EXHIBIT 10.16
BUSINESS LOAN AGREEMENT
This Agreement dated as of January 30, 2004, is between Bank of
America, N.A. (the "Bank") and Pacific Sunwear of California, Inc., a California
corporation (the "Borrower").
1. LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described
below, the Bank will provide a line of credit to the Borrower. The amount of the
line of credit (the Commitment") is equal to the amount indicated for each
period specified below:
PERIOD AMOUNT
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From the date of this Agreement through $45,000,000
March 31, 2005
From April 1, 2005 through March 31, 2006 $50,000,000
From April 1, 2006 through April 1, 2007 $60,000,000
(b) This is a revolving line of credit providing
for cash advances, letters of credit, and shipside bonds. During the
availability period, the Borrower may repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the
outstanding principal balance of the line of credit, shipside bonds and letters
of credit, including amounts drawn on letters of credit and not yet reimbursed,
to exceed the Commitment. If the Borrower exceeds this limit, the Borrower will
immediately pay the excess to the Bank upon the Bank's demand. The Bank may
apply payments received from the Borrower under this Paragraph to the
obligations of the Borrower to the Bank in the order and manner as the Bank, in
its discretion, may determine.
1.2 Availability Period. The line of credit is available
between the date of this Agreement and April 1, 2007, or such earlier date as
the availability may terminate as provided in this Agreement (the "Expiration
Date").
1.3 Interest Rate.
(a) Unless the Borrower elects an optional
interest rate as described below, the interest rate is a rate per year equal to
the Bank's Prime Rate.
(b) The Prime Rate is the rate of interest
publicly announced from time to time by the Bank as its Prime Rate. The Prime
Rate is set by the Bank based on various factors, including the Bank's costs and
desired return, general economic conditions and other
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factors, and is used as a reference point for pricing some loans. The Bank may
price loans to its customers at, above, or below the Prime Rate. Any change in
the Prime Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in the Bank's Prime Rate.
1.4 Repayment Terms.
(a) The Borrower will pay interest on February
1, 2004, and then monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay in full all
principal and any unpaid interest or other charges outstanding under this line
of credit no later than the Expiration Date. Any amount bearing interest at an
optional interest rate (as described below) may be repaid at the end of the
applicable interest period, which shall be no later than the Expiration Date.
1.5 Optional Interest Rates. Instead of the interest rate
based on the Bank's Prime Rate, the Borrower may elect the optional interest
rate listed below during interest periods agreed to by the Bank and the
Borrower. The optional interest rate shall be subject to the terms and
conditions described later in this Agreement. Any principal amount bearing
interest at an optional rate under this Agreement is referred to as a "Portion."
The following optional interest rate is available:
(a) the LIBOR Rate plus 1.0 percentage point.
1.6 Letters of Credit.
(a) This line of credit may be used for
financing:
(i) commercial letters of credit with a
maximum maturity of 180 days but not to extend more than 120 days beyond the
Expiration Date; provided, however, that each commercial letter of credit
outstanding after the Expiration Date must be secured with collateral acceptable
to the Bank. Each commercial letter of credit will require drafts payable at
sight.
(ii) standby letters of credit with a
maximum maturity of 365 days but not to extend more than 365 days beyond the
Expiration Date; provided, however, that each standby letter of credit
outstanding after the Expiration Date must be secured with collateral acceptable
to the Bank.
(iii) The amount of letters of credit
outstanding at any one time (including amounts drawn on letters of credit and
not yet reimbursed) may not exceed the Commitment.
(iv) The letters of credit set forth on
Schedule 1.6 are outstanding from the Bank for the account of the Borrower. As
of the date of this Agreement, these letters of credit shall be deemed to be
outstanding under this Agreement, and shall be subject to all the terms and
conditions stated in this Agreement.
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(b) The Borrower agrees:
(i) any sum drawn under a letter of
credit may, at the option of the Bank, be added to the principal amount
outstanding under this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.
(ii) if an Event of Default has occurred
and is continuing under this Agreement, to immediately prepay and make the Bank
whole for any outstanding letters of credit.
(iii) the issuance of any letter of
credit and any amendment to a letter of credit is subject to the Bank's written
approval and must be in form and content satisfactory to the Bank and in favor
of a beneficiary acceptable to the Bank.
(iv) to sign the Bank's form Application
and Agreement for Commercial Letter of Credit or Application and Agreement for
Standby Letter of Credit, as applicable.
(v) to pay any issuance and/or other
fees that the Bank notifies the Borrower will be charged for issuing and
processing letters of credit for the Borrower.
(vi) to allow the Bank to automatically
charge its checking account for applicable fees, discounts, and other charges.
(vii) to pay the Bank a non-refundable
fee equal to the greater of (aa) 1.50% per annum of the outstanding undrawn
amount of each standby letter of credit or (bb) Three Hundred Dollars ($300.00),
payable quarterly in advance, calculated on the basis of the face amount
outstanding on the day the fee is calculated. If there is an Event of Default
which has occurred and is continuing under this Agreement, at the Bank's option
upon written notice to the Borrower, the amount of the fee shall be increased to
3.50% per annum, effective starting on the day the Bank provides notice of the
increase to the Borrower.
1.7 Shipside Bonds. This line of credit up to a maximum
face value outstanding of Five Million Dollars ($5,000,000) may be used for
financing shipside bonds. The shipside bonds set forth on Schedule 1.7 are
outstanding from the Bank for the account of the Borrower. As of the date of
this Agreement, these shipside bonds shall be deemed to be outstanding under
this Agreement, and shall be subject to all the terms and conditions stated in
this Agreement. The Borrower agrees:
(a) any sum owed to the Bank under a shipside
bond may, at the option of the Bank, be added to the principal amount
outstanding under this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.
(b) if an Event of Default has occurred and is
continuing under this Agreement, to immediately prepay and make the Bank whole
for any outstanding shipside bonds.
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(c) the issuance of any shipside bond is subject
to the Bank's express approval and must be in form and content satisfactory to
the Bank.
(d) to sign the Bank's application, security
agreement and other standard forms for shipside bonds, and to pay any issuance
and/or other fees that the Bank notifies the Borrower will be charged for
issuing and processing shipside bonds for the Borrower.
(e) to allow the Bank to automatically charge
its checking account for applicable fees, discounts, and other charges.
2. OPTIONAL INTEREST RATES
2.1 Optional Rates. Each optional interest rate is a rate
per year. Interest will be paid on the last day of each interest period, and, if
the interest period is longer than one month, then on the first day of each
month during the interest period. At the end of any interest period, the
interest rate will revert to the rate based on the Prime Rate, unless the
Borrower has designated another optional interest rate for the Portion. No
Portion will be converted to a different interest rate during the applicable
interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of optional interest rates
for interest periods commencing after the default occurs.
2.2 LIBOR Rate. The election of LIBOR Rates shall be
subject to the following terms and requirements:
(a) The interest period during which the LIBOR
Rate will be in effect will be one, two, three, six or twelve months. The first
day of the interest period must be a day other than a Saturday or a Sunday on
which the Bank is open for business in New York and London and dealing in
offshore dollars (a "LIBOR Banking Day"). The last day of the interest period
and the actual number of days during the interest period will be determined by
the Bank using the practices of the London inter-bank market.
(b) Each LIBOR Rate Portion will be for an
amount not less than One Million Dollars ($1,000,000). Borrower may not elect to
have more than six (6) LIBOR Rate Portions outstanding at any time.
