Exhibit 10.24
THIRD AMENDED AND RESTATED
REVOLVING CREDIT AND TERM LOAN AGREEMENT
This THIRD AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT
is made as of the ___ day of July, 2004, 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 Second Amended and Restated
Revolving Credit and Term Loan Agreement dated October 30, 2003 (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 $18,000,000 at all times;
(ii) continue the three existing term loan facilities in the original
principal amounts of $1,500,000, $3,000,000, and $3,000,000, with
current outstanding principal amounts of [$1,325,000], $1,500,000,
and $2,550,000 respectively;
(iii) provide an additional term loan facility in the principal amount of
$10,000,000; 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 Third Amended and Restated Revolving Credit
and Term Loan Agreement, as further amended, modified or restated from time to
time.
"Altama" means Altama Delta Corporation.
"Altama Acquisition Agreement" means the Stock Purchase Agreement
dated as of ___________, 2004 by and among W. Xxxxxxx Xxxxx, Altama, and
Borrower.
"Altama Business" means the combat boot and related products
business operated by Borrower and its Subsidiaries.
"Altama PR" means Altama Delta (Puerto Rico) Corporation.
"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, Xxxxxxx Xxxxx, Xxxxxxx
Xxxx, or Xxxxxxx Xxxxxxxx, 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 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;
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(b) plus 50% of the Eligible Inventories of Borrower and its
Subsidiaries that are used in their business with a $3,500,000 inventory cap for
Borrower, $1,500,000 inventory cap for the Xxxxx Business, $1,500,000 inventory
cap for the Royal Business, and $3,000,000 inventory cap for the Altama
Business;
(c) less a Term Loan Reserve equal to $1,700,000.00, which
$1,700,000.00 amount will be reduced on a dollar-for-dollar basis as quarterly
payments on the Second Term Loan are made; and
(d) 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.
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"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.
"Contingent Earn-Out Amount(s)" means, (i) from July 1, 2004,
through June 30, 2005, $2,500,000 with respect to contingent earn-out
obligations under the Royal Acquisition Agreement, and (ii) from October 3, 2004
through October 1, 2005, $2,000,000 with respect to contingent earn-out
obligations under the Altama Acquisition Agreement.
"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.
"Earn-Out Letter of Credit" has the meaning given to it in the Royal
Acquisition Agreement.
"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 to the accounts of plan participants 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
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(50%) of the outstanding amount from the payor is less than ninety (90) days
beyond date of invoice, minus
(d) contra accounts receivable, minus
(e) Affiliate accounts receivable, minus
(f) 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), minus
(g) employee accounts receivable, minus
(h) xxxx and hold accounts receivable (i.e., accounts relating
to goods not yet shipped but invoiced) except for xxxx and hold U.S. government
receivables related to the Altama Business, minus
(i) uncollectible accounts receivable, accounts minus
(j) receivable arising from progressive xxxxxxxx (i.e.,
accounts receivable from xxxxxxxx for work performed on a partially completed
contract), minus
(k) accounts receivable arising from guaranteed sales with buy
back provisions (i.e., sales in which Borrower is obligated to repurchase
inventory or merchandise sold to customers), minus
(l) 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 minus
(m) 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 except the U.S.
government 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, and all first quality raw
materials inventories owned by Altama, valued at the lower of cost (on a FIFO
basis) or market, minus such reserves as Borrower or a
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Subsidiary has historically established including but not limited to (i)
shrinkage reserves, (ii) markdown reserves, (iii) reserves which restore
standard costs to actual costs and (iv) customer deposits on contracts. Eligible
Inventories do not include:
(a) perishable or non-saleable inventories,
(b) inventory on consignment to or from Borrower or any
Subsidiary,
(c) inventory subject to an Eligible Account,
(d) inventory subject to a Lien other than a Permitted Lien,
(e) 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,
(f) inventory not located on Borrower's or its Subsidiary's
premises within the United States or Puerto Rico, except for inventory held
pursuant to warehousing and distribution arrangements with Xxxxxx Logistics
provided that Xxxxxx Logistics has acknowledged the security interest of the
Bank in form satisfactory to the Bank and the Bank has a perfected first
priority security interest in such inventory,
(g) goods-in-transit,
(h) inventory arising outside of the Borrower's or its
Subsidiary's ordinary course of business,
(i) inventory not at all times subject to the perfected, first
priority security interest of the Bank and no other security interest or lien,
and
(j) inventory subject to a licensing agreement with third
parties, except for the licensing agreements listed on Schedule 1.1 hereto,
unless the Bank shall have received consents, 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.
