loan shall end on the TERMINATION DATE.
"INVENTORY" shall mean all of BORROWER'S inventory, merchandise,
finished inventory and all other tangible personal property held by BORROWER for
sale or lease, furnished or to be furnished under contracts of service, or used
or consumed in BORROWER'S business.
"INVESTMENT PROPERTY" shall mean all of BORROWER'S securities,
securities entitlements and securities accounts, and all other INVESTMENT
PROPERTY within the meaning of such term under the UCC.
"LEASE(S)" shall mean any right of BORROWER to use real or personal
property which property is owned by another.
"L/C APPLICATION" shall mean the BANK'S standard form of letter of
credit application and reimbursement agreement from time to time, which may be
submitted by electronic means or by facsimile transmission.
"L/C BALANCE shall mean the aggregate undrawn, uncanceled portions of
all LETTER(S) OF CREDIT outstanding from time to time and at any time.
"LETTER(S) OF CREDIT" shall mean LETTER(S) OF CREDIT issued by the BANK
for the account of the BORROWER, payable on sight to a beneficiary who is a
supplier of goods to the BORROWER, which, upon delivery to BORROWER, will be
INVENTORY and which LETTER(S) OF CREDIT require the delivery and presentation to
BANK at the BANK'S OFFICE of DOCUMENTS reflecting a sale of such goods to the
BORROWER, as a condition of BANK'S payment thereon.
"LIBOR BASE RATE" shall mean, with respect to any LIBOR RATE ADVANCE
for any INTEREST PERIOD, the rate per annum determined by the BANK to be the
rate at which deposits in DOLLARS are offered to BANK in the London Interbank
Market at approximately 10:00 a.m. (Boston time) two BUSINESS DAYS prior to the
first day of such INTEREST PERIOD for delivery on the first day of such INTEREST
PERIOD for a period equal to such INTEREST PERIOD and in an amount substantially
equal to the principal amount of the BORROWING of which a LIBOR RATE ADVANCE or
LIBOR RATE election is a part.
"LIBOR MARGIN" shall mean one and one half percent 1.5% per annum.
"LIBOR RATE" shall mean, with respect to any INTEREST PERIOD for each
LIBOR RATE ADVANCE, an interest rate per annum equal at all times during such
INTEREST PERIOD to the sum of (i) the ADJUSTED LIBOR RATE and (ii) the LIBOR
MARGIN.
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"LIBOR RATE ADVANCE(S)" shall mean any ADVANCE, the interest rate on
which is calculated by reference to the LIBOR RATE.
"LIBOR RATE PRICING" shall mean any election of the BORROWER to pay or
to continue to pay the LIBOR RATE for any INTEREST PERIOD with respect to the
REAL ESTATE LOAN.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other) or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, and any financing lease having substantially the same
economic effect as any of the foregoing.
"LOAN ACCOUNT" shall mean the account or accounts on the books of BANK
in which will be recorded REVOLVING LOANS, and any other extensions of credit
made by BANK to the BORROWER pursuant to Article II hereof, payments made on
such REVOLVING LOAN(S) and extensions of credit and any other appropriate debits
and credits as provided by the FINANCING AGREEMENTS, other than the REAL ESTATE
LOAN.
"LOAN AGREEMENT " shall mean the Loan Agreement as amended from time to
time, including by this instrument, unless otherwise specified herein.
"MARGIN-STOCK" shall have the meaning set forth in Regulation U (12 CFR
221) of the Board of Governors of the Federal Reserve System.
"MATURITY DATE" shall mean July 30, 2002.
"MULTIEMPLOYER PLAN" shall mean a PLAN which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"OBLIGATIONS" shall mean all LOANS, ADVANCES, indebtedness,
liabilities, and amounts, liquidated or unliquidated, owing from the BORROWER to
the BANK, at any time, and arising under the FINANCING AGREEMENTS, absolute or
contingent, due or to become due, now existing or hereafter arising or
contracted. Said term shall also include all interest, fees and other charges
chargeable to the BORROWER or due from the BORROWER to the BANK from time to
time hereunder and also all covenants, agreements or undertakings of the
BORROWER to the BANK whether for the payment of money or otherwise arising under
the FINANCING AGREEMENTS.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to ERISA.
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"PERSON" shall mean any individual, corporation (including a business
trust), partnership, trust, unincorporated association, joint stock company or
other legal entity or organization and any government or agent or political
subdivision thereof.
"PLAN" shall mean any plan of a type described in Section 4021(a) of
ERISA in respect of which the BORROWER is an "employer" as defined in Section
3(5) of ERISA.
"PRIMARY OBLIGATION(S)" shall have the meaning set forth in the
definition of CONTINGENT OBLIGATIONS above.
"PRIME RATE" shall mean the annual rate of interest announced by the
BANK in Boston from time to time, as its "Prime Rate".
"PRIME RATE ADVANCE(S)" shall mean an ADVANCE, the interest rate on
which is calculated by reference to the PRIME RATE.
"PRIME RATE PRICING" shall mean any election of the BORROWER to pay the
PRIME RATE for any INTEREST PERIOD with respect to the REAL ESTATE LOAN or
pricing at the PRIME RATE in default of such election.
"QUARTERLY PERIOD" shall mean any three (3) month period ending on or
about the last day of the third, sixth, ninth and twelfth months of BORROWER'S
FISCAL YEAR.
"REAL ESTATE" shall mean the real property located in Meredith, N.H. at
which the BORROWER maintained a distribution facility and commonly known and
numbered as One Winterbrook Way.
"REAL ESTATE CLOSING" shall mean the date of the closing of the REAL
ESTATE LOAN which occurred on July 30, 1997.
"REAL ESTATE LOAN" shall mean the loan which was made by the BANK to
the BORROWER pursuant to Article VI hereof.
"REAL ESTATE LOAN BALANCE" shall mean the outstanding unpaid balance
from time to time owed with respect to the REAL ESTATE LOAN.
"REAL ESTATE MORTGAGE" shall mean a mortgage of the REAL ESTATE, as the
same may hereafter be amended from time to time, granted by the BORROWER to the
BANK securing repayment of the OBLIGATIONS including without limitation the REAL
ESTATE NOTE, which shall include without limitation:
(a) A first security interest in the BORROWER'S equipment and fixtures
from time to time located at the REAL ESTATE, and in addition to the foregoing,
all
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contract rights, accounts, general intangibles and other personal property now
owned or hereafter acquired relating thereto.
(b) A first lien by assignment of the rents, leases and profits which
may from time to time be realized in connection with the REAL ESTATE. This
assignment shall call for exercise by the BANK only upon the occurrence of an
EVENT OF DEFAULT by BORROWER.
"REAL ESTATE NOTE" shall mean the promissory note dated as at the date
of the REAL ESTATE CLOSING in the face amount provided in Section 6.02 hereof
issued by the BORROWER to the order of BANK and evidencing the obligation to
repay the REAL ESTATE LOAN.
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"RESERVE RATE" shall mean the rate (expressed as a decimal) at which
the BANK would be required to maintain reserves under Regulation D (or its
equivalent) of the Board of Governors of the Federal Reserve System against
Eurocurrency Liabilities if such liabilities were outstanding. The ADJUSTED
LIBOR RATE shall be adjusted automatically on and as of the effective date of
any change in the RESERVE RATE, and the rate of interest thereby effected shall
simultaneously change.
"REVOLVING CREDIT COMMITMENT AMOUNT" (sometimes the "REVOLVING
COMMITMENT AMOUNT") shall mean the sum of Thirty Million Dollars
($30,000,000.00) unless BORROWER delivers written notice to the BANK requesting
a lesser amount and BANK confirms same in writing.
"REVOLVING LOAN(S)" shall mean the ADVANCES under Article II hereof.
"SECURITY AGREEMENT" shall mean a Security Agreement dated June 5,
1997, duly executed and delivered by the BORROWER, to the BANK granting a
security interest in all of the assets of the BORROWER, including, without
limitation, the COLLATERAL and securing the payment and performance of the
OBLIGATIONS as provided in Article VIII hereof, as the same has been amended and
may hereafter be amended, from time to time.
"SHAREHOLDER PAYMENTS" shall mean any payment or distribution to or for
the benefit of any holder of any class of capital stock of BORROWER with respect
to such capital stock, directly or indirectly, whether in cash or in kind,
including, without limitation, dividends or payments in redemption or retirement
of any stock.
"SUBSIDIARY" shall mean any PERSON in which fifty percent (50%) of the
ownership interests are owned, directly or indirectly, by the BORROWER.
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"TANGIBLE NET WORTH" shall mean the net worth of the BORROWER including
any "Deferred Tax Asset" but excluding all other GENERAL INTANGIBLES.
"TERMINATION DATE" shall mean June 1, 2001.
"THIRD REPLACEMENT REVOLVING NOTE" shall mean the promissory note dated
as of the date hereof in the face amount of Thirty Million Dollars
($30,000,000.00) issued by the BORROWER to the order of the BANK, and evidencing
the obligation to repay the REVOLVING LOAN.
"TREASURY BASE RATE" shall mean the annual rate of interest equal to
the yield of United States Treasury securities with a three (3) year maturity
with respect to the REAL ESTATE LOAN as determined by the BANK.
