EXHIBIT 10.4
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of the 30th
day of October, 2003, by and among PHOENIX FOOTWEAR GROUP, INC., a corporation
formed under the laws of the State of Delaware ("Borrower") and MANUFACTURERS
AND TRADERS TRUST COMPANY, a bank formed under the laws of the State of New York
("Bank").
RECITALS:
A. Borrower and Bank are parties to a First Amended and Restated
Revolving Credit and Term Loan Agreement dated March 30, 2000, as amended (the
"Prior Agreement"), pursuant to which Bank has made loans to Borrower for the
purposes described therein.
B. Borrower has requested that the Prior Agreement be amended in
its entirety to, among other things:
(i) provide a revolving credit facility in the maximum
principal amount of $15,000,000 (during the months of
June through January) to $18,000,000 (during the
months of February through May);
(ii) continue the two existing term loan facilities in the
original principal amounts of $2,250,000 and
$3,000,000, respectively;
(iii) provide an additional term loan facility in the
principal amount of $1,500,000; and
(iv) make certain changes to the terms and conditions of
the Prior Agreement.
NOW, THEREFORE, Borrower and the Bank hereby agree that the Prior
Agreement (including all Schedules and Exhibits thereto) is hereby amended and
restated in its entirety as follows:
ARTICLE I
DEFINITIONS
1.1 The following terms shall have the following meanings unless
otherwise expressly stated herein:
"Affiliate" means any entity which directly or indirectly, or
through one or more intermediaries, Controls or is Controlled By or is Under
Common Control with Borrower.
"Agreement" means this Second Amended and Restated Revolving
Credit and Term Loan Agreement, as further amended, modified or restated from
time to time.
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"Average Borrowed Funds to EBITDA Ratio" means as of the
applicable measurement date, the Average Borrowed Funds as of such date divided
by EBITDA for the twelve (12) Fiscal Month period ended as of such date.
"Average Borrowed Funds" means as of the last day of any
Fiscal Quarter, the average of the aggregate amounts of Borrowed Funds of the
Borrower as of such day, and as of the last day of each of the eleven (11)
immediately preceding Fiscal Months.
"Authorized Person" means Xxxxx Xxxxxxx, or Xxxxxxx Xxxx each
of whom are authorized by the Borrower to request Loans and Letters of Credit,
and any additional person who the Borrower notifies the Bank of in writing is
authorized to do the same.
"Bank" means Manufacturers and Traders Trust Company.
"Borrowed Funds" means, as of the measurement date, without
duplication, on a consolidated basis, Borrower's and its Subsidiaries' (1)
indebtedness or liability for borrowed money, including Obligations under the
Loan Documents; (2) obligations evidenced by bonds, debentures, notes, or other
similar instruments; (3) obligations for the deferred purchase price of property
or services (excluding trade obligations); (4) obligations as lessee under
capital leases; (5) current liabilities in respect of unfunded vested benefits
under Plans covered by ERISA; (6) obligations under letters of credit (other
than the Comerica L/Cs and Earn-Out Letter of Credit; (7) obligations under
acceptance facilities; (8) all guaranties, endorsements (other than for
collection or deposit in the ordinary course of business), and other contingent
obligations to purchase, to provide funds for payment, to supply funds to invest
in any person or entity, or otherwise to assure a creditor against loss; (9)
obligations secured by any Liens, whether or not the obligations have been
assumed; (10) all purchase money mortgages, outstanding under asset
securitization vehicles, conditional sales contracts and similar title retention
debt instruments; and (11) the Contingent Earn-Out Amounts.
"Borrower" means Phoenix Footwear Group, Inc. and its
successors, legal representatives and assigns.
"Borrower's 401(k) Plan " means the Borrower's defined
contribution 401(k) savings plan.
"Borrowing Base" means the sum of the following:
(a) 80% of the Eligible Accounts of Borrower and
Guarantors;
(b) plus the lesser of (i) $3,500,000 and (ii)
50% of the Eligible Inventories of Borrower and its Subsidiaries that are used
in their business other than the Xxxxx Business or the Royal Business;
(c) plus the lesser of (i) $1,500,000 and (ii)
50% of the Eligible Inventories of Borrower and its Subsidiaries that are used
in the Xxxxx Business;
(d) plus the lesser of (i) $1,500,000 and (ii)
50% of the Eligible Inventories of Borrower and its Subsidiaries that are used
in the Royal Business;
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(e) less a Term Loan Reserve equal to
$2,000,000.00, which $2,000,000.00 amount will be reduced on a dollar-for-dollar
basis as quarterly payments on the Second Term Loan are made; and
(f) less Letter of Credit Obligations.
The Bank reserves the right in its sole discretion to modify
the Borrowing Base or make changes in the definitions of Eligible Accounts or
Eligible Inventories, or to delete certain accounts or inventories from the
Borrowing Base in the event of a material adverse change in any of the
collateral for the Revolving Credit or its collectibility, or in the event the
Bank reasonably concludes that there are circumstances or conditions which
materially affect the value of the collateral.
"Borrowing Base Report" means a report described in Section
8.1 of this Agreement.
"Business Day" means any day other than a Saturday, Sunday, or
other day on which commercial banks in New York are authorized or required to
close under the laws of such State and, if the applicable day relates to LIBOR
Loan, LIBOR Interest Period, or notice with respect to a LIBOR Loan, a day on
which dealings in Dollar deposits are also carried on in the London interbank
market and banks are open for business in London.
"Cash Flow" means for the applicable period EBITDA minus (i)
taxes paid, minus (ii) Unfinanced Capital Expenditures, minus (iii) interest
expense, minus (iv) dividends paid in accordance with Section 9.5 all determined
in accordance with GAAP.
"Cash Flow Coverage Ratio" means as of the applicable
measurement date, Cash Flow for the four (4) Fiscal Quarters then ended, divided
by the sum of all Scheduled Principal Payments due during the four (4) Fiscal
Quarters immediately following such date.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any person or group
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934
and the rules of the Securities and Exchange Commission thereunder as in effect
on the date hereof), of shares representing more than twenty-five percent (25%)
of the aggregate ordinary voting power represented by the issued and outstanding
capital stock of Borrower by any person, excluding however the acquisition of
shares by any person who is a shareholder of Borrower on the date hereof.
"Closing Date" means the first date on which the conditions
set forth in Section 7.1 have been satisfied and the Bank has made a Loan
hereunder.
"Comerica L/Cs" means the commercial letters of credit issued
by Comerica Bank, N.A. for the account of Royal and the benefit of Royal's
vendors existing as of the Closing Date.
"Commitment" means the obligation of the Bank to make
Revolving Credit Loans to the Borrower and issue Letters of Credit for the
account of the Borrower pursuant to the provisions of Section 2.1 and 4.1,
respectively.
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"Contingent Earn-Out Amount" means;
(a) from the date hereof through June 30, 2004,
$4,967,000 less the sum of the undrawn amount under
the Earn-Out Letter of Credit and any reimbursement
obligations incurred in connection therewith, and
(b) from July 1, 2004, through June 30, 2005, $2,683,500
less the sum of the undrawn amount under the Earn-Out
Letter of Credit and any reimbursement obligations in
connection therewith.
"Controls" (including the terms "Controlled By" or "Under
Common Control") means, but not be limited to, the ownership of ten percent
(10%) or more of the outstanding shares of capital stock of any corporation
having voting power for the election of directors, whether or not at the same
time stock of any other class or classes has or might have voting power by
reason of the happening of any contingency, or ownership of ten percent (10%) or
more of any interest in any partnership, limited liability company or any other
entity or any other interest by reason of which a controlling influence over the
affairs of the entity may be exercised.
"Current Assets" means current assets of the Borrower on a
consolidated basis determined in accordance with GAAP.
"Current Liabilities" means (a) current liabilities of the
Borrower on a consolidated basis determined in accordance with GAAP; plus (b)
the outstanding principal balance under the Revolving Credit Note.
"Current Ratio" means Current Assets compared to Current
Liabilities.
"Dating Accounts" means trade accounts receivable due sixty
(60) to one hundred twenty (120) days from the date of invoice.
"EBITDA" means, for the applicable period, Net Income plus
interest expense, taxes, depreciation and amortization of intangible assets,
plus the value of all stock allocated pursuant to Borrower's 401(k) Plan, all on
a consolidated basis and determined in accordance with GAAP on a consistent
basis.
"Eligible Accounts" means: (a) Dating Accounts which are less
than thirty-one (31) days after due date, plus (b) for trade accounts receivable
from payors whose accounts are less than ninety (90) days beyond date of
invoice, all accounts receivable, plus (c) for trade accounts receivable from
payors whose accounts are in whole or in part more than ninety (90) days beyond
date of invoice, the portion of the accounts receivable less than ninety (90)
days beyond date of invoice provided that at least fifty percent (50%) of the
outstanding amount from the payor is less than ninety (90) days beyond date of
invoice, minus all (d) contra accounts receivable, Affiliate accounts
receivable, foreign accounts receivable (unless backed by irrevocable letters of
credit, confirmed by a U.S. bank, and acceptable to the Bank in its sole
discretion, and duly assigned to the Bank), employee accounts receivable, xxxx
and hold accounts receivable (i.e., accounts relating to goods not yet shipped
but invoiced), uncollectible accounts receivable, accounts receivable arising
from progressive xxxxxxxx (i.e., accounts receivable from xxxxxxxx for work
performed on a partially completed contract), accounts receivable arising from
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guaranteed sales with buy back provisions (i.e., sales in which Borrower is
obligated to repurchase inventory or merchandise sold to customers), accounts
receivable from the United States of America or agency or department thereof
(unless assignment and notice thereof is effected in accordance with the
Assignment of Claims Act), and accounts receivable from businesses reasonably
believed by the Bank to be at risk of defaulting on accounts including, without
limitation, accounts receivable from insolvent payors. In the event that total
accounts receivable from any payor represent more than twenty percent (20%) of
the total accounts receivable of Borrower and its Subsidiaries, on a
consolidated basis, the Bank reserves the right in its sole discretion to delete
from Eligible Accounts that portion of such accounts receivable. Eligible
Accounts must be trade accounts receivable that arise from goods sold or
delivered or services rendered in the Borrower's or any Subsidiary's ordinary
course of business as it exists on the date of this Agreement and must be
subject to the first priority security interest of the Bank and to no other
security interest or lien. Eligible Accounts must be valid and legally
enforceable obligations of the account debtor and not subject to credit,
allowance, defense, offset, counterclaim or adjustment, except discounts for
prompt payment.
"Eligible Inventories" means all first quality finished goods
inventories owned by Borrower or any Subsidiary, located at the Improvements,
valued at the lower of cost (on a FIFO basis) or market, minus all perishable or
non-saleable inventories and such reserves as Borrower or a Subsidiary has
historically established including but not limited to (a) shrinkage reserves,
(b) markdown reserves, (c) reserves which restore standard costs to actual costs
and (d) customer deposits on contracts. Eligible Inventories do not include (i)
inventory on consignment to or from Borrower or any Subsidiary, (ii) inventory
subject to an Eligible Account, (iii) inventory subject to a Lien other than a
Permitted Lien and (iv) inventory to which any customer has rights, interests or
claims superior to the Bank's perfected, first priority security interest
therein, whether by operation of agreement, law or otherwise. Eligible
Inventories must arise from Borrower's or its Subsidiary's ordinary course of
business, must at all times be subject to the perfected, first priority security
interest of the Bank and no other security interest or lien, must be located on
Borrower's or its Subsidiary's premises within the United States, must conform
in all respects to warranties contained in the Agreement and all related
agreements and documents, and, except for the licensing agreements listed on
Schedule 1.1 hereto, must not be subject to a licensing agreement with third
parties unless the Bank shall have received consents or acknowledgements or
other assurances satisfactory to the Bank from such third parties as may be
deemed necessary or desirable to facilitate the Bank's realization upon such
inventory. The calculation of Eligible Inventories must be satisfactory to the
Bank in its sole discretion.
"Environment" means any water, including, but not limited to,
surface water and ground water or water vapor: any land, including land surface
or subsurface; stream sediments; air; fish; wildlife; plants; and all other
natural resources or environmental media.
"Environmental Laws" means all present and future federal,
state and local environmental, land use, zoning, health, chemical use, safety
and sanitation laws, statutes, ordinances, regulations, codes and rules relating
to the protection of the Environment and/or governing the use, storage,
treatment, generation, transportation, processing, handling, production or
disposal of Hazardous Substances and the regulations, rules, ordinances, bylaws,
policies, guidelines, procedures, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.
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"Environmental Permits" means all licenses, permits,
approvals, authorizations, consents or registrations required by any applicable
Environmental Laws and all applicable judicial and administrative orders in
connection with ownership, lease, purchase, transfer, closure, use and/or
operation of the Improvements and/or as may be required for the storage,
treatment, generation, transportation, processing, handling, production or
disposal of Hazardous Substances.
