<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED October 2, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_______________________ TO _______________________
Commission file number 1-13474
FLORSHEIM GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3520923
- ------------------------------------------------ -------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
200 North LaSalle Street, Chicago, Illinois 60601-1014
- ------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 458-2500
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes [x] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,453,651 Shares as of October 29, 1999
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<PAGE> 2
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheet:
October 2, 1999 and January 2, 1999
Condensed Consolidated Statement of Operations and Comprehensive
Earnings:
Three Months Ended October 2, 1999 and October 3, 1998
Nine Months Ended October 2, 1999 and October 3, 1998
Condensed Consolidated Statement of Cash Flows:
Nine Months Ended October 2, 1999 and October 3, 1998
Notes to Condensed Consolidated Financial Statements
Item 2. Managements's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk
2
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FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
January 2, October 2,
1999 1999
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,931 $ 4,578
Receivables, less allowances of $1,207 at
January 2, 1999 and $2,188 at October 2, 1999 33,370 34,681
Inventories 79,855 82,884
Other current assets 10,170 11,419
--------- ---------
Total current assets 130,326 133,562
Property, plant and equipment, net 30,981 31,773
Deferred taxes net 12,852 14,451
Other assets 25,407 28,623
--------- ---------
Total Assets $ 199,566 $ 208,409
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank credit facility - current portion $ 18,500 $ 31,117
Accounts payable and accrued expenses 28,374 25,759
--------- ---------
Total current liabilities 46,874 56,876
Bank credit facility 58,500 65,000
Long-term debt 18,412 18,412
Other long-term liabilities 22,433 20,760
--------- ---------
Total liabilities 146,219 161,048
Shareholders' equity:
Common stock, 20,000,000 shares authorized, without par value,
$1.00 stated value, 8,453,651 shares issued and outstanding 8,454 8,454
Paid-in capital 50,580 50,580
Accumulated other comprehensive loss-
Translation adjustment (2,335) (2,341)
Accumulated deficit (3,352) (9,332)
--------- ---------
Total shareholders' equity 53,347 47,361
--------- ---------
Total Liabilities and Shareholders' Equity $ 199,566 $ 208,409
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE EARNINGS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months Three months
ended ended
October 3, October 2,
1998 1999
----------- -----------
<S> <C> <C>
Net sales $ 60,258 $ 57,455
Cost of sales 32,786 33,355
Costs associated with plant closing -- 2,000
----------- -----------
Gross profit 27,472 22,100
Selling, general and administrative expenses 24,235 26,048
Other income (expense) (40) (34)
----------- -----------
Earnings (loss) from operations 3,197 (3,914)
Interest expense, net 2,294 2,819
----------- -----------
Earnings (loss) before income tax expense
and extraordinary item 903 (6,733)
Income tax expense (benefit) 340 (1,111)
----------- -----------
Net earnings (loss) before extraordinary item 563 (5,622)
Extraordinary item, net of tax -- (750)
----------- -----------
Net loss 563 (6,372)
Other comprehensive earnings (loss)
Foreign currency translation adjustment (1,243) (46)
----------- -----------
Comprehensive earnings (loss) $ (680) $ (6,418)
=========== ===========
EARNINGS (LOSS) PER SHARE
Basic:
Earnings (loss) before extraordinary item $ 0.07 $ (0.66)
Extraordinary item -- (0.09)
----------- -----------
Net earnings (loss) $ 0.07 $ (0.75)
=========== ===========
Diluted:
Earnings (loss) before extraordinary item $ 0.07 $ (0.66)
Extraordinary item -- (0.09)
----------- -----------
Net earnings (loss) $ 0.07 $ (0.75)
=========== ===========
Weighted average number of shares outstanding
Basic 8,413,151 8,453,651
Diluted 8,612,151 8,453,651
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE EARNINGS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
October 3, October 2,
1998 1999
----------- -----------
<S> <C> <C>
Net sales $ 180,740 $ 183,524
Cost of sales 96,834 99,554
Costs associated with plant closing -- 2,000
----------- -----------
Gross profit 83,906 81,970
Selling, general and administrative expenses 74,589 79,321
Other expenses (47) 1,115
----------- -----------
Earnings from operations 9,270 1,534
Interest expense, net 6,610 7,646
----------- -----------
Earnings (loss) before income tax expense and
extraordinary item 2,660 (6,112)
Income tax expense (benefit) 973 (882)
----------- -----------
Net earnings (loss) before extraordinary item 1,687 (5,230)
Extraordinary item, net of tax -- 750
----------- -----------
Net earnings (loss) 1,687 (5,980)
Other comprehensive earnings (loss) -
Foreign currency translation adjustment (1,404) (3)
----------- -----------
Comprehensive earnings $ 283 $ (5,983)
=========== ===========
EARNINGS (LOSS) PER SHARE
Basic:
Earnings (loss) before extraordinary item $ 0.20 $ (0.62)
Extraordinary item -- (0.09)
----------- -----------
Net earnings (loss) $ 0.20 $ (0.71)
=========== ===========
Diluted:
Earnings (loss) before extraordinary item $ 0.20 $ (0.62)
Extraordinary item -- (0.09)
----------- -----------
Net earnings (loss) $ 0.20 $ (0.71)
=========== ===========
Weighted average number of shares outstanding
Basic 8,412,984 8,453,651
Diluted 8,639,353 8,453,651
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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FLORSHEIM GROUP INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars and thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
October 3, October 2,
1998 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 1,687 $ (5,980)
Adjustments to reconcile net earnings to net cash
used in operating activities:
Gain on disposal of assets (20) (1,215)
Depreciation and amortization 3,525 4,779
Deferred taxes 723 (1,643)
Extraordinary item -- 750
Noncash interest expense 323 376
Decrease (increase) in receivables (9,903) (1,311)
Decrease (increase) in inventories 2,973 (3,029)
Decrease (increase) in other current assets (6,783) (4,335)
Increase (decrease) in accounts payable and
accrued expenses (2,787) (2,473)
Decrease in income taxes payable -- (145)
Decrease in other long-term liabilities (310) (1,673)
-------- --------
Net cash used in operating activities (10,572) (15,899)
-------- --------
Cash flows from investing activities:
Proceeds from the disposal of assets 785 465
Additions to property, plant and equipment (7,810) (6,036)
-------- --------
Net cash used in investing activities (7,025) (5,571)
-------- --------
Cash flows from financing activities--
Net borrowing under revolving credit facility 13,887 19,117
-------- --------
Net decrease in cash and cash equivalents (3,710) (2,353)
Cash and cash equivalent at beginning of period 7,195 6,931
-------- --------
Cash and cash equivalents at end of period $ 3,485 $ 4,578
======== ========
Supplemental disclosure:
Cash payments for income taxes, net $ 915 $ 24
Cash payments for interests $ 6,909 $ 7,849
</TABLE>
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FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 2, 1999
(Dollars in thousands)
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements of
Florsheim Group Inc. ("Florsheim" or the "Company) have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating
results for the three month and nine month periods ended October 2,
1999 are not necessarily indicative of the results that may be
expected for the year ended January 1, 2000.
The balance sheet at January 2, 1999 has been derived from the
audited financial statements at that date, but does not include all
of the information and notes required by generally accepted
accounting principles for complete financial statements.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual
report in Form 10-K for the fiscal year ended January 2, 1999.
(2) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
January 2, October 2,
1999 1999
---------- ----------
<S> <C> <C>
Retail merchandise $39,375 $37,094
Finished Products 32,621 37,103
Work-in process 1,172 597
Raw materials 6,687 8,090
------- -------
$79,855 $82,884
======= =======
</TABLE>
(3) LONG TERM DEBT
On August 23, 1999, the Company refinanced its existing
indebtedness with a $110.0 million Credit Facility (the "Credit
Facility") with a new bank. Borrowings under the Credit Facility
are subject to borrowing base availability ($109.8 million at
October 2, 1999). Borrowings outstanding under the Credit Facility
were $96.1 million at October 2 ,1999, $65.0 million of which are
classified as long-term. Interest on the outstanding borrowing
(8.5% at October 2,1999) are based on alternative floating rate
structures, at the Company's option, and various covenant ratios.
7
<PAGE> 8
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 2, 1999
(Dollars in thousands)
(Unaudited)
The Credit Facility is secured by substantially all domestic
accounts receivable, inventory and property, plant and equipment as
well as the capital stock of certain foreign subsidiaries. The
Credit Facility requires a minimum EBITDA (earnings before interest
expense, income taxes, depreciation and amortization and other
non-recurring items) to interest expense, commencing January 1,
2000. The Credit Facility, provides various other restrictions,
including limitations on the incurrence of additional indebtedness.
The Credit Facility provides for an unused line fee of 0.375% per
annum of the credit limit. Letters of credit are permitted by the
Credit Facility, but reduce the amount of availability. Letters of
credit of $6.7 million were outstanding at October 2 ,1999.
In connection with the refinancing, the Company recorded an
extraordinary charge of $0.75 million (net of tax benefits of $0.4
million) related to the write-off of deferred financing fees
associated with the old credit facility.
(4) PLANT CLOSING
In September 1999, the Company recorded a $2.0 million charge
related to the closing of its Cape Girardeau, Missouri
manufacturing facility. The charge has been reflected as "Costs
Associated with Plant Closing", a separate component of cost of
goods sold in the accompanying statement of operations. The
facility will cease operations in December 1999 and is expected to
be disposed of in 2000. A summary of the charge is as follows (in
thousands):
<TABLE>
<S> <C>
Severance $ 501
Employee Benefit Costs 154
Property and Equipment 595
Inventory 750
------
$2,000
======
</TABLE>
8
<PAGE> 9
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 2, 1999
(Dollars in thousands)
(Unaudited)
The severance costs include the severance and related payroll taxes
for 186 employees in the Cape Girardeau facility as well as certain
other personnel who support the operation. Employee benefit costs
include pension costs and post-employment related benefit costs.
Property and equipment costs reflect the write-off of equipment to
the net realizable value, carrying costs associated with the
facility and costs associated with the buyout of certain leased
equipment. Inventory adjustments relate to the write-down to net
realizable value of raw material inventory which will result from
the plant closing. Approximately $1.0 million of the plant closing
charge is a cash charge, with the remaining $1.0 million being a
non-cash charge.
(5) OTHER EXPENSE
During the second quarter of 1999 the Company recorded a $1.1
million charge to income related to the resignation of its former
Chief Executive Officer and for costs associated with an evaluation
of strategic alternatives by its financial advisor. The charge is
included in Other Expense.
(6) EARNINGS PER SHARE
The Company presents basic and diluted earnings per share. Basic
earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution that could occur
if securities or other contracts to issue common stock were
exercised. Basic and diluted earnings per share do not include
securities in instances where they would be antidilutive.
The following table provides a reconciliation of the weighted
average shares outstanding used in calculating basic and diluted
earnings per share (000's):
<TABLE>
<CAPTION>
Three months ended Nine months ended
October 3, October 2, October 3, October 2,
1998 1999 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding - basic 8,413 8,454 8,413 8,454
Assumed exercise of stock options 199 -- 226 --
----- ----- ----- -----
Weighted average shares
outstanding - diluted 8,612 8,454 8,639 8,454
===== ===== ===== =====
</TABLE>
9
<PAGE> 10
FLORSHEIM GROUP INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 2, 1999
(Dollars in thousands)
(Unaudited)
(7) BUSINESS SEGMENT INFORMATION
Operating segment information is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 3, October 2, October 3, October 2,
1998 1999 1998 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales
U.S. Wholesale $ 22,741 $ 22,809 $ 66,828 $ 74,679
U.S. Retail 25,900 24,065 79,936 75,048
International 11,617 10,581 33,976 33,797
--------- --------- --------- ---------
$ 60,258 $ 57,455 $ 180,740 $ 183,524
========= ========= ========= =========
<CAPTION>
Earnings (Loss) from Operations
<S> <C> <C> <C> <C>
U.S. Wholesale $ 4,583 $ (3,107) $ 13,352 $ 2,723
U.S. Retail (2,208) (2,296) (5,849) (4,087)
International 822 1,489 1,767 2,898
--------- --------- --------- ---------
$ 3,197 $ (3,914) $ 9,270 $ 1,534
========= ========= ========= =========
<CAPTION>
Total Assets
January 2, October 2,
1999 1999
---------- ----------
<S> <C> <C>
U.S. Wholesale $ 105,459 $ 120,044
U.S. Retail 71,544 65,364
International 22,563 23,001
--------- ---------
$ 199,566 $ 208,409
========= =========
</TABLE>
U.S. Wholesale includes certain corporate expenses and assets which are not
charged to other reportable segments.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months ended October 2, 1999 Compared to the Three Months ended October 3,
1998
Net sales for the three months ended October 2, 1999 were $57.5 million, down
$2.8 million, or 4.7%, as compared to the three months ended October 3, 1998.
Net sales were negatively impacted by problems associated with the
implementation of the Company's new wholesale computer software system. The
systems problems resulted in reduced shipments to wholesale customers as well as
to the Company's U.S. Retail business. U.S. Retail net sales decreased $1.8
million, or 7.1%, as a result of planned store closings. U.S. Specialty Stores
same store sales increased of 1.1% over the comparable 1998 period.
International sales decreased $1.0 million due largely to the bankruptcy of a
large Canadian customer.
Gross profit margin for the third quarter 1999 was 38.5% of net sales, as
compared to 45.6% of net sales for the third quarter 1998. The 1999 period
included a $2.0 million charge related to the closing of the Company's Cape
Girardeau, Missouri manufacturing facility. Excluding the effect of the plant
closing charge, gross profit margin was 41.9%. Gross profit margin was also
negatively impacted by increased sales of close out products and the effect of
the write-down of excess inventory resulting from problems associated with the
Company's new computer system.
Selling, general and administrative expenses for the third quarter 1999 were
$26.0 million, an increase of $1.8 million from the third quarter 1998. Selling,
general and administrative expenses for the third quarter 1999 were 45.3% of net
sales, an increase from 40.2% of net sales for the third quarter of 1998,
partially due to an additional provision for bad debt reserves, higher
depreciation expense, primarily related to the Company's computer systems
upgrades, and increased costs associated with the implementation of the new
computer system.
Loss from operations for the third quarter 1999 was $6.7 million, compared to
income of $0.9 million in the 1998 period. The decrease reflects the effects of
the reduced sales due to computer system issues, costs associated with the plant
closing and the increased selling, general and administrative expense as noted
above.
Interest expense for the third quarter 1999 was $2.8 million as compared to the
third quarter 1998 amount of $2.3 million. This increase is due to increased
borrowings during the third quarter 1999 as compared to the third quarter 1998
and an increase in the weighted average interest rate under the Company's new
credit facility. (See Note 3 to Condensed Consolidated Financial Statements).
Income tax benefit for the third quarter of 1999 was $1.1 million, compared to
income tax expense of $0.3 million in the 1998 period. The effective tax rate
for 1999 was 16.5% compared to 37.7% in 1998. The 1999 period includes the
write-off of $1.3 million of foreign tax credits which will expire in fiscal
2000. The Company conducted a review of its tax position and concluded the tax
credit will not be utilized in fiscal 2000 and will expire.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONT'D).
The Company recorded an extraordinary charge of $0.75 million net-of-tax, $1.1
million pretax, in the third quarter for the write-off of deferred financing
fees related to the Company's old bank credit facility. The refinancing was
completed in August 1999. (See Liquidity and Capital Resources).
Nine Months Ended October 2, 1999 Compared to Nine Months Ended October 3, 1998
Net sales for the nine months ended October 2, 1999 were $183.5 million, up $2.8
million, or 1.5%, as compared to the nine months ended October 3, 1998. U.S.
wholesale net sales increased $7.9 million, or 11.7%. The increase was across
all channels of distribution within U.S. Wholesale. The increase was primarily
in department stores, which was led by J.C. Penney's, a new customer in the
second quarter of 1998. New products showed significant gains, with the
successful launch of the MagneForce golf shoe line. U.S. Retail net sales
decreased $4.9 million, or 6.1%, as a result of store closings, however, same
store sales at U.S. specialty stores improved 3.2% over the prior year.
Gross profit margin for the first half of 1999 was 44.7% of net sales as
compared to 46.4% of net sales for the first half 1998. 1999 included a $2.0
million plant closing charge. Excluding the effect of the charge, gross profit
margin for the 1999 period was 45.8%. Gross profit margin was negatively
effected by the write-down of excess inventory resulting from the Company's new
computer system and the effect of sales of close-out products.
Selling, general and administrative expenses for the nine months ended October
2, 1999 were $79.3 million, an increase of $4.7 million, or 6.3%, compared to
the 1998 period. Selling, general and administrative expenses for 1999 were
43.2% of net sales, an increase from 41.3% of net sales for 1998. The increased
expense was due to higher bad debt expense, increased depreciation expense
related to the computer system upgrade, and increased costs due to the
implementation of the new computer systems.
Other expense for the nine months ended October 2, 1999 includes a $1.1 million
charge related to the costs related to the review of strategic alternatives by
the Company and costs associated with the resignation of the Company's former
Chief Executive Officer.
Earnings from operations for the nine months ended October 2, 1999 were $1.5
million, compared to $9.3 million in the 1998 period. The decrease was due to
costs associated with the plant closing, increased selling, general and
administrative expense and other expense as noted above, as well as the decrease
in gross profit.
Interest expense for the nine months ended October 2, 1999 was $7.6 million, as
compared to $6.6 million in 1998. This increase is due to increased outstanding
borrowings under the credit facility during 1999 as compared to the 1998 period
and an increase in the weighted average interest rate under the new bank credit
facility.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONT'D).
Income tax benefit for the nine months ended October 2, 1999 was $0.9 million
compared to income tax expense of $1.0 million in the comparable 1998 period.
The effective tax rate for 1999 was 14.4% compared to 36.6% in 1998. The 1999
period reflects the effect of the write-off of $1.3 million of foreign tax
credits as previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital
Working capital at October 2, 1999 was $76.7 million, as compared to $83.5
million at January 2, 1999. The decrease is primarily due to increase borrowing
under the bank credit facility. Additional borrowings were made to finance
increases in accounts receivable and inventory, a reduction in accounts payable
and accrued expenses, to fund capital expenditures and to pay fees and expenses
associated with the new credit facility.
In August 1999 the Company completed a refinancing of its bank credit facility.
See Note 3 to Condensed Consolidated Financial Statements for a description of
the new credit facility.
INFORMATION TECHNOLOGY UPGRADE AND YEAR 2000
General
The Company is currently working to resolve the potential impact of the Year
2000 Issue on the processing of time-sensitive information by its computerized
information systems. Year 2000 issues may arise as the result of computer
programs being written using two digits rather than four to define the
applicable year. Any of the Company's computer programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This situation could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
related activities.
The Company named a task force in April 1998 to assess and develop action plans
to address and assess the potential impact of the Year 2000 Issue. The task
force is also responsible to evaluate the exposures from third party (e.g.
suppliers and customers) failures to correct their systems for Year 2000.
Commencing in May 1998, questionnaires were sent to the third parties identified
by various areas of the Company's operating units. The task force has reviewed
all responses to identify potential Year 2000 risks.
Internal Systems
The Company completed an assessment of the impact of the Year 2000 issues on its
internal systems and determined that it has to modify or replace portions of its
computer hardware and
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONT'D).
software to enable these systems to function properly with respect to dates in
the Year 2000 and thereafter. These issues are being addressed as part of the
overall information technology upgrade described in the following paragraph. The
Company believes that the Year 2000 issue will not pose significant operational
problems for its internal computer systems.
The Company is in the process of a significant information technology upgrade,
costing approximately $13.0 million, which is being capitalized during 1997,
1998 and 1999. The Year 2000 issue is being addressed within this upgrade. The
Company is utilizing both internal and external resources to reprogram or
replace, and test equipment and software to resolve the Year 2000 Issue. The
Company has completed two of the three phases of the upgrade, which include the
financial systems and the wholesale and warehouse systems. The Company
anticipates completing the retail system which is the third phase of system
upgrade and the Year 2000 in November, 1999. The Company is currently developing
a contingency plan for the retail system. Total costs for the system upgrade to
date are approximately $11.9 million.
The costs of the systems project and the date on which the Company believes it
will complete the Year 2000 modifications are based upon management's best
estimates, which were derived by utilizing numerous assumptions of future
events, including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no guarantee that
these estimates will be achieved and the actual results could differ materially
from those anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes and the impact of third party information system failures.
Suppliers
The Company utilizes numerous suppliers to supply materials and components for
its various products. As noted above, the Company has surveyed all of its major
suppliers regarding their Year 2000 status. A number of suppliers have returned
completed questionnaires to the Company, some of which state that they are
either Year 2000 compliant or that they anticipate that they will be Year 2000
compliant by a date early enough to avoid any disruption. However, the Company,
is unable to verify this information, and it is possible that the advice
received from suppliers may be erroneous. Moreover, certain suppliers have not
yet responded to the Company's request for information and may not be Year 2000
compliant. The Company does not currently anticipate that suppliers' Year 2000
issues would have a material adverse effect on the Company.
Service Providers
The Company has submitted questionnaires to, but is not currently aware of the
Year 2000 readiness of, certain outside service companies such as freight,
telecommunications and utility providers. Failure of certain of these providers
to be Year 2000 compliant could have a material adverse effect on the Company
which is not currently quantifiable, and it is possible that the Company's
operations could be seriously disrupted.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (CONT'D).
Customers
The Company's major customers have been surveyed by the Company for Year 2000
compliance, and the Company is in the process of evaluating responses. A
customer's Year 2000 issues could cause a delay in receipt of purchase orders or
in payment. If Year 2000 issues are widespread among the Company's customers,
the Company's sales and cash flows could be materially adversely affected.
FORWARD LOOKING STATEMENTS
When used in this discussion, the words "believes" and "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, over which the Company has no
control, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place reliance on these forward-looking
statements, which speak only as of the date hereof. The Company undertakes no
obligations to republish revised forward-looking statements to reflect events or
circumstances after the date thereof or to reflect the occurrence of
unanticipated events. Readers are also urged to carefully review and consider
the various disclosures made by the Company in this report, as well as the
Company's periodic reports with the Securities Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISKS
There have been no material changes in the Company's market risk during the nine
month period ended October 2, 1999. For additional information, refer to Item 7A
in the Company's Annual Report on form 10-K for the year ended January 2, 1999.
15
<PAGE> 16
PART II OTHER INFORMATION
Item 4. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
Exhibit
Number Description
------ -----------
4.1 Amended and Restated Credit Agreement dated August 23,
1999 among the Company and BT Commercial Corporation,
as Agent, and Lenders party thereto.
27 Financial Data Schedule
(b) Form 8-K was not required to be filed during the quarter ended
October 2, 1999.
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLORSHEIM GROUP INC.
