16TH AMENDMENT TO CREDIT AGREEMENT
AND
FORBEARANCE AGREEMENT
THIS 16TH AMENDMENT TO CREDIT AGREEMENT AND FORBEARANCE
AGREEMENT (this "Agreement"), is made and executed as of the 9th day of
November, 2001, by and among X.X. XXXXXX COMPANY, a North Carolina corporation
(the "Borrower"), XXXXXX SHOE COMPANY, a Pennsylvania corporation (the
"Guarantor"), and STANDARD FEDERAL BANK NATIONAL ASSOCIATION (f/k/a Michigan
National Bank) (as successor in interest to Mellon Bank, N.A.) (the "Lender").
RECITALS
A. The Borrower and the Lender are parties to that certain Credit
Agreement, dated as of August 15, 1995, as amended by the First Amendment
thereto, dated as of April 15, 1996, the Second Amendment thereto, dated as of
October 18, 1996, the Third Amendment thereto, dated as of November 16, 1996,
the Fourth Amendment thereto, dated as of March 11, 1997, the Fifth Amendment
thereto, dated as of July 8, 1998, the Sixth Amendment thereto, dated as of
December 28, 1998, the Seventh Amendment thereto, dated as of June 29, 1999,
the Eighth Amendment thereto, dated as of December 31, 1999, the Ninth
Amendment thereto, dated as of January 28, 2000, the Tenth Amendment thereto,
dated as of June 23, 2000, the Eleventh Amendment thereto, dated as of March
30, 2001, the Twelfth Amendment thereto, dated as of May 31, 2001, the
Thirteenth Amendment thereto, dated as of July 16, 2001, the Fourteenth
Amendment thereto, dated as of October 12, 2001, and the Fifteenth Amendment
thereto, dated as of November 2, 2001 (such Credit Agreement, as previously
amended and as it may hereafter be amended, modified, supplemented or restated
from time to time, the "Credit Agreement"). All capitalized terms used herein
without definition shall have the meanings ascribed to such terms in the
Credit Agreement.
B. Pursuant to the Credit Agreement, the Lender has made Loans to the
borrower secured by all of the Collateral.
C. To induce the Lender to enter into the Credit Agreement and make
Loans to the Borrower thereunder, the Guarantor executed and delivered to the
Lender a Guaranty and Suretyship Agreement, dated as of August 15, 1995, by
which the Guarantor unconditionally guaranteed to the Lender the payment and
performance of all of the Loans and other Obligations owing from time to time
by the Borrower to the Lender.
D. The Revolving Credit Maturity Date is November 9, 2001, on which
date all of the Loans and other Obligations owing to the Lender are due and
payable in full. The Borrower and the Guarantor have advised the Lender that
they will be unable to pay the Loans and the other Obligations in full on that
date and that they intend to develop a plan to effect an orderly sale,
disposition and collection of their assets to the extent necessary to pay all
of the Loans and other Obligations in full.
E. The Borrower and the Guarantor are of the opinion that such an
orderly sale, disposition and collection or their respective assets will
maximize the value thereof and is in the best interests of the Borrower, the
Guarantor and their creditors and shareholders. The Borrower and the
Guarantor have requested that the Lender forbear from exercising remedies of
suit, repossession and foreclosure otherwise available to the Lender under the
Credit Agreement and the other Loan Documents, and continue making Revolving
Credit Loans to the Borrower under the Credit Agreement, in order to afford
the Borrower and the Guarantor an opportunity to pay all of the Obligations
owing to the Lender by an orderly sale, disposition and collection of their
assets and to maximize the value of such assets.
F. Upon the terms and subject to the conditions hereof, the Lender is
willing for a limited period of time to (i) forbear from exercising remedies
of suit, repossession and foreclosure available to it in consequence of the
failure of the Borrower and the Guarantor to pay in full the Loans and other
Obligations on the Revolving Credit Maturity Date, and (ii) continue making
Revolving Credit Loans to the Borrower under the Credit Agreement as amended
hereby.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for and in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
expressly acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I
FORBEARANCE; CONTINUED MAKING OF REVOLVING CREDIT LOANS;
FORBEARANCE CONDITIONS; AMENDMENTS TO CREDIT AGREEMENT
1.1. Definitions. In addition to the terms defined in the Credit
Agreement and elsewhere in this Agreement, the following terms shall have the
following meanings for the purposes of this Agreement:
"Availability" shall mean, at any date of determination thereof, the
Borrowing Base at such date less the balance of the Revolving Credit Loans
then outstanding.
