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EXHIBIT 10.2
EXECUTION COPY
NOTE PURCHASE AGREEMENT
BY AND
AMONG
ROCKY SHOES & BOOTS, INC.
AND THE OTHER LOAN PARTIES IDENTIFIED ON
THE SIGNATURE PAGES HERETO,
AMERICAN CAPITAL FINANCIAL SERVICES, INC.,
AS AGENT,
AND
THE PURCHASERS IDENTIFIED ON
ANNEX A HERETO
January 6, 2005
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NOTE PURCHASE AGREEMENT
$30,000,000 AGGREGATE PRINCIPAL AMOUNT OF SENIOR SECURED TERM B
NOTES DUE JANUARY 6, 2011
THIS NOTE PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
January
6, 2005, is by and among ROCKY SHOES &
BOOTS, Inc., an Ohio corporation,
("PARENT") and the other parties identified
on the signature pages hereto as
"Loan Parties" (each a "Loan Party" and,
together with Parent, the "LOAN
PARTIES"), the note purchasers that are now
and hereafter at any time parties
hereto and are listed in Annex A (or any
amendment or supplement thereto)
attached hereto (each a "PURCHASER" and
collectively, the "PURCHASERS"), and
AMERICAN CAPITAL FINANCIAL SERVICES, INC.,
a Delaware corporation ("ACFS"), as
administrative and collateral agent for the
Purchasers (in such capacity
"AGENT"). Capitalized terms used and not
defined elsewhere in this Agreement are
defined in Article 1 hereof.
RECITALS
A. The Loan Parties have proposed selling
Senior Secured Term B Notes to the
Purchasers designated on Annex A in the
aggregate amount of $30,000,000 for the
purpose of partially financing the
acquisition of all of the equity interests of
EJ Footwear LLC, a Delaware limited
liability company, Georgia Boot LLC, a
Delaware limited liability company, HM
Lehigh Safety Shoe Co. LLC, a Delaware
limited liability company, and their
respective subsidiaries (collectively EJ
FOOTWEAR") by Parent (the
"ACQUISITION").
B. The Loan Parties also propose to enter
into a revolving credit facility with
and to obtain term loans from the Lenders
(as defined herein) in the aggregate
amount of $118,000,000.
NOW, THEREFORE, the parties hereto, in consideration of the
promises
and their mutual covenants and agreements
herein set forth and intending to be
legally bound hereby, covenant and agree as
follows:
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINITIONS. In addition to other words and terms
defined elsewhere in this Agreement, the
following words and terms shall have
the meanings set forth below:
"ACAS" shall mean American Capital Strategies, Ltd., a Delaware
corporation.
"ACFS"
shall have the meaning assigned to such term in the preamble
hereto.
"ACQUISITION" shall have the meaning assigned to such term in
the
recitals hereto.
"ACQUISITION-RELATED EXPENSES" shall mean the sum of the
aggregate
amount of fees, expenses, financing costs
and other expenses incurred in
connection with the Transactions, to the
extent paid substantially
contemporaneously with, or on or about the
Closing Date.
"AFFILIATE" shall mean, with respect to any Person, any other
Person
that is directly or indirectly controlling,
controlled by or under common
control with such Person or entity or
any
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of its Subsidiaries, and the term "control"
(including the terms "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means
having, directly or indirectly, the power
to direct or cause the direction of the
management and policies of a Person,
whether through ownership of voting
securities, by contract or otherwise.
Without limiting the foregoing, the
ownership of ten percent (10%) or more of
the voting securities of a Person shall be
deemed to constitute control and
notwithstanding anything to the contrary
herein, neither the Purchasers nor any
of their respective Affiliates shall be
deemed to be Affiliates of the Loan
Parties by virtue of the transactions
contemplated in this Agreement.
"AGENT" shall have the meaning assigned to such term in the
preamble
hereto and shall include any successor
agent provided for hereunder.
"AGREEMENT" shall mean this Note Purchase Agreement, as the same
may
be amended, restated, supplemented or
otherwise modified from time to time.
"BANKRUPTCY CODE" shall mean Title 11, United States Code.
"BUSINESS" shall mean the principal business of the Loan Parties
as
set forth in Section 5.1(b) herein and as
such shall continue to be conducted
following the purchase and sale of the
Senior Term Notes.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or
other day on which banking institutions in
Maryland and New York are authorized
or required by law to close.
"BY-LAWS" shall mean, with respect to any Person, the by-laws,
partnership agreement, operating agreement,
limited liability company agreement
or analogous instrument governing the
operations of the Loan Parties, as
applicable, including all amendments and
supplements thereto.
"CAPITAL EXPENDITURES" shall mean, for any period of
determination,
the sum of capital expenditures and
payments under Capitalized Leases of the
Loan Parties for such period determined and
consolidated in accordance with
GAAP.
"CAPITALIZATION SCHEDULE" shall have the meaning assigned to
such
term in Section 5.1(d)
"CAPITALIZED LEASES" shall mean, with respect to any Person,
leases
of (or other agreements conveying the right
to use) any property (whether real,
personal or mixed) by such Person as lessee
that, in accordance with GAAP,
either would be required to be classified
and accounted for as capital leases on
a balance sheet of such Person or would
otherwise be disclosed as such in a note
to such balance sheet.
"CASH FLOW PREPAYMENT" shall have the meaning assigned to such
term
in Section 3.5(b) hereof.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C.
Section 9604, et seq.), as amended,
and rules, regulations, and standards
promulgated thereunder.
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"CHANGE OF CONTROL" shall mean the occurrence of any of the
following:
(a) any transaction or series of related transactions resulting
in
the sale or issuance of securities or any
rights to securities of Parent by
Parent representing in the aggregate more
than fifty percent (50%) of its issued
and outstanding securities entitled to vote
for the election of directors of
Parent, or any transaction or series of
related transactions resulting in the
sale, transfer, assignment or other
conveyance or disposition of any securities
or any rights to securities of Parent by
any holder or holders thereof
representing in the aggregate more than
fifty percent (50%) of the issued and
outstanding securities entitled to vote for
the election of directors of Parent;
(b) a merger, consolidation, reorganization, recapitalization
or
share exchange (whether or not Parent is
the surviving and continuing
corporation) in which the stockholders of
Parent immediately prior to such
transaction own, as a result of such
transaction, less than fifty percent (50%)
of the securities entitled to vote for the
election of directors of the
resulting corporation or less than fifty
percent (50%) of the capital stock of
the resulting corporation;
(c) a sale, transfer or other disposition of all or
substantially
all of the assets of Parent and its
Subsidiaries, on a consolidated basis; and
(d) any sale or issuance or series of sales or issuances of the
Common Stock or any other voting security
(or security convertible into,
exchangeable for, or exercisable for any
other voting security) of Parent within
a twelve (12) month period that results in
a transfer of more than fifty percent
(50%) of the issued and outstanding shares
of voting stock of Parent or a
transfer of more than fifty percent (50%)
of the voting power of Parent.
"CHARGES" shall mean all taxes, charges, fees, imposts, levies
or
other assessments, including, without
limitation, all net income, gross income,
gross receipts, sales, use, ad valorem,
value added, transfer, franchise,
profits, inventory, capital stock, license,
withholding, payroll, employment,
social security, unemployment, excise,
severance, stamp, occupation and property
taxes, custom duties, fees, assessments,
liens, claims and charges of any kind
whatsoever, together with any interest and
any penalties, additions to tax or
additional amounts, imposed by any taxing
or other authority, domestic or
foreign (including, without limitation, the
PBGC or any environmental agency or
superfund), upon the Collateral, the Loan
Parties or any of their Affiliates.
"CHARTER DOCUMENTS" shall mean, with respect to any Person, the
Articles of Incorporation, Certificate of
Incorporation, certificate of limited
partnership, certificate of limited
liability company, charter or analogous
organic instrument filed with the
appropriate Governmental Authorities of such
Person, as applicable, including all
amendments and supplements thereto.
"CLOSING" shall have the meaning assigned in Section 2.3
hereof.
"CLOSING PROCESSING FEE" shall mean an amount equal to $300,000
less
the amount of the Term Sheet Processing Fee
paid by Parent to ACAS.
"CLOSING DATE" shall have the meaning assigned to such term in
Section 2.3 hereof.
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"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COLLATERAL" shall have the meaning assigned to such term in
the
Security Agreement.
"COLLATERAL ASSIGNMENT OF CONTRACTS" shall have the meaning
assigned
to such term in Section 4.1(c) hereof.
"COMMITMENT FEE" shall mean an amount equal to $300,000, which
was
previously paid to ACAS by Parent upon the
delivery of a commitment letter by
ACAS to Parent, pursuant to which ACAS
committed to purchase the Senior Term
Notes from the Loan Parties subject to the
terms and conditions contained
therein.
"COMMON STOCK" shall mean the common stock, without par value,
of
Parent.
"CONDITION" shall mean any condition that results in or
otherwise
relates to any Environmental
Liabilities.
"CONTROLLED GROUP" shall mean the "controlled group of
corporations"
as that term is defined in Section 1563 of
the Code, of which the Loan Parties
are a party from time to time.