Eligible Inventories must conform in all respects to warranties contained in
this Agreement and the Loan Documents. 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,
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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.
"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 4 14(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.
"Excess Cash Flow" means, for the applicable period, Net Income plus
income tax expense as recorded in Borrower's consolidated financial statements
less income taxes actually paid plus depreciation and amortization, calculated
according to GAAP, less Unfinanced Capital Expenditures, less the aggregate of
regularly scheduled principal payments of Indebtedness actually paid.
"Financial Statements" means Borrower's audited financial statements
for the Fiscal Year ending December 27, 2003.
"First Term Loan" means the $1,500,000.00 remaining outstanding
balance term loan made by the Bank and reflected in Section 3.1 hereof.
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"First Term Note" means the $1,500,000.00 Amended and Restated First
Term Note (which amended and restated the $2,250,000.00 Amended and Restated
Term Note dated October 20, 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.
"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.
"Fourth Term Loan" means the $10,000,000.00 term loan made by the
Bank and reflected in Section 3.1 hereof.
"Fourth Term Note" means the $10,000,000.00 Fourth Term Note 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
"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, Altama, Altama PR, 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.
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"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 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, (j) all obligations
(including, without limitation, contingent obligations) in respect of bankers'
acceptances, and all net obligations (but not any net asset value) with respect
to Rate Management Transactions. 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, third, or sixth 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.
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"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 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 Interbank 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.
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"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 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.
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"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;
(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
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a Non-Premium Event, during the period ending at the close of business of the
day immediately prior to the Termination 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.
"Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into by
Borrower or its Subsidiaries which is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
forward transaction, currency swap transaction, cross-currency rate swap
transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions) or any combination thereof,
whether linked to one or more interest rates, foreign currencies, commodity
prices, equity prices or other financial measures.
"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
period ending at the close of business of the day immediately prior to the
Termination Date, other than by reason of a Non-Premium Event or the occurrence
of the Termination Date.
"Regulation D" means 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 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.
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"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 $18,000,000.00 Amended and
Restated Revolving Credit Note dated October 30, 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 L, Costa, 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 outsdoor leisure sportswear and related
products business operated by Borrower and its Subsidiaries.
"Scheduled Principal Payments" means (i) all regularly scheduled
principal payments (not including Excess Cash Flow mandatory prepayments) on the
Term Loans, without credit or reduction for any prepayments, and (ii) principal
payments due with respect to other Indebtedness (including among others
capitalized lease payments), but not including Contingent Earn-Out Payments.
"Second Term Loan" means the $2,550,000.00 outstanding principal
balance term loan made by the Bank and reflected in Section 3.2 hereof.
"Second Term Note" means the $2,550,000 Amended and Restated Second
Term Note (which amends and restates the $3,000,000 LIBOR Amended and Restated
Term Note dated October 30, 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.
"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
(including among others consolidated subsidiaries of consolidated subsidiaries).
"Termination Date" means June 30, 2006.
"Term Loans" means, collectively, the First Term Loan, the Second
Term Loan, the Third Term Loan, and the Fourth Term Loan, and "Term Loan" means
any of the Term Loans.
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"Term Notes" means, collectively, the First Term Note, the Second
Term Note, the Third Term Note, and the Fourth Term Note and "Term Note"
means any of the Term Notes,
"Third Term Loan" means the [$1,325,000] outstanding principal
balance term loan made by the Bank pursuant to Article III hereof.