(Registrant)
By /s/ Richard J. Anglin
---------------------------------
Richard J. Anglin
Executive Vice-President,
Chief Financial Officer
Date: November 15, 1999
17
<PAGE> 1
EXHIBIT 4.1
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
$110,000,000
AMONG
FLORSHEIM GROUP INC. AND EACH OF ITS
SUBSIDIARIES PARTY HERETO
AS BORROWERS,
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 11.8 HEREOF,
AS LENDERS,
AND
BT COMMERCIAL CORPORATION,
AS AGENT
DATED AS OF AUGUST 23, 1999
================================================================================
This Amended and Restated Credit Agreement is secured
by, among other things, two Deeds of Trust and
Security Agreements, each dated as of May 9, 1997 as
amended by amendments dated as of the date hereof,
encumbering properties in the Counties of Cape
Girardeau and Cole, Missouri, each Securing Future
Obligations and Future Advances.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
----
<S> <C>
1 DEFINITIONS..............................................................................................2
1.1 General Definitions.............................................................................2
1.2 Accounting Terms and Determinations............................................................19
1.3 Other Terms; Headings..........................................................................19
2 REVOLVING LOANS.........................................................................................19
2.1 Revolving Credit Commitments...................................................................19
2.2 Borrowing of Revolving Loans...................................................................20
2.3 Notice of Request for Lender Advances..........................................................21
2.4 Periodic Settlement of Agent Advances; Interest and Fees; Statements...........................21
2.5 Sharing of Payments............................................................................22
2.6 Defaulting Lenders.............................................................................23
2.7 Reliance on Notices; Appointment of Borrower Representative....................................24
3 LETTERS OF CREDIT.......................................................................................24
3.1 Issuance of Letters of Credit..................................................................24
3.2 Terms of Letters of Credit.....................................................................25
3.3 Notice of Issuance.............................................................................25
3.4 Lenders' Participation.........................................................................25
3.5 Payments of Amounts Drawn Under Letters of Credit..............................................25
3.6 Payment by Lenders.............................................................................25
3.7 Obligations Absolute...........................................................................26
3.8 Agent's Execution of Applications and Other Issuing Bank Documentation:
Reliance on Credit Agreement by Issuing Bank...................................................26
4 COMPENSATION, REPAYMENT AND REDUCTION OF COMMITMENTS....................................................26
4.1 Interest on Revolving Loans....................................................................26
4.2 Unused Line Fee................................................................................27
4.3 Letter of Credit Fees..........................................................................27
4.4 Interest and Letter of Credit Fees After Event of Default......................................28
4.5 Expenses.......................................................................................28
4.6 Mandatory Payment; Reductions of Commitments...................................................28
4.7 Maintenance of Loan Account; Statements of Account.............................................29
4.8 Payment Procedures.............................................................................29
4.9 Collection of Accounts.........................................................................29
4.10 Distribution and Application of Collections and Other Amounts..................................30
4.11 Calculations...................................................................................30
4.12 Special Provisions Relating to LIBOR Rate Loans................................................31
4.13 Indemnification in Certain Events..............................................................34
5 CONDITIONS PRECEDENT....................................................................................35
5.1 Conditions Precedent to the Credit Agreement...................................................35
5.2 Conditions Precedent to All Revolving Loans and Letters of Credit..............................36
</TABLE>
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<TABLE>
<S> <C>
6 REPRESENTATIONS AND WARRANTIES..........................................................................36
6.1 Organization and Qualification.................................................................37
6.2 Authority......................................................................................37
6.3 Enforceability.................................................................................37
6.4 No Conflict....................................................................................37
6.5 Consents and Filings...........................................................................37
6.6 Government Regulation..........................................................................37
6.7 Solvency.......................................................................................38
6.8 Rights in Collateral; Priority of Liens........................................................38
6.9 Financial Data.................................................................................38
6.10 Locations of Offices, Records and Inventory....................................................38
6.11 Subsidiaries; Ownership of Stock...............................................................39
6.12 No Judgments or Litigation.....................................................................39
6.13 No Defaults....................................................................................39
6.14 Labor Matters..................................................................................39
6.15 Compliance with Law............................................................................39
6.16 ERISA..........................................................................................39
6.17 Compliance with Environmental Laws.............................................................40
6.18 Intellectual Property..........................................................................40
6.19 Licenses and Permits...........................................................................40
6.20 Taxes and Tax Returns..........................................................................41
6.21 Material Contracts.............................................................................42
6.22 Accuracy and Completeness of Information.......................................................42
6.23 Year 2000......................................................................................42
6.24 No Change......................................................................................42
7 AFFIRMATIVE COVENANTS...................................................................................42
7.1 Financial Reporting............................................................................42
7.2 Collateral Reporting...........................................................................44
7.3 Notification Requirements......................................................................45
7.4 Corporate Existence............................................................................46
7.5 Books and Records; Inspections.................................................................47
7.6 Insurance......................................................................................47
7.7 Taxes..........................................................................................48
7.8 Compliance with Laws...........................................................................48
7.9 Use of Proceeds................................................................................48
7.10 Fiscal Year....................................................................................49
7.11 Maintenance of Property........................................................................49
7.12 ERISA Documents................................................................................49
7.13 Environmental and Other Matters................................................................49
7.14 Year 2000 Compliance Reports...................................................................50
7.15 Further Assurances.............................................................................50
8 NEGATIVE COVENANTS......................................................................................50
8.1 Interest Coverage Ratio........................................................................50
8.2 Capital Expenditures...........................................................................51
8.3 Additional Indebtedness........................................................................51
</TABLE>
ii
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<TABLE>
<S> <C>
8.4 Liens..........................................................................................52
8.5 Contingent Obligations.........................................................................53
8.6 Sale of Assets.................................................................................53
8.7 Restricted Payments............................................................................54
8.8 Investments....................................................................................54
8.9 Affiliate Transactions.........................................................................55
8.10 Restrictions on Foreign Subsidiary Trade Support...............................................56
8.11 Additional Bank Accounts.......................................................................56
8.12 Additional Negative Pledges....................................................................56
8.13 Additional Subsidiaries........................................................................57
9 EVENTS OF DEFAULT AND REMEDIES..........................................................................57
9.1 Events of Default..............................................................................57
9.2 Acceleration, Termination of Commitments and Cash Collateralization............................58
9.3 Rescission of Acceleration.....................................................................59
9.4 Remedies.......................................................................................59
9.5 Right of Setoff................................................................................59
9.6 License of Use of Software and Other Intellectual Property.....................................59
9.7 Application of Proceeds; Surplus; Deficiencies.................................................59
10 THE AGENT...............................................................................................60
10.1 Appointment of Agent...........................................................................60
10.2 Nature of Duties of Agent......................................................................60
10.3 Lack of Reliance on Agent......................................................................60
10.4 Certain Rights of the Agent....................................................................61
10.5 Reliance by Agent..............................................................................61
10.6 Indemnification of Agent.......................................................................61
10.7 The Agent in its Individual Capacity...........................................................62
10.8 Holders of Revolving Notes.....................................................................62
10.9 Successor Agent................................................................................62
10.10 Collateral Matters.............................................................................63
10.11 Actions with Respect to Defaults...............................................................64
10.12 Delivery of Information........................................................................64
11 MISCELLANEOUS...........................................................................................64
11.1 GOVERNING LAW..................................................................................64
11.2 SUBMISSION TO JURISDICTION.....................................................................64
11.3 SERVICE OF PROCESS.............................................................................65
11.4 JURY TRIAL.....................................................................................65
11.5 LIMITATION OF LIABILITY........................................................................65
11.6 Delays.........................................................................................65
11.7 Notices........................................................................................65
11.8 Assignments and Participations.................................................................66
11.9 Confidentiality................................................................................67
11.10 Indemnification................................................................................67
11.11 Amendments and Waivers.........................................................................68
11.12 Counterparts and Effectiveness.................................................................68
</TABLE>
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<TABLE>
<S> <C>
11.13 Severability...................................................................................69
11.14 Maximum Rate...................................................................................69
11.15 Entire Agreement; Successors and Assigns.......................................................69
ANNEXES
Annex I List of Lenders; Commitment Amounts; and Applicable Lending Offices
SCHEDULES
Schedule A Closing Document List
Schedule B Disclosure Schedules
Schedule B, Part 6.1 States in which Qualified
Schedule B, Part 6.9 Contingent Obligations and Other Liabilities
Schedule B, Part 6.10 Principal Places of Business; Locations of Collateral
Schedule B, Part 6.11 Subsidiaries
Schedule B, Part 6.12 Pending Judgments, Litigation and other Claims
Schedule B, Part 6.14 Labor Contracts
Schedule B, Part 6.16 Plans
Schedule B, Part 6.17 Environmental Matters
Schedule B, Part 6.20 Tax Matters; Tax Sharing Agreements
Schedule B, Part 6.21 Material Contracts
Schedule B, Part 8.3 Existing Indebtedness
Schedule B, Part 8.4 Existing Liens
Schedule B, Part 8.8 Existing Investments
Schedule B, Part 8.11 Disbursement Accounts
EXHIBITS
Exhibit A Form of Borrowing Base Certificate
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Patent Security Agreement
Exhibit D Form of Revolving Note
Exhibit E Form of Security Agreement
Exhibit F Form of Trademark Security Agreement
Exhibit G-1 Form of Depositary Account Agreement
Exhibit G-2 Form of Lock Box Agreement
Exhibit H Form of Notice of Continuation
Exhibit I Form of Notice of Conversion
Exhibit J Form of Compliance Certificate
Exhibit K Form of Assignment and Assumption Agreement
Exhibit L Form of Assumption Agreement
</TABLE>
iv
<PAGE> 6
THIS AMENDED AND RESTATED CREDIT AGREEMENT ("Credit Agreement") is
entered into as of August 23, 1999, among FLORSHEIM GROUP INC., Delaware
corporation ("Florsheim") and each of the Subsidiaries set forth on the
signature pages hereto (Florsheim and each such Subsidiary are sometimes
referred to individually as a "Borrower" and collectively as the "Borrowers";
each financial institution identified on Annex I, together with its successors
and assigns, hereinafter referred to individually as a "Lender" and collectively
as the "Lenders"); and BT COMMERCIAL CORPORATION, a Delaware corporation (in its
individual capacity, "BTCC"), acting in its capacity as agent for the Lenders
(in such capacity, together with its successors in such capacity, the "Agent").
R E C I T A L S
A. Florsheim is a party to that certain Credit Agreement dated as of
May 9, 1997, as amended prior to the date hereof by amendments dated as of April
22, 1998, August 19, 1998, February 4, 1999 and July 1, 1999 (the "Existing
Credit Agreement") among Florsheim as Borrower, various financial institutions
party thereto (the "Banks"), and Bankers Trust Company, as Agent.
B. Pursuant to various Assignment and Assumption Agreements of even
date herewith (the "Assignments"), each of the Banks has assigned to BTCC its
respective interest in the Existing Credit Agreement, the "Notes" and all
"Obligations" (as defined in the Existing Credit Agreement), and BTCC has
assumed the respective commitments of each of the Banks under the Existing
Credit Agreement.
C. Immediately after giving effect to the Assignment, Bankers Trust
Company has resigned as agent under the Existing Credit Agreement, and BTCC has
been appointed as successor agent in accordance with the provisions of Section
12.09(b) of the Existing Credit Agreement, and with the approval of Florsheim,
in accordance with those same provisions.
D. BTCC as successor agent under the Existing Credit Agreement, BTCC as
the sole Bank under the Existing Credit Agreement, and Florsheim as borrower
under the Existing Credit Agreement, desire to amend and restate the Existing
Credit Agreement, in connection with which amendment and restatement the
"Subsidiary Guarantors" (as defined in the Existing Credit Agreement), being
irrevocably, jointly and severally liable, along with Florsheim, with respect to
the 'Obligations" (as defined in the Existing Credit Agreement), shall join in
this amendment and restatement of the Existing Credit Agreement as co-borrowers
and shall join in all evidence of the Obligations under this amendment and
restatement of the Existing Credit Agreement as co-makers and co-obligors.
E. The Existing Credit Agreement is hereby amended and restated in its
entirety as herein set forth which, among other things, effects the joinder of
the Subsidiaries of Florsheim which are a party hereto as Borrowers, in
replacement of their guaranties under the Existing Credit Agreement.
<PAGE> 7
ARTICLE 1
DEFINITIONS
1.1 GENERAL DEFINITIONS.
ACCOUNT has the meaning set forth in the Security Agreement.
AFFILIATE of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with or is a director or
officer of, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to vote twenty percent (20%) or
more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a business.
AGENT ADVANCES has the meaning set forth in Section 2.2.
APOLLO means Apollo Advisors, L.P. and Lion Advisors, L.P., both
Delaware limited partnerships.
APPLICABLE LENDING OFFICE means, with respect to each Lender, such
Lender's LIBOR Lending Office in the case of a LIBOR Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.
ASSIGNMENT AND ASSUMPTION AGREEMENT has the meaning set forth in
Section 11.8.
AUDITORS means a nationally recognized firm of independent public
accountants selected by Florsheim and satisfactory to the Agent in its sole
discretion; provided, that, for purposes of this Credit Agreement, any of the
current so-called "Big Five" firms of independent public accountants shall be
deemed to be satisfactory to the Agent.
BANKRUPTCY CODE means Title 11 of the U.S. Code (11 U.S.C.ss.ss. 101 et
seq.), as amended from time to time, and any successor statute.
BENEFIT PLAN means a "defined benefit plan" (as defined in Section
3(35) of ERISA) (other than a Multiemployer Plan) for which any Borrower, any of
its Subsidiaries or any ERISA Affiliate has been an "employer" (as defined in
Section 3(5) of ERISA) within the past six years.
BORROWER REPRESENTATIVE means Florsheim in its capacity as Borrower
Representative pursuant to the provisions of Section 2.7.
BORROWING means a borrowing of Revolving Loans of the same Type by the
Borrower Representative on a pro rata basis from each of the Lenders on a given
date (whether pursuant to Section 2.2 or resulting from continuations or
conversions of Revolving Loans on a given date pursuant to Sections 4.14(a) and
(b), respectively) having, in the case of LIBOR Rate Loans, the same Interest
Period.
2
<PAGE> 8
BORROWING BASE means, at any time, the sum at such time of:
(a) Eighty-five percent (85%) of Eligible Accounts Receivable,
plus
(b) the lesser of (i) $50,000,000 and (ii) (x) during the
months of May, June, July, August, September and October during the
term hereof, seventy percent (70%) and (y) at all other times during
the term hereof, sixty-five percent (65%) of Eligible Inventory, plus
(c) the Fixed Asset and Intellectual Property Sublimit, plus
(d) the Tranche B Availability.
In addition, the Agent, in the exercise of its Permitted Discretion,
may (i) establish and increase or decrease reserves against Eligible Accounts
Receivable and Eligible Inventory, and (ii) impose additional restrictions (or
eliminate the same) to the standards of eligibility set forth in the definitions
of "Eligible Accounts Receivable" and "Eligible Inventory."
BORROWING BASE CERTIFICATE means the certificate of the Borrower
Representative concerning the Borrowing Base to be provided under Section 7.2,
substantially in the form of Exhibit A.
BT ACCOUNT has the meaning set forth in Section 4.11.
BUSINESS DAY means any day that is not a Saturday, a Sunday or a day on
which commercial banks in Chicago, Illinois are required or permitted by law to
be closed and, when used in connection with LIBOR Rate Loans, this definition
will also exclude any day on which commercial banks are not open for dealing in
United States dollar deposits in the London (U.K.) interbank market.
CAPITAL EXPENDITURES means, for any Person for any period, the sum of
all expenditures capitalized by such Person for financial statement purposes in
accordance with GAAP during such period (whether payable in cash or other
property or accrued as a liability), including the capitalized portion of
Capital Leases and that portion of Investments made by such Person allocable to
property, plant or equipment. Capital Expenditures shall exclude proceeds of a
casualty loss applied to the repair or replacement of the property affected by
the casualty loss. "Casualty loss", as used herein, means, for any Person, (i)
the loss, damage, or destruction of any asset or property owned or used by such
Person, (ii) the condemnation, confiscation, or other taking, in whole or in
part, of any such asset or property, or (iii) the diminishment of the use of any
such asset or property so as to render impracticable or unreasonable the use
thereof for its intended purpose.
CAPITAL LEASE shall mean any lease of property, real or personal, the
obligation of the lessee in respect of which is required in accordance with GAAP
to be capitalized on the balance sheet of the lessee.
3
<PAGE> 9
CASH EQUIVALENTS shall mean, as to any Person, (i) direct obligations
of the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated in the highest
grade by a nationally recognized credit rating agency, (iii) time deposits with,
including certificates of deposit issued by, the Agent or any office located in
the United States of any bank or trust company the senior debt securities of
which are rated in one of the two highest categories by a nationally recognized
credit rating agency, provided in each case that such securities or other
obligations described in subsections (i), (ii) and (iii) above mature within one
year from the date of acquisition thereof by a Borrower or a Subsidiary, (iv)
repurchase obligations with a term of not more than ten (10) days of underlying
securities of the type described in clause (i) entered into with any bank of the
type described in clause (iii), (v) investments in money market funds that are
registered under the Investment Company Act of 1940, which have net assets of at
least $100,000,000 and at least eighty-five percent (85%) of whose assets
consist of securities and other obligations of the type described in clauses (i)
through (iv) above, and (vi) investments in any other money market mutual fund
the underlying assets of which are rated at least AAA or the equivalent by
Standard & Poor's Corporation or at least Aaa or the equivalent thereof by
Moody's Investors Service, Inc., including, without limitation, any such mutual
fund managed or advised by the Agent or any Lender. All such Cash Equivalents
must be denominated solely for payment in U.S. Dollars.
CHANGE OF CONTROL means the occurrence of any of the following: (i) the
sale or other transfer of all or substantially all of the assets of Florsheim to
any person other than Apollo, any account managed by Apollo for so long as it
exercises power of disposition and voting with respect thereto (a "Controlled
Account"), or an Affiliate of Apollo or of a Controlled Account, (ii) any
transaction (including a merger or consolidation) the result of which is that
any "person" or "group" (within the meaning of Section 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) becomes the
"beneficial owner" (within the meaning of Rule 13d-3 under the Exchange Act) of
more than thirty-five percent (35%) (calculated on a fully diluted basis) of the
voting power of all classes of voting stock of Florsheim and/or warrants or
options to acquire such voting stock and, at such time, such person or group is
the beneficial owner of a greater percentage of the voting power of the voting
stock of Florsheim than that which is then owned (calculated on a fully diluted
basis) by Apollo or a Controlled Account or an Affiliate of Apollo or of a
Controlled Account, (iii) the adoption of a plan relating to the liquidation or
dissolution of Florsheim and (iv) the first day on which a majority of the
members of the Board of Directors of Florsheim cease to be Continuing Directors
(meaning the directors of Florsheim on the date hereof and each other director,
if such director's nomination for election to the Board of Directors of
Florsheim is recommended by a majority of the Continuing Directors at the time
of such nomination or election).
CLOSING DATE means the date of execution and delivery of this Credit
Agreement, amending and restating the Existing Credit Agreement, by all of the
parties hereto.
CLOSING DOCUMENT LIST has the meaning set forth in Section 5.1.
CODE has the meaning set forth in Section 1.3.
4
<PAGE> 10
COLLATERAL means the Accounts, Inventory and other real and personal
property identified in the Collateral Documents as security for the Obligations.
COLLATERAL ACCESS AGREEMENT means an agreement in form and substance
reasonably satisfactory to the Agent 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, acknowledges the Liens of
the Agent and, in the case of any such agreement with a mortgagee or lessor,
permits the Agent access to and use of such real property for a reasonable
amount of time following the occurrence and during the continuance of an Event
of Default to assemble, complete and sell any Collateral stored or otherwise
located thereon.
COLLATERAL DOCUMENTS means, collectively, the Security Agreement, the
Mortgages and all other contracts, instruments and other documents pursuant to
which Liens are now or hereafter granted to the Agent to secure any or all of
the Obligations.
COLLECTION ACCOUNT has the meaning set forth in Section 4.9.
COLLECTION BANKS has the meaning set forth in Section 4.9.
COLLECTIONS means all cash, funds, checks, notes, instruments and any
other form of remittance tendered by account debtors in payment of Accounts.
COMMITMENT of a Lender means its commitment to make Revolving Loans and
to participate in Letters of Credit, up to the amount set forth below its name
on Annex I, as such amount may be reduced from time to time in accordance with
the terms of this Credit Agreement.
CONSOLIDATED ENTITY means Florsheim and those of its Subsidiaries
consolidated with it for purposes of financial reporting.
CONSOLIDATED NET INCOME means the consolidated net income of the
Consolidated Entity.
CONTINGENT OBLIGATION means, with respect to any Person, any direct,
indirect, contingent or non-contingent guaranty or obligation of such Person for
the Indebtedness of another Person, except for endorsements in the ordinary
course of business.
CREDIT DOCUMENTS means, collectively, this Credit Agreement, the
Revolving Notes, the Letters of Credit, each of the Collateral Documents and all
other documents, agreements and instruments now or hereafter executed in
connection herewith or therewith, in each case as modified, amended, extended,
restated or supplemented from time to time.
CREDIT PARTIES means, collectively, the Borrowers and each other party
to any of the Credit Documents (other than the Lenders, the Agent or the Issuing
Bank).
5
<PAGE> 11
DEFAULT means an event, condition or default which with the giving of
notice, the passage of time or both would be an Event of Default.
DEFAULTING LENDER has the meaning set forth in Section 2.6.
DEPOSITARY ACCOUNT AGREEMENTS has the meaning set forth in Section 4.9.
DISBURSEMENT ACCOUNT means the operating account of Florsheim
maintained with the Disbursement Account Bank.
DISBURSEMENT ACCOUNT BANK means Bankers Trust Company/Deutsche Bank or
any other financial institution selected from time to time by the Agent and
reasonably acceptable to Florsheim.
DOMESTIC LENDING OFFICE means, with respect to any Lender, the office
of such Lender specified as its "Domestic Lending Office" on Annex I, as such
annex may be amended from time to time, which office shall in any event be
located in the United States.
EBITDA means, for any period, the Consolidated Net Income of the
Consolidated Entity (excluding extraordinary items) for such period, plus or
minus (a) all Interest Expense, income tax expense or benefit, depreciation and
amortization (including amortization of any goodwill or other intangibles) for
such period; plus or minus (b) gains and losses attributable to any fixed asset
sales; plus or minus (c) any other non-cash charges or gains which have been
subtracted or added in calculating Consolidated Net Income.
ELIGIBLE ACCOUNTS RECEIVABLE means Accounts of the Borrowers deemed by
the Agent in the exercise of its Permitted Discretion to be eligible for
inclusion in the calculation of the Borrowing Base. In determining the amount to
be so included, the face amount of such Accounts shall be reduced by the amount
of all returns, discounts, deductions, claims, credits, charges, or other
allowances. Unless otherwise approved in writing by the Agent, no Account shall
be deemed to be an Eligible Account Receivable if:
(a) it arises out of a sale made by a Borrower to an Affiliate
(other than an Affiliate of Apollo which would not otherwise be an
Affiliate of Borrower but for the relationship to Apollo; or
(b) it is unpaid more than ninety (90) days after the date of
invoice; or
(c) it is from the same account debtor or its Affiliate and
fifty percent (50%) or more of all Accounts from that account debtor
(and its Affiliates) are ineligible under (b) above; or
(d) when aggregated with all other Accounts of an account
debtor, the Account exceeds ten percent (10%) in face value of all
Accounts of such Borrower then outstanding, to the extent of such
excess, unless supported by an irrevocable letter of credit reasonably
satisfactory to the Agent (as to form, substance and issuer) and
assigned
6
<PAGE> 12
to and directly drawable by the Agent but excluding the Accounts owing
to any Borrower by Sears, Roebuck and Company, J.C. Penney Company,
Inc., and Dayton Hudson Corporation (d/b/a Mervyn's California), which
Accounts shall not be subject to the limitation of this subsection (d);
or
(e) the account debtor for the Account is a creditor of a
Borrower, has or has asserted a right of setoff against such Borrower,
has disputed its liability or made any claim with respect to the
Account or any other Account which has not been resolved, but in each
of the foregoing cases, solely to the extent of the amount of such
actual or asserted right of setoff, or the amount of such dispute or
claim, as the case may be; or
(f) the account debtor is (or its assets are) the subject of
an Insolvency Event; or
(g) the Account is not payable in United States dollars or
Canadian dollars or the account debtor for the Account is located
outside the continental United States or Canada, unless the Account is
supported by an irrevocable letter of credit satisfactory to the Agent
(as to form, substance and issuer) and assigned to and directly
drawable by the Agent; or
(h) the sale to the account debtor is on a bill-and-hold,
guarantied sale, sale-and-return, sale on approval or consignment basis
or made pursuant to any other written agreement providing for
repurchase or return; or
(i) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless the Borrower duly
assigns its rights to payment of such Account to the Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. ss.ss. 3727
et seq.); or
(j) the goods giving rise to such Account have not been
shipped and delivered to and accepted by the account debtor, the
services giving rise to such Account have not been performed and
accepted, or the Account otherwise does not represent a final sale; or
(k) the Account does not comply with all Requirements of Law,
including, without limitation, the Federal Consumer Protection Act, the
Federal Truth-in-Lending Act and Regulation Z; or
(l) the Account is subject to any adverse security deposit,
progress payment or other similar advance made by or for the benefit of
the applicable account debtor; or
(m) the Account is not subject to a valid and perfected first
priority Lien in favor of the Agent or does not otherwise conform to
the representations and warranties contained in the Credit Documents.
ELIGIBLE INVENTORY means the aggregate amount of Inventory deemed by
the Agent in the exercise of its Permitted Discretion to be eligible for
inclusion in the calculation of the
7
<PAGE> 13
Borrowing Base. In determining the amount to be so included, Inventory
shall be valued at the lower of cost or market on a basis consistent
with the Borrowers' current and historical accounting practice. Unless
otherwise approved in writing by the Agent, no Inventory shall be
deemed Eligible Inventory if:
(a) it is not owned solely by a Borrower or a Borrower does
not have good, valid and marketable title thereto; or
(b) it is not located in the United States or Canada; or
(c) it is not located on property owned by a Borrower or by a
third party that has executed and delivered a Collateral Access
Agreement and, in the case of Inventory located on property owned by
such a third party, it is segregated or otherwise separately
identifiable from goods of others, if any, stored on such property,
provided, however, that Inventory located at any retail store operated
by a Borrower and leased from a third party owner shall not be deemed
ineligible solely by reason of the failure of such Borrower to deliver
a Collateral Access Agreement to Agent; or
(d) it is not subject to a valid and perfected first priority
Lien in favor of the Agent (including Inventory located in Canada),
except with respect to Inventory stored at sites described in clause
(c) above, for Liens for unpaid rent or normal and customary
warehousing charges; or
(e) it consists of goods returned or rejected by any
Borrower's customers or goods in transit to third parties (other than
to warehouse sites covered by a Collateral Access Agreement); or
(f) it is not finished goods deemed suitable for retail sale,
is obsolete or slow moving, is not raw material consisting of leather
in a commercially saleable condition, or does not otherwise conform to
the representations and warranties contained in the Credit Documents.
ENVIRONMENTAL REPORTS means the reports issued for the real property
located in Cape Girardeau, Missouri and Jefferson City, Missouri dated April 25,
1997.
ERISA means the Employee Retirement Income Security Act of 1974, 29
U.S.C. ss.ss. 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
ERISA AFFILIATE means any entity required to be aggregated with the
Borrower or any of its Subsidiaries under Sections 414 (b), (c), (m) or (o) of
the Internal Revenue Code.
EVENT OF DEFAULT has the meaning set forth in Article 9.
EXCESS CASH FLOW for any fiscal year means EBITDA of the Consolidated
Entity for that year minus the sum of the following items for that year: (i)
Interest Expense, (ii) income taxes
8
<PAGE> 14
paid in cash, (iii) principal payments on or mandatory redemptions of
Indebtedness (other than repayments of Revolving Loans in the ordinary course of
business which do not permanently reduce the Commitments), (iv) Capital
Expenditures of the Consolidated Entity, (v) the aggregate amount of cash
dividends paid by the Borrowers.
EXPENSES means all reasonable costs and expenses of the Agent incurred
in connection with the Credit Documents and the transactions contemplated
therein, including, without limitation, (i) the costs of conducting record
searches, examining collateral, opening bank accounts and lockboxes, depositing
checks, and receiving and transferring funds (including charges for checks for
which there are insufficient funds), (ii) the reasonable fees and expenses of
legal counsel and paralegals (excluding allocated costs of internal legal
counsel and paralegals), accountants, appraisers and other consultants, experts
or advisors retained by the Agent, (iii) expenses incurred in connection with
the assignments of or sales of participations in the Revolving Loans, (iv) the
cost of title insurance premiums, real estate survey costs, and fees and taxes
in connection with the filing of financing statements, and (v) the costs of
preparing and recording Collateral Documents, releases of Collateral, and
waivers, amendments, and terminations of any of the Credit Documents. Expenses
also means all reasonable costs and expenses (including the reasonable fees and
expenses of legal counsel and other professionals) paid or incurred by the Agent
and any Lender (i) during the continuance of an Event of Default (including,
without limitation, the cost of any property or casualty insurance obtained by
the Agent to insure the Collateral), (ii) in enforcing or defending its rights
under or in respect of this Credit Agreement, the other Credit Documents or any
other document or instrument now or hereafter executed and delivered in
connection herewith, (iii) collecting the Revolving Loans, (iv) foreclosing or
otherwise collecting upon the Collateral or any part thereof and (v) in
obtaining any legal, accounting or other advice in connection with any of the
foregoing.
EXPIRATION DATE means August 22, 2002.
FEDERAL FUNDS RATE means, for any period, a fluctuating interest rate
per annum for each day during such period equal 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 that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
FEDERAL RESERVE BOARD means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.
