EXHIBIT 4.3
CREDIT AGREEMENT
AGREEMENT made as of this 13th day of May, 1997, by and among FLEET
NATIONAL BANK, a national banking association organized under the laws of the
United States having a place of business at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx,
Xxxxx Xxxxxx 00000 ("Fleet"), in its capacity as agent (in the event there is
more than one lender) and as a lender and FRENCH FRAGRANCES, INC., a Florida
corporation, with its principal place of business at 00000 X.X. 00xx Xxxxxx,
Xxxxx Xxxxx, Xxxxxxx 00000 (together with the predecessor Florida corporation,
the "Borrower").
W I T N E S S E T H:
WHEREAS, Borrower and Lenders have agreed to enter into this Credit
Agreement pursuant to which Lenders will make revolving credit advances and
other extensions of credit to Borrower from time to time subject to the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing, Lenders and Borrower
hereby agree as follows:
I. DEFINITIONS
SECTION 1.01. DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings:
"Accounts" shall mean all accounts (as that term is defined in the
Uniform Commercial Code), whether now owned or hereinafter acquired by Borrower
or, for purposes of Section 8.08 hereof, any of its Subsidiaries.
"Advance or Advances" shall mean the individual or aggregate principal
amount advanced by Lenders to Borrower pursuant to Section 2.01 hereof.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such Person.
"Agent" shall mean Fleet, in its capacity as agent for itself and the
other Lenders as appointed pursuant to the provisions of Article XI of this
Agreement, and its successors in such capacity.
"Agreement" shall mean this Credit Agreement, as the same may be
amended, supplemented, extended and modified from time to time by the execution
and delivery of an Amendment Letter or otherwise in accordance with the terms
hereof.
"Amendment Letter" shall mean a letter signed by Lenders and agreed to
by Borrower in substantially the form attached hereto as EXHIBIT A, which letter
shall constitute an amendment to this Agreement, the Notes and the Security
Documents, as appropriate.
"Applicable Eurodollar Rate Margin" shall mean,
if the Funded Debt to then the Applicable
Shareholders Equity Base is Eurodollar Rate Margin is:
--------------------------- --------------------------
greater than
2.00 : 1.00 2.25%
less than or equal to
2.00 : 1.00 but greater than
1.50 : 1.00 2.00%
less than or equal
to 1.50 : 1.00 1.75%.
"Applicable Revolving Funded Debt Rate" shall mean the rate of interest
which corresponds to the Funded Debt to Shareholders Equity Base ratio as
follows:
Funded Debt to
Shareholders Equity Base Interest Rate
------------------------ -------------
greater than 2.00:1.00 Prime Rate + .50%
less than or equal to 2.00:1.00 Prime Rate + .25%
but greater than 1.50:1.00
less than or equal to 1.50:1.00 Prime Rate
"Approved Eligible Accounts Receivable" shall mean Eligible Accounts
Receivable which are not Insured Eligible Accounts Receivable and which are owed
by an account debtor listed on SCHEDULE 1.01(A) to this Agreement. The list of
account debtors may be updated from time to time by Agent without Borrower's
consent in its sole discretion upon Agent's delivery to Borrower of a writing
signed by Agent or a new SCHEDULE 1.01(A), signed at the bottom by Agent.
"Basic Eurodollar Rate" shall mean, for any Interest Period, the rate
of interest per annum determined by Agent (fixed through such Interest Period
(subject to adjustments for the Eurodollar Rate Reserve Percentage), and rounded
upwards, if necessary, to the next 1/16 of 1%) which is equal to the quotient of
(i) either (a) the rate of interest at which Dollar deposits are offered in the
London interbank market in an amount approximately equal to the principal of
such Eurodollar Loan for a period of time equal to such Interest Period as such
rate appears on
-2-
the Telerate Page 3750 as of 11:00 a.m. London time two (2) Business Days prior
to the Business Day on which such Interest Period begins, or (b) if no such rate
appears on the Telerate Page 3750, the rate of interest determined by Agent to
be the average of up to four interest rates per annum at which Dollar deposits
are offered in the London interbank market in an amount approximately equal to
the principal amount of such Eurodollar Loan, for a period of time equal to such
Interest Period as such rates appear on the Xxxxxx'x Screen LIBO Page as of
11:00 a.m. London time two (2) Business Days prior to the Business Day on which
such Interest Period begins so long as at least two such offered rates so appear
on the Xxxxxx'x Screen LIBO Page, or (c) if two such offered rates do not appear
on the Xxxxxx'x Screen LIBO Page, the rate of interest determined by Agent to be
the interest rate per annum at which Dollar deposits are offered to the Agent by
first-class banks in the London interbank market at approximately 11:00 a.m.,
London time, two (2) Business Days prior to the Business Day on which such
Interest Period begins in an amount approximately equal to the principal amount
of such Eurodollar Loan for a period of time equal to such Interest Period and
(ii) a number equal to the number one minus the Eurodollar Rate Reserve
Percentage. The Basic Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurodollar Rate Reserve Percentage.
"Bonus Pool" shall mean bonuses paid to employees, officers and/or
directors as approved by the Board of Directors of the Borrower from time to
time in an amount not to exceed six percent (6%) of the Borrower's pre-tax
profits in any fiscal year.
"Borrowed Money" shall mean, with respect to any Person, all
Indebtedness of such Person representing borrowed money, including, without
limitation, (i) any Indebtedness evidenced by notes, bonds, debentures or
similar obligations, (ii) any Indebtedness representing any obligation for the
deferred purchase price of property or services or an obligation under a
conditional sale or other title retention agreement, (iii) any Indebtedness
representing Capitalized Lease Obligations and (iv) any Indebtedness
representing a reimbursement obligation for any letter of credit or with respect
to any performance bond.
"Borrower" shall mean French Fragrances, Inc., a Florida corporation,
and its successors and assigns to the extent permitted hereunder.
"Borrower Security Agreement" shall mean the Security Agreement, in
such form as Agent shall reasonably require, pursuant to which Borrower grants
to Agent for the ratable benefit of Lenders and to Lenders security interests in
Borrower's Accounts and Inventory.
"Borrowing Base" shall mean, as of any date, the sum of, without
duplication, (i) eighty-five percent (85%) of Insured Eligible Accounts
Receivable determined as of such date, PLUS (ii) eighty-five percent (85%) of
Approved Eligible Accounts Receivable determined as of such date, PLUS, (iii)
eighty percent (80%) of Eligible Accounts Receivable (other than Insured
Eligible Accounts Receivable or Approved Eligible Accounts Receivable)
determined as of such date, PLUS (iv) fifty percent (50%) of Eligible In-House
Inventory; provided that the portion of the Borrowing Base derived from clause
(iv) shall be capped at Twenty Million Dollars ($20,000,000), and provided
further there shall be a reserve against total Eligible In-House Inventory of
One Million Two Hundred Thousand Dollars ($1,200,000). The
-3-
foregoing definition of "Borrowing Base", including the respective percentages
set forth therein, may be amended from time to time by the execution and
delivery of an Amendment Letter or other written instrument executed by Borrower
and Lenders.
"Borrowing Base Certificate" shall mean a certificate of the chief
financial officer of Borrower, in the form attached hereto as EXHIBIT B having
the blanks therein appropriately completed, setting forth in reasonable detail
Eligible Accounts Receivable, Eligible In House Inventory and Eligible Inventory
as of the last day of the preceding month.
"Borrowing Date" shall mean the date an Advance is made to Borrower
pursuant to a Request for Advance.
"Business Day" shall mean any day except a Saturday, Sunday or other
day on which commercial banks in Providence, Rhode Island or London, England are
authorized or required to close.
"Capital Base" shall mean, with respect to any Person, as at any date,
the stockholders' equity of such Person as of such date as determined in
accordance with GAAP, PLUS with respect to the Borrower the principal amount
outstanding under the Subordinated Debentures.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures of such Person for assets which are or should be capitalized, and
the fair value of any assets leased by such Person under any leases which would
be capitalized, under GAAP.
"Capitalized Lease" shall mean any lease which is or should be
capitalized on the balance sheet of the lessee thereunder in accordance with
GAAP.
"Capital Stock" shall mean any and all shares, interests, rights to
purchase, participations or other equivalents of or interests in (however
designated) corporate stock.
"Capitalized Lease Obligations" shall mean, with respect to any Person,
the amount of the liability under all Capitalized Leases of such Person as at
any date, determined in accordance with GAAP.
"Chief Operating Officer Compensation Agreement" shall mean that
certain Chief Operating Officer Compensation Agreement dated as of April 1, 1997
between E.S.B. Consultants, Inc. and Borrower.
"Closing Date" shall mean the effective date on which all of the
conditions precedent to the transactions contemplated pursuant to this Agreement
set forth in Article 6 hereof have been satisfied to Lenders' satisfaction.
"CMLTD" shall mean, with respect to any Person for any fiscal period,
all regularly scheduled principal payments for Borrowed Money in accordance with
GAAP.
-4-
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder, as the same may from time to
time be amended and remain in effect.
"Collateral" shall mean (a) all Inventory, whether now owned or
hereafter acquired, (b) all Accounts, whether now owned or hereafter acquired,
or in which the Borrower (or for purposes of Section 8.08, its Subsidiaries),
may now have or hereafter acquire an interest; (c) all accessions, additions or
improvements to, all replacements, substitutions and parts for, and all proceeds
and products of, all of the foregoing; and (d) all books, records and documents
relating to all of the foregoing.
"Commitment Share" shall mean with respect to the Revolving Credit
Commitment, each Lender's percentage share of the Revolving Credit Commitment,
as set forth opposite such Lender's name on SCHEDULE 1.01(B) attached hereto, as
amended from time to time.
"Commonly Controlled Entity" shall mean any Person (including any
Subsidiary), whether or not incorporated, which is under common control with
Borrower within the meaning of section 414(b) or (c) of the Code.
"Current Assets" shall mean, with respect to any Person, as of any
date, the current assets of such Person as determined in accordance with GAAP.
"Current Liabilities" shall mean, with respect to any Person, as of any
date, the current liabilities of such Person as determined in accordance with
GAAP.
"Delinquent Lender" shall mean any Lender which fails to make available
to Agent such Lender's Commitment Share of any Advance requested or deemed to be
requested by Borrower in accordance with such Lender's obligations under this
Agreement or any Lender which gives Agent written notice that it will not fund
any requested Advance in accordance with such Lender's obligations under this
Agreement after the date of such notice.
"Dollars" and the sign "$" shall mean lawful money of the United States
of America.
"EBITDA" shall mean, with respect to any Person for any period, pre-tax
income (or loss) of such Person for such period, PLUS (i) the sum of (a)
Interest Expense, (b) depreciation, amortization and other non-cash charges, (c)
losses on asset sales, exchanges, transfers or other dispositions, and (d)
extraordinary or other unusual losses or charges, LESS (ii) the sum of (a) gains
on asset sales, exchanges, transfers or other dispositions, (b) extraordinary or
other unusual gains or credits, and (c) income attributable to non-cash items or
other non-cash credits, in each case to the extent included in arriving at such
pre-tax income (or loss) for such period and determined in accordance with GAAP.
"Eligible Accounts Receivable" shall mean the face amount of such of
any of Borrower's trade accounts receivable for goods sold and/or services
rendered by Borrower in the ordinary
-5-
course of its business which satisfy each of the following requirements (unless
waived by Lenders):
(i) the subject goods have been shipped or delivered to an
account debtor (a) on an absolute sale basis and not on consignment,
approval or a sale-or-return basis or subject to any other repurchase
or return agreement, or (b) on an open account basis, in either case
with no part of the subject goods having been returned, rejected, lost
or damaged; PROVIDED, HOWEVER, that if a part of the subject goods have
been returned, rejected, lost or damaged, and Majority Lenders
determine in their sole discretion that such return, rejection, loss or
damage will not affect the likelihood of payment by the account debtor
for the remaining subject goods, the face amount of the account for
such subject goods, less an amount which in the opinion of Majority
Lenders reflect the value of such returned, rejected, lost or damaged
goods, may be included in the computation of Eligible Accounts
Receivable (subject to the other requirements set forth below);
(ii) the account is not evidenced by chattel paper or an
instrument of any kind;
(iii) the account debtor is not insolvent or the subject of
any bankruptcy or insolvency proceeding of any kind;
(iv) the account debtor is located in the United States;
(v) it is a valid, legally enforceable obligation of the
account debtor thereunder and is not subject to any offset (other than
discount for prompt payment consistent with past practices of Borrower)
or other defense on the part of such account debtor or to any claim on
the part of such account debtor denying liability thereunder;
(vi) it is subject to no lien or security interest whatsoever,
except for the security interest of the Agent and the Lenders under the
Security Documents and liens permitted by Section 8.02 hereof;
(vii) it has not remained unpaid for a period exceeding ninety
(90) days after the date of invoice;
(viii) to the extent the obligation is with an account debtor
that is the federal government or a political subdivision thereof and
Borrower has complied with the Federal Assignment of Claim Acts of
1940, and any amendment thereto, with respect to such obligation.
(ix) it does not arise out of a transaction with any Affiliate
of Borrower or any Related Person;
-6-
(x) no more than fifty percent (50%) of the accounts
receivable for the same account debtor shall have remained unpaid for a
period exceeding ninety (90) days after the date of invoice; and
(xi) it is not otherwise determined by Majority Lenders to be
difficult to collect, uncollectible or otherwise unacceptable for any
reason, irrespective of how many days past due, as reasonably
determined by Majority Lenders, which determination shall be final and
binding.
"Eligible In-House Inventory" shall mean Eligible Inventory which as of
the date of determination (a) is located on premises described in SCHEDULE 5.15,
(b) is stored with Majority Lenders' prior written consent with a bailee,
warehouseman or similar party so long as Agent has received from such bailee,
warehouseman or similar party warehouse receipts therefor in Agent's name for
the ratable benefit of Lenders and Lenders and in form and substance
satisfactory to Majority Lenders, or (c) is located at such other in-house
location as shall be approved by Majority Lenders in writing from time to time.
"Eligible Inventory" shall mean the lower of fair market value or cost
of Borrower's inventory of raw materials, work-in-process and finished goods
determined on a consolidated FIFO basis in accordance with GAAP which, as of the
day preceding any calculation of the Revolving Credit Commitment, is in good
condition, meets all standards imposed by any governmental agency or department
or division thereof having regulatory authority over such goods, their use,
manufacture and/or sale, is currently usable or currently saleable in the normal
course of the Borrower's business, is not on consignment to or from any Person
and is not otherwise deemed by the Majority Lenders in their reasonable
discretion to be ineligible.
"Employment Agreement" shall mean that certain Employment Agreement
dated April 1, 1997 between Borrower and Xxxxxx Xxxxxx.
"Environmental Laws" shall mean any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
and the rules and regulations promulgated thereunder, as the same may from time
to time be amended and remain in effect.
"Event of Default" shall have the meaning given to such term in Article
IX hereof.
-7-
"Eurodollar" shall mean deposits of Dollars in an international
banking facility.
"Eurodollar Loan" shall mean all or any portion of the Advances bearing
interest at the applicable Eurodollar Rate designated for the Advances.
"Eurodollar Rate" shall mean the rate of interest per annum equal to
the Basic Eurodollar Rate as in effect from time to time PLUS the Applicable
Eurodollar Rate Margin, in each case fixed for the Interest Period in question
(subject to adjustment, however, as a result of any change in the Basic
Eurodollar Rate based upon a change in the Eurodollar Rate Reserve Percentage).
"Eurodollar Rate Reserve Percentage" shall mean, with respect to any
Interest Period, the maximum effective rate (expressed as a decimal) of the
statutory reserve requirements (without duplication, but including, without
limitation, basic, supplemental, marginal and emergency reserves then in effect)
determined by the Agent from time to time to be applicable to the Agent when
making a Basic Eurodollar Rate determination for such Interest Period, or which
in any other respect relate directly to the funding of Eurodollar Loans, under
regulations of the Board of Governors of the Federal Reserve System (or any
successor), including without limitation Regulation D or any other regulation
dealing with maximum reserve requirements which are applicable to the Agent with
respect to its "Eurocurrency Liabilities," as that term may be defined from time
to time by the Board of Governors of the Federal Reserve System (or any
successor).
"Fine Fragrances" shall mean Fine Fragrances, Inc., a Delaware
corporation and a wholly owned subsidiary of Borrower .
"First Mortgage" shall mean a mortgage granting a first priority
interest in the Headquarter's Location, as security for the Mortgage
Indebtedness.
"Floating Rate Loan" shall mean all or any portion of the Advances
bearing interest at the Applicable Revolving Funded Debt Rate.
"FMG" shall mean Fragrance Marketing Group, Inc., a Florida
corporation.
"FMG Consulting Agreement" shall mean that certain Consulting Agreement
dated as of May 10, 1996 between the Borrower and Xxxx X. Xxxxxx.
"FMG Subordinated Debentures" shall mean those certain 8.5% Junior
Subordinated Debentures due 2004 and in the original principal amount of
$7,100,034.
"FRM Services" shall mean FRM Services, Inc., a Delaware corporation
and wholly-owned subsidiary of Borrower.
-8-
"Funded Debt" shall mean, as of the date of any determination thereof,
the total of all Indebtedness of Borrower including, without limitation, the
Public Debt, the Subordinated Debentures, the Loans and the Mortgage
Indebtedness, but excluding the Halston Royalty Note.
"GAAP" shall mean generally accepted accounting principles consistently
applied.
"G.B. Parfums" shall mean G.B. Parfums, Inc., a Delaware corporation
and wholly owned subsidiary of Borrower.
"G.B. Sublicense Agreement" shall mean that certain Sublicense
Agreement dated April 1, 1995 between Borrower and G.B. Parfums.
"Halston" shall mean Halston Parfums, Inc., a Delaware corporation and
wholly-owned subsidiary of the Borrower.
"Halston License Agreement" shall mean that certain License Agreement
dated as of March 21, 1996 between Borrower and Halston.
"Halston Royalty Note" shall mean that certain $2,000,000 promissory
note of Borrower in favor of Halston Borghese, Inc.
"Headquarter's Location" shall mean the real property owned by Borrower
located at 00000 X.X. 00xx Xxxxxx, Xxxxx Xxxxx, Xxxxxxx 00000.
"Xxxxxx" shall mean Xxxxxx Financial, Inc.
"Xxxxxx Factoring Agreement" shall mean that certain Accounts Credit
and Servicing Agreement dated July 13, 1993, among Borrower and Xxxxxx.
"Xxxxxx Intercreditor Agreement" shall mean that certain letter
agreement dated July 8, 1993 among Fleet, Borrower and Xxxxxx.
"Indebtedness" shall mean, with respect to any Person, all items which
in accordance with GAAP should be included as liabilities on the balance sheet
of such Person as at the date as of which Indebtedness is to be determined, and,
in any event, shall include the following, without limitation or duplication:
(a) all Borrowed Money of such Person (b) all obligations secured by any
mortgage, pledge, lien or conditional sale or other title retention agreement to
which any property or asset owned or held by such Person is subject, whether or
not the obligations secured thereby shall have been assumed, (c) all obligations
of others which such Person has directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business),
discounted or sold with recourse or agreed (contingently or otherwise) to
purchase or repurchase or otherwise acquire, or in respect of which such Person
has agreed to supply or advance funds (whether by way of loan, stock purchase,
capital contribution or otherwise) or otherwise to become directly or indirectly
liable, and (d) all obligations with respect to any letters
-9-
of credit issued on behalf of such Person to any beneficiary or with respect
to which such Person has any reimbursement obligations.
"Insured Eligible Accounts Receivable" shall mean Eligible Accounts
Receivable, the collection of which is fully insured by Xxxxxx pursuant to the
Xxxxxx Factoring Agreement or other factor reasonably satisfactory to Agent such
other agreement which, as of the date of determination of Insured Eligible
Accounts Receivable, is in full force and effect, such agreement to be
reasonably satisfactory to Agent. For the purposes of this definition, "Eligible
Accounts Receivable" shall include accounts with an account debtor that is the
federal government or a political subdivision thereof, although Borrower may not
have complied with the Federal Assignment of Claims Acts of 1940, or any
amendment thereto, with respect to such obligation. Any such Insured Eligible
Account Receivable shall be an "Approved Account" under the Xxxxxx Factoring
Agreement or shall be otherwise approved by such other factor under its
operative agreement, and shall be included in the Borrowing Base only (i) to the
extent of the amount thereof approved by Xxxxxx or other factor and (ii) so long
as all or any portion thereof is not subject to return or reassignment under the
Xxxxxx Factoring Agreement or any such other operative agreement, in each case
as of the date of determining the Borrowing Base.
"Interest Adjustment Date" shall mean (i) as to any Floating Rate Loan,
the Business Day elected by the Borrower in its applicable Interest Rate
Election as the Business Day on which such Floating Rate Loan is to convert to a
Eurodollar Loan; PROVIDED, HOWEVER, that such Business Day shall be at least two
(2) Business Days after receipt by the Agent of an Interest Rate Election
changing the interest rate on such Floating Rate Loan to the Eurodollar Rate in
accordance with Section 3.01 hereof, and (ii) as to any Eurodollar Loan, 12:00
Noon (Providence, Rhode Island time) on the last Business Day of the Interest
Period pertaining to such Eurodollar Loan.
"Interest Expense" shall mean, with respect to any Person, for any
fiscal period, the interest expense of such Person and its Subsidiaries for such
fiscal period, determined on a consolidated basis in accordance with GAAP.
"Interest Period" shall mean, with respect to any Eurodollar Loan, each
one (1), two (2), three (3) or six (6) month period of a Eurodollar Loan
selected by the Borrower in its Interest Rate Election and commencing on (i) the
Borrowing Date for such Eurodollar Loan, (ii) the Interest Adjustment Date for
the immediately preceding Interest Period applicable to any Eurodollar Loan
continuing as a Eurodollar Loan or (iii) the Interest Adjustment Date applicable
to any Floating Rate Loan changing to a Eurodollar Loan, as the case may be;
PROVIDED, HOWEVER, that (x) any Interest Period (other than an Interest Period
determined pursuant to clause (z) below) which would otherwise end on a day
which is not a Business Day shall be extended to the next Business Day unless
such Business Day falls in another calendar month, in which case such Interest
Period shall end on the immediately preceding Business Day; (y) any Interest
Period which begins on the last Business Day of the calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall, subject to clause (z) below, end on the last
Business Day of a calendar month; and (z) no Interest Period for Advances shall
end after the Revolving Credit Maturity Date.
-10-
"Interest Rate Election" shall mean an irrevocable notice to the Agent
by an authorized officer of the Borrower given in accordance with Section 3.01
hereof that the Eurodollar Rate or the Applicable Revolving Funded Debt Rate
shall apply or continue to apply to all or any portion of the Advances with any
such written notice or confirmation of telephonic notice to be in the form of
EXHIBIT C attached hereto, with all blanks therein appropriately completed.
- "Inventory" shall mean all inventory (as that term is defined in the Uniform
Commercial Code), whether now owned or hereinafter acquired by Borrower or, for
purposes of Section 8.08 hereof, any of its Subsidiaries
"Lease" shall mean that certain Lease dated July 2, 1992 between NTM
and Borrower covering the premises at 00000 X.X. 00xx Xxxxxx, Xxxxx, Xxxxxxx.
"Lender" or "Lenders" shall mean Fleet together with any other bank or
financial institution which becomes a party to this Agreement.