"COPYRIGHT LICENSES" means any agreement, whether written or
oral,
providing for the grant by or to the Loan
Parties or any of their Subsidiaries
of any right under any Copyright, including
the grant of any right to use, copy,
publicly perform, display, create
derivative works, manufacture, distribute,
exploit or sell materials derived from any
Copyright.
"COPYRIGHTS" means (a) all right, title and interest in or
relating
to copyrights, whether now owned or
hereafter acquired or existing, arising
under the laws of the United States or any
other country or any political
subdivision thereof, whether registered or
unregistered and whether published or
unpublished, all registrations and
recordings thereof and all applications in
connection therewith, including all
registrations, recordings and applications
in the United States Copyright Office or in
any counterparts thereof, and (b)
the right to obtain all renewals,
continuations, reversions and extensions
thereof.
"COVERED TAXES" shall have the meaning assigned to such term in
Section 3.7 hereof.
"DEBT TO EBITDA RATIO" shall mean the ratio of (i) Indebtedness
of
the Loan Parties, on a consolidated basis,
as of a particular date, to (ii) the
EBITDA for the twelve (12) month period
ending on such date.
"DEFAULT" shall mean any event or condition that, but for the
giving
of notice or the lapse of time, or both,
would constitute an Event of Default.
"DEPOSIT ACCOUNT CONTROL AGREEMENTS" shall have the meaning
assigned
to such term in Section 4.1(c).
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"DOMESTIC SUBSIDIARY" shall mean, with respect to any Person, a
Subsidiary of such Person, which Subsidiary
is incorporated or otherwise
organized under the laws of a State of the
United States of America.
"EARNINGS BEFORE INTEREST AND TAXES" shall mean, for any period,
the
sum of (i) net income (or loss) of Parent
on a Consolidated Basis for such
period (excluding extraordinary gains or
losses), plus (ii) all interest expense
of Parent on a Consolidated Basis for such
period, plus (iii) all Charges
against income of Parent on a Consolidated
Basis for such period for federal,
state and local Taxes.
"EBITDA" shall mean, for any period, the sum of (i) Earnings
Before
Interest and Taxes for such period, plus
(ii) depreciation expenses for such
period, plus (iii) amortization expenses
for such period, plus (iv)
Acquisition-Related Expenses. For purposes
of Sections 7.3(b), 7.3(c) and
7.3(d), EBITDA for the fiscal quarters
ended prior to the Closing Date shall be
deemed to have been (w) $5,733,545 for the
fiscal quarter ended March 31, 2004,
(x) $7,898,460 for the fiscal quarter ended
June 30, 2004, (y) $13,845,283 for
the fiscal quarter ended September 30, 2004
and (z) $6,287,713 for the fiscal
quarter ended December 31, 2004.
"EJ FINANCIAL INFORMATION" shall have the meaning assigned to
such
term in Section 5.1(c) hereof.
"EJ FOOTWEAR" shall have the meaning assigned to such term in
the
recitals hereto.
"ENVIRONMENTAL LAWS" shall mean any Laws that address, are
related
to or are otherwise concerned with
environmental, health or safety issues,
including any Laws relating to any
emissions, releases or discharges of
Pollutants into ambient air, surface water,
ground water or land, or otherwise
relating to the manufacture, processing,
distribution, use, treatment, storage,
disposal, transport, handling, clean-up or
control of Pollutants or any exposure
or impact on worker health and safety.
"ENVIRONMENTAL LIABILITIES" shall mean any obligations or
liabilities (including any claims, suits or
other assertions of obligations or
liabilities) that are:
(a) related to environmental, health or safety issues
(including
on-site or off-site contamination by
Pollutants of surface or subsurface soil or
water, and occupational safety and health);
and
(b) based upon or related to (i) any provision of past, present
or
future United States or foreign
Environmental Law (including CERCLA and RCRA) or
common law, or (ii) any judgment, order,
writ, decree, permit or injunction
imposed by any court, administrative
agency, tribunal or otherwise.
The term "Environmental Liabilities" includes: (i) fines,
penalties,
judgments, awards, settlements, losses,
damages (including foreseeable and
unforeseeable consequential damages),
costs, fees (including attorneys' and
consultants' fees), expenses and
disbursements; (ii) defense and other responses
to any administrative or judicial action
(including claims, notice letters,
complaints, and other assertions of
liability); and (iii) financial
responsibility for (1) cleanup costs and
injunctive relief, including any
Removal, Remedial or other Response
actions, and natural resource damages, and
(2) any other compliance or remedial
measures.
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"ENVIRONMENTAL SCHEDULE" shall have the meaning assigned to
such
term in Section 5.1(l) hereof.
"EPA" shall mean the United States Environmental Protection
Agency
and any governmental body or agency
succeeding to the functions thereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of
1974, as the same may from time to time be
amended, and the rules and
regulations of any governmental agency or
authority, as from time to time in
effect, promulgated thereunder.
"ERISA AFFILIATE" shall mean any Loan Party and any Person who is
a
member of a group which is under common
control with any Loan Party, who
together with any Loan Party is treated as
a single employer within the meaning
of Section 414 of the Internal Revenue
Code.
"EVENT OF DEFAULT" shall mean any of the events of default
described
in Section 8.1 hereof.
"EXCESS CASH FLOW" shall mean, for any period, the greater of
(a)
zero (0); or (b) without duplication, the
total of the following for Parent on a
Consolidated Basis, each calculated for
such period: (i) EBITDA; plus (ii) tax
refunds actually received; less (iii)
Capital Expenditures (to the extent
actually made in cash and/or due to be made
in cash within such period,
excluding any Capital Expenditures under or
with respect to Capitalized Leases
to the extent of the amount financed
thereby; less (iv) income and franchise
taxes paid or accrued excluding any
provision for deferred taxes included in the
determination of net income; less (v)
decreases in deferred income taxes
resulting from payments of deferred taxes
accrued in prior periods; less (vi)
amounts of cash interest paid during such
period; less (vii) mandatory
prepayments made under the GMAC Credit
Agreement (other than excess cash flow
payments pursuant to Section 2.4(B)(3) or
this Agreement); less (viii) payments
of principal paid in cash with respect to
all long-term Indebtedness (other than
Revolving Loans under the GMAC Credit
Agreement) and Capitalized Leases.
"FINANCIAL PROJECTIONS" shall have the meaning assigned to such
term
in Section 5.1(c) hereof.
"FINANCIAL STATEMENTS" shall have the meaning assigned to such
term
in Section 5.1(c) hereof.
"FINANCING
STATEMENTS" shall have the meaning assigned to such term
in Section 4.1(c) hereof.
"FISCAL YEAR" or "FISCAL YEAR" shall mean each twelve (12)
month
period ending on December 31 of each
year.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any period, the
ratio
of EBITDA of Parent on a Consolidated Basis
less Capital Expenditures on a
consolidated basis during such period to
the Fixed Charges during such period.
"FIXED CHARGES" shall mean, for any period, and each calculated
for
such period (without duplication) of Parent
on a Consolidated Basis, the sum of
(a) cash interest expense of the
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Loan Parties; (b) scheduled payments of
principal with respect to all
Indebtedness; (c) any cash payment of
income or franchise taxes included in the
determination of net income, excluding any
provision for deferred taxes; and (d)
payment of deferred taxes, income and
franchise taxes accrued in any prior
period.
"FOREIGN SUBSIDIARY" means, with respect to any Person, a
Subsidiary
of such Person, which Subsidiary is not
incorporated or otherwise organized
under the laws of a Sate of the United
States of America.
"GAAP" shall have the meaning assigned to such term in Section
1.2
hereof.
"GMAC" shall mean GMAC Commercial Finance, LLC, a Delaware
limited
liability company.
"GMAC AGENT" shall mean the administrative agent as defined in
the
GMAC Credit Agreement.
"GMAC CREDIT AGREEMENT" shall mean that certain Loan and
Security
Agreement by and among the Loan Parties and
GMAC, dated as of January 6, 2005,
as such may be amended or modified from
time to time as permitted hereunder.
"GMAC CREDIT DOCUMENTS" shall mean the GMAC Credit Agreement and
all
ancillary documents and materials entered
into in connection with the GMAC
Credit Agreement.
"GMAC FINANCING" shall mean, collectively, the Indebtedness and
other obligations under or relating to the
Term Financing and the Revolving
Financing.
"GOVERNMENTAL AUTHORITIES" shall mean any federal, state or
municipal court or other governmental
department, commission, board, bureau,
agency or instrumentality, governmental or
quasi-governmental, domestic or
foreign.
