Exhibit 10.40
[Execution Copy]
LOAN AND SECURITY AGREEMENT
by and among
SUPREME INTERNATIONAL, INC.
▇▇▇▇▇▇▇, INC.
as Borrowers
and
▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL, INC.
PEI LICENSING, INC.
▇▇▇▇▇▇▇ APPAREL CORP.
BBI RETAIL, L.L.C.
SUPREME MUNSINGWEAR CANADA INC.
SUPREME REAL ESTATE I, LLC
SUPREME REAL ESTATE II, LLC
SUPREME REALTY LLC
▇▇▇▇▇ ▇▇▇▇▇ REAL ESTATE CORPORATION
as Guarantors
CONGRESS FINANCIAL CORPORATION (FLORIDA)
as Agent
and
THE LENDERS FROM TIME TO TIME PARTY HERETO
as Lenders
Dated: As of October 1, 2002
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS .............................................................................. 1
SECTION 2. CREDIT FACILITIES......................................................................... 31
2.1 Loans.................................................................................... 31
2.2 Letter of Credit Accommodations.......................................................... 32
2.3 Commitments.............................................................................. 36
SECTION 3. INTEREST AND FEES......................................................................... 36
3.1 Interest................................................................................. 36
3.2 Fees..................................................................................... 38
3.3 Changes in Laws and Increased Costs of Loans............................................. 39
SECTION 4. CONDITIONS PRECEDENT...................................................................... 41
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations................ 41
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.................... 43
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST................................................. 43
SECTION 6. COLLECTION AND ADMINISTRATION............................................................. 49
6.1 Borrowers' Loan Accounts................................................................. 49
6.2 Statements............................................................................... 49
6.3 Collection of Accounts................................................................... 49
6.4 Payments................................................................................. 50
6.5 Authorization to Make Loans.............................................................. 53
6.6 Use of Proceeds.......................................................................... 54
6.7 Appointment of Borrower Agent as Agent for Requesting Loans and Receipts of Loans
and Statements........................................................................... 54
6.8 Pro Rata Treatment....................................................................... 55
6.9 Sharing of Payments, Etc. ............................................................... 55
6.10 Settlement Procedures.................................................................... 56
6.11 Obligations Several; Independent Nature of Lenders' Rights............................... 58
SECTION 7. COLLATERAL REPORTING AND COVENANTS........................................................ 58
7.1 Collateral Reporting..................................................................... 58
7.2 Accounts Covenants....................................................................... 60
7.3 Inventory Covenants...................................................................... 61
7.4 Equipment and Real Property Covenants.................................................... 62
(i)
7.5 Power of Attorney........................................................................ 62
7.6 Right to Cure............................................................................ 63
7.7 Access to Premises....................................................................... 63
SECTION 8. REPRESENTATIONS AND WARRANTIES............................................................ 64
8.1 Corporate Existence, Power and Authority................................................. 64
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations................ 64
8.3 Financial Statements; No Material Adverse Change......................................... 65
8.4 Priority of Liens; Title to Properties................................................... 65
8.5 Tax Returns.............................................................................. 65
8.6 Litigation............................................................................... 66
8.7 Compliance with Other Agreements and Applicable Laws..................................... 66
8.8 Environmental Compliance................................................................. 66
8.9 Employee Benefits........................................................................ 67
8.10 Bank Accounts............................................................................ 68
8.11 Intellectual Property.................................................................... 68
8.12 Subsidiaries; Affiliates; Capitalization; Solvency....................................... 68
8.13 Labor Disputes........................................................................... 69
8.14 Restrictions on Subsidiaries............................................................. 69
8.15 Material Contracts....................................................................... 70
8.16 Payable Practices........................................................................ 70
8.17 Accuracy and Completeness of Information................................................. 70
8.18 Survival of Warranties; Cumulative....................................................... 70
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS........................................................ 70
9.1 Maintenance of Existence................................................................. 70
9.2 New Collateral Locations................................................................. 71
9.3 Compliance with Laws, Regulations, Etc. ................................................. 71
9.4 Payment of Taxes and Claims.............................................................. 72
9.5 Insurance................................................................................ 72
9.6 Financial Statements and Other Information............................................... 73
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. ................................ 75
9.8 Encumbrances............................................................................. 79
9.9 Indebtedness............................................................................. 82
9.10 Loans, Investments, Etc. ................................................................ 90
9.11 Dividends and Redemptions................................................................ 95
9.12 Transactions with Affiliates............................................................. 96
9.13 Compliance with ERISA.................................................................... 97
9.14 End of Fiscal Years; Fiscal Quarters..................................................... 97
9.15 Change in Business....................................................................... 97
9.16 Limitation of Restrictions Affecting Subsidiaries........................................ 97
(ii)
9.17 Minimum EBITDA .......................................................... 98
9.18 License Agreements ...................................................... 98
9.19 Costs and Expenses ...................................................... 99
9.20 Further Assurances ...................................................... 100
SECTION 10. EVENTS OF DEFAULT AND REMEDIES .......................................... 100
10.1 Events of Default ....................................................... 100
10.2 Remedies ................................................................ 102
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW ............................................. 106
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver ... 106
11.2 Waiver of Notices ....................................................... 107
11.3 Amendments and Waivers .................................................. 107
11.4 Waiver of Counterclaims ................................................. 109
11.5 Indemnification ......................................................... 109
SECTION 12. THE AGENT ............................................................... 110
12.1 Appointment, Powers and Immunities ...................................... 110
12.2 Reliance by Agent ....................................................... 111
12.3 Events of Default ....................................................... 111
12.4 Congress in its Individual Capacity ..................................... 112
12.5 Indemnification ......................................................... 112
12.6 Non-Reliance on Agent and Other Lenders ................................. 112
12.7 Failure to Act .......................................................... 113
12.8 Additional Loans ........................................................ 113
12.9 Concerning the Collateral and the Related Financing Agreements .......... 114
12.10 Field Audit, Examination Reports and other Information;
Disclaimer by Lenders ................................................... 114
12.11 Collateral Matters ...................................................... 114
12.12 Agency for Perfection ................................................... 116
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS ........................................ 116
13.1 Term .................................................................... 116
13.2 Interpretative Provisions ............................................... 118
13.3 Notices ................................................................. 119
13.4 Partial Invalidity ...................................................... 120
13.5 Confidentiality ......................................................... 120
13.6 Successors .............................................................. 121
13.7 Assignments; Participations ............................................. 121
13.8 Entire Agreement ........................................................ 123
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Form of Assignment and Acceptance
Exhibit B Information Certificate
Exhibit C Form of Borrowing Base Certificate
Exhibit D Form of Compliance Certificate
Schedule 1.43 Existing Lenders
Schedule 1.44 Existing Letters of Credit
Schedule 1.108 Senior Note Priority Collateral
Schedule 9.7(b) Existing Licenses of Trademarks Owned by Borrowers or
Guarantors to Third Parties
(iv)
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated September __, 2002 is entered
into by and among Supreme International, Inc., a Delaware corporation
("Supreme") and ▇▇▇▇▇▇▇, Inc., a Delaware corporation ("▇▇▇▇▇▇▇", and together
with Supreme, each individually a "Borrower" and collectively, "Borrowers"),
▇▇▇▇▇ ▇▇▇▇▇ International, Inc., a Florida corporation ("Parent"), PEI
Licensing, Inc., a Delaware corporation ("PEI Licensing"), ▇▇▇▇▇▇▇ Apparel
Corp., a Delaware corporation ("▇▇▇▇▇▇▇ Apparel"), BBI Retail, L.L.C., a Florida
limited liability company ("BBI"), Supreme I Real Estate, LLC, a Florida limited
liability company ("Supreme I"), Supreme II Real Estate, LLC, a Florida limited
liability company ("Supreme II") and Supreme Realty LLC, a Florida limited
liability company ("Supreme Realty"), Supreme Munsingwear Canada Inc., a Canada
corporation ("Supreme Canada"), ▇▇▇▇▇ ▇▇▇▇▇ Real Estate Corporation, a Delaware
corporation ("PE Real Estate", and together with Parent, PEI Licensing, ▇▇▇▇▇▇▇
Apparel, BBI, Supreme I, Supreme II, Supreme Realty and Supreme Canada, each
individually a "Guarantor" and collectively, "Guarantors"), the parties hereto
as lenders, whether by execution of this Agreement or an Assignment and
Acceptance (each individually, a "Lender" and collectively, "Lenders") and
Congress Financial Corporation (Florida) , a Florida corporation, in its
capacity as agent for Lenders (in such capacity, "Agent").
W I T N E S S E T H:
WHEREAS, Borrowers and Guarantors have requested that Agent and Lenders
enter into financing arrangements with Borrowers pursuant to which Lenders may
make Loans and provide other financial accommodations to Borrowers; and
WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such Loans and provide such financial accommodations to Borrowers on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and the other Financing Agreements;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
SECTION 1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean, as to each Borrower and Guarantor, all
present and future rights of such Borrower and Guarantor to payment of a
monetary obligation, whether or not earned by performance, which is not
evidenced by chattel paper or an instrument, (a) for property that has been or
is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for
services rendered or to be
rendered, (c) for a secondary obligation incurred or to be incurred, or (d)
arising out of the use of a credit or charge card or information contained on or
for use with the card.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next one-sixteenth (1/16) of one (1%) percent)
determined by dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes
hereof, "Reserve Percentage" shall mean the reserve percentage, expressed as a
decimal, prescribed by any United States or foreign banking authority for
determining the reserve requirement which is or would be applicable to deposits
of United States dollars in a non-United States or an international banking
office of Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar
Rate Loan made with the proceeds of such deposit, whether or not the Reference
Bank actually holds or has made any such deposits or Loans. The Adjusted
Eurodollar Rate shall be adjusted on and as of the effective day of any change
in the Reserve Percentage.
1.3 "Affiliate" shall mean, with respect to a specified Person, any
other Person which directly or indirectly, through one or more intermediaries,
controls or is controlled by or is under common control with such Person, and
without limiting the generality of the foregoing, includes (a) any Person which
beneficially owns or holds five (5%) percent or more of any class of Voting
Stock of such Person or other equity interests in such Person, (b) any Person of
which such Person beneficially owns or holds five (5%) percent or more of any
class of Voting Stock or in which such Person beneficially owns or holds five
(5%) percent or more of the equity interests and (c) any director or executive
officer of such Person. For the purposes of this definition, the term "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.
1.4 "Agent" shall mean Congress Financial Corporation (Florida), in its
capacity as agent on behalf of Lenders pursuant to the terms hereof and any
replacement or successor agent hereunder.
1.5 "Agent Payment Account" shall mean account no. 5000000030334 of
Agent at Wachovia Bank, National Association, or such other account of Agent as
Agent may from time to time designate to Borrower Agent as the Agent Payment
Account for purposes of this Agreement and the other Financing Agreements.
1.6 "Applicable Margin" means, at any time, as to the interest rate for
Prime Rate Loans and the interest rate for Eurodollar Rate Loans the applicable
percentage (on a per annum basis) set forth below if either (a) the sum of: (i)
the Quarterly Average Excess Availability for the immediately preceding fiscal
quarter plus (ii) the Excess Cash as of the last day of the immediately
preceding fiscal quarter is at or within the amounts indicated for such
percentage or (b) the Leverage Ratio as of the last day of the immediately
preceding fiscal quarter (which ratio for this purpose shall be calculated based
2
on the four (4) immediately preceding fiscal quarters) is at or within the
levels indicated for such percentage:
Quarterly Average Applicable Applicable
Excess Availability Prime Eurodollar
Tier plus Excess Cash Leverage Ratio Rate Margin Rate Margin
---- ---------------- -------------- ----------- -----------
1 $35,000,000 or more 2.00 to 1.00 or less 0% 2 %
2 Greater than or equal to Greater than 2.00 to 1.00 0% 2 1/4%
$25,000,000 and less but equal to or less than
than $35,000,000 3.00 to 1.00
3 Greater than or equal to Greater than 3.00 to 1.00 1/4% 2 1/2%
$15,000,000 and less but equal to or less than
than $25,000,000 4.00 to 1.00
4 Less than $15,000,000 Greater than 4.00 to 1.00 1/2% 2 3/4%
provided, that, (i) the Applicable Margin shall be calculated and established
once each fiscal quarter (commencing with the fiscal quarter ending January 31,
2003) and shall remain in effect until adjusted thereafter at the end of the
next quarter and (ii) the Applicable Margin shall be the lower percentage set
forth above based on (A) the sum of the Quarterly Average Excess Availability
and the Excess Cash as provided above or (B) the Leverage Ratio.
1.7 "Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender's interest hereunder in accordance with the provisions of Section 13.7
hereof.
1.8 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.9 "Borrower Agent" shall mean ▇▇▇▇▇ ▇▇▇▇▇ International, Inc., a
Florida corporation in its capacity as Borrower Agent on behalf of itself and
the other Borrowers pursuant to Section 6.7 hereof and it successors and assigns
in such capacity.
1.10 "Borrowing Base" shall mean, at any time, as to each Borrower, the
amount equal to:
(a) the lesser of:
(i) the amount equal to: (A) eighty-five (85%) percent of the
Eligible Accounts of such Borrower, plus (B) eighty-five (85%) percent of the
Eligible Factor Receivables of such Borrower, plus (C) the lesser of the
Inventory Loan Limit for such Borrower or the lesser of (1) sixty-
3
five (65%) percent multiplied by the Value of the Eligible
Inventory of such Borrower consisting of finished goods or (2) eighty-five (85%)
percent of the Net Recovery Percentage (such percentage of the Net Recovery
Percentage being sixty-two (62%) percent as of the date hereof) multiplied by
the Value of such Eligible Inventory, or
(ii) the Loan Limit for such Borrower,
minus
(b) Reserves attributable to such Borrower.
