S & K Famous Brands, Inc.
Credit Agreement
Dated As Of May 31, 2000
THIS CREDIT AGREEMENT, dated as of May 31, 2000, is made by and between
S&K FAMOUS BRANDS, INC., a Virginia corporation (the "Company"), and SunTrust
Bank, a Georgia corporation (the "Bank").
SECTION I
DEFINITIONS
1.1 Definitions.
As used in this Agreement,
"Agreement" means this credit agreement, as it may be amended from time
to time.
"Bond Purchase Agreement" means the Bond Purchase Agreement and
Agreement of Sale dated as of December 1, 1983 as amended on November 1, 1984 by
and among the Company, the Bank, and the Industrial Development Authority of the
County of Henrico, Virginia.
"Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks in Richmond, Virginia are authorized or required to
close under applicable law.
"Capitalized Lease Obligations" means the amount of the obligations of
the Company and its Subsidiaries under Financing Leases which would be shown as
a liability on a balance sheet of the Company or a Subsidiary, prepared in
accordance with generally accepted accounting principles.
"Consolidated" refers to any determination to be made for the Company
and its Subsidiaries in accordance with generally accepted accounting
principles, including the principles of consolidation.
"Default" means an event described in Section 8.1 of this Agreement.
"Effective Tangible Net Worth" means Tangible Net Worth plus the
principal amount of Subordinated Debt outstanding from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurodollar Loan" means any Revolving Loan on which interest accrues
based on a Eurodollar Rate.
"Eurodollar Rate" means, with respect to any Eurodollar Loan for any
Interest Period, an interest rate per annum determined by the Bank (rounded
upwards, if necessary, to the next 1/16 of 1%) as the interest rate at which
deposits of U. S. dollars approximately equal in principal amount to the
Eurodollar Loan and for a maturity comparable to the Interest Period are offered
in immediately available funds to the Bank by at least two leading banks in the
London interbank market on the date of determination. Each determination by the
Bank of any Eurodollar Rate shall be conclusive and binding on the Company and
the Bank absent manifest error. The Bank and the Company acknowledge that the
Bank may determine the Eurodollar Rate from quotations of the Bank's money desk
or by reference to Reuter Screen or similar quotations, in the discretion of the
Bank, on and as of the date of determination.
"Federal Funds Rate Loan" means any overnight Loan on which the
interest accrues based on the Federal Funds Rate.
"Federal Funds Rate" means for any day, the rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) 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 on such day, as published by
the Federal Reserve Bank of New York, on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if such rate is not so published for any day,
the Federal Funds Rate for such a day shall be such rate on such transactions as
shall be determined by the Bank.
"Financing Lease" means any lease of property which would be
capitalized on a balance sheet of the Company or a Subsidiary, prepared in
accordance with generally accepted accounting principles.
"Funded Debt" means any Indebtedness of the Company or any Subsidiary
which has a stated maturity more than one year after the date of determination
or has a maturity which may be extended by the Company or any Subsidiary to a
date more than one year after the date of determination.
"Guaranty" means any agreement by which the Company or any Subsidiary
assumes, guarantees, endorses, contingently agrees to purchase or provide funds
for the payment of, or otherwise becomes liable upon, the obligation of any
other Person for borrowed money, or agrees to maintain the net worth or working
capital or other financial condition of any other Person or otherwise assures
any creditor of such other Person against loss.
"Indebtedness" means the Company's and each Subsidiary's (a)
obligations for borrowed money, (b) obligations representing the deferred
purchase price of property other than accounts payable arising in connection
with the purchase of inventory on terms customary in the trade, (c) obligations,
whether or not assumed and with or without recourse, secured by liens or payable
out of the proceeds or production from property now or hereafter owned or
acquired by the Company or any Subsidiary and (d) Capitalized Lease Obligations.
"Interest Period" means, (1) with respect to each Negotiated Rate Loan
or Eurodollar Loan, the period commencing on the date of the borrowing and
ending one, three, or six months thereafter or such other period as may be
agreed between the Company and the Bank, and (2) with respect to each Floating
Rate Loan other than a Eurodollar Loan, the period commencing on the date of
borrowing and ending on the date of repayment.
"Investment" means any loan, advance, extension of credit (excluding
accounts receivable arising in the ordinary course of business), or contribution
of capital by the Company or any Subsidiary to any other Person or any
investment in, or purchase or other acquisition of, the stock, notes,
debentures, or other securities of any Person made by the Company or any
Subsidiary.
"Lien" means any security interest, mortgage, pledge, lien, claim,
charge, encumbrance, title retention agreement, lessor's interest under a
Financing Lease or analogous instrument, in, of or on any of the Company's or
any Subsidiary's property.
"Loans" means the Revolving Loans defined in ss.2.1 and the Term Loan
defined in ss.3.1 of this Agreement.
"Notes" means the Revolving Note defined in ss.2.4 and the Term Note
defined in ss.3.3 of this Agreement.
"Obligations" means all unpaid principal and interest under the Notes
and all other obligations of the Company or any Subsidiary to the Bank arising
under this Agreement or the Notes.
"Person" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, government or any department or
agency of any government.
"Plan" means a "defined benefit plan" as defined in Section 3(35) of
ERISA, other than a "multiemployer plan" as defined in Section 3(37)(A) of
ERISA, for which the Company or any Subsidiary could be held liable for Unfunded
Liabilities by the Pension Benefit Guaranty Corporation.
"Potential Default" means an event described in Section 8.1 which but
for the lapse of time or the giving of notice, or both, would constitute a
Default.
"Prepayment Penalty" means with respect to the prepayment of any
Negotiated Rate Loan, any Eurodollar Loan, or any Term Loan prior to the end of
an Interest Period, the amount paid by the Company to the Bank and calculated as
follows: (1) the principal amount of the prepayment, times (2) the positive
difference between the accruing interest rate of the Loan and the interest rate,
determined as of the date of prepayment, for a U. S. Government security of
comparable maturity to the remaining Interest Period divided by (3) 365, times
(4) the number of days remaining to the maturity of the Interest Period.