"TREASURY MARGIN" shall mean one and one-half percent (1.5%).
"TREASURY RATE" shall mean with respect to any INTEREST PERIOD an
interest rate per annum equal at all times during said INTEREST PERIOD to the
sum of (i) the TREASURY BASE RATE and (ii) the TREASURY MARGIN.
"TREASURY RATE PRICING" shall mean any election of the BORROWER to pay
the TREASURY RATE for any INTEREST PERIOD with respect to the REAL ESTATE LOAN.
"UCC" shall mean the Uniform Commercial Code as in effect in The
Commonwealth of Massachusetts, as amended from time to time.
"UNFINANCED CAPITAL EXPENDITURES" shall mean capital expenditures minus
new long term indebtedness issued during the applicable period plus the
aggregate amount of all long term indebtedness prepaid during such period. For
the purpose of this calculation the INDEBTEDNESS shown on Schedule 1.01 shall be
considered new long term indebtedness in the applicable period.
1.02 All terms defined in the UCC and used in this Agreement, and not
otherwise defined herein, shall have the meaning ascribed to them in the UCC.
1.03 All accounting terms used in this agreement, including, without
limitation, "net worth", "current assets", "current liabilities", "liabilities",
"net income", "income" and "expense" shall, except as otherwise specifically
provided herein, be determined in accordance with GAAP.
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ARTICLE II
REVOLVING LOANS
2.01 Subject to, and upon the terms and conditions herein provided,
during the AVAILABILITY PERIOD, the BANK agrees to make ADVANCES to the BORROWER
including, without limitation, those ADVANCES provided for in Section 3.06
hereof which shall be deemed ADVANCES under this Section 2.01, so long as (A)
after giving effect to the making of each ADVANCE, then the CREDIT BALANCE does
not exceed the REVOLVING CREDIT COMMITMENT AMOUNT and (B) at the time of such
ADVANCE the conditions specified in Section 2.08 have been and remain fulfilled.
2.02 Whenever the BORROWER wishes to request the making of an ADVANCE
hereunder, the BORROWER shall make such BORROWING REQUEST in writing, which
shall be substantially in the form of Exhibit "2.02", and shall deliver the same
to the BANK not later than 12:00 noon (Boston time) two (2) BUSINESS DAYS prior
to the BORROWING DATE specified therein if the ADVANCE is to be a LIBOR RATE
ADVANCE, and not later than 12:00 noon (Boston time) on the BORROWING DATE
(followed by written certification within two (2) BUSINESS DAYS thereafter), if
the ADVANCE is to be a PRIME RATE ADVANCE).
2.03 Each BORROWING REQUEST for an ADVANCE pursuant to Section 2.02
shall specify the proposed BORROWING DATE, the aggregate amount of the proposed
ADVANCE, whether such ADVANCE will be a PRIME RATE ADVANCE or a LIBOR RATE
ADVANCE and, in the case of a LIBOR RATE ADVANCE, the initial INTEREST PERIOD
with respect thereto.
2.04 The BANK will credit the amount of each ADVANCE to a demand
deposit account maintained by the BORROWER.
2.05 The debit balance of the LOAN ACCOUNT shall reflect the amount of
the BORROWER'S indebtedness to the BANK from time to time by reason of ADVANCES
under this Article II and any other appropriate charges under the FINANCING
AGREEMENTS. At least once each month the BANK shall render to the BORROWER a
statement of account showing as of its date the debit balance on the LOAN
ACCOUNT which, unless within thirty (30) days of such date, notice to the
contrary is received by the BANK from the BORROWER, shall be considered correct
and accepted by the BORROWER and conclusively binding upon it absent manifest
error.
2.06 No ADVANCE under this Article II will be made on or after the
TERMINATION DATE.
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2.07 All OBLIGATIONS arising under or by reason of this Article II
shall be paid in full, without notice or demand, on the TERMINATION DATE or upon
any earlier acceleration, notwithstanding any provisions of the THIRD
REPLACEMENT REVOLVING NOTE or other instrument evidencing any part of the
OBLIGATIONS.
2.08 No ADVANCES Under this Article II will be made, nor any LETTERS OF
CREDIT issued, unless each of the following conditions shall have been and
remain fulfilled as of the BORROWING DATE.
(a) All conditions precedent as set forth in Article XV shall have
been and remain fulfilled.
(b) No EVENT OF DEFAULT shall have occurred and be continuing, nor
shall a DEFAULT have occurred and be continuing.
(c) The warranties and representations set forth in Article IX
hereof shall be true and correct, in all material respects, as
of the date they were made, and, except to the extent that
written notice of a change thereof shall have been given by
the BORROWER to the BANK, and such change would not constitute
a DEFAULT or EVENT OF DEFAULT, on the date of the BORROWING
REQUEST.
2.09 All ADVANCES and repayments of principal of the PRIME RATE
ADVANCES shall be in integral multiples of Ten Thousand Dollars ($10,000.00).
All LIBOR RATE ADVANCES shall be in the minimum amount of Five Hundred Thousand
Dollars ($500,000.00) and in integral multiples of One Hundred Thousand Dollars
($100,000.00).
2.10 If at any time the CREDIT BALANCE exceeds the REVOLVING CREDIT
COMMITMENT AMOUNT, BORROWER shall forthwith pay to the BANK such amount as may
be necessary to reduce the CREDIT BALANCE to the REVOLVING CREDIT COMMITMENT
AMOUNT.
2.11 During the AVAILABILITY PERIOD, BORROWER may repay, in whole or in
part, without penalty, the outstanding principal of the PRIME RATE ADVANCES.
Such repayment may be effected by a new BORROWING subject to the provisions
hereof.
2.12 Notwithstanding the provisions of this Article II, the BANK, in
its discretion, may make ADVANCES in excess of the REVOLVING CREDIT COMMITMENT
AMOUNT.
2.13 The obligation of the BORROWER to repay the REVOLVING LOANS with
interest thereon is and shall be evidenced by the THIRD REPLACEMENT REVOLVING
NOTE.
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2.14 Prior to the TERMINATION DATE, all LIBOR RATE ADVANCES shall be
repaid in full at the end of each applicable INTEREST PERIOD. Such repayment may
be effected by a new BORROWING.
2.15 A request by the BORROWER for a LIBOR RATE ADVANCE shall be
irrevocable.
2.16 The initial BORROWING under this instrument shall be in the form
of the making of ADVANCE(S) pursuant to Section 2.01 in an aggregate principal
amount which is sufficient to pay all OBLIGATIONS owed to the BANK other than
the then outstanding OBLIGATIONS with respect to (i) the REVOLVING LOANS and
(ii) the REAL ESTATE LOAN, and shall be applied to pay in full all such
OBLIGATIONS. The proceeds of all subsequent ADVANCES shall be applied to the
working capital needs of the BORROWER.
2.17 At least once each consecutive thirteen (13) month period
commencing with the date hereof, the BORROWER shall fully repay the REVOLVING
LOANS which repayment shall not be effected by BORROWING, and BORROWER shall not
effect or permit any ADVANCE for a period of thirty (30) consecutive days
thereafter within said thirteen (13) month period, provided however that the
foregoing shall not apply to any issuances of LETTERS OF CREDIT in the normal
course of business during such period.
ARTICLE III
LETTERS OF CREDIT
3.01 Subject to and upon the terms and conditions herein provided,
during the AVAILABILITY PERIOD, the BANK shall issue LETTERS OF CREDIT to
purchase INVENTORY so long as: (A) After giving effect to each such issuance,
the CREDIT BALANCE does not exceed the REVOLVING COMMITMENT AMOUNT; (B) All
conditions specified in Section 2.08 shall have been fulfilled; (C) BORROWER
shall have delivered to the BANK (i) an L/C APPLICATION, duly completed and
executed, or a facsimile application followed up by the original documents
received by the BANK within Three (3) BUSINESS DAYS thereafter, or by electronic
transmission, which is not required to be followed by additional submissions,
(ii) such other accompanying documentation as the BANK shall require, and (iii)
an amount equal to BANK'S then customary letter of credit application fee and
other fees, which amounts shall be non-refundable. The face amount of any LETTER
OF CREDIT shall not exceed the purchase price of the INVENTORY purchased
therewith and covered by the document relating thereto.
3.02 No LETTER OF CREDIT shall be issued after the TERMINATION DATE. No
LETTER OF CREDIT to be issued hereunder shall permit a draft to be presented
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thereunder after the earlier of (A) 180 days after the date of issue thereof or
(b) three (3) BANKING DAYS before the TERMINATION DATE.
3.03 Each LETTER OF CREDIT shall be in such form, contain such terms
and support such transactions as shall be satisfactory to the BANK consistent
with its then current practices.
3.04 The BORROWER hereby agrees to indemnify and hold harmless the BANK
from and against any and all claims and damages, losses, liabilities, costs or
expenses which the BANK may incur (or which may be claimed against the BANK by
any PERSON whatsoever) by reason of or in connection with the execution and
delivery or transfer of, or payment or refusal to pay, under any LETTER OF
CREDIT; provided that the BORROWER shall not be required to indemnify the BANK
for any claims, damages, losses, liabilities, costs or expenses to the extent,
but only to the extent, caused by (x) the willful misconduct or gross negligence
or bad faith of the BANK in determining whether a request presented under any
LETTER OF CREDIT complied with the terms of such LETTER OF CREDIT or (y) the
BANK's failure to pay under any LETTER OF CREDIT after the presentation to it of
a draft and DOCUMENTS strictly complying with the terms and conditions of such
LETTER OF CREDIT. Nothing in this Section is intended to limit the other
obligations of the BORROWER or the BANK under this Agreement.
