EXHIBIT 4.1
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT dated as
of July 22, 2008 (the “Agreement”), is executed by and
between PARLUX FRAGRANCES, INC., a Delaware corporation
(“PFI”), which has its chief executive office located
at 5900 North Andrews Avenue, Suite 500, Fort Lauderdale, Florida
33309, PARLUX LTD., a New York corporation (“LTD.”),
which has its chief executive office located at 5900 North Andrews
Avenue, Suite 500, Fort Lauderdale, Florida 33309 (individually
and/or collectively, the “Borrower”), and REGIONS BANK,
an Alabama banking corporation (the “Bank”), whose
address is 100 S.E. Third Avenue, 17 th Floor, Fort
Lauderdale, Florida 33394.
R E C I T A L
S :
A.
The Borrower desires to borrow funds and
obtain other financial accommodations from the Bank.
B.
Pursuant to the Borrower’s request,
the Bank is willing to extend such financial accommodations to the
Borrower under the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the
premises, and the mutual covenants and agreements set forth herein,
the Borrower agrees to borrow from the Bank, and the Bank agrees to
lend to the Borrower, subject to and upon the following terms and
conditions:
A G R E E M E
N T S :
Section
1.
DEFINITIONS .
1.1.
Defined Terms . For the purposes of this Agreement, the
following capitalized words and phrases shall have the meanings set
forth below.
“ Affiliate ” of any
Person shall mean (a) any other Person which, directly or
indirectly, controls or is controlled by or is under common control
with such Person, (b) any officer or director of such Person, and
(c) with respect to the Bank, any entity administered or managed by
the Bank, or an Affiliate or investment advisor thereof and which
is engaged in making, purchasing, holding or otherwise investing in
commercial loans. A Person shall be deemed to be
“controlled by” any other Person if such Person
possesses, directly or indirectly, power to direct or cause the
direction of the management and policies of such Person whether by
contract, ownership of voting securities, membership interests or
otherwise.
“ Applicable Margin ”
shall mean two percent (2.00%) per annum in the case of LIBOR
Loans, and zero percent (0%) per annum in the case of Prime
Loans.
“ Bank
Product Agreements ” shall mean those certain agreements
entered into from time to time by the Borrower or any Subsidiary
with the Bank or any Affiliate of the Bank concerning Bank
Products.
“ Bank Product Obligations
” shall mean all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by the Borrower
or any Subsidiary to the Bank or any Affiliate of the Bank pursuant
to or evidenced by the Bank Product Agreements and irrespective of
whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, now existing or
hereafter arising.
“ Bank Products ”
shall mean any service or facility extended to the Borrower or any
Subsidiary by the Bank or any Affiliate of the Bank, including:
(a) credit cards, (b) credit card processing services, (c)
debit cards, (d) purchase cards, (e) ACH transactions, (f) cash
management, including controlled disbursement, accounts or
services, or (g) Hedging Agreements.
“ Bankruptcy Code ”
shall mean the United States Bankruptcy Code, as now existing or
hereafter amended.
“ Borrowing Base Amount
” shall mean:
(a)
an amount equal to eighty percent (80%)
of the net amount (after deduction of such Reserves and allowances
as the Bank deems reasonably proper and necessary) of all Eligible
Accounts, excluding Eligible Accounts of Perfumania,
plus
(b)
an amount equal to the lesser of (i)
$5,000,000.00, or (ii) sixty-five percent (65%) of the net amount
(after deduction of such Reserves and allowances as the Bank deems
reasonably proper and necessary) of all Eligible Accounts of
Perfumania, plus
(c)
an amount equal to the lesser of (i) (A)
for the period of time from December 1 through July 31,
$10,000,000.00, and (B) for the period of time from August 1
through November 30, $15,000,000.00 or (ii) fifty percent (50%) of
the lower of cost or market value (after deduction of such Reserves
and allowances as the Bank deems reasonably proper and necessary)
of all Eligible Inventory.
Notwithstanding the foregoing, in no
event shall the amount derived in subsection (c) above exceed
$2,500,000.00 of Eligible Inventory consisting of Raw
Materials.
“ Borrowing Base Certificate
” shall mean a certificate to be signed by the Borrower
certifying to the accuracy of the Borrowing Base Amount in form and
substance satisfactory to the Bank.
“ Business Day ” shall
mean any day other than a Saturday, Sunday or a legal holiday on
which banks are authorized or required to be closed for the conduct
of commercial banking business in Fort Lauderdale,
Florida.
“ Capital Expenditures
” shall mean all expenditures (including Capitalized Lease
Obligations) which, in accordance with GAAP, would be required to
be capitalized and shown on the consolidated balance sheet of the
Borrower, but excluding expenditures made in connection with the
replacement, substitution or restoration of assets to the extent
financed (i) from insurance proceeds (or other similar recoveries)
paid on account of the loss of or damage to the assets being
replaced or restored or (ii) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets
being replaced.
“ Capital Lease ”
shall mean, as to any Person, a lease of any interest in any kind
of property or asset, whether real, personal or mixed, or tangible
or intangible, by such Person, as lessee, that is, or should be, in
accordance with Financial Accounting Standards Board Statement No.
13, as amended from time to time, or, if such statement is not then
in effect, such statement of GAAP as may be applicable, recorded as
a “capital lease” on the financial statements of such
Person prepared in accordance with GAAP.
“ Capital Securities ”
shall mean, with respect to any Person, all shares, interests,
participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now
outstanding or issued or acquired after the date hereof, including
common shares, preferred shares, membership interests in a limited
liability company, limited or general partnership interests in a
partnership or any other equivalent of such ownership
interest.
“ Capitalized Lease
Obligations ” shall mean, as to any Person, all rental
obligations of such Person, as lessee under a Capital Lease which
are or will be required to be capitalized on the books of such
Person.
“ Cash Equivalent Investment
” shall mean, at any time, (a) any evidence of Debt, maturing
not more than one year after such time, issued or guaranteed by the
United States government or any agency thereof, (b) commercial
paper, maturing not more than one year from the date of issue, or
corporate demand notes, in each case (unless issued by the Bank or
its holding company) rated at least A-l by Standard &
Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. or P-l by Moody’s Investors Service, Inc.,
(c) any certificate of deposit, time deposit or banker’s
acceptance, maturing not more than one year after such time, or any
overnight Federal Funds transaction that is issued or sold by the
Bank or its holding company (or by a commercial banking institution
that is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than
$250,000,000.00), (d)
any repurchase agreement entered into
with the Bank, or other commercial banking institution of the
nature referred to in clause (c) , which (i) is secured by a
fully perfected security interest in any obligation of the type
described in any of clauses (a) through (c) above,
and (ii) has a market value at the time such repurchase agreement
is entered into of not less than one hundred percent (100%) of the
repurchase obligation of the Bank, or other commercial banking
institution, thereunder, (e) money market accounts or mutual funds
which invest exclusively in assets satisfying the foregoing
requirements, and (f) other short term liquid investments approved
in writing by the Bank.
“ Change in Control ”
shall mean any Person or group of Persons (within the meaning of
Section 13(d) of the Securities Exchange Act of 1934, as amended),
other than Glenn H. Nussdorf, Steven Nussdorf, or any of their
Affiliates, shall obtain ownership or control in one or more series
of transactions of more than fifty percent (50%) of the common
stock or fifty percent (50%) of the voting power of PFI entitled to
vote in the election of members of the board of directors of PFI.
“ Collateral ” shall
have the meaning set forth in Section 6.1 hereof.