"GUARANTY" shall mean any guaranty of the payment or performance
of
any Indebtedness or other obligation and
any other arrangement whereby credit is
extended to one obligor on the basis of any
promise of another Person, whether
that promise is expressed in terms of an
obligation to pay the Indebtedness of
such obligor, or to purchase an obligation
owed by such obligor, or to purchase
goods and services from such obligor
pursuant to a take-or-pay contract, or to
maintain the capital, working capital,
solvency or general financial condition
of such obligor, whether or not any such
arrangement is reflected on the balance
sheet of such other Person, firm or
corporation, or referred to in a footnote
thereto, but shall not include endorsements
of items for collection in the
ordinary course of business. For the
purpose of all computations made under this
Agreement, the amount of a Guaranty in
respect of any obligation shall be deemed
to be equal to the maximum aggregate amount
of such obligation or, if the
Guaranty is limited to less than the full
amount of such obligation, the maximum
aggregate potential liability under the
terms of the Guaranty.
"INDEBTEDNESS" shall mean, for any Person at the time of any
determination, without duplication, all
obligations, contingent or otherwise, of
such Person that, in accordance with GAAP,
should be classified upon the balance
sheet of such Person as indebtedness, but
in any event including: (i) all
obligations for borrowed money, (ii) all
obligations arising from
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installment purchases of property or
representing the deferred purchase price of
property or services in respect of which
such Person is liable, contingently or
otherwise, as obligor or otherwise (other
than trade payables and other current
liabilities incurred in the ordinary course
of business on terms customary in
the trade), (iii) all obligations evidenced
by notes, bonds, debentures,
acceptances or instruments, or arising out
of letters of credit or bankers'
acceptances issued for such Person's
account, (iv) all obligations, whether or
not assumed, secured by any Lien or payable
out of the proceeds or production
from any property or assets now or
hereafter owned or acquired by such Person,
(v) all obligations for which such Person
is obligated pursuant to a Guaranty
which are classified under GAAP as
indebtedness, (vi) the capitalized portion of
lease obligations under Capitalized Leases,
(vii) all obligations for which such
Person is obligated pursuant to any
Interest Rate Protection Agreements or
derivative agreements or arrangements,
(viii) all factoring arrangements and
(ix) all obligations of such Person upon
which interest charges are customarily
paid or accrued.
"INTELLECTUAL PROPERTY AGREEMENTS" shall have the meaning
assigned
to such term in Section 4.1(c) hereof.
"INTELLECTUAL PROPERTY SCHEDULE" shall have the meaning assigned
to
such term in Section 5.1(r) hereof.
"INTERCREDITOR AGREEMENT" shall have the meaning assigned to
such
term in Section 10.17 hereof.
"INTEREST RATE PROTECTION AGREEMENT" shall mean any interest
rate
swap, interest rate cap, interest rate
collar or other interest rate hedging
agreement or arrangement.
"INVESTMENT" as applied to any Person shall mean the amount paid
or
agreed to be paid or loaned, advanced or
contributed to other Persons, and in
any event shall include, without
limitation, (i) any direct or indirect purchase
or other acquisition of any notes,
obligations, instruments, stock, securities
or ownership interest (including
partnership interests and joint venture
interests) and (ii) any capital
contribution to any other Person.
"IRS" shall mean the Internal Revenue Service and any
governmental
body or agency succeeding to the functions
thereof.
"LANDLORD WAIVER" shall mean a letter in form and substance
acceptable to Agent and executed by a
landlord in respect of inventory of the
Loan Parties located at any leased premises
of the Loan Parties pursuant to
which such landlord, among other things,
waives or subordinates any Lien such
landlord may have in respect of such
inventory.
"LAWS" shall mean all U.S. and foreign federal, state or local
statutes, laws, rules, regulations,
ordinances, codes, policies, rules of common
law, and the like, now or hereafter in
effect, including any judicial or
administrative interpretations thereof, and
any judicial or administrative
orders, consents, decrees or judgments.
"LENDERS" shall collectively mean the lenders party to the GMAC
Credit Agreement.
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"LIBOR BUSINESS DAY" means a business day on which banks in the
city
of London are generally open for interbank
or foreign exchange transactions.
"LIBOR PERIOD" means each month commencing on the Closing Date
(or
if the Closing Date is not a LIBOR Business
Day, the next succeeding LIBOR
Business Day) and ending one month
thereafter; provided, that the foregoing
provision relating to LIBOR Periods is
subject to the following:
(a) if any LIBOR Period would otherwise end on a day that is not
a
LIBOR Business Day, such LIBOR Period shall
be extended to the next succeeding
LIBOR Business Day unless the result of
such extension would be to carry such
LIBOR Period into another calendar month in
which event such LIBOR Period shall
end on the immediately preceding LIBOR
Business Day;
(b) any LIBOR Period that would otherwise extend beyond the
maturity
date of any Senior Term Note to which it
relates shall end on such maturity
date; and
(c) any LIBOR Period that begins on the last LIBOR Business Day of
a
calendar month (or on a day for which there
is no numerically corresponding day
in the calendar month at the end of such
LIBOR Period) shall end on the last
LIBOR Business Day following such calendar
month.
"LIBOR RATE" shall mean, an interest rate per annum equal to
the
posted rate for thirty (30) day deposits in
United States dollars appearing on
Telerate page 3750 as of 11:00 a.m. (London
time) on the Business Day that is
the second (2nd) Business Day immediately
preceding the date as of which the
LIBOR Rate is to be determined; provided,
further, that if no rate appears on
Telerate page 3750 at such time and day,
then the LIBOR Rate shall be determined
by Agent using such other indication of the
prevailing LIBOR Rate as may
reasonably be chosen by Agent.
"LIEN" shall mean any security interest, lien, pledge,
bailment,
mortgage, hypothecation, deed of trust,
conditional sales and title retention
agreement (including any lease in the
nature thereof), charge, encumbrance or
other similar arrangement or interest in
real or personal property, now owned or
hereafter acquired, whether such interest
is based on common law, statute or
contract.
"LIFESTYLE" shall mean Lifestyle Footwear, Inc., a Delaware
corporation.
"LITIGATION SCHEDULE" shall have meaning assigned to such term
in
Section 5.1(j) hereof.
"LOAN PARTY" shall have the meaning assigned to such term in
the
preamble hereto.
"MANAGE" and "MANAGEMENT" shall mean generation, production,
handling, distribution, processing, use,
storage, treatment, operation,
transportation, recycling, reuse and/or
disposal, as those terms are defined in
CERCLA, RCRA and other Environmental Laws
(including as those terms are further
defined, construed, or otherwise used in
rules, regulations, standards,
guidelines and publications issued pursuant
to, or otherwise in implementation
of, such Environmental Laws).
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"MATERIAL ADVERSE CHANGE" shall mean any change that has a
Material
Adverse Effect.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on
the business, properties, assets,
liabilities or condition (financial or
otherwise) of the Loan Parties, taken
together as a whole.
"MATURITY DATE" shall have the meaning assigned to such term in
Section 3.2 hereof.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan (within
the
meaning of Section 3(37) of ERISA) that is
maintained for the benefit of the
employees of the Loan Parties or any member
of the Controlled Group.
"ORGANIZATION SCHEDULE" shall have the meaning assigned to such
term
in Section 5.1(a) hereof.
"OTHER TAXES" shall have the meaning assigned to such term in
Section 3.7 hereof.
"PARENT" shall have the meaning assigned to such term in the
preamble hereof.
"PARENT ON A CONSOLIDATED BASIS" shall mean the consolidation,
in
accordance with GAAP, of the financial
accounts of Parent and its Subsidiaries.
"PARENT SEC REPORTS" shall have the meaning assigned to such term
in
Section 5.1(y) hereof.
"PATENT LICENSE" means all agreements, whether written or oral,
providing for the grant by or to the Loan
Parties or any of their Subsidiaries
of any right to any Patent, including the
grant of any right to manufacture,
have manufactured, use, import, lease, sell
or offer for sale any invention
covered in whole or in part by a
Patent.
"PATENTS" means (a) all right, title and interest in or relating
to
letters patent of the United States, any
other country or any political
subdivision thereof and all reissues,
reexaminations, and extensions thereof,
(b) all applications for letters patent of
the United States or any other
country or any political subdivisions
thereof and all divisionals, continuations
and continuations-in-part thereof and (c)
all rights to obtain any reissues,
reexaminations or extensions of the
foregoing.
"PATRIOT ACT" shall have the meaning assigned to such term in
Section 5.1(x) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title
IV of ERISA, or any other
governmental agency, department or
instrumentality succeeding to the functions
thereof.
"PERMITTED ENCUMBRANCES SCHEDULE" shall have the meaning assigned
to
such term in Section 7.2(b) hereof.
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"PERMITTED INDEBTEDNESS SCHEDULE" shall have the meaning assigned
to
such term in Section 7.2(a) hereof.
"PERMITTED INVESTMENT" shall have the meaning assigned to such
term
in Section 7.2(h) hereof.
"PERMITTED LIENS" shall have the meaning assigned to such term
in
Section 7.2(b) hereof.
"PERSON" shall mean any individual, partnership, limited
partnership, corporation, limited liability
company, association, joint stock
company, trust, joint venture,
unincorporated organization or governmental
entity or department, agency or political
subdivision thereof.
"PLAN" shall mean any employee benefit plan (within the meaning
of
Section 3(3) of ERISA), other than a
Multiemployer Plan, established or
maintained by the Loan Parties or any
member of the Controlled Group.
