<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
------------------ TO -----------------
0-24390
Commission file number ...............
TREND - LINES, INC.
......................................................
(Exact name of registrant as specified in its charter)
Massachusetts 04-2722797
................................... ..............................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
135 American Legion Highway, Revere, Massachusetts 02151
...............................................................
(Address of principal executive office) (Zip Code)
(617) 853 - 0900
.................................................
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months ( or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ..X... No......
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
CLASS OCTOBER 1, 1996
----- -----------------------------------
<S> <C>
Class A Common Stock, $.01 par value 6,264,403
Class B Common Stock, $.01 par value 4,780,026 *
</TABLE>
* Each share of Class B Common Stock is convertible into a share of Class A
Common Stock.
1
<PAGE>
INDEX
Page
----
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
August 31, 1996 (Unaudited) and March 2, 1996 3
Condensed Consolidated Statements of Operations
Three Months and Six Months Ended August 31, 1996
and August 26,1995 (Unaudited) 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended August 31, 1996
and August 26, 1995 (Unaudited) 5
Notes to Condensed Consolidated
Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12-13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security
Holders 13-14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TREND-LINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
<TABLE>
<CAPTION>
(Unaudited)
August 31, March 2,
ASSETS 1996 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $1,454 $436
Accounts receivable, net 9,978 8,319
Refundable income taxes 1,561 4,401
Inventories 70,284 68,885
Prepaid expenses and other current 5,610 5,492
assets -------- --------
Total current assets 88,887 87,533
-------- --------
PROPERTY AND EQUIPMENT, NET 13,334 12,815
OTHER ASSETS 667 310
-------- --------
$102,888 $100,658
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank credit facility $27,169 $18,483
Current portion of capital lease 606 566
obligations
Accounts payable 24,840 30,476
Accrued expenses 5,642 6,602
-------- --------
Total current liabilities 58,257 56,127
-------- --------
CAPITAL LEASE OBLIGATIONS, NET OF
CURRENT PORTION 1,934 2,243
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value -
Class A - Authorized - 20,000,000
shares
Issued and outstanding - 6,264,403 62 62
shares and 6,252,965
shares at August 31, 1996 and March
2, 1996, respectively
Class B - Authorized - 5,000,000
shares
Issued and outstanding - 32 32
4,780,026 shares and 4,790,915
shares at August 31, 1996 and
March 2, 1996, respectively
Additional paid-in capital 41,316 41,316
Retained earnings 1,287 878
-------- --------
Total stockholders' equity 42,697 42,288
-------- --------
$102,888 $100,658
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
TREND-LINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands)
(Unaudited)
Three months ended Six months ended
------------------ ----------------
August 31, August 26, August 31, August 26,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $46,827 $36,458 $96,138 $73,834
COST OF SALES 31,604 23,567 64,499 46,813
------- ------- ------- -------
Gross Profit 15,223 12,891 31,639 27,021
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 14,230 10,797 29,926 23,304
------- ------- ------- -------
Income from operations 993 2,094 1,713 3,717
INTEREST EXPENSE, net of 615 636 1,025 964
interest income ------- ------- ------- -------
Income before 378 1,458 688 2,753
provision for income
taxes
PROVISION FOR INCOME TAXES 153 583 279 1,107
------- ------- ------- -------
Net income $225 $875 $409 $1,646
======= ======= ======= =======
NET INCOME PER COMMON SHARE $0.02 $0.09 $0.04 $0.16
======= ======= ======= =======
WEIGHTED AVERAGE COMMON
SHARES
OUTSTANDING 11,298 10,034 11,297 10,006
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
TREND-LINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
----------------
August 31, August 26,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $409 $1,646
Adjustments to reconcile net income
to net cash used in operating
activities -
Depreciation and amortization 831 659
Gain on retirement of property and (18) -
equipment
Changes in current assets and
liabilities-
Accounts receivable (1,659) (2,024)
Refundable income taxes 2,840 -
Inventories (1,399) (12,313)
Prepaid expenses and other (118) (606)
current assets
Accounts payable (5,636) (6,861)
Accrued expenses and other (960) 1,254
current liabilities ------- --------
Net cash used in operating (5,710) (18,245)
activities ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,332) (3,113)
Increase in other assets (357) 284
------- --------
Net cash used in investing (1,689) (2,829)
activities ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of stock - 19
options
Net borrowings under bank credit 8,686 20,496
facility
Net borrowings (payments) on (269) 622
capital lease obligations ------- --------
Net cash provided by financing 8,417 21,137
activities ------- --------
NET INCREASE IN CASH 1,018 63
CASH, BEGINNING OF PERIOD 436 361
------- --------
CASH, END OF PERIOD $1,454 $424
======= ========
Supplemental Disclosure of Cash Flow
Information:
Cash paid for - Interest $536 $782
======= ========
Income Taxes $133 $1,868
======= ========
Supplemental Schedule of Noncash
Investing and
Financing Activities:
Equipment acquired under capital $- $534
lease obligations ======= ========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
TREND - LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
------------------------
The information set forth in these financial statements is unaudited and
may be subject to normal year end adjustments. In the opinion of
management, the information reflects all adjustments, which consist of
normal recurring accruals, that are considered necessary to present a fair
statement of the results of operations of Trend-Lines, Inc. (the Company)
for the interim periods presented. The operating results for the six
months ended August 31, 1996 are not necessarily indicative of the results
to be expected for the fiscal year ending March 1, 1997.
The financial statements presented herein should be read in conjunction
with the financial statements included in the Company's Annual Report on
Form 10-K for the year ended March 2, 1996. Certain information in
footnote disclosures normally included in financial statements have been
condensed or omitted in accordance with the rules and regulations of the
Securities and Exchange Commission.
2. Earnings per Share Data
--------------------------
Net income per share for the six months ended August 31, 1996 and August
26, 1995 is computed by dividing net income by the weighted average number
of shares of common stock and common stock equivalents outstanding during
the period. Common stock equivalents are calculated using the treasury
stock method and consist of common stock issuable upon the exercise of
outstanding stock options. Outstanding shares and options have been
adjusted to reflect a three-for-two split of the Class A Common Stock and
a corresponding split of Class B Common Stock (Note 3).
3. Stock Split
--------------
In August, 1995, the Board of Directors approved a three-for-two stock
split of the Class A Common Stock effected in the form of a stock dividend.
The record date for the stock split was August 24, 1995 and the dividend
was paid on September 1, 1995. In July, 1996 the Board of Directors
approved a corresponding three-for-two stock split of the Class B Common
Stock effected in the form of a stock dividend. The stock splits have
been retroactively reflected in the accompanying consolidated statements
and notes for all periods presented.
6
<PAGE>
TREND-LINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. Bank Credit Facility
-----------------------
At August 31, 1996, the Company had approximately $27.2 million of
borrowings outstanding and approximately $1.1 million of letters of credit
outstanding. The Company had approximately $8.4 million in available
borrowings under this facility.
On July 3, 1996, the Company entered into a new, three-year revolving
secured credit facility with another institution, pursuant to which the
Company may borrow a maximum of $40 million based on a borrowing formula
related to inventory levels, as defined. The facility bears interest, at
the Company's option, at the bank's reference rate plus .75% or LIBOR plus
2.25%. A commitment fee of .375% per year of the average unused commitment
amount, as defined, is payable monthly.
5. Restructuring Charge
------------------------
In the fourth quarter of fiscal 1995, the Company recorded a restructuring
charge of approximately $1.4 million, representing the costs associated
with reorganizing its operations. These costs include a $954,000 charge
for the rent and related expenses for closing 12 retail store locations and
the severance and related benefits for terminated employees. Additionally,
$443,000 was charged for the consolidation of the Company's distribution
centers.
As of August 31, 1996, 11 retail store locations were closed and
approximately $475,000 was charged against the restructuring reserve for
store closing related activities. In addition, approximately $185,000
associated with the consolidation of the Company's distribution centers
was also charged against the restructuring reserve.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
---------------------
Net sales for the second quarter of fiscal 1996 increased by $10.4 million,
or 28.4%, from $36.5 million for the second quarter of fiscal 1995 to $46.8
million. Net catalog sales for the second quarter of fiscal 1996 decreased
$.7 million or (4.6)%, from $15.1 million for the second quarter of fiscal
1995 to $14.4 million for the second quarter of fiscal 1996, while retail
sales increased $11.1 million or 52.1% as compared to the second quarter of
fiscal 1995. The decrease in net catalog sales was primarily caused by the
reduced response rate for the Golf Day catalog and to the Company's opening
of retail stores in areas previously only serviced by its catalogs which
has resulted in a decrease in the Company's catalog sales in those areas.
The Company believes that the expansion of its retail store operations will
continue to result in a decrease in its catalog sales. The revenue growth
of retail stores was attributable to the expansion of the Company's retail
store base, which expanded over 28% from 113 locations at the end of the
second quarter of fiscal 1995 to 145 locations at the end of the second
quarter of fiscal 1996. Comparable net store sales for Woodworkers
Warehouse / Post Tool stores and Golf Day stores for the second quarter of
fiscal 1996 increased by 18.4% as compared to the second quarter of fiscal
1995.
Net sales for the first six months of fiscal 1996 increased by $22.3
million, or 30.2%, from $73.8 million for the first six months of fiscal
1995 to $96.1 million for the first six months of fiscal 1996. Comparable
net store sales for Woodworkers Warehouse / Post Tool Stores and Golf Day
for the first six months of fiscal 1996 increased by 12.3% as compared to
the first six months of fiscal 1995. Catalog sales for the first six
months of fiscal 1996 increased $1.4 million , or 4.4%, from $31.9 million
for the first six months of fiscal 1995 to $33.3 million for the six months
of fiscal 1996, while retail sales increased $20.9 million, or 49.9%, as
compared to the first six months of fiscal 1995. The increase in net
catalog sales was primarily attributable to the Trend-Lines catalog being
more promotional and moderate expansion of the Company's Golf Day catalog
circulation during the first quarter.
Gross profit for the second quarter of fiscal 1996 increased 17.5% from
$12.9 million for the second quarter of fiscal 1995 to $15.2 million for
the second quarter of fiscal 1996. As a percentage of net sales, gross
profit decreased 2.9% from 35.4% of net sales for the second quarter of
fiscal 1995 to 32.5% of net sales in the second quarter of fiscal 1996.
The decrease in the Company's gross profit percentage was the result of
promotional catalog and retail activity and the Company's changing sales
mix, which was caused by the increase in retail sales as a percentage of
total sales. The Company's retail store sales generally have lower overall
gross margins than catalog sales.
Gross profit for the first six months of fiscal 1996 increased 16.8% from
$27.0 million for the first six months of fiscal 1995 to $31.6 million for
the first six months of fiscal 1996. As a percentage of net sales, gross
profit decreased 3.7% from 36.6% of net sales for first six months of
fiscal 1995 to 32.9% of net sales for the first six months of fiscal 1996.
The decrease in the
8
<PAGE>
Company's gross profit percentage was primarily the result of promotional
catalog and retail activity and the Company's changing sales mix.
Selling, general and administrative expenses for the second quarter of
fiscal 1996 increased 31.5%, or $3.4 million, from $ 10.8 million for the
second quarter of fiscal 1995 to $14.2 million for the second quarter of
fiscal 1996. As a percentage of net sales, selling, general and
administrative expenses increased .7% from 29.6% of net sales in the second
quarter of fiscal 1995 to 30.3% of net sales in the second quarter of
fiscal 1996. Selling, general and administrative expenses increased in
dollar terms and as a percentage of net sales due primarily to the
Company's continuing retail expansion.
Selling, general and administrative expenses for the first six months of
fiscal 1996 increased 28.3%, or $6.6 million, from $23.3 million for the
first six months of fiscal 1995 to $29.9 million for the first six months
of fiscal 1996. As a percentage of net sales, selling, general and
administrative expenses decreased .5% from 31.6% of net sales for the first
six months of fiscal 1995 to 31.1% of net sales for the first six months of
fiscal 1996. The dollar increases in selling, general and administrative
expenses are primarily related to the Company's continuing retail
expansion.
As the result of the above factors income from operations for the second
quarter of fiscal 1996 decreased by $1.1 million, or (54.2)%, from $2.1
million in the second quarter of fiscal 1995 to $1.0 million in the second
quarter of fiscal 1996. As a percentage of net sales, income from
operations decreased 3.7% from 5.7% of net sales in the second quarter of
fiscal 1995 to 2.1% of net sales in the second quarter of fiscal 1996.
As the result of the above factors income from operations for the first six
months of fiscal 1996 decreased $2.0 million, or (54.8)% from $3.7 million
in the first six months of fiscal 1995 to $1.7 million in the first six
months of fiscal 1996. As a percent of net sales, income from operations
decreased 3.3% from 5.0% of net sales in the first six months of 1995 to
1.7% of the net sales in the first six months of fiscal 1996.
Interest expense, net of interest income, for the second quarter of fiscal
1996 decreased by $21,000 from $636,000 in the second quarter of fiscal
1995 to $615,000 in the second quarter of fiscal 1996. The decrease in
interest expense was attributable to the decrease in the Company's average
borrowings, which was partially offset by an increased borrowing rate .
Interest expense, net of interest income, for the first six months of
fiscal 1996 increased by $61,000 from $964,000 in the first six months of
fiscal 1995 to $1,025,000 in the first six months of fiscal 1996, caused by
the increased borrowing rate.
9
<PAGE>
Liquidity and Capital Resources
--------------------------------
The Company's working capital decreased by $.8 million, from $31.4 million as of
March 2, 1996 to $30.6 million as of August 31, 1996. During the first six
months of fiscal 1996, net cash used in operating activities was approximately
$6.4 million, net cash used in investing activities was approximately $1.7
million and net cash provided from financing activities was approximately $9.1
million. The net cash used in operating activities resulted primarily from $1.2
million provided by net income and depreciation, $2.8 million provided from
income tax refunds, offset by a decrease in Accounts Payable and accrued
expenses of $7.3 million and a combined $3.1 million increase in inventories,
accounts receivable and prepaid expenses and other current assets. The net cash
used in investing activities was primarily related to purchases of property and
equipment required for the Company's retail expansion. During the first six
months of fiscal 1996, the net cash provided from financing activities was
primarily attributable to $9.4 million in net borrowings under the Company's
bank credit facility, offset by $.3 million in payments under capital leases.
The Company anticipates that in fiscal 1996, it will continue to invest in
leasehold improvements and equipment to support its retail store expansion
plans. In addition, the Company's expansion plans will require the use of cash
to fund increased inventories associated with the operation of additional retail
stores. The Company opened two stores and closed four stores in the second
quarter. For fiscal 1996, the Company currently plans to open approximately 25
to 35 retail stores, including those opened in the last two quarters.
The amount available under the credit facility is $36.7 million, of which $27.2
million (including letters of credit totaling approximately $1.1 million) was
outstanding as of August 31, 1996.
The Company believes that the cash generated from operating activities, trade
credit and available bank borrowings will be sufficient to fund its operations
and its retail store expansion program for the next twelve months, however,
there can be no assurance that this will be the case. See "Safe Harbor Statement
under the Private Securities Litigation Reform Act of 1995".
Impact of Inflation
- -------------------
The Company does not believe that inflation has had a material impact on its net
sales or results of operations.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies,
10
<PAGE>
objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (ii) the Company's ability to open
the planned number of stores will depend upon a number of other factors,
including securing desirable locations, negotiating leases with acceptable
terms, and hiring, training and retraining qualified personnel; (iii) the
Company's plans and results of operations will be affected by the Company's
ability to manage its growth and inventory; (iv) the Company's tool and golf
businesses are highly competitive and the entrance of new competitors into or
the expansion of the operations by existing competitors in the Company's markets
and other changes in the tool or golf retail climate could adversely affect the
Company's plans and results of operations; and (v) other risks and uncertainties
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.
11
<PAGE>
TREND - LINES, INC.
Part II - Other Information
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
At the Annual Meeting of Stockholders of the Company held on July
17, 1996, the stockholders approved certain amendments to the
Restated Articles of Organization of the Company (the "Restated
Articles").
The stockholders approved amendments to the Restated Articles
which generally have the effect of decreasing from two-thirds to
a majority the vote required to amend the Restated Articles, to
amend the By-Laws and to approve mergers and sales of
substantially all of the assets of the Company. Any change in
the rights and preferences of the Class A Common Stock ("Class A
Stock") and Class B Common Stock ("Class B Stock") would still
require the affirmative vote of two-thirds of the total voting
power of the Company.
The stockholders also approved an amendment to the Restated
Articles under which the Company elected not to be governed by a
Massachusetts statute which prohibits a corporation with more
than 200 stockholders from engaging in a "business combination"
with a 5% or more stockholder of the corporation for a period of
three years after the date the person became a 5% holder, subject
to certain exceptions. The stockholders also amended the
Restated Articles to delete a provision generally similar, but
not identical to, the provisions of this Massachusetts statute.
The general effect of these amendments is to make it easier for
the Company to engage in a "business combination" with a 5%
stockholder.
The stockholders also approved an amendment to the Restated
Articles such that shares of Class B Stock surrendered upon
conversion can be reissued in connection with certain dividends
and other distributions of capital stock. Prior to the
amendment, the shares of Class B Stock surrendered upon
conversion were canceled and not available for reissuance. The
general effect of this amendment is to restore converted shares
of class B Stock to the staus of authorized but unissued shares,
available for reissuance in connection with dividends and other
12
<PAGE>
distributions of Class B Stock payable with respect to the Class
B Stock, all in accordance with the provisions of the Restated
Articles.
In August 1995, the Company declared a 3-for-2 stock split of the
Class A Stock to be effected in the form of a stock dividend.
The Company suspended the corresponding dividend on the Class B
Stock because there was not a sufficient number of authorized but
unissued shares of Class B Stock to effect a 3-for-2 stock
split. As a result, the conversion ratio of the Class B Stock
was increased from 1 to 1.5 shares of Class A Stock for each
share of Class B Stock. The suspension of such dividend was
agreed by the holders of the Class B Stock with the understanding
that the Company, at the next succeeding annual meeting of
stockholders, would seek to make available additional shares of
Class B Stock so that the suspended dividend could be paid.
Following the amendment of the Restated Articles, the Company
distributed shares of Class B Stock to the holders thereof, in
payment of the suspended 1995 dividend. The dividend had the
effect of restoring the original 1 to 1 conversion ratio.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a vote of Security Holders The Annual
Meeting of Stockholders was held July 17, 1996. Proxies for the
Annual Meeting were solicited pursuant to Section 14 of The
Securities and Exchange Act of 1934, as amended and regulations
promulgated thereunder.
At the Annual Meeting, a total of 5,342,983 shares of Class A
Common Stock and 3,193,943 shares of Class B Common Stock were
represented by proxy. Each share of Class A Common Stock has one
vote per share and each share of Class B Common Stock has 10
votes per share. The shares represented were voted in the
following manner upon the proposal put forth at the meeting:
<TABLE>
<CAPTION>
Broker
For Against Abstain Non Vote
<S> <C> <C> <C> <C>
To elect Messrs. Stanley D. Black, Ronald L. Franklin,
Norman W. Zagorsky, John A. McGregor, Karl P,
Sniady, Richard A. Mandell and Merrill Zenner as
directors of the Company.
Class A shares 5,169,846 173,137 -0- -0-
Class B shares 3,193,943 -0- -0- -0-
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
Broker
For Against Abstain Non Vote
<S> <C> <C> <C> <C>
To amend the Company's Restated Articles
of Organization to eliminate certain
supermajority voting provisions, and
thereby permit approval of certain actions
by the holders of a majority of the
outstanding voting power.
Class A shares 1,831,652 158,898 -0- 3,352,433
Class B shares 3,193,943 -0- -0- -0-
Broker
For Against Abstain Non Vote
To amend the Company's Restated Articles
of Organization to amend the terms of the
Class B Common Stock to provide that the
shares of Class B Common Stock surrendered
upon conversion into Class A Common
Stock are restored to the status of authorized
but unissued stock, available for reissuance
in connection with certain dividends and
other distributions of capital stock.
Class A shares 1,796,976 198,498 -0- 3,347,509
Class B shares 3,193,943 -0- -0- -0-
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number
-------
3.0 Restated Articles of Organization, as amended. Filed herewith
10.0 Loan and Security Agreement dated as Filed herewith
of July 3, 1996.
(b) Reports on Form 8-K - not applicable
</TABLE>
14
<PAGE>
SIGNATURE
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.
TREND-LINES, INC
----------------------
Registrant
Date: October 15, 1996
/s/ Stanley D. Black
-----------------------
Stanley D. Black
(President and Chief Executive
Officer)
/s/ Karl P. Sniady
----------------------
Karl P. Sniady
(Executive Vice President,
Chief Financial Officer)
15
<PAGE>
FEDERAL IDENTIFICATION
NO. 04-2722797
-------------------
The Commonwealth of Massachusetts
William Francis Galvin
- ---------- Secretary of the Commonwealth
Examiner One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
- ----------
Name
Approved
We, Stanley D. Black , * President ,
----------------------
and Howard L. Levin , * Clerk ,
----------------------
of Trend-Lines, Inc. ,
----------------------
(Exact name of corporation)
located at: 135 American Legion Highway, Revere, MA 02151 ,
----------------------------------------------------
(Street address of corporation in Massachusetts)
certify that these Articles of Amendment affecting articles numbered:
4 and 6
---------------------------------------------------------------------
(Number those articles 1, 2, 3, 4, 5, and/or 6 being amended)
of the Articles of Organization were duly adopted at a meeting held
on July 17 , 1996 , by vote of:
--------- ------
5,342,983 shares of Class A Common of 6,252,965 shares
------------ --------------------- -------------
outstanding, (type, class & series, if any)
3,193,943 shares of Class B Common of 3,193,943 shares
------------ --------------------- -------------
outstanding, and (type, class & series, if any)
shares of of shares
------------ --------------------- -------------
outstanding. (type, class & series, if any)
C [_] /1/** /2/** being at least two-thirds of each type,
P [_] class or series outstanding and entitled to vote thereon and of each
M [_] type, class or series of stock whose rights are adversely affected
R.A. [_] thereby:
*Delete the inapplicable words. **Delete the inapplicable clause.
/1/For amendments adopted pursuant to Chapter 156B, Section 70.
/2/For amendments adopted pursuant to Chapter 156B, Section 71.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on one side only of
separate 8 1/2 x 11 sheets of paper with a left margin of at least 1
inch. Additions to more than one article may be made on a single
sheet so long as each article requiring each addition is clearly
indicated.
- ---------
P.C.
<PAGE>
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:
The total presently authorized is:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
Change the total authorized to:
<TABLE>
<CAPTION>
WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
VOTED: To amend Articles 4 and 6 of the Amended and Restated Articles
-----
of Organization to read in their entirety as set forth on
Exhibit A attached hereto as if set forth verbatim.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effectively on such later date.
Later effective date: n/a .
-----------
SIGNED UNDER THE PENALTIES OF PERJURY, this 17th day of July , 1996 .
------ -------- ---
/s/ Stanley D. Black , *President,
_________________________________________________________________
Stanley D. Black
/s/ Howard L. Levin , *Clerk.
_________________________________________________________________
Howard L. Levin
*Delete the inapplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
================================================================================
I hereby approve the within Articles of Amendment, and the filing fee in the
amount of $___________ having been paid, said article is deemed to have been
filed with me with this ________day of ____________, 19____.
Effective date:
-------------------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Howard L. Levin, Esquire
- ---------------------------------------------------------------
Brown, Rudnick, Freed & Gesmer
- ---------------------------------------------------------------
One Financial Center
- ---------------------------------------------------------------
Boston, MA 02111
- ---------------------------------------------------------------
<PAGE>
EXHIBIT A
TREND-LINES, INC.
RESTATED ARTICLES OF ORGANIZATION
CONTINUATION PAGES
ARTICLE 4
---------
If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each class
thereof and any series now established.
The classes of capital stock of the Corporation authorized by Article 4
shall have the voting powers, qualifications and relative participating,
optional or other special rights and preferences, limitations or restrictions as
set forth in this Article 4.
PART I - COMMON STOCK
---------------------
A. General Voting Rights and Powers.
--------------------------------
(i) Subject to the rights and preferences of the holders of the
Preferred Stock and any other class of stock ranking senior to the Common Stock,
the holders of shares of Class A Common Stock shall be entitled to one vote per
share on all matters to be voted on by stockholders, and holders of shares of
Class B Common Stock shall be entitled to ten votes per share on all matters to
be voted on by stockholders. The holders of Class A Common Stock and Class B
Common Stock shall vote together as a single class on all matters on which the
stockholders may vote, except when class voting is required by applicable law or
when the holders of Class B Common Stock shall be entitled to vote as a separate
class in accordance with Section B of this Part I.
(ii) Notwithstanding anything contained in these Restated Articles of
Organization to the contrary, the affirmative vote of the holders of at least
two-thirds of the combined voting power of the outstanding shares of Class A
Common Stock and Class B Common Stock, voting together as a single class, shall
be required to amend this Part I, or to adopt any provision inconsistent
herewith.
(iii) Subject to the rights and preferences of the Preferred Stock and
any other class of stock ranking senior to Common Stock and subject to
Subparagraph (ii) above, the vote of a majority of the combined voting power of
all classes, voting as a single class, or of each class entitled as a matter of
law or under these Restated Articles of Organization to vote as a separate
class, shall be sufficient to approve any action to (i) amend these Articles of
Organization or the
<PAGE>
By-laws of the Corporation, or (ii) approve any agreement of merger or
consolidation of the Corporation with or into another corporation or any sale,
lease or exchange of substantially all of the assets of the Corporation,
notwithstanding any provision of law or of the Articles of Organization that
would otherwise require a greater vote in the absence of this provision.
B. Special Voting Power of Class B Common Stock. In addition to the
--------------------------------------------
foregoing voting power and any rights provided by law, so long as any Class B
Common Stock shall be outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of the holders of not less
than a majority of the voting power of then-outstanding shares of Class B Common
Stock, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class: (i) amend or appeal any provision of, or add
any provision to, the Corporation's Restated Articles of Organization or By-Laws
if such action would alter or change the preferences, rights, privileges or
powers of, or the restrictions provided for the benefit of, the Class B Common
Stock; (ii) authorize or issue any new or existing class or classes or series of
capital stock having any voting power superior to or on a parity with any voting
power of the Class B Common Stock, or authorize or issue shares of stock of any
class or any bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of the capital
stock of the Corporation having any voting power superior to or on a parity with
the voting power of the Class B Common Stock; and (iii) reclassify any Class A
Common Stock into shares having any voting power superior to or on a parity with
the voting power of the Class B Common Stock.
C. No Preemptive Rights. Subject to the provisions of Section F of
--------------------
this Part II in respect of Class B Common Stock, no holder of Class A Common
Stock or Class B Common Stock shall have any rights, preemptive or other, to
subscribe for or to acquire any capital stock of the Corporation solely by
reason of the ownership or holding of any such Class A Common Stock or Class B
Common Stock.
D. Dividends and Other Distributions. Subject to the rights and
---------------------------------
preferences of the holders of the Preferred Stock and any other class of stock
ranking senior to the Common Stock, the holders of Class A Common Stock and
Class B Common Stock shall be entitled to dividends when, as and if declared and
paid to the holders of Class A Common Stock and Class B Common Stock; provided
that dividends must be paid on both the Class A Common Stock and the Class B
Common Stock at any time that dividends are paid on either class. Any dividend
so declared and payable in cash, capital stock of the Corporation (other than
Class A Common Stock or Class B Common Stock) or other property shall be paid
equally, share for share, on the Class A Common Stock and the Class B Common
Stock. Dividends and distributions payable in shares of Class A Common Stock may
be paid only on shares of Class A Common Stock and dividends and distributions
payable in shares of Class B Common Stock may be paid only on shares of Class B
Common Stock. If a dividend or distribution payable in Class A Common Stock is
made on the Class A Common Stock, the Corporation shall also make a simultaneous
dividend or distribution on the Class B Common Stock. If a dividend or
distribution payable in Class B Common Stock is made on the Class B Common
Stock, the Corporation shall also make a simultaneous dividend or distribution
on the Class A Common Stock. Pursuant to any such dividend or distribution, each
share of Class A Common Stock will receive a number of shares of Class A Common
Stock
<PAGE>
equal to the number of shares of Class B Common Stock payable on each share of
Class B Common Stock and each share of Class B Common Stock will receive a
number of Class B Common Stock equal to the number of shares of Class A Common
Stock payable on each share of Class A Common Stock.
E. Liquidation Rights. In the event of the liquidation, dissolution
------------------
or winding up of the Corporation and subject to the rights and preferences of
the holders of the Preferred Stock and any other class of stock ranking senior
to or on a parity with the Common Stock, the holders of the shares of Class A
Common Stock and Class B Common Stock shall be entitled to share ratably, share
for share, in all assets remaining after payment of all debts and other
liabilities of the Corporation available for distribution.
F. Conversion of Class B Common Stock.
----------------------------------
(i) Each share of Class B Common Stock may be converted, at the option of
the holder, at any time into one fully-paid and non-assessable share of Class A
Common Stock in the manner and subject to adjustment as set forth in
Subparagraph (ii) of this Section F.
(ii) The Class B Common Stock shall be converted into Class A Common Stock in
the following manner:
(a) A holder of Class B Common Stock shall give written notice to
the Corporation by mail of its desire to convert all or a portion of the shares
of Class B Common Stock owned by such holder. Such notice shall be accompanied
by certificates, duly endorsed for conversion, evidencing the number of shares
of Class B Common Stock such holder desires to convert. The Corporation will, as
soon as practicable thereafter, deliver to such holder or to such holder's
nominee or nominees, a certificate or certificates for the appropriate number of
shares of Class A Common Stock, a certificate representing the balance, if any,
of the shares of Class B Common Stock tendered by the surrendered certificate or
certificates but not converted to Class A Common Stock.
(b) If, prior to the date on which all shares of Class B Common
Stock are converted, the Corporation shall (1) pay a dividend in shares of Class
A Common Stock or make a distribution in shares of Class A Common Stock, (2)
subdivide its outstanding Class A Common Stock, (3) combine its outstanding
Class A Common Stock into a smaller number of shares of Class A Common Stock or
(4) issue by reclassification of its Class A Common Stock other securities of
the Corporation, the right to convert shall thereupon be adjusted, or, if
necessary, amended, such that the number of shares of Class A Common Stock
receivable upon conversion of the shares of Class B Common Stock immediately
prior thereto shall be adjusted so that the holder shall be entitled to receive,
upon the conversion of such shares of Class B Common Stock, the kind and number
of shares of Class A Common Stock or other securities of the Corporation which
it would have owned or would have been entitled to receive after the happening
of any of the events described above had the Class B Common Stock been converted
immediately prior to the happening of such event or any record date with respect
thereto. Any adjustment made pursuant to this subparagraph (b) shall become
effective immediately after the effective date of such event
<PAGE>
and such adjustment shall be retroactive to the record date, if any, for such
event. Except as provided in this subparagraph (c), no adjustment with respect
to any ordinary dividends (made out of current earnings) on shares of Class A
Common Stock shall be made.
