REVOLVING LINE OF CREDIT NOTE AND CREDIT AGREEMENT
EXHIBIT 10.1
MANUFACTURERS
AND TRADERS TRUST
COMPANY
REVOLVING
LINE OF CREDIT
NOTE
AND
CREDIT AGREEMENT
This
Note renews, increases, modifies and restates a note originally dated as of
August 19, 2005 executed by EMERGING VISION, INC. in favor of MANUFACTURERS
AND
TRADERS TRUST COMPANY (the “Original Note”) in the amount of $2,000,000.00 (the
“Original Loan”), OF WHICH THERE IS CURRENTLY OUTSTANDINGTHE PRINCIPAL AMOUNT
OF $350,000.00, which note is being renewed, increased and modified
hereby in the amount of $6,000,000.00, of which $350,000.00 is the current
balance outstanding.
BORROWER: EMERGING
VISION, INC.
PRINCIPAL: $6,000,000 Date:
As of August 7, 2007
PROMISE
TO PAY: The undersigned (the "Borrower"), for value received,
does hereby assume the Original Loan and all obligations under the Original
Note
in connection herewith and therewith, and does hereby promise to pay to the
order of MANUFACTURERS AND TRADERS TRUST COMPANY (the "Bank") at its offices
at
▇▇▇ ▇ & ▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at any of its branches, the sum
of SIX MILLION ($6,000,000) DOLLARS (the “Maximum Loan Amount”), or so much
hereof as shall be outstanding, plus interest thereon from the date hereof
as
set forth herein. Borrower hereby warrants, acknowledges and
represents that as of the date hereof there is currently outstanding under
the
terms of the Note the principal sum of Three Hundred Fifty Thousand and
00/100 ($350,000.00) DOLLARS, without offset, defense or
counterclaim.
RATE
AND PAYMENT: The Borrower shall pay said sum, or such lesser
amount as may then be the aggregate unpaid principal balance of all loans made
by the Bank to the Borrower hereunder, (each a "Loan" and collectively the
"Loans") as set forth herein.
Advances
to the Borrower hereunder shall be available on a revolving basis from the
date
hereof until August 1, 2009 (the “Revolving
Line Maturity Date”)
and shall be utilized by the Borrower to finance working capital needs and
acquisition of 1725758 Ontario Inc. d/b/a The Optical Group and assets of Corowl
Optical Credit Services, Inc. This Note shall mature on the Revolving
Line Maturity date, after which date no further Loans shall be available and
on
which date all outstanding principal, interest and/or related charges due to
the
Bank hereunder shall be due and payable.
RATE
AND PAYMENT ON ADVANCES UNDER THE REVOLVING CREDIT LOAN: The Borrower
promises to pay interest (computed on the basis of a 360 day year for actual
days elapsed) at said office on the unpaid principal amount hereof from time
to
time outstanding from the date hereof until the Revolving Line Maturity Date
at
a floating rate equal to two hundred seventy five (275) basis points in excess
of the “Effective
LIBOR Rate”. Each
change is the Effective LIBOR Rate shall effect a simultaneous and corresponding
change in the interest rate hereunder without notice to the
Borrower. Interest shall be payable monthly on the first day of each
month, commencing on the first such day to occur after the date hereof, and
upon
payment in full of the unpaid principal amount hereof.
The
Effective LIBOR Rate, as utilized herein, shall mean the rate for deposits
in
U.S. Dollars for a period of one month (the “Interest
Period”)
which appears on the Telerate page 3750 as of 11:00 a.m. London time on the
day
that is two London Banking Days preceding the first business day of each
calendar month. If such rate does not appear on the Telerate page
3750 the rate for that reset date shall be the London Interbank Offered Rate
for
one month as published in the "Money Rates" column of the Wall Street
Journal on the business day preceding the first business day of each
calendar month. Additional terms are set forth in the LIBOR
Rate Addendum attached hereto and made a part hereof.
DEFAULT
RATE: The Borrower further agrees that this Note shall bear
interest at any stated or accelerated maturity hereof at a rate of five (5%)
percent in excess of the highest rate hereinbefore provided for then in effect,
payable on demand. In no event shall the rate either before or after
the occurrence of any such default exceed the highest rate of interest, if
any,
permitted under applicable New York or Federal law.
If
any
payment is not made within ten (10) days of its respective due date as set
forth
herein, or if the entire balance becomes due and payable and is not paid, all
or
part of the amount due may be offset out of any account or other property which
the Borrower has at the Bank or any affiliate of the Bank without prior notice
or demand.
LATE
CHARGES: The Borrower will pay a charge of five (5%) percent of
the amount of any payment which is not made within five (5) days of its
respective due date, or, if applicable, which cannot be debited from its account
due to insufficient balance on the debit date.
ATTORNEYS
FEES: In the event the Bank retains counsel with respect to
enforcement of this Note or any other document or instrument given to the Bank,
the Borrower agrees to pay the Bank's reasonable attorneys fees (whether or
not
an action is commenced and whether or not in the court of original jurisdiction,
appellate court, bankruptcy court, or otherwise).