“ Collateral Access
Agreement ” shall mean an agreement in form and substance
reasonably satisfactory to the Bank pursuant to which a mortgagee
or lessor of real property on which Collateral is stored or
otherwise located, or a warehouseman, processor or other bailee of
Inventory or other property owned by the Borrower or any
Subsidiary, acknowledges the Liens of the Bank and, in the case of
any such agreement with a mortgagee or lessor, permits the Bank
reasonable access to and use of such real property following the
occurrence and during the continuance of an Event of Default to
assemble, complete and sell any collateral stored or otherwise
located thereon.
“ Contingent Liability
” and “ Contingent Liabilities ” shall
mean, respectively, each obligation and liability of the Borrower
and all such obligations and liabilities of the Borrower incurred
pursuant to any agreement, undertaking or arrangement by which the
Borrower: (a) guarantees, endorses or otherwise becomes or is
contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to
assure a creditor against loss) the indebtedness, dividend,
obligation or other liability of any other Person in any manner
(other than by endorsement of instruments in the course of
collection), including any indebtedness, dividend or other
obligation which may be issued or incurred at some future time; (b)
guarantees the payment of dividends or other distributions upon the
shares or ownership interest of any other Person; (c) undertakes or
agrees (whether contingently or otherwise) with a third party:
(i) to purchase, repurchase, or otherwise acquire any
indebtedness, obligation or liability of any other Person or any
property or assets constituting security therefor, (ii) to advance
or provide funds for the payment or discharge of any indebtedness,
obligation or liability of any other Person (whether in the form of
loans, advances, stock purchases, capital contributions or
otherwise), or to maintain solvency, assets, level of income,
working capital or other financial condition of any other Person,
or (iii) to make payment to any other Person other than for value
received; (d) agrees with a third party to lease
property
or to purchase securities, property or
services from such other Person with the purpose or intent of
assuring the owner of such indebtedness or obligation of the
ability of such other Person to make payment of the indebtedness or
obligation; (e) induces the issuance of any letter of credit for
the benefit of such other Person; or (f) undertakes or agrees
otherwise to assure a creditor of another Person against loss.
The amount of any Contingent Liability shall (subject to any
limitation set forth herein) be deemed to be the principal amount
guaranteed or supported by the Borrower.
“ Contract Rate ”
shall mean a fluctuating per annum rate of interest equal to One
Month LIBOR, plus the relevant Applicable Margin, provided,
however, that in the event the One Month LIBOR is unavailable as a
result of Bank’s good faith determination of the occurrence
of one or more events (including, without limitation, (i)
governmental authority asserted that it is unlawful to make loans
bearing interest at One Month LIBOR, or (ii) circumstances
affecting the market used to fund the loans make it impracticable
for Bank to determine the One Month LIBOR), the Contract Rate shall
be a fluctuating per annum rate of interest equal to the Prime
Rate, plus the relevant Applicable Margin. The One
Month LIBOR Rate shall be adjusted by Bank, as necessary, at the
end of each Business Day during the term of this Agreement.
Bank shall not be required to notify Borrower of any
adjustment in the One Month LIBOR Rate; however, Borrower may
request a quote of the prevailing Contract Rate on any Business
Day.
“ Date of Reference ”
means, on any Business Day, a date which is two (2) Eurodollar
Banking Days prior to the Business Day in question.
“ Debt ” shall mean,
as to any Person, without duplication, (a) the principal amount of
all obligations of such Person in respect of borrowed money,
whether or not evidenced by bonds, debentures, notes or similar
instruments; (b) all obligations to pay the deferred purchase price
of property or services; (c) all obligations, contingent or
otherwise, with respect to the maximum face amount of all letters
of credit (whether or not drawn), bankers’ acceptances and
similar obligations issued for the account of such Person
(including the Letters of Credit), and all unpaid drawings in
respect of such letters of credit, bankers’ acceptances and
similar obligations; (d) all indebtedness secured by any Lien on
any property owned by such Person, whether or not such indebtedness
has been assumed by such Person (provided, however, if such Person
has not assumed or otherwise become liable in respect of such
indebtedness, such indebtedness shall be deemed to be in an amount
equal to the fair market value of the property subject to such Lien
at the time of determination); (e) the aggregate amount of all
Capitalized Lease Obligations of such Person; (f) all Contingent
Liabilities of such Person, whether or not reflected on its balance
sheet; (g) all Hedging Obligations of such Person; (h) all Debt of
any partnership of which such Person is a general partner; and (i)
all monetary obligations of such Person under (i) a so-called
synthetic, off-balance sheet or tax retention lease, or (ii) an
agreement for the use or possession of property creating
obligations that do not appear on the balance sheet of such Person
but which, upon the insolvency or bankruptcy of such Person, would
be characterized as the indebtedness of such Person (without regard
to accounting treatment). Notwithstanding the
foregoing,
Debt shall not include trade payables and
accrued expenses incurred by such Person in accordance with
customary practices and in the ordinary course of business of such
Person.
“ Default Rate ” shall
mean a fluctuating per annum rate of interest equal to the LIBOR
Rate plus six percent (6.0%) per annum. Overdue interest,
fees and other amounts shall bear interest at a fluctuating per
annum rate of interest equal to the LIBOR Rate plus six
percent (6.0%) per annum.
“ Depreciation ” shall
mean the total amounts added to depreciation, amortization,
obsolescence, valuation and other proper reserves, as reflected on
the Borrower’s financial statements and determined in
accordance with GAAP.
“ EBITDA ” shall mean,
for any period, the sum of the following: (a) Net Income, plus (b)
Interest Charges, plus (c) income taxes payable or accrued, plus
(d) Depreciation, plus (e) amortization, plus (f) non-cash expenses
related to the issuance of options and warrants.
“ Eligible Account ”
and “ Eligible Accounts ” shall mean each
Account and all such Accounts (exclusive of sales, excise or other
similar taxes) owing to the Borrower or any Subsidiary which meets
each of the following requirements:
(a)
it is genuine in all respects and has
arisen in the ordinary course of the Borrower’s business from
(i) the performance of services by the Borrower or the applicable
Subsidiary, which services have been fully performed, acknowledged
and accepted by the account debtor or (ii) the sale, license,
assignment, or lease of Goods by the Borrower, including C.O.D.