(c) If, prior to the date on which the shares of Class B Common
Stock are converted, the Corporation shall (1) reorganize, reclassify or
otherwise change the number of outstanding shares of Class A Common Stock, (2)
consolidate with or merge with or into another "Person" (as defined in Section H
of Article 6 hereof) resulting in a reclassification, conversion, exchange or
cancellation of outstanding shares of Class A Common Stock, (3) sell or
otherwise transfer all or substantially all of the assets of the Corporation,
then a holder of Class B Common Stock shall thereafter have the right to convert
such shares of Class B Common Stock into the kind and amount of stock,
securities or assets, if any, such holder would have been entitled to receive
upon such reorganization, reclassification, consolidation, merger, sale or
transfer had such holder converted its shares of Class B Common Stock into Class
A Common Stock immediately prior to such transaction.
(d) If a holder of Class B Common Stock has delivered notice to the
Corporation of its desire to convert all or a portion of its shares of Class B
Common Stock and certificates, duly endorsed for conversion in respect of such
shares, then all shares of Class B Common Stock so tendered to the Corporation
shall be deemed to be no longer outstanding and, notwithstanding the failure of
the Corporation to issue the Class A Common Stock, such holder shall be deemed,
for all purposes, to be a holder of the number of shares of Class A Common Stock
into which the shares of Class B Common Stock were converted and such holder is
entitled to receive pursuant to the terms of this Section F in each case as of
the close of business on the date on which such conversion notice is delivered.
(e) The Corporation shall not, by amendment of its Restated
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Section F by the Corporation
but shall at all times in good faith assist in the carrying out of all the
provisions of this Section F. The Corporation shall at all times reserve and
keep available out of its authorized but unissued Class A Common Stock the full
number of shares of Class A Common Stock deliverable upon the conversion of all
the then outstanding shares of Class B Common Stock and shall take all such
action and obtain all such permits or orders as may be necessary to enable the
Corporation to validly and legally issue fully paid and non-assessable shares of
Class A Common Stock upon the conversion of Class B Common Stock. The
Corporation shall obtain prior to or concurrently with the first issuance of the
Class B Common Stock, and shall use its best efforts to maintain for as long as
any shares of Class B Common Stock shall be outstanding, the authorization for
the listing of shares of Class A Common Stock issuable upon conversion of the
Class B Common Stock on the Nasdaq Stock Market National Market and on any
national securities exchange on which the Class A Common Stock is listed for
trading, as applicable. The Corporation shall pay any and all transfer, stamp
and other like taxes that may be payable in respect of the issuance or delivery
of shares of Class A Common Stock on conversion of the Class B Common Stock.
<PAGE>
(f) Shares of Class B Common Stock which shall have been converted,
purchased or otherwise reacquired by the Corporation shall be restored to the
status of authorized but unissued shares and shall be available for reissuance
in the circumstances permitted by Part I, Section D, or to remedy any prior
deficient dividend thereunder.
(g) In the event of a "Transfer Event" (as defined in paragraph (h)
of this Section F(ii)) in respect of any share of Class B Common Stock, such
share shall be automatically converted into one share of Class A Common Stock as
at the time of the Transfer Event in the same manner and subject to the same
adjustments as set forth in paragraphs (a) through (f), inclusive, of this
Section F(ii) as if written notice thereof had been given to the Corporation
thereunder.
(h) For purposes of this Section F, (1) a "Transfer Event" in
respect of a specific holder includes or shall be deemed to have occurred upon
(i) any sale, assignment, transfer, pledge or other disposition, including by
gift, devise, intestacy, operation of law or otherwise, of any of the shares of
the Class B Common Stock by such holder other than to Stanley D. Black or Emilia
F. Black or to a "Controlled Person" (as defined below) of either of them, (ii)
the holder of Class B Common Stock voluntarily files a petition under any
bankruptcy or insolvency law or a petition for the appointment of a receiver, or
makes an assignment for the benefit of creditors, (iii) the holder of Class B
Common Stock is subject involuntarily to such a petition or assignment or any
creditor or other Person obtains an attachment or other legal or equitable
interest in any shares of the Class B Common Stock of such holder, and such
involuntary petition, assignment or attachment is not discharged within 90 days
after creation, or (iv) if the holder of Class B Common Stock is required to
transfer any such shares by reason of a judgment, court order or decree from
which no appeal may be taken or by operation of law; (2) "Person" shall have the
meaning set forth in Section H of Article 6 hereof; (3) a "Controlled Person"
shall mean with respect to a specified holder any Person which is, directly or
indirectly, controlled by or under direct or indirect common control with such
specified holder. For the purpose of this definition, "Control" when used with
respect to any Person means the sole or shared power to vote, or to direct the
voting of, and/or the sole or shared power to dispose of, or to direct the
disposition of, shares of Class B Common Stock, directly or indirectly, through
ownership, proxy, or any contract, arrangement, understanding, relationship, or
otherwise; and the term "controlled" shall have meanings correlative to the
foregoing.
(i) Determinations with respect to Transfer Events described in
subparagraph (h) of this Section F(ii) shall be made by majority vote of the
entire Board of Directors of the Corporation.
PART II - PREFERRED STOCK
-------------------------
(i) The 1,000,000 shares of Preferred Stock (the "Preferred Stock")
may consist of one or more series. The Board of Directors is hereby empowered to
establish and designate, from time to time, the different series for the shares
of Preferred Stock and the variations in the relative rights and preferences as
between the different series as provided in paragraph (ii) below. In the event
that at any time the Board of Directors shall have established and designated
one or more series of Preferred Stock consisting of a number of shares less than
all of the authorized number of shares of Preferred Stock, the remaining
authorized shares of Preferred Stock shall be
<PAGE>
deemed to be shares of an undesignated series of Preferred Stock until
designated by the Board of Directors as being a part of a series previously
established or a new series then being established by the Board of Directors.
(ii) Subject to the provisions of this Article 4, the Board of
Directors is authorized to establish one or more series of Preferred Stock and,
to the extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts, to fix and determine the preferences, voting powers,
qualifications and special or relative rights or privileges of each series
including, but not limited to:
(a) the number of shares to constitute such series and the
distinctive designation of such series;
(b) the dividend rate on the shares of such series and
preferences, if any, and the special and relative rights of such shares of such
series as to dividend;
(c) whether or not the shares of such series shall be
redeemable, and, if redeemable, the price, terms and manner of redemption;
(d) the preferences, if any, and the special and relative
rights of the shares of such series upon liquidation of the Corporation;
(e) whether or not the shares of such series shall be subject
to the operation of a sinking or purchase fund and, if so, the terms and
provisions of such fund;
(f) whether or not the shares of such series shall be
convertible into shares of any other class or of any other series of the same or
any other class of stock of the Corporation and, if so, the conversion price or
ration and other conversion rights;
(g) the conditions under which the shares of such series shall
have separate voting rights or no voting rights; and
(h) such other designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions of such series to the full extent now and hereafter by the laws
of the Commonwealth of Massachusetts.
<PAGE>
ARTICLE 6
---------
Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the Corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the Corporation, or of its
directors or stockholders, or of any class of stockholders:
A. For the conduct and regulation of the business and affairs of
the Corporation, and in further limitation, definition and regulation of the
powers of the Corporation and of its directors and of its stockholders or any
class thereof, as the case may be, it is further provided that:
(1) The business of the Corporation shall be conducted by the
officers of the Corporation under the supervision of the Board of Directors.
(2) The number of directors which shall constitute the entire
Board of Directors shall be fixed by, or in the manner provided in, the By-Laws
of the Corporation. The "entire" Board of Directors means the total number of
directors (assuming no vacancies) which the Corporation would have under or
pursuant to the By-Laws in effect at the time such number is to be determined.
No election of Directors need be by written ballot.
(3) The By-Laws of the Corporation may provide that the Board
of Directors of the Corporation may make, amend or repeal the By-Laws at any
time in whole or in part by a majority vote of the "Continuing Directors" (as
defined in Section H below), except with respect to any provision thereof which
by law or the By-Laws requires action by the stockholders. The stockholders may
also make, amend or repeal the By-Laws by the affirmative vote of the holders of
a majority of the shares of "Voting Stock" (as defined in Section H below) then
outstanding. In no event shall any amendment to the By-Laws provide for the
classification of Directors of the Corporation for staggered terms pursuant to
the provisions of subsection (b) of Section 50A of the Massachusetts Business
Corporation Law be effective unless the same shall be set forth in an amendment
to these Restated Articles of Organization or in a By-Law adopted by the Board
of Directors by a majority vote of the entire Board of Directors.
B. The Corporation may be a general or limited partner in any
business enterprise which the Corporation would have power to conduct by itself.
C. The Corporation may, to the fullest extent permitted by Section
67 of the Massachusetts Business Corporation Law, as same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which a person indemnified may be entitled under any By-Law,
agreement, vote of stockholders or disinterested Directors of otherwise, both as
to action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person
<PAGE>
who has ceased to be Director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
D. From time to time any of the provisions of these Restated
Articles of Organization may be amended, altered or repealed, in accordance with
Article 4, Part 1 Section A. All rights at any time conferred upon the
stockholders of the Corporation by these Restated Articles of Organization are
granted subject to the provisions of this Section D of this Article 6.
E. No Director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
Director as a Director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law (i) for breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Sections 61 and 62 of the Massachusetts
Business Corporation Law or (iv) for any transaction from which the director
derived an improper personal benefit. No amendment to or repeal of this Section
E of Article 6 shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such Director occurring prior to such amendment.
F. The provisions of Chapter 110F of the Massachusetts General Laws
shall not apply to the Corporation.
G. The Board of Directors of the Corporation, when evaluating any
offer of another person to (a) purchase or exchange any securities or property
for any outstanding equity securities of the Corporation, (b) merge or
consolidate the Corporation with another corporation, or (c) purchase or
otherwise acquire all or substantially all of the properties and assets of the
Corporation, shall in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and its
stockholders, give due consideration not only to the price or other
consideration being offered, but also to all other relevant factors, including
without limitation, the interests of the Corporation's employees, suppliers,
creditors and customers, the economy of the state, region and nation, community
and societal considerations, and the long-term and short-term interests of the
Corporation and its stockholders, including the possibility that these interests
may be better served by the continued independence of the Corporation.
H. Definitions
-----------
The following definitions shall apply for the purpose of Article 4 and
this Article 6:
(a) "Affiliate" shall have the meaning given such term in Rule 12b-2
under the Exchange Act.
(b) "Continuing Director" shall mean any member of the Board of
Directors who is not an Affiliate of any Related Person and who was a member of
the Board of Directors prior to the time that any such Related Person became a
Related Person, and any successor of a Continuing Director who is unaffiliated
with any Related Person and is recommended to
<PAGE>
succeed a Continuing Director by a majority of the Continuing Directors then on
the Board of Directors. Notwithstanding the above, a majority of the then
existing Continuing Directors can deem a new director to be a Continuing
Director, even though such person is Affiliated with a Related Person.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, from time to time.
(d) "Person" shall mean any individual, firm, partnership, joint
venture, joint stock company, trust, business trust, corporation, unincorporated
association or other entity of whatsoever nature.
(e) "Related Person" shall mean any Person (other than the
Corporation, any Subsidiary or any individual who was as stockholder of the
Corporation on May 1, 1994 which, together with such Person's Affiliates and
Associates and with any other Person (other than the Corporation, any Subsidiary
or any individually who was a stockholder of the Corporation on May 1, 1994)
with which such Person or they have entered into any agreement, arrangements or
understanding with respect to acquiring, holding or disposing of Voting Stock,
acquires beneficial ownership (as defined in Rule 13d-3 of the Exchange Act,
except that such term shall include any Voting Stock which such person has the
right to acquire, whether or not such right may be exercised within 60 days),
directly or indirectly of more than 5% of the voting power of the outstanding
Voting Stock after May 1, 1994.
(f) "Subsidiary" shall mean any corporation in which a majority of
the capital stock entitled to vote generally in the election of directors is
owned, directly or indirectly, by the Corporation.
(g) "Voting Stock" shall mean all of the then outstanding shares of
the capital stock of the Corporation entitled to vote generally in the election
of directors.
<PAGE>
FORM CD-74-10M-10-79-152328
The Commonwealth of Massachusetts
- ------------
Examiner
MICHAEL JOSEPH CONNOLLY FEDERAL
Secretary of State IDENTIFICATION
ONE ASHBURTON PLACE, BOSTON, MASS: 02108 NO. 04-2722797
------------
RESTATED ARTICLES OF ORGANIZATION
General Laws, Chapter 156B, Section 74
This certificate must be submitted to the Secretary of the
Commonwealth within sixty days after the date of the vote of
stockholders adopting the restated articles of organization. The fee
for filing this certificate is prescribed by General Laws, Chapter
156B, Section 114. Make check payable to the Commonwealth of
Massachusetts.
---------------
We, Stanley D. Black , President and
Howard L. Levin , Assistant Clerk of
Trend-Lines, Inc.
.......................................................................
(Name of Corporation)
located at 100 Justin Drive, Chelsea
.............................................................
do hereby certify that the following restatement of the articles of
organization of the corporation was duly adopted by written consent on
May 9, 1994, by vote of
900,000 shares of Common out of 900,000 shares outstanding,
.......... ................ ...........
(Class of Stock)
shares of out of shares outstanding, and
.......... ................ .......
(Class of Stock)
shares of out of shares outstanding,
.......... ................ ...........
(Class of Stock)
being at least two-thirds of each class of stock outstanding and
entitled to vote and of each class or series of stock adversely
affected thereby:-
1. The name by which the corporation shall be known is:-
Trend Lines, Inc.
2. The purpose for which the corporation is formed are as follows:-
Please see Continuation Page marked Article 2
C [_]
P [_]
M [_]
RA[_]
- ---------
P.C.
Note: If the space provided under any article or item on this form is
insufficient additions shall be set forth on separate 8 1/2 x 11 sheets
of paper leaving a left hand margin of at least 1 inch for binding.
Additions to more than one article may be continued on a single sheet
so long as each article requiring each such addition is clearly
indicated.
<PAGE>
3. The total number of shares and the par value, if any, of each class of
stock which the corporation's authorized to issue is as follows:
WITHOUT PAR VALUE WITH PAR VALUE
----------------- --------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- -------------- ---------------- ---------------- ---------
Preferred 0 1,000,000 $.01
Common Class A 20,000,000 $.01
0 Class B 5,000,000 $.01
*4. If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting
powers, qualifications, special or relative rights or privileges as to
each class thereof and any series not established:
Please see Continuation Pages marked Article 4
*5. The restrictions, if any, imposed by the articles of organization upon
the transfer of shares of stock of any class are as follows:
None
*6. Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution,
or for limiting, defining, or regulating the powers of the corporation,
or of its directors or stockholders, or of any class of stockholders:
Please see Continuation Pages marked Article 6
*If there are no such provisions, state "None".
<PAGE>
TREND-LINES, INC.
RESTATED ARTICLES OF ORGANIZATION
CONTINUATION PAGE
-----------------
ARTICLE 2
---------
2. The purposes for which the corporation is formed are as follows:
Import, export, manufacture, buy and sell at wholesale or retail merchandise
of every kind and nature and all other items related thereto.
To purchase, lease, hire or otherwise acquire real and personal property,
improved and unimproved of every kind and description, and to sell, dispose
of, lease, convey, encumber and mortgage said property or any part thereof.
To acquire, hold, lease, manage, operate, develop, control, build, erect,
maintain for the purpose of said company, construct, reconstruct or
purchase, either directly or indirectly through ownership of stock in any
corporation, any lands, buildings, offices, stores, warehouses, mills, shops
factories, plants, easements, privileges, franchises and licenses, to sell,
lease, hire or otherwise dispose of the lands, buildings or other property
of the company, or any part thereof. To borrow money, with or without
pledge or mortgage upon all or any of its property, real or personal, as
security, and to loan in advance money upon mortgages on personal and real
property, or either of them.
To purchase or otherwise acquire, undertake, carry on, improve and develop
all or any of the business, goodwill, rights, assets or liabilities of any
person, firm, association or corporation carrying on any kind of business
the same as or of similar nature to that which this corporation is
authorized to carry on pursuant to the provisions of this certificate.
In general, to carry on and to have and exercise all of the powers
permissible under Chapter 156B of the General Laws and Amendments thereto.
<PAGE>
TREND-LINES, INC.
RESTATED ARTICLES OF ORGANIZATION
CONTINUATION PAGE
-----------------
ARTICLE 4
---------
If more than one class is authorized, a description of each of the different
classes of stock with, if any, the preferences, voting powers, qualifications,
special or relative rights or privileges as to each class thereof and any series
now established.
The classes of capital stock of the Corporation authorized by Article 4
shall have the voting powers, qualifications and relative participating,
optional or other special rights and preferences, limitations or restrictions as
set forth in this Article 4.
PART I - COMMON STOCK
---------------------
A. General Voting Rights and Powers.
--------------------------------
Subject to the rights and preferences of the holders of the Preferred Stock
and any other class of stock ranking senior to the Common Stock, the holders of
shares of Class A Common Stock shall be entitled to one vote per share on all
matters to be voted on by stockholders and holders of shares of Class B Common
Stock shall be entitled to ten votes per share on all matters to be voted on by
stockholders. The holders of Class A Common Stock and Class B Common Stock
shall vote together as a single class on all matters on which the stockholders
may vote, except when class voting is required by applicable law or when the
holders of Class B Common Stock shall be entitled to vote as a separate class in
accordance with Section B of this Part I.
B. Special Voting Power of Class B Common Stock. In addition to the foregoing
--------------------------------------------
voting power and any rights provided by law, so long as any Class B Common Stock
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of not less than a majority
of the voting power of then-outstanding shares of Class B Common Stock, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class: (i) amend or appeal any provision of, or add any
provision to, the Corporation's Restated Articles of Organization or By-Laws if
such action would alter or change the preferences, rights, privileges or powers
of, or the restrictions provided for the benefit of, the Class B Common Stock;
(ii) authorize or issue any new or existing class or classes or series of
capital stock having any voting power superior to or on a parity with any
<PAGE>
voting power of the Class B Common Stock, or authorize or issue shares of stock
of any class or any bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having option rights to purchase, any shares of the
capital stock of the Corporation having any voting power superior to or on a
parity with the voting power of the Class B Common Stock; and (iii) reclassify
any Class A Common Stock into shares having any voting power superior to or on a
parity with the voting power of the Class B Common Stock.
C. No Preemptive Rights. Subject to the provisions of Section F of this Part I
--------------------
in respect of Class B Common Stock, no holder of Class A Common Stock or Class B
Common Stock shall have any rights, preemptive or other, to subscribe for or to
acquire any capital stock of the Corporation solely by reason of the ownership
or holding of any such Class A Common Stock or Class B Common Stock.
D. Dividends and Other Distributions. Subject to the rights and preferences of
---------------------------------
the holders of the Preferred Stock and any other class of stock ranking senior
to the Common Stock, the holders of Class A Common Stock and Class B Common
Stock shall be entitled to dividends when, as and if declared and paid to the
holders of Class A Common Stock and Class B Common Stock; provided that
dividends must be paid on both the Class A Common Stock and the Class B Common
Stock at any time that dividends are paid on either class. Any dividend so
declared and payable in cash, capital stock of the Corporation (other than Class
A Common Stock or Class B Common Stock) or other property shall be paid equally,
share for share, on the Class A Common Stock and the Class B Common Stock.
Dividends and distributions payable in shares of Class A Common Stock may be
paid only on shares of Class A Common Stock and dividends and distributions
payable in shares of Class B Common Stock may be paid only on shares of Class B
Common Stock. If a dividend or distribution payable in Class A Common Stock is
made on the Class A Common Stock, the Corporation shall also make a simultaneous
dividend or distribution on the Class B Common Stock. If a dividend or
distribution payable in Class B Common Stock is made on the Class B Common
Stock, the Corporation shall also make a simultaneous dividend or distribution
on the Class A Common Stock. Pursuant to any such dividend or distribution,
each share of Class A Common Stock will receive a number of shares of Class A
Common Stock equal to the number of shares of Class B Common Stock payable on
each share of Class B Common Stock and each share of Class B Common Stock will
receive a number of Class B Common Stock equal to the number of shares of Class
A Common Stock payable on each share of Class A Common Stock.
E. Liquidation Rights. In the event of the liquidation, dissolution or winding
------------------
up of the Corporation and subject to the rights and preferences of the holders
of the Preferred Stock and
<PAGE>
any other class of stock ranking senior to or on a parity with the Common Stock,
the holders of the shares of Class A Common Stock and Class B Common Stock shall
be entitled to share ratably, share for share, in all assets remaining after
payment of all debts and other liabilities of the Corporation available for
distribution.
F. Conversion of Class B Common Stock.
----------------------------------
(i) Each share of Class B Common Stock may be converted, at the option of
the holder, at any time into one fully-paid and non-assessable share of
Class A Common Stock in the manner and subject to adjustment as set forth in
Subparagraph (ii) of this Section F.
(ii) The Class B Common Stock shall be converted into Class A Common Stock
in the following manner:
(a) A holder of Class B Common Stock shall give written notice to the
Corporation by mail of its desire to convert all or a portion of the shares
of Class B Common Stock owned by such holder. Such notice shall be
accompanied by certificates, duly endorsed for conversion, evidencing the
number of shares of Class B Common Stock such holder desires to convert.
The Corporation will, as soon as practicable thereafter, deliver to such
holder or to such holder's nominee or nominees, a certificate or
certificates for the appropriate number of shares of Class A Common Stock, a
certificate representing the balance, if any, of the shares of Class B
Common Stock tendered by the surrendered certificate or certificates but not
converted to Class A Common Stock.
(b) If, prior to the date on which all shares of Class B Common Stock
are converted, the Corporation shall (1) pay a dividend in shares of Class A
Common Stock or make a distribution in shares of Class A Common Stock, (2)
subdivide its outstanding Class A Common Stock, (3) combine its outstanding
Class A Common Stock into a smaller number of shares of Class A Common Stock
or (4) issue by reclassification of its Class A Common Stock other
securities of the Corporation, the right to convert shall thereupon be
adjusted, or, if necessary, amended, such that the number of shares of Class
A Common Stock receivable upon conversion of the shares of Class B Common
Stock immediately prior thereto shall be adjusted so that the holder shall
be entitled to receive, upon the conversion of such shares of Class B Common
Stock, the kind and number of shares of Class A Common Stock or other
securities of the Corporation which it would have owned or would have been
entitled to receive after the happening of any of the events described above
had the Class B Common Stock been converted immediately prior to the
<PAGE>
happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subparagraph (b) shall become effective
immediately after the effective date of such event and such adjustment shall
be retroactive to the record date, if any, for such event. Except as
provided in this subparagraph (c), no adjustment with respect to any
ordinary dividends (made out of current earnings) on shares of Class A
Common Stock shall be made.
(c) If, prior to the date on which the shares of Class B Common Stock
are converted, the Corporation shall (1) reorganize, reclassify or otherwise
change the number of outstanding shares of Class A Common Stock, (2)
consolidate with or merge with or into another "Person" (as defined in
Section H of Article 6 hereof) resulting in a reclassification, conversion,
exchange or cancellation of outstanding shares of Class A Common Stock, (3)
sell or otherwise transfer all or substantially all of the assets of the
Corporation, then a holder of Class B Common Stock shall thereafter have the
right to convert such shares of Class B Common Stock into the kind and
amount of stock, securities or assets, if any, such holder would have been
entitled to receive upon such reorganization, reclassification,
consolidation, merger, sale or transfer had such holder converted its shares
of Class B Common Stock into Class A Common Stock immediately prior to such
transaction.
(d) If a holder of Class B Common Stock has delivered notice to the
Corporation of its desire to convert all or a portion of its shares of Class
B Common Stock and certificates, duly endorsed for conversion in respect of
such shares, then all shares of Class B Common Stock so tendered to the
Corporation shall be deemed to be no longer outstanding and, notwithstanding
the failure of the Corporation to issue the Class A Common Stock, such
holder shall be deemed, for all purposes, to be a holder of the number of
shares of Class A Common Stock into which the shares of Class B Common Stock
were converted and such holder is entitled to receive pursuant to the terms
of this Section F in each case as of the close of business on the date on
which such conversion notice is delivered.
(e) The Corporation shall not, by amendment of its Restated
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed under this
Section F by the Corporation but shall at all times in good faith assist in
the carrying out of all the provisions of this Section F. The Corporation
shall at all times reserve and keep available out of its authorized but
<PAGE>
unissued Class A Common Stock the full number of shares of Class A Common
Stock deliverable upon the conversion of all the then outstanding shares of
Class B Common Stock and shall take all such action and obtain all such
permits or orders as may be necessary to enable the Corporation to validly
and legally issue fully paid and non-assessable shares of Class A Common
Stock upon the conversion of Class B Common Stock. The Corporation shall
obtain prior to or concurrently with the first issuance of the Class B
Common Stock, and shall use its best efforts to maintain for as long as any
shares of Class B Common Stock shall be outstanding, the authorization for
the listing of shares of Class A Common Stock issuable upon conversion of
the Class B Common Stock on the Nasdaq Stock Market National Market and on
any national securities exchange on which the Class A Common Stock is listed
for trading, as applicable. The Corporation shall pay any and all transfer,
stamp and other like taxes that may be payable in respect of the issuance or
delivery of shares of Class A Common Stock on conversion of the Class B
Common Stock.
(f) Shares of Class B Common Stock which shall have been converted,
purchased or otherwise reacquired by the Corporation shall be retired and
cancelled and shall no longer be available for issuance.
(g) In the event of a "Transfer Event" (as defined in paragraph (h) of
this Section F(ii)) in respect of any share of Class B Common Stock, such
share shall be automatically converted into one share of Class A Common
Stock as at the time of the Transfer Event in the same manner and subject to
the same adjustments as set forth in paragraphs (a) through (f), inclusive,
of this Section F(ii) as if written notice thereof had been given to the
Corporation thereunder.
(h) For purposes of this Section F, (1) a "Transfer Event" in respect
of a specific holder includes or shall be deemed to have occurred upon (i)
any sale, assignment, transfer, pledge or other disposition, including by
gift, devise, intestacy, operation of law or otherwise, of any of the shares
of the Class B Common Stock by such holder other than to Stanley D. Black or
Emilia F. Black or to a "Controlled Person" (as defined below) of either of
them, (ii) the holder of Class B Common Stock voluntarily files a petition
under any bankruptcy or insolvency law or a petition for the appointment of
a receiver, or makes an assignment for the benefit of creditors, (iii) the
holder of Class B Common Stock is subject involuntarily to such a petition
or assignment or any creditor or other Person obtains an attachment or other
legal or equitable interest in any shares of the Class B Common Stock of
such holder, and such involuntary petition, assignment or attachment is not
discharged within 180 days after creation, or (iv) if the
<PAGE>
holder of Class B Common Stock is required to transfer any such shares by
reason of a judgment, court order or decree from which no appeal may be
taken or by operation of law; (2) "Person" shall have the meaning set forth
in Section H of Article 6 hereof; (3) a "Controlled Person" shall mean with
respect to a specified holder any Person which is, directly or indirectly,
controlled by or under direct or indirect common control with such specified
holder. For the purpose of this definition, "Control" when used with respect
to any Person means the sole or shared power to vote, or to direct the
voting of, and/or the sole or shared power to dispose of, or to direct the
disposition of, shares of Class B Common Stock, directly or indirectly,
through ownership, proxy, or any contract, arrangement, understanding,
relationship, or otherwise; and the term "controlled" shall have meanings
correlative to the foregoing.
(i) Determinations with respect to Transfer Events described in
subparagraph (h) of this Section F(ii) shall be made by majority vote of the
entire Board of Directors of the Corporation.
(j) Notwithstanding anything contained in these Restated Articles of
Organization to the contrary, the affirmative vote of the holders of at
least two-thirds of the combined voting power of the outstanding shares of
Class A Common Stock and Class B Common Stock, voting together as a single
class, shall be required to amend this Part I, or to adopt any provision
inconsistent herewith.
PART II - PREFERRED STOCK
-------------------------
(i) The 1,000,000 shares of Preferred Stock (the"Preferred Stock") may
consist of one or more series. The Board of Directors is hereby empowered
to establish and designate, from time to time, the different series for the
shares of Preferred Stock and the variations in the relative rights and
preferences as between the different series as provided in paragraph (ii)
below. In the event that at any time the Board of Directors shall have
established and designated one or more series of Preferred Stock consisting
of a number of shares less than all of the authorized number of shares of
Preferred Stock, the remaining authorized shares of Preferred Stock shall be
deemed to be shares of an undesignated series of Preferred Stock until
designated by the Board of Directors as being a part of a series previously
established or a new series then being established by the Board of
Directors.
(ii) Subject to the provisions of this Article 4, the Board of Directors is
authorized to establish one or more series of Preferred Stock and, to the
extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts, to fix and
<PAGE>
determine the preferences, voting powers, qualifications and special or
relative rights or privileges of each series including, but not limited to:
(a) the number of shares to constitute such series and the distinctive
designation of such series;
(b) the dividend rate on the shares of such series and preferences, if
any, and the special and relative rights of such shares of such series
as to dividend;
(c) whether or not the shares of such series shall be redeemable, and,
if redeemable, the price, terms and manner of redemption;
(d) the preferences, if any, and the special and relative rights of
the shares of such series upon liquidation of the Corporation;
(e) whether or not the shares of such series shall be subject to the
operation of a sinking or purchase fund and, if so, the terms and
provisions of such fund;
(f) whether or not the shares of such series shall be convertible into
shares of any other class or of any other series of the same or any
other class of stock of the Corporation and, if so, the conversion
price or ration and other conversion rights;
(g) the conditions under which the shares of such series shall have
separate voting rights or no voting rights; and
(h) such other designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions of such series to the full extent now and hereafter by the
laws of the Commonwealth of Massachusetts.
<PAGE>
TREND-LINES, INC.
RESTATED ARTICLES OF ORGANIZATION
CONTINUATION PAGE
-----------------
ARTICLE 6
---------
Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the Corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the Corporation, or of its
directors or stockholders, or of any class of stockholders:
A. For the conduct and regulation of the business and affairs of the
Corporation, and in further limitation, definition and regulation of the
powers of the Corporation and of its directors and of its stockholders
or any class thereof, as the case may be, it is further provided that:
(1) The business of the Corporation shall be conducted by the officers
of the Corporation under the supervision of the Board of Directors.
(2) The number of directors which shall constitute the entire Board of
Directors shall be fixed by, or in the manner provided in, the By-Laws
of the Corporation. The "entire" Board of Directors means the total
number of directors (assuming no vacancies) which the Corporation would
have under or pursuant to the By-Laws in effect at the time such number
is to be determined. No election of Directors need be by written ballot.
(3) The By-Laws of the Corporation may provide that the Board of
Directors of the Corporation may make, amend or repeal the By-Laws at
any time in whole or in part by a majority vote of the "Continuing
Directors" (as defined in Section I below), except with respect to any
provision thereof which by law or the By-Laws requires action by the
stockholders. The stockholders may also make, amend or repeal the By-
Laws by the affirmative vote of the holders of at least two-thirds of
the combined voting power of the outstanding shares of all "Voting
Stock" (as defined in Section H below), voting together as a single
class. In no event shall any amendment to the By-Laws provide for the
classification of Directors of the Corporation for staggered terms
pursuant to the provisions of subsection (b) of Section 50A of the
Massachusetts Business Corporation Law be effective unless the same
shall be set forth in an amendment to these Restated Articles of
Organization or in a By-Law adopted by the Board of Directors by a
majority vote of the entire Board of Directors.