"Prime Rate" shall mean the rate established from time to time by the
Bank and recorded in its Credit Administration Division as a reference for
establishing the lending rate on commercial loans. The Prime Rate is not
necessarily the lowest rate of interest charged by the Bank for commercial
borrowings.
"Section" and "ss." means a numbered section of this Agreement, unless
another document is specifically referenced.
"Subordinated Debt" means any Indebtedness of the Company which is
subordinated to the payment of the Obligations on terms approved in writing by
the Bank.
"Subsidiary" means a corporation or other entity of which 50% or more
of the voting stock or other ownership interest is owned directly or indirectly
by the Company, by one or more of its Subsidiaries, or by the Company and one or
more of its Subsidiaries, and the financial statements of which are Consolidated
with those of the Company in preparing the Company's annual report to
stockholders, it being understood that as of the date hereof the Company has no
Subsidiaries and until the Company has a Subsidiary all references herein to
Consolidated statements and figures shall refer to the statements and figures of
the Company alone.
"Tangible Net Worth" means the Consolidated stockholders' equity as
reported in the Company's most recent financial reports as described in Section
7.1.1(a) and 7.1.1(b) minus any goodwill, any patents and any other intangible
assets determined in accordance with generally accepted accounting principles as
reported in those same financial reports.
"Unfunded Liabilities" means with regard to any Plan, the excess of the
current value of the Plan's benefits guaranteed by the Pension Benefit Guaranty
Corporation under ERISA over the current value of the Plan's assets allocable to
such benefits.
"Unsubordinated Liabilities" means all amounts which would be treated
as liabilities on a balance sheet prepared in accordance with generally accepted
accounting principles, excluding, however, Subordinated Debt.
"Unsubordinated Funded Debt" means all Funded Debt other than
Subordinated Debt.
"Working Capital" means current assets minus current liabilities
determined in accordance with generally accepted accounting principles.
The foregoing definitions shall be equally applicable to both the
singular and plural of the defined terms.
SECTION II
REVOLVING LOANS
2.1 Commitment to Lend. Subject to the terms and conditions of this
Agreement, the Bank agrees to make Revolving Loans ("Revolving Loans") to the
Company from time to time until maturity of the Revolving Note as defined in
Section 2.4, up to the maximum outstanding principal amount at any one time
outstanding of Twenty Million Dollars ($20,000,000) from the date hereof to and
including May 31, 2003, such amounts being hereafter called the "Commitment."
Revolving Loans may be designated as Floating Rate Loans (Section 2.5) or
Negotiated Rate Loans (Section 2.2). The Company may borrow, repay, and reborrow
the maximum annual permitted principal amount of the Commitment.
2.2 Negotiated Rate Loans.
(a) Parties' Option. Subject to the terms and conditions of this
Agreement, from time to time the Company may request the Bank to make offers to
the Company to make Revolving Loans which are designated as Negotiated Rate
Loans. The Bank may, but shall have no obligation to, make such offers, and the
Company may, but shall have no obligation to, accept such offers.
(b) Rate Quote Requests. When the Company wishes to request an
offer from the Bank to make Negotiated Rate Loans, it shall notify the Bank by
telephone (each such telephone request a "Rate Quote Request") not later than
11:00 a.m. (Eastern Time) on the day of the proposed borrowing (or such other
time and date as the Company and the Bank shall agree), specifying:
(i) the proposed date of borrowing, which shall be a Business
Day;
(ii) the amount of such borrowing, which shall be a minimum
amount of $500,000 and;
(iii) the duration of the Interest Period or Interest Periods
applicable thereto, subject to the definition of the Interest Period.
The Company may request an offer to make Negotiated Rate Loans for more
than one Interest Period in a single Rate Quote Request. Each Rate Quote Request
shall constitute an invitation by the Company to the Bank to submit a fixed rate
quote offering to make a Negotiated Rate Loan or Negotiated Rate Loans to which
the applicable Rate Quote Request relates.
2.3 Maturity of Loans. Each Revolving Loan shall mature, and the
principal amount thereof shall be due and payable on the last day of the
Interest Period applicable thereto, but in no event shall a Revolving Loan
mature later than May 31, 2003, when the Commitment expires in accordance with
the terms of the Revolving Note as defined in Section 2.4.
2.4 Revolving Note; Interest Payments. The Revolving Loans shall be
evidenced by a single note in the form of Exhibit A attached hereto (the
"Revolving Note") maturing on May 31, 2003. The Company agrees to deliver to the
Bank the Revolving Note in the principal amount of Twenty Million Dollars
($20,000,000), representing the obligation of the Company to pay the aggregate
unpaid principal amount of all Revolving Loans from time to time made by the
Bank. Accrued interest on the Revolving Note shall be paid monthly on the last
day of the month, regardless of the Interest Period or Interest Periods
selected, or at maturity, whichever is sooner.
2.5 Floating Rate Loans. Floating Rate Loans made on any one occasion
shall be in the minimum principal amount of $25,000 or any higher integral
multiple of $25,000. Principal payments will be in minimum principal amounts of
$25,000 or any higher integral multiple of $25,000. The Company shall notify the
Bank by telephone not later than 11:00 a.m. (Eastern Time) on the day of the
proposed borrowing (or such other time and date as the Company and the Bank
shall agree), specifying; the proposed date of borrowing, which shall be a
Business Day, the amount of such borrowing, the interest rate, as determined in
this Section, and the duration of the Interest Period or Interest Periods, if
any, applicable thereto. The unpaid principal balance of each Floating Rate Loan
made under the Revolving Note shall bear interest calculated in accordance with
ss.9.5 and at the interest rate selected by the Company from the following
options ("Interest Rate Option") on the date each Floating Loan is made:
(a). Interest Rate Option A. For a Federal Funds Rate Loan at a
rate per annum equal to the Federal Funds Rate (Index) plus .75% (Interest
Spread). Such rate shall change daily.