For purposes only of applying the Inventory Loan Limit, Agent may treat the then
undrawn amounts of outstanding Letter of Credit Accommodations for the purpose
of purchasing Eligible Inventory as Loans to the extent Agent is in effect
basing the issuance of the Letter of Credit Accommodations on the Value of the
Eligible Inventory being purchased with such Letter of Credit Accommodations. In
determining the actual amounts of such Letter of Credit Accommodations to be so
treated for purposes of the sublimit, the outstanding Loans and Reserves shall
be attributed first to any components of the lending formulas set forth above
that are not subject to such sublimit, before being attributed to the components
of the lending formulas subject to such sublimit.
1.11 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of Florida, or the State of North Carolina, and a day on
which Agent is open for the transaction of business, except that if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.12 "Capital Leases" shall mean, as applied to any Person, any lease of
(or any agreement conveying the right to use) any property (whether real,
personal or mixed) by such Person as lessee which in accordance with GAAP, is
required to be reflected as a liability on the balance sheet of such Person.
1.13 "Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's capital stock or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
1.14 "Cash Equivalents" shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of ninety (90) days or less issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith and credit of the United
States of America is pledged in support thereof; (b) certificates of deposit or
bankers'
4
acceptances with a maturity of ninety (90) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than
$250,000,000; (c) commercial paper (including variable rate demand notes) with a
maturity of ninety (90) days or less issued by a corporation (except an
Affiliate of any Borrower or Guarantor) organized under the laws of any State of
the United States of America or the District of Columbia and rated at least A-1
by Standard & Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies,
Inc. or at least P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.; (d) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in clause (a) above entered into with any
financial institution having combined capital and surplus and undivided profits
of not less than $250,000,000; (e) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by any governmental agency
thereof and backed by the full faith and credit of the United States of America,
in each case maturing within ninety (90) days or less from the date of
acquisition; provided, that, the terms of such agreements comply with the
guidelines set forth in the Federal Financial Agreements of Depository
Institutions with Securities Dealers and Others, as adopted by the Comptroller
of the Currency on October 31, 1985; and (f) investments in money market funds
and mutual funds which invest substantially all of their assets in securities of
the types described in clauses (a) through (e) above.
1.15 "Change of Control" shall mean (a) the transfer (in one transaction
or a series of transactions) of all or substantially all of the assets of any
Borrower or Guarantor to any Person or group (as such term is used in Section
13(d)(3) of the Exchange Act), other than as permitted in Section 9.7 hereof;
(b) the liquidation or dissolution of any Borrower or Guarantor or the adoption
of a plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), except for one or
more Permitted Holders, of beneficial ownership, directly or indirectly, of more
than thirty-five (35%) percent of the voting power of the total outstanding
Voting Stock of Parent and either (i) the Permitted Holders beneficially own,
directly or indirectly, in the aggregate, voting stock of Parent that represents
a lesser percentage of the aggregate voting power of all classes of the voting
stock of Parent, voting together as a single class, than such other person or
group and are not entitled to (by voting power, contract or otherwise) to elect
directors of Parent having a majority of the total voting power of the Board of
Directors of Parent or (ii) such other person or group is entitled to elect
directors of Parent having a majority of the total voting power of the Board of
Directors of Parent; (d) during any period of two (2) consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Parent (together with any new directors whose election by the
Board of Directors of Parent, or whose nomination for election by the
stockholders of such Borrower or Guarantor, as the case may be, was approved by
a vote of at least sixty-six and two-thirds (66 2/3%) percent of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the Parent
then still in office; (e) the failure of Parent to own directly or indirectly
one hundred (100%) percent of the voting power of the total outstanding Voting
Stock of any other
5
Borrower or Obligor; or (f) any "Change of Control" as defined in the Senior
Note Indenture or the Subordinated Note Indenture.
1.16 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.17 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.18 "Collateral Access Agreement" shall mean an agreement in writing, in
form and substance satisfactory to Agent, from any lessor of premises to any
Borrower or Guarantor, or any other person to whom any Collateral is consigned
or who has custody, control or possession of any such Collateral or is otherwise
the owner or operator of any premises on which any of such Collateral is
located, pursuant to which such lessor, consignee or other person, inter alia,
acknowledges the first priority security interest of Agent in such Collateral,
agrees to waive any and all claims such lessor, consignee or other person may,
at any time, have against such Collateral, whether for processing, storage or
otherwise, and agrees to permit Agent access to, and the right to remain on, the
premises of such lessor, consignee or other person so as to exercise Agent's
rights and remedies and otherwise deal with such Collateral and in the case of
any consignee or other person who at any time has custody, control or possession
of any Collateral, acknowledges that it holds and will hold possession of the
Collateral for the benefit of Agent and Lenders and agrees to follow all
instructions of Agent with respect thereto.
1.19 "Commitment" shall mean, at any time, as to each Lender, the
principal amount set forth below such Lender's signature on the signatures pages
hereto designated as the Commitment or on Schedule 1 to the Assignment and
Acceptance Agreement pursuant to which such Lender became a Lender hereunder in
accordance with the provisions of Section 13.7 hereof, as the same may be
adjusted from time to time in accordance with the terms hereof; sometimes being
collectively referred to herein as "Commitments".
1.20 "Congress" shall mean Congress Financial Corporation (Florida), a
Florida corporation, in its individual capacity, and its successors and assigns.
1.21 "Consolidated Net Income" shall mean, with respect to any Person for
any period, the aggregate of the net income (loss) of such Person and its
Subsidiaries, on a consolidated basis, for such period (excluding to the extent
included therein any extraordinary or non-recurring gains and extraordinary
non-cash charges, including impairment charges to property, plant and equipment
or goodwill and non-cash employee stock option expenses) after deducting all
charges which should be deducted before arriving at the net income (loss) for
such period and after deducting the Provision for Taxes for such period, all as
determined in accordance with GAAP; provided, that, (a) the net income of any
Person that is not a wholly-owned Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid or payable to such Person or a wholly-owned
Subsidiary of such Person; (b) except to the extent included
6
pursuant to the foregoing clause, the net income of any Person accrued prior to
the date it becomes a wholly-owned Subsidiary of such Person or is merged into
or consolidated with such Person or any of its wholly-owned Subsidiaries or that
Person's assets are acquired by such Person or by any of its wholly-owned
Subsidiaries shall be excluded; and (c) the effect of any change in accounting
principles adopted by such Person or its Subsidiaries after the date hereof
shall be excluded. For the purposes of this definition, net income excludes any
gain and non-cash loss (but not any cash loss) together with any related
Provision for Taxes for such gain and non-cash loss (but not any cash loss)
realized upon the sale or other disposition of any assets that are not sold in
the ordinary course of business (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or of any capital stock of such
Person or a Subsidiary of such Person and any net income realized as a result of
changes in accounting principles or the application thereof to such Person.
1.22 "Credit Facility" shall mean the Loans and Letter of Credit
Accommodations provided to or for the benefit of any Borrower pursuant to
Sections 2.1 and 2.2 hereof.
1.23 "Currency Exchange Agreements" shall mean, collectively, any spot or
forward foreign exchange agreements and currency swap, currency option or other
similar financial agreements or arrangements entered into by any Borrower or
Guarantor designed to protect against or manage exposure to fluctuations in
foreign currency exchange rates; sometimes being referred to herein individually
as a "Currency Exchange Agreement".
1.24 "Default" shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
1.25 "Defaulting Lender" shall have the meaning set forth in Section 6.10
hereof.
1.26 "Deposit Account Control Agreement" shall mean an agreement in
writing, in form and substance reasonably satisfactory to Agent, by and among
Agent, any Borrower or any Guarantor with a deposit account at any bank and the
bank at which such deposit account is at any time maintained which provides that
such bank will comply with instructions originated by Agent directing
disposition of the funds in the deposit account without further consent by such
Borrower or Guarantor and such other terms and conditions as Agent may
reasonably require, including as to any such agreement with respect to any
Blocked Account, providing that all items received or deposited in the Blocked
Accounts are the property of Agent, that the bank has no lien upon, or right to
setoff against, the Blocked Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis to the
Agent Payment Account all funds received or deposited into the Blocked Accounts.
1.27 "EBITDA" shall mean, as to any Person, with respect to any period,
an amount equal to: (a) the Consolidated Net Income of such Person for such
period, plus (b) depreciation and amortization for such period (to the extent
deducted in the computation of Consolidated Net Income of such Person), all in
accordance with GAAP, plus (c) Interest Expense for such period (to the extent
7
deducted in the computation of Consolidated Net Income of such Person), plus (d)
the Provision of Taxes for such period (to the extent deducted in the
computation of Consolidated Net Income of such Person).
1.28 "Eligible Accounts" shall mean, as to each Borrower, Accounts
created by such Borrower which are and continue to be acceptable to Agent based
on the criteria set forth below. In general, Accounts shall be Eligible Accounts
of a Borrower if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by such Borrower or rendition of services by such Borrower in
the ordinary course of its business which transactions are completed in
accordance with the terms and provisions contained in any documents related
thereto;
(b) such Accounts are not unpaid more than the earlier of sixty
(60) days after the original due date for them or one hundred twenty (120) days
after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(b) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect
to such Accounts is located in the United States of America or Canada (provided,
that, at any time promptly upon Agent's request, such Borrower shall execute and
deliver, or cause to be executed and delivered, such other agreements, documents
and instruments as may be required by Agent to perfect the security interests of
Agent in those Accounts of an account debtor with its chief executive office or
principal place of business in Canada in accordance with the applicable laws of
the Province of Canada in which such chief executive office or principal place
of business is located and take or cause to be taken such other and further
actions as Agent may request to enable Agent as secured party with respect
thereto to collect such Accounts under the applicable Federal or Provincial laws
of Canada) or, at Agent's option, if the chief executive office and principal
place of business of the account debtor with respect to such Accounts is located
other than in the United States of America or Canada, then if either: (i) the
account debtor has delivered to such Borrower an irrevocable letter of credit
issued or confirmed by a bank satisfactory to Agent and payable only in the
United States of America and in U.S. dollars, sufficient to cover such Account,
in form and substance satisfactory to Agent and if required by Agent, the
original of such letter of credit has been delivered to Agent or Agent's agent
and the issuer thereof, and such Borrower has complied with the terms of Section
5.2(f) hereof with respect to the assignment of the proceeds of such letter of
credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent
may specify, or (ii) such Account is subject to credit insurance payable to
Agent issued by an
8
insurer and on terms and in an amount acceptable to Agent, or
(iii) such Account is otherwise acceptable in all respects to Agent (subject to
such lending formula with respect thereto as Agent may determine);
(f) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇ (such that
the obligation of the account debtors with respect to such Accounts is
conditioned upon such Borrower's satisfactory completion of any further
performance under the agreement giving rise thereto), ▇▇▇▇ and hold invoices or
retainage invoices, except as to ▇▇▇▇ and hold invoices, if Agent shall have
received an agreement in writing from the account debtor, in form and substance
satisfactory to Agent, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to any right of setoff or recoupment
against such Accounts (but the portion of the Accounts of such account debtor in
excess of the amount at any time and from time to time owed by such Borrower to
such account debtor or claimed owed by such account debtor may be deemed
Eligible Accounts),
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectibility of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Agent and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted under this Agreement that are subject and subordinate to the security
interests of Agent pursuant to an intercreditor agreement in form and substance
satisfactory to Agent between the holder of such security interest or lien and
Agent;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee, agent or
other Affiliate of any Borrower or Guarantor;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, except that if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof such Accounts may be
Eligible Accounts so long as upon Agent's request at any time that a Default or
Event of Default exists or has occurred or the aggregate amount of such Accounts
outstanding exceed $1,000,000 or the aggregate amount of the Excess Availability
of Borrowers is less than $5,000,000, the Federal Assignment of Claims Act of
1940, as amended or any similar State or local law, if applicable, has been
complied with in a manner satisfactory to Agent;
9
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition (including, without limitation, any bankruptcy, dissolution,
liquidation, reorganization or similar proceeding);
(m) such Accounts are not evidenced by or arising under any
instrument or chattel paper and do not arise in connection with royalties or
other payments with respect to the licensing or grant of a right to use any
Intellectual Property or do not constitute Accounts that have been sold or
assigned to any Factor or constitute Factor Receivables or any other amounts
payable by any Factor to such Borrower;
(n) the aggregate amount of such Accounts owing by a single
account debtor (other than Wal-Mart, Kohls, Mervyns, ▇.▇. ▇▇▇▇▇▇, Target or
Sears ▇▇▇▇▇▇▇ & Co.) do not constitute more than ten (10%) percent of the
aggregate amount of all otherwise Eligible Accounts and such Accounts owing by
Wal-Mart, Kohl, and Mervyns in each case do not constitute more than twenty-five
(25%) percent of the aggregate amount of all otherwise Eligible Accounts and
such Accounts owing by each of ▇.▇. Penney, Target and Sears ▇▇▇▇▇▇▇ & Co. do
not in each case constitute more than twenty (20%) percent of the aggregate
amount of all otherwise Eligible Accounts (but the portion of the Accounts not
in excess of the applicable percentages may be deemed Eligible Accounts),
provided, that, in the event that the aggregate amount of such Accounts owing by
a single account debtor that is a nationally recognized retailer (other than
those mentioned above) and whose short term commercial paper rating is at least
A or higher by ▇▇▇▇▇'▇ Investors Service, Inc. or A-3 or higher by Standard &
Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or whose
long term unsecured debt rating is at least A or higher by Standard & Poor's
Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or ▇▇▇▇▇'▇
Investors Service, Inc., then as to the Accounts of such nationally recognized
retailer, such percentage shall be increased to fifteen (15%) percent;
(o) such Accounts are not owed by an account debtor who has
Accounts unpaid more than the lesser of sixty (60) days after the original due
date for them or one hundred twenty (120) days after the original invoice date
for them which constitute more than fifty (50%) percent of the total Accounts of
such account debtor;
(p) the account debtor is not located in a state requiring the
filing of a Notice of Business Activities Report or similar report in order to
permit such Borrower to seek judicial enforcement in such State of payment of
such Account, unless such Borrower has qualified to do business in such state or
has filed a Notice of Business Activities Report or equivalent report for the
then current year or such failure to file and inability to seek judicial
enforcement is capable of being remedied without any material delay or material
cost;
(q) such Accounts are owed by account debtors whose total
indebtedness to such Borrower does not exceed the credit limit with respect to
such account debtors as determined by such Borrower from time to time, to the
extent such credit limit as to any account debtor is established
10
consistent with the current practices of such Borrower as of the date hereof and
to the extent such credit limits are established by such Borrower consistent
with such practices, such credit limit is acceptable to Agent (but the portion
of the Accounts not in excess of such credit limit may be deemed Eligible
Accounts); and
(r) such Accounts are owed by account debtors reasonably deemed
creditworthy at all times by Agent.