"Environmental Report" means written reports, if any, prepared
for the Bank by an environmental consulting or environmental engineering firm.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any trade or business (whether
incorporated or unincorporated) which together with the Borrower is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code.
"Eurocurrency Reserve Requirement" means, for any Interest
Period for a LIBOR Loan, the daily average of the stated maximum rate (expressed
as a decimal) at which reserves (including any marginal, supplemental, or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D by member banks of the Federal Reserve System in New York
City with deposits exceeding one billion dollars against "Eurocurrency
Liabilities" (as such term is used in Regulation D) but without benefit or
credit of proration, exemptions, or offsets that might otherwise be available
from time to time under Regulation D. Without limiting the effect of the
foregoing, the Eurocurrency Reserve Requirement shall reflect any other reserves
required to be maintained against (1) any category of liabilities that includes
deposits by reference to which the LIBOR Interest Rate for LIBOR Loans is to be
determined; or (2) any category of extension of credit or other assets that
include LIBOR Loans.
"Event of Default" means the occurrence of any event described
in Section 12.1.
"Financial Statements" means Borrower's audited financial
statements for the Fiscal Year ending December 31, 2002.
"First Term Loan" means the $2,250,000.00 term loan made by
the Bank and reflected in Section 3.1 hereof.
"First Term Note" means the $2,250,000.00 Amended and Restated
First Term Note (which amends and restates the $2,250,000.00 Amended and
Restated Term Note dated August 7, 2003, issued by Borrower to Bank), as such
note may be amended, modified or restated from time to time.
"Fiscal Month" means a period of four or five weeks having 7
days in each week ending on a Saturday and that constitutes Borrower's monthly
accounting period.
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"Fiscal Quarter" means any of the quarterly accounting periods
of Borrower ending on the last Saturday of March, June, September and on the
Saturday closest to December 31st each year.
"Fiscal Year" means the annual accounting period of Borrower
ending on the Saturday closest to December 31st of each year.
"GAAP" and "Generally Accepted Accounting Principles" means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession in the
United States of America, which are applicable to the circumstances as of the
date of determination.
"Guarantors" means Penobscot, Xxxxx, Royal and each Subsidiary
which becomes a Guarantor pursuant to Section 8.13.
"Guaranties" means, collectively, the continuing guaranties
executed and delivered to Bank by each Guarantor which guaranty payment of the
Obligations, as amended, modified or restated from time to time, and "Guaranty"
means any of the Guaranties.
"Hazardous Substances" means, without limitation, any
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances
and any other material defined as a hazardous substance in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Sections 9601, et. seq.; the Hazardous Materials Transportation Act, as
amended, 49 U.S.C. Sections 1801, et. seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Sections 6901, et. seq.; Articles 15 and 27
of the New York State Environmental Conservation Law or any other federal,
state, or local law, regulation, rule, ordinance, by-law, policy, guideline,
procedure, interpretation, decision, order, or directive, whether existing as of
the date hereof, previously enforced or subsequently enacted.
"Improvements" means any and all real property and
improvements owned or used by Borrower or any of its Subsidiaries.
"Indebtedness" means, without duplication and whether now
existing or hereafter incurred, (a) all obligations (including, without
limitation, contingent obligations) for borrowed money or with respect to
deposits or advances of any kind, (b) all obligations (including, without
limitation, contingent obligations) evidenced by bonds, debentures, notes or
similar instruments, (c) all obligations (including, without limitation,
contingent obligations) upon which interest charges are customarily paid, (d)
all obligations (including, without limitation, contingent obligations) under
conditional sale or other title retention agreements relating to property
acquired, (e) all obligations in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing
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right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired, whether or not the Indebtedness secured thereby has been assumed, (g)
all guarantees of Indebtedness of other persons, (h) all capital lease
obligations (including, without limitation, contingent obligations), (i) all
obligations (including, without limitation, contingent obligations) as an
account party in respect of letters of credit (including but not limited to all
reimbursement obligations with respect to Letters of Credit), and letters of
guaranty and (j) all obligations (including, without limitation, contingent
obligations) in respect of bankers' acceptances. The Indebtedness shall include
the Indebtedness of any other person (including any partnership in which such
person is a general partner) to the extent such person is liable therefore as a
result of such person's ownership interest in or other relationship with such
person, except to the extent the terms of such Indebtedness provide that such
person is not liable therefore.
"Interest Period" means with respect to any LIBOR Loan, the
period commencing on the date such Loan is made, converted or renewed, as
applicable, and ending, as a Borrower may select, on the numerically
corresponding day in the first, second, or third calendar month thereafter,
subject however, to the following limitations:
(a) Each Interest Period that commences on the
last Business Day of the calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month;
(b) No Interest Period may extend beyond the
Termination Date; and
(c) If an Interest Period would end on a day
that is not a Business Day, such Interest Period shall be extended to the next
Business Day unless, such Business Day would fall in the next calendar month, in
which event such Interest Period shall end on the immediately preceding Business
Day.
"Letters of Credit" means the Letters of Credit described in
Section 4.1 of this Agreement.
"Letter of Credit Obligations" means the sum of the face
amount of all outstanding Letters of Credit and all unpaid reimbursement
obligations under the Reimbursement Agreement.
"LIBOR Interest Rate" means, for each LIBOR Loan, the rate per
annum (rounded upward, if necessary, to the nearest 1/100th of 1%) determined by
the Bank to be equal to the quotient of (1) the London lnterbank Offered Rate
for such LIBOR Loan for such Interest Period divided by (2) one minus the
Eurocurrency Reserve Requirement for such Interest Period.
"LIBOR Loan" means any Loan when and to the extent that the
interest rate for such Loan is determined by reference to the LIBOR Interest
Rate.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien, assignment or charge of any kind or description and shall
include, without limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any lease in the nature
thereof including any lease or similar arrangement with a public authority
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executed in connection with the issuance of industrial development revenue bonds
or pollution control revenue bonds, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code (or comparable law) of any
jurisdiction naming the owner of the asset to which such lien applies as a
debtor (other than a filing which does not evidence an outstanding secured
obligation, or a commitment to make advances or to incur any other obligation of
any kind).
"Loan(s)" means, collectively, the Revolving Credit Loans and
the Term Loans, or the Revolving Credit Loans or the Term Loans, as the context
requires.
"Loan Documents" means the Agreement, the Notes, the Security
Documents, the Reimbursement Agreement, and all other agreements, documents and
certificates executed with or in favor of the Bank in connection with the
Agreement or any amendment to the Agreement or to any other Loan Document.
"London lnterbank Offered Rate" applicable to any Interest
Period for a LIBOR Loan means the rate per annum (rounded upward, if necessary,
to the nearest 1/100th of 1%) fixed by the British Bankers Association for
United States dollar deposits for a period and in an amount comparable to the
Interest Period and the principal amount of such LIBOR Loan, at approximately
11:00 a.m. London time as determined by the Bank from any broker, quoting
service or commonly available source utilized by the Bank.
"Mortgage" means the Mortgage, Lease Assignment and Security
Agreement executed and delivered to Bank by Penobscot and dated as of March 30,
2000.
"Multiemployer Plan" means a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA as to which the Company, any Subsidiary or any
ERISA Affiliate is obligated to make, has made, or will be obligated to make
contributions on behalf of participants who are or were employed by any of them.
"Net Income" means for the applicable period, the net earnings
of the Borrower and its Subsidiaries on a consolidated basis, determined in
accordance with GAAP on a consistent basis, but excluding:
(a) any gain or loss arising from the sale of
capital assets;
(b) any gain arising from any write-up of
assets;
(c) net earnings or losses of any Subsidiary of
Borrower accrued prior to the date it became a Subsidiary;
(d) net earnings or losses of any corporation,
substantially all the assets of which have been acquired in any manner by
Borrower, realized by such corporation prior to the date of such acquisition;
(e) net earnings or losses of any business
entity in which Borrower has an ownership interest, except any such net earnings
which have actually been received by Borrower in the form of cash distributions
and except the net earnings or losses of any business
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entity which has guaranteed all of the Borrower's Indebtedness to the Bank and
any of the Bank's affiliates;
(f) any portion of the net earnings of any
Subsidiary of Borrower which for any reason is unavailable for payment of
dividends to Borrower;
(g) the net earnings or losses of any person to
which any assets of Borrower shall have been sold, transferred or disposed of,
or into which Borrower shall have merged, or been a party to any consolidation
or other form of reorganization, prior to the date of such transaction;
(h) any gain arising from the acquisition of any
securities of Borrower;
(i) any gain or loss arising from extraordinary
items; and
(j) the 2003 Non-Recurring Expenses and Charges.
"Non-Premium Event" means a reduction of the Commitment or
prepayment of the Term Loans as a result of or through use of funds generated by
internal cash flow, asset dispositions, sales of equity or equity-linked debt
instruments (including the sale of Borrower).
"Notes" means, collectively, the Revolving Credit Note and the
Term Notes, and "Note" means any of the Notes.
"Obligations" shall include all of the Borrower's obligations
related to the Agreement of any kind or nature, arising now or in the future,
including, without limitation, obligations under the Revolving Credit Note, the
Term Notes, and the Reimbursement Agreements.
"PBGC" means the Pension Benefit Guarantee Corporation and any
successor thereto.
"Penobscot" means Penobscot Shoe Company.
"Permitted Liens" means the Liens set forth on Schedule 1.2
and the following liens:
(a) liens imposed by any governmental authority
for taxes, assessments or charges not yet due or which are being contested in
good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrower subject to such lien in
accordance with GAAP on a consistent basis.
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like liens arising in the ordinary course of
business which are not overdue for a period of more than thirty (30) days, or
which are being contested in good faith and by appropriate proceedings;
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(c) pledges or deposits under workers'
compensation, unemployment insurance and other social security legislation; and
(d) deposits to secure the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business;
"Plan" means any employee benefit plan, program, arrangement,
practice or contract, maintained by or on behalf of a Borrower or an ERISA
Affiliate, which provides benefits or compensation to or on behalf of employees
or former employees, whether formal or informal, whether or not written,
including but not limited to the following types of plans:
(a) Executive Arrangements - any bonus,
incentive compensation, stock option, deferred compensation, commission,
severance, "golden parachute", "rabbi trust", or other executive compensation
plan, program, contract, arrangement or practice;
(b) ERISA Plans - any "employee benefit plan" as
defined in ERISA, including, but not limited to, any defined benefit pension
plan, profit sharing plan, money purchase pension plan, savings or thrift plan,
stock bonus plan, employee stock ownership plan, Multiemployer Plan, or any
plan, fund, program, arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness, disability, or
life insurance benefits; and
(c) Other Employee Fringe Benefits - any stock
purchase, vacation, scholarship, day care, prepaid legal services, severance pay
or other fringe benefit plan, program, arrangement, contract or practice.
"Prepayment Premium" means a payment to the Bank of 3 percent
(3%) of the principal amount of any prepayment of any Term Loan by the Borrower,
other than by reason of a Non-Premium Event, during the first three (3) years
following the Closing Date.
"Prime Loan" means any Loan when and to the extent that the
interest rate for such Loan is determined by reference to the Prime Rate.
"Prime Rate" means the rate of interest announced by the Bank
from time to time at its Principal office as its prime commercial lending rate,
which rate is not intended to be the lowest rate of interest charged by Bank to
its borrowers.
"Principal Office" means the Bank's office at 000 Xxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx 00000.
"Quarterly Covenant Compliance Sheet" means the covenant
compliance sheet delivered on a quarterly basis by Borrower to Bank in the form
of Exhibit A attached hereto.
"Reduction Fee" means a payment to the Bank of 3 percent (3%)
of the principal amount of any reduction of the Commitment by the Borrower
during the first three (3) years following the Closing Date, other than by
reason of a Non-Premium Event or the occurrence of the Termination Date.
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"Regulation D" Regulation D of the Board of Governors of the
Federal Reserve System as amended or supplemented from time to time.
"Reimbursement Agreements" means, collectively, the
Reimbursement Agreements to be executed and delivered pursuant to Section 4.3 of
this Agreement, as amended, modified or restated from time to time.
"Reimbursement Obligations" shall have the meaning assigned to
such term in Section 4.3.
"Release" has the same meaning as given to that term in
Section 101 (22) of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601(22), and the
regulations promulgated thereunder.
"Revolving Credit Facility" means the revolving credit
facility established pursuant to Section 2.1 of this Agreement.
"Revolving Credit Loan" means a loan made by the Bank to
Borrower under the Revolving Credit Facility.
"Revolving Credit Note" means the $18,000,000 Amended and
Restated Revolving Credit Note (which amends and restates the $11,000,000.00
Amended and Restated Revolving Credit Note dated August 7, 2003, executed by
Borrower in favor of Bank), as such note may be amended, modified or restated
from time to time.