(b). Interest Rate Option B. For a Eurodollar Loan at a rate per
annum equal to the Eurodollar Rate (Index) plus .75% (Interest Spread) for
Interest Periods of one month, three months or six months, as specified by the
Company.
(c). Interest Rate Option C. At a rate per annum equal to the
Bank's Prime Rate with any change in such interest rate being effective as of
the day such Prime Rate is changed.
2.6 Prepayment. The Company may without penalty prepay any Floating
Rate Loan accruing interest in accordance with Interest Rate Options A or C.
Prepayment of Negotiated Rate Loans or Eurodollar Loans prior to the end of the
Interest Period will be subject to Prepayment Penalty.
2.7 Commitment Fee. The Company shall pay to the Bank an annual
commitment fee in an amount equal to the product of the annual Commitment amount
multiplied by .125% (.00125). The commitment fee shall be paid in equal
quarterly installments on the last day of each quarter commencing June 30, 2000
through maturity. For the purpose of prorating the amount of the commitment fee
due, a quarter shall be deemed to consist of 91 days.
SECTION III
TERM LOAN
3.1 Amount. The Bank agrees to make a Term Loan (the "Term Loan") to
the Company on May 31, 2003, in a principal amount equal to the principal amount
of the Revolving Note outstanding on such date, or any part thereof as specified
by the Company.
3.2 Proceeds. The proceeds of the Term Loan shall be applied first to
payment of the Revolving Note. Any unpaid balance of such Revolving Note
thereafter remaining, together with accrued interest shall be contemporaneously
paid by the Company to the Bank. Upon expiration or termination of the
Commitment and payment by the Company of all Obligations on the Revolving Note
held by the Bank, the Bank shall deliver the Revolving Note to the Company with
a notation that it has been canceled.
3.3 Term Note. On May 31, 2003, the Company shall deliver to the Bank a
note in the form of Exhibit B attached hereto (the "Term Note") dated such date
and in a principal amount equal to the principal amount of the Term Loan to be
made by the Bank. The principal of the Term Note shall be paid in fortyseven
consecutive equal monthly installments of principal plus interest each payable
on the last day of each month commencing June 30, 2003 with a final installment
due on May 31, 2007, when the unpaid principal amount and the accrued and unpaid
interest on the Term Note shall be payable in full.
3.4 Interest. The Term Note shall bear interest calculated in
accordance with Section 9.5 from the date thereof on the unpaid principal
balance from time to time outstanding at an interest rate per annum equal to the
Company's option of: (a) a rate floating at the Prime Rate with any change in
such interest rate being effective as of the date the Prime Rate is changed, (b)
a rate at the Federal Funds Rate (Index) plus 1.25% (Interest Spread). Such rate
shall change daily, or (c) The Eurodollar Rate (Index) plus 1.25% (Interest
Spread) for Interest Periods of one month, three months or six months, as
specified by the Company. The Company shall choose an interest rate option when
the Term Loan is initially funded which shall remain in effect for the life of
the Loan. Accrued interest on the Term Note shall be paid monthly on the last
day of each month commencing June 30, 2003 and at its maturity.
3.5 Voluntary Prepayments. The Company may make full or partial
prepayments for application to the Term Note, provided that (a) the Company pays
accrued interest on the principal prepaid to the date of prepayment, and (b) any
partial prepayment shall be in a minimum aggregate principal amount equal to
$25,000 or any higher integral multiple of $25,000. Each partial prepayment
shall be applied first to the payment of accrued interest and other charges
payable hereunder and then to installments of principal in the inverse order of
maturity. If interest is accruing based on a Eurodollar Rate under 3.4(c) then
any prepayment would be subject to a Prepayment Penalty. If interest is accruing
based on the Prime Rate or Fed Funds option, prepayment may be made without
premium or penalty.
SECTION IV
CONDITIONS PRECEDENT TO CLOSING AGREEMENT AND MAKING LOANS
4.1 Conditions Precedent to Closing Agreement. The following conditions
must be satisfied contemporaneously with the execution of this Agreement by the
Company:
(a) Receipt by the Bank of an opinion addressed to the Bank from
McGuire, Woods, Battle, & Boothe, L.L.P., counsel for the Company, substantially
in the form of Exhibit C attached hereto.
(b) Receipt by the Bank of such other documents as the Bank shall
require, all in form and substance satisfactory to the Bank and its counsel,
including, without limitation, appropriate corporate resolutions and certificate
of incumbency.
4.2 Conditions Precedent to Making Loans. (a) Prior to making the
Revolving Loans, the Bank shall receive an appropriately completed and executed
Revolving Note, and the following conditions shall have been satisfied prior to
and after each Loan:
(i) No event shall have occurred and be continuing or
condition shall exist, or would result from the proposed Revolving Loan, which
constitutes or, with the lapse of time or the giving of notice, or both, would
constitute a Default; in the case of a Refunding Loan (as hereinafter defined),
this condition shall only require that no event shall have occurred and be
continuing or condition exist, or would result from the proposed Refunding Loan,
which constitutes a Default;
(ii) The representations and warranties contained in Sections
6.1 through 6.12 hereof shall be true and correct on and as of the date of the
proposed Revolving Loan as though made on and as of such date, provided,
however, in the case of a Refunding Loan, this condition shall not include the
representations and warranties in Sections 6.5 (second sentence), 6.6, 6.7, 6.8,
6.9, 6.10 and 6.12; and
(iii) No change shall have occurred in any law or regulation
thereunder or interpretation thereof which in the opinion of counsel for the
Bank would make it illegal for the Bank to make the Revolving Loans as provided
herein.
As used herein, the term "Refunding Loan" means a Revolving Loan which,
after application of the proceeds thereof, results in no net increase of the
outstanding principal amount of the Revolving Loan.
(b) Prior to making the Term Loan, the Bank shall receive an
appropriately completed and executed Term Note and the following conditions
shall have been satisfied:
(i) No event shall have occurred and be continuing or
conditions shall exist, or would result from the proposed Loan, which
constitutes or, with lapse of time or the giving of notice, or both, would
constitute a Default; and
(ii) No change shall have occurred in any law or regulation
thereunder or interpretation thereof which in the opinion of counsel for the
Bank would make it illegal for the Bank to make the Loans as provided herein.