<PAGE>
B. The Corporation may be a general or limited partner in any business
enterprise which the Corporation would have power to conduct by itself.
C. The Corporation may, to the fullest extent permitted by Section 67
of the Massachusetts Business Corporation Law, as same may be amended
and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which a person indemnified may be
entitled under any By-Law, agreement, vote of stockholders or
disinterested Directors of otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
D. From time to time any of the provisions of these Restated Articles
of Organization may be amended, altered or repealed, and other
provisions authorized by the laws of the Commonwealth of Massachusetts
at the time in force may be added or inserted in the manner and at the
time prescribed by said laws, and all rights at any time conferred upon
the stockholders of the Corporation by these Restated Articles of
Organization are granted subject to the provisions of this Section D of
this Article 6.
E. No Director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by
such Director as a Director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i)
for breach of the Director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Sections 61 and 62 of the Massachusetts Business Corporation Law
or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this paragraph of this
Section E of Article 6 shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such Director occurring prior
to such amendment.
F. 1. In addition to the affirmative vote otherwise required by law or
any provision of these Restated Articles of Organization, except as
otherwise provided in subsection 2 of this Section F, any "Business
Combination" (as defined in Section
<PAGE>
H below) shall require the affirmative vote of the holders of two-thirds
of the combined voting power of all Voting Stock, voting together as a
single class.
Such affirmative vote shall be required notwithstanding any other
provisions of these Restated Articles of Organization, or any provision
of law or of any agreement with any national securities exchange which
might otherwise permit a lesser vote or no vote, and such affirmative
vote of the holders of the combined voting power of the outstanding
shares of any particular class of series of the Voting Stock or other
capital stock required by law or by these Restated Articles of
Organization.
2. The provisions of subsection 1 of this Section F shall not be
applicable in respect of a Business Combination if, in the case of such
Business Combination that does not involve any consideration received by
the stockholders of the Corporation, solely in their respective
capacities as stockholders of the Corporation, the condition specified
in paragraph (a) below is met, or, in the case of any other Business
Combination, the conditions specified in either of paragraphs (a) or (b)
below are met; otherwise, such Business Combination shall require only
such affirmative vote as is required by law, any other provision of
these Restated Articles of Organization, or any agreement with any
national securities exchange, as the case may be:
(a) The Business Combination shall have been approved by a majority
of the Continuing Directors, it being understood that this condition
shall not be capable of satisfaction unless there is at least one
Continuing Director.
(b) All of the following conditions shall have been met:
(i) The form of the consideration received by holders of
shares of a particular class of outstanding Voting Stock shall be in
cash or in the same form as the "Related Person" (as defined in Section
H below) has paid for shares of such class of Voting Stock within the
two-year period ending on and including the "Determination Date" (as
defined in Section H below). If, within such two-year period, the
Related Person has paid for shares of any class of Voting Stock with
varying forms of consideration, the form of consideration received per
share by holders of shares of such class of Voting Stock shall be either
cash or the form used to acquire the largest number of shares of such
class of Voting Stock acquired by the Related Person within such two-
year period.
(ii) The aggregate amount of consideration received per share
by holders of each class of Voting Stock in such Business Combination
shall be at least equal to the higher of the following (it being
intended that the requirements of this paragraph (b)(ii) shall be met
with respect to every such class
<PAGE>
of Voting Stock outstanding, whether or not the Related Person has
previously acquired any shares of that particular class of Voting
Stock):
(a) (if applicable) the highest per share price (including
any brokerage commission, transfer taxes and soliciting
dealers' fees) paid by the Related Person for any shares of
that class of Voting Stock acquired by it within the two-year
period immediately prior to the "Announcement Date" (as
defined in Section H below) or in the transaction in which it
became a Related Person, whichever is higher; or
(b) the "Fair Market Value" (as defined in Section H below)
per share of such Voting Stock on the Announcement Date; or
(c) in the case of any class of Preferred Stock, the highest
preferential amount per share to which the holders of shares
of such class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation.
(iii) After such Related Person has become a Related Person and
prior to the consummation of such Business Combination:
(a) except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding preferred
stock;
(b) there shall have been (I) no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors, and (II)
an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock
split, recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of
outstanding shares of the Common Stock), unless the failure so
to increase such annual rate of dividends is approved by a
majority of the Continuing Directors;
(c) such Related Person shall not have become the beneficial
owner of any newly issued shares of Voting Stock directly or
indirectly from the Corporation except as part of the
transaction which results in such Related Person becoming a
Related Person.
<PAGE>
(d) after such Related Person has become a Related Person,
such Related Person shall not have received the benefit,
directly or indirectly (except proportionately, solely in such
Related Person's capacity as a stockholder of the
Corporation), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.
(e) a proxy or information statement describing the proposed
Business Combination and complying with the requirements of
the Exchange Act and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to all stockholders of the
Corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to the "Exchange
Act" (as defined in Section H below) or subsequent
provisions). Such proxy or information statement shall contain
on the front thereof, prominently displayed, any
recommendation as to the advisability or inadvisability of the
Business Combination which the Continuing Directors, or any of
them, may have furnished in writing to the Board of Directors
and/or shall contain an opinion by an investment banking firm,
selected by a majority of the Continuing Directors, as to the
fairness (or unfairness) of the Business Combination to the
stockholders of the Corporation, other than the Related
Person.
(c) A majority of the total number of Continuing Directors shall
have the power and duty to determine, on the basis of information known
to them, after reasonable inquiry, all facts necessary to determine
compliance with this Section F including, without limitation, (i)
whether a person is a Related Person, (ii) the number of shares of
Voting Stock beneficially owned by any person, (iii) whether the
applicable conditions set forth in paragraph (b) of subsection 2 have
been met with respect to any Business Combination, and (iv) whether the
assets which are the subject of any Business Combination or the
consideration received for the issuance or transfer of securities by the
Corporation or any Subsidiary in any Business Combination have an
aggregate fair market value in excess of 10% of the Corporation's total
stockholders' equity as reflected on the Corporation's most recent
audited financial statements.
(d) Nothing contained in this Section F shall be construed to
relieve any Related Person from any fiduciary obligation imposed by law.
<PAGE>
(e) Notwithstanding anything contained in these Restated Articles
of Organization to the contrary, the affirmative vote of the holders of
at least two-thirds of the combined voting power of all Voting Stock,
voting together as a single class, shall be required to amend or repeal
this Section F or Section H below, or to adopt any provision
inconsistent herewith or therewith.
G. The Board of Directors of the Corporation, when evaluating any
offer of another person to (a) purchase or exchange any securities or
property for any outstanding equity securities of the Corporation, (b)
merge or consolidate the Corporation with another corporation, or (c)
purchase or otherwise acquire all or substantially all of the properties
and assets of the Corporation, shall in connection with the exercise of
its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration not only to the
price or other consideration being offered, but also to all other
relevant factors, including without limitation, the interests of the
Corporation's employees, suppliers, creditors and customers, the economy
of the state, region and nation, community and societal considerations,
and the long-term and short-term interests of the Corporation and its
stockholders, including the possibility that these interests may be
better served by the continued independence of the Corporation.
(e) Notwithstanding anything contained in these Restated Articles
of Organization to the contrary, the affirmative vote of the holders of
at least two-thirds of the combined voting power of all Voting Stock,
voting together as a single class, shall be required to amend or repeal
this Section G, or to adopt any provision inconsistent herewith.
H. Definitions
-----------
The following definitions shall apply for the purpose of Article 4
and Sections F and G, inclusive, of this Article 6:
(a) "Affiliate" shall have the meaning given such term in Rule
12b-2 under the Exchange Act.
(b) "Announcement Date" shall mean the date of first public
announcement of the proposal of a Business Combination.
(c) "Associate" shall have the meaning given such term in Rule 12b-2
under the Exchange Act.
(d) "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
Subsidiary with (a) any Related Person, or (b) any other
corporation (whether or not itself a Related
<PAGE>
Person) which is, or after such merger or consolidation
would be, an Affiliate of a Related Person; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Related Person or any
Affiliate of any Related Person of any assets of the
Corporation or any Subsidiary having an aggregate Fair
Market Value in excess of 10% of the Corporation's total
stockholders' equity as reflected on the Corporation's most
recent audited financial statements; or
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions)
of any securities of the Corporation or any Subsidiary to
any Related Person or any Affiliate of any Related Person
in exchange for cash, securities or other property (or a
combination thereof) having an aggregate fair market value
in excess of 10% of the Corporation's total stockholders'
equity as reflected on the Corporation's most recent
audited financial statements; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of
any Related Person or any Affiliate of any Related Person;
or
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any of
its Subsidiaries or any other transaction (whether or not
with or into or otherwise involving the Related Person)
which has the effect, directly or indirectly, of increasing
the proportionate share or convertible securities of the
Corporation or any Subsidiary which is directly or
indirectly owned by any Related Person or any Affiliate of
any Related Person.
(e) "Continuing Director" shall mean any member of the Board of
Directors who is not an Affiliate of any Related Person and who was a
member of the Board of Directors prior to the time that any such
Related Person became a Related Person, and any successor of a
Continuing Director who is unaffiliated with any Related Person and is
recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on the Board of Directors. Notwithstanding
the above, a majority of the then existing Continuing Directors can
deem a new director to be a Continuing Director, even though such
person is Affiliated with a Related Person.
<PAGE>
(f) "Determination Date" shall mean the date upon which the Business
Combination is consummated.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, from time to time.
(h) "Fair Market Value" shall mean: (i) in the case of stock, the
highest closing bid or sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the Nasdaq
Stock Market National Market and on the principal United States
securities exchange registered under the Exchange Act on which such
stock is listed, or, if such stock is not listed on the Nasdaq Stock
Market National Market or any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of
Securities Dealer, Inc. Automated Quotations System or any system then
in use or, if no such quotations are available, the fair market value
on the date in question of a share of such stock as determined by the
Board of Directors in good faith; and (ii) in the case of property
other than cash or stock, the fair market value of such property on the
date in question as determined by the Board of Directors in good faith.
(i) "Person" shall mean any individual, firm, partnership, joint
venture, joint stock company, trust, business trust, corporation,
unincorporated association or other entity of whatsoever nature.
(j) "Related Person" shall mean any Person (other than the
Corporation, any Subsidiary or any individual who was as stockholder of
the Corporation on May 9, 1994 which, together with such Person's
Affiliates and Associates and with any other Person (other than the
Corporation, any Subsidiary or any individually who was a stockholder
of the Corporation on May 1, 1994) with which such Person or they have
entered into any agreement, arrangements or understanding with respect
to acquiring, holding or disposing of Voting Stock, acquires beneficial
ownership (as defined in Rule 13d-3 of the Exchange Act, except that
such term shall include any Voting Stock which such person has the
right to acquire, whether or not such right may be exercised within 60
days), directly or indirectly of more than 5% of the voting power of
the outstanding Voting Stock after May 9, 1994.
(k) "Subsidiary" shall mean any corporation in which a majority of
the capital stock entitled to vote generally in the election of
directors is owned, directly or indirectly, by the Corporation.
<PAGE>
(l) "Voting Stock" shall mean all of the then outstanding shares of
the Class A Common Stock and the Class B Common Stock, voting together
as a single class, and entitled to vote generally in the election of
directors.
<PAGE>
*We further certify that the foregoing restated articles of organization
effect no amendments to the articles of organization of the corporation as
heretofore amended, except amendments to the following articles..............
3,4,5 and 6
.............................................................................
(*If there are no such amendments, state "None".)
Briefly describe amendments in space below:
Article 3 is amended to increase and change the authorized capital and
Article 4 is amended to describe the new classes of stock.
Article 5 is amended to delete the restrictions upon transfer of stock.
Article 6 is amended to change the other lawful provisions for the conduct and
regulation of the business and affairs of the Corporation.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 7th day of June. In the year 1994.
/s/ Stanley D. Black
- ----------------------- President
Stanley D. Black
/s/ Howard L. Levin
- ----------------------- Clerk
Howard L. Levin
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
i hereby approve the within restated articles of
organization and, the filing fee in the amount of
$25,500.00 having been paid, said articles are
deemed to have been filed with me this 20th
day of June, 1994.
/s/ Michael Joseph Connolly
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT
TO:
Edythe Bradford Harkins
..........................................................
Brown, Rudnick, Freed & Gesmer
..........................................................
One Financial Center
..........................................................
Boston, MA 02111
..........................................................
Telephone (617)330-9000
.................................................
Copy Mailed
<PAGE>
LOAN AND SECURITY AGREEMENT
Dated as of July 3, 1996
Among
BANKAMERICA BUSINESS CREDIT, INC.
as the Lender
-------------
and
TREND-LINES, INC.
POST TOOL, INC.
as the Borrowers
----------------
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------- ----
1. DEFINITIONS........................................................... 1
Accounts.............................................................. 1
Acount Debtor......................................................... 1
Adjusted Tangible Net Worth........................................... 1
Affiliate............................................................. 2
Anniversary Date...................................................... 2
Applicable Margin..................................................... 2
Assigned Contracts.................................................... 2
Availability.......................................................... 2
Bank.................................................................. 3
Borrower.............................................................. 3
Borrowing............................................................. 3
Borrowing Base........................................................ 3
Business Day.......................................................... 3
Capital Adequacy Regulation........................................... 3
Capital Expenditures.................................................. 3
Capital Lease......................................................... 3
Closing Date.......................................................... 3
Closing Fee........................................................... 4
Code.................................................................. 4
Collateral............................................................ 4
Contaminant........................................................... 4
Conversion/Continuation Date.......................................... 4
Debt.................................................................. 4
Distribution.......................................................... 4
DOL................................................................... 4
EBITDA................................................................ 4
Eligible Inventory.................................................... 5
Environmental Compliance Reserve...................................... 5
Environmental Laws.................................................... 5
Environmental Lien.................................................... 6
Equipment............................................................. 6
ERISA................................................................. 6
ERISA Affiliate....................................................... 6
ERISA Event........................................................... 6
i
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
SECTION PAGE
- ------- ----
Event................................................................. 7
Event of Default...................................................... 7
Existing Debt......................................................... 7
Facility Fee.......................................................... 7
Financial Statements.................................................. 7
Fiscal Year........................................................... 7
Fixed Charges Ratio................................................... 7
Funding Date.......................................................... 7
GAAP.................................................................. 7
Guaranty.............................................................. 7
Intercompany Accounts................................................. 8
Interest Adjustment Date.............................................. 8
Interest Adjustment Period............................................ 8
Interest Coverage Ratio............................................... 8
Interest Period....................................................... 8
Inventory............................................................. 8
IRS................................................................... 9
Latest Projections.................................................... 9
Letter of Credit...................................................... 9
Letter of Credit Fee.................................................. 9
LIBOR Interest Payment Date........................................... 9
LIBOR Interest Rate Determination Date................................ 9
LIBOR Rate............................................................ 9
Eurodollar Reserve Percentage.................................. 9
LIBOR..........................................................10
LIBOR Rate Loan.......................................................10
LIBOR Revolving Loan..................................................10
Lien..................................................................10
Loan and Loans........................................................10
Loan Documents........................................................10
Mortgages.............................................................10
Multiemployer Plan....................................................10
Notice of Borrowing...................................................11
Notice of Conversion/Continuation.....................................11
Obligations...........................................................11
Other Taxes...........................................................11
Outstanding Credit....................................................11
ii
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
SECTION PAGE
- ------- ----
Participating Lender................................................. 11
Payment Account...................................................... 11
PBGC................................................................. 11
Pending Loans........................................................ 12
Pension Plan......................................................... 12
Permitted Liens...................................................... 12
Person............................................................... 13
Plan................................................................. 13
Premises............................................................. 13
Prior Lender......................................................... 13
Proceeds............................................................. 13
Property............................................................. 13
Proprietary Rights................................................... 13
Public Authority..................................................... 13
Receivables.......................................................... 14
Reference Rate....................................................... 14
Reference Rate Loans................................................. 14
Reference Rate Revolving Loans....................................... 14
Release.............................................................. 14
Rental Reserve....................................................... 14
Rental............................................................... 14
Reportable Event..................................................... 14
Requirement of Law................................................... 15
Restricted Investment................................................ 15
Reversions........................................................... 15
Revolving Loans...................................................... 15
Rolling Period....................................................... 15
Security Interest.................................................... 15
Solvent.............................................................. 15
Stated Termination Date.............................................. 16
Subfacility.......................................................... 16
Subsidiary........................................................... 16
Taxes................................................................ 16
Total Facility....................................................... 16
Trademark Security Agreements........................................ 16
UCC.................................................................. 16
Unused Line Amount................................................... 16
iii
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
SECTION PAGE
- ------- ----
Unused Line Fee...................................................... 16
Accounting Terms..................................................... 16
Other Terms.......................................................... 17
2. LOANS AND LETTERS OF CREDIT.......................................... 17
2.1 Total Facility.................................................. 17
2.2 Revolving Loans................................................. 17
2.3 Letters of Credit............................................... 18
3. INTEREST AND OTHER CHARGES........................................... 22
3.1 Interest....................................................... 22
3.2 Conversion and Continuation Elections.......................... 23
3.3 Maximum Interest Rate.......................................... 24
3.4 Facility Fee................................................... 25
3.5 [Intentionally Left Blank]..................................... 25
3.6 [Intentionally Left Blank]..................................... 25
3.7 Letter of Credit Fee........................................... 25
4. PAYMENTS AND PREPAYMENTS............................................. 25
4.1 Revolving Loans................................................. 25
4.2 [Intentionally Left Blank]...................................... 25
4.3 [Intentionally Left Blank]...................................... 25
4.4 [Intentionally Left Blank]...................................... 25
4.5 Place and Form of Payments; Extension of Time................... 25
4.6 Application and Reversal of Payments............................ 26
4.7 INDEMNITY FOR RETURNED PAYMENTS................................. 26
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS....................... 26
6. TAXES, YIELD PROTECTION AND ILLEGALITY............................... 27
6.1 Taxes........................................................... 27
6.2 Illegality...................................................... 28
6.3 Increased Costs and Reduction of Return......................... 28
6.4 Funding Losses.................................................. 29
6.5 Inability to Determine Rates.................................... 29
6.6 Survival........................................................ 29
iv
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
SECTION PAGE
- ------- ----
7. COLLATERAL.......................................................... 29
7.1 Grant of Security Interest..................................... 29
7.2 Perfection and Protection of Security Interest................. 30
7.3 Location of Collateral......................................... 31
7.4 Title to, Liens on, and Sale and Use of Collateral............. 31
7.5 Appraisals..................................................... 32
7.6 Access and Examination......................................... 32
7.7 Insurance...................................................... 32
7.8 Collateral Reporting........................................... 33
7.9 [Intentionally Left Blank]..................................... 33
7.10 Collection of Accounts; Payments............................... 33
7.11 Inventory...................................................... 34
7.12 Equipment...................................................... 35
7.13 Assigned Contracts............................................. 35
7.14 Documents, Instruments, and Chattel Paper...................... 36
7.15 Right to Cure.................................................. 36
7.16 Power of Attorney.............................................. 36
7.17 Lender's Rights, Duties, and Liabilities....................... 37
8. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.................... 37
8.1 Books and Records............................................... 37
8.2 Financial Information........................................... 37
8.3 Notices to Lender............................................... 39
9. GENERAL WARRANTIES AND REPRESENTATIONS............................... 41
9.1 Authorization, Validity, and Enforceability of this Agreement
and the Loan Documents........................................ 41
9.2 Validity and Priority of Security Interest.................... 41
9.3 Organization and Qualification................................ 42
9.4 Corporate Name; Prior Transactions............................ 42
9.5 Subsidiaries and Affiliates................................... 42
9.6 Financial Statements and Projections.......................... 42
9.7 Capitalization................................................ 42
9.8 Solvency...................................................... 43
9.9 Debt.......................................................... 43
9.10 Distributions................................................. 43
v
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
SECTION PAGE
- ------- ----
9.11 Title to Property............................................. 43
9.12 Adequate Assets............................................... 43
9.13 Real Property; Leases......................................... 43
9.14 Proprietary Rights............................................ 43
9.15 Trade Names and Terms of Sale................................. 43
9.16 Litigation.................................................... 44
9.17 Restrictive Agreements........................................ 44
9.18 Labor Disputes................................................ 44
9.19 Environmental Laws............................................ 44
9.20 No Violation of Law........................................... 45
9.21 No Default.................................................... 45
9.22 ERISA Compliance.............................................. 46
9.23 Taxes......................................................... 46
9.24 Use of Proceeds............................................... 46
9.25 Private Offerings............................................. 47
9.26 Broker's Fees................................................. 47
9.27 No Material Adverse Change.................................... 47
9.28 Disclosure.................................................... 47
10. AFFIRMATIVE AND NEGATIVE COVENANTS.................................. 47
10.1 Taxes and Other Obligations................................... 47
10.2 Corporate Existence and Good Standing......................... 47
10.3 Compliance with Law and Agreements............................ 48
10.4 Maintenance of Property and Insurance......................... 48
10.5 Environmental Laws............................................ 48
10.6 ERISA......................................................... 48
10.7 Mergers, Consolidations, Acquisitions, or Sales............... 48
10.8 Distributions; Capital Changes................................ 49
10.9 Transactions Affecting Collateral or Obligations.............. 49
10.10 Guaranties.................................................... 49
10.11 Debt.......................................................... 49
10.12 Prepayment.................................................... 49
10.13 Transactions with Affiliates.................................. 49
10.14 [Intentionally Left Blank].................................... 49
10.15 Business Conducted............................................ 49
10.16 Liens......................................................... 49
10.17 Sale and Leaseback Transactions............................... 50
vi
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
SECTION PAGE
- ------- ----
10.18 New Subsidiaries.............................................. 50
10.19 Restricted Investments........................................ 50
10.20 Capital Expenditures.......................................... 50
10.21 [Intentionally Left Blank..................................... 50
10.22 Interest Coverage Ratio....................................... 50
10.23 Intentionally Left Blank...................................... 51
10.24 Intentionally Left Blank...................................... 51
10.25 Intentionally Left Blank...................................... 51
10.26 Intentionally Left Blank...................................... 51
10.27 Adjusted Tangible Net Worth................................... 51
10.28 Buy-Back of Common Stock...................................... 52
10.29 Post-Closing Matters.......................................... 52
10.30 Further Assurances............................................ 52
11. CLOSING; CONDITIONS TO CLOSING...................................... 53
11.1 Conditions Precedent to Making of Loans on the Closing Date... 53
Representations and Warranties; Covenants..................... 53
Delivery of Document.......................................... 53
[Intentionally Left Blank].................................... 53
[Intentionally Left Blank..................................... 53
Termination of Liens.......................................... 53
[Intentionally Left Blank..................................... 53
Environmental Compliance...................................... 53
Payment of Fees and Expenses.................................. 53
Required Approvals............................................ 54
No Material Adverse Change.................................... 54
Proceedings................................................... 54
Excess Availability........................................... 54
Release From Prior Lender..................................... 54
11.2 Conditions Precedent to Each Loan............................. 54
12. DEFAULT; REMEDIES................................................... 55
12.1 Events of Default............................................. 55
13. REMEDIES............................................................ 57
vii
<PAGE>
TABLE OF CONTENTS
-----------------
(cont'd)
SECTION PAGE
- ------- ----
14. TERM AND TERMINATION............................................... 58
15. MISCELLANEOUS...................................................... 59
15.1 Cumulative Remedies; No Prior Recourse to Collateral......... 59
15.2 No Implied Waivers........................................... 59
15.3 Severability................................................. 59
15.4 Governing Law................................................ 59
15.5 Consent to Jurisdiction and Venue; Service of Process........ 59
15.6 Waiver of Jury Trial......................................... 60
15.7 [Intentionally Left Blank]................................... 60
15.8 Survival of Representations and Warranties................... 60
15.9 Other Security and Guaranties................................ 60
15.10 Fees and Expenses............................................ 60
15.11 Notices...................................................... 61
15.12 Indemnification.............................................. 62
15.13 Waiver of Notices............................................ 63
15.14 Binding Effect; Assignment................................... 63
15.15 Modification................................................. 63
15.16 Counterparts................................................. 64
15.17 Captions..................................................... 64
15.18 Right of Set-Off............................................. 64
15.19 Participating Lender's Security Interests.................... 64
<PAGE>
LOAN AND SECURITY AGREEMENT, dated as of July 3, 1996, by and among
BANKAMERICA BUSINESS CREDIT, INC., a Delaware corporation with offices at 40
East 52nd Street, New York, New York (the "Lender"), and TREND-LINES, INC., a
------
Massachusetts corporation with offices at 135 American Legion Highway, Revere,
Massachusetts ("Trend-Lines"), and POST TOOL, INC., a Massachusetts corporation
with offices at 135 American Legion Highway, Revere, Massachusetts ("Post
Tool").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Borrowers (as defined below) have requested the Lender to
make available to the Borrowers a revolving line of credit for loans and letters
of credit in an amount not to exceed $40,000,000, which extensions of credit the
Borrowers will use to refinance certain debt outstanding under their existing
revolving credit facility and for their working capital needs and general
business purposes;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the Borrowers and the Lender hereby
agree as follows:
I. DEFINITIONS. As used herein:
------------
"Accounts" means all of a Borrower's now owned or hereafter acquired
--------
or arising accounts, and any other rights to payment for the sale or lease of
goods or rendition of services, whether or not they have been earned by
performance.
"Account Debtor" means each Person obligated in any way on or in
--------------
connection with an Account.
"Adjusted Tangible Assets" means all of Trend-Lines' assets on a
------------------------
consolidated basis except: (a) deferred assets, other than prepaid insurance
and prepaid taxes; (b) patents, copyrights, trademarks, trade names, franchises,
goodwill, and other similar intangibles; (c) Restricted Investments; (d)
unamortized debt discount and expense; (e) assets of Trend-Lines constituting
Intercompany Accounts; and (f) fixed assets to the extent of any write-up in the
book value thereof resulting from a revaluation effective after the Closing
Date.
"Adjusted Tangible Net Worth" means, at any date: (a) the book value
---------------------------
(after deducting related depreciation, obsolescence, amortization, valuation,
and other proper reserves as determined in accordance with GAAP) at which the
Adjusted Tangible Assets would be shown on a consolidated balance sheet of
Trend-Lines at such date prepared in accordance with GAAP less (b) the amount at
----
which Trend-Lines' consolidated liabilities would be shown on such balance
sheet, including as liabilities all reserves for contingencies and other
potential liabilities which would be shown on such
<PAGE>
balance sheet, including as liabilities all reserves for contingencies and other
potential liabilities which would be shown on such balance sheet or disclosed in
the notes thereto.
"Affiliate" means, with respect to either Borrower: (a) a Person
---------
which, directly or indirectly, controls, is controlled by, or is under common
control with, such Borrower; (b) a Person which beneficially owns or holds,
directly or indirectly, ten percent or more of any class of voting stock of such
Borrower; or (c) a Person in which five percent of any class of the voting stock
is beneficially owned or held, directly or indirectly, by the Borrower. The
term control (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of the Person in question.
"Anniversary Date" means each anniversary of the Closing Date.
----------------
"Applicable Margin" means (i) with respect to Reference Rate Loans and
-----------------
all other obligations (other than LIBOR Rate Loans), three-quarters of one
percent (0.75%) and (ii) with respect to LIBOR Rate Loans, two and one-quarter
percent (2.25%); provided, however, that, if for any Rolling Period the
certificate referred to in Section 8.2(c) relating to such Rolling Period
indicates that the Fixed Charges Ratio is equal to or more than 1.0:1.0, then
the "Applicable Margin" for each type of Loan outstanding during the Interest
Adjustment Period immediately following such Rolling Period (but only so long as
no Event or Event of Default exists during such Interest Adjustment Period)
shall be as set forth below:
<TABLE>
<CAPTION>
Applicable Margin for Applicable Margin
Reference Rate Loans for LIBOR Rate Loans
----------------------- ---------------------
<S> <C>
0.5% 2.0%
</TABLE>
"Assigned Contracts" means, collectively, all of the relevant
--------------------
Borrower's rights and remedies under, and all moneys and claims for money due or
to become due to such Borrower under, any material contracts and any and all
amendments, supplements, extensions, and renewals thereof, including, without
limitation, all rights and claims of such Borrower now or hereafter existing:
(a) under any insurance, indemnities, warranties, and guarantees provided for or
arising out of or in connection with the foregoing agreements; (b) for any
damages arising out of or for breach or default under or in connection with the
foregoing agreements; (c) to all other amounts from time to time paid or payable
under or in connection with the foregoing agreements; or (d) to exercise or
enforce any and all covenants, remedies, powers and privileges thereunder.
"Availability" means, at any time with respect to either Borrower:
------------
(a) the Subfacility of such Borrower at such time; minus
-----
<PAGE>
(b) the sum of (i) the Outstanding Credit to such Borrower at such
time, (ii) reserves for accrued interest on the Obligations of such Borrower,
(iii) the Environmental Compliance Reserve for such Borrower, (iv) the Rental
Reserve for such Borrower and (v) all other reserves which the Lender deems
necessary in the exercise of its reasonable credit judgment to maintain with
respect to such Borrower's account, including, without limitation, reserves for
any amounts which the Lender may be obligated to pay in the future for the
account of such Borrower.
"Bank" means Bank of America National Trust and Savings Association in
----
San Francisco, California.
"Borrower" means either of Trend-Lines or Post Tool.
--------
"Borrowing" means a borrowing hereunder consisting of Revolving Loans
---------
made on the same day by the Lender to a Borrower.
"Borrowing Base" means, with respect to either Borrower, 55% of the
--------------
value, at the lower of cost (on a first-in, first-out basis) or market, of all
Eligible Inventory of such Borrower plus, without duplication, 50% of the
----
undrawn face amount of Letters of Credit issued or caused to be issued by the
Lender for the account of such Borrower for the purchase of goods which will
become Eligible Inventory.
"Business Day" means (a) any day that is not a Saturday, Sunday, or a
------------
day on which banks in New York, New York or San Francisco, California, are
required or permitted to be closed, and (b) with respect to all notices,
determinations, fundings and payments in connection with the LIBOR Rate or LIBOR
Rate Loans, any day that is a Business Day pursuant to clause (a) above and that
is also a day on which trading is carried on by and between banks in the London
interbank market.
"Capital Adequacy Regulation" means any guideline, request or
---------------------------
directive of any central bank or other Public Authority, or any other law, rule
or regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means all payments due (whether or not paid)
--------------------
during a Fiscal Year in respect of the cost of any fixed asset or improvement,
or replacement, substitution, or addition thereto, which has a useful life of
more than one year, including, without limitation, those arising in connection
with the direct or indirect acquisition of such assets by way of increased
product or service charges or offset items or in connection with Capital Leases.
<PAGE>
"Capital Lease" means any lease of Property by a Borrower that, in
-------------
accordance with GAAP, should be reflected as a liability on the balance sheet of
such Borrower.
"Closing Date" means the date of this Agreement, being the date first
------------
above written.
"Closing Fee" has the meaning specified in Section 3.5.
----------- -----------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" has the meaning given to such term in Section 7.1
----------
"Contaminant" means any waste, pollutant, hazardous substance, toxic
-----------
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos in any form or condition, polychlorinated biphenyls
("PCBs"), or other substance or material, the handling, release, or possession
of which is regulated to protect health, safety, or environment, or any
constituent of any such substance or waste.