FEES means, collectively, the Unused Line Fee, the Letter of Credit
Fees, the Issuing Bank Fees, and the other fees provided for in that certain
letter dated of even date herewith between BTCC and Florsheim (the "Fee
Letter").
FINANCIAL STATEMENTS means the consolidated and consolidating balance
sheets, statements of operations, statements of cash flows and statements of
changes in shareholder's
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<PAGE> 15
equity of the Consolidated Entity for the period specified, prepared in
accordance with GAAP and consistently with prior practices.
FIXED ASSET AND INTELLECTUAL PROPERTY SUBLIMIT means an amount equal to
$35,000,000; provided, that the Fixed Asset and Intellectual Property Sublimit
shall be automatically and permanently reduced by an amount equal to: (i) on the
date which is one hundred-twenty (120) days after the end of the fiscal year of
Florsheim ending December 31, 2000, and the end of each fiscal year of Florsheim
ending thereafter, in each case by an amount equal to fifty percent (50%) of
Excess Cash Flow for such fiscal year; (ii) upon consummation of any sales of
any fixed assets in accordance with Section 8.6(v), in an amount equal to the
net proceeds thereof; provided, that the Fixed Asset and Intellectual Property
sublimit shall not be reduced by the net proceeds of such sale, to the extent
that the aggregate amount of such proceeds from such fixed asset sale (x) does
not exceed $1,000,000 during any fiscal year, or (y) are reinvested in
replacement fixed assets within 270 days of such disposition and which in the
Agent's reasonable determination are of at least substantially equivalent value;
and (iii) at any time after the Closing Date, and after giving effect to any
sale of assets permitted by subsections (iii) and (v) of Section 8.6 hereof (or
the sale by any Foreign Subsidiary of all or substantially all of the assets of
such Foreign Subsidiary) that the Agent determines by re-appraisal that, the
ratio of the aggregate appraised value of the Borrower's fixed assets (excluding
Florsheim's real property located in Cape Girardeau, Missouri (the "Cape
Girardeau Real Estate")) and intellectual property (including without
limitation, such general intangibles as trade names, licenses and franchise
value) to the Fixed Asset and Intellectual Property Sublimit is less than such
ratio as of the Closing Date, an amount sufficient to cause such ratio to be at
least equal to such ratio as of the Closing Date. In no event however shall the
Fixed Asset and Intellectual Property Sublimit exceed $35,000,000.
FLORSHEIM means Florsheim Group Inc., a Delaware corporation and its
successors.
FOREIGN SUBSIDIARY means any Subsidiary of a Person not incorporated in
the United States.
GAAP means generally accepted accounting principles in the United
States as in effect from time to time.
GOVERNING DOCUMENTS means certificates or articles of incorporation,
by-laws and other similar organizational or governing documents.
GOVERNMENTAL AUTHORITY means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
HIGHEST LAWFUL RATE means, at any given time during which any
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate that at any time or from time to time may be contracted for, taken,
reserved, charged or received on such Obligations, under the laws of the State
of Illinois (or the law of any other jurisdiction whose laws may be mandatorily
applicable notwithstanding other provisions of this Credit Agreement and the
other Credit
10
<PAGE> 16
Documents), or under applicable federal laws which may presently or hereafter be
in effect and which allow a higher maximum nonusurious interest rate than under
Illinois (or such other jurisdiction's) law, in any case after taking into
account, to the extent permitted by applicable law, any and all relevant
payments or charges under this Credit Agreement and any other Credit Documents
executed in connection herewith, and any available exemptions, exceptions and
exclusions.
INDEBTEDNESS of a Person means, without duplication, (a) indebtedness
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), whether on open account or
evidenced by a note, bond, debenture or similar instrument, (b) obligations
under capital leases, (c) reimbursement obligations for letters of credit,
banker's acceptances or other credit accommodations, (d) liabilities, as
determined by the Agent, under any Interest Rate Agreement, (e) Contingent
Obligations and (f) Indebtedness secured by any Lien on any property of that
Person, even if that Person has not assumed such Indebtedness.
INDIAN JOINT VENTURE means, for so long as Florsheim beneficially owns
at least twenty percent (20%) of all outstanding capital stock thereof, Florind
Shoes Limited or any successor thereto.
INFORMATION SYSTEMS AND EQUIPMENT means all computer hardware, firmware
and software, as well as other information processing systems, or any equipment
containing embedded microchips, whether directly owned, licensed, leased,
operated or otherwise controlled by any Borrower or any of their Subsidiaries,
including through third-party service providers, and which are integral to the
Borrowers' or any of their respective Subsidiaries' conduct of their business.
INSOLVENCY EVENT means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or generally fail to pay, or admit in writing its inability to pay,
its debts as they become due, (b) the voluntary commencement of any proceeding
or the filing of any petition under any bankruptcy, insolvency or similar law,
(c) the seeking of dissolution or reorganization or the appointment of a
receiver, trustee, custodian or liquidator for it or a substantial portion of
its property, assets or business or to effect a plan or other arrangement with
its creditors, (d) the filing of any answer admitting the jurisdiction of the
court and the material allegations of an involuntary petition filed against it
in any bankruptcy, insolvency or similar proceeding, (e) such Person shall make
a general assignment for the benefit of its creditors, or shall consent to, or
acquiesce in the appointment of, a receiver, trustee, custodian or liquidator
for a substantial portion of its property, assets or business. Insolvency Event
shall also mean, with respect to any Person, the occurrence of any of the
following: an involuntary proceeding or involuntary petition shall be commenced
or filed against such Person under any bankruptcy, insolvency or similar law
seeking the dissolution or reorganization of it or the appointment of a
receiver, trustee, custodian or liquidator for it or of a substantial part of
its property, assets or business, or any writ, judgment, warrant of attachment,
execution or similar process shall be issued or levied against a substantial
part of its property, assets or business, and such proceedings or petitions
shall not be dismissed, or such writ, judgment, warrant of attachment, execution
or similar process shall not be released, vacated or
11
<PAGE> 17
fully bonded, within sixty (60) days after commencement, filing, or levy, as the
case may be, or any order for relief shall be entered in any such proceeding.
INSURANCE PROCEEDS means the proceeds of any insurance or any
judgements or settlements made in lieu thereof resulting from a casualty with
respect to the Collateral or any part thereof.
INTEREST EXPENSE means the aggregate consolidated expense (net of cash
interest received) of the Consolidated Entity for interest on Indebtedness,
including, without limitation, the interest portion of any deferred payment
obligation and the interest component of any capital lease obligation, but
excluding amortization of original issue discount and incurrence fees (to the
extent included in interest expense).
INTEREST PERIOD means, for any LIBOR Rate Loan, the period commencing
on the date of such Borrowing and ending on the last day of the period selected
by the Borrower Representative pursuant to the provisions below. The duration of
each such Interest Period shall be one, two, three or six months, in each case
as the Borrower Representative may, in an appropriate Notice of Borrowing,
Notice of Continuation or Notice of Conversion, select; provided, that the
Borrower Representative may not select any Interest Period that ends after the
Expiration Date. Whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day; provided, that
if such extension would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day.
INTEREST RATE AGREEMENT means any interest rate protection or hedge
agreement, including, without limitation, interest rate future, option, swap,
and cap agreements.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986,
amendments thereto, successor statutes, and regulations or guidance promulgated
thereunder.
INVENTORY has the meaning set forth in the Security Agreement.
INVESTMENT means all expenditures made and all liabilities incurred
(contingently or otherwise) for or in connection with the acquisition of stock
or Indebtedness of, or for loans, advances, capital contributions or transfers
of property to, or acquisition of substantially all the assets of, a Person. In
determining the aggregate amount of Investments outstanding at any particular
time, (i) the amount of any Investment represented by a guaranty shall be taken
at not less than the principal amount of the obligations guaranteed and
outstanding; (ii) there shall be deducted in respect of each such Investment any
amount received as a return of capital (but only by repurchase, redemption,
retirement, repayment, liquidating dividend or liquidating distribution); (iii)
there shall not be deducted in respect of any Investment any amounts received as
earnings on such Investment, whether as dividends, interest or otherwise; and
(iv) there shall not be deducted from the aggregate amount of Investments any
decrease in the market value thereof.
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<PAGE> 18
ISSUING BANK means Bankers Trust Company/Deutsche Bank or any Lender or
other financial institution that is acceptable to the Agent and the Borrowers
which may at any time issue or be requested to issue a Letter of Credit for the
account of a Borrower.
ISSUING BANK FEES has the meaning set forth in Section 4.3(b).
LENDER ADVANCES has the meaning set forth in Section 2.2.
LETTER OF CREDIT FEE has the meaning set forth in Section 4.3(a).
LETTER OF CREDIT OBLIGATIONS means the sum of the aggregate undrawn
face amount of all Letters of Credit outstanding, plus the aggregate amount of
all drawings under Letters of Credit for which the Borrowers have not reimbursed
the Issuing Bank, plus the aggregate amount of all payments made by Lenders to
the Issuing Bank for their participations in Letters of Credit, for which the
Borrowers have not reimbursed the Lenders.
LETTER OF CREDIT REQUEST has the meaning set forth in Section 3.3.
LETTERS OF CREDIT means all letters of credit issued for the account of
a Borrower under Article 3 and all amendments, renewals, extensions or
replacements thereof.
LIBOR LENDING OFFICE means, with respect to any Lender, the office of
such Lender specified as its "LIBOR Lending Office" opposite its name on Annex
I, as such annex may be amended from time to time (or, if no such office is
specified, its Domestic Lending Office).
LIBOR RATE means, with respect to any Interest Period for each LIBOR
Rate Loan comprising part of the same Borrowing, an interest rate per annum
equal to the rate (rounded upward to the nearest whole multiple of one-sixteenth
(1/16) of one percent (1.00%) per annum, if such rate is not such a whole
multiple of one-sixteenth (1/16) of one percent (1.00%)) of the offered
quotation, if any, to first class banks in the London (U.K.) interbank market by
Bankers Trust Company for United States dollar deposits of amounts in
immediately available funds comparable to the principal amount of the LIBOR Rate
Loan of BTCC for which the LIBOR Rate is being determined with maturities
comparable to the Interest Period for which such LIBOR Rate will apply as of
approximately 10:00 a.m. Chicago time two (2) Business Days prior to the
commencement of such Interest Period.
LIBOR RATE LOAN means a Revolving Loan that bears interest as provided
in Section 4.l(b) hereof.
LIBOR RATE MARGIN means two and three quarters percent (2.75%) per
annum for each Interest Period for a LIBOR Rate Loan, provided however, that if
the ratio of (1) EBITDA to (2) Interest Expense, as at the end of any fiscal
quarter commencing with the fiscal quarter ending September 30, 2000 (measured
on the basis of the four fiscal quarters ending with any such fiscal quarter)
shall fall within any of the ranges set forth in the schedule below, based on
such financial reports delivered by Florsheim to Agent sufficient to Agent's
reasonable satisfaction confirming such fact, and so long as no Default or Event
of Default then exists, the LIBOR Rate
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<PAGE> 19
Margin shall be adjusted, effective on the first day of the calendar month
following the month in which Agent has confirmed such fact, to the rate set
opposite such range in the schedule below for any Interest Period occurring
during the three (3) calendar months commencing with the month in which the
reduction in the LIBOR Rate Margin is effective (except that notwithstanding the
foregoing, if a Default or Event of Default shall occur during any period during
the term hereof in which Borrower is otherwise entitled to the benefit of a
reduced LIBOR Rate Margin, no such reduction shall be effective during the
pendency of any such Default or Event of Default):
<TABLE>
<CAPTION>
===============================================================
RANGE OF RATIO LIBOR RATE MARGIN
- ---------------------------------------------------------------
<S> <C>
2.5 to 1 or greater, but less than 2.50%
3.0 to 1
- ---------------------------------------------------------------
3.0 to 1 or greater, but less than 2.25%
3.5 to 1
- ---------------------------------------------------------------
3.5 to 1 or greater 2.00%
===============================================================
</TABLE>
LIEN means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, financing lease, conditional
sale, retention of title, or other preferential arrangement having substantially
the same economic effect as any of the foregoing, whether voluntary or imposed
by law.
LINE OF CREDIT means the aggregate revolving line of credit extended
pursuant to this Credit Agreement by the Lenders to the Borrower for Revolving
Loans and Letters of Credit, in an amount up to $110,000,000, as such amount may
be reduced from time to time pursuant to the respective terms and provisions
hereof.
LOAN ACCOUNT has the meaning set forth in Section 4.7.
LOCKBOXES has the meaning set forth in Section 4.9
LOCKBOX ACCOUNT has the meaning set forth in Section 4.9.
LOCKBOX AGREEMENTS has the meaning set forth in Section 4.9.
LOCKBOX BANKS has the meaning set forth in Section 4.9.
MAJORITY LENDERS means those Lenders holding in the aggregate more than
fifty percent (50%) of the total Commitments, or if the Commitments are
terminated, those Lenders owed more than fifty percent (50%) of the Revolving
Loans and Letter of Credit Obligations then outstanding.
MATERIAL ADVERSE EFFECT means a material adverse effect on (i) the
business, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of Florsheim and the
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<PAGE> 20
other Borrowers and their consolidated Subsidiaries taken as a whole, (ii) the
ability of the Borrowers (taken as a whole) to perform their obligations under
the Credit Documents to which they are a party, or on the ability of the Agent
or the Lenders to enforce the Obligations or realize upon the Collateral, or
(iii) the value of the Collateral (taken as a whole), or the amount which the
Agent or the Lenders would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of such
Collateral.
MATERIAL CONTRACT means any contract or other arrangement to which
Florsheim or any of its Subsidiaries is a party (other than the Credit
Documents) for which breach, nonperformance, cancellation or failure to renew
could reasonably be expected to have a Material Adverse Effect.
MOODY'S means Moody's Investor Services, Inc., or any successor
thereto.
MORTGAGE shall mean, with respect to real property owned by any
Borrower, each mortgage or deed of trust executed and delivered on the date
hereof or hereafter delivered from time to time pursuant to the terms hereof,
and with respect to real property leased by each such Borrower, each leasehold
mortgage or leasehold deed of trust, if any, executed and delivered on the date
hereof or hereafter delivered from time to time pursuant to the terms hereof, as
any of the same may be amended, modified, supplemented, extended or renewed from
time to time.
MULTIEMPLOYER PLAN means a "multiemployer plan" (as defined in Section
4001(a) (3) of ERISA) to which Florsheim, any of its Subsidiaries or any ERISA
Affiliate has contributed within the past three years or with respect to which
Florsheim or any of its Subsidiaries could reasonably be expected to incur any
liability.
NET CASH PROCEEDS shall mean, with respect to the sale or disposition
of any asset, the aggregate amount of cash received by a Borrower (including
cash payments received in respect of deferred payment pursuant to any note or
installment receivable or otherwise and state or federal income tax refunds
attributable to such sale or disposition, but in each case only as and when
received) in respect of such sale or disposition minus (i) all fees,
commissions, expenses and taxes incurred in connection with such sale or
disposition, (ii) the principal amount of Indebtedness of any Borrower which is
senior (in lien priority) to the Indebtedness hereunder and which by its terms
is required to be and is repaid, and (iii) any amount considered appropriate by
Florsheim, in good faith, to provide reserves for payment of indemnities or
liabilities that may be incurred in connection with such sale or disposition.
For purposes of this definition, if taxes or other expenses payable in
connection with the sale or disposition of any asset are not known as of the
date of such sale or disposition, then such fees, commissions, expenses or taxes
shall be estimated by Florsheim, in good faith, and such estimated amounts shall
be deducted therefrom.
NOTICE OF BORROWING means an irrevocable and binding notice delivered
by the Borrower Representative to the Agent either by telephone or by facsimile
transmission (and if by telephone, confirmed in writing), of the Borrower
Representative's request for a Borrowing, which notice shall be substantially in
the form of Exhibit B.
NOTICE OF CONTINUATION has the meaning set forth in Section 4.14(a).
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<PAGE> 21
NOTICE OF CONVERSION has the meaning set forth in Section 4.14(b).
OBLIGATIONS means the unpaid principal and interest hereunder
(including interest accruing on or after the occurrence of an Insolvency Event),
reimbursement obligations under Letters of Credit, Fees, Expenses and all other
obligations and liabilities of the Borrowers to the Agent, the Issuing Bank or
to the Lenders under this Credit Agreement, the Revolving Notes, or any other
Credit Document.
PATENT SECURITY AGREEMENT means, collectively, the Patent Security
Agreements executed by certain of the Borrowers in favor of the Agent in the
form attached hereto as Exhibit C.
PERMITTED DISCRETION means the Agent's judgment exercised in good faith
and not in an irrational manner based upon its consideration of any factor which
the Agent believes in good faith could adversely affect the value of any
Collateral, including any Inventory or Accounts or the amount which the Agent
and the Lenders would be likely to receive (after giving consideration to delays
in payment and costs of enforcement) in the liquidation of such Collateral. In
exercising such judgment, the Agent may consider such factors which are already
included in or tested by the definition of Eligible Accounts Receivable or
Eligible Inventory, as well as any of the following: (i) changes in collection
history and dilution with respect to the Accounts, (ii) changes in levels of
backlog of firm purchase orders and demand for, and pricing of, Inventory, (iii)
changes in any concentration of risk with respect to Accounts and Inventory, and
(iv) any other factors that change the credit risk of lending to the Borrower on
the security of the Accounts and Inventory.
PERMITTED LIENS means the Liens referred to in clauses (a) through (l)
of Section 8.4.
PERSON means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, entity, party or government (including any division, agency or
department thereof), and its successors, heirs and assigns.
PLAN means any Benefit Plan, Multiemployer Plan, or Retiree Health
Plan, or any employee benefit plan, fund, program or arrangement, whether oral
or written, maintained or contributed to by Florsheim or any of its
Subsidiaries, or with respect to which any of them could reasonably be expected
to incur liability.
PRIME LENDING RATE means the rate which Bankers Trust Company/Deutsche
Bank (New York office) publicly announces as its prime lending rate, from time
to time. The Prime Lending Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. Bankers
Trust Company/Deutsche Bank and each of the Lenders may make commercial loans or
other loans at rates of interest at, above or below the Prime Lending Rate.
PRIME RATE LOAN means a Revolving Loan that bears interest as provided
in Section 4.1(a) hereof.
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<PAGE> 22
PROPORTIONATE SHARE of a Lender means a fraction, expressed as a
percentage, obtained by dividing its Commitment by the Line of Credit or, if the
Commitments are terminated, by dividing its then outstanding Revolving Loans and
Letter of Credit participations by the then outstanding aggregate Revolving
Loans and Letter of Credit Obligations.
PURCHASE MONEY LIENS has the meaning set forth in Section 8.3(e).
REGISTER has the meaning set forth in Section 11.8.
REGULATION D means Regulation D of the Federal Reserve Board, as in
effect from time to time.
REGULATION Z means Regulation Z of the Federal Reserve Board, as in
effect from time to time.
REPORTABLE EVENT means any of the events described in Section 4043 of
ERISA and the regulations thereunder.
REQUIREMENT OF LAW means, with respect to any Person, (a) the Governing
Documents of such Person, (b) any law, treaty, rule or regulation or
determination of an arbitrator, court or other Governmental Authority binding on
such Person, or (c) any franchise, license, lease, permit, certificate,
authorization, qualification, easement, right of way, right or approval binding
on a Person or any of its property.
RETIREE HEALTH PLAN means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA, and any other plan, program or arrangement,
whether oral or written, that provides benefits to persons after termination of
employment, other than as required by Section 601 of ERISA.
REVOLVING LOANS has the meaning set forth in Section 2.1.
REVOLVING NOTE means a promissory note of the Borrowers payable to the
order of any Lender, substantially in the form of Exhibit D.
S&P means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
SECURITY AGREEMENT means the Security Agreement of even date herewith
executed in favor of the Agent by the Borrowers in the form of Exhibit E.
SETTLEMENT DATE has the meaning set forth in Section 2.4(a).
SUBSIDIARY of a Person means a corporation or other entity in which
that Person directly or indirectly owns or controls the shares of stock or other
ownership interests having ordinary
17
<PAGE> 23
voting power to elect a majority of the board of directors or appoint other
managers of such corporation or other entity.
TERMINATION EVENT means (i) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (ii) the withdrawal of a Borrower, any of
its Subsidiaries or any ERISA Affiliate from a Benefit Plan during a plan year
in which it was a "substantial employer" (as defined in Section 4001(a) (2) of
ERISA); (iii) the providing of notice of intent to terminate a Benefit Plan in a
distress termination (as described in Section 4041 (c) of ERISA); (iv) the
institution by the Pension Benefit Guaranty Corporation of proceedings to
terminate a Benefit Plan or Multiemployer Plan; (v) any event or condition (a)
which could reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Benefit Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal, within the meaning of Sections 4203 and 4205 of ERISA, of a
Borrower, any of its Subsidiaries or any ERISA Affiliate from a Multiemployer
Plan.
TRANCHE B AVAILABILITY means an amount equal to $10,000,000, which
amount shall automatically and permanently be reduced by $2,000,000 per month
commencing with the last Business Day of August, 2000, and on the last Business
Day of each month thereafter until reduced to zero ($0).
TRADEMARK SECURITY AGREEMENT means, collectively, the Trademark
Security Agreement executed by certain of the Borrowers in favor of the Agent in
the form attached hereto as Exhibit F.
TYPE means a LIBOR Rate Loan or a Prime Rate Loan.
UNRESTRICTED PROCEEDS means the sum of (i) the net proceeds of any
Indebtedness permitted by Section 8.3(f) hereof, and (ii) the net proceeds
received by a Borrower from a public offering or private placement of equity
securities (including, without limitation, common stock, preferred stock and
warrants and options to acquire the same) of such Borrower minus, but without
duplication, all underwriting discounts and commissions, placement fees and
other professional fees, expenses and taxes incurred in connection with such
offering or placement. For purposes of this definition, if any such discounts,
commissions, fees, expenses or taxes payable in connection with such offering or
placement are not known as of the date of the distribution of the proceeds
thereof, then such discounts, commissions, fees, expenses or taxes shall be
estimated in good faith by Florsheim and such estimated amounts shall be
deducted from the calculation of such net proceeds.
UNUSED LINE FEE has the meaning set forth in Section 4.2.
YEAR 2000 COMPLIANT means that all Information Systems and Equipment
accurately process date data (including, but not limited to, calculating,
comparing and sequencing), before, during and after the year 2000, as well as
same and multi-century dates, or between the years 1999 and 2000, taking into
account all leap years, including the fact that the year 2000 is a leap year,
and further, that when used in combination with, or interfacing with, other
Information
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Systems and Equipment, shall accurately accept, release and exchange date data,
and shall in all material respects continue to function in the same manner as it
performs today and shall not otherwise materially impair the accuracy or
functionality of Information systems and Equipment.
1.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise defined or
specified herein, all accounting terms used in this Credit Agreement shall be
construed in accordance with GAAP, applied on a basis consistent in all material
respects with the Financial Statements referred to in Section 6.9. All
accounting determinations for purposes of determining compliance with the
financial covenants contained in Article 8 shall be made in accordance with GAAP
as in effect on the Closing Date and applied on a basis consistent in all
material respects with the audited Financial Statements as of and for the fiscal
year ended January 2, 1999. The Financial Statements required to be delivered
hereunder from and after the Closing Date, and all financial records, shall be
maintained in accordance with GAAP. If GAAP shall change from the basis used in
preparing the audited Financial Statements delivered to the Agent on or before
the Closing Date, the certificates required to be delivered pursuant to Section
7.1 demonstrating compliance with the covenants contained herein shall include,
at the election of the Borrower or upon the request of the Majority Lenders,
calculations setting forth the adjustments necessary to demonstrate how the
Borrower is in compliance with the financial covenants based upon GAAP as in
effect on the Closing Date.
1.3 OTHER TERMS; HEADINGS. Terms used herein and not otherwise defined
in Article 1 that are defined in the Uniform Commercial Code in effect in the
State of Illinois (the "Code") shall have the meanings given in the Code. Each
of the words "hereof," "herein," and "hereunder" refer to this Credit Agreement
as a whole. An Event of Default shall "continue" or be "continuing" until such
Event of Default has been waived in accordance with Section 11.11 hereof.
References to Articles, Sections, Annexes, Schedules, and Exhibits are internal
references to this Credit Agreement, and to its attachments, unless otherwise
specified. The headings and the Table of Contents are for convenience only and
shall not affect the meaning or construction of any provision of this Credit
Agreement.
ARTICLE 2
REVOLVING LOANS
2.1 REVOLVING CREDIT COMMITMENTS. Subject to the terms and conditions
set forth in this Credit Agreement, and in reliance on the representations and
warranties of the Borrowers set forth herein, on and after the Closing Date and
to and excluding the Expiration Date, each Lender severally agrees to make loans
and advances to the Borrower (each a "Revolving Loan") in an amount not to
exceed at any time its Proportionate Share of the lesser at such time of the
Line of Credit and the Borrowing Base minus, in each case, the then outstanding
Letter of Credit Obligations. (Only those Lenders which are designated as
Tranche B Lenders on Annex 1 hereto are obligated to make loans and advances to
the Borrowers against the Tranche B Availability.)
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2.2 BORROWING OF REVOLVING LOANS. Revolving Loans shall be made
available to the Borrower Representative directly by the Lenders ("Lender
Advances") or, in the circumstances described in Section 2.2(b), from the Agent
acting on behalf of the Lenders ("Agent Advances").
(a) LENDER ADVANCES. Subject to the determination by the Agent
and the Lenders that the conditions for borrowing contained in Section
5.2 are satisfied, upon receipt of a Notice of Borrowing from the
Borrower Representative received by the Agent before noon Chicago time
on a Business Day, Lender Advances of Revolving Loans shall be made to
the extent of each Lender's Proportionate Share of the requested
Borrowing. Each Notice of Borrowing shall specify whether the requested
Borrowing is of Prime Rate Loans or LIBOR Rate Loans. So long as the
Borrowers continue to have Tranche B Availability hereunder, such
Lender Advances shall first be made against the Tranche B Availability
before any other Lender Advances are made.