"Letters of Credit" shall mean any commercial letter of credit
(commercial or standby) issued by Agent pursuant to the terms hereof and
pursuant to the Letter of Credit Application.
"Letter of Credit Application" shall mean that certain Application and
Agreement for Commercial Letter of Credit dated as of March 14, 1996, as the
same may be amended, supplemented, altered or modified from time to time
hereafter and any other letter of credit applications required by Agent in
connection with the issuance of any Letters of Credit.
"Letter of Credit Documents" shall mean the Letter of Credit
Application, any issued Letter of Credit and any other application or agreement
in the form customarily used by Agent for or in connection with the issuance of
commercial letters of credit.
"Letter of Credit Reimbursement Obligations" shall mean any and all
obligations of the Borrower under the Letter of Credit Documents to reimburse
the issuer upon the occurrence of any draw under any Letter of Credit.
"Loans" shall mean the Advances and the issuance of Letters of Credit
and any other loans or advances made by Lenders from time to time.
"Loans Outstanding" shall mean, with respect to any Lender, the sum of
(x) the aggregate outstanding principal amount of Loans made by such Lender to
Borrower, PLUS (y) the stated undrawn amount of any outstanding Letter of Credit
issued by such Lender (or its risk participation thereon, as the case may be),
PLUS (z) the aggregate amount of unpaid Letter of Credit Reimbursement
Obligations due to such Lender (or its risk participation therein, as the case
may be).
"Majority Lenders" shall mean those Lenders whose hold sixty-six and
two-thirds percent (66-2/3%) or more of the Revolving Credit Commitment.
-11-
"Mortgage Indebtedness" shall mean a mortgage loan in the original
principal amount of $6,000,000 to Borrower from Westmark Commercial Mortgage
Fund II.
"Multiemployer Plan" means a multiemployer plan as defined in Title IV
of ERISA.
"Notes" shall mean collectively, the Revolving Credit Notes issued
hereunder, each as may be amended, supplemented, extended and modified from time
to time in accordance with the terms hereof.
"NTM" shall mean National Trading Manufacturing, Inc., a Florida
corporation.
"Operating Cash Flow" shall mean, with respect to any Person for any
fiscal period, the net income of such Person and its Subsidiaries (after
provision for income taxes) for such fiscal period, PLUS Interest Expense paid
or accrued on all interest-bearing obligations of Borrower and its Subsidiaries
and MINUS interest income and dividends earned during such fiscal period, PLUS
any income taxes paid, accrued or deferred and MINUS any income tax credits
received or accrued for such fiscal period, PLUS any losses and MINUS any gains
of such Person and its Subsidiaries attributable to dispositions of assets
during such fiscal period, PLUS any other extraordinary losses or charges and
MINUS any other extraordinary gains or credits of such Person and its
Subsidiaries for such fiscal period, all determined on a consolidated basis in
accordance with GAAP.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" shall mean any individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Plan" shall mean an employee benefit plan as defined in Section 3 of
ERISA maintained for employees of Borrower or any Commonly Controlled Entity.
"Prime Rate" shall mean the floating rate of interest designated by
Agent from time to time as being its "prime rate" of interest.
"Public Debt" shall mean those $115,000,000 10-3/8% Senior Notes Due
2007 of the Borrower issued on May 13, 1997, including any and all Subsidiary
guarantees issued from time to time in respect thereof.
"Public Offering" shall mean the sale by Borrower of equity securities
of Borrower to the public pursuant to an offering registered under the
Securities Act of 1933, as amended.
"Purchase-Money Indebtedness" shall mean, with respect to any Person,
Indebtedness of such Person incurred to acquire assets in the ordinary course of
such Person's business, which Indebtedness is secured by purchase-money liens or
other liens of a conditional vendor; provided, however, that the Indebtedness
secured thereby shall not exceed the cost thereof and
-12-
PROVIDED FURTHER that such Indebtedness shall not otherwise be prohibited by
the terms of this Agreement.
"Related Person" shall mean, with respect to any Person, any director,
executive officer, partner or stockholder of such Person, and any spouse,
brother, sister, child or parent of such director, executive officer, partner or
stockholder.
"Reportable Event" shall have the meaning assigned to that term in
Title IV of ERISA, but shall exclude events the reporting of which is waived
under regulations promulgated under Title IV of ERISA.
"Request for Advance" shall mean Borrower's telephonic or written
request for an Advance, any such written request to be substantially in the form
of EXHIBIT C attached hereto and made a part hereof, appropriately completed and
signed by a duly authorized officer of Borrower. Each such request shall
indicate the Borrowing Date and the amount of the Advance requested.
"Reuter's Screen LIBO Page" means the display designated as Page "LIBO"
on the Reuters Monitor Money Rate Service (or such other page as may replace the
LIBO page on that service for the purpose of displaying London interbank offered
rates of major banks).
"Revolving Credit Commitment" shall mean the aggregate maximum
principal amount of the commitment of Lenders to make Advances under the
Revolving Credit Facility from time to time as set forth in Section 2.03 hereof,
as such maximum amount is adjusted from time to time in accordance with Section
2.03 hereof.
"Revolving Credit Facility" shall mean the Forty Million Dollars
($40,000,000) revolving credit facility available to the Borrower pursuant to
the provisions of Article II hereof and subject to the other terms and
conditions of this Agreement.
"Revolving Credit Maturity Date" shall mean May 31, 1999, as extended
from time to time by the execution and delivery of an Amendment Letter or other
written instrument executed and delivered by Lenders Agent hereunder.
"Revolving Credit Note" or "Revolving Credit Notes" shall mean the
secured revolving credit notes of Borrower issued to Lenders in the aggregate
principal amount not to exceed Forty Million Dollars ($40,000,000) and
substantially in the form attached hereto as EXHIBIT D, which promissory notes
evidence the obligations of Borrower to repay Lenders the Advances made by
Lenders under the Revolving Credit Facility, which notes are hereby incorporated
herein by reference and made a part hereof, as such Revolving Credit Notes may
be amended, extended or renewed from time to time by the execution and delivery
of an Amendment Letter or other written instrument executed and delivered by
Lenders hereunder.
"Security Documents" shall mean all of the documents and instruments
described in Section 4.02 hereof providing security for Agent for the ratable
benefit of Lenders and Lenders
-13-
for the Notes, the Letters of Credit and for all fees and other sums due under
this Agreement and the Security Documents, as the same may be amended,
supplemented, restated or otherwise modified from time to time in accordance
with the terms thereof.
"7.5% Convertible Debentures" shall mean 7.5% Subordinated Convertible
Debentures Due 2006 issued by the Borrower.
"Shareholders Equity Base" shall mean, with respect to any Person, as
at any date, the stockholders' equity of such Person as of such date as
determined in accordance with GAAP.
"Single Employer Plan" shall mean any Plan which is not a Multiemployer
Plan.
"Subordinated Creditors" shall mean the holders of the Subordinated
Debentures.
"Subordinated Debentures" shall mean FMG Subordinated Debentures and
the 7.5% Convertible Debentures.
"Subsidiary" shall mean collectively, G.B. Parfums, Halston, Fine
Fragrances, FRM Services and any other corporation or other entity of which the
Capital Stock or other ownership interests having voting power to elect a
majority of the board of directors or other persons performing similar functions
is owned by (i) the Borrower, (ii) the Borrower and one or more of its
Subsidiaries or (iii) one or more Subsidiaries of the Borrower.
"Telerate Page 3750" means the display designated as page "3750" on the
Telerate Service (or such other page as may replace the 3750 page on that
service or such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank offered
rates for U.S. dollar deposits).
"Transaction Documents" shall mean this Agreement, the Notes, the
Security Documents, and any and all other agreements, documents and instruments
executed or delivered in connection herewith or therewith to which Lenders are a
party or which is issued in its favor pursuant to the terms hereof or thereof.
SECTION 1.02. CONSTRUCTION OF CERTAIN TERMS.
(a) The term "Consolidated", when used with reference to any term
defined herein, shall mean that term as applied to the accounts of a Person and
all of its Subsidiaries, or such of its Subsidiaries as may be specified, which
should be consolidated in accordance with GAAP, with appropriate deductions for
minority interests in Subsidiaries.
(b) Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and, except as provided in the proviso of the succeeding sentence, all financial
statements required to be delivered hereunder shall be prepared, in accordance
with GAAP as in effect at the time of such preparation. In the event that
changes in GAAP accounting principles occur and such changes
-14-
result in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, the parties agree to negotiate in good
faith to amend such provisions of this Agreement as shall be necessary to
equitably take into account such change with the desired result that the
criteria for evaluating Borrower.
II. GENERAL TERMS OF REVOLVING CREDIT FACILITY
SECTION 2.01. ADVANCES UNDER THE REVOLVING CREDIT FACILITY.
(a) Subject to the terms and conditions contained in this Agreement,
from time to time from the Closing Date to and including the Business Day
preceding the Revolving Credit Maturity Date, each Lender severally and not
jointly agrees to loan to Borrower such Lender's Commitment Share of Advances as
may be requested by Borrower under the Revolving Credit Facility in accordance
with the terms hereof; PROVIDED, HOWEVER, in no event shall the aggregate amount
of Advances outstanding exceed at any time the Revolving Credit Commitment as in
effect at such time. Borrower and each Lender acknowledges that each such
Lender's Revolving Credit Commitment shall be the percentage set forth on
SCHEDULE 1.01(B) hereto. Each Advance shall be in an amount of at least Fifty
Thousand Dollars ($50,000), or, if a greater amount, in integral multiples of
Fifty Thousand Dollars ($50,000). From the Closing Date to and including the
Business Day preceding the Revolving Credit Maturity Date and within the
Revolving Credit Commitment limits, Borrower may borrow, prepay (subject to
Section 2.06 and Section 3.02 hereof) and reborrow under this Section 2.01 by
submitting to Agent a Request for Advance or by telephonic notice to Agent
confirmed by a Request for Advance telecopied to Agent on the same day as such
telephonic notice is given. Each Request for Advance or telephonic notice
thereof shall be delivered or given by Borrower to Agent at least one (1)
Business Day prior to the Borrowing Date. Lenders shall not be obligated to make
any Advance if after giving effect to the making of such Advance, the aggregate
amount of Advances outstanding would exceed the Revolving Credit Commitment as
then in effect; PROVIDED, HOWEVER, a Lender may make an Advance which causes the
aggregate amount of Advances outstanding under such Lender's Revolving Credit
Note to exceed its Commitment Share to the extent a Delinquent Lender has failed
to make available to Agent its Commitment Share of any Advance requested or
deemed to be requested by Borrower in accordance with such Delinquent Lender's
obligations under this Agreement, but only if such Lender shall have determined
in its sole discretion that such Advance satisfies the credit standards of such
Lender and the aggregate amount of Advances outstanding would not exceed the
Revolving Credit Commitment as then in effect.
(b) Agent shall telephone each Lender promptly upon receipt of a Request
for Advance under the Revolving Credit Facility, and shall telex or telecopy
copies thereof to each Lender, within one (1) Business Day of such telephonic
communication. Subject to the other provisions of this Section 2.01, not later
than 11:00 A.M. (Providence, Rhode Island time) on the Borrowing Date specified
in such notice, each Lender shall make available to Agent, in immediately
available funds, at Agent's office at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx
Xxxxxx 00000, such Lender's Commitment Share of the requested Advance. Upon
receipt by Agent of the funds contemplated by this paragraph (b), and upon
satisfaction of the conditions set forth in Article VI hereof as determined in
good faith by Agent, Agent shall promptly disburse such funds to
-15-
Borrower. Should any Lender fail to make its Commitment Share of the requested
Advance available at the office of Agent prior to 11:00 A.M. (Providence, Rhode
Island time) on the Borrowing Date specified in the notice to such Lender, such
default shall not affect the obligation of the other Lenders to make available
their respective Commitment Shares of the requested Advance, Agent shall notify
Borrower of such default and Agent may, but shall not be obligated to, advance
to Borrower on such Lender's behalf, out of funds otherwise available to Agent,
such Lender's Commitment Share of such Advance, or a portion thereof; PROVIDED,
HOWEVER, Agent shall not be authorized to make any such advance on behalf of any
such Lender if prior to 11:00 A.M. (Providence, Rhode Island time) on such
Borrowing Date, Agent shall have received a written instrument signed by a duly
authorized officer of such Lender revoking Agent's authority hereunder or
stating that such Lender's Commitment Share is not required to be advanced
pursuant to this Section 2.01. If Agent advances such Lender's Commitment Share
of such Advance or a portion thereof as permitted hereby, Agent shall notify the
Delinquent Lender of such funding by Agent on the date of funding and such
Lender shall reimburse Agent in full therefor within one (1) Business Day after
the date of such Advance, together with interest on the principal amount so
advanced by Agent at a rate per annum equal to the interest rate payable by
Borrower from time to time on such Advance or portion thereof while it is
outstanding.
SECTION 2.02. REVOLVING CREDIT NOTES.
The Advances made by Lenders pursuant to Section 2.01 hereof shall be
evidenced by the Revolving Credit Notes issued by Borrower to the order of
Lenders in the original principal amount of Forty Million Dollars ($40,000,000).
SECTION 2.03. THE REVOLVING CREDIT COMMITMENT.
(a) The Revolving Credit Commitment shall be equal to the
lesser of:
(i) the Borrowing Base as in effect from time to time, or
(ii) Forty Million Dollars ($40,000,000).
(b) The Borrowing Base shall be adjusted upon Agent's review and
acceptance of (i) each monthly Borrowing Base Certificate submitted by Borrower
or (ii) any additional information obtained by Agent (including any Request for
Advance or updated Borrowing Base Certificates) relating to the determination of
Eligible Accounts Receivable and Eligible Inventory.
(c) Borrower may, at its option, upon prepayment of all outstanding
principal of and interest on the Revolving Credit Notes in accordance with the
terms of Section 2.06 hereof, and upon thirty (30) days' prior written notice to
Agent, cancel the Revolving Credit Commitment. Borrower may, at its option, upon
thirty (30) days' prior written notice to Agent, but not more frequently than
two (2) times in any fiscal year of Borrower, reduce the Revolving Credit
Commitment by an amount not less than One Hundred Thousand Dollars ($100,000),
or, if a greater amount, in integral multiples of Fifty Thousand Dollars
($50,000); PROVIDED, HOWEVER, that the Revolving Credit Commitment shall not at
any time be reduced by operation of this
-16-
Section 2.03(c) to an amount less than the aggregate unpaid principal amount
then outstanding under the Revolving Credit Notes and to an amount equal to the
face amount of any Letters of Credit still outstanding. Any such reduction or
cancellation shall be irrevocable and shall not affect any of the obligations or
liabilities of Borrower to Lenders under the Revolving Credit Notes (except to
the extent prepaid).
SECTION 2.04. INTEREST ON THE REVOLVING CREDIT NOTE.
The aggregate principal amount of Advances outstanding under the
Revolving Credit Notes shall bear interest, commencing on the Borrowing Date for
such Advances and continuing until payment in full thereof, at either (i) the
Applicable Revolving Funded Debt Rate with calculation of the appropriate Funded
Debt to Shareholders Equity Base ratio on a quarterly basis or (ii) the
applicable Eurodollar Rate for the applicable Interest Period. The Applicable
Revolving Funded Debt Rate shall also change upon changes in the Prime Rate and
such changes shall become effective on the effective date of such change in the
Prime Rate. The Borrower's rights to election of a Eurodollar Rate are more
specifically set forth in Section 3.01 hereof, but are subject to the provisions
of Section 3.02 hereof. Interest shall be payable monthly in arrears on the
first day of each month, commencing June 1, 1997 and continuing on the first day
of each month thereafter until payment in full, and on the Revolving Credit
Maturity Date; provided, however that in addition to any such monthly payment of
interest, all accrued and unpaid interest outstanding under any Eurodollar Loan
shall be paid in full on the Interest Adjustment Date for such Eurodollar Loan.
Interest shall be calculated on the basis of a year of 360 days, counting the
actual number of days elapsed.
SECTION 2.05. MANDATORY REPAYMENT OF ADVANCES.
(a) In the event the outstanding aggregate principal amount of Advances
as of any date exceeds the Revolving Credit Commitment as in effect for such
date, Borrower shall immediately pay to Agent, on behalf of Lenders, without
further notice or demand, the amount by which the outstanding aggregate
principal amount of Advances exceeds the Revolving Credit Commitment for such
date. Any such payment shall be applied to outstanding Floating Rate Loans or to
Eurodollar Loans, if any, which have an Interest Adjustment Date on the date
such payment is due, as designated by Borrower; PROVIDED, HOWEVER, that in the
absence of a designation by the Borrower that such payment is a payment of
Floating Rate Loans or Eurodollar Loans, the Agent shall apply such payment
first to outstanding Floating Rate Loans with any balance applied to Eurodollar
Loans, which balance shall be applied first to those Eurodollar Loans with an
Interest Adjustment Date on the payment date. If any such payment is applied to
Eurodollar Loans, such payment shall be accompanied by amounts, if any, due
under Section 3.02(e) with respect to the Eurodollar Loans being paid.
(b) The aggregate principal amount of Advances outstanding under the
Revolving Credit Notes, together with all unpaid interest thereon, shall be
payable in full on the Revolving Credit Maturity Date.
-17-
(c) The outstanding aggregate principal amount of Advances shall
otherwise be payable in accordance with this Article II and the provisions of
the Revolving Credit Notes.
SECTION 2.06. VOLUNTARY PREPAYMENT OF ADVANCES.
Subject to the provisions of this Agreement, Borrower may prepay the
Advances outstanding under the Revolving Credit Notes, in whole at any time or
in part from time to time, upon not less than one (1) Business Day's prior
written or telephonic notice to Agent; PROVIDED, HOWEVER, that any such
prepayment shall be made only on a Business Day and each partial prepayment
shall be in an amount equal to at least Fifty Thousand Dollars ($50,000), or, if
a greater amount, in integral multiples of Fifty Thousand Dollars ($50,000) AND
PROVIDED further, that any such repayment of principal of a Eurodollar Loan
shall be made only on the Interest Adjustment Date for such Eurodollar Loan
(unless accompanied by amounts, if any, due under Section 3.02(e) hereof) and
any partial repayment of principal of a Eurodollar Loan shall be in an amount so
that such outstanding Eurodollar Loan remains in a principal amount of Five
Hundred Thousand Dollars ($500,000) or, if a greater amount, in integral
multiples of One Hundred Thousand Dollars ($100,000). Any such telephonic notice
shall be confirmed in writing by letter mailed or telecopied to Agent on the
same day as the telephonic notice. Each such notice or confirmation shall
specify the prepayment date and the principal amount of the Advances to be
prepaid. All repayments shall be applied by the Agent to outstanding Floating
Rate Loans, or to Eurodollar Loans, if any, which have an Interest Adjustment
Date on the date such payment is to be made as designated by the Borrower;
PROVIDED, HOWEVER, that in the absence of a designation by Borrower that such
repayment is a payment of Floating Rate Loans or Eurodollar Loans, the Agent
shall apply such payment first to outstanding Floating Rate Loans with any
balance applied to Eurodollar Loans, which balance shall be applied first to
those Eurodollar Loans with an Interest Adjustment Date on the repayment date.
If any such repayment is applied to Eurodollar Loans, such repayment shall be
accompanied by amounts, if any, due under Section 3.02(e) hereof with respect to
any Eurodollar Loan so repaid. Any Advances so repaid pursuant to this Section
2.06 (and not constituting a permanent reduction or cancellation of the
Commitment pursuant to Section 2.03(c)) may be reborrowed from time to time by
the Borrower within the Revolving Credit Commitment limits, and in accordance
with the terms and provisions of this Agreement.
SECTION 2.07. REVOLVING CREDIT UNUSED COMMITMENT FEE.
Borrower hereby agrees to pay to Agent for the account of each Lender
computed from the Closing Date to and including the Revolving Credit Maturity
Date, a revolving credit commitment fee in an amount equal to .375% of the
average daily unused portion of the Revolving Credit Commitment (as in effect as
of the date of any determination thereof, giving effect to any adjustment
pursuant to Section 2.03), payable quarterly in arrears, commencing July 31,
1997 and continuing on the last day of each October, January, April and July
thereafter and payable upon payment in full of the Revolving Credit Notes and
cancellation of the Revolving Credit Commitment, and on the Revolving Credit
Maturity Date. Such fee shall be computed on the basis of a 360-day year,
counting the actual number of days elapsed.
-18-
SECTION 2.08. AGENT'S ADMINISTRATIVE FEE.
Borrower hereby agrees to pay to Agent for the account of the Agent
computed from the Closing Date to and including the Revolving Credit Maturity
Date, an administrative fee equal to Twenty Thousand Dollars ($20,000) per annum
(the "Administrative Fee"), payable to the Agent quarterly in arrears,
commencing July 31, 1997 and continuing on the last day of each October,
January, April and July thereafter. Such fee shall be computed on the basis of a
360 day year, counting the actual number of days elapsed. In the event there
have been no Advances made by Lender under the Revolving Credit Facility at any
time during any quarter, Agent agrees to waive the Administrative Fee for the
corresponding quarter period.
SECTION 2.09. USE OF PROCEEDS.
The proceeds of the Advances shall be used by Borrower solely to
finance general corporate and working capital requirements of Borrower.
SECTION 2.10. ENDORSEMENTS.
Borrower hereby authorizes each Lender to endorse on the last page of
its Revolving Credit Note or to enter into such Lender's internal records an
appropriate notation evidencing the making of each Advance, the interest rate(s)
in effect under such Revolving Credit Note, each change in such rate(s), and
each repayment or prepayment of Advances. In the absence of manifest error, such
notations and such Lender's records containing such notations shall constitute
presumptive evidence of the facts stated therein, including, without limitation,
the outstanding amount of Advances and all amounts due and owing to such Lender
at any time. Any such notations and such Lender's records containing such
notations may be introduced in evidence in any judicial or administrative
proceeding relating to this Agreement, the Loans or the Revolving Credit Notes.
No Lender shall have liability for its failure to make such notations and any
such failure shall not affect the obligations of Borrower hereunder or under the
Revolving Credit Notes.
SECTION 2.11. FACILITY FEES.
In consideration of the issuance of Lenders' commitment to enter into
this Agreement, and its processing and review of matters relating to the Loans
and the purposes thereof, including its due diligence in respect thereof,
Borrower hereby agrees to pay to Agent on behalf of Lenders a facility fee equal
to one quarter of one percent (.25%) of the Revolving Credit Facility
($100,000).
-19-
III. SPECIAL PROVISIONS REGARDING INTEREST RATES UNDER THE LOANS.
SECTION 3.01. SPECIAL PROVISIONS RELATING TO INTEREST RATE ELECTIONS
ON THE LOANS.
(a) Subject to the terms of Section 3.02 hereof, at the time of the
making of any Advance, the Borrower may select the Applicable Revolving Funded
Debt Rate, or the Eurodollar Rate for the applicable Interest Period, to apply
to all or a portion of such Advance, to be effective on the Borrowing Date, by
making an Interest Rate Election in accordance with Section 3.01(b) hereof.