SECTION V
BORROWING PROCEDURES
5.1 Applicability. The following procedures shall be applicable to each
loan.
5.2 Notice of Borrowing. The Company shall certify to the Bank the
name, title and true signature of each officer of the Company authorized to sign
the Notes and give notice of borrowing hereunder. The Bank may conclusively rely
on such certification until it receives written notice to the contrary from the
Company.
5.3 Funds. The Bank shall make available to the Company on the date of
borrowing the amount of such borrowing in immediately available funds at its
main office in Richmond, Virginia, during its normal business hours.
5.4 Method of Payment. All payments of the Obligations shall be made by
the Company to the Bank by check or in immediately available funds, but the Bank
reserves the right to require immediately available funds.
SECTION VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank (which representatives
and warranties shall survive the execution and delivery of the Notes and the
making of the Loans), as follows:
6.1 Corporate Existence and Standing. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Virginia
and the Company has all requisite authority to conduct its business in each
jurisdiction in which its business is conducted and where failure to have such
authority would have a material adverse effect on the Company.
6.2 Authorization and Validity. The execution and delivery by the
Company of this Agreement and the Notes (together the "Loan Documents") have
been duly authorized by proper corporate proceedings and this Agreement and the
Revolving Note constitute, and the Term Note when executed and delivered for
value will constitute, legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms except as the same may be
limited by bankruptcy, insolvency, reorganization and other laws affecting the
enforcement of creditors' rights generally and by usual equity principles.
6.3 Compliance with Laws and Contracts. Neither the execution and
delivery by the Company of the Loan Documents, the consummation of the
transactions herein contemplated, or compliance with the provisions thereof will
violate any law, rule, regulation, order, writ, judgment, injunction, decree, or
award binding on the Company or the Company's articles of incorporation or
bylaws or the provisions of any indenture, instrument or agreement to which the
Company is a party or conflict with or constitute a default thereunder, or
result in the creation or imposition of any Lien pursuant to the terms of any
such indenture, instrument or agreement.
6.4 No Governmental or Other Approvals. The execution, delivery and
performance of the Loan Documents and the transactions contemplated hereby do
not require any approval or consent of, or filing or registration with, any
governmental agency, stockholders, or any other property, except for the filing
of this Agreement with the Securities and Exchange Commission as an exhibit to
any report of the Company pursuant to ss.13 of the Securities Exchange Act of
1934.
6.5 Financial Statements. The financial statements of the Company
contained in the Company's Form 10K Annual Report for the fiscal year ended
January 29, 2000 and in the Company's 10Q Quarterly Report for the fiscal
quarter ended October 30, 1999 filed with the Securities and Exchange
Commission, copies of which have been heretofore delivered to the Bank, were
prepared in accordance with generally accepted accounting principles in effect
on the dates such statements were prepared and fairly present the financial
condition of the Company at the dates of such statements and the results of its
operations for the periods then ended. No material adverse change in the
condition of the Company as shown on such financial statements has occurred
since the dates thereof.
6.6 Taxes. The Company has filed all United Stated Federal income tax
returns and all other tax returns which are required to be filed and has paid
all taxes due pursuant to said returns or pursuant to any assessment received by
the Company, except such taxes, if any, as are being contested in good faith and
as to which adequate reserves have been provided. The charges, accruals and
reserves on the books of the Company in respect of any taxes or other
governmental charges are adequate.
6.7 Litigation. There is no litigation or proceeding pending or, to the
knowledge of any of its officers, threatened against the Company which might
materially and adversely affect the condition of the Company or the ability of
the Company to perform the Obligations.
6.8 ERISA. As of the date of this Agreement, the Company does not
maintain or contribute to a "multiemployer plan" as defined in section 3(37)(A)
of ERISA, or any Plan. The Company is not in the process of terminating any
Plan. To the best of the Company's knowledge and belief, no fact, including any
event described in Section 4043 of ERISA (a "Reportable Event"), exists in
connection with any Plan which might constitute grounds for the termination of
any Plan by the Pension Benefit Guaranty Corporation or the appointment by the
appropriate United States district court of a trustee to administer any Plan.
6.9 Defaults. No Default or Potential Default has occurred and is
continuing. The Company is not in default in respect of any of its Indebtedness
for borrowed money and no holder of any such Indebtedness has given notice of an
asserted default thereunder. No liquidation, dissolution or other winding up of
the Company and no bankruptcy or similar proceedings relative to the Company are
pending or, to the Company's knowledge, threatened.
6.10 Accuracy of Information. No information, exhibit or report
furnished by the Company to the Bank in connection with the negotiation of the
Loan Documents contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained therein in the
light of the circumstances under which they were made not misleading.
6.11 Regulation U. The Company is not engaged principally, or as one of
its important activities, in the business of extending credit for the purpose of
purchasing or carrying "margin stock" (as defined in Regulation U of the Board
of Governors of the Federal Reserve System).
6.12 Subsidiaries. The representatives and warranties set forth in 6.1,
6.3, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10 and 6.11 of this Section VI are also true and
correct with respect to any Subsidiary of the Company.