(b) AGENT ADVANCES. The Agent is authorized by the Lenders,
but is not obligated, to make Agent Advances upon a receipt of any
Notice of Borrowing received by the Agent before 3:00 P.M. Chicago time
on a Business Day. Agent Advances shall be subject to periodic
settlement with the Lenders under Section 2.4. Agent Advances may be
made only in the following circumstances:
(i) NORMAL COURSE AGENT ADVANCES. For administrative
convenience, the Agent may, but is not obligated, to make
Agent Advances up to the amount available for borrowing under
Section 2.1 in reliance upon the actual or deemed
representations of the Borrowers under Section 5.2 that the
conditions for borrowing are satisfied.
(ii) OTHER AGENT ADVANCES. (A) When the conditions
for borrowing under Section 5.2 cannot be fulfilled, and
notwithstanding the Borrowing Base limitation of Section 2.1,
the Lenders authorize the Agent, in its sole discretion, to
make Revolving Loans ("Interim Advances"), to the Borrowers
during the period commencing on the date the Agent first
receives a Notice of Borrowing requesting an Interim Advance
until the earliest of (1) the tenth (10th) Business Day after
such date, (2) the date the Borrower is again able to comply
with such Borrowing Base limitation and conditions precedent,
or obtains an amendment or waiver with respect thereto and (3)
the date the Majority lenders instruct the Agent, or the Agent
determines, to cease making Interim Advances (in each case,
the "Interim Advance Period").
(B) The Agent shall not, in any event, make any
Interim Advances in excess of ten percent (10%) of the
Borrowing Base on the first day of the Interim Advance Period,
calculated without giving effect to Interim Advances made on
such day, and, in no event, if such Interim Advance would
result in outstanding Revolving Loans and Letters of Credit
exceeding the Line of Credit.
(C) All amounts received by the Agent during an
Interim Advance Period on account of the Obligations, whether
in the form of payments from the
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Borrower, collections on the Collateral or otherwise, shall,
so long as any Interim Advances made during such Interim
Advance Period are outstanding, be applied by the Agent,
first, to the repayment of such Interim Advances and, second,
in accordance with Section 4.10.
(c) DISBURSEMENT OF REVOLVING LOANS. The proceeds of Revolving
Loans shall be transmitted: (x) in the circumstances described in
Section 3.5, by the Agent directly to the Issuing Bank, and (y) in all
other circumstances, by the Agent or Lenders, as the case may be.
(d) NOTICES OF BORROWING. Notices of Borrowing may be given
under this Section by telephone or facsimile transmission, and, if by
telephone, promptly confirmed in writing. The Borrower Representative
shall specify in each Notice of Borrowing whether the conditions for
the requested Borrowing are satisfied. The Borrower Representative may
request one or more Borrowings of Revolving Loans constituting Prime
Rate Loans on the same Business Day. Each Notice of Borrowing for LIBOR
Rate Loans shall be given not later than noon Chicago time on the third
Business Day prior to the proposed Borrowing. Each Notice of Borrowing
shall, unless otherwise specifically provided herein, consist entirely
of Revolving Loans of the same Type and, if such Borrowing is to
consist of LIBOR Rate Loans, shall be in an aggregate amount of not
less than $5,000,000 or an integral multiple of $1,000,000 in excess
thereof. The right of the Borrower Representative to choose LIBOR Rate
Loans is subject to the provisions of Section 4.12. Once given, a
Notice of Borrowing is irrevocable by and binding on the Borrowers. The
Borrower Representative shall provide to the Agent a list, with
specimen signatures, of officers authorized to request Revolving Loans.
The Agent is entitled to rely upon such list until it is replaced by
the Borrower Representative.
2.3 NOTICE OF REQUEST FOR LENDER ADVANCES. Subject to the last sentence
of this Section, the Agent shall give each Lender prompt notice by telephone or
facsimile transmission of a Notice of Borrowing that is received pursuant to
Section 2.2(a) and is to be satisfied by Lender Advances. No later than 3:00
P.M. Chicago time on the date of receipt of such notice, each Lender shall make
available for the account of its Applicable Lending Office to the Agent at the
Agent's address for deposit into the Loan Disbursement Account, its
Proportionate Share of such Borrowing in immediately available funds. Unless the
Agent receives contrary written notice prior to any such Borrowing, it is
entitled to assume that each Lender will make available its Proportionate Share
of the Borrowing and in reliance upon that assumption, but without any
obligation to do so, may advance such Proportionate Share on behalf of the
Lender, without the necessity of giving daily notice to each Lender of the
receipt of a Notice of Borrowing.
2.4 PERIODIC SETTLEMENT OF AGENT ADVANCES; INTEREST AND FEES;
STATEMENTS.
(a) THE SETTLEMENT DATE; ALLOCATION OF INTEREST AND FEES. The
amount of each Lender's Proportionate Share of Revolving Loans shall be
computed weekly (or more frequently in the Agent's discretion) and
shall be adjusted upward or downward based on all Loans (including
Agent Advances) and repayments received by the Agent as
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of 5:00 P.M. Chicago time on the last Business Day of the period
specified by the Agent (such date, the "Settlement Date").
(b) SUMMARY STATEMENTS; SETTLEMENTS. The Agent shall deliver
to the Borrower Representative and each of the Lenders promptly after
the Settlement Date a summary statement of the account of outstanding
Loans (including Agent Advances) for the period, the amount of
repayments received for the period, and the amount allocated to each
Lender of the interest and Unused Line Fee for the period. After
application of payments under Section 4.10, as reflected on the summary
statement: (i) the Agent shall transfer to each Lender its allocated
share of interest and Unused Line Fee, and its Proportionate Share of
repayments; and (ii) each Lender shall transfer to the Agent, or the
Agent shall transfer to each Lender, such amounts as are necessary to
insure that, after giving effect to all such transfers, the amount of
Loans made by each Lender shall be equal to such Lender's Proportionate
Share of the aggregate amount of Loans outstanding as of such
Settlement Date. If the summary statement requires transfers to be made
to the Agent by the Lenders and is received by the Lenders prior to
12:00 noon Chicago time on a Business Day, such transfers shall be made
in immediately available funds no later than 3:00 P.M. Chicago time
that day; and, if received after 12:00 noon Chicago time, then no later
than 3:00 P.M. Chicago time on the next Business Day. The obligation of
each Lender to transfer such funds is irrevocable, unconditional and
without recourse to or warranty by the Agent.
(c) DISTRIBUTION OF INTEREST AND UNUSED LINE FEES. Interest on
the Revolving Loans (including Agent Advances) and the Unused Line Fee
shall be allocated by the Agent to each Lender (i) in the case of
interest, in accordance with the Revolving Loans actually advanced by
and repaid to such Lender and (ii) in the case of the Unused Line Fee,
in accordance with the Proportionate Share of such Lender. Interest
shall accrue from and including the date Revolving Loans are advanced
and to but excluding the date such Revolving Loans are either repaid by
the Borrowers or, if later, actually settled under this Section.
Promptly after the end of each month, the Agent shall distribute to
each Lender its portion, allocated as provided above, of the interest
and Unused Line Fee which has accrued during such month.
2.5 SHARING OF PAYMENTS. If any Lender shall obtain any payment
(whether made voluntarily or involuntarily, or through the exercise of any right
of set-off, or otherwise) on account of the Revolving Loans made by it or its
participation in the Letter of Credit Obligations in excess of its Proportionate
Share of payments on account of the Revolving Loans or Letter of Credit
Obligations obtained by all the Lenders, such Lender shall forthwith purchase
from the other Lenders such participations in the Revolving Loans made by them
or in their participation in Letters of Credit as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each of them;
provided, that if all or any portion of such excess payment is thereafter
recovered from such purchasing Lender, such purchase from each Lender shall be
rescinded and each such Lender shall repay to the purchasing Lender the purchase
price to the extent of such recovery, together with an amount equal to such
Lender's ratable share (according to the proportion of (i) the amount of such
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
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purchasing Lender in respect to the total amount so recovered. The Borrowers
agree that any Lender so purchasing a participation from another Lender pursuant
to this Section 2.5, to the fullest extent permitted by law, may exercise all of
its rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrowers (or any of them) in the amount of such participation.
2.6 DEFAULTING LENDERS.
(a) A Lender who fails to pay the Agent its Proportionate
Share of any Revolving Loans (including Agent Advances) made available
by the Agent on such Lender's behalf, or who fails to pay any other
amounts owing by it to the Agent, is a "Defaulting Lender." The Agent
is entitled to recover from such Defaulting Lender all such amounts
owing by such Defaulting Lender on demand. If the Defaulting Lender
does not pay such amounts on the Agent's demand, the Agent shall
promptly notify the Borrower Representative and the Borrowers shall pay
such amounts within five (5) Business Days of its receipt of such
notice. In addition, the Defaulting Lender or the Borrowers shall pay
to the Agent for its own account interest on such amount for each day
from the date it was made available by the Agent to the Borrowers to
the date it is recovered by the Agent at a rate per annum equal to (x)
the overnight Federal Funds Rate, if paid by the Defaulting Lender, or
(y) the then applicable rate of interest calculated under Section 4.1,
if paid by the Borrowers; plus, in each case, the Expenses and losses,
if any, incurred as a result of the Defaulting Lender's failure to
perform its obligations. Nothing herein shall be deemed to relieve any
Lender of its obligation to fulfill its commitments hereunder or to
prejudice any rights which the Borrowers may have against any Lender as
a result of any default by such Lender hereunder, including, without
limitation, the right of the Borrowers to seek reimbursement from any
Defaulting Lender for any amounts paid by the Borrowers under clause
(y) above on account of such Defaulting Lender's default.
(b) The failure of any Lender to fund its Proportionate Share
of a Revolving Loan shall not relieve any other Lender of its
obligation to fund its Proportionate Share of a Revolving Loan.
Conversely, no Lender shall be responsible for the failure of another
Lender to fund its Proportionate Share of a Revolving Loan.
(c) The Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by the Borrower to the Agent for
the Defaulting Lender's benefit; nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder. Amounts payable to a
Defaulting Lender shall instead be paid to or retained by the Agent.
The Agent may hold and, in its discretion, re-lend to the Borrowers the
amount of all such payments received by it for the account of such
Lender. For purposes of voting or consenting to matters with respect to
the Credit Documents and determining Proportionate Shares, such
Defaulting Lender shall be deemed not to be a "Lender" and such
Lender's Commitment shall be deemed to be zero (-0-). This Section
shall remain effective with respect to such Lender until (x) the
Obligations under this Credit Agreement shall have been declared or
shall have become immediately due and payable or (y) the Majority
Lenders, the Agent and the Borrowers shall have waived such
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Lender's default in writing. The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender,
or relieve or excuse the performance by the Borrowers of their duties
and obligations hereunder.
2.7 RELIANCE ON NOTICES; APPOINTMENT OF BORROWER REPRESENTATIVE. Agent
shall be entitled to rely upon, and shall be fully protected in relying upon,
any Notice of Borrowing or similar notice believed by Agent to be genuine. Agent
may assume that each person executing and delivering such notice was duly
authorized, unless the responsible individual acting thereon for Agent has
actual knowledge to the contrary or, in the case of Notice of Borrowing, unless
the notice is not executed by an officer designated by the Borrower
Representative under Section 2.2(d).. Each Borrower hereby designates Florsheim
("Borrower Representative") as its representative and agent on its behalf for
the purpose of issuing a Notice of Borrowing, giving instructions with respect
to the disbursement of the proceeds of the loans, selecting interest rate
options, requesting Letters of Credit, giving and receiving all other notices
and consents hereunder or under any of the other Credit Documents and taking all
other actions (including in respect of compliance with covenants) on behalf of
any Borrower or Borrowers under the Credit Documents. Borrower Representative
hereby accepts such appointment. Agent and each Lender may regard any notice or
other communication pursuant to any Credit Document from the Borrower
Representative as a notice or communication from all Borrowers, and may give any
notice or communication required or permitted to be given to any Borrower or
Borrowers hereunder to Borrower Representative on behalf of such Borrower or
Borrowers. Each Borrower agrees that each notice, election, representation and
warranty, covenant, agreement and undertaking made on its behalf by Borrower
Representative shall be deemed for all purposes to have been made by such
Borrower and shall be binding upon and enforceable against such Borrower to the
same extent as if the same had been made directly by such Borrower.
ARTICLE 3
LETTERS OF CREDIT
3.1 ISSUANCE OF LETTERS OF CREDIT. Subject to the terms and conditions
hereof and in reliance on the representations and warranties of the Borrowers
set forth herein, the Agent shall cause the Issuing Bank to issue Letters of
Credit hereunder at the request of the Borrower Representative and for its
account, as more specifically described below. The Agent shall not be obligated
to cause the Issuing Bank to issue any Letter of Credit if:
(a) issuance of the requested Letter of Credit (i) would cause
the Letter of Credit Obligations then outstanding to exceed
$25,000,000, or (ii) would cause the sum of the Revolving Loans plus
the Letter of Credit Obligations then outstanding to exceed the lesser
of (x) the Line of Credit then in effect and (y) the Borrowing Base
then in effect; or
(b) issuance of the Letter of Credit is enjoined, restrained
or prohibited by any Governmental Authority, Requirement of Law or any
request or directive of any Governmental Authority (whether or not
having the force of law) or would impose upon the Agent or the Issuing
Bank any material restriction, reserve, capital requirement, loss,
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cost or expense (for which the Agent or the Issuing Bank is not
otherwise compensated) not in effect or known as of the Closing Date.
3.2 TERMS OF LETTERS OF CREDIT. The proposed terms and conditions, and
form of each Letter of Credit (and of any drafts or acceptances thereunder)
shall be subject to approval by the Issuing Bank. The term of each standby
Letter of Credit shall not exceed three hundred sixty-five (365) days, but may
be subject to annual renewal. The term of each documentary Letter of Credit
shall not exceed one hundred eighty (180) days. No Letter of Credit shall have
an expiry date later than five (5) Business Days prior to the Expiration Date;
provided, however, that any Issuing Bank may, but shall not be obligated to,
issue Letters of Credit having terms not exceeding ninety (90) days beyond the
Expiration Date, so long as such Letters of Credit are collateralized by cash in
an amount equal to 110% of the face amount of all such Letters of Credit as of
the date of issuance.
3.3 NOTICE OF ISSUANCE. A request for issuance of a Letter of Credit (a
"Letter of Credit Request") may be given in writing or electronically and, if
requested by the Agent, promptly confirmed in writing. A Letter of Credit
Request must be received by the Agent no later than 1:00 P.M. Chicago time at
least four (4) Business Days (or such shorter period as may be agreed to by the
Issuing Bank) in advance of the proposed date of issuance.
3.4 LENDERS' PARTICIPATION. Immediately upon issuance or amendment of
any Letter of Credit, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from the Issuing Bank, without recourse
or warranty, an undivided interest and participation in all rights and
obligations under such Letter of Credit (other than fees and other amounts owing
to the Issuing Bank) in accordance with such Lender's Proportionate Share.
3.5 PAYMENTS OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT. The Agent shall
notify the Borrower Representative of the receipt by the Agent of notice from
the Issuing Bank of a draft or other presentation for payment or drawing under a
Letter of Credit not later than 11:00 A.M. Chicago time on the Business Day
immediately prior to the date on which the Issuing Bank intends to honor such
drawing. Unless the procedures set forth in Section 9.2(c) shall be applicable,
the Borrower Representative shall be deemed to have concurrently given a Notice
of Borrowing to the Agent to make a Revolving Loan in the amount of and at the
time of such drawing, the proceeds of which shall be applied directly by the
Agent to reimburse the Issuing Bank for the amount of such drawing.
3.6 PAYMENT BY LENDERS. If a Revolving Loan is not made in an amount
sufficient to reimburse the Issuing Bank in full for the amount of any draw
under a Letter of Credit, the Agent shall promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's respective
participation therein. Each Lender shall make available to the Agent, for the
account of the Issuing Bank, the amount of its participation in immediately
available funds not later than 1:00 P.M. Chicago time on the next Business Day
after such Lender receives notice from the Agent of the amount of such Lender's
participation in such unreimbursed amount. If any Lender fails to make available
to the Agent the amount of such Lender's participation, the Issuing Bank shall
be entitled to recover such amount on demand from such Lender together with
interest at the Federal Funds Rate for the first three Business Days and
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thereafter at the Prime Lending Rate. For each Letter of Credit, the Agent shall
promptly distribute to each Lender which has funded the amount of its
participation its Proportionate Share of all payments subsequently received by
the Agent from the Borrower in reimbursement of honored drawings.
3.7 OBLIGATIONS ABSOLUTE. The obligations of the Borrowers to reimburse
the Lenders under Section 3.6 shall be unconditional and irrevocable and shall
be paid strictly in accordance with the terms of this Credit Agreement under all
circumstances including, without limitation, upon the occurrence and during the
continuance of an Event of Default.
3.8 AGENT'S EXECUTION OF APPLICATIONS AND OTHER ISSUING BANK
DOCUMENTATION: RELIANCE ON CREDIT AGREEMENT BY ISSUING BANK. The Agent shall be
authorized to execute, deliver and perform on behalf of the Lenders such letter
of credit applications, shipping indemnities, letter of credit modifications and
consents and other undertakings for the benefit of the Issuing Bank as may be
reasonably necessary or appropriate in connection with the issuance or
modification of Letters of Credit requested by the Borrower hereunder. The
Lenders, the Agent and the Borrowers all expressly agree that the terms of this
Article 3 and various other provisions of this Credit Agreement identifying the
Issuing Bank are also intended to benefit the Issuing Bank and the Issuing Bank
shall be entitled to enforce the provisions hereof which are for its benefit.
ARTICLE 4
COMPENSATION, REPAYMENT
AND REDUCTION OF COMMITMENTS
4.1 INTEREST ON REVOLVING LOANS.
(a) Interest on the unpaid principal amount of Revolving Loans
which are Prime Rate Loans shall be payable monthly in arrears, on the
first Business Day of each month, at an interest rate per annum equal
to the Prime Lending Rate plus one and three-quarters percent (1.75%)
calculated on the net balances owing to the Agent and the Lenders at
the close of business each day during such month. The rate hereunder
shall change each day the Prime Lending Rate changes.
(b) Interest on Revolving Loans which are LIBOR Rate Loans
shall be payable on the last day of each Interest Period (provided,
that in the case of any LIBOR Rate Loan having an Interest Period of
six (6) months, such interest shall be payable on the ninetieth day
occurring in such Interest Period and on the last day of such Interest
Period) with respect to such LIBOR Rate Loans, at the date of
conversion of such LIBOR Rate Loans (or a portion thereof) to a Prime
Rate Loan and at maturity of such LIBOR Rate Loans at an interest rate
per annum equal during the Interest Period for such LIBOR Rate Loans to
the LIBOR Rate for the Interest Period in effect for such LIBOR Rate
Loans plus the LIBOR Rate Margin. After maturity of such LIBOR Rate
Loans (whether by acceleration or otherwise), interest shall be payable
upon demand. The Agent upon
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determining the LIBOR Rate for any Interest Period shall promptly
notify the Borrower and the Lenders by telephone (confirmed promptly in
writing) or in writing thereof. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all
purposes, absent demonstrable error.
(c) Notwithstanding the provisions of Sections 4.1(a) and (b),
the Borrower shall pay to each Lender, so long as and to the extent
such Lender shall be required under regulations of the Board of
Governors of the Federal Reserve System to maintain reserves with
respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Revolving Loan comprised of LIBOR Rate Loans of such
Lender, from the date of such LIBOR Rate Loan until such principal
amount is paid in full, at an interest rate per annum equal at all
times to the remainder obtained by subtracting (a) the LIBOR Rate for
the applicable Interest Period for such LIBOR Rate Loan from (b) the
rate obtained by dividing such LIBOR Rate by a percentage equal to 1
minus the stated maximum rate (stated as a decimal) applicable two (2)
Business Days before the first day of such Interest Period of all
reserves, if any, required to be maintained against "Eurocurrency
liabilities" as specified in Regulation D (or against any other
category of liabilities which includes deposits by reference to which
the interest rate on LIBOR Rate Loans is determined or any category of
extensions of credit or other assets which includes loans by a
non-United States office of any Lender to United States residents)
having a term equal to the Interest Period applicable to such LIBOR
Rate Loan. Such Lender shall as soon as practicable provide notice to
the Agent and the Borrower of any such additional interest arising in
connection with such LIBOR Rate Loan, which notice shall be conclusive
and binding, absent demonstrable error.
(d) Notwithstanding the provisions of Sections 4.1(a) and (b),
interest on Revolving Loans outstanding against the Tranche B
Availability shall be calculated at a rate per annum equal to eleven
and one-half percent (11.5%). If, for any reason, Revolving Loans
against Tranche B Availability remain outstanding after December 31,
2000, then in such event the rate of interest applicable to such loans
is to be increased by one percent (1%) per annum on January 1, 2001 and
on the first day of each July and January thereafter until the Tranche
B Availability is reduced to zero (0).
4.2 UNUSED LINE FEE. The Borrowers shall pay to the Agent, for the
ratable benefit of the Lenders, a non-refundable fee (the "Unused Line Fee")
equal to three-eights of one percent (.375%) per annum of the unused portion of
the Line of Credit. The Unused Line Fee shall accrue daily from the Closing Date
until the Expiration Date, and shall be due and payable monthly in arrears, on
the first Business Day of each month and on the Expiration Date. The aggregate
undrawn face amount of Letters of Credit shall constitute use of the Line of
Credit for purposes of calculating the Unused Line Fee.
4.3 LETTER OF CREDIT FEES.
(a) The Agent, for the ratable benefit of the Lenders, shall
be entitled to charge to the account of the Borrowers, in arrears, on
the first Business Day of each
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month, a fee (the "Letter of Credit Fee"), in an amount equal to (i)
two and three-quarters percent (2.75%) per annum of the daily weighted
average undrawn amount of Letters of Credit (other than documentary
Letters of Credit) outstanding during the immediately preceding month,
and (ii) one and three-quarters percent (1.75%) per annum of the daily
weighted average undrawn amount of documentary Letters of Credit
outstanding during the immediately preceding month.
(b) The Agent shall also be entitled to charge to the account
of the Borrower, as and when incurred by the Agent or any Lender, the
customary charges, fees, costs and expenses charged to the Agent or any
Lender for the Borrower's account by any Issuing Bank (the "Issuing
Bank Fees") in connection with the issuance, transfer, drawing,
amendment or negotiation of any Letters of Credit by the Issuing Bank.
Each determination by the Agent of Letter of Credit Fees, Issuing Bank
Fees and other fees, costs and expenses charged under this Section
shall be conclusive and binding for all purposes, absent manifest
error.
4.4 INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF DEFAULT. From the
date of occurrence of an Event of Default until the earlier of the date upon
which (i) all Obligations shall have been paid and satisfied in full or (ii)
such Event of Default shall have been waived, interest on the Revolving Loans
and Letter of Credit Fees on Letter of Credit Obligations shall each be payable
on demand as a rate per annum equal to, with respect to the Revolving Loans, the
rate in effect under Section 4.1, plus two percent (2%) (the "Default Rate"),
and with respect to the Letter of Credit Obligations, the rate at which Letter
of Credit Fees are charged pursuant to the first sentence of Section 4.3(a),
plus two percent (2%).
4.5 EXPENSES. The Borrowers shall reimburse the Expenses of the Agent,
or any Lender, as the case may be, promptly upon demand.
4.6 MANDATORY PAYMENT; REDUCTIONS OF COMMITMENTS.
(a) Except during the period described in Section 2.2(b)(ii),
the aggregate outstanding principal amount of Revolving Loans plus
Letter of Credit Obligations at any time in excess of the lesser at
such time of (i) the Borrowing Base and (ii) the Line of Credit, shall
be immediately due and payable without the necessity of any demand.
(b) On the Expiration Date, the Commitment of each Lender
shall automatically reduce to zero (-0-) and may not be reinstated.
(c) The Borrowers may reduce or terminate the Line of Credit
at any time and from time to time in whole or in part; provided, that
each such reduction must be in an amount not less than $5,000,000 (and
in increments of $1,000,000 in excess thereof). Once reduced, no
portion of the Line of Credit may be reinstated. If the Borrowers seek
to reduce the Line of Credit to an amount less than $25,000,000, then
the Line of Credit shall be reduced to zero (-0-).
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(d) If any Borrower shall make any sale or distribution of any
assets permitted pursuant to Section 8.6 hereof, the Borrowers shall
prepay the outstanding balance of the Revolving Loans at the time of
such sale or disposition from the proceeds thereof in an amount equal
to the lesser of (i) the Revolving Loans then outstanding or (ii) the
Net Cash Proceeds received in connection with such sale or disposition.
Any prepayments required to be made under this subsection (d) shall not
constitute a permanent reduction of the Line of Credit.
4.7 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF ACCOUNT. The Agent shall
maintain an account on its books in the name of Florsheim (the "Loan Account")
in which the Borrowers will be charged with all loans and advances made by the
Lenders to the Borrowers or for the account of the Borrowers, including the
Revolving Loans, and all Letter of Credit Obligations, the Fees, the Expenses
and any other Obligations, as and when such payments become due. The Loan
Account will be credited with all payments received by the Agent from the
Borrowers or for the account of the Borrowers, including all amounts received in
the BT Account from the Lockbox and Collection Banks. After the end of each
month, the Agent shall send the Borrower Representative a monthly statement
accounting for the charges, loans, advances and other transactions occurring
among and between the Agent, the Lenders and the Borrowers during that month,
provided, that the failure of the Agent to send such statement to the Borrower
Representative shall not relieve the Borrowers of any Obligations. Absent
manifest error, each monthly statement shall be an account stated and shall be
final, conclusive and binding on the Borrowers, unless Agent receives a written
statement of the Borrowers' exceptions thereto within sixty (60) days after any
such monthly statement is mailed.
4.8 PAYMENT PROCEDURES. Payments of principal, interest, Fees and
Expenses shall be made not later than 2:00 P.M. Chicago time on the day when
due, in immediately available dollars, to the offices of the Agent, at the
address set forth in Section 11.7, or as the Agent may otherwise direct the
Borrowers. The Borrowers hereby authorize the Agent to charge the Loan Account
with the amount of all payments to be made hereunder and under the other Credit
Documents, including all Fees and Expenses, as and when such payments become
due. The obligation of the Borrowers to the Lenders with respect to such
payments shall be discharged by making such payments to the Agent pursuant to
this Section or by the charging of the Loan Account by the Agent.