Subject to the terms of Section 3.02 hereof, by making an Interest Rate
Election, the Borrower may, with respect to all or any portion of the
outstanding Advances, (i) change the applicable interest rate for any Floating
Rate Loan to the Eurodollar Rate for the applicable Interest Period, or change
the applicable interest rate for any Eurodollar Loan to the Applicable Revolving
Funded Debt Rate, in either case only to be effective on the Interest Adjustment
Date applicable to such Loan, or (ii) with respect to any Eurodollar Loan for
which the Interest Period is expiring on an Interest Adjustment Date, elect the
Eurodollar Rate to continue for such Loan on such Interest Adjustment Date for
the applicable Interest Period.
(b) An Interest Rate Election shall be made by written or telephonic
(confirmed in writing) notice to the Agent selecting the Applicable Revolving
Funded Debt Rate, or the Eurodollar Rate for the applicable Interest Period, and
confirming the applicable Borrowing Date or Interest Adjustment Date, as the
case may be; PROVIDED, HOWEVER, that any Interest Rate Election selecting the
Eurodollar Rate must be in writing and must be received by the Agent prior to
10:00 A.M. (Providence, Rhode Island time) on at least two (2) Business Days
prior to the applicable Borrowing Date or Interest Adjustment Date, as the case
may be. Each Interest Rate Election shall be effective as of the applicable
Borrowing Date or Interest Adjustment Date, for any applicable Interest Period,
as the case may be, with respect to the interest rate on the Advances or any
portion thereof to which such Interest Rate Election was made. Any Interest Rate
Election received after 10:00 A.M. (Providence, Rhode Island time) on a Business
Day shall be deemed, for all purposes of this Agreement, to have been received
prior to 10:00 A.M. (Providence, Rhode Island time) on the next succeeding
Business Day. Any selection of the Eurodollar Rate permitted hereunder shall be
made so that after giving effect to any such selection, the outstanding
Eurodollar Loan shall be in a principal amount of Five Hundred Thousand Dollars
($500,000), or if a greater amount, in integral multiples of One Hundred
Thousand Dollars ($100,000).
(c) Notwithstanding any other provision of this Agreement, no more than
six (6) Eurodollar Loans shall be outstanding at any time.
(d) Notwithstanding any other provision of this Agreement, in the case
of any Eurodollar Loan requested by the Borrower, if, on or before 10:00 A.M.
(Providence, Rhode Island time) on the date at least two (2) Business Days prior
to any Borrowing Date or any Interest Adjustment Date, the Borrower fails to
make an effective Interest Rate Election selecting the Eurodollar Rate to apply
to the Advances or any portion thereof in accordance with this Section 3.01 or
specifying an Interest Period for such Loan or portion thereof or is incomplete
in any other
-20-
respects, then such Loan or portion thereof shall bear interest at the
Applicable Revolving Funded Debt Rate from such Borrowing Date or such Interest
Adjustment Date until payment in full or receipt by the Agent of an effective
Interest Rate Election, properly accepted, for such Loan or portion thereof.
(e) Notwithstanding any other provision of this Agreement, unless the
Agent shall otherwise agree, after the occurrence and during the continuance of
an Event of Default declared by the Agent pursuant to written notice to the
Borrower, the Borrower may not elect to have a Loan be made or converted into a
Eurodollar Loan, or continued as a Eurodollar Loan after the expiration of any
Interest Period then in effect for that Eurodollar Loan.
SECTION 3.02. SPECIAL PROVISIONS RELATING TO EURODOLLAR LOANS.
The Eurodollar Loans shall be subject to and governed by the following
additional terms and conditions:
(a) Notwithstanding any other provision of this Agreement, if, prior to
or on the date on which all or any portion of any Advance is to be made
as or converted into a Eurodollar Loan, the Agent shall determine (which
determination shall be conclusive and binding on the Borrower) that
(i) dollar deposits in the relevant amounts and for
the relevant Interest Period are not offered to Agent in the
inter-bank eurodollar market in which such Lenders regularly
participate,
(ii) by reason of circumstances affecting the
inter-bank eurodollar market in which Agent regularly
participates, adequate and reasonable means do not exist for
ascertaining the interest rate applicable to such Eurodollar
Loan, or
(iii) the Basic Eurodollar Rate no longer represents
the effective cost to Agent for dollar deposits in the
inter-bank eurodollar market in which such Lenders regularly
participate;
the Agent shall promptly give telephonic or telecopied notice of such
event to the Lenders and the Borrower, and all or such portion of such
Advance which is subject to any of Section 3.02(a)(i) through (iii) as a
result of the Agent's determination, shall be made as, or converted into
at the end of the applicable Interest Period, as the case may be,
Floating Rate Loans, and no Lender shall have any further obligation to
make Eurodollar Loans until further written notice to the contrary is
given by the Agent to the Lenders and the Borrower. The Agent shall
promptly confirm any such telephonic notice in writing to the Lenders and
the Borrower.
(b) In the event any change in applicable laws or regulations
(including the enactment of any new applicable law or regulation) or in
the interpretation thereof
-21-
(whether or not having the force of law) by any governmental or other
regulatory authority charged with the administration thereof, makes it
unlawful for any Lender to make or continue to maintain Eurodollar Loans,
the obligation of such Lender to make or maintain Eurodollar Loans shall,
upon the happening of such event, terminate, and such Lender shall, by
telephonic, telexed or telecopied notice to the Agent and the Borrower
declares that such obligation has so terminated, and such Eurodollar
Loans shall, on the last day on which such Lender can lawfully continue
to maintain such Eurodollar Loans, automatically convert into Floating
Rate Loans. Such Lender shall promptly confirm any such telephonic notice
in writing to the Agent and the Borrower and shall provide a written
explanation as to the reasons for such termination.
(c) If the circumstances set forth in subsections (a) or (b) above
subsequently change so that Agent or a Lender shall no longer be so
affected, as the case may be, the Lenders' or such Lender's (as
applicable) obligation to make or maintain Eurodollar Loans shall be
reinstated when the Agent or such Lender (as applicable) obtains actual
knowledge of such change of circumstances, and promptly after obtaining
such actual knowledge, written notice thereof shall be forwarded to the
Borrower. The Borrower shall then have the right to submit an Interest
Rate Election to the Agent electing the Eurodollar Rate to apply in
accordance with but subject to the terms of this Agreement. During any
period throughout which the Lenders or such Lender (as applicable) has no
obligation to make or maintain Eurodollar Loans, no Interest Rate
Elections electing the Eurodollar Rate shall be effective with regard to
any Advance.
(d) The Borrower agrees to pay to the Agent, on a joint and several
basis, for the account of each applicable Lender from time to time such
amounts as will compensate such Lender for any increase in the costs to
such Lender, reasonably incurred, of making or maintaining (or of its
obligation to make or maintain) all or any portion of any Eurodollar
Loans and for any reduction in the amount of any sum receivable by such
Lender under this Agreement in respect of making or maintaining (or of
its obligation to make or maintain) all or any portion of such Eurodollar
Loans, in either case, by reason of:
(i) any reserve, special deposit or similar
requirement against assets of, deposits with or for the account
of, or credit extended by, such Lender, under or pursuant to any
law, treaty, rule, regulation (including, without limitation,
any Regulations of the Board of Governors of the Federal Reserve
System but expressly excluding Regulation D) or requirement in
effect on or after the date hereof, any interpretation thereof
by any governmental authority charged with administration
thereof or by any central bank or other fiscal or monetary
authority or other authority having jurisdiction over such
Lender, or any requirement imposed by any central bank or such
other authority whether or not having the force of law; or
-22-
(ii) any change in (including the enactment of any
new) applicable law, treaty, rule, regulation or requirement or
in the interpretation thereof by any official authority, or the
imposition of any requirement of any central bank, whether or
not having the force of law, which shall subject such Lender to
any tax (other than taxes on overall net income, profits or
gains imposed on such Lender by the United States of America or
the state in which the head office of such Lender is located or
by the jurisdiction in which the applicable lending office is
located), levy, impost, charge, fee, duty, deduction or
withholding of any kind whatsoever or change the taxation of
such Lender with respect to making or maintaining (or of its
obligation to make or maintain) all or any portion of any
Eurodollar Loans and the interest thereon (other than any change
which affects, and to the extent that it affects, the taxation
of overall net income, profits or gains of such Lender by the
United States of America or the state in which the head office
of such Lender is located or by the jurisdiction in which the
applicable lending office is located).
In any such event, the applicable Lender shall promptly notify the Agent
and the Borrower thereof in writing stating the reasons therefor and the
additional amounts required to fully compensate such Lender for such
increased or new cost or reduced amount as determined by such Lender.
Such additional amounts shall be payable on each date on which interest
is to be paid hereunder or, if there is no outstanding principal amount
under the Notes, on the last Business Day of the month in which the
Borrower receives the notice in question. The applicable Lender's
certificate as to any such increased or new cost or reduced amount
(including calculations, in reasonable detail, showing how such Lender
computed such cost or reduction) shall be submitted by such Lender to the
Agent and the Borrower before the Borrower are required to pay any such
additional amount and shall, in the absence of manifest error, be
conclusive and binding. In determining any such amount such Lender may
use any reasonable averaging and attribution methods.
(e) In the event any Lender shall incur any loss or expense (including,
without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Lender to fund or maintain all or any portion of the Advances as
Eurodollar Loans) as a result of
(i) any payment or any mandatory or voluntary
repayment by the Borrower of all or any portion of any
Eurodollar Loan on a date other than the Interest Adjustment
Date applicable thereto, for any reason;
(ii) conversion of all or any portion of any
Eurodollar Loan on a day other than the Interest Adjustment Date
applicable to such Loan to a Floating Rate Loan for any reason
including, without limitation, delivery of an Interest Rate
Election or any other cause whether voluntary or
-23-
involuntary and whether or not referred to or described in this
Agreement, except for any Lender's inability to continue to
maintain Eurodollar Loans as set forth in Section 3.02(b)
hereof; or
(iii) any failure by the Borrower to borrow an
Advance as a Eurodollar Loan on the Borrowing Date specified in
any Interest Rate Election selecting the Eurodollar Rate;
then upon the request of such Lender, the Borrower shall pay to the
Agent, on a joint and several basis, for the account of such Lender such
amount as will (in the reasonable determination of such Lender) reimburse
such Lender for such loss or expense; PROVIDED, HOWEVER, that clauses
(i), (ii) and (iii) hereof shall not be deemed to grant to the Borrower
any right to convert a Eurodollar Loan to a Floating Rate Loan prior to
the Interest Adjustment Date applicable thereto without reimbursement to
the Lender for any loss or expenses as contemplated above, or any right
to fail to borrow on any Borrowing Date specified in any Interest Rate
Election selecting the Eurodollar Rate. The applicable Lender shall
furnish to the Agent and the Borrower, before the Borrower shall be
required to make any such payment, a written statement setting forth the
computation of any such amounts payable to such Lender under this Section
3.02(e).
(f) Each Lender agrees that upon the occurrence of any of the events
described in Section 3.02(a), (d) or (e), such Lender will exercise its
best efforts to take such reasonable actions at no expense to such Lender
(other than expenses (i) which are covered by the Borrower's advance
deposit of funds with such Lender for such purpose, or (ii) if such
Lender agrees, which the Borrower hereby agrees to pay or reimburse to
such Lender in full upon demand), in accordance with such Lender's usual
banking practices in such situations and subject to any statutory or
regulatory requirements applicable to such Lender, as such Lender may
take without the consent or participation of any other person to, in the
case of an event described in Section 3.02(d) or (e), mitigate the cost
of such events to the Borrower and, in the case of an event described in
Section 3.02(a), to seek dollar deposits in any other inter-bank
eurodollar market in which such Lender regularly participates and in
which the applicable determination(s) described in Section 3.02(a), does
(do) not apply.
IV. TERMS APPLICABLE TO REVOLVING CREDIT FACILITIES.
SECTION 4.01. INCREASED COSTS - CAPITAL.
In the event that after the date hereof the adoption or implementation
of or any change in (including the enactment of any new) applicable law, rule or
regulation, or in the interpretation or administration thereof by any
governmental authority, central bank or other comparable agency charged with the
interpretation or administration thereof, or compliance by any of the Lenders
with any request or directive (whether or not having the force of law) of any
such governmental
-24-
authority, central bank or comparable agency, shall impose, modify or deem
applicable any capital adequacy or similar requirement (including, without
limitation, a request or requirement which affects the manner in which any of
the Lenders allocates capital resources to its commitments, including its
obligations hereunder) and as a result thereof, in the good faith judgment of
the applicable Lender, the rate of return on such Lender's capital as a
consequence of its obligations hereunder is reduced to a level below that which
such Lender could have achieved but for such circumstances, then and in each
such case, upon notice to Agent and Borrower by such Lender and such Lender's
request for payment thereof, from time to time Borrower shall pay to Agent, for
the account of such Lender such additional amount or amounts as shall compensate
such Lender for such reduction in rate of return (but only to the extent such
capital adequacy or similar requirement shall have reduced such rate of return
and with appropriate adjustment for the extent, if any, such capital adequacy or
similar requirement shall have previously been reflected in the determination of
the applicable base interest rates payable on the Notes). In any such event, the
applicable Lender shall promptly notify Borrower thereof in writing, stating the
reasons therefor and the additional amounts required to fully compensate such
Lender for such reduction in rate of return. Such additional amounts shall be
payable on each date on which interest is to be paid hereunder or, if there is
no outstanding principal amounts under the Notes, on the last business day of
the month in which Borrower received the notice in question. The applicable
Lender's certificate as to any such reduction in return (including calculations,
in reasonable detail, showing how such Lender computed such reduction) shall be
submitted to Borrower before any additional amount shall become payable and
shall, in the absence of manifest error, be conclusive and binding. In
determining any such amount, such Lender may use any reasonable averaging and
attribution methods.
SECTION 4.02. SECURITY FOR THE NOTES.
The Notes and the Letter of Credit Documents shall be secured by:
(a) Borrower Security Agreement;
(b) the Xxxxxx Intercreditor Agreement; and
(c) such financing statements, assignments, agreements to assign,
landlord waivers and consents and other instruments, in each case in form and
substance reasonably satisfactory to Lenders and their counsel, as Lenders may
reasonably request in connection with any or all of the foregoing.
SECTION 4.03. MANNER OF PAYMENTS.
All payments and prepayments to be made by Borrower of principal of, and
interest on, the Notes and in respect of Letter of Credit Reimbursement
Obligations, and all fees and other sums and charges payable by Borrower
hereunder, shall be made to Agent in U.S. dollars in immediately available funds
prior to 11:00 A.M. (Providence, Rhode Island time) on the day that such payment
is due; PROVIDED that it shall not be deemed to be an Event of Default hereunder
if a payment is due on a day which is not a Business Day and Agent receives such
payment in
-25-
Dollars in immediately available funds prior to 11:00 A.M. (Providence, Rhode
Island time) on the next succeeding Business Day, and PROVIDED FURTHER that upon
not less than two (2) Business Days prior notice to Borrower any such payment
may be made by Agent debiting the demand deposit accounts, if any, maintained
with Agent on each date on which any such payment is due or remains unpaid
hereunder or under the Notes, in an amount up to the principal, interest, Letter
of Credit Reimbursement Obligations, fees or other sums or charges due and
payable hereunder or under the Notes, and any such debit shall be deemed payment
hereunder and/or under the Notes in question to the extent immediately available
funds are then in such accounts. Any such payment which is not received in such
form or prior to such time shall be deemed received for all purposes of this
Agreement on the next succeeding Business Day on which such funds become
immediately available prior to such time. Promptly upon receipt thereof, Agent
shall cause such payments to be distributed by wire transfer to Lenders entitled
thereto, in like funds with respect to the payment received by Agent from
Borrower. Distributions to Lenders by Agent shall be made to such office as such
Lender shall from time to time designate in writing to Agent. The amount of each
payment wired by Agent to each such Lender shall be such amount as shall be
necessary to provide such Lender with its Commitment Share of such payment
(without consideration or use of any contra accounts of any Lender), or with
such other amount as may be owing to such Lender in accordance with this
Agreement (in each case, without deduction for any claim, defense or offset of
any type). Each such wire transfer shall be sent by Agent only after Agent has
received immediately available dollars from or on behalf of Borrower and each
such wire transfer by Agent shall provide each Lender receiving same with
immediately available funds.
SECTION 4.04. LATE CHARGES.
Borrower hereby agrees to pay to Agent on behalf of Lenders, upon
demand, to the extent permitted by law, a late charge in an amount equal to five
percent (5%) of each payment of principal and/or interest, and/or in respect of
any other sum or amount, which is not paid in full within ten (10) days of the
date on which such payment is due (without giving effect to any applicable grace
period).
SECTION 4.05. SET-OFF.
Upon the occurrence and during the continuance of any Event of Default,
each Lender is hereby authorized at any time and from time to time, without
notice to Borrower (any such notice being expressly waived by Borrower), to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by it and any and all other Indebtedness
at any time owing by such Lender to or for the credit or the account of Borrower
against any and all of the obligations of Borrower now or hereafter existing
under this Agreement, the Notes, the Letter of Credit Reimbursement Obligations
or in respect of the other Transaction Documents, irrespective of whether or not
Agent or such Lender shall have made any demand under this Agreement, the Notes,
the Letter of Credit Reimbursement Obligations or the Transaction Documents, and
although such obligations may be unmatured. Each Lender agrees to promptly
notify Agent and Borrower after any such setoff and application; PROVIDED THAT
the failure to give such notice shall not affect the validity of such setoff and
application.
-26-
Promptly following any notice of setoff received by Agent from a Lender pursuant
to the foregoing, Agent shall notify each other Lender thereof. The rights of
each Lender under this Section 4.05 are in addition to all other rights and
remedies (including, without limitation, other rights of setoff) which such
Lender may have.
SECTION 4.06. REPLACEMENT OF LENDER.
In the event that any Lender becomes a Delinquent Lender and remains so
for ten (10) Business Days after written notice thereof to such Delinquent
Lender from Agent or Borrower, as the case may be, or in the event a Delinquent
Lender notifies Agent or Borrower that it does not intend to make additional
Advances after the date of such notice, in each case with copies of such notice
to each other party to this Agreement, Agent, Borrower and the other Lender
shall exercise good faith efforts to reach mutual agreement on and to implement
(i) a means of replacing the Delinquent Lender with another bank or banks or
(ii) the purchase of the Delinquent Lender's Loans Outstanding and its
Commitment Share by any other Lender, PROVIDED, HOWEVER, no such default shall
obligate any other Lender to make any Advance in excess of its Commitment Share
or to purchase the Loans Outstanding of the Delinquent Lender. Each Lender
agrees that in the event that it becomes a Delinquent Lender, it shall take all
such actions as may be reasonably requested by Borrower, Agent and any other
Lenders, at the Delinquent Lender's sole cost and expense, to permit its
replacement and/or purchase of its Loans Outstanding and its Commitment Share at
no more than the outstanding principal amount of such Loans Outstanding plus
accrued interest thereon, and that it shall indemnify and hold harmless
Borrower, Agent and any other Lender from and against all out-of-pocket loss,
cost or expense resulting from its acts or omissions in becoming and being a
Delinquent Lender or resulting from replacement of the Delinquent Lender and/or
purchase of the Delinquent Lender's Loans Outstanding and its Commitment Share,
and all out-of-pocket costs and expenses incurred by Borrower, Agent or any
other Lender in connection with any necessary amendments of this Agreement, any
of the Notes and/or any other document, instrument or agreement entered into in
connection therewith which result from replacement of such Delinquent Lender
and/or purchase of such Delinquent Lender's Loans Outstanding and its Commitment
Share, but excluding any credit risk of any Lender which purchases all or any
part of the Delinquent Lender's Loans Outstanding and its Commitment Share. The
indemnifications set forth in this Section 4.06 shall not be deemed to limit any
rights or remedies of Borrower or any Lender against the Delinquent Lender.
SECTION 4.07. PRO RATA TREATMENT. Each payment and prepayment of interest
and/or principal on the Loans to Agent for the account of Lenders or to Lenders
hereunder (whether directly made by Borrower or received by Agent or a Lender
through the exercise of a right of set-off or otherwise), shall be made pro
rata, according to each Lender's Commitment Share, and according, in the case of
payments or prepayments, to the then outstanding principal amounts of the Notes
which are being paid or prepaid, and each payment of fees under Section 2.07 and
4.11(f) (whether directly made by Borrower or received by Agent or a Lender
through the exercise of a right of set-off or otherwise) shall be made pro rata,
according to each Lender's Commitment Share; PROVIDED, HOWEVER, that any amounts
payable by Borrower pursuant to either of Sections 12.02 or 12.03 shall be paid
to Agent for the account of Lenders or Lenders entitled to such amounts. Each
Lender's share of Advances shall be equal to such Lender's
-27-
Commitment Share. Notwithstanding the foregoing provisions of this Section 4.07,
upon the occurrence and during the continuance of an Event of Default, each
payment and prepayment of principal and interest on the Loans to Agent for the
account of Lenders or to Lenders hereunder (whether directly made by Borrower or
received by Agent or a Lender through the exercise of a right of set-off or
otherwise), shall be made pro rata, according to each Lender's share of Loans
Outstanding.
SECTION 4.08. DECLARATION OF INVALIDATION. Each Lender agrees that, to
the extent that any amount received by any Lender from Borrower or otherwise on
account of any of the Loans, is subsequently invalidated, declared to be
fraudulent or preferential, set aside or judicially required to be repaid to a
debtor-in-possession, trustee, receiver, custodian or any other Person in
connection with any proceeding referred to in Article IX(g) or (h) hereof or any
similar cause of action (a "Preference"), then, to the extent of such
Preference, each Lender shall upon demand reimburse Lenders(s) subjected to such
Preference the amount necessary to cause each Lender to be affected by such
Preference in proportion to its pro rata share of the Loans Outstanding.
SECTION 4.09. PRO RATA SHARES PARI PASSU AND EQUAL. The Commitment Share
of each Lender, and each Lender's pro rata share of Loans Outstanding, shall be
PARI PASSU and equal with the Commitment Shares and pro rata shares of Loans
Outstanding, of all other Lenders, and no Lender shall have priority over any
other.
SECTION 4.10. APPLICATION OF FUNDS RECEIVED BY LENDERS. As long as any
amounts due under any of the Notes or this Agreement are outstanding, if any
Lender shall receive from Borrower or any other Person, whether by exercise of a
right of setoff pursuant to Section 4.05 or otherwise, or resulting from a
banker's lien or by voluntary payment, counterclaim, cross action, suit at law
or in equity or by proof of claim in bankruptcy, liquidation or similar
proceedings, or by sale or disposition of any Collateral or by payment made
under any policy of insurance or otherwise (but excluding any amounts received
by such Lender from Agent in accordance with this Agreement), any amount in
respect of its Note or Notes (other than an amount owing by Borrower to such
Lender under any of Sections 4.01, 4.04, 12.02 or 12.03 of this Agreement), such
Lender shall promptly send by wire transfer the portion of such amount remaining
(after deduction by such Lender of any expenses or costs incurred by such Lender
in connection with obtaining such amount) to Agent which are immediately
available to Agent upon receipt, together with such Lender's accounting of the
gross amount so received and the expenses or costs deducted therefrom. Agent
shall, promptly after Agent's receipt of such amount in immediately available
funds, send to each Lender by wire transfer funds (which are immediately
available to such Lenders upon receipt) in such amount as may be necessary to
cause each Lender (including Lenders which wired the above-referenced amount to
Agent) to receive payment of a portion of said amount so received by Agent which
is proportionate to such Lender's Commitment Share, or pro rata share of Loans
Outstanding, as the case may be. If any such payment in respect of any such
amount is made by any Lender pursuant to this Section 4.10 and if such amount or
any part thereof is thereafter recovered from such Lender, the related payment
to Agent and by Agent to Lenders shall be rescinded, to the extent of said
recovery, and any distribution or payment restored as to the portion of such
payment so recovered, but without interest. This Section 4.10
-28-
shall be applied so as to maintain for each Lender its Commitment Share, or pro
rata share of Loans Outstanding, as the case may be.