"Third Term Note" means the Amended and Restated Third Term Note
evidencing the Third Term Loan (which amends and restates the $1,500,000 Term
Note dated October 30, 2003, issued by Borrower to Bank), 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
nonrecurring expenses and charges detailed in a letter from Borrower to Bank
dated as of October 30, 2003.
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 $18,000,000, 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.
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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.
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 11:00A.M. (eastern standard time) on the day which is not less than
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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. The Borrower may not have
more than five (5) LIBOR elections in effect at any one time with respect to
Revolving Credit Loans.
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 250 basis points or Prime plus
..25% through December 31, 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 in
substantially the form of Exhibit D to this Agreement, with blanks appropriately
completed. 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.
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.
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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
Altama (including payments of the purchase price, amounts payable under or
pursuant to the Altama Acquisition Agreement, and Indebtedness of Altama
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
(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
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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 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.
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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 maybe.
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 December 31, 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 First Term Loan
(a) First Term Loan. The Bank has made and continues to make
hereunder a loan (the "First Term Loan") to Borrower in the outstanding
principal amount as of the Closing Date of One Million Five Hundred Thousand
Dollars ($1,500,000).
(b) First Term Note. Borrower's obligation to repay the First Term
Loan is evidenced by its $2,250,000 Amended and Restated Term Note dated October
30, 2003 (the "First Term Note"). Borrower acknowledges that the First Term Note
remains in full force and effect and that the terms incorporated by reference
therein are the terms of this Agreement as they have been and in the future may
be further amended.
(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 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 Second Term Loan
(a) Second Term Loan. The Bank has made and continues to make
hereunder a loan (the "Second Term Loan") to Borrower, in the outstanding
principal amount as of the Closing Date of Two Million Five Hundred Fifty
Thousand Dollars ($2,550,000).
(b) Second Term Note. Borrower's obligation to repay the Second Term
Loan is evidenced by its $3,000,000 Amended and Restated Term Note dated October
30, 2003 (the
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"Second Term Note"). Borrower acknowledges that the Second Term Note remains in
full force and effect and that the terms incorporated by reference therein are
the terms of this Agreement as they have been and in the future may be further
amended.
(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 Third Term Loan
(a) Third Term Loan. The Bank has made and continues to make
hereunder a loan (the "Third Term Loan") to Borrower, in the outstanding
principal amount as of the Closing Date of [One Million Three Hundred
Twenty-Five Thousand Dollars ($1,325,000)].
(b) Third Term Note. Borrower's obligation to repay the Third Term
Loan is evidenced by its $1,500,000 Term Note dated October 30, 2003 (the "Third
Term Note"). Borrower acknowledges that the Third Term Note remains in full
force and effect and that the terms incorporated by reference therein are the
terms of this Agreement as they have been and in the future may be further
amended.
(c) Principal Payments on Third Term Loan. Borrower has agreed 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 Fourth Term Loan
(a) Fourth Term Loan. The Bank agrees on the terms and conditions
hereinafter set forth, to make a loan (the "Fourth Term Loan") to Borrower, in
the principal amount of Ten Million Dollars ($10,000,000.00).
(b) Fourth Term Note. Borrower's obligation to repay the Fourth Term
Loan shall be evidenced by its promissory note in substantially the form of
Exhibit C to this Agreement, with blanks appropriately completed.
(c) Principal Payments on Fourth Term Loan. Borrower agrees to pay
the principal amount of the Fourth Term Loan in consecutive monthly installments
each in the amount of $166,667, commencing August 1, 2004, and the entire unpaid
principal amount of the Fourth Term Loan shall be due and payable on July 1,
2009.
3.5 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
275 basis points or Prime plus .375% through December 31, 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
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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.
3.6 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 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.
3.7 Use of Proceeds. The proceeds of the Fourth Term Loan shall be
used by Borrower to fund the acquisition of Altama. 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.