4.9 COLLECTION OF ACCOUNTS. Until instructed otherwise by the Agent,
the Borrowers shall be entitled to receive Collections directly from retail
customers and deposit such Collections in local depository banks in accordance
with its historical practices. The Borrowers, the Agent and financial
institutions selected by Florsheim and acceptable to the Agent (the "Collection
Banks") shall enter into agreements substantially in the form of Exhibit G-1
(the "Depositary Account Agreements"), which among other things shall provide
for the opening of an account for the deposit of Collections (a "Collection
Account") at a Collection Bank. All Collections and other amounts received by
the Borrowers from any retail customer, in addition to all other cash received
from any other Collateral, shall upon receipt be deposited directly into a
Collection Account, or into a local depository bank which shall be instructed to
make daily transfers of all collected amounts to a Collection Account.
Termination of such arrangements shall also be subject to approval by the Agent.
Upon the terms and subject to the conditions set
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forth in the Depositary Account Agreements, all available amounts held in each
Collection Account shall be wired each Business Day into an account (the "BT
Account") maintained by the Agent at Bankers Trust Company/Deutsche Bank.
Amounts received in the BT Account from the Collection Banks shall be credited
to the Loan Account and distributed and applied as set forth in Section 4.10.
The Borrowers shall at all times maintain lockboxes ("Lockboxes") and
shall instruct all wholesale account debtors on the Accounts of the Borrowers to
remit all Collections therefrom to the Lockboxes. The Borrowers, the Agent and
financial institutions selected by Florsheim and acceptable to the Agent (the
"Lockbox Banks") shall enter into agreements substantially in the form of
Exhibit G-2 (the "Lockbox Agreements"), which among other things shall provide
for the opening of an account for the deposit of all such Collections (a
"Lockbox Account") at a Lockbox Bank. All such Collections and other amounts
received by the Borrowers from any wholesale account debtor, in addition to all
other cash received from any other source shall upon receipt be deposited into a
Lockbox Account. Termination of such arrangements shall also be subject to
approval by the Agent. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all available amounts held in each Lockbox Account shall
be wired each Business Day into the BT Account. Amounts received in the BT
Account from the Lockbox Banks shall be credited to the Loan Account and
distributed and applied as set forth in Section 4.10.
4.10 DISTRIBUTION AND APPLICATION OF COLLECTIONS AND OTHER AMOUNTS. All
Collections received by the Agent, and all other amounts received by the
Borrowers from any account debtor and delivered to the Agent, shall be credited
to the Loan Account, unless an Event of Default has occurred and is continuing,
in which case such Collections and other amounts shall be distributed and
applied in the following order: first, to the payment of any Fees, Expenses or
other Obligations due and payable to the Agent under any of the Credit
Documents, including Agent Advances and any other amounts advanced by the Agent
on behalf of the Lenders; second, to the payment of any Fees, Expenses or other
Obligations due and payable to the Issuing Bank under any of the Credit
Documents; third, to the ratable payment of any Fees, Expenses or other
Obligations due and payable to the Lenders under any of the Credit Documents
other than those Obligations specifically referred to in this Section; fourth,
to the ratable payment of interest due on the Revolving Loans; and, fifth, to
the ratable payment of principal due on the Revolving Loans. Notwithstanding the
foregoing, in the event that the Obligations are declared due and payable
pursuant to Section 9.2 hereof at a time when Revolving Loans are outstanding
against the Tranche B Availability, any distributions for the ratable payment of
interest and principal on the Revolving Loans shall be made by the Agent as if
no such Tranche B Availability Revolving Loans were outstanding, to the effect
that all interest and principal on all other outstanding loans shall be paid
prior to the payment of interest and principal on any Revolving Loans
outstanding against Tranche B Availability.
4.11 CALCULATIONS. All calculations of (i) interest hereunder and (ii)
Fees, including, without limitation, Unused Line Fees and Letter of Credit Fees,
shall be made by the Agent, on the basis of a year of 360 days, or, if such
computation would cause the interest and fees chargeable hereunder to exceed the
Highest Lawful Rate, 365/366 days, in each case for the actual number of days
elapsed (including the first day but excluding the last day) occurring in the
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period for which such interest or Fees are payable. Each determination by the
Agent of an interest rate, Fee or other payment hereunder shall be conclusive
and binding for all purposes, absent manifest error.
4.12 SPECIAL PROVISIONS RELATING TO LIBOR RATE LOANS.
(a) CONTINUATION. With respect to any Borrowing consisting of
LIBOR Rate Loans, the Borrower Representative may, subject to the
provisions of Section 4.12(c), elect to maintain such Borrowing or any
portion thereof as consisting of LIBOR Rate Loans by selecting a new
Interest Period for such Borrowing, which new Interest Period shall
commence on the last day of the immediately preceding Interest Period.
Each selection of a new Interest Period shall be made by notice given
not later than noon Chicago time on the third Business Day prior to the
date of any such continuation relating to LIBOR Rate Loans, by the
Borrower Representative to the Agent. Such notice by the Borrower
Representative of a continuation (a "Notice of Continuation") shall be
by telephone or facsimile transmission, and if by telephone, promptly
confirmed in writing, substantially in the form of Exhibit H, in each
case specifying (i) the date of such continuation, (ii) the Type of
Revolving Loans subject to such continuation, (iii) the aggregate
amount of Revolving Loans subject to such continuation and (iv) the
duration of the selected Interest Period. The Borrower Representative
may elect to maintain more than one Borrowing consisting of LIBOR Rate
Loans by combining such Borrowings into one Borrowing and selecting a
new Interest Period pursuant to this Section 4.12(a). If the Borrower
Representative shall fail to select a new Interest Period for any
Borrowing consisting of LIBOR Rate Loans in accordance with this
Section 4.12(a), such Revolving Loans will automatically, on the last
day of the then existing Interest Period therefor, convert into Prime
Rate Loans. The Agent shall give each Lender prompt notice by telephone
or facsimile transmission of each Notice of Continuation.
(b) CONVERSION. The Borrower Representative may on any
Business Day (so long as no Default or Event of Default has occurred
and is continuing), upon notice (each such notice, a "Notice of
Conversion") given to the Agent, and subject to the provisions of
Section 4.12(c), convert the entire amount of or a portion of all
Revolving Loans of one Type comprising the same Borrowing into
Revolving Loans of another Type; provided, that any conversion of any
LIBOR Rate Loans into Revolving Loans of another Type shall be made on,
and only on, the last day of an Interest Period for such LIBOR Rate
Loans and, upon conversion of any Prime Rate Loans into Revolving Loans
of another Type, the Borrowers shall pay accrued interest to the date
of conversion on the principal amount converted. Each such Notice of
Conversion shall be given not later than Noon Chicago time on the
Business Day prior to the date of any proposed conversion into Prime
Rate Loans and on the third Business Day prior to the date of any
proposed conversion into LIBOR Rate Loans. Subject to the restrictions
specified above, each Notice of Conversion shall be by telephone or
facsimile transmission, and if by telephone, promptly confirmed in
writing, substantially in the form of Exhibit I, in each case
specifying (i) the requested date of such conversion, (ii) the Type of
Revolving Loans to be converted (iii) the portion of such Type of
Revolving Loan to be converted, (iv) the Type of Revolving Loans such
Revolving Loans are to be converted into and
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(v) if such conversion is into LIBOR Rate Loans, the duration of the
Interest Period of such Loan. Each conversion shall be in an aggregate
amount for the Revolving Loans of not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof. The Borrower
Representative may elect to convert the entire amount of or a portion
of all Revolving Loans of one Type comprising more than one Borrowing
into Revolving Loans of another Type by combining such Borrowers into
one Borrowing; provided, that if the Borrowers so combined consist of
LIBOR Rate Loans, such Loans shall have Interest Periods ending on the
same date.
(c) CERTAIN LIMITATIONS ON LIBOR RATE LOANS. The right of the
Borrowers to maintain, select, continue or convert LIBOR Rate Loans
shall be limited as follows:
(i) If the Agent is advised by Bankers Trust
Company/Deutsche Bank that it is not offering United States
dollar deposits (in the applicable amounts) in the London
interbank market, or the Agent determines that adequate and
fair means do not otherwise exist for ascertaining the LIBOR
Rate or LIBOR Rate Loans comprising any requested Borrowing,
continuation or conversion, the right of the Borrower
Representative to select or maintain LIBOR Rate Loans for such
Borrowing or any subsequent Borrowing shall be suspended until
the Agent shall notify the Borrower Representative and the
Lenders that the circumstances causing such suspension no
longer exists, and each Revolving Loan shall be made as a
Prime Rate Loan.
(ii) If the Majority Lenders shall, at least one
Business Day before the date of any requested Borrowing,
continuation or conversion, notify the Agent that the LIBOR
Rate for Revolving Loans comprising such Borrowing will not
adequately reflect the cost to such Lenders of making or
funding their respective Revolving Loans for such Borrowing,
the right of the Borrower Representative to select LIBOR Rate
Loans for such Borrowing shall be suspended until the Agent
shall notify the Borrower Representative and the Lenders that
the circumstances causing such suspension no longer exist, and
each Revolving Loan comprising such Borrowing and each other
Borrowing requested during such period of suspension shall be
made as a Prime Rate Loan.
(iii) If at any time any Lender determines (which
determination shall, absent manifest error, be conclusive and
binding on all parties) that the making, continuation or
conversion of any Revolving Loan as a LIBOR Rate Loan by such
Lender has become unlawful or impermissible by reason of
compliance by that Lender with any law, governmental rule,
regulation or order of any Governmental Authority (whether or
not having the force of law), then, and in any such event,
such Lender may give notice of that determination in writing,
to the Agent and the Borrower Representative and the Agent
shall promptly transmit the notice to each other Lender. Until
such Lender gives notice otherwise, the right of the Borrower
Representative to select LIBOR Rate Loans from that Lender
shall be suspended and each Revolving Loan made by that
Lender, notwithstanding the Type of Revolving Loan made by the
other Lenders, shall be a Prime Rate Loan and each
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LIBOR Rate outstanding from that Lender shall automatically,
on the last day of the existing Interest Period therefor (or
earlier, if so required under such law, rule, regulation or
order), convert to a Prime Rate Loan.
(iv) No Agent Advance shall be made as a LIBOR Rate
Loan.
(v) No Revolving Loans may be made, continued or
converted as or to LIBOR Rate Loans at any time that a Default
or Event of Default shall have occurred and be continuing.
(vi) At no time shall there be outstanding move than
six (6) Borrowings of LIBOR Rate Loans.
(vii) The Borrower Representative may not select a
LIBOR Rate Loan prior to the date which is the earlier of (i)
thirty (30) days after the Closing Date, or (ii) the closing
of the primary re-syndication of the facility under this
Credit Agreement.
(d) COMPENSATION.
(i) Each Notice of Continuation and Notice of
Conversion shall be irrevocable by and binding on the
Borrowers. In the case of any Borrowing, continuation or
conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be
comprised of LIBOR Rate Loans, the Borrowers shall indemnify
each Lender against any loss, cost or expense incurred by such
Person as a result of any failure to fulfill, on or before the
date for such Borrowing, continuation or conversion specified
in such Notice of Borrowing, Notice of Continuation or Notice
of Conversion, the applicable conditions set forth in Article
5, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of
the liquidation or re-employment of deposits or other funds
acquired by such Lender to fund the Revolving Loan to be made
by such Lender as part of such Borrowing, continuation or
conversion.
(ii) If any payment of principal of, or conversion or
continuation of, any LIBOR Rate Loan is made other than on the
last day of the Interest Period for such Loan as a result of a
payment, prepayment, conversion or continuation of such Loan
or acceleration of the maturity of the Revolving Notes or for
any other reason, the Borrowers shall, upon demand by any
Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss (excluding
loss of anticipated profits), cost or expense incurred by
reason of the liquidation or re-employment of deposits or
other funds acquired by any Lender to fund or maintain such
Loan.
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(iii) Calculation of all amounts payable to a Lender
under this Section 4.12(d) shall be made as though such Lender
elected to fund all LIBOR Rate Loans by purchasing United
States dollar deposits in its LIBOR Lending Office's interbank
eurodollar market.
4.13 INDEMNIFICATION IN CERTAIN EVENTS.
(a) INCREASED COSTS. If after the Closing Date, either (i) any
change in or in the interpretation of any law or regulation is
introduced, including, without limitation, with respect to reserve
requirements applicable to the Agent, to any of the Lenders, Bankers
Trust Company/Deutsche Bank or any other banking or financial
institution from whom any of the Lenders borrows funds or obtains
credit (a "Funding Bank"), or (ii) the Agent, a Funding Bank or any of
the Lenders complies with any future guideline or request from any
central bank or other Governmental Authority proposed or promulgated
after the date of the Agreement or (iii) the Agent, a Funding Bank or
any of the Lenders determines that the adoption of any applicable law,
rule or regulation regarding capital adequacy or any change therein, or
any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof announced after the date
of this Credit Agreement has or would have the effect described below,
or the Agent, a Funding Bank or any of the Lenders complies with any
request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable
agency announced after the date of this Credit Agreement and in the
case of any event set forth in this clause (iii), such adoption, change
or compliance has or would have the direct or indirect effect of
reducing the rate of return on any of such Person's capital as a
consequence of its obligations hereunder to a level below that which
such Person could have achieved but for such adoption, change or
compliance (taking into consideration such Person's policies with
respect to capital adequacy) by an amount deemed by such Person to be
material, and any of the foregoing events described in clauses (i),
(ii) or (iii) increases the cost to the Agent, or any of the Lenders of
(A) funding or maintaining its Commitments or (B) issuing, causing the
issuance of making or maintaining any Letter of Credit or of purchasing
or maintaining any participation therein, or reduces the amount
receivable in respect thereof by the Agent or any Lender, then the
Borrowers shall upon demand by the Agent at any time within one hundred
eighty (180) days after the date on which an officer of the Agent, such
Funding Bank or such Lender, as the case may be, responsible for
overseeing this Credit Agreement knows or has reason to know of its
right to additional compensation under this Section 4.13(a), pay to the
Agent, for the account of such Lender or, as applicable, the Agent or a
Funding Bank, additional amounts sufficient to reimburse the Agent,
such Funding Bank and such Lender against such increase in cost or
reduction in amount receivable; provided, however, that if the Agent or
any such Lender or Funding Bank, as the case may be, fails to deliver
such demand within such 180 day period, such entity shall only be
entitled to additional compensation for any such costs incurred from
and after the date that is one hundred eighty (180) days prior to the
date the Borrower Representative receives such demand; and provided
further, however, that before making any such demand, the Agent and
each Lender agree to use reasonable efforts (consistent
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with its internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office if the making of such a
designation would avoid the need for, or reduce the amount of, such
increased cost and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender. A certificate as
to the amount of such increased cost, and setting forth in reasonable
detail the calculation thereof, shall be submitted to the Borrower
Representative by the Agent, or the applicable Lender or Funding Bank,
and shall be conclusive absent demonstrable error.
(b) Each Lender will promptly notify the Borrower
Representative and the Agent, and the Agent will promptly notify the
Borrower Representative, of any event of which it has knowledge that
would entitle such entity to additional compensation under this Section
4.13. Neither the Agent nor any Lender shall request any additional
compensation under this Section 4.13 unless it is generally making
similar requests of other borrowers similarly situated, and the Agent
and each Lender agrees to use a reasonable basis for calculating
amounts allocable to its commitment to lend or its Revolving Loans and
Letter of Credit obligations hereunder.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 CONDITIONS PRECEDENT TO THE CREDIT AGREEMENT. This Credit Agreement
is subject to the satisfaction or waiver of the following conditions precedent:
(a) CLOSING DOCUMENT LIST. The Agent and the Lenders shall
have received each of the agreements, opinions, reports, approvals,
consents, certificates and other documents set forth on the closing
document list attached hereto as Schedule A (the "Closing Document
List"). Upon issuance of the Revolving Note by the Borrowers, upon
receipt by the Agent of the other items specified in the Closing
Document List and upon satisfaction or waiver of the other conditions
precedent set forth in subsections (b), (c) and (d) of this Section
5.1, the "Note" (as defined in the Existing Credit Agreement) issued
and outstanding pursuant to Section 13.04(b) of the Existing Credit
Agreement and the "Subsidiary Guaranty" (as defined in the Existing
Credit Agreement) shall be duly surrendered in exchange for the
Revolving Note.
(b) MATERIAL ADVERSE CHANGE. (i) No event shall have occurred
which has had or could reasonably be expected to have a Material
Adverse Effect; or (ii) there shall not have occurred a substantial
impairment of the financial markets generally that is reasonably likely
to materially and adversely affect the transactions contemplated
hereby, in each case as determined solely by the Agent in its
reasonable discretion.
(c) FEES AND EXPENSES. All Fees and Expenses payable by the
Borrower hereunder on or before the Closing Date shall have been paid
in full.
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(d) BORROWING BASE; UNUSED AVAILABILITY. After giving pro
forma effect to the Revolving Loans outstanding under the Existing
Credit Agreement on the date hereof, the funding of the additional
Revolving Loans hereunder on the date hereof, the assumption of the
Letters of Credit outstanding under the Existing Credit Agreement on
the date hereof, and the payment of all costs, fees and expenses
incurred by or for the account of the Borrower in connection with the
execution and delivery of this Credit Agreement and the other Credit
Documents, there shall be unused availability under the Borrowing Base
of at least $9,000,000.
5.2 CONDITIONS PRECEDENT TO ALL REVOLVING LOANS AND LETTERS OF CREDIT.
The obligation of each Lender to fund its Proportionate Share of any requested
Revolving Loan or of the Issuing Bank to issue any requested Letter of Credit is
subject to the satisfaction of the conditions precedent set forth below. Each
Notice of Borrowing, each Letter of Credit Request, and each issuance by
Florsheim of a check drawn against, or request for transfer from, the
Disbursement Account shall constitute a representation and warranty by the
Borrowers that such conditions are satisfied.
(a) All representations and warranties contained in this
Credit Agreement and the other Credit Documents are true and correct in
all material respects on and as of the date of such Notice of
Borrowing, Letter of Credit Request or issuance of a check drawn
against or request for transfer from the Disbursement Account, as if
then made, other than representations and warranties that relate solely
to a date other than the date of such Notice of Borrowing, Letter of
Credit Request or issuance of a check drawn against or request for
transfer from the Disbursement Account;
(b) No Default or Event of Default shall have occurred and be
continuing or could reasonably be expected to result from the making of
the requested Revolving Loan or the issuance of the requested Letter of
Credit, which has not been waived; and
(c) Since July 3, 1999 no event shall have occurred which has
had or could reasonably be expected to have a Material Adverse Effect.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Credit Agreement
and to induce the Lenders to make the Revolving Loans and other financial
accommodations described herein, the Borrowers hereby represent and warrant to
the Agent and the Lenders that the representations and warranties contained in
this Article 6 are true and correct in all material respects. Such
representations and warranties, and all other representations and warranties
made by the Borrowers in any other Credit Documents, shall survive the execution
and delivery of this Credit Agreement and such other Credit Documents. All
references in this Article 6 to "Subsidiaries" shall not include any Foreign
Subsidiaries of any of the Borrowers.
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6.1 ORGANIZATION AND QUALIFICATION. Each of the Borrowers and each of
their respective Subsidiaries (i) are corporations duly organized, validly
existing and in good standing under the laws of the respective states of their
incorporation, (ii) have the power and authority to own their respective
properties and assets and to transact their respective businesses in which they
presently are, or propose to be, engaged and (iii) are duly qualified and are
authorized to do business and are in good standing in every jurisdictions in
which the failure to be so authorized, qualified, or in good standing could
reasonably be expected to have a Material Adverse Effect. As of the date of this
Credit Agreement, Schedule B, Part 6.1 lists all jurisdictions in which the
Borrowers and each of their respective Subsidiaries are qualified to do business
as foreign corporations.
6.2 AUTHORITY. Each of the Borrowers and each of their respective
Subsidiaries have the requisite corporate power and authority to execute,
deliver and perform the respective Credit Documents to which they are parties.
All corporate action necessary for the execution, delivery and performance of
any of the Credit Documents by the Borrowers and each of their Subsidiaries has
been taken.
6.3 ENFORCEABILITY. This Credit Agreement and each of the other Credit
Documents are the legal, valid and binding obligations of the Borrowers and each
of their Subsidiaries which are parties thereto, enforceable in accordance with
their respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
and (ii) general principles of equity.
6.4 NO CONFLICT. The execution, delivery and performance of each Credit
Document by the Borrowers and each of their Subsidiaries which are parties
thereto are not in contravention of (i) the Governing Documents of such Persons,
or (ii) any Requirement of Law, or (iii) any indenture, contract, agreement or
instrument or other commitment to which any or all of such Persons are parties
or by which any of such Persons or any of its properties are bound, except for
any such contravention which could not reasonably be expected to have a Material
Adverse Effect, and will not, except as contemplated herein, result in the
imposition of any material Liens upon any of the properties of any of such
Persons.
6.5 CONSENTS AND FILINGS. No consent, authorization, permit or filing
is required in connection with the execution, delivery and performance of this
Credit Agreement or any Credit Document by the Borrowers and each of their
Subsidiaries which are parties thereto, or in connection with the continuing
operations of such Persons, the lack of which could reasonably be expected to
have a Material Adverse Effect, except (i) those that have been obtained or made
and (ii) filings necessary to create, perfect or retain the perfection of Liens
against the Collateral.
6.6 GOVERNMENT REGULATION. None of the Borrowers nor any of their
respective Subsidiaries are subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act,
the Investment Company Act of 1940, or any other similar Requirement of Law that
limits the respective abilities of such Persons to incur indebtedness or
consummate the transactions contemplated in this Credit Agreement and the other
Credit Documents.
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6.7 SOLVENCY. The fair saleable value of the assets of the Borrowers,
taken as a whole, exceeds all their probable liabilities, including those to be
incurred pursuant to this Credit Agreement and the other Credit Documents. The
Borrowers, taken as a whole, (i) do not have unreasonably small capital in
relation to the business in which they are or propose to be engaged and (ii)
have not incurred and do not believe that they will incur, after giving effect
to the transactions contemplated by this Credit Agreement, debts beyond their
ability to pay as such debts become due.
6.8 RIGHTS IN COLLATERAL; PRIORITY OF LIENS. All property constituting
Collateral is owned or leased by the applicable Borrower, free and clear of any
and all Liens in favor of third parties, other than Permitted Liens. Upon the
proper filing of the UCC financing statements (and termination statements, if
any), the Mortgages (or assignments thereof), the Patent Security Agreement and
the Trademark Security Agreement listed in the Closing Document List, the
security interests granted pursuant to the Credit Documents constitute valid and
enforceable first, prior (subject to Permitted Liens) and perfected Liens on the
Collateral, to the extent such Liens can be perfected by the filing of such
documents.
6.9 FINANCIAL DATA. Florsheim has provided to the Agent complete and
accurate copies of annual audited Financial Statements for the Consolidated
Entity for the fiscal year ended January 2, 1999 and unaudited Financial
Statements for the six-month fiscal period ended July 3, 1999. Such Financial
Statements have been prepared in accordance with GAAP (as applicable to annual
and interim statements respectively) consistently applied and fairly present the
respective consolidated financial positions, results of operations and cash
flows of the Consolidated Entity for each of the periods covered (subject, in
the case of unaudited Financial Statements, to normal year-end adjustments) as
of the date of such Financial Statement. As of the date of this Credit
Agreement, the Consolidated Entity has no Contingent Obligation, or liability
for taxes or long-term leases, which is not reflected in all material respects
in such Financial Statements or the footnotes thereto, or is not otherwise
disclosed on Schedule B, Part 6.9.
6.10 LOCATIONS OF OFFICES, RECORDS AND INVENTORY. The address of the
principal place of business and chief executive office of each of the Borrowers
is set forth on Schedule B, Part 6.10, as the same may be amended after the
Closing Date in accordance with Section 11.11. The books and records of each
Borrower, and all its chattel paper, if any, and records of Accounts, are
maintained exclusively at the location identified on Schedule B, Part 6.10.
There is no jurisdiction in which any Borrower has any Collateral (except for
vehicles and Inventory in transit) other than those jurisdictions identified on
Schedule B, Part 6.10, as the same may be amended after the Closing Date in
accordance with Section 11.11. A complete list of the legal name and address of
each warehouse at which Inventory of any Borrower is stored as of the date of
this Credit Agreement is set forth on Schedule B, Part 6.10, as the same may be
amended after the Closing Date in accordance with Section 11.11. None of the
receipts received and to be received by any Borrower from any warehouseman state
that the Inventory covered thereby is to be delivered to bearer or to the order
of a named Person or to a named Person and such named Person's assigns, in each
case other than any Borrower.
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6.11 SUBSIDIARIES; OWNERSHIP OF STOCK. As of the Closing Date, except
as otherwise expressly disclosed on Schedule B, (i) the only direct or indirect
Subsidiaries of Florsheim are those listed on Schedule B, Part 6.11, (ii)
Florsheim is the record and beneficial owner of all of the respective shares of
capital stock of each of its Subsidiaries listed on Schedule B, Part 6.11 (other
than directors' qualifying shares, if any, for Subsidiaries that are not
Borrowers), (iii) there are no proxies, irrevocable or otherwise, with respect
to such shares, and no equity securities of any of such Subsidiaries are or may
become required to be issued by reason of any options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of any
capital stock of any such Subsidiary, and (iv) there are no contracts,
commitments, understandings or arrangements by which any such Subsidiary is or
may become bound to issue additional shares of its capital stock or securities
convertible into or exchangeable for such shares. All of such shares so owned by
Florsheim are owned by Florsheim free and clear of any Liens, other than Liens
in favor of the Agent created pursuant to the Credit Documents.
6.12 NO JUDGMENTS OR LITIGATION. Except as set forth on Schedule B,
Part 6.12, no judgments, orders, writs or decrees are outstanding against any
Borrower or any of its Subsidiaries, nor is there now pending or, to the best of
any Borrower's knowledge after diligent inquiry, threatened, any litigation,
contested claim, investigation, arbitration, or governmental proceeding by or
against such Borrower or any of its Subsidiaries, which, in either case, could
reasonably be expected to have a Material Adverse Effect.
6.13 NO DEFAULTS. None of the Borrowers nor any of their respective
Subsidiaries is in default under any term of any indenture, contract, lease,
agreement, instrument or commitment to which any of them is a party or by which
any of them is bound, which default, individually or in the aggregate with any
other defaults, could reasonably be expected to have a Material Adverse Effect.
No Borrower knows of any dispute regarding any such indenture, contract, lease,
agreement, instrument or other commitment which dispute, individually or when
aggregated with other disputes, could reasonably be expected to have a Material
Adverse Effect.