SECTION 4.11. LETTER OF CREDIT FACILITY.
(a) From time to time, so long as no Event of Default exists and so
long as after giving effect to the issuance of the Letter of Credit the
aggregate outstanding Revolving Credit Loans do not exceed the Revolving Credit
Commitment, the Agent, as issuer agrees to issue for the account of Borrower
Letters of Credit, in form and substance satisfactory to Agent in accordance
with its usual and customary practice.
(b) The aggregate outstanding amount of all Letters of Credit issued
pursuant hereto shall at no time exceed a face amount equal to Three Million
Dollars ($3,000,000).
(c) The Letters of Credit issued pursuant hereto shall be governed by
the terms of this Agreement and by the Letter of Credit Documents, signed or
guaranteed or otherwise verified by Borrower in a manner satisfactory to Lenders
at the time of the issuance, extension or renewal thereof.
(d) Borrower hereby agrees to pay to Agent, as issuer a letter of
credit fee equal to the customary fees charged by such issuer in connection with
the issuance of Letters of Credit, payable upon issuance of each Letter of
Credit.
(e) Borrower hereby agrees to pay to Agent, as issuer, on demand, all
drawing fees, transfer fees, other administrative fees and all other usual and
customary fees and transaction charges of Agent, as issuer in connection with
letters of credit as described in the Letter of Credit Documents as in effect
from time to time.
(f) Borrower hereby agrees to pay to Agent on behalf of Lenders, on
demand, letter of credit fees as follows: (i) for trade letters of credit, an
annual fee equal to one percent (1%) of the face amount of the issued trade
letters of credit, and (ii) for standby letters of credit, an annual fee equal
to two percent (2%) of the face amount of the issued standby letters of credit,
such fees shall be payable quarterly in arrears.
(g) No Letter of Credit shall have a maturity date after the Revolving
Credit Maturity Date.
V. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lenders (which
representations and warranties shall survive the delivery of the Notes, the
making of each Advance and the issuance of any Letters of Credit), that:
SECTION 5.01. FINANCIAL STATEMENTS. Borrower has heretofore furnished
to Lenders (a) balance sheets of Borrower as at January 31, 1997 (on a
consolidated basis), January 31, 1996
-29-
(on a consolidated basis), January 31, 1995 (on a consolidated basis) and, June
30, 1994 and statements of income and of cash flows of Seller for the fiscal
years then ended, together with the notes thereto, audited by Deloitte & Touche,
certified public accountants and (b) a PRO FORMA balance sheet of Borrower and
its Subsidiaries giving effect to the incurrence of the Public Debt, and
projected statements of income of Borrower and its Subsidiaries for each of the
fiscal years of Borrower ending January 31, 1998 through January 31, 2000,
prepared by Borrower. The balance sheets and statements described in clause (a)
have been prepared in accordance with GAAP applied on a basis consistent with
that of preceding periods (except as described therein), and fairly present the
financial condition of Borrower and its Subsidiaries on a consolidated basis, as
applicable as at said dates and the results of its operations for the years
ended on said dates. The PRO FORMA balance sheet and projected statements of
income and cash flows described in clause (b) have been prepared on a sound
financial planning basis in accordance with GAAP applied on a basis consistent
with that utilized in preparing the balance sheets and statements described in
clause (a) (except as described therein) and the assumptions upon which such
projections are based are reasonable. Borrower and its Subsidiaries have no
indebtedness, contingent obligations or liabilities that should properly be
reflected in a financial statement prepared in accordance with GAAP, except as
specifically reflected in such financial statements.
Since January 31, 1997, no event has occurred which has had a material
adverse impact on the condition of Borrower and its Subsidiaries' (on a
consolidated basis) operations, financial or otherwise, and there has been no
material adverse change in the financial condition, business, prospects, assets,
operations or properties of Borrower and its Subsidiaries' (on a consolidated
basis) operations, and since such date no distributions have been declared or
paid or made to the stockholders of Borrower. Since the dates of preparation of
the financial statements described in clause (b) above, no event has occurred
which has had a material adverse impact on the condition of Borrower and its
Subsidiaries on a consolidated basis, financial or otherwise, and there has been
no material adverse change in the financial condition, business, prospects,
assets, operations or properties of Borrower and its Subsidiaries on a
consolidated basis as represented in the financial statements described in
clause (b) or which would render any of the assumptions contained therein
unreasonable.
SECTION 5.02. INCORPORATION. Borrower is duly organized and validly
existing as a corporation under the laws of the State of Florida, has all
requisite power and authority to own its properties and to carry on its business
as now being conducted or presently contemplated, and is qualified to do
business in every jurisdiction where it is required to be so qualified, except
such jurisdictions, if any, in which the failure to be so qualified will not
have a material adverse effect on the financial condition, business, prospects,
assets, operations or properties of Borrower. Borrower has all requisite power
and authority to execute and deliver, and perform its obligations under, this
Agreement, the Notes and the Security Documents executed by it.
SECTION 5.03. AUTHORIZATION; COMPLIANCE. The execution and delivery of,
and performance by Borrower of its obligations under, this Agreement, the Notes
and the Security Documents executed by it, have been duly authorized by all
requisite action, will not violate any provision of law, any order of any court
or other agency of government, the charter or by-laws of Borrower, or any
indenture, agreement or other instrument to which Borrower is a party, or by
-30-
which it is bound, or be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or except as may be
provided by the Security Documents executed by it, result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the property or assets of Borrower pursuant to, any such indenture, agreement
or instrument. This Agreement, the Notes and the Security Documents to which
Borrower is a party have been duly executed and delivered by Borrower and
constitute the valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Except as set forth on SCHEDULE 5.03
hereto, Borrower is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any court,
governmental instrumentality or other agency, or any other Person, in connection
with or as a condition to the execution, delivery or performance of this
Agreement, the Notes, or any Security Documents, as the case may be, other than
such filings as are required to perfect any lien granted by the Security
Documents.
SECTION 5.04. LITIGATION. There is no action, suit or proceeding at law
or in equity or by or before any court, governmental instrumentality or other
agency now pending or, to the knowledge of Borrower, threatened against or
affecting Borrower which, if adversely determined, would have a material adverse
effect on the business, operations, prospects, properties, assets or condition,
financial or otherwise, of Borrower.
SECTION 5.05. MATERIAL AGREEMENTS. Borrower is not a party to any
agreement or instrument or subject to any other restriction adversely affecting
its business, properties, assets, operations, prospects or condition, financial
or otherwise.
SECTION 5.06. TITLE TO PROPERTY. Borrower has good title to all of its
properties and assets, free and clear of all mortgages, security interests,
restrictions, liens and encumbrances of any kind, except mortgages, security
interests, restrictions, liens and encumbrances described on SCHEDULE 5.06
attached hereto and made a part hereof or permitted under Section 8.02 hereof or
under any of the Security Documents, and except for restrictions, easements and
minor irregularities in title which do not and will not interfere with the
occupation, use and enjoyment by Borrower of such properties and assets in the
normal course of its business as presently conducted, or materially impair the
value of such properties and assets for the purpose of such business.
SECTION 5.07. SUBSIDIARIES. Borrower has the Subsidiaries listed on
SCHEDULE 5.07(A) and owns the issued and outstanding shares of Capital Stock or
other equity interest of any Person, or any warrant, option or other right to
purchase any such shares of Capital Stock or other equity interest, and any
security convertible into or exchangeable for any such shares of Capital Stock
to the extent disclosed on SCHEDULE 5.07(A).
SECTION 5.08. INSOLVENCY. Entering into this Agreement, making and
delivering the Notes and any borrowings made by Borrower under this Agreement,
do not and will not render Borrower insolvent; Borrower is not contemplating
either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidating of all or a major portion of its property,
and Borrower has no knowledge of any person contemplating the filing of any such
-31-
petition against it or any of its assets; and after giving effect to the
transactions contemplated by this Agreement (including all borrowings to be made
hereunder), Borrower is and will be able to pay its debts as such debts become
due, will have and continue to have funds and capital sufficient to carry on its
business as presently conducted or contemplated, and will own property having a
value both at fair market valuation and at fair saleable value in the ordinary
course of Borrower's business greater than the amount required to pay its
Indebtedness, including for this purpose unliquidated and disputed claims.
SECTION 5.09. DISCLOSURE. No statement of fact made by or on behalf of
Borrower in this Agreement or in any certificate or schedule furnished to
Lenders pursuant hereto, contains any untrue statement of a material fact as to
which Borrower is aware or omits to state any material fact as to which Borrower
is aware necessary to make statements contained therein or herein not
misleading. There is no fact presently known to Borrower which has not been
disclosed to Lenders which materially adversely affects, nor as far as Borrower
can reasonably foresee, will materially adversely affect the property, business,
operations, prospects or condition (financial or otherwise) of Borrower.
SECTION 5.10. INVESTMENT COMPANY. Borrower is not an "investment
company", or a company "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
SECTION 5.11. MARGIN STOCK PURPOSE CREDIT. Borrower does not own nor
does it have any present intention of acquiring, any "margin security" or
"margin stock" within the meaning of Regulation G (12 CFR Part 207), or any
"margin stock" within the meaning of Regulation U (12 CFR Part 221), of the
Board of Governors of the Federal Reserve System (herein called "margin
security" and "margin stock"). None of the proceeds of the Advances or Loans
will be used, directly or indirectly, by Borrower for the purpose of purchasing
or carrying, or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry, any margin security or margin
stock or for any other purpose which might constitute the transactions
contemplated hereby a "purpose credit" within the meaning of said Regulation G
or Regulation U, or cause this Agreement to violate any other regulation of the
Board of Governors of the Federal Reserve System or the Securities Exchange Act
of 1934, as amended, or any rules or regulations promulgated under such
statutes.
SECTION 5.12. TAXES. Except as set forth on SCHEDULE 5.12, Borrower has
filed or caused to be filed or has properly secured extensions to file all
federal, state and local tax returns required to be filed, and has paid or made
adequate provision for the payment of all federal, state and local taxes,
charges and assessments imposed upon Borrower or upon its income and profits or
upon any of its property or upon any part thereof.
SECTION 5.13. EMPLOYEE BENEFIT PLANS. (a) Neither Borrower nor any
Commonly Controlled Entity maintains or contributes to any Plan which is not in
material compliance with ERISA, the Code and Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1985 (P.L. 99-272), as amended, or which has
incurred any material accumulated funding deficiency within the meaning of
section 412 or 418B of the Code, or which has applied for or obtained a
-32-
waiver from the Internal Revenue Service of any minimum funding requirement
under section 412 of the Code. SCHEDULE 5.13 attached hereto and made a part
hereof correctly identifies each Plan. Neither Borrower nor any Commonly
Controlled Entity has incurred any liability to the PBGC in connection with any
Plan covering any employees of Borrower or any Commonly Controlled Entity or
ceased operations at any facility or withdrawn from any Plan in a manner which
could subject any of them to liability under Section 4062(e), 4063 or 4064 of
ERISA or liability to any Plan participant or beneficiary, and know of no facts
or circumstance which might give rise to any liability of Borrower or any
Commonly Controlled Entity to the PBGC under Title IV of ERISA or liability to
any Plan participant or beneficiary. Neither Borrower nor any Commonly
Controlled Entity has incurred any withdrawal liability (including but not
limited to any contingent or secondary withdrawal liability) within the meaning
of Sections 4201 and 4202 of ERISA, to any Multiemployer Plan, and no event has
occurred, and there exists no condition or set of circumstances, which presents
a risk of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(b) Full payment has been made of all amounts which Borrower and any
Commonly Controlled Entity were required to have paid prior to the Closing Date
as premiums to the PBGC under Sections 4006 and 4007 of ERISA, or as
contributions to any Plan under applicable law or under any Plan or any
agreement relating to any Plan to which Borrower or any Commonly Controlled
Entity is a party.
(c) Neither Borrower nor any Commonly Controlled Entity has any
knowledge of, nor do any of them have any reason to believe that, any Reportable
Event has occurred with respect to any Plan subject to Title IV of ERISA.
(d) All Plans which are employee pension benefit plans (as defined in
Section 3(2) of ERISA) are qualified plans under section 401(a) of the Code, and
Borrower or a Commonly Controlled Entity (as appropriate) has received favorable
determination letters from the Internal Revenue Service to such effect, which
letters remain in effect.
(e) No civil or criminal action brought pursuant to Part 5 of Title I
of ERISA or under any state law and no claim (other than routine course) is
pending with respect to any Plan, and neither Borrower nor any Commonly
Controlled Entity has any knowledge of, or reason to believe that, any such
action or claim is threatened against Borrower, any Commonly Controlled Entity,
or any fiduciary of any Plan.
(f) Neither Borrower nor any Commonly Controlled Entity has had any tax
assessed against it by the Internal Revenue Service for any alleged violation
under section 4975 of the Code, nor has Borrower or any Commonly Controlled
Entity incurred any material liability under Section 406 of ERISA.
SECTION 5.14. EMPLOYEE MATTERS. Borrower is not a party to any contract
with any labor organization, nor has Borrower agreed to recognize any union or
other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of its
-33-
employees. There is no strike or work stoppage pending or, to the best knowledge
of Borrower, threatened, or any organizational effort currently being made or,
to the best knowledge of Borrower, threatened, by or on behalf of any labor
union with respect to employees of Borrower. Borrower has not experienced any
strike, work stoppages, grievance proceedings, claims of unfair labor practices
filed or threatened to be filed, or other significant labor difficulties of any
nature, nor are there any material controversies pending or threatened between
Borrower and any of its employees.
SECTION 5.15. LOCATIONS. SCHEDULE 5.15 attached hereto and made a part
hereof sets forth (i) every location where any tangible asset, either real or
personal, of Borrower or any Subsidiary is located, (ii) every location where
Borrower or any Subsidiary has an office or place of business, (iii) the address
of all real estate owned by Borrower or any Subsidiary, (iv) the address of all
real estate leased by Borrower or any Subsidiary (including the record owner and
any mortgagee of such real estate), and (v) each jurisdiction in which Borrower
or any Subsidiary is qualified or required to be qualified to do business.
SECTION 5.16. LICENSES; TRADEMARKS. (a) SCHEDULE 5.16 attached hereto
and made a part hereof sets forth a list of (i) all material non-governmental
licenses held by Borrower relating to the operation of its business as now
conducted or presently contemplated (including, as to each such license, the
name of the licensee and licensor, a description of the subject matter of the
license, the termination date or notice requirement with respect to termination
and renewal options) and (ii) all material trademarks, trade names, service
marks, copyrights, know-how, patents and applications for any of the foregoing
owned by or registered in the name of Borrower or any Subsidiary, relating to or
used in connection with the operation of its business as now conducted or
presently contemplated.
(b) Except as set forth in SCHEDULE 5.16, all of such licenses are in
full force and effect and constitute legal, valid and binding obligations of
Borrower; there have not been and there currently are not any defaults
thereunder by Borrower or, to the best of its knowledge, by any other party
which could cause such license to be canceled, revoked or terminated; and no
event has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute such a default by
Borrower or, to the best of its knowledge, by any other party thereunder.
Borrower owns all the trademarks, trade names, service marks, copyrights,
know-how, patents and applications for any of the foregoing listed on SCHEDULE
5.16 and, except as set forth thereon or as permitted herein, pays no royalty
under any of them and has the exclusive right to bring actions for the
infringement thereof. Except as set forth on SCHEDULE 5.16, no product made or
sold by Borrower violates any license or, to the best of its knowledge,
infringes any trademark, trade name, service xxxx, copyright, know-how, patent
or application for any of the foregoing of any other Person. Except as listed on
SCHEDULE 5.16, there is no pending or, to the best of its knowledge, threatened
claim or litigation against Borrower contesting the right of Borrower to use any
of the trademarks, trade names, service marks and know-how or the validity of
any of the licenses, copyrights and patents listed on such Schedule or asserting
the misuse thereof.
-34-
SECTION 5.17. MATERIAL AGREEMENTS. (a) SCHEDULE 5.17 attached hereto
and made a part hereof sets forth a list of all material contracts, agreements
and other instruments binding upon Borrower or to which it is a party, or
otherwise relating to the operation by Borrower of its business as now conducted
or presently contemplated (but only to the extent not listed on another Schedule
hereto), including any (i) material distribution, sales, agency, manufacturer's
representative or similar contract relating to the payment of a commission, (ii)
contract involving payment of more than $250,000 in any instance for the future
purchase of material, supplies, equipment or services (iii) contract for the
future sale of products involving payment of more than $500,000, (iv) contract
or commitment for the employment of any employee or other type of contract or
understanding with any employee or consultant, involving payment of more than
$200,000 on an annual basis, (v) indenture, mortgage, promissory note, loan
agreement, guarantee or other agreement or commitment for the borrowing of money
or for a line of credit, or for a leasing transaction required to be capitalized
in accordance with GAAP (vi) guaranty of the obligations of a third party, (vii)
lease, sublease, tenancy or other agreement with respect to use of real or
personal property by Borrower not required to be listed under clause (v) above
involving payment of more than $50,000 annually, (viii) agreement or arrangement
for the sale of any of the assets, property or rights of Borrower outside the
ordinary course of business or requiring the consent of any party to the
transfer and assignment of such assets, property and rights, or (ix) any other
contract deemed by Borrower to be material to the operation of its business as
now conducted or presently contemplated.
(b) Except as described in SCHEDULE 5.17, Borrower has in all material
respects observed or performed all the obligations required to be observed or
performed by it to date pursuant to, and is not in default or alleged to be in
default under, any agreement, lease, contract, commitment, instrument or
obligation required to be listed on any Schedule to this Agreement or any other
material contract, agreement or other instrument relating to the operation by
Borrower of its business, and there exists no event, condition or occurrence
which, after notice or lapse of time, or both, would constitute such a default
by it under any of the foregoing.
SECTION 5.18. COMPLIANCE. Except as set forth on SCHEDULE 5.18 attached
hereto and made a part hereof, Borrower is in compliance with all federal, state
and local laws, ordinances, rules, regulations and orders applicable to the
business or properties of Borrower, including Environmental Laws and those
relating to, anti-competitive practices, discrimination, employment, health and
safety, except such laws, ordinances, rules, regulations and orders, if any,
with which the failure to comply will not have a material adverse effect on the
financial condition, business, prospects, assets, operations or properties of
Borrower. Borrower has all federal, state and local governmental licenses and
permits necessary in the conduct of the business of Borrower, except such
licenses and permits, if any, the failure of which to have will not have a
material adverse effect on the financial condition, business, prospects, assets,
operations or properties of Borrower, and all such licenses and permits are in
full force and effect, and no violations are or have been recorded in respect of
any thereof, and no proceeding is pending or, to the best of its knowledge,
threatened to revoke or limit any thereof. SCHEDULE 5.18 contains a list of: (i)
all such governmental licenses and permits (all of which are transferable
without consent of any third party unless otherwise indicated by an asterisk)
and (ii) all judicial or governmental consents, orders, decrees and other
compliance agreements under which
-35-
Borrower is operating or by which it is bound, copies of all of which have been
furnished to Lenders. To the best knowledge of Borrower, no federal, state or
local statute, rule, regulation, ordinance or order has been adopted or
promulgated which materially adversely affects the business or assets of
Borrower or its ability to carry on its business as now being conducted or as
presently contemplated to be conducted.
SECTION 5.19. ENVIRONMENTAL COMPLIANCE. Except as set forth on SCHEDULE
5.19 attached hereto and made a part hereof, there has never been any event
("Environmental Event") at, on or in connection with any real estate owned,
leased or operated by Borrower or any of the Subsidiaries ("Facilities"), or in
connection with the business of Borrower or any of the Subsidiaries or, to the
best of Borrower's knowledge of any predecessor-in-interest, which would be
deemed a release or a disposal of any hazardous, toxic or dangerous substance,
waste or material ("Hazardous Material"), defined as such in, or for the purpose
of, the Comprehensive Environmental Response, Liability and Compensation Act, or
any other Environmental Law. In addition, except as set forth on SCHEDULE 5.19,
(i) neither Borrower, nor, to its knowledge, any predecessor-in-interest, has
generated, stored, transported or disposed of any Hazardous Material in
connection with their respective business operations, and Borrower is not
currently generating, storing, transporting or disposing of Hazardous Material,
(ii) neither Borrower nor, to its knowledge, any predecessor-in-interest, has
contaminated lands, wetlands, or waters of others with Hazardous Material in the
course of their respective business operations, (iii) Borrower has never
received any notification from any federal, state, local or other governmental
authority of any potential or known violation of any Environmental Law or
release or threat of release of any Hazardous Material at, on or in connection
with any Facilities or its business operations or any vessel owned, occupied, or
operated by Borrower or any Person for whose conduct Borrower is responsible,
and/or of the incurrence of any expense or loss by such governmental entity, and
(iv) Borrower does not know or have reason to know of any claims, actions,
lawsuits, litigation, proceedings, or investigations pending or threatened
before any governmental entity relating to any environmental matter generally,
nor any basis for any such claim, action, lawsuit, litigation, proceeding or
investigation. As used herein, "predecessor-in-interest" means all Persons who
previously conducted all or any portion of the business conducted by Borrower,
and all persons who previously conducted any business at any Facilities (but
only to the extent of their conduct of such business), and all previous owners
of any Facilities.
SECTION 5.20. INVENTORY. In determining which items of inventory listed
on any schedule of inventory heretofore or hereafter provided by Borrower to
Lenders are Eligible Inventory, Lenders may rely on all statements or
representations made by Borrower or any of them on or with respect to any such
schedule; further, Borrower represents and warrants that:
(a) all inventory is located on premises described in SCHEDULE
5.15 as being premises owned or leased by Borrower, or on such premises
as shall be approved by Agent in writing from time to time (including
the additional locations set forth in SCHEDULE 5.15);
(b) no inventory is subject to any lien or security interest
whatsoever, except as permitted by the terms of this Agreement; and
-36-
(c) except as specified on such schedules of inventory
submitted to Lenders, no inventory is now, or shall at any time or
times hereafter be, stored with a bailee, warehouseman or similar party
without Agent's prior written consent and, if Agent gives such consent,
Borrower will upon the request of Agent cause any such bailee,
warehouseman or similar party to issue and deliver to Lenders in form
and substance acceptable to Lenders, warehouse receipts therefor in
Agent's name for the ratable benefit of Lenders.