"Conversion/Continuation Date" has the meaning given to such term in
----------------------------
Section 3.2(b).
"Debt" means all liabilities, obligations and indebtedness of either
----
Borrower to any Person, of any kind or nature, now or hereafter owing, arising,
due or payable, howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed or otherwise, and
including, without limitation, (a) such Borrower's liabilities and obligations
to trade creditors; (b) all Obligations; (c) all obligations and liabilities of
any Person secured by any Lien on such Borrower's Property, even though such
Borrower shall not have assumed or become liable for the payment thereof;
provided, however, that all such obligations and liabilities which are limited
- -------- -------
in recourse to such Property shall be included in Debt only to the extent of the
book value of such Property as would be shown on a balance sheet of such
Borrower prepared in accordance with GAAP; (d) all obligations or liabilities
created or arising under any Capital Lease or conditional sale or other title
retention agreement with respect to Property used or acquired by such Borrower,
even if the rights and remedies of the lessor, seller or lender thereunder are
limited to repossession of such Property; provided, however, that all such
-------- -------
obligations and liabilities which are limited in recourse to such Property shall
be included in Debt only to the extent of the book value of such Property as
would be shown on a balance sheet of such Borrower prepared in accordance with
GAAP; (e) all accrued pension fund and other employee benefit plan obligations
and liabilities; (f) all obligations and liabilities under Guaranties; and (g)
deferred taxes.
"Distribution" means, in respect of any corporation: (a) the payment
------------
or making of any dividend or other distribution of Property in respect of
capital stock of such corporation,
<PAGE>
other than distributions in capital stock of the same class; or (b) the
redemption or other acquisition of any capital stock of such corporation.
"DOL" means the United States Department of Labor or any successor
---
department or agency.
"EBITDA" means, with respect to any period of Trend-Lines and its
------
Subsidiaries, the sum of:
(i) the net income (or net loss) of Trend-Lines and its
Subsidiaries (determined in accordance with GAAP) for such period,
without giving effect to any GAAP extraordinary gains or extraordinary
losses (including, without limitation, any store closing or
restructuring expenses); plus (or minus)
(ii) to the extent that any of the items referred to in any of
clauses (A) through (C) below were deducted or added in calculating
such net income:
(A) interest expense of Trend-Lines and its Subsidiaries for
such period;
(B) federal and state income tax expense of Trend-Lines and its
Subsidiaries for such period; and
(C) the amount of all depreciation and amortization for such
period.
"Eligible Inventory" means, with respect to either Borrower, Inventory
------------------
of such Borrower, valued at the lower of cost (on a first-in, first-out basis)
or market, that constitutes raw materials or first quality finished goods and
that: (a) is owned by such Borrower and with respect to which such Borrower has
good and marketable title; (b) is not, in the Lender's reasonable opinion, slow
moving, excess, obsolete or unmerchantable; (c) is located at Premises owned or
leased by a Borrower or on Premises otherwise reasonably acceptable to the
Lender; (d) is subject to the Lender's first priority perfected security
interest; (e) is not work-in-process, spare parts, packaging and shipping
materials, supplies, bill-and-hold Inventory, returned or defective Inventory,
or Inventory delivered to such Borrower on consignment; and (f) the Lender, in
the exercise of its reasonable discretion, deems eligible as the basis for
Revolving Loans based on such collateral and credit criteria as the Lender may
from time to time establish, provided, however, that the Lender shall give the
Borrower at least 10 days' written notice prior to establishing such additional
criteria and the reason(s) therefor. There shall in any event be excluded from
Eligible Inventory (i) any goods returned by a Borrower's customers that are
<PAGE>
determined by such Borrower or the Lender to be unsalable in the ordinary course
of business or held for return to vendors and (ii) goods in transit. If any
Inventory at any time ceases to be Eligible Inventory, such Inventory shall
promptly be excluded from the calculation of Eligible Inventory.
"Environmental Compliance Reserve" means all reserves which the Lender
--------------------------------
from time to time establishes for amounts that are reasonably required to be
expended in order for a Borrower and such Borrower's operations and Property to
comply with Environmental Laws or in order to correct any violation by such
Borrower or such Borrower's operations or Property of Environmental Laws.
"Environmental Laws" means all federal, state and local laws, rules,
------------------
regulations, ordinances, programs, permits, guidance, orders and consent decrees
relating to health, safety, hazardous substances, and environmental matters
applicable to the relevant Borrower's business and facilities (whether or not
owned by it). Such laws and regulations include but are not limited to the
Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., as amended;
the Comprehensive Environmental Response Compensation and Liability Act, 42
U.S.C. (S) 9601 et seq., as amended; the Toxic Substances Control Act, 15 U.S.C.
(S) 2601 et seq., as amended; the Clean Water Act, 33 U.S.C. (S) 466 et seq., as
amended; the Clean Air Act, 42 U.S.C.
(S) 7401 et seq., as amended; state and federal lien and environmental cleanup
programs; and U.S. Department of Transportation regulations.
"Environmental Lien" means a Lien in favor of any Public Authority for
------------------
(a) any liability under any Environmental Laws, or (b) damages arising from, or
costs incurred by such Public Authority in response to, a Release or threatened
Release of a Contaminant into the environment.
"Equipment" means all of each Borrower's now owned and hereafter
---------
acquired machinery, equipment, furniture, furnishings, fixtures, and other
tangible personal property (except Inventory), including, without limitation,
data processing hardware and software, motor vehicles, aircraft, dies, tools,
jigs, and office equipment, as well as all of such types of property leased by
such Borrower and all of such Borrower's rights and interests with respect
thereto under such leases (including, without limitation, options to purchase);
together with all present and future additions and accessions thereto,
replacements therefor, component and auxiliary parts and supplies used or to be
used in connection therewith, and all substitutes for any of the foregoing, and
all manuals, drawings, instructions, warranties and rights with respect thereto;
wherever any of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) under common control with Trend-Lines within the meaning of
Section 414(b) or Section 414(c) of the Code (and Sections 414(m) and (o) of the
Code for purposes of provisions relating to Section 412 of the Code).
"ERISA Event" means, with respect to either Borrower, any ERISA
-----------
Affiliate or any Pension Plan, the occurrence of any of the following: (a) a
Reportable Event; (b) a withdrawal by a substantial employer (as defined in
Section 4001 (a)(12) of ERISA) subject to Section 4063 of ERISA; (c) a cessation
of operations which is treated as a withdrawal under Section 4062(e) of ERISA;
(d) a complete or partial withdrawal by such Borrower or any ERISA Affiliate
under Section 4203 or Section 4205 of ERISA from a Multiemployer Plan; (e) a
notification that a Multiemployer Plan is in reorganization under Section 4242
of ERISA; (f) the filing of a notice of intent to terminate a Pension Plan under
4041 of ERISA; (g) the treatment of an amendment of a Pension Plan as a
termination under 4041 of ERISA; (h) the termination of a Multiemployer Plan
under Section 4041A of ERISA; (i) the commencement of proceedings by the PBGC to
terminate a Pension Plan under 4042 of ERISA; (j) an event or condition which
could reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, a Pension
Plan; or (k) the imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA.
"Event" means any event or condition which, with notice, the passage
-----
of time, the happening of any other condition or event, or any combination
thereof, would constitute an Event of Default.
"Event of Default" has the meaning specified in Section 12.1.
----------------
"Existing Debt" means all Debt owing under or in connection with the
-------------
loan provided under the Amended and Restated Revolving Credit Agreement, dated
as of March 1, 1996, between Trend-Lines and the Prior Lender.
"Facility Fee" has the meaning specified in Section 3.4.
------------
"Financial Statements" means, according to the context in which it is
--------------------
used, the financial statements attached hereto as Exhibit B-l, and the pro forma
-----------
balance sheet attached hereto as Exhibit B-2 or any financial statements
-----------
required to be given to the Lender pursuant to Section 8.2(a), Section 8.2(b),
and Section 8.2(c), or any combination thereof.
"Fiscal Year" means the Borrowers' fiscal year for financial
-----------
accounting purposes. The current Fiscal Year of the Borrowers will end on March
1, 1997.
<PAGE>
"Fixed Charges Ratio" means, for any Rolling Period, EBITDA for such
-------------------
Rolling Period divided by the sum of Capital Expenditures, interest expense of
the Borrowers, federal and state income tax expense of the Borrowers and
principal payments which the Borrowers were required to make for borrowed money,
for such Rolling Period.
"Funding Date" means the date on which a Borrowing occurs.
------------
"GAAP" means at any particular time generally accepted accounting
----
principles as in effect at such time.
"Guaranty" by any Person means all obligations of such Person which in
--------
any manner directly or indirectly guarantee or assure, or in effect guarantee or
assure, the payment or performance of any indebtedness, dividend or other
obligation of any other Person (the "guaranteed obligations"), or to assure or
in effect assure the holder of the guaranteed obligations against loss in
respect thereof, including, without limitation, any such obligations incurred
through an agreement, contingent or otherwise: (a) to purchase the guaranteed
obligations or any Property constituting security therefor; (b) to advance or
supply funds for the purchase or payment of the guaranteed obligations or to
maintain a working capital or other balance sheet condition; or (c) to lease
Property or to purchase any debt or equity securities or other Property or
services.
"Intercompany Accounts" means all assets and liabilities, however
---------------------
arising, which are due to a Borrower from, which are due from a Borrower to, or
which otherwise arise from any transaction by a Borrower with, any Affiliate.
"Interest Adjustment Date" means, with respect to any Rolling Period
------------------------
in connection with the adjustment of the Applicable Margin, the first day of the
month that commences at least three Business Days after the delivery to the
Lender of the calculation of the Fixed Charges Ratio referred to in Section
8.2(c).
"Interest Adjustment Period" means a period commencing on any Interest
--------------------------
Adjustment Date and ending on the first day of the following month.
"Interest Coverage Ratio" means, for any period, the ratio of (a)
-----------------------
EBITDA over (b) total interest expense during such period.
----
"Interest Period" means, as to any LIBOR Rate Loan, the period
---------------
commencing on the Funding Date of such Loan or on the Conversion/Continuation
Date on which a Reference Rate Loan is converted into a LIBOR Rate Loan or a
LIBOR Rate Loan is continued as such a
<PAGE>
LIBOR Rate Loan, and ending on the date one, two, or three months thereafter as
selected by the Borrower in its Notice of Borrowing or Notice of
Conversion/Continuation; provided, however, that:
(i) if any Interest Period would otherwise end on a day that is
not a Business Day, that Interest Period shall be extended to the
following Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event
such Interest Period shall end on the preceding Business Day;
(ii) any Interest Period pertaining to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day
of the calendar month at the end of such Interest Period;
(iii) there shall be no more than five different Interest
Periods in effect at any one time; and
(iv) no Interest Period shall extend beyond the Stated
Termination Date or any renewal term.
"Inventory" means all of each Borrower's now owned and hereafter
---------
acquired inventory, goods, merchandise, and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work-in-process, finished goods, returned goods, and
materials and supplies of any kind, nature or description which are or might be
used or consumed in such Borrower's business or used in connection with the
manufacture, packing, shipping, advertising, selling or finishing of such goods,
such merchandise and such other personal property, and all documents of title or
other documents representing them.
"IRS" means the Internal Revenue Service or any successor agency.
---
"Latest Projections" means: (a) on the Closing Date and thereafter
------------------
until the Lender receives new projections pursuant to Section 8.2(j), the
projections of the Borrowers' monthly financial condition, results of
operations, and cash flow for the one-year period ending March 1, 1997,
attached hereto as Exhibit B-3; and (b) thereafter, the projections most
-----------
recently received by the Lender pursuant to Section 8.2(f);
"Letter of Credit" has the meaning specified in Section 2.3.
----------------
<PAGE>
determined by such Borrower or the Lender to be unsalable in the ordinary
course of business or held for return to vendors and (ii) goods in transit. If
any Inventory at any time ceases to be Eligible Inventory, such Inventory shall
promptly be excluded from the calculation of Eligible Inventory.
"Environmental Compliance Reserve" means all reserves which the Lender
--------------------------------
from time to time establishes for amounts that are reasonable required to be
expended in order for a Borrower and such Borrower's operations and Property to
comply with Environmental Laws or in order to correct any violation by such
Borrower or such Borrower's operations or Property of Environmental Laws.
"Environmental Laws" means all federal, state and local laws, rules,
------------------
regulations, ordinanaces, programs, permits, guidance, orders and consent
decrees relating to health, safety, hazardous substances, and environmental
matters applicable to the relevant Borrower's business and facilities (whether
or not owned by it). Such laws and regulations include but are not limited to
the Resource Conservation and Recovery Act, 42 U.S.C. (S)6901 et seq., as
amended; the Comprehensive Environmental Response Compensation and Liability
Act, 42 U.S.C. (S)9601 et seq., as amended; the Toxic Substances Control Act,
15 U.S.C. (S)2601 et seq., as amended; the Clean Water Act, 33 U.S.C. (S)466
et seq., as amended; the Clean Air Act, 42 U.S.C. (S)7401 et seq., as amended;
state and federal lien and environmental cleanup programs; and U.S. Department
of Transportation regulations.
(e) any liability under any Environmental Laws, or (b) damages arising
from, or costs incurred by such Public Authority in response to, a Release or
threatened Release of a Contaminant into the environment.
"Equipment" means all of each Borrower's now owned and hereafter
---------
acquired machinery, equipment, furniture, furnishing, fixtures, and other
tangible personal property (except Inventory), including, without limitation,
data processing hardware and software, motor vehicles, aircraft, dies, tools,
jigs, and office equipment, as well as all of such types of property leased by
such Borrower and all of such Borrower's rights and interests with respect
thereto under such leases (including, without limitation, options to purchase)
all present and future additions and accessions thereto, replacements therefor,
component and auxiliary parts and supplies used or to be used in connection
therewith, and all substitutes for any of the foregoing, and all manuals,
drawings, instructions, warranties and rights with respect thereto; wherever any
of the foregoing is located.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
<PAGE>
"Letter of Credit Fee" has the meaning specified in Section 3.7.
--------------------
"LIBOR Interest Payment Date" means, with respect to a LIBOR Rate
---------------------------
Loan, the last day of each Interest Period applicable to such Loan.
"LIBOR Interest Rate Determination Date" means each date of
--------------------------------------
calculating the LIBOR Rate for purposes of determining the interest rate with
respect to an Interest Period. The LIBOR Interest Rate Determination Date for
any LIBOR Rate Loan shall be the second Business Day prior to the first day of
the related Interest Period for such LIBOR Rate Loan.
"LIBOR Rate" means, for any Interest Period, with respect to LIBOR
----------
Rate Loans comprising part of the same Borrowing, the rate of interest per annum
(rounded upward to the next 1/100th of 1.0%) determined as follows:
LIBOR Rate = LIBOR
----------------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
-----------------------------
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1.0%) in effect on such
day (whether or not applicable to the Lender) under regulations issued
from time to time by the Federal Reserve Board for determining the
maximum reserve requirement (including, without limitation, any
emergency, supplemental or other marginal reserve requirement) with
respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"LIBOR" means the rate of interest per annum (rounded upward to
-----
the next 1/16 of 1%) notified to the Lender by the Bank as the rate of
interest at which United States Dollar deposits in the approximate
amount of the Loan to be made or continued as, or converted into, a
LIBOR Rate Loan and having a maturity comparable to such Interest
Period would be offered by the Bank's applicable lending office to
major banks in the London interbank market at their request at
approximately 11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
"LIBOR Rate Loan" means a Loan during any period in which it bears
---------------
interest based on the LIBOR Rate.
<PAGE>
"LIBOR Revolving Loan" means a Revolving Loan during any period in
--------------------
which it bears interest based on the LIBOR Rate.
"Lien" means: (a) any interest in Property securing an obligation
----
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute, or contract, and including,
without limitation, a security interest, charge, claim, or lien arising from a
mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, agreement, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes; and (b) to the extent
not included under clause (a), any reservation, exception, encroachment,
easement, right-of-way, covenant, condition, restriction, lease or other title
exception or encumbrance affecting Property.
"Loan and Loans" means all loans and advances provided for in Section
--------------
2. The terms Loans and Revolving Loans are used herein interchangeably.
"Loan Documents" means this Agreement, the Trademark Security
--------------
Agreements, the Seabrook Mortgage, the Stock Pledge Agreement, and all other
agreements, instruments, and documents heretofore, now or hereafter evidencing,
securing, guaranteeing or otherwise relating to the Obligations, the Collateral,
the Security Interest, or any other aspect of the transactions contemplated by
this Agreement.
"Mortgages" means: (a) each mortgage, security agreement, and
---------
assignments of leases and rents between either Borrower and the Lender and
delivered to the Lender; and (b) all other real property mortgages, leasehold
mortgages, assignments of leases, mortgage deeds, deeds of trust, deeds to
secure debt, security agreements, and other similar instruments hereafter
entered into which provide the Lender a lien on or other interest in any portion
of the Premises or which relate to any such lien or interest.
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA to which Trend-Lines or any ERISA Affiliate makes, is
making, made, or was at any time during the current year or the immediately
preceding six years obligated to make contributions.
"Notice of Borrowing" has the meaning specified in Section 2.2(b).
------------------- --------------
"Notice of Conversion/Continuation" has the meaning specified in
---------------------------------
Section 3.2(b).
- --------------
"Obligations" means all present and future loans, advances,
-----------
liabilities, obligations, covenants, duties, and Debt owing by either Borrower
to the Lender, whether or not arising under this Agreement, whether or not
evidenced by any note, or other instrument or
<PAGE>
document, whether arising from an extension of credit, opening of a letter of
credit, acceptance, loan, guaranty, indemnification or otherwise, whether direct
or indirect (including, without limitation, those acquired by assignment from
others, and any participation by the Lender in such Borrower's debts owing to
others), absolute or contingent, due or to become due, primary or secondary, as
principal or guarantor, and including, without limitation, all interest,
charges, expenses, fees, attorneys' fees, filing fees and other sums chargeable
to such Borrower hereunder, under another Loan Document, or under any other
agreement or instrument with the Lender. "Obligations" includes, without
limitation, all debts, liabilities, and obligations now or hereafter owing from
such Borrower to the Lender under or in connection with the Letters of Credit.
"Other Taxes" means any present or future stamp or documentary taxes
-----------
or any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or any other Loan Documents.
"Outstanding Credit" means, at any time with respect to either
------------------
Borrower, the sum of (a) the aggregate outstanding principal amount of the Loans
at such time made to such Borrower plus (b) the aggregate undrawn amount of all
outstanding Letters of Credit at such time issued for the account of such
Borrower plus (c) the aggregate amount of all unpaid reimbursement obligations
of such Borrower in respect of Letters of Credit issued for the account of such
Borrower.
"Participating Lender" means any Person who shall have been granted
--------------------
the right by the Lender to participate in the Loans and who shall have entered
into a participation agreement in form and substance satisfactory to the Lender.
"Payment Account" means each blocked bank account or bank account
---------------
associated with a lock box, established pursuant to Section 7.10, to which the
funds of either Borrower (including, without limitation, Proceeds of Accounts
and other Collateral) are deposited or credited, and which is maintained in the
name of the Lender or such Borrower, as the Lender may determine, on terms
acceptable to the Lender.
"PBGC" means the Pension Benefit Guaranty Corporation or any Person
----
succeeding to the functions thereof.
"Pending Loans" means, at any time, the aggregate principal amount of
-------------
all Loans requested in any Notice(s) of Borrowing received by the Lender which
have not yet been advanced.
<PAGE>
"Pension Plan" means a pension plan (as defined in Section 3(2) of
------------
ERISA) subject to Title IV of ERISA which Trend-Lines or an ERISA Affiliate
sponsors or maintains or to which it makes, is making, or is obligated to make
contributions or, in the case of a Multiemployer Plan, has made contributions at
any time during the current year or the immediately preceding six plan years.
"Permitted Liens" means: (a) Liens for taxes not yet delinquent or
---------------
Liens for taxes in an amount not to exceed $100,000 being contested in good
faith by appropriate proceedings diligently pursued, provided that a reserve or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor on the applicable Financial Statements and that a stay of
enforcement of any such Lien is in effect; (b) Liens in favor of the Lender; (c)
Liens arising by operation of law in favor of warehousemen, landlords, carriers,
mechanics, materialmen, laborers, employees or suppliers, incurred in the
ordinary course of business of Trend-Lines or any of its Subsidiaries and not in
connection with the borrowing of money, for sums not yet delinquent or which are
being contested in good faith and by proper proceedings diligently pursued,
provided that a reserve or other appropriate provision, if any, required by GAAP
shall have been made therefor on the applicable Financial Statements and a stay
of enforcement of any such Lien is in effect; (d) Liens in connection with
worker's compensation or other unemployment insurance incurred in the ordinary
course of the relevant Borrower's business; (e) Liens created by deposits of
cash to secure performance of bids, tenders, leases (to the extent permitted
under this Agreement), or trade contracts, incurred in the ordinary course of
business of the relevant Borrower and not in connection with the borrowing of
money; (f) Liens arising by reason of cash deposit for surety or appeal bonds in
the ordinary course of business of the relevant Borrower; (g) Liens of or
resulting from any judgment or award, the time for the appeal or petition for
rehearing of which has not yet expired, or in respect of which the relevant
Borrower is in good faith prosecuting an appeal or proceeding for a review, and
in respect of which a stay of execution pending such appeal or proceeding for
review has been secured; (h) Liens with respect to the real estate which are
exceptions to the commitments for title insurance issued in connection with the
Mortgages, as accepted by the Lender; (i) with respect to any Premises:
easements, rights of way, zoning and similar covenants and restrictions and
similar encumbrances which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which in any event do
not materially interfere with or impair the use or operation of the Collateral
by the relevant Borrower or the value of the Lender's Security Interest therein,
or materially interfere with the ordinary conduct of the business of the
relevant Borrower; and (j) purchase money security interests and liens of
lessors under capital leases to the extent that the acquisition or lease of the
underlying asset was permitted under Section 10.20, the security interest or
lien only encumbers the asset purchased or leased, and so long as the security
interest or lien only secures the purchase price of the asset.
<PAGE>
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, limited liability company,
association, corporation, Public Authority, or other entity.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
----
ERISA) which any Borrower or any ERISA Affiliate sponsors or maintains or to
which any Borrower or any ERISA Affiliate makes, is making, or is obligated to
make contributions and includes any Pension Plan.
"Premises" means the land identified by addresses on Schedule 9.13
-------- -------------
together with all buildings, improvements, and fixtures thereon and all
tenements, hereditaments, and appurtenances belonging or in any way appertaining
thereto, and which constitutes all of the real property in which either Borrower
has any interests on the Closing Date.
"Prior Lender" means Fleet Bank.
------------
"Proceeds" means all products and proceeds of any Collateral, and all
--------
proceeds of such products and proceeds, including, without limitation, all cash
and credit balances, all payments under any indemnity, warranty, or guaranty
payable with respect to any Collateral, all awards for taking by eminent domain,
all proceeds of fire or other insurance, and all money and other Property
obtained as a result of any claims against third parties or any legal action or
proceeding with respect to Collateral.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, or tangible or intangible.
"Proprietary Rights" means all of each Borrower's now owned and
------------------
hereafter arising or acquired: licenses, franchises, permits, patents, patent
rights, copyrights, works which are the subject matter of copyrights,
trademarks, trade names, trade styles, patent and trademark applications and
licenses and rights thereunder, including, without limitation, those patents,
trademarks and copyrights set forth on Schedule 9.14, and all other rights under
-------------
any of the foregoing, all extensions, renewals, reissues, divisions,
continuations, and continuations-in-part of any of the foregoing, and all rights
to sue for past, present, and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill;
customer and other lists in whatever form maintained; and trade secret rights,
copyright rights, rights in works of authorship, and contract rights relating to
computer software programs, in whatever form created or maintained.
<PAGE>
"Public Authority" means the government of any country or sovereign
----------------
state, or of any state, province, municipality, or other political subdivision
thereof, or any department, agency, public corporation or other instrumentality
of any of the foregoing.
"Receivables" means all of the Borrower's now owned and hereafter
-----------
arising or acquired: Accounts (whether or not earned by performance),
including, without limitation, Accounts owed to the Borrower by any of its
Subsidiaries or Affiliates, together with all interest, late charges, penalties,
collection fees, and other sums which shall be due and payable in connection
with any Account; proceeds of any letters of credit naming the Borrower as
beneficiary; contract rights, chattel paper, instruments, documents, general
intangibles (including, without limitation, choses in action, causes of action,
tax refunds, tax refund claims, and Reversions and other amounts payable to the
Borrower from or with respect to any Plan) and all forms of obligations owing to
the Borrower (including, without limitation, in respect of loans, advances, and
extensions of credit by the Borrower to its Subsidiaries and Affiliates);
guarantees and other security for any of the foregoing; goods represented by or
the sale, lease or delivery of which gave rise to any of the foregoing;
merchandise returned to or repossessed by the Borrower and rights of stoppage in
transit, replevin, and reclamation; and other rights or remedies of an unpaid
vendor, lienor, or secured party.
"Reference Rate" means the rate of interest publicly announced from
--------------
time to time by the Bank as its reference rate. It is a rate set by the Bank
based upon various factors including the Bank's costs and desired return,
general economic conditions, and other factors, and is used as a reference point
for pricing some loans. However, the Bank may price loans at, above, or below
such announced rate. Any changes in the Reference Rate shall take effect on the
day specified in the public announcement of such change.
"Reference Rate Loans" means the Reference Rate Revolving Loans.
--------------------
"Reference Rate Revolving Loans" means a Revolving Loan during any
------------------------------
period in which it bears interest based on the Reference Rate.
"Release" means a release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration of a
Contaminant into the indoor or outdoor environment or into or out of any real
estate or other property, including, without limitation, the movement of
Contaminants through or in the air, soil, surface water, groundwater or real
estate or other property.
"Rental Reserve", with respect to any lease of real estate by either
--------------
Borrower, shall mean, as of any date, an amount equal to the next three months
of Rental that would be payable by the relevant Borrower under such lease.
<PAGE>
"Rental" means all payments due from the lessee or sublessee under a
------
lease, including, without limitation, basic rent, percentage rent, prepaid
taxes, utility and maintenance costs, and insurance premiums.
"Reportable Event" means any of the events set forth in Section
----------------
4043(b) of ERISA or the regulations thereunder, other than any such event for
which the 30-day notice requirement under ERISA has been waived in regulations
issued by the PBGC.
"Requirement of Law" means any law (statutory or common), treaty, rule
------------------
or regulation or determination of an arbitrator or of a Public Authority.
"Restricted Investment" means any acquisition of Property by a
---------------------
Borrower or any of its Subsidiaries in exchange for cash or other Property,
whether in the form of an acquisition of stock, debt security, or other
indebtedness or obligation, or the purchase or acquisition of any other
Property, or a loan, advance, capital contribution, or subscription, except
acquisitions of the following:
(a) fixed assets to be used in the business of a
Borrower, so long as the acquisition costs thereof constitute Capital
Expenditures permitted hereunder; (b) current assets arising from the sale or
lease of goods or rendition of services in the ordinary course of business of a
Borrower; (c) direct obligations of the United States of America, or any agency
thereof, or obligations guaranteed by the United States of America, provided
that such obligations mature within one year from the date of acquisition
thereof; (d) certificates of deposit maturing within one year from the date of
acquisition, bankers acceptances, Eurodollar bank deposits, or overnight bank
deposits, in each case issued by, created by, or with, a bank or trust company
organized under the laws of the United States or any state thereof having
capital and surplus aggregating at least $100,000,000; and (e) commercial paper
given the highest rating by a national credit rating agency and maturing not
more than 270 days from the date of creation thereof.
"Reversions" means any funds which may become due to either Borrower
----------
in connection with the termination of any Plan or other employee benefit plan.
"Revolving Loans" has the meaning specified in Section 2.2.
---------------
"Rolling Period" means each period of 12 consecutive fiscal months
--------------
ended March 1, 1997 and each fiscal month end thereafter.
"Seabrook Mortgage" means a Mortgage in form and substance
-----------------
satisfactory to the Lender on the Seabrook Premises.
"Seabrook Premises" shall mean the real estate owned by Trend-Lines
-----------------
located at 1 Batchelder Road at Route 107 in Seabrook, New Hampshire.
<PAGE>
"Security Interest" means collectively the Liens granted to the Lender
-----------------
in the Collateral pursuant to this Agreement, the other Loan Documents, or any
other agreement or instrument.
"Solvent" shall mean when used with respect to any Person that: (a)
-------
the fair value of all its Property is in excess of the total amount of its debts
(including, without limitation, contingent liabilities); (b) it is able to pay
its debts as they mature; (c) it does not have unreasonably small capital for
the business in which it is engaged or for any business or transaction in which
it is about to engage; and (d) it is not "insolvent" as such term is defined in
Section 101(32) of the Bankruptcy Code.
"Stated Termination Date" means July 3, 1999.
-----------------------
"Stock Pledge Agreement" means the Stock Pledge Agreement dated July
----------------------
3, 1996 between the Lender and Trend-Lines.
"Subfacility" means, as of any date with respect to either Borrower,
-----------
the lesser of (a) the excess, if any, of (i) the Total Facility on such date
over (ii) the Outstanding Credit of the other Borrower on such date or (b) the
Borrowing Base of such Borrower on such date.
"Subsidiary" of a Person means any corporation, association,
----------
partnership, joint venture or other business entity of which more than 50% of
the voting stock or other equity interests (in the case of Persons other than
corporations), is owned or controlled directly or indirectly by the Person, or
one or more of the Subsidiaries of the Person, or a combination thereof. Unless
the context otherwise clearly requires, references herein to a "Subsidiary"
refer to a Subsidiary of the relevant Borrower.
"Taxes" means any and all present or future taxes, assessments,
-----
levies, imposts, impositions, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, in the case of the Lender, such
taxes (including, without limitation, income taxes or franchise taxes) as are
imposed on or measured by the Lender's net income by the jurisdiction (or any
political subdivision thereof) under the laws of which the Lender is organized
or maintains a lending office.
"Total Facility" has the meaning specified in Section 2.1.
--------------
"Trademark Security Agreements" means the Trademark Security
-----------------------------
Agreements, each dated as of the date hereof, executed and delivered by the
Borrowers to the Lender to evidence and perfect the Lender's Security Interest
in the Borrowers' present and future trademarks and related licenses and rights.
<PAGE>
"UCC" means the Uniform Commercial Code (or any successor statute) of
---
the State of New York or of any other state the laws of which are required by
Section 9-103 thereof to be applied in connection with the issue of perfection
of security interests.
"Unused Line Amount" means (a) during the period beginning on the
------------------
Closing Date and ending on the day before the first Anniversary Date,
$30,000,000, (b) during the period beginning on the first Anniversary Date and
ending on the day before the second Anniversary Date, $35,000,000 and (c)
beginning on the second Anniversary Date and ending on the third Anniversary
Date, $40,000,000.
"Unused Line Fee" has the meaning specified in Section 3.1(c).
---------------
Accounting Terms. Any accounting term used in this Agreement shall
-----------------
have, unless otherwise specifically provided herein, the meaning customarily
given in accordance with GAAP, and all financial computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied and using the same method for inventory valuation as is
used in the preparation of the Financial Statements.