"PLEDGE AGREEMENT" shall have the meaning assigned to such term
in
Section 4.1(c) hereof.
"POLLUTANT" shall include any "hazardous substance" and any
"pollutant or contaminant" as those terms
are defined in CERCLA; any "hazardous
waste" as that term is defined in RCRA; and
any "hazardous material" as that
term is defined in the Hazardous Materials
Transportation Act (49 U.S.C. Section
1801 et seq.), as amended (including as
those terms are further defined,
construed, or otherwise used in rules,
regulations, or standards promulgated
pursuant to, or otherwise in implementation
of, said Environmental Laws); and
including without limitation any petroleum
product or byproduct, solvent,
flammable or explosive material,
radioactive material, asbestos, polychlorinated
biphenyls (PCBs), dioxins, dibenzofurans,
heavy metals, and radon gas; and
including any other substance or material
that is reasonably determined to
present a threat, hazard or risk to human
health or the environment.
"PRO FORMA BALANCE SHEET" shall have the meaning assigned to
such
term in Section 5.1(c)(iii).
"PROPERTIES AND FACILITIES" shall have the meaning assigned to
such
term in Section 5.1(q) hereof.
"PROPERTIES SCHEDULE" shall have the meaning assigned to such
term
in Section 5.1(q) hereof.
"PROPRIETARY RIGHTS" shall mean, collectively, whether now owned
or
hereafter acquired or existing, (a) all
right, title and interest of the Loan
Parties or any of their Subsidiaries in or
relating to intellectual property or
industrial property, whether arising under
United States, multinational or
foreign laws or otherwise, including
Copyrights, Copyright Licenses, Patents,
Patent Licenses, Trademarks, Trademark
Licenses, trade secrets, Internet domain
names and domain name registrations,
software and contract rights relating to
software, Websites, advertising rights,
rights in designs, including
registrations thereof, and rights in data,
and (b) all right to income,
royalties, proceeds and damages now or
hereafter due and/or payable under and
with
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respect thereto, including all rights to
sue and recover at law or in equity for
any past, present and future infringement,
misappropriation, dilution, violation
or other impairment thereof.
"PURCHASER" shall have the meaning assigned to such term in the
preamble hereto and in Section 6.2
hereof.
"RCRA" shall mean the Resource Conservation and Recovery Act
(42
U.S.C. Section 6901 et seq.), as amended,
and all rules, regulations, standards,
guidelines, and publications issued
thereunder.
"REMOVAL," "REMEDIAL" and "RESPONSE" actions shall include the
types
of activities "covered" by CERCLA, RCRA,
and other comparable Environmental
Laws, and whether the activities are those
that might be taken by a government
entity or those that a government entity or
any other person might seek to
require of waste generators, handlers,
distributors, processors, users, storers,
treaters, owners, operators, transporters,
recyclers, reusers, disposers, or
other persons under "removal," "remedial,"
or other "response" actions.
"REPORTABLE EVENT" shall mean any of the events that are
reportable
under Section 4043 of ERISA and the
regulations promulgated thereunder, other
than an occurrence for which the thirty
(30) day notice contained in 29 C.F.R.
Section 2615.3(a) is waived.
"REQUIRED PURCHASERS" shall mean, at any time, the Purchasers
holding a pro rata percentage of the
outstanding principal amount of the Senior
Term Notes aggregating at least 66-2/3% at
such time.
"REVOLVING FINANCING" shall mean a secured revolving line of
credit
facility pursuant to the GMAC Credit
Agreement in an aggregate principal amount
not to exceed $100,000,000, provided,
however, that the outstanding amount of
Revolving Financing may exceed $
100,000,000, so long as the advance rates and
standards for determining the eligible
receivables and eligible inventory for
inclusion in the borrowing base under the
GMAC Credit Agreement in effect on the
Closing Date support such increase and are
satisfied.
"SARBANES OXLEY" shall mean the United States Sarbanes-Oxley Act
of
2002.
"SEC" shall mean the Securities and Exchange Commission and any
governmental body or agency succeeding to
the functions thereof.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SECURITIES EXCHANGE ACT" shall mean the Securities Exchange Act
of
1934, as amended.
"SECURITY AGREEMENT" shall have the meaning assigned to such term
in
Section 4.1(c) hereof.
"SECURITY DOCUMENTS" shall mean the Security Agreement, the
Pledge
Agreement, the Collateral Assignment of
Contracts, the Financing Statements, and
all other documents, instruments and other
materials necessary to create or
perfect the security interests created
pursuant to the Security Agreement.
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"SENIOR DEBT" shall mean all Indebtedness of Parent on a
Consolidated Basis other than (a) senior
Indebtedness under the Senior Term
Notes and (b) any unsecured
Indebtedness.
"SENIOR LEVERAGE RATIO" shall mean, for any period, the ratio of
(x)
Senior Debt as of the end of such period to
(y) EBITDA for such period.
"SENIOR TERM NOTES" shall have the meaning assigned to such term
in
Section 2.1 hereof.
"SUBSIDIARY" of any corporation shall mean any other corporation
or
limited liability company of which the
outstanding capital stock possessing a
majority of voting power in the election of
directors (otherwise than as the
result of a default) is owned or controlled
by such corporation directly or
indirectly through Subsidiaries.
"SUBSIDIARY SCHEDULE" shall have the meaning assigned to such
term
in Section 5.1(e) hereof.
"TAXES" shall have the meaning assigned to such term in Section
3.7
hereof.
"TERM FINANCING" shall mean secured term credit facilities under
the
GMAC Credit Agreement with aggregate
principal amount not to exceed $18,000,000,
minus scheduled principal payments made
thereon after the date hereof.
"TERM SHEET PROCESSING FEE" shall mean $60,000, which was paid
by
Parent to ACAS in consideration of the
execution of the term sheet, dated
November 3, 2004, by and between Parent and
ACAS.
"THIRD PARTY PROPRIETARY RIGHTS" means any right, title or
interest
of any Person other than the Loan Parties
or any of their Subsidiaries under
patent, copyright, trademark or trade
secret law or any other statutory
provision or common law doctrine relating
to intellectual property or
proprietary rights.
"TOTAL LEVERAGE RATIO" shall mean, for any period, the ratio of
(x)
total Indebtedness of Parent on a
Consolidated Basis as of the end of such
period to (y) EBITDA for such period.
"TRADEMARK LICENSE" means any agreement, whether written or
oral,
providing for the grant by or to the Loan
Parties or any of their Subsidiaries
of any right under any Trademark.
"TRADEMARKS" means (a) all trademarks, trade names, corporate
names,
company names, business names, fictitious
business names, trade styles, trade
dress, service marks, logos and other
source or business identifiers, and, in
each case, all goodwill associated
therewith, whether now owned or hereafter
acquired or existing, all registrations and
recordings thereof and all
applications in connection therewith, in
each case whether in the United States
Patent and Trademark Office or in any
similar office or agency of any State
thereof or any other country or any
political subdivision thereof, or otherwise,
and all common-law rights related thereto,
and (b) the right to obtain all
renewals and extensions thereof.
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"TRANSACTION DOCUMENTS" shall mean this Agreement, the Senior
Term
Notes and the Security Documents and all
other agreements, instruments and
documents delivered in connection therewith
as any or all of the foregoing may
be supplemented or amended from time to
time.
"TRANSACTIONS" shall mean the incurrence of debt and the issuance
of
securities in connection therewith, as
contemplated by this Agreement, the
Senior Term Notes, the consummation of the
Acquisition, and all other agreements
contemplated hereby and thereby.
"UCC" shall mean the Maryland Uniform Commercial Code.
"UST" shall mean an underground storage tank, including as that
term
is defined, construed and otherwise used in
RCRA and in rules, regulations,
standards, guidelines and publications
issued pursuant to RCRA and comparable
state and local laws.
"WORKING CAPITAL" shall mean, on a consolidated basis, current
assets minus current liabilities excluding
short-term debt determined in
accordance with GAAP.
1.2 ACCOUNTING PRINCIPLES. The character or amount of any
asset,
liability, capital account or reserve and
of any item of income or expense to be
determined, and any consolidation or other
accounting computation to be made,
and the construction of any definition
containing a financial term, pursuant to
this Agreement shall be determined or made
in accordance with generally accepted
accounting principles in the United States
of America consistently applied
("GAAP"), unless such principles are
inconsistent with the express requirements
of this Agreement.
1.3 OTHER DEFINITIONAL PROVISIONS; CONSTRUCTION. Whenever the
context so requires, neuter gender includes
the masculine and feminine, the
singular number includes the plural and
vice versa. The word "including" when
used herein shall mean "including without
limitation" unless the context states
otherwise. The words "hereof," "herein" and
"hereunder" and words of similar
import when used in this Agreement shall
refer to this Agreement as a whole and
not to any particular provision of this
Agreement, and references to any
section, article, annex, schedule, exhibit
or like references are references to
this Agreement unless otherwise specified.