(c) The "LIBOR Rate" means the interest rate
determined by the following formula, rounded upward to the nearest 1/100 of one
percent. (All amounts in the calculation will be determined by the Bank as of
the first day of the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
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(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate"
means the average per annum interest rate at which U.S. dollar deposits would be
offered for the applicable interest period by major banks in the London
inter-bank market, as shown on the Telerate Page 3750 (or
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any successor page) at approximately 11:00 a.m. London time two (2) London
Banking Days before the commencement of the interest period. If such rate does
not appear on the Telerate Page 3750 (or any successor page), the rate for that
interest period will be determined by such alternate method as reasonably
selected by the Bank. A "London Banking Day" is a day on which the Bank's London
Banking Center is open for business and dealing in offshore dollars.
(ii) "Reserve Percentage" means the
total of the maximum reserve percentages for determining the reserves to be
maintained by member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in Federal Reserve Board Regulation D, rounded upward to
the nearest 1/100 of one percent. The percentage will be expressed as a decimal,
and will include, but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.
(d) The Borrower shall irrevocably request a
LIBOR Rate Portion no later than 12:00 noon California time on the LIBOR Banking
Day preceding the day on which the London Inter-Bank Offered Rate will be set,
as specified above. For example, if there are no intervening holidays or weekend
days in any of the relevant locations, the request must be made at least three
days before the LIBOR Rate takes effect.
(e) The Borrower may not elect a LIBOR Rate with
respect to any principal amount which is scheduled to be repaid before the last
day of the applicable interest period.
(f) Each prepayment of a LIBOR Rate Portion,
whether voluntary, by reason of acceleration or otherwise, will be accompanied
by the amount of accrued interest on the amount prepaid and a prepayment fee as
described below. A "prepayment" is a payment of an amount on a date earlier than
the scheduled payment date for such amount as required by this Agreement.
(g) The prepayment fee shall be in an amount
sufficient to compensate the Bank for any loss, cost or expense incurred by it
as a result of the prepayment, including any loss of anticipated profits and any
loss or expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Portion or from fees payable to terminate the deposits
from which such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing. For
purposes of this paragraph, the Bank shall be deemed to have funded each Portion
by a matching deposit or other borrowing in the applicable interbank market,
whether or not such Portion was in fact so funded.
(h) The Bank will have no obligation to accept
an election for a LIBOR Rate Portion if any of the following described events
has occurred and is continuing:
(i) Dollar deposits in the principal
amount, and for periods equal to the interest period, of a LIBOR Rate Portion
are not available in the London inter-bank market; or
(ii) the LIBOR Rate does not accurately
reflect the cost of a LIBOR Rate Portion.
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3. FEES AND EXPENSES
3.1 Fees.
(a) Unused Commitment Fee. The Borrower agrees
to pay a fee on any difference between Commitment and the amount of credit it
actually uses, determined by the weighted average credit outstanding during the
specified period. The fee will be calculated at 0.20% per year. The calculation
of credit outstanding shall include undrawn amounts of letters of credit and
shipside bonds. The fee will be payable quarterly in arrears until expiration of
the availability period.
(b) Waiver Fee. If the Bank, at its discretion,
agrees to waive or amend any terms of this Agreement, the Borrower will, at the
Bank's option, pay the Bank a fee for each waiver or amendment in an amount
advised by the Bank at the time the Borrower requests the waiver or amendment.
Nothing in this paragraph shall imply that the Bank is obligated to agree to any
waiver or amendment requested by the Borrower. The Bank may impose additional
requirements as a condition to any waiver or amendment.
(c) Late Fee. To the extent permitted by law,
the Borrower agrees to pay a late fee in an amount not to exceed two percent
(2%) of any payment that is more than fifteen (15) days late. The imposition and
payment of a late fee shall not constitute a waiver of the Bank's rights with
respect to the default.
3.2 Expenses. The Borrower agrees to immediately repay
the Bank for expenses that include, but are not limited to, filing, appraisal
and search fees, and documentation fees.
3.3 Reimbursement Costs. The Borrower agrees to reimburse
the Bank for any expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement. Expenses include, but are
not limited to, reasonable attorneys' fees, including any allocated costs of the
Bank's in-house counsel.
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 Requests for Credit. Each request for an extension of
credit will be made in writing in a manner acceptable to the Bank, or by another
means acceptable to the Bank.
4.2 Disbursements and Payments.
(a) Each payment by the Borrower will be made in
immediately available funds by direct debit to deposit account number
14585-25065 as specified below or, for payments not required to be made by
direct debit, by mail to the address shown on the Borrower's statement or at one
of the Bank's banking centers in the United States.
(b) Each disbursement by the Bank and each
payment by the Borrower will be evidenced by records kept by the Bank. In
addition, the Bank may, at its discretion, require the Borrower to sign one or
more promissory notes.
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4.3 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax
instructions for advances or repayments or for the designation of optional
interest rates and telefax requests for the issuance of letters of credit given,
or purported to be given, by any one of the individuals authorized to sign loan
agreements on behalf of the Borrower, or any other individual designated by any
one of such authorized signers.
(b) Advances will be deposited in and repayments
will be withdrawn from the Borrower's account number 14585-25065, or such other
of the Borrower's accounts with the Bank as designated in writing by the
Borrower.
(c) The Borrower will indemnify and hold the
Bank harmless from all liability, loss, and costs in connection with any act
resulting from telephone or telefax instructions the Bank reasonably believes
are made by any individual authorized by the Borrower to give such instructions.
This paragraph will survive this Agreement's termination, and will benefit the
Bank and its officers, employees, and agents.
4.4 Direct Debit (Pre-Billing).
(a) The Borrower agrees that the Bank will debit
the Borrower's deposit account number 14585-25065, or such other of the
Borrower's accounts with the Bank as designated in writing by the Borrower (the
"Designated Account") on the date each payment of principal and interest and any
fees from the Borrower becomes due (the "Due Date").
(b) Prior to each Due Date, the Bank will mail
to the Borrower a statement of the amounts that will be due on that Due Date
(the "Billed Amount"). The xxxx will be mailed a specified number of calendar
days prior to the Due Date, which number of days will be mutually agreed upon
from time to time by the Bank and the Borrower. The calculation will be made on
the assumption that no new extensions of credit or payments will be made between
the date of the billing statement and the Due Date, and that there will be no
changes in the applicable interest rate.
(c) The Bank will debit the Designated Account
for the Billed Amount, regardless of the actual amount due on that date (the
"Accrued Amount"). If the Billed Amount debited to the Designated Account
differs from the Accrued Amount, the discrepancy will be treated as follows:
(i) If the Billed Amount is less than
the Accrued Amount, the Billed Amount for the following Due Date will be
increased by the amount of the discrepancy. The Borrower will not be in default
by reason of any such discrepancy.
(ii) If the Billed Amount is more than
the Accrued Amount, the Billed Amount for the following Due Date will be
decreased by the amount of the discrepancy.
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Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without compounding. The
Bank will not pay the Borrower interest on any overpayment.
(d) The Borrower will maintain sufficient funds
in the Designated Account to cover each debit. If there are insufficient funds
in the Designated Account on the date the Bank enters any debit authorized by
this Agreement, the Bank may reverse the debit.
4.5 Banking Days. Unless otherwise provided in this
Agreement, a banking day is a day other than a Saturday, Sunday or other day on
which commercial banks are authorized to close, or are in fact closed, in the
state where the Bank's lending office is located, and, if such day relates to
amounts bearing interest at an offshore rate (if any), means any such day on
which dealings in dollar deposits are conducted among banks in the offshore
dollar interbank market. All payments and disbursements which would be due on a
day which is not a banking day will be due on the next banking day. All payments
received on a day which is not a banking day will be applied to the credit on
the next banking day.
4.6 Taxes.
(a) If any payments to the Bank under this
Agreement are made from outside the United States, the Borrower will not deduct
any foreign taxes from any payments it makes to the Bank. If any such taxes are
imposed on any payments made by the Borrower (including payments under this
paragraph), the Borrower will pay the taxes and will also pay to the Bank, at
the time interest is paid, any additional amount which the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
taxes had not been imposed. The Borrower will confirm that it has paid the taxes
by giving the Bank official tax receipts (or notarized copies) within thirty
(30) days after the due date.