sales, which Goods have been completed in accordance with the
account debtor’s specifications (if any) and delivered to and
accepted by the account debtor, and the Borrower or the applicable
Subsidiary has possession of, or has delivered to the Bank at the
Bank’s request, shipping and delivery receipts evidencing
such delivery;
(b)
it is subject to a perfected, first
priority Lien in favor of the Bank and is not subject to any other
assignment, claim or Lien;
(c)
it is the valid, legally enforceable and
unconditional obligation of the account debtor with respect
thereto, and is not subject to the fulfillment of any condition
whatsoever or any counterclaim, credit (except as provided in
subsection (h) of this definition), trade or volume discount,
allowance, discount, rebate or adjustment by the account debtor
with respect thereto provided that any Account shall only be
ineligible to the extent of such discount, allowance, rebate as
adjustment, or to any claim by such account debtor denying
liability thereunder in whole or in part and the account debtor has
not refused to accept and/or has not returned or offered to return
any of the Goods or services which are the subject of such
Account;
(d)
the account debtor with respect thereto
is a resident or citizen of, and is located within, the United
States, Canada or Puerto Rico, unless the sale of goods or services
giving rise to such Account is on letter of credit, banker’s
acceptance or other credit support terms reasonably satisfactory to
the Bank;
(e)
it is not an Account arising from a
“sale on approval”, “sale or return”,
“consignment”, “guaranteed sale” or
“bill and hold”, or are subject to any other repurchase
or return agreement;
(f)
it is not an Account with respect to
which possession and/or control of the goods sold giving rise
thereto is held, maintained or retained by the Borrower or any
Subsidiary (or by any agent or custodian of the Borrower or any
Subsidiary) for the account of, or subject to, further and/or
future direction from the account debtor with respect
thereto;
(g)
it has not arisen out of contracts with
the United States or any department, agency or instrumentality
thereof, unless the Borrower has assigned its right to payment of
such Account to the Bank pursuant to the Assignment of Claims Act
of 1940, and evidence (satisfactory to the Bank) of such assignment
has been delivered to the Bank, or any state, county, city or other
governmental body, or any department, agency or instrumentality
thereof;
(h)
if the Borrower maintains a credit limit
for an account debtor, the aggregate dollar amount of Accounts due
from such account debtor, including such Account, does not exceed
such credit limit;
(i)
if the Account is evidenced by chattel
paper or an instrument, the originals of such chattel paper or
instrument shall have been endorsed and/or assigned and delivered
to the Bank or, in the case of electronic chattel paper, shall be
in the control of the Bank, in each case in a manner satisfactory
to the Bank;
(j)
such Account is evidenced by an invoice
delivered to the related account debtor and is not more than (i)
sixty (60) days past the due date thereof, or (ii) ninety (90) days
past the original invoice date thereof, in each case according to
the original terms of sale;
(k)
it is not an Account with respect to an
account debtor that is located in any jurisdiction which has
adopted a statute or other requirement with respect to which any
Person that obtains business from within such jurisdiction must
file a notice of business activities report or make any other
required filings in a timely manner in order to enforce its claims
in such jurisdiction’s courts unless (i) such notice of
business activities report has been duly and timely filed or the
Borrower or the applicable Subsidiary is exempt from filing such
report and has provided the Bank with satisfactory evidence of such
exemption or (ii) the
failure to make such filings may be cured
retroactively by the Borrower or the applicable Subsidiary for a
nominal fee;
(l)
the account debtor with respect thereto
is not the Borrower or an Affiliate of the Borrower;
(m)
such Account does not arise out of a
contract or order which, by its enforceable terms, forbids or makes
void or unenforceable the assignment thereof by the Borrower or any
Subsidiary to the Bank and is not unassignable to the Bank for any
other reason;
(n)
there is no bankruptcy, insolvency or
liquidation proceeding pending by or against the account debtor
with respect thereto, nor has the account debtor suspended
business, made a general assignment for the benefit of creditors or
failed to pay its debts generally as they come due, and/or no
condition or event has occurred having a Material Adverse Effect on
the account debtor which would require the Accounts of such account
debtor to be deemed uncollectible in accordance with
GAAP;
(o)
it is not owed by an account debtor
(other than Perfumania) with respect to which twenty-five percent
(25%) or more of the aggregate amount of outstanding Accounts owed
at such time by such account debtor is classified as ineligible
under clause (j) of this definition;
(p)
it is not owed by Perfumania with respect
to which fifty percent (50%) or more of the aggregate amount of
outstanding Accounts owed at such time by Perfumania is classified
as ineligible under clause (j) of this definition;
(q)
if the aggregate amount of all Accounts
owed by the account debtor thereon exceeds twenty-five percent
(25%) of the aggregate amount of all Accounts at such time, then
all Accounts owed by such account debtor in excess of such amount
shall be deemed ineligible; and
(r)
the representations and warranties in the
Loan Documents pertaining to such Account are not true and
correct.
An Account which is at any time an
Eligible Account, but which subsequently fails to meet any of the
foregoing requirements, shall forthwith cease to be an Eligible
Account. Further, with respect to any Account, if the Bank at
any time hereafter determines in its reasonable discretion that the
prospect of payment or performance by the account debtor with
respect thereto is materially impaired for any reason whatsoever,
such Account shall cease to be an Eligible Account after notice of
such determination is given to the Borrower.
“ Eligible Inventory ”
shall mean all Inventory of the Borrower or any Subsidiary which
meets each of the following requirements:
(a)
it is subject to a perfected, first
priority Lien in favor of the Bank and is not subject to any other
assignment, claim or Lien (other than Permitted Liens);
(b)
it is salable and not slow-moving,
obsolete or discontinued, as determined in the reasonable
discretion of the Bank;
(c)
it is in the possession and control of
the Borrower or any Subsidiary and it is stored and held in
facilities owned by the Borrower or any Subsidiary or, if such
facilities are not so owned, the Bank is in possession of a
Collateral Access Agreement with respect thereto;
(d)
it is not Inventory produced in violation
of the Fair Labor Standards Act and subject to the “hot
goods” provisions contained in Title 29 U.S.C.
§215;
(e)
it is not subject to any agreement or
license which would restrict the Bank’s ability to sell or
otherwise dispose of such Inventory;
(f)
it is located in the United States or in
any territory or possession of the United States that has adopted
Article 9 of the Uniform Commercial Code;
(g)
it is not “in transit” to the
Borrower or any Subsidiary or held by the Borrower or any
Subsidiary on consignment;
(h)
it is not “work-in-progress”
Inventory;
(i)
it is not identified to any purchase
order or contract to the extent progress or advance payments are
received with respect to such Inventory;
(j)
it does not breach any of the
representations, warranties or covenants pertaining to Inventory
set forth in the Loan Documents; and
(k)
the Bank shall not have determined in its
reasonable discretion that it is unacceptable due to age, type,
category, quality, quantity and/or any other reason
whatsoever.
Inventory which is at any time Eligible
Inventory but which subsequently fails to meet any of the foregoing
requirements shall forthwith cease to be Eligible
Inventory.
“ Employee Plan ”
includes any pension, stock bonus, employee stock ownership plan,
retirement, profit sharing, deferred compensation, stock option,
bonus or other incentive plan, whether qualified or nonqualified,
or any disability, medical, dental or other health plan, life
insurance or other death benefit plan, vacation benefit plan,
severance plan or other employee benefit plan or arrangement,
including those pension,
profit-sharing and retirement plans of
the Borrower described from time to time in the financial
statements of the Borrower and any pension plan, welfare plan,
Defined Benefit Pension Plans (as defined in ERISA) or any
multi-employer plan, maintained or administered by the Borrower or
to which the Borrower is a party or may have any liability or by
which the Borrower is bound.
“ Environmental Laws ”
shall mean all present or future federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative or judicial orders, consent
agreements, licenses, authorizations and permits of, and agreements
with, any governmental authority, in each case relating to any
matter arising out of or relating to public health and safety, or
pollution or protection of the environment or workplace, including
any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal,
distribution, discharge, emission, release, threatened release,
control or cleanup of any Hazardous Substance.
“ ERISA ” shall mean
the Employee Retirement Income Security Act of 1974, as amended
from time to time.
“ Eurodollar Banking Day
” means the day on which banks in the London Interbank Market
deal in United States dollar deposits and on which banking
institutions are generally open for domestic and international
business in Fort Lauderdale, Florida and in New York
City.
“ Event of Default ”
shall mean any of the events or conditions which are set forth in
Section 11 hereof.
“ Federal Funds Rate ”
shall mean, for any day, a fluctuating interest rate equal for each
day during such period to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Bank from three Federal funds brokers
of recognized standing selected by the Bank. The Bank’s
determination of such rate shall be binding and conclusive absent
manifest error.
