NOTE AND SECURITY AGREEMENT
Exhibit
10.1
This
Note
and Security Agreement (“Agreement”),
dated
November 7, 2007, is entered by ARTFUL
HOLDINGS, LLC, a
Delaware limited liability company (“Borrower”),
and
given to ICONIX
BRAND GROUP, INC.,
a
Delaware corporation (“Lender”).
BACKGROUND
WHEREAS,
Borrower entered into that certain Asset Purchase Agreement, dated as of
November 7, 2007 (the “Acquisition
Agreement”),
by
and among the party thereto as seller (“Seller”),
the
parties thereto as principals, Borrower and Scion LLC (“Scion”),
pursuant to which Borrower acquired (the “Acquisition”)
certain assets of Seller (“Acquired
Assets”);
WHEREAS,
Borrower has requested that Lender make available to it a senior secured term
loan facility in the aggregate amount of Twelve
Million Dollars ($12,000,000) the
proceeds of which shall be used to finance the Acquisition and to pay related
fees and expenses;
NOW,
THEREFORE, in consideration of the premises and the agreements hereinafter
set
forth, the parties hereto hereby agree as follows:
1.
(a) On
the
Effective Date, Lender shall make available to Borrower a term loan facility
in
a principal amount not to exceed in the aggregate Twelve Million Dollars
($12,000,000). The term loan facility advances shall, so long as no Event of
Default has occurred and is continuing, be available to Borrower as follows:
(i)
Tranche A, in a principal amount not to exceed Ten Million Five Hundred Thousand
Dollars ($10,500,000) (“Tranche
A Loan”)
and
(ii) Tranche B, in a principal amount not to exceed in the aggregate One Million
Five Hundred Thousand Dollars ($1,500,000) (“Tranche
B Loan”
and
along with tranche A Loan, collectively, the “Loan”).
(b) So
long
as all the conditions to closing set forth in Section 5 of this Agreement have
been satisfied, Lender shall advance the Tranche A Loan on the Effective Date
(as defined below) and Borrower shall use the proceeds thereof to pay the
purchase price for the Acquisition in accordance with the terms of the
Acquisition Agreement and to pay related fees and expenses.
(c) So
long
as no Event of Default has occurred and is continuing, Lender shall advance
the
Tranche B Loan, or portion thereof, upon Borrower’s request.
(d) Borrower
agrees to pay interest on the outstanding principal balance of the Loan from
time to time at the per annum rate equal to Prime plus 5.00%; provided, that
upon the occurrence and during the continuance of an Event of Default hereunder,
such per annum rate shall be equal to Prime plus 7.50%. “Prime”
on
any
day of determination shall mean the rate of interest per annum published on
such
day (or, if not then published, on the most recently preceding day) in The
Wall
Street Journal as the “Prime Rate”; changes in the rate payable hereunder shall
be effective on each day on which a change in the “Prime Rate” is published.
Interest shall be calculated on the basis of a year of 360 days based on the
actual number of days elapsed, and shall be due and payable on the first
business day of each month and on the Maturity Date. In no event shall the
amount of interest paid or agreed to be paid to Lender hereunder exceed the
highest lawful rate permissible under any law which a court of competent
jurisdiction may deem applicable hereto. All contractual rates of interest
chargeable on this outstanding Loan shall continue to accrue and be paid even
after default, maturity, acceleration, termination of the Loan, judgment,
bankruptcy, insolvency proceedings of any kind or the happening of any event
or
occurrence similar or dissimilar.
(e) The
outstanding principal amount of the Loan and accrued interest, fees, costs
and
expenses shall be due and payable
on
November 7, 2012 (the “Maturity
Date”).
(f) Borrower
shall, on the last business day of each of January, April, July and October,
commencing with January 30, 2008, prepay the Loan in an amount equal to fifty
percent (50%) of the Excess Cash Flow for the most recently completed fiscal
quarter immediately preceding such last business day. For the purpose of this
Agreement, “Excess
Cash Flow”
means,
for any fiscal quarter, the difference, if any, of (a) (i) the net income
of Borrower for such fiscal quarter, determined in accordance with GAAP,
plus
(ii) all
non-cash items of Borrower that caused a reduction in the calculation of such
net income such fiscal quarter minus
(b) the aggregate amount of all optional prepayments of the Loan and all
interest paid with respect to the Loan, in each case during such fiscal quarter.