(b) Payments made by the Borrower to the Bank
will be made without deduction of United States withholding or similar taxes. If
the Borrower is required to pay U.S. withholding taxes, the Borrower will pay
such taxes in addition to the amounts due to the Bank under this Agreement. If
the Borrower fails to make such tax payments when due, the Borrower indemnifies
the Bank against any liability for such taxes, as well as for any related
interest, expenses, additions to tax, or penalties asserted against or suffered
by the Bank with respect to such taxes.
(c) Any assignee or successor to the Bank that
is not incorporated under the laws of the United States of America or a state
thereof (each a "Non-U.S. Lender") agrees that it will, on or before the
effective date of any assignment pursuant to which it becomes a successor or
assign to the Bank and on the request of the Borrower, (i) deliver to the
Borrower two duly completed copies of United States Internal Revenue Service
Form W-8ECI or W-8BEN or any successor form, certifying in either case that such
Person is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes, and (ii) deliver to the
Borrower a United States Internal Revenue Form W-8 or W-9, as the case may be,
and certify that it is entitled to an exemption from United States backup
withholding tax. Each Non-U.S. Lender further undertakes to deliver to the
Borrower (1)
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renewals or additional copies of such form (or any successor form) on or before
the date that such form expires or becomes obsolete, and (2) after the
occurrence of any event requiring a change in the most recent forms so delivered
by it, such additional form or amendments thereto as may be reasonably requested
by the Borrower. All forms or amendments described in the preceding sentence
shall certify that such Person is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred after the relevant date and prior to the date on
which any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Person from duly completing and
delivering any such form or amendment with respect to it and such Person advises
the Borrower that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.
(d) For any period during which a Non-U.S.
Lender has failed to provide the Borrower with an appropriate form pursuant to
clause (c) above (unless such failure is due to a change after the relevant date
in any treaty, law or regulation, or any change in the interpretation or
administration thereof by any governmental authority, occurring subsequent to
the date on which a form originally was required to be provided), such Non-U.S.
Lender shall not be entitled to receive any payment or indemnification under
this Agreement with respect to taxes; provided that, should a Non-U.S. Lender
which is otherwise exempt from or subject to a reduced rate of withholding tax
become subject to taxes because of its failure to deliver a form required under
clause (c) above, the Borrower shall take (at the expense of such person) such
steps as such Non-U.S. Lender shall reasonably request to assist such Non-U.S.
Lender to recover such taxes.
(e) Any Person that is entitled to an exemption
from or reduction of withholding tax with respect to payments under this
Agreement pursuant to the law of any relevant jurisdiction or any treaty shall
deliver to the Borrower at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law as
will permit such payments to be made without withholding or at a reduced rate.
(f) If the U.S. Internal Revenue Service or any
other governmental authority of the United States or any other country or any
political subdivision thereof asserts a claim that the Borrower did not properly
withhold tax from amounts paid to or for the account of any successor or assign
of the Bank (because the appropriate form was not delivered or properly
completed, because such Person failed to notify the Borrower of a change in
circumstances which rendered its exemption from withholding ineffective, or for
any other reason), such Person shall indemnify the Borrower fully for all
amounts paid, directly or indirectly, by the Borrower as tax, withholding
therefor, or otherwise, including penalties and interest, and including taxes
imposed by any jurisdiction on amounts payable to the Borrower under this
subsection, together with all costs and expenses related thereto.
4.7 Additional Costs. The Borrower will pay the Bank, on
demand, for the Bank's costs or losses arising from any statute or regulation,
or any request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The
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costs and losses will be allocated to the loan in a manner determined by the
Bank, using any reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the
Bank's assets and commitments for credit.
4.8 Interest Calculation. Except as otherwise stated in
this Agreement, all interest and fees, if any, will be computed on the basis of
a 360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used. Installments of
principal which are not paid when due under this Agreement shall continue to
bear interest until paid.
4.9 Default Rate. Upon the occurrence and during the
continuance of any Event of Default under this Agreement, following written
notice from the Bank, principal amounts outstanding under this Agreement will at
the option of the Bank bear interest at a rate which is 2.0 percentage point(s)
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any default.
4.10 Interest Compounding. At the Bank's sole option in
each instance, any interest, fees or costs which are not paid when due under
this Agreement shall bear interest from the due date at the Bank's Prime Rate
plus 2.0 percentage point(s). This may result in compounding of interest.
5. CONDITIONS
The Bank must receive the following items, in form and content
acceptable to the Bank, before it is required to extend any credit to the
Borrower under this Agreement:
5.1 Authorizations. Evidence that the execution, delivery
and performance by the Borrower and each guarantor of this Agreement and any
instrument or agreement required under this Agreement have been duly authorized.
5.2 Governing Documents. A copy of the articles of
incorporation or organization for the Borrower and each guarantor.
5.3 Guaranty. A limited guaranty ("Guaranty") signed by
Pacific Sunwear Stores Corp. and Xxxxxxxxxx.xxx Corp.
5.4 Good Standing. Certificates of good standing for the
Borrower and each guarantor from its state of formation and from any other state
in which the Borrower and each guarantor is required to qualify to conduct its
business.
5.5 Payment of Fees. Payment of all accrued and unpaid
expenses incurred by the Bank as required by the paragraph entitled
"Reimbursement Costs."
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5.6 Other Items. Any other items that the Bank reasonably
requires.
6. REPRESENTATIONS AND WARRANTIES
When the Borrower signs this Agreement, and until the Bank is
repaid in full, the Borrower makes the following representations and warranties.
Each request for an extension of credit constitutes a renewal of these
representations and warranties as of the date of the request:
6.1 Organization of Borrower. The Borrower is a
corporation duly formed and existing under the laws of the state where
organized. Each subsidiary of the Borrower, including without limitation, the
subsidiaries set forth on Exhibit A hereto (individually a "Subsidiary" and
collectively, the "Subsidiaries"), is a corporation or a limited liability
company duly formed and existing under the laws of the state where organized.
Each Guarantor is a corporation or limited liability company duly formed and
existing under the laws of the state where organized.
6.2 Authorization. This Agreement, and any instrument or
agreement required hereunder, are within the Borrower's powers, have been duly
authorized, and do not conflict with any of its organizational papers. The
execution, delivery and performance of each guarantor of the Guaranty is within
its corporate powers, has been duly authorized and does not conflict with any of
its organizational papers.
6.3 Enforceable Agreement. This Agreement is a legal,
valid and binding agreement of the Borrower, enforceable against the Borrower in
accordance with its terms, and any instrument or agreement required hereunder
from the Borrower or any guarantor, when executed and delivered, will be
similarly legal, valid, binding and enforceable, except as enforceability
thereof may be limited by bankruptcy, insolvency or other similar laws relating
to or affecting enforcement of creditors' rights generally or by general
equitable principles.
6.4 Good Standing. In each state in which the Borrower,
each guarantor and each Subsidiary does business, it is properly licensed, in
good standing, and, where required, in compliance with fictitious name statutes,
except where the failure to do so would not have a material adverse effect on
the Borrower and its Subsidiaries taken as a whole.
6.5 No Conflicts. This Agreement does not conflict with
any law, agreement, or obligation by which the Borrower, any guarantor or any
Subsidiary is bound.
6.6 Financial Information. All financial and other
information that has been or will be supplied to the Bank is sufficiently
complete to give the Bank accurate knowledge of the Borrower's (and any
guarantor's) financial condition, including all material contingent liabilities.
Since the date of the most recent financial statement provided to the Bank,
there has been no material adverse change in the business condition (financial
or otherwise), operations, properties or prospects of the Borrower (or any
guarantor).