3.05 Notwithstanding the provisions of Section 3.01, BANK in its
discretion may issue LETTERS OF CREDIT such that the CREDIT BALANCE exceeds the
REVOLVING COMMITMENT AMOUNT.
3.06 If a draft shall be presented under a LETTER OF CREDIT and the
BANK shall honor the same, the BANK shall charge any demand deposit account of
the BORROWER and if the balance(s) of such account(s) is not sufficient, such
presentation, up to the full amount of the LETTER OF CREDIT, shall be deemed to
be a request of the BANK for a PRIME RATE ADVANCE, pursuant to Section 2.01
hereof without any notice to or from BORROWER being required and the amount paid
by the BANK with respect to such draft shall be deemed to be a PRIME RATE
ADVANCE provided however that if by virtue of such ADVANCE, the CREDIT BALANCE
shall exceed the REVOLVING COMMITMENT AMOUNT, the excess shall be forthwith
repaid by the BORROWER.
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ARTICLE IV
TERM LOAN
INTENTIONALLY DELETED
ARTICLE V
THE INTERIM LOAN
INTENTIONALLY DELETED
ARTICLE V(A)
BRIDGE LOAN
INTENTIONALLY DELETED
ARTICLE V(B)
SHORT TERM REVOLVING LOAN
INTENTIONALLY DELETED
ARTICLE VI
REAL ESTATE LOAN
6.01 The terms, provisions and conditions hereof having been fulfilled,
no DEFAULT or EVENT OF DEFAULT having occurred and the provisions of Section
2.08(a) having been fulfilled, and those in Sections 2.08(b) and 2.08(c) having
been represented by the BORROWER to have been fulfilled, the BANK made the
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REAL ESTATE LOAN to BORROWER in accordance with the terms, provisions and
conditions set forth below.
6.02 The amount of the REAL ESTATE LOAN was One Million Six Hundred
Fifty Thousand Dollars ($1,650,000.00).
6.03 Payment of the REAL ESTATE LOAN shall be effected in fifty-nine
(59) consecutive monthly payments in the principal amount of Nine Thousand One
Hundred Sixty-Seven Dollars ($9,167.00) and a final payment equal to the then
REAL ESTATE LOAN BALANCE.
6.04 The obligation of the BANK to make the REAL ESTATE LOAN was
subject to satisfaction by the BANK of each of the following:.
(a) The BANK having received an appraisal satisfactory to it.
(b) The BANK having been furnished with a satisfactory survey of
the REAL ESTATE depicting the following: that the bounds and measurements shown
on the plan are substantially correct, that the title lines and actual lines of
possession are the same; the location of all means of ingress to and egress from
the REAL ESTATE; the actual and/or plan location of all utilities services from
the REAL ESTATE to the nearest public road or right-of-way, and if from the REAL
ESTATE to the public right-of-way they pass over land owned by others, said
passage shall be by means of valid, recorded easement not subject to
divestiture; the bounds of any areas submitted to the Federal Flood Disaster
Protection Act and any other area restricting use; the location of all easements
and takings affecting the REAL ESTATE; and depicting that no encroachment over
any property lines or over any easements, servitudes or rights-of-way exist. The
survey having been certified to by a licensed professional engineer reasonably
acceptable to the BANK.
(c) The BANK having been furnished with a certificate of a
licensed professional engineer satisfactory to the BANK certifying to the
following: (1) That the utilities services, storm drainage and sewage facilities
are sufficient to adequately service the REAL ESTATE; (2) the REAL ESTATE and
its current use comply with all applicable zoning, building code, health, fire,
safety and environmental statutes, codes, bylaws and regulations.
(d) There having been delivered to the BANK the opinions of
BORROWER'S counsel relating to (i) due authorization, enforceability,
non-contravention absence of litigation; (ii) zoning and land use; (iii) such
other matters (not including compliance with ENVIRONMENTAL LAWS) as the BANK
shall reasonably require.
(e) The BANK having received satisfactory reports from acceptable,
qualified professionals indicating on the basis of soils tests and other tests
and inspections
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that the REAL ESTATE complies with ENVIRONMENTAL LAWS and areas adjacent thereto
are free from hazardous materials, hazardous wastes, asbestos, PCB's or toxic
substances and that the REAL ESTATE has not been used as a dump site for oil,
hazardous materials, hazardous wastes, asbestos, PCB's or toxic substances or
otherwise used in such a manner which would cause the likelihood of incurring
any liability under Federal or state legal requirements regarding oil, hazardous
materials, hazardous wastes or toxic substances. Without limitation, the REAL
ESTATE MORTGAGE shall contain a provision whereby BORROWER shall be obligated to
immediately contain and remove any hazardous waste and toxic substances found on
the REAL ESTATE. In addition, it shall be an event of default under the REAL
ESTATE MORTGAGE if BORROWER shall fail to obtain a satisfaction of any "Notice
of Violation" ("NOV") within 60 days after the issuance thereof or if any
"Superlien" claim is filed against the REAL ESTATE under the Superfund Act.
(f) The REAL ESTATE MORTGAGE having been insured by a title
insurer acceptable to the BANK, which policy shall comply with the following: it
shall be in the standard ALTA form; there shall be no exceptions for survey,
easements or other use restrictions not shown on the survey which are acceptable
to the BANK; there shall be no inspection exceptions except in respect to
improvements thereafter added; the standard form so-called pending disbursement
exception shall be permitted; and there shall be no other exceptions which in
the opinion of counsel to the BANK may have an adverse effect upon the use of
all or any portion of the REAL ESTATE as contemplated.
(g) The conditions specified in Article XV and Section 2.08 having
been, and remaining fulfilled.
(h) There having been delivered to the BANK an insurance policy,
including liability and extended coverage, in amounts satisfactory to the BANK
and first payable to the BANK as mortgagee. The BANK shall have been furnished
with evidence that flood insurance is not required for the REAL ESTATE under the
Federal Flood Disaster Protection Act. In the event that flood insurance is
required, flood insurance written by a company satisfactory to the BANK and in
an amount and form acceptable to the BANK shall also have been disclosed.
(i) The BANK having received such other customary documents as the
BANK shall reasonably have requested.
6.05 All closing documents prepared to close the REAL ESTATE LOAN
contemplated hereby were in form and contain terms and provisions consistent
with this Article VI and as reasonably required by counsel to the BANK.
6.06 While the REAL ESTATE LOAN remains outstanding, no portion of the
REAL ESTATE PREMISES may be sold. While the REVOLVING LOAN(s) or
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REAL ESTATE LOAN remain outstanding, there shall be no other liens on the REAL
ESTATE granted by the BORROWER except such as granted to the BANK hereunder.
6.07 (a) The REAL ESTATE LOAN shall bear interest at the rate of six
and 81/100% (6.81%) per annum from the date of the REAL ESTATE CLOSING until
August 31, 1999. Thereafter it shall bear interest at the PRIME RATE unless
there shall be an election as provided below.
(b) If, effective on or after September 1, 1999, the BORROWER
wishes to convert the REAL ESTATE LOAN from PRIME RATE PRICING or what would be
PRIME RATE PRICING but for an election as provided herein, to LIBOR RATE
PRICING, or if the BORROWER wishes to continue to pay interest at the LIBOR RATE
after the end of a current INTEREST PERIOD during which LIBOR RATE PRICING has
been elected, as the case may be, BORROWER shall give an irrevocable request to
the BANK which must be received by the BANK not later than 10:00 a.m., Boston
time, two (2) BANKING DAYS before (i) the CONVERSION DATE if PRIME RATE PRICING
is, or would be, in effect, or (ii) the last day of any current INTEREST PERIOD
during which LIBOR RATE PRICING is in effect, as the case may be, requesting
that interest rate be so converted, or continued, as the case may be, and notice
of the requested CONVERSION DATE if the request is to convert from PRIME RATE
PRICING. The request shall specify the duration of the INTEREST PERIOD
applicable to such conversion or continuance, subject to any requirements
elsewhere herein set forth.
(c) If the BORROWER wishes to convert the REAL ESTATE LOAN from
PRIME RATE PRICING or LIBOR RATE PRICING to TREASURY RATE PRICING, BORROWER
shall give an irrevocable request to the BANK which must be received by the BANK
not later than 10:00 a.m., Boston time, two (2) BANKING DAYS before (i) the
CONVERSION DATE if PRIME RATE PRICING is in effect or (ii) or the last day of
any current INTEREST PERIOD during which LIBOR RATE PRICING is in effect, as the
case may be, requesting that interest rate be so converted and notice of the
requested CONVERSION DATE if the request is to convert from PRIME RATE PRICING.
Notwithstanding any other provision hereof, once TREASURY RATE PRICING is
elected, it shall be for the balance of the term of the REAL ESTATE LOAN.
(d) No such election to pay any rate other than the PRIME RATE
shall be given effect if on the date of election or the date on which such
election would be given effect, there exists any DEFAULT or EVENT OF DEFAULT.