IN
CONSIDERATION OF THE GRANTING OF THE LOANS EVIDENCED BY THIS NOTE, THE BORROWER
HEREBY AGREES AS FOLLOWS:
REVOLVING
CREDIT COMMITMENT: The following shall apply to all loans made
hereunder:
(a) The
Loans evidenced by this Note are available in one or more advances during the
period which commences on the date hereof and ends on August 1, 2009 (the
"Credit Period") in an aggregate principal amount up to, but not exceeding
at
any time (and inclusive of any sums currently outstanding) the outstanding
principal sum of Six Million ($6,000,000) Dollars (the
"Commitment"). During the Credit Period, subject to the advance
limitations herein, the Borrower may use the Commitment by borrowing, prepaying
in whole or in part and reborrowing, on a revolving basis, all in accordance
with the terms and conditions hereof; provided, however, that each Loan or
prepayment be in a minimum amount of Twenty Five Thousand ($25,000)
Dollars;
(b) The
date and amount of each Loan and of each payment of principal shall be
maintained by the Bank in its books and records at the time of each Loan or
payment. All such notations shall be presumed to be correct and the
aggregate net unpaid amount of Loans set forth therein shall be presumed to
be
the principal balance hereof;
(c) Each
request for a Loan shall be subject to the satisfaction of the following
conditions precedent:
(i) The
Borrower shall have given the Bank notice of such request, setting forth the
amount of the Loan requested and the date thereof. Such notice may be
written or oral and shall be sufficient if received by 1 p.m. two Business
Days
prior to the date the Loan is requested. If the request is oral, it
shall be thereafter confirmed in writing delivered by the Borrower to the Bank
within twenty-four (24) hours.
(ii) No
Event of Default, or event which would be an Event of Default but for the giving
of notice or the passage of time or both, has occurred and is continuing; and
all of the representations and warranties made by the Borrower herein shall
be
true and correct on and as of the date of such request as if made on and as
of
such date.
(d) The
outstanding principal balance of the Loans shall at no time exceed the amount
of
the Commitment.
CONDITIONS
PRECEDENT:
(a) Prior
to funding the first Loan, the Borrower shall satisfy or shall have satisfied
the following conditions precedent including delivery to the Bank of the
following, which shall be acceptable in form and substance to the
Bank:
(i) An
executed copy of this Note;
(ii) A
first perfected security interest in all non-realty assets of the BORROWER,
a
first/second perfected security interest in all assets of COMBINE BUYING GROUP,
INC., a wholly owned subsidiary of Borrower (“Combine”), a first perfected
security interest in all assets of OG ACQUISITION, INC, a wholly owned
subsidiary of Borrower (“OG”), and 1725758 ONTARIO INC. d/b/a THE OPTICAL GROUP,
an entity purchased/to be purchased by OG (“Optical”) (the
"Collateral") pursuant, in part, to the general security agreements
(collectively, the "Security Agreement") to be evidenced and delivered in
connection herewith;
(iii) An
Assignment of Trademarks of the Borrower pursuant to the Assignment of
Trademarks (the "Assignment") to be evidenced and delivered in connection
herewith;
(iv) An
Assignment of Franchisee Notes of Borrower (the “Assignment of Franchisee
Notes”) to be evidenced and delivered in connection herewith;
(v) An
Assignment of Leases and Rents of Borrower (the “Assignment of Leases”) to be
evidenced and delivered in connection herewith;
(vi) A
Stock Pledge Agreement (the “Pledge Agreement”) and Irrevocable Stock Power
(“Stock Power”) pledging the shares of 1725758 Ontario Inc. (d/b/a The Optical
Group) acquired by OG Acquisition, Inc. to the Bank;
(vii) A
copy of the resolutions passed by the Borrower's and Company Guarantors’ Board
of Directors, Partners or Members, as the case may be, certified by its
Secretary or Assistant Secretary as being in full force and effect on the date
of this Agreement, authorizing the loan herein provided for or guaranty thereof,
as the case may be, the execution, delivery and performance of this Note and
any
other instrument or agreement required hereunder and containing a certificate
of
incumbency as to the person or persons authorized to execute and deliver the
same;
(viii) Continuing
Guaranties of All Liability for the Borrower from Combine, OG and Optical,
and
any other existing and future wholly owned subsidiaries of the Borrower
(collectively referred to as the “Guarantor” or “Guarantors”) on the Bank's
standard forms of Guaranty (the “Guaranty”);
(ix) A
copy of the Purchase Contract for Optical by OG;
(x) If
required by Lender, a favorable written opinion, of the
Borrower's
counsel (which counsel must be satisfactory to the Bank) with respect to the
matters set forth in the Representations and Warranties section hereof with
the
exceptions of subsections (g) and (h);
(xi) Establishment
of total banking relationship including deposit/operating accounts with the
Bank;
(xii) Insurance
Certificates covering all assets of Borrower and Guarantors of Borrower listing
the Bank as loss payee;
(xiii) Commitment
Fee in the amount of 1.0% of Loan Amount;
(xiv) All
other documents reasonably required by the Bank and/or its counsel in order
to
evidence and/or secure the Bank's position as set forth herein.