VI. CONDITIONS OF MAKING THE ADVANCES AND
ISSUING LETTERS OF CREDIT
SECTION 6.01. The obligation of Lenders to make any Advances on the
Closing Date and to issue the Letters of Credit is subject to the following
conditions precedent:
(a) The representations and warranties set forth in Article V
hereof shall be true and correct on and as of the date hereof;
(b) Borrower shall have executed and/or delivered or caused to
be executed and delivered to Agent on behalf of Lenders the following:
(i) This Agreement and the Note;
(ii) The Security Documents, together with all
instruments required to be delivered pursuant to the terms
thereof;
(iii) A Certificate of the Secretary or Assistant
Secretary of Borrower certifying as to the due authorization,
execution and delivery by Borrower of this Agreement, the
Notes and the Security Documents to be executed by Borrower;
(iv) A Certificate of the Secretary or Assistant
Secretary of Borrower certifying as to its articles and
by-laws and listing the names of officers of Borrower
authorized to sign this Agreement, the Notes, and the Security
Documents to be executed by Borrower and any other documents
or certificates to be delivered pursuant to this Agreement,
together with the true signatures of such officers. Lenders
may conclusively rely on such certificate until Agent shall
receive a further certificate of the Secretary or Assistant
Secretary of Borrower canceling or amending the prior
certificate and submitting the signatures of the officers
named in such further certificate;
(v) Certificates of the Secretary of State and of the
Division of Taxation (if applicable) of the state of
incorporation of Borrower, dated reasonably near the Closing
Date, stating that Borrower is duly organized and in
-37-
good standing in such State and has paid all taxes, fees and
other charges due such State as of the date of such
certificate;
(vi) Certificates of insurance evidencing the
insurance coverage required by Section 7.01 hereof and by the
Security Documents, together with copies of insurance policies
and endorsements naming Agent for the ratable benefit of
Lenders as loss payee in accordance with the requirements of
the Security Documents;
(vii) A Request for Advance, a Borrowing Base
Certificate and an Interest Rate Election, if applicable;
(viii) Copies of all documents, instruments and
agreements described on any Schedule hereto, certified as true
and correct copies by the Secretary of Borrower;
(ix) Copies of all Public Debt documentation;
(x) A copy of the Chief Operating Officer
Compensation Agreement;
(xi) A copy of the Employment Agreement;
(xii) A certificate of the President of Borrower
stating that:
(A) The representations and warranties set forth
in Article V hereof are true and correct on and as of the
Closing Date as though made on and as of such date;
(B) No Event of Default, nor any event which,
upon notice or lapse of time or both, would constitute such an
Event of Default, has occurred or will have occurred after
giving effect to the making of the Advances, the Revolving
Credit Commitment or the Loans;
(C) There has occurred no material adverse
change in the financial condition, business, assets,
prospects, operations or properties of Borrower since January
31, 1997;
(xiii) The pro forma balance sheet and projections
described in Section 5.01 hereof; and
(xiv) Such other supporting documents and
certificates as Lenders may reasonably request on or prior to
the Closing Date.
-38-
(c) Lenders shall have received the favorable written opinion
of Steel Xxxxxx & Xxxxx LLP, counsel for Borrower dated the Closing
Date, reasonably satisfactory to Lenders and their counsel in scope and
substance;
(d) Lenders shall have completed their due diligence review of
Borrower and its assets and operations with results satisfactory to
Lenders;
(e) All necessary consents, if any, to the transactions
contemplated hereby shall have been obtained;
(f) Borrower shall be indebted to Halston Borghese, Inc. in
the aggregate principal amount of not more than $2,000,000 evidenced by
the Halston Royalty Note;
(g) All legal matters incident to the transactions
contemplated hereby shall be reasonably satisfactory to counsel for
Lenders;
(h) No Event of Default, nor any event which, upon notice or
lapse of time or both, would constitute such an Event of Default, shall
have occurred; and
(i) Lenders shall have received payment of the fees described
in Section 2.11 hereof in immediately available funds.
SECTION 6.02. SUBSEQUENT ADVANCES.
(a) The obligation of Lenders to make any Advance subsequent to the
Closing Date is subject to the following conditions precedent:
(i) All representations and warranties set forth in Sections
5.02 through 5.20 hereof shall be true and accurate as of the Borrowing
Date for such Advance, except to the extent altered by actions
permitted pursuant to the terms hereof or to the extent Lenders shall
have been advised in writing of any inaccuracy with respect to such
representations and warranties and shall have waived the same in
writing;
(ii) There shall have occurred no material adverse change in
the financial condition, business, prospects, assets, operations, or
properties of Borrower, or in the value of the collateral securing
Borrower's obligations hereunder, in each case since the date of the
most recent financial statements required to be delivered to Agent
under Section 7.04(a) of this Agreement;
(iii) No Event of Default, nor any event which, upon notice or
lapse of time or both, would constitute such an Event of Default, shall
have occurred and be continuing or would have occurred after giving
effect to the borrowing contemplated by such Advance;
(iv) Each such Advance shall continue to be secured by a
perfected first priority lien (except as otherwise permitted by this
Agreement and the Security Documents)
-39-
arising under the Security Documents in favor of Agent for the
ratable benefit of Lenders and Lenders covering the Collateral; and
(vi) No change shall have occurred under any applicable law
which would make any Advance pursuant to the terms hereof illegal, or
make the obligation of Borrower to repay the same voidable.
(b) The obligation of Lenders to make any Advance subsequent to the
Closing Date is also subject to the additional condition precedent that Agent
shall have received with respect to such Advance a Request for Advance and an
Interest Rate Election, if applicable.
SECTION 6.03. LETTERS OF CREDIT.
The obligation of the Agent to issue, extend or renew, or to cause any
Affiliate to extend, issue or renew any Letter of Credit after the Closing Date,
and the obligation of the Lenders to purchase a participation interest in any
such Letter of Credit, is subject to all of the conditions precedent set forth
in Section 6.02 and to the following additional conditions precedent:
(i) The Borrower shall have executed all Letter of Credit
Documents as may be reasonably required by the Agent; and
(ii) The Agent shall have received in immediately available
funds payment of any fees due and payable under Section 4.11(d) and (f)
hereof.
VII. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, from the date hereof and until
payment in full of the principal of and interest on, the Notes and any other
indebtedness, liabilities and obligations of Borrower to Lenders, whether now
existing or arising hereafter, unless the prior written consent of Majority
Lenders shall have been obtained, Borrower will:
SECTION 7.01. PRESERVATION OF EXISTENCE. (a) Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
corporate existence and its rights, licenses, permits and franchises applicable
to it; at all times maintain, preserve and protect all such franchises,
trademarks, trade names, service marks, copyrights, know-how and patents, and
preserve all the remainder of its property used or useful in the conduct of its
business and keep the same in good repair, working order and condition, and from
time to time, make, or cause to be made, all needful and proper repairs,
renewals, replacements, betterments and improvements thereto, as are necessary
in the reasonable business judgment of Borrower so that the business carried on
in connection therewith may be properly and advantageously conducted at all
times; and keep its insurable properties adequately insured at all times in the
reasonable business judgment of Borrower, by financially sound and reputable
insurers, to such extent and against such risks, including fire and other risks
insured against by extended coverage, and maintain liability and such other
insurance, as is required by the Security Documents or, if greater, as is
customarily maintained by similarly situated companies engaged in similar
businesses, and upon
-40-
request of Lenders, furnish to Agent satisfactory evidence of the same; and
notify Agent of any material change in the insurance maintained on Borrower's
properties after the date hereof and furnish Agent satisfactory evidence of any
such change. In the event that Borrower shall default in the performance of any
of its obligations under this Section, Lenders may, at their option, effect such
insurance coverage with an insurer acceptable to Lenders and add the premium(s)
paid therefor to the principal amount of the indebtedness incurred pursuant
hereto, and the amount of such premium shall be payable by Borrower on demand
with interest thereon at the highest rate payable hereunder.
(b) Comply with all applicable laws and regulations applicable to it
whether now in effect or hereafter enacted; provided that it shall not be
required to so comply with any such law or regulation so long as it shall
contest the same in good faith by appropriate proceedings diligently pursued and
the effects of any such non-compliance would not be materially adverse to
Borrower or its condition, financial or otherwise.
(c) To the extent not prohibited hereunder, pay, perform and fulfill
all of its obligations and covenants under each material document, instrument or
agreement to which it is a party or by which it is bound, all in accordance with
their respective terms; PROVIDED, HOWEVER, that with respect to any such
documents, instruments and agreements (other than the Transaction Documents and
any other documents, instruments or agreements with or in favor of Lenders or
Agent), so long as Borrower is contesting in good faith any alleged failure by
it to pay, perform and fulfill such obligations and covenants by proper
proceedings and has made any proper reserve or other provision in accordance
with GAAP on account thereof, Borrower shall not be deemed in violation of this
Section 7.01(c); PROVIDED FURTHER that payment, performance or fulfillment of
such obligations and covenants shall be made or completed before any of its
property shall be seized or foreclosure proceedings commenced in satisfaction
thereof.
SECTION 7.02. TAXES. Pay and discharge or cause to be paid and
discharged all taxes, assessments and governmental charges or levies imposed
upon it or upon its respective income and profits or upon any of its property,
real, personal or mixed, or upon any part thereof, before the same shall become
in default, as well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon such properties
or any part thereof; provided that it shall not be required to pay and discharge
or cause to be paid and discharged any such tax, assessment, charge, levy or
claim so long as the validity thereof shall be contested in good faith by
appropriate proceedings and it shall have set aside on its books adequate
reserves with respect to any such tax, assessment, charge, levy or claim, so
contested.
SECTION 7.03. NOTICES. Give prompt written notice to Agent of any
proceedings instituted against Borrower by or in any federal or state court or
before any commission or other regulatory body, whether federal, state or local,
which, if adversely determined, would have a material adverse effect upon its
business, operations, prospects, properties, assets, or condition, financial or
otherwise, including any notice of non-compliance by Borrower with any
Environmental Law.
-41-
SECTION 7.04. FINANCIAL STATEMENTS. Furnish to Agent:
(a) Within ninety (90) days of the end of each fiscal year of
Borrower, a consolidated and consolidating balance sheet and
consolidated and consolidating statements of income, of changes in
stockholders' equity and of cash flows of Borrower and its
Subsidiaries, together with notes to financial statements, audited by
Deloitte & Touche or other independent certified public accountants
selected by Borrower and reasonably acceptable to Lenders, the form of
certification to be also reasonably satisfactory to Lenders, showing
the financial condition of Borrower and its Subsidiaries at the close
of such fiscal year and the results of operations during such year, and
to be on a comparative basis with the corresponding statements for the
preceding fiscal year on a consolidated basis; such statements shall be
accompanied by (i) a statement by such accountants to the effect that
such financial statements have been prepared in accordance with GAAP
applied on a basis consistent with prior years (except as to changes
with which such accountants concur) and fairly present the financial
condition of Borrower and its Subsidiaries at the dates thereof and the
results of its operations for the periods covered thereby and (ii) a
management letter from such accountants to Borrower;
(b) Within forty-five (45) days after the end of each quarter
in each such fiscal year, commencing with the quarter ending July 31,
1997, a consolidated and consolidating balance sheet and statements of
income, of changes in stockholders' equity and of cash flows of
Borrower and its Subsidiaries on a consolidated and consolidating
basis, prepared by Borrower and certified by its chief financial
officer, such balance sheet to be as of the close of such quarter and
such statements of income, of changes in stockholders' equity and of
cash flows to be for the period from the beginning of the then current
fiscal year to the end of such quarter, and to set forth in comparative
form the corresponding figures for the corresponding quarter(s) of the
preceding fiscal year, in each case subject to normal audit and
year-end adjustments;
(c) Within thirty (30) days after the end of each month in
each such fiscal year, commencing with the month ending April 30, 1997,
a consolidated and consolidating balance sheet and statement of income,
prepared by Borrower and certified by its chief financial officer, such
balance sheet to be as of the close of such month and such statement of
income to be for the period from the beginning of the then current
fiscal year to the end of such month, in each case subject to normal
audit and year-end adjustments, together with a written statement by
the President or chief financial officer describing, in reasonable
detail, any material changes in the financial condition and prospects
of Borrower and the reasons therefor;
(d) Concurrently with the delivery of any and all financial
statements required by Section 7.04(a) or (b), a certificate of the
chief financial officer of Borrower in substantially the form of
EXHIBIT E attached hereto and made a part hereof (i) calculating,
setting forth and certifying, to the best knowledge of such officer
after diligent inquiry, as to the accuracy of the amounts required to
be calculated under Sections 7.08 through 7.11, 8.01(d), 8.01(h), 8.06,
and 8.09 through 8.11 hereof, and (ii) certifying as to the fact
-42-
that such officer has examined such financial statements and the
provisions of this Agreement and that, to the best knowledge of such
officer after diligent inquiry, no Event of Default, nor any event
which upon notice or lapse of time or both, would constitute such an
Event of Default, has occurred;
(e) Ninety (90) days after the end of each fiscal year of
Borrower, commencing with the fiscal year ending January 31, 1997,
projections in reasonable detail of the operating budget and cash flow
of Borrower and its Subsidiaries for each of its two next succeeding
fiscal years, prepared by Borrower, and also containing a certification
by its chief financial officer to the effect that such projections have
been prepared on a sound financial planning basis in accordance with
GAAP and that the assumptions upon which such projections are based are
reasonable;
(f) Within fifteen (15) days after the end of each month in
each fiscal year of Borrower, a Borrowing Base Certificate, together
with a schedule setting forth in reasonable detail Borrower's inventory
and the agings of all accounts receivable of Borrower, certified by
Borrower's chief financial officer as of the end of such month;
(g) Written notice of any of the following events, as soon as
possible and in any event within 15 days after Borrower knows or has
reason to know thereof: (i) the occurrence or expected occurrence of
any Reportable Event with respect to any Plan, or (ii) the institution
of proceedings or the taking or expected taking of any other action by
PBGC or Borrower or any Commonly Controlled Entity to terminate,
withdraw or partially withdraw from any Plan and, with respect to any
Multiemployer Plan, the Reorganization (as defined in Section 4241 of
ERISA) or Insolvency (as defined in Section 4245 of ERISA) of such Plan
and, in addition to such notice, deliver to Lenders whichever of the
following may be applicable (x) a certificate of the chief financial
officer of Borrower setting forth details as to such Reportable Event
and the action that Borrower or such Commonly Controlled Entity
proposes to take with respect thereto, together with a copy of any
notice of such Reportable Event that may be required to be filed with
PBGC, or (y) any notice delivered by PBGC evidencing its intent to
institute such proceedings or any notice to PBGC that such Plan is to
be terminated, as the case may be;
(h) Promptly upon circulation or filing thereof, copies of any
material written reports issued by any Borrower to any of its
stockholders or any material creditors relating to the Borrower's
financial condition, and copies of all regular, periodic and special
reports and all registration statements which the Borrower files or is
required to file with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any
national securities exchange; and
(i) Promptly, from time to time, such other information
regarding the operations, assets, business, affairs and financial
condition of Borrower (including, without limitation, any updated
Borrowing Base Certificate), as Lenders may reasonably request.
-43-
SECTION 7.05. INSPECTION. Permit Lenders and their agents or
representatives, at reasonable hours and upon reasonable notice, at any time and
from time to time, at Borrower's sole reasonable expense, to inspect the
properties and books and records of the Borrower and to make abstracts or
reproductions thereof and to discuss the business affairs of Borrower with any
of its officers or any attorney or accountant engaged to perform services for
it; provided that, so long as no Event of Default shall have occurred and be
continuing audits at Borrower's reasonable expense shall be conducted no more
frequently than once a quarter.
SECTION 7.06. MATERIAL ADVERSE CHANGE. Promptly advise Agent of any
material adverse change in the business, operations, prospects, properties,
assets or condition, financial or otherwise, of Borrower or of the occurrence of
any Event of Default, or of the occurrence of any event which upon notice or
lapse of time or both, would constitute such an Event of Default.
SECTION 7.07. ACCOUNTING. Maintain a standard system of accounting in
accordance with GAAP with only such exceptions as are reasonably acceptable to
Lenders.
SECTION 7.08. RATIO OF INDEBTEDNESS TO CAPITAL BASE. Maintain as at the
last day of each fiscal quarter of Borrower a maximum ratio of (A) Indebtedness
of Borrower as at such date LESS the aggregate principal amounts outstanding
under the Subordinated Debentures as at such date to (B) the Capital Base of
Borrower as at such date, of 3.0 to 1.0.
SECTION 7.09. SHAREHOLDERS' EQUITY BASE. Maintain at the end of each
fiscal quarter Shareholders' Equity Base at least equal to $37,000,000 ("Minimum
Amount") from the Closing Date through and including the fiscal quarter ending
January 31, 1997; provided, however, such Minimum Amount shall be increased
ninety (90) days following each fiscal year end after January 31, 1997 in an
amount equal to 50% of the net income of Borrower for the preceding fiscal year,
and; provided further, the Minimum Amount shall be immediately increased by an
amount equal to the net proceeds received by Borrower as a result of any Public
Offering, upon Borrower's receipt of the net proceeds therefrom.
SECTION 7.10. MINIMUM DEBT SERVICE COVERAGE. Maintain at the end of
each fiscal quarter for the twelve preceding months then ended, a minimum ratio
of EBITDA less Capital Expenditures to Interest Expense plus CMLTD of 1.25 to
1.00 for the fiscal quarters including the quarter ending on January 31, 1998
and 1.40 to 1.00 thereafter.
SECTION 7.11. MINIMUM INTEREST COVERAGE. Maintain at the end of each
fiscal quarter for the twelve preceding months then ended, a minimum ratio of
Operating Cash Flow to Interest Expense of 1.35 to 1.0 for the fiscal quarters
including the quarter ending on January 31, 1998 and 1.50 to 1.0 thereafter.
For purposes of the calculations required in connection with Sections 7.08,
7.09, 7.10 and 7.11 hereof, all tests shall be determined on a consolidated
basis.
SECTION 7.12. PRINCIPAL DEPOSITORY. Use Agent as the principal
depository of its corporate funds.
-44-
VIII. NEGATIVE COVENANTS.
Borrower covenants and agrees that, until payment in full of the
principal of and interest on, the Notes and any other indebtedness, liabilities
or obligations of Borrower to Lenders, whether now existing or arising
hereafter, unless the prior written consent of Majority Lenders shall have been
obtained, Borrower will not, directly or indirectly:
SECTION 8.01. INDEBTEDNESS. Incur, create, assume, become or be liable
in any manner with respect to, or permit to exist, any Indebtedness, except:
(a) Indebtedness to Lenders;
(b) Indebtedness with respect to trade obligations and other
normal accruals in the ordinary course of business not yet due and
payable, or with respect to which it is contesting in good faith the
amount or validity thereof by appropriate proceedings, and then only to
the extent it has set aside as to such contested amounts on its books
adequate reserves therefor;
(c) Endorsements of negotiable instruments for collection in
the ordinary course of business;
(d) Indebtedness representing (i) existing Capitalized Lease
Obligations or Purchase-Money Indebtedness described on SCHEDULE
8.01(D) hereto (but not any renewals or refinancings thereof), (ii)
additional Capitalized Lease Obligations or Purchase-Money Indebtedness
in an aggregate amount not to exceed $100,000 (but only to the extent
such additional Indebtedness is incurred within the limits set forth in
Section 8.10 hereof), and (iii) Capitalized Lease Obligations or
Purchase-Money Indebtedness exceeding the amount described in (ii)
above, but only under terms and conditions and in amount acceptable to
Lenders.
(e) Deferred taxes, but only to the extent it has set aside on
its books adequate reserves in accordance with GAAP;
(f) Indebtedness to the Subordinated Creditors evidenced by
the Subordinated Debentures in an aggregate principal amount not to
exceed at any time outstanding $12,560,034 only so long as such
Indebtedness is subordinated to Indebtedness of Borrower to Lenders;
(g) Indebtedness to Seller evidenced by the Halston Royalty
Note in a principal amount not to exceed at any time outstanding
$2,000,000;
(h) Obligations under existing Plans maintained in accordance
with the terms of this Agreement, but only to the extent it has set
aside on its books adequate reserves in accordance with GAAP;
-45-
(i) Indebtedness to Xxxxxx evidenced by the Xxxxxx Factoring
Agreement;
(j) Indebtedness pursuant to foreign currency exchange
contracts in aggregate face amounts not to exceed $200,000 at any time
outstanding;
(k) Indebtedness issued pursuant to the Public Debt;
(l) the Mortgage Indebtedness; and
(m) Indebtedness incurred in connection with an acquisition
permitted under Section 8.08 hereof.
SECTION 8.02. LIENS AND ENCUMBRANCES. Create, incur, assume or suffer
to exist any mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets, now or hereafter owned, other than:
(a) liens securing the payment of taxes, either not yet
delinquent or the validity of which is being contested in good faith by
appropriate proceedings, and as to which it shall have set aside on its
books adequate reserves in accordance with GAAP;
(b) deposits under workers' compensation, unemployment
insurance and social security laws, or to secure the performance of
bids, tenders, contracts (other than for the repayment of borrowed
money) or leases, or to secure statutory obligations or surety or
appeal bonds, or to secure indemnity, performance or other similar
bonds in the ordinary course of business;
(c) carriers', warehousemen's and mechanics' liens, incurred
by it in good faith in the ordinary course of business, and liens
arising out of a judgment or award against it with respect to which it
shall currently be prosecuting an appeal, a stay of execution pending
such appeal having been secured;
(d) liens in favor of Agent for the ratable benefit of Lenders
or Lenders;
(e) liens securing Indebtedness permitted by Section 8.01(d)
hereof, PROVIDED that the liens securing such Indebtedness shall be
confined solely to the assets purchased from the proceeds of such
Indebtedness or assets required to be capitalized in connection with
such Indebtedness;
(f) liens and other encumbrances permitted pursuant to the
Security Documents;
(g) liens in favor of the Subordinated Creditors;
(h) liens in favor of Xxxxxx so long as the Xxxxxx
Intercreditor Agreement is in full force and effect;
-46-
(i) the First Mortgage;
(j) liens and encumbrances disclosed on SCHEDULE 5.06 hereof;
and
(k) liens and encumbrances incurred in connection with an
acquisition permitted under Section 8.08 hereof.
SECTION 8.03. GUARANTEES. Guarantee, endorse or otherwise in any way
become or be responsible for, obligations of any other Person, whether by
agreement to purchase Indebtedness of any other Person, or agreement for the
furnishing of funds to any other Person, through purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or loan,
for the purpose of paying or discharging any Indebtedness or obligation of such
other Person, or otherwise (except endorsements on negotiable instruments for
collection in the ordinary course of business and except for that certain
Guarantee Agreement, dated March 16, 1995, from Borrower to Xxxxxxxx Xxxxx,
Inc.).
SECTION 8.04. SALE - LEASEBACKS. Enter into any arrangements, directly
or indirectly, with any Person whereby it shall sell or transfer any property or
asset, real, personal or mixed, used or useful in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such property or
asset.
SECTION 8.05. SALE OF ASSETS. Sell, lease, transfer or otherwise
dispose of all or any portion of its properties or assets to any Person, except
in the ordinary course of its business (which ordinary course shall include the
sale or other disposition of obsolete or excess inventory, fixtures or equipment
to the extent ordinary and consistent with past practice including machinery and
equipment related to the manufacture of footwear), or turn over the management
of, or enter into a management contract with respect to, such properties or
assets; provided, however, Borrower may, prior to the end of each calendar year,
assign its Accounts and other intangible assets, to FRM Services so long as the
Borrower shall take such action as Agent may require to perfect or continue to
perfect the Agent's security interest in the Accounts.