6.14 LABOR MATTERS. Schedule B, Part 6.14 accurately sets forth all
labor contracts to which any Borrower or any of its Subsidiaries is a party as
of the Closing Date (including their dates of expiration). There are no existing
or, to the knowledge of any Borrower, threatened strikes, lockouts or other
disputes relating to any collective bargaining or similar agreement to which the
Borrowers or any of its Subsidiaries is a party, which individually, or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
6.15 COMPLIANCE WITH LAW. None of the Borrowers nor any of their
respective Subsidiaries has violated or failed to comply with any Requirements
of Law, including without limitation ERISA and environmental laws, except for
any such violations or failures which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
6.16 ERISA. None of the Borrowers, any of their respective Subsidiaries
or any ERISA Affiliate maintains or contributes to any Plan other than those
listed on Schedule B, Part 6.16. Each Plan has been and is maintained and funded
in all material respects in
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accordance with its terms and in compliance with all applicable provisions of
ERISA and the Code. Each Borrower, each Subsidiary of a Borrower and each ERISA
Affiliate has fulfilled in all material respects all contribution obligations
for each Plan (including obligations related to the minimum funding standards of
ERISA and the Internal Revenue Code). No Termination Event has occurred nor has
any other event occurred that may result in a Termination Event. None of the
Borrowers, any of their respective Subsidiaries, or any ERISA Affiliate, or any
fiduciary of any Plan is subject to any direct or indirect liability with
respect to any Plan under any Requirement of Law or agreement, except for any
such liabilities which individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect. None of the Borrowers, any of their
respective Subsidiaries or any ERISA Affiliate, is required to provide security
to any Plan under Section 401(a)(29) of the Internal Revenue Code.
6.17 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as disclosed on
Schedule B, Part 6.17, and excluding any such matters which could not reasonably
be expected to have a Material Adverse Effect, (i) the operations of the
Borrowers and each of their respective Subsidiaries comply with all applicable
federal, state and local environmental, health and safety statutes, regulations,
directions, ordinances, criteria and guidelines; (ii) no Borrower has received
notice that any of the operations of such Borrower or any of its Subsidiaries is
the subject of any judicial or administrative proceeding alleging the violation
of any federal, state or local environmental, health or safety statute,
regulation, direction, ordinance, criteria or guideline; (iii) none of the
operations of the Borrowers or any of their respective Subsidiaries is the
subject of any federal or state investigation evaluating whether the Borrowers
or any of their respective Subsidiaries disposed of any hazardous or toxic
waste, substance or constituent or other substance at any site that may require
remedial action, or any federal or state investigation evaluating whether any
remedial action is needed to respond to a release of any hazardous or toxic
waste, substance or constituent or other substance into the environment; (iv)
none of the Borrowers nor any of their respective Subsidiaries has filed any
notice under any federal or state law indicating past or present treatment,
storage or disposal of a hazardous waste, substance or constituent or reporting
a spill or release of a hazardous or toxic waste, substance or constituent or
other substance into the environment; and (v) none of the Borrowers nor any of
their respective Subsidiaries has any contingent liability of which any Borrower
has knowledge, or reasonably should have knowledge, in connection with any
release or potential release of any hazardous or toxic waste, substance or
constituent or other substance into the environment, nor has any Borrower or any
of its Subsidiaries received any notice, letter or other indication of potential
liability arising from the disposal of any hazardous or toxic waste, substance
or constituent or other substance into the environment.
6.18 INTELLECTUAL PROPERTY. Florsheim possesses such assets, licenses,
patents, patent applications, copyrights, service marks, trademarks and trade
names as are necessary to continue to conduct its respective present business
activities of the Borrowers (including Florsheim) and their respective
Subsidiaries.
6.19 LICENSES AND PERMITS. The Borrowers and each of their respective
Subsidiaries have obtained and hold in full force and effect all franchises,
licenses, leases, permits, certificates, authorizations, qualifications,
easements, rights of way and other rights and approvals which are necessary for
the operation of their respective business as presently
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conducted, except where the failure to obtain or hold in effect any of the
foregoing, either individually, or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
6.20 TAXES AND TAX RETURNS.
(a) Except as set forth on Schedule B, Part 6.20, the
Borrowers and their respective Subsidiaries have timely filed,
inclusive of any permitted extension, all United States federal income
tax returns and all other material tax returns they are required to
file. The information filed is complete and accurate in all material
respects. All material deductions taken in such income tax returns are
appropriate and in accordance with applicable laws and regulations,
except deductions that may have been disallowed but are being
challenged in good faith and for which adequate reserves have been made
in accordance with GAAP).
(b) All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date hereof, have been
timely paid (except where the same are being challenged in good faith
and for which adequate reserves have been made in accordance with GAAP)
and neither the Borrowers nor any of their respective Subsidiaries have
any liability for taxes in excess of the amounts so paid or reserves so
established.
(c) Except as set forth in Schedule B, Part 6.20, no material
deficiencies for taxes have been claimed, proposed or assessed by any
taxing or other Governmental Authority against any Borrower or any of
their respective Subsidiaries and no material tax liens have been filed
other than Liens permitted under Section 8.4(i) of this Credit
Agreement of which the Agent has been notified in writing, and which
are being contested in good faith by appropriate proceedings, and
appropriate reserves therefor have been established and maintained as
reflected on the audited financial statements for Florsheim's fiscal
year ended January 2, 1999 in accordance with GAAP, and to the extent
such reserves are maintained for period after January 2, 1999,
consistent with the Borrowers' past practice, and to the extent such
Liens have been bonded in a manner reasonably satisfactory to the
Agent. As of the date of this Credit Agreement and except as set forth
in Schedule B, Part 6.20, there are no pending or threatened audits,
investigations or claims for or relating to any liability for taxes and
there are no matters under discussion with any Governmental Authority
which could reasonably be expected to result in a material additional
liability for taxes. As of the date of this Credit Agreement, either
the federal income tax returns of the Borrowers have been audited by
the Internal Revenue Service and such audits have been closed, or the
period during which any assessments may be made by the Internal Revenue
Service has expired without waiver or extension for all years up to and
including the fiscal year of the Consolidated Entity ended December 31,
1994. As of the date of this Credit Agreement, except as set forth in
Schedule B, Part 6.20, no extension of a statute of limitations
relating to taxes, assessments, fees or other governmental charges is
in effect with respect to the Borrowers or any of their respective
Subsidiaries.
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(d) Except as set forth on Schedule B, Part 6.20, none of the
Borrowers nor any of their respective Subsidiaries has any obligation
under any written tax sharing agreement or agreement regarding payments
in lieu of taxes.
6.21 MATERIAL CONTRACTS. Schedule B, Part 6.21, contains a true,
correct and complete list of all the Material Contracts currently in effect on
the Closing Date. As of the date of this Credit Agreement and except as
described on Schedule B, Part 6.21, none of the Material Contracts contains any
burdensome restrictions on the Borrower or any of its Subsidiaries or any of
their respective properties which could reasonably be expected to have a
Material Adverse Effect, all of the Material Contracts are in full force and
effect and no defaults currently exist thereunder.
6.22 ACCURACY AND COMPLETENESS OF INFORMATION. All factual information
furnished by or on behalf of the Borrowers or any of their respective
Subsidiaries in writing to the Agent, any Lender, or the Auditors for purposes
of or in connection with this Credit Agreement or any Credit Documents or any
transaction contemplated hereby or thereby is or will be true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any material fact necessary to
make such information not misleading at such time.
6.23 YEAR 2000. All reprogramming, remediation or any other corrective
action, including the internal testing of the Borrowers' and their respective
Subsidiaries' Information Systems and Equipment, are being developed on a timely
basis so as to avoid any Event of Default or a Material Adverse Effect arising
from the so-called "Year 2000 Problem" (that is, the risk that computer
applications and embedded micro chips in non-computing devices used by the
Borrowers, or any of their respective Subsidiaries may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999).
6.24 NO CHANGE. Since July 3, 1999 no event has occurred which has had
or could reasonably be expected to have a Material Adverse Effect.
ARTICLE 7
AFFIRMATIVE COVENANTS
All references in this Article 7, except for Section 7.1, to
"Subsidiaries" shall not include any Foreign Subsidiaries of any Borrower. Until
termination of this Credit Agreement and payment and satisfaction of all
Obligations due hereunder (other than Letter of Credit Obligations with respect
to Letters of Credit expiring after the Expiration Date which have been cash
collateralized pursuant to the terms hereof):
7.1 FINANCIAL REPORTING. The Borrower shall timely deliver to each
Lender the following information:
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(a) AUDITOR'S ENGAGEMENT LETTER. As soon as available, but in
any event not later than the earlier of (i) the end of each fiscal year
or (ii) prior to the date the Auditors commence work on the preparation
of the annual audited Financial Statement, a copy of the engagement
letter between Florsheim and its Auditors, which engagement letter
shall notify such Auditors that such annual audited Financial Statement
will be delivered by Florsheim to the Agent and Lenders.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not
later than ninety (90) days after each fiscal year end: (i) the annual
audited consolidated, and if requested by Agent, unaudited
consolidating, Financial Statements of the Consolidated Entity; (ii) a
comparison in reasonable detail to the prior year annual audited and
unaudited Financial Statements; (iii) the Auditors' unqualified opinion
stating that such Financial Statements present fairly in all material
respects the financial position of the Consolidated Entity and the
results of its operations and cash flows for such fiscal year in
conformity with GAAP and otherwise reported in a manner acceptable to
the Securities Exchange Commission, accompanied by a statement
indicating whether the Auditors have obtained knowledge of the
existence of any Default or Event of Default during the course of their
audit; (iv) a narrative discussion of the consolidated financial
condition and results of operations and the consolidated liquidity and
capital resources of the Consolidated Entity for such fiscal year,
prepared by or under the supervision of the chief financial officer,
chief accounting officer or treasurer of Florsheim; (v) a compliance
certificate substantially in the form of Exhibit J with an attached
schedule of calculations demonstrating compliance with the financial
covenants set forth in Article 8;and (vi) not later than one-hundred
fifty (150) days after each fiscal year end, a copy of any "Management
Letter" issued by the Auditors.
(c) MONTHLY AND ANNUAL PROJECTIONS. Not later than forty-five
(45) days after each fiscal year end, beginning with the fiscal year
ending January 1, 2000, monthly projections of the financial condition
and results of operations of the Consolidated Entity for the next
succeeding year, and annual projections for each succeeding fiscal year
thereafter, through and including the fiscal year in which the
Expiration Date will occur, in each case containing projected
consolidated balance sheets, statements of operations, and statements
of cash flows.
(d) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but
not later than forty-five (45) days after each end of each of the first
three fiscal quarters, and ninety (90) days after end of the last
fiscal quarter: (i) Financial Statements of the Consolidated Entity as
of the fiscal quarter then ended, and for the fiscal year to date; (ii)
a comparison in reasonable detail to the Financial Statements for the
corresponding periods of the prior fiscal year; (iii) the certification
of the chief financial officer, chief accounting officer or treasurer
of Florsheim, that such Financial Statements have been prepared in
accordance with GAAP for interim financial statements (subject to
year-end audit adjustments); (iv) a narrative discussion of the
consolidated financial condition and results of operations and the
consolidated liquidity and capital resources of the Consolidated Entity
for such fiscal quarter and fiscal year to date; and (v) a compliance
certificate substantially in the form
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of Exhibit J with an attached schedule of calculations demonstrating
compliance with the financial covenants set forth in Article 8.
(e) MONTHLY FINANCIAL STATEMENTS. As soon as available, but
not later than thirty (30) days after the end of each of the first two
(2) months of each fiscal quarter, and simultaneously with the
deliveries required in subsections (b) and (d) above with respect to
the third month of each fiscal quarter: (i) a balance sheet for the
Consolidated Entity as at the end of such month and for the fiscal year
to date and statements of operations and cash flows for such month and
for the fiscal year to date; (ii) a comparison to the balance sheet,
statement of operations and statement of cash flows for the same
periods in the prior year; (iii) a certification by the chief financial
officer, chief accounting officer or treasurer of Florsheim that such
balance sheet, statement of operations and statement of cash flows have
been prepared in accordance with GAAP for interim financial statements
(subject to year-end audit adjustments); and (iv) a compliance
certificate substantially in the form of Exhibit J with an attached
schedule of calculations demonstrating compliance with the financial
covenants set forth in Article 8.
(f) MONTHLY COMPARISON TO PRIOR PROJECTIONS. As soon as
available, but not later than thirty (30) days after the end of each of
the first eleven (11) months, and forty-five (45) days after the end of
the last month, a comparison of actual results of operations, cash flow
and capital expenditures for Consolidated Entity for such month and for
the period from the beginning of the current fiscal year through the
end of such month with amounts previously projected for those periods
(see Section 7.1(c)) and with actual results for corresponding periods
in the previous fiscal year.
7.2 COLLATERAL REPORTING. The Borrowers shall timely deliver to the
Agent the following certificates and reports:
(a) WEEKLY AND MONTHLY BORROWING BASE CERTIFICATES. Weekly,
before 12:00 noon on the third Business Day of each week (except the
last week of each month), monthly, within five (5) Business Days after
the last Business Day of each month, and at any other time requested by
the Agent, a Borrowing Base Certificate, which shall be: (i)
substantially in the form of Exhibit A, detailing the Eligible Accounts
Receivable as of each Friday of the immediately preceding week and,
until otherwise directed by the Agent, Eligible Inventory as of the
last Business Day of the immediately preceding month (if a weekly
Borrowing Base Certificate), or as of the last Business Day of the
immediately preceding month (if a monthly Borrowing Base Certificate),
or as of such other date as the Agent may request; and (ii) prepared by
or under the supervision of the chief financial officer, chief
accounting officer or treasurer of Florsheim and certified by such
officer subject only to adjustment upon completion of the normal annual
audit of physical inventory. Each Borrowing Base Certificate shall have
attached to it such additional schedules and other information as the
Agent may reasonably request, including, without limitation, an aging
of Accounts.
(b) APPRAISALS. When requested by the Agent, a report of
Inventory, based upon a physical count, which shall describe the
Borrowers' Inventory by category and by
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item (in reasonable detail) and report the then appraised value (at
lower of cost or market) of such Inventory.
(c) FURTHER ASSURANCES. When requested by the Agent, any
further information regarding the Collateral, business affairs and
financial condition of the Borrowers or any of their respective
Subsidiaries.
7.3 NOTIFICATION REQUIREMENTS. The Borrowers shall timely give to the
Agent and each of the Lenders the following notices:
(a) NOTICE OF DEFAULTS. Promptly, and in any event within
three (3) Business Days after becoming aware of the occurrence of a
Default or Event of Default, a certificate of the chief financial
officer, chief accounting officer or treasurer of the effected
Borrower specifying the nature thereof and the proposed response of
such Borrower thereto, each in reasonable detail.
(b) PROCEEDINGS OR ADVERSE CHANGES. Promptly, and in any event
within five (5) Business Days after such Borrower becomes aware of (i)
any proceeding being instituted or threatened to be instituted by or
against such Borrower or any of its Subsidiaries in any federal, state,
local or foreign court or before any commission or other regulatory
body (federal, state, local or foreign) in which (x) the amount in
controversy exceeds $3,000,000 and is not covered by insurance, or (y)
injunctive or similar relief is sought, (ii) any order, judgment or
decree in excess of $1,000,000 being entered against such Borrower or
any of its Subsidiaries or any of their respective properties or assets
or (iii) any actual or prospective change, development or event which
has had or could reasonably be expected to have a Material Adverse
Effect, a written statement describing such proceeding, order,
judgment, decree, change, development or event and any action being
taken with respect thereto by such Borrower or any such Subsidiary.
(c) ERISA NOTICES. (i) Promptly, and in any event within ten
(10) Business Days after any Borrower, any of its Subsidiaries or any
ERISA Affiliate knows or has reason to know that a Termination Event
has occurred, a written statement of the chief financial officer, chief
accounting officer, treasurer, secretary or assistant secretary of such
Borrower describing such Termination Event and any action that is being
taken with respect thereto by such Borrower, any such Subsidiary or
ERISA Affiliate, and any action taken or threatened by the Internal
Revenue Service, Department of Labor or Pension Benefit Guaranty
Corporation (the "PBGC"). Each Borrower, each such Subsidiary and each
such ERISA Affiliate shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor; (ii)
promptly, and in any event within three (3) Business Days after the
filing thereof with the Internal Revenue Service, a copy of each
funding waiver request filed with respect to any Benefit Plan and all
communications received by any Borrower, any of its Subsidiaries or any
ERISA Affiliate with respect to such request; and (iii) promptly, and
in any event within three (3) Business Days after receipt by such
Borrower, any of its Subsidiaries or any ERISA Affiliate, of the PBGC's
intention to terminate a Benefit Plan or to have a trustee appointed to
administer a Benefit Plan, copies of each such notice.
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(d) ENVIRONMENTAL AND HEALTH AND SAFETY NOTICES. Promptly, and
in any event within ten (10) Business Days after receipt by any
Borrower or any of its Subsidiaries of any notice, complaint or order
alleging any actual or prospective violation of any environmental,
health or safety Requirement of Law or alleging responsibility for
costs of a cleanup, which violation or responsibility could reasonably
be expected to have a Material Adverse Effect, together with a copy of
such notice, complaint, or order and a written statement describing any
action being taken with respect thereto by such Borrower or any of its
Subsidiaries.
(e) MATERIAL CONTRACTS. Promptly, and in any event within ten
(10) Business Days after any Material Contract of any Borrower or any
of its Subsidiaries is terminated or amended or any new Material
Contract is entered into, a written statement describing such event,
with copies of amendments or new contracts, and an explanation of any
actions being taken with respect thereto.
(f) COLLATERAL AND OTHER MATTERS.
(i) At least thirty (30) Business Days' prior written
notice to the Agent of any change in the location of any
Collateral having a value in excess of $1,000,000 or in the
location of the chief executive office or place of business of
any Borrower or any of its Subsidiaries from the locations
specified in Schedule B, Part 6.10. At least twenty (20)
Business Days prior to any such change, such Borrower shall
cause to be executed and delivered to the Agent any financing
statements, Collateral Access Agreements or other documents
reasonably required by the Agent, all in form and substance
reasonably satisfactory to the Agent.
(ii) Within ten (10) Business Days prior to the
occurrence thereof, notice of the sale of any assets permitted
pursuant to Section 8.6 hereof where the proceeds from such
sale are in excess of $500,000, and notice of the sale by any
Foreign Subsidiary of all or substantially all of its assets
(including any transaction which has the effect of vesting
title to such assets in another Person other than a Borrower),
together with such additional information with respect to any
such transaction as the Agent shall reasonably request.
7.4 CORPORATE EXISTENCE. Each Borrower shall, and shall cause each of
its Subsidiaries to, (i) maintain in full force and effect all material
licenses, bonds, franchises, leases, trademarks and qualifications to do
business, and all material patents, contracts and other rights necessary or
advisable for the profitable conduct of their businesses, (ii) continue in, and
limit their operations to, the same general lines of business as presently
conducted by them and reasonable extensions thereof, (iii) in the case of
Florsheim, maintain all material terms and provisions of its corporate charter
and bylaws in the form in effect on the Closing Date, and (iv) maintain its
corporate existence and not consolidate or merge with or into any other Person,
provided that (a) Florsheim may merge with or into another Subsidiary if
Florsheim is the corporation surviving such merger, (b) any Subsidiary
(including a Borrower) may merge with or
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into any other Person provided that (x) following the merger the surviving
corporation shall be a wholly-owned Subsidiary of a Borrower engaged in the same
or similar general type of business as conducted by such Subsidiary prior to
such merger, (y) if such Person shall be the corporation surviving such merger,
and either such Subsidiary was a Borrower or such Person is required by Section
8.14 hereof to become a Borrower, such person executes an Assumption Agreement
in form and substance reasonably acceptable to the Agent whereby such Person
becomes a co-obligor on the Obligations and a Borrower hereunder and the Agent
holds a perfected Lien on its assets (including a first priority Lien on its
Accounts and Inventory), and (z) prior to completing the merger the Agent
receives such Collateral Access Agreements as the Agent may reasonably request
from any mortgagee or lessor of property on which any Collateral is stored or
otherwise located or any warehouseman, filler, processor or packer at which any
Collateral is stored or otherwise located, (c) Florsheim may merge into, or
liquidate and transfer all its assets to, or consolidate with, any Borrower (in
which event all rights and responsibilities of Florsheim hereunder shall devolve
and inure to such successor), and (d) any Subsidiary (including a Borrower) may
liquidate and transfer substantially all its assets to, or consolidate with, or
merge into, Florsheim or any Borrower; and provided further, however, that no
such consolidations or mergers may be done at such time as there shall be an
Event of Default hereunder or if either by reason of, or after giving effect to
such transaction there would be a Default or an Event of Default. In the event
of any such permitted consolidation or merger, the Agent shall be given at least
(e) ten (10) Business Days advance notice for any consolidation or merger of a
Borrower into any other Person and (f) notice within 5 Business Days of any
other consolidation or merger, and the Borrowers shall, in connection with any
such consolidation or merger, execute, record and file such instruments and
certificates, if any, as may be necessary to continue the perfection and
relative priorities of the Liens of the Agent and the Lenders in the Collateral
(including the assets being acquired by any Borrower by virtue of such merger).
In addition, the assets of any Borrower (other than Florsheim) may be disposed
of through a merger or consolidation of such Borrower with and into another
Person that is not an Affiliate of such Borrower or by a sale of 100% of the
capital stock of any such Borrower to another such Person, if, and only if, the
disposition of assets resulting from such merger, consolidation or stock sale,
if completed as a sale of assets, would be permitted pursuant to Section 8.6
hereof.
7.5 BOOKS AND RECORDS; INSPECTIONS. Each Borrower agrees to maintain,
and to cause each of its Subsidiaries to maintain, books and records pertaining
to the Collateral in such detail, form and scope as is consistent with good
business practice. Each Borrower agrees that the Agent or its agents may enter
upon the premises of such Borrower or any of its Subsidiaries at any time and
from time to time, during normal business hours and upon reasonable prior notice
under the circumstances, and at any time at all upon the occurrence and during
the continuance of an Event of Default, for the purposes of (i) inspecting and
verifying the Collateral, (ii) inspecting and/or copying (at the expense of the
Borrowers) any and all records pertaining thereto, and (iii) discussing the
affairs, finances and business of such Borrower with any officers, employees and
directors of such Borrower or with the Auditors.
7.6 INSURANCE. Florsheim agrees to maintain, for itself and each of its
Subsidiaries, public liability insurance, third party property damage insurance
and replacement value insurance on the Collateral under such policies of
insurance, with such insurance companies, in such amounts and covering such
risks as are at all times satisfactory to the Agent in its
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commercially reasonable judgment. Such insurance may include levels of
self-insurance comparable to those in place on the Closing Date or otherwise
satisfactory to the Agent, in its commercially reasonable judgement. All
policies covering the Collateral are to name the Agent as an additional insured
and/or the loss payee in case of loss, and are to contain such other provisions
as the Agent may reasonably require to fully protect the Agent's interest in the
Collateral and to any payments to be made under such policies.
Unless the Borrower provides the Agent with satisfactory evidence of
the insurance coverage required hereby, the Agent may purchase insurance at the
Borrowers' expense to protect the Agent's interest in the Collateral. This
insurance may, but need not, protect the interests of the Borrowers. The
coverage that the Agent purchases may not pay any claim that the Borrowers make
or any claim that is made against the Borrowers in connection with the
Collateral. The Borrowers may later cancel any insurance purchased by the Agent,
but only after providing the Agent with satisfactory evidence that the Borrowers
have obtained insurance as required hereby. If the Agent purchases insurance for
the Collateral, the Borrowers will be responsible for the costs of that
insurance, including interest thereon at the Default Rate and any other charges
which the Agent may impose in connection with the placement of the insurance
until the effective date of the cancellation or expiration of the insurance. The
costs of the insurance may be added to the Obligations, shall constitute
Expenses, shall bear interest at the Default Rate, and shall be payable upon
demand. The costs of the insurance may be more than the cost of insurance the
Borrowers may be able to obtain on their own.
7.7 TAXES. Each Borrower agrees to pay, when due, and to cause each of
its Subsidiaries to pay when due, all taxes lawfully levied or assessed against
such Borrower, any of its Subsidiaries or any of the Collateral before any
penalty or interest accrues thereon; provided, that, unless such taxes have
become a federal tax or ERISA Lien on any of the assets of such Borrower or any
of its Subsidiaries, no such tax need be paid if the same is being contested, in
good faith, by appropriate proceedings promptly instituted and diligently
conducted and if an adequate reserve or other appropriate provision shall have
been made therefor as required in order to be in conformity with GAAP.
7.8 COMPLIANCE WITH LAWS. Each Borrower agrees to comply, and to cause
each of its Subsidiaries to comply, with all Requirements of Law applicable to
the Collateral or any part thereof, or to the operation of its business or its
assets generally, except where the failure to comply could not reasonable be
expected to have a Material Adverse Effect, unless such Borrower contests any
such Requirements of Law in a reasonable manner and in good faith.
7.9 USE OF PROCEEDS. Proceeds of the Revolving Loan made on the date
hereof, shall be used by the Borrowers to pay the costs and expenses of the
transactions contemplated by this Credit Agreement which are due and payable on
the Closing Date, including without limitation the Fees and Expenses due on the
Closing Date pursuant to Section 5.1(c) hereof and for ongoing working capital
requirements and other general corporate purposes; and the proceeds of any
subsequent Revolving Loans made hereunder shall be used by the Borrowers solely
for ongoing working capital requirements and other general corporate purposes.
The Borrowers shall not use any portion of the proceeds of any Revolving Loans
for the purpose of purchasing or carrying any "margin stock" (as defined in
Regulation U) in any manner which violates the provisions of
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Regulation U or X or of the terms and conditions of this Credit Agreement or any
other Credit Document.
7.10 FISCAL YEAR. Florsheim agrees to maintain, and to cause each of
its Subsidiaries to maintain, its fiscal year as a year ending on the Saturday
closest to or falling on December 31.
7.11 MAINTENANCE OF PROPERTY. Each Borrower agrees to keep, and to
cause each of its Subsidiaries to keep, all material property useful and
necessary to their respective businesses in good working order and condition
(ordinary wear and tear excepted) in accordance with their past operating
practices and not to commit or suffer any waste with respect to any of their
material properties.