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ARTICLE VII
INTEREST, FEES AND COMPUTATION
7.01 The BORROWER will pay interest on the daily outstanding unpaid
balance of principal of the ADVANCES at the following rates:
(a) On PRIME RATE ADVANCES, the PRIME RATE; and
(b) On LIBOR RATE ADVANCES, the LIBOR RATE.
7.02 Interest on the unpaid balance of the ADVANCES shall be paid on
each INTEREST PAYMENT DATE and upon the TERMINATION DATE or earlier upon
acceleration.
7.03 INTENTIONALLY DELETED.
7.04 INTENTIONALLY DELETED.
7.05 INTENTIONALLY DELETED.
7.06 The BORROWER will pay interest on the REAL ESTATE LOAN BALANCE at
the rates provided in Section 6.07(a) unless BORROWER shall have made an
election to pay at the TREASURY RATE or LIBOR RATE as permitted in said Section
6.07 in which case interest shall be payable at the rate so elected.
7.07 The BORROWER will also pay to the BANK on demand such standard and
regular charges as the BANK makes with respect to commercial letters of credit,
including, without limitation issuance, negotiation and amendment fees.
7.08 BORROWER shall pay to BANK a commitment fee (the "Commitment Fee")
for the period commencing on the date hereof, to and including the earlier of
the TERMINATION DATE or acceleration of the CREDIT BALANCE equal to one eighth
of one percent (.125%) per annum (computed daily on the basis of the actual
number of days elapsed over a 360 day year) on the amount by which the REVOLVING
CREDIT COMMITMENT AMOUNT exceeds CREDIT BALANCE. The Commitment Fee shall be
payable monthly in arrears and on the TERMINATION DATE.
7.09 In the event any payment of principal or interest, fee, or other
amount payable by the BORROWER under the FINANCING AGREEMENTS shall not be paid
when due and shall remain unpaid for ten (10) days thereafter, the BORROWER
shall pay interest with respect thereto commencing as of the date such payment
was initially due at a per ANNUM rate equal to the sum of (x) the rate of
interest in effect on the due date of such payment, and (y) four percent (4%)
per annum. In the event that
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BORROWER shall default under terms of the L/C APPLICATION, amounts due from
BORROWER shall bear interest at a rate equal to (a) PRIME RATE plus (b) three
percent (3%) per annum payable daily.
7.10 All rates of interest based on the PRIME RATE shall change
immediately upon the date upon which a change in the PRIME RATE shall become
effective.
7.11 Except as otherwise expressly provided in this Agreement, whenever
any payment to be made by the BORROWER hereunder shall be stated to be due on a
day other than a BANKING DAY, such payment shall be made on the next succeeding
BANKING DAY, and such extension of time shall in such case be included in the
computation of such payment.
7.12 All payments by the BORROWER under this Agreement shall be made
without set-off or counterclaim and free and clear of and without deduction for
any taxes, levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any country or any political subdivision thereof or taxing
or other authority therein unless the BORROWER is compelled by law to make such
deduction or withholding. If any such obligation is imposed upon the BORROWER
with respect to any amount payable by it hereunder, the BORROWER will pay to the
BANK, on the date on which the said amount becomes due and payable hereunder,
such additional amount as shall be necessary to enable the BANK to receive the
same net amount which it would have received on such due date had no such
obligation been imposed upon the BORROWER. The BORROWER will deliver promptly to
the BANK certificates or other valid vouchers for all taxes or other charges
deducted from or paid with respect to payments made by the BORROWER hereunder.
7.13 The BORROWER agrees to pay any present or future stamp or
documentary taxes and any other excise or property taxes, charges or similar
levies, excluding, in the case of the BANK, taxes imposed on it by the
jurisdiction under the laws of which the BANK is organized or any political
subdivision thereof and taxes imposed on its net income and franchise taxes
imposed on it, which arise from any payment made by the BORROWER hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this LOAN AGREEMENT, or any other of the FINANCING AGREEMENTS. The BORROWER will
indemnify the BANK on demand for the full amount of any such taxes, charges or
similar levies paid by the BANK or any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto.
7.14 Without prejudice to the survival of any other agreement of the
BORROWER hereunder, the agreements and obligations of the BORROWER contained in
Sections 7.13 AND 7.14 shall survive the payment in full of principal of and
interest on the LOANS. The BANK agrees to give to the BORROWER notice of any
such taxes, charges or similar levies paid by it and for which demand for
payment may be made hereunder, and the BORROWER shall have the right to contest
the
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validity or legal assertion thereof; provided, however, that the foregoing shall
in no way limit the BORROWER'S obligation to indemnify the BANK as in this
Agreement provided.
7.15 All interest, fees or other charges payable by BORROWER to BANK
shall be computed on the basis of a year of three hundred sixty (360) days and
for the actual number of days elapsed.
7.16 INTENTIONALLY DELETED.
7.17 Interest not paid when due shall become a portion of the loans to
which they relate and bear interest at the applicable rate until paid in full.
7.18 Upon the occurrence and during the continuance of an EVENT OF
DEFAULT, BORROWER hereby authorizes BANK to charge any account maintained by it
with BANK for any payment due from BORROWER hereunder or under any of the
FINANCING AGREEMENTS. In any of such cases, such authorization, however, does
not obligate BANK so to charge nor does it limit BORROWER's obligation to make
such payment when due.
7.19 Each payment to be made by BORROWERS hereunder, whether principal,
interest, fees, or of any other kind, shall be paid not later than 2:00 p.m.
(Boston time) on the day when due to the BANK at the BANK's OFFICE in DOLLARS
and in immediately available funds.
7.20 The BANK shall calculate all interest rates arising and all
interest and fees due hereunder.
7.21 In the event that the BORROWER shall, before the due date
therefor, prepay all or any portion of the REAL ESTATE LOAN which is subject to
TREASURY RATE PRICING, whether by reason of voluntary prepayment or
acceleration, BORROWER shall pay a prepayment charge equal to the BANK's COST OF
FUNDS REDEPLOYMENT unless such prepayment is made from BORROWER'S EXCESS CASH
FLOW.
7.22 In addition to and not in limitation of any other provision of
this Agreement, BORROWER will, on demand by the BANK at any time, indemnify the
BANK against COST OF FUNDS REDEPLOYMENT as a consequence of:
(a) The breach by the BORROWER of its OBLIGATIONS to borrow a
LIBOR RATE ADVANCE on the BORROWING DATE thereof;
(b) The failure by the BORROWER to pay, punctually on the due date
thereof, any amount payable hereunder with respect to a LIBOR
RATE ADVANCE;
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(c) The repayment or prepayment of any principal of any LIBOR RATE
ADVANCE of the REAL ESTATE LOAN at a time when the said
obligation is subject to LIBOR RATE PRICING, on a date other
than the due date of such principal, whether due to
acceleration or otherwise.
7.23 COSTS OF FUNDS REDEPLOYMENT shall mean the following:
(i) any costs incurred by the BANK in carrying funds
which were to have been borrowed by the BORROWER or
in carrying funds to cover the amount of any overdue
principal of or overdue interest thereon;
(ii) any interest payable by the BANK to lenders of the
funds borrowed by the BANK in order to carry the
funds referred to in the immediately preceding
sub-clause (i); and
(iii) any losses incurred by the BANK in liquidating or
re-employing funds acquired from third parties to
effect or maintain the same. The amount (and the
computations thereof) of any such losses, costs and
expenses shall be determined reasonably by the BANK
and set forth in a certificate signed by an officer
of the BANK, which certificate shall, save for
manifest error, be conclusive and binding upon the
BORROWER.
7.24 Without prejudice to any other rights it may have, the BANK may
collect a "late charge" equal to five (5%) percent of any OBLIGATION not paid
within fifteen (15) days of the due date thereof.
7.25 If at any point, during the term of the REVOLVING LOAN or the REAL
ESTATE LOAN, the LIBOR BASE RATE shall cease to be available then, thereafter,
during such period of unavailability, LIBOR RATE ADVANCES and LIBOR RATE PRICING
shall cease to be available hereunder with respect thereto.
ARTICLE VIII
SECURITY, GUARANTIES AND SUBORDINATION
8.01 Any and all deposits or other sums at any time credited by or due
from BANK to BORROWER shall, at all times constitute security for all
OBLIGATIONS and upon and during the continuance of an EVENT OF DEFAULT may be
set off against any of the OBLIGATIONS at any time when due whether or not other
security held by BANK is deemed to be adequate.
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8.02 Subject to any contrary provision of this Agreement, the
OBLIGATIONS are secured by the security interests granted in the SECURITY
AGREEMENT, as well as by all of the other FINANCING AGREEMENTS, which shall be
subject to no LIENS except those permitted under Section 11.06.
ARTICLE IX
WARRANTIES AND REPRESENTATIONS BY BORROWERS
9.01 The BANK has entered into this Agreement in reliance upon the
warranties and representations of the BORROWER set forth in this Article, each
of which is acknowledged by the BORROWER to be continuing and material. Each
such warranty and representation shall be deemed to have been newly made on each
day BORROWER requests an ADVANCE except to the extent that written notice of a
change thereof shall have been given by the BORROWER to the BANK, and such
change would not constitute a default or event of default pursuant to Section
12.01(e).