The criteria for Eligible Accounts set forth above may only be changed and any
new criteria for Eligible Accounts may only be established by Agent in good
faith based on either: (i) an event, condition or other circumstance arising
after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely affect
the Accounts in the good faith determination of Agent. Any Accounts which are
not Eligible Accounts shall nevertheless be part of the Collateral.
1.29 "Eligible Factor Receivables" shall mean, as to each Borrower,
Factor Receivables arising from the sale of Accounts by such Borrower to a
Factor pursuant to and in accordance with the terms and conditions of the
Factoring Agreements of such Borrower with such Factor, which are and continue
to be acceptable to Agent based on the criteria set forth below, less any
charges, commissions, fees, chargebacks, deductions, setoffs and other amounts
payable to such Factor; provided, that, regardless of the aggregate amount of
Factor Receivables or Receivables that might satisfy the criteria so as to
constitute Eligible Factor Receivables, in no event shall the aggregate amount
of the Factor Receivables that constitute Eligible Factor Receivables be deemed
to be more than $5,000,000 at any time. In general, subject to such limitation,
Factor Receivables shall be Eligible Factor Receivables of a Borrower if:
(a) the Accounts of such Borrower so sold to the Factor giving
rise to such Factor Receivable have been approved by such Factor for its own
credit risk and the sale of goods giving rise to such Accounts so sold have been
approved and accepted by such Factor in accordance with the terms and conditions
of the applicable Factoring Agreements (and such Accounts do not constitute
"client risk" Accounts under the terms of the arrangements of such Borrower with
such Factor);
(b) such Factor Receivable has been validly assigned by such
Borrower to Agent and is payable to Agent pursuant to the Factor Assignment
Agreement with the Factor obligated to pay such Factor Receivable;
(c) Agent shall have received a Factor Assignment Agreement duly
authorized, executed and delivered by the Factor obligated in respect of such
Factor Receivable and such Factor Assignment Agreement shall be in full force
and effect and such Factor shall be in compliance in all respects with the terms
thereof;
11
(d) such Factor Receivable is not unpaid after the date specified
for payment under the terms of the Factoring Agreements applicable thereto;
(e) such Factor Receivable is subject to the first priority,
valid and perfected security interest of Agent and is not subject to any other
security interest, pledge, lien, claim or other encumbrance except those
permitted under this Agreement that are subject and subordinate to the security
interests of Agent pursuant to an intercreditor agreement in form and substance
satisfactory to Agent between the holder of such security interest or lien and
Agent;
(f) the Factoring Agreements of such Borrower with the Factor
obligated on such Factor Receivable shall be in full force and effect and each
party to the Factoring Agreements with the Factor obligated on such Factor
Receivable shall be in compliance with the terms and conditions thereof and no
breach of such terms or default or event of default thereunder shall exist or
have occurred;
(g) the Factor obligated in respect of such Factor Receivable
shall not have sent any notice of default or of the failure of such Borrower to
comply with any of the terms of the applicable Factoring Agreements or otherwise
notified any Borrower or Guarantor of the intention of such Factor to cease or
suspend payments to such Borrower in respect of the Factor Receivable;
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Factor Receivable or
delay payment thereunder;
(i) the Accounts of such Borrower sold giving rise to such Factor
Receivable satisfy all of the conditions for the purchase thereof by the Factor
obligated thereon and the approval and acceptance of such sale by such Factor in
accordance with the terms of the applicable Factoring Agreements and shall not
be subject to any chargeback or other right of such Factor to reassign such
Account to such Borrower (whether or not such Factor exercises such right) or
obligation of such Borrower to pay the amount of such Account to such Factor,
whether because the goods sold giving rise to such Account have been rejected or
returned by the account debtor owing such Account or otherwise;
(j) the Accounts sold giving rise to such Factor Receivable are
not unpaid more than the earlier of sixty (60) days after the original due date
for them or ninety (90) days after the date of the original invoice for them;
(k) such Accounts sold giving rise to such Factor Receivable
comply with the terms and conditions contained in Section 7.2(b) of this
Agreement.
The criteria for Eligible Factor Receivables set forth above may only be changed
and any new criteria for Eligible Factor Receivables may only be established by
Agent in good faith based on either: (i) an event, condition or other
circumstance arising after the date hereof, or (ii) an event, condition or other
circumstance existing on the date hereof to the extent Agent has no written
notice thereof from a
12
Borrower prior to the date hereof, in either case under clause (i) or (ii) which
adversely affects or could reasonably be expected to adversely affect the Factor
Receivables in the good faith determination of Agent. Any Factor Receivables
which are not Eligible Factor Receivables shall nevertheless be part of the
Collateral.
1.30 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower consisting of finished goods held for resale in the ordinary
course of the business of such Borrower, in each case which are acceptable to
Agent based on the criteria set forth below. In general, Eligible Inventory
shall not include (a) raw materials; (b) work-in-process; (c) components which
are not part of finished goods; (d) spare parts for equipment; (e) packaging and
shipping materials; (f) supplies used or consumed in such Borrower's business;
(g) Inventory at premises other than those owned or leased and controlled by any
Borrower; provided, that, (i) as to locations which are leased by a Borrower, if
Agent shall not have received a Collateral Access Agreement from the owner and
lessor with respect to such location, duly authorized, executed and delivered by
such owner and lessor (or Agent shall determine to accept a Collateral Access
Agreement that does not include all required provisions or provisions in the
form otherwise required by Agent), Agent may, at its option, establish such
Reserves in respect of amounts at any time due or to become due to the owner and
lessor thereof as Agent shall determine; (h) Inventory subject to a security
interest or lien in favor of any Person except those permitted under this
Agreement that are subject and subordinate to the security interests of Agent
pursuant to an intercreditor agreement in form and substance satisfactory to
Agent between the holder of such security interest or lien and Agent; (i) ▇▇▇▇
and hold goods; (j) obsolete Inventory; (k) Inventory which is not subject to
the first priority, valid and perfected security interest of Agent; (l) returned
inventory (other than returned inventory deemed salable that is to be resold by
such Borrower and does not constitute Factor Priority Collateral), damaged
inventory and/or defective Inventory; (m) Inventory purchased or sold on
consignment and (n) Inventory located outside the United States of America or
Canada. The criteria for Eligible Inventory set forth above may only be changed
and any new criteria for Eligible Inventory may only be established by Agent in
good faith based on either: (i) an event, condition or other circumstance
arising after the date hereof, or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely affect
the Inventory in the good faith determination of Agent. Any Inventory which is
not Eligible Inventory shall nevertheless be part of the Collateral.
1.31 "Eligible Transferee" shall mean (a) any Lender; (b) the parent
company of any Lender and/or any Affiliate of such Lender which is at least
fifty (50%) percent owned by such Lender or its parent company; (c) any person
(whether a corporation, partnership, trust or otherwise) that is engaged in the
business of making, purchasing, holding or otherwise investing in bank loans and
similar extensions of credit in the ordinary course of its business and is
administered or managed by a Lender or with respect to any Lender that is a fund
which invests in bank loans and similar extensions of credit, any other fund
that invests in bank loans and similar extensions of credit and is managed by
the same investment advisor as such Lender or by an Affiliate of such investment
advisor, and in each case is approved by Agent; and (d) any other commercial
bank, financial institution or "accredited investor" (as
13
defined in Regulation D under the Securities Act of 1933) approved by Agent,
provided, that, (i) neither any Borrower nor any Guarantor or any Affiliate of
any Borrower or Guarantor shall qualify as an Eligible Transferee and (ii) no
Person to whom any Indebtedness which is in any way subordinated in right of
payment to any other Indebtedness of any Borrower or Guarantor shall qualify as
an Eligible Transferee, except as Agent may otherwise specifically agree.
1.32 "Environmental Laws" shall mean all foreign, Federal, State and
local laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between any Borrower or
Guarantor and any Governmental Authority, (a) relating to pollution and the
protection, preservation or restoration of the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, (b) relating to the exposure to, or the
use, storage, recycling, treatment, generation, manufacture, processing,
distribution, transportation, handling, labeling, production, release or
disposal, or threatened release, of Hazardous Materials, or (c) relating to all
laws with regard to recordkeeping, notification, disclosure and reporting
requirements respecting Hazardous Materials. The term "Environmental Laws"
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state counterparts to such laws and (iii) any
common law or equitable doctrine that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Materials.
1.33 "Equipment" shall mean, as to each Borrower and Guarantor, all of
such Borrower's and Guarantor's now owned and hereafter acquired equipment,
wherever located, including machinery, data processing and computer equipment
(whether owned or licensed and including embedded software), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.34 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, together with all rules, regulations and interpretations thereunder or
related thereto.
1.35 "ERISA Affiliate" shall mean any person required to be aggregated
with any Borrower, any Guarantor or any of its or their respective Subsidiaries
under Sections 414(b), 414(c), 414(m) or 414(o) of the Code.
1.36 "ERISA Event" shall mean (a) any "reportable event", as defined in
Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment
14
to a Plan that would require the provision of security pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect
to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of
the Code or Section 302 of ERISA), whether or not waived; (d) the filing
pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (e) the
occurrence of a "prohibited transaction" with respect to which any Borrower,
Guarantor or any of its or their respective Subsidiaries is a "disqualified
person" (within the meaning of Section 4975 of the Code) or with respect to
which any Borrower, Guarantor or any of its or their respective Subsidiaries
could otherwise be liable; (f) a complete or partial withdrawal by any Borrower,
Guarantor or any ERISA Affiliate from a Multiemployer Plan or a cessation of
operations which is treated as such a withdrawal or notification that a
Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to
terminate, the treatment of a Plan amendment as a termination under Section 4041
or 4041A of ERISA, or the commencement of proceedings by the Pension Benefit
Guaranty Corporation to terminate a Plan; (h) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan; (i) the
imposition of any liability under Title IV of ERISA, other than the Pension
Benefit Guaranty Corporation premiums due but not delinquent under Section 4007
of ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of
$1,000,000 and (j) any other event or condition with respect to a Plan including
any Plan subject to Title IV of ERISA maintained, or contributed to, by any
ERISA Affiliate that could reasonably be expected to result in liability of any
Borrower in excess of $1,000,000.
1.37 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by a Borrower or Borrower Agent on behalf
of such Borrower and approved by Agent) on or about 9:00 a.m. (New York time)
two (2) Business Days prior to the commencement of such Interest Period in
amounts substantially equal to the principal amount of the Eurodollar Rate Loans
requested by and available to such Borrower in accordance with this Agreement,
with a maturity of comparable duration to the Interest Period selected by or on
behalf of a Borrower.
1.38 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.39 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.40 "Excess Availability" shall mean, as to each Borrower, the amount,
as determined by Agent, calculated at any date, equal to: (a) the lesser of: (i)
the Borrowing Base of such Borrower and (ii) the Loan Limit of such Borrower (in
each case under (i) or (ii) after giving effect to any Reserves other than any
Reserves in respect of Letter of Credit Accommodations), minus (b) the sum of:
(i) the
15
amount of all then outstanding and unpaid Obligations of such Borrower (but not
including for this purpose Obligations of such Borrower arising pursuant to any
guarantees in favor of Agent and Lenders of the Obligations of the other
Borrowers or the then outstanding Letter of Credit Accommodations), plus (ii)
the amount of all Reserves then established in respect of Letter of Credit
Accommodations, plus (iii) the aggregate amount of all then outstanding and
unpaid trade payables and other obligations of such Borrower which are
outstanding more than sixty (60) days past due as of such time (other than trade
payables or other obligations being contested or disputed by such Borrower in
good faith).
1.41 "Excess Cash" shall mean the cash or Cash Equivalents owned by a
Borrower or Guarantor, which funds are and shall be available for use by a
Borrower (directly or indirectly), without condition or restriction, free and
clear of any pledge, security interest, lien, claim or other encumbrance (except
in favor of Agent) that are in account no. 817966 at Bank of America, N.A. or
successor account so long as such account is subject to an Investment Property
Control Agreement or Deposit Account Control Agreement in form and substance
satisfactory to Agent and Bank of America, N.A. is in compliance with the terms
thereof.
1.42 "Exchange Act" shall mean the Securities Exchange Act of 1934,
together with all rules, regulations and interpretations thereunder or related
thereto.