SECTION VII
COVENANTS
During the term of this Agreement, and until the Obligations are paid
in full, unless the Bank shall otherwise consent in writing:
7.1 The Company will:
7.1.1 Financial Reporting. Maintain, for itself and each Subsidiary, a
modern system of accounting, and furnish to the Bank:
(a) Within 90 days after the close of each of its fiscal years,
provide to the Bank an unqualified audit report certified by
PricewaterhouseCoopers, L.L.P., or other accountants of recognized national
standing, prepared in accordance with generally accepted accounting principles,
consistently applied (except for changes in such principles or their application
as approved by such accountants), on a Consolidated basis for itself and the
Subsidiaries, including balance sheets as of the end of such period, statements
of income or loss, statements of changes in stockholders' equity and statements
of cash flows accompanied by a certificate of such accountants that, in the
course of their examination necessary for their certification of the foregoing,
they have obtained no knowledge of any Default or Potential Default, or if, in
the opinion of such accountants, any Default or Potential Default shall exist,
such certificate shall state the nature and status thereof;
(b) Within 60 days after the close of the first three quarterly
periods during each fiscal year, for itself and the Subsidiaries, provide to the
Bank, Consolidated unaudited balance sheets as at the close of each such period
and Consolidated statements of income or loss, statements of changes in
stockholders' equity and statements of cash flows for the period from the
beginning of such fiscal year to the end of such quarter, all prepared in
accordance with generally accepted accounting principles, consistently applied
(except for changes in such principles or their application as approved by the
Company's chief financial officer), and certified by its chief financial
officer;
(c) Together with the financial statements required under 7.1.1 (a)
and (b) above, a certificate, dated as of the end of the fiscal period to which
the financial statements apply, signed by the Company's chief financial officer
stating that to the best of his knowledge and belief there neither exists on the
date of such certificate, nor existed during such period, any Default or
Potential Default, or if any such Default or Potential Default existed or
exists, the certificate shall specify the nature thereof, the period of
existence thereof and what action the Company has taken, is taking or proposed
to take with respect thereto;
(d) Within 90 days after the close of each fiscal year, a statement
of the Unfunded Liabilities of each Plan which exceeded $100,000, certified as
correct by an actuary enrolled under ERISA;
(e) As soon as possible and in any event within 10 days after the
Company knows that any Reportable Event (as described in Section 4043 of ERISA)
has occurred with respect to any Plan which is required to be reported to the
Pension Benefit Guaranty Corporation, a statement, signed by the chief financial
officer of the Company, describing such Reportable Event and the action which
the Company proposes to take with respect thereto; and
(f) Promptly upon their becoming available, (i) copies of all
financial statements, proxy statements and reports which the Company shall send
to its stockholders, and (ii) copies of all regular and periodic financial
reports, if any, which the Company shall file with the Securities and Exchange
Commission, or any governmental agency or agencies substituted therefor, or any
similar or corresponding governmental department, commission, board, bureau or
agency, or with any national securities exchange;
(g) Such other information (including nonfinancial information) as
the Bank may from time to time reasonably request.
7.1.2 Use of Proceeds. Use of proceeds of the Loans only for working
capital and other general corporate purposes, including funds for the Company's
store expansion.
7.1.3 Minimum Consolidated Tangible Net Worth. Maintain Consolidated
Tangible Net Worth at all times of not less than $48,300,000 of Consolidated
Tangible Net Worth at January 30, 1999, and for each fiscal year thereafter, of
not less than $48,300,000 plus 80% of each successive year's net income.
However, during the fiscal year beginning February 1, 1999, and all periods
thereafter, upon approval of the Company's Board of Directors and notification
to SunTrust, S & K Famous Brands may purchase up to an additional $12,800,000 of
its own stock. Any such repurchases shall reduce the minimum Consolidated
Tangible Net Worth requirement by 90% of the value of the stock repurchased. The
minimum Consolidated Tangible Net Worth will not be adjusted for any net loss
reported by the Company.
7.1.4 Current Ratio. Maintain as of the end of each of its fiscal
quarters a ratio of Consolidated current assets to Consolidated current
liabilities of not less than 2.5 to 1. For purposes of this computation, amounts
outstanding under the Revolving Note and the agreements referenced in Section
9.16 shall be considered long term debt.
7.1.5 Ratio of Consolidated Unsubordinated Liabilities to Consolidated
Effective Tangible Net Worth. Maintain at the end of each fiscal quarter a ratio
of Consolidated Unsubordinated Liabilities to Consolidated Effective Tangible
Net Worth of not greater than 1.25 to 1 and maintain at the end of each fiscal
year end a ratio of Consolidated Unsubordinated Liabilities to Consolidated
Effective Tangible Net Worth of not greater than .85 to 1.
7.1.6 Fixed Charge Coverage Ratio. Maintain, as of the end of each
fiscal quarter, a ratio greater than 1.25 to 1 of (a) the sum of profit before
tax, noncash charges, interest expense (including interest on Capitalized Lease
Obligations) and operating lease payments (all for the four most recent fiscal
quarters ending prior to the quarter in which the determination is made) to (b)
the sum of interest expense (including interest in Capitalized Lease
Obligations), operating lease payments, Capitalized Lease Obligations, payments
due on Funded Debt for the four ensuing fiscal quarters (including the quarter
in which the determination is made), and cash dividends for the four most recent
fiscal quarters ending prior to the quarter in which determination is made.
7.2 The Company will and will cause each Subsidiary to:
7.2.1 Notice of Default. Give prompt notice in writing to the Bank of
the occurrence of any Default or Potential Default and of any other development,
financial or otherwise, which might materially and adversely affect its
business, properties or affairs or the ability of the Company to perform the
Obligations.
7.2.2 Conduct of Business and Maintenance of Existence. Carry on and
conduct business in substantially the same manner and in substantially the same
fields of enterprise as it is presently conducted; and do all things necessary
to remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
governmental authority to conduct business in each jurisdiction in which failure
to maintain such authority would have a material adverse effect on the Company.
Notwithstanding the above, Subsidiaries may be dissolved if the continued
existence of such Subsidiary is not material to the business or Consolidated
financial condition of the Company and its remaining Subsidiaries.
7.2.3 Taxes. Pay when due all taxes, assessments and governmental
charges and levies upon it or its income, profits or property, except those
which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside.
7.2.4 Insurance. Maintain insurance in such amounts and covering such
risks as is consistent with sound business practice.
7.2.5 Inspection. Permit the Bank by its representatives and agents and
at its expense, to inspect any of the properties, corporate books and financial
records of the Company and each Subsidiary, to examine and make copies of the
books of accounts and other financial records of the Company and each
Subsidiary, and to discuss the affairs, finances and accounts of the Company and
each Subsidiary with, and to be advised as to the same by, its officers at such
reasonable times and intervals as the Bank may designate.