“ Funded Debt ” shall
mean all indebtedness for borrowed money, purchase money
indebtedness and indebtedness with respect to capital lease
obligations, including each renewal or extension, if any, in whole
or in part.
“ GAAP ” shall mean
generally accepted accounting principles set forth from time to
time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession),
which are applicable to the circumstances
as of the date of determination, provided, however, that interim
financial statements or reports shall be deemed in compliance with
GAAP despite the absence of footnotes and fiscal year-end
adjustments as required by GAAP.
“ Hazardous Substances
” shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, dielectric fluid
containing levels of polychlorinated biphenyls, radon gas and mold;
(b) any chemicals, materials, pollutant or substances defined
as or included in the definition of “hazardous
substances”, “hazardous waste”, “hazardous
materials”, “extremely hazardous substances”,
“restricted hazardous waste”, “toxic
substances”, “toxic pollutants”,
“contaminants”, “pollutants” or words of
similar import, under any applicable Environmental Law; and
(c) any other chemical, material or substance, the exposure
to, or release of which is prohibited, limited or regulated by any
governmental authority or for which any duty or standard of care is
imposed pursuant to, any Environmental Law.
“ Hedging Agreement ”
shall mean any interest rate, currency or commodity swap agreement,
cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in
interest rates, currency exchange rates or commodity
prices.
“ Hedging Obligation ”
shall mean, with respect to any Person, any liability of such
Person under any Hedging Agreement.
“ Indemnified Party ”
and “ Indemnified Parties ” shall mean,
respectively, each of the Bank and any parent corporation,
Affiliate or Subsidiary of the Bank, and each of their respective
officers, directors, employees, attorneys and agents, and all of
such parties and entities.
“ Intellectual Property
” shall mean the collective reference to all rights,
priorities and privileges relating to intellectual property,
whether arising under United States, multinational or foreign laws
or otherwise, including copyrights, patents, service marks and
trademarks, and all registrations and applications for registration
therefor and all licensees thereof, trade names, domain names,
technology, know-how and processes, and all rights to sue at law or
in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages
therefrom.
“ Interest Charges ”
shall mean, for any period, the sum of: (a) all interest,
charges and related expenses payable with respect to that fiscal
period to a lender in connection with borrowed money or the
deferred purchase price of assets that are treated as interest in
accordance with GAAP, plus (b) the portion of Capitalized
Lease Obligations with respect to that fiscal period that should be
treated as interest in accordance with GAAP, plus (c) all
charges paid or payable (without duplication) during that period
with respect to any Hedging Agreements.
“ Investment ” shall
mean, with respect to any Person, any investment in another Person,
whether by acquisition of any debt or equity security, by making
any loan or advance, by becoming obligated with respect to a
Contingent Liability in respect of obligations of such other Person
(other than travel and similar advances to employees in the
ordinary course of business).
“ Letter of Credit ”
and “ Letters of Credit ” shall mean,
respectively, a letter of credit and all such letters of credit
issued by the Bank, in its sole discretion, upon the execution and
delivery by the Borrower and the acceptance by the Bank of a Master
Letter of Credit Agreement and a Letter of Credit Application, as
set forth in Section 2.6 of this
Agreement.
“ Letter of Credit
Application ” shall mean, with respect to any request for
the issuance of a Letter of Credit, a letter of credit application
in the form being used by the Bank at the time of such request for
the type of Letter of Credit requested which shall contain items
reasonably consistent with the terms of the Loan
Documents.
“ Letter of Credit
Commitment ” shall mean an amount equal to
$1,000,000.00.
“ Letter of Credit Maturity
Date ” shall mean the Revolving Loan Maturity
Date.
“ Letter of Credit
Obligations ” shall mean, at any time, an amount equal to
the aggregate of the original face amounts of all Letters of Credit
minus the sum of (i) the amount of any reductions in the original
face amount of any Letter of Credit which did not result from a
draw thereunder, (ii) the amount of any payments made by the Bank
with respect to any draws made under a Letter of Credit for which
the Borrower has reimbursed the Bank, (iii) the amount of any
payments made by the Bank with respect to any draws made under a
Letter of Credit which have been converted to a Revolving Loan as
set forth in Section 2.6 , and (iv) the portion of
any issued but expired Letter of Credit which has not been drawn by
the beneficiary thereunder. For purposes of determining the
outstanding Letter of Credit Obligations at any time, the
Bank’s acceptance of a draft drawn on the Bank pursuant to a
Letter of Credit shall constitute a draw on the applicable Letter
of Credit at the time of such acceptance.
“ Liabilities ” shall
mean at all times all liabilities of the Borrower that would be
shown as such on a balance sheet of the Borrower prepared in
accordance with GAAP.
“ LIBOR Loan ” or
“ LIBOR Loans ” shall mean that portion, and
collectively those portions, of the aggregate outstanding principal
balance of the Loans that bear interest at the LIBOR
Rate.
“ LIBOR Rate ” shall
mean the relevant Contract Rate equal to the One Month LIBOR plus
the Applicable Margin.
“ Lien ” shall mean,
with respect to any Person, any interest granted by such Person in
any real or personal property, asset or other right owned or being
purchased or acquired by such Person (including an interest in
respect of a Capital Lease) which secures payment or performance of
any obligation and shall include any mortgage, lien, encumbrance,
title retention lien, charge or other security interest of any
kind, whether arising by contract, as a matter of law, by judicial
process or otherwise.
“ Loans ” shall mean,
collectively, all Revolving Loans made by the Bank to the Borrower
and all Letter of Credit Obligations, under and pursuant to this
Agreement.
“ Loan Documents ”
shall mean each of the agreements, documents, instruments and
certificates set forth in Section 3.1 hereof, and any and
all such other instruments, documents, certificates and agreements
from time to time executed and delivered by the Borrower, or any of
its Subsidiaries for the benefit of the Bank pursuant to any of the
foregoing, and all amendments, restatements, supplements and other
modifications thereto.
“ Master Letter of Credit
Agreement ” shall mean, at any time, with respect to the
issuance of Letters of Credit, a Master Letter of Credit Agreement
in the form being used by the Bank at such time which shall contain
terms reasonably consistent with the terms of the Loan
Documents.
“ Material Adverse Effect
” shall mean (a) a material adverse change in, or a material
adverse effect upon, the assets, business, properties, condition
(financial or otherwise) or results of operations of the Borrower
and its Subsidiaries taken as a whole, (b) a material impairment of
the ability of the Borrower and its Subsidiaries to perform any of
the Obligations under any of the Loan Documents, or (c) a material
adverse effect on (i) all or substantially all of the Collateral,
(ii) the legality, validity, binding effect or enforceability
against the Borrower and its Subsidiaries of any of the Loan
Documents, (iii) the perfection or priority of any Lien granted to
the Bank under any Loan Document, or (iv) the rights or remedies of
the Bank under any Loan Document.
“ Net Income ” shall
mean, with respect to the Borrower and its Subsidiaries for any
period, the consolidated net income (or loss) of the Borrower and
its Subsidiaries for such period as determined in accordance with
GAAP, excluding any extraordinary gains and any gains from
discontinued operations, but without giving effect to any gain
resulting from any reappraisal or write-up of any asset.
“ Non-Excluded Taxes ”
shall have the meaning set forth in Section 2.7(a)
hereof.
“ Note ” shall mean,
the Revolving Note, as the same may be amended, modified, increased
or extended from time to time.