3.8 Prepayment.
(a) Excess Cash Flow Recapture Mandatory Prepayment. On or before
the one-hundredth (100th) day after the end of each of its Fiscal Years, the
Borrower shall prepay the Fourth Term Loan in an amount equal to fifty percent
(50%) of Excess Cash Flow for such Fiscal Year just ended, up to a maximum of
$1,500,000, if the ratio of Average Borrowed Funds to EBITDA as of the last day
of such Fiscal Year is greater than 2.00:1.00. Such mandatory prepayments shall
be applied to unpaid principal of the Fourth Term Loan in inverse order of the
dates on which payments are due thereunder.
(b) Prepayment Premium. 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.
3.9 Applicable Provisions. Sections 2.5, 2.11, 2.12, 2.13, 2.14, and
2,15 also shall apply to the Term Loans.
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
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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 $6,000,000.
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 (1.5%) 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 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
23
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 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.
5.8 Taxes Payable by Borrower. If under applicable law any Tax is
required to be withheld or deducted by the Borrower from, or is otherwise
payable by the Borrower in connection with, any payment to the Bank under the
Loan Documents, the Borrower shall (a) make such withholdings or deductions as
are required by applicable law, (b) pay the full amount withheld or deducted to
the relevant taxation authority or other authority in accordance with applicable
law, and (c) pay to the Bank such additional amounts as may be necessary so that
the net amount received by the Bank with respect to such payment, after
withholding or deducting all Taxes required to be withheld or deducted by the
Borrower, is equal to the full amount payable under the Loan Documents. For
purposes of this Section 5.8, "Tax" means any federal, state or foreign tax
(including any withholding tax), assessment or other governmental charge
(including penalties and interest) upon a Person or upon its assets, revenues,
income or profits.
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 and jurisdictions in which it is required to
qualify or in which failure to qualify could have a material adverse impact on
its business. The jurisdictions of formation and qualification for the Borrower
and each of its
24
Subsidiaries are described in Schedule 6.1. 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. All of
the outstanding shares and other equity interests of each of Borrower's
Subsidiaries are owned by Borrower or a Subsidiary of Borrower.
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 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 the Fiscal Year ended December 27, 2003, 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
25
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 March 27, 2004 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.
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
26
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,
Royal, and Altama, 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:
(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;
27
(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).
6.17 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 and the Fourth Term Loan 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 and Fourth Term Loan is made.
(b) Opinion of Counsel. Borrower and its Subsidiaries shall have
delivered a favorable opinion of their counsel, in form and substance
satisfactory to the Bank.
(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 Guarantors 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
28
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, Altama, and
Altama PR shall have delivered to the Bank (a) certificates of good standing
from appropriate state officials to the effect that the Borrower, Altama, and
Altama PR 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, Altama, and Altama PR in all jurisdictions deemed
necessary by the Bank, all of which shall be satisfactory to the Bank in all
respects.
(i) Altama Acquisition Agreement. The Altama Acquisition Agreement
shall have been executed and delivered setting forth the terms of the Altama
acquisition that are satisfactory to Bank, and the transaction contemplated
thereby shall have been closed. If such closing occurs on the date of this
Agreement, the closing shall be deemed to have preceded the execution of this
Agreement and Altama and Altama PR shall be deemed to be Subsidiaries of the
Borrower at the time of execution of and for purposes of this Agreement.
(j) Equity Capital. The Borrower shall have received at least
$22,000,000 in proceeds (net of expenses and underwriting discounts) in
connection with its 2004 Registration Statement on Form S-2.
(k) Projected Financial Covenants Compliance. The Bank shall have
received evidence satisfactory to the Bank of Borrower's projected compliance
with the Financial Covenants.
(l) No Material Adverse Change. On the date of this Agreement, there
shall have been no change since March 27, 2004 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.
(m) Solvency Certificates. The Bank shall have received reasonably
satisfactory certificates from the Chief Financial Officer of the Borrower,
Altama, and Altama PR as to the financial condition and solvency of each of the
Borrower, Altama, and Altama PR.
29
(n) 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.
(o) 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.
(p) Minimum Borrowing Capacity. The Bank shall have received
evidence of a minimum borrowing capacity of the Borrower of $2,000,000 on the
Closing Date.