REPRESENTATIONS
AND WARRANTIES: The Borrower hereby represents and warrants to
the Bank that:
(a) The
Borrower and each Guarantor is duly organized, validly existing and in good
standing under the laws of the State of its formation and is qualified to do
business and in good standing under the laws of each state where its failure
to
so qualify would have a material adverse effect on their business, operations
or
properties;
(b) This
Note, the Guaranty, the Security Agreement and all other documents executed
and
delivered herewith have been duly authorized, executed and delivered and
constitute the valid and legally binding obligations of the Borrower and the
Guarantors, enforceable in accordance with their respective terms, to their
stated dollar amounts, including the granting to the Bank of a first perfected
security interest in the Collateral;
(c) The
execution and delivery of this Note, the Guaranty, the Security Agreement and
all other documents executed and delivered herewith and performance hereunder
and thereunder, will not violate any provision of law;
(d) There
are no actions or proceedings pending or in process before any
court or governmental authority, bureau or agency, with respect to or to the
best of their knowledge threatened against or affecting the Borrower, any
Guarantor or any Subsidiary, which if determined adversely would have a material
adverse effect on the business, the assets or the financial condition of the
Borrower, any Guarantor or any Subsidiary, except as specifically set
forth and described on Exhibit A annexed hereto. As used
herein, the term "Subsidiary" or "Subsidiaries" means any corporation or
corporations of which the Borrower alone, or the Borrower and/or one or more
of
its Subsidiaries, owns, directly or indirectly, at least a majority of the
securities having ordinary voting power for the election of
directors;
(e) The
Borrower and its subsidiaries and Guarantors are not, to the best of Borrower's
knowledge, in default under, or in violation of, any term of any agreement,
ordinance, resolution, decree, bond, note, indenture, order or judgment to
which
it is a party or by which it is bound, or by which any of the properties or
assets owned by or used in the conduct of their business is affected, which
default or violation may have a material adverse effect on their business,
assets or financial condition. The operations of the Borrower and its
subsidiaries and
Guarantors comply in all material respects with all laws, ordinances and
regulations applicable to them;
(f) The
Borrower and its subsidiaries and Guarantors are not a party to or bound by,
nor
are any of the properties or assets owned by them or used in the conduct of
their business affected by any agreement, ordinance, resolution, decree, bond,
note, indenture, order or judgment, or subject to any charter or other corporate
restriction, which materially and adversely affects their business, assets
or
financial condition;
(g) All
balance sheets, profit and loss statements and other financial information
heretofore furnished to the Bank are complete and present fairly the financial
condition of the Borrower and its Subsidiaries and Guarantors as at the dates
thereof and for the periods covered thereby, including contingent liabilities
of
every kind, which financial conditions has not materially adversely changed
since the date of the most recently dated balance sheet of the Borrower and/or
Guarantors heretofore furnished to the Bank;
(h) No
part of the proceeds of the loan which is evidenced by this Note will be used
directly or indirectly for the purpose of purchasing or carrying, or for payment
in full or in part of indebtedness which was incurred for the purpose of
purchasing or carrying, any margin stock as such term is defined in Sec. 221.3
of Regulation U of the Board of Governors of the Federal Reserve
System;
(i) The
Borrower and its Subsidiaries and Guarantors are, to the best of Borrower's
knowledge, in compliance in all material respects with the Employees Retirement
Income Security Act of 1974 ("ERISA") and all rules and regulations
thereunder. Neither the Borrower nor any of its Subsidiaries nor any
of its Company Guarantors has any unfunded vested liability under any type
of
plan described in Section 4021(a) of ERISA ("Pension Plan") and no reportable
event, as set forth in Section 4043(b) of ERISA, has occurred or is continuing
with respect to any Plan.
FINANCIAL
STATEMENTS: The Borrower shall deliver to the Bank:
(a) Annual
audited signed Financial Statements of the Borrower prepared by a Certified
Public Accountant (“CPA”) acceptable to the Bank within ninety (90) days after
the end of each fiscal year;
(b) Quarterly
10-Q Statement within sixty (60) of each quarter end;
(c) Quarterly,
the Borrower shall submit a Covenant Compliance Certificate in form and
substance satisfactory to the Lender together with the 10-Q Statements required
hereinabove;
(d) Semi-annual
Accounts Receivable and Franchisee Notes Receivable Aging Reports of the
Borrower within sixty (60) days of each semi-annual period end;
(e) Within
a reasonable time after a written request therefor, such other financial data
or
information as the Bank may reasonably request from time to time.
AFFIRMATIVE
COVENANTS: The Borrower will, and with respect to the agreements
set forth in subsections (a) through (f) hereof, will cause each Subsidiary
to:
(a) With
respect to its properties, assets and business, maintain insurance against
loss
or damage, to the extent that property, assets and businesses of similar
character are usually so insured by companies similarly situated and operating
like properties, assets or businesses with responsible insurance companies
satisfactory to the Bank, said insurance to be assigned to the Bank at
closing;
(b) Duly
pay and discharge all taxes or other claims which might become a lien upon
any
of its properties except to the extent that such items are being in good faith
appropriately contested;
(c) Maintain,
preserve and keep its properties in good repair, working order and condition,
and make all reasonable repairs, replacements and additions
thereto;
(d) Conduct
its business in substantially the same manner and in substantially the same
fields as such business is now carried on and conducted;
(e) Comply
with all statutes, rules and regulations and maintain its corporate
existence;
(f) Permit
the Bank to make or cause to be made, inspections and audits of any books,
records and papers of the Borrower and of any parent or subsidiary and each
endorser or guarantor hereof and to make extracts therefrom at all such
reasonable times and as often as the Bank may reasonably require;
(g) Immediately
give notice to the Bank that an Event of Default has occurred or that an event
which, with the giving of notice or lapse of time, or both, would constitute
an
Event of Default, has occurred and specifying the action which the Borrower
has
taken and proposes to take with respect thereto;
(h) In
addition to the aforementioned, the Borrower agrees that the following financial
covenants (“Financial
Covenants”)
are covenants upon which the Bank relies in the extension of the Loan which
Financial Covenants must be evidenced by the combined financial statements
of
the Borrower and the Guarantor(s) as required above, and that any violation
or
default under same shall constitute an event of default under the terms of
this
Note:
(1) Minimum
total net worth of $3,000,000 at all times. This covenant shall be
tested on a semi-annual basis;
(2) Minimum
Debt Service Coverage of 2.0 : 1, to be tested on a trailing four quarter
basis. For purposes hereof, Debt Service Coverage shall be defined as
EBITDA less dividends divided by the Current Portion of Long
Term Debt plus interest expense;
(3) Maximum
Funded Debt to EBITDA* as follows:
4.0
as of 9/30/07 and
12/31/07;
3.75
as of 3/31/08, 6/30/08 and
9/30/08;
3.5
as of 12/31/08 and all quarters
thereafter, to be tested quarterly on a trailing 12 month basis..