9.02 The BORROWER is a duly organized and existing corporation under
the laws of its state of incorporation and is in good standing under the laws
thereof.
9.03 The BORROWER is duly qualified to do business and is in good
standing as a foreign corporation in each state or other jurisdiction where the
failure to so qualify would have a material adverse effect on the BORROWER. All
such jurisdictions, if any, are listed on Exhibit "9.03" to this instrument.
9.04 The BORROWER has good title to all properties and assets which it
purports to own, as reflected in the CURRENT FINANCIALS, free and clear of all
mortgages, liens, pledges, security interests and encumbrances except as set
forth on Exhibit 9.04 or permitted by Section 11.06 to this instrument.
9.05 The BORROWER owns or leases and holds all real and personal
property necessary or incidental to the conduct of its businesses, including
without limitation, patents, trademarks, service marks, trade names, copyrights
and licenses and other rights with respect to the foregoing.
9.06 All books and records of the BORROWER, including, but not limited
to, minute books, by-laws and books of account fairly reflect all matters and
transactions which should currently be reflected therein.
9.07 The BORROWER'S business is now limited to the sale of personal
property from CATALOGS and activities related thereto (including without
limitation the sale of personal property from retail outlet stores) and in the
future will be so limited except that such retail stores are not required to be
so-called "outlet" stores.
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9.08 Except as set forth in Exhibit 9.08 to this instrument, the
BORROWER has no subsidiaries nor any investments in the stock or securities of
any other corporation, firm, trust or other entity, except Birch Pond Realty
Corp.
9.09 Except as set forth in Exhibit 9.09 to this instrument, there are
no actions, suits, proceedings, or investigations pending or, to the knowledge
of BORROWER, threatened against the BORROWER or any of its properties in any
court, before any governmental authority, arbitration board, or any other
tribunal which, singly or in the aggregate, if decided adversely to BORROWER,
would materially and adversely affect the business, properties or condition
(whether financial or otherwise) of the BORROWER. BORROWER is not, nor by
execution and delivery of the FINANCING AGREEMENTS and performance of the
OBLIGATIONS (with or without the passage of time or the giving of notice), will
be, in default with respect to any order of any court, governmental authority,
arbitration board or other tribunal.
9.10 BORROWER has furnished to the BANK the financial statements at
December 31, 1998 for the prior twelve (12) month period. Said statements, the
"CURRENT FINANCIALS," fairly present the condition of the BORROWER at the dates
thereof, all in conformity with GAAP except, in respect of interim statements,
with respect to footnotes, and subject to customary year end adjustments.
9.11 Except to the extent reflected or reserved against in the CURRENT
FINANCIALS or as set forth on Exhibit "9.11" to this instrument, if any,
BORROWER, as of the date of said financial statements, had no material
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
including, without limitation, tax liabilities, due or to become due, or arising
out of transactions entered into or any state of facts existing prior thereto,
of a type required by GAAP to be reflected or reserved against on financial
statements.
9.12 Since the date of the CURRENT FINANCIALS and through the date
hereof, and except as shown on Exhibit "9.12" to this instrument, there has not
been:
(a) any change in the condition of the BORROWER'S assets or
liabilities, other than changes in its ordinary course of
business, none of which has been materially adverse.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the BORROWER'S
properties or business;
(c) any declaration of, setting aside of, or making of a payment
or any dividend or other distribution with respect to the
BORROWER'S capital stock or any direct or indirect redemption,
purchase or other acquisition of any such stock;
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(d) any materially adverse:
(i) controversy with any labor organization or
employees;
(ii) claim or controversy involving any federal,
state or local government agencies; or
(iii) other event or condition affecting the
businesses of or properties of the BORROWER.
9.13 The BORROWER has filed all federal and state income tax returns,
excise tax returns and all other tax returns of every kind and nature which are
required to be filed by it and has paid all taxes shown to be due on said
returns, except where in the future such taxes are being contested in good faith
by appropriate proceedings. To BORROWER's knowledge, no audit or other
investigation is presently being conducted with respect to any tax obligation of
BORROWER.
9.14 INTENTIONALLY DELETED
9.15 The execution and delivery of the FINANCING AGREEMENTS, the
borrowing by BORROWER as herein provided, the execution and delivery by them of
all instruments, agreements and documents of every kind and nature pursuant to
this instrument and the performance by the BORROWER of the OBLIGATIONS have been
duly authorized by the Board of Directors of the BORROWER and, to the extent
required by law or otherwise, by stockholders, and the FINANCING AGREEMENTS and
all instruments, agreements and documents executed pursuant thereto are valid
and binding obligations of the BORROWER enforceable in accordance with their
terms, except to the extent that such enforceability may be limited by laws of
general application affecting the rights of creditors.
9.16 There is no provision in the articles of organization, the
by-laws, or other charter documents of BORROWER, or any other indenture,
contract or agreement to which it is party or by which it is bound, which
prohibits the execution and delivery of the FINANCING AGREEMENTS or the
performance by the BORROWER of the OBLIGATIONS.
9.17 No DEFAULT or EVENT OF DEFAULT exists. Neither the nature of
BORROWER'S businesses or properties, nor any relationships in connection with
the execution or delivery of the FINANCING AGREEMENTS is such as to require a
consent, approval, license, permit or authorization of, or filing, registration,
or qualification with, any governmental authority on the part of BORROWER as a
condition to the execution and delivery of the FINANCING AGREEMENTS or any
instrument, agreement or document contemplated hereby, or the performance by the
BORROWER of the OBLIGATIONS.
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9.18 Exhibit "9.18" to this instrument sets forth a full list of all
patents, patent applications, registered copyrights, and registered trademarks
and service marks currently used by the BORROWER.
9.19 Exhibit "9.19" to this instrument contains a description of all
real property and material personal property which the BORROWER holds under a
term of a LEASE, including a description of the property, the date of the LEASE
and the identity of the lessor.
9.20 The BORROWER represents and warrants to the BANK that the BORROWER
has taken such actions as are disclosed in its most recent filing of Form 10Q to
be filed with the United States Securities and Exchange Commission (a copy of
which is attached as Schedule 9.20) to assess, evaluate and correct all of the
hardware, software, embedded microchips and other processing capabilities it
uses directly or indirectly, to ensure that it will be able to function
accurately and without interruption or ambiguity using the information before,
during and after January 1, 2000.
ARTICLE X
AFFIRMATIVE COVENANTS
10.01 BORROWER shall furnish to BANK, in form and detail acceptable to
BANK:
(a) As soon as practicable and in any event within one hundred
twenty (120) days after the end of each fiscal year,
statements, on an unqualified audit basis of income, retained
earnings and cash flow of the BORROWER for such year, and
audited balance sheets of the BORROWER as at the end of such
year, setting forth in each case in comparative form
corresponding figures for the preceding fiscal year from the
preceding annual audit, all in reasonable detail and
reasonably satisfactory in scope to the BANK and certified by
the ACCOUNTANTS whose certificate shall be on an unqualified,
audited basis representing an unqualified opinion, all in
scope and substance satisfactory to the BANK, and such
financial statements shall be prepared in accordance with
GAAP.
(b) As soon as practicable and in any event within forty-five (45)
days after the end of each of the first three quarterly period
in each FISCAL YEAR, statements of income and cash flow of the
BORROWER for the period from the beginning of the current
FISCAL YEAR to the end of such quarterly period, and balance
sheet of the BORROWER as at the end of such quarterly period,
setting forth in each case commencing one year from the date
hereof, in comparative form, figures for the corresponding
period in the preceding FISCAL YEAR, all in reasonable detail,
and such financial statements shall be prepared in accordance
with GAAP subject
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to customary year end adjustments and the absence of
footnotes. Such quarterly statements may be prepared
internally.
(c) At the time of delivery of the reports required by Sections
10.01(a) and 10.01(b); a certificate of the Chief Financial
Officer, Vice President of Finance or Controller of the
BORROWER (i) stating that, in his, her or their opinions, if
such be the case, there has been and is existing no DEFAULT or
EVENT OF DEFAULT hereunder, or if that not be the case,
setting forth the details of all such DEFAULT or EVENT OF
DEFAULT, and (ii) showing appropriate calculations indicating
compliance (or non-compliance) with the covenants set forth in
Article XI and XII.
(d) Periodically, promptly after filed, copies of all notices to
shareholders, all proxies, reports and any other publicly
available materials filed with the Securities Exchange
Commission and all press releases.
(e) With reasonable promptness, such other financial data and/or
operating data as the BANK may reasonably request in such form
as the BANK may reasonably request.
10.02 The BORROWER will, duly and punctually, pay all interest,
principal and all other amounts of money becoming due from it to the BANK and
will duly and punctually perform all things on its part to be done or performed
under the FINANCING AGREEMENTS.
10.03 The BORROWER shall, at all times, keep proper books of account
which shall at all times fairly reflect its financial condition and in which
entries will be made of its transactions in accordance with GAAP to the extent
applicable thereto.
10.04 The BORROWER shall make its books and records available, in its
offices, for inspection, examination and copying by the BANK and the BANK's
representatives and will at all reasonable times (and, prior to a DEFAULT or
EVENT OF DEFAULT, upon reasonable notice), permit inspection of its books and
records and properties by the BANK and the BANK's representatives.