1.43 "Existing Lenders" shall mean the lenders to Borrowers listed on
Schedule 1.43 hereto (and including Bank of America, N.A. in its capacity as
agent acting for such lenders) and their respective predecessors, successors and
assigns.
1.44 "Existing Letters of Credit" shall mean, collectively, the letters
of credit issued for the account of a Borrower or Guarantor or for which such
Borrower or Guarantor is otherwise liable listed on Schedule 1.44 hereto, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.45 "Factor Assignment Agreements" shall mean, collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the Assignment
of Factoring Credit Balances, dated of even date herewith, between The CIT
Group/Commercial Services, Inc. (as assignee of Congress ▇▇▇▇▇▇▇ Corporation)
and Agent, as acknowledged and agreed to by Borrowers and Guarantors; (b) the
Assignment of Factoring Credit Balances, dated of even date herewith, between
HSBC Business Credit, Inc. (formerly Republic Business Credit Corporation) and
Agent, as acknowledged and agreed to by Borrowers and Guarantors; and (c) any
other assignment of factoring credit balances entered into after the date hereof
between Agent and a Factor, in form and substance satisfactory to Agent, as
acknowledged by Borrowers and Guarantors; each of such Factor Assignment
Agreements sometimes being referred to herein individually as a "Factor
Assignment Agreement".
1.46 "Factoring Agreements" shall mean, collectively, the following (as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced): (a) the
16
Amended and Restated Collection Factoring Agreement, dated on or about the date
hereof, between The CIT Group/Commercial Services, Inc. (as assignee of Congress
▇▇▇▇▇▇▇ Corporation) and Supreme (as assignee of Parent), and all agreements,
documents and instruments at any time executed and/or delivered by any Borrower
or Guarantor in connection therewith; (b) the Factoring Agreement, dated on or
about the date hereof, between The CIT Group/Commercial Services, Inc. and
▇▇▇▇▇▇▇, and all agreements, documents and instruments at any time executed
and/or delivered by any Borrower or Guarantor in connection therewith; (c) the
Amended and Restated Factoring Agreement, dated on or about the date hereof,
between HSBC Business Credit (USA), Inc. (formerly Republic Business Credit
Corporation) and Supreme (as assignee of Supreme International Corporation) and
all agreements, documents and instruments at any time executed and/or delivered
by any Borrower or Guarantor in connection therewith; (d) the Factoring
Agreement, dated on or about the date hereof, between HSBC Business Credit
(USA), Inc. (formerly Republic Business Credit Corporation) and ▇▇▇▇▇▇▇ and all
agreements, documents and instruments at any time executed and/or delivered by
any Borrower or Guarantor in connection therewith; and (e) any other factoring
agreement entered into by a Borrower or Guarantor with a Factor after the date
hereof, on then commercially reasonable terms, provided, that, (i) each of the
conditions set forth in Section 9.7(b)(ix) with respect to the factoring
arrangements subject to such factoring agreement shall have been satisfied and
(ii) any of the agreements referred to above with The CIT Group/Commercial
Services, Inc. or HSBC Business Credit (USA), Inc. entered into after the date
hereof shall be in form and substance reasonably satisfactory to Agent; each of
such Factoring Agreements sometimes being referred to herein individually as a
"Factoring Agreement".
1.47 "Factor Priority Collateral" shall mean (a) in the case of HSBC
Business Credit (USA) Inc. and any other Factor (other than The CIT
Group/Commercial Services, Inc.), collectively, the following: (i) the accounts
receivable of any Borrower or Guarantor in each case as set forth in an
assignment submitted by such Borrower or Guarantor to such Factor in accordance
with the terms of the applicable Factoring Agreement (collectively, the
"Assigned Accounts" and individually an "Assigned Account"), (ii) all supporting
obligations with respect to any Assigned Accounts, (iii) all instruments at any
time evidencing the payment obligation of the account debtor arising from any
Assigned Account, (iv) the invoices and shipping documents related to any
Assigned Account, (v) unpaid seller's rights of such Borrower or Guarantor with
respect to any Assigned Account, (vi) returned and repossessed goods sold giving
rise to any Assigned Account (to the extent not returned to the inventory of
such Borrower or Guarantor for resale), (vii) reserves and credit balances under
the Factoring Agreements of such Borrower or Guarantor with such Factor, and
(viii) all proceeds of all the foregoing (including proceeds of inventory deemed
to be accounts receivable) and (b) in the case of The CIT Group/Commercial
Services, Inc. ("CIT"), collectively, the following: (i) the accounts receivable
of Supreme and ▇▇▇▇▇▇▇ as set forth in an assignment submitted to CIT in
accordance with the terms of the applicable Factoring Agreement (collectively,
the "CIT Assigned Accounts" and individually a "CIT Assigned Account"),
documents exclusively relating to a CIT Assigned Account, chattel paper
(including electronic chattel paper) exclusively relating to a CIT Assigned
Account, general intangibles exclusively relating to a CIT Assigned Account
(including payment intangibles and all other rights to payment) and any other
obligations owing to such Borrower exclusively relating to a CIT
17
Assigned Account, (ii) unpaid seller's rights (including rescission,
repossession replevin, reclamation and stoppage in transit) relating exclusively
to a CIT Assigned Account, (iii) rights to any inventory represented by the
foregoing, including returned goods, (iv) reserves and credit balances arising
under the Factoring Agreement of such Borrower with CIT, (v) guarantees,
collateral, supporting obligations and letter of credit rights for the foregoing
(including rights under any letters of credit or other credit enhancements in
favor of such Borrower), (vi) insurance policies, proceeds or rights relating
exclusively to the foregoing, (vii) cash and non-cash proceeds of the foregoing,
and (viii) books and records of such Borrower relating exclusively to any of the
foregoing; provided, that, nothing contained in this definition shall be
construed to include in the Factor Priority Collateral any interest in any
trademarks, tradenames, service marks, or similar or related general
intangibles.
1.48 "Factor Receivables" shall mean, as to each Borrower or Guarantor,
the Accounts of such Borrower or Guarantor consisting of the right to payment of
a monetary obligation from a Factor for Accounts sold by such Borrower or
Guarantor to such Factor pursuant to and in accordance with the terms and
conditions of the Factoring Agreements of such Borrower or Guarantor with such
Factor.
1.49 "Factors" shall mean, collectively, the following (together with
their respective successors and assigns): (a) The CIT Group/Commercial Services,
Inc. (as successor to Congress ▇▇▇▇▇▇▇ Corporation); (b) HSBC Business Credit
(USA), Inc. (formerly Republic Business Credit Corporation); and (c) any
replacement factor acceptable to Agent that has executed and delivered to Agent
a Factor Assignment Agreement in form and substance satisfactory to Agent;
sometimes being referred to herein individually as a "Factor".
1.50 "Fee Letter" shall mean the letter agreement, dated of even date
herewith, by and among Borrowers, Guarantors and Agent, setting forth certain
fees payable by Borrowers to Agent for the benefit of itself and Lenders, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.51 "Financing Agreements" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements, deposit account control
agreements, investment property control agreements, intercreditor agreements and
all other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by any Borrower or Obligor in connection with this
Agreement.
1.52 "Funded Debt" shall mean, with respect to any Person, any
Indebtedness of such Person and its Subsidiaries consisting of any liability (a)
in respect of borrowed money (whether or not the recourse of the lender is to
the whole of the assets of such Person or only to a portion thereof) or
evidenced by bonds, notes, debentures or similar instruments (which shall not be
construed to mean Indebtedness described in subsection (f) of the definition of
the term Indebtedness in this Agreement); (b) representing the balance deferred
and unpaid of the purchase price of any property or services (except any such
balance that constitutes an account payable to a trade creditor (whether or not
an Affiliate) created, incurred, assumed or guaranteed by such Person in the
ordinary course of business of
18
such Person in connection with obtaining goods, materials or services that is
not overdue by more than ninety (90) days, unless the trade payable is being
contested in good faith); and (c) all obligations as lessee under leases which
have been, or should be, in accordance with GAAP recorded as Capital Leases.
1.53 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that
for purposes of Section 9.17 hereof and the calculation of the Leverage Ratio or
any component thereof, GAAP shall be determined on the basis of such principles
in effect on the date hereof and consistent with those used in the preparation
of the most recent audited financial statements delivered to Agent prior to the
date hereof.
1.54 "Governmental Authority" shall mean any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
1.55 "Guarantors" shall mean, collectively, the following (together with
their respective successors and assigns): (a) ▇▇▇▇▇ ▇▇▇▇▇ International, Inc. a
Florida corporation; (b) PEI Licensing, Inc., a Delaware corporation; (c)
▇▇▇▇▇▇▇ Apparel Corp., a Delaware corporation; (d) BBI Retail, L.L.C., a Florida
limited liability company; (e) Supreme Munsingwear Canada Inc., an Ontario
corporation; (f) Supreme Real Estate I LLC, a Florida limited liability company;
(g) Supreme Real Estate II, LLC, a Florida limited liability company; (h)
Supreme Realty LLC, a Florida limited liability company; and (i) ▇▇▇▇▇ ▇▇▇▇▇
Real Estate Corporation, a Delaware corporation; each sometimes being referred
to herein individually as a "Guarantor".
1.56 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.57 "Indebtedness" shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing the balance deferred and unpaid of the purchase
price of any
19
property or services (except any such balance that constitutes an account
payable to a trade creditor (whether or not an Affiliate) created, incurred,
assumed or guaranteed by such Person in the ordinary course of business of such
Person in connection with obtaining goods, materials or services that is not
overdue by more than ninety (90) days, unless the trade payable is being
contested in good faith); (c) obligations as lessee under leases which have
been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any
contractual obligation, contingent or otherwise, of such Person to pay or be
liable for the payment of any indebtedness described in this definition of
another Person, including, without limitation, any such indebtedness, directly
or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise
acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof, or to maintain solvency,
assets, level of income, or other financial condition; (e) all obligations with
respect to redeemable stock and redemption or repurchase obligations under any
Capital Stock or other equity securities issued by such Person; (f) all
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit,
banker's acceptances, drafts or similar documents or instruments issued for such
Person's account; (g) all indebtedness of such Person in respect of indebtedness
of another Person for borrowed money or indebtedness of another Person otherwise
described in this definition which is secured by any consensual lien, security
interest, collateral assignment, conditional sale, mortgage, deed of trust, or
other encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness,
net of any asset value of such Person (marked to market) arising under Interest
Rate Protection Agreements, Currency Exchange Agreements and other agreements or
arrangements designed to protect such person against fluctuations in interest
rates or currency or commodity values; and (i) all obligations owed by such
Person under License Agreements with respect to non-refundable, advance or
minimum guarantee royalty payments.
1.58 "Information Certificate" shall mean, collectively, the Information
Certificates of Borrowers and Guarantors constituting Exhibit B hereto
containing material information with respect to Borrowers and Guarantors, their
respective businesses and assets provided by or on behalf of Borrowers and
Guarantors to Agent in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.59 "Intellectual Property" shall mean, as to each Borrower and Guarantor,
such Borrower's and Guarantor's now owned and hereafter arising or acquired:
patents, patent rights, patent applications, copyrights, works which are the
subject matter of copyrights, copyright registrations, trademarks, service
marks, trade names, trade styles, service marks, trademark and service ▇▇▇▇
applications, and licenses and rights to use any of the foregoing; all
extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to ▇▇▇ for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or the license of any trademark); customer and
other lists in whatever form maintained; trade secret rights, copyright rights,
20
rights in works of authorship, domain names and domain name registration;
software and contract rights relating to computer software programs, in whatever
form created or maintained.
1.60 "Interest Expense" shall mean, for any period, as to any Person, as
determined in accordance with GAAP, the total interest expense of such Person,
whether paid or accrued during such period (including the interest component of
Capital Leases for such period), including, without limitation, discounts in
connection with the sale of any Accounts, but excluding interest paid in
property other than cash and any other interest expense not payable in cash.
1.61 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), three (3) or six (6) months duration as any
Borrower (or Borrower Agent on behalf of such Borrower) may elect, the exact
duration to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, such Borrower (or Borrower
Agent on behalf of such Borrower) may not elect an Interest Period which will
end after the last day of the then-current term of this Agreement.
1.62 "Interest Rate" shall mean,
(a) Subject to clauses (b) and (c) of this definition below:
(i) as to Prime Rate Loans, a rate equal to the Prime Rate
calculated on a per annum basis,
(ii) as to Eurodollar Rate Loans, a rate equal to two (2%)
percent per annum in excess of the Adjusted Eurodollar Rate (in each case, based
on the Eurodollar Rate applicable for the relevant Interest Period, whether such
rate is higher or lower than any rate previously quoted to a Borrower);
(b) Subject to clause (c) of this definition below, effective as of
the first (1st) day of the second month of each fiscal quarter (commencing with
the fiscal quarter ending on January 31, 2003), the Interest Rate payable by
each Borrower shall be increased or decreased, as the case may be, (i) as to
Prime Rate Loans, to the rate equal to the Applicable Margin for Prime Rate
Loans on a per annum basis in excess of the Prime Rate, and (ii) as to
Eurodollar Rate Loans, to the rate equal to the Applicable Margin for Eurodollar
Rate Loans on a per annum basis in excess of the Adjusted Eurodollar Rate.