2. In
order
to secure all existing and future liabilities and obligations of every kind
or
nature at any time owing by Borrower to Lender in connection herewith, the
transactions contemplated hereby, administration thereof or otherwise, whether
related or unrelated, primary or secondary, matured or contingent, direct or
indirect, due or to become due, and whether principal, interest (including
interest which may accrue as post-petition interest in connection with any
bankruptcy or similar proceeding), fees, costs or expenses (including without
limitation attorneys’ fees), and any extensions, modifications, substitutions,
increases and renewals thereof, and the payment of all reasonable amounts
advanced or costs incurred by Lender, to preserve, protect and enforce its
rights hereunder and/or in connection herewith (collectively, “Obligations”),
Borrower hereby assigns and transfers to Lender, and hereby grants to Lender,
a
security interest in, all of the following property now owned or at any time
hereafter acquired by Borrower or in which Borrower now has or at any time
in
the future may acquire any right, title or interest (collectively, the
“Collateral”) (unless otherwise defined herein, each capitalized term used in
this Section 2 shall have the meanings given to them in the Uniform Commercial
Code in effect from time to time in the State of New York):
(a) all
Accounts;
(b) all
Chattel Paper;
(c) all
Contracts (including, without limitation, the rights of Borrower under the
Acquisition Agreement);
(d) all
Deposit Accounts;
(e) all
Documents;
(f) all
Equipment;
(g) all
General Intangibles;
(h) all
Instruments;
(i) all
rights, priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, copyrights, copyright licenses, software,
databases, patents, patent licenses, trademarks, trademark licenses, trademark
applications, service marks, service xxxx licenses, service xxxx applications,
trade names, brand names, domain names, mask works, mask work licenses,
technology and related improvements, know-how and processes, trade secrets,
all
registrations and applications related to any of the above, and all rights
to
xxx at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom,
(j) all
Inventory;
(k) all
Investment Property;
(l) all
Letter-of-Credit Rights;
(m) all
Goods
and other property not otherwise described above;
(n) all
books
and records pertaining to the Collateral; and
(o) to
the
extent not otherwise included, all Proceeds and products of any and all of
the
foregoing, all Supporting Obligations in respect of any of the foregoing and
all
collateral security and guarantees given by any individual, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature with respect to any of the
foregoing.
3. Borrower
covenants that it shall not sell, transfer, convey, lease, or otherwise dispose
of any of the Collateral (other than obsolete or unused equipment or inventory
disposed of by Borrower in the ordinary course of Borrower’s business) and shall
ensure that the liens and security interests granted hereunder to Lender are
at
all times first priority perfected liens on and security interests in the
Collateral, except for Permitted Liens. For the purposes hereof, “Permitted
Liens” shall mean (a) unrecorded liens which have priority over the Lender’s
liens on the Collateral by operation of law, (b) liens for taxes, assessments
or
other governmental charges not delinquent or being contested in good faith
and
by appropriate proceedings, or (c) or liens which do not have a Material Adverse
Effect, as determined by Lender in its reasonable discretion. For the purpose
of
Section 3(c), “Material Adverse Effect” shall mean a material adverse effect on
(i) the financial condition of the Borrower, (ii) the Borrower’s ability to pay
or perform the Obligations in accordance with the terms hereof or (iii) the
ability of Lender to enforce the Obligations or its rights and remedies under
this Agreement or the other Loan Documents.
4. Lender
is
hereby authorized by Borrower to file any financing statements covering the
Collateral or an amendment that adds collateral covered by a financing statement
and Lender may file such financing statements and amendments to financing
statements describing the Collateral in any filing office as Lender, in its
sole
discretion, may determine, including financing statements containing language
indicating that the acquisition by a third party of any right, title or interest
in or to the Collateral without Lender’s consent, shall be a violation of
Lender’s rights. Borrower shall perform all further acts that may be lawfully
and reasonably required by Lender to secure Lender and effectuate the intentions
and objects of this Agreement.
5. This
Agreement shall take effect upon satisfaction of the following conditions
precedent: (the “Effective
Date”).