6.7 Lawsuits. There is no lawsuit, tax claim or other
dispute pending or threatened against the Borrower or any Subsidiary which, if
lost, would impair the Borrower's
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and its Subsidiaries financial condition taken as a whole or ability to repay
the loan, except as have been disclosed in writing to the Bank.
6.8 Permits, Franchises. The Borrower and each Subsidiary
possesses all permits, memberships, franchises, contracts and licenses required
and all trademark rights, trade name rights, patent rights and fictitious name
rights necessary to enable it to conduct the business in which it is now
engaged, except where the failure to own or possess any of the foregoing would
not have a material adverse effect on the financial condition or operations of
the Borrower and its Subsidiaries taken as a whole.
6.9 Other Obligations. Neither the Borrower nor any
Subsidiary is in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation.
6.10 Tax Matters. The Borrower has no knowledge of any
pending assessments or adjustments of its income tax in excess of Two Hundred
Fifty Thousand Dollars ($250,000) for any year and all taxes due have been paid,
except as have been disclosed in writing to the Bank.
6.11 No Tax Avoidance Plan. The Borrower's obtaining of
credit from the Bank under this Agreement does not have as a principal purpose
the avoidance of U.S. withholding taxes.
6.12 No Event of Default. There is no event which is, or
with notice or lapse of time or both would be, a default under this Agreement.
6.13 Insurance. The Borrower has obtained, and maintained
in effect, the insurance coverage required in the "Covenants" section of this
Agreement.
6.14 Location of Borrower. The Borrower's place of
business (or, if the Borrower has more than one place of business, its chief
executive office) is located at the address listed under the Borrower's
signature on this Agreement.
6.15 ERISA Plans.
(a) Each Plan (other than a multiemployer plan)
is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other federal or state law, except to the extent that any
non-compliance would not result in a material liability of Borrower. Each Plan
has received a favorable determination letter from the IRS and to the best
knowledge of the Borrower, nothing has occurred which would cause the loss of
such qualification in any case where the failure to be qualified would result in
a material liability of Borrower. The Borrower has fulfilled its obligations, if
any, under the minimum funding standards of ERISA and the Code with respect to
each Plan, except to the extent that any failure to fulfill such obligation
would not result in a material liability of Borrower, and has not incurred any
material liability with respect to any Plan under Title IV of ERISA.
12
(b) There are no claims, lawsuits or actions
(including by any governmental authority), and there has been no prohibited
transaction or violation of the fiduciary responsibility rules, with respect to
any Plan which has resulted or could reasonably be expected to result in a
material adverse effect.
(c) With respect to any Plan subject to Title IV
of ERISA:
(i) No reportable event has occurred
under Section 4043(c) of ERISA for which the PBGC requires 30-day notice, which
would result in a material liability of Borrower.
(ii) No action by the Borrower or any
ERISA Affiliate to terminate or withdraw from any Plan has been taken and no
notice of intent to terminate a Plan has been filed under Section 4041 of ERISA,
which termination or withdrawal would result in a material liability of
Borrower.
(iii) No termination proceeding has been
commenced with respect to a Plan under Section 4042 of ERISA, and to Borrower's
knowledge, no event has occurred or condition exists which might constitute
grounds for the commencement of such a proceeding.
(d) The following terms have the meanings
indicated for purposes of this Agreement:
(i) "Code" means the Internal Revenue
Code of 1986, as amended from time to time.
(ii) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended from time to time.
(iii) "ERISA Affiliate" means any trade
or business (whether or not incorporated) under common control with the Borrower
within the meaning of Section 414(b) or (c) of the Code.
(iv) "PBGC" means the Pension Benefit
Guaranty Corporation.
(v) "Plan" means a pension,
profit-sharing, or stock bonus plan intended to qualify under Section 401(a) of
the Code, maintained or contributed to by the Borrower or any ERISA Affiliate,
including any multiemployer plan within the meaning of Section 4001(a)(3) of
ERISA.
7. COVENANTS
The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
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7.1 Use of Proceeds. To use the proceeds of the credit
only for working capital, capital expenditures, general corporate purposes and
for the issuance of letters of credit and shipside bonds.
7.2 Financial Information. To provide the following
financial information and statements in form and content acceptable to the Bank,
and such additional information as requested by the Bank from time to time:
(a) Within 90 days of the Borrower's fiscal year
end, the Borrower's annual financial statements or Form 10-K Annual Report filed
with the Securities and Exchange Commission. These financial statements must be
audited (with an unqualified opinion) by Deloitte & Touche or other Certified
Public Accountant acceptable to the Bank. The statements shall be prepared on a
consolidated basis.
(b) Within 45 days of the period's end, the
Borrower's quarterly financial statements or Form 10-Q Quarterly Report filed
with the Securities and Exchange Commission, certified and dated by an
authorized officer of the Borrower. These financial statements may be company
prepared and shall be prepared on a consolidated basis.
(c) Within 120 days of the Borrower's fiscal
year end, projections of the Borrower's consolidated financial statements for
the succeeding calendar years (through the maturity of the credit facilities
provided under this Agreement) on a quarterly basis for the next fiscal year and
annually thereafter. These projections may be Borrower prepared.
(d) Within the period(s) provided in (a) and (b)
above, a compliance certificate of the Borrower signed by an authorized
financial officer of the Borrower in substantially the form of Exhibit B hereto,
setting forth (i) the information and computations (in sufficient detail) to
establish that the Borrower is in compliance with all financial covenants at the
end of the period covered by the financial statements then being furnished and
(ii) whether there existed as of the date of such financial statements and
whether there exists as of the date of the certificate, any default under this
Agreement and, if any such default exists, specifying the nature thereof and the
action the Borrower is taking and proposes to take with respect thereto.
(e) Promptly upon the Bank's request, such other
books, records, statements, lists of property and accounts, budgets, forecasts
or reports as to the Borrower and as to each guarantor of the Borrower's
obligations to the Bank as the Bank may request.
7.3 EBITDA. To maintain on a consolidated basis EBITDA
equal to at least $85,000,000.
"EBITDA" means net profit before taxes, plus interest expense, depreciation,
amortization and any impairment of goodwill as required by generally accepted
accounting principles. This covenant will be calculated at the end of each
quarter, using the results of that quarter and each of the 3 immediately
preceding quarters.
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7.4 Total Liabilities to Tangible Net Worth. To maintain
on a consolidated basis a ratio of Total Liabilities (excluding Subordinated
Liabilities) to Tangible Net Worth not exceeding 0.80:1.0. This covenant will be
calculated at the end of each fiscal quarter.
"Total Liabilities" means the sum of current liabilities plus long term
liabilities.
"Subordinated Liabilities" means liabilities subordinated to the Borrower's
obligations to the Bank in a manner acceptable to the Bank, using the Bank's
standard form.
"Tangible Net Worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
unamortized debt discount and expense, capitalized or deferred research and
development costs, deferred marketing expenses, deferred receivables, and other
like intangibles and monies due from affiliates, officers, directors, employees,
or shareholders of the Borrower), plus Subordinated Liabilities, less Total
Liabilities, including but not limited to accrued and deferred income taxes, and
any reserves against assets.
7.5 Paydown Period. To reduce the amount of advances
outstanding under this Agreement to zero for at least 30 consecutive days during
any rolling twelve-month period. For purposes of this paragraph, "advances" does
not include undrawn amounts of outstanding letters of credit or shipside bonds.
7.6 Other Debts. The Borrower shall not and shall not
permit any Subsidiary to have outstanding or incur any Indebtedness (other than
those to the Bank), or become liable for the liabilities of others, without the
Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on
normal trade credit.
(b) Endorsing negotiable instruments received in
the usual course of business.
(c) Obtaining surety bonds in the usual course
of business.