Other Terms. All other undefined terms contained in this Agreement
------------
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are used or defined therein. Wherever
appropriate in the context, terms used herein in the singular also include the
plural, and vice versa, and each masculine, feminine, or neuter pronoun shall
---- -----
also include the other genders. Unless the context indicates otherwise, all
section and schedule references herein are to Sections hereof and Schedules
hereto, respectively.
2. LOANS AND LETTERS OF CREDIT.
----------------------------
2.1 Total Facility". Subject to all of the terms
---------------
and conditions of this Agreement, the Lender shall make available a total credit
facility of up to $40,000,000 in the aggregate (the "Total Facility") for the
--------------
Borrowers' use from time to time during the term of this Agreement. The Total
Facility shall be comprised of: a revolving line of credit up to the limits of
the Availability, consisting of revolving loans and letters of credit as
described in Sections 2.2 and 2.3.
------------ ---
2.2 Revolving Loans.
---------------
(a) The Lender shall, upon a Borrower's request from time
to time, make revolving loans (the "Revolving Loans") to such Borrower (subject
---------------
to the Total Facility) up to the limits of the Availability of such Borrower.
The Lender, in its discretion, may elect to make Revolving Loans or cause the
issuance of Letters of Credit (as provided for in Section 2.3)
<PAGE>
in excess of the limits of the Availability for either Borrower on one or more
occasions, but, if it does so, the Lender shall not be deemed thereby to have
changed the limits of the Availability for either Borrower or to be obligated to
exceed the limits of the Availability for either Borrower on any other occasion.
If the sum of the outstanding Revolving Loans, the undrawn amount of outstanding
Letters of Credit and any unpaid reimbursement obligations in respect of Letters
of Credit exceeds the Availability (determined for this purpose as if the amount
of the Revolving Loans were zero), then the Lender may refuse to make or
otherwise restrict Revolving Loans on such terms as the Lender determines until
such excess has been eliminated. A Borrower may request Revolving Loans either
telephonically or in writing. Each oral request for a Revolving Loan shall be
conclusively presumed to be made by a person authorized by such Borrower to do
so and the crediting of a Revolving Loan to such Borrower's deposit account, or
transmittal to such Person as the Borrower shall direct, shall conclusively
establish the obligation of such Borrower to repay such Revolving Loan as
provided herein. The Lender will charge all Revolving Loans to and other
Obligations of a Borrower to a loan account of such Borrower maintained with the
Lender. All fees, commissions, costs, expenses, and other charges under or
pursuant to the Loan Documents, and all payments made and out-of-pocket expenses
incurred by the Lender pursuant to the Loan Documents, will be charged as
Revolving Loans to such Borrower's loan account as of the date due from such
Borrower or the date paid or incurred by the Lender, as the case may be.
(b) Procedure for Borrowing.
-----------------------
(i) Each Borrowing shall be made upon a Borrower's irrevocable written
notice delivered to the Lender in the form of a Notice of Borrowing (which
notice must be received by the Lender prior to 11:00 a.m. (New York City time)
(1) four Business Days prior to the requested Funding Date, in the case of LIBOR
Rate Loans, and (2) on the requested Funding Date, in the case of Reference Rate
Loans, specifying:
(A) the amount of the Borrowing;
(B) the requested Funding Date, which shall be a Business Day;
(C) whether the Revolving Loans requested are to be Reference Rate
Revolving Loans or LIBOR Revolving Loans; and
(D) the duration of the Interest Period if the requested Revolving
Loans are to be LIBOR Revolving Loans. If the Notice of Borrowing fails to
specify the duration of the Interest Period for any Borrowing comprised of LIBOR
Rate Loans, such Interest Period shall be three months; provided, however, that,
with respect to the Borrowings to
<PAGE>
be made on the Closing Date, such Borrowings will consist of Reference Rate
Revolving Loans only.
(ii) After giving effect to any Borrowing, there may not be more than
five different Interest Periods in effect.
(iii) With respect to any request for Reference Rate Revolving Loans,
in lieu of delivering the above-described Notice of Borrowing a Borrower may
give the Lender telephonic notice of such request by the required time, with
such telephonic notice to be confirmed in writing within 24 hours of the giving
of such notice, but the Lender shall be entitled to rely on the telephonic
notice in making such Revolving Loans.
2.3 Letters of Credit.3 (a) Subject to the terms and conditions of this
-------------------
Agreement, the Lender shall, upon a Borrower's request from time to time, cause
merchandise or standby letters of credit to be issued for such Borrower's
account by the Bank or another issuer reasonably acceptable to such Borrower and
the Lender (the "Letters of Credit"). The Lender will not cause to be issued any
-----------------
Letter of Credit if: (i) the maximum face amount of the requested Letter of
Credit, plus the aggregate undrawn face amount of all outstanding Letters of
Credit, would exceed $2,500,000; (ii) the maximum face amount of the requested
Letter of Credit, and all commissions, fees, and charges due from such Borrower
to the Lender in connection with the opening thereof, would cause the
Availability to be exceeded at such time; or (iii) the expiration date of the
Letter of Credit would exceed the Stated Termination Date or any renewal term or
be greater than (A) 12 months from the date of issuance if such Letter of Credit
is a standby Letter of Credit or (B) 180 days from the date of issuance if such
Letter of Credit is a merchandise Letter of Credit. All payments made and
expenses incurred by the Lender pursuant to or in connection with the Letters of
Credit will be charged to the Borrower's loan account as Reference Rate Loans.
(b) Other Conditions. In addition to being subject to the
----------------
satisfaction of the applicable conditions precedent contained in Section 11, the
----------
obligation of the Lender to cause to be issued any Letter of Credit is subject
to the following conditions precedent having been satisfied in a manner
satisfactory to the Lender:
(1) The relevant Borrower shall have delivered to the proposed
issuer of such Letter of Credit, at such times and in such manner as such
proposed issuer may prescribe, an application in form and substance satisfactory
to such proposed issuer and the Lender for the issuance of the Letter of Credit
and such other documents as may be required pursuant to the terms thereof, and
the form and terms of the proposed Letter of Credit shall be satisfactory to the
Lender and such proposed issuer; and
<PAGE>
(2) As of the date of issuance, no order of any court, arbitrator
or Public Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Public Authority with jurisdiction over
money center banks generally shall prohibit, or request that the proposed issuer
of such Letter of Credit refrain from, the issuance of letters of credit
generally or the issuance of such Letters of Credit.
(c) Issuance of Letters of Credit.
-----------------------------
(1) Request for Issuance. The relevant Borrower shall give the
--------------------
Lender two Business Days' prior written notice of such Borrower's request for
the issuance of a Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a
single or in partial draws, the date on which such requested Letter of Credit is
to expire (which date shall be a Business Day), the purpose for which such
Letter of Credit is to be issued, and the beneficiary of the requested Letter of
Credit. Such Borrower shall attach to such notice the proposed form of the
Letter of Credit that the Lender is requested to cause to be issued.
(2) No Extensions or Amendment. The Lender shall not be obligated
--------------------------
to cause any Letter of Credit to be extended or amended unless the requirements
of this Section 2.3 are met as though a new Letter of Credit were being
-----------
requested and issued.
(d) Payments Pursuant to Letters of Credit.
--------------------------------------
(1) Payment of Letter of Credit Obligations. The Borrowers agree
---------------------------------------
to reimburse the issuer for any draw under any Letter of Credit immediately upon
demand, and to pay the issuer of the Letter of Credit the amount of all other
obligations and other amounts payable to such issuer under or in connection with
any Letter of Credit immediately when due, irrespective of any claim, setoff,
defense or other right which either Borrower may have at any time against such
issuer or any other Person.
(2) Reference Rate Loans to Satisfy Reimbursement Obligations.
---------------------------------------------------------
In the event that the issuer of any Letter of Credit honors a draw under such
Letter of Credit and the relevant Borrower shall not have repaid such amount to
the issuer of such Letter of Credit pursuant to Section 2.3(d)(1), the Lender
-----------------
shall pay the issuer and such amount when paid shall constitute a Reference Rate
Loan which shall be deemed to have been requested by such Borrower.
(e) Compensation for Letters of Credit.
----------------------------------
<PAGE>
(1) Letter of Credit Fee. The Borrowers agree to pay to the Lender,
--------------------
with respect to each Letter of Credit, the Letter of Credit Fee specified in,
and in accordance with the terms of, Section 3.7.
-----------
(2) Issuer Fees and Charges. The Borrowers shall pay to the issuer of
-----------------------
any Letter of Credit, or to the Lender for the account of the issuer of any such
Letter of Credit, solely for such issuer's account, such fees and other charges
as are charged by such issuer for letters of credit issued by such issuer,
including, without limitation, its standard fees for issuing, administering,
amending, renewing, paying and canceling letters of credit and all other fees
associated with issuing or servicing letters of credit, as and when assessed.
(f) Indemnification; Exoneration; Power of Attorney
-----------------------------------------------
(1) Indemnification. In addition to amounts payable as elsewhere
---------------
provided in this Section 2.3, the Borrowers hereby agree to protect, indemnify,
-----------
pay and save the Lender harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including, without
limitation, reasonable attorneys' fees) which the Lender may incur or be subject
to as a consequence, direct or indirect, of the issuance of any Letter of Credit
or the provision of any credit support or enhancement in connection therewith.
The agreement in this Section 2.3(f)(1) shall survive payments of all
Obligations.
(2) Assumption of Risk by the Borrowers. As among the Borrowers and
-----------------------------------
the Lender, the Borrowers assume all risks of the acts and omissions of, or
misuse of any of the Letters of Credit by, the respective beneficiaries of such
Letters of Credit other than risks arising from the gross negligence or willful
misconduct of the Lender. In furtherance and not in limitation of the
foregoing, the Lender shall not be responsible for: (A) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any Person in connection with the application for and issuance of and
presentation of drafts with respect to any of the Letters of Credit, even if it
should prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (C) the
failure of the beneficiary of any Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (D) errors,
omissions, interruptions, or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(E) errors in interpretation of technical terms; (F) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any Letter of Credit or of the proceeds thereof; (G) the misapplication by
the beneficiary of any Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (H) any consequences arising from causes beyond the
control of the
<PAGE>
Lender, including, without limitation, any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Public Authority. None of
-- ---- -- -----
the foregoing shall affect, impair or prevent the vesting of any rights or
powers of the Lender under this Section 2.3.
-----------
(3) Exoneration. In furtherance and extension, and not in limitation,
-----------
of the specific provisions set forth above, no action taken or omitted by the
Lender under or in connection with any of the Letters of Credit or any related
certificates, if taken or omitted in the absence of gross negligence or willful
misconduct, shall put the Lender under any resulting liability to the Borrowers
or relieve the Borrowers of any of their obligations hereunder to any such
Person.
(4) Power of Attorney. In connection with all Inventory financed by
-----------------
Letters of Credit, each Borrower hereby appoints the Lender, or the Lender's
designee, as such Borrower's attorney, with full power and authority: (a) to
sign and/or endorse such Borrower's name upon any warehouse or other receipts;
(b) to sign such Borrower's name on bills of lading and other negotiable and
non-negotiable documents; (c) to clear Inventory through customs in the Lender's
or such Borrower's name, and to sign and deliver to customs officials powers of
attorney in such Borrower's name for such purpose; (d) to complete in such
Borrower's or the Lender's name, any order, sale, or transaction, obtain the
necessary documents in connection therewith and collect the proceeds thereof;
and (e) to do such other acts and things as are necessary in order to enable the
Lender to obtain possession of the Inventory and to obtain payment of the
Obligations. Neither the Lender nor its designee, as such Borrower's attorney,
shall be liable for any acts or omissions, nor for any error of judgment or
mistakes of fact or law. This power, being coupled with an interest, is
irrevocable until all Obligations have been paid and satisfied.
(5) Account Party. Each Borrower hereby authorizes and directs any
-------------
issuer of a Letter of Credit to name such Borrower as the "account party"
therein, to deliver to the Lender all instruments, documents and other writings
and property received by the issuer pursuant to the Letter of Credit, and to
accept and rely upon the Lender's instructions and agreements with respect to
all matters arising in connection with the Letter of Credit or the application
therefor.
(6) Control of Inventory. In connection with all Inventory financed
--------------------
by Letters of Credit, each Borrower shall, at the Lender's request, instruct all
suppliers, carriers, forwarders, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which the Lender holds a security
interest to deliver them to the Lender and/or subject to the Lender's order and,
if they shall come into a Borrower's possession, such Borrower shall deliver
them, upon request, to the Lender in their original form. Each Borrower shall
also, at the Lender's request, designate the Lender as the consignee on all
bills of lading and other negotiable and non-negotiable documents.
<PAGE>
(g) Cash Collateral. If, notwithstanding the provisions of this
--------------- ----
Section 2.3 and Section 14, any Letter of Credit is outstanding upon the
- ----------- ----------
termination of this Agreement, then upon such termination each Borrower shall
deposit with the Lender, at its discretion, with respect to each Letter of
Credit then outstanding, cash in amounts necessary to reimburse the Lender for
payments made by the Lender under such Letter of Credit or under any credit
support or enhancement provided through the Lender. Such deposit of cash shall
be held by the Lender as security for, and to provide for the payment of, the
aggregate undrawn amount of such Letters of Credit remaining outstanding.
3. INTEREST AND OTHER CHARGES. INTEREST AND OTHER CHARGES".
--------------------------- ---------------------------
3.1 Interest
--------
(a) All outstanding Obligations shall bear interest on the
unpaid principal amount thereof (including, to the extent permitted by law, on
interest thereon not paid when due) from the date made until paid in full in
cash at a rate determined by reference to the Reference Rate or the LIBOR Rate
and Section 3.1 (a)(i) or Section 3.1(a)(ii), as applicable, but not to exceed
----------------------------------------
the Maximum Rate referred to in Section 3.3. Subject to the provisions of
Section 3.2, any of the Loans may be converted into, or continued as, Reference
- -----------
Rate Loans or LIBOR Rate Loans in the manner provided in Section 3.2. If at any
-----------
time Loans are outstanding with respect to which notice has not been delivered
to the Lender in accordance with the terms of this Agreement specifying the
basis for determining the interest rate applicable thereto, then those Loans
shall be Reference Rate Loans and shall bear interest at a rate determined by
reference to the Reference Rate until notice to the contrary has been given to
the Lender and such notice has become effective. Except as otherwise provided
herein, the Obligations shall bear interest as follows:
(i) For all Reference Rate Loans and other Obligations
(other than LIBOR Rate Loans), at a fluctuating per annum rate equal to the
Reference Rate plus the Applicable Margin; and
(ii) For all LIBOR Rate Loans, at a per annum rate for each
Interest Period therefor equal to the LIBOR Rate for such Interest Period plus
the Applicable Margin.
Each change in the Reference Rate shall be reflected in the interest rate
described in (i) above as of the effective date of such change. All interest
charges shall be computed on the basis of a year of 360 days and actual days
elapsed. All interest shall be payable to the Lender on the first day of each
month hereafter.
<PAGE>
(b) If any Event or Event of Default occurs, then, from the
date such Event or Event of Default occurs until it is cured, or, if not cured,
until all Obligations are paid and performed in full, the Borrowers shall pay
interest on the unpaid principal balances of the Revolving Loans at a per annum
rate 2% greater than the rate of interest otherwise specified herein, and the
Letter of Credit Fee shall be increased to three and one-quarter percent (3.25%)
per annum.
(c) Unused Line Fee. For every month during the term of this
---------------
Agreement, the Borrowers agree, jointly and severally, to pay the Lender a fee
(the "Unused Line Fee") in an amount equal to three-eighths of one percent per
---------------
annum, multiplied by the average daily amount by which the Unused Line Amount
-------------
exceeds the sum of (i) the average daily outstanding amount of Revolving Loans
and (ii) the undrawn face amount of all outstanding Letters of Credit during
such month, with the unpaid balance calculated for this purpose by applying
payments immediately upon receipt. Such a fee, if any, shall be calculated on
the basis of a year of 360 days and actual days elapsed and shall be payable to
the Lender on the first day of each month with respect to the prior month.
3.2 Conversion and Continuation Elections.
-------------------------------------
(a) Either Borrower may, upon irrevocable written notice to the
Lender in accordance with Subsection 3.2(b):
(i) elect, as of any Business Day, in the case of Reference
Rate Loans to convert any such Loans (or any part thereof) into LIBOR Rate
Loans; or
(ii) elect, as of the last day of any Interest Period applicable
thereto, to continue to maintain as LIBOR Rate Loans any LIBOR Rate Loans to
such Borrower having Interest Periods expiring on such day;
provided that neither Borrower may make such election if any LIBOR Rate Loans
resulting from such election would be in an amount less than $3,000,000 or an
integral multiple of $1,000,000 in excess thereof; provided further that, if at
----------------
any time the aggregate amount of LIBOR Rate Loans in respect of any Borrowing is
reduced, by payment, prepayment, or conversion of part thereof to be less than
$1,000,000, such LIBOR Rate Loans shall automatically convert into Reference
Rate Loans, and on and after such date the right of such Borrower to continue
such Loans as, and convert such Loans into, LIBOR Rate Loans, as the case may
be, shall terminate.
(b) Such Borrower shall deliver a notice ("Notice of
Conversion/Continuation") to be received by the Lender not later than 11:00 a.m.
(New York City time) at least three Business Days in advance of the date of
conversion or continuation (the
<PAGE>
"Conversion/Continuation Date") if the Loans are to be converted into or
continued as LIBOR Rate Loans, and specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or
continued;
(C) the type of Loans resulting from the proposed conversion
or continuation; and
(D) the duration of the requested Interest Period.
(c) If, upon the expiration of any Interest Period applicable to LIBOR
Rate Loans, the relevant Borrower has failed to select timely a new Interest
Period to be applicable to such LIBOR Rate Loans or if any Event or Event of
Default then exists, such Borrower shall be deemed to have elected to convert
such LIBOR Rate Loans into Reference Rate Loans effective as of the expiration
date of such Interest Period.
(d) During the existence of an Event or Event of Default, neither
Borrower may elect to have a Loan converted into or continued as a LIBOR Rate
Loan.
(e) After giving effect to any conversion or continuation of Loans,
there may not be more than five different Interest Periods in effect.
3.3 Maximum Interest Rate. In no event shall any interest rate
---------------------
provided for hereunder exceed the maximum rate permissible for corporate
borrowers under applicable law for loans of the type provided for hereunder (the
"Maximum Rate"). If, in any month, any interest rate, absent such limitation,
would have exceeded the Maximum Rate, then the interest rate for that month
shall be the Maximum Rate, and, if in future months, that interest rate would
otherwise be less than the Maximum Rate, then that interest rate shall remain at
the Maximum Rate until such time as the amount of interest paid hereunder equals
the amount of interest that would have been paid if the same had not been
limited by the Maximum Rate. In the event that, upon payment in full of the
Obligations under this Agreement, the total amount of interest paid or accrued
by a Borrower under the terms of this Agreement is less than the total amount of
interest which would, but for this Section 3.3, have been paid or accrued if
-----------
the interest rates otherwise set forth in this Agreement had at all times been
in effect, then such Borrower shall, to the extent permitted by applicable law,
pay the Lender an amount equal to the difference between (a) the lesser of (i)
the amount of interest which would have been charged if the Maximum Rate had, at
all times, been in effect or (ii) the amount of interest which would have
accrued had the interest rates otherwise set forth in this Agreement, at all
times, been in effect and (b) the amount
<PAGE>
of interest actually paid or accrued under this Agreement. In the event that a
court determines that the Lender has received from a Borrower interest and other
charges hereunder in excess of the Maximum Rate, such excess shall be deemed
received on account of, and shall automatically be applied to reduce, the
Obligations of such Borrower other than interest, in the inverse order of
maturity, and, if there are no Obligations outstanding, the Lender shall refund
to such Borrower such excess.
3.4 Facility Fee. The Borrowers agree, jointly and severally, to
pay the Lender on the Closing Date a facility fee in the amount of $200,000 (the
"Facility Fee"). The Lender acknowledges that it received 1/2 of the Facility
------------
Fee prior to the Closing Date. The Lender and the Borrowers agree that the
Facility Fee shall be financed by the Lender as a Revolving Loan to Trend-Lines.
3.5 [Intentionally Left Blank].
--------------------------
3.6. [Intentionally Left Blank].
--------------------------
3.7 Letter of Credit Fee.
--------------------
Letter of Credit Fee". The Borrowers agree, jointly and severally, to pay to the
Lender a fee (the "Letter of Credit Fee") equal to one and one-quarter percent
(1.25%) per annum of the undrawn face amount of each Letter of Credit issued for
any Borrower's account at such Borrower's request, plus all out-of-pocket costs,
fees and expenses incurred by the Lender in connection with the application for,
issuance of, or amendment to any Letter of Credit, which costs, fees and
expenses could include a "fronting fee" required to be paid by the Lender to
such issuer for the assumption of the settlement risk in connection with the
issuance of such Letter of Credit. The Letter of Credit Fee shall be payable
monthly in arrears on the first day of each month following any month in which a
Letter of Credit was issued and/or in which a Letter of Credit remains
outstanding. The Letter of Credit Fee shall be computed on the basis of a 360-
day year for the actual number of days elapsed.
4. PAYMENTS AND PREPAYMENTS.
-------------------------
4.1 Revolving Loans. The Borrowers shall repay the
---------------
outstanding principal balance of the Revolving Loans, plus all accrued but
unpaid interest thereon, upon the termination of this Agreement for any reason.
In addition, and without limiting the generality of the foregoing, the Borrowers
shall pay to the Lender, on demand, the amount by which the unpaid principal
balance of the Revolving Loans at any time exceeds the Availability at such time
(determined for this purpose as if the amount of the Revolving Loans were zero).
4.2 [Intentionally Left Blank].
--------------------------
<PAGE>
4.3 [Intentionally Left Blank].
--------------------------
4.4 [Intentionally Left Blank].
--------------------------
4.5 Place and Form of Payments; Extension of Time.5 Place and Form
----------------------------------------------- --------------
of Payments; Extension of Time". All payments by the Borrowers of principal,
- -------------------------------
interest, premium, and other sums due to the Lender shall be made at the
Lender's address set forth in Section 15.11. Except for Proceeds received
-------------
directly by the Lender, all such payments shall be made in immediately available
funds. Subject to the provisions set forth in the definition of "Interest
Period", if any payment by the Borrowers of principal, interest, premium, or
other sum to be made hereunder becomes due and payable on a day other than a
Business Day, the due date of such payment shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the applicable
interest rate during such extension.
4.6 Application and Reversal of Payments.6 Application and
-------------------------------------- ---------------
Reversal of Payments". The Lender shall determine in its sole discretion the
- ---------------------
order and manner in which Proceeds of Collateral and other payments that the
Lender receives are applied to the Revolving Loans, interest thereon, and the
other Obligations, and the Borrowers hereby irrevocably waive the right to
direct the application of any payment or Proceeds. The Lender shall have the
continuing and exclusive right to apply and reverse and reapply any and all such
Proceeds and payments to any portion of the Obligations.
4.7 INDEMNITY FOR RETURNED PAYMENTS.7 INDEMNITY FOR RETURNED
--------------------------------- ----------------------
PAYMENTS". IF, AFTER RECEIPT OF ANY PAYMENT WHICH IS APPLIED TO THE PAYMENT OF
- ---------
ALL OR ANY PART OF THE OBLIGATIONS, THE LENDER IS FOR ANY REASON COMPELLED TO
SURRENDER SUCH PAYMENT TO ANY PERSON BECAUSE SUCH PAYMENT IS INVALIDATED,
DECLARED FRAUDULENT, SET ASIDE, DETERMINED TO BE VOID OR VOIDABLE AS A
PREFERENCE, AN IMPERMISSIBLE SETOFF, OR A DIVERSION OF TRUST FUNDS, OR FOR ANY
OTHER REASON, THEN: THE OBLIGATIONS OR PART THEREOF INTENDED TO BE SATISFIED
SHALL BE REVIVED AND CONTINUE, THIS AGREEMENT SHALL CONTINUE IN FULL FORCE AS IF
SUCH PAYMENT HAD NOT BEEN RECEIVED BY THE LENDER, AND THE BORROWERS SHALL BE
LIABLE TO PAY TO THE LENDER AND HEREBY DO JOINTLY AND SEVERALLY INDEMNIFY THE
LENDER AND HOLD THE LENDER HARMLESS FOR THE AMOUNT OF SUCH PAYMENT SURRENDERED.
The provisions of this Section 4.7 shall be and remain effective notwithstanding
-----------
any contrary action which may have been taken by the Lender in reliance upon
such payment, and any such contrary action so taken shall be without prejudice
to the Lender's rights under this Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable. The
provisions of this Section 4.7 shall survive the termination of this Agreement.
-----------
5. LENDER'S BOOKS AND RECORDS; MONTHLY STATEMENTS. LENDER'S BOOKS AND
----------------------------------------------- ------------------
RECORDS; MONTHLY STATEMENTS". Each Borrower agrees that the Lender's books and
- ----------------------------
records showing the Obligations and the
<PAGE>
transactions pursuant to this Agreement and the other Loan Documents shall be
admissible in any action or proceeding arising therefrom and shall constitute
prima facie proof thereof, irrespective of whether any Obligation is also
- ----- -----
evidenced by a promissory note or other instrument. The Lender shall provide to
Trend-Lines a monthly statement of Loans, payments, and other transactions of
the Borrowers pursuant to this Agreement. Such statement shall be deemed
correct, accurate, and binding on the Borrowers and as an account stated (except
for reversals and reapplications of payments made as provided in Section 4.6 and
-----------
corrections of errors discovered by the Lender), unless Trend-Lines notifies the
Lender in writing to the contrary within 30 days after such statement is
rendered. In the event a timely written notice of objections is given by Trend-
Lines, only the items to which exception is expressly made will be considered to
be disputed.
6. TAXES, YIELD PROTECTION AND ILLEGALITY.
---------------------------------------
6.1 Taxes.
------
(a) Any and all payments by a Borrower to the Lender under this
Agreement and any other Loan Document shall be made free and clear of, and
without deduction or withholding for, any Taxes. In addition, the Borrowers
shall pay all Other Taxes.
(b) The Borrowers agree to indemnify and hold harmless the Lender for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section) paid by the Lender and any liability (including, without limitation,
penalties, interest, additions to tax, and expenses) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. Payment under this indemnification shall be made within 30
days after the date the Lender makes written demand therefor.
(c) If any Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to Lender,
then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including, without limitation,
deductions and withholdings applicable to additional sums payable under this
Section) the Lender receives an amount equal to the sum it would have received
had no such deductions or withholdings been made;
(ii) such Borrower shall make such deductions and withholdings;
<PAGE>
(iii) such Borrower shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) such Borrower shall also pay to the Lender, at the time
interest is paid, all additional amounts which the Lender specifies as being
necessary to preserve the after-tax yield the Lender would have received if such
Taxes or Other Taxes had not been imposed.
(d) Within 30 days after the date of any payment by a Borrower of
Taxes or Other Taxes, such Borrower shall furnish the Lender the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to the Lender.
(e) The obligations of the Borrowers under this Section 6.1 shall be
joint and several.
6.2 Illegality. (a) If the Lender determines that
-----------
the introduction of any Requirement of Law, or any change in any Requirement of
Law, or in the interpretation or administration of any Requirement of Law, has
made it unlawful, or that any central bank or other Public Authority has
asserted that it is unlawful, for the Lender or its applicable lending office to
make LIBOR Rate Loans, then, on notice thereof by the Lender to the Borrowers,
any obligation of the Lender to make LIBOR Rate Loans shall be suspended until
the Lender notifies the Borrowers that the circumstances giving rise to such
determination no longer exists.
(b) If the Lender determines that it is unlawful to maintain any LIBOR
Rate Loan, the Borrowers shall, upon their receipt of notice of such fact and
demand from the Lender, prepay in full such LIBOR Rate Loans then outstanding,
together with interest accrued thereon and amounts required under Section 6.4,
-----------
either on the last day of the Interest Period thereof, if the Lender may
lawfully continue to maintain such LIBOR Rate Loans to such day, or immediately,
if the Lender may not lawfully continue to maintain such LIBOR Rate Loan. If a
Borrower is required so to prepay any LIBOR Rate Loan, then, concurrently with
such prepayment, such Borrower shall borrow from the Lender, in the amount of
such repayment, a Reference Rate Loan.
6.3 Increased Costs and Reduction of Return.3 Increased Costs and
----------------------------------------- -------------------
Reduction of Return". (a) If the Lender determines that, due to either (i) the
- ---------------------
introduction of or any change in the interpretation of any law or regulation or
(ii) the compliance by the Lender with any guideline or request from any central
bank or other Public Authority (whether or not having the force of law), there
shall be any increase in the cost to the Lender of agreeing to make or making,
funding or maintaining any LIBOR Rate Loans, then the Borrowers shall be liable
for, and shall from time to time, upon
<PAGE>
demand, pay to the Lender, such additional amounts as are sufficient to
compensate the Lender for such increased costs.
(i) If the Lender shall have determined that (i) the introduction of
any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy
Regulation, (iii) any change in the interpretation or administration of any
Capital Adequacy Regulation by any central bank or other Public Authority
charged with the interpretation or administration thereof, or (iv) compliance by
the Lender or any corporation controlling the Lender with any Capital Adequacy
Regulation, affects or would affect the amount of capital, reserves, or special
deposits required or expected to be maintained by the Lender or any corporation
controlling the Lender and (taking into consideration such Lender's or such
corporation's policies with respect to capital adequacy and such Lender's
desired return on capital) determines that the amount of such capital, reserves,
or special deposits is increased as a consequence of its loans, credits or
obligations under this Agreement, then, upon demand of the Lender to the
Borrowers, the Borrowers shall pay to the Lender, from time to time as specified
by the Lender, additional amounts sufficient to compensate the Lender for such
increase. Notwithstanding the foregoing, all such amounts shall be subject to
the provisions of Section 3.3.
(ii) The obligations of the Borrowers under this Section 6.3
shall be joint and several.
6.d Funding Losses.4 Funding Losses". Each Borrower shall
---------------- ---------------
reimburse the Lender and hold the Lender harmless from any loss or expense which
the Lender may sustain or incur as a consequence of:
(a) the failure of such Borrower to make on a timely basis
any payment of principal of any LIBOR Rate Loan;
(b) the failure of such Borrower to borrow, continue or
convert a Loan after such Borrower has given (or is deemed to have given) a
Notice of Borrowing or a Notice of Conversion/Continuation;
(c) the prepayment or other payment (including, without
limitation, after acceleration thereof) by such Borrower of any LIBOR Rate Loan
on a day that is not the last day of the relevant Interest Period;
including, without limitation, any such loss or expense arising from the
liquidation or reemployment of funds obtained by it to maintain its LIBOR Rate
Loans or from fees payable to terminate the deposits from which such funds were
obtained.
<PAGE>
6.5 Inability to Determine Rates. If the Lender determines that for
----------------------------
any reason adequate and reasonable means do not exist for determining the LIBOR
Rate for any requested Interest Period with respect to a proposed LIBOR Rate
Loan, or that the LIBOR Rate for any requested Interest Period with respect to a
proposed LIBOR Rate Loan does not adequately and fairly reflect the cost to the
Lender of funding such Loan, the Lender will promptly so notify the Borrowers.