A Default or Event of Default shall
"continue" or be "continuing" until such
Default or Event of Default has been
cured or waived by Agent and the
Purchasers. References in this Agreement to any
Persons shall include such Persons,
successors and permitted assigns. Other
terms contained in this Agreement (which
are not otherwise specifically defined
herein) shall have the meanings provided to
such terms in Article 9 of the UCC
on the date hereof to the extent the same
are used or defined therein.
ARTICLE 2
ISSUE AND SALE OF THE SENIOR TERM NOTES
2.1 SENIOR TERM NOTES. The Loan Parties have duly authorized
the
issuance to the Purchasers designated on
Annex A of $30,000,000 aggregate
principal amount of the Loan Parties'
Senior Secured Term B Notes due January 6,
2011 (together with any promissory notes
issued in substitution therefor
pursuant to Sections 6.3 and 6.4, the
"SENIOR TERM NOTES") to be substantially
in the form of the promissory notes made by
the Loan Parties in favor of the
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Purchasers thereof in the form attached
hereto as Exhibit A to be delivered by
the Loan Parties at the Closing.
2.2 SALE AND PURCHASE. Subject to the terms and conditions and
in
reliance upon the representations,
warranties and agreements set forth herein,
the Loan Parties shall sell to the
Purchasers, and the Purchasers shall purchase
from the Loan Parties, in amounts
designated in Annex B, the Senior Term Notes
in the aggregate principal amount set forth
in Section 2.1 hereof.
2.3 THE CLOSING. Delivery of and payment for the Senior Term
Notes
(the "CLOSING") shall be made at the
offices of Weil, Gotshal & Manges LLP, 767
Fifth Avenue, New York, NY 10153,
commencing at 10:00 a.m., local time, on or
about January 6, 2005 or at such place or
on such other date on or before
January 6, 2005 as may be mutually
agreeable to the Loan Parties and the
Purchasers. The date and time of the
Closing as finally determined pursuant to
this Section 2.3 are referred to herein as
the "CLOSING DATE." Delivery of the
Senior Term Notes shall be made to the
Purchasers against payment of the
purchase price therefor, less any unpaid
Closing Processing Fee, Commitment Fee
or Term Sheet Processing Fee and other
amounts payable pursuant to Section
4.1(l) hereof, by wire transfer of
immediately available funds in the manner
agreed to by the Loan Parties and the
Purchasers. The Senior Term Notes shall be
issued in such name or names and in such
permitted denomination or
denominations, numbers and amounts as set
forth in Annex A or as the Purchasers
may request in writing not less than two
(2) Business Days before the Closing
Date.
ARTICLE 3
REPAYMENT OF SENIOR TERM NOTES
3.1 INTEREST RATES AND INTEREST PAYMENTS.
(a) SENIOR TERM NOTES. The Loan Parties, jointly and severally,
covenant and agree to make payments to
Agent, for the ratable benefit of the
Purchasers holding Senior Term Notes, of
accrued interest on the Senior Term
Notes monthly in arrears on the first LIBOR
Business Day of each LIBOR Period,
commencing on February 1, 2005 through the
date of repayment in full of the
Senior Term Notes. The Senior Term Notes
shall bear interest on the outstanding
principal thereof at a rate equal to the
LIBOR Rate, as such rate may adjust
from time to time, plus eight percent
(8%).
(b) COMPUTATION OF INTEREST. Interest on the Senior Term Notes
shall
be computed on the basis of a year with
three hundred sixty (360) days and the
actual number of days elapsed.
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3.2 REPAYMENT OF SENIOR TERM NOTES. Beginning on the first day
of
the first month following the third
anniversary of the Closing, the Loan
Parties, jointly and severally, covenant
and agree to repay to Agent, for the
ratable benefit of the Purchasers holding
Senior Term Notes, by making equal
monthly payments of the then outstanding
principal of the Senior Term Notes
(unless and until the then outstanding
balance of the Senior Term Notes are
fully repaid). Notwithstanding the
foregoing, the Loan Parties, jointly and
severally, covenant and agree to repay any
and all unpaid principal on the
Senior Term Notes, together with all
accrued and unpaid interest, fees and other
amounts due in connection with the Senior
Term Notes upon maturity of the Senior
Term Notes on January 6, 2011 (the
"MATURITY DATE").
3.3 OPTIONAL PREPAYMENT OF SENIOR TERM NOTES. Subject to the
terms
of this Section 3.3, the Loan Parties may
prepay to Agent, for the ratable
benefit of the Purchasers, the outstanding
principal amount of the Senior Term
Notes in whole or in part in multiples of
$100,000, or such lesser amount as is
then outstanding, at any time plus accrued
interest, if any, to the date set for
prepayment on the principal amount to be
repaid. All prepayments shall be
applied by Agent ratably to the outstanding
principal amount of the Senior Term
Notes in inverse of order of maturity. All
such prepayments shall be so applied
after application of such prepayment to any
accrued interest payable, if any, in
connection therewith. For the avoidance of
doubt, no prepayment fee shall be
payable with respect to the optional
repayment of the Senior Term Notes at any
time.
3.4 NOTICE OF OPTIONAL PREPAYMENT. If the Loan Parties shall
elect
to prepay any Senior Term Notes pursuant to
Section 3.3 hereof, the Loan Parties
shall give notice of such prepayment to
Agent and each holder of the Senior Term
Notes to be prepaid not less than thirty
(30) days or more than ninety (90) days
prior to the date fixed for prepayment,
specifying (i) the date on which such
prepayment is to be made, (ii) the
principal amount of such Senior Term Notes to
be prepaid on such date, and (iii) the
premium, if any, and accrued interest
applicable to the prepayment. Such notice
shall be accompanied by a certificate
of the Chief Executive Officer, the Chief
Financial Officer, or the Chief
Operating Officer of Parent that such
prepayment is being made in compliance
with Section 3.3. Notice of prepayment
having been so given, the aggregate
principal amount of the Senior Term Notes
specified in such notice, together
with accrued interest thereon and the
premium, if any, shall become due and
payable on the prepayment date set forth in
such notice.
3.5 MANDATORY PREPAYMENT.
(a) CHANGE OF CONTROL; EVENT OF DEFAULT. The Senior Term Notes
shall
be prepaid in full, together with all
accrued and unpaid interest, fees and
expenses in the event of a Change of
Control or upon such Senior Term Notes
becoming due as a consequence of an Event
of Default pursuant to Section 8.2.
(b) EXCESS CASH FLOW. In addition to the amounts payable by the
Loan
Parties in respect of the Senior Term Notes
pursuant to Sections 3.1, 3.2, 3.3
and 3.5(a) hereof, the Loan Parties,
jointly and severally, covenant and agree
to make annual principal prepayments on the
Senior Term Notes (each a "CASH FLOW
PREPAYMENT") on or before the one hundred
twentieth (120th) day following the
end of each Fiscal Year in an amount equal
to twenty-five percent (25%) of the
Excess Cash Flow, or such lesser amount as
is then outstanding under the Senior
Term Notes, for so long as any amounts
remain outstanding under the Senior Term
Notes. All
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Cash Flow Prepayments in respect of any
Fiscal Year shall be applied by Agent to
the outstanding principal of the Senior
Term Notes in inverse order of maturity.
3.6 HOME OFFICE PAYMENT. The Loan Parties will pay all sums
becoming
due on any Senior Term Note for principal,
prepayment penalty, if any, and
interest to Agent by the method and at the
address specified for such purpose in
Annex A, or by such other method or at such
other address as the Purchasers
shall have from time to time specified to
the Loan Parties in writing for such
purpose, without the presentation or
surrender of such Senior Term Note or the
making of any notation thereon, except that
upon written request of the Loan
Parties made concurrently with or
reasonably promptly after payment or
prepayment in full of any Senior Term Note,
each holder of a Senior Term Note
shall surrender such Senior Term Note for
cancellation, reasonably promptly
after such request, to the Loan Parties at
their principal executive office.