7.3 The Company will not, nor will it permit any Subsidiary to:
7.3.1 Mergers, Acquisitions and Sale of Assets. (a) Merge or
consolidate with or into any other Person; (b) lease, sell or otherwise dispose
of all, or a substantial portion of, its property, assets or business to any
other Person; or (c) lease, purchase or otherwise acquire all, or a substantial
portion of, the property, assets or business of any other Person, except that
(i) any Subsidiary may merge with, or transfer its assets to, any Subsidiary or
to the Company, (ii) the Company may merge or consolidate with another Person if
the Company is the surviving entity and if, after giving effect to the merger
and consolidation, there would exist no Default or Potential Default hereunder,
(iii) assets may be leased, sold or otherwise disposed of provided such assets
are not material to the business or Consolidated financial condition of the
Company and its Subsidiaries, (iv) the Company may purchase or acquire its
inventory from a Person even if such inventory constitutes all or a substantial
portion of the property, assets or business of such Person, (v) inventory may be
sold in the ordinary course of business of the Company or any Subsidiary, and
(vi) sales, leases or other dispositions in any fiscal year of the Company in an
aggregate amount for the Company and all Subsidiaries not to exceed $2,000,000
shall be permitted.
7.3.2 Sale of Accounts. Sell or otherwise dispose of any notes
receivable or accounts receivable, with or without recourse, having an aggregate
face value of more than $400,000.
7.3.3 Investments. Make or suffer to exist any Investments, or
commitments therefore, except:
(a) Shortterm obligations of, or fully guaranteed as to interest
and principal by, the United States of America.
(b) Commercial paper of any Person rated at least A2 by Standard
and Poor's or P2 by Moody's Investors Service, Inc.
(c) Demand deposit accounts maintained in the ordinary course of
its business, or that of its Subsidiaries.
(d) Certificates of deposit issued by commercial banks having
capital and surplus in excess of $100,000,000.
(e) Investments in Subsidiaries, if, after giving effect thereto,
there would exist no Default or Potential Default hereunder.
(f) Notes or other securities of any Person issued in connection
with any disposition of assets permitted by this Agreement.
(g) Any other Investments which, in the aggregate, are less than 5%
of the Consolidated Tangible Net Worth of the Company and its Subsidiaries.
(h) Repurchase of the Company's outstanding shares , if , after
giving effect thereto, there would not exist any Default or Potential Default
hereunder subject to Section 7.1.3.
7.3.4 Guaranties. Make or suffer to exist any Guaranties, except (a) by
endorsement of instruments for deposit or collection in the ordinary course of
business and (b) the guaranty by the Company of the obligations of any
Subsidiary or issuing authority in connection with any industrial revenue bonds
issued to finance the purchase or construction of facilities to be purchased by
or leased to the Company or any Subsidiary.
7.3.5 Liens. Create, incur, or suffer to exist any Lien, except:
(a) Those in favor of the Company by its Subsidiaries.
(b) Those for taxes, assessments or governmental charges or levies
on its property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith and by
appropriate proceedings.
(c) Those imposed by law, such as liens in favor of lessors for
distraint and similar remedies and carriers', warehousemen's, and mechanics'
liens and other similar liens arising in the ordinary course of business which
secure payment of obligations not more than 90 days past due, or, if the same
are more than 90 days past due, those that are being contested in good faith and
by appropriate proceedings.
(d) Those arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation.
(e) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the saleability of the same or interfere with the use
thereof in the business of the Company or the Subsidiaries.
(f) Liens and charges for maintenance, repairs and operation of
facilities owned or leased by the Company or its Subsidiaries or used in
connection therewith, arising under joint easement and maintenance agreements,
reciprocal easement agreements or similar documents governing the use or
occupancy of such facilities.
(g) Judgment liens not in existence for a period longer than 60
days after the creation thereof, or, if a stay of execution shall have been
obtained, for a period longer than 60 days after the expiration of such stay.
(h) Lessors' interests under Financing Leases.
(i) Those disclosed in exhibit D attached hereto.
(j) Liens securing the purchase or deferred price of fixed assets
if the Lien extends only to the property acquired.
(k) Equitable liens in favor of dissenting shareholders of acquired
corporations for the fair market value of their shares of stock of such
corporations.
(l) Liens in addition to those permitted above securing an
aggregate amount not exceeding 1% of the Consolidated Tangible Net Worth of the
Company and its Subsidiaries at any one time.
7.3.6 Prepayment of Subordinated Debt. Prepay, in whole or in part (or
upon the occurrence and continuation of a Default, repay), the principal amount
of any of its Subordinated Debt.
7.3.7 Purchase of Stock. Extend credit to others for the purpose of
purchasing or carrying any "margin stock" (as defined in Regulation U
promulgated by the Board of Governors of the Federal Reserve System) or use any
of the proceeds of the Loans made under this Agreement to purchase or carry any
"margin stock."
SECTION VIII
DEFAULTS
8.1 Events of Default. The occurrence of any one or more of the
following events shall constitute a Default:
8.1.1 Any material representation or warranty made by the Company to
the Bank under or in connection with any Loan Document shall be materially false
as of the date on which made.
8.1.2 Nonpayment of principal of or interest or commitment fee on any
of the Notes within 5 days after the same becomes due.
8.1.3 The breach by the Company of any of the terms or provisions of
sections 7.1.2, 7.1.3, 7.1.4, 7.1.5, 7.1.6, 7.2.2, 7.3.1, 7.3.2, 7.3.3, 7.3.4,
7.3.5, 7.3.6, or 7.3.7.
8.1.4 The Company shall breach or fail to perform any of the other
terms or provisions of the Agreement and such default shall continue for 30 days
after written notice thereof has been given to the Company by the Bank.