(c) Notwithstanding anything to the contrary contained in clauses (a)
and (b) of this definition, the Applicable Margin otherwise used to calculate
the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall be the
highest percentage set forth in the definition of the term Applicable Margin for
each category of Loans (without regard to the amount of Quarterly Average Excess
Availability or the Leverage Ratio) plus two (2%) percent per annum, at Agent's
option, (i) for the period (A) from and after the effective date of termination
or non-renewal hereof until Agent and
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Lenders have received full and final payment of all outstanding and unpaid
Obligations which are not contingent and cash collateral or letter of credit, as
Agent may specify, in the amounts and on the terms required under Section 13.1
hereof for contingent Obligations (notwithstanding entry of a judgment against
any Borrower or Guarantor) and (B) from and after the date of the occurrence of
an Event of Default and for so long as such Event of Default is continuing and
(ii) on Loans to a Borrower at any time outstanding in excess of the Borrowing
Base of such Borrower (whether or not such excess(es) arise or are made with or
without the knowledge or consent of Agent or any Lender and whether made before
or after an Event of Default).
1.63 "Interest Rate Protection Agreements" shall mean, collectively, any
interest rate protection agreements and other types of interest rate hedging
agreements (including, without limitation, interest rate swaps, caps, floors,
collars and similar agreements) between an Obligor and a Lender or an Affiliate
of Lender, or another financial institution acceptable to Agent, designed to
protect against or manage exposure to fluctuations in interest rates; sometimes
being referred to herein individually as an "Interest Rate Protection
Agreement".
1.64 "Inventory" shall mean, as to each Borrower and Guarantor, all of such
Borrower's and Guarantor's now owned and hereafter existing or acquired goods,
wherever located, which (a) are leased by such Borrower or Guarantor as lessor;
(b) are held by such Borrower for sale or lease or to be furnished under a
contract of service; (c) are furnished by such Borrower or Guarantor under a
contract of service; or (d) consist of raw materials, work in process, finished
goods or materials used or consumed in its business.
1.65 "Inventory Loan Limit" shall mean, as to each Borrower, at any time,
the amount equal to $40,000,000 minus the then outstanding principal amount of
Loans to the other Borrower based on Eligible Inventory (and including Letter of
Credit Accommodations to the extent provided in the definition of the term
Borrowing Base).
1.66 "Investment Property Control Agreement" shall mean an agreement in
writing, in form and substance reasonably satisfactory to Agent, by and among
Agent, any Borrower or Guarantor (as the case may be) and any securities
intermediary, commodity intermediary or other person who has custody, control or
possession of any investment property of such Borrower or Guarantor
acknowledging that such securities intermediary, commodity intermediary or other
person has custody, control or possession of such investment property on behalf
of Agent, that it will comply with entitlement orders originated by Agent with
respect to such investment property, or other instructions of Agent, or (as the
case may be) apply any value distributed on account of any commodity contract as
directed by Agent, in each case, without the further consent of such Borrower or
Guarantor and including such other terms and conditions as Agent may reasonably
require.
1.67 "Lenders" shall mean the financial institutions who are signatories
hereto as Lenders and other persons made a party to this Agreement as a Lender
in accordance with Section 13.7 hereof, and
22
their respective successors and assigns; each sometimes being referred to herein
individually as a "Lender".
1.68 "Letter of Credit Accommodations" shall mean, collectively, the
letters of credit, merchandise purchase or other guaranties which are from time
to time either (a) issued or opened by Agent or any Lender for the account of
any Borrower or Obligor or (b) with respect to which Agent or Lenders have
agreed to indemnify the issuer or guaranteed to the issuer the performance by
any Borrower or Obligor of its obligations to such issuer; sometimes being
referred to herein individually as "Letter of Credit Accommodation". The term
"Letter of Credit Accommodation" as used herein shall not be deemed to include
any letters of credit issued by any Letter of Credit Issuer that may be a Lender
pursuant to any of the Letter of Credit Facilities.
1.69 "Letter of Credit Facilities" shall mean, collectively, (a) the letter
of credit and related acceptance facility provided to Parent and Borrowers by
Israel Discount Bank of New York in accordance with the terms of the Letter of
Credit Facility Agreement of Parent and Borrowers with Israel Discount Bank of
New York, as in effect on the date hereof; (b) the letter of credit and related
acceptance facility provided to Parent and Borrowers by CommerceBank, N.A. in
accordance with the terms of the Letter of Credit Facility Agreement of Parent
and Borrowers with CommerceBank, N.A. as in effect on the date hereof; (c) the
letter of credit and related acceptance facility provided to Parent and
Borrowers by Ocean Bank in accordance with the terms of the Letter of Credit
Facility Agreement of Parent and Borrowers with Ocean Bank as in effect on the
date hereof; (d) the letter of credit and related acceptance facility provided
to Parent and Borrowers by The Hong Kong and Shanghai Banking Corporation
Limited and HSBC Bank USA in accordance with the Letter of Credit Facility
Agreement of Parent and Borrowers with The Hong Kong and Shanghai Banking
Corporation Limited and HSBC Bank USA as in effect on the date hereof; and (e)
any other letter of credit facility hereafter entered into by Borrowers with a
financial institution that is reasonably acceptable to Agent pursuant to which
such financial institution will issue letters of credit for the account of
Borrowers on commercially reasonable terms; provided, that, as to any such other
letter of credit facility, each of the conditions set forth in Section 9.9(j)
hereof shall have been satisfied; each of such Letter of Credit Facilities
sometimes being referred to herein individually as a "Letter of Credit
Facility".
1.70 "Letter of Credit Facility Agreements" shall mean, collectively, the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed or replaced): (a) the Letter of Credit and
Security Agreement, dated April 23, 2002, by Parent and Borrowers and Israel
Discount Bank of New York and the General Security Agreement, dated July 31,
2002, between Parent and Borrowers and Israel Discount Bank of New York; (b) the
Commitment Letter, dated June 24, 2002, by and among Parent, Borrowers and
CommerceBank, N.A. and the Commercial Security Agreement, dated July 2, 2002, by
Parent and Borrowers in favor of CommerceBank, N.A.; (c) the Facility Agreement,
dated as of June 30, 2002, by and among Parent, Borrowers and Ocean Bank and the
Security Agreement, dated as of April 24, 2002, by and among Parent, Borrowers
and Ocean Bank; (d) Continuing Letter of Credit Agreement, dated October 25,
2001, by and among Parent, Borrowers, The Hong Kong and Shanghai Banking
Corporation and
23
HSBC Bank USA, the General Security Agreement, dated October 25, 2001, by and
among Parent, Borrowers and The Hong Kong and Shanghai Banking Corporation, the
Unlimited Continuing Guaranty, dated October 25, 2001, by PEI Licensing in favor
of The Hong Kong and Shanghai Banking Corporation; (e) any other letter of
credit facility agreements entered into after the date hereof by a Borrower with
a Letter of Credit Issuer, on commercially reasonable terms; each of such Letter
of Credit Facility Agreements sometimes being referred to herein individually as
a "Letter of Credit Facility Agreement".
1.71 "Letter of Credit Intercreditor Agreements" shall mean, collectively,
the following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed or replaced): (a) the Intercreditor Agreement,
dated of even date herewith, by and among Israel Discount Bank of New York and
Agent, as acknowledged and agreed to by Borrowers and Guarantors; (b) the
Intercreditor Agreement, dated of even date herewith, between CommerceBank, N.A.
and Agent, as acknowledged and agreed to by Borrowers and Guarantors; (c) the
Intercreditor Agreement, dated of even date herewith, between Ocean Bank and
Agent, as acknowledged and agreed to by Borrowers and Guarantors; (d) the
Intercreditor Agreement, dated of even date herewith, by and among The Hong Kong
and Shanghai Banking Corporation Limited, HSBC Bank USA and Agent, as
acknowledged and agreed to by Borrowers and Guarantors; and (e) any
intercreditor agreement entered into after the date hereof between Agent and a
Letter of Credit Issuer, in form and substance reasonably satisfactory to Agent;
each of such Letter of Credit Intercreditor Agreements sometimes being referred
to herein individually as a "Letter of Credit Intercreditor Agreement".
1.72 "Letter of Credit Issuers" shall mean, collectively, (a) Israel
Discount Bank of New York, (b) CommerceBank, N.A., (c) Ocean Bank, (d) The Hong
Kong and Shanghai Banking Corporation Limited, (e) HSBC Bank USA, and (f) any
other financial institution that provides a Letter of Credit Facility to
Borrowers or Guarantors after the date hereof and is reasonably acceptable to
Agent and has executed and delivered to Agent a Letter of Credit Intercreditor
Agreement in form and substance satisfactory to Agent; sometimes being referred
to herein individually as a "Letter of Credit Issuer".
1.73 "Letter of Credit Issuer Priority Collateral" shall mean, as to any
Letter of Credit Issuer, the Inventory purchased with the proceeds of a letter
of credit issued pursuant to the Letter of Credit Facility of such Letter of
Credit Issuer, the documents pertaining thereto and any insurance proceeds
relating thereto that is subject to the valid and perfected, first priority
purchase money security interests of such Letter of Credit Issuer under the
Letter of Credit Facility of such Letter of Credit Issuer with a Borrower;
provided, that, (a) the security interest in any such Inventory, documents and
insurance proceeds shall at all times only secure the reimbursement obligations
of the Borrower for the letter of credit used to purchase such Inventory and (b)
in no event shall such assets include any of the Accounts.
1.74 "Leverage Ratio" shall mean, at any time, the ratio of: (a) the amount
equal to: (i) the Funded Debt of Parent and its Subsidiaries as of such time
(and including for this purpose, (A) the
24
Indebtedness evidenced by or arising under the Senior Notes and the Subordinated
Notes, (B) all Funded Debt of Parent and any direct or indirect Subsidiary of
Parent, whether foreign or domestic and (C) the Loans) minus (ii) the Excess
Cash at such time in excess of $1,000,000 to (b) the EBITDA of Parent and its
Subsidiaries for the four (4) immediately preceding fiscal quarters of Parent
(treated as a single accounting period).
1.75 "License Agreements" shall have the meaning set forth in Section 8.11
hereof.
1.76 "Loan Limit" shall mean, as to each Borrower, at any time, the amount
equal to the Maximum Credit minus the then outstanding principal amount of the
Loans and the Letter of Credit Accommodations provided to the other Borrowers.
1.77 "Loans" shall mean the loans now or hereafter made by or on behalf of
any Lender or by Agent for the account of any Lender on a revolving basis
pursuant to the Credit Facility (involving advances, repayments and readvances)
as set forth in Section 2.1 hereof.
1.78 "Material Adverse Effect" shall mean a material adverse effect on (a)
the financial condition, business, performance or operations of Borrowers and
Guarantors (taken as a whole) or the legality, validity or enforceability of
this Agreement or any of the other Financing Agreements; (b) the legality,
validity, enforceability, perfection or priority of the security interests and
liens of Agent upon the Collateral; (c) the Collateral or its value, (d) the
ability of any Borrower to repay the Obligations or of any Borrower to perform
its obligations under this Agreement or any of the other Financing Agreements as
and when to be performed; or (e) the ability of Agent or any Lender to enforce
the Obligations or realize upon the Collateral or otherwise with respect to the
rights and remedies of Agent and Lenders under this Agreement or any of the
other Financing Agreements.
1.79 "Material Contract" shall mean any contract or other agreement (other
than the Financing Agreements), written or oral, of any Borrower or Guarantor
involving monetary liability of or to any Person in an amount in excess of
$5,000,000 in any fiscal year.
1.80 "Maximum Credit" shall mean the amount of $60,000,000.
1.81 "Multiemployer Plan" shall mean a "multi-employer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by any Borrower,
Guarantor or any ERISA Affiliate.
1.82 "Net Recovery Percentage" shall mean the fraction, expressed as a
percentage, (a) the numerator of which is the amount equal to the amount of the
recovery in respect of the Inventory at such time on a "net orderly liquidation
value" basis as set forth in the most recent acceptable appraisal of Inventory
received by Agent in accordance with Section 7.3, net of operating expenses,
liquidation expenses and commissions, and (b) the denominator of which is the
applicable original cost of the aggregate amount of the Inventory subject to
such appraisal.
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1.83 "Obligations" shall mean (a) any and all Loans, Letter of Credit
Accommodations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of Borrowers to Agent or any
Lender and/or any of their Affiliates, including principal, interest, charges,
fees, costs and expenses, however evidenced, whether as principal, surety,
endorser, guarantor or otherwise, arising under this Agreement or any of the
other Financing Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to such Borrower
under the United States Bankruptcy Code or any similar statute (including the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, or secured or unsecured and (b) for purposes only of
Section 5.1 hereof and subject to the priority in right of payment set forth in
Section 6.4 hereof, all obligations of Borrowers or Guarantors to a Lender or an
Affiliate of Lender, or another financial institution acceptable to Agent,
arising under or pursuant to an Interest Rate Protection Agreement in each case
acceptable to Agent, provided, that, upon Agent's request, Agent shall have
entered into an agreement, in form and substance satisfactory to Agent, with
such Lender, Affiliate or other Person that is a counterparty to such Interest
Rate Protection Agreement, as acknowledged and agreed to by Borrowers and
Guarantors, providing for the delivery to Agent by such counterparty of
information with respect to the amount of such obligations and providing for the
other rights of Agent and such Lender, Affiliate or other Person, as the case
may be, in connection with such arrangements. In no event shall the party to
such Interest Rate Protection Agreement to whom such obligations are owed be
deemed a Lender for purposes hereof to the extent of and as to such obligations
other than for purposes of Section 5.1 hereof and other than for purposes of
Sections 12.1, 12.2, 12.5, 12.6, 12.7 and 12.12 hereof.
1.84 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations (including, without
limitation, Guarantors), other than Borrowers.
1.85 "Other Taxes" shall mean any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement or any of the
other Financing Agreements.
1.86 "Parent" shall mean ▇▇▇▇▇ ▇▇▇▇▇ International, Inc., a Florida
corporation, and its successors and assigns.