3.7 TAXES. Any and all payments by the Loan Parties hereunder
or
under the Senior Term Notes or other
Transaction Documents that are made to or
for the benefit of the Purchasers shall be
made free and clear of and without
deduction for any and all present or future
taxes, levies, imposts, deductions,
charges or withholdings and penalties,
interests and all other liabilities with
respect thereto (collectively, "TAXES"),
excluding taxes imposed on Agent's or
the Purchasers' net income or capital and
franchise taxes imposed on any of them
by the jurisdiction under the laws of which
any of them is organized or any
political subdivision thereof (all such
non-excluded Taxes being hereinafter
referred to as "COVERED TAXES"). If any of
the Loan Parties shall be required by
Law to deduct any Covered Taxes from or in
respect of any sum payable hereunder
or under any Senior Term Notes or other
Transaction Documents to Agent for the
benefit of the Purchasers, or to the
Purchasers, the sum payable shall be
increased as may be necessary so that after
making all required deductions of
Covered Taxes (including deductions of
Covered Taxes applicable to additional
sums payable under this paragraph), each
Purchaser receives an amount equal to
the sum it would have received had no such
deductions been made. The Loan
Parties shall make such deductions and the
Loan Parties shall pay the full
amount so deducted to the relevant taxation
authority or other authority in
accordance with applicable law. In
addition, the Loan Parties agree to pay any
present or future stamp, documentary,
excise, privilege, intangible or similar
levies that arise at any time or from time
to time from any payment made under
any and all Transaction Documents or from
the execution or delivery by the Loan
Parties or from the filing or recording or
maintenance of, or otherwise with
respect to the exercise by Agent or the
Purchasers of their respective rights
under any and all Transaction Documents
(collectively, "OTHER TAXES"). The Loan
Parties will indemnify Agent and the
Purchasers for the full amount of Covered
Taxes imposed on or with respect to amounts
payable hereunder and Other Taxes,
and any liability (including penalties,
interest and expenses) arising therefrom
or with respect thereto. Payment of this
indemnification shall be made within
thirty (30) days from the date Agent or the
Purchasers provide the Loan Parties
with a certificate certifying and setting
forth in reasonable detail the
calculation thereof as to the amount and
type of such Taxes. Any such
certificates submitted by Agent or the
Purchasers in good faith to the Loan
Parties shall, absent manifest error, be
final, conclusive and binding on all
parties. The obligations of the Loan
Parties under this Section 3.7 shall
survive the payment of the Senior Term
Notes and the termination of this
Agreement. Within thirty (30) days after
the Loan Parties having received a
receipt for payment of Covered Taxes and/or
Other Taxes, the Loan Parties shall
furnish to Agent the original or certified
copy of a receipt evidencing payment
thereof.
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3.8 MAXIMUM LAWFUL RATE. This Agreement, the Senior Term Notes
and
the other Transaction Documents are hereby
limited by this Section 3.8. In no
event, whether by reason of acceleration of
the maturity of the amounts due
hereunder or otherwise, shall interest and
fees contracted for, charged,
received, paid or agreed to be paid to the
Purchasers exceed the maximum amount
permissible under applicable Law. If, from
any circumstance whatsoever, interest
and fees would otherwise be payable to
Agent or the Purchasers in excess of the
maximum amount permissible under applicable
Law, the interest and fees shall be
reduced to the maximum amount permitted
under such Law. If from any
circumstance, Agent or the Purchasers shall
have received anything of value
deemed interest by applicable Law in excess
of the maximum lawful amount, an
amount equal to any excess of interest
shall be applied to the reduction of the
principal amount of the Senior Term Notes,
in such manner as may be determined
by Agent, and not to the payment of fees or
interest, or if such excess interest
exceeds the unpaid balance of the principal
amount of the Senior Term Notes,
such excess shall be refunded to the Loan
Parties.
3.9 BREAK FUNDING PAYMENTS. In the event of the payment of any
principal of any Senior Term Notes other
than on the date such payment was
scheduled or the due date for mandatory
prepayments pursuant to Section 3.5
hereof (including payments as a result of
an Event of Default), the Loan Parties
shall compensate each Purchaser, upon
demand, for the loss, cost and expense
attributable to such event with respect to
the period from such payment date to
the day immediately preceding the next
scheduled payment date.
3.10 CAPITAL ADEQUACY. If, after the date hereof, either the
introduction of or any change of the
interpretation of any Law or the compliance
by the Purchasers with any guideline or
request from any Governmental Authority
(whether or not having the force of Law)
has or would have the effect of
reducing the rate of return on the capital
or assets of the Purchasers as a
consequence of, as determined by Agent or
the Purchasers in their reasonable
discretion, the existence of any
Purchaser's obligations under this Agreement or
any other Transaction Documents, then, upon
demand by the Purchasers, the Loan
Parties immediately shall pay to the
Purchasers, from the time as specified by
Purchasers, additional amounts sufficient
to compensate the Purchaser in light
of such circumstances. The obligations of
the Loan Parties under this Section
3.10 shall survive the payments of the
Senior Term Notes and the termination of
this Agreement.
3.11 CERTAIN WAIVERS. The Loan Parties unconditionally waive (i)
any
rights to presentment, demand, protest or
(except as expressly required hereby)
notice of any kind, and (ii) any rights of
rescission, setoff, counterclaim or
defense to payment under the Senior Term
Notes or otherwise that the Loan
Parties may have or claim against any
Purchaser, Agent or any prior Purchaser or
Agent.
ARTICLE 4
CONDITIONS
4.1 CONDITIONS TO THE PURCHASE OF THE SENIOR TERM NOTES. The
obligation of the Purchasers to purchase
and pay for the Senior Term Notes is
subject to the satisfaction, prior to or at
the Closing, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and
warranties contained in Article 5 hereof
shall be true and correct at and as of
the Closing Date as
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though then made, except to the extent of
changes caused by the transactions
expressly contemplated herein.
(b) MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change in the business, financial
condition, assets, Business or
prospects of Parent on a Consolidated Basis
(prior to the effective date of the
Transactions), or the capital markets since
December 15, 2004.
(c) SECURITY AGREEMENT; ETC. The Loan Parties and Agent, for
the
benefit of the Purchasers, shall have
entered into (i) a security agreement or
security agreements with Agent, in form and
substance as set forth in Exhibit B
attached hereto (as the same may be
amended, modified or supplemented from time
to time in accordance with the terms
thereof, the "SECURITY AGREEMENT"), (ii)
(a) short-form security agreements for all
Patents, Patent Licenses, Trademarks,
Trademark Licenses and registered
Copyrights of the Loan Parties in form and
substance reasonably acceptable to Agent
for filing with the United States
Patent and Trademark Office and the United
States Copyright Office in the form
set forth in Exhibit C attached hereto and
(b) a duly executed form of
assignment of all Internet domain names of
the Loan Parties (together with
appropriate supporting documentation as may
be requested by Agent) in form and
substance reasonably acceptable to Agent
(such assignment and such short-form
security agreements set forth under the
foregoing (ii)(a), as the same may be
amended, modified or supplemented from time
to time in accordance with the terms
thereof, the "INTELLECTUAL PROPERTY
AGREEMENTS"), (iii) a stock pledge and
security agreement in form and substance as
set forth in Exhibit D attached
hereto (as the same may be amended,
modified or supplemented from time to time
in accordance with the terms thereof, the
"PLEDGE AGREEMENT") (iv) if reasonably
requested by GMAC Agent and Agent, the Loan
Parties and their depository banks
shall have entered into deposit account
control agreements in form and substance
satisfactory to Agent ("DEPOSIT ACCOUNT
CONTROL AGREEMENTS"), and (v) a
collateral assignment of rights of the Loan
Parties under certain documents
executed in connection with the Acquisition
in form and substance as set forth
in Exhibit E (the "COLLATERAL ASSIGNMENT OF
CONTRACTS"). The Loan Parties shall
have executed and delivered to Agent, for
the benefit of the Purchasers, an
authorization to file such financing
statements and other instruments
(collectively, "FINANCING STATEMENTS"), and
shall have delivered to Agent such
certificates, instruments and documents, as
Agent shall reasonably require in
order to perfect and maintain the continued
perfection of the security interests
created by the agreements described herein.
Agent shall have received reports of
filings with appropriate government
agencies showing that there are no Liens on
the assets of the Loan Parties other than
Permitted Liens.
(d) ENVIRONMENTAL REPORTS. Agent shall have received reports
covering the Loan Parties' properties in
form and substance satisfactory to
Agent regarding the Loan Parties'
compliance with Environmental Laws.
(e) INTERCREDITOR AGREEMENT. Agent and GMAC Agent shall have
executed the Intercreditor Agreement on
terms reasonably satisfactory to Agent
and the Purchasers.
(f) CHARTER AND BYLAWS. Each Loan Party shall have made such
amendments to its Articles of
Incorporation, Certificate of Incorporation,
By-laws, membership agreement and such
other documents as the Purchasers shall
reasonably request.
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(g) CLOSING DOCUMENTS. The Loan Parties will have delivered or
caused to be delivered to Agent all of the
following documents in form and
substance satisfactory to Agent:
(i) two (2) or more Senior Term Notes (as designated by Agent
and the Purchasers pursuant to Section 2.1 and Annex A hereof)
in
aggregate original principal amounts as set forth herein, duly
completed and executed by the Loan Parties;
(ii) certificates of good standing dated not more than ten
(10) days prior to the Closing Date for the Loan Parties, issued
by
their respective jurisdiction of organization and each
jurisdiction
where a Loan Party is qualified to operate as a foreign
corporation,
or its equivalent, except where the failure to so qualify is
not
reasonably likely to have a Material Adverse Effect;
(iii) a copy of the Charter Documents of each of the Loan
Parties, certified by the appropriate governmental official of
the
jurisdiction of its organization as of a date not more than
thirty
(30) days prior to the Closing Date;
(iv) a copy of the By-laws or members agreement of the Loan
Parties, certified as of the Closing Date by the secretary,
assistant secretary, manager or general partner, as applicable,
of
the Loan Parties;
(v) a certificate of the secretary or assistant secretary,
manager or general partner of the Loan Parties, certifying as to
the
names and true signatures of the officers or other authorized
person
of the Loan Parties authorized to sign this Agreement and the
other
documents to be delivered by the Loan Parties hereunder;
(vi) copies of the resolutions duly adopted by the board of
directors, general partners, board of managers or other
governing
body of the Loan Parties, authorizing the execution, delivery
and
performance by the Loan Parties of this Agreement and each of
the
other agreements, instruments and documents contemplated hereby
to
which each of the Loan Parties is a party to, and the
consummation
of all of the other Transactions, certified as of the Closing
Date
by the secretary, assistant secretary, manager or general partner
of
the Loan Parties;
(vii) a certificate dated as of the Closing Date from an
officer, general partner or manager of each of the Loan Parties
stating that the conditions specified in this Section 4.1 have
been
fully satisfied or waived by Agent;
(viii) certificates of insurance evidencing the existence of
all insurance required to be maintained by the Loan Parties
pursuant
to Section 7.1(c), and Agent shall be satisfied with the type
and
extent of such coverage;
(ix) an opinion of Porter, Wright, Morris & Arthur LLP,
counsel to Parent, in form and substance satisfactory to Agent;
(x) copies of all material leases and contracts to which each
of the Loan Parties is a party; and
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(xi) such other
documents relating to the Transactions
contemplated by this Agreement as Agent or its special counsel
may
reasonably request.