"Beginning Calculation Date" shall mean Monday, November 12, 2001.
"Budget" shall mean the weekly budget set forth on Exhibit A attached
hereto, as such budget may be amended from time by time by written approval of
the Lender, setting forth those reasonable and necessary expenses to be
incurred by the Borrower and the Guarantor during the period set forth therein
for the collection of their outstanding accounts and for the sale, liquidation
or other disposition of all of their assets and the application thereof to the
Obligations in accordance with the terms of this Agreement and the Loan
Documents, and including not only budgeted cash expenditures, but also
projected amounts of sales, collections and Availability.
"Specified Events of Default" shall mean the following Events of Default
under the Credit Agreement: (i) the failure of the Borrower to pay the Loans
and the Obligations in full on the Revolving Credit Maturity Date of November
3, 2001; and (ii) the failure of the Borrower and the Guarantor to comply with
any of the financial covenants set forth in Section 6.01 of the Credit
Agreement
"Forbearance Conditions" shall mean the conditions to forbearance set
forth in Section 1.4 hereof.
"Forbearance Termination Date" shall mean January 31, 2002, or such
later date as the Borrower and the Guarantor shall request and the Lender, in
the exercise of its sole and unfettered discretion, may agree in writing.
1.2. Agreement to Forbear. If and for so long as each of the
Forbearance Conditions is satisfied, the Lender agrees that it will not,
solely by reason of the existence or occurrence of the Specified Events of
Default, exercise any default remedy available to the Lender under the
Credit Agreement or any of the other Loan Documents to enforce collection from
the Borrower or the Guarantor of any of the Obligations or to foreclose upon
the Lender's Liens in any of the Collateral during the period from the date
hereof through the Forbearance Termination Date. Neither this Agreement nor
the Lender's forbearance hereunder shall be deemed to be a waiver of or a
consent to any of the Specified Events of Default.
1.3. Additional Revolving Credit Loans. If and for so long as each of
the Forbearance Conditions is satisfied, the Lender agrees to continue to make
Revolving Credit Loans to the Borrower under the Credit Agreement, provided
that (a) the requested Revolving Credit Loan, when added to the balance of all
other Revolving Credit Loans then outstanding, does not exceed either the
Revolving Credit Committed Amount or the Borrowing Base at such time, (b) the
proceeds of the Revolving Credit Loan shall be used solely for the payment of
those expenses which are expressly set forth in the Budget, and (c) the Lender
agrees, in the exercise of its sole discretion, to make the requested
Revolving Credit Loan. Each such additional Revolving Credit Loan which the
Lender elects to make to the Borrower shall be payable according to the terms
of, and at the interest rate set forth in, the Credit Agreement, and shall be
secured by all of the Collateral.
1.4. Conditions to Forbearance. The following conditions shall
constitute Forbearance Conditions, the satisfaction of each and every one of
which shall be a condition to the agreement of the Lender to forbear as set
forth in Section 1.2 hereof and to continue to make additional Revolving
Credit Loans to the Borrower as set forth in Section 1.3 hereof:
(a) The Borrower and the Guarantor shall each duly and punctually
observe, perform and discharge each and every obligation and covenant on its
part to be performed under this Agreement, the Credit Agreement and the other
Loan Documents, except for those covenants giving rise to the Specified Events
of Default, including, without limitation, the continued maintenance of the
Lockbox into which all proceeds of the Collateral shall be sent by the
Borrower and the Guarantor immediately upon receipt for deposit to the Cash
Collateral Account and application to the Obligations as required by Section
2.05 of the Credit Agreement;
(b) No Default or Event of Default shall occur or exist other than the
Specified Events of Default;
(c) The Borrower and the Guarantor shall each promptly pay as and when
due and payable all taxes on its income, properties or profits, all sales
taxes and all employment taxes;
(d) The Borrower shall make all payments of principal, interest, fees or
other amounts owing under the Credit Agreement and the other Loan Documents on
the respective due dates thereof;
(e) The unpaid balance of the Revolving Credit Loans outstanding
at anytime shall not exceed either the Revolving Credit Committed Amount or
the Borrowing Base at such time, nor shall Availability at any time be less
than $1.00;
(f) There shall not occur any event or condition which the Lender, in
good faith, determines constitutes a material adverse change in the financial
condition, results of operations or business prospects of the Borrower, the
Guarantor or the Collateral, or which the Lender determines materially and
adversely affects the ability of the Borrower or the Guarantor to have
paid and performed in full all of the Obligations no later than the
Forbearance Termination Date;
(g) The cash expenditures made by the Borrower and the Guarantor for
any period of two (2) consecutive weeks, beginning with the week of the