*Note: EBITDA
shall add back any non-cash expense associated
with
compensation and/or stock awards. Funded Debt shall
include
outstanding
balances under the M&T Revolving Line of Credit plus
related
party debt including the Combine seller note.
(i) In
addition to the aforementioned, the Borrower agrees that all future wholly
owned
subsidiaries shall provide a Continuing Guaranty of all Liability of Borrower
to
the Bank on the Bank’s standard form;
(j) In
addition to the aforementioned, the Borrower agrees that it shall transfer
its
entire banking relationship including all deposit/operating accounts to the
Bank
within thirty (30) days of closing;
(k) Immediately
give notice to the Bank that an Event of Default has occurred or that an event
which, with the giving of notice or lapse of time, or both, would constitute
an
Event of Default, has occurred under any FRANCHISE NOTE RECEIVABLE and
specifying the action which the Borrower has taken and proposes to take with
respect thereto.
NEGATIVE
COVENANTS: The Borrower and its subsidiaries will
not:
(a) Create,
incur, assume or suffer to exist any liability for borrowed money, in excess
of
One Hundred Thousand Dollars $100,000 except (i) indebtedness to the Bank;
(ii)
existing debt as reflected on the most recent balance sheet provided to the
Bank
and further incurred through the date of this Agreement, which further incurred
debt has been acknowledged by the Borrower to the Bank in writing prior to
the
execution hereof. The Borrower agrees to provide the Bank an
opportunity to finance any additional borrowing needs during the term of this
Note;
(b) make,
or in any way extend any advances or loans to officers, shareholders, or any
affiliates of the Borrower;
(c) make
or extend investments in other entities in excess of One Hundred Thousand
($100,000) Dollars;
(d) enter
into any merger or consolidation or liquidate, wind-up or dissolve itself or
sell, transfer or lease or otherwise dispose of all or any substantial part
of
its assets;
(e) lend
or advance money, credit or property to or invest in (by capital contribution,
loan, purchase or otherwise) any firm, corporation, or other person except
(i)
as otherwise permitted herein, (ii) investments in United States Government
obligations and certificates of deposit of any bank institution with combined
capital and surplus of at least Two Hundred Million ($200,000,000) Dollars,
(iii) trade credit, and (iv) security deposits;
(f) create,
assume or permit to exist, any mortgage, pledge, lien or encumbrance of or
upon
or security interest in, any of its property or assets now owned or hereafter
acquired except (i) mortgages, liens, pledges and security interests in favor
of
the Bank; (ii) other liens, charges and encumbrances incidental to the conduct
of its business or the ownership of its property and assets which were not
incurred in connection with the borrowing of money or the obtaining of advances
or credit and which do not materially impair the use thereof in the operation
of
its business; (iii) liens for taxes or other governmental charges which are
not
delinquent or which are being contested in good faith and for which a reserve
shall have been established in accordance with generally accepted accounting
principles; and (iv) liens granted to secure purchase money financing of
equipment, provided such liens are limited to the equipment financed; (v) liens
granted to refinance unencumbered equipment provided such liens are limited
to
the equipment refinanced and the incurrence of which will not cause a default
hereunder or in any other loan agreements or notes with the Bank;
(g) assume,
endorse, be or become liable for or guarantee the obligations of any person
to
any entity other than the Bank except by the endorsement of negotiable
instruments for deposit or collection in the ordinary course of
business;
(h) declare
or pay any dividends on its capital stock or purchase, redeem retire or
otherwise acquire any of its capital stock at any time outstanding in default
hereof; or
(i) (1) terminate
any Pension Plan so as to result in any material liability to The Pension
Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV
of
ERISA (the "PBCG"), (2) engage in or permit any person to engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975
of
the Internal Revenue Code of 1954, as amended) involving any Pension Plan which
would subject the Borrower to any material tax, penalty or other liability,
(3)
incur or suffer to exist any material "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, involving any Pension
Plan, or (4) allow or suffer to exist any event or condition, which presents
a
material risk of incurring a material liability to the PBCG by reason of
termination of any Pension Plan.
COLLATERAL
SECURITY:
(a) As
collateral security for the payment of any and all sums owing under this Note
and all other obligations, direct or contingent, joint, several or independent,
of the Borrower and of any Parent or Subsidiary and each endorser or Guarantor
hereof now or hereafter existing, due or to become due to, or held, or to be
held by, the Bank, whether created directly or acquired by assignment or
otherwise (all of such obligations, including this Note, are hereinafter called
the "Obligations"), the Borrower hereby grants to the Bank a lien on and
security interest in any and all deposits or other sums at any time credited
by
or due from the Bank to the Borrower, whether in regular or special depository
accounts or otherwise, and any and all monies, securities and other property
of
the Borrower, and the proceeds thereof, now or hereafter held or received by
or
in transit to the Bank from or for the Borrower, whether for safekeeping,
custody, pledge, transmission, collection or otherwise, and any such deposits,
sums, monies, securities and other property, may at any time after the
occurrence of any Event of Default be set-off, appropriated and applied by
the
Bank against any of the Obligations whether or not such Obligations are then
due
or are secured by any collateral, or, if they are so secured, whether or not
such collateral held by the Bank is considered to be adequate and with respect
to all collateral security the Bank shall have all the rights and remedies
available to it under the Uniform Commercial Code of New York and other
applicable law;
(b) This
Note is also secured by the Collateral;
(c) This
Note is also secured by the Assignment, the Assignment of Leases, the
Assignment of Franchisee Notes and the Pledge Agreement;
(d) Continuing
Guaranties of All Liability for the Borrower from Combine, OG and Optical and
all other existing and future wholly owned subsidiaries of Borrower (the
“Guarantor” or AGuarantors@)
on the Bank's standard form.