“ Obligations ” shall
mean the Loans, as evidenced by any Note, all interest accrued
thereon (including interest which would be payable as post-petition
in connection with any bankruptcy or similar proceeding, whether or
not permitted as a claim thereunder), any fees due the Bank
hereunder, any expenses incurred by the Bank hereunder, including
without limitation, all liabilities and obligations under this
Agreement, under any other Loan Document, any reimbursement
obligations of the Borrower in respect of Letters of Credit and
surety bonds, all Hedging Obligations of the Borrower which are
owed to the Bank or any Affiliate of the Bank, and all Bank Product
Obligations of the Borrower, and any and all other liabilities and
obligations owed by the Borrower to the Bank from time to time,
howsoever created, arising or evidenced, whether direct or
indirect, joint or several, absolute or contingent, now or
hereafter existing, or due or to become due, together with any and
all renewals, extensions, restatements or replacements of any of
the foregoing.
“ Obligor ” shall mean
the Borrower, any Subsidiary of the Borrower, any guarantor,
accommodation endorser, third party pledgor, or any other party
liable to the Bank or its Affiliates with respect to the
Obligations.
“ One Month LIBOR ”
shall mean a per annum rate of interest (rounded upwards, if
necessary, to the next higher 1/16 of 1%) determined by Bank and
equal to the average rate per annum at which deposits (denominated
in United States dollars) in an amount similar to the principal
amount of that Loan and with a maturity of one (1) month are
offered at 11:00 a.m. London time (or as soon thereafter as
practicable) on the Date of Reference by banking institutions in
the London, United Kingdom market, as such interest rate is
referenced and reported by the British Bankers Association on
Reuters Screen LIBOR01 Page or, if the same is unavailable, any
other generally accepted authoritative source of such interest rate
as Bank may reference from time to time.
“ Organizational Identification
Number ” means, with respect to Borrower, the
organizational identification number assigned to Borrower by the
applicable governmental unit or agency of the jurisdiction of
organization of the Borrower.
“ Other Taxes ” shall
mean any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies which arise
from the execution, delivery, enforcement or registration of, or
otherwise with respect to, this Agreement or any of the other Loan
Documents (other than recurring intangible taxes).
“ Permitted Liens ”
shall mean (a) Liens for Taxes, assessments or other
governmental charges not at the time delinquent or thereafter
payable without penalty or being contested in good faith by
appropriate proceedings and, in each case, for which it maintains
adequate reserves in accordance with GAAP and in respect of which
no Lien has been filed; (b) Liens arising in the ordinary course of
business (such as (i) Liens of carriers, warehousemen, mechanics
and materialmen and other similar Liens imposed by law, and (ii)
Liens in the form of deposits or pledges incurred in connection
with worker’s compensation, unemployment compensation and
other types of social security (excluding Liens arising under
ERISA) or in connection with surety bonds, bids,
performance bonds and similar
obligations) for sums not overdue or being contested in good faith
by appropriate proceedings and not involving any advances or
borrowed money or the deferred purchase price of property or
services, which do not in the aggregate materially detract from the
value of the property or assets of the Borrower or materially
impair the use thereof in the operation of the Borrower’s
business and, in each case, for which it maintains adequate
reserves in accordance with GAAP and in respect of which no Lien
has been filed; (c) Liens described on Schedule 9.2 as of
the Closing Date; (d) attachments, appeal bonds,
judgments and other similar Liens, for sums not exceeding Two
Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) arising in
connection with court proceedings, provided the execution or
other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith
and by appropriate proceedings and to the extent such judgments or
awards do not constitute an Event of Default under Section 11.8
hereof; (e) easements, rights of way, restrictions, minor defects
or irregularities in title and other similar Liens not interfering
in any material respect with the ordinary conduct of the business
of the Borrower or any of its Subsidiaries; (f) subject to the
limitation set forth in Section 9.1 , Liens arising in
connection with Capitalized Lease Obligations (and attaching only
to the property being leased) and purchase money Debt (and
attaching only to the Property being purchased); (g) subject to the
limitation set forth in Section 9.1 , Liens that constitute
purchase money security interests on any property securing Debt
incurred for the purpose of financing all or any part of the cost
of acquiring such property, provided that any such Lien
attaches to such property within twenty (20) days of the
acquisition thereof and attaches solely to the property so
acquired; and (h) Liens granted to the Bank hereunder
and under the Loan Documents.
“ Person ” shall mean
any natural person, partnership, limited liability company,
corporation, trust, joint venture, joint stock company,
association, unincorporated organization, government or agency or
political subdivision thereof, or other entity, whether acting in
an individual, fiduciary or other capacity.
“ Prime Loan ” or
“ Prime Loans ” shall mean that portion, and
collectively, those portions of the aggregate outstanding principal
balance of the Loans that bear interest at the Prime Rate
plus the Applicable Margin per annum.
“ Prime Rate ” shall
mean the fluctuating per annum rate of interest which at any time,
and from time to time, shall be most recently publicly announced by
the Bank as its Prime Rate, which is not intended to be the
Bank’s lowest or most favorable rate of interest at any one
time. The effective date of any change in the Prime Rate
shall for purposes hereof be the date the Prime Rate is changed by
the Bank automatically and immediately. The Bank shall not be
obligated to give notice of any change in the Prime
Rate.
“ Raw Materials ”
shall mean all fragrance oils and bulk (oils mixed with alcohol or
lotion).
“ Regulatory Change ”
shall mean the introduction of, or any change in any applicable
law, treaty, rule, or regulation or in the interpretation or
administration thereof by any governmental authority or any central
bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or the lending office of the Bank making
the Loan.
“ Reserves ” shall
mean as of any date of determination, such amounts as Bank may
from time to time establish and revise in good faith reducing the
amount of Revolving Loans and Letters of Credit which would
otherwise be available to Borrower under the lending formula(s)
provided for herein: (i) to reflect events, conditions,
contingencies or risks which, as determined by Bank in good
faith, adversely affect, or would have a reasonable likelihood of
adversely affecting, either (1) the Collateral or any other
property which is security for the Obligations, its value or the
amount that might be received by Bank from the sale or other
disposition or realization upon such Collateral, or (2) the assets,
business or prospects of Borrower or (3) the security interests and
other rights of Bank in the Collateral (including the
enforceability, perfection and priority thereof) or (ii) to
reflect Bank's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower
to Bank is or may have been incomplete, inaccurate or
misleading in any material respect or (iii) to reflect
outstanding Letters of Credit as provided in
Section 2.6 hereof or (iv) in respect of any
state of facts which Bank determines in good faith constitutes
an Unmatured Event of Default or an Event of Default. Without
limiting the generality of the foregoing, Reserves may,
at Bank’s option in its reasonable discretion, be
established to reflect: dilution with respect to the Eligible
Accounts (based on the ratio of the aggregate amount of non-cash
reductions in Eligible Accounts for any trailing twelve-month
period to the aggregate dollar amount of the sales of Borrower for
such period) as calculated by Bank for such period is or is
reasonably anticipated to be greater than five percent (5%);
returns, discounts, claims, credits and allowances of any nature
that are not paid pursuant to the reduction of Eligible
Accounts; sales, excise or similar taxes included in the amount of
any Eligible Accounts reported to Lender; a change in the
turnover, age or mix of the categories of Inventory that adversely
affects the aggregate value of all Inventory; amounts due or to
become due (not in excess of three (3) months) to owners and
lessors of premises where any Collateral is located, other than for
those locations where Bank has received a Collateral Access
Agreement that Bank has accepted in writing. The amount
of any Reserve established by Bank shall have a reasonable
relationship to the event, condition or other matter which is the
basis for such reserve as determined by Bank in good faith and
to the extent that such Reserve is in respect of amounts that may
be payable to third parties Bank may, at its option, deduct
such Reserve from the Revolving Loan Commitment, at any time
that such limit is less than the amount of the Borrowing
Base Amount.