(d) Additional capital lease obligations for the
acquisition of fixed assets not to exceed Fifteen Million Dollars ($15,000,000)
in the aggregate.
(e) Indebtedness of Borrower to any of its
wholly-owned Subsidiaries, and any wholly-owned Subsidiary of Borrower may
become and remain liable with respect to indebtedness to Borrower or other
wholly-owned Subsidiaries of Borrower.
(f) Additional Indebtedness for business
purposes that does not exceed Fifteen Million Dollars ($15,000,000) in the
aggregate.
For purposes hereof "Indebtedness", as applied to Borrower and any Subsidiary,
means (i) all indebtedness for borrowed money, (ii) that portion of obligations
with respect to capital leases that is properly classified as a liability on a
balance sheet in conformity with generally accepted accounting principles, (iii)
notes payable and drafts accepted representing extensions of credit whether or
not representing obligations for borrowed money, (iv) any obligation owed for
all or
15
any part of the deferred purchase price of property or services (excluding any
such obligations incurred under ERISA), which purchase price is (a) due more
than six months from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, and (v) all
indebtedness secured by any lien on any property or asset owned or held by such
party regardless of whether the indebtedness secured thereby shall have been
assumed by such party or is nonrecourse to the credit of such party.
7.7 Other Liens. The Borrower shall not, and shall not
permit any Subsidiary to create, assume, or allow any security interest or lien
(including judicial liens) on property the Borrower or any Subsidiary now or
later owns, except: (a) deeds of trust and security agreements in favor of the
Bank; (b) liens for taxes, assessments, levies or other governmental charges not
yet due (subject to applicable grace periods) or which are being contested in
good faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrower or such Subsidiary, as the
case may be, in accordance with generally accepted accounting principles; (c)
carriers', warehousemen's, mechanics', landlords', vendor's, materialmen's,
repairmen's, sureties' or other like liens arising in the ordinary course of
business (or deposits to obtain the release of any such lien); (d) pledges or
deposits in connection with worker's compensation, unemployment insurance and
other social security legislation; (e) deposits to secure insurance in the
ordinary course of business, the performance of bids, tenders, contracts (other
than contracts for the payment of money), leases, licenses, franchises,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business; (f)
easements, rights-of-way, covenants, reservations, exceptions, encroachments,
zoning and similar restrictions and other similar encumbrances or title defects
incurred in the ordinary course of business which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from the
value of the property subject thereto or materially interfere with the ordinary
conduct of the business of the Borrower and its Subsidiaries taken as a whole;
and (g) liens securing Indebtedness permitted under Section 7.6(d) and (f). The
Borrower hereby acknowledges and agrees that it will not enter into any
agreement with any other creditor, lender or other person that would have the
effect of prohibiting or otherwise limiting the ability of the Borrower at any
time to pledge any or all of its assets to the Bank without first obtaining the
prior written consent from the Bank.
7.8 Loans to Officers or Affiliates. Not to make any
loans, advances or other extensions of credit (including extensions of credit in
the nature of accounts receivable or notes receivable arising from the sale or
lease of goods or services) to any of the Borrower's executives, officers,
directors or shareholders (or any relatives of any of the foregoing), or to any
affiliated entities, in excess of One Million Dollars ($1,000,000) in the
aggregate outstanding at anytime, or to any affiliated entities of the Borrower
or any subsidiary, except for intercompany loans permitted under Section 7.6(e).
7.9 Capital Expenditures. Not to spend more than One
Hundred Million Dollars ($100,000,000) in any fiscal year to acquire fixed
assets.
7.10 Dividends. Not to declare or pay any dividends on any
of its shares, and not to purchase, redeem or otherwise acquire for value any of
its shares, or create any sinking fund in relation thereto, except:
16
(a) dividends payable in its capital stock;
(b) restricted stock purchases in accordance
with any of Borrower's stock plans, not in excess of Ten Thousand Dollars
($10,000) in any one fiscal year.
(c) capital stock repurchases not in excess of
Fifty Million Dollars ($50,000,000) in the aggregate at any time; provided that,
after giving effect to such stock repurchase (i) no Event of Default under this
Agreement has occurred and is continuing, and (ii) Borrower has not less than
Fifty Million Dollars ($50,000,000) in Unencumbered Liquid Assets. For the
purposes of this Agreement, "Unencumbered Liquid Assets" means the following
assets (excluding assets of any retirement plan) which (1) are not the subject
of any lien, pledge, security interest or other arrangement with any creditor to
have his claim satisfied out of the asset (or proceeds thereof) prior to the
general creditors of the Borrower, and (2) may be converted to cash within five
(5) days:
(A) Cash or cash equivalents held in
the United States;
(B) United States Treasury or
governmental agency obligations which
constitute full faith and credit of the
United States of America;
(C) Commercial paper rated P-1 or A1 by
Xxxxx'x or S & P, respectively;
(D) Medium and long-term securities
rated investment grade by one of the rating
agencies described in (C) above;
(E) Eligible Stocks;
(F) Mutual funds quoted in The Wall
Street Journal which invest primarily in the
assets described in (A) - (E) above.
"Eligible Stocks" includes any common or
preferred stock which (i) is not subject to
statutory or contractual restrictions on
sales, (ii) is traded on a U. S. national
stock exchange or included in the National
Market tier of NASDAQ, and (iii) has, as of
the close of trading on the applicable
exchange (excluding after hours trading), a
per share price of at least Fifteen Dollars
($15.00).
If more than 25% of the value of
Unencumbered Liquid Assets is represented by
margin stock, the Borrower will, upon the
Bank's request, provide the Bank a Form U-1
Purpose Statement confirming that none of
the proceeds of the loan will be used to buy
or carry any margin stock.
7.11 Notices to Bank. To promptly notify the Bank in
writing of:
17
(a) any lawsuit over Five Million Dollars
($5,000,000) against the Borrower, any Subsidiary or any guarantor.
(b) any substantial dispute involving a claim of
Two Million Dollars ($2,000,000) or more between the Borrower, any Subsidiary or
any guarantor and any government authority.
(c) any event of default under this Agreement,
or any event which, with notice or lapse of time or both, would constitute an
event of default.
(d) any material adverse change in the business
condition (financial or otherwise), operations, properties or prospects of the
Borrower and its Subsidiaries taken as a whole, or in the Borrower's ability to
repay the credit.
(e) any change in the Borrower's name, legal
structure, place of business, or chief executive office if the Borrower has more
than one place of business.
(f) any actual contingent liabilities of the
Borrower (or any guarantor), and any such contingent liabilities which are
reasonably foreseeable, where such liabilities are in excess of Five Million
Dollars ($5,000,000) in the aggregate.
(g) the receipt of any notice or communication
which could reasonably be expected to have a material adverse effect on the
financial condition or operations of the Borrower and its Subsidiaries taken as
a whole, regarding (i) any threatened or pending investigation or enforcement
action by any governmental authority or any other claim relating to health,
safety, the environment, or any hazardous substances with regard to the
property, activities, or operations of the Borrower or any Subsidiary or (ii)
any belief or suspicion of the Borrower or any Subsidiary that hazardous
substances exist on or under the real property of the Borrower or any
Subsidiary.
7.12 Books and Records. To maintain adequate books and
records.
7.13 Audits. To allow the Bank and its agents to inspect
the Borrower's properties and examine, audit, and make copies of books and
records at any reasonable time. Prior to the occurrence and continuance of any
Event of Default, the Bank agrees to give reasonable prior notice to Borrower of
its desire to conduct any inspection or audit. If any of the Borrower's
properties, books or records are in the possession of a third party, the
Borrower authorizes that third party to permit the Bank or its agents to have
access to perform inspections or audits and to respond to the Bank's requests
for information concerning such properties, books and records.