1.87 "Participant" shall mean any financial institution that acquires and
holds a participation in the interest of any Lender in any of the Loans and
Letter of Credit Accommodations in conformity with the provisions of Section
13.7 of this Agreement governing participations.
26
1.88 "Permitted Holders" shall mean, as of the date of determination, (a)
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, their spouses, their respective lineal
descendants and the spouses of such lineal descendants, (b) any Person
controlled by any of the Persons included in clause (a) of this definition (as
the term "controlled" is defined in the definition of the term "Affiliate"
herein), (c) trusts for the benefit of any of the persons included in clause (a)
of this definition, and (d) any charitable foundation a majority of whose
members, trustees or directors, as the case may be, are Persons included in
clause (a) of this definition.
1.89 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.90 "Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower or Guarantor sponsors, maintains, or to which it
makes, is making, or is obligated to make contributions, or in the case of a
Multiemployer Plan has made contributions at any time during the immediately
preceding six (6) plan years.
1.91 "Prime Rate" shall mean the rate from time to time publicly announced
by Wachovia Bank, National Association, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.92 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.93 "Pro Rata Share" shall mean as to any Lender, the fraction (expressed
as a percentage) the numerator of which is such Lender's Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender's Loans and its interest
in the Letter of Credit Accommodations and the denominator shall be the
aggregate amount of all unpaid Loans and Letter of Credit Accommodations.
1.94 "Provision for Taxes" shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State, Provincial, county or
local, and whether foreign or domestic, that are paid or payable by any Person
in respect of any period in accordance with GAAP.
1.95 "Quarterly Average Excess Availability" shall mean, at any time, the
daily average of the aggregate amount of the Excess Availability of Borrowers
for the immediately preceding fiscal quarter as calculated by Agent in good
faith.
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1.96 "Real Property" shall mean all now owned and hereafter acquired real
property of each Borrower and Guarantor, including leasehold interests, together
with all buildings, structures, and other improvements located thereon and all
licenses, easements and appurtenances relating thereto, wherever located.
1.97 "Receivables" shall mean all of the following now owned or hereafter
arising or acquired property of each Borrower and Guarantor: (a) all Accounts
(and including Factor Receivables); (b) all interest, fees, late charges,
penalties, collection fees and other amounts due or to become due or otherwise
payable in connection with any Account; (c) all payment intangibles of such
Borrower or Guarantor; (d) letters of credit, indemnities, guarantees, security
or other deposits and proceeds thereof issued or payable to any Borrower or
Guarantor or otherwise in favor of or delivered to any Borrower or Guarantor in
connection with any Account; or (e) all other accounts, contract rights, chattel
paper, instruments, notes, general intangibles and other forms of obligations
owing to any Borrower or Guarantor, whether from the sale and lease of goods or
other property, licensing of any property (including Intellectual Property or
other general intangibles), rendition of services or from Loans or advances by
any Borrower or Guarantor or to or for the benefit of any third person
(including Loans or advances to any Affiliates or Subsidiaries of any Borrower
or Guarantor) or otherwise associated with any Accounts, Inventory or general
intangibles of any Borrower or Guarantor (including, without limitation, choses
in action, causes of action, tax refunds, tax refund claims, any funds which may
become payable to any Borrower or Guarantor in connection with the termination
of any Plan or other employee benefit plan and any other amounts payable to any
Borrower or Guarantor from any Plan or other employee benefit plan, rights and
claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance covering the lives
of employees on which any Borrower or Guarantor is a beneficiary).
1.98 "Records" shall mean, as to each Borrower and Guarantor, all of such
Borrower's and Guarantor's present and future books of account of every kind or
nature, purchase and sale agreements, invoices, ledger cards, bills of lading
and other shipping evidence, statements, correspondence, memoranda, credit files
and other data relating to the Collateral or any account debtor, together with
the tapes, disks, diskettes and other data and software storage media and
devices, file cabinets or containers in or on which the foregoing are stored
(including any rights of any Borrower or Guarantor with respect to the foregoing
maintained with or by any other person).
1.99 "Reference Bank" shall mean Wachovia Bank, National Association, or
such other bank as Agent may from time to time designate.
1.100 "Refinancing Indebtedness" shall have meaning set forth in Section
9.9 hereof.
1.101 "Register" shall have the meaning set forth in Section 13.7 hereof.
1.102 "Renewal Date" shall the meaning set forth in Section 13.1 hereof.
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1.103 "Required Lenders" shall mean, at any time, those Lenders whose Pro
Rata Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of the
aggregate of the Commitments of all Lenders, or if the Commitments shall have
been terminated, Lenders to whom at least sixty-six and two-thirds (66 2/3%)
percent of the then outstanding Obligations are owing.
1.104 "Reserves" shall mean as of any date of determination, such amounts
as Agent may from time to time establish and revise in good faith reducing the
amount of Loans and Letter of Credit Accommodations which would otherwise be
available to any Borrower under the lending formula(s) provided for herein: (a)
to reflect events, conditions, contingencies or risks which, as determined by
Agent in good faith, adversely affect, or would have a reasonable likelihood of
adversely affecting, either (i) the Collateral or any other property which is
security for the Obligations or its value or (ii) the assets or business of any
Borrower or Obligor or (iii) the security interests and other rights of Agent or
any Lender in the Collateral (including the enforceability, perfection and
priority thereof) or (b) to reflect Agent's good faith belief that any
collateral report or financial information furnished by or on behalf of any
Borrower or Obligor to Agent is or may have been incomplete, inaccurate or
misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any
state of facts which Agent determines in good faith constitutes a Default or an
Event of Default. Without limiting the generality of the foregoing, Reserves
may, at Agent's option, be established to reflect: (i) dilution with respect to
the accounts of a Borrower (based on the ratio of the aggregate amount of
non-cash reductions in accounts for any period to the aggregate dollar amount of
the sales of such Borrower for such period), other than from chargebacks,
exceeds or is reasonably anticipated to exceed five (5%) percent; (ii)
chargebacks with respect to Accounts, (iii) returns, discounts, claims, credits
and allowances of any nature that are not paid pursuant to the reduction of
Accounts, (iv) the sales, excise or similar taxes included in the amount of any
Accounts reported to Agent, (v) a change in the turnover, age or mix of the
categories of Inventory that adversely affects the aggregate value of all
Inventory, (vi) amounts due or to become due to owners and licensors of
trademarks and other Intellectual Property used by any Borrower and (vii)
obligations (contingent or otherwise) of Borrowers or Guarantors to any
Affiliate of Agent or a Lender or any other Person arising under or in
connection with any Interest Rate Protection Agreement of any Borrower or
Guarantor with such Affiliate or Person or as such Affiliate or Person may
otherwise require in connection therewith (provided, that, as of the date hereof
the amount of the Reserve in respect of such obligations and requirements is
zero) to the extent that such obligations constitute Obligations as such term is
defined herein or otherwise receive the benefit of the security interest of
Agent in any Collateral. To the extent Agent may revise the lending formulas
used to determine the Borrowing Base or establish new criteria or revise
existing criteria for Eligible Accounts or Eligible Inventory so as to address
any circumstances, condition, event or contingency in a manner satisfactory to
Agent, Agent shall not establish a Reserve for the same purpose. The amount of
any Reserve established by Agent shall have a reasonable relationship to the
event, condition or other matter which is the basis for such reserve as
determined by Agent in good faith.
1.105 "Senior Note Guarantors" shall mean, collectively, the following
(together with their respective successors and assigns) to the extent that each
has guaranteed the Indebtedness of Parent
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under the Senior Notes: (a) Supreme Canada, (b) Supreme International
Corporation de Mexico, S.A. de C.V., a Mexico corporation, (c) BBI, (d) ▇▇▇▇▇▇▇
Apparel, (e) PEI Licensing, (f) Supreme, (g) ▇▇▇▇▇▇▇, (h) Supreme I, (i) Supreme
II, (j) Supreme Realty and (k) PE Real Estate; sometimes being referred to
herein individually as a "Senior Note Guarantor".
1.106 "Senior Note Indenture" shall mean the Indenture, dated as of March
22, 2002, by and among Parent, as issuer, the Senior Note Guarantors, as
Subsidiary Guarantors and Senior Note Trustee, as trustee, with respect to the
Senior Notes, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.107 "Senior Note Intercreditor Agreement" shall mean the Intercreditor
Agreement, dated on or about the date hereof, by and among Agent, Senior Note
Trustee, Israel Discount Bank of New York, The Hongkong and Shanghai Banking
Corporation Limited, HSBC USA Bank, CommerceBank, N.A. and Ocean Bank, as
acknowledged and agreed to by Borrowers and Guarantors, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.
1.108 "Senior Note Priority Collateral" shall mean the Intellectual
Property described on Schedule 1.108 hereto.
1.109 "Senior Notes" shall mean, collectively, the 9 1/2% Series B Senior
Secured Notes due 2009 issued by Parent pursuant to the Senior Note Indenture in
the original aggregate principal amount of $57,000,000, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.110 "Senior Note Trustee" shall mean State Street Bank and Trust Company,
a Massachusetts trust company, as trustee under the Senior Note Indenture and
any successor, replacement or additional trustee and their respective successors
and assigns.
1.111 "Solvent" shall mean, at any time with respect to any Person, that at
such time such Person (a) is able to pay its debts as they mature and has (and
has a reasonable basis to believe it will continue to have) sufficient capital
(and not unreasonably small capital) to carry on its business consistent with
its practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
1.112 "Special Agent Advances" shall have the meaning set forth in Section
12.11 hereof.
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1.113 "Subordinated Note Guarantors" shall mean, collectively, the
following (together with their respective successors and assigns) to the extent
that each has guaranteed the Indebtedness of Parent under the Subordinated
Notes: (a) Supreme Canada, (b) Supreme International Corporation de Mexico,
S.A. de C.V., a Mexico corporation, (c) BBI, (d) ▇▇▇▇▇▇▇ Apparel, (e) PEI
Licensing, (f) Supreme, (g) ▇▇▇▇▇▇▇, (h) Supreme I, (i) Supreme II, (j) Supreme
Realty and (k) PE Real Estate; sometimes being referred to herein individually
as a "Subordinated Note Guarantor".
1.114 "Subordinated Note Indenture" shall mean the Indenture, dated April
6, 1999, by and between Parent, as issuer, the Subordinated Note Guarantors, as
Subsidiary Guarantors, and State Street Bank and Trust Company, as trustee, as
the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.115 "Subordinated Notes" shall mean, collectively, the 12 1/4% Series B
Senior Subordinated Notes due 2006 in the original principal amount of
$100,000,000, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.116 "Subsidiary" or "subsidiary" shall mean, with respect to any Person,
any corporation, limited liability company, limited liability partnership or
other limited or general partnership, trust, association or other business
entity of which an aggregate of at least a majority of the outstanding Capital
Stock or other interests entitled to vote in the election of the board of
directors of such corporation (irrespective of whether, at the time, Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency), managers, trustees
or other controlling persons, or an equivalent controlling interest therein, of
such Person is, at the time, directly or indirectly, owned by such Person and/or
one or more subsidiaries of such Person.
1.117 "Taxes" shall mean any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of any Lender, such taxes (including income
taxes, franchise taxes or capital taxes) as are imposed on or measured by such
Lender's net income or capital by any jurisdiction (or any political subdivision
thereof).
1.118 "UCC" shall mean the Uniform Commercial Code as in effect in the
State of Florida, and any successor statute, as in effect from time to time
(except that terms used herein which are defined in the Uniform Commercial Code
as in effect in the State of Florida on the date hereof shall continue to have
the same meaning notwithstanding any replacement or amendment of such statute
except as Agent may otherwise reasonably determine).
1.119 "Value" shall mean, as determined by Agent in good faith, with
respect to Inventory, the lower of 1.120 cost computed on a first-in first-out
basis in accordance with GAAP or (a) market value, provided, that, for purposes
of the calculation of the Borrowing Base, (i) the Value of the Inventory shall
not include: (A) the portion of the value of Inventory equal to the profit
earned by any Affiliate on the sale thereof to any Borrower or (B) write-ups or
write-downs in value with respect to
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currency exchange rates and (ii) notwithstanding anything to the contrary
contained herein, the cost of the Inventory shall be computed in the same manner
and consistent with the most recent appraisal of the Inventory received and
accepted by Agent prior to the date hereof.
1.121 "Voting Stock" shall mean with respect to any Person, (a) one (1)
or more classes of Capital Stock of such Person having general voting powers to
elect at least a majority of the board of directors, managers or trustees of
such Person, irrespective of whether at the time Capital Stock of any other
class or classes have or might have voting power by reason of the happening of
any contingency, and (b) any Capital Stock of such Person convertible or
exchangeable without restriction at the option of the holder thereof into
Capital Stock of such Person described in clause (a) of this definition.
1.122 "Weighted Average Life to Maturity" shall mean, when applied to
any Indebtedness at any date, the number of years obtained by dividing (a) the
then outstanding principal amount of such Indebtedness into (b) the total of the
product obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to and upon the terms and conditions contained herein,
each Lender severally (and not jointly) agrees to make its Pro Rata Share of
Loans to Borrowers from time to time in amounts requested by a Borrower (or
Borrower Agent on behalf of Borrowers) up to the amount outstanding at any time
equal to the lesser of: (i) the aggregate amount of the Borrowing Bases of
Borrowers at such time or (ii) the Maximum Credit.
(b) Except in Agent's discretion, with the consent of all Lenders, or
as otherwise provided herein, (i) the aggregate amount of the Loans and the
Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit, (ii) the aggregate principal amount of the Loans and Letter of
Credit Accommodations outstanding at any time to Borrowers shall not exceed the
aggregate amount of the Borrowing Bases of Borrowers, and (iii) the aggregate
principal amount of the Loans outstanding at any time to Borrowers based on the
Eligible Inventory of Borrowers (and included the then undrawn amounts of Letter
of Credit Accommodations used to purchase Inventory to the extent set forth in
Section 1.10 hereof) shall not exceed $40,000,000.