Thereafter, the obligation of the Lender to make or maintain LIBOR Rate Loans
hereunder shall be suspended until the Lender revokes such notice in writing.
Upon receipt of such notice, the relevant Borrower may revoke any Notice of
Borrowing or Notice of Conversion/Continuation then submitted by such Borrower.
If such Borrower does not revoke such Notice, the Lender shall make, convert or
continue the Loans, as proposed by such Borrower, in the amount specified in the
applicable notice submitted by such Borrower, but such Loans shall be made,
converted or continued as Reference Rate Loans instead of LIBOR Rate Loans.
6.6 Survival. The agreements and obligations of the Borrowers in
this Section 6 shall survive the payment of all other obligations.
---------
<PAGE>
7. COLLATERAL.
----------
7.1 Grant of Security Interest
--------------------------
(a) As security for the Obligations, each Borrower hereby grants to
the Lender a continuing security interest in, lien on, assignment of and right
of set-off against, all of the following property of such Borrower, whether now
owned or existing or hereafter acquired or arising, regardless of where located:
(i) all Receivables, Inventory, Equipment, Assigned Contracts, Proprietary
Rights, and Proceeds, wherever located and whether now existing or hereafter
arising or acquired; (ii) all moneys, securities and other property and the
Proceeds thereof, now or hereafter held or received by, or in transit to, the
Lender from or for either Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, including, without limitation, all of
such Borrower's deposit accounts, credits, and balances with the Lender and all
claims of such Borrower against the Lender at any time existing; (iii) all of
such Borrower's deposit accounts with any financial institutions with which such
Borrower maintains deposits; and (iv) all books, records and other Property
relating to or referring to any of the foregoing, including, without limitation,
all books, records, ledger cards, data processing records, computer software and
other property and general intangibles at any time evidencing or relating to the
Receivables, Inventory, Equipment, Assigned Contracts, Proprietary Rights,
Proceeds, and other property referred to above (all of the foregoing, together
with the real estate covered by the Mortgages and all other property in which
the Lender may at any time be granted a Lien, being herein collectively referred
to as the "Collateral"). The Lender shall have all of the rights of a secured
----------
party with respect to the Collateral under the UCC and other applicable laws.
(b) As additional security for the Obligations, the Borrower shall
simultaneously herewith execute and deliver to the Lender a Mortgage
satisfactory to the Lender on the Seabrook Premises.
(c) All Obligations shall be secured by all of the Collateral. The
Lender may, in its sole discretion, (i) exchange, waive, or release any of the
Collateral, (ii) apply Collateral and direct the order or manner of sale thereof
as the Lender may determine, and (iii) settle, compromise, collect, or otherwise
liquidate any Collateral in any manner, all without affecting the Obligations or
the Lender's right to take any other action with respect to any other
Collateral.
7.2 Perfection and Protection of Security Interest. Each Borrower
------------------------------------- --------
shall, at its expense, perform all steps requested by the Lender at any time to
perfect, maintain, protect, and enforce the Security Interest, including,
without limitation: (a) executing and recording of
<PAGE>
the Mortgages and the Trademark Security Agreements and executing and filing
financing or continuation statements, and amendments thereof, in form and
substance satisfactory to the Lender; (b) delivering to the Lender upon request
the original certificates of title for motor vehicles with the Security Interest
properly endorsed thereon; (c) delivering to the Lender the originals of all
instruments, documents, and chattel paper, and all other Collateral of which the
Lender determines it should have physical possession in order to perfect and
protect the Security Interest therein, duly endorsed or assigned to the Lender
without restriction; (d) delivering to the Lender upon request warehouse
receipts covering any portion of the Collateral located in warehouses and for
which negotiable warehouse receipts are issued; (e) placing notations on such
Borrower's books of account to disclose the Security Interest; (f) executing and
delivering to the Lender upon request a security agreement relating to the
Reversions in form and substance satisfactory to the Lender; (g) delivering to
the Lender upon request all letters of credit on which such Borrower is named
beneficiary; and (h) taking such other steps as are deemed necessary by the
Lender to maintain the Security Interest. To the extent permitted by applicable
law, the Lender may file, without either Borrower's signature, one or more
financing statements disclosing the Security Interest. The Borrowers agree that
a carbon, photographic, photostatic, or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement. If any
Collateral is at any time in the possession or control of any warehouseman, any
bailee or any of either Borrower's agents or processors, then the relevant
Borrower shall notify the Lender thereof and shall notify such Person of the
Security Interest in such Collateral and, upon the Lender's request, instruct
such Person to hold all such Collateral for the Lender's account subject to the
Lender's instructions. If at any time any Collateral is located on any Premises
that are not owned by either Borrower, then the Borrowers shall obtain written
waivers, in form and substance satisfactory to the Lender, of all present and
future Liens to which the owner or lessor or any mortgagee of such Premises may
be entitled to assert against the Collateral. From time to time, the Borrowers
shall, upon the Lender's request, execute and deliver confirmatory written
instruments pledging to the Lender the Collateral, but neither Borrower's
failure to do so shall affect or limit the Security Interest or the Lender's
other rights in and to the Collateral. So long as this Agreement is in effect
and until all Obligations have been fully satisfied, the Security Interest shall
continue in full force and effect in all Collateral (whether or not deemed
eligible for the purpose of calculating the Availability or as the basis for any
advance, loan, extension of credit, or other financial accommodation).
7.3 Location of Collateral. Each Borrower represents and warrants
----------------------
to the Lender that: (a) Schedule 7.3 hereto is a correct and complete list of
------------
such Borrower's chief executive office, the location of its books and records,
the locations of the Collateral, and the locations of all of its other places of
business and (b) Schedule 7.3 correctly identifies any of such facilities and
------------
locations that are not owned by such Borrower and sets forth the names of the
owners and lessors or sub-lessors of, and, to the best of such Borrower's
knowledge, the holders of any mortgages on, such facilities and locations. Each
Borrower covenants and agrees that it
<PAGE>
will not maintain any Collateral at any location other than (a) those listed on
Schedule 7.3 and (b) those with respect to which such Borrower has given notice
- ------------
to the Lender, has executed any and all financing statements and other documents
that the Lender has required in connection therewith, and has filed same in the
appropriate places and within the time periods indicated by the Lender. Within
30 days after the end of each month, the Borrowers shall give the Lender written
notice of the opening of any new store, the closing of any store, and any other
event that resulted in a change of location of any Collateral, during the
previous month.
7.4 Title to, Liens on, and Sale and Use of Collateral. Title to,
--------------------------------------------------
Each Borrower represents and warrants to the Lender with respect to collateral
owned by such Borrower that: (a) all Collateral is and will continue to be owned
by such Borrower free and clear of all Liens whatsoever, except for the Security
Interest and other Permitted Liens; (b) the Security Interest will not be
subject to any prior Lien except for the Liens described in (b), (c), (e), (f),
(h), (i) and (j) of the definition of Permitted Liens; (c) such Borrower will
use, store, and maintain such Collateral with all reasonable care and will use
such Collateral for lawful purposes only; and (d) such Borrower will not,
without the Lender's prior written approval, sell, lease, or dispose of or
permit the sale or disposition of such Collateral or any portion thereof, except
for sales of Inventory in the ordinary course of business and as permitted by
Section 7.12. The inclusion of Proceeds in the Collateral shall not be deemed
the Lender's consent to any sale or other disposition of the Collateral except
as expressly permitted herein.
7.5 Appraisals. Whenever an Event or Event of Default exists, and
----------
at such other times not more frequently than once a year as the Lender requests,
each Borrower shall, at its expense and upon the Lender's request, provide the
Lender with appraisals or updates thereof of any or all of the Collateral owned
by such Borrower from an appraiser.
7.6 Access and Examination. The Lender may at all reasonable times
----------------------
have access to, examine, audit, make extracts from and inspect either Borrower's
records, files, and books of account and the Collateral and may discuss such
Borrower's affairs with such Borrower's officers and management. Such Borrower
shall deliver to the Lender any instrument necessary for the Lender to obtain
records from any service bureau maintaining records for such Borrower. The
Lender may, at any time when an Event of Default exists and at either Borrower's
expense, make copies of all of such Borrower's books and records, or require
such Borrower to deliver such copies to the Lender. The Lender may, without
expense to the Lender, use such of either Borrower's personnel, supplies, and
Premises as may be reasonably necessary for maintaining or enforcing the
Security Interest. The Lender shall have the right, at any time, in the Lender's
name or in the name of a nominee of the Lender, to verify the validity, amount
or any other matter relating to the Accounts, by mail, telephone, or otherwise.
<PAGE>
7.7 Insurance. The Borrowers shall insure the Collateral against
loss or damage by fire with extended coverage, theft, burglary, pilferage, loss
in transit, and such other hazards as the Lender shall specify, in amounts,
under policies and by insurers acceptable to the Lender. The Borrowers shall
also maintain flood insurance for real estate covered by the Mortgages and for
any Equipment and Inventory located on such real estate, in the event of a
designation of the area in which real estate is located as a "flood prone" or a
-----------
"flood risk area" (hereinafter "SFHA") as defined by the Flood Disaster
---------------
Protection Act of 1973, in an amount to be reasonably determined by the Lender,
and shall comply with the additional requirements of the National Flood
Insurance Program as set forth therein. Upon the Lender's request, the Borrowers
shall also maintain flood insurance for such Inventory and Equipment as is
located at any time in an SFHA. The Borrowers shall cause the Lender to be named
in each such policy as a secured party or mortgagee and loss payee or additional
insured, in a manner acceptable to the Lender. Each policy of insurance shall
contain a clause or endorsement requiring the insurer to give not less than 30
days' prior written notice to the Lender in the event of cancellation of the
policy for any reason whatsoever and a clause or endorsement stating that the
interest of the Lender shall not be impaired or invalidated by any act or
neglect of either Borrower or the owner of any premises where Collateral is
located nor by the occupation of such premises for purposes more hazardous than
are permitted by such policy. The Borrowers shall pay, upon the Lender's
request, all fees incurred by the Lender to determine whether any of the real
estate and other Collateral is located in an SFHA. The Borrowers shall also pay
all premiums for such insurance when due and shall deliver to the Lender
certificates of insurance and, if requested, photocopies of the policies. If the
Borrowers fail to pay such fees or to procure such insurance or the premiums
therefor when due, the Lender may (but shall not be required to) do so and
charge the costs thereof to either Borrower's loan account as a Reference Rate
Loan. The Borrowers shall promptly notify the Lender of any loss, damage, or
destruction to the Collateral or arising from its use, whether or not covered by
insurance. The Lender is hereby authorized to collect all insurance proceeds
directly. After deducting from such proceeds the expenses, if any, incurred by
the Lender in the collection or handling thereof, the Lender may apply such
proceeds to the reduction of the Obligations in such order as the Lender
determines or at the Lender's option may permit or require the Borrowers to use
such money, or any part thereof, to replace, repair, restore or rebuild the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction.
7.8 Collateral Reporting. The Borrowers shall provide the Lender
with the following documents at the following times in form satisfactory to the
Lender: (a) on a weekly basis as of the end of the Borrowers' fiscal week, a
report of the inventory balance (by location) based on the perpetual inventory
reports no later than four Business Days following the end of such fiscal week;
(b) monthly agings of accounts receivable no later than the 10th day of the
following month; (c) monthly aged inventory reports by category no later than
the 10th day of
<PAGE>
the following month; (d) upon request, monthly perpetual inventory reports; (e)
monthly agings of accounts payable no later than the 10th day of the following
month; (f) upon request, copies of purchase orders, invoices, and delivery
documents for Inventory and Equipment acquired by either Borrower; (g) on or
before the third Business Day of each week, a Borrowing Base Certificate in the
form of Exhibit C, as of the last Business Day of the prior week; (h) such other
reports as to the Collateral as the Lender shall request from time to time; and
(i) certificates of an officer of the relevant Borrower certifying as to the
foregoing. If any of a Borrower's records or reports of the Collateral are
prepared by an accounting service or other agent, such Borrower hereby
authorizes such service or agent to deliver such records, reports, and related
documents to the Lender.
7.9 [Intentionally Left Blank].
--------------------------
7.10 Collection of Accounts; Payments.
--------------------------------
(a) Until the Lender notifies the Borrowers to the contrary, the
Borrowers shall make collection of all Accounts and other Collateral for the
Lender, shall receive all payments as the Lender's trustee, and shall
immediately deliver all payments to the Lender in their original form duly
endorsed in blank or deposit them into a Payment Account established at the
Lender's request, as the Lender may direct. If the Lender requests, each
Borrower shall establish a lock-box service for collections of Accounts at a
bank mutually acceptable to the Lender and such Borrower and pursuant to
documentation satisfactory to the Lender. If such lock-box service is
established, such Borrower shall instruct all Account Debtors to make all
payments directly to the address established for such service. If,
notwithstanding such instructions, such Borrower receives any Proceeds of
Accounts, it shall receive such payments as the Lender's trustee and shall
immediately deliver such payments to the Lender in their original form duly
endorsed in blank or deposit them into a Payment Account, as the Lender may
direct. All collections received in any such lock box or Payment Account or
directly by a Borrower or the Lender, and all funds in any Payment Account or
other account to which such collections are deposited, shall be the sole
property of the Lender and subject to the Lender's sole control. The Lender or
the Lender's designee may, at any time, notify obligors that the Accounts have
been assigned to the Lender and of the Security Interest therein, collect them
directly, and charge the collection costs and expenses to the relevant
Borrower's loan account as a Revolving Loan. At the Lender's request, the
relevant Borrower shall execute and deliver to the Lender such documents as the
Lender shall require to grant the Lender access to any post office box in which
collections of Accounts are received.
(b) If sales of Inventory are made for cash, the relevant Borrower
shall immediately deliver to the Lender or cause to be deposited into a Payment
Account the identical checks, cash, or other forms of payment which such
Borrower receives.
<PAGE>
(c) All payments received by the Lender on account of Accounts or as
Proceeds of other Collateral shall be the Lender's sole property. Collected
funds received in the Lender's account by 1:00 p.m. (New York City time) on any
day shall be credited to the relevant Borrower's loan account on such day.
(d) In the event the Borrowers repay all of the Obligations upon the
termination of this Agreement, other than through the Lender's receipt of
payments on account of Accounts or Proceeds of other Collateral, such payment
will be credited (conditional upon final collection) to the relevant Borrower's
loan account one Business Day after the Lender's receipt thereof.
7.11 Inventory. The Borrowers represent and warrant to the Lender that
---------
all of the Inventory is and will be held for sale or lease, or to be furnished
in connection with the rendition of services in the ordinary course of the
Borrowers' respective business, and is and will be fit for such purposes. The
Borrowers shall keep the Inventory in good and marketable condition, at their
own expense. The Borrowers shall not, without prior written notice to the
Lender, acquire or accept any Inventory on consignment or approval. The
Borrowers agree that all Inventory will be produced in accordance with the
Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations, and orders thereunder. Each Borrower shall maintain a perpetual
inventory reporting system at all times. Each Borrower shall conduct a physical
count of the Inventory at least once per Fiscal Year, and at such other times as
the Lender requests, and shall promptly supply the Lender with a copy of such
count accompanied by a report of the value of such Inventory (valued at the
lower of cost, on a first-in, first-out basis, or market value). Neither
Borrower shall, without the Lender's prior written consent, sell any Inventory
on a bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or other repurchase or return basis.
7.12 Equipment. The Borrowers represent and warrant to the Lender that
---------
all of the Equipment is and will be used or held for use in the relevant
Borrower's business and is and will be fit for such purposes. The Borrowers
shall keep and maintain the Equipment in good operating condition and repair
(ordinary wear and tear excepted) and shall make all necessary replacements
thereof. The Borrowers shall promptly inform the Lender of any material
additions to or deletions from the Equipment. Neither Borrower shall permit any
Equipment to become a fixture to real property or an accession to other personal
property, unless the Lender has a valid, perfected, and first priority Security
Interest in such real or personal property. The Borrowers shall not, without the
Lender's prior written consent, alter or remove any identifying symbol or number
on the Equipment. The Borrowers shall not, without the Lender's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of the Equipment,
other than in the ordinary course of business. No later than the 10th day of
each
<PAGE>
month (in conjunction with the collateral reporting under Section 7.8), the
Borrowers shall provide notice to the Lender as to any Equipment that was sold,
leased as a lessor or otherwise disposed of in the preceding month.
7.13 Assigned Contracts. Each Borrower shall fully perform all of
------------------
its obligations under each of the Assigned Contracts and shall enforce all of
its rights and remedies thereunder as it deems appropriate in its business
judgment, provided, however, that neither Borrower take any action or fail to
-------- -------
take any action with respect to the Assigned Contracts that would result in a
waiver or other loss of any material right or remedy of such Borrower
thereunder. Without limiting the generality of the foregoing, the Borrowers
shall take all action necessary or appropriate to permit, and shall not take any
action which would have any adverse effect upon, the full enforcement of all
indemnification rights under the Assigned Contracts. Except in the ordinary
course of business, neither Borrower shall, without the Lender's prior written
consent, modify, amend, supplement, compromise, satisfy, release, or discharge
any of the Assigned Contracts, any collateral securing the same, any Person
liable directly or indirectly with respect thereto, or any agreement relating to
any of the Assigned Contracts or the collateral therefor. Each Borrower shall
notify the Lender in writing, promptly after such Borrower becomes aware
thereof, of any event or fact which could give rise to a claim by such Borrower
for indemnification under any of the Assigned Contracts and shall diligently
pursue such right and report to the Lender on all further developments with
respect thereto. Each Borrower shall remit directly to the Lender, for
application to the Obligations in such order as the Lender determines, all
amounts received by such Borrower as indemnification or otherwise pursuant to
the Assigned Contracts. If a Borrower shall fail after the Lender's demand to
pursue diligently any right under the Assigned Contracts, or if an Event of
Default exists, then the Lender may directly enforce such right in its own or
such Borrower's name and may enter into such settlements or other agreements
with respect thereto as the Lender determines. All amounts thereby recovered by
the Lender, after deducting Lender's costs and expenses in connection therewith,
shall be applied to the Obligations in such order as the Lender determines. In
any suit, proceeding or action brought by the Lender under any Assigned Contract
for any sum owing thereunder or to enforce any provision thereof, the Borrowers
shall indemnify and hold the Lender harmless from and against all expense, loss
or damage suffered by reason of any defense, setoff, counterclaim, recoupment,
or reduction of liability whatsoever of the obligor thereunder arising out of a
breach by a Borrower of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing from a Borrower to or in
favor of such obligor or its successors. All such obligations of such Borrower
shall be and remain enforceable only against such Borrower and shall not be
enforceable against the Lender. Notwithstanding any provision hereof to the
contrary, the Borrowers shall at all times remain liable to observe and perform
all of their respective duties and obligations under the Assigned Contracts and
the Lender's exercise of any of its rights with respect to the Collateral shall
not release either Borrower from any of such duties and obligations. The Lender
shall not be
<PAGE>
obligated to perform or fulfill any of the Borrower's duties or obligations
under the Assigned Contracts or to make any payment thereunder or to make any
inquiry as to the nature or sufficiency of any payment or Property received by
it thereunder or the sufficiency of performance by any party thereunder, or to
present or file any claim, or to take any action to collect or enforce any
performance or payment of any amounts due.
7.14 Documents, Instruments, and Chattel Paper. Documents, The
-----------------------------------------
Borrowers represent and warrant to the Lender that: (a) all documents,
instruments, and chattel paper describing, evidencing, or constituting
Collateral, and all signatures and endorsements thereon, are and will be
complete, valid, and genuine; and (b) all goods evidenced by such documents,
instruments, and chattel paper are and will be owned by the relevant Borrower
free and clear of all Liens other than Permitted Liens.
7.15 Right to Cure. The Lender may, in its sole discretion and at
-------------
any time, pay any amount or do any act required of a Borrower hereunder to
preserve, protect, maintain or enforce the Obligations, the Collateral or the
Security Interest, and which such Borrower fails to pay or do, including,
without limitation, payment of any judgment against such Borrower, any insurance
premium, any warehouse charge, any finishing or processing charge, any
landlord's claim, and any other Lien upon or with respect to the Collateral.
All payments that the Lender makes under this Section 7.15 and all out-of-pocket
------------
costs and expenses that the Lender pays or incurs in connection with any action
taken by it hereunder shall be charged to such Borrower's loan account as a
Reference Rate Loan. Any payment made or other action taken by the Lender under
this Section 7.15 shall be without prejudice to any right to assert an Event of
------------
Default hereunder and to proceed thereafter as herein provided.
7.16 Power of Attorney. Each Borrower hereby appoints the Lender and
-----------------
the Lender's designees as such Borrower's attorney, with power: (a) to endorse
such Borrower's name on any checks, notes, acceptances, money orders, or other
forms of payment or security that come into the Lender's possession; (b) to sign
such Borrower's name on any invoice, bill of lading, or other document of title
relating to any Collateral, on drafts against customers, on assignments of
Accounts, on notices of assignment, financing statements and other public
records, on verifications of Accounts and on notices to Account Debtors; (c) to
notify the post office authorities, when an Event of Default exists, to change
the address for delivery of such Borrower's mail to an address designated by the
Lender and to receive, open and dispose of all mail addressed to such Borrower;
(d) to send requests for verification of Accounts to Account Debtors; and (e) to
do all things necessary to carry out this Agreement. The Borrowers ratify and
approve all acts of such attorney. Neither the Lender nor the attorney shall be
liable for any acts or omissions or for any error of judgment or mistake of fact
or law. This power, being coupled with an interest, is irrevocable until this
Agreement has been terminated and the Obligations have been fully satisfied.
<PAGE>
7.17 Lender's Rights, Duties, and Liabilities. Lender's Rights, The
----------------------------------------
Borrowers assume all responsibility and liability arising from or relating to
the use, sale, or other disposition of the Collateral. Neither the Lender nor
any of its officers, directors, employees, and agents shall be liable or
responsible in any way for the safekeeping of any of the Collateral, for any act
or failure to act with respect to the Collateral, for any loss or damage
thereto, for any diminution in the value thereof, or for any act of default of
any warehouseman, carrier, forwarding agency or other person whomsoever, all of
which shall be at the Borrowers' sole risk. The Obligations shall not be
affected by any failure of the Lender to take any steps to perfect the Security
Interest or to collect or realize upon the Collateral, nor shall loss of or
damage to the Collateral release either Borrower from any of the Obligations.
The Lender may (but shall not be required to), without notice to or consent from
the Borrowers, sue upon or otherwise collect, extend the time for payment of,
modify or amend the terms of, compromise or settle for cash, credit, or
otherwise upon any terms, grant other indulgences, extensions, renewals,
compositions, or releases, and take or omit to take any other action with
respect to the Collateral, any security therefor, any agreement relating
thereto, any insurance applicable thereto, or any Person liable directly or
indirectly in connection with any of the foregoing, without discharging or
otherwise affecting the liability of the Borrowers for the Obligations or under
this Agreement or any other agreement now or hereafter existing between the
Lender and either Borrower.
8. BOOKS AND RECORDS; FINANCIAL INFORMATION; NOTICES.
-------------------------------------------------
8.1 Books and Records. The Borrowers shall maintain, at all times,
-----------------
correct and complete books, records and accounts in which complete, correct and
timely entries are made of its transactions in accordance with GAAP consistent
with those applied in the preparation of the Financial Statements. The Borrowers
shall, by means of appropriate entries, reflect in such accounts and in all
Financial Statements proper liabilities and reserves for all taxes and proper
provision for depreciation and amortization of Property and bad debts, all in
accordance with GAAP. The Borrowers shall maintain at all times books and
records pertaining to the Collateral in such detail, form, and scope as the
Lender shall reasonably require, including, without limitation, records of: (a)
all payments received and all credits and extensions granted with respect to the
Accounts; (b) the return, rejection, repossession, stoppage in transit, loss,
damage, or destruction of any Inventory; and (c) all other dealings affecting
the Collateral.
8.2 Financial Information. The Borrowers shall promptly furnish to
---------------------
the Lender or its agents all such financial information as the Lender shall
reasonably request. Without limiting the foregoing, Trend-Lines and its
Subsidiaries shall furnish to the Lender, in such detail as the Lender shall
request, the following:
<PAGE>
(a) As soon as available, but in any event not later than 90 days
after the close of each Fiscal Year, consolidated and consolidating unaudited
balance sheets, and statements of income and expense, retained earnings, and
changes in financial position and stockholders equity for Trend-Lines and its
consolidated Subsidiaries for such Fiscal Year, and the accompanying notes
thereto, setting forth in each case in comparative form figures for the previous
Fiscal Year, all in reasonable detail, fairly presenting the financial position
and the results of operations of Trend-Lines and its consolidated Subsidiaries
as at the date thereof and for the Fiscal Year then ended, and prepared in
accordance with GAAP. Such statements shall be examined in accordance with
generally accepted auditing standards by and accompanied by a report thereon
unqualified as to scope by independent certified public accountants selected by
Trend-Lines and reasonably satisfactory to the Lender.
(b) As soon as available, but in any event not later than 45 days
after the close of each fiscal quarter other than the fourth quarter of a Fiscal
Year, consolidated and consolidating unaudited balance sheets of Trend-Lines and
its consolidated Subsidiaries as at the end of such quarter, and consolidated
and consolidating unaudited statements of income and expense and changes in
financial position for Trend-Lines and its consolidated Subsidiaries for such
quarter and for the period from the beginning of the Fiscal Year to the end of
such quarter, together with the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and results of operation of
Trend-Lines and its consolidated Subsidiaries as at the date thereof and for
such periods, prepared in accordance with GAAP consistent with the audited
Financial Statements required pursuant to Section 8.2(a). Such statements shall
--------------
be certified to be correct by the chief financial or accounting officer of
Trend-Lines, subject to normal year-end adjustments.
(c) As soon as available, but in any event not later than 30 days
after the end of each month, consolidated and consolidating unaudited balance
sheets of Trend-Lines and its consolidated Subsidiaries as at the end of such
month, and consolidated and consolidating unaudited statements of income and
expenses for Trend-Lines and its consolidated Subsidiaries for such month and
for the period from the beginning of the Fiscal Year to the end of such month,
all in reasonable detail, fairly presenting the financial position and results
of operation of Trend-Lines and its consolidated Subsidiaries as at the date
thereof and for such periods, and prepared in accordance with GAAP consistent
with the audited Financial Statements required pursuant to Section 8.2(a), along
--------------
with a calculation of the Fixed Charges Ratio for the Rolling Period as of such
month end. Such statements shall be certified to be correct by the chief
financial or accounting officer of Trend-Lines, subject to normal year-end
adjustments.
(d) With each of the audited Financial Statements delivered pursuant
to Section 8.2(a), a certificate of the independent certified public accountants
--------------
that examined such statements to the effect that they have reviewed and are
familiar with the Loan Documents and
<PAGE>
that, in examining such Financial Statements, they did not become aware of any
fact or condition which then constituted an Event or Event of Default, except
for those, if any, described in reasonable detail in such certificate.
(e) With each of the annual audited and quarterly unaudited Financial
Statements delivered pursuant to Sections 8.2(a) and 8.2(b), a certificate of
--------------- ------
the chief executive or chief financial officer of Trend-Lines (i) setting forth
in reasonable detail the calculations required to establish that Trend-Lines was
in compliance with its covenants set forth in Sections 10.20 through 10.28
during the period covered in such Financial Statements, and (ii) stating that,
except as explained in reasonable detail in such certificate, (A) all of the
representations and warranties of the Borrowers contained in this Agreement and
the other Loan Documents are correct and complete as at the date of such
certificate as if made at such time, (B) no Event or Event of Default then
exists or existed during the period covered by such Financial Statements and
(iii) describing and analyzing in reasonable detail all material trends, changes
and developments in such Financial Statements. If such certificate discloses
that a representation or warranty is not correct or complete, that a covenant
has not been complied with, or that an Event or Event of Default existed or
exists, such certificate shall set forth what action the relevant Borrower has
taken or proposes to take with respect thereto.
(f) No sooner than 90 days and no later than 30 days prior to the
beginning of each Fiscal Year, consolidated and consolidating projected balance
sheets, statements of income and expense, and statements of cash flow for Trend-
Lines and its Subsidiaries as at the end of and for each month of such Fiscal
Year.
(g) Within 45 days after the end of each fiscal quarter, a report of
the Capital Expenditures of Trend-Lines and its Subsidiaries for such quarter
and a statement of cash flow for Trend-Lines and its Subsidiaries for the period
from the beginning of the then current Fiscal Year to the end of such quarter,
prepared in accordance with GAAP consistent with the audited Financial
Statements required pursuant to Section 8.2(a).
--------------
(h) Promptly after their preparation, copies of any and all proxy
statements, financial statements, and reports which Trend-Lines makes available
to its stockholders.
(i) Promptly after filing with the PBGC, DOL, or IRS, a copy of each
annual report or other reasonably material filing or notice filed with respect
to each Plan of Trend-Lines or any ERISA Affiliate and, within 10 days (in
conjunction with its reporting under Section 7.8) after the end of each month, a
list of all other filings and notices so filed.
<PAGE>
(j) Such additional information as the Lender may from time to time
reasonably request regarding the financial and business affairs of Trend-Lines
or any Subsidiary, including, without limitation, projections of future
operations on both a consolidated and consolidating basis.
8.3 Notices to Lender. The Borrowers shall notify the Lender in
-----------------
writing of the following matters at the following times:
(a) Promptly, but in no event later than three Business Days, after
becoming aware of the existence of any Event or Event of Default.
(b) Promptly, but in no event later than three Business Days, after
becoming aware that the holder of any capital stock of a Borrower or of any Debt
has given notice or taken any action with respect to a claimed default.
(c) Promptly, but in no event later than three Business Days, after
becoming aware of any material adverse change in a Borrower's Property,
business, operations, or condition (financial or otherwise).
(d) Promptly, but in no event later than three Business Days, after
becoming aware of any pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened investigation by a
Public Authority, which could be projected reasonably to result in the
Borrowers, either individually or collectively, having to pay $1 million or
more.
(e) Promptly, but in no event later than three Business Days, after
becoming aware of any pending or threatened strike, work stoppage, material
unfair labor practice claim, or other material labor dispute affecting a
Borrower or any of its Subsidiaries.
(f) Promptly, but in no event later than three Business Days, after
becoming aware of any violation of any law, statute, regulation, or ordinance of
a Public Authority applicable to a Borrower, any Subsidiary, or their respective
Properties which may materially and adversely affect the Collateral, the
repayment of the Obligations, the Lender's rights under the Loan Documents, or a
Borrower's Property, business, operations, or condition (financial or
otherwise).
(g) Promptly, but in no event later than three Business Days, after
becoming aware of any violation by a Borrower of Environmental Laws or
immediately upon receipt of any notice that a Public Authority has asserted that
a Borrower is not in compliance with Environmental Laws or that its compliance
is being investigated.
<PAGE>
(h) Thirty days prior to a Borrower's changing its name.