7.14 Compliance with Laws. To comply, and cause each
Subsidiary to comply, with the laws (including any fictitious name statute),
regulations, and orders of any government body with authority over the
Borrower's business and the business of each Subsidiary, except where the
failure to comply will not have a material adverse effect on the Borrower and
its Subsidiaries taken as a whole.
18
7.15 Preservation of Rights. To maintain and preserve all
rights, privileges, and franchises the Borrower and each subsidiary now has,
except where the failure to maintain the foregoing will not have a material
adverse effect on the Borrower and its Subsidiaries taken as a whole.
7.16 Maintenance of Properties. To make any repairs,
renewals, or replacements to keep the Borrower's properties and the properties
of its Subsidiaries in good working condition, except where the failure to do so
will not have a material adverse effect on the Borrower and its Subsidiaries
taken as a whole.
7.17 Cooperation. To take any action reasonably requested
by the Bank to carry out the intent of this Agreement.
7.18 Insurance.
(a) General Business Insurance. To maintain
insurance satisfactory to the Bank as to amount, nature and carrier covering
property damage (including loss of use and occupancy) to any of the Borrower's
and its Subsidiaries properties, public liability insurance including coverage
for contractual liability, product liability and workers' compensation, and any
other insurance which is usual for the Borrower's and its Subsidiaries business.
(b) Marine and War Insurance. To maintain a
marine and war insurance policy for any shipment where the seller is not
insuring the goods in transit. The insurance must be issued by an insurance
company acceptable to the Bank and must include a lender's loss payable
endorsement in favor of the Bank in form acceptable to the Bank.
(c) Evidence of Insurance. Upon the request of
the Bank, to deliver to the Bank a copy of each insurance policy, or, if
permitted by the Bank, a certificate of insurance listing all insurance in
force.
7.19 Additional Negative Covenants. The Borrower shall not
and shall not permit any Subsidiary to, without the Bank's written consent:
(a) engage in any business activities
substantially different from the present business of the Borrower and its
Subsidiaries.
(b) liquidate or dissolve the business of the
Borrower or any Subsidiary, except with or into Borrower or its wholly-owned
Subsidiaries.
(c) enter into any consolidation, merger, or
other combination, or become a partner in a partnership, a member of a joint
venture, or a member of a limited liability company involving a capital
contribution in excess One Million Dollars ($1,000,000) in any fiscal year,
except any Subsidiary of the Borrower may be merged with or into the Borrower or
any Subsidiary of Borrower and in connection with any acquisitions permitted
under Section 7.20.
19
(d) sell, assign, lease, transfer or otherwise
dispose of any assets for less than fair market value, or enter into any
agreement to do so, except as permitted in (f) below. For the purpose of this
Paragraph, "fair market value" shall mean the fair market value of such assets
as reasonably determined by the Board of Directors of Borrower, provided that at
the time of such disposition no such Event of Default shall exist or shall
result from such disposition.
(e) sell, assign, lease, transfer or otherwise
dispose of all or a substantial part of the business or the assets of the
Borrower and its Subsidiaries, taken as a whole.
(f) except as permitted by (d) above, sell,
assign, lease, transfer or otherwise dispose of any assets, or enter into any
agreement to do so, except:
(i) dispositions of inventory, or used,
worn-out or surplus equipment, all in the ordinary course of business;
(ii) the sale of equipment to the extent
that such equipment is exchanged for credit against the purchase price of
similar replacement equipment, or the proceeds of such sale are reasonably
promptly applied to the purchase price of such replacement equipment;
(g) enter into any sale and leaseback agreement
covering any of its fixed assets; and
(h) voluntarily suspend all or a substantial
part of its business operations.
7.20 Acquisitions.
(a) The Borrower shall not, and shall not permit
any Subsidiary to, without the Bank's written consent, acquire or purchase a
business or all or substantially all of its assets for a consideration including
assumption of direct or contingent debt, and the up-front purchase price
(including stock and cash portions), in excess of Twenty Million Dollars
($20,000,000) in any fiscal year, provided that the revenues of the entity being
acquired do not exceed One Hundred Million Dollars ($100,000,000.00) in any
fiscal year.
(b) Notwithstanding anything to the contrary set
forth herein, Borrower shall not, and shall not use the proceeds of any credit
facilities under this Agreement, to purchase or otherwise acquire any shares of
any corporation or association or any interest in any other business entity (i)
if such entity is not engaged in a business similar to the businesses of the
Borrower and its Subsidiaries and (ii) if such purchase or acquisition is
opposed by such entity's board of directors or other governing body or by a
shareholder or shareholders controlling a significant portion of the voting
shares of such entity or to make such purchase or acquisition with knowledge of
facts or circumstances that such purchase or acquisition is likely to be hostile
or unfriendly.
20
(c) Prior to the consummation of any acquisition
otherwise permitted under this Section 7.20, Bank shall receive the following,
in form and substance satisfactory to Bank: (aa) a certificate of the Borrower
stating (i) that no Event of Default has occurred and is continuing, and (ii)
information and computations (in sufficient detail) to establish compliance by
the Borrower with all financial covenants after giving effect to such
acquisition.
7.21 Investments. Not to have any existing, or make any
new, investments in any individual or entity, or make any capital contributions
or other transfers of assets to any individual or entity, except for:
(a) Existing investments disclosed to the Bank
in writing.
(b) Investments in the Borrower's current
subsidiaries.
(c) Investments in any of the following:
(i) certificates of deposit;
(ii) U.S. treasury bills and other
obligations of the federal government;
(iii) readily marketable securities
(including commercial paper, but excluding restructured stock and stock subject
to the provisions of Rule 144 of the Securities and Exchange Commission).
(d) Investments that do not exceed an aggregate
amount of Ten Million Dollars ($10,000,000.00) outstanding at any one time.
7.22 ERISA Plans. Promptly during each year, to pay and
cause any subsidiaries to pay contributions adequate to meet at least the
minimum funding standards under ERISA with respect to each and every Plan; file
each annual report required to be filed pursuant to ERISA in connection with
each Plan for each year; and notify the Bank within ten (10) days of the
occurrence of any Reportable Event that might constitute grounds for termination
of any capital Plan by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time. Capitalized terms in this paragraph shall
have the meanings defined within ERISA.
7.23 Additional Guarantors. Promptly notify the Bank at
the time that any entity becomes a subsidiary, and promptly thereafter (and in
any event within 30 days), cause such entity to (a) become a guarantor by
executing and delivering to the Bank a counterpart of the Guaranty and (b)
deliver to the Bank evidence of the legality, validity, binding effect and
enforceability of the documentation referred to in clause (a), all in form and
content acceptable to the Bank.
8. HAZARDOUS SUBSTANCES
21
8.1 Indemnity Regarding Hazardous Substances. The
Borrower will indemnify and hold harmless the Bank from any loss or liability
the Bank incurs in connection with or as a result of this Agreement, which
directly or indirectly arises out of the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of a hazardous substance. This indemnity will apply whether the
hazardous substance is on, under or about the Borrower's property or operations
or property leased to the Borrower. The indemnity includes but is not limited to
attorneys' fees (including the reasonable estimate of the allocated cost of
in-house counsel and staff). The indemnity extends to the Bank, its parent,
subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns.
8.2 Definition of Hazardous Substances. "Hazardous
substances" means any substance, material or waste that is or becomes designated
or regulated as "toxic," "hazardous," "pollutant," or "contaminant" or a similar
designation or regulation under any federal, state or local law (whether under
common law, statute, regulation or otherwise) or judicial or administrative
interpretation of such, including without limitation petroleum or natural gas.
This indemnity will survive repayment of the Borrower's obligations to the Bank.
9. DEFAULT
If any of the following events (each an "Event of Default")
occurs, the Bank may do one or more of the following: declare the Borrower in
default, stop making any additional credit available to the Borrower, and
require the Borrower to repay its entire debt immediately and without prior
notice. If an Event of Default occurs under the paragraph entitled "Bankruptcy,"
below, with respect to the Borrower, then the entire debt outstanding under this
Agreement will automatically be due immediately.