(c) In the event that the aggregate principal amount of the Loans and
Letter of Credit Accommodations outstanding to a Borrower exceed the Borrowing
Base of such Borrower or the Loan Limit of such Borrower, or the aggregate
principal amount of Loans and Letter of Credit Accommodations based on the
Eligible Inventory of a Borrower exceed the Inventory Loan Limit of
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such Borrower, or the aggregate principal amount of Loans and Letter of Credit
Accommodations based on the Eligible Inventory of all Borrowers exceeds the
sublimit set forth above, or the aggregate amount of the outstanding Letter of
Credit Accommodations exceed the sublimit for Letter of Credit Accommodations
set forth in Section 2.2(e), or the aggregate amount of the Loans and Letter of
Credit Accommodations exceed the Maximum Credit, such event shall not limit,
waive or otherwise affect any rights of Agent or Lenders in such circumstances
or on any future occasions and subject to the immediately following sentence of
this subsection (c), Borrowers shall, upon demand by Agent, which may be made at
any time or from time to time, immediately repay to Agent the entire amount of
any such excess(es) for which payment is demanded. In the event that a Borrower
has Excess Availability, and the aggregate principal amount of the Loans and
Letter of Credit Accommodations outstanding to the other Borrower exceeds the
Borrowing Base of such other Borrower or the Loan Limit of such other Borrower,
Agent shall cause the repayment of such excess, without notice or demand, by the
transfer of Loans or Letter of Credit Accommodations in the loan account of the
Borrower with Agent whose Loans and Letter of Credit Accommodations exceed its
Borrowing Base or Loan Limit to the loan account of the Borrower that has Excess
Availability to the extent of such Excess Availability.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein, at
the request of a Borrower (or Borrower Agent on behalf of such Borrower), Agent
agrees, for the ratable risk of each Lender according to its Pro Rata Share, to
provide or arrange for Letter of Credit Accommodations for the account of such
Borrower but for the benefit of any Borrower or Guarantor containing terms and
conditions acceptable to Agent and the issuer thereof. Any payments made by or
on behalf of Agent or any Lender to any issuer thereof and/or related parties in
connection with the Letter of Credit Accommodations provided to or for the
benefit of a Borrower shall constitute additional Loans to such Borrower
pursuant to this Section 2 (or Special Agent Advances as the case may be).
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Borrowers
shall pay to Agent, for the benefit of Lenders, a letter of credit fee at a rate
equal to two (2%) percent per annum, on the daily outstanding balance of the
Letter of Credit Accommodations for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding month,
except that Agent may, and upon the written direction of Required Lenders shall,
require Borrowers to pay to Agent for the ratable benefit of Lenders such letter
of credit fee, at a rate equal to four (4%) percent per annum on such daily
outstanding balance for: (i) the period from and after the date of termination
hereof until Agent and Lenders have received full and final payment of all
Obligations (notwithstanding entry of a judgment against any Borrower) and (ii)
the period from and after the date of the occurrence of an Event of Default for
so long as such Event of Default is continuing as determined by Agent. Such
letter of credit fee shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed and the obligation of Borrowers to pay
such fee shall survive the termination of this Agreement.
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(c) The Borrower requesting such Letter of Credit Accommodation (or
Borrower Agent on behalf of such Borrower) shall give Agent two (2) Business
Days' prior written notice of such Borrower's request for the issuance of a
Letter of Credit Accommodation. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit Accommodation
requested, the effective date (which date shall be a Business Day) of issuance
of such requested Letter of Credit Accommodation, whether such Letter of Credit
Accommodations may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit Accommodation is to expire (which date shall be
a Business Day and in no event shall be a date later than five (5) Business Days
prior to the Renewal Date), the purpose for which such Letter of Credit
Accommodation is to be issued, and the beneficiary of the requested Letter of
Credit Accommodation. The Borrower requesting the Letter of Credit Accommodation
(or Borrower Agent on behalf of such Borrower) shall attach to such notice the
proposed terms of the Letter of Credit Accommodation.
(d) In addition to being subject to the satisfaction of the
applicable conditions precedent contained in Section 4 hereof and the other
terms and conditions contained herein, no Letter of Credit Accommodations shall
be available unless each of the following conditions precedent have been
satisfied in a manner satisfactory to Agent: (i) the Borrower requesting such
Letter of Credit Accommodation (or Borrower Agent on behalf of such Borrower)
shall have delivered to the proposed issuer of such Letter of Credit
Accommodation at such times and in such manner as such proposed issuer may
require, an application, in form and substance satisfactory to such proposed
issuer and Agent, for the issuance of the Letter of Credit Accommodation and
such other documents as may be required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance,
no order of any court, arbitrator or other Governmental Authority shall purport
by its terms to enjoin or restrain money center banks generally from issuing
letters of credit of the type and in the amount of the proposed Letter of Credit
Accommodation, and no law, rule or regulation applicable to money center banks
generally and no request or directive (whether or not having the force of law)
from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that the proposed issuer of such Letter of
Credit Accommodation refrain from, the issuance of letters of credit generally
or the issuance of such Letter of Credit Accommodation; and (iii) the Excess
Availability of the Borrower requesting such Letter of Credit Accommodation,
prior to giving effect to any Reserves with respect to such Letter of Credit
Accommodations, on the date of the proposed issuance of any Letter of Credit
Accommodations, shall be equal to or greater than: (A) if the proposed Letter of
Credit Accommodation is for the purpose of purchasing Eligible Inventory and the
documents of title with respect thereto are consigned to the issuer, the sum of
(1) the percentage equal to one hundred (100%) percent minus the then applicable
percentage with respect to Eligible Inventory set forth in the definition of the
term Borrowing Base multiplied by the Value of such Eligible Inventory, plus (2)
freight, taxes, duty and other amounts which Agent estimates must be paid in
connection with such Inventory upon arrival and for delivery to one of such
Borrower's locations for Eligible Inventory within the United States of America
and (B) if the proposed Letter of Credit Accommodation is for any other purpose
or the documents of title are not consigned to the issuer in connection with a
Letter of Credit Accommodation for the purpose of purchasing Inventory, an
amount equal to one hundred (100%)
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percent of the face amount thereof and all other commitments and obligations
made or incurred by Agent with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, a Reserve shall be established in the
applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).
(e) Except in Agent's discretion, with the consent of all Lenders,
the amount of all outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Agent or any Lender in
connection therewith shall not at any time exceed $30,000,000.
(f) Borrowers and Guarantors shall indemnify and hold Agent and
Lenders harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Agent or any Lender may suffer or incur in
connection with any Letter of Credit Accommodations and any documents, drafts or
acceptances relating thereto, including any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation, except for
such losses, claims, damages, liabilities, costs or expenses that are a direct
result of the gross negligence or wilful misconduct of Agent or any Lender as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction. Each Borrower and Guarantor assumes all risks with respect to the
acts or omissions of the drawer under or beneficiary of any Letter of Credit
Accommodation and for such purposes the drawer or beneficiary shall be deemed
such Borrower's agent. Each Borrower and Guarantor assumes all risks for, and
agrees to pay, all foreign, Federal, State and local taxes, duties and levies
relating to any goods subject to any Letter of Credit Accommodations or any
documents, drafts or acceptances thereunder. Each Borrower and Guarantor hereby
releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by any Borrower, Guarantor,
by any issuer or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation, except for the gross negligence or wilful
misconduct of Agent or any Lender as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. The provisions of
this Section 2.2(f) shall survive the payment of Obligations and the termination
of this Agreement.
(g) In connection with Inventory purchased pursuant to Letter of
Credit Accommodations, Borrowers and Guarantors shall, at Agent's request,
instruct all suppliers, carriers, forwarders, customs brokers, warehouses or
others receiving or holding cash, checks, Inventory, documents or instruments in
which Agent holds a security interest to deliver them to Agent and/or subject to
Agent's order, and if they shall come into such Borrower's or Guarantor's
possession, to deliver them, upon Agent's request, to Agent in their original
form. Borrowers and Guarantors shall also, at Agent's request, designate Agent
as the consignee on all bills of lading and other negotiable and non-negotiable
documents.
(h) Each Borrower and Guarantor hereby irrevocably authorizes and
directs any issuer of a Letter of Credit Accommodation to name such Borrower or
Guarantor as the account party therein and to deliver to Agent all instruments,
documents and other writings and property received by issuer pursuant to the
Letter of Credit Accommodations and to accept and rely upon Agent's
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instructions and agreements with respect to all matters arising in connection
with the Letter of Credit Accommodations or the applications therefor. Nothing
contained herein shall be deemed or construed to grant any Borrower or Guarantor
any right or authority to pledge the credit of Agent or any Lender in any
manner. Agent and Lenders shall have no liability of any kind with respect to
any Letter of Credit Accommodation provided by an issuer other than Agent or any
Lender unless Agent has duly executed and delivered to such issuer the
application or a guarantee or indemnification in writing with respect to such
Letter of Credit Accommodation. Borrowers and Guarantors shall be bound by any
reasonable interpretation made in good faith by Agent, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of any Borrower or
Guarantor; provided, that, the foregoing shall not be deemed to release Agent or
any issuer from any liability as a result of the failure of such issuer to
follow any reasonable instructions of any Borrower or Guarantor given in
accordance with the terms hereof in connection with any application for a Letter
of Credit Accommodation or a guarantee or indemnification provided by the Agent
constituting a Letter of Credit Accommodation at the request of such Borrower or
Guarantor or to the extent such instructions are consistent with the
interpretation made by Agent or issuer or correspondent.
(i) At any time, so long as no Event of Default exists or has
occurred and is continuing, a Borrower (or Borrower Agent on behalf of a
Borrower) may, with Agent's consent, (i) grant any extensions of the maturity
of, time of payment for, or time of presentation of, any drafts, acceptances, or
documents, and (ii) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letter of Credit Accommodations, or documents, drafts or
acceptances thereunder or any letters of credit included in the Collateral;
provided, that, Borrowers may approve or resolve any questions of non-compliance
of documents following notice to Agent thereof and without Agent's consent
except as otherwise provided in Section 2.2(j) below.
(j) At any time an Event of Default exists or has occurred and is
continuing, Agent shall have the right and authority to, and Borrowers and
Guarantors shall not, without the prior written consent of Agent, (i) approve or
resolve any questions of non-compliance of documents, (ii) give any instructions
as to acceptance or rejection of any documents or goods, (iii) execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, (iv) grant any extensions of the maturity of, time of payments for, or
time of presentation of, any drafts, acceptances, or documents, and (v) agree to
any amendments, renewals, extensions, modifications, changes or cancellations of
any of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder. Agent may take
such actions either in its own name or in any Borrower's name.
(k) Any rights, remedies, duties or obligations granted or
undertaken by any Borrower or Guarantor to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement in
favor of any issuer or correspondent relating to any Letter of Credit
36
Accommodation, shall be deemed to have been granted or undertaken by such
Borrower or Guarantor to Agent for the ratable benefit of Lenders. Any duties or
obligations undertaken by Agent to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Agent in favor of any issuer or correspondent to the extent relating to any
Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrowers and Guarantors to Agent for the ratable benefit of Lenders and to
apply in all respects to Borrowers and Guarantors.
(l) Immediately upon the issuance or amendment of any Letter of
Credit Accommodation, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Lender's Pro Rata
Share of the liability with respect to such Letter of Credit Accommodation
(including, without limitation, all Obligations with respect thereto).
(m) Each Borrower is irrevocably and unconditionally obligated,
without presentment, demand or protest, to pay to Agent any amounts paid by an
issuer of a Letter of Credit Accommodation with respect to such Letter of Credit
Accommodation (whether through the borrowing of Loans in accordance with Section
2.2(a) or otherwise). In the event that any Borrower fails to pay Agent on the
date of any payment under a Letter of Credit Accommodation in an amount equal to
the amount of such payment, Agent (to the extent it has actual notice thereof)
shall promptly notify each Lender of the unreimbursed amount of such payment and
each Lender agrees, upon one (1) Business Day's notice, to fund to Agent the
purchase of its participation in such Letter of Credit Accommodation in an
amount equal to its Pro Rata Share of the unpaid amount. The obligation of each
Lender to deliver to Agent an amount equal to its respective participation
pursuant to the foregoing sentence is absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or continuance of any
Event of Default, the failure to satisfy any other condition set forth in
Section 4 or any other event or circumstance. If such amount is not made
available by a Lender when due, Agent shall be entitled to recover such amount
on demand from such Lender with interest thereon, for each day from the date
such amount was due until the date such amount is paid to Agent at the Federal
Funds Rate for each day during such period (as published by the Federal Reserve
Bank of New York or at Agent's option based on the arithmetic mean determined by
Agent of the rates for the last transaction in overnight Federal funds arranged
prior to 9:00 a.m. (New York City time) on that day by each of the three leading
brokers of Federal funds transactions in New York City selected by Agent) and if
such amounts are not paid within three (3) days, at the highest Interest Rate
provided for in Section 3.1 hereof applicable to Prime Rate Loans.
2.3 Commitments. The aggregate amount of each Lender's Pro Rata Share
of the Loans and Letter of Credit Accommodations shall not exceed the amount of
such Lender's Commitment, as the same may from time to time be amended in
accordance with the provisions hereof.
37
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Agent, for the benefit of Lenders,
interest on the outstanding principal amount of the Loans at the Interest Rate.