(h) PURCHASER'S FEES AND EXPENSES.
(i) CLOSING PROCESSING FEE. On the Closing Date, the Loan
Parties shall pay the Closing Processing Fee to ACFS (and the
Loan
Parties hereby authorize Agent to deduct from the aggregate
proceeds
from the sales of the Senior Term Notes by the Loan Parties,
the
unpaid amount of such Closing Processing Fee).
(ii) OTHER FEES AND EXPENSES. On the Closing Date, the Loan
Parties shall have paid the fees and expenses of Agent and the
Purchasers, payable by the Loan Parties pursuant to Section
10.4
hereof (and the Loan Parties hereby authorize Agent to deduct
all
such amounts from the aggregate proceeds of the sale of the
Senior
Term Notes by the Loan Parties).
(i) LEGAL INVESTMENT. On the Closing Date, the Purchasers'
purchases
of the Senior Term Notes shall not be
prohibited by any applicable law, rule or
regulation of any Governmental Authority
(including, without limitation,
Regulations T, U or X of the Board of
Governors of the Federal Reserve System)
as a result of the promulgation or
enactment thereof or any changes therein, or
change in the interpretation thereof by any
Governmental Authority, subsequent
to the date of this Agreement.
(j)
PROCEEDINGS. All proceedings taken or required to be taken in
connection with the transactions
contemplated hereby to be consummated at or
prior to the Closing and all documents
incident thereto will be satisfactory in
form and substance to Agent and its special
counsel and to the Purchasers and
their special counsel.
(k) BACKGROUND INVESTIGATIONS. Agent shall be satisfied with
the
results of background investigations of
Mike Brooks, John Grzybowski, John Hull,
James E. McDonald, and David Sharp.
(l) EMPLOYMENT/CONFIDENTIALITY AND NONCOMPETE AGREEMENTS.
Parent
shall have entered into
employment/confidentiality and noncompete arrangements
or agreements with officers and employees
of EJ Footwear designated by Parent on
terms reasonably satisfactory to the
Purchasers, and such confidentiality and
noncompete agreements shall be in full
force and effect as of the Closing Date
and shall not have been amended or
modified. The Loan Parties shall have
provided Agent with copies of all
employment/confidentiality and noncompete
agreements and all other agreements
providing compensation in any form
whatsoever (including, without limitation,
any benefit plans between the Loan
Parties and any of their directors,
officers or employees).
(m) CONSUMMATION OF ACQUISITION/CHARTER AND BYLAW AMENDMENTS.
The
Acquisition shall have been consummated in
form and substance satisfactory to
the Purchasers, in the Purchasers' sole
discretion, and the Purchasers shall
have been provided copies of all material
agreements, instruments and documents
delivered in connection therewith. The Loan
Parties shall have entered into such
amendments to their respective Articles of
Incorporation or Certificates of
Incorporation and Bylaws as the Purchasers
shall request.
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(n) CONSUMMATION OF GMAC FINANCING. The GMAC Financing shall
have
been consummated in form and substance
satisfactory to the Purchasers in the
Purchasers' sole discretion and the
Purchasers shall have been provided copies
of all agreements, instruments and
documents in connection therewith.
(q) WORKING CAPITAL. Parent on a Consolidated Basis shall have
in
the aggregate at least $100,000,000 of
Working Capital on the Closing Date.
(o) MINIMUM EQUITY. Parent on a Consolidated Basis shall have
at
least $70,000,000 in stockholders' equity
on the Closing Date.
(p) MINIMUM AVAILABILITY. The Loan Parties shall have a minimum
availability under the Revolving Financing
on the Closing Date of at least
$20,000,000.
(q) LANDLORD WAIVERS. The Loan Parties shall have used
reasonable
efforts to deliver to Agent a Landlord
Waiver for each leased property, in form
and substance satisfactory to Agent.
4.2 WAIVER. Any condition specified in this Article 4 may be
waived
by Agent on behalf of the Purchasers;
provided that no such waiver will be
effective against Agent unless it is set
forth in a writing executed by Agent.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES
5.1 REPRESENTATIONS AND WARRANTIES OF THE LOAN PARTIES. As a
material inducement to Agent and the
Purchasers to enter into this Agreement and
for the Purchasers to purchase the Senior
Term Notes, Parent for itself and each
Loan Party and each Loan Party as to
itself, hereby represent and warrant to
Agent and the Purchasers as follows:
(a) ORGANIZATION AND POWER. Each of the Loan Parties is a legal
entity of the type designated on Schedule
5.1(a). Each of the Loan Parties is
duly organized, validly existing and in
good standing under the laws of its
state of formation. Each of the Loan
Parties has all requisite corporate or
other organizational power and authority
and all material licenses, permits,
approvals and authorizations necessary to
own and operate its properties, to
carry on its businesses as now conducted
and presently proposed to be conducted
and to carry out the Transactions, and is
qualified to do business in the
jurisdictions listed on the "ORGANIZATIONAL
SCHEDULE" attached hereto as
Schedule 5.1(a), which includes every
jurisdiction where the failure to so
qualify is reasonably likely to have a
Material Adverse Effect (other than
Lifestyle, which is not in good standing in
Puerto Rico as of the Closing Date
but will be restored to good standing in
such jurisdiction as soon as reasonably
practicable thereafter and in no event
later than July 1, 2005). Each of the
Loan Parties has its principal place of
business as set forth on the
Organizational Schedule. The copies of the
Charter Documents and By-laws of each
of the Loan Parties that have been
furnished to Agent reflect all amendments
made thereto at any time prior to the date
of this Agreement and are correct and
complete.
(b) PRINCIPAL BUSINESS. The Loan Parties are primarily engaged
in
the business of assembling and selling
specialty footwear and related apparel
and accessories (the "BUSINESS").
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(c) FINANCIAL STATEMENTS AND FINANCIAL PROJECTIONS.
(i) FINANCIAL STATEMENTS; HISTORICAL STATEMENTS. Parent has
delivered to Agent copies of its audited consolidated year-end
financial
statements for and as of the end of the three (3) fiscal
years ended December 31, 2003 together, and unaudited balance
sheet,
income statements and cash flow statements for the nine (9)
month
period ended September 30, 2004 (together, the "FINANCIAL
STATEMENTS"). The Financial Statements were compiled from the
books
and records maintained by Parent's management are correct and
complete and fairly represent the consolidated financial
condition
of Parent as of their dates and the results of operations for
the
fiscal periods then ended and have been prepared in accordance
with
GAAP consistently applied.
(ii) EJ FINANCIAL STATEMENTS. Parent has delivered to Agent
the unaudited, combined balance sheet, income statement,
statements
of cash flows and owner's equity of EJ Footwear and their
Subsidiaries for the fiscal year ended September 30, 2004 (the
"EJ
FINANCIAL INFORMATION"). To the knowledge of Parent, the EJ
Financial Information was derived from the internal books and
records of EJ Footwear and has been prepared in a manner
consistent
with GAAP, and fairly presents, in all material respects, the
financial position of EJ Footwear and their Subsidiaries as of
such
dates and the results of operations of EJ Footwear and their
Subsidiaries for the periods covered thereby, in each case on a
combined basis, and subject to the absence of footnotes and
other
presentation items. The EJ Financial Information was prepared
for
the purpose of the agreement evidencing the Acquisition and for
the
internal management purposes of EJ Footwear. None of the
companies
that EJ Footwear is comprised of was conducted on a stand-alone
basis as a separate entity during the periods indicated in the
EJ
Financial Information and the allocations and estimates included
in
the EJ Financial Information are not necessarily indicative of
the
costs that would have resulted if each of the companies of EJ
Footwear had been operated and conducted on a stand-alone basis as
a
separate entity during such periods.