"Royal" means Royal Xxxxxxx, Inc.
"Royal Acquisition Agreement" means the Stock Purchase
Agreement dated as of October 2, 2003 by and among Xxx J and Xxxxxx X. Xxxxx, as
trustees of the Xxx X. and Xxxxxx X. Xxxxx 1997 Family Trust and Xxxxxxx Xxxxx
as trustee of the Xxxxxx X. Xxxxx Trust and the Xxxxxx X. Xxxxx Trust, Royal and
Borrower.
"Royal Business" means the outdoor leisure sportswear and
related products business operated by Borrower and its Subsidiaries.
"Second Term Loan" means the $3,000,000.00 term loan made by
the Bank and reflected in Section 3.2 hereof.
"Second Term Note" means the $3,000,000 Amended and Restated
LIBOR Term Note (which amends and restates the $3,000,000 LIBOR Term Note dated
August 7, 2003, issued by Borrower to Bank), as such note may be amended,
modified or restated from time to time.
"Security Agreements" means the General Security Agreements
listed on Schedule 1.3.
"Security Documents" means those documents set forth on
Schedule 1.3.
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"Scheduled Principal Payments" means all regularly scheduled
principal payments (including sinking fund payments) on the Term Loans, without
credit or reduction for any prepayments.
"Subsidiary" means any corporation, limited liability company
or other entity, the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements in accordance with
GAAP.
"Termination Date" means June 30, 2005.
"Term Loans" means, collectively, the First Term Loan, the
Second Term Loan and the Third Term Loan, and "Term Loan" means any of the Term
Loans.
"Term Notes" means, collectively, the First Term Note, the
Second Term Note and the Third Term Note, and "Term Note" means any of the Term
Notes.
"Third Term Loan" means the $1,500,000 term loan made by the
Bank pursuant to Article III hereof.
"Third Term Note" means the Third Term Note evidencing the
Third Term Loan to be executed and delivered pursuant to Section 3.3 of this
Agreement, as such note may be amended, modified or restated from time to time.
"Trademark Security Agreements" means the Trademark Collateral
Security and Pledge Agreement listed on Schedule 1.3, and any similar document
delivered by any Subsidiary of Borrower, and, as amended, modified or restated
from time to time.
"Xxxxx" means X.X. Xxxxx & Co.
"Xxxxx Business" means the men's casual boot and footwear
business conducted by Borrower and its Subsidiaries.
"Unfinanced Capital Expenditures" means all capital
expenditures other than (i) capital expenditures financed by the Bank (but
excluding for this definition any capital expenditures financed with the
proceeds of a Revolving Credit Loan), and (ii) capital expenditures financed
with Indebtedness (other than the Loans) permitted under this Agreement or
Indebtedness to which the Bank consents in writing.
"2003 Non-Recurring Expenses and Charges" means those one-time
non-recurring expenses and charges detailed in a letter from Borrower to Bank of
even date herewith.
ARTICLE II
REVOLVING CREDIT FACILITY
2.1 Commitment. The Bank agrees, subject to Section 2.2 and the
other terms and conditions hereinafter set forth, to make Revolving Credit Loans
to the Borrower from time to time during the period from the date of this
Agreement up to but not including the Termination Date in an aggregate principal
amount not to exceed at any time outstanding the amount of
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$15,000,000 during the months of June through January, and $18,000,000 during
the months of February through May, as such amount may be reduced pursuant to
Section 2.3.
Each Revolving Credit Loan which shall not utilize the Commitment in
full shall be in an amount not less than Fifty Thousand Dollars ($50,000),
provided that each LIBOR Loan shall be in an amount not less than Five Hundred
Thousand Dollars ($500,000). During the period from the Closing Date to the
Termination Date and within the limits of the Commitment and subject to Section
2.2, the Borrower may borrow, prepay pursuant to Section 2.8, and reborrow under
this Section 2.1. On such terms and conditions, the Revolving Credit Loans may
be outstanding as Prime Loans or LIBOR Loans. Each type of Revolving Credit Loan
shall be made and maintained at the Bank's Principal Office.
2.2 Borrowing Base. Notwithstanding the provisions of Section 2.1,
the aggregate principal amount of all outstanding Revolving Credit Loans and all
Letter of Credit Obligations shall not exceed the lesser of the Borrowing Base
and the Commitment. At any time that the aggregate principal amount of all
outstanding Revolving Credit Loans and all Letter of Credit Obligations exceeds
the lesser of the Borrowing Base and the Commitment, the Borrower shall
immediate prepay the Revolving Credit Loans pursuant to Section 2.8 hereof.
2.3 Reduction of Commitment. The Borrower shall have the right,
upon at least three (3) Business Days' notice to the Bank, to terminate in whole
or reduce in part the unused portion of the Commitment on the following terms
and conditions;
(a) each partial reduction in the Commitment shall be in
the amount of at least One Million Dollars ($1,000,000);
(b) unless financed from a Non-Premium Event, a reduction
in the Commitment requires concurrent payment to Bank of a Reduction Fee.
(c) no reduction in the Commitment shall be permitted if,
after giving effect thereto, and to any prepayment made therewith, the
outstanding and unpaid principal amount of the Revolving Credit Loans and the
Letter of Credit Obligations shall exceed the lesser of Commitment or the
Borrowing Base; and
(d) the Commitment, once reduced or terminated, may not
be reinstated.
2.4 Notice and Manner of Borrowing. Borrower agrees to give the
Bank notice of any Revolving Credit Loan under this Agreement, at least one (1)
Business Day before each Prime Loan, and at least three (3) Business Days before
each LIBOR Loan, specifying: (a) the date of such Loan; (b) the amount of such
Loan; (c) the type of Loan; and (d) in the case of a LIBOR Loan, the duration of
the Interest Period applicable thereto. Not later than 3:00 P.M. (eastern
standard time) on the date of such Revolving Credit Loan and upon fulfillment of
the applicable conditions set forth in Article VII, the Bank will make such
Revolving Credit Loan available to the Borrower in immediately available funds
by crediting the amount thereof to the Borrower's account with the Bank.
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All notice given under this Section 2.4 shall be irrevocable and shall
be given not later than 11:00 A.M. (eastern standard time) on the day which is
not less than the number of Business Days specified above for such notice.
2.5 Conversions and Renewals. Borrower may elect from time to time
to convert all or a part of one type of Loan into another type of Loan or to
renew all or part of a Loan by giving the Bank notice at least one (1) Business
Day before conversion into a Prime Loan and at least three (3) Business Days
before the conversion into or renewal of a LIBOR Loan, specifying: (a) the
renewal or conversion date; (b) the amount of the Loan to be converted or
renewed; (c) in the case of conversions, the type of Loan to be converted into;
and (d) in the case of renewals of or a conversion into LIBOR Loans, the
duration of the Interest Period applicable thereto; provided that LIBOR Loans
can be converted only on the last day of the Interest Period for such Loan. All
notices given under this Section 2.5 shall be irrevocable and shall be given not
later than 11:00 A.M. (eastern standard time) on the day which is not less than
the number of Business Days specified above for such notice. If the Borrower
shall fail to give the Bank the notice as specified above for the renewal or
conversion of a LIBOR Loan prior to the end of the Interest Period with respect
thereto, such LIBOR Loan shall automatically be converted into a Prime Loan on
the last day of the Interest-Period for such Loan.
2.6 Interest. Borrower shall pay interest to the Bank on the
outstanding and unpaid principal amount of the Revolving Credit Loans made under
this Agreement at a rate per annum of LIBOR plus 275 basis points or Prime plus
..25% through June 30, 2004, and thereafter, at a rate per annum selected by
Borrower, at the appropriate level, from the two Revolver columns of the pricing
grid attached as Exhibit B to this Agreement. Any change in the interest rate
resulting from a change in the Prime Rate shall be effective as of the opening
of business on the day on which such change in the Prime Rate becomes effective.
Interest on each Loan shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Interest on the Loans shall be paid in
immediately available funds to the Bank at its Principal Office, in the case of
Prime Loans on the first day of each month and in the case of LIBOR Loans, on
the last day of the Interest Period with respect thereto. All accrued and unpaid
interest shall be due and payable on the Termination Date.
2.7 Revolving Credit Note. Borrower's obligation to repay the
Revolving Credit Loan shall be evidenced by the Revolving Credit Note. All
Revolving Credit Loans shall be repaid on the Termination Date.
2.8 Prepayments. Borrower may prepay the Revolving Credit Note in
whole or in part with accrued interest to the date of such prepayment on the
amount prepaid, but without premium or penalty, provided that (a) each partial
payment shall be in a principal amount of not less then Fifty Thousand Dollars
($50,000); and (b) LIBOR Loans may be prepaid only on the last day of the
Interest Period for such Loans. In addition, at any time that the Borrower
becomes aware or receive notice (oral or written) that the outstanding principal
amount of all Revolving Credit Loans exceeds the Borrowing Base, Borrower shall
immediately prepay the Revolving Credit Loans by the amount necessary to comply
with the provisions of Section 2.2. In addition, Borrower shall cause the
Revolving Credit Loans to be prepaid to the extent necessary so that the
aggregate outstanding principal amount of the Revolving Credit Loans does
16
not exceed $15,000,000 during each (approximately) eight month period from the
first day after the last Saturday in May and to and including the last Saturday
in January.
2.9 Method of Payment. Borrower shall make each payment under this
Agreement and under the Note not later than 12:00 P.M. (eastern standard time)
on the date when due in lawful money of the United States to the Bank at its
Principal Office in immediately available funds. Borrower hereby authorizes the
Bank, if and to the extent payment is not made when due under this Agreement or
under the Note, to change from time to time against any account of Borrower with
the Bank any amount as due. Whenever any payment to be made under this Agreement
or under the Note shall be stated to be due on a day other than a Business Day,
such payments shall be made on the next succeeding Business Day, and such
extension of time shall be included in the computation of the payment of
interest and the commitment fee, as the case may be, except, in the case of a
LIBOR Loan, if the result of such extension would be to extend such payment into
another calendar month, such payment shall be made on the immediately preceding
Business Day.
2.10 Use of Proceeds. The proceeds of the Revolving Credit Loans
hereunder shall be used to finance the working capital requirements of the
Borrower and may also be used to finance the costs of Borrower's acquisition of
Royal (including payments of the purchase price, amounts payable under or
pursuant to the Royal Acquisition Agreement, and Indebtedness of Royal existing
prior to its acquisition by Borrower). Borrower will not, directly or
indirectly, use any part of such proceeds for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to any person for
the purpose of purchasing or carrying any such margin stock, or for any purpose
which violates, or is inconsistent with, Regulation X of such Board of
Governors.
2.11 Illegality. Notwithstanding any other provision in this
Agreement, if the Bank determines that any applicable law, rule, or regulation,
or any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Bank with any request or directive (whether or not having the force of law) of
any such authority, central bank, or comparable agency shall make it unlawful or
impossible for the Bank to maintain or fund LIBOR Loans, then upon notice to the
Borrower, the outstanding principal amount of all LIBOR Loans, together with
interest accrued thereon, and any other amounts payable to the Bank under this
Agreement shall be repaid (a) immediately upon demand of the Bank if such change
or compliance with such request, in the judgment of the Bank, requires immediate
repayment, or (b) at the expiration of the last Interest Period to expire before
the effective date of any such change or request.
2.12 Disaster. Notwithstanding anything to the contrary herein, if
the Bank determines (which determination shall be conclusive) that:
(a) Quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR Interest Rate are not being
provided in the relevant amounts or for the relative maturities for purposes of
determining the rate of interest on a LIBOR Loan as provided in this Agreement;
or
17
(b) The relevant rates of interest referred to in the
definition of LIBOR Interest Rate upon the basis of which the rate for any such
type of Loan is to be determined do not accurately cover the cost to the Bank of
making or maintaining LIBOR Loans; then the Bank shall forthwith give notice
thereof to the Borrower, whereupon (a) the obligation of the Bank to make LIBOR
Loans shall be suspended until the Bank notifies the Borrower that the
circumstances giving rise to such suspension no longer exist, and (b) the
Borrower shall repay in full the then outstanding principal amount of each LIBOR
Loan together with accrued interest thereon, on the last day of the then current
Interest Period applicable to such Loan.