Beginning Calculation Date, shall not exceed one hundred ten percent (110%) of
the aggregate amount of the cash expenditures budgeted for such two (2) weeks
as set forth in the Budget;
(h) The Borrower and the Guarantor shall permit an auditor employed by
the Lender to be on the Borrower's and the Guarantor's premises and allow such
auditor to have access to all of the Collateral and all of the Borrower's and
the Guarantor's books and records relating thereto for the purposes of
reviewing such books and records and for verifying, testing, protecting,
safeguarding or preserving of all or any part of the Collateral. The Borrower
and the Guarantor shall pay to the Lender a fee of $650 for each day or part
thereof spent by such auditor in the Borrower's and the Guarantor's premises
plus reasonable and necessary expenses of the auditor;
(i) The Borrower shall employ and utilize, at all times from the date
hereof through and including the Forbearance Termination Date, and pay all of
the fees and expenses of, a liquidation consultant (the "Liquidation
Consultant"), selected by the Borrower and reasonably acceptable to the
Lender, with industry expertise to assist the Borrower and the Guarantor with,
among other things, the orderly sale, liquidation and disposition of their
respective assets and properties. The Liquidation Consultant shall continue
to be employed by the Borrower and the Guarantor at all times unless the
employment of the Liquidation Consultant is terminated by the Borrower and the
Guarantor solely on account of the Liquidation Consultant's willful misconduct
or for other good cause, in which event the Borrower and the Guarantor shall
promptly notify the Lender in writing and promptly employ a replacement
Liquidation Consultant reasonably acceptable to the Lender;
(j) Neither the Borrower nor the Guarantor shall return any of its
inventory to a supplier or vendor thereof, or any other Person, for credit
against future purchases or then existing payables;
(k) All of the Loans and the other Obligations owing to the Lender are
paid and satisfied in full on or before the Forbearance Termination Date;
(l) (The Borrower and the Guarantor shall each use their respective
best efforts to sell, dispose of and otherwise collect Collateral for the best
obtainable prices in order that the Loans and the other Obligations owing to
the Lender are paid and satisfied in full no later than the Forbearance
Termination Date. Notwithstanding the foregoing, neither the Borrower nor the
Guarantor shall:
(i) sell or otherwise dispose of any Inventory to any purchaser unless
such sale is (i) pursuant to a firm purchase order from a purchaser
deemed creditworthy by the Borrower and the Liquidation Consultant in
the exercise of their reasonable business judgment, (ii) at a price
equal to at least seventy-five percent (75%) of the book value of such
Inventory, and (iii) on the Borrower's usual and customary payment terms
for such Inventory;
(ii) sell or otherwise dispose of any Equipment or other to any
purchaser except for prices and upon payment terms approved in advance
by the Lender; or
(iii) grant any discounts or otherwise compromise or settle any
Accounts of the Borrower or the Guarantor;
(m) The Borrower and the Guarantor shall not pay any severance or
termination pay, stay bonus, or any other kind of compensation to any of its
employees except for the usual and customary payroll and payroll related
expenses that the Borrower and the Guarantor have paid before the date of this
Agreement;
(n) The Borrower and the Guarantor shall notify the Lender immediately
upon the Borrower's or the Guarantor's learning of the commencement of any
litigation affecting the Borrower, the Guarantor or the Collateral and shall
send the Lender copies of any such suits and other pleadings related thereto;
(o) The Borrower shall cause the Liquidation Consultant to provide to
the Lender, on each Business Day by email, an actual report of each of the
items set forth in the Budget for such Business Day, showing the variances
(both positive and negative) from the Budget on both a rolling two (2) week
basis and a cumulative basis from the Beginning Calculation Date; and
(p) The Borrower shall furnish to the Lender: (i) on a daily basis, a
certificate on a form acceptable to the Lender of daily sales, credits issued,
collections received, and expenditures made, and (ii) on a weekly basis,
inventory certifications which shall include a breakdown of the amount of
inventory by type (raw materials, work-in-process and finished goods), by
location, and identification of write-offs and write-downs.
In the event that one or more of the Forbearance Conditions is not
satisfied, and the failure of the Borrower and the Guarantor to satisfy each
of the Forbearance Conditions has not been waived in writing by the Lender,
the Lender's agreement to forbear as set forth in Section 1.2 hereof and the
Lender's agreement to continue to make Revolving Credit Loans to the Borrower
as set forth in Section 1.3 hereof shall forthwith terminate and the Lender
shall thereupon have and may exercise from time to time all remedies available
under the Credit Agreement and the other Loan Documents as a consequence of an
Event of Default, including without limitation, the Existing Events of
Default.