SECTION 8.06. INVESTMENTS. Purchase, invest in or otherwise acquire or
hold securities, including, without limitation, capital stock or other
securities or evidences of Indebtedness of, or make loans or advances to, or
enter into any arrangement for the purpose of providing funds or credit to, any
Person, except:
(a) advances to employees for business expenses or for
personal needs not to exceed Twenty Thousand Dollars ($20,000) in the
case of any one (1) employee and not to exceed Fifty Thousand Dollars
($50,000) in the aggregate to all such employees of Borrower
outstanding at any one time;
(b) investments in short-term obligations of the United States
of America;
-47-
(c) demand deposits, certificates of deposit, bankers'
acceptances and time deposits of United States banks having total
assets in excess of $250,000,000;
(d) securities commonly known as "commercial paper" issued by
a corporation organized and existing under the laws of the United
States of America or any state thereof which at the time of purchase
have been rated and the ratings for which are not less than "P-1" if
rated by Xxxxx'x Investors Services, Inc., and not less than "A-1" if
rated by Standard & Poor's;
(e) investments in money market funds, liquid assets funds and
other similar funds purchasing, investing in or otherwise acquiring or
holding only investments otherwise permitted by paragraphs (b) through
(d) of this Section 8.06;
(f) investments in Fine Fragrances, evidenced by Capital Stock
of Fine Fragrances issued to Borrower;
(g) investments in G.B. Parfums, evidenced by Capital Stock of
G.B. Parfums issued to Borrower;
(h) investments in Halston, evidenced by Capital Stock of
Halston issued to Borrower;
(i) investments in FRM Services, evidenced by Capital Stock of
FRM Services issued to Borrower; and
(j) investments permitted pursuant to Section 8.08 hereof
SECTION 8.07. CHANGES. Dissolve, liquidate or commence the winding up
of its affairs, or merge or consolidate with or into any Person, except for the
merger of any Subsidiary with or into any other wholly-owned Subsidiary or the
Borrower.
SECTION 8.08. ASSET PURCHASES. Except in the case of the Borrower and
its Subsidiary, acquire all or substantially all of the assets of any Person,
except that Borrower or any of its Subsidiaries may, without the prior written
consent of Lenders, acquire all or substantially all of the assets of any Person
so long as (a) Borrower gives Lenders prior written notice of such acquisition,
(b) such acquisition is in the same, similar or complementary business of
Borrower, (c) neither Borrower nor any Subsidiary shall assume or create any
liabilities or contingent obligations in connection with such acquisition in an
amount in excess of $50,000,000 in the aggregate, (d) Agent for the ratable
benefit of Lenders has a first priority security interest in the Accounts and
Inventory acquired immediately following such acquisition, (e) the purchase
price for such assets, when added to the purchase price paid for all other
acquisitions of assets permitted pursuant to this Section 8.08 do not exceed
$50,000,000 in the aggregate for the then current fiscal year and (f) there
exists no Event of Default, or any event which, with the giving of notice or
passage of time or both, or after giving effect to such acquisition, would
constitute an Event of Default. In connection with any such acquisition, the
Borrower or any such Subsidiary
-48-
shall be permitted to secure the indebtedness permitted pursuant to clause (c)
of this Section 8.08 with the assets acquired (other than Accounts and
Inventory).
SECTION 8.09. DIVIDENDS AND DISTRIBUTIONS. Declare or pay any dividends
(other than stock dividends) or make any other distribution of cash or property
to any of its stockholders (other than in connection with the terms of any
outstanding warrants), or directly or indirectly redeem, purchase or otherwise
acquire for consideration, any shares of its Capital Stock (a "Restricted
Distribution"), except that Borrower may make payments (a) to the holders of the
Subordinated Debentures and the Halston Royalty Note to the extent such payments
are not prohibited under Section 8.12 hereof, (b) pursuant to the terms of the
FMG Consulting Agreement, (c) pursuant to the terms of the Employment Agreement,
(d) pursuant to the terms of the Chief Operating Officer Compensation Agreement,
(e) pursuant to the Bonus Plan and (f) additional Restricted Distributions
(exclusive of those set forth in subsections (a) through (e) hereof) in an
amount not to exceed $50,000 in the aggregate per annum.
SECTION 8.10. CAPITAL EXPENDITURES. Make Capital Expenditures during
any fiscal year in excess of $2,500,000.
SECTION 8.11. CAPITAL LEASES. Incur obligations under any lease not
deemed to be a Capitalized Lease if the aggregate rental payable by Borrower
during any fiscal year under all such leases in effect at any one time during
such year exceeds $100,000 plus the obligations outstanding under the Lease.
SECTION 8.12. SUBORDINATED PAYMENTS.
(a) Make any payments to the holder(s) of the Subordinated Debentures,
whether on account of principal, premium, if any, or interest due thereunder if
an Event of Default has occurred and is continuing.
(b) Make any payment of regularly scheduled principal to the holders of
the FMG Subordinated Debentures unless the Borrower is maintaining a Debt
Service Coverage (as required by Section 7.10 hereof) of at least 1:50:1.0, and
(c) Make any payment of regularly scheduled interest to the holders of
the FMG Subordinated Debentures unless Borrower is maintaining an interest
coverage ratio (as required by Section 7.11 hereof) of 1.75:1.0.
SECTION 8.13. TRANSACTIONS WITH AFFILIATES. Conduct or enter into any
business or transaction or series of related transactions (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate except on terms and conditions determined in good
faith by the Board of Directors of Borrower to be no less favorable to Borrower
than could be obtained in arms-length transactions with unaffiliated Persons,
except (i) for the FMG Consulting Agreement, the G.B. Parfums Sublicense
Agreement, the Halston License Agreement, the Employment Agreement, the Chief
Operating Officer Compensation Agreement and the Bonus Pool, (ii) transfers to
FRM Services as permitted pursuant to Section
-49-
8.05 and (iii) the granting of a license by Fine Fragrances to the Borrower for
the use of the trademarks and trademark application owned by Fine Fragrances and
the payment of royalties thereunder.
SECTION 8.14. ACCOUNTS RECEIVABLE. Except for (i) the sale of Accounts
pursuant to the Xxxxxx Factoring Agreement and (ii) transfers permitted to FRM
Services pursuant to Section 8.05, sell, assign, discount or dispose in any way
of any accounts receivable, promissory notes or trade acceptances, with or
without recourse, except for collection (including endorsements) in the ordinary
course of business.
SECTION 8.15. ERISA. (a) Terminate any Plan so as to result in any
material liability to PBGC, including, without limitation, any contingent or
secondary withdrawal liability within the meaning of Sections 4201 and 4202 of
ERISA to any Multiemployer Plan, (b) engage in any "prohibited transaction" (as
defined in section 4975 of the Code) involving any Plan which would result in a
material liability for an excise tax or civil penalty in connection therewith,
(c) incur or suffer to exist any material "accumulated funding deficiency" (as
defined in Section 302 of ERISA or section 412 and/or 418B of the Code), whether
or not waived, involving any Plan, (d) allow or suffer to exist any event or
condition, which presents a material risk of incurring a material liability to
PBGC by reason of termination of any such Plan or (e) cause or permit any Plan
maintained by Borrower and/or any Commonly Controlled Entity to be administered
in a manner which is not in material compliance with ERISA, the Code and/or
Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L.
99-272), as amended.
SECTION 8.16. AMENDMENTS; MODIFICATIONS. Amend, waive or modify in any
material respect any of the terms of (a) the documentation evidencing the Public
Debt, (b) the Subordinated Debentures (c) the Halston Royalty Note, (d) the FMG
Consulting Agreement or (e) the Chief Operating Officer Compensation Agreement.
SECTION 8.17. CHANGE IN BUSINESS. Engage, directly or indirectly, in a
business substantially different from the business conducted by Borrower during
the preceding calendar year .
SECTION 8.18. FISCAL YEAR. Change the fiscal year of Borrower.
SECTION 8.19. SUBSIDIARIES. Sell, assign or otherwise dispose of, or
directly or indirectly create, incur, assume or suffer to exist any mortgage,
pledge, lien, charge or other encumbrance or any nature whatsoever on,
Borrower's Capital Stock in Fine Fragrances, G. B. Parfums, Halston or FRM
Services, except as provided in Section 8.02 hereof.
-50-
IX. DEFAULTS
In case of the occurrence of any one or more of the following events
(each of which event is herein and in the Notes and the Security Documents
sometimes called an "Event of Default"):
(a) any representation or warranty made herein or in any
Security Document, or in any report, certificate, financial statement
or other instrument furnished to Agent or Lenders in connection with
this Agreement, or any borrowing hereunder, shall prove to be false or
misleading in any material respect when made or deemed to have been
made;
(b) default (i) in the payment of any installment of the
principal of or interest on the Notes or any other Indebtedness of
Borrower to Lenders, whether at the due date thereof or at a date fixed
for prepayment, by acceleration, demand or otherwise, or (ii) in the
payment of any other amount or fee due to Lenders hereunder or under
any of the Security Documents and the continuation of any such default
described in this clause (ii) for five (5) days after written notice
thereof by such Agent to Borrower;
(c) default in the due observance or performance of any
covenant, condition or agreement contained in any Section of Article
VII (except for Sections 7.01, 7.02 or 7.07) or any Section of Article
VIII hereof;
(d) default in the due observance or performance of any other
covenant, condition or agreement on the part of Borrower to be observed
or performed pursuant to the terms hereof or pursuant to the terms of
any of the Security Documents (other than as set forth in subparagraphs
(b) and (c) above), and such default shall continue unremedied for
thirty (30) days after written notice thereof by the Agent to Borrower;
(e) (i) default under any other Indebtedness of Borrower
(other than to any of Lenders) in an amount outstanding which exceeds
One Hundred Thousand Dollars ($100,000) at the time of such default if,
as a result of such default, the holder thereof would be entitled to
accelerate the maturity of such Indebtedness (after any applicable
notice and the passage of any applicable grace period), or (ii) if any
Indebtedness described in clause (i) above is not paid when due and
payable, whether at the due date thereof or a date fixed for
prepayment, by demand or otherwise;
(f) dissolution, liquidation, winding-up, or termination of
existence of Borrower;
(g) if Borrower shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of it or
any of its property, (ii) admit in writing its inability to pay its
debts as they mature, (iii) make a general assignment for the benefit
of creditors, (iv) be adjudicated a bankrupt or insolvent or be the
subject of an order for relief under Title 11 of the United States
Code, or (v) file a voluntary petition in bankruptcy, or a petition or
an answer seeking reorganization or an arrangement with creditors or to
take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law or statute, or an
answer admitting the
-51-
material allegations of a petition filed against it in any proceeding
under any such law or if action shall be taken for the purpose of
effecting any of the foregoing;
(h) an order, judgment or decree shall be entered, without the
application, approval or consent of Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of Borrower
or appointing a receiver, trustee, custodian or liquidator of Borrower
or of all or a substantial part of its assets, and such order, judgment
or decree shall continue unstayed and in effect for any period of
thirty (30) consecutive days;
(i) final judgment for the payment of money in excess of an
aggregate of One Hundred Thousand Dollars ($100,000) shall be rendered
against Borrower and the same shall remain undischarged for a period of
thirty (30) consecutive days, during which period execution shall not
be effectively stayed or bonded, unless such judgment shall be covered
by an insurance policy maintained by Borrower in full force and effect
without notice of the denial of or any challenge to a claim brought in
respect thereof;
(j) the occurrence of any attachment of any deposits or other
property of Borrower in the hands or possession of Agent for the
ratable benefit of Lenders or Lenders, which shall not be discharged,
stayed or bonded within thirty (30) days of the date of such
attachment;
(k) the occurrence of any attachment of any other property of
Borrower in an amount exceeding Fifty Thousand Dollars ($50,000), which
shall not be discharged, bonded or stayed pending appeal within thirty
(30) days of the date of such attachment;
(l) an Event of Default under any of the Security Documents
shall have occurred and be continuing beyond any applicable grace
period;
(m) an Event of Default under any of the Subordinated
Debentures or the Halston Royalty Note shall have occurred and be
continuing beyond any applicable grace period;
then and in every such Event of Default which shall be continuing, Majority
Lenders may declare the obligation to make the Advances to be terminated,
whereupon the same shall forthwith terminate, and Majority Lenders may, by
notice to Borrower, declare the entire unpaid principal amount of the Notes and
all fees and interest accrued and unpaid thereon and/or under this Agreement and
any and all other Indebtedness of Borrower to Lenders and/or to any holder of
all or any portion of the Notes to be forthwith due and payable, whereupon the
Notes and all such accrued fees and interest and other Indebtedness shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by
Borrower; provided, however that upon the occurrence of an Event of Default
under Article IX (g) or (h) hereof, all of the unpaid principal amount of the
Notes, all fees and interest accrued and unpaid thereon and/or under this
Agreement and any and all other Indebtedness of Borrower to Lenders and/or to
any such holder shall thereupon become and be forthwith due and payable in full
without any need for Lenders to make any such declaration or
-52-
take any action, and Lenders' obligations to make the Advances shall
simultaneously terminate. Upon the occurrence of any Event of Default, Lenders,
without regard to the value or adequacy of the security for the Indebtedness of
Borrower under the Transaction Documents, shall be entitled as a matter of
right, if they so elect, to the appointment of or taking possession by a
trustee, receiver or liquidator (or other similar official) of all or any
substantial part of the properties of Borrower, for the purpose of collecting
all rents, income and other benefits thereof, or of liquidating all or any part
of the collateral, and applying such rents, income or other benefits or the
proceeds of such liquidation to the Indebtedness of Borrower to Lenders (or to
such other indebtedness as the court appointing such trustee, receiver,
liquidator or other official may direct). The remedies specified herein are
cumulative and not exclusive of any other remedy after any particular Event of
Default and shall not operate as a waiver of any remedy in that or in any
subsequent instance.
X. MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS
SECTION 10.01. (a) Upon the occurrence of an Event of Default, or the
occurrence of any event which, with the giving of notice or passage of time or
both, would constitute an Event of Default, or a material change in the value of
the collateral securing Borrower's obligations under this Agreement, the Notes
and the other Transaction Documents, upon request of Majority Lenders, Borrower
shall arrange for all payments due to Borrower from any Person, including, but
not limited to, customers or account debtors of Borrower, to be made directly to
lock-boxes owned or designated by Agent to which Agent or its designee shall
have exclusive access for the purpose of collecting and processing payments on
Accounts, or in such other manner as Majority Lenders may reasonably direct.
Agent shall credit all payments made with respect to Accounts of Borrower to
Borrower's account, conditioned upon final collection. All items of payment
received (subject to dishonor) upon the collection of any Account shall be
applied (conditioned upon final collection) by Agent to outstanding Advances the
Business Day payment is received by Agent in immediately available funds at its
office in Providence, Rhode Island. Any such payment which is not received in
such form or prior to 12:00 Noon (Providence, Rhode Island time) shall be deemed
received for all purposes of this Agreement on the next succeeding Business Day
on which such funds become immediately available prior to such time.
(b) In the event Borrower (or any Affiliate of Borrower or any Person
acting for or in concert with Borrower) shall, notwithstanding the existence of
any lock-box arrangement referred to in subsection (a) of this Section 10.01,
receive any monies, checks, drafts or other similar negotiable items of payments
made with respect to Accounts of Borrower, Borrower or such Persons shall
receive the same in trust and shall deliver to Agent (or to a depository
designated by Agent) in original form and on the date of receipt thereof, all
checks, drafts, notes, money orders, acceptances, cash and other evidences of
Indebtedness.
(c) Upon the occurrence of an Event of Default, or the occurrence of
any event which, with the giving of notice or passage of time or both, would
constitute an Event of Default, or the occurrence of a material change in the
value of the collateral securing Borrower's obligations under this Agreement,
the Notes and the other Transaction Documents, Borrower will, at Majority
Lenders' request, at Borrower's cost and expense, collect and otherwise enforce
as
-53-
Lenders' property and in trust for Agent for the ratable benefit of Lenders all
amounts payable on or otherwise receivable with respect to the Accounts and
Inventory of Borrower. In such event, as to all moneys so collected and all
other proceeds of Accounts and Inventory received by Borrower, Borrower shall
receive in trust and shall deliver to Agent (or to a lock-box designated by
Agent pursuant to Section 10.01(a) hereof) in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness. Upon any termination of Borrower's authority to
collect and enforce the Accounts and amounts payable with respect to Inventory
of Borrower (which Agent may do at any time after the occurrence of an Event of
Default, or the occurrence of any event which, with the passage of time or
giving of notice or both, would constitute an Event of Default, or the
occurrence of a material change in the value of the collateral securing
Borrower's obligations under this Agreement, the Notes and the other Transaction
Documents), Agent may send a notice of assignment and/or notice of Lenders'
security interest to any and all customers or any third party otherwise
concerned with any of the Accounts or such Inventory, and thereafter Agent shall
have the sole right to collect and receive and/or take possession of the
Accounts and such other amounts and the books and records relating thereto.
(d) (i) Borrower hereby constitutes Agent or its designee on
behalf of Lenders as Borrower's attorney-in-fact with power: to receive,
endorse, assign and/or deliver in its name or the name of Borrower on any notes,
acceptances, checks, drafts, money orders or other evidences of payment or
account that may come into its possession and Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed; to sign
Borrower's name on any invoice or xxxx of lading relating to any of the
Accounts, drafts against customers, assignments and verifications of Accounts
and notices to customers; to send verifications of Accounts; to do all other
acts and things necessary to carry out this Agreement and, upon the occurrence
of an Event of Default, or the occurrence of any event which, with the giving of
notice or passage of time or both, would constitute an Event of Default, to
notify postal service authorities to change the address for delivery of mail
addressed to Borrower to such address as Agent may designate. All acts of said
attorney or designee are hereby ratified and approved, and said attorney or
designee shall not be liable for any acts of omission or commission, for any
error of judgment or for any mistake of fact or law, provided that Agent or its
designee shall not be relieved of liability to the extent it is determined by a
final judicial decision that its act, error or mistake constituted gross
negligence or willful misconduct. This power of attorney, being coupled with an
interest, is irrevocable until all of the obligations of Borrower to Agent under
this Agreement and the Notes are paid in full and this Agreement is terminated.
(ii) Agent, on behalf of the Lenders, without notice to or
consent of Borrower, upon the occurrence of an Event of Default under
subsections (g) or (h) of Article IX hereof or upon the occurrence and during
the continuance of any other Event of Default, (A) may make demand on, xxx upon
or otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise upon such terms as shall be determined by Agent in its
sole discretion, any of the Accounts or any securities, instruments or insurance
applicable thereto and/or release the obligor thereon; and (B) is authorized and
empowered to accept the return of the goods represented by any of the Accounts.
-54-
(e) Nothing herein contained shall be construed to constitute
Borrower as agent of Agent for any purpose whatsoever, and Agent shall not be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof (except for Agent's obligations, if any, under the Uniform
Commercial Code with respect thereto or to the extent it is determined by a
final judicial decision that Agent's act or omission constituted gross
negligence or willful misconduct). Agent shall not, under any circumstances or
in any event whatsoever, have any liability for any error or omission or delay
of any kind occurring in the settlement, collection or payment of any of the
Accounts or any instrument received in payment thereof or for any damage
resulting therefrom (except to the extent it is determined by a final judicial
decision that Agent's error, omission or delay constituted gross negligence or
willful misconduct). Agent, by anything herein or in any assignment or
otherwise, does not assume any of Borrower's obligations under any contract or
agreement assigned to Agent, and Agent shall not be responsible in any way for
the performance by Borrower of any of the terms and conditions thereof.
(f) If any of the Accounts include a charge for any tax
payable to any governmental tax authority, Agent is hereby authorized (but in no
event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for Borrower's account and to charge Borrower's account
therefor. Borrower shall notify Agent if any Accounts include any tax due to any
such taxing authority and, in the absence of such notice, Agent shall have the
right to retain the full proceeds of such Accounts and shall not be liable for
any taxes that may be due from Borrower by reason of the sale and delivery
creating such Accounts.
SECTION 10.02. ACCOUNTS DOCUMENTATION. Borrower will, in addition to
the monthly Accounts agings certificates and Borrowing Base Certificates
delivered pursuant to Section 7.04 of this Agreement, at such intervals as
Majority Lenders require (including on a daily basis), furnish a Borrowing Base
Certificate and such further schedules and/or information to Agent as Majority
Lenders may reasonably require relating to the Accounts, including, without
limitation, sales invoices. In addition, Borrower shall notify Agent of any
non-compliance with respect to the representations, warranties and covenants
contained in Section 10.03 below. The items to be provided under this Section
10.02 are to be in form satisfactory to Agent and are to be executed and
delivered to Agent from time to time solely for its convenience in maintaining
records of the Accounts; Borrower's failure to give any of such items to Agent
shall not affect, terminate, modify or otherwise limit Lenders' lien or security
interest in the Accounts or any other Collateral securing the obligations of
Borrower to Lenders under this Agreement and the Notes.
SECTION 10.03. STATUS OF ACCOUNTS.
(a) With respect to Eligible Accounts of Borrower in existence on the
date hereof and at the time any future Eligible Accounts are included in any
Borrowing Base Certificate, Borrower represents and warrants that:
(i) Borrower is the sole owner of the Account and is fully
authorized to sell, transfer, pledge and/or grant a security interest
in each and every Account, free and clear
-55-
of all liens except in favor of Agent for the ratable benefit of
Lenders and Lenders or otherwise permitted hereunder;
(ii) each Account is a good and valid account representing a
bona fide transaction completed in accordance with the terms and
provisions contained in any documents related thereto;
(iii) the amount of the face value shown on any schedule of
Accounts provided to Agent and/or all invoices and statements delivered
to Agent with respect to any Account, are actually and absolutely owing
to Borrower for delivery of goods or services and are not contingent
for any reason;
(iv) to the best of Borrower's knowledge, there are no
setoffs, counterclaims or disputes existing or asserted with respect
thereto, the Account is not a contra account, and Borrower not has made
any agreement with any account debtor thereunder for any deduction
therefrom, except a discount or allowance allowed by Borrower in the
ordinary course of its business for prompt payment consistent with past
practices of Borrower uniformly applied, all of which discounts or
allowances are reflected in the calculation of the face value of each
respective invoice related thereto;
(v) none of the transactions underlying or giving rise to any
Account shall violate in any material respect any applicable state or
federal laws or regulations, and all documents relating to any Account
shall be legally sufficient under such laws or regulations and shall be
legally enforceable in accordance with their terms;
(vi) to the best of Borrower's knowledge, all signatures and
endorsements that appear on all documents and agreements relating to
Accounts are genuine and each account debtor, guarantor or endorser
thereunder (i) had the capacity, power and authority to contract at the
time any such document or agreement giving rise to the Account was
executed and (ii) is solvent and will continue to be fully able to pay
all Accounts on which it is obligated in full when due;
(vii) all documents and agreements relating to Accounts are
true and correct and in all respects what they purport to be, are not
evidenced by a judgment and are only evidenced by one executed
original;
(viii) to the best of Borrower's knowledge, there are no
facts, events or occurrences which in any way impair the validity or
enforcement thereof or tend to reduce the amount payable or collectible
thereunder from the amount of the invoice face value shown on any
schedule of Accounts, and on all contracts, invoices and statements
delivered to Agent with respect thereto;
(ix) the goods giving rise thereto are not, and were not at
the time of the sale thereof, subject to any lien, claim, encumbrance
or security interest, except the lien of Borrower as vendor thereof
pursuant to the Uniform Commercial Code, the security
-56-
interest of Lenders pursuant to the Security Documents, the security
interests permitted by, and subject to, Section 8.02(g) of this
Agreement and the security interest of Xxxxxx under the Xxxxxx
Factoring Agreement;
(x) to the best of Borrower's knowledge, there are no
proceedings or actions which are threatened or pending against any
account debtor thereunder which might result in any material adverse
change in the financial condition of such account debtor; and
(xi) they have not been pledged to any other Person except as
permitted by, and subject to, Section 8.02 of this Agreement.