2.13 Increased Cost. From time to time upon notice to the Borrower
from the Bank the Borrower shall pay to the Bank such amounts as the Bank may
determine to be necessary to compensate the Bank for any costs incurred by the
Bank which the Bank determines are attributable to its making or maintaining any
LIBOR Loans hereunder or its obligation to make any such Loans hereunder, or any
reduction in any amount receivable by the Bank under this Agreement or the Note
in respect of any such Loans or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any change after the date of this Agreement in U.S. federal,
state, municipal, or foreign laws or regulations (including Regulation D), or
the adoption or making after such date of any interpretations, directives, or
requirements applying to a class of banks including the Bank of or under U.S.
federal, state, municipal, or foreign laws or regulations (whether or not having
the force of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof ("Regulatory Change"), which:
(a) changes the basis of taxation of any amounts payable to the Bank under this
Agreement or the Note in respect of any such Loans (other than taxes imposed on
the overall net income of the Bank for any of such Loans by the jurisdiction
where the Principal Office is located); or (b) imposes or modifies any reserve,
special deposit, compulsory loan, or similar requirements relating to any
extensions or credit or other assets of, or any deposits with or other
liabilities of, the Bank (including any of such Loans or any deposits referred
to in the definition of LIBOR Interest Rate); or (c) imposes any other condition
affecting this Agreement or the Note (or any such extensions of credit or
liabilities). The Bank will notify the Borrower of any event occurring after the
date of this Agreement which will entitle the Bank to compensation pursuant to
this Section 2.13 as promptly as practicable after it obtains knowledge thereof
and determines to request such compensation, but in no event will Borrower be
liable for Additional Costs arising from any Regulatory Change which occurred
more than six (6) months before the date of such notice.
Determinations by the Bank for purposes of this Section 2.13 of the
effect of any Regulatory Change on its costs of making or maintaining Loans or
on amounts receivable by it in respect of Loans, and of the additional amounts
required compensate any the Bank in respect of any Additional Costs, shall be
conclusive, provided that such determinations are made on a reasonable basis.
2.14 Risk-Based Capital. In the event that the Bank determines that
with respect to any LIBOR Loans hereunder (a) compliance with any judicial,
administrative, or other governmental interpretation of any law or regulation or
(b) compliance by the Bank or any corporation controlling the Bank with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law) has the effect of requiring an increase
in the amount of capital required or expected to be maintained by the Bank or
any
18
corporation the Bank, and the Bank determines that such increase is based upon
its obligations hereunder, and other similar obligations, the Borrower shall pay
to the Bank, such additional amount as shall be certified by the Bank to be the
amount allocable to the Bank's obligations to the Borrower hereunder. The Bank
will notify the Borrower of any event occurring after the date of this Agreement
that will entitle the Bank to compensation pursuant to this Section 2.14 as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation, but in no event will the Borrower be liable for any
compensation hereunder based on any event which occurred more than six (6)
months before the date of such notice.
Determinations by the Bank for purposes of this Section 2.14 of the
effect of any increase in the amount of capital required to be maintained by the
Bank and of the amount allocable to the Bank's obligations to the Borrower
hereunder shall be conclusive, provided that such determinations are made on a
reasonable basis.
2.15 Funding Loss Indemnification. Upon notice to Borrower from the
Bank, Borrower shall pay to the Bank such amount or amounts as shall be
sufficient (in the reasonable opinion of the Bank) to compensate it for any
loss, cost, or expense incurred as a result of:
(a) Any payment of a LIBOR Loan on a date other than the
last day of the Interest Period for such Loan including, but not limited to
acceleration of the Loans; or
(b) Any failure by Borrower to borrow or convert a LIBOR
Loan on the date for borrowing or conversion specified in the relevant notice
under Section 2.4 or 2.5, as the case may be.
2.16 Unused Commitment Fee. Borrower agrees to pay to the Bank a
fee on the average unused portion of the Commitment at the rate per annum of
..25% through June 30, 2004, and thereafter at the rate per annum, at the
appropriate level, from the pricing grid attached as Exhibit B to this
Agreement. Such fee shall be payable quarterly and the Bank is hereby authorized
to charge Borrower's account with Bank for the amount of such fee. The Bank will
send Borrower an invoice setting forth the amount of such fee and the basis upon
which it was calculated.
ARTICLE III
AMOUNT AND TERMS OF THE TERM LOANS
3.1 (a) First Term Loan. The Bank has made and continues to
make hereunder a loan (the "First Term Loan") to Borrower in the principal
amount of Two Million Two Hundred Fifty Thousand and 00/100 Dollars
($2,250,000.00).
(b) First Term Note. Borrower's obligation to repay the
First Term Loan shall be evidenced by its promissory note (the "First Term
Note") in substantially the form of Exhibit C to this Agreement, with blanks
appropriately completed.
(c) Principal Payments on First Term Loan. Borrower has
agreed to pay the principal amount of the First Term Loan in three consecutive
annual installments each in the
19
amount of $750,000, commencing May 1, 2004, and each subsequent payment being
made on the anniversary thereof. Notwithstanding the foregoing, the entire
unpaid principal amount of the First Term Loan shall be due and payable on May
1, 2006.
3.2 (a) Second Term Loan. The Bank has made and continues to
make hereunder a loan (the "Second Term Loan") to Borrower, in the principal
amount of Three Million and 00/100 Dollars ($3,000,000.00).
(b) Second Term Note. Borrower's obligation to repay the
Second Term Loan shall be evidenced by its promissory note (the "Second Term
Note") in substantially the form of Exhibit D to this Agreement, with blanks
appropriately completed.
(c) Principal Payments on Second Term Loan. Borrower has
agreed to pay the principal amount of the Second Term Loan in twenty consecutive
quarterly installments each in the amount of $150,000, commencing November 1,
2003, and the entire unpaid principal amount of the Second Term Loan shall be
due and payable on August 1, 2008.
3.3 (a) Third Term Loan. The Bank agrees on the terms and
conditions hereinafter set forth, to make a loan (the "Third Term Loan") to
Borrower, in the principal amount of One Million Five Hundred Thousand and
00/100 Dollars ($1,500,000.00).
(b) Third Term Note. Borrower's obligation to repay the
Third Term Loan shall be evidenced by its promissory note in substantially the
form of Exhibit E to this Agreement, with blanks appropriately completed.
(c) Principal Payments on Third Term Loan. Borrower
agrees to pay the principal amount of the Third Term Loan in sixty consecutive
monthly installments each in the amount of $25,000, commencing December 1, 2003,
and the entire unpaid principal amount of the Third Term Loan shall be due and
payable on November 1, 2008.
3.4 Interest. Borrower shall pay interest to the Bank on the
outstanding principal amount of the Term Loans at a rate per annum of LIBOR plus
300 basis points or Prime plus .375% through June 30, 2004, and thereafter, at a
rate per annum selected by Borrower, at the appropriate level, from the two Term
columns of the pricing grid attached as Exhibit B to this Agreement. Any change
in the interest rate resulting from a change in the Prime Rate shall be
effective as of the opening of business on the day on which such change in the
Prime Rate becomes effective. Interest on the Term Loans shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed. Interest
on the Term Loans shall be paid in immediately available funds to the Bank at
its Principal Office, in the case of Prime Loans on the first day of each month
and the case of LIBOR Loans, on the last day of the Interest Period with respect
thereto. All accrued and unpaid interest shall be payable on the Termination
Date.
3.5 Method of Payment. Borrower shall make each payment under this
Agreement and under the Term Notes not later than 11:00 A.M. (eastern standard
time) on the date when due in lawful money of the United States to the Bank at
its Principal Office in immediately available funds. Borrower hereby authorizes
the Bank, if and to the extent payment is not made when due under this Agreement
and under the Term Notes, to charge from time to time against any account of
Borrower with the Bank any amount so due. Whenever any payment to be made
20
under this Agreement or under the Term Notes shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of the payment of interest.
3.6 Use of Proceeds. The proceeds of the Third Term Loan shall be
used by Borrower to fund the acquisition of Royal. Borrower will not, directly
or indirectly, use any part of such proceeds for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to any person for
the purpose of purchasing or carrying any such margin stock, or for any purpose
which violates, or is inconsistent with, Regulation X of such Board of
Governors.
3.7 Prepayment. Unless financed from a Non-Premium Event, a
prepayment, in whole or in part, of any of the Term Loans requires concurrent
payment to Bank of a Prepayment Premium.
ARTICLE IV
LETTERS OF CREDIT SUBFACILITY
4.1 Letter of Credit Subfacility. Subject to the terms and
conditions of this Agreement and provided the Borrower complies with all
application requirements of the Bank for issuing letters of credit, prior to the
Termination Date, the Bank agrees to issue and extend standby and commercial
letters of credit (individually, a "Letter of Credit") for the account of
Borrower: provided, however, that (a) no Letter of Credit (other than the
Earn-Out Letter of Credit) shall have an expiration date that is later than the
earlier of one year after the date of issuance thereof or the Termination Date
(provided that a Letter of Credit may provide that it is extendable for
consecutive one year periods if such period does not end after the Termination
Date); (b) Borrower shall not request that the Bank issue any Letter of Credit,
if, after giving effect to such issuance, the sum of the aggregate Letter of
Credit Obligations plus the aggregate outstanding principal amount of all
outstanding Revolving Credit Loans would exceed the Commitment; and (c) Borrower
shall not request that the Bank issue any Letter of Credit if after giving
effect to such issuance, the aggregate Letter of Credit Obligations would exceed
$5,000,000. On the Closing Date, any outstanding Letters of Credit under the
Prior Agreement shall be converted into Letters of Credit under this Agreement
and Bank shall issue the "Earn-Out Letter of Credit" as defined and required by
the Royal Acquisition Agreement.
4.2 Fees. The Borrower will pay to the Bank on the date of
issuance of each standby Letter of Credit and on each anniversary date
thereafter if such Letter of Credit is renewed, a Letter of Credit fee equal to
one and one-half percent (1 1/2%) of the aggregate face amount of such Letter of
Credit. The Borrower will pay to the Bank on the date of issuance of each
commercial Letter of Credit and on each anniversary date thereafter if such
Letter of Credit is renewed, a Letter of Credit fee equal to one-quarter percent
(1/4%) of the aggregate face amount of such Letter of Credit. In addition, the
Borrower shall pay to the Bank all other fees customarily charged by the Bank in
connection with the issuance of the Letter of Credit.
4.3 Reimbursement. Prior to issuance of each Letter of Credit, the
Borrower will execute a Letter of Credit Reimbursement Agreement (each a
"Reimbursement Agreement") in
21
form and substance satisfactory to Bank, documenting its Obligations with
respect to the Letters of Credit (such Obligations being the Borrower's
"Reimbursement Obligations"). To the extent of any conflict between the terms of
this Agreement and the Reimbursement Agreement or any letter of credit
application, the terms of this Agreement shall control.
ARTICLE V
CERTAIN GENERAL PROVISIONS
5.1 Administrative Expenses. Borrower shall pay any reasonable
fees, expenses and disbursements, including reasonable legal fees, of the Bank
related to this Agreement, the Obligations, the perfection of any collateral
security required hereunder, and the transactions contemplated by this
Agreement. Such payments shall be due at Closing.
5.2 Collection Costs. At the request of the Bank, Borrower shall
promptly pay any expenses, reasonable attorney's fees, costs, or disbursements
in connection with administration of the Obligations or collection of any of the
Obligations or enforcement of any of the Bank's rights hereunder or under any
Note, Security Document, Reimbursement Agreement, or other agreement related
hereto. This obligation shall survive the payment of any notes executed
hereunder. The Bank may apply any payments of any nature received by it first to
the payment of Obligations under this Section 5.2, notwithstanding any
conflicting provision contained in this Agreement or any other agreement with
the Borrower.
5.3 Default Interest Rate. Upon the occurrence of an Event of
Default, notwithstanding anything else herein, the rate of interest on each of
the Obligations shall be automatically increased to a rate at all times equal to
three percent (3%) above the rate of interest which would be in effect absent
such failure of compliance, such increased rate to remain in effect through and
including the satisfaction and payment in full of all of the Obligations and the
termination of the Commitment, or written waiver of such Event of Default by the
Bank.
5.4 Late Payment Fees. Payments of principal and/or interest not
made in full before the date five (5) days after the date due shall be subject
to a processing charge of five percent (5%) of the payment due.
5.5 Prepayments Upon Default. If by reason of an Event of Default
the Bank elects to declare the Obligations to be immediately due and payable
and/or to reduce or terminate the Commitment, then the Prepayment Premium and
the Reduction Fee shall become due and payable in the same manner as though the
Borrower had reduced, or terminated the Commitment, as applicable.
5.6 Payment of Fees. Borrower hereby authorizes the Bank to
withdraw an amount equal to the fees which are due and payable hereunder from
any of its accounts with the Bank if not paid on the due date for such fees. The
Bank shall give the Borrower notice of any such withdrawals, provided, however,
that failure by the Bank to give the Borrower notice shall not prevent the Bank
from making any such withdrawals under this Section 5.6.
5.7 Voluntary Prepayments. Borrower may prepay the Loans in whole
or in part with accrued interest to the date of such prepayment on the amount
prepaid, provided that each partial prepayment shall be in a principal amount of
not less than $50,000 further provided that LIBOR
22
Loans may only be prepaid on the last day of an Interest Period. Voluntary
prepayments of the Term Loans shall be applied to the principal installments in
the inverse order of their maturities.