9.1 Failure to Pay. The Borrower fails to make any
principal payment when due under this Agreement or fails to make a payment of
interest, any fee or other sum under this Agreement within five (5) days of the
date when due.
9.2 False Information. The Borrower or any guarantor has
given the Bank information or representations that are false or misleading in
any material respect.
9.3 Bankruptcy. The Borrower, any guarantor or any
Subsidiary files a bankruptcy petition, a bankruptcy petition is filed against
the Borrower or any guarantor or any Subsidiary or the Borrower or any guarantor
or any Subsidiary makes a general assignment for the benefit of creditors. The
default will be deemed cured if any bankruptcy petition filed against the
Borrower or any guarantor or any Subsidiary is dismissed within a period of 30
days after the filing; provided, however, that the Bank will not be obligated to
extend any additional credit to the Borrower during that period.
9.4 Receivers. A receiver or similar official is
appointed for a substantial portion of the Borrower's or any guarantor's or any
Subsidiary's business, or the business is terminated, or any guarantor is
liquidated or dissolved.
22
9.5 Judgments. Any judgments or arbitration awards are
entered against the Borrower (or any guarantor), or the Borrower (or any
guarantor) enters into any settlement agreements with respect to any litigation
or arbitration, in an aggregate amount of One Million Dollars ($1,000,000) or
more in excess of any insurance coverage, and shall remain undischarged,
unvacated, unbonded or unstayed for a period of sixty (60) days.
9.6 Government Action. Any government authority takes
action that the Bank believes materially adversely affects the Borrower's (or
any guarantor's) financial condition or ability to repay.
9.7 Material Adverse Change. A material adverse change
occurs, or is reasonably likely to occur, in the Borrower's (or any guarantor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
9.8 Cross-default. Any default occurs and is continuing
under any agreement in connection with any credit the Borrower or any guarantor
or any Subsidiary has obtained from anyone else or which the Borrower or any
guarantor or any of the Borrower's Subsidiaries has guaranteed, in the aggregate
amount of One Million Dollars ($1,000,000) or more, if the effect of such
default is to cause, or to permit the holder or holders of that indebtedness to
cause such indebtedness to become or be declared due and payable prior to its
stated maturity (upon the giving of notice, lapse of time, or both, or
otherwise).
9.9 Default under Related Documents. Any default occurs
under any guaranty, or other document required by or delivered in connection
with this Agreement or any such document is no longer in effect, or any
guarantor purports to revoke or disavow the guaranty.
9.10 Other Bank Agreements. The Borrower or any guarantor
or any Subsidiary fails to meet the conditions of, or fails to perform any
obligation under any other agreement the Borrower or any guarantor or any of the
Borrower's Subsidiaries has with the Bank or any affiliate of the Bank, and such
default shall not have been remedied or waived within 30 days after receipt by
the Borrower of written notice from the Bank of such default.
9.11 ERISA Plans. Any one or more of the following events
occurs with respect to a Plan of the Borrower subject to Title IV of ERISA,
provided such event or events could reasonably be expected, in the judgment of
the Bank, to subject the Borrower to any tax, penalty or liability (or any
combination of the foregoing) which, in the aggregate, could have a material
adverse effect on the financial condition of the Borrower:
(a) A reportable event shall occur under Section
4043(c) of ERISA with respect to a Plan.
(b) Any Plan termination (or commencement of
proceedings to terminate a Plan) or the full or partial withdrawal from a Plan
by the Borrower or any ERISA Affiliate.
9.12 Other Breach Under Agreement.
23
(a) Failure of Borrower to perform or comply
with any term or condition contained in Sections 7.2, 7.3, 7.4, 7.5, 7.6, 7.7,
7.8, 7.9, 7.10, 7.19 or 7.20 of this Agreement; or
(b) Borrower shall default on the performance of
or compliance with any term contained in this Agreement, other than any such
term referred to in any other subsection of this Section 9, and such default
shall not have been remedied or waived within 30 days after receipt by Borrower
of written notice from the Bank of such default; provided, however, that the
Bank will not be obligated to extend any additional credit to the Borrower
during that period.
9.13 Change of Control. There occurs any Change of Control
with respect to the Borrower. For the purposes of this Section 9.13, "Change of
Control" means, with respect to the Borrower, an event or series of events by
which:
(a) any "person" or "group" (as such terms are
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such person or its subsidiaries, and any
person or entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have "beneficial ownership" of all securities
that such person or group has the right to acquire (such right, an "option
right"), whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 30% or more of the equity securities of the
Borrower entitled to vote for members of the board of directors or equivalent
governing body of the Borrower on a fully diluted basis (and, taking into
account all such securities that such person or group has the right to acquire
pursuant to any option right); or
(b) during any period of 12 consecutive months,
other than by reason of removal and/or replacement of any member(s) upon death,
retirement, or disability, a majority of the members of the board of directors
or other equivalent governing body of the Borrower cease to be composed of
individuals: (i) who were members of that board or equivalent governing body on
the first day of such period, (ii) whose election or nomination to that board or
equivalent governing body was approved by individuals referred to in clause (i)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body or (iii) whose election or
nomination to that board or other equivalent governing body was approved by
individuals referred to in clauses (i) and (ii) above constituting at the time
of such election or nomination at least a majority of that board or equivalent
governing body (excluding, in the case of both clause (ii) and clause (iii), any
individual whose initial nomination for, or assumption of office as, a member of
that board or equivalent governing body occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of
one or more directors by any person or group other than a solicitation for the
election of one or more directors by or on behalf of the board of directors).
10. ENFORCING THIS AGREEMENT; MISCELLANEOUS
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10.1 GAAP. Except as otherwise stated in this Agreement,
all financial information provided to the Bank and all financial covenants will
be made under generally accepted accounting principles, consistently applied.
10.2 California Law. This Agreement is governed by
California law.
10.3 Successors and Assigns. This Agreement is binding on
the Borrower's and the Bank's successors and assignees. The Borrower agrees that
it may not assign this Agreement without the Bank's prior consent. The Bank may
sell participations in or assign this loan, and may exchange financial
information about the Borrower with actual or potential participants or
assignees; provided that such actual or potential participants or assignees
shall agree to treat all financial information exchanged as confidential. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.
10.4 Arbitration and Waiver of Jury Trial.
(a) This paragraph concerns the resolution of
any controversies or claims between the Borrower and the Bank, whether arising
in contract, tort or by statute, including but not limited to controversies or
claims that arise out of or relate to: (i) this Agreement (including any
renewals, extensions or modifications); or (ii) any document related to this
Agreement (collectively a "Claim").
(b) At the request of the Borrower or the Bank,
any Claim shall be resolved by binding arbitration in accordance with the
Federal Arbitration Act (Title 9, U. S. Code) (the "Act"). The Act will apply
even though this Agreement provides that it is governed by the law of a
specified state.
(c) Arbitration proceedings will be determined
in accordance with the Act, the applicable rules and procedures for the
arbitration of disputes of JAMS or any successor thereof ("JAMS"), and the terms
of this paragraph. In the event of any inconsistency, the terms of this
paragraph shall control.
(d) The arbitration shall be administered by
JAMS and conducted in any U. S. state where real or tangible personal property
collateral for this credit is located or if there is no such collateral, in
California. All Claims shall be determined by one arbitrator; however, if Claims
exceed Five Million Dollars ($5,000,000), upon the request of any party, the
Claims shall be decided by three arbitrators. All arbitration hearings shall
commence within ninety (90) days of the demand for arbitration and close within
ninety (90) days of commencement and the award of the arbitrator(s) shall be
issued within thirty (30) days of the close of the hearing. However, the
arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide
a concise written statement of reasons for the award. The arbitration award may
be submitted to any court having jurisdiction to be confirmed and enforced.