(b) Borrower covenants that, from and after the date hereof:
(i) Borrower shall maintain books and records pertaining to
said collateral in such detail, form and scope as Lenders shall
reasonably require;
(ii) Borrower will, promptly upon learning thereof, report to
Agent any matters adversely affecting the value, enforceability or
collectibility of any of the Accounts;
(iii) if any amount payable under or in connection with any
Account is evidenced by a promissory note or other instrument, as such
terms are defined in the Uniform Commercial Code, such promissory note
or instrument shall be immediately pledged, endorsed, assigned and
delivered to Agent for the ratable benefit of Lenders as additional
collateral;
(iv) Borrower shall not re-date any invoice or sale, or make
sales on extended terms dating beyond that customary in the industry;
(v) Borrower shall conduct a physical count of its inventory
at such intervals as Lenders may reasonably request, and promptly
supply Agent with a copy of such counts accompanied by a report of the
value (based on the lower of cost (on a FIFO basis) and market value)
of such inventory;
(vi) Borrower is not and shall not be entitled to pledge
Lenders' credit on any purchases or for any purpose whatsoever; and
(vii) Borrower shall not, without Lenders' prior written
consent, grant any extension of the time of payment of any Eligible
Account Receivable, compromise or settle any Eligible Account
Receivable for less than the full amount thereof, release in whole or
in part, any Person or property liable for the payment thereof, or
allow any credit or discount whatsoever thereon (other than discounts
in the ordinary course of business for prompt payment consistent with
past practices); provided, that, Borrower may without Lenders' prior
written consent grant extensions of time of payment for Accounts which
are not Eligible Accounts Receivable, or compromise or settle any such
-57-
Accounts for less than the full amount thereof or allow a credit or
discount on any such Account, so long as such extension, compromise,
settlement, credit or discount is in the ordinary course of Borrower's
business consistent with past practices and on such terms as may be
customary in the industry.
SECTION 10.04. COLLATERAL CUSTODIAN. Upon the occurrence of an Event of
Default set forth in subsections (g) or (h) of Article IX hereof or upon the
occurrence and during the continuance of any other Event of Default (or any
event which, with the giving of notice or passage of time or both, would
constitute an Event of Default), Agent may at any time and from time to time
employ and maintain in the premises of Borrower a custodian selected by Agent
who shall have full authority to do all acts necessary to protect Lenders'
interests and to report to Agent thereon. Borrower hereby agrees to cooperate
with any such custodian and to do whatever Agent may reasonably request to
preserve the collateral. All costs and expenses incurred by Agent by reason of
the employment of the custodian shall be charged to Borrower's account and added
to the amounts due and owing under this Agreement and the Notes.
XI. AGENT.
SECTION 11.01. APPOINTMENT.
Fleet is hereby appointed as agent hereunder and each Lender hereby
authorizes Fleet to act hereunder and under the Transaction Documents (as
applicable) as its agent hereunder and thereunder. Fleet agrees to act as such
upon the express conditions contained in this Article XI. The provisions of this
Article XI are solely for the benefit of Fleet, as agent for Lenders, and
neither Borrower nor any third party shall have any rights as a third party
beneficiary of any of the provisions hereof. In performing its functions and
duties under this Agreement, Fleet shall act solely as agent of Lenders and does
not assume and shall not be deemed to have assumed any obligation towards or
relationship of agency or trust with or for Borrower.
SECTION 11.02. POWERS; GENERAL IMMUNITY.
(a) DUTIES SPECIFIED. Each Lender irrevocably authorizes Agent to take
such action on such Lender's behalf, and to exercise such powers hereunder and
under the other instruments and agreements referred to herein as are
specifically delegated to Agent by the terms hereof and thereof, together with
such powers as are reasonably incidental thereto. Agent shall be responsible for
delivering to each Lender, promptly upon Agent's receipt of the same, copies of
all financial statements, reports and other written materials required to be
delivered to Agent pursuant to Section 7.04 hereto. Agent shall have only those
other duties and responsibilities which are expressly specified in this
Agreement and it may perform such duties by or through its agents or employees.
The duties of Agent shall be mechanical and administrative in nature; and Agent
shall not have by reason of this Agreement a fiduciary relationship in respect
of any Lender; and nothing in this Agreement, expressed or implied, is intended
to or shall be so construed as to impose upon Agent any obligations in respect
of this Agreement or the other instruments and agreements referred to herein
except as expressly set forth herein or therein.
-58-
(b) NO RESPONSIBILITY FOR CERTAIN MATTERS. Agent shall not be responsible
to any Lender for the execution, effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Agreement, the Notes or
other Transaction Documents or any other document, instrument or agreement now
or hereafter executed in connection herewith or therewith, or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other statements,
instruments, reports, certificates or any other documents executed in connection
herewith or therewith by or on behalf of Borrower or any Subsidiary to Agent or
any Lender, or be required to ascertain or inquire as to the performance or
observance of any of the terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds of the Loans or of
the existence or possible existence of any default or Event of Default.
(c) EXCULPATORY PROVISIONS. Neither Agent nor any of its officers,
directors, employees or agents shall be liable to any Lender for any action
taken or omitted hereunder or in connection herewith unless caused by its or
their gross negligence or willful misconduct. If Agent shall request
instructions from Lenders with respect to any act or action (including the
failure to take an action) in connection with this Agreement, Agent shall be
entitled to refrain from such act or taking such action unless and until it
shall have received instructions from Lenders. Without prejudice to the
generality of the foregoing, (i) Agent shall be entitled to rely, and shall be
fully protected in relying, upon any communication, instrument or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and shall be entitled to rely and shall be protected
in relying on opinions and judgments of attorneys (who may be attorneys for
Borrower), accountants, experts and other professional advisors selected by it;
and (ii) no Lenders shall have any right of action whatsoever against Agent as a
result of Agent acting or (where so instructed) refraining from acting under
this Agreement or the other instruments and agreements referred to herein in
accordance with the instructions of Lenders. Agent shall be entitled to refrain
from exercising any power, discretion or authority vested in it under this
Agreement or the other instruments and agreements referred to herein unless and
until it has obtained the instructions of Lenders.
(d) AGENT ENTITLED TO ACT AS LENDER. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, Agent in its individual capacity as Lender hereunder. With
respect to its participation in the Loans and the commitments of Lenders
hereunder, Agent shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not performing the duties and
functions delegated to it hereunder, and the term "Lender" or "Lenders" or any
similar term shall, unless the context clearly otherwise indicates, include
Agent in its individual capacity. Agent and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with Borrower or any Subsidiary as if they
were not performing the duties specified herein, and may accept fees and other
consideration from Borrower for services in connection with this Agreement and
otherwise without having to account for the same to Lenders.
(e) AGENT'S DUTIES REGARDING COLLATERAL. Except as expressly provided
herein, and in the Security Documents, Agent shall have no duty to take any
affirmative steps with respect to the
-59-
collection of amounts payable in respect of the Collateral. Agent shall incur no
liability to any Lender as a result of any private sale of the Collateral.
Lenders hereby consent, and agree upon written request by Agent to execute and
deliver such instruments and other documents as Agent may deem desirable to
confirm such consent, to the release of Liens in favor of Agent for the ratable
benefit of Lenders on any of the Collateral in connection with any sale,
transfer or other disposition of Collateral or any part thereof in accordance
with the Transaction Documents (as applicable). Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which Agent accords its own property, it being understood that none of
Agent or any Lender shall have responsibility for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Collateral, whether or not Agent or Lenders have
or are deemed to have knowledge of such matters, or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Collateral.
SECTION 11.03. REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR
APPRAISAL OF CREDITWORTHINESS.
Each Lender represents and warrants that it has made its own independent
investigation of the financial condition and affairs of Borrower and its
Subsidiaries in connection with the making of the Loans hereunder, and has made
and shall continue to make its own appraisal of the creditworthiness of Borrower
and its Subsidiaries. Agent shall not have any duty or responsibility either
initially or on a continuing basis to make any such investigation or any such
appraisal on behalf of Lenders or to provide any Lender with any credit or other
information with respect thereto whether coming into its possession before the
making of any Loan or any time or times thereafter (except for information
received by Agent hereunder), and Agent shall further not have any
responsibility with respect to the accuracy of or the completeness of the
information provided to Lenders.
SECTION 11.04. RIGHT TO INDEMNITY.
Each Lender severally agrees to indemnify Agent, according to its pro
rata share of Loans Outstanding, to the extent Agent shall not have been
reimbursed by Borrower and/or any Subsidiary, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against Agent in performing its duties hereunder or in
any way relating to or arising out of this Agreement, the Notes and/or any of
the other Transaction Documents; PROVIDED that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct. If any indemnity furnished to Agent for any
purpose shall, in the opinion of Agent, be insufficient or become impaired,
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished.
-60-
SECTION 11.05. PAYEE OF NOTE TREATED AS OWNER.
Agent may deem and treat the payee of any Note as the owner thereof for
all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with Agent in accordance with the terms
of this Agreement. Any request, authority or consent of any person or entity
who, at the time of making such request or giving such authority or consent, is
the holder of any Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Note or of any Note or Notes issued in exchange
for such Note.
SECTION 11.06. RESIGNATION BY AGENT.
(a) In the event Agent reasonably determines that it can no longer serve
as agent hereunder by reason of a conflict of interest or restrictions imposed
by any law, rule or regulation applicable to it, Agent may resign from the
performance of all its functions and duties hereunder by giving thirty (30) days
prior written notice to Borrower and each Lender. Such resignation shall take
effect upon the acceptance by a successor agent of appointment pursuant to
clauses (b) or (c) below or as otherwise provided below.
(b) Upon any such notice of resignation, Lenders shall appoint a
successor agent who shall be reasonably satisfactory to Borrower and shall be an
incorporated bank or trust company insured by the Federal Deposit Insurance
Corporation and having a combined surplus and undivided capital of at least Five
Hundred Million Dollars ($500,000,000).
(c) If a successor agent shall not have been so appointed within said
thirty (30) day period, the resigning agent, with the consent of Borrower (not
to be unreasonably withheld or delayed), shall then appoint a successor agent
who shall serve as Agent until such time, if any, as Lenders, with the consent
of Borrower (not to be unreasonably withheld or delayed), appoint a successor
agent as provided above.
(d) If no successor agent has been appointed pursuant to clause (b) or
(c) by the 40th day after the date such notice of resignation was given by the
resigning agent, the resigning agent's resignation shall become effective and
Lenders shall thereafter perform all the duties of the resigning agent hereunder
until such time, if any, as Lenders, with the consent of Borrower (not to be
unreasonably withheld or delayed), appoint a successor agent as provided above.
SECTION 11.07. SUCCESSOR AGENT.
Upon the acceptance of any appointment as Agent hereunder by a successor
Agent, that successor agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retired agent, and the
retiring agent shall be discharged from its duties and obligations as Agent
under this Agreement. After any retiring agent's resignation as Agent the
provisions of this Article XI shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
-61-
XII. MISCELLANEOUS
SECTION 12.01. SURVIVAL. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by Lenders of the Advances, the Loans
and the issuances of Letters of Credit and shall continue in full force and
effect so long as the Notes and any other Indebtedness of Borrower to Lenders is
outstanding and unpaid.
SECTION 12.02. REIMBURSEMENT OF COSTS. Borrower agrees to reimburse
Lenders upon demand for all reasonable costs, charges and expenses of Lenders
(including reasonable fees and disbursements of counsel to Lenders) in
connection with (i) the preparation, execution and delivery of this Agreement,
the Notes and the Security Documents, (ii) the making of the Advances, (iii) the
making of the Loans and the issuance of Letters of Credit, (iv) any amendments,
modifications, consents or waivers in respect thereof, (v) any appraisals or
other valuation of collateral requested by Majority Lenders and (vi) any
enforcement thereof, and all reasonable costs and out-of-pocket expenses of
Lenders in connection with the conduct by Lenders or their representatives of
any field audit or examination of Borrower's properties and records. In
addition, Borrower shall pay on demand any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution and
delivery of this Agreement, the Notes, the Security Documents and the other
instruments and documents to be delivered hereunder, and Borrower agrees to save
Lenders harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
SECTION 12.03. INDEMNIFICATION. Borrower irrevocably agrees to, and
does hereby indemnify and hold harmless each Lender, its agents and employees
and each Person, if any, who controls Lenders within the meaning of Section 15
of the Securities Act of 1933, as amended, and each and all and any of them (the
"Indemnified Parties"), against any and all losses, claims, actions, causes of
action, damages or liabilities (including any amount paid in settlement of any
action, commenced or threatened), joint or several, to which they, or any of
them, may become subject under statutory law or at common law, insofar as such
losses, claims, damages, liabilities or actions arise out of or are related to
any act or omission of Borrower with respect to the Loans, including without
limitation, any such losses, claims, actions, causes of action, damages or
liabilities which arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by or on behalf of Borrower contained in any
document distributed in connection therewith, or the omission or alleged
omission by or on behalf of Borrower to state in any of the foregoing a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and to reimburse the Indemnified
Parties for any legal or other expenses reasonably incurred by it or them in
connection with investigating, preparing for or defending against any such
actions, commenced or threatened.
Promptly upon receipt of notice of the commencement of any action, or
information as to any threatened action, against any of the Indemnified Parties
in respect of which indemnity or reimbursement may be sought from Borrower on
account of the agreement contained in this Section 12.03, notice shall be given
to Borrower in writing of the commencement or threat
-62-
thereof, together with a copy of all papers served, but the omission so to
notify Borrower of any such action or threat shall not release Borrower from any
liability which it may have to such Indemnified Parties otherwise than on
account of the indemnity agreement contained in this Section 12.03.
In case any such action shall be brought against any of the Indemnified
Parties, Borrower shall be entitled to participate in (and, to the extent that
it shall wish, including the selection of counsel reasonably acceptable to the
Indemnified Parties, to direct) the defense thereof at its own expense. Any of
the Indemnified Parties shall have the right to employ its or their own counsel
in any such case, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless the employment of such counsel shall
have been authorized in writing by Borrower in connection with the defense of
such action or Borrower shall not have employed counsel reasonably acceptable to
the Indemnified Parties to have charge of the defense of such action or such
Indemnified Party shall have been advised by legal counsel that there may be
defenses available to it which are different from or additional to those
available to Borrower (in which case Borrower shall not have the right to direct
the defense of such action on behalf of such Indemnified Party), in any of which
events the reasonable expenses of such Indemnified Party shall be borne by
Borrower. If and so long as Borrower has effectively waived any right to
question or challenge Borrower's liability to fully indemnify an Indemnified
Party for a claim, such Indemnified Party shall not be entitled to compromise or
settle such claim without Borrower's consent.
The provisions of Section 12.03 shall be effective only to the fullest
extent permitted by law.
SECTION 12.04. GOVERNING LAW. This Agreement and the Notes shall be
construed in accordance with, and governed by, the laws of the State of Rhode
Island applicable to contracts made and to be performed entirely within the
State of Rhode Island. Borrower and Lenders each acknowledge that this Agreement
and the Notes were executed by Borrower in New York but were delivered in the
State of Rhode Island.
SECTION 12.05. CONSENT. No modification or waiver of any provision of
this Agreement, or of the Notes, nor consent to any departure by Borrower
therefrom, shall in any event be effective unless the same shall be in writing
(in the case of a waiver or consent, signed by Lenders, and in the case of a
modification, signed by Borrower and Lenders), and then such waiver or consent
shall be effective only in the specific instance, and for the purpose, for which
given. No notice to, or demand, on Borrower in one case, shall entitle Borrower
to any other or future notice or demand in the same, similar or other
circumstances.
SECTION 12.06. WAIVER. Neither any failure nor any delay on the part of
Lenders in exercising any right, power or privilege hereunder, or under the
Notes, or under any of the Security Documents or any other instrument given as
security for the Notes, shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or future exercise, or the exercise
of any other right, power or privilege.
-63-
SECTION 12.07. NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telegraphic
communication) and mailed, telecopied or telegraphed or delivered to the
applicable party at the addresses indicated below, if to Lenders, to:
Fleet National Bank
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxxx X.X. Xxxxxx
Senior Vice President
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and if to Borrower, to:
French Fragrances, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
C.F.O.
and
Oscar Marina
V.P., General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other parties complying as to delivery with the terms
of this Section. All such notices, requests, demands and other communications
shall, when mailed, telecopied or telegraphed, respectively, be deemed to be
effective three (3) days after deposited in the mails by registered or certified
mail, postage prepaid, return receipt requested, or when transmitted by
telecopier or delivered to the telegraph company, respectively, addressed or
sent as aforesaid.
SECTION 12.08. UNCONDITIONAL OBLIGATIONS. Borrower's obligation to make
all payments provided for in this Agreement and/or the Notes shall be
unconditional. Each such payment shall be made without deduction for any claim,
defense or offset of any type, including without limitation, any withholdings
and other deductions on account of income or other taxes and regardless of
whether any claims, defenses or offsets of any type exist. However, this Section
12.08 shall not constitute a waiver of any claims Borrower may hereafter have at
law against Lenders.
-64-
SECTION 12.09. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of Borrower and Lenders, and their respective
successors and assigns, except that Borrower shall not have any right to assign
its rights hereunder or any interest herein without the prior written consent of
Lenders.
SECTION 12.10. CONSENT TO JURISDICTION; WAIVER OF TRIAL BY JURY.
Borrower, to the extent that it may lawfully do so, hereby consents to the
jurisdiction of the courts of the State of Rhode Island and the United States
District Court for the District of Rhode Island and to the courts of the State
of Florida and the United States District Court for the Southern District of
Florida, as well as to the jurisdiction of all courts from which an appeal may
be taken from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising hereunder or with
respect to the transactions contemplated hereby, and expressly waives any and
all objections which it may have as to venue in any of such courts. TO THE
EXTENT PERMITTED BY LAW, BORROWER AND LENDERS ALSO WAIVE TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES, THE SECURITY
DOCUMENTS AND ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH. NEITHER
BORROWER, LENDERS, AGENT NOR ANY ASSIGNEE OF OR SUCCESSOR TO BORROWER, LENDERS,
OR AGENT, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR
ANY OTHER LITIGATION OR PROCEDURE BASED UPON, OR ARISING OUT OF, THIS AGREEMENT,
THE NOTES, THE SECURITY DOCUMENTS OR ANY OF THE OTHER DOCUMENTS, INSTRUMENTS AND
AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR
THE RELATIONSHIP BETWEEN OR AMONG THE PARTIES HERETO, OR ANY OF THEM. NO PARTY
WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED,
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED.
THE PROVISIONS OF THIS SECTION 12.10 HAVE BEEN FULLY DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTION. NO PARTY HAS IN
ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY THAT THE PROVISIONS OF
THIS SECTION 12.10 WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
SECTION 12.11. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 12.12. HEADINGS. The Articles and Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 12.13. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original of this Agreement,
and all such counterparts shall constitute a part of this Agreement.
-65-
SECTION 12.14. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties hereto and supersedes all prior
agreements and understandings relating to the subject matter hereof.
SECTION 12.15. PARTICIPATIONS. Upon the prior notification to the
Agent, any Lender may sell participations in all or part of the Loans and/or its
commitment hereunder or any other interest herein or in the Notes to another
Person, but in any such event the participant shall not have any rights under
this Agreement, the Notes, the Security Documents or any other document
delivered in connection herewith (the participant's rights against Lenders in
respect of that participation to be those set forth in the agreement executed by
that Lender in favor of the participant relating thereto), and all amounts
payable by Borrower hereunder or thereunder shall be determined as if Lenders
had not sold such participation. Lenders may furnish any information concerning
Lenders and Borrower in the possession of Lenders from time to time to
participants (including prospective participants); provided that any such
provision of any confidential information about Borrower to any such participant
or prospective participant shall obtain such participant's or prospective
participant's agreement to keep any such confidential information confidential.
SECTION 12.16. NO MODIFICATION.
No amendment or waiver of any provision of this Agreement, the Notes, the
Letter of Credit Documents or any other Transaction Documents, nor consent to
any departure by Borrower therefrom, nor the release by Agent of any material
items of Collateral (other than in connection with the sale or disposition of
Collateral permitted under any Transaction Document or the payment in full of
all Indebtedness and termination of the Revolving Credit Commitment), shall be
effective unless the same shall be in writing and signed or approved by Majority
Lenders; PROVIDED, HOWEVER, that no amendment, waiver or consent nor any such
release shall have the effect of any of the following unless the same shall be
in writing and signed or approved by all Lenders: (i) increasing the maximum
principal amount of the Revolving Credit Facility, (ii) reducing the principal
amount of, or the rate of interest on, the Notes or any unpaid Letter of Credit
Reimbursement Obligations or other sum due and payable hereunder, or releasing
or discharging Borrower from its obligations to make payments of any such sums,
(iii) postponing any date fixed for payment or prepayment of principal of, or
interest on, the Notes or any unpaid Letter of Credit Reimbursement Obligations
or other sum due and payable hereunder, (iv) extending or renewing the maturity
date for the Revolving Credit Facility, (v) amending this Section 12.17 or (vi)
releasing Collateral (other than in connection with the sale or disposition of
Collateral permitted under any Transaction Document or the payment in full of
all Indebtedness and termination of the Revolving Credit Commitment) if the
aggregate net book value of all Collateral released by Agent exceeds $2,000,000
in the aggregate during any one fiscal year or exceeds $5,000,000 in the
aggregate while any Loans are outstanding and unpaid; and PROVIDED, FURTHER,
HOWEVER, that no amendment, waiver or consent (x) shall affect the rights or
duties of Agent under this Agreement, any Note, the Letter of Credit Documents
or any other Transaction Documents, unless the same shall be in writing and
signed by Agent in addition to Lenders required above, and (y) subject to
Section 4.06 hereof, shall change the Commitment Share of any Lender, unless the
same shall be in writing and signed by Agent and Lenders so affected.
-66-
SECTION 12.17. SYNDICATIONS. (a) Each Lender shall have the right to
further syndicate the its Revolving Credit Commitments hereunder or any other
interest herein or in the Notes to one or more Persons (an "Assignee") on such
terms and in accordance with such documentation as shall be satisfactory to
Lenders in their sole discretion (provided the terms of the Loans are not
modified or revised), so long as (i) Fleet and its Affiliates retain in the
aggregate a fifty-one percent (51%) or more interest in, the Revolving Credit
Commitment and the Notes and (ii) any action to be taken by Lenders and such
Assignee would require consent of Lenders holding a 51% or more interest
therein. Borrower hereby agrees at Lenders' or such Assignee's expense so long
as no Event of Default exists (and at Borrower's expense if an Event of Default
exists) to execute and deliver any and all documents requested by Lenders to
effectuate or facilitate such syndication, including, without limitation, an
amendment to this Agreement adding the Assignee as a Lender and new Notes
evidencing the interest of Lenders and such Assignee in the Revolving Credit
Commitment.