ARTICLE VI
REPRESENTATIONS OF BORROWER
The Borrower represents and warrants to the Bank as follows:
6.1 Organization and Power. Borrower and each of its Subsidiaries
is duly organized, validly existing and in good standing under the laws of its
state of incorporation and is duly qualified to transact business and in good
standing in all other states in which it is required to qualify or in which
failure to qualify could have a material adverse impact on its business.
Borrower and each of its Subsidiaries has full power and authority to own its
properties, to carry on its business as now being conducted, to execute, deliver
and perform the Agreement and all related documents and instruments, and to
consummate the transactions contemplated hereby.
6.2 Proceedings of Borrower. All necessary action on the part of
the Borrower and each of its Subsidiaries relating to authorization of the
execution and delivery of this Agreement and all related documents and
instruments, and the performance of the Obligations of the Borrower, and each of
its Subsidiaries, hereunder and thereunder has been taken. This Agreement and
all related documents and instruments constitute legal, valid and binding
obligations of Borrower and its Subsidiaries, as applicable, enforceable in
accordance with their respective terms. The execution and delivery by the
Borrower of this Agreement and all related documents and agreements, and the
performance by the Borrower and its Subsidiaries of their respective obligations
under this Agreement, the Security Documents and all related documents and
agreements will not violate any provision of law or Borrower's or its
Subsidiaries' Certificates of Incorporation or By-Laws. The execution, delivery
and performance of this Agreement, the Security Documents and all related
documents and agreements, and the consummation of the transactions contemplated
hereby will not violate, be in conflict with, result in a breach of, or
constitute a default under any agreement to which Borrower or its Subsidiaries
is a party or by which any of its properties is bound, or any order, writ,
injunction, or decree of any court or governmental instrumentality, and will not
result in the creation or imposition of any lien, charge or encumbrance upon any
of its properties, and do not require the consent or approval of any
governmental authority.
6.3 Capitalization. All of the outstanding shares and other equity
interests of Borrower are duly authorized, validly issued and fully paid.
6.4 Litigation. Except as set forth on Schedule 6.4, as of the
date hereof there is no action, suit or proceeding at law or in equity by or
before any court or any federal, state, municipal or other governmental
department, commission, board, bureau, instrumentality or other agency, domestic
or foreign, pending or, to the knowledge of Borrower or its Subsidiaries,
threatened against or affecting Borrower or its Subsidiaries that brings into
question the legality, validity or enforceability of this Agreement or the
transactions contemplated hereby or that, if adversely determined, is not
adequately covered by insurance and would have a material adverse
23
effect on the financial condition, performance, business, operations or
prospects of the Borrower and its Subsidiaries, taken as a whole.
6.5 Financial Statements. The audited balance sheets of Borrower
as of December 31, 2002, and the related statements of operation, stockholders
equity and cash flows (including supporting footnote disclosures) for the fiscal
years then ended, with the opinion of Deloitte & Touche, LLP, all heretofore
furnished to the Bank, have been prepared in accordance with GAAP consistently
applied throughout the periods indicated are all true and correct in all
material respects and present fairly the financial condition at the date of said
financial statements and the results of operations for the fiscal period then
ending. Borrower as of such date did not have any significant liabilities,
contingent or otherwise, including liabilities for taxes or any unusual forward
or long-term commitments which were not disclosed by or reserved against in the
financial statements referred to above or in the notes thereto, and at the
present time there are no material unrealized or anticipated losses from any
unfavorable commitments of Borrower or any of its Subsidiaries. All such
financial statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved.
6.6 Material Adverse Changes. Since September 30, 2003 there has
been no material adverse change in the operations, business, property, assets or
condition, financial or otherwise of the Borrower and its Subsidiaries, taken as
a whole.
6.7 Taxes. Borrower and its Subsidiaries have filed or caused to
be filed when due all federal tax returns or extensions and all state and local
tax returns or extensions that are required to be filed, and have paid or caused
to be paid all taxes as shown on said returns or any assessment received.
Neither Borrower's, nor its Subsidiaries, tax returns are being audited on the
date of this Agreement and neither Borrower, nor its Subsidiaries, have been
notified of any intention by any taxing authority to conduct such an audit.
6.8 Properties; Liens. Borrower and its Subsidiaries have good and
marketable title to all of their properties and assets, including without
limitation, the properties and assets reflected in the Financial Statements free
and clear of all Liens, except for Permitted Liens. Borrower and its
Subsidiaries have undisturbed peaceable possession under all leases under which
they are operating, none of which contain unusual or burdensome provisions that
may materially affect the operations of the Borrower or its Subsidiaries, and
all such leases are in full force and effect.
6.9 Indebtedness. Except for Permitted Indebtedness (as defined in
Section 9.1), the Borrower and its Subsidiaries have no outstanding
Indebtedness.
6.10 Franchises, Permits. Borrower and its Subsidiaries possesses
all franchises, permits, licenses and other authority as are necessary to enable
Borrower and its Subsidiaries to conduct their business as now being conducted.
Borrower and its Subsidiaries are not in default under any such franchise,
permit, license or authority such that it would have a material adverse change
in the operations of business, property, assets, condition, financial or
otherwise of the Borrower and its Subsidiaries, taken as a whole.
24
6.11 Margin Securities. No proceeds of the Obligations have been or
will be used for the purpose of purchasing or carrying Margin Securities as
defined in Regulation U of the Federal Reserve Board.
6.12 Compliance With Law. Borrower and its Subsidiaries are not in
violation of any laws, ordinances, governmental rules, requirements, or
regulations, or any order, writ, injunction or decree of any court or federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, to which it is subject which
violation could reasonably be expected to materially adversely affect the
condition (financial or otherwise) of the Borrower or its Subsidiaries. Borrower
and its Subsidiaries have obtained and are in compliance with all licenses,
permits, franchises, and governmental authorizations necessary for the ownership
of their properties and the conduct of their business, for which failure to
comply could reasonably be expected to materially adversely affect the
operations, business, property, assets or condition (financial or otherwise) of
the Borrower and its Subsidiaries, taken as a whole.
6.13 Patents, Trademarks, and Authorizations. Borrower and its
Subsidiaries own, possess or have licenses for all of the patents, trademarks,
service marks, trade names, copyrights, licenses, authorizations, and all rights
with respect to the foregoing (collectively, the "Intellectual Property"),
necessary to the conduct of their business as now conducted. A complete list of
all such Intellectual Property with respect to which registrations have been
issued by the U.S. Patent and Trademark Office the U.S. Copyright Office, or any
comparable foregoing governmental authority is set forth on the Schedule 6.13.
Except as disclosed in Schedule 6.4, to the knowledge of Borrower, no product,
process, method, substance, part or other material presently contemplated to be
sold by or employed by Borrower or its Subsidiaries in connection with its
business infringes or may infringe any patent, trademark, service xxxx, trade
name, copyright, license or other right owned by any other person. Except as
disclosed in Schedule 6.4, there is no pending or threatened claim or litigation
against or affecting Borrower or its Subsidiaries contesting its right to sell
or use any such product, process, method, substance, part or other material.
There is not pending or proposed any patent, invention, device application or
principle or any statute, law, rule, regulation, standard or code which would
prevent, inhibit or render obsolete the production or sale of any products of,
or substantially reduce the projected revenues of, or otherwise have a
materially adverse effect on the financial condition, performance or prospects
of the Borrower and its Subsidiaries, taken as a whole, or the business, assets,
property or operations of the Borrower or its Subsidiaries, taken as a whole.
6.14 Contracts and Agreements. Borrower and its Subsidiaries are
not parties to any contractor agreement that materially adversely affects its
business, property, assets, or condition financial or otherwise, and Borrower
and its Subsidiaries are in compliance in all material respects with all
material contracts and agreements to which they are a party.
6.15 Subsidiaries and Affiliates. Except for Xxxxx, Penobscot and
Royal, which are each wholly-owned Subsidiaries of Borrower and Subsidiaries
permitted by Section 9.10 below, Borrower has no Subsidiaries or Affiliates.
6.16 ERISA. Except as set forth on the Schedule 6.16:
25
(a) Identification of Plans. (i) Neither Borrower, nor
any ERISA Affiliate, maintains or contributes to, or has maintained or
contributed to, any Plan that is an ERISA Plan, and (ii) Borrower and its ERISA
Affiliates do not maintain or contribute to, or have not maintained or
contributed to, any Plan that is an Executive Arrangement;
(b) Compliance. Each Plan has at all times been
maintained, by its terms and in operation, in accordance with all applicable
laws, except such noncompliance (when taken as a whole) that will not have a
material adverse effect on the financial condition, performance or prospects of
the Borrower and its Subsidiaries, taken as a whole or the business or
operations of the Borrower and its Subsidiaries, taken as a whole;
(c) Liabilities. Neither Borrower, nor any ERISA
Affiliate, is currently, and has not been obligated in the last six (6) years to
make contributions (directly or indirectly) to a Multiemployer Plan, and is not
currently subject to any liability (including withdrawal liability), tax or
penalty whatsoever to any person whomsoever with respect to any Plan including,
but not limited to, any tax, penalty or liability arising under Title I or Title
IV or ERISA or Chapter 43 of the Internal Revenue Code, except such liabilities
(when taken as a whole) as will not have a materially adverse effect on
financial condition, performance or prospects of the Borrower and its
Subsidiaries, taken as a whole or the business or operations of the Borrower and
its Subsidiaries, taken as a whole; and
(d) Funding. The Borrower and each ERISA Affiliate have
made full and timely payment of all amounts (i) required to be contributed under
the terms of each Plan and applicable law and (ii) required to be paid as
expenses of each Plan. No Plan has an "amount of unfunded benefit liabilities"
(as defined in Section 4001(a)(18) of ERISA).
6.18 Disclosure. Neither this Agreement, any Loan Document nor any
other document, certificate or statement furnished to the Bank by or on behalf
of Borrower or any Subsidiary in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading, if, in
either case, such fact is material to an understanding of the financial
condition, performance or prospects of Borrower and its Subsidiaries, taken as a
whole or their business or operations, taken as a whole, or the ability of
Borrower or its Subsidiaries to fulfill their obligations under this Agreement
or by any Loan Documents to which they are a party.
ARTICLE VII
CONDITIONS OF LENDING
7.1 Initial Revolving Credit Loans and Letter of Credit. The
following conditions must be satisfied before the Bank shall have any obligation
to make the initial Revolving Credit Loan or to issue the initial Letter of
Credit under this Agreement:
(a) Performance. Borrower shall have performed and
complied with all agreements and conditions required to be performed or complied
with by it prior to or at the time the first Revolving Credit Loan is made or
the first Letter of Credit issued.
(b) Opinion of Counsel. Borrower shall have delivered a
favorable opinion of their counsel, in form and substance satisfactory to the
Bank.
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(c) Documents to be Delivered. Borrower shall have
executed and delivered or have caused to be executed and delivered to the Bank
all Loan Documents, together with a confirmation of certain Security Documents
in form and substance satisfactory to Bank, and all Loan Documents shall be in
full force and effect.
(d) Certified Resolutions. Borrower and Royal shall have
delivered a certificate of their respective corporate secretaries certifying (i)
resolutions duly adopted by their Boards of Directors authorizing the execution,
delivery and performance of the Loan Documents to which each is a party and the
consummation of the transactions contemplated hereby and thereby, as applicable,
which resolutions shall remain in full force and effect so long as any of the
Obligations are outstanding or the Commitment has not been terminated, (ii) the
Certificate of Incorporation and By-Laws and (iii) the incumbency of the
officers authorized to execute, deliver and perform this Agreement or the Loan
Documents, as applicable.
(e) Fees and Taxes. Borrower shall have paid all filing
fees, taxes, and assessments related to the borrowings and the perfection of any
interests in collateral security required hereunder.
(f) Insurance. Borrower shall have delivered evidence
satisfactory to the Bank of the existence of insurance required hereby.
(g) Other Documents and Agreements. On or before the date
of this Agreement, the Borrower shall have executed and/or delivered such other
documents, instruments, and agreements as the Bank and its legal counsel may
reasonably require in connection with the transactions contemplated hereby.
(h) Certificates of Good Standing; Searches. Borrower and
Royal shall have delivered to the Bank (a) certificates of good standing from
appropriate state officials to the effect that the Borrower and Royal are in
good standing in the state of their incorporation as well as in all other states
in which qualification is necessary to carry on their businesses as presently
conducted and (b) UCC, judgment, bankruptcy and tax searches against the
Borrower and Royal in all jurisdictions deemed necessary by the Bank, all of
which shall be satisfactory to the Bank in all respects.
(i) Royal Acquisition Agreement. Borrower and Royal shall
have executed and delivered an acquisition agreement setting forth the terms of
the Royal acquisition that is satisfactory to Bank.