7.12 ERISA DOCUMENTS. Each Borrower will cause to be delivered to the
Agent, upon the Agent's reasonable request, each of the following: (i) a copy of
each Plan (or, where any such plan is not in writing, complete description
thereof) (and if applicable, related trust agreements or other funding
instruments) and all amendments thereto, all written interpretations thereof and
written descriptions thereof that have been distributed to employees or former
employees of such Borrower or any of its Subsidiaries; (ii) the most recent
determination letter issued by the Internal Revenue Service with respect to each
Benefit Plan; (iii) for the three (3) most recent plan years, Annual Reports on
Form 5500 Series required to be filed with any governmental agency for each
Benefit Plan; (iv) all actuarial reports prepared for the last three (3) plan
years for each Benefit Plan; (v) a listing of all Multiemployer Plans, with the
aggregate amount of the most recent annual contributions required to be made by
such Borrower or any ERISA Affiliate to each such plan and copies of the
collective bargaining agreements requiring such contributions; (vi) any
information that has been provided to such Borrower or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan; and (vii) the
aggregate amount of the most recent annual payments made to former employees of
such Borrower or any ERISA Affiliate under any Retiree Health Plan.
7.13 ENVIRONMENTAL AND OTHER MATTERS.
(a) Each Borrower and each of its Subsidiaries will conduct
their businesses so as to comply in all material respects with all
environmental, land use, occupational, safety or health laws,
regulations, directions, ordinances, criteria and guidelines in all
jurisdictions in which any of them is or may at any time be doing
business, except to the extent that (i) any such failure to comply
could not reasonably be expected to have a Material Adverse Effect, or
(ii) such Borrower or such Subsidiary is contesting, in good faith by
appropriate legal proceedings, any such law, regulation, direction,
ordinance, criteria, guideline, or interpretation thereof or
application thereof; provided, that each Borrower and each of its
Subsidiaries shall comply with the order of any court or other
Governmental Authority relating to such laws unless such Borrower or
such Subsidiary shall currently be prosecuting an appeal or proceedings
for review and shall have secured a stay of enforcement or execution or
other arrangement postponing enforcement or execution pending such
appeal or proceedings for review.
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(b) If the Agent reasonably believes, or the Majority Lenders
reasonably believe, that the facts or circumstances evidence or suggest
that any Borrower or any of its Subsidiaries is in material
non-compliance with any environmental law and that such non-compliance
could reasonably be expected to have a Material Adverse Effect, then at
the written request of the Agent or the Majority Lenders, which request
shall specify in reasonable detail the basis therefor, at any time and
from time to time, such Borrower will provide at its sole cost and
expense an environmental site assessment report concerning the site
owned, operated or leased by such Borrower or such Subsidiary in
respect of which such material non-compliance is believed to have
occurred and be continuing, such report to be prepared by an
environmental consulting firm approved by the Agent and the Majority
Lenders, indicating the presence, release or absence of hazardous
materials on or from such site and the potential cost of any removal,
remedial or corrective action in connection with any such hazardous
materials on such site.
7.14 YEAR 2000 COMPLIANCE REPORTS. The Borrower Representative shall
provide the Agent and any Lender with such information about the Year 2000
computer readiness of the Borrowers and their Subsidiaries (including, without
limitation, information as to contingency plans, budgets and testing results) as
the Agent shall reasonably request.
7.15 FURTHER ASSURANCES. Each Borrower shall take, and shall cause each
of its Subsidiaries to take, all such further actions and execute all such
further documents and instruments as the Agent may at any time reasonably
determine in the exercise of its sole discretion to be necessary or desirable to
further carry out and consummate the transactions contemplated by the Credit
Documents, to cause the execution, delivery and performance of the Credit
Documents to be duly authorized and to perfect or protect the Liens (and the
priority status thereof) of the Agent on the Collateral.
ARTICLE 8
NEGATIVE COVENANTS
All references in this Article 8, except for Sections 8.1, 8.2 and
8.13, to "Subsidiaries" shall not include any Foreign Subsidiaries. Until
termination of this Credit Agreement and payment and satisfaction of all
Obligations due hereunder (other than Letter of Credit Obligations with respect
to Letters of Credit expiring after the Execution Date which have been cash
collateralized pursuant to the terms hereof), the Borrowers shall comply with,
and, where required, shall cause each of its Subsidiaries to comply with, the
following covenants:
8.1 INTEREST COVERAGE RATIO. The Consolidated Entity shall have as of
the end of each fiscal period set forth below a ratio of EBITDA to Interest
Expense of not less than the ratio set forth below:
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<TABLE>
<CAPTION>
================================================================================
PERIOD RATIO
- --------------------------------------------------------------------------------
<S> <C>
three fiscal months ending with the 1.35:1.0
fourth quarter of fiscal 1999
- --------------------------------------------------------------------------------
six fiscal months ending with the first 1.65:1.0
quarter of fiscal 2000
- --------------------------------------------------------------------------------
nine fiscal months ending with the 1.75:1.0
second quarter of fiscal 2000
- --------------------------------------------------------------------------------
twelve fiscal months ending with the 1.75:1.0
third quarter of fiscal 2000
- --------------------------------------------------------------------------------
twelve fiscal months ending with the 2.0:1.0
fourth quarter of fiscal 2000, and each
fiscal quarter thereafter for the then
ending twelve month period
================================================================================
</TABLE>
8.2 CAPITAL EXPENDITURES. The Consolidated Entity shall not make
payments for Capital Expenditures in excess of $12,000,000 during fiscal 1999
and $10,000,000 during each fiscal year thereafter. To the extent that all or
any portion of such amount is not used in any fiscal year, fifty percent (50%)
of such amount may be carried forward to the immediately following fiscal year
to be used for Capital Expenditures. The Consolidated Entity shall not make any
Capital Expenditures that are not directly related to the business conducted on
the Closing Date by the Borrower.
As an addition to the maximum permissible amounts of Capital
Expenditures for each fiscal year as set forth above, the Consolidated Entity
may incur additional Capital Expenditures out of any Insurance Proceeds.
8.3 ADDITIONAL INDEBTEDNESS. None of the Borrowers nor any of their
respective Subsidiaries shall directly or indirectly incur, create, assume or
suffer to exist any Indebtedness other than:
(a) Indebtedness under the Credit Documents;
(b) Indebtedness in the ordinary course of business under
Interest Rate Agreements in form and substance reasonably satisfactory
to the Agent;
(c) Indebtedness of any Borrower to any other Borrower;
provided that if and to the extent any of such Indebtedness is
evidenced by a promissory note or other instrument, such note or other
instrument shall be endorsed to and delivered to the Agent as
additional Collateral securing the Obligations.
(d) Indebtedness described on Schedule B, Part 8.3;
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(e) Indebtedness secured by purchase money Liens on equipment
acquired after the date of this Credit Agreement not to exceed
$10,000,000 in the aggregate outstanding at any one time ("Purchase
Money Liens") so long as (i) such Indebtedness shall be on commercially
reasonable terms and conditions, (ii) each Purchase Money Lien shall
attach only to the property to be acquired, (iii) a description shall
have been furnished to the Agent for any item of equipment for which
the purchase price is greater than $1,000,000, and (iv) the debt
incurred shall not exceed one hundred percent (100%) of the purchase
price of the item or items of equipment purchased.
(f) (i) Unsecured Indebtedness on commercially reasonable
terms and conditions, and (ii) secured Indebtedness subordinated to the
Obligations hereunder from parties and on terms and conditions
(including without limitation, subordination terms) satisfactory to the
Agent and the Majority Lenders, in the aggregate for (i) and (ii) not
to exceed $20,000,000;
(g) any refinancing of the above described Indebtedness, so
long as the aggregate principal amount of the Indebtedness so
refinanced shall not be increased and the refinancing shall be on terms
and conditions no more restrictive than the terms and conditions of the
Indebtedness to be refinanced; and
(h) Indebtedness consisting of unsecured guarantees of the
Indebtedness of Foreign Subsidiaries.
8.4 LIENS. None of the Borrowers nor any of their respective
Subsidiaries shall directly or indirectly create, incur, assume, or suffer to
exist any Lien on any of its property now owned or hereafter acquired except:
(a) Liens granted to the Lenders under the Credit Documents;
(b) Liens listed on Schedule B, Part 8.4;
(c) Purchase Money Liens;
(d) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, or landlords, liens for taxes, assessments
or other governmental charges, and other similar Liens arising by
operation of law for amounts that are not yet due and payable or that
are being diligently contested in good faith by the effected Borrower,
so long as the Agent has been notified thereof and adequate reserves
are maintained by such Borrower for their payment;
(e) Attachment or judgment Liens so long as such Liens are (i)
bonded to the reasonable satisfaction of the Agent or (ii) covered by
insurance to the reasonable satisfaction of the Agent;
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(f) Deposits or pledges made in the ordinary course of
Borrowers' businesses to secure obligations under workmen's
compensation, social security or similar laws, under unemployment
insurance, or to secure public or statutory obligations;
(g) Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of like nature arising in the ordinary course of business;
(h) Easements, rights-of-way, restrictions and other similar
encumbrances on title to, or restrictions on the use of, real property,
which, in the aggregate, in the opinion of the Agent, are not material
in amount and which do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary
conduct of the business of the effected Borrower or any of its
Subsidiaries;
(i) Liens for taxes, assessments, governmental charges or
levies not yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of Florsheim or the appropriate Subsidiary, as
the case may be, in accordance with GAAP;
(j) Liens affecting assets existing at the time such assets
are acquired provided that such Liens are not created in contemplation
of such acquisition; and
(k) Liens affecting the assets of any Borrower's Subsidiaries
at the time such Subsidiaries are acquired provided such Liens are not
created in contemplation of such acquisition.
(l) Extensions and renewals of any of the foregoing so long as
the aggregate amount of extended or renewed Liens are not increased and
are on terms and conditions no more restrictive than the terms and
conditions of the Liens extended or renewed.
8.5 CONTINGENT OBLIGATIONS. None of the Borrowers nor any of their
respective Subsidiaries shall directly or indirectly incur, assume, or suffer to
exist any Contingent Obligation, excluding indemnities given in connection with
the sale of Inventory or other asset dispositions permitted hereunder and
Contingent Obligations for Indebtedness permitted to be incurred under Section
8.3, and Investments permitted under Section 8.8.
8.6 SALE OF ASSETS. The Borrowers shall not, and shall not permit any
of their respective Subsidiaries to, directly or indirectly, sell, lease,
assign, transfer or otherwise dispose of any assets other than (i) Inventory in
the ordinary course of business; (ii) the Cape Giradeau Real Estate, (iii) the
capital stock or other ownership interests of Florsheim in Florsheim Australia
Limited, (iv) obsolete or worn out property disposed of in the ordinary course
of business; and (v) dispositions of assets not otherwise permitted under the
preceding clause of this Section 8.6, provided, that, (a) such dispositions
under clause (v), are for fair value, (b) the aggregate consideration is paid in
full in cash at the time of disposition and is thereupon (I) reinvested in the
business of the applicable Borrower or its Subsidiaries or (II) delivered to
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the Agent, in which case such consideration will be applied to repay the
Revolving Loans and (c) the aggregate amount of all such dispositions does not
exceed $1,000,000 per fiscal year.
8.7 RESTRICTED PAYMENTS. Florsheim shall not, directly or indirectly,
(i) except with Unrestricted Proceeds and so long as no Default or Event of
Default shall have occurred and be continuing, declare or pay any dividend or
make any distribution on its capital stock or to the holders of its capital
stock (other than (x) dividends or distributions payable in its capital stock or
rights to acquire its capital stock and (y) so long as no Default or Event of
Default shall have occurred and be continuing or would result therefrom, cash
dividends on preferred stock), (ii) except with Unrestricted Proceeds and so
long as no Default or Event of Default shall have occurred and be continuing,
redeem, repurchase or otherwise acquire or retire for value, or permit any
Subsidiary to, directly or indirectly, redeem, purchase or otherwise acquire or
retire for value, any such capital stock (except shares acquired upon the
conversion thereof into other shares of capital stock or rights to acquire such
capital stock, odd lot shares, and except for the repurchase or acquisition of
such capital stock held by directors, officers or employees of Florsheim or any
domestic Subsidiary upon death, disability, retirement or termination of
employment not to exceed $1,500,000 in the aggregate in any fiscal year) or
rights to acquire such capital stock, or (iii) except with (a) Unrestricted
Proceeds and (b) unused Net Cash Proceeds after giving effect to any required
repayment of the Revolving Loans under Section 4.6(d), and so long as no Default
or Event of Default shall have occurred and be continuing, redeem, repurchase,
defease or otherwise acquire or retire for value, or permit any Subsidiary to,
directly or indirectly, redeem, repurchase, defease or otherwise acquire or
retire for value, prior to any scheduled or mandatory maturity, scheduled or
mandatory repayment or scheduled sinking fund payment (after giving effect to
the exercise of any and all unconditional (other than as to the giving of
notice) options to extend the maturity), Indebtedness of Florsheim or any other
Borrower or any of their respective Subsidiaries (other than Indebtedness
pursuant to this Credit Agreement and the refinancing of Indebtedness permitted
by Section 8.3(g) hereof).
8.8 INVESTMENTS. The Borrowers shall not, and shall not permit any of
their respective Subsidiaries to, directly or indirectly, make any Investment in
any Person, whether in cash, securities, or other property of any kind
including, without limitation, any Subsidiary or Affiliate, other than:
(a) Advances or loans made in the ordinary course of business
not to exceed $1,000,000 outstanding at any time to any one Person and
$2,500,000 in the aggregate outstanding at any one time;
(b) Loans, investments and advances between the Borrowers and
Subsidiaries or between the Borrowers and Foreign Subsidiaries in
existence as of the date hereof and described on Schedule B, Part 8.8,
or as permitted pursuant to Section 8.3(c);
(c) Cash Equivalents;
(d) Deposits with financial institutions, disclosed in
Schedule B, Part 8.8, and which are insured by the Federal Deposit
Insurance Corporation ("FDIC") or a similar federal insurance program;
provided, that the Borrower may, in the ordinary course of its
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business, maintain in its disbursement accounts from time to time
amounts in excess of then applicable FDIC or other program insurance
limits;
(e) The reinvestment in any Foreign Subsidiary of any
dividends paid by any Foreign Subsidiary to a Borrower;
(f) Additional equity Investments in Foreign Subsidiaries not
to exceed $3,000,000 in the aggregate through and including December
31, 2000, and $5,000,000 in the aggregate thereafter;
(g) Investments consisting of purchase money notes received in
connection in any asset sales permitted by the terms hereof which does
not require the payment of the purchase price in cash;
(h) Investments consisting of securities distributed pursuant
to any plan of reorganization;
(i) Investments consisting of permitted trade support of
Foreign Subsidiaries pursuant to Section 8.10 hereof;
(j) Other Investments outstanding on the date hereof as
disclosed in Schedule B, Part 8.8; and
(k) Such other Investments as the Agent may approve in writing
in the exercise of its sole discretion.
8.9 AFFILIATE TRANSACTIONS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, enter into any
transaction with (including, without limitation, the purchase, sale or exchange
of property or the rendering of any service to) any Subsidiary or Affiliate of
the Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of the Borrower's or such Subsidiary's business, as the case may
be, and upon fair and reasonable terms no less favorable to the Borrower or such
Subsidiary than could be obtained in a comparable arm's-length transaction with
an unaffiliated Person, except for (i) transactions otherwise permitted under
Sections 8.7 and 8.8; provided, however, that the foregoing provisions of this
Section 8.9 shall not prohibit, (a) the Borrowers or any Subsidiary of any
Borrower from making sales to or purchases from any Affiliate and, in connection
therewith, extending credit or making payments, or from making payments for
services rendered by any Affiliate, or from effecting any other transactions
with an Affiliate, if such sales or purchases are made or such services are
rendered, or such other transactions are effected, on terms and conditions at
least as favorable and reasonable to the Borrowers or such Subsidiary as the
terms and conditions which would apply in a similar transaction on an arm's
length basis with a Person not an Affiliate and will not have a material adverse
effect on the Collateral taken as a whole or the Accounts and Inventory, (b) the
preparation and filing of one or more registration statements with respect to
securities of Florsheim owned by Apollo or a Controlled Account, or an Affiliate
of Apollo or of a Controlled Account, and the payment of reasonable expenses
associated therewith other than underwriting discounts and commissions so long
as no Default or Event of
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Default shall have occurred and be continuing, (c) the Borrowers or any
Subsidiary from participating in, or effecting, any other transaction in
connection with, any joint enterprise or other joint arrangement with, any
Affiliate if the Borrowers or such Subsidiary participates on a basis no less
advantageous than the basis on which such Affiliate participates on terms and
conditions which would apply in a similar transaction on an arm's length basis
with a Person not an Affiliate, (d) payment of fees in the aggregate amount not
to exceed $400,000 to Apollo, a Controlled Account, an Affiliate of Apollo or of
a Controlled Account in any fiscal year in respect of services rendered provided
such fees are approved by the Board of Directors of Florsheim and no Default or
Event of Default shall have occurred and be continuing on the date of such
payment or occasioned thereby; (e) for so long as the Indian Joint Venture is
engaged primarily in the manufacture, sale and/or distribution of footwear
and/or footwear components for sale to or on behalf of Florsheim or any other
Borrower, and subject in all respects to Sections 8.8 and 8.10 hereof,
transactions in the ordinary course of business with the Indian Joint Venture
and (f) the incurrence of Indebtedness to Apollo subject in all respects to
Section 8.3(f). For purposes of this Section 8.9, the term "Affiliate" shall not
include any Borrower or the Subsidiaries of the Borrowers.
The foregoing restrictions shall not apply to reasonable fees paid to
and indemnity provided on behalf of the Directors and officers of Florsheim or
any of its or their Subsidiaries in the ordinary course of business and
consistent with past practices.
8.10 RESTRICTIONS ON FOREIGN SUBSIDIARY TRADE SUPPORT. None of the
Borrowers will permit to exist any open account sales or transfers by any such
Borrowers of goods of any kind to any Foreign Subsidiary (including, for purpose
of this Section 8.10, the Indian Joint Venture) outside of the ordinary course
of business of any such Borrower (including, but not limited to, business and
support of a scope and nature contemplated by the Borrowers and disclosed in
projections and models to the Agent on or prior to the date hereof).
8.11 ADDITIONAL BANK ACCOUNTS. The Borrowers shall not, and shall not
permit any of their respective Subsidiaries to, directly or indirectly, open,
maintain or otherwise have any checking, savings or other accounts at any bank
or other financial institution, or any other account where money is or may be
deposited or maintained with any Person, other than the Disbursement Account and
the accounts set forth on Schedule B, Part 8.11, except to the extent that the
Borrower shall give the Agent seven (7) days prior written notice thereof.
8.12 ADDITIONAL NEGATIVE PLEDGES. The Borrowers shall not, and shall
not permit any of their respective Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective, or permit any
of its Subsidiaries to create or otherwise cause or suffer to exist or become
effective, directly or indirectly, (i) any prohibition or restriction (including
any agreement to provide equal and ratable security to any other Person in the
event a Lien is granted to or for the benefit of the Agent and the Lenders) on
the creation or existence of any Lien upon the assets of the Borrower or its
Subsidiaries, other than Permitted Liens; or (ii) any contractual obligation
which may restrict or inhibit the Agent's rights or ability to sell or otherwise
dispose of the Collateral or any part thereof after the occurrence of an Event
of Default.
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8.13 ADDITIONAL SUBSIDIARIES. The Borrowers shall not, and shall not
permit any of their respective Subsidiaries to, directly or indirectly, form or
acquire any new Subsidiaries, unless, and subject to the limitations of Section
8.8 hereof, (i) with respect to Foreign Subsidiaries, the capital stock thereof
owned by the Borrowers shall be pledged as part of the Collateral, except in the
case of Foreign Subsidiaries constituting "Controlled Foreign Corporations"
within the meaning of Section 951 of the Internal Revenue Code, Borrowers shall
not be required to pledge hereunder more than 65% of the total combined voting
power of all classes of capital stock of such Foreign Subsidiary entitled to
vote, and (ii) with respect to all other Subsidiaries, the capital stock thereof
shall be pledged as part of the Collateral, and to the extent the Investment of
any Borrower (or Subsidiary thereof) shall exceed $500,000.00, such newly-formed
Subsidiary shall execute an Assumption Agreement in form and substance similar
to that attached hereto and made a part hereof as Exhibit L, pursuant to which
such Subsidiary shall become a co-obligor of the Revolving Notes and a Borrower
hereunder and shall pledge its assets to secure the Obligations.
ARTICLE 9
EVENTS OF DEFAULT AND REMEDIES
9.1 EVENTS OF DEFAULT. The occurrence of any of the following events
shall constitute an event of default (each an "Event of Default") hereunder:
(a) FAILURE TO PAY. The Borrowers shall fail to pay principal
when the same shall become payable, and shall fail to pay any other
Obligation when the same shall become payable, and such failure shall
continue for three (3) Business Days.
(b) BREACH OF CERTAIN COVENANTS. Any Borrower shall fail to
comply with any covenant contained in Sections 7.1, 7.2, 7.4, 7.6, 7.9,
8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8 and 8.9 hereof.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation
or warranty made or deemed to be made by any Borrower in this Credit
Agreement or in any other Credit Document (and in any statement or
certificate given under this Credit Agreement or any other Credit
Document), shall be false or misleading in any material respect when
made or deemed to be made.
(d) BREACH OF OTHER COVENANTS. Any Borrower shall fail to
comply with any covenant contained in this Credit Agreement or any
other Credit Document, other than as set forth in Section 9.1(b), and
such failure shall continue for five (5) days after its occurrence.
(e) DISSOLUTION. Any material Borrower shall dissolve, wind up
or otherwise cease its business except as the result of any merger
with, or transfer of assets to, any other Borrower.
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(f) INSOLVENCY EVENT. Any Credit Party shall become the
subject of an Insolvency Event.
(g) CHANGE OF CONTROL. A Change of Control shall occur.
(h) CROSS DEFAULT. A default or event of default shall occur
(and continue beyond any applicable grace period) under any note,
agreement or instrument evidencing any other Indebtedness of a Borrower
or any Subsidiary of a Borrower, which default or event of default
permits the acceleration of its maturity, provided, that the aggregate
principal amount of all such Indebtedness for which the default or
event of default has occurred exceeds $5,000,000.
(i) FAILURE OF ENFORCEABILITY OF CREDIT DOCUMENTS; SECURITY.
Any material covenant, agreement or obligation of any Credit Party
contained in or evidenced by any of the Credit Documents shall cease to
be enforceable, or shall be determined to be unenforceable, in
accordance with its terms; any Credit Party shall deny or disaffirm its
obligations under any of the Credit Documents or any Liens granted in
connection therewith; or, any Liens granted in any of the Collateral
with a value in excess of $1,000,000 shall be determined to be void,
voidable, invalid or unperfected, are subordinated or not given the
priority contemplated by this Credit Agreement.
9.2 ACCELERATION, TERMINATION OF COMMITMENTS AND CASH
COLLATERALIZATION. Upon the occurrence and during the continuance of any Event
of Default, without prejudice to the rights of the Agent or any Lender to
enforce its claims against the Borrowers:
(a) ACCELERATION. Upon the written request of the Majority
Lenders, and by delivery of written notice to the Borrower
Representative from the Agent, all Obligations shall be immediately due
and payable (except with respect to any Event of Default set forth in
Section 9.1(f), in which case all Obligations shall automatically
become immediately due and payable without the necessity of any request
of the Majority Lenders or notice or other demand to the Borrower
Representative) without presentment, demand, protest or any other
action or obligation of the Agent or any Lender.
(b) TERMINATION OF COMMITMENTS. Upon the written request of
the Majority Lenders, and by delivery of written notice to the Borrower
Representative from the Agent, the Commitments shall be immediately
terminated and, at all times thereafter, all Revolving Loans made by
any Lender pursuant to this Credit Agreement shall be at such Lender's
sole discretion, unless such Event of Default is waived in accordance
with Section 11.11, in which case the Commitments shall be
automatically reinstated.
(c) CASH COLLATERALIZATION. On demand of the Agent or the
Majority Lenders, the Borrowers shall immediately deposit with the
Agent for each Letter of Credit then outstanding, cash or Cash
Equivalents in an amount equal to 110% of the greatest amount drawable
thereunder. Such deposit shall be held by the Agent and used to
reimburse the Issuing Bank for the amount of each drawing made under
such Letters of Credit, as and when each such drawing is made.
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9.3 RESCISSION OF ACCELERATION. After acceleration of the maturity of
the Obligations, if the Borrowers pay all accrued interest and all principal due
(other than by reason of the acceleration) and all Defaults and Events of
Default are waived in accordance with Section 11.11, the Majority Lenders may
elect in their sole discretion, to rescind the acceleration and return to the
Borrowers any cash collateral deposited with the Agent pursuant to Section
9.2(c). (This Section is intended only to bind all of the Lenders to a decision
of the Majority Lenders and not to confer any right on the Borrowers, even if
the described conditions for the Majority Lenders' election may be met.)
9.4 REMEDIES. Upon the occurrence and during the continuance of an
Event of Default, upon the written request and at the direction of the Majority
Lenders, the Agent may exercise any rights and remedies available to it under
applicable law (including under the Code) and under the Collateral Documents.
The foregoing rights and remedies are not intended to be exhaustive and the full
or partial exercise of any right or remedy shall not preclude the full or
partial exercise of any other right or remedy available under this Credit
Agreement, any other Credit Document, at equity or at law.
9.5 RIGHT OF SETOFF. In addition to and not in limitation of all rights
of offset that any Lender may have under applicable law, upon the occurrence and
during the continuance of any Event of Default, and whether or not any Lender
has made any demand or the Obligations of any Credit Party have matured, each
Lender shall have the right to appropriate and apply to the payment of the
Obligations of such Credit Party all deposits and other obligations then or
thereafter owing by such Lender to such Credit Party. Each Lender exercising
such rights shall notify the Agent thereof and any amount received as a result
of the exercise of such rights shall be shared by the Lenders in accordance with
Section 2.5.