EVENTS
OF DEFAULT: If any one or more of the following events ("Events
of Default") shall occur, the entire unpaid balance of the principal of and
interest on the Obligations shall immediately become due and
payable:
(a) Failure
to pay any amount required by this Note on its respective due date or any other
obligation owed to the Bank by Borrower or any Guarantor within ten (10) days
of
default, or, if applicable, failure to have sufficient funds in its account
for
loan payments to be debited on the due date within ten (10) days after said
default;
(b) Failure
to perform or keep or abide by any term, covenant or condition contained in
this
Note, any Guaranty or any other document or instrument given to the Bank in
connection with this loan within thirty (30) days after written notice of said
default;
(c) The
filing of a bankruptcy proceeding, assignment for the benefit of creditors,
issuance of any execution, garnishment, or levy against, or the commencement
of
any proceeding for relief from indebtedness by or against the Borrower or any
Guarantor (provided, however, that in the event of an involuntary filing, the
Debtor shall have a period of sixty (60) days to obtain a dismissal of
same);
(d) The
happening of any event which, in the reasonable judgment of the Bank, materially
adversely affects the Borrower's ability to repay, the financial condition
of
the Guarantor(s), or the value of any collateral;
(e) If
any written material representation or statement made to the Bank by the
Borrower or Guarantor(s) is untrue when made;
(f) The
occurrence of a default under the Security Agreement, any Guaranty, or any
other
document or instrument given to the Bank in connection with this loan which
is
not cured within thirty (30) days after written notice of such
default;
(g) Dissolution
of Borrower or Guarantor;
(h) Failure
to provide the Bank with any financial information on reasonable request and
notice or permit an examination of books and records;
(i) In
the event that more than fifty percent (50%) of the shares of stock of the
Borrower are sold or in any way transferred without the prior written consent
of
the Bank;
(j) Failure
by Borrower to transfer its entire banking relationship including
deposit/operating accounts to the Bank within thirty (30) days of the date
hereof;
(k) Failure
of Borrower to deliver a continuing absolute guaranty of its obligations to
the
Bank from any future wholly owned subsidiary of Borrower with ten (10) days
of
acquisition of such subsidiary;
(l) Failure
of Borrower to give notice to the Bank on a timely basis of any default or
Event
of Default under a Franchisee Note.
MISCELLANEOUS:
(a) Only
those agreements, representations and warranties made expressly herein shall
survive the delivery of this Note. The Borrower waives trial by jury,
set-off and counterclaim of any nature or description in any litigation in
any
court with respect to, in connection with, or arising out of, this Note or
any
instrument or document delivered pursuant hereto or the validity, protection,
interpretation, collection or enforcement hereof;
(b) No
modification or waiver of or with respect to any provision of this Note, or
consent to any departure by the Borrower from any of the terms or conditions
hereof, shall in any event be effective unless it shall be in writing and signed
by the Borrower and the Bank, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrower in any case shall, of itself, entitle it
to
any other or further notice or demand in similar or other
circumstances;
(c) Each
and every right granted to the Bank hereunder or under any other document
delivered hereunder or in connection herewith, or allowed it by law or equity,
shall be cumulative and may be exercised from time to time. No
failure on the part of the Bank or the holder of this Note to exercise, and
no
delay in exercising, any right shall operate as a waiver thereof, nor shall
any
single or partial exercise of any right preclude any other or future exercise
thereof or the exercise of any other right;
(d) In
the event that this Note is placed in the hands of an attorney for collection
by
reason of any default hereunder, the Borrower agrees to pay reasonable
attorney's fees so incurred. The Borrower promises to pay all
reasonable expenses of any nature as soon as incurred whether in or out of
court
and whether incurred before or after this Note shall become due at its maturity
date or otherwise and reasonable costs which the Bank may reasonably deem
necessary or proper in connection with the satisfaction of the indebtedness
or
the administration, supervision, preservation, protection (including but not
limited to maintenance of adequate insurance) of or the realization upon the
collateral;
(e) The
Borrower hereby waives presentment, demand for payment, protest, notice of
protest, notice of dishonor, and any or all other notices or demands except
as
otherwise expressly provided for herein;
(f) All
accounting terms not otherwise defined in this Note shall have the meanings
ascribed thereto under generally accepted accounting principles;
(g) Delay
or failure of the Bank to exercise any of its rights under this Note shall
not
be deemed a waiver thereof. No waiver of any condition or requirement
shall operate as a waiver of any other or subsequent condition or
requirement. The Bank or any other holder of this Note need not
present it before requiring payment. This Note may not be modified or
terminated orally. This Note shall be governed by the laws of the
State of New York without regard to its conflicts of laws rules. The
Borrower irrevocably consents to the jurisdiction and venue of the New York
State Supreme Court, Suffolk County in any action concerning this
Note. This Note is binding upon the Borrower, its heirs, successors
and assigns;
(h) The
Borrower expressly acknowledges that no statements, agreements or
representations, whether oral or written, have been made by the Bank, or by
any
employee, agent or broker of the Bank with respect to the obligation or debt
evidenced by this Note. The Borrower further expressly warrants and
represents that (i) no oral commitment has been made by the Bank to extend
or
continue any credit to the Borrower or any party other than as expressly stated
herein or in those certain documents executed in connection herewith, (ii)
no
representation or agreement has been made by or with the Bank, or any employee,
agent or broker of the Bank, to forebear or refrain in any way from exercising
any right or remedy in its favor hereunder or otherwise unless expressly set
forth herein, and (iii) the Borrower and Guarantor(s) have not and will not
rely
on any commitment to extend or continue any credit, nor on any agreement to
forebear or refrain from exercising rights or remedies unless such commitment
or
agreement shall be in writing and duly executed by an authorized officer of
the
Bank;
(i) Notwithstanding
anything to the contrary contained in this Note, the rate of interest payable
on
this Note shall never exceed the maximum rate of interest permitted under
applicable law. If at any time the rate of interest otherwise
prescribed herein shall exceed such maximum rate, and such prescribed rate
is
thereafter below such maximum rate, the prescribed rate shall be increased
to
the maximum rate for such period of time as is required so that the total amount
of interest received by the Bank is that which would have been received by
the
Bank, except for the operation of the first sentence of this
Section.