(i) Promptly, but in no event later than three Business Days,
after becoming aware of any ERISA Event, accompanied by any materials required
to be filed with the PBGC with respect thereto; immediately after a Borrower's
receipt of any notice concerning the imposition of any withdrawal liability
under Section 4042 of ERISA with respect to a Plan; immediately upon the
establishment of any Pension Plan not existing at the Closing Date or the
commencement of contributions by a Borrower to any Pension Plan to which such
Borrower was not contributing at the Closing Date; and immediately upon becoming
aware of any other event or condition regarding a Plan or a Borrower's or an
ERISA Affiliate's compliance with ERISA, which may materially and adversely
affect a Borrower's Property, business, operations, or condition (financial or
otherwise).
Each notice given under this Section 8.3 shall describe the subject matter
-----------
thereof in reasonable detail and shall set forth the action that the relevant
Borrower has taken or proposes to take with respect thereto.
9. GENERAL WARRANTIES AND REPRESENTATIONS.
---------------------------------------
The Borrowers jointly and severally continuously warrant and represent
to the Lender, at all times during the term of this Agreement and until all
Obligations have been satisfied, that, except as hereafter disclosed to and
accepted by the Lender in writing:
9.1 Authorization, Validity, and Enforceability of this Agreement
-------------------------------------------------------------
and the Loan Documents. Each Borrower has the corporate power and authority to
execute, deliver and perform this Agreement and the other Loan Documents, to
incur the Obligations, and to grant the Security Interest. Each Borrower has
taken all necessary corporate action (including, without limitation, obtaining
approval of its stockholders) to authorize its execution, delivery, and
performance of this Agreement and the other Loan Documents. No consent,
approval, or authorization of, or declaration or filing with, any Public
Authority, and no consent of any other Person, is required in connection with
each Borrower's execution, delivery, and performance of this Agreement and the
other Loan Documents, except for those already duly obtained. This Agreement and
the other Loan Documents have been duly executed and delivered by each Borrower
party thereto and each constitutes the legal, valid and binding obligation of
such Borrower, enforceable against it in accordance with its terms without
defense, setoff, or counterclaim. Each Borrower's execution, delivery, and
performance of this Agreement and such other Loan Documents do not and will not
conflict with, or constitute a violation or breach of, or constitute a default
under, or result in the creation or imposition of any Lien upon the Property of
any Borrower or any of its Subsidiaries (except as contemplated by this
Agreement
<PAGE>
and the other Loan Documents) by reason of the terms of (a) any
mortgage, lease, agreement, or instrument to which any Borrower or any of its
Subsidiaries is a party or which is binding upon it, (b) any judgment, law,
statute, rule or governmental regulation applicable to such Borrower or any of
its Subsidiaries, or (c) the corporate charter or By-Laws of such Borrower or
any of its Subsidiaries.
9.2 Validity and Priority of Security Interest. The provisions of
-------------------------------------------
this Agreement, the Mortgages, and the other Loan Documents create legal and
valid Liens on all the Collateral in the Lender's favor, and, when the Mortgages
have been recorded in the places indicated in Schedule 9.2, such Liens will
constitute perfected and continuing Liens on all the Collateral, having priority
over all other Liens on the Collateral except for the Permitted Liens identified
in Section 7.4, securing the Obligations, and enforceable against each Borrower
and all third parties.
9.3 Organization and Qualification. Each Borrower: (a) is duly
------------------------------
incorporated and organized and validly existing in good standing under the laws
of Massachusetts; (b) is qualified to do business as a foreign corporation and
is in good standing in each State in which qualification is necessary in order
for it to own or lease its Property and conduct its business; and (c) has all
requisite power and authority to conduct its business and to own its Property.
9.4 Corporate Name; Prior Transactions. Neither of the Borrowers
----------------------------------
has during the five years ending on the Closing Date been known by or used any
other corporate or fictitious name, or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its Property out of the ordinary course of business, except
as set forth on Schedule 9.4.
------------
9.5 Subsidiaries and Affiliates. Schedule 9.5 is a correct and
--------------------------- ------------
complete list of the name and relationship to Trend-Lines of each and all of
Trend-Lines' Subsidiaries and other Affiliates. Each Subsidiary is (a) duly
incorporated and organized and validly existing in good standing under the laws
of its state of incorporation set forth on Schedule 9.5, and (b) qualified to do
------------
business as a foreign corporation and in good standing in the states set forth
opposite its name on Schedule 9.5, which are the only states in which such
------------
qualification is necessary in order for it to own or lease its Property and
conduct its business. Post Tool is a wholly-owned subsidiary of Trend-Lines.
9.6 Financial Statements and Projections.
------------------------------------
(a) Trend-Lines has delivered to the Lender the audited balance
sheet and related statements of income, retained earnings, changes in financial
position, and changes in
<PAGE>
stockholders equity for Trend-Lines as of March 2, 1996 and for the Fiscal Year
then ended, accompanied by the report thereon of Trend-Lines' independent
certified public accountants, Arthur Andersen LLP. Trend-Lines has also
delivered to the Lender the unaudited balance sheet and related statements of
income and changes in financial position for Trend-Lines, as at [May 31,] 1996
and for the three months then ended. Such financial statements are attached
hereto as Exhibit B-4. All such financial statements have been prepared in
-----------
accordance with GAAP and present accurately and fairly Trend-Lines' financial
position as at the dates thereof and its results of operations for the periods
then ended.
(b) The Latest Projections represent Trend-Lines' best estimate
of Trend-Lines' future financial performance for the periods set forth therein.
The Latest Projections have been prepared on the basis of the assumptions set
forth therein, which Trend-Lines believes are fair and reasonable in light of
current and reasonably foreseeable business conditions.
9.7 Capitalization. The only Persons who own beneficially (as such
--------------
term is used under the securities laws of the United States) 10% or more of any
class of stock or the voting power of Trend-Lines are Stanley Black and his
spouse, together with certain entities controlled by Mr. Black and his spouse.
Trend-Lines owns beneficially and of record 100% of all classes of stock of Post
Tool.
9.8 Solvency. Each Borrower is Solvent prior to and after giving
--------
effect to the making of each Revolving Loan and the issuance of Letters of
Credit.
9.9 Debt. Neither Borrower has any Debt, except (a) the
----
Obligations, (b) Debt set forth in the most recent Financial Statements
delivered to the Lender, or the notes thereto, (c) trade payables and other
contractual obligations arising in the ordinary course of business since the
date of such Financial Statements, and (d) Debt incurred since the date of such
Financial Statements to finance Capital Expenditures permitted hereby.
9.10 Distributions. Since March 2, 1996, no Distribution has been
-------------
declared, paid, or made upon or in respect of any capital stock or other
securities of Trend-Lines.
9.11 Title to Property. Except for Property which either Borrower
-----------------
leases, each Borrower has good and marketable title in fee simple (subject to
Permitted Liens) to the Premises indicated on Schedule 9.13 belonging to it and
good, indefeasible, and merchantable title to all of its other Property,
including, without limitation, the assets reflected on the most recent Financial
Statements delivered to the Lender, except as disposed of since the date thereof
in the ordinary course of business.
<PAGE>
9.12 Adequate Assets. Each Borrower possesses adequate assets for
---------------
the conduct of its business.
9.13 Real Property; Leases. Schedule 9.13 is a correct and complete
--------------------- -------------
list of all real property owned by either Borrower, all leases and subleases of
real or personal property by either Borrower as lessee or sublessee, and all
leases and subleases of real or personal property by either Borrower as lessor
or sublessor. Each of such leases and subleases is valid and enforceable in
accordance with its terms and is in full force and effect, and no material
default by any party to any such lease or sublease exists.
9.14 Proprietary Rights. Schedule 9.14 is a correct and complete
------------------ -------------
list of each Borrower's Proprietary Rights. None of the Proprietary Rights is
subject to any licensing agreement or similar arrangement except as set forth on
Schedule 9.14. None of the Proprietary Rights infringes on or conflicts with any
- -------------
other Person's Property, and no other Person's Property infringes on or
conflicts with the Proprietary Rights. The Proprietary Rights described on
Schedule 9.14 as belonging to a Borrower constitute all of the Property of such
- -------------
type necessary to the current and anticipated future conduct of such Borrower's
business.
9.15 Trade Names and Terms of Sale. All trade names or styles under
------------------------------
which either Borrower will sell Inventory or create Accounts, or to which
instruments in payment of Accounts may be made payable, are listed on Schedule
--------
9.15.
- ----
9.16 Litigation. Except as set forth on Schedule 9.16, there is no
---------- -------------
pending or, to the best of either Borrower's knowledge, threatened action, suit,
proceeding, or counterclaim by any Person, or investigation by any Public
Authority, or any basis for any of the foregoing, which may materially and
adversely affect the Collateral, the repayment of the Obligations, the Lender's
rights under the Loan Documents, or either Borrower's Property, business,
operations, or condition (financial or otherwise).
9.17 Restrictive Agreements. Neither Borrower is a party to any
----------------------
contract or agreement, and neither is subject to any charter or other corporate
restriction, which affects such Borrower's ability to execute, deliver, and
perform the Loan Documents and repay the Obligations or which materially and
adversely affects such Borrower's Property, business, operations, or condition
(financial or otherwise).
9.18 Labor Disputes. Except as set forth on Schedule 9.18:
-------------- -------------
(a) there is no collective bargaining agreement or other labor contract covering
employees of either Borrower or any of its Subsidiaries; (b) no such collective
bargaining agreement or other labor contract is scheduled to expire during the
term of this Agreement; (c) no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees of
either
<PAGE>
Borrower or any of its Subsidiaries or for any similar purpose; and (d) there is
no pending or, to the best of either Borrower's knowledge, threatened strike,
work stoppage, material unfair labor practice claim, or other material labor
dispute against or affecting either Borrower or any of its Subsidiaries or their
respective employees.
9.19 Environmental Laws.
------------------
(a) Each Borrower has complied in all material respects with
all Environmental Laws applicable to its Premises and business, and neither
Borrower nor any of its present Premises or operations, nor its past property or
operations, is subject to any enforcement order from or liability agreement with
any Public Authority or private Person respecting (i) compliance with any
Environmental Law or (ii) any potential liabilities and costs or remedial action
arising from the Release or threatened Release of a Contaminant.
(b) Each Borrower has obtained all permits necessary for its
current operations under Environmental Laws, all such permits are in good
standing, and each Borrower is in compliance with all terms and conditions of
such permits.
(c) Neither Borrower, nor, to the best of such Borrower's
knowledge, any of its predecessors in interest has stored, treated or disposed
of any hazardous waste on any Premises, as defined pursuant to 40 CFR Part 261
or any equivalent Environmental Law.
(d) Neither Borrower has received any summons, complaint, order
or similar written notice that it is not currently in compliance with, or that
any Public Authority is investigating its compliance with, any Environmental
Laws or that it is or may be liable to any other Person as a result of a Release
or threatened Release of a Contaminant.
(e) None of the present or past operations of either Borrower
is the subject of any investigation by any Public Authority evaluating whether
any remedial action is needed to respond to a Release or threatened Release of a
Contaminant.
(f) There is not now, nor to the best of either Borrower's
knowledge has there ever been, on or in the Premises:
(i) any underground storage tanks or surface
impoundments,
(ii) any asbestos containing material, or
(iii) any polychlorinated biphenyls (PCB's) used in
hydraulic oils, electrical transformers or other equipment.
<PAGE>
(g) Neither Borrower has filed any notice under any requirement
of Environmental Law reporting a spill or accidental and unpermitted release or
discharge of a Contaminant into the environment.
(h) Neither Borrower has entered into any negotiations or
settlement agreements with any Person (including, without limitation, the prior
owner of its property) imposing material obligations or liabilities on such
Borrower with respect to any remedial action in response to the Release of a
Contaminant or environmentally related claim.
(i) None of the products manufactured, distributed or
sold by either Borrower contains asbestos material.
(j) No Environmental Lien has attached to any Premises of
either Borrower.
9.20 No Violation of Law. Neither Borrower is in violation of any
-------------------
law, statute, regulation, ordinance, judgment, order, or decree applicable to it
which violation would in any respect materially and adversely affect the
Collateral, the repayment of the Obligations, the Lender's rights under the Loan
Documents, or such Borrower's Property, business, operations, or condition
(financial or otherwise).
9.21 No Default. Neither Borrower is in default with respect to any
----------
note, indenture, loan agreement, mortgage, lease, deed, or other agreement to
which such Borrower is a party or bound, which default could reasonably be
expected to materially and adversely affect the Collateral, the repayment of the
Obligations, the Lender's rights under the Loan Documents, or such Borrower's
Property, business, operations, or condition (financial or otherwise).
9.22 ERISA Compliance.
----------------
(a) Each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law.
Each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the IRS and, to the best
knowledge of Trend-Lines, nothing has occurred which would cause the loss of
such qualification. Each Borrower and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
<PAGE>
(b) There are no pending or, to the best knowledge of the
Borrowers, threatened claims, actions or lawsuits, or actions by any Public
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a material adverse effect on either Borrower's business or
operations. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in a material adverse effect on either
Borrower's business or operations.
(c) (i) No ERISA Event has occurred or is reasonably expected
to occur; (ii) no Pension Plan has any unfunded pension liability; (iii) neither
a Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability under Title IV of ERISA with respect to any Pension Plan (other
than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither
a Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur,
any liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Section 4201 or
Section 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither a
Borrower nor any ERISA Affiliate has engaged in a transaction that could subject
any Person to Section 4069 or Section 4212(c) of ERISA.
9.23 Taxes. Each Borrower and its Subsidiaries have file all tax
-----
returns and other reports required to be filed and have paid all Taxes,
assessments, fees and other governmental charges levied or imposed upon them or
their properties, income or assets that are otherwise due and payable.
9.24 Use of Proceeds. None of the transactions comtemplated in this
---------------
Agreement (including, without limitation, the use of proceeds from the Loans)
will violate or result in the violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulations issued pursuant thereto, including,
without limitation, Regulations G,T,U and X of the Board of Governors of the
Federal Reserve System, 12 CFR, Chapter II. Except as permitted by Section
10.28, (a) neither Borrower owns or intends to carry or purchase any "margin
stock" within the meaning of said Regulation U or G and (b) none of the proceeds
of the loans will be used, directly or indirectly, to purchase or carry (or
refinance any borrowing, the proceeds of which were used to purchase or carry)
any "security" within the meaning of the Securities Exchange Act of 1934, as
amended.
9.25 Private Offerings. Neither Borrower has, directly or
-----------------
indirectly, offered the Loans for sale to, or solicited offers to buy part
thereof from, or otherwise approached or negotiated with respect thereto with
any prospective purchaser other than the Lender. Each Borrower hereby agrees
that neither it nor anyone acting on its behalf has offered or will offer the
Loans or any part thereof or any similar securities for issue or sale to or
solicit any offer to
<PAGE>
acquire any of the same from anyone so as to bring the issuance thereof within
the provisions of Section 5 of the Securities Act of 1933, as amended.
9.26 Broker's Fees. No Person is entitled to any brokerage or
-------------
finder's fee with respect to the transactions described in this Agreement.
9.27 No Material Adverse Change. No material adverse change has
--------------------------
occurred in either Borrower's Property, business, operations, or conditions
(financial or otherwise) since the date of the Financial Statements delivered to
the Lender.
9.28 Disclosure. Neither this Agreement nor any document or
-----------
statement furnished to the Lender by or on behalf of either Borrower hereunder
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make the statements contained herein or therein not
misleading.
10. AFFIRMATIVE AND NEGATIVE COVENANTS. The Borrowers covenant jointly
----------------------------------
and severally that, so long as any of the Obligations remains outstanding or
this Agreement is in effect:
10.1 Taxes and Other Obligations. Trend-Lines and each of its
---------------------------
Subsidiaries shall: (a) file when due all tax returns and other reports which it
is required to file, pay, or provide for the payment, when due, of all Taxes,
fees, assessments and other governmental charges against it or upon its
Property, income, and franchises, make all required withholding and other tax
deposits, and establish adequate reserves for the payment of all such items, and
shall provide to the Lender, upon request, satisfactory evidence of its timely
compliance with the foregoing; and (b) pay when due all Debt owed by it and
perform and discharge in a timely manner all other obligations undertaken by it;
provided, however, that Trend-Lines and its Subsidiaries need not pay any tax,
- -------- -------
fee, assessment, governmental charge, or Debt, or perform or discharge any other
obligation, that it is contesting in good faith by appropriate proceedings
diligently pursued.
10.2 Corporate Existence and Good Standing. Trend-Lines and each of
-------------------------------------
its Subsidiaries shall maintain its corporate existence and its qualification
and good standing in all states necessary to conduct its business and own its
Property and shall obtain and maintain all licenses, permits, franchises and
governmental authorizations necessary to conduct its business and own its
Property.
10.3 Compliance with Law and Agreements. Trend-Lines and each of
----------------------------------
its Subsidiaries shall comply with the terms and provisions of each judgment,
law, statute, rule, and
<PAGE>
governmental regulation applicable to it and each contract, mortgage, lien,
lease, indenture, order, instrument, agreement, or document to which it is a
party or by which it is bound.
10.4 Maintenance of Property and Insurance. Trend-Lines and each of
-------------------------------------
its Subsidiaries shall: (a) maintain all of its Property necessary and useful in
its business in good operating condition and repair, ordinary wear and tear
excepted; and (b) in addition to the insurance required by Section 7.7, maintain
-----------
with financially sound and reputable insurers such other insurance with respect
to its Property and business against casualties and contingencies of such types
(including, without limitation, business interruption, environmental liability,
public liability, product liability, and larceny, embezzlement or other criminal
misappropriation) and in such amounts as is customary for Persons of established
reputation engaged in the same or a similar business and similarly situated,
naming the Lender, at its request, as additional insured under each such policy.
10.5 Environmental Laws. Trend-Lines and each of its Subsidiaries
------------------
shall conduct its business in full compliance with all Environmental Laws
applicable to it, including, without limitation, those relating to Trend-Lines'
generation, handling, use, storage, and disposal of hazardous and toxic wastes
and substances. Trend-Lines shall take prompt and appropriate action to respond
to any non-compliance with Environmental Laws and shall regularly report to the
Lender on such response. Without limiting the generality of the foregoing,
whenever a Borrower gives notice to the Lender pursuant to Section 8.3(g) Trend-
--------------
Lines shall, at the Lender's request and Trend-Lines' expense: (a) cause an
independent environmental engineer acceptable to the Lender to conduct such
tests of the site where Trend-Lines' noncompliance or alleged non-compliance
with Environmental Laws has occurred and prepare and deliver to the Lender a
report setting forth the results of such tests, a proposed plan for responding
to any environmental problems described therein, and an estimate of the costs
thereof; and (b) provide to the Lender a supplemental report of such engineer
whenever the scope of the environmental problems, or Trend-Lines' response
thereto or the estimated costs thereof, shall change.
10.6 ERISA. Trend-Lines and each of its Subsidiaries shall cause
-----
each Plan, which has been designated to be so, to be qualified within the
meaning of Section 401(a) of the Code and to be administered in all respects in
compliance with Section 401(a) of the Code. Trend-Lines and each of its
Subsidiaries shall cause each Plan to be administered in all respect in
compliance with ERISA.
10.7 Mergers, Consolidations, Acquisitions, or Sales. Neither
-----------------------------------------------
Trend-Lines nor any of its Subsidiaries shall enter into any transaction of
merger, reorganization, or consolidation, or transfer, sell, assign, lease, or
otherwise dispose of all or any part of its Property, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except, in the
<PAGE>
ordinary course of business, sales of Inventory, obsolete or worn-out Equipment,
or Equipment which is no longer necessary for the conduct of its business.
10.8 Distributions; Capital Changes. Neither Trend-Lines nor any of
------------------------------
its Subsidiaries shall: (a) directly or indirectly declare or make, or incur any
liability to make, any Distribution, except Distributions to Trend-Lines by a
Subsidiary wholly-owned by Trend-Lines; or (b) make any change in its capital
structure which could adversely affect the repayment of the Obligations.
10.9 Transactions Affecting Collateral or Obligations. Neither
------------------------------------------------
Trend-Lines nor any of its Subsidiaries shall enter into any transaction which
materially and adversely affects the Collateral or either Borrower's ability to
repay the Obligations.
10.10 Guaranties. Neither Trend-Lines nor any of its Subsidiaries
----------
shall make, issue, or become liable on any Guaranty, except Guaranties in favor
of the Lender and endorsements of instruments for deposit.
10.11 Debt. Neither Trend-Lines nor any of its Subsidiaries shall
----
incur or maintain any Debt, other than: (a) the Obligations; (b) trade payables
and contractual obligations to suppliers and customers incurred in the ordinary
course of business; and (c) other Debt existing on the Closing Date and
reflected in the Financial Statements attached as Exhibit B-l.
-----------
10.12 Prepayment. Neither Trend-Lines nor any of its Subsidiaries
----------
shall voluntarily prepay any Debt, except the Obligations in accordance with
their terms.
10.13 Transactions with Affiliates. Except as set forth below,
----------------------------
neither Trend-Lines nor any of its Subsidiaries shall: sell, transfer,
distribute, or pay any money or Property to any Affiliate, or lend or advance
money or Property to any Affiliate, or invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness or any Property
of any Affiliate, or become liable on any Guaranty of the indebtedness,
dividends, or other obligations of any Affiliate. Notwithstanding the foregoing,
if no Event of Default has occurred and is continuing, Trend-Lines and its
Subsidiaries may engage in transactions with Affiliates in the ordinary course
of business in amounts and upon terms fully disclosed to the Lender and no less
favorable to Trend-Lines or such Subsidiary than would obtain in a comparable
arm's length transaction with a third party who is not an Affiliate.
<PAGE>
10.14 [Intentionally Left Blank].
--------------------------
10.15 Business Conducted. Trend-Lines and its Subsidiaries shall not
------------------
engage, directly or indirectly, in any line of business other than the
businesses in which the Borrower and its Subsidiaries are engaged on the Closing
Date.
10.16 Liens. Neither Trend-Lines nor any of its Subsidiaries shall
-----
create, incur, assume, or permit to exist any Lien on any Property now owned or
hereafter acquired by any of them, except Permitted Liens.
10.17 Sale and Leaseback Transactions. Neither Trend-Lines nor any
-------------------------------
of its Subsidiaries shall, directly or indirectly, enter into any arrangement
with any Person providing for Trend-Lines or a Subsidiary to lease or rent
Property that Trend-Lines or a Subsidiary has or will sell or otherwise transfer
to such Person; provided, however, that the Borrowers may enter into sale and
-------- -------
leaseback transactions in the ordinary course of the Borrowers' business as
conducted on the Closing Date (i) with respect to Borrowers' Equipment which
does not exceed $1,000,000 in aggregate in any Fiscal Year and (ii) with respect
to the Seabrook Premises.
10.18 New Subsidiaries. Trend-Lines shall not, directly or
----------------
indirectly, organize or acquire any Subsidiary other than those listed on
Schedule 10.18.
- --------------
10.19 Restricted Investments. Neither Trend-Lines nor any of its
----------------------
Subsidiaries shall make any Restricted Investment.
10.20 Capital Expenditures. Neither Trend-Lines nor any of its
--------------------
any of its Subsidiaries shall make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures by
Trend-Lines and its Subsidiaries (a) during the Fiscal Year ending in February
1997 would exceed $4,000,000, (b) during the Fiscal Year ending in February 1998
would exceed $5,250,000, or (c) during the Fiscal Year ending in February 1999
would exceed $6,500,000, provided however, that, if all or a portion of the
amount of Capital Expenditures permitted during any Fiscal Year is not expended,
such amount may be expended during the following Fiscal Year.
10.21 [Intentionally Left Blank].
--------------------------
10.22 Interest Coverage Ratio. For the fiscal quarters indicated
-----------------------
below, Trend-Lines on a consolidated basis shall maintain an Interest Coverage
Ratio, determined as of the last day of such fiscal quarter, of not less than
the amount set forth below:
<PAGE>
Ratio
-----
First Quarter 1996 0.83:1
Second Quarter 1996 0.80:1
Third Quarter 1996 1.1:1
Thereafter, Trend-Lines on a consolidated basis shall maintain an Interest
Coverage Ratio, determined as of the last day of each fiscal quarter set forth
below for the preceding four fiscal quarters ending on such last day, of not
less than the amount set forth below:
Ratio
-----
4th Quarter 1996 1.40:1
1st Quarter 1997 1.40:1
2nd Quarter 1997 1.40:1
3rd Quarter 1997 1.45:1
4th Quarter 1997 and each fiscal quarter 1.50:1
thereafter
10.23 Intentionally Left Blank.
------------------------
10.24 Intentionally Left Blank.
------------------------
10.25 Intentionally Left Blank.
------------------------
10.26 Intentionally Left Blank.
------------------------
10.27 Adjusted Tangible Net Worth. Trend-Lines on a
---------------------------
consolidated basis shall maintain Adjusted Tangible Net Worth, determined as of
the last day of each fiscal month indicated below, of not less than the
following amounts:
<TABLE>
<CAPTION>
Net Worth
---------
<S> <C> <C>
1st Fiscal Month 1996 $38,000,000
2nd Fiscal Month 1996 38,000,000
3rd Fiscal Month 1996 38,000,000
4th Fiscal Month 1996 38,000,000
5th Fiscal Month 1996 38,000,000
6th Fiscal Month 1996 38,000,000
7th Fiscal Month 1996 38,000,000
8th Fiscal Month 1996 38,000,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Net Worth
---------
<S> <C>
9th Fiscal Month 1996 39,000,000
10th Fiscal Month 1996 39,000,000
11th Fiscal Month 1996 39,000,000
12th Fiscal Month 1996 39,000,000
1st Fiscal Month 1997 39,000,000
2nd Fiscal Month 1997 39,000,000
3rd Fiscal Month 1997 39,000,000
4th Fiscal Month 1997 39,000,000
5th Fiscal Month 1997 39,000,000
6th Fiscal Month 1997 39,000,000
7th Fiscal Month 1997 39,000,000
8th Fiscal Month 1997 39,000,000
9th Fiscal Month 1997 40,000,000
10th Fiscal Month 1997 40,000,000
11th Fiscal Month 1997 40,000,000
12th Fiscal Month 1997 40,000,000
1st Fiscal Month 1998 40,000,000
2nd Fiscal Month 1998 40,000,000
3rd Fiscal Month 1998 40,000,000
4th Fiscal Month 1998 40,000,000
5th Fiscal Month 1998 40,000,000
6th Fiscal Month 1998 40,000,000
7th Fiscal Month 1998 40,000,000
8th Fiscal Month 1998 40,000,000
9th Fiscal Month 1998 and each fiscal month 41,000,000
thereafter
</TABLE>
10.28 Buy-Back of Common Stock. Notwithstanding the provisions of
------------------------
Sections 9.24, 10.8, and 10.19, at any time and from time to time Trend-Lines
shall be permitted to repurchase or redeem stock (a "buy-back"), provided that,
at the time of any such buy-back, (a) the total cost of all buy-backs from the
Closing Date to the date of completion of any such buy-back shall not exceed
$4,000,000, (b) no accounts payable by either Borrower shall be more than 30
days past due, (c) after giving effect to such buy-back, the Borrowers'
aggregate remaining Availability is not less than $10,000,000 (d) no Event or
Event of Default shall exist at the time of such buy-back or after giving effect
thereto and (e) Trend-Lines shall have provided Lender with at least three (and
not more than five) days prior written notice, which notice shall include a
statement as to the amount of such buy-back, the total of all buy-backs after
giving effect to such buy-back, a statement that no account payable of the
Borrowers is more than 30 days past due
<PAGE>
and that no Event or Event of Default exists as of the date thereof before or
after giving effect to such buy-back.
10.29 Post-Closing Matters. Within (i) 60 days after the Closing
--------------------
Date, the Lender shall have received with respect to each real property on which
Inventory is located against which Inventory the relevant lessor may assert a
statutory, common law, or contractual lien (as reasonably determined by the
Lender), (A) a copy of a current and legally valid, binding and enforceable
lease agreement containing a waiver with respect to such lien in form and
substance satisfactory to the Lender or (B) a waiver of such lien in form and
substance satisfactory to the Lender, provided, however, that the failure of
-------
either Borrower to comply with this Section 10.29(i) shall not constitute an
Event or Event of Default but the Lender may, in its sole and absolute
discretion, establish a Rental Reserve with respect to the relevant property
until such time as the Lender receives such waiver and (ii) 30 days after the
Closing Date the Lender shall have received the Seabrook Mortgage and a current
ALTA form of mortgage title insurance policy from a company, and in form and
substance, acceptable to the Lender, insuring the lien of the Seabrook Mortgage
as a first Lien on the Seabrook Premises in such amounts and subject only to
such exceptions and exclusions as are acceptable to the Lender and insuring
unconditionally against all possible contractors', suppliers' and mechanics'
lien claims, such commitment to contain a complete copy of each easement,
restriction, limitation, or condition of title which is referred to therein that
burdens or benefits the Seabrook Premises.
10.30 Further Assurances. The Borrowers shall execute and deliver,
------------------
or cause to be executed and delivered, to the Lender such documents and
agreements, and shall take or cause to be taken such actions, as the Lender may,
from time to time, request to carry out the terms and conditions of this
Agreement and the other Loan Documents.
11. CLOSING; CONDITIONS TO CLOSING. The Lender shall not be obligated to
------------------------------
make the initial Loans or to obtain any Letters of Credit on the Closing Date,
unless the following conditions precedent have been satisfied in a manner
satisfactory to the Lender:
11.1 Conditions Precedent to Making of Loans on the Closing Date.
------------------------------------------------------------
(a) Representations and Warranties; Covenants. The Borrowers'
-----------------------------------------
representations and warranties contained in this Agreement and the other Loan
Documents shall be correct and complete and the Borrowers shall have performed
and complied with all covenants, agreements, and conditions contained herein and
in the other Loan Documents which are required to have been performed or
complied with.
(b) Delivery of Documents. The Borrowers shall have delivered,
---------------------
or caused to be delivered, to the Lender such documents, instruments,
agreements, financing
<PAGE>
statements, consents, evidence of corporate authority, certificates, landlord
and/or mortgagee waivers, insurance certificates and loss payee endorsements,
opinions of counsel and other writings and covenants as the Lender shall request
in connection herewith, duly executed by all parties thereto other than the
Lender, and in form and substance satisfactory to the Lender and its counsel.
(c) [Intentionally Left Blank].
--------------------------
(d) [Intentionally Left Blank].
-------------------------
(e) Termination of Liens. The Lender shall have received duly
--------------------
executed UCC-3 Termination Statements and other instruments, in form and
substance satisfactory to the Lender, as shall be necessary to terminate and
satisfy all Liens on the Property of the Borrower and its Subsidiaries except
Permitted Liens.
(f) [Intentionally Left Blank].
--------------------------
(g) Environmental Compliance. The Lender shall have received
------------------------
copies of any environmental reports previously obtained or received by the
Borrowers relating to the Seabrook Premises.
(h) Facility Fee. The Borrowers shall have paid in full the
------------
Facility Fee.
(i) Payment of Fees and Expenses. The Borrowers shall have
----------------------------
paid all fees and expenses of the Lender's outside counsel, Williams & Harris,
and all other fees and expenses of the Lender incurred in connection with any of
the Loan Documents and the transactions contemplated thereby.
(j) Required Approvals. The Lender shall have received
------------------
certified copies of all consents or approvals of any Public Authority or other
Person which the Lender determines is required in connection with the
transactions contemplated by this Agreement.