(iii) PRO FORMA BALANCE SHEET. The unaudited pro forma balance
sheet of Parent on a Consolidated Basis as of December 31, 2004,
a
copy of which has heretofore been delivered to Agent, gives pro
forma effect to the consummation of the Acquisition, the
initial
extensions of credit made under this Agreement, and the payment
of
transaction fees and expenses related to the foregoing, all as
if
such events had occurred on such date (the "PRO FORMA BALANCE
SHEET"). The Pro Forma Balance Sheet has been prepared in a
manner
consistent with customary accounting practices and the
financial
statements described in Section 5.1(c)(i) (subject to the absence
of
footnotes required by GAAP and subject to normal year-end
adjustments) and, subject to stated assumptions made in good
faith
and having a reasonable basis set forth therein, presents fairly
the
financial condition of the Loan Parties on an unaudited pro
forma
basis as of the date set forth therein after giving effect to
the
consummation of the transactions described above.
(iv) FINANCIAL PROJECTIONS. The Loan Parties have delivered to
Agent financial projections of Parent on a Consolidated Basis
for
the period January 1,
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2005 through December 31, 2008 derived from various assumptions
of
the Loan Parties' management (the "FINANCIAL PROJECTIONS"). The
Financial Projections were prepared in accordance with GAAP and
customary accounting procedures and reflect all information
available to the management of the Loan Parties at the time the
Financial Projections were produced. The Financial Projections
in
good faith project the liabilities of the Loan Parties upon
consummation of the transactions contemplated hereby as of the
Closing Date.
(v) ACCURACY OF FINANCIAL STATEMENTS. As of the dates of such
Financial Statements, Parent on a Consolidated Basis did not
have
any liabilities, contingent or otherwise, or forward or
long-term
commitments that are not disclosed in the Financial Statements or
in
the notes thereto, and except as disclosed therein, as of such
dates, and as disclosed on the Pro Forma Balance Sheets as of
the
date hereof, there are no unrealized or anticipated losses from
any
commitments of the Loan Parties that are reasonably likely to have
a
Material Adverse Effect.
(d) CAPITALIZATION AND RELATED MATTERS. As of the Closing Date
and
immediately thereafter, the authorized
capital stock of Parent is as set forth
on the "CAPITALIZATION SCHEDULE" attached
hereto as Schedule 5.1(d). As of the
Closing Date, the authorized capital stock
or other equity interests of each of
the Subsidiaries of Parent and the number
and ownership of all outstanding
capital stock or equity interests of each
of the Loan Parties (other than
Parent) is set forth on Schedule 5.1(d).
Except as set forth on the Schedule
5.1(d), as of the Closing Date, none of the
Loan Parties will have outstanding
any stock or securities convertible into or
exchangeable for any shares of its
capital stock and none will have
outstanding any rights or options to subscribe
for or to purchase its capital stock or
other equity interests or any stock or
securities convertible into or exchangeable
for its capital stock or other
equity interests. As of the Closing Date,
none of the Loan Parties will be
subject to any obligation (contingent or
otherwise) to repurchase or otherwise
acquire or retire any shares of its capital
stock or other equity interests. As
of the Closing Date, all of the outstanding
shares and capital stock or other
equity interests of the Loan Parties will
be validly issued, fully paid and
nonassessable. None of the Loan Parties
have violated any applicable federal or
state securities laws in any material
respect in connection with the offer, sale
or issuance of any of its capital stock or
other equity interests, and the
offer, sale and issuance of the Senior Term
Notes hereunder do not require
registration under the Securities Act or
any applicable state securities laws.
(e) SUBSIDIARIES. Except as set forth on the "SUBSIDIARY
SCHEDULE",
attached hereto as Schedule 5.1(e), the
Loan Parties do not own, or hold any
rights to acquire, any shares of stock or
any other security or interest in any
other Person.
(f) AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement, the other
Transaction Documents to which each of
the Loan Parties is a party, and the
consummation of the Transactions and the
Acquisition have been duly authorized by
the Loan Parties. The execution and
delivery by the Loan Parties of the
Transaction Documents and the consummation
of the Transactions and the Acquisition
does not and will not (i) conflict with
or result in a breach of the terms,
conditions or provisions of, (ii) constitute
a default under, (iii) except as created
pursuant to the Security Documents and
the GMAC Credit Documents, result in the
creation of any Lien upon the Loan
Parties' capital stock or assets pursuant
to, (iv) give any
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third party the right to accelerate any
material obligation under, (v) result in
a violation of, or (vi) require any
authorization, consent, approval, exemption
or other action by or notice to any
Governmental Authority pursuant to, the
Charter Documents of the Loan Parties, or
any law, statute, rule or regulation
to which the Loan Parties are subject, or
any material agreement or instrument,
order, judgment or decree to which any of
the Loan Parties is a party or to
which it or each of its respective assets
are subject.
(g) GOVERNMENTAL APPROVALS. Except as specifically provided by
the
Transaction Documents, no registration with
or consent or approval of, or other
action by, any Governmental Authority is or
will be required in connection with
the consummation of the Transactions by the
Loan Parties. Except as specifically
provided by the Acquisition Agreement, no
registration with or consent or
approval of, or other action by, any
Governmental Authority was required in
connection with the consummation of the
Acquisition.
(h) ENFORCEABILITY. This Agreement constitutes, and each of the
other Transaction Documents when duly
executed and delivered by each of the Loan
Parties who is a party thereto will
constitute, legal, valid and binding
obligations of the Loan Parties enforceable
in accordance with their respective
terms, except as enforceability may be
limited by applicable bankruptcy,
insolvency, moratorium or other laws
affecting the enforcement of creditors'
rights generally and by general principles
of equity.
(i) NO MATERIAL ADVERSE CHANGE. Since November 3, 2004, there
has
been no Material Adverse Change, with
respect to either (a) Parent and its
Subsidiaries taken as a whole, prior to
giving effect to the Transactions, or
(b) EJ Footwear, taken as a whole, prior to
giving effect to the Transactions;
provided, that the consummation of the
Transactions shall not, in and of itself,
be deemed to be a Material Adverse
Change.
(j) LITIGATION. Except as described in the "LITIGATION
SCHEDULE"
attached hereto as Schedule 5.1(j), as of
the Closing Date, there are no
actions, suits or proceedings at law or in
equity or by or before any arbitrator
or any Governmental Authority now pending
or, to the knowledge of the Loan
Parties' management after reasonable
inquiry, threatened against or filed by or
affecting the Loan Parties or their
respective directors or officers or the
businesses, assets or rights of any of the
Loan Parties, which are reasonably
likely to have a Material Adverse
Effect.
(k) COMPLIANCE WITH LAWS. The Loan Parties are not in violation
of
any applicable Law which violation or
violations are reasonably likely to have a
Material Adverse Effect. The Loan Parties
are not in, and the consummation of
the Transactions will not cause any,
default concerning any judgment, order,
writ, injunction or decree of any
Governmental Authority. As of and after the
Closing Date, there is no investigation,
enforcement action or regulatory action
pending or, to the knowledge of the Loan
Parties, threatened against or
affecting any of the Loan Parties by any
Governmental Authority, except as set
forth on the Litigation Schedule, which is
reasonably likely to have a Material
Adverse Effect. Except as set forth in the
Litigation Schedule, as of and after
the Closing Date, there is no remedial or
other corrective action that any of
the Loan Parties is required to take to
remain in compliance with any judgment,
order, writ, injunction or decree of any
Governmental Authority or to maintain
any material permits, approvals or licenses
granted by any Governmental
Authority in full force and effect which is
reasonably likely to have a Material
Adverse Effect. To the knowledge of Parent,
during the past ten (10) years, none
of the executive officers, directors or
management of Parent or any of its
Subsidiaries
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(before giving effect to the Acquisition)
have been arrested or convicted of any
material crime nor have any of them been
bankrupt or an officer or director of a
bankrupt corporation or other entity.
(l) ENVIRONMENTAL PROTECTION. Except as specified in
"ENVIRONMENTAL
SCHEDULE" attached hereto as Schedule
5.1(l) and after giving effect to the
Transactions, except for materials,
conditions, operations and noncompliance
which are not reasonably likely to have a
Material Adverse Effect: (i) the
business of the Loan Parties and each of
their Subsidiaries, the methods and
means employed by the Loan Parties (and
their Subsidiaries) in the operation
thereof (including all operations and
conditions at or in the properties of the
Loan Parties or any of their Subsidiaries),
the assets owned, leased, managed,
used, controlled, held or operated by the
Loan Parties and/or their Subsidiaries
comply in all material respects with all
applicable Environmental Laws; (ii)
with respect to the Properties and
Facilities, and except as disclosed in the
Environmental Schedule, the Loan Parties
have obtained, possess, and are in
compliance in all material respects with
all permits, licenses, reviews,
certifications, approvals, registrations,
consents, and any other authorizations
under any Environmental Laws; (iii) the
Loan Parties have not received (x) any
claim or notice of violation, lien,
complaint, suit, order or other claim or
notice to the effect that the Loan Parties
are or may be liable to any Person as
a result of (A) the environmental condition
of any of their Properties and
Facilities or any other property, or (B