8.1.5 The Company or any Subsidiary shall (a) not pay, or admit in
writing its inability to pay, its debts generally as they become due, (b) make
an assignment for the benefit of creditors, (c) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any substantial part of its property,
(d) institute any proceeding seeking to adjudicate it insolvent, or seeking a
decree or order for relief in bankruptcy or dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (e) take any
corporate action to authorize or effect any of the foregoing actions set forth
in this Section 8.1.5, or (f) fail to contest in good faith any appointment or
proceeding described in Section 8.1.6.
8.1.6 Without the application, approval or consent of the Company or
any Subsidiary, a receiver, custodian, trustee, examiner, liquidator or similar
official shall be appointed for the Company or any Subsidiary or any substantial
part of its property, or a proceeding described in Section 8.1.5(d) shall be
instituted against the Company or any Subsidiary and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 60 days.
8.1.7 Any court, government or governmental agency shall condemn, seize
or otherwise appropriate, or take custody or control of all or any portion of
the property of the Company or any Subsidiary which is material to the conduct
of the business of the Company and the Subsidiaries on a Consolidated basis, and
for which the Company does not receive market consideration.
8.1.8 The Company or any Subsidiary shall fail within 60 days to pay,
bond or otherwise discharge any judgment or order for the payment of money in
excess of $500,000, which is not stayed on appeal or otherwise being
appropriately contested in good faith.
8.1.9 The Unfunded Liabilities of all Plans shall exceed $500,000 in
the aggregate.
8.1.10 An Event of Default under the Bond Purchase Agreement.
8.1.11 An Event of Default under the Credit Agreement and/or Notes with
First Union National Bank.
8.2 Acceleration and Recourse. Upon the occurrence of any Default the
Bank may, at its option, by notice given to the Company, terminate the Bank's
Commitment and, if Loans are then outstanding, declare the then outstanding Note
to be forthwith due and payable, whereupon the principal amount of such Note
together with accrued interest thereon shall become immediately due and payable
without presentment, demand, protest, or other notice of any kind, all of which
are hereby expressly waived by the Company.
SECTION IX
MISCELLANEOUS
9.1 Notices. All written notices hereunder shall be deemed to have been
given (i) when delivered at the address specified on the signature page hereto
or at such other address as a party may hereafter advise the other party in
writing or (ii) three calendar days after the same shall have been deposited in
the United States mail, by certified or registered mail, return receipt
requested, postage prepaid.
9.2 Term of Agreement. This Agreement shall continue in effect so long
as any Commitment, Loan, Note or Obligation of the Company shall be outstanding.
9.3 No Waivers. Any failure by the Bank to exercise any right hereunder
shall not be construed as a waiver of the right to exercise the same or any
other right at any time. The rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies otherwise provided by law.
9.4 Jurisdiction. This Agreement and each Note shall be construed in
accordance with and governed by the laws of the Commonwealth of Virginia.
9.5 Computation of Interest. Interest shall be calculated daily on the
unpaid principal balance of the outstanding Notes and shall be computed on the
basis of a year of 365 days and paid for the actual number of days for which
due. Such daily computation shall not be compounded. If the due date for any
payment of principal is extended by operation of law, interest shall be payable
for such extended time. If any payment becomes due on a day which is not a
Business Day such payment may be made on the next succeeding Business Day, and
such additional day(s) shall be included in computing interest in connection
with such payment.
9.6 Expenses, Taxes, Etc. The Company agrees to pay all reasonable
outofpocket expenses of the Bank and the reasonable fees and expenses of
counsel to the Bank, in connection with the preparation of all documentation in
connection with this Agreement, the Loans and the enforcement thereof, whether
or not any Loans are made. The Company agrees to indemnify the Bank from, and
hold it harmless against, any taxes, charges or penalties (other than in respect
of taxes imposed upon or measured by the income of the Bank) imposed by any
governmental authority by reason of the execution and delivery of this Agreement
or the issuance or the acquisition of the Notes or the making of any Loans
unless any such tax, charge or penalty shall be the result of the negligence or
misconduct of the Bank. In the event that the Bank shall retain at any time an
attorney to collect, enforce or protect its interest with respect to this
Agreement, any Loan or any Note, the Company shall pay all of the costs and
expenses of such collection, enforcement or protection, including reasonable
fees of attorneys, and the Bank may take judgment for all such amounts.
9.7 Accounting Terms. Unless expressly otherwise defined in this
Agreement, all accounting terms shall be defined, and all accounting
computations shall be made, in accordance with generally accepted accounting
principles.
9.8 Repayment in Bankruptcy. In the event any amount of the Obligations
is paid by the Company and because of bankruptcy or other laws relating to
creditors' rights the Bank repays any such amounts to the Company or to any
trustee, receiver or otherwise, then the amounts so repaid shall again become
part of the Obligations.
9.9 Changes, Waivers, Etc. This Agreement may not be amended or
terminated orally, but only by a statement in writing signed by both parties.
9.10 Singular and Plural. Terms in the singular number shall include
the plural and those in the plural shall include the singular.
9.11 Use of Defined Terms. All terms defined in this Agreement shall
have the defined meanings when used in the Notes and in other documents
delivered pursuant to this Agreement, unless the context shall otherwise
require.
9.12 Binding Effect of Agreement. This Agreement shall be binding upon
and inure to the benefit of the Company, the Bank and their respective
successors and assigns, provided that the Company may not assign or transfer its
rights hereunder.
9.13 Headings. Headings or captions have been inserted for convenience
only and shall not be construed as limiting or affecting in any way the
provisions of this Agreement.
9.14 Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if such signatures were upon the same
instrument.
9.15 Cross Default. The Company agrees that if the maturity of the
Notes shall be accelerated because of a Default hereunder or if the Notes shall
mature and be unpaid when due, upon request of the Bank and tender of the Bonds
(the "Bonds") issued under the Bond Purchase Agreement to the Company duly
endorsed without recourse, the Company shall purchase (or cause its designee to
purchase) the Bonds from the Bank at a price equal to the outstanding principal
amount of the Bonds plus accrued interest thereon to the date of purchase.