“ Revolving Interest Rate
” shall mean the LIBOR Rate or the Prime Rate, as selected by
PFI, plus the Applicable Margin.
“ Revolving Loan ” and
“ Revolving Loans ” shall mean, respectively,
each direct advance and the aggregate of all such direct advances
made by the Bank to the
Borrower under and pursuant to this
Agreement, as set forth in Section 2.1 of this
Agreement.
“ Revolving Loan
Availability ” shall mean, at any time, an amount equal
to the lesser of (a) the Revolving Loan Commitment
minus the Letter of Credit Obligations, or (b) the Borrowing
Base Amount minus the Letter of Credit Obligations.
“ Revolving Loan Commitment
” shall mean Twenty Million and 00/100 Dollars
($20,000,000.00).
“ Revolving Loan Maturity
Date ” shall mean July 22, 2010, unless extended by the
Bank pursuant to any modification, extension or renewal note
executed by the Borrower and accepted by the Bank in its sole and
absolute discretion in substitution for the Revolving
Note.
“ Revolving Note ”
shall mean that certain Revolving Promissory Note. in the form
prepared by and acceptable to the Bank, dated as of the date
hereof, in the amount of the Revolving Loan Commitment and maturing
on the Revolving Loan Maturity Date, duly executed by the Borrower
and payable to the order of the Bank, together with any and all
renewal, extension, modification or replacement notes executed by
the Borrower and delivered to the Bank and given in substitution
therefor.
“ Subordinated Debt ”
shall mean that portion of the Debt of the Borrower approved by the
Bank in writing from time to time, which shall be subordinated to
the Obligations in a manner satisfactory to the Bank.
“ Subsidiary ” and
“ Subsidiaries ” shall mean, respectively, with
respect to any Person, each and all such corporations,
partnerships, limited partnerships, limited liability companies,
limited liability partnerships, joint ventures or other entities of
which or in which such Person owns, directly or indirectly, such
number of outstanding Capital Securities as have more than fifty
percent (50.00%) of the ordinary voting power for the election of
directors or other managers of such corporation, partnership,
limited liability company or other entity. Unless the context
otherwise requires, each reference to Subsidiaries herein shall be
a reference to Subsidiaries of the Borrower.
“ Taxes ” shall mean
any and all present and future taxes, duties, levies, imposts,
deductions, assessments, charges or withholdings, and any and all
liabilities (including interest and penalties and other additions
to taxes) with respect to the foregoing.
“ UCC ” shall mean the
Uniform Commercial Code in effect in the State of Florida from time
to time.
“ United States Treasury
Securities ” means actively traded United States Treasury
bonds, bills and notes.
“ Unmatured Event of Default
” shall mean any event which, with the giving of notice, the
passage of time or both, would constitute an Event of
Default.
“ Voidable Transfer ”
shall have the meaning set forth in Section 13.21
hereof.
“ Wholly-Owned Subsidiary
” shall mean any Subsidiary of which or in which the Borrower
owns, directly or indirectly, one hundred percent (100%) of the
Capital Securities of such Subsidiary.
1.2.
Accounting Terms
. Any accounting terms used in this
Agreement which are not specifically defined herein shall have the
meanings customarily given them in accordance with GAAP.
Calculations and determinations of financial and accounting
terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Bank
pursuant hereto shall be made and prepared, both as to
classification of items and as to amount, in accordance with sound
accounting practices and GAAP as used in the preparation of the
financial statements of the Borrower on the date of this Agreement.
If any changes in accounting principles or practices from
those used in the preparation of the financial statements are
hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified
Public Accountants (or any successor thereto or agencies with
similar functions), which results in a material change in the
method of accounting in the financial statements required to be
furnished to the Bank hereunder or in the calculation of financial
covenants, standards or terms contained in this Agreement, the
parties hereto agree to enter into good faith negotiations to amend
such provisions so as equitably to reflect such changes to the end
that the criteria for evaluating the financial condition and
performance of the Borrower will be the same after such changes as
they were before such changes; and if the parties fail to agree on
the amendment of such provisions, the Borrower will furnish
financial statements in accordance with such changes, but shall
provide calculations for all financial covenants, perform all
financial covenants and otherwise observe all financial standards
and terms in accordance with applicable accounting principles and
practices in effect immediately prior to such changes.
Calculations with respect to financial covenants required to
be stated in accordance with applicable accounting principles and
practices in effect immediately prior to such changes shall be
reviewed and certified by the Borrower’s
accountants.
1.3.
Other Terms Defined in UCC
. All other capitalized words and
phrases used herein and not otherwise specifically defined herein
shall have the respective meanings assigned to such terms in the
UCC, to the extent the same are used or defined therein.
1.4.
Other Interpretive
Provisions .
(a)
The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
Whenever the context so requires, the neuter gender includes
the masculine and feminine, the single number includes the plural,
and vice versa, and in particular the word “Borrower”
shall be so construed.
(b)
Section and Schedule references are to
this Agreement unless otherwise specified. 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.
(c)
The term “including” is not
limiting, and means “including, without
limitation”.
(d)
In the computation of periods of time
from a specified date to a later specified date, the word
“from” means “from and including”; the
words “to” and “until” each mean “to
but excluding”, and the word “through” means
“to and including”.
(e)
Unless otherwise expressly provided
herein, (i) references to agreements (including this Agreement
and the other Loan Documents) and other contractual instruments
shall be deemed to include all subsequent amendments, restatements,
supplements and other modifications thereto, but only to the extent
such amendments, restatements, supplements and other modifications
are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation shall be
construed as including all statutory and regulatory provisions
amending, replacing, supplementing or interpreting such statute or
regulation.
(f)
To the extent any of the provisions of
the other Loan Documents are inconsistent with the terms of this
Agreement, the provisions of this Agreement shall
govern.
(g)
This Agreement and the other Loan
Documents may use several different limitations, tests or
measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and each
shall be performed in accordance with its terms.
Section
2.
COMMITMENT OF THE BANK
.
2.1.
Revolving Loans
.
(a)
Revolving Loan Commitment
. Subject to the terms and
conditions of this Agreement and the other Loan Documents, and in
reliance upon the representations and warranties of the Borrower
set forth herein and in the other Loan Documents, the Bank agrees
to make such Revolving Loans at such times as
the Borrower may from time to time
request until, but not including, the Revolving Loan Maturity Date,
and in such amounts as the Borrower may from time to time request,
provided, however, that the aggregate principal balance of all
Revolving Loans outstanding at any time shall not exceed the
Revolving Loan Availability. Revolving Loans made by the Bank
may be repaid and, subject to the terms and conditions hereof,
borrowed again up to, but not including the Revolving Loan Maturity
Date unless the Revolving Loans are otherwise accelerated,
terminated or extended as provided in this Agreement. The
Revolving Loans shall be used by the Borrower for the purposes of
(a) refinancing Borrower’s existing indebtedness; and (b)
providing for the working capital requirements and general
corporate purposes of the Borrower.