9.6 LICENSE OF USE OF SOFTWARE AND OTHER INTELLECTUAL PROPERTY. Unless
expressly prohibited by the licenser thereof, if any, the Agent is hereby
granted a license, effective upon any acceleration of the Obligations pursuant
to this Article 9, to use all computer software programs, data bases, processes
and materials used by the Borrowers in connection with their businesses or in
connection with the Collateral. The Agent agrees not to use any such license
prior to the occurrence of an Event of Default without giving the Borrowers
prior notice.
9.7 APPLICATION OF PROCEEDS; SURPLUS; DEFICIENCIES. The net cash
proceeds resulting from the Agent's exercise of any of the foregoing rights
against any Collateral (after deducting all of the Agent's Expenses related
thereto) shall be applied by the Agent to the payment of the Obligations,
whether due or to become due, in the order set forth in Section 4.12. The
Borrowers shall remain liable to the Agent and the Lenders for any deficiencies,
and the Agent and the Lenders in turn agree to remit to the Borrowers or their
successors or assigns, any surplus resulting therefrom.
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ARTICLE 10
THE AGENT
10.1 APPOINTMENT OF AGENT.
(a) Each Lender hereby designates BTCC as Agent to act as
herein specified. Each Lender hereby irrevocably authorizes, and each
holder of any Revolving Note, by the acceptance of such Revolving Note,
shall be deemed irrevocably to authorize the Agent to take such action
on its behalf under the provisions of this Credit Agreement and the
other Credit Documents and any other instruments and agreements
referred to herein and therein and to exercise such powers and to
perform such duties hereunder and thereunder as are specifically
delegated to or required of the Agent by the terms hereof and thereof
and such other powers as are reasonably incidental thereto. The Agent
shall hold all Collateral and all payments of principal, interest,
Fees, (other than Fees that are exclusively for the account of the
Agent), charges and Expenses received pursuant to this Credit Agreement
or any other Credit Document for the ratable benefit of the Lenders.
The Agent may perform any of its duties hereunder by or through its
agents or employees.
(b) Other than the Borrowers' rights under Section 10.9, the
provisions of this Article 10 are for the benefit of the Agent and the
Lenders only and none of the Credit Parties or any other Persons shall
have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Credit
Agreement and the other Credit Documents, the Agent shall act only for
the Lenders and does not assume and shall not be deemed to have assumed
any obligation toward or relationship of agency or trust with or for
any Credit Party.
10.2 NATURE OF DUTIES OF AGENT. The Agent has no duties or
responsibilities except those expressly set forth in the Credit Documents.
Neither the Agent nor any of its officers, directors, employees or agents shall
be liable for any action taken or omitted hereunder or in connection herewith,
unless caused by its or their gross negligence or willful misconduct. The duties
of the Agent shall be mechanical and administrative in nature; the Agent shall
not have by reason of this Credit Agreement or any of the other Credit Documents
a fiduciary relationship in respect of any Lender or any participant of any
Lender; and nothing in this Credit Agreement or any other Credit Document,
expressed or implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of this Credit Agreement or any other
Credit Document, except as expressly set forth herein or therein.
10.3 LACK OF RELIANCE ON AGENT.
(a) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial or other
condition and affairs of each Credit Party in connection with the
taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of each Credit Party, and, except
as expressly
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provided in this Credit Agreement, the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto,
whether coming into its possession before the making of the Revolving
Loans or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness,
validity, enforceability, collectibility, priority or sufficiency of
this Credit Agreement or any of the other Credit Documents or the
financial or other condition of any Credit Party. The Agent shall not
be required to make any inquiry concerning either the performance or
observance of any other terms, provisions or conditions of this Credit
Agreement or any of the other Credit Documents, or the financial
condition of any Credit Party, or the existence or possible existence
of any Default or Event of Default, unless specifically requested to do
so in writing by any Lender.
10.4 CERTAIN RIGHTS OF THE AGENT. The Agent shall have the right to
request instructions from the Majority Lenders by notice to each of the Lenders.
If the Agent shall request instructions from the Majority Lenders with respect
to any act or action (including the failure to act) in connection with this
Credit Agreement, the Agent shall be entitled to refrain from such act or taking
such action unless and until the Agent shall have received instructions from the
Majority Lenders, and the Agent shall not incur liability to any Person by
reason of so refraining. Without limiting the foregoing, no Lender shall have
any right of action whatsoever against the Agent as a result of the Agent acting
or refraining from acting hereunder in accordance with the instructions of the
Majority Lenders. The Agent may give any notice required under Article 9 hereof
without the consent of any of the Lenders unless otherwise directed by the
Majority Lenders in writing and will, at the direction of the Majority Lenders,
give any such notice required under Article 9.
10.5 RELIANCE BY AGENT. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, sent or made
by the proper person. The Agent may consult with legal counsel (including
counsel for the Borrowers with respect to matters concerning the Borrowers),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
10.6 INDEMNIFICATION OF AGENT. To the extent the Agent is not
reimbursed and indemnified by the Borrowers, each Lender will reimburse and
indemnify the Agent, in proportion to its respective Commitment, for and against
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in performing its duties hereunder, in any way
relating
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to or arising out of this Credit Agreement; provided, that no Lender shall be
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct.
10.7 THE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to its
obligation to lend under this Credit Agreement, the Revolving Loans made by it
and the Revolving Notes issued to it and its participation in Letters of Credit
issued hereunder, the Agent shall have the same rights and powers hereunder as
any other Lender or holder of a Revolving Note or participation interests and
may exercise the same as though it was not performing the duties specified
herein; and the terms "Lenders," "Majority Lenders," "holders of Revolving
Notes," or any similar terms shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity. The Agent may accept
deposits from, lend money to, acquire equity interests in, and generally engage
in any kind of banking, trust, financial advisory or other business with the
Borrowers or any Affiliate of any Borrower as if it were not performing the
duties specified herein, and may accept fees and other consideration from the
Borrower for services in connection with this Credit Agreement and otherwise
without having to account for the same to the Lenders.
10.8 HOLDERS OF REVOLVING NOTES. The Agent may deem and treat the payee
of any Revolving Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any Person who, at
the time of making such request or giving such authority or consent, is the
holder of any Revolving Note, shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Revolving Note or of any Revolving Note
or Notes issued in exchange therefor.
10.9 SUCCESSOR AGENT.
(a) The Agent may, upon five (5) Business Days' notice to the
Lenders and the Borrower Representative, resign at any time (effective
upon the appointment of a successor Agent pursuant to the provisions of
this Section 10.9) by giving written notice thereof to the Lenders and
the Borrower. Upon any such resignation, the Majority Lenders shall
have the right, upon five (5) days' notice and approval by Florsheim
(which approval shall not be unreasonably withheld or delayed), to
appoint a successor Agent. If no successor Agent shall have been so
appointed by the Majority Lenders and accepted such appointment, within
thirty (30) days after the retiring Agent's giving of notice of
resignation, then, upon five (5) days' notice and approval by Florsheim
(which approval shall not be unreasonably withheld or delayed), the
retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a bank or a trust company or other financial
institution which maintains an office in the United States, or a
commercial bank organized under the laws of the United States of
America or of any State thereof, or any Affiliate of such bank or trust
company or other financial institution which is engaged in the banking
business, having a combined capital and surplus of at least
$500,000,000.
(b) Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of
the retiring Agent, and the retiring
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Agent shall be discharged from its duties and obligations under this
Credit Agreement and the other Credit Documents. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article
10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under or in connection with this Credit
Agreement.
10.10 COLLATERAL MATTERS.
(a) Each Lender authorizes and directs the Agent to enter into
the Collateral Documents for the benefit of the Lenders. Each Lender
hereby agrees, and each holder of any Revolving Note by the acceptance
thereof will be deemed to agree, that, except as otherwise set forth
herein, any action taken by the Majority Lenders in accordance with the
provisions of this Credit Agreement or any of the Credit Documents, and
the exercise by the Majority Lenders of the powers set forth herein or
therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all of the Lenders. The
Agent is hereby authorized on behalf of all of the Lenders, without the
necessity of any notice to or further consent from any Lender, from
time to time prior to an Event of Default, to take any action with
respect to any Collateral or Collateral Documents which may be
necessary to perfect and maintain the perfection of the Liens upon the
Collateral granted pursuant to the Collateral Documents.
(b) The Lenders hereby authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by the Agent
upon any Collateral (i) upon termination of the Commitments and payment
and satisfaction of all of the Obligations at any time arising under or
in respect of this Credit Agreement or the Credit Documents or the
transactions contemplated hereby or thereby or (ii) if approved,
authorized or ratified in writing by the Majority Lenders, unless such
release is required to be approved by all of the Lenders pursuant to
Section 11.11. Upon request by the Agent at any time, the Lenders will
confirm in writing the Agent's authority to release particular types or
items of Collateral pursuant to this Section 10.10.
(c) The Lenders hereby agree that the Lien granted to the
Agent and the Lenders in any property sold or disposed of in accordance
with the provisions of Section 8.6 hereof shall, if no Default or Event
of Default shall then exist, be automatically released (although a
signed release of the Agent may be requested in any transaction
permitted pursuant to Section 8.6); provided however that Agent's Lien
shall attach to and continue in the proceeds and products of such
property arising from any such sale or disposition and; provided,
further, that the proceeds from any such sale or disposition by the
Borrowers shall be paid to the Agent for to the then outstanding Loans.
(d) The Agent shall have no obligation whatsoever to the
Lenders or to any other Person to assure that the Collateral exists or
is owned by a Borrower or is cared for, protected or insured or that
the Liens granted to the Agent in or pursuant to any of the Collateral
Documents have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular
priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or
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fidelity any of the rights, authorities and powers granted or available
to the Agent in this Section 10.10 or in any of the Collateral
Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Agent
may act in any manner it may deem appropriate, in its sole discretion,
given the Agent's own interest in the Collateral as one of the Lenders
and that the Agent shall have no duty or liability whatsoever to the
Lenders, except for its gross negligence or willful misconduct. The
Agent agrees to conduct or cause to be conducted at least one audit of
the Collateral during each year that this Credit Agreement shall remain
in effect.
10.11 ACTIONS WITH RESPECT TO DEFAULTS. In addition to the Agent's
right to take actions on its own accord as permitted under this Credit
Agreement, the Agent shall take such action with respect to a Default or Event
of Default as shall be directed by the Majority Lenders; provided, that until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable and in the best
interests of the Lenders.
10.12 DELIVERY OF INFORMATION. The Agent shall not be required to
deliver to any Lender originals or copies of any documents, instruments,
notices, communications or other information received by the Agent from the
Borrowers, any Subsidiary of a Borrower, the Majority Lenders, any Lender or any
other Person under or in connection with this Credit Agreement or any other
Credit Document except (i) as specifically provided in this Credit Agreement or
any other Credit Document and (ii) as specifically requested from time to time
in writing by any Lender with respect to a specific document, instrument, notice
or other written communication received by and in the possession of the Agent at
the time of receipt of such request and then only in accordance with such
specific request.
ARTICLE 11
MISCELLANEOUS
11.1 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS CREDIT AGREEMENT AND THE REVOLVING NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF
ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
11.2 SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG THE BORROWERS AND
THE LENDERS (OR THE AGENT ACTING ON THEIR BEHALF), WHETHER SOUNDING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL COURTS
LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE
TAKEN; PROVIDED, HOWEVER, THAT THE AGENT, ON BEHALF OF THE LENDERS, SHALL HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
BORROWERS OR THEIR RESPECTIVE PROPERTIES IN ANY LOCATION REASONABLY SELECTED BY
THE AGENT IN GOOD FAITH TO ENABLE
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THE AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER IN FAVOR OF THE AGENT. THE BORROWERS AGREE THAT THEY WILL NOT ASSERT ANY
PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY
THE AGENT. THE BORROWERS WAIVE ANY OBJECTION THAT THEY MAY HAVE TO THE LOCATION
OF THE COURT IN WHICH THE AGENT HAS COMMENCED A PROCEEDING, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON FORUM NON
CONVENIENS.
11.3 SERVICE OF PROCESS. THE BORROWERS HEREBY IRREVOCABLY AGREE THAT
SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS CREDIT
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE AFFECTED BY MAILING A COPY THEREOF
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER REPRESENTATIVE
AT ITS ADDRESS SET FORTH IN SECTION 11.7.
11.4 JURY TRIAL. THE BORROWERS, THE AGENT AND THE LENDERS EACH HEREBY
WAIVE ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A
BENCH TRIAL.
11.5 LIMITATION OF LIABILITY. NEITHER THE AGENT NOR ANY LENDER SHALL
HAVE ANY LIABILITY TO THE BORROWERS (WHETHER SOUNDING IN TORT, CONTRACT, OR
OTHERWISE) FOR LOSSES SUFFERED BY THE BORROWERS IN CONNECTION WITH, ARISING OUT
OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS CONTEMPLATED BY
THIS CREDIT AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR
COURT ORDER BINDING ON THE AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE
RESULT OF ACTS OR OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6 DELAYS. No delay or omission of the Agent or the Lenders to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof.
11.7 NOTICES. Except as otherwise provided herein, all notices and
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, if to the Agent or any of the Lenders, then to BT
Commercial Corporation, 233 South Wacker Drive, Chicago, Illinois 60606,
Attention: Credit Department, and if to the Borrower, then to c/o The Borrower
Representative at Florsheim Group Inc., at 200 North LaSalle Street, Chicago,
Illinois 60601 Attention: Richard J. Anglin, Executive Vice President and Chief
Financial Officer, or by facsimile transmission, promptly confirmed in writing
sent by first class mail, if to the Agent, or any of the Lenders, at (312)
993-8096 and if to the Borrower at (312) 458-2641. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, three Business Days after being postmarked, (ii) if sent by overnight
delivery service, when received at the above stated
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addresses or when delivery is refused and (iii) if sent by telex or facsimile
transmission, when receipt of such transmission is acknowledged.
11.8 ASSIGNMENTS AND PARTICIPATIONS.
(a) BORROWER ASSIGNMENT. The Borrower shall have no right to
assign this Credit Agreement, or any rights or obligations hereunder,
without the prior written consent of the Agent and the Lenders.
(b) LENDER ASSIGNMENTS. Each Lender may assign to one or more
banks or other financial institutions all or a portion of its rights
and obligations under this Credit Agreement, the Revolving Notes and
the other Credit Documents, with the consent of the Agent; and upon
execution and delivery to the Agent, for its acceptance and recording
in the Register, of an agreement in substantially the form of Exhibit K
(an "Assignment and Assumption Agreement"), together with surrender of
any Revolving Note or Revolving Notes subject to such assignment and a
processing and recordation fee of $3,500. No such assignment shall be
for less than $10,000,000 of the Commitments unless it is to another
Lender or is an assignment of all of such Lender's rights and
obligations under this Credit Agreement. (This Section does not apply
to branches and Affiliates of a Lender, it being understood that a
Lender may make, carry or transfer Revolving Loans at or for the
account of any of its branch offices or Affiliates without consent of
the Borrowers, the Agent or any other Lender).
(c) AGENT'S REGISTER. The Agent shall maintain a register of
the names and addresses of the Lenders, their Commitments, and the
principal amount of their Revolving Loans (the "Register") at the
address specified for the Agent in Section 11.7. The Agent shall also
maintain a copy of each Assignment and Assumption Agreement delivered
to and accepted by it and modify the Register to give effect to each
Assignment and Assumption Agreement. Upon its receipt of each
Assignment and Assumption Agreement and surrender of the affected
Revolving Note or Revolving Notes, the Agent will give prompt notice
thereof to the Borrower Representative and deliver to the Borrower
Representative a copy of the Assignment and Assumption Agreement and
the surrendered Revolving Note or Revolving Notes. Within five (5)
Business Days after its receipt of such notice, the Borrower shall
execute and deliver to the Agent a substitute Revolving Note or
Revolving Notes to the order of the assignee in the amount of the
Commitment or Commitments assumed by it and to the assignor in the
amount of the Commitment or Commitments retained by it, if any. Such
substitute Revolving Note or Revolving Notes shall re-evidence the
Indebtedness outstanding under the surrendered Revolving Note or
Revolving Notes and shall be dated as of the Closing Date. The Agent
shall be entitled to rely upon the Register exclusively for purposes of
identifying the Lenders hereunder. The Register shall be available for
inspection by the Borrower Representative and the Lenders (or any of
them) at any reasonable time and from time to time upon reasonable
notice to the Agent.
(d) LENDER PARTICIPATIONS. Each Lender may sell participations
(without the consent of the Agent, the Borrowers or any other Lender)
to one or more parties in or to
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all or a portion of its rights and obligations under this Credit
Agreement, the Revolving Notes and the other Credit Documents.
Notwithstanding a Lender's sale of a participation interest, its
obligations hereunder shall remain unchanged. The Borrowers, the Agent,
and the other Lenders shall continue to deal solely and directly with
such Lender. No participant shall have rights to approve any amendment
or waiver of this Credit Agreement or any of the other Credit Documents
except to the extent such amendment or waiver would (i) increase the
participant's obligation in respect of the Commitment of the Lender
from whom the participant purchased its participation interest; (ii)
reduce the principal of, or stated rate or amount of interest on, the
Revolving Loans subject to such participation, (iii) postpone any
maturity date fixed for final payment of principal of the Revolving
Loans subject to the participation interest, and (iv) release any
guarantor of the Obligations or all or a substantial portion of the
Collateral, other than when otherwise permitted hereunder.
11.9 CONFIDENTIALITY. Each Lender agrees that it will use its best
efforts not to disclose without the prior consent of the Borrowers any
information with respect to the Borrower or any of their respective Subsidiaries
which is furnished pursuant to this Credit Agreement and which is designated by
the Borrower to the Lenders in writing as confidential, provided, that, each
Lender may disclose any such information (a) to its employees, auditors, or
counsel, or to another Lender if the disclosing Lender or such disclosing
Lender's holding or parent company in its sole discretion determines that any
such party should have access to such information, (b) as has become generally
available to the public, (c) as may be required or appropriate in any report,
statement or testimony submitted to any Governmental Authority having or
claiming to have jurisdiction over such Lender, (d) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, (e) in order to comply with any Requirement of Law, and (f) to any
such prospective or actual transferee or participant in connection with any
contemplated transfer or participation of any of the Revolving Notes or
Commitments or any interest therein by such Lender.
11.10 INDEMNIFICATION. The Borrowers hereby jointly and severally
indemnify and agree to defend and hold harmless the Agent and each of the
Lenders and their respective directors, officers, agents, employees and counsel
from and against any and all losses, claims, damages, liabilities, deficiencies,
judgments or expenses incurred by any of them (except to the extent that it is
finally judicially determined to have resulted from their own gross negligence
or willful misconduct) arising out of or by reason of (a) any litigations,
investigations, claims or proceedings which arise out of or are in any way
related to (i) this Credit Agreement or the transactions contemplated hereby,
(ii) the issuance of the Letters of Credit, (iii) the failure of the Issuing
Bank to honor a drawing under any Letter of Credit, as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority, (iv) any actual or proposed use by a
Borrower of the proceeds of the Revolving Loans or (v) the Agent's or the
Lenders' entering into this Credit Agreement, the other Credit Documents or any
other agreements and documents relating hereto, including, without limitation,
amounts paid in settlement, court costs and the fees and disbursements of
counsel incurred in connection with any such litigation, investigation, claim or
proceeding or any advice rendered in connection with any of the foregoing and
(b) any remedial or other action taken by a Borrower or any of the Lenders in
connection with compliance by such Borrower or any of its
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Subsidiaries, or any of their respective properties, with any federal, state or
local environmental laws, acts, rules, regulations, orders, directions,
ordinances, criteria or guidelines.
11.11 AMENDMENTS AND WAIVERS. No amendment or waiver of any provision
of this Credit Agreement, any part of Schedule B, or any other Credit Document
shall be effective unless in writing and signed by the Majority Lenders (or by
the Agent on their behalf), except that:
(a) the consent of all the Lenders is required to (i) increase
the Commitments, (ii) reduce the principal of, or interest on, the
Revolving Notes, any Letter of Credit reimbursement obligations or any
Fees hereunder (other than Fees that are exclusively for the account of
the Agent), (iii) postpone any date fixed for any payment in respect of
principal of, or interest on, the Revolving Notes, any Letter of Credit
reimbursement obligations or any Fees hereunder, (iv) change the
percentage of the Commitments, or any minimum requirement necessary for
the Lenders or the Majority Lenders to take any action hereunder, (v)
amend or waive this Section 11.11(a), or change the definition of
Majority Lenders or (vi) except as otherwise expressly provided in this
Credit Agreement, and other than in connection with the financing,
refinancing, sale or other disposition of any asset of the Borrower
permitted under this Credit Agreement, release any Liens in favor of
the Lenders on any of the Collateral; and
(b) Notwithstanding the provisions of the foregoing subsection
(a) the consent of the Majority Lenders, plus all of the Lenders which
are making loans or advances against the Tranche B Availability (the
"Tranche B Lenders") shall be required to change the definition of
Tranche B Availability, and only the consent of all of the Tranche B
Lenders shall be required and with respect to all other matters
relating to such loans or advances including, without limitation, any
changes with respect to the rate of interest thereon; and
(c) the consent of the Agent shall be required for any
amendment, waiver or consent affecting the rights or duties of the
Agent under any Credit Document, in addition to the consent of the
Lenders otherwise required by this Section.
The consent of the Borrowers shall not be required for any amendment,
modification or waiver of the provisions of Article 10 (other than Section 10.9
and Section 10.10(c)). The Borrowers and the Lenders each hereby authorize the
Agent to modify this Credit Agreement by unilaterally amending or supplementing
Annex I to reflect assignments of the Commitments. Notwithstanding the
foregoing, the Borrowers may unilaterally amend Schedule B, Parts 6.1, 6.10, and
6.14, without the consent of the Majority Lenders.
11.12 COUNTERPARTS AND EFFECTIVENESS. This Credit Agreement and any
waiver or amendment hereto may be executed in any number of counterparts and by
the different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. This Credit Agreement shall become
effective on the date on which all of the parties hereto shall have signed a
copy hereof (whether the same or different copies) and shall have delivered the
same to the
68
<PAGE> 74
Agent pursuant to Section 11.7 or, in the case of the Lenders, shall have given
to the Agent written, telecopied or telex notice (actually received) at such
office that the same has been signed and mailed to it.
11.13 SEVERABILITY. In case any provision in or obligation under this
Credit Agreement or the Revolving Notes or the other Credit Documents shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
11.14 MAXIMUM RATE. Notwithstanding anything to the contrary contained
elsewhere in this Credit Agreement or in any other Credit Document, the
Borrowers, the Agent and the Lenders hereby agree that all agreements among them
under this Credit Agreement and the other Credit Documents, whether now existing
or hereafter arising and whether written or oral, are expressly limited so that
in no contingency or event whatsoever shall the amount paid, or agreed to be
paid, to the Agent or any Lender for the use, forbearance, or detention of the
money loaned to the Borrowers and evidenced hereby or thereby or for the
performance or payment of any covenant or obligation contained herein or
therein, exceed the Highest Lawful Rate. If due to any circumstance whatsoever,
fulfillment of any provisions of this Credit Agreement or any of the other
Credit Documents at the time performance of such provision shall be due shall
exceed the Highest Lawful Rate, then, automatically, the obligation to be
fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance any
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to the Borrowers. All sums paid or agreed to be paid to
the Agent or any Lender for the use, forbearance, or detention of the
Obligations and other Indebtedness of the Borrower to the Agent or any Lender,
to the extent permitted by applicable law, shall be amortized, prorated,
allocated and spread throughout the full term of such Indebtedness, until
payment in full thereof, so that the actual rate of interest on account of all
such Indebtedness does not exceed the Highest Lawful Rate throughout the entire
term of such Indebtedness. The terms and provisions of this Section shall
control over every other provision of this Credit Agreement, the other Credit
Documents, and all agreements among the Borrowers, the Agent and the Lenders.
11.15 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS. This Credit Agreement
and the other Credit Documents constitute the entire agreement among the
Borrowers, the Agent and the Lenders, supersede any prior agreements among them,
and shall bind and benefit each of such Persons and their respective successors
and permitted assigns.
[SIGNATURE PAGE FOLLOWS]
69
<PAGE> 75
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed and delivered in Chicago, Illinois by their proper and
duly authorized officers as of the date first set forth above.
BORROWER:
FLORSHEIM GROUP INC.
By: R. Anglin
-----------------------------------------
Name: Richard Anglin
Title: Executive V.P. and C.F.O
THE FLORSHEIM SHOE STORE
COMPANY - NORTHEAST
By: R. Anglin
-----------------------------------------
Name: Richard Anglin
Title: Executive V.P. and C.F.O
THE FLORSHEIM SHOE STORE
COMPANY - WEST
By: R. Anglin
-----------------------------------------
Name: Richard Anglin
Title: Executive V.P. and C.F.O
FLORSHEIM OCCUPATIONAL
FOOTWEAR, INC.
By: R. Anglin
-----------------------------------------
Name: Richard Anglin
Title: Executive V.P. and C.F.O
L.J. O'NEILL SHOE CO.
By: R. Anglin
-----------------------------------------
Name: Richard Anglin
Title: Executive V.P. and C.F.O
70
<PAGE> 76
AGENT:
BT COMMERCIAL CORPORATION, as Agent
By: Wayne D. Hillock
----------------------------------------
Name: Wayne D. Hillock
Title: Director
LENDERS:
BT COMMERCIAL CORPORATION
By: Wayne D. Hillock
----------------------------------------
Name: Wayne D. Hillock
Title: Director
71
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> OCT-02-1999
<CASH> 3,911
<SECURITIES> 667
<RECEIVABLES> 34,681
<ALLOWANCES> 2,188
<INVENTORY> 82,884
<CURRENT-ASSETS> 133,562
<PP&E> 90,827
<DEPRECIATION> 59,054
<TOTAL-ASSETS> 208,409
<CURRENT-LIABILITIES> 56,876
<BONDS> 83,412
0
0
<COMMON> 8,454
<OTHER-SE> 38,907
<TOTAL-LIABILITY-AND-EQUITY> 208,409
<SALES> 57,455
<TOTAL-REVENUES> 57,455
<CGS> 35,355
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<INTEREST-EXPENSE> 2,819
<INCOME-PRETAX> (6,733)
<INCOME-TAX> 1,111
<INCOME-CONTINUING> (5,622)
<DISCONTINUED> (5,622)
<EXTRAORDINARY> (750)
<CHANGES> 0
<NET-INCOME> (6,372)
<EPS-BASIC> (0.75)
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