(a) Lender
shall have received this Agreement and the other Loan Documents executed and
delivered by each of the parties thereto.
(b) The
Acquisition shall have been consummated in accordance with the terms of the
Acquisition Agreement, as in effect on the date thereof, in all material
respects without any waiver, modification or amendment thereof that is
materially adverse to Lender (as determined by Lender), unless consented to
by
Lender.
(c) Scion
LLC
shall deliver a Guaranty Agreement dated as of the date hereof in favor of
Lender, in form and substance reasonably satisfactory to Lender (“Guaranty”).
(d) Xxxxx
Xxxxxx shall deliver that certain Limited Guarantee and Pledge Agreement dated
as of the date hereof in favor of Lender, in form and substance reasonably
satisfactory to Lender (“Limited
Guaranty”
together with the Guaranty and this Agreement, the “Loan
Documents”).
(e) No
Event
of Default shall have occurred and be continuing on the Effective Date or after
giving effect to the Tranche A Loan made on the Effective Date.
6. Each
of
the following events shall constitute an event of default (“Event
of Default”):
(a) Payments
- if
Borrower fails to make any payment of principal or interest on the date when
such payment is due and payable and with respect to the failure to make any
payment of interest, such failure continues for a period of ten (10) days;
or
(b) Other
Charges
- if
Borrower fails to pay any other charges, fees, costs or expenses or other
monetary obligations owing to Lender, arising out of or incurred in connection
with this Agreement on the date when such payment is due and payable, whether
upon maturity, acceleration, demand or otherwise and such failure continues
for
a period of ten (10) days after Borrower receives written notice of such
failure; or
(c) Agreements
with Others
- if
Borrower shall default beyond any grace period under any agreement with any
creditor for borrowed money having an aggregate principal amount in excess
of
$100,000, and the effect of such default is to cause Borrower's obligations
which are the subject thereof to become due prior to its maturity date;
or
(d) Assignment
for Benefit of Creditors, etc.
- if
Borrower makes or proposes an assignment for the benefit of creditors generally,
offers a composition or extension to creditors, or makes or sends notice of
an
intended bulk sale of any business or assets now or hereafter owned or conducted
by Borrower which might materially and adversely affect Borrower; or
(e) Bankruptcy,
Dissolution, etc.
- upon
the commencement of any action for the dissolution or liquidation of Borrower
or
the commencement of any proceeding to avoid any transaction entered into by
Borrower or the commencement of any case or proceeding for reorganization or
liquidation of Borrower’s debts under the Bankruptcy Code or any other state or
federal law, now or hereafter enacted for the relief of debtors, whether
instituted by or against Borrower; provided, however, that Borrower shall have
sixty (60) days to obtain the dismissal or discharge of involuntary proceedings
filed against Borrower, it being understood that during such sixty (60) day
period, Lender shall be under no obligation to extend any credit hereunder
and
Lender may seek adequate protection in any bankruptcy proceeding; or
(f) Receiver
- upon
the appointment of a receiver, liquidator, custodian, trustee or similar
official or fiduciary for Borrower or for any of Borrower’s Property; or
Upon
the
occurrence of an Event of Default and at any time thereafter, Lender may declare
all Obligations secured hereby immediately due and payable, all without demand,
notice, presentment or protest or further action of any kind (it also being
understood that the occurrence of any of the events or conditions set forth
in
subparagraphs (d), (e), or (f) shall automatically cause an acceleration of
the
Obligations), and Lender shall have, in addition to any remedies provided herein
or by any applicable law, all of the rights and remedies of a Lender under
the
Uniform Commercial Code, as enacted in the applicable jurisdiction and as in
effect from time to time. Unless the Collateral is perishable or threatens
to
decline speedily in value or is of a type customarily sold on a recognized
market, Lender will give Borrower reasonable notice of the time and place of
any
public sale thereof or of the time after which any private sale or any other
intended disposition thereof is to be made. The requirements of reasonable
notice shall be met if such notice is mailed, postage prepaid, to the business
address of Borrower shown in this Agreement at least seven (7) days before
the
time of the intended sale or disposition. Expenses of retaking, holding,
preparing for sale, selling or the like shall include Lender’s reasonable
attorneys’ fees and legal expenses, incurred or expended by Lender to enforce
any payment due it under this Agreement either as against Borrower, or in the
prosecution or defense of any action (all of which shall be included in the
Obligations). All rights and remedies granted Lender hereunder and under any
agreements, instruments or documents executed and/or delivered in connection
with the Loan Documents, or otherwise available at law or in equity, shall
be
deemed concurrent and cumulative, and not alternative remedies, and Lender
may
proceed with any number of remedies at the same time until all Obligations
are
satisfied in full. The exercise of any one right or remedy shall not be deemed
a
waiver or release of any other right or remedy, and Lender, upon or at any
time
after the occurrence of an Event of Default, may proceed against Borrower,
at
any time, under any agreement, with any available remedy and in any
order.