10.05 The BORROWER will maintain its corporate existence in good
standing. The BORROWER will comply with all laws and regulations of the United
States, or any state or states thereof, of any political subdivision thereof and
of any governmental authority which may be applicable to it or to its business
including, without limitation, the ENVIRONMENTAL LAWS; provided, however, that a
failure so to comply which does not materially and adversely affect its
businesses or financial condition shall not be a breach hereof.
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10.06 The BORROWER will pay all real and personal property taxes,
assessments and charges and all franchise, income, unemployment, old age
benefit, withholding, sales and other taxes assessed against it or payable by it
at such times and in such manner to prevent any penalty from accruing or any
lien or charge from attaching to its properties. The provisions of this section,
however, shall not preclude BORROWER from contesting in good faith any such tax,
nor shall there be a default hereunder, by reason of the existence of a lien for
taxes not then due provided that the BORROWER shall have set aside on its books
reserves certified by the BORROWER to be adequate for the timely satisfaction of
such obligations.
10.07 The BORROWER will put and maintain its properties in good repair,
working condition and order, reasonable wear and tear excepted, and from time to
time, make all needful and proper repairs, renewals and replacements.
10.08 The BORROWER will maintain insurance covering such risks and in
such minimum amounts as BANK may reasonably require, all such insurance to be in
such form and for such periods and written by such companies as shall be
reasonably acceptable to BANK. The BANK shall be named as an additional "loss
payee" as elsewhere herein provided and the BANK shall receive certified copies
of such original policies, if available, and upon the occurrence of an EVENT OF
DEFAULT the BANK shall forthwith be provided with and hold the originals of each
such policy.
10.09 The BORROWER will punctually and promptly make when due, after
the expiration of all applicable periods of grace or notice, all payments and
perform all other obligations which may be required of it with respect to any
indebtedness (whether for money borrowed, goods purchased, services rendered or
however such indebtedness may arise) owing to persons, firms or corporations
other than the BANK, including, without limitation, indebtedness which may be
secured by a security interest in assets of the BORROWER or its property and all
obligations under the terms of any Leases. The provisions of this Section shall
not preclude the BORROWER from contesting in good faith any such indebtedness or
obligation. The BORROWER may accept extended payment terms regularly offered by
any creditor selling goods to the BORROWER or furnishing services to the
BORROWER.
10.10 The BORROWER shall pay or cause to be paid when due all amounts
necessary to fund in accordance with its terms any deferred compensation and/or
other employee benefit plans, whether now in existence or hereafter created and
whether subject to the applicable provisions of ERISA and all regulations
thereunder, and it will not withdraw from participation in, permit the
termination or partial termination of, or permit the occurrence of any other
event with respect to any deferred compensation plan maintained for the benefit
of employees under circumstances that could result in any liability to "PBGC",
or any of its successors or assigns, or to the entity which provides funds for
such deferred compensation plan. To the extent that BORROWER become subject to
the provision of the ERISA, BORROWER will, promptly upon obtaining knowledge
thereof, notify the BANK of (i) the occurrence of any "reportable event"
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described in Section 4043 of ERISA, (ii) receipt of notice of an application by
the PBGC to institute proceedings to terminate an employee benefit plan, and
(iii) receipt of notice of any liability pursuant to Section 4202 of ERISA. The
BORROWER is not a party to a MULTI-EMPLOYER PLAN.
10.11 The BORROWER shall promptly give notice to BANK of the
commencement of any suit or proceedings against the BORROWER, in which the
amount claimed exceeds Two Hundred and Fifty Thousand and 00/100 Dollars
($250,000.00) unless such liability is fully covered by insurance in effect and
the insurer is defending such action without reservation of rights against the
BORROWER.
10.12 Upon the occurrence of any DEFAULT or EVENT OF DEFAULT, BORROWER
shall promptly give the BANK notice thereof.
10.13 The BORROWER will give the BANK not less than thirty (30) days'
prior notice of any proposed change in its principal places of business or chief
executive offices or the establishment of any other location of COLLATERAL,
other than as currently shown on Exhibit 10.13 to this instrument.
10.14 The BORROWER will give the BANK not less than thirty (30) days'
prior notice of any intended change in its corporate name or the adoption of any
trade name.
10.15 In the event of any change in the identification of the directors
and statutory officers of the BORROWER as reflected on Exhibit "10.15" to this
instrument, the BORROWER shall, within thirty (30) days thereafter, give notice
thereof to BANK.
10.16 The BORROWER shall continue to maintain its primary deposit
accounts with BANK, from which payments due on LOANS may be deducted.
ARTICLE XI
NEGATIVE COVENANTS
11.01 The BORROWER will not issue evidences of INDEBTEDNESS nor create,
assume, become contingently liable for, nor suffer to exist INDEBTEDNESS for
borrowed money in addition to indebtedness to the BANK; provided, however, that
BORROWER (a) may incur liabilities other than for money borrowed which are
incurred or arise in the ordinary course of the BORROWER'S business, and (b) may
in any fiscal year of the BORROWER grant purchase money security interests in
connection with the purchase of property with a purchase price not to exceed
Five Hundred Thousand Dollars ($500,000.00), and (c) has been given permission
to incur such INDEBTEDNESS as is shown on Schedule 1.01.
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<PAGE>
11.02 The BORROWER shall not make or continue any loans to any
individual, firm or corporation, including, without limitation, BORROWER'S,
officers and employees except for loans or advances to employees and officers in
the ordinary course of the BORROWER'S business not to exceed Two Hundred Fifty
Thousand Dollars ($250,000.00) at any time.
11.03 Except as described in Section 9.08, the BORROWER shall not
invest in or purchase any stock or securities of any individual, firm,
partnership, joint venture or corporation without the BANK's prior written
consent; provided, however, that the BORROWER, without the BANK's consent may
invest in direct obligations of or securities guaranteed by the United States of
America or any agency thereof, certificates of deposit or other obligations of
the BANK or any other member bank of the Federal Reserve System having assets of
not less than One Hundred Million Dollars, prime banker's acceptances,
money-market funds, commercial paper of a domestic issue rated either A1 by
Standard & Poor's Corporation or P1 by Moody's Investor Service, Inc., and other
securities the cost to BORROWER of which do not exceed One Hundred Thousand
Dollars ($100,000.00) in the case of any single issuer.
11.04 The BORROWER will not merge or consolidate or be merged or
consolidated with or into any other corporation or entity.
11.05 Except for sales of INVENTORY in the ordinary course of business,
the BORROWER shall not sell or dispose of any of BORROWER'S assets except that
the BORROWER may sell or otherwise dispose of EQUIPMENT which is no longer
needed by the BORROWER for the conduct of its business.
11.06 Except with respect to the BANK as provided herein, or as
previously consented to in writing by the BANK, the BORROWER shall not grant or
suffer to exist, any mortgage, pledge, title retention agreement, security
interest, lien or encumbrance with respect to any of its assets, tangible or
intangible, whether now owned or hereafter acquired including, but not limited
to, its ownership interests, and any other of its interests, in Birch Pond
Realty Corporation, or subject any of its assets to the prior payment of any
indebtedness, or transfer in any manner any of such assets with the intent or
purpose, directly or indirectly, of subjecting such assets to the payment of
INDEBTEDNESS except (i) landlords', carriers', warehousemans', mechanics' and
other similar liens arising by operation of law in the ordinary course of the
BORROWER'S businesses; (ii) liens arising out of pledge or deposits under
worker's compensation, unemployment insurance, old age pension, social security,
retirement benefits or other similar legislation; (iii) liens in favor of the
BANK; (iv) liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings and the BORROWER maintains appropriate reserves
(reasonably approved by the BANK) in respect thereto; (v) judgment or
prejudgment liens with respect to which there has issued a stay of execution
pending appeal or otherwise and as to which the BORROWER maintain appropriate
reserves in respect thereto (reasonably approved by the BANK); (vi) easements,
rights of way, restrictions and other similar charges or liens relating to
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<PAGE>
real property and not interfering in a material way with the ordinary conduct of
the BORROWER'S business; (vii) liens securing the payment of INDEBTEDNESS
permitted under Section 11.01 hereof; and (viii) encumbrances on the BORROWER'S
property or assets created in connection with the refinancing of INDEBTEDNESS
secured by liens on such property permitted hereunder that do not extend to
property and assets of the BORROWER not encumbered prior to such refinancing.
11.07 The BORROWER will not engage in any business other than the
business in which it is currently engaged or a business reasonably allied
thereto including, without limitation, those businesses referred to in Section
9.07.
11.08 The BORROWER shall not guaranty, endorse, contingently agree to
purchase or otherwise become liable for obligations for borrowed money of any
other person, firm partnership, joint venture, corporation or other entity;
provided, however, that the provisions of this Section 11.08 shall not preclude
the BORROWER from endorsing checks, drafts or other similar items for collection
in the ordinary course of business.
11.09 The BORROWER will not make or enter into any so-called management
agreement whereby management, supervision or control of its business or any of
its principal functions shall be delegated to any persons other than its duly
elected officers and directors.