(q) 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 with the sole exception of a waiver from the landlord of the
premises occupied by Royal on the Closing Date located in Modesto, California.
7.2 Subsequent Loans and Letters of Credit. The obligation of the
Bank to make any Revolving Credit Loan or issue any Letters of Credit 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, and except for
Section 6.6 which shall be true and correct in all material respects on the date
of this Agreement), 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.
7.3 Notice of Borrowing Representation. 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.
30
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 E 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
31
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 and its Subsidiaries' 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
32
the 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 and its Subsidiaries' 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 of its and its Subsidiaries' 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 and its Subsidiaries' 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 and its Subsidiaries to conduct each of their
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 its and its
Subsidiaries' 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 and its Subsidiaries' Certificates 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 and a general security
33
agreement, 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.
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 three Fiscal
Month period ended March, 2004, (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, (h) amounts payable under or
related to the Royal Acquisition Agreement, and (i) amounts payable under or
related to the Altama 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 Altama 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,
34
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
unless after giving effect to any such transaction Borrower shall be in
compliance with all the covenants in this Agreement. Notwithstanding the
foregoing, (i) Borrower's Subsidiaries may pay dividends from a subsidiary to
its parent corporation, and (ii) Borrower may declare and pay cash dividends on
its outstanding capital stock after December 31, 2005 provided that both (a) no
Default or Event of Default hereunder has occurred and is continuing, or would
result from the payment of such dividends, and (b) Borrower's Average Borrowed
Funds to EBITDA Ratio, on a consolidated basis, is no greater than 2.0 to 1.0.
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 or permit its Subsidiaries to
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, on a consolidated basis, no greater than 3.00 to 1.0
measured at the end of each Fiscal Quarter.
10.2 Minimum Current Ratio. Maintain a minimum Current Ratio, on a
consolidated basis, equal to or greater than 1.35 to 1.0 measured at the end of
each Fiscal Quarter.
35
10.3 Cash Flow Coverage Ratio. Maintain a Cash Flow Coverage Ratio,
on a consolidated basis, equal to or greater than (i) 1.15 on September 30,
2004, (ii) 1.2 to 1 .0 from October 1, 2004, until the Termination Date, and
(ii) an amount set by the Bank thereafter, each measured at the end of each
Fiscal Quarter.
10.4 Net Income. Not have Net Income, on a consolidated basis, for
any consecutive two (2) Fiscal Quarters in the same calendar year of less than
zero.
10.5 Quarterly Covenant Compliance Sheet. Provide the Quarterly
Covenant Compliance Sheet to the Bank within thirty (30) days after the close of
each of its Fiscal Quarters.
ARTICLE XI -
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.
36
(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 noncompliance 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.
37
(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,
38
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
39
environmental contamination or other problem that may have become apparent or
will become apparent to the Bank.
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 Amounts due under (i) 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, and (ii) the Altama Acquisition Agreement which are capable of being
paid with additional Revolving Credit Loans available under the Revolving Credit
Facility 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
40
(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
(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 or any
Subsidiary as a result of application of relevant provisions of ERISA.
(f) 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: (i) 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-I Financing Statement, or (ii) cease to be in
full force and effect or shall be declared null and void, or (iii) 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.l(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.l(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
41
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 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:
42
If to Bank: Manufacturers and Traders Trust Company
One M&T Place
Buffalo, New York
Attention: Xxxx Xxxxx, Collateral and Documentation
Dept.
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
43
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 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 Electronic Communications. Borrowing base and compliance
certificates submitted to the Bank electronically by a representative of the
Borrower shall be deemed to have been submitted and signed by the representative
sending the electronic communication.
13.12 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 13.12. Borrower hereby irrevocably waives
the defense of an inconvenient forum to the maintenance of any such action, suit
or proceeding in any such court.
13.13 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: _______________________________
Name: Xxxxx Xxxxxx
Title: Assistant Vice President
PHOENIX FOOTWEAR GROUP, INC.
By: _______________________________
Name: Xxxxx Xxxxxxx
Title: Chairman
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