1.5 Amendments to Credit Agreement. The Credit Agreement is hereby
amended as follows:
(a) The definition of "Revolving Credit Committed Amount" in
Article 1 of the Credit Agreement is deleted and replaced with the following:
"Revolving Credit Committed Amount" shall mean, at any date of
determination thereof, the amount set forth below corresponding to such
date:
Date Amount
November 9, 2001 - November 23, 2001 $3,100,000
November 24, 2001 - November 30, 2001 $2,900,000
December 1, 2001 - December 7, 2001 $2,800,000
December 8, 2001 - December 14, 2001 $2,550,000
December 15, 2001 - December 21, 2001 $2,400,000
December 22, 2001 - December 28, 2001 $2,200,000
December 29, 2001 - January 4, 2001 $2,000,000
January 5, 2002 - January 11, 2002 $1,750,000
January 12, 2002 - January 18, 2002 $1,500,000
January 19, 2001 - January 25, 2002 $1,000,000
January 26, 2002 - January 30, 2002 $700,000"
(b) The commitment of the Lender to issue L/C's requested by the Borrower
as set forth in Section 2.03(a) of the Credit Agreement is hereby terminated
and the Borrower shall not hereafter request, nor shall the Lender have any
obligation to issue, any further L/C's.
1.6 Non-Waiver of Specified Events of Default. Neither this
Agreement, nor the Lender's forbearance hereunder nor the Lender's continued
making of Revolving Credit Loans to the Borrower shall be deemed a waiver of
or consent to the Specified Events of Default or any other Event of Default
that may exist on the date of this Agreement or may hereafter occur.
Each of the Borrower and the Guarantor agrees that any such Events of Default
shall not be deemed to have been waived, released or cured by virtue of such
Revolving Credit Loans, the Lender's agreement to forbear pursuant to the
terms hereof or the execution of this Agreement.
ARTICLE II
ACKNOWLEDGMENTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES
The Borrower and the Guarantor each hereby acknowledges, agrees,
represents and warrants to and with the Lender that:
2.1 Compliance with the Credit Agreement. As of the execution of this
Agreement, the Borrower and the Guarantor are each in compliance with all of
the terms and provisions set forth in the Credit Agreement and the other Loan
Documents to be observed or performed by it, except where the failure has been
waived in writing by the Lender and except for the Specified Events of
Default.
2.2 Representations in Credit Agreement. The representations and
warranties of the Borrower and the Guarantor set forth in the Credit Agreement
and the other Loan Documents are true and correct in all material respects as
of the date of this Agreement except to the extent that such representations
and warranties relate solely to or are specifically expressed as of a
particular date or period which is past or expired and except for the
Specified Events of Default.
2.3 Events of Default. No Default or Event of Default exists except
for the Specified Events of Default. The Specified Events of Default
currently exist and have not been waived by the Lender.
2.4 Balances of Loans. As of the close of business on November 8,
2001, the aggregate principal balance of all of the Revolving Credit Loans
outstanding under the Credit Agreement was in the sum of $2,730,168.14.
2.5 No Offsets. The Loans owing by the Borrower under the Credit
Agreement and as described in Section 2.4 above are absolutely due and owing
by the Borrower to the Lender without any defenses, deductions, offsets or
counterclaims.
2.6 Enforceability of Loan Documents. The Credit Agreement and the
other Loan Documents executed by the Borrower and the Guarantor are the legal,
valid and binding obligation of the Borrower and the Guarantor, enforceable
against the Borrower and the Guarantor in accordance with their respective
terms without any defenses, deductions, offsets or counterclaims.
2.7 Liens. The Liens granted by the Borrower and the Guarantor to the
Lender in all of the Collateral are duly perfected first priority Liens
therein as security for all of the Obligations owing to the Lender subject
only to Permitted Liens.
2.8 No Waiver. Neither the entering into of this Agreement by the
Lender nor any other previous action or inaction on the part of the Lender
constitutes or shall be deemed to constitute a waiver of or consent to any
past, present or future Default or Event of Default, including, without
limitation, the Specified Events of Default.
2.9 No Duress. Each of the Borrower and the Guarantor is entering
into this Agreement freely and voluntarily with the advice of legal counsel
of its own choosing, and each has freely and voluntarily agreed to the
releases, waivers and undertakings set forth in this Agreement.