11.10 The BORROWER will not change its FISCAL YEAR.
11.11 The BORROWER will not, for any QUARTERLY PERIOD, permit its ratio
of INDEBTEDNESS to TANGIBLE NET WORTH to exceed 1.50 to 1.
11.12 The BORROWER will not for any QUARTERLY PERIOD permit its ratio
of current assets to current liabilities to be less than 1.50 to 1 for any
QUARTERLY PERIOD through the QUARTERLY PERIOD ending December 25, 1999 or 1.75
to 1 for any QUARTERLY PERIOD ending thereafter.
11.13 The BORROWER will not, for any four (4) consecutive fiscal
quarters, permit DEBT SERVICE COVERAGE to be less than 1.25 to 1. Such covenant
shall be calculated quarterly based upon the preceding 12 months of operations
commencing with the twelve-month period ending on or about June 26, 1999.
Notwithstanding the foregoing, the calculation for the quarter ending on or
about March 31, 1999 shall be made without any deduction for UNFINANCED CAPITAL
EXPENDITURES.
11.14 Borrower does not own and has no present intention of acquiring
any MARGIN STOCK. None of the funds advanced to the Borrower hereunder will be
used to purchase or carry any MARGIN STOCK. Neither Borrower, nor any agent
acting on its behalf, has taken any action which might cause this Agreement or
either of the Notes to violate Regulation G, Regulation T, Regulation U,
Regulation X or any other
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<PAGE>
regulation of the Board of Governors of the Federal Reserve System or to violate
the Securities Exchange Act of 1934, as now in effect.
ARTICLE XII
EVENTS OF DEFAULT
12.01 The occurrence of any of the following events shall be any EVENT
OF DEFAULT hereunder and under each of the FINANCING AGREEMENTS:
(a) The REVOLVING LOAN(S) and all accrued interest thereon shall
not be paid in full on the TERMINATION DATE.
(b) The BORROWER shall fail to make a payment of interest or
principal on account of the REAL ESTATE LOAN or any other fee
or charge arising under the FINANCING AGREEMENTS within five
(5) days of when such payment is due, (or if within any grace
period provided therein).
(c) The BORROWER shall fail to observe or perform any covenants
contained in this Agreement other than with respect to the
payment of money within TEN (10) days of notice from the BANK
or such earlier date as may be necessary to protect the
interests of the BANK.
(d) The BORROWER shall fail to observe any other covenant or
agreement contained in any FINANCING AGREEMENT or in any
instrument, document or agreement executed pursuant thereto
when required or within any grace period provided therein.
(e) Any written warranty, representation or statement made or
furnished to BANK by or on behalf of the BORROWER proves to
have been false in any material respect when made or
furnished.
(f) Any event which results in the acceleration of the maturity of
the indebtedness of the BORROWER (i) to the BANK, or (ii) to
any other party under any indenture, agreement, undertaking or
otherwise if the same relates to aggregate INDEBTEDNESS, in
excess of $250,000.00.
(g) Any levy or seizure of any property of the BORROWER in which
the amount involved exceeds in the aggregate $250,000.00 and
which levy or seizure is not stayed within thirty (30) days
and if reasonably required by the BANK adequate security is
imposed.
(h) Any attachment of any property of the BORROWER which
attachment secures claim in the aggregate of more than Two
Hundred and Fifty
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<PAGE>
Thousand and 00/100 Dollars ($250,000.00) or more and is not
discharged within thirty (30) days.
(i) Dissolution, termination of existence, as the case may be of
the BORROWER.
(j) The BORROWER shall: (i) cease, be unable or admit in writing
its, inability to pay its debts as they mature or make a
general assignment for the benefit of, or enter into any
composition, trust mortgage or other arrangement with
creditors; (ii) apply for, or consent (by admission of
material allegations of a petition or otherwise) to the
appointment of a receiver, trustee or liquidator of the
BORROWER or of a substantial part of its assets, or authorize
such application or consent, or proceedings seeking such
appointment shall be commenced against the BORROWER and
continue unstayed and undismissed for sixty (60) days; or
(iii) apply for, or consent (by admission of material
allegations of a petition or otherwise) to the application of
any bankruptcy, reorganization, readjustment of debt,
insolvency, dissolution, liquidation or other similar law of
any jurisdiction, or authorize such application or consent, or
proceedings to such end shall be instituted against the
BORROWER and remain unstayed and undismissed for sixty (60)
days, be approved as properly instituted or result in
adjudication of bankruptcy or insolvency.
(k) Birch Pond Realty Corporation, a SUBSIDIARY, shall grant or
suffer to exist, any mortgage, pledge, title retention
agreement, security interest or, lien other than a mortgage to
John Hancock Real Estate Finance, Inc. with respect to that
real estate in Tilton, New Hampshire originally subject to a
mortgage to the BANK and subsequently conveyed to Birch Pond
Realty Corporation with the written consent of the BANK or
shall, as to itself, fail to comply with any covenant provided
in Sections 10.05, 10.06, 10.07, 10.08, 10.10, 10.11, 11.03,
11.04, 11.05 and 11.08 hereof within a period of time extended
by a period equal to any notice and grace period provided
herein for an equivalent obligation of BORROWER, if
applicable, or shall fail to engage only in those businesses
now permitted by its Articles of Organization.
12.02 Upon the occurrence of any EVENT OF DEFAULT, all OBLIGATIONS
including, without limitation, the REVOLVING LOAN, and/or the REAL ESTATE LOAN,
shall, at the BANK's option, become immediately due and payable without notice
or demand and the BANK shall have all such rights and remedies as are provided
herein or under the other FINANCING AGREEMENTS or at law or in equity.
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<PAGE>
ARTICLE XIII
NOTICES
13.01 All communications herein provided shall be in writing and shall
be sufficient if (i) sent by United States mail, registered or certified,
postage prepaid, (ii) delivered by national courier service which requires
receipt evidencing delivery or (iii) sent by confirmed telephone facsimile and
addressed as provided in this Article.
13.02 The addresses to which such communications shall be sent are as
follows:
a) If intended for the BORROWER, to:
DM Management Company
25 Recreation Drive
Hingham, MA 02043
Fax: (617) 740-2408
Attn: Olga L. Conley, Chief Financial Officer
with courtesy copies to:
Foley, Hoag & Eliot, LLP
One Post Office Square
Boston, MA 02109
Fax: (617) 832-7000
Attn: David R. Pierson, Esq.
b) If intended for BANK to:
Citizens Bank of Massachusetts
28 State Street
Boston, MA 02109
Fax: (617) 725-5690
Attn: Lori B. Leeth, Senior Vice President
with courtesy copies to:
Goldstein & Manello, P.C.
265 Franklin Street
Boston, MA 02110
Fax: 617-946-8181
Attn: Richard J. Snyder, Esq.
13.03 The addresses set forth herein may be changed by notice to the
other party hereunder.
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<PAGE>
13.04 Any notice sent in accordance with the provisions and this
Article XIII shall be effective (i) if mailed, on the second BUSINESS DAY, (ii)
if delivered by courier service, upon receipt or (iii) if sent by confirmed
telephone facsimile, upon transmission.
ARTICLE XIV
MISCELLANEOUS
14.01 The BORROWER will, from time to time, execute and deliver to the
BANK all such other and further reasonable instruments and documents and take or
cause to be taken all such other and further action as the BANK or any other
party which is a bank, trust company or other institutional lender which shall
acquire an interest in the BANK's right hereunder may reasonably request in
order to effect and confirm more securely in the BANK all rights contemplated in
this Agreement, and in any other of the FINANCING AGREEMENTS.
14.02 The BORROWER may take any action herein prohibited or omit to
perform any act required to be performed by the BORROWER if the BORROWER shall
obtain the BANK's prior written consent to each such action, or omission to act.
No waiver on the BANK's part on any one occasion shall be deemed a waiver on any
other occasion. The BANK shall not be deemed to have waived any of its rights
hereunder unless such waiver shall be in writing and duly signed by an
authorized officer of the BANK.
14.03 This Agreement may be amended only by an instrument in writing
and duly signed by the BORROWER and an authorized officer of the BANK.
14.04 All covenants, agreements, representations and warranties
contained in this Agreement shall bind the BORROWER and its successors and
assigns, and shall inure to the BANK's benefit and the benefit of the BANK's
successors and assigns, whether expressed or not; provided, however, that the
BORROWER may not assign its rights or benefits hereunder.
14.05 All rights of the BANK hereunder shall be cumulative. The BANK
shall not be required to have recourse to any COLLATERAL or other security
before enforcing its rights or remedies against the BORROWER. BORROWER hereby
waives presentment and protest of any instrument and any notice thereof.
14.06 If any provisions of this Agreement shall be held to be illegal
or unenforceable, such illegality or unenforceability shall relate solely to
such provision and shall not affect the remainder of this Agreement.
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<PAGE>
14.07 This Agreement shall be construed and enforced as an instrument
under seal in accordance with the laws of the Commonwealth of Massachusetts.
14.08 The captions herein contained are inserted as a matter of
convenience only and such captions do not form a part of this Agreement and
shall not be utilized in the construction hereof.