7.
(a) Lender
shall not be deemed to have waived any of Lender’s right hereunder or under any
other agreement, instrument or paper signed by Borrower unless such waiver
is in
writing and signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any other right.
A waiver on any one occasion shall not be construed as a bar to or waiver of
any
right or remedy on any future occasion.
(b) The
Borrower agrees to pay, indemnify or reimburse Lender, its s affiliates, and
its
officers, directors, trustees, employees, advisors, agents and controlling
persons (each, an “Indemnitee”) for, and hold each Indemnitee, solely in its
capacity as Lender and not as a direct or indirect equity owner of Borrower
or
Scion LLC, harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever incurred by an Indemnitee or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, any other Loan
Document or any agreement or instrument contemplated hereby or thereby, the
performance by the parties hereto or thereto of their respective obligations
hereunder or thereunder or the consummation of the transactions contemplated
hereby or thereby, (ii) the Loan or the use or proposed use of the proceeds
thereof, or (iii) any actual or prospective claim, litigation, investigation
or
proceeding relating to any of the foregoing, whether based on contract, tort
or
any other theory, and regardless of whether any Indemnitee is a party thereto
(all the foregoing, collectively, the “Indemnified Liabilities”), provided, that
Borrower shall have no obligation hereunder to any Indemnitee with respect
to
Indemnified Liabilities to the extent such Indemnified Liabilities are found
by
a final and nonappealable decision of a court of competent jurisdiction to
have
resulted from the gross negligence or willful misconduct of such Indemnitee
or
any affiliate thereof. All amounts due under this Section shall be payable
not
later than 30 days after written demand therefor. The agreements in this Section
shall survive repayment of the Loans and all other amounts payable
hereunder.
(c) Lender
shall not be liable for, and Borrower hereby agrees that Lender’s liability in
the event of a breach by Lender of this Agreement shall be limited to Borrower’s
direct damages suffered and shall not extend to, any consequential or incidental
damages. In the event Borrower brings suit against Lender in connection with
the
transactions contemplated hereunder, and Lender is found not to be liable,
Borrower shall indemnify and hold Lender harmless from all costs and expenses,
including attorneys’ fees, incurred by Lender in connection with such
suit.
(d) The
liability of Borrower hereunder is absolute and unconditional and shall not
be
reduced, impaired or affected in any way by reason of (i) any failure to obtain,
retain or preserve, or the lack of prior enforcement of, any rights against
any
person or persons, or in any property, (ii) the invalidity or unenforceability
of any Obligations or rights in any Collateral, (iii) any delay in making demand
upon other Borrower or any delay in enforcing, or any failure to enforce, any
rights against other Borrower or in any Collateral even if such rights are
thereby lost, (iv) any failure, neglect or omission to obtain, perfect or retain
any lien upon, protect, exercise rights against, or realize on, any property
of
Borrower, or any other party securing the Obligations, (v) the commencement
of
any bankruptcy, reorganization, liquidation, dissolution or receivership
proceeding or case filed by or against any of Borrower.
8. Each
of
the officers of Lender or its representative is hereby irrevocably made,
constituted and appointed the true and lawful attorney for Borrower (without
requiring it to act as such) with full power of substitution to do the
following: (a) endorse the name of Borrower upon any and all checks, drafts,
money orders and other instruments for the payment of monies that are payable
to
Borrower and constitute collections on the Collateral; (b) execute in the name
of Borrower, schedules, assignments, instruments, documents and statements
that
Borrower is obligated to give Lender hereunder or is necessary to perfect (or
continue to evidence the perfection of such security interest or lien); and
(c) do such other and further acts and deeds in the name of Borrower that
Lender may reasonably deem necessary or desirable to enforce any Collateral
or
perfect Lender’s security interest or lien in the Collateral.
9. THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE
LAW
OF THE STATE OF NEW YORK.
10. The
provisions of this Agreement and other agreements and documents referred to
herein are to be deemed severable, and the invalidity or unenforceability of
any
provision shall not affect or impair the remaining provisions which shall
continue in full force and effect. All covenants of Borrower hereunder or under
any related agreement, instrument or document, shall be deemed continuing until
all of the Obligations are paid in full.
11. This
Agreement together with any documents referenced herein constitute the entire
understanding of the parties hereto regarding the subject matter hereof, and
no
amendment to, or modification of, this Agreement shall be binding unless in
writing and signed by Borrower and Lender.
12. Each
individual signatory hereto represents and warrants that he or she is duly
authorized to execute this Agreement on behalf of his principal and that he
executes the Agreement in such capacity and not as a party.
13. All
provisions herein shall inure to, become binding upon the successors,
representatives, trustees, administrators, executors, heirs and assigns of
the
parties hereto, except that Borrower shall not assign its obligations or rights
hereunder without the prior written consent of Lender.
14. LENDER
AND BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHTS THEY MAY
HAVE TO A JURY TRIAL IN ANY AND ALL DISPUTES BETWEEN LENDER AND BORROWER
HEREUNDER.
15. Any
notice, request, demand, waiver, consent, approval or other communication which
required or permitted hereunder shall be in writing and shall be deemed given
only if delivered personally or sent by registered or certified mail or by
nationally recognized overnight courier service, postage prepaid, or by
facsimile, with written confirmation to follow, as follows:
| If to Lender: |
0000
Xxxxxxxx, 0xx Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxx Xxxx, CEO
Telecopy:
000-000-0000
Telephone:
000-000-0000
| If to Borrower: | Artful Holdings, LLC |
000
Xxxxx
Xxxx
Xxxxxxxxxx,
XX 00000
Attn:
Xxxxxx Xxxxxxx, Esq.
Telecopy:
000-000-0000
Telephone:
000-000-0000
With
a
copy to:
Scion
LLC
0000
Xxxxxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxx Xxxx, CEO
Telecopy:
000-000-0000
Telephone:
000-000-0000
and
all
such other address as the addressee may have specified in a notice duly given
to
the sender as provided herein. Such notice, request, demand, waiver, consent,
approval or other communication will be deemed to have been given as of the
date
so delivered.
16. Borrower
will pay all reasonable
expenses of Lender on demand (including, without limitation, search costs,
audit
fees, appraisal fees, and the reasonable fees and expenses of legal counsel
for
Lender) relating to this Agreement and the Loan Documents, and all related
agreements and documents, including, without limitation, expenses incurred
in
the analysis, negotiation, preparation, closing, administration and enforcement
of this Agreement and any and all related agreements, instruments and documents,
the enforcement, protection and defense of the rights of Lender hereunder and
with respect to the Collateral, and any reasonable expenses relating to
extensions, amendments, waivers or consents pursuant to the provisions hereof,
or any related agreements and documents or relating to agreements with other
creditors, or termination of this Agreement. Any such expenses not paid upon
demand by Lender shall bear interest at the per annum rate set forth herein
with
respect to Loan.
17. No
rights
are intended to be created hereunder, or under any related agreements or
documents for the benefit of any third party donee, creditor or incidental
beneficiary of Borrower. Nothing contained in this Agreement shall be construed
as a delegation to Lender of Borrower’s duty of performance, including, without
limitation, Borrower’s duties under any account or contract with any other
person.
18. Signature
by pdf or facsimile shall bind the parties hereto.
[Signature
Appears on Following Page]
Dated
as
of the date and year first set forth above.
|
ARTFUL
HOLDINGS, LLC
By:
Scion LLC, its sole Member and
Manager
By: /s/Xxxx
Xxxxxxxx
Xxxx
Xxxxxxxx
Manager
|
[Signature
Page to Note and Security Agreement]