(b)
Revolving Loan Interest and
Payments . Except as
otherwise provided in this Section 2.1(b) , the principal
amount of the Revolving Loans outstanding from time to time shall
bear interest at the applicable Revolving Interest Rate as selected
by PFI. Accrued and unpaid interest on the unpaid principal
balance of all Revolving Loans outstanding from time to time, shall
be due and payable monthly, in arrears, commencing on August 1,
2008 and continuing on the first day of each calendar month
thereafter, and on the Revolving Loan Maturity Date. From and
after maturity, or after the occurrence and during the continuation
of an Event of Default, interest on the outstanding principal
balance of the Revolving Loans, at the option of the Bank, may
accrue at the Default Rate and shall be payable upon demand from
the Bank.
(c)
Revolving Loan Principal
Payments .
(i)
Revolving Loan Mandatory
Payments . All Revolving
Loans hereunder shall be repaid by the Borrower on the Revolving
Loan Maturity Date, unless payable sooner pursuant to the
provisions of this Agreement. In the event the aggregate
outstanding principal balance of all Revolving Loans and Letter of
Credit Obligations hereunder exceeds the Revolving Loan
Availability, the Borrower shall, without notice or demand of any
kind, immediately make such repayments of the Revolving Loans or
take such other actions as are satisfactory to the Bank as shall be
necessary to eliminate such excess.
2.2.
Intentionally deleted
.
2.3.
Additional LIBOR Loan
Provisions .
(a)
Intentionally deleted
.
(b)
LIBOR Unavailability;
Continuation . If the
Bank determines in good faith (which determination shall be
conclusive, absent manifest error) that (i) the making or
maintenance of any LIBOR Loan would violate any applicable law,
rule, regulation or directive, whether or not having the force of
law, (ii) United
States dollar deposits in the principal
amount for funding any LIBOR Loan are not available in the London
Interbank Eurodollar market in the ordinary course of business,
(iii) by reason of circumstances affecting the London Interbank
Eurodollar market, adequate and fair means do not exist for
ascertaining the LIBOR Rate to be applicable to the relevant LIBOR
Loan, or (iv) the LIBOR Rate does not accurately reflect the cost
to the Bank of a LIBOR Loan, the Bank shall promptly notify the
Borrower thereof and, so long as the foregoing conditions continue,
none of the Loans may be advanced as a LIBOR Loan thereafter.
(c)
Regulatory Change
. In addition, if, after the date
hereof, a Regulatory Change shall, in the reasonable determination
of the Bank, make it unlawful for the Bank to make or maintain the
LIBOR Loans, then the Bank shall promptly notify the Borrower and
none of the Loans may be advanced as a LIBOR Loan thereafter.
In addition, each existing LIBOR Loan shall be immediately
converted to a Prime Loan on the last Business Day of the month or
on such earlier date as required by law, all without further
demand, presentment, protest or notice of any kind, all of which
are hereby waived by the Borrower.
(d)
LIBOR Indemnity
. If any Regulatory Change, or
compliance by the Bank or any Person controlling the Bank with any
request or directive of any governmental authority, central bank or
comparable agency (whether or not having the force of law) shall
(a) impose, modify or deem applicable any assessment, reserve,
special deposit or similar requirement against assets held by, or
deposits in or for the account of or loans by, or any other
acquisition of funds or disbursements by, the Bank; (b) subject the
Bank or any LIBOR Loan to any tax, duty, charge, stamp tax or fee
or change the basis of taxation of payments to the Bank of
principal or interest due from the Borrower to the Bank hereunder
(other than a change in the taxation of the overall net income of
the Bank); or (c) impose on the Bank any other condition regarding
such LIBOR Loan or the Bank’s funding thereof, and the Bank
shall determine (which determination shall be conclusive, absent
manifest error) that the result of the foregoing is to increase the
cost to, or to impose a cost on, the Bank or such controlling
Person of making or maintaining such LIBOR Loan or to reduce the
amount of principal or interest received by the Bank hereunder,
then the Borrower shall pay to the Bank or such controlling Person,
on demand, such additional amounts as the Bank shall, from time to
time, determine are sufficient to compensate and indemnify the Bank
for such increased cost or reduced amount. Bank shall provide
to Borrower a written computation of such costs in reasonable
detail.
2.4.
Interest and Fee Computation;
Collection of Funds .
Except as otherwise set forth herein, all interest and fees
shall be calculated on the basis of a year consisting of 360 days
and shall be paid for the actual number of days elapsed.
Principal payments submitted in funds not immediately
available shall continue to bear interest until collected. If
any payment to be made by the Borrower hereunder or under any Note
shall become due on a day other than a Business Day, such payment
shall be made on the next
succeeding Business Day and such
extension of time shall be included in computing any interest in
respect of such payment. Notwithstanding anything to the
contrary contained herein, the final payment due under any of the
Loans must be made by wire transfer or other immediately available
funds. All payments made by the Borrower hereunder or under
any of the Loan Documents shall be made without setoff,
counterclaim, or other defense. To the extent permitted by
applicable law, all payments hereunder or under any of the Loan
Documents (including any payment of principal, interest, or fees)
to, or for the benefit, of any Person shall be made by the Borrower
free and clear of, and without deduction or withholding for, or
account of, any taxes now or hereinafter imposed by any taxing
authority.
2.5.
Late Charge . If any payment of interest or principal due
hereunder is not made within ten (10) days after such payment is
due in accordance with the terms hereof, then, in addition to the
payment of the amount so due, the Borrower shall pay to the Bank a
“late charge” of five cents for each whole dollar so
overdue to defray part of the cost of collection and handling such
late payment. The Borrower agrees that the damages to be sustained
by the Bank for the detriment caused by any late payment are
extremely difficult and impractical to ascertain, and that the
amount of five cents for each one dollar due is a reasonable
estimate of such damages, does not constitute interest, and is not
a penalty.
2.6.
Letters of Credit
. Subject to the terms and
conditions of this Agreement and upon (i) the execution by the
Borrower and the Bank of a Master Letter of Credit Agreement
(together with all amendments, modifications and restatements
thereof, the “Master Letter of Credit Agreement”), and
(ii) the execution and delivery by the Borrower, of a Letter of
Credit Application, the Bank agrees to issue for the account of the
Borrower such Letters of Credit in the standard form of the Bank
and otherwise in form and substance acceptable to the Bank, from
time to time during the term of this Agreement, provided that the
Letter of Credit Obligations may not at any time exceed the Letter
of Credit Commitment and provided further, that no Letter of Credit
shall have an expiration date later than the Letter of Credit
Maturity Date. The amount of any payments made by the Bank
with respect to draws made by a beneficiary under a Letter of
Credit for which the Borrower has failed to reimburse the Bank upon
the earlier of (i) the Bank’s demand for repayment, or (ii)
five (5) days from the date of such payment to such beneficiary by
the Bank, shall be deemed to have been converted to a Revolving
Loan as of the date such payment was made by the Bank to such
beneficiary. Upon the occurrence of an Event of a Default and
at the option of the Bank, all Letter of Credit Obligations shall
be converted to Revolving Loans consisting of Prime Loans, all
without demand, presentment, protest or notice of any kind, all of
which are hereby waived by the Borrower. To the extent the
provisions of the Master Letter of Credit Agreement differ from, or
are inconsistent with, the terms of this Agreement, the provisions
of this Agreement shall govern.
2.7.
Taxes .
(a)
All payments made by the Borrower under
this Agreement shall be made free and clear of, and without
deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter
imposed, levied, collected, withheld or assessed by any
governmental authority, excluding net income taxes and franchise
taxes (imposed in lieu of net income taxes) imposed on the Bank as
a result of a present or former connection between the Bank and the
jurisdiction of the governmental authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Bank having
executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or any other Loan
Document). If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings (collectively,
“Non-Excluded Taxes”) or Other Taxes are required to be
withheld from any amounts payable to the Bank hereunder, the
amounts so payable to the Bank shall be increased to the extent
necessary to yield to the Bank (after payment of all Non-Excluded
Taxes and Other Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be
required to increase any such amounts payable to the Bank with
respect to any Non-Excluded Taxes that are attributable to the
Bank’s failure to comply with the requirements of subsection
2.7(c).