14.09 In the event the BORROWER fails to make any payment or take any
action required by this Agreement or any other of the FINANCING AGREEMENTS, BANK
may, but shall not be required to, upon prior notice to the BORROWER make such
payment or to take, or cause to be taken, such action. If the BANK chooses to
make any such payment or to take or cause to be taken any such action, the
amount of such payment and the cost of such action shall become part of the
OBLIGATIONS, shall be payable upon demand and, until paid in full, shall bear
interest at the rate set forth in Section 7.09 hereof.
14.10 The BORROWER shall pay on demand all reasonable out-of-pocket
costs and expenses of every kind and nature, including reasonable attorneys'
fees and costs, incurred or expended by the BANK in connection with the
preparation of the FINANCING AGREEMENTS, the making of LOANS hereunder, the
collection or sale or attempted collection or sale of the COLLATERAL and the
protection or supervision thereof and the protection or enforcement of the
BANK's rights hereunder. The BORROWER acknowledges that such supervision will
include audits of the BORROWER' business, records, and assets by employees,
agents, or other representatives of the BANK but the BORROWER shall not be
required for to pay for such audits unless undertaken after EVENT OF DEFAULT
shall have occurred and while the same shall be continuing.
14.12 THE BANK, and the BORROWER each irrevocably waive all right to a
trial by jury in any proceeding hereafter instituted by or against the BANK or
the BORROWER in respect of this Agreement or arising out of any FINANCING
AGREEMENTS.
ARTICLE XV
CONDITIONS PRECEDENT
15.01 Unless each of the following conditions are satisfied at the
CLOSING, and until each of the following conditions are satisfied, no ADVANCES
will be made, and the BANK shall have no obligation under this Agreement:
(a) All instruments and documents required to be executed on or
prior to the CLOSING pursuant to the terms hereof shall have
been duly executed and delivered.
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<PAGE>
(b) The BANK shall hold a valid and perfected security interest in
the COLLATERAL subject to no other lien, charge, encumbrances
or security interest of any kind or nature except as otherwise
explicitly provided in this Agreement.
(c) The BANK shall have received from counsel to the BORROWER
opinions satisfactory in form and substance to the BANK.
(d) The BANK shall have received a certificate from the Clerk or
other appropriate recording officer of each of the BORROWER in
form and substance satisfactory to the BANK and its counsel,
showing the authority of the BORROWER to enter into and amend
and restate this Agreement and, without limitation, the
FINANCING AGREEMENTS, to perform the OBLIGATIONS and the
specific authority of the persons executing this Agreement and
all instruments and documents pursuant hereto so to execute.
The BANK shall have received any amendments, certified copies
of the Articles of Organization (or other charter documents)
and By-Laws of the BORROWER since the same were last submitted
to it.
(e) All policies of insurance described herein or in any other of
the FINANCING AGREEMENTS, have been obtained, be in full force
and effect, and shall show BANK as an additional loss payee.
The BANK shall have received a binder with respect to each
such policy showing compliance herewith. Such policies shall
not be canceled except upon thirty (30) days advance written
notice to BANK.
(f) The BANK shall have received such certificates from public
officials with respect to the corporate existence of each of
the corporations constituting the BORROWER and its
qualification to do business and good standing, as the BANK
may reasonably require.
(f) BANK shall have received such other and further documents and
instruments as BANK may reasonably require.
ARTICLE XVI
CLOSING
16.01 All instruments and documents then to be executed pursuant hereto
were executed and delivered at a CLOSING held on the CLOSING DATE at the offices
of Goldstein & Manello, P.C., 265 Franklin Street, Boston, Massachusetts.
ARTICLE XVII
TERMINATION
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<PAGE>
17.01 Upon the TERMINATION DATE, all obligations of BANK to make
ADVANCES shall terminate, and the CREDIT BALANCE shall become immediately due
and payable in full without notice or demand.
17.02 Notwithstanding the passage of the TERMINATION DATE, and the
payment of the CREDIT BALANCE, until all OBLIGATIONS shall have been fully paid,
performed and satisfied, all rights of BANK arising under this Agreement and
other FINANCING AGREEMENTS shall continue, and all obligations of BORROWER
arising under this Agreement and the other FINANCING AGREEMENTS shall continue.
17.03 BANK in its sole discretion, from time to time may extend the
TERMINATION DATE by written notice to BORROWER. BANK may condition any such
extension on such matters that it determines appropriate. BANK is in no way
obligated to extend or to consider extending the TERMINATION DATE.
ARTICLE XVIII
INCONSISTENCY IN FINANCING AGREEMENTS
18.01 In the event that in any provision of the other FINANCING
AGREEMENTS, is inconsistent with a provision of this Second Amended and Restated
Loan Agreement, then and in such event, the provisions of this instrument shall
control.
18.02 The existence of a provision in the other FINANCING AGREEMENTS
which are not present in this Second Amended and Restated Loan Agreement shall
not be deemed to be an inconsistency.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the date first above written.
DM MANAGEMENT COMPANY
By: /s/ Peter J. Tulp
------------------------------------
Peter J. Tulp, Corporate Controller
CITIZENS BANK OF MASSACHUSETTS
By: /s/ Lori B. Leeth, SVP
------------------------------------
Lori B. Leeth, Senior Vice President
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<PAGE>
Schedule 1.01
EXISTING INDEBTEDNESS
$9,500,000 loan from Citizens Leasing Corporation
$980,000 loan from the Belknap County Economic Development Council, Inc.
$12,000,000 loan to Birch Pond Realty Corp. by John Hancock Real Estate Finance,
Inc.
<PAGE>
Exhibit 10.9
THIRD REPLACEMENT REVOLVING NOTE
Boston, Massachusetts
$30,000,000.00 May 4, 1999
On or before the "Termination Date" as defined in the Loan Agreement
hereinafter defined, or earlier upon the occurance of an "Event of Default", as
defined in the Loan Agreement, the undersigned DM Management Company, for value
received, promises to pay to the order of Citizens Bank of Massachusetts
(hereinafter called the "Bank"), at its principal office at 28 State Street,
Boston, Massachusetts 02109, or such other location that the holder may specify
Thirty Million DOLLARS ($30,000,000.00)
or such lesser amount which shall have been advanced hereunder, with interest
thereon, as herein provided, until paid in full. This note replaces the "Second
Replacement Revolving Note" dated September 4, 1998 issued by the undersigned to
the order of the Bank pursuant to the terms of a certain Loan Agreement dated
June 5, 1997, by and between Bank and the undersigned, as previously amended and
as amended and restated as of the date hereof by a certain Third Amended and
Restated Loan Agreement (the "Loan Agreement").
Interest shall accrue at the rates provided in the Loan Agreement for
the Revolving Loan as defined therein and shall be paid at maturity hereof.
Overdue principal and overdue interest from time to time outstanding shall bear
interest in accordance with the terms of the Loan Agreement. If any payment is
not made when due hereunder, then, without limitation on any other right of the
Holder, there shall be a late charge as provided in the Loan Agreement.
If an Event of Default (as defined in the Loan Agreement) shall occur,
the entire unpaid principal balance of this note and all accrued and unpaid
interest may become or be declared due and payable without notice or demand, in
the manner and with the effect provided in the Loan Agreement.
Every maker, endorser and guarantor of this note, or the obligation
represented by this note, waives presentment, demand, notice, protest, and all
other demands or notices in connection with the delivery, acceptance,
endorsement, performance, default, or enforcement of this note, assents to any
and all extensions or postponements of the time of payment or any other
indulgence, to any substitution, exchange, or release of collateral, and/or to
the addition or release of any other party or person primarily or secondarily
liable, and generally waives all suretyship defenses and defenses in the nature
thereof.
<PAGE>
The undersigned will pay all reasonable out-of-pocket costs and
expenses of collection, including reasonable attorneys' fees, incurred or paid
by the holder in enforcing this note or the obligations hereby evidenced, to the
extent permitted by law.
No delay or omission of the holder in exercising any right of remedy
hereunder shall constitute a waiver of any such right or remedy.
The holder need not enter payments of principal or interest upon this
note, but may maintain a record thereof on a separate ledger maintained by the
holder.
The word "holder" as used in this note shall mean the payee or indorsee
of this note who is in possession of it or the bearer if this note is at the
time payable to bearer.
This note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts and shall take effect as an instrument
under seal.
WITNESS: DM MANAGEMENT COMPANY
/s/ Thomas K. Schou By:/s/ Peter J. Tulp
- --------------------------------- --------------------------------
Peter J. Tulp
Corporate Controller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AT MARCH 27, 1999 AND FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 27, 1999
CONTAINED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS
ENDED MARCH 27, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000910721
<NAME> DM MANAGEMENT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> MAR-27-1999
<CASH> 773
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 31,503
<CURRENT-ASSETS> 52,427
<PP&E> 48,927
<DEPRECIATION> 0
<TOTAL-ASSETS> 107,607
<CURRENT-LIABILITIES> 28,839
<BONDS> 23,139
0
0
<COMMON> 48
<OTHER-SE> 55,531
<TOTAL-LIABILITY-AND-EQUITY> 107,607
<SALES> 64,719
<TOTAL-REVENUES> 64,719
<CGS> 28,598
<TOTAL-COSTS> 43,984
<OTHER-EXPENSES> 18,139
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 412
<INCOME-PRETAX> 2,184
<INCOME-TAX> 874
<INCOME-CONTINUING> 1,310
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,310
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