9.16 Additional Banks/Loan Agreements. The Bank understands that the
Company also maintains a $20,000,000 revolving credit facility with First Union
National Bank. The Bank further understands that the terms and conditions of the
$20,000,000 loan agreement do not conflict with those in this Agreement and that
all loan proceeds from any First Union National Bank loans are used for working
capital and general corporate purposes. During the term of this Agreement, the
Company or any Subsidiary agrees that it shall not enter into any other loan
agreement(s) which would cause its Indebtedness to exceed $40,000,000 (excluding
loans under the Bond Purchase Agreement).
WITNESS the following signatures.
S&K FAMOUS BRANDS, INC.
By: /s/ Robert E. Knowles
Title: Executive Vice President
Chief Financial Officer
Address: 11100 West Broad Street
P.O. Box 31800
Richmond, Virginia 232941800
Attn: Executive Vice President and
Chief Financial Officer
SunTrust Bank
By /s/ W. A. Stratton
Title Senior Vice President
Address: 919 East Main Street
P.O. Box 26665
Richmond, Virginia 23261
William A. Stratton
EXHIBIT A
REVOLVING NOTE
$20,000,000 Richmond, Virginia
May, 31, 2000
FOR VALUE RECEIVED, on May 31, 2003, S&K FAMOUS BRANDS, INC., a
Virginia corporation (the "Borrower"), hereby promises to pay to the order of
SunTrust Bank (the "Payee" or the "Bank") at its main office, in Richmond,
Virginia, in lawful money of the United States, the principal of Twenty Million
and no/100 Dollars ($20,000,000) or the aggregate unpaid principal amount of all
Revolving Loans made by the Payee to the Borrower pursuant to the Credit
Agreement hereinafter referred to, whichever is less (the "Principal"). The
Borrower further promises to pay interest on the last day of each month during
the term hereof, commencing June 30, 2000, and on the last day of each month
thereafter and on May 31, 2003, on the amount of the Principal from time to time
outstanding during the period beginning on the date hereof and continuing until
this Note is paid in full at a rate or rates provided for in the Credit
Agreement. Interest payable hereunder shall be calculated on the basis of a
365day year and paid for the actual number of days for which due.
This Note is issued pursuant to and subject to the provisions of a
certain Credit Agreement dated as of May 31, 2000, between the Borrower and the
Bank (herein, as the same may from time to time be amended, referred to as the
"Credit Agreement"); but neither this reference to the Credit Agreement nor any
provisions thereof shall affect or impair the absolute and unconditional
obligation of the Borrower to pay the Principal of and Interest on this Note as
herein provided.
This Note is subject to prepayment, in whole or in part, as specified
in the Credit Agreement. In case a Default, as defined in the Credit Agreement,
shall occur and be continuing, this Note may become or may be declared to be due
and payable in the manner and with the effect provided in the Credit Agreement,
and the Borrower hereby agrees to pay all costs and expenses in connection
therewith, including reasonable attorney's fees, as provided in the Credit
Agreement.
The Borrower and all guarantors, endorsers and pledgors hereof hereby
waive presentment, demand, notice of dishonor, protest, and all other demands
and notices in connection with the delivery, acceptance and performance of this
Note.
This Note shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Virginia.
In Witness Whereof, the Borrower has caused its corporate name to be
signed by its duly authorized officer as of the day and year first above
written.
S&K FAMOUS BRANDS, INC.
By /s/ Robert E. Knowles
Title Executive Vice President
Chief Financial Officer
EXHIBIT B
TERM NOTE
$_____________ Richmond, Virginia
May 31, 2003
FOR VALUE RECEIVED, S&K FAMOUS BRANDS, INC., a Virginia corporation
(the "Borrower"), hereby promises to pay to the order of SunTrust Bank (the
"Payee" or the "Bank") at its main office, in Richmond, Virginia, in lawful
money of the United States, the principal of _______________ Dollars
($_______________) (the "Principal"), in fortyseven consecutive monthly
installments of principal of _____________________ Dollars ($_______________)
each, plus interest, commencing on June 30, 2003, and continuing on the last day
of each month thereafter and one final payment of principal of _____________
Dollars ($_______________) on May 31, 2007, when the entire unpaid Principal and
accrued interest thereon shall be paid in full. The Borrower hereby further
promises to pay interest from the date hereof on the amount of Principal from
time to time outstanding at a rate or rates as provided for in the Credit
Agreement. Interest shall be payable on the last day of each month during the
term hereof, commencing on June 30, 2003, and on the last day of the month
thereafter and on May 31, 2007. Interest shall continue to accrue on this Note
after maturity at the rate set forth above and shall then be payable on demand
of the holder of this Note. Interest payable hereunder shall be calculated on
the basis of a 365day year and paid for the actual number of days for which
due.
This Note is issued pursuant to and subject to the provisions of a
certain Credit Agreement dated as of May 31, 2000, between the Borrower and the
Payee (herein, as the same may from time to time be amended, referred to as the
"Credit Agreement"); but neither this reference to the Credit Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the Borrower to pay the Principal of and interest on this Note as
herein provided.
This Note is subject to prepayment, in whole or in part, as specified
in the Credit Agreement. In case a Default, as defined in the Credit Agreement,
shall occur and be continuing, this Note may become or may be declared to be due
and payable in the manner and with the effect provided in the Credit Agreement,
and the Borrower hereby agrees to pay all costs and expenses in connection
therewith, including reasonable attorney's fees, as provided in the Credit
Agreement.
The Borrower and all guarantors, endorsers and pledgors hereof hereby
waive presentment, demand, notice of dishonor, protest and all other demands and
notices in connection with the delivery, acceptance, performance and enforcement
of this Note.
This Note shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Virginia.
IN WITNESS WHEREOF, the Borrower has caused its corporate name to be
signed by its duly authorized officer as of the day and year first above
written.
S&K FAMOUS BRANDS, INC.
By ____________________________________
Title _________________________________
EXHIBIT D
LIST OF LIENS
1. Liens created in favor of the holder of the Bonds pursuant to the Bond
Purchase Agreement.