NOTICES: All
notices, requests and other communications pursuant to this Note shall be in
writing, either by letter (delivered by hand or sent by certified mail, return
receipt requested) or telegram, addressed as follows:
(a) if
to the Borrower:
EMERGING
VISION,
INC.
▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇
Attention:
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
CEO
(b) if
to the Bank:
MANUFACTURERS
AND TRADERS TRUST COMPANY
▇▇▇
▇
& ▇ ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
Office of General Counsel
Any
notice, request or communication hereunder shall be deemed to have been given
when deposited in the mails, postage prepaid, or in the case of telegraphic
notice, when delivered to the telegraph company, addressed as
aforesaid. Any party may change the person or address to whom or
which the notices are to be given hereunder, but any such notice shall be
effective only when actually received by the party to whom it is
addressed.
[BALANCE
OF THIS PAGE INTENTIONALLY
LEFT BLANK]IN WITNESS WHEREOF, the Borrower has signed this Note the date and
year above written.
EMERGING
VISION,
INC.
By: /s/▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
CEO
Tax
ID
# ▇▇-▇▇▇▇▇▇▇
EXHIBIT
A
Pending/Current
Litigation:
In
1999,
Berenter Greenhouse and ▇▇▇▇▇▇▇, an advertising agency previously utilized
by
the Company, commenced an action, against the Company, in the New York State
Supreme Court, New York County, for amounts alleged to be due for advertising
and related fees. The amounts claimed by the plaintiff are in excess
of $200,000. In response to this action, the Company filed
counterclaims of approximately $500,000, based upon estimated overpayments
allegedly made by the Company pursuant to the agreement previously entered
into
between the parties. As of the date hereof, these proceedings were
still in the discovery stage. The Company has not recorded an accrual
for a loss in this action, as the Company does not believe it is probable that
the Company will be held liable in respect of plaintiff’s claims.
In
July
2001, the Company commenced an arbitration proceeding, in the Ontario Superior
Court of Justice, against Eye-Site, Inc. and Eye Site (Ontario), Ltd., as the
makers of two promissory notes (in the aggregate original principal amount
of
$600,000) made by one or more of the makers in favor of the Company, as well
as
against ▇▇▇▇▇▇▇▇ ▇▇▇, as the guarantor of the obligations of each maker under
each note. The notes were issued, by the makers, in connection with
the makers’ acquisition of a Master Franchise Agreement for the Province of
Ontario, Canada, as well as their purchase of the assets of, and a Sterling
Optical Center Franchise for, four of the Company’s retail optical stores then
located in Ontario, Canada. In response, the defendants
counterclaimed for damages, in the amount of $1,500,000, based upon, among
other
items, alleged misrepresentations made by representatives of the Company in
connection with these transactions. The Company believes that it has
a meritorious defense to each counterclaim. As of the date hereof,
these proceedings were in the discovery stage. The Company has not
recorded an accrual for probable losses in the event that the Company shall
be
held liable in respect of defendant’s counterclaims, as the Company does not
believe that any such loss is reasonably possible.
In
February 2002, ▇▇▇▇ ▇▇▇▇▇▇▇, LLP, the law firm previously retained by the
Company as its outside counsel, commenced an action in the New York State
Supreme Court seeking unpaid legal fees of approximately
$122,000. The Company answered the complaint in such action, and has
heard nothing since. The Company believes that it has a meritorious
defense to such claim. Although the Company has recorded an accrual
for probable losses in the event that the Company shall be held liable in
respect of plaintiff’s claims, the Company does not believe that any such loss
is reasonably possible, or, if there is a loss, the Company does not believe
that it is reasonably possible that such loss would exceed the amount
recorded.
On
May
20, 2003, Irondequoit Mall, LLC commenced an action against the Company and
Sterling Vision of Irondequoit, Inc. (“SVI”) alleging, among other things, that
the Company had breached its obligations under its guaranty of the lease for
the
former Sterling Optical store located in Rochester, New York. The
Company and SVI believe that they have a meritorious defense to such
action. As of the date hereof, these proceedings were in the
discovery stage. Although the Company has recorded an accrual for
probable losses in the event that the Company shall be held liable in respect
of
plaintiff’s claims, the Company does not believe that any such loss is
reasonably possible, or, if there is a loss, the Company does not believe that
it is reasonably possible that such loss would exceed the amount
recorded.
In
May
2006, the Company commenced an action against I and A Optical, Inc., ▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇, in the Supreme Court of the State of New York, County of
Nassau, seeking, among other things, monetary damages as a result of the
defendants' alleged breach of the terms of the Sterling Optical Center Franchise
Agreement (and related documents) with the Company to which they are
parties. The defendants then asserted counterclaims against the
Company, seeking, among other things, money damages arising under the Franchise
Agreement with the Company as a result of the Company's alleged violation of
such Franchise Agreement. The Company believes that is has a
meritorious defense to such claims. As of the date hereof, these
proceedings were in the discovery stage. The Company has not recorded
an accrual for a loss in this action, as the Company does not believe it is
probable that the Company will be held liable in respect of defendants'
counterclaims.