(j) Projected Financial Covenants Compliance. The Bank
shall have received projected compliance with the Financial Covenants
satisfactory to Bank.
(k) No Material Adverse Change. Since September 30, 2003,
there shall have been no change which has had or could reasonably be expected to
have a material adverse effect on the business, assets, liabilities, operations
or financial condition of Borrower and its Subsidiaries, taken as a whole.
27
(l) Solvency Certificates. The Bank shall have received
reasonably satisfactory certificates from the Chief Financial Officer of the
Borrower and Royal as to the financial condition and solvency of each of the
Borrower and Royal.
(m) Consents and Approvals. The Bank shall have received
evidence of receipt of all governmental, shareholder and other, if any, consents
and approvals necessary in connection with the related financings and other
transactions contemplated under this Agreement, except where the failure to
obtain such consents or approvals would not, individually or in the aggregate,
have a material adverse effect on the business, assets, liabilities, operations
or financial condition of the Borrower and its Subsidiaries, taken as a whole.
(n) Litigation. The Bank shall have been informed of any
suit, investigation or proceeding pending in any court or before any arbitrator
or governmental authority that would reasonably be expected to have a material
adverse effect on the Borrower and its Subsidiaries, taken as a whole, or on
their ability to perform their respective obligations under this Agreement.
(o) Minimum Borrowing Capacity. The Bank shall have
received evidence of a minimum borrowing capacity of the Borrower of
$1,500,000.00.
(p) Landlord Waivers. The Bank shall have received a
waiver in form and substance satisfactory to Bank from each landlord of premises
on which the Bank's collateral is located and that is not owned by Borrower or
its Subsidiaries.
7.2 Subsequent Loans and Letters of Credit. The obligation of the
Bank to make any Revolving Credit Loan, issue any Letters of Credit, or make the
any Term Loans shall at all times be subject to the following continuing
conditions:
(a) Representations and Warranties. The representations
and warranties of the Borrower and its Subsidiaries contained herein shall be
true and correct in all material respects as of the date of making of each such
advance (except those which are specific as to a date certain), with the same
effect as if made on and as of such date.
(b) No Defaults. There shall exist no condition or event
that constitutes (or that, with the giving of notice or the passage of time or
both, would constitute) an Event of Default at the time each advance is to be
made or the Letter of Credit is to be issued.
(c) No Material Adverse Change. Since the date of the
most recent financial statements of the Borrower described in Section 8.1, there
shall have been no change which has had or could reasonably be expected to have
a material adverse effect on the financial condition, performance or prospects
of the Borrower and its Subsidiaries, taken as a whole, or the business or
operations of the Borrower and its Subsidiaries taken as a whole.
Each Notice of Borrowing given by a Borrower in accordance with Section
2.4 hereof and the acceptance by Borrower of the proceeds of a Revolving Credit
Loan shall constitute a representation and warranty by the Borrower, made as of
the time of the making of such Revolving Credit Loan, that the conditions
specified in Sections 7.1 (solely with respect to the initial Revolving Credit
Loan and Letter of Credit issuances) and 7.2 (with respect to all other
Revolving Credit Loans or Letter of Credit issuances) have been fulfilled as of
such time.
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ARTICLE VIII
AFFIRMATIVE COVENANTS OF BORROWER
So long as any Obligations to the Bank shall be outstanding or this
Agreement remains in effect, unless the Bank otherwise consents in writing, the
Borrower shall:
8.1 Financial Statements; Other Information.
(a) Furnish to the Bank as soon as available, but in no
event later than ninety (90) days after the close of each Fiscal Year in which
this Agreement remains in effect, copies of annual financial statements of the
Borrower in reasonable detail satisfactory to the Bank prepared in accordance
with GAAP on a consistent basis audited by and with an unqualified opinion from
an independent certified public accountant satisfactory to the Bank. Said
financial statements shall include at least a consolidated and consolidating
balance sheet and consolidated and consolidating statements of operations,
stockholder's equity and cash flow, and shall be accompanied by a schedule
showing computation of financial covenants and a copy of any management letter
prepared by such accountants. Such financial statements shall be accompanied by
a certificate of the Chief Financial Officer of Borrower to the effect that no
Event of Default has occurred and no condition exists which with the passage of
time or the giving of notice would constitute an Event of Default.
(b) Furnish to the Bank unaudited financial statements
not more than thirty (30) days after the close of each month. Said statements
shall be in reasonable detail satisfactory to the Bank, shall be prepared in
accordance with GAAP, shall include at least a consolidated and consolidating
balance sheet and a consolidated and consolidating statements of operations,
stockholder's equity and cash flow, and shall be accompanied by a schedule
showing computation of financial covenants. Said financial statements shall be
certified to be true and correct to the best knowledge of the Chief Financial
Officer of Borrower. Such financial statements shall be accompanied by a
certificate of the Chief Financial Officer of Borrower to the effect that no
Event of Default has occurred and no condition exists which with the passage of
time or the giving of notice would constitute an Event of Default.
(c) Provide to the Bank interim financial statements, if
any, prepared by the Borrower's or its Subsidiaries' independent accountants.
(d) Provide to the Bank Borrowing Base Reports together
with accounts receivable agings and inventory reports and any changes to the
Dating Account List, on or before the twentieth (20th) day of each calendar
month and more often in the event the Bank so requests. Borrowing Base Reports
must be in the form of Exhibit F attached hereto.
(e) Permit the Bank, at its option, to perform full field
audits of the Borrower's or its Subsidiaries' accounts receivable and
inventories at the Borrower's expense no more than twice during each calendar
year. The Bank reserves the right, in its sole discretion and the Banks expense
(unless there is an Event of Default, in which case it will be at the Borrower's
expense), to perform field audits of the Borrower's or its Subsidiaries'
accounts receivable and inventories more than two (2) times per year, but not
more than four (4) times per
29
year, provided that there shall be no limitation on the number of times the Bank
may perform full field audits during the continuance of an Event of Default.
(f) Permit the Bank to request accounts receivable
verifications from the Borrower's or its Subsidiaries' customers, but prior to
an Event of Default no more than twice per calendar year. These requests will be
done under an assumed name and P.O. Box address or its equivalent.
(g) Furnish to the Bank such additional information,
reports, or financial statements as the Bank may, from time to time, reasonably
request, including, without limitation, lists of vendors and suppliers and
information necessary to monitor Revolving Credit borrowings.
(h) Permit any person designated by the Bank to inspect
the property, assets and books of the Borrower or its Subsidiaries at reasonable
times and, prior to an Event of Default, upon reasonable notice, and shall
discuss its affairs, finances and accounts at reasonable times with the Bank
from time to time as often as may be reasonably requested.
(i) Report immediately to the Bank in writing upon
becoming aware of any noncompliance with any covenant in this Agreement,
including without limitation becoming aware of any noncompliance with Article X
in advance of the date on which the corresponding quarterly financial statements
are due to be delivered to the Bank.
8.2 SEC Reports. Furnish to the Bank, as applicable, copies of all
proxy statements, financial statements and reports which Borrower sends to its
stockholders, and copies of all regular, periodic and special reports, and all
statements which Borrower files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefore, or with any
national securities exchange.
8.3 Taxes. Pay and discharge all taxes, assessments, levies and
governmental charges upon the Borrower or its Subsidiaries, their income and
property, prior to the date on which penalties are attached thereto; provided,
however, that the Borrower or its Subsidiaries may in good faith contest any
such taxes, assessments, levies or charges so long as such contest is diligently
pursued and no lien or execution exists or is levied against any of the
Borrower's or its Subsidiaries' assets related to the contested items.
8.4 Insurance. Maintain or cause to be maintained insurance, of
kinds and in amounts satisfactory to the Bank, with responsible insurance
companies on all of its real and personal properties in such amounts and against
such risks as are prudent, including, but not limited to, full-risk extended
coverage hazard insurance to the full insurable value of real property
(co-insurance not being permitted without the prior written consent of the
Bank), all-risk coverage for personal property, business interruption or loss of
rents coverage, worker's compensation insurance, and comprehensive general
liability and products liability insurance. The Borrower and its Subsidiaries
also shall maintain flood insurance covering any real properties located in
flood zones. The Borrower and its Subsidiaries shall provide to the Bank, no
less often than annually and upon its request, a detailed list and evidence
satisfactory to the Bank of their insurance carriers and coverage and shall
obtain such additional insurance as the
30
Bank may reasonably request. Hazard insurance policies for personalty and
liability insurance policies shall name the Bank as additional insured, as its
interests may appear, and all policies shall provide for at least thirty (30)
days prior notice of cancellation to the Bank.
8.5 Maintenance of Business Assets. At all times maintain,
preserve, protect, and keep its assets in good repair, working order, and
condition and, from time to time, make all needful and proper repairs, renewals,
replacements, betterments and improvements thereto, so that the business of the
Borrower and its Subsidiaries may be properly and advantageously conducted at
all times and the value of the Bank's collateral shall be preserved.
8.6 Maintenance of Real Estate. At all times maintain, preserve
and protect all real estate (including all real estate subject to mortgages in
favor of the Bank) pursuant to commercially reasonable standards and, from time
to time, make needful and proper repairs so that the value of the Bank's
collateral shall be preserved.
8.7 Material Changes, Judgments. Notify the Bank immediately of
any material adverse change in the financial condition of the Borrower or its
Subsidiaries and of the filing of any suits, judgments or liens which, if
adversely determined, could reasonably be expected to have a material adverse
effect on the financial condition, performance or prospects of the Borrower and
its Subsidiaries, taken as a whole, or the business or operations of the
Borrower and its Subsidiaries, taken as a whole.
8.8 ERISA Compliance. Comply in all material respects with the
provisions of ERISA and regulations and interpretations related thereto with
respect to all of its Plans.
8.9 Franchises/Permits/Laws. Preserve and keep in full force and
effect its existence and all franchises, permits, licenses and other authority
as are necessary to enable it to conduct its business as being conducted on the
date of this Agreement and comply in all material respects with all laws,
regulations and requirements now in effect or hereafter promulgated by any
properly constituted governmental authority having jurisdiction over it.
8.10 Payments. Make all payments as and when required by this
Agreement and the notes and other agreements related hereto or to the
Obligations.
8.11 Deposits/Bank Services. Maintain at the Bank all of their
primary depository accounts, with exceptions permitted for accounts maintained
for convenience in other geographical locations for the temporary deposit of
receipts.
8.12 Amendments. Give the Bank written notice of an amendment or
modification to its Certificate of Incorporation or By-Laws other governing
documents or agreements.
8.13 Additional Guarantors. Borrower shall notify the Bank of the
acquisition or creation of any new Subsidiary and cause each Subsidiary created
or acquired after the Closing Date to execute and deliver to the Bank a
Continuing Guaranty, in form and substance satisfactory to Bank, together with
legal opinions in form and substance satisfactory to the Bank opining to the
authorization, validity and enforceability of such Guaranty, and to such other
matters at the Bank may reasonably request.
31
8.14 Further Assurances. Cooperate with the Bank and execute such
further instruments and documents as the Bank shall reasonably request to carry
out the transactions contemplated by this Agreement and the other Loan
Documents.
ARTICLE IX
NEGATIVE COVENANTS OF BORROWER
So long as any Obligations shall be outstanding, or this Agreement
shall remain in effect, unless the Bank otherwise consents in writing, the
Borrower shall not, directly or indirectly, jointly or severally:
9.1 Indebtedness, Mortgages and Liens. Create, incur, assume or
allow to exist, voluntarily or involuntarily, or permit any Subsidiary to
create, incur, assume or allow to exist, voluntarily or involuntarily, any
Indebtedness, excluding only (a) Indebtedness to and interests held by the Bank
and/or its Affiliates, (b) Indebtedness reflected in the Financial Statements
and in Borrower's unaudited financial statements as of and for the six Fiscal
Month period ended on June __, 2003, (c) Indebtedness incurred since June 28,
2003, in the ordinary course of business, (d) Indebtedness described in Schedule
9.1 attached hereto and made a part hereof, which may not be renewed, extended,
amended or modified, (e) Permitted Liens, (f) Indebtedness and interests to
which the Bank consents in writing, (g) Indebtedness of Borrower to any
Subsidiary or of any Subsidiary to Borrower, and (h) amounts payable under or
related to the Royal Acquisition Agreement (collectively, "Permitted
Indebtedness").
9.2 Loans and Investments. Make any loan or advance to, or any
investment in, any person, firm, joint venture, corporation or other entity
whatsoever, or permit any Subsidiaries to do so, except for loans or advances
to, and investments in, Borrower or any Subsidiary and short-term investments in
certificates of deposit of financial institutions and similar investments made
in the ordinary course of business.