(b) Upon the syndication of the Revolving Credit Commitment hereunder,
the respective rights of Lenders and Borrower against each other under this
Agreement, the Notes, the Security Documents or any other document delivered in
connection herewith with respect to the portion of the Loans being assigned or
delegated shall be terminated and Lenders and Borrower shall each be released
from all further obligations to the other hereunder with respect thereto (all
such rights and obligations being so terminated or released being referred to in
this Section 12.17(b) as "Discharged Rights and Obligations"), and Borrower and
Assignee shall each acquire rights against each other and assume obligations
toward each other which differ from the Discharged Rights and Obligations only
in so far as Borrower and Assignee have assumed and/or acquired the same in
place of Lenders.
SECTION 12.18. ACTUAL KNOWLEDGE.
For purposes of this Agreement, neither Agent nor any Lender shall be
deemed to have actual knowledge of any fact or state of facts unless the senior
loan officer or any other officer responsible for Borrower's account established
pursuant to this Agreement, shall, in fact, have actual knowledge of such fact
or state of facts or unless written notice of such fact shall have been received
by Agent or such Lender in accordance with Section 12.07.
SECTION 12.19. RELATIONSHIP; LIMITATION ON DAMAGES.
(a) THE RELATIONSHIP AMONG BORROWER, AGENT AND LENDERS SHALL BE SOLELY
THAT OF BORROWER, AGENT AND LENDERS. AGENT AND LENDERS SHALL NOT HAVE ANY
FIDUCIARY RESPONSIBILITIES TO BORROWER.
(b) AGENT AND LENDERS SHALL NOT HAVE ANY LIABILITY WITH RESPECT TO, AND
BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO XXX UPON ANY CLAIM FOR, ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES SUFFERED BY BORROWER IN
CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS
CONTEMPLATED OR THE RELATIONSHIP ESTABLISHED BY THIS AGREEMENT, THE OTHER
TRANSACTION DOCUMENTS OR ANY OTHER AGREEMENT ENTERED INTO IN CONNECTION
-67-
HEREWITH OR THEREWITH OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
HEREWITH OR THEREWITH, UNLESS IT IS DETERMINED BY A JUDGMENT OF A COURT THAT IS
BINDING ON AGENT OR SUCH LENDER (WHICH JUDGMENT SHALL BE FINAL AND NOT SUBJECT
TO REVIEW ON APPEAL), THAT SUCH DAMAGES WERE THE RESULT OF ACTS OR OMISSIONS ON
THE PART OF AGENT OR SUCH LENDER CONSTITUTING GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. THIS SECTION SHALL NOT BE DEEMED TO LIMIT OR PROHIBIT ANY CLAIMS BY
BORROWER AGAINST A DELINQUENT LENDER AS CONTEMPLATED BY SECTION 4.06 HEREOF.
SECTION 12.20. INTEGRATION.
This Agreement supersedes Borrower's application for the Loans, the term
sheets and/or commitment letters of Lenders generally describing the Loans and
all other prior dealings among Borrower, Agent, any of Lenders and any of their
respective agents, employees or officers with respect to the Loans.
SECTION 12.21. CONFIDENTIALITY.
Lenders shall, with respect to any and all financial statements or other
reports or documents delivered by Borrower to Agent pursuant to Section 7.04, to
the extent that Borrower shall have specifically designated any information
contained therein to be treated as confidential (provided that pro forma
financial statements and projections shall be deemed confidential although not
designated as such) and to the extent that such information therein contained
has not theretofore otherwise been disclosed in such a manner as to render such
information no longer confidential, employ reasonable procedures designed to
maintain the confidential nature of the information therein contained; provided,
however, that any Lender may disclose or disseminate such information to: (a)
such Lender's respective employees, agents, attorneys and accountants who would
ordinarily have access to such information in the normal course of the
performance of their duties in connection with the administration of the Loans;
(b) upon notice to Borrower, such third parties as such Lender may, in its
reasonable discretion, deem reasonably necessary in connection with or in
response to (i) compliance with any law, ordinance or governmental order,
regulation, rule, policy, subpoena, investigation or request, or (ii) any order,
decree, judgment, subpoena, notice of discovery or similar ruling or pleading
issued, filed, served or purported on its face to be issued, filed or served (x)
by or under authority of any court, tribunal, arbitration board or any
governmental agency, commission, authority board or similar entity or (y) in
connection with any proceeding, case or matter pending (or on its face purported
to be pending) before any court, tribunal, arbitration board or any governmental
agency, commission, authority, board or similar entity, provided sufficient
notice has been given to such Borrower to enable such Borrower to seek an
appropriate protective order or (iii) collection of any of the Indebtedness now
or hereafter owing by Borrower and/or any Subsidiary to any of Lenders or
enforcement of any rights or remedies now or hereafter possessed by any of
Lenders; (c) subject to Sections 12.15 and 12.17, any prospective purchaser
(including an Affiliate of any Lender), in connection with the resale or
proposed resale by it of any portion of its Note or other participation in its
Commitment Share or Loans Outstanding, provided that such prospective purchaser
agrees to be bound by the confidentiality provisions set forth above; and (d)
any entity utilizing such information to rate or
-68-
classify any Lender's debt or equity securities for sale to the public, provided
that such entity agrees to be bound by the confidentiality provisions set forth
above.
IN WITNESS WHEREOF, Agent, Lenders and Borrower have each caused this
Agreement to be duly executed under seal by their duly authorized
representatives, all as of the day and year first above written.
LENDERS:
FLEET NATIONAL BANK, AS LENDER
By: /s/ Xxxxxx X.X. Xxxxxx
-----------------------------------------
Title: Senior Vice President
BORROWER:
FRENCH FRAGRANCES, INC.
By: /s/ Xxxxx X. Marina
-------------------------------------------
Title: Vice President
FLEET NATIONAL BANK, AS AGENT
By: /s/ Xxxxxx X.X. Xxxxxx
-----------------------------------------
Title: Senior Vice President
-69-
EXHIBITS AND SCHEDULES
Exhibit A - Amendment Letter
Exhibit B- Borrowing Base Certificate
Exhibit C- Request for Advance
Exhibit D- Form of Revolving Credit Note
Exhibit E- Compliance Certificate
Schedule 1.01(A) Eligible Accounts Receivable
Schedule 1.01(B) Lenders' Commitment Share
Schedule 5.03 Required Consents
Schedule 5.06 Liens and Encumbrances
Schedule 5.07(A) Capitalization
Schedule 5.07(B) Subsidiaries
Schedule 5.12 Taxes
Schedule 5.13 Employee Benefit Plans
Schedule 5.15 Location of Tangible Assets
Schedule 5.16 Licenses, Trademarks and Tradenames
Schedule 5.17 Material Contracts
Schedule 5.18 Compliance
Schedule 5.19 Environmental
Schedule 8.01(D) Capitalized Lease Obligations or Purchase Money Indebtedness
EXHIBIT A
[], 199[]
French Fragrances, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxx Xxxxx, Xxxxxxx 00000
Re: AMENDMENT LETTER
Ladies and Gentlemen:
Upon your acceptance of the terms of this letter agreement as evidenced
by your execution and delivery to Fleet National Bank as agent (the "Agent") on
behalf of Fleet National Bank, as a lender (the "Lenders") on or before [],
19[], the date upon which the foregoing amendments shall take effect, of a copy
of this letter, French Fragrances, Inc. (the "Borrower") and the Lenders agree
to amend (i) that certain Credit Agreement dated as of May 13, 1997, by and
among the Lenders, the Agent and Borrower, as amended to date (the "Original
Credit Agreement"); (ii) the Revolving Credit Notes (as defined in the Credit
Agreement and/or (iii) the Security Documents (as defined in the Credit
Agreement), as follows:
1. All capitalized terms not defined herein shall have the same
meanings ascribed to such terms as provided in the Credit Agreement.
2. [Choose appropriate paragraphs to be amended].
3. After giving effect to the amendments contemplated by this Letter
Agreement, Borrower hereby reaffirms and restates, as of the date hereof, all of
the representations and warranties made by it in the Original Credit Agreement,
except to the extent altered by actions permitted pursuant to the terms of the
Original Credit Agreement or expressly contemplated pursuant to the terms
hereof, or to the extent the Agent has been advised in writing of any inaccuracy
with respect to such representations or warranties and has waived the same in
writing.
4. All references to obligations of the Borrower in the Security
Documents shall be deemed amended to include all obligations of Borrower under
the Original Credit Agreement, as amended by the terms hereto. All references to
the "Credit Agreement", the "Loans", the "Revolving Credit Notes", the "Notes",
the Security Documents and any other defined terms amended hereby as set forth
in the Transaction Documents shall, to the extent applicable, be deemed amended
to be references to such terms, agreements and documents as amended by the terms
of this Letter Amendment.
5. Each of the Borrower and Lenders hereby agree that nothing contained
herein or done pursuant hereto shall limit or be construed to limit the security
interest or lien previously
granted by Borrower to the Agent for the benefit of the Lenders under the
Security Documents, or the priority thereof over other liens, encumbrances and
security interests. The Security Document shall remain in full force and effect
and Borrower hereby ratifies and confirms the Security Documents in all other
respects, including, without limitation, the continuing grant of a lien on and
security interest in the collateral covered thereby.
6. All representations and warranties made in this Letter Amendment
shall survive execution and delivery hereof and the closing of the transactions
contemplated hereby.
7. Borrower ratifies and confirms all of its obligations, covenants,
duties and agreements set forth in the Transaction Documents, as amended by the
terms hereof.
8. All reasonable costs and expenses, including reasonable attorneys'
fees, relating to the negotiation, preparation, execution and delivery of this
Agreement and all instruments, agreements and documents contemplated hereby
shall be the responsibility of the Borrower.
9. The Borrower hereby acknowledges and agrees that the Credit
Agreement and each of the other Transaction Documents, as amended by the terms
hereof, are not subject as of the date hereof to any defenses rights of setoff,
claims or counterclaims that might limit the enforceability thereof.
9. This Agreement shall be governed by and construed in accordance with
the laws of the State of Rhode Island applicable to contracts made and to be
performed within such state. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their respective officers hereunto duly authorized, all as of the
day and year first above written.
Very truly yours,
FLEET NATIONAL BANK
By__________________________________
Title____________________________
By__________________________________
Title____________________________
Accepted and agreed as of
the [] day of []. 19[].
FRENCH FRAGRANCES, INC.
By___________________________
Title _________________________
EXHIBIT B
BORROWING BASE CERTIFICATE
Fleet National Bank
000 Xxxxxxxxxxx Xxxxxx Date:
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X.X. Xxxxxx
Senior Vice President
Ladies and Gentlemen:
Pursuant to the provisions of Section 2.01 of that certain Credit
Agreement (the "Agreement") dated as of May 13, 1997, among Fleet National Bank,
as agent, French Fragrances, Inc., as Borrower, and Fleet National Bank, as a
lender, the undersigned hereby represents and warrants that the aggregate
principal amount of Advances (as defined in the Agreement) outstanding under the
Revolving Credit Notes dated as of May 13, 1997 (the "Note") of the undersigned
in the aggregate principal amount of $40,000,000, after taking into
consideration the amount of the Advance, if any, requested this date, is less
than or equal to the "Revolving Credit Commitment" (as defined in the Agreement)
in effect on the date hereof (as calculated below in accordance with the
Agreement).
COMMITMENT: Lesser of:
A. $40,000,000
(OR)
B. Borrowing Base:
1. Total Accounts Receivable (as of , 19 ): $________
(a) Insured Eligible Accounts Receivable:
0-30 Days: $__________
31-60 Days: $__________
61-90 Days: $__________
Total Insured Eligible AR: $_________
Percentage advance: 85%
Insured AR Borrowing Base: $_________
(b) Approved Eligible Accounts Receivable
0-30 Days: $__________
31-60 Days: $__________
61-90 Days: $__________
Total Approved Eligible AR: $_________
Percentage advance: 85%
Approved AR Borrowing Base: $_________
(c) Eligible Accounts Receivable (other than Insured Eligible
Accounts Receivable or Approved Eligible Accounts Receivable):
0-30 Days: $__________
31-60 Days: $__________
61-90 Days: $__________
Total Approved Eligible AR: $_________
Percentage advance: 80%
Approved AR Borrowing Base: $_________
TOTAL AR BORROWING BASE $_________
2. Inventory Borrowing Base
(a) Eligible In-House Inventory; at $________
(b) Less a reserve against Total Eligible In-House
Inventory of $1,200,000
(c) Capped at a maximum of $20,000,000
TOTAL INVENTORY
BORROWING BASE $_________
3. Total Borrowing Base:
AR Borrowing Base: $_________
PLUS
Inventory Borrowing Base $_________
TOTAL $_________
Very truly yours
FRENCH FRAGRANCES, INC.
By:______________________________________
Title:________________________________
EXHIBIT C
REQUEST FOR ADVANCE
[], 19[]
Fleet National Bank, as Agent
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X.X. Xxxxxx, Senior Vice President
Ladies and Gentlemen:
Pursuant to the provisions of Section 2.01 of that certain Credit
Agreement (the "Agreement") dated as of May 13, 1997, among French Fragrances,
Inc., as borrower, Fleet National Bank, as agent and Fleet National Bank, as a
lender, the undersigned hereby requests an "Advance", as that term is defined in
the Agreement, of $[] to be made on [], 19[] pursuant to Section 2.01 of the
Agreement, which Advance shall be evidenced by the Secured Revolving Credit
Notes of the undersigned, dated as of May 13, 1997.
The undersigned hereby ratifies, reaffirms and confirms that the
representations and warranties set forth in Sections 5.02 through 5.20 and
Section 10.03 of the Agreement are true and accurate as of the date such Advance
is to be made, except to the extent altered by actions permitted by the
Agreement and except to the extent you have been advised in writing of any
inaccuracy with respect to such representations and warranties and have waived
the same in writing. The undersigned hereby further represents and warrants that
(i) there has occurred no material adverse change in the financial condition,
business, assets, operations or properties of the undersigned since the date of
the most recent financial statements required to be delivered under Section 7.04
of the Agreement and (ii) no "Event of Default", as that term is defined in the
Agreement, has occurred, nor has any event occurred, nor will any event have
occurred after giving effect to such proposed Advance, which would constitute
such an Event of Default but for the requirement that notice be given or time
elapse, or both.
Very truly yours,
FRENCH FRAGRANCES, INC.
By:_______________________________
Title:_________________________
EXHIBIT D
SECURED REVOLVING CREDIT NOTE
$40,000,000 As of May 13, 1997
New York, New York
FOR VALUE RECEIVED, the undersigned FRENCH FRAGRANCES, INC., a Florida
corporation (together with the predecessor Florida corporation, "Borrower"),
hereby promises to pay to the order of FLEET NATIONAL BANK, a national banking
association organized under the laws of the United States having a place of
business at 000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx Xxxxxx 00000 (the
"Lender"), as hereinafter provided, the principal sum of Forty Million Dollars
($40,000,000) or, if less, the aggregate unpaid principal amount of advances
made by the Lender to Borrower pursuant to that certain Credit Agreement of even
date herewith by and among Borrower, Fleet National Bank, as Agent and Lender,
as a lender (the "Credit Agreement"), together with interest, whether before or
after maturity, at the rate hereinafter provided, on any and all principal
amounts outstanding hereunder from time to time from the date hereof until
payment in full hereof.
This Note is one of the so-called "Revolving Credit Notes" referred to
in, and is entitled to the benefits of, the Credit Agreement. The terms and
provisions of the Credit Agreement are hereby incorporated herein by reference
as if fully set forth herein. All capitalized terms used herein and not
otherwise defined shall have the meanings given to them in the Credit Agreement.
From the date hereof until this Note is paid in full, interest on
principal amounts outstanding hereunder shall accrue and be payable at a rate
per annum equal to (i) the Applicable Revolving Funded Debt Rate or (ii) the
applicable Eurodollar Rate for the applicable Interest Period, or both, in
accordance with the terms of the Credit Agreement. Interest hereon shall be
calculated on the basis of a year of three hundred sixty (360) days counting the
actual number of days elapsed.
Interest on the principal amounts outstanding hereunder shall be due and
payable monthly in arrears on the first day of each month, commencing June 1,
1997 and continuing on the first day of each month thereafter until payment in
full hereof; PROVIDED, HOWEVER, that in addition to any such monthly payment of
interest all accrued and unpaid interest outstanding under any Eurodollar Loan
shall be paid in full on the Interest Adjustment Date for such Eurodollar Loan.
Principal amounts outstanding hereunder in excess of the Revolving Credit
Commitment then in effect, as reduced from time to time pursuant to the Credit
Agreement, shall be immediately due and payable without further notice or demand
as provided in the Credit Agreement. All principal amounts outstanding
hereunder, together with all unpaid interest hereon, shall be due and payable on
the Revolving Credit Maturity Date, or on such earlier date or dates as said
principal, or any part thereof, may become due and payable pursuant to the
Credit Agreement.
Payments of principal and interest due hereunder shall be made by
Borrower to the Lender in lawful money of the United States of America at the
office of Agent at 111 Westminster Street, Providence, Rhode Island, or such
other place as the Lender may designate to Borrower in writing, in accordance
with the Credit Agreement. Payments of principal and interest hereunder may be
made by the Lender by debiting the demand deposit account(s) of Borrower, if
any, maintained with Agent or in such other reasonable manner as may be
designated by the Lender in writing to Borrower, and in any event shall be made
in immediately available funds prior to 12:00 o'clock Noon (Providence time) on
the Business Day such payment is due. Borrower hereby authorizes Agent to so
debit such demand deposit account(s).
The Borrower hereby agrees to pay to the Lender, upon demand, to the
extent permitted by law, a late charge in an amount equal to five percent (5%)
of each payment of principal and/or interest, and/or in respect of any other sum
or amount, which is not paid in full within ten (10) days of the date on which
such payment is due (without giving effect to any applicable grace period).
This Note is secured by, and is entitled to all the benefits of, the
Security Documents referred to in the Credit Agreement. Reference is made to the
Credit Agreement for rights and obligations as to (i) advances and readvances of
the principal sums evidenced hereby, (ii) mandatory and voluntary reductions of
the Revolving Credit Commitment under the Credit Agreement, (iii) mandatory and
voluntary repayment of principal and interest hereunder, (iv) acceleration of
the maturity hereof and (v) rights of prepayment as set forth in Section 2.06
the Credit Agreement. The occurrence or existence of an Event of Default shall
constitute a default under this Note and shall entitle the Lender to accelerate
the entire indebtedness hereunder and to take such other action as may be
provided for in the Credit Agreement and the Security Documents.
All advances, readvances, repayments and prepayments of principal
hereunder may be recorded by the Lender on this Note or in its internal records,
and the Lender is hereby authorized to make all such entries on this Note or in
such records.
In the event that the Lender shall exercise or endeavor to exercise any
remedies hereunder or under the Credit Agreement or any Security Documents,
Borrower shall pay all reasonable costs and expenses incurred in connection
therewith, including, without limitation, reasonable attorneys' fees, and the
Lender may take judgment for all such amounts in addition to all other sums due
hereunder.
Borrower hereby expressly waives presentment, dishonor, protest and
demand, diligence, notice of protest, of demand and of dishonor, and any other
notice otherwise required to be given under the law in connection with the
delivery, acceptance, performance, default, enforcement or collection of this
Note, and expressly agrees that this Note, or any payment hereunder, may be
extended or subordinated (by forbearance or otherwise) from time to time,
without in any way affecting the liability of Borrower.
2
No consent or waiver by the holder hereof with respect to any action or
failure to act which, without such consent or waiver, would constitute a breach
of any provision of this Note shall be valid and binding unless in writing and
signed by Borrower and the Lender.
All agreements between Borrower and the Lender are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
prepayment, acceleration of maturity of the indebtedness evidenced hereby or
otherwise, shall the amount charged, reserved, paid or agreed to be paid to the
Lender for the use, forbearance or detention of the indebtedness evidenced
hereby and by the Credit Agreement exceed the maximum permissible under
applicable law. As used herein, the term "applicable law" shall mean the law in
effect as of the date hereof; PROVIDED, HOWEVER, that in the event there is a
change in the law which results in a higher permissible rate of interest, then
this Note shall be governed by such new law as of its effective date. If, from
any circumstance whatsoever, fulfillment of any provision hereof or of any of
the Security Documents or the Credit Agreement at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, IPSO FACTO, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance the Lender
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. This provision shall control every other provision of all agreements
between Borrower and the Lender.
This Note shall be construed in accordance with the laws of the State of
Rhode Island applicable to contracts made and to be performed entirely within
such State without resort to its conflict of laws rules, except to the extent
that such laws are superseded by Federal enactments.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed under
seal by its duly authorized officers as of the date first above written.
Witness: FRENCH FRAGRANCES, INC.
By
--------------------------------- ----------------------------------
Title:
-------------------------
3
STATE OF NEW YORK )
) ss.:
COUNTY OF _________ )
On the __ day of May, 1997, before me personally came _____________, to
me known, who, being by me duly sworn, did depose and say that he resides at
____________________; that he is the ______________ of ______________________,
the corporation described in and which executed the foregoing instrument; and
that he signed his name thereto by order of the board of directors of said
corporation.
-----------------------------------
Notary Public
EXHIBIT E
Fleet National Bank
000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx X.X. Xxxxxx
Senior Vice President
RE: Compliance Certificate required by Section 7.04(d) of Credit
Agreement (the "Agreement") dated as of May 13, 1997, by and between French
Fragrances, Inc., as borrower, Fleet National Bank, as agent and Fleet National
Bank, as a lender.
Dear Bob:
This certificate is submitted by the undersigned pursuant to Section
7.04(d) of the Agreement. Capitalized terms used herein have the same meaning as
in the Agreement.
The undersigned hereby certify that the following information is true,
accurate and complete as of_____________.
I. Section 7.08: Indebtedness to Capital Base
Ratio as of ____________: _______
Ratio required by Agreement: 3.0:1.0
II. Section 7.09: Shareholders' Equity Base
Current Amount: ________
Amount required by Agreement: $37,000,000
(through 1/31/97); to be increased
thereafter
III. Section 7.10: Debt Service
Ratio as of ____________: ________
Ratio required by Agreement: 1.25:1.0 through fiscal
quarter ending 1/31/98;
1.40:1.0 thereafter
IV. Section 7.11: Operating Cash Flow to
Interest Expense
Ratio as of ____________: ________
Amount required by Agreement: 1.35:1.0 through fiscal
quarter ending 1/31/98;
1.50:1.0 thereafter
V. Section 8.01(d): Permitted Indebtedness
Capitalized Lease Obligations
and Purchase-Money Indebtedness: _________
Maximum permitted by Agreement: Existing plus $100,000
VI. Section 8.01(l): Permitted Indebtedness
Foreign Currency Exchange _________
Maximum Permitted by Agreement: $200,000
VII. Section 8.06: Permitted Advances
Aggregate Advances to Employees: _________
Maximum Permitted by Agreement: $ 25,000
VIII. Section 8.09: Dividends
Distributions __________
IX. Section 8.10: Capital Expenditure Limitation
Capital Expenditures: __________
Maximum permitted by Agreement: $2,500,000
X. Section 8.11: Operating Lease Limitation
Operating lease obligations: __________
Maximum permitted by Agreement: $100,000
The undersigned further certifies that he has examined the financial
statements delivered in connection herewith and the provisions of the Agreement
and that, to the best of his
knowledge after diligent inquiry, as of the date hereof no Event of Default, nor
any event which upon notice or lapse of time, or both, would constitute an Event
of Default, has occurred.
FRENCH FRAGRANCES, INC.
By:_________________________________
Title:_________________________