(b)
The Borrower shall pay any Other Taxes to
the relevant governmental authority in accordance with applicable
law.
(c)
At the request of the Borrower and at the
Borrower’s sole cost, the Bank shall take reasonable steps to
(i) contest its liability for any Non-Excluded Taxes or Other Taxes
that have not been paid, or (ii) seek a refund of any Non-Excluded
Taxes or Other Taxes that have been paid.
(d)
Whenever any Non-Excluded Taxes or Other
Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Bank a certified copy of
an original official receipt received by the Borrower showing
payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes or Other Taxes when due to the appropriate
taxing authority or fails to remit to the Bank the required
receipts or other required documentary evidence or if any
governmental authority seeks to collect a Non-Excluded Tax or Other
Tax directly from the Bank for any other reason, the Borrower shall
indemnify the Bank on an after-tax basis for any incremental taxes,
interest or penalties that may become payable by the
Bank.
(e)
The agreements in this Section shall
survive the satisfaction and payment of the Obligations and the
termination of this Agreement.
2.8.
All Loans to Constitute Single
Obligation . The Loans
shall constitute one general obligation of the Borrower, and shall
be secured by Bank’s priority security
interest in and Lien upon all of the
Collateral and by all other security interests, Liens, claims and
encumbrances heretofore, now or at any time or times hereafter
granted by the Borrower and/or any Subsidiary to Bank.
Section
3.
CONDITIONS OF BORROWING
.
Notwithstanding any other provision of
this Agreement, the Bank shall not be required to make any Loan, if
any of the following conditions shall have occurred.
3.1.
Loan Documents . The Borrower shall have failed to execute and
deliver to the Bank any of the following Loan Documents, all of
which must be satisfactory to the Bank in form, substance and
execution:
(a)
Loan Agreement . Two copies of this Agreement duly executed by
the Borrower.
(b)
Revolving Note . A Revolving Note duly executed by the
Borrower.
(c)
Collateral Access
Agreement. On or before
August 31, 2008, Borrower shall use reasonable efforts to obtain
Collateral Access Agreements dated as of the date of this
Agreement, from the owner, lessor or mortgagee, as the case may be,
of any real estate whereon any portion of the Collateral with a
value in excess of $100,000.00 (as determined by Bank in its sole
and absolute discretion) is stored or otherwise located, in form
acceptable to the Bank.
(d)
Leased Property
. In the case of any leased real
property, on or before August 31, 2008, a consent, in form and
substance satisfactory to the Bank, from the owner and/or mortgagor
of such leased real property subordinating any landlord’s
Lien in respect of personal property kept at the premises subject
to such lease.
(e)
Patent and Trademark Security
Agreement . Two copies
of a Patent and Trademark Security Agreement from PFI in favor of
Bank with respect to all patents and trademarks owned by
PFI.
(f)
Borrowing Base Certificate
. A Borrowing Base Certificate in
the form attached as Exhibit 3.1(g) , certified as accurate
by the Borrower.
(g)
Search Results; Lien
Terminations . Copies of
UCC search reports dated such a date as is reasonably acceptable to
the Bank, listing all effective financing statements which name the
Borrower and any of its domestic Subsidiaries, under its present
names and any previous names, as debtors, together with (i) copies
of such financing statements, (ii) payoff letters evidencing
repayment in full of all existing Debt to be repaid with the Loans,
the termination of all agreements relating thereto and the release
of all Liens granted in
connection therewith, with UCC or other
appropriate termination statements and documents effective to
evidence the foregoing (other than Permitted Liens), and (iii) such
other UCC termination statements as the Bank may reasonably
request.
(h)
Organizational and Authorization
Document . Copies of (i)
the Articles of Incorporation and Bylaws of the Borrower; (ii)
resolutions of the board of the Borrower and each of its domestic
Subsidiaries approving and authorizing such Person’s
execution, delivery and performance of the Loan Documents to which
it is party and the transactions contemplated thereby; (iii)
signature and incumbency certificates of the officers of the
Borrower and each of its domestic Subsidiaries, executing any of
the Loan Documents, each of which the Borrower hereby certifies to
be true and complete, and in full force and effect without
modification, it being understood that the Bank may conclusively
rely on each such document and certificate until formally advised
by the Borrower of any changes therein; and (iv) good standing
certificates in the state of incorporation of the Borrower
and each of its domestic Subsidiaries and in each other state
requested by the Bank.
(i)
Insurance . Evidence satisfactory to the Bank of the
existence of insurance required to be maintained pursuant to
Section 8.6 , together with evidence that the Bank has been
named as a lender’s loss payee.
(j)
Borrower Information
Certificate . A Borrower
Information Certificate in the form attached hereto as Exhibit
“A”, certified as accurate by the Borrower.
(k)
Additional Documents
. Such other certificates,
financial statements, schedules, resolutions, opinions of counsel,
notes and other documents which are provided for hereunder or which
the Bank shall reasonably require.
3.2.
Event of Default
. Any Event of Default, or
Unmatured Event of Default shall have occurred and be
continuing.
3.3.
Material Adverse Effect
. Other than disclosed to the Bank
by PFI in writing, since March 31, 2008, there shall have occurred
an event having a Material Adverse Effect upon the
Borrower.
3.4.
Litigation . Other than as disclosed to the Bank in
writing, any litigation or governmental proceeding shall have been
instituted against the Borrower or any of its officers or
shareholders having a Material Adverse Effect upon the
Borrower.
3.5.
Representations and
Warranties . Any
representation or warranty of the Borrower contained herein or in
any Loan Document shall be untrue or incorrect as of the date of
any Loan as though made on such date, except to the extent such
representation or warranty expressly relates to an earlier
date.
3.6.
Commitment Fee . The Borrower shall have failed to pay to the
Bank a commitment fee in the amount of Seventy-Five Thousand and
00/100 Dollars ($75,000.00) in connection with the Loan, payable on
or before the execution of this Agreement by the Bank.
Section
4.
NOTES EVIDENCING LOANS
.
4.1.
Revolving Note . The Revolving Loans and the Letter of Credit
Obligations shall be evidenced by the Revolving Note. At the
time of the initial disbursement of a Revolving Loan and at each
time any additional Revolving Loan shall be requested hereunder or
a repayment made in whole or in part thereon, a notation thereof
shall be made on the books and records of the Bank. All
amounts recorded shall be, absent manifest error, conclusive and
binding evidence of (i) the principal amount of the Revolving Loans
advanced hereunder and the amount of all Letter of Credit
Obligations, (ii) any accrued and unpaid interest owing on the
Revolving Loans, and (iii) all amounts repaid on the Revolving
Loans or the Letter of Credit Obligations. The failure to
record any such amount or any error in recording such amounts shall
not, however, limit or otherwise affect the obligations of the
Borrower under the Revolving Note to repay the principal amount of
the Revolving Loans, together with all interest accruing
thereon.
Section
5.
MANNER OF BORROWING
.
5.1.
Borrowing Procedures
. Each Revolving Loan may be
advanced as a LIBOR Loan. Each Loan shall be made available
to the Borrower upon any written, verbal, electronic, telephonic or
telecopy loan request which the Bank in good faith bel