(e) The arbitrator(s) will have the authority to
decide whether any Claim is barred by the statute of limitations and, if so, to
dismiss the arbitration on that basis. For purposes of the application of the
statute of limitations, the service on JAMS under
25
applicable JAMS rules of a notice of Claim is the equivalent of the filing of a
lawsuit. Any dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s) shall
have the power to award legal fees pursuant to the terms of this Agreement.
(f) This paragraph does not limit the right of
the Borrower or the Bank to: (i) exercise self-help remedies, such as but not
limited to, setoff; (ii) initiate judicial or nonjudicial foreclosure against
any real or personal property collateral; (iii) exercise any judicial or power
of sale rights, or (iv) act in a court of law to obtain an interim remedy, such
as but not limited to, injunctive relief, writ of possession or appointment of a
receiver, or additional or supplementary remedies.
(g) The procedure described above will not apply
if the Claim, at the time of the proposed submission to arbitration, arises from
or relates to an obligation to the Bank secured by real property. In this case,
both the Borrower and the Bank must consent to submission of the Claim to
arbitration. If both parties do not consent to arbitration, the Claim will be
resolved as follows: The Borrower and the Bank will designate a referee (or a
panel of referees) selected under the auspices of JAMS in the same manner as
arbitrators are selected in JAMS administered proceedings. The designated
referee(s) will be appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections. The referee (or the
presiding referee of the panel) will be an active attorney or a retired judge.
The award that results from the decision of the referee(s) will be entered as a
judgment in the court that appointed the referee, in accordance with the
provisions of California Code of Civil Procedure Sections 644 and 645.
(h) The filing of a court action is not intended
to constitute a waiver of the right of the Borrower or the Bank, including the
suing party, thereafter to require submittal of the Claim to arbitration.
(i) By agreeing to binding arbitration,
the parties irrevocably and voluntarily waive any right they may have to a trial
by jury in respect of any Claim. Furthermore, without intending in any way to
limit this agreement to arbitrate, to the extent any Claim is not arbitrated,
the parties irrevocably and voluntarily waive any right they may have to a trial
by jury in respect of such Claim. This provision is a material inducement for
the parties entering into this Agreement.
10.5 Severability; Waivers. If any part of this Agreement
is not enforceable, the rest of the Agreement may be enforced. The Bank retains
all rights, even if it makes a loan after default. If the Bank waives a default,
it may enforce a later default. Any consent or waiver under this Agreement must
be in writing.
10.6 Administration Costs. The Borrower shall pay the Bank
for all reasonable costs incurred by the Bank in connection with administering
this Agreement, promptly upon receipt of written notification of such costs from
the Bank.
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10.7 Attorneys' Fees. The Borrower shall reimburse the
Bank for any reasonable costs and attorneys' fees incurred by the Bank in
connection with the enforcement or preservation of any rights or remedies under
this Agreement and any other documents executed in connection with this
Agreement, and in connection with any amendment, waiver, "workout" or
restructuring under this Agreement. In the event of a lawsuit or arbitration
proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys' fees incurred in connection with the lawsuit or arbitration
proceeding, as determined by the court or arbitrator. In the event that any case
is commenced by or against the Borrower under the Bankruptcy Code (Title 11,
United States Code) or any similar or successor statute, the Bank is entitled to
recover costs and reasonable attorneys' fees incurred by the Bank related to the
preservation, protection, or enforcement of any rights of the Bank in such a
case. As used in this paragraph, "attorneys' fees" includes the allocated costs
of the Bank's in-house counsel.
10.8 One Agreement. This Agreement and any related
security or other agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and
agreements between the Bank and the Borrower concerning this credit;
(b) replace any prior oral or written agreements
between the Bank and the Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as
the final, complete and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
10.9 Indemnification. The Borrower will indemnify and hold
the Bank harmless from any loss, liability, damages, judgments, and costs of any
kind relating to or arising directly or indirectly out of (a) this Agreement or
any document required hereunder, (b) any credit extended or committed by the
Bank to the Borrower hereunder, and (c) any litigation or proceeding related to
or arising out of this Agreement, any such document, or any such credit;
provided that this Section 10.9 shall not apply to loss, liability, damages,
judgments and costs of any kind resulting from the gross negligence or willful
misconduct of the Bank. This indemnity includes but is not limited to attorneys'
fees (including the allocated cost of in-house counsel). This indemnity extends
to the Bank, its parent, subsidiaries and all of their directors, officers,
employees, agents, successors, attorneys, and assigns. This indemnity will
survive repayment of the Borrower's obligations to the Bank. All sums due to the
Bank hereunder shall be obligations of the Borrower, due and payable immediately
without demand.
10.10 Confidentiality. The Bank shall hold all nonpublic
information obtained pursuant to the requirements of this Agreement from the
Borrower in accordance with such Bank's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
lending practices, and shall use such nonpublic information only in connection
with the negotiation, execution, administration, enforcement, assignment and
27
participation of the transactions contemplated hereunder and the matters
contemplated hereby and by the other loan documents or in connection with other
business now or hereafter existing or contemplated with the Borrower or any of
its Subsidiaries, provided that the Bank in any event may make disclosure (a) if
such information was or becomes generally available to the public other than by
disclosure by the Bank, (b) was or becomes available on from a non-confidential
basis from a source other than the Borrower, (c) to any of its legal or
financial advisors or as reasonably required by a bona fide offeree, transferee
or participant in connection with any contemplated transfer or participation or
any recipient reasonably acceptable to the Borrower or as required or requested
by an governmental or regulatory agency or representative thereof or pursuant to
legal process or other requirement of law or order or as reasonably required in
any litigation to which the Bank is a party, (d) to the extent reasonably
required in connection with the enforcement of this Agreement or any other loan
document and (e) to their affiliates, so long as any such legal or financial
advisor, offeree, transferee or participant or other approved recipient shall be
made aware of the provisions of this Section 10.10 and shall undertake to comply
(and undertake to each of any of its offerees, transferees or participants or
other approved recipient to comply) with this Section 10.10.
10.11 Notices. Unless otherwise provided in this Agreement
or in another agreement between the Bank and the Borrower, all notices required
under this Agreement shall be personally delivered or sent by first class mail,
postage prepaid, or by overnight courier, to the addresses on the signature page
of this Agreement, or sent by facsimile to the fax numbers listed on the
signature page, or to such other addresses as the Bank and the Borrower may
specify from time to time in writing. Notices and other communications sent by
(a) first class mail shall be deemed delivered on the earlier of actual receipt
or on the fourth business day after deposit in the U.S. mail, postage prepaid,
(b) overnight courier shall be deemed delivered on the next business day, and
(c) telecopy shall be deemed delivered when transmitted.
10.12 Headings. Article and paragraph headings are for
reference only and shall not affect the interpretation or meaning of any
provisions of this Agreement.
10.13 Counterparts. This Agreement may be executed in as
many counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
10.14 Prior Agreement Superseded. This Agreement supersedes
the Business Loan Agreement entered into as of April 3, 2001, as amended,
between the Bank and the Borrower, and any credit outstanding thereunder shall
be deemed to be outstanding under this Agreement.
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This Agreement is executed as of the date stated at the top of the first page.
Bank of America, N.A. Pacific Sunwear of California, Inc.
By_______________________ By_________________________
Typed Name_______________ Typed Name_________________
Title____________________ Title__________________________
By_________________________
Typed Name_________________
Title__________________________
Address where notices to Address where notices to
the Bank are to be sent: the Borrower are to be sent:
000 Xxxxx Xxxxxxxxx, 0xx Xxxxx 0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000 Xxxxxxx, Xxxxxxxxxx 00000
29