9.3 Mergers, Sales and Acquisitions/Change in Ownership Interests.
Exclusive of the Royal acquisition, enter into any merger or consolidation, or
acquire all or substantially all the stock or other ownership interests or
assets of any person, firm, joint venture, corporation, or other entity, or
sell, lease, transfer, or otherwise dispose of any its assets, or permit any
Subsidiaries to do so, except, for (a) non-material assets in the ordinary
course of business, and (b) the merger of Borrower into any Subsidiary or of any
Subsidiary into Borrower (but not reflecting any acquisition of a new
Subsidiary).
9.4 Amendments. Allow the amendment or modification of its
Certificate of Incorporation, By-Laws or other governing documents and
agreements in any material respect without the prior written consent of the
Bank.
9.5 Dividends, Distributions and Stock Repurchases. Make any cash
or property dividends or distributions with respect to any of its shareholder or
ownership interests, or apply any of its property or assets to the purchase,
redemption or other retirement of, or set apart any sum for the payment of any
cash dividends on or distributions with respect to, or for the purchase,
redemption or other retirement of, or make any other distribution by reduction
of capital or otherwise in respect of, any shareholder or ownership interests in
Borrower, except for
32
dividends from a subsidiary to its parent corporation, unless after giving
effect to any such transaction Borrower shall be in compliance with all the
covenants in this Agreement. Notwithstanding the foregoing, Borrower may declare
and pay cash dividends on its outstanding capital stock, provided that (a) no
Default or Event of Default hereunder has occurred and is continuing, or would
result from the payment of such dividends, and (b) unless and until Borrower's
Tangible Net Worth (as defined in the next sentence) is not less than: (i)
$3,500,000 at December 31, 2003; (ii) $5,400,000 from March 31, 2004 to
September 30, 2004; and (iii) $8,000,000 from December 31, 2004 until the
Termination Date. As used in the preceding sentence, "Tangible Net Worth" means
total tangible assets of Borrower (excluding accounts from employees and
Affiliates and any intangible assets or goodwill) as determined by GAAP less the
sum of (1) total liabilities as determined by GAAP, and (2) the amount that any
time prior to the Termination Date is or may become owing in respect of any
callable or redeemable securities issued by Borrower.
9.6 Material Changes. Permit any material change to be made in the
character of the business of Borrower and its Subsidiaries, or in the nature of
their operations as carried on at the date hereof.
9.7 Compensation. Compensate any person or entity, including,
without limitation, salaries, bonuses, consulting fees, or otherwise, in excess
of amounts reasonably related to services rendered to Borrower or its
Subsidiaries.
9.8 Judgments. Allow to exist any judgments against Borrower or
its Subsidiaries in excess of $100,000 which are not fully covered by insurance
or for which an appeal or other proceeding for the review thereof shall not have
been taken and for which a stay of execution pending such appeal shall not have
been obtained.
9.9 Margin Securities. Allow any proceeds of the Obligations to be
used for the purpose of carrying any Margin Securities as defined in Regulation
U of the Board of Governors of the Federal Reserve.
9.10 Subsidiaries. Form, or permit to be formed, any Subsidiary
unless such Subsidiary guarantees all Obligations to the Bank, which guarantee
must be secured by all of its assets pursuant to a guaranty and a security
agreement in form and substance acceptable to the Bank in its sole discretion.
ARTICLE X
FINANCIAL COVENANTS
So long as any Obligations to the Bank shall be outstanding or this
Agreement remains in effect, unless the Bank otherwise consents in writing, the
Borrower shall:
10.1 Average Borrowed Funds to EBITDA. Maintain an Average Borrowed
Funds to EBITDA Ratio no greater than 3.5 to 1.0 measured at the end of each
Fiscal Quarter.
10.2 Minimum Current Ratio. Maintain a minimum Current Ratio equal
to or greater than 1.35 to 1.0 measured at the end of each Fiscal Quarter.
33
10.3 Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage Ratio
equal to or greater than: (i) 0.85 to 1.0 from December 31, 2003, until June 30,
2004; (ii) 1.2 to 1.0 from June 30, 2004, until the Termination Date, and (iii)
2.0 to 1.0 thereafter, each measured at the end of each Fiscal Quarter.
10.4 Net Income. Not have Net Income for any consecutive two (2)
Fiscal Quarters in the same calendar year of less than zero. The foregoing Net
Income covenant will be measured for the first time as of the Fiscal Year ending
December 31, 2003.
10.5 Quarterly Covenant Compliance Sheet. Provide the Quarterly
Covenant Compliance Sheet to the Bank.
ARTICLE XII
ENVIRONMENTAL MATTERS; INDEMNIFICATION
11.1 Environmental Representations. Borrower represents and
warrants that:
(a) Neither the Improvements nor any property adjacent to
the Improvements is being or has been used for the storage, treatment,
generation, transportation, processing, handling, production or disposal of any
Hazardous Substance or as a landfill or other waste disposal site or for the
storage of petroleum or petroleum based products except in compliance with all
Environmental Laws.
(b) Underground storage tanks are not and have not been
located on the Improvements except in compliance with all Environmental Laws
(c) The soil, subsoil, bedrock, surface water and
groundwater of the Improvements are free of any Hazardous Substances, except as
permitted by Environmental Laws.
(d) There has been no Release, nor is there the threat of
a Release of. any Hazardous Substance on, at or from the Improvements or any
property adjacent to or within the immediate vicinity of the Improvements which
through soil, subsoil, bedrock, surface water or groundwater migration could
come to be located on the Improvements, and the Borrower and its Subsidiaries
have not received any form of notice or inquiry from any federal, state or local
governmental agency or authority, any operator, tenant, subtenant, licensee or
occupant of the Improvements or any property adjacent to or within the immediate
vicinity of the Improvements or any other person with regard to a Release or the
threat of a Release of any Hazardous Substance on, at or from the Improvements
or any property adjacent to the Improvements.
(e) All Environmental Permits relating to the Borrower
and its Subsidiaries and the Improvements have been obtained and are in full
force and effect.
(f) No event has occurred with respect to the
Improvements which, with the passage of time or the giving of notice, or both,
would constitute a violation of any applicable Environmental Law or
non-compliance with any Environmental Permit.
34
(g) There are no agreements, consent orders, decrees,
judgments, license or permit conditions or other orders or directives of any
federal, state or local court, governmental agency or authority relating to the
past, present or future ownership, use, operation, sale, transfer or conveyance
of the Improvements which require any change in the present condition of the
Improvements or any work, repairs, construction, containment, clean up,
investigations, studies, removal or other remedial action or capital
expenditures with respect to the Improvements.
(h) There are no actions, suits, claims or proceedings,
pending or threatened, which could cause the incurrence of expenses or costs of
any name or description or which seek money damages, injunctive relief, remedial
action or any other remedy that arise out of, relate to or result from (i) a
violation or alleged violation of any applicable Environmental Law or
non-compliance or alleged non-compliance with any Environmental Permit, (ii) the
presence of any Hazardous Substance or a Release or the threat of a Release of
any Hazardous Substance on, at or from the Improvements or any property adjacent
to or within the immediate vicinity of the Improvements or (iii) human exposure
to any Hazardous Substance, noises, vibrations or nuisances of whatever kind to
the extent the same arise from the condition of the Improvements or the
ownership, use, operation, sale, transfer or conveyance thereof.
11.2 Environmental Covenants. Borrower covenants and agrees with
the Bank that, until the Obligations have been fully satisfied and paid and the
Commitment has been terminated, the Borrower shall:
(a) Comply with, and shall cause its Subsidiaries, all
operators, tenants, subtenants, licensees and occupants of the Improvements to
comply with all applicable Environmental Laws and shall obtain and comply with,
and shall cause all operators, tenants, subtenants, licensees and occupants of
the Improvements to obtain and comply with, all Environmental Permits.
(b) Not cause or permit any change to be made in the
present or intended use of the Improvements which would (i) violate any
applicable Environmental Law, (ii) constitute non-compliance with any
Environmental Permit or (iii) materially increase the risk of a Release of any
Hazardous Substance.
(c) Promptly provide the Bank with a copy of all
notifications which it gives or receives with respect to any past or present
Release or the threat of a Release of any Hazardous Substance on, at or from the
Improvements or any property adjacent to the Improvements.
(d) Undertake and complete all investigations, studies,
sampling and testing and all removal and other remedial actions required by law
to contain, remove and clean up all Hazardous Substances that are determined to
be present at the Improvements in accordance with all applicable Environmental
Laws and all Environmental Permits.
(e) At all times upon prior notice, allow the Bank and
its officers, employees, agents, representatives, contractors and subcontractors
access to the Improvements for the purposes of ascertaining site conditions,
including, but not limited to, subsurface conditions.
35
(f) Deliver promptly to the Bank: (i) copies of any
documents received from the United States Environmental Protection Agency, or
any state, county or municipal environmental or health agency concerning a
Borrower's or its Subsidiaries' operations or the Improvements; and (ii) copies
of any documents submitted by Borrower or its Subsidiaries to the United States
Environmental Protection Agency or any state, county or municipal environmental
or health agency concerning its operations or the Improvements.
(g) If at any time the Bank obtains any reasonable
evidence or information which suggests that a material potential environmental
problem may exist at the improvements, the Bank may require that a kill or
supplemental environmental inspection and audit report with respect to the
Improvements of a scope and level of detail satisfactory to the Bank be prepared
by an environmental engineer or other qualified person acceptable to the Bank at
the Borrower's expense. Such audit may include a physical inspection of the
Improvements, a visual inspection of any property adjacent to or within the
immediate vicinity of the Improvements, personnel interviews and a review of all
Environmental Permits. If the Bank requires, such inspection shall also include
a records search and/or subsurface testing for the presence of Hazardous
Substances in the soil, subsoil, bedrock, surface water and/or groundwater. If
such audit report indicates the presence of any Hazardous Substance or a Release
or the threat of a Release of any Hazardous Substance on, at or from the
Improvements, the Borrower and its Subsidiaries shall promptly undertake and
diligently pursue to completion all necessary, appropriate and legally
authorized investigative, containment, removal, clean up and other remedial
actions, using methods recommended by the engineer or other person who prepared
said audit report and acceptable to the appropriate federal, state and local
agencies or authorities.
11.3 Indemnity. Borrower agrees to indemnify, defend and hold
harmless the Bank from and against any and all liabilities, claims, damages,
penalties, expenditures, losses or charges, including, but not limited to, all
costs of investigation, monitoring, legal representation, remedial response,
removal, restoration or permit acquisition of any kind whatsoever, which may now
or in the future be undertaken, suffered, paid, awarded, assessed, or otherwise
incurred by the Bank (or any other person or entity affiliated with the Bank or
representing or acting for the Bank or at the Bank's behest, or with a claim on
the Bank or to whom the Bank has liability or responsibility of any sort related
to this Section 11.3) relating to, resulting from or arising out of (a) the use
of the Improvements for the storage, treatment, generation, transportation,
processing, handling, production or disposal of any Hazardous Substance or as a
landfill or other waste disposal site, (b) the presence of any Hazardous
Substance or a Release or the threat of a Release of any Hazardous Substance on,
at or from the Improvements, (c) the failure to promptly undertake and
diligently pursue to completion all necessary, appropriate and legally
authorized investigative, containment, removal, clean up and other remedial
actions with respect to a Release or the threat of a Release of any Hazardous
Substance on, at or from the Improvements, (d) human exposure to any Hazardous
Substance, noises, vibrations or nuisances of whatever kind to the extent the
same arise from the condition of the Improvements or the ownership, use,
operation, sale, transfer or conveyance thereof, (e) a violation of any
applicable Environmental Law, (f) non-compliance with any Environmental Permit
or (g) a material misrepresentation or inaccuracy in any representation or
warranty or a material breach of or failure to perform any covenant made by
Borrower in this Agreement. Such costs or other liabilities incurred by the Bank
or other entity described in this Section 11.3 shall be deemed to include,
without limitation,
36
any sums which the Bank deems it necessary or desirable to expend to protect its
security interests and liens.
11.4 No Limitation. The liability of the Borrower under this
Article XI shall in no way be limited, abridged, impaired or otherwise affected
by (a) any amendment or modification of this Agreement or any other document
relating to the Obligations by or for the benefit of the Borrower, its
Subsidiaries or any subsequent owner of the Improvements except for an amendment
or modification which expressly refers to this Article XI, (b) any extensions of
time for payment or performance required by this Agreement or any other document
relating to the Obligations, (c) the release of Borrower, any Subsidiary or any
other person from the performance or observance of any of the agreements,
covenants, terms or conditions contained in this Agreement or any other document
relating to the Obligations by operation of law, the Bank's voluntary act or
otherwise, (d) the invalidity or unenforceability of any of the terms or
provisions of this Agreement or any other document relating to the Obligations,
(e) any exculpatory provision contained in this Agreement or any other document
relating to the Obligations limiting the Bank's recourse, to property encumbered
by any mortgage or to any other security or limiting the Bank's rights to a
deficiency judgment against the Borrower, (f) any applicable statute of
limitations, (g) any investigation or inquiry conducted by or on behalf of the
Bank or any information which the Bank may have or obtain with respect to the
environmental or ecological condition of the Improvements, (h) the sale,
assignment or foreclosure of any interest in collateral for the Obligations, (i)
the sale, transfer or conveyance of all or part of the Improvements, (j) the
dissolution and liquidation of Borrower, (k) the death or legal incapacity of
any individual, (l) the release or discharge, in whole or in part, of Borrower
in any bankruptcy, insolvency, reorganization, arrangement, readjustment,
composition, liquidation or similar proceeding, or (m) any other circumstances
which might otherwise constitute a legal or equitable release or discharge of
Borrower, in whole or in part.