In
August
2006, ▇▇▇ ▇▇▇▇▇, a former employee of the Company, commenced an action against
the Company, in the United States District Court, Eastern District of New York,
alleging, among other things, that the Company violated Title VII of the Civil
Rights Act of 1964, as amended, 42 U.S.C. 2000e, et seq, the Pregnancy
Discrimination Act of 1978, and the New York Executive Law, Human Rights Law,
Section 290 et seq., and seeks an unspecified monetary sum as damages
resulting therefrom. The Company believes that it has a meritorious
defense to plaintiff’s claims in this action. As of the date hereof,
these proceedings were in the discovery stage. Although the Company
has recorded an accrual for probable losses in the event that the Company shall
be held liable in respect of plaintiff’s claims, the Company does not believe
that any such loss is reasonably possible, or, if there is a loss, the Company
does not believe that it is reasonably possible that such loss would exceed
the
amount recorded.
In
January 2007, PR Prince Georges Plaza, LLC commenced an action against the
Company, in the Circuit Court of the State of Maryland, Prince George’s County,
alleging, among other things, that the Company had breached its obligations
under its guaranty of the lease for the former Sterling Optical store located
at
The Mall at Prince Georges, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, Prince George’s
County, Maryland. The Company believes that it has a meritorious
defense to this action. The action is presently in the discovery
stage. Although the Company has recorded an accrual for probable
losses in the event that the Company shall be held liable in respect of the
plaintiff’s claims, the Company does not believe that any such loss is
reasonably possible, or, if there is a loss, the Company does not believe that
it is reasonably possible that such loss would exceed the amount
recorded.
In
January 2007, Laurelrising as Owner, LLC commenced an action against the
Company, in the Circuit Court of the State of Maryland, Prince Georges County,
alleging, among other things, that the Company had breached its obligations
under its lease for the former Sterling Optical store located at ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇. The Company believes that it has a
meritorious defense to this action. The defendant’s time to answer
the complaint has not expired as of the date hereof. Although the
Company has recorded an accrual for probable losses in the event that the
Company shall be held liable in respect of the plaintiff’s claims, the Company
does not believe that any such loss is reasonably possible, or, if there is
a
loss, the Company does not believe that it is reasonably possible that such
loss
would exceed the amount recorded.
In
January 2007, ▇▇▇▇ ▇▇▇▇▇, d/b/a Simon Properties commenced an action against
the
Company, in the District Court of the State of North Dakota, Cass County,
alleging, among other things, that the Company had breached its obligations
under its lease for the former Sterling Optical store located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇,
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇. In May 2007, this action was settled, the terms
of which included, among other things, the Company’s payment to the plaintiff of
approximately $85,000.
In
July,
2007, ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ commenced an action against the Company,
among others, in the Supreme Court of the State of New York, County of New
York,
Index Number 105637-07.
Although
the Company, where indicated herein, believes that it has a meritorious defense
to the claims asserted against it (and its affiliates), given the uncertain
outcomes generally associated with litigation, there can be no assurance that
the Company’s (and its affiliates’) defense of such claims will be
successful.
In
addition to the foregoing, in the ordinary course of business, the Company
is a
defendant in certain lawsuits alleging various claims incurred, certain of
which
claims are covered by various insurance policies, subject to certain deductible
amounts and maximum policy limits. In the opinion of management, the
resolution of these claims should not have a material adverse effect,
individually or in the aggregate, upon the Company’s business or financial
condition. Other than as set forth above, management believes that
there are no other legal proceedings, pending or threatened, to which the
Company is, or may be, a party, or to which any of its properties are or may
be
subject to, which, in the opinion of management, will have a material adverse
effect on the Company.
RIDER
B TO
NOTE
(LIBOR
Rider)
Borrower:
EMERGING VISION, INC.
Note
Original Principal Amount: $6,000,000.00
Note
Date: As of August 7, 2007
Definitions. As
used in this Rider, each capitalized term shall have the meaning specified
in
the Note and the following terms shall have the indicated meanings:
|
1)
|
“Adjustment
Date” shall be (i) if the one month interest period is selected,
the first calendar day of each month; (ii) if the two month interest
period is selected, the first calendar day of the second month following
the Base Month and the first calendar day of every second month
thereafter; (iii) if the three month interest period is selected,
the
first calendar day of the third month following the Base Month and
the
first calendar day of every third month thereafter; and (iv) if the
six
month interest period is selected, the first calendar day of the
sixth
month following the Base Month and the first calendar day of every
sixth
month thereafter.
|
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2)
|
“Applicable
Interest Rate” shall mean either the LIBOR Rate or the Base Rate,
as the case may be.
|
|
3)
|
“Base
Month” shall mean the first month following the month in which
the Set Date occurs. For example, if the Set Date is March 10,
then the “Base Month” would be
April.
|
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4)
|
“Base
Rate” shall mean the rate of interest announced by the Lender
as
its prime rate of interest plus one (1) percentage
point.
|
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5)
|
“Business
Day” shall mean any day of the year on which banking institutions
in New York, New York are not authorized or required by law or other
governmental action to close and, in connection with the LIBOR Rate,
on
which dealings are carried on in the London Interbank
market.
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6)
|
“LIBOR”
means the rate obtained by dividing (i) the one, two, three or six
month
interest period (as selected by Borrower) London Interbank Offered
Rate
for United States dollar deposits in the London Interbank Eurodollar
Market at approximately 11:00 a.m. London time (or as soon thereafter
as
practicable) as determined by the Lender from any broker, quoting
service
or commonly available source utilized by the Lender or its agents,
or, if
such yield or index is not so published or otherwise determinable,
a
comparable index chosen by the Lender or its agents in its sole
discretion, by (ii) a percentage equal to 100% minus the stated maximum
rate of all reserves required to be maintained against “Eurocurrency
Liabilities” as specified in Regulation D (or against any other category
of liabilities which includes deposits by reference or any category
of
extensions of credit or other assets which includes loans by a non-United
States office of a bank to United States residents) on such date
to any
member bank of the Federal Reserve
System.
|
|
7)
|
“LIBOR
Rate” shall mean LIBOR with the applicable interest period as
set
forth in the Note (one, two, three or six month) plus the applicable
percentage points above LIBOR as set forth in the
Note.
|
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8)
|
“Set
Date” shall mean as
follows:
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(i)
|
with
respect to Lender’s standard form Line of Credit or Mortgage Note, the
date of the Note.