(k) No Material Adverse Change. There shall have occurred no
--------------------------
material adverse change in Trend-Lines' business, operations, profits, prospects
or financial condition or in the Collateral since March 2, 1996, and the Lender
shall have received a certificate of Trend-Lines' chief executive officer to
such effect. In no event shall Trend-Lines' net income for the first fiscal
quarter of the fiscal year ending March 1, 1997 be negative.
<PAGE>
(l) Proceedings. All proceedings to be taken in connection
-----------
with the transactions contemplated by this Agreement, and all documents
contemplated in connection herewith, shall be satisfactory in form and substance
to the Lender and its counsel.
(m) Excess Availability. After taking into account the Revolving
-------------------
Loans and the Letters of Credit to be made or issued on the Closing Date and
after deducting the amount of the Borrowers' accounts payable more than 30 days
past due, the Borrowers' aggregate remaining Availability shall be at least
$4,000,000.
(n) Release From Prior Lender. Trend-Lines shall have received a
-------------------------
release and termination of the financing arrangements between Trend-Lines and
the Prior Lender, satisfactory in form, scope and substance to the Lender, from
the Prior Lender with respect to the Existing Debt.
11.2 Conditions Precedent to Each Loan. The obligation of the Lender
---------------------------------
to make each Loan or to provide for the issuance of any Letter of Credit shall
be subject to the conditions precedent that on the date of any such extension of
credit the following statements shall be true, and the acceptance by either
Borrower of any extension of credit shall be deemed to be a statement to the
effect set forth in clauses (a) and (b), with the same effect as the delivery to
the Lender of a certificate signed by the chief executive officer and chief
financial officer of Trend-Lines, dated the date of such extension of credit,
stating that:
(a) The representations and warranties contained in this
Agreement and the other Loan Documents are correct in all material respects on
and as of the date of such extension of credit as though made on and as of such
date, except to the extent that the Lender has been notified by Trend-Lines that
any representation or warranty is not correct and the Lender has explicitly
waived in writing compliance with such representation or warranty; and
(b) No Event or Event of Default has occurred and is continuing
or would result from such extension of credit.
12. DEFAULT; REMEDIES.
-----------------
12.1 Events of Default. It shall constitute an event of default
-----------------
("Event of Default") if any one or more of the following shall occur for any
----------------
reason:
(a) failure to make payment of principal, interest, fees or
premium on any of the Obligations when due;
<PAGE>
(b) any representation or warranty made or deemed made by
either Borrower in this Agreement, any of the other Loan Documents, any
Financial Statement, or any certificate furnished by either Borrower or any
Subsidiary at any time to the Lender shall prove to be untrue in any material
respect as of the date when made, deemed made, or furnished;
(c) the Borrowers shall (i) fail to comply with any of the
covenants set forth in Article 10 (other than Sections 10.1, 10.2, 10.3, 10.4,
10.5 or 10.6) or Article 8 or (ii) fail to comply with any of the covenants set
forth in Sections 10.1, 10.2, 10.5 or 10.6 if such failure shall have existed
for more than 30 (or 10 days for Section 10.4) after the date that such Borrower
discovers, or reasonably should have discovered, such failure; provided,
--------
however, that, to the extent that any covenant in Article 8 specifies the number
- -------
of days within which a Borrower must comply with any reporting requirement
therein, such failure shall have existed for the number of days specified in
such covenant plus five days.
(d) except as provided in Section 12.1(c), default shall
occur in the observance or performance of any of the covenants and agreements
contained in this Agreement, the Mortgages, the other Loan Documents, or any
other agreement entered into at any time to which either Borrower and the Lender
are party, or if any such agreement or document shall terminate (other than in
accordance with its terms or with the written consent of the Lender) or become
void or unenforceable without the written consent of the Lender or any event of
default as defined therein shall occur.
(e) default shall occur in the payment of any principal or
interest on any indebtedness for borrowed money (other than the Obligations)
beyond any period of grace provided with respect thereto;
(f) Trend-Lines or any Subsidiary shall: (i) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement or
readjustment of its debts or for any other relief under the Federal Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency act or law, state
or federal, now or hereafter existing, or consent to, approve of, or acquiesce
in, any such petition, action or proceeding; (ii) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator, sequestrator, custodian,
trustee or similar officer for it or for all or any part of its Property; (iii)
make an assignment for the benefit of creditors; or (iv) be unable generally to
pay its debts as they become due;
(g) an involuntary petition shall be filed or an action or
proceeding otherwise commenced seeking reorganization, arrangement or
readjustment of Trend-Lines' or any Subsidiary's debts or for any other relief
under the Federal Bankruptcy Code, as amended, or under any other bankruptcy or
insolvency act or law, state or federal, now or hereafter
<PAGE>
existing and such petition, action or proceeding shall not be dismissed within
60 days from such filing or commencement, provided that the Lender shall have no
obligation to make any Revolving Loans or obtain any Letters of Credit during
such 60-day grace period;
(h) a receiver, assignee, liquidator, sequestrator,
custodian, trustee or similar officer for Trend-Lines or any Subsidiary or for
all or any part of their Property shall be appointed involuntarily; or a warrant
of attachment, execution or similar process shall be issued against any part of
the Property of Trend-Lines or any Subsidiary and such waiver, execution or
process shall not be released or fully bonded within 30 days of its issuance,
provided that the Lender shall have no obligation to make any Revolving Loans or
obtain any Letters of Credit during such 30-day grace period;
(i) Trend-Lines or any Subsidiary shall file a certificate of
dissolution under applicable state law or shall be liquidated, dissolved or
wound-up or shall commence or have commenced against it any action or proceeding
for dissolution, winding-up or liquidation, or shall take any corporate action
in furtherance thereof;
(j) all or any part of the Property of either Borrower shall
be nationalized, expropriated or condemned, seized or otherwise appropriated, or
custody or control of such Property or of either Borrower shall be assumed by
any Public Authority or any court of competent jurisdiction at the instance of
any Public Authority, except where contested in good faith by proper proceedings
diligently pursued where a stay of enforcement is in effect;
(k) any guaranty of the Obligations shall be terminated,
revoked or declared void or invalid;
(l) one or more final judgments for the payment of money
aggregating in excess of $500,000 (whether or not covered by insurance) shall be
rendered against Trend-Lines or any Subsidiary and Trend-Lines or such
Subsidiary shall fail to discharge the same within 30 days from the date of
notice of entry thereof or to appeal therefrom;
(m) any loss, theft, damage or destruction of any item or
items of Collateral occurs which: (i) materially and adversely affects the
operation of either Borrower's business or (ii) is material in amount and is not
adequately covered by insurance;
(n) Trend-Lines shall cease to own 100% of the voting stock
of Post Tool or any person other than Stanley Black and his Affiliates shall own
more than 50% of the voting stock of Trend-Lines or have the power to control
(such term having the meaning given to it in the definition of Affiliate herein)
the Board of Directors of Trend-Lines.
<PAGE>
(o) any event or condition shall occur or exist with respect
to a Plan that could, in the Lender's reasonable judgment, subject Trend-Lines
or any Subsidiary to any tax, penalty or liability under ERISA, the Code or
otherwise which in the aggregate is material in relation to the business,
operations, Property or financial or other condition of either Borrower; or
(p) there occurs any material adverse change in either
Borrower's Property, business, operations, or condition (financial or
otherwise).
13. REMEDIES.
---------
(a) If an Event of Default exists, the Lender may, without notice to
or demand on either Borrower, do one or more of the following at any time or
times and in any order: (i) reduce the Availability or one or more of the
elements thereof; (ii) restrict the amount of or refuse to make Revolving Loans
and restrict or refuse to arrange for Letters of Credit; (iii) terminate this
Agreement; (iv) declare any or all Obligations to be immediately due and payable
(provided however that, upon the occurrence of any Event of Default described in
any of Sections 12.1(e), 12.1(f), 12.1(g), and 12.1(h), all Obligations shall
automatically become immediately due and payable); and (v) pursue its other
rights and remedies under the Loan Documents and applicable law.
(b) If an Event of Default exists: (i) the Lender shall have, in
addition to all other rights, the rights and remedies of a secured party under
the UCC; (ii) the Lender may, at any time, take possession of the Collateral and
keep it on either Borrower's premises, at no cost to Lender, or remove any part
of it to such other place or places as the Lender may desire, or a Borrower
shall, upon the Lender's demand, at such Borrower's cost, assemble the
Collateral and make it available to the Lender at a place reasonably convenient
to the Lender; and (iii) the Lender may sell and deliver any Collateral at
public or private sales, for cash, upon credit or otherwise, at such prices and
upon such terms as the Lender deems advisable, in its sole discretion, and may,
if the Lender deems it reasonable, postpone or adjourn any sale of the
Collateral by an announcement at the time and place of sale or of such postponed
or adjourned sale without giving a new notice of sale. Without in any way
requiring notice to be given in the following manner, the Borrowers agree that
any notice by the Lender of sale, disposition or other intended action hereunder
or in connection herewith, whether required by the UCC or otherwise, shall
constitute reasonable notice to the relevant Borrower if such notice is mailed
by registered or certified mail, return receipt requested, postage prepaid, or
is delivered personally against receipt, at least five days prior to such action
to the Borrower's address specified in or pursuant to Section 15.11. If any
-------------
Collateral is sold on terms other than payment in full at the time of sale, no
credit shall be given against the Obligations until the Lender receives payment,
and if the buyer defaults in payment, the Lender may resell the Collateral
without further notice
<PAGE>
to either Borrower. In the event the Lender seeks to take possession of all or
any portion of the Collateral by judicial process, the Borrowers irrevocably
waive: (a) the posting of any bond, surety or security with respect thereto
which might otherwise be required; (b) any demand for possession prior to the
commencement of any suit or action to recover the Collateral; and (c) any
requirement that the Lender retain possession and not dispose of any Collateral
until after trial or final judgment. The Borrowers agree that the Lender has no
obligation to preserve rights to the Collateral or marshal any Collateral for
the benefit of any Person. The Lender is hereby granted a license or other right
to use, without charge, each Borrower's labels, patents, copyrights, name, trade
secrets, trade names, trademarks, and advertising matter, or any similar
property, in completing production of, advertising or selling any Collateral,
and each Borrower's rights under all licenses and all franchise agreements shall
inure to the Lender's benefit. The proceeds of sale shall be applied first to
all expenses of sale, including, without limitation, attorneys' fees and second,
in whatever order the Lender elects, to all Obligations. The Lender will return
any excess to relevant Borrower or such other Person as shall be legally
entitled thereto and the Borrowers shall remain liable for any deficiency.
(c) If an Event of Default occurs, the Borrowers hereby waive (i)
all rights to notice and hearing prior to the exercise by the Lender of the
Lender's rights to repossess the Collateral without judicial process or to
replevy, attach or levy upon the Collateral without notice or hearing, and (ii)
all rights of set-off and counterclaim against Lender.
(d) If the Lender terminates this Agreement upon an Event of
Default, the Borrower shall pay the Lender, immediately upon termination, an
early termination penalty equal to the early termination fee that would have
been payable under Section 14 if this Agreement had been terminated on that
----------
date pursuant to the Borrowers election.
14. TERM AND TERMINATION. This Agreement shall expire on the Stated
---------------------
Termination Date unless terminated or automatically extended as provided in this
Section. This Agreement shall automatically be renewed thereafter for successive
one-year terms, unless this Agreement is terminated as provided below. The
Lender and the Borrowers shall have the right to terminate this Agreement,
without premium or penalty, at the end of the initial term or at the end of any
renewal term by giving the other written notice not less than 60 days prior to
the end of such term by registered or certified mail. The Borrowers may also
terminate this Agreement at any time during its initial term or any successive
renewal term if: (a) they give the Lender 60 days' prior written notice of
termination by registered or certified mail; (b) they pay and perform all
Obligations on or prior to the effective date of termination; and (c) they pay
the Lender, on or prior to the effective date of termination, $800,000 (the
"Termination Fee") if such termination is made on or prior to the first
Anniversary Date. The Lender may also terminate this Agreement without notice
upon an Event of Default, provided, however, that no Termination Fee shall be
due as a result of such a termination. Upon the effective date of termination of
this
<PAGE>
Agreement for any reason whatsoever, all Obligations shall become immediately
due and payable and the Borrowers shall immediately arrange for the cancellation
of Letters of Credit then outstanding. Notwithstanding the termination of this
Agreement, until all Obligations are paid and performed in full, the Lender
shall retain all its rights and remedies hereunder (including, without
limitation, in all then existing and after-arising Collateral).
15. MISCELLANEOUS.
--------------
15.1 Cumulative Remedies; No Prior Recourse to Collateral.
----------------------------------------- ----------
The enumeration herein of the Lender's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Lender may have under the
UCC or other applicable law. The Lender shall have the right, in its sole
discretion, to determine which rights and remedies are to be exercised and in
which order. The exercise of one right or remedy shall not preclude the exercise
of any others, all of which shall be cumulative. The Lender may, without
limitation, proceed directly against the Borrowers or either of them to collect
the Obligations without any prior recourse to the Collateral.
15.2 No Implied Waivers. No act, failure or delay by the Lender
------------------
shall constitute a waiver of any of its rights and remedies. No single or
partial waiver by the Lender of any provision of this Agreement or any other
Loan Document, or of breach or default hereunder or thereunder, or of any right
or remedy which the Lender may have, shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. No waiver by the Lender shall
affect its rights to require strict performance of this Agreement.
15.3 Severability. If any provision of this Agreement shall
------------
be prohibited or invalid, under applicable law, it shall be in effective only to
such extent, without invalidating the remainder of this Agreement.
15.4 Governing Law. This Agreement shall be deemed to have
-------------
been made in the State of New York and shall be governed by and interpreted in
accordance with the laws of such state, except that no doctrine of choice of law
shall be used to apply the laws of any other state or jurisdiction.
15.5 Consent to Jurisdiction and Venue; Service of Process.
-----------------------------------------------------
The Borrower agrees that, in addition to any other courts that may have
jurisdiction under applicable laws, any action or proceeding to enforce or
arising out of this Agreement or any of the other Loan Documents may be
commenced in the Supreme Court of the State of New York for New York County, or
in the United States District Court for the Southern District of New York, and
the Borrowers consent and submit in advance to such jurisdiction and agree that
venue will be proper
<PAGE>
in such courts on any such matter. The Borrowers hereby waive personal service
of process and agree that a summons and complaint commencing an action or
proceeding in any such court shall be properly served and shall confer personal
jurisdiction if served by registered or certified mail to the Borrowers. Should
a Borrower fail to appear or answer any summons, complaint, process or papers so
served within 30 days after the mailing or other service thereof, such Borrower
shall be deemed in default and an order or judgment may be entered against it as
demanded or prayed for in such summons, complaint, process or papers. The choice
of forum set forth in this section shall not be deemed to preclude the
enforcement of any judgment obtained in such forum, or the taking of any action
under this Agreement to enforce the same, in any appropriate jurisdiction.
15.6 Waiver of Jury Trial. EACH BORROWER HEREBY WAIVES TRIAL
--------------------
BY JURY, RIGHTS OF SETOFF, AND THE RIGHT TO IMPOSE COUNTERCLAIMS IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL, OR
ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR ANY OTHER
CLAIM OR DISPUTE HOWSOEVER ARISING, BETWEEN SUCH BORROWER AND THE LENDER. EACH
BORROWER CONFIRMS THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
15.7 [Intentionally Left Blank].
--------------------------
15.8 Survival of Representations and Warranties. All of each
------------------------------------------
Borrower's representations and warranties contained in this Agreement shall
survive the execution, delivery, and acceptance thereof by the parties,
notwithstanding any investigation by the Lender or its agents.
15.9 Other Security and Guaranties. The Lender may, without
-----------------------------
notice or demand and without affecting either Borrower's obligations hereunder,
from time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Obligations and exchange,
enforce or release such collateral or any part thereof; and (b) accept and hold
any endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or any
part of the Obligations, or any other Person in any way obligated to pay all or
any part of the Obligations.
15.10 Fees and Expenses.10 Fees and Expenses". The Borrowers shall
-------------------- ------------------
pay to the Lender on demand all costs and expenses that the Lender pays or
incurs in connection with the negotiation, preparation, consummation,
administration, enforcement, and termination of this Agreement and the other
<PAGE>
Loan Documents, including, without limitation: (a) attorneys' and paralegal's
fees and disbursements of counsel to the Lender (including, without limitation,
a reasonable estimate of the allocable cost of in-house counsel and staff) ; (b)
costs and expenses, including, without limitation, attorneys' and paralegals'
fees and disbursements (including, without limitation, a reasonable estimate of
the allocable cost of in-house counsel and staff) for any amendment,
supplement, waiver, consent, or subsequent closing in connection with the Loan
Documents and the transactions contemplated thereby; (c) costs and expenses of
lien and title searches and title insurance; (d) Taxes, fees and other charges
for recording the mortgages, filing financing statements and continuations, and
other actions to perfect, protect, and continue the Security Interest; (e) sums
paid or incurred to pay any amount or take any action required of either
Borrower under the Loan Documents that such Borrower fails to pay or take; (f)
costs of appraisals, inspections, and verifications of the Collateral,
including, without limitation, travel, lodging, and meals together with an
allocated charge equal to its then customary per diem fee (currently $750) per
day for each auditor employed by the Lender for inspections of the Collateral
and the Borrower's operations; (g) costs and expenses of forwarding loan
proceeds, collecting checks and other items of payment, and establishing and
maintaining Payment Accounts and lock boxes; (h) costs and expenses of
preserving and protecting the Collateral; and (i) costs and expenses, including,
without limitation, attorneys' and paralegals' fees and disbursements
(including, without limitation, a reasonable estimate of the allocable cost of
in-house counsel and staff) paid or incurred to obtain payment of the
Obligations, enforce the Security Interest, sell or otherwise realize upon the
Collateral, and otherwise enforce the provisions of the Loan Documents, or to
defend any claims made or threatened against the Lender arising out of the
transactions contemplated hereby (including, without limitation, preparations
for and consultations concerning any such matters). The foregoing shall not be
construed to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by the Borrowers. All of the foregoing costs and
expenses shall be charged to the relevant Borrower's loan account as Reference
Rate Loans.
15.11 Notices. Except as otherwise provided herein, all
-------
notices, demands, and requests that either party is required or elects to give
to the other shall be in writing, shall be delivered personally against receipt,
or sent by recognized overnight courier services, or mailed by registered or
certified mail, return receipt requested, postage prepaid, and shall be
addressed to the party to be notified as follows:
<PAGE>
If to the Lender: BankAmerica Business Credit, Inc.
40 East 52nd Street
New York, New York 10022
Attention: Division Manager
with a copy to: Bank of America NT&SA, Legal Department
335 Madison Avenue
New York, New York 10017
Attention: Jerry M. Saccone
- and -
Williams & Harris
20 Exchange Place, 7th Floor
New York, New York 10005
Attention: Homer L. Harris
If to Trend-Lines: Trend-Lines, Inc.
135 American Legion Highway
Revere, MA 02151
Attention: Chief Financial Officer
with a copy to: Brown, Rudnick, Freed & Gesmer, PC
One Financial Center
Boston, MA 02111
Attention: Howard L. Levin
If to Post Tool: Post Tool, Inc.
135 American Legion Highway
Revere, MA 02151
Attention: Chief Financial Officer
with a copy to: Brown, Rudnick, Freed & Gesmer, PC
One Financial Center
Boston, MA 02111
Attention: Howard L. Levin
<PAGE>
or to such other address as each party may designate for itself by like notice.
Any such notice, demand, or request shall be deemed given when received if
personally delivered or sent by overnight courier, or when deposited in the
United States mails, postage paid, if sent by registered or certified mail.
15.12 Indemnification. EACH BORROWER HEREBY INDEMNIFIES,
---------------
DEFENDS AND HOLDS LENDER, AND ITS DIRECTORS, OFFICERS, AGENTS, EMPLOYEES AND
COUNSEL, HARMLESS FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES,
LIABILITIES, DEFICIENCIES, JUDGMENTS, PENALTIES OR EXPENSES IMPOSED ON, INCURRED
BY OR ASSERTED AGAINST ANY OF THEM, WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL,
ARISING OUT OF OR BY REASON OF ANY LITIGATION, INVESTIGATIONS, CLAIMS, OR
PROCEEDINGS (WHETHER BASED ON ANY FEDERAL, STATE OR LOCAL LAWS OR OTHER STATUTES
OR REGULATIONS, INCLUDING, WITHOUT LIMITATION, SECURITIES, ENVIRONMENTAL, OR
COMMERCIAL LAWS AND REGULATIONS, UNDER COMMON LAW OR AT EQUITY, OR IN CONTRACT
OR OTHERWISE) COMMENCED OR THREATENED, WHICH ARISE OUT OF OR ARE IN ANY WAY
BASED UPON THE NEGOTIATION, PREPARATION, EXECUTION, DELIVERY, ENFORCEMENT,
PERFORMANCE OR ADMINISTRATION OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY
UNDERTAKING OR PROCEEDING RELATED TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
OR ANY ACT, OMISSION TO ACT, EVENT OR TRANSACTION RELATED OR ATTENDANT THERETO,
INCLUDING, WITHOUT LIMITATION, AMOUNTS PAID IN SETTLEMENT, COURT COSTS, AND THE
FEES AND EXPENSES OF COUNSEL REASONABLY INCURRED IN CONNECTION WITH ANY SUCH
LITIGATION, INVESTIGATION, CLAIM OR PROCEEDING AND FURTHER INCLUDING, WITHOUT
LIMITATION, ALL LOSSES, DAMAGES (INCLUDING, WITHOUT LIMITATION, CONSEQUENTIAL
DAMAGES), EXPENSES OR LIABILITIES SUSTAINED BY THE LENDER IN CONNECTION WITH ANY
ENVIRONMENTAL INSPECTION, MONITORING, SAMPLING, OR CLEANUP OF THE ENCUMBERED
REAL ESTATE REQUIRED OR MANDATED BY ANY ENVIRONMENTAL LAW; PROVIDED, HOWEVER,
THAT NEITHER BORROWER SHALL INDEMNIFY THE LENDER OR ITS DIRECTORS, OFFICERS,
AGENTS, EMPLOYEES AND COUNSEL FROM SUCH DAMAGES RESULTING FROM THEIR GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. Without limiting the foregoing, if, by reason
of any suit or proceeding of any kind, nature, or description against a
Borrower, or by a Borrower or any other party against the Lender, which in the
Lender's sole discretion makes it advisable for the Lender to seek counsel for
protection and preservation of its liens and security assets, or to defend its
own interest, such expenses and counsel fees shall be allowed to the Lender. To
the extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section 15.12
-------------
<PAGE>
may be unenforceable because it is violative of any law or public policy, the
Borrowers shall contribute the maximum portion which they are permitted to pay
and satisfy under applicable law, to the payment and satisfaction of all
indemnified matters incurred by Lender. The foregoing indemnity shall survive
the payment of the Obligations and the termination of this Agreement. All of the
foregoing costs and expenses shall be part of the Obligations and secured by the
Collateral.
15.13 Waiver of Notices. Unless otherwise expressly provided
-----------------
herein, the Borrowers waive presentment, protest and notice of demand or
dishonor and protest as to any instrument, as well as any and all other notices
to which they might otherwise be entitled. No notice to or demand on a Borrower
which the Lender may elect to give shall entitle either Borrower to any or
further notice or demand in the same, similar or other circumstances.
15.14 Binding Effect; Assignment. The provisions of this
--------------------------
Agreement shall be binding upon and inure to the benefit of the respective
representatives, successors and assigns of the parties hereto; provided,
however, that no interest herein may be assigned by either Borrower without the
prior written consent of the Lender. The rights and benefits of the Lender
hereunder shall, if the Lender so agrees, inure to any party acquiring any
interest in the Obligations or any part thereof.
15.15 Modification. This Agreement is intended by the Borrowers
------------
and the Lender to be the final, complete, and exclusive expression of the
agreement among them. This Agreement supersedes any and all prior oral or
written agreements relating to the subject matter hereof and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
of the parties. There are no oral agreements between the parties. No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement shall be made, except by a written agreement signed by the Borrowers
and a duly authorized officer of the Lender.
15.16 Counterparts. This Agreement may be executed in any
------------
number of counterparts, and by the Lender and the Borrowers in separate
counterparts, each of which shall be an original, but all of which shall
together constitute one and the same agreement.
15.17 Captions. The captions contained in this
--------
Agreement are for convenience only, are without substantive meaning and should
not be construed to modify, enlarge, or restrict any provision.
15.18 Right of Set-Off. Whenever an Event of Default exists,
----------------
the Lender is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at
<PAGE>
any time held and other indebtedness at any time owing by the Lender or any
affiliate of the Lender to or for the credit or the account of either Borrower
against any and all of the Obligations, whether or not then due and payable. The
Lender agrees promptly to notify the relevant Borrower after any such set-off
and application made by the Lender, provided that the failure to give such
notice shall not affect the validity of such set-off and application.
15.19 Participating Lender's Security Interests. The Lender may,
-----------------------------------------
without notice to or consent by the Borrowers, grant one or more participations
in the Loans to Participating Lenders. If a Participating Lender shall at any
time with the Borrowers' knowledge participate with the Lender in the Loans, the
Borrowers hereby grant to such Participating Lender, and the Lender and such
Participating Lender shall have and are hereby given, a continuing lien on and
security interest in any money, securities and other property of the Borrowers
in the custody or possession of the Participating Lender, including, without
limitation, the right of setoff, to the extent of the Participating Lender's
participation in the Obligations, and such Participating Lender shall be deemed
to have the same right of setoff to the extent of such Participating Lender's
participation in the Obligations under this Agreement as it would have if it
were a direct lender.
15.20 Joint and Several Liability. The liability of the
---------------------------
Borrowers for all of the Obligations shall be joint and several regardless of
which Borrower actually receives loans or other extensions of credit hereunder
or the amount of such loans received or the manner in which the Lender accounts
for such loans or other extensions of credit on its books and records. Each
Borrower's Obligations with respect to Revolving Loans made to it or Letters of
Credit issued for its account, and related fees, costs and expenses, and each
Borrower's Obligations arising as a result of the joint and several liability of
the Borrowers hereunder, with respect to Revolving Loans made to the other
Borrower hereunder or Letters of Credit issued for the account of the other
Borrower hereunder, together with the related fees, costs and expenses, shall be
separate and distinct obligations, all of which are primary obligations of each
Borrower.
Each Borrower's Obligations arising as a result of the joint and
several liability of the Borrowers hereunder with respect to loans or other
extensions of credit made to the other Borrower hereunder shall, to the fullest
extent permitted by law, be unconditional irrespective of (i) the validity of
enforceability, avoidance or subordination of the Obligations of the other
Borrower or of any promissory note or other document evidencing all of any part
of the Obligations of the other Borrower, (ii) the absence of any attempt to
collect the Obligations from the other Borrower, any other guarantor, or any
other security therefor, or the absence of any other action to enforce the same,
(iii) the waiver, consent, extension, forbearance or granting of any indulgence
by the Lender with respect to any provision of any instrument evidencing the
Obligations of the other Borrower, or any part thereof, or any other agreement
now or hereafter executed by the other Borrower and delivered to the Lender,
(iv) the failure by the Lender to
<PAGE>
take any steps to perfect and maintain its security interest in, or to preserve
its rights to, any security or collateral for the Obligations of the other
Borrower, (v) the Lender's election, in any proceeding instituted under the
Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy
Code, (vi) any borrowing or grant of a security interest by the other Borrower,
as debtor-in-possession under Section 364 of the Bankruptcy Code, (vii) the
disallowance of all or any portion of the Lender's claim(s) for repayment of the
Obligations of the other Borrower under Section 502 of the Bankruptcy Code, or
(viii) any other circumstance which might constitute a legal or equitable
discharge or defense of a guarantor or of the other Borrower.
Each Borrower (the "First Borrower") hereby irrevocably agrees that it
will not bring any "claims" (as defined in Section 101(5) of the Bankruptcy
Code) against the other Borrower to which the First Borrower is or would at any
time be otherwise entitled by virtue of its obligations under this Agreement or
under any of the Loan Documents, including, without limitation, any right of
subrogation (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise), reimbursement, contribution, exoneration or other similar right
against the other Borrower until such time as all of the Obligations have been
satisfied in full and this Agreement shall have terminated in accordance with
its terms.
Upon any Event of Default, the Lender may, at its sole election,
proceed directly and at once, without notice, against either Borrower to collect
and recover the full amount, or any portion of the Obligations, without first
proceeding against the other Borrower or any other Person, or against any
security or collateral for the Obligations. Each Borrower consents and agrees
that the Lender shall be under no obligation to marshall any assets in favor of
such Borrower or against or in payment of any or all of the Obligations.
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement on
the date first above written.
TREND-LINES, INC.
By: /s/ Stanley D. Black
--------------------------------
Name: Stanley D. Black
Title: President
POST TOOL, INC.
By: /s/ Stanley D. Black
--------------------------------
Name: Stanley D. Black
Title: President
BANKAMERICA BUSINESS
CREDIT, INC.
By: /s/ Michael Lemiszki
--------------------------------
Name: Michael Lemiszki
Title: Vice President
<PAGE>
VOTED: To amend Articles 4 and 6 of the Amended and Restated Articles of
- -----
Organization to read in their entirety as set forth on Exhibit A
attached hereto as if set forth verbatim.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: n/a
------------------------------.
SIGNED UNDER THE PENALTIES OF PERJURY, this 17th day of July, 1996.
---- ---- --
/s/ Stanley D. Black , *President.
- ---------------------------------------
Stanley D. Black
/s/ Howard L. Levin , *Clerk.
- ---------------------------------------
Howard L. Levin
*Delete the inapplicable words.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
================================================================================
I herby approve the within Articles of Amendment, and the filing fee in the
amount of $ having been paid, said article is deemed to have been
---------------
filed with me this day of , 19 .
------- ------------------- --
Effective date:
-----------------------------------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Howard I. Levin, Esquire
------------------------------------------------------
Brown, Rudnick, Freed & Gesmer
One Financial Center
------------------------------------------------------
Boston, MA 02111
------------------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM "10-K" AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> MAR-01-1997 MAR-02-1996
<PERIOD-START> MAR-03-1996 MAR-01-1995
<PERIOD-END> AUG-31-1996 MAR-02-1996
<CASH> 1,454 436
<SECURITIES> 0 0
<RECEIVABLES> 9,978 8,319
<ALLOWANCES> 0 0
<INVENTORY> 70,284 68,885
<CURRENT-ASSETS> 88,887 87,533
<PP&E> 13,334 12,815
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 102,888 100,658
<CURRENT-LIABILITIES> 58,257 56,127
<BONDS> 0 0
0 0
0 0
<COMMON> 94 94
<OTHER-SE> 42,603 42,194
<TOTAL-LIABILITY-AND-EQUITY> 102,888 100,658
<SALES> 96,138 174,795
<TOTAL-REVENUES> 96,138 174,795
<CGS> 64,499 117,447
<TOTAL-COSTS> 64,499 117,447
<OTHER-EXPENSES> 29,925 61,242
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,025 1,654
<INCOME-PRETAX> 689 (5,548)
<INCOME-TAX> 279 (2,229)
<INCOME-CONTINUING> 410 (3,319)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 410 (3,319)
<EPS-PRIMARY> .04 (.33)
<EPS-DILUTED> 0 0
</TABLE>