11.5 Survival. Notwithstanding anything to the contrary contained
herein, the liability and obligations of the Borrower under Section 11.3 shall
survive the discharge, satisfaction or assignment of this Agreement by the Bank
and the payment in full of all of the Obligations.
11.6 Investigations. If Borrower defaults on any of its Obligations
pursuant to this Agreement or any other Loan Document, the Bank or its designee
shall have the right, upon reasonable notice to the Borrower, to enter upon the
Improvements and conduct such tests, investigation and sampling, including, but
not limited to, installation of monitoring xxxxx, as shall be reasonably
necessary for the Bank to determine whether any disposal of Hazardous Substances
has occurred on, at or near the Improvements. The costs of all such tests,
investigations and samplings shall be considered as additional indebtedness
secured by all collateral for the Obligations and shall become immediately due
and payable without notice and with interest thereon at the highest rate then
borne by any of the Obligations.
11.7 No Warranty Regarding Information. Borrower agrees that the
Bank shall not be liable in any way for the completeness or accuracy of any
Environmental Report or the information contained therein. The Borrower further
agrees that the Bank has no duty to warn the Borrower, its Subsidiaries or any
other person or entity about any actual or potential environmental contamination
or other problem that may have become apparent or will become apparent to the
Bank.
37
ARTICLE XII
DEFAULTS
12.1 Defaults. The following events (hereinafter called "Events of
Default') shall constitute defaults under this Agreement
(a) Nonpayment. Failure of Borrower to make any payment
of any type under the terms of this Agreement, any of the Notes, or of any of
the agreements contemplated hereunder (including without limitation, the
Reimbursement Agreement), within ten (10) days after the same becomes due and
payable, except that there shall be no ten (10) day grace period for the
Borrower's obligation to reduce the principal balance of the Revolving Credit
Facility if the outstanding principal balance of the Revolving Credit Facility
exceeds the Commitment or the Borrowing Base under Sections 2.1 and 2.2 of this
Agreement.
(b) Performance. Failure of Borrower or any Subsidiary to
observe or perform, as applicable, (i) any of the financial covenants in Article
X of this Agreement or (ii) any other condition, covenant or term of this
Agreement, any Loan Document or any related agreements and documents which is
not cured within thirty (30) days after notice of such failure is sent by the
Bank, and provided that during such thirty (30) day period Borrower and any
affected Subsidiary is diligently and in good faith curing such failure.
(c) Other Obligations. Failure of Borrower or any
Subsidiary to observe or perform any other condition, covenant any other
agreement or instrument with the Bank, M&T Real Estate or any other subsidiary
or affiliate of the Bank after any applicable cure or grace period related
thereto, or default by Borrower under any agreement or instrument involving
borrowed money or the like, or any other agreement with any third person or
entity, which is not terminable on thirty (30) days or less notice or provides
for payment of consideration of more than $100,000 by any party thereafter, but
excluding from the operation of this Subsection (c) of this Section 12.1 the
payment or acceleration of the due date of contingent earn-out payments due
under the Royal Acquisition Agreement which are capable of being paid with
additional Revolving Credit Loans available under the Revolving Credit Facility,
the Earn-Out Letter of Credit or committed third party equity or equity-like
financing.
(d) Representations. Failure of any representation or
warranty made by Borrower or any Subsidiary in connection with the execution and
performance of any Loan Document or any certificate of officers pursuant
thereto, to be truthful, accurate or correct in all material respects.
(e) Financial Difficulties. Financial difficulties of
Borrower or any Subsidiary as evidenced by:
(i) any admission in writing of inability to pay
debts as they become due; or
(ii) immediately upon the filing of a voluntary,
or sixty (60) days after a filing of an involuntary, petition in bankruptcy, or
under any chapters of the Bankruptcy Code, or under any federal or state statute
providing for the relief of debtors; or
38
(iii) making an assignment for the benefit of
creditors; or
(iv) consenting to the appointment of a trustee
or receiver for all or a major part of any of its property; or
(v) the entry of a court order appointing a
receiver or a trustee for all or a major part of its property which is not
bonded, discharged or stayed within sixty (60) days; or
(vi) the occurrence of any event, action, or
transaction that could give rise to a lien or encumbrance on the assets of
Borrower as a result of application of relevant provisions of ERISA.
(f) Change in Control. The occurrence of a Change in
Control.
(g) Security Documents. Borrower or any Subsidiary and/or
any Guarantors, as signatory under any of the Security Documents, shall cause at
any time or if for any reason the Security Documents to: (A) cease to create a
valid and perfected security interest or lien in and to the property purported
to be subject to the same for any reason other than the failure of the secured
parties thereunder to continue any UCC-1 Financing Statement; or (B) cease to be
in full force and effect or shall be declared null and void, or (C) the validity
or enforceability of any Security Document shall be contested by any party
thereto or any party thereto shall deny it has any further liability or
obligations to the secured parties thereunder.
(h) ERISA. Any event occurs or condition exists which,
with notice or lapse of time or both, would make any Plan of Borrower, and
Subsidiary or any Guarantor subject to termination under subsections (1), (2)
and (3) of Section 4042(a) of ERISA, or Borrower, any Subsidiary, any Guarantor
or any of their respective plan administrators shall have received notice from
the PBGC indicating that it has made a determination that any Plan of Borrower,
any Subsidiary or any Guarantor is subject to termination under Section
4042(a)(4) of ERISA, or Borrower, any Subsidiary or any Guarantor is subject to
employer's liability under Section 4062, 4063, or 4064 of ERISA, in each case
under ERISA as now or hereafter amended.
12.2 Remedies. If any one or more Events of Default listed in
Section 12.1(e)(i)-(vi) occur, (a) the Commitment and any further commitments or
obligations of the Bank shall be deemed to be automatically and without need for
further action terminated, and (b) all Obligations of the Borrower to the Bank,
automatically and without need for further action, shall become forthwith due
and payable without presentment, demand, protest, or other notice of any kind,
all of which are hereby expressly waived. If any one or more Events of Default
other than those listed in Section 12.1(e)(i)-(vi) occur, the Bank may, at its
option, take either or both of the following actions at the same or different
times: (i) terminate the Commitment and any further commitments or obligations
of the Bank, and (ii) declare all Obligations of the Borrower to the Bank,
automatically and without need for further action, to be forthwith due and
payable without presentment, demand, protest, or other notice of any kind, all
of which are hereby expressly waived.
In case any such Events of Default shall occur, the Bank shall
be entitled to recover judgment against the Borrower for all Obligations of the
Borrower to the Bank either
39
before, or after, or during the pendency of any proceedings for the enforcement,
of any Security Document and, in the event of realization of any funds from any
security or guarantee and application thereof to the payment of the Obligations
due, the Bank shall be entitled to enforce payment of and recover judgment for
all amounts remaining due and unpaid on such Obligations. The Bank shall be
entitled to exercise any other legal or equitable right which it may have, and
may proceed to protect and enforce its rights by any other appropriate
proceedings, including action for the specific performance of any covenant or
agreement contained in this Agreement and other agreements held by the Bank.
ARTICLE XIII
MISCELLANEOUS
13.1 Waiver. No delay or failure of the Bank to exercise any right,
remedy, power or privilege hereunder shall impair the same or be construed to be
a waiver of the same or of any Event of Default or an acquiescence therein. No
single or partial exercise of any right, remedy, power or privilege shall
preclude other or further exercise thereof by the Bank. All rights, remedies,
powers, and privileges herein conferred upon the Bank shall be deemed cumulative
and not exclusive of any others available.
13.2 Survival of Representations. All representations and
warranties contained herein shall survive the execution and delivery of this
Agreement and the execution and delivery of other agreements hereunder.
13.3 Additional Security/Setoff. The Bank shall have a security
interest in and right of setoff with respect to all deposits or other sums
credited by or due from the Bank to Borrower and a security interest in all
securities or other property of Borrower in the Bank's possession for
safekeeping or otherwise. The Bank's security interest shall secure payment of
the Obligations. In the event of any Event of Default under this Agreement,
regardless of the adequacy of collateral, without any demand or notice, except
as required by applicable law, the Bank may apply or setoff such deposits or
other sums and may sell or dispose of any or all of such securities or other
property and may exercise any and all rights it may have under the New York
Uniform Commercial Code, as in effect from time to time. The rights of the Bank
under this Agreement are in addition to, and not exclusive of, any other rights
it may have with respect to such deposits, sums, securities, or other property
under other agreements or applicable principles of law. The Bank shall have no
duty to take steps to preserve rights against prior parties as to such
securities or other property.
13.4 Notices. Any notice or demand upon any party hereto shall be
deemed to have been sufficiently given or served for all purposes hereof when
delivered in person or by nationally recognized overnight courier with receipt
requested, or two (2) business days after it is mailed certified mail postage
prepaid, return receipt requested, addressed as follows:
If to Bank: Manufacturers and Traders Trust Company
One M&T Place
Buffalo, New York
Attention: Xxxx Xxxxx, Collateral and
Documentation Dept.
40
and
Manufacturers and Traders Trust Company
M&T Place
000 Xxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Assistant Vice
President
If to Borrower: Phoenix Footwear Group, Inc.
0000 Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxx, Chief Financial
Officer
Any party may change, by notice in writing to the other parties, the address to
which notices to it shall be sent.
13.5 Entire Agreement. This Agreement and the Loan Documents embody
the entire agreement and understanding among the parties and supersede all prior
agreements and understandings relating to the subject mailer hereof. This
Agreement shall not be changed or amended without the written agreement of all
parties hereto. This Agreement embodies all commitments to lend between the Bank
and the Borrower and supersedes any prior commitments. No handwritten
modifications or deletions in this Agreement or in any Loan Document shall be
effective unless initialed by a duly authorized representative of the Bank and
the Borrower and/or any other party thereto. This provision shall not apply to
handwritten insertions to complete blanks in the Agreement and/or the Loan
Documents.
13.6 Parties in Interest. All the terms and provisions of this
Agreement shall inure to the benefit of and be binding upon and be enforceable
by the parties and their respective successors and assigns and shall inure to
the benefit of and be enforceable by any holder of notes executed hereunder.
Upon any transfer of any Obligation or any interest therein the Bank may deliver
or otherwise transfer or assign to the holder any collateral or guarantees for
the Obligation, which holder shall thereupon have all the rights of the Bank.
13.7 Business Days. Whenever any payment is due, or obligation is
to be performed hereunder of a Saturday. Sunday, or banking holiday in the State
of New York, such payment may be made or obligation performed on the next
succeeding business day. Such extension of time shall, in such case, be included
in the computation of any interest or fees.
13.8 Severability. In the event that anyone or more of the
provisions contained in this Agreement or any other Loan Document shall, for any
reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or such other Loan Document.
13.9 Governing Law. This Agreement and the Loan Documents, together
with all of the rights and obligations of the parties hereto, shall be
construed, governed and enforced in
41
accordance with the laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
13.10 Participations. The Bank shall have the right to sell or
repurchase participations in the Obligations without giving prior notice to the
Borrower, so long as the Bank retains servicing responsibility with respect to
this Agreement and the transactions contemplated hereby.
13.11 Jurisdiction. Borrower hereby irrevocably and unconditionally
consents to jurisdiction and service of process, which may be effected by
certified mail, in the Supreme Court of the State of New York sifting in Monroe
County, or of the United States District Court for the Western District of New
York. Borrower hereby irrevocably and unconditionally waives any objection it
may have to the laying of venue of any such action, suit or proceeding in any
such court referred to in this Section 13.11. Borrower hereby irrevocably waives
the defense of an inconvenient forum to the maintenance of any such action, suit
or proceeding in any such court.
13.12 Waiver of Trial by Jury. Borrower waives trial by jury of any
claims or proceedings with respect to this Agreement, the Loan Documents, the
Obligations and all matters related hereto to the fullest extent allowed by law.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
MANUFACTURERS AND TRADERS TRUST COMPANY
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: Assistant Vice President
PHOENIX FOOTWEAR GROUP, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxx
Title: Chairman & CEO
[Signature Page to Second Amended and Restated Revolving Credit and Term Loan
Agreement]