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(ii)
|
with
respect to Lender’s standard form Mortgage Note (Construction to
Permanent), (x) the date the first advance is made to Borrower in
connection with the Construction Loan Period and (y) the Amortization
Commencement Date in connection with the Permanent Loan
Period.
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(iii)
|
with
respect to Lender’s standard form Mortgage Note (Construction), the date
the first advance is made to
Borrower.
|
LIBOR
Rate Adjustments. The LIBOR Rate shall be initially based on
the selected LIBOR (i.e., one, two, three or six month) in effect two
(2) Business Days before the Set Date, then adjusted on the first calendar
day
of the Base Month using the LIBOR in effect two (2) Business Days prior to
that
first calendar day of the Base Month. Thereafter, the LIBOR rate
shall be adjusted on the Adjustment Date based on the applicable LIBOR in effect
two (2) Business Days prior to the relative Adjustment Date. For example,
assuming a standard M&T Note is being used, a three month interest period is
selected and the loan closes on January 19, then: (i) the “Set Date”
would be January 19 and the initial LIBOR Rate would be based on the quote
for
the three month interest period LIBOR in effect on January 17 (assuming January
18 and 17 were Business Days) and would be changed on February 1 based on the
quote for the three month interest period LIBOR in effect on January 30
(assuming that January 31 and 30 were Business Days), (ii) February would be
the
“Base Month” and (iii) the LIBOR Rate would be adjusted on each “Adjustment
Date” which would start on May 1 using the quote for the three month interest
period LIBOR in effect on April 29 (assuming that April 30 and 29 were Business
Days), the next Adjustment Date would be August 1, etc.).
Inability
to Determine LIBOR Rates. If the Lender shall determine that
for any reason adequate and reasonable means do not exist for ascertaining
LIBOR
with respect to this Note, the Lender will give notice of such determination
to
Borrower. Thereafter, the Lender may not maintain the Applicable Rate
at the LIBOR Rate hereunder until the Lender revokes such notice in
writing. Upon such determination and notice, the Lender may convert
the Applicable Interest Rate from the LIBOR Rate to the Base Rate.
Increased
Cost. If the Lender shall determine that due to either (a)
the introduction of any change (other than any change by way of imposition
of or
increase in reserve requirements included in the calculation of LIBOR) in or
in
the interpretation of any requirement of law or (b) the compliance with any
guideline or request from any central bank or other governmental authority
(whether or not having the force of law), there shall be any increase in the
cost to the Lender of agreeing to make or making, funding or maintaining any
loan at the LIBOR Rate, Borrower shall be liable for, and shall from time to
time, upon demand therefor by the Lender and pay to the Lender such additional
amounts as are sufficient to compensate the Lender for such increased
costs.
Illegality. If
the Lender shall determine that the introduction of any law (statutory or
common), treaty, rule, regulation, guideline or determination of an arbitrator
or of a governmental authority or in the interpretation or administration
thereof, has made it unlawful, or that any central bank or other governmental
authority has asserted that it is unlawful for the Lender to make a loan at
the
LIBOR Rate then, on notice thereof by the Lender to Borrower, the Lender may
suspend maintaining this loan at the LIBOR Rate until the Lender shall have
notified Borrower that the circumstances giving rise to such determination
shall
no longer exist and the Lender may convert the Applicable Interest Rate from
the
LIBOR Rate to the Base Rate.
Conversion. The
Lender may, in its sole discretion, convert the Applicable Interest Rate from
the LIBOR Rate to the Base Rate upon the occurrence of an Event of
Default. The Applicable Rate shall automatically convert from the
LIBOR Rate to the Base Rate on the date Borrower commences, or has commenced
against it, any proceeding or request for relief under any bankruptcy,
insolvency or similar laws now or hereafter in effect in the United States
of
America or any state or territory thereof or any foreign jurisdiction or any
formal or informal proceeding for the dissolution or liquidation of, settlement
of claims against or winding up of affairs of Borrower.
Default
Rate. Notwithstanding anything to the contrary in the Note,
the default rate of interest which the Lender may charge under the Note shall
be
three (3) percentage points above the higher of the LIBOR Rate or the Base
Rate. Nothing herein shall be construed to be a waiver by the Lender
to have any Loan accrue interest at the default rate or other rights of the
Lender set forth in this Note.
Prepayment. If,
during the term of this Note, Borrower prepays any principal amount (in whole
or
in part) when the Applicable Rate is the LIBOR Rate prior to the end of a
selected interest period (other than regular installments of principal as set
forth in the Note), or there is a conversion of the Applicable Rate due to
an
Event of Default or otherwise before the end of a selected interest period,
then
Borrower shall be liable for and shall pay the Lender, on demand, the higher
of
$250.00 or the actual amount of the liabilities, expenses, costs and/or funding
losses that are a direct or indirect result of such prepayment, failure to
draw,
revocation or otherwise. The determination by the Lender of the
foregoing amount shall, in the absence of manifest error, be conclusive and
binding upon Borrower. Such amount shall be in addition to any
prepayment premium required under the Note.
EMERGING
VISION, INC.
By:
/s/▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, CEO