ARTICLE III
REAFFIRMATION OF LOAN DOCUMENTS; RELEASES
3.1 Reaffirmation of Loan Documents. The Borrower and the Guarantor
each hereby ratify and reaffirm the validity, legality and enforceability of
each of the Loan Documents and agree that each of the Loan Documents is and
shall remain in full force and effect until all of the Revolving Credit Loans
and the other Obligations have been paid and satisfied in full and the
Credit Agreement and the other Loan Documents have been terminated in writing.
3.2 Release of Claims. TO INDUCE THE LENDER TO ENTER INTO THIS
AGREEMENT, THE BORROWER AND THE GUARANTOR EACH HEREBY RELEASES,
ACQUITS AND FOREVER DISCHARGES THE LENDER AND ITS OFFICERS, DIRECTORS,
AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES, CLAIMS,
DEMANDS, ACTIONS OR CAUSES OF ACTION OF ANY KIND (IF ANY THERE BE), WHETHER
ABSOLUTE OR CONTINGENT, DUE OR TO BECOME DUE, DISPUTED OR UNDISPUTED, AT
LAW OR IN EQUITY, THAT EITHER OF THEM NOW HAS OR EVER HAD AGAINST THE LENDER
ARISING UNDER OR IN CONNECTION WITH THE CREDIT AGREEMENT, ANY OF THE OTHER
LOAN DOCUMENTS OR OTHERWISE.
ARTICLE IV
GENERAL
4.1 Relationship of Parties. Nothing in this Agreement shall be
construed to change or alter the existing debtor-creditor relationship
between the Borrower and the Guarantor, on the one hand, and the Lender,
on the other hand. This Agreement is not intended, nor shall it be
construed, to create a partnership or joint venture relationship between
any of the parties hereto.
4.2 Applicable Law. This Agreement shall be governed by, construed
and enforced in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to choice of law principles.
4.3 Entire Agreement. This Agreement, the Credit Agreement and the
other Loan Documents constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof. This Agreement may not be
modified, altered or amended except by agreement in writing signed by all of
the parties hereto.
4.4 No Novation, etc. This Agreement is not intended to be, nor shall
it be construed to create, a novation or accord and satisfaction, and, except
as otherwise expressly stated herein, the Credit Agreement and the other Loan
Documents remain in full force and effect. Notwithstanding any prior mutual
temporary disregard of any of the terms of the Credit Agreement or the other
Loan Documents, the parties agree that the terms of each of the Credit
Agreement and the other Loan Documents shall be strictly adhered to on and
after the date hereof, except as expressly modified by this Agreement.
4.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one and the same instrument.
4.6 Expenses. The Borrower shall pay and reimburse the Lender for all
reasonable legal fees and expenses incurred by the Lender in connection with
the preparation, execution and delivery of this Agreement, including
reasonable fees and expenses of the Lender's counsel. At the Lender's option,
such fees and expenses to be paid or reimbursed by the Borrower to the
Lender shall be added to the unpaid principal balance of the Revolving Credit
Loans and shall be secured, bear interest and be payable in the same manner as
any other Revolving Credit Loan made by the Lender to the Borrower under the
Credit Agreement.
4.7 Headings. The headings in this Agreement are for the purpose of
reference only and shall not affect the construction of this Agreement.
4.8 Severability. The provisions of this Agreement shall be
severable and the illegibility, unenforceability or invalidity of any
provision of this Agreement shall not affect or impair the remaining
provisions hereof, and each provision of this Agreement shall be construed
to be valid and enforceable to the fullest extent permitted by law.
4.9 Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns. Notice of acceptance hereof by the Lender is hereby waived by the
Borrower and the Guarantor. Time is of the essence of this Agreement.
4.10 Waiver of Jury Trial. THE PARTIES HERETO WAIVE, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF
OR RELATING TO THE CREDIT AGREEMENT, THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO.
[Signatures Begin on the Next Page]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
Borrower:
X.X. XXXXXX COMPANY
By:___________________________________
Xxxx X. Xxxxxxxx, President
Guarantor:
XXXXXX SHOE COMPANY
By:__________________________________
Xxxx X. Xxxxxxxx, President
Lender:
STANDARD FEDERAL BANK NATIONAL
ASSOCIATION (f/k/a Michigan National Bank),
as successor in interest to Mellon Bank,
N.A. successor in interest to Mellon
Bank, N.A.
By: LASALLE BUSINESS CREDIT, INC.,
Its agent
By:____________________________________
Authorized Signatory
EXHIBIT A
TO
LIQUIDATION AND FORBEARANCE AGREEMENT
Budget Attached
12