All interest accruing hereunder on and after the date of any Event of Default or
termination hereof shall be payable on demand.
(b) Each Borrower (or Borrower Agent on behalf of such Borrower)
may from time to time request Eurodollar Rate Loans or may request that Prime
Rate Loans be converted to Eurodollar Rate Loans or that any existing Eurodollar
Rate Loans continue for an additional Interest Period. Such request from a
Borrower (or Borrower Agent on behalf of such Borrower) shall specify the amount
of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be
converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate Loans to
be continued (subject to the limits set forth below) and the Interest Period to
be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Agent of such a
request from a Borrower (or Borrower Agent on behalf of such Borrower), such
Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to
Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Default or Event of Default shall exist or have
occurred and be continuing, (ii) no party hereto shall have sent any notice of
termination of this Agreement, such Borrower (or Borrower Agent on behalf of
such Borrower) shall have complied with such customary procedures as are
established by Agent and specified by Agent to Borrower Agent from time to time
for requests by Borrowers for Eurodollar Rate Loans, (iii) no more than seven
(7) Interest Periods may be in effect at any one time, (iv) the aggregate amount
of the Eurodollar Rate Loans must be in an amount not less than $1,000,000 or an
integral multiple of $500,000 in excess thereof, and (v) Agent and each Lender
shall have determined that the Interest Period or Adjusted Eurodollar Rate is
available to Agent and such Lender and can be readily determined as of the date
of the request for such Eurodollar Rate Loan by such Borrower. Any request by or
on behalf of a Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans
to Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall
be irrevocable. Notwithstanding anything to the contrary contained herein, Agent
and Lenders shall not be required to purchase United States Dollar deposits in
the London interbank market or other applicable Eurodollar Rate market to fund
any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as
if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate
Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Agent has
received and approved a request to continue such Eurodollar Rate Loan at least
three (3) Business Days prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Agent's option, upon notice by Agent
to Borrower Agent, be subsequently converted to Prime Rate Loans in the event
that this Agreement shall terminate or not be renewed. Borrowers shall pay to
Agent, for the benefit of
38
Lenders, upon demand by Agent (or Agent may, at its option, charge any loan
account of any Borrower) any amounts required to compensate any Lender or
Participant for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Agent, for the
account of Lenders, monthly in arrears not later than the first day of each
calendar month and shall be calculated on the basis of a three hundred sixty
(360) day year and actual days elapsed. The interest rate on non-contingent
Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the
first day of the month after any change in such Prime Rate is announced based on
the Prime Rate in effect on the last day of the month in which any such change
occurs. In no event shall charges constituting interest payable by Borrowers to
Agent and Lenders exceed the maximum amount or the rate permitted under any
applicable law or regulation, and if any such part or provision of this
Agreement is in contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.
3.2 Fees.
(a) Borrowers shall pay to Agent for the ratable benefit of Lenders
monthly an unused line fee at a rate equal to the percentage (on a per annum
basis) set forth below calculated upon the amount by which $45,000,000 as then
in effect exceeds the average daily principal balance of the outstanding Loans
and Letter of Credit Accommodations during the immediately preceding month (or
part thereof) while this Agreement is in effect and for so long thereafter as
any Obligations are outstanding. Such fee shall be payable on the first day of
each month in arrears. The percentage used for determining the unused line fee
shall be one-quarter (1/4%) percent, provided, that, effective as of the first
(1/st/) day of the second month of each fiscal quarter (commencing with the
fiscal quarter ending on January 31, 2003), the percentage used for determining
the unused line fee shall be as set forth below if either (i) the sum of the
Quarterly Average Excess Availability for the immediately preceding fiscal
quarter plus the Excess Cash as of the last day of the immediately preceding
fiscal quarter is at or within the amounts indicated for such percentage or (ii)
the Leverage Ratio as of the last day of the immediately preceding fiscal
quarter (which ratio for this purpose shall be calculated based on the four (4)
immediately preceding fiscal quarters) is at or within the levels indicated for
such percentage:
Quarterly Average
Excess Availability plus Unused Line
Excess Cash Leverage Ratio Fee Percentage
----------- -------------- --------------
35,000,000 or more 2.00 to 1.00 or less 1/4%
Greater than or equal to Greater than 2.00q to 1.00 1/4%
$25,000,000 and less but,equal to or less than
than $35,000,000 3.00 to 1.00
39
Quarterly Average
Excess Availability plus Unused Line
Excess Cash Leverage Ratio Fee Percentage
----------- -------------- --------------
Greater than or equal to Greater than 3.00 to 1.00 3/8%
$15,000,000 and less but equal to or less than
than $25,000,000 4.00 to 1.00
Less than $15,000,000 Greater than 4.00 to 1.00 3/8%
provided, that, (A) the unused line fee percentage shall be calculated and
established once each fiscal quarter (commencing with the fiscal quarter ending
on January 31, 2003) and (B) the unused line fee percentage shall be the lower
percentage set forth above based on (1) the sum of the Quarterly Average Excess
Availability plus the Excess Cash as provided above or (2) the Leverage Ratio.
(b) Borrowers agree to pay to Agent the other fees and amounts
set forth in the Fee Letter in the amounts and at the times specified therein.
3.3 Changes in Laws and Increased Costs of Loans.
(a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Lender or any
banking or financial institution from whom any Lender borrows funds or obtains
credit (a "Funding Bank"), or (ii) a Funding Bank or any Lender complies with
any future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank or any Lender reasonably determines that the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof has or would have the effect
described below, or a Funding Bank or any Lender complies with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, and in the case of any
event set forth in this clause (iii), such adoption, change or compliance has or
would have the direct or indirect effect of reducing the rate of return on any
Lender's capital as a consequence of its obligations hereunder to a level below
that which Lender could have achieved but for such adoption, change or
compliance (taking into consideration the Funding Bank's or Lender's policies
with respect to capital adequacy) by an amount deemed by such Lender in good
faith to be material, and the result of any of the foregoing events described in
clauses (i), (ii) or (iii) is or results in an increase in the cost to any
Lender of funding or maintaining the Loans, the Letter of Credit Accommodations
or its Commitment, then Borrowers and Guarantors shall from time to time upon
demand by Agent pay to Agent additional amounts sufficient to indemnify Lenders
against such increased cost on an after-tax basis (after taking into account
applicable deductions and credits in respect of the amount indemnified). A
certificate as to the
40
amount of such increased cost shall be submitted to Borrower Agent by Agent and
shall be conclusive as to the amount, absent manifest error.
(b) If prior to the date of the request of Borrower Agent for any
Eurodollar Rate Loan in accordance with the terms hereof, Agent has received
notice from the Required Lenders that the Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect the
cost to Lenders of making or maintaining Eurodollar Rate Loans during such
Interest Period, or if prior to the first day of any Interest Period, Agent
shall have determined in good faith (which determination shall be conclusive and
binding upon Borrowers and Guarantors) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest Period, or Dollar deposits in
the principal amounts of the Eurodollar Rate Loans to which such Interest Period
is to be applicable are not generally available in the London interbank market,
Agent shall give telecopy or telephonic notice thereof to Borrower Agent as soon
as practicable thereafter, and will also give prompt written notice to Borrower
Agent when such conditions no longer exist. If such notice is given (A) any
Eurodollar Rate Loans requested to be made on the first day of such Interest
Period shall be made as Prime Rate Loans, (B) any Loans that were to have been
converted on the first day of such Interest Period to or continued as Eurodollar
Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each
outstanding Eurodollar Rate Loan shall be converted, on the last day of the
then-current Interest Period thereof, to Prime Rate Loans. Until such notice has
been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or
continued as such, nor shall any Borrower (or Borrower Agent on behalf of any
Borrower) have the right to convert Prime Rate Loans to Eurodollar Rate Loans.
(c) Notwithstanding any other provision herein, if the adoption of or
any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly
give written notice of such circumstances to Borrower Agent (which notice shall
be withdrawn whenever such circumstances no longer exist), (ii) the commitment
of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate
Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then
have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is
requested and (iii) such Lender's Loans then outstanding as Eurodollar Rate
Loans, if any, shall be converted automatically to Prime Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Rate Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, Borrowers and Guarantors shall pay
to such Lender such amounts, if any, as may be required pursuant to Section
3.3(d) below.
(d) Borrowers and Guarantors shall indemnify Agent and each Lender
and hold Agent and each Lender harmless from any loss or expense which Agent or
such Lender may sustain or incur
41
as a consequence of (i) default by Borrower in making a borrowing of, conversion
into or extension of Eurodollar Rate Loans after such Borrower (or Borrower
Agent on behalf of such Borrower) has given a notice requesting the same in
accordance with the provisions of this Loan Agreement, (ii) default by any
Borrower in making any prepayment of a Eurodollar Rate Loan after such Borrower
has given a notice thereof in accordance with the provisions of this Agreement,
and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is
not the last day of an Interest Period with respect thereto. With respect to
Eurodollar Rate Loans, such indemnification may include an amount equal to the
excess, if any, of (A) the amount of interest which would have accrued on the
amount so prepaid, or not so borrowed, converted or extended, for the period
from the date of such prepayment or of such failure to borrow, convert or extend
to the last day of the applicable Interest Period (or, in the case of a failure
to borrow, convert or extend, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Eurodollar Rate Loans provided for herein over (B) the amount of interest
(as determined by such Agent or such Lender) which would have accrued to Agent
or such Lender on such amount by placing such amount on deposit for a comparable
period with leading banks in the interbank Eurodollar market. This covenant
shall survive the termination or non-renewal of this Loan Agreement and the
payment of the Obligations.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Agent and
Lenders making the initial Loans and providing the initial Letter of Credit
Accommodations hereunder:
(a) Agent shall have received, in form and substance satisfactory to
Agent, all releases, terminations and such other documents as Agent may request
to evidence and effectuate the termination by the Existing Lenders of their
respective financing arrangements with Borrowers and Guarantors and the
termination and release by it or them, as the case may be, of any interest in
and to any assets and properties of each Borrower and Guarantor, duly
authorized, executed and delivered by it or each of them, including, but not
limited to, UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and any Borrower or Guarantor, as debtor;
(b) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Agent, and Agent shall have received all information and copies
of all documents, including records of requisite corporate action and
proceedings which Agent may have requested in connection therewith, such
documents where requested by Agent or its counsel to be certified by appropriate
corporate officers or Governmental Authority (and including a copy of the
certificate of incorporation or certificate of formation as applicable, of each
Borrower and Guarantor certified by the Secretary of State (or equivalent
Governmental Authority) which shall set forth the same complete corporate or
limited liability company name of such Borrower or Guarantor as is set forth
herein and such document as shall set
42
forth the organizational identification number of each Borrower or Guarantor, if
one is issued in its jurisdiction of incorporation);
(c) no material adverse change shall have occurred in the assets,
business or prospects of Borrowers since the date of Agent's latest field
examination (not including for this purpose the field review referred to in
clause (d) below) and no change or event shall have occurred which would impair
in any material respect the ability of any Borrower or Obligor to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Agent or any Lender to enforce the Obligations or realize upon
the Collateral;
(d) Agent shall have completed a field review of the Records and
such other information with respect to the Collateral as Agent may require to
determine the amount of Loans available to Borrowers (including, without
limitation, current perpetual inventory records and/or roll-forwards of Accounts
and Inventory through the date of closing and test counts of the Inventory in a
manner satisfactory to Agent, together with such supporting documentation as may
be necessary or appropriate, and other documents and information that will
enable Agent to accurately identify and verify the Collateral), the results of
which in each case shall be satisfactory to Agent, not more than three (3)
Business Days prior to the date hereof;
(e) Agent shall have received, in form and substance satisfactory
to Agent, all consents, waivers, acknowledgments and other agreements from third
persons which Agent may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including, without limitation, Collateral Access Agreements by
owners and lessors of leased premises of each Borrower and by processors and
warehouses at which Collateral is located;
(f) the aggregate amount of the Excess Availability of Borrowers
as determined by Agent, as of the date hereof, shall be not less than
$20,000,000 after giving effect to the initial Loans made or to be made and
Letter of Credit Accommodations issued or to be issued in connection with the
initial transactions hereunder;
(g) Agent shall have received, in form and substance satisfactory
to Agent, Deposit Account Control Agreements by and among Agent, each Borrower
and Guarantor, as the case may be and each bank where such Borrower (or
Guarantor) has a deposit account, in each case, duly authorized, executed and
delivered by such bank and Borrower or Guarantor, as the case may be;
(h) Agent shall have received, in form and substance satisfactory
to Agent, the Noteholder Intercreditor Agreement, the Factor Assignment
Agreements, and each of the Letter of Credit Intercreditor Agreements, in each
case, duly authorized, executed and delivered by the parties thereto;
43
(i) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest in all of the Collateral (other than the Senior Note Priority
Collateral and the Letter of Credit Issuer Priority Collateral);
(j) Agent shall have received and reviewed lien and judgement
search results for the jurisdiction of incorporation of each Borrower and
Guarantor, the jurisdiction of the chief executive office of each Borrower and
Guarantor and all jurisdictions in which assets of Borrowers and Guarantors are
located, which search results shall be in form and substance satisfactory to
Agent;
(k) Agent shall have received originals of the shares of the stock
certificates representing all of the issued and outstanding shares of the
Capital Stock of each Borrower and Guarantor (other than Parent) and owned by
any Borrower or Guarantor, in each case together with stock powers duly executed
in blank with respect thereto;
(l) Agent shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Agent, and certificates of insurance policies
and/or endorsements naming Agent as loss payee;
(m) Agent shall have received, in form and substance satisfactory
to Agent, such opinion letters of counsel to Borrowers and Guarantors with
respect to the Financing Agreements and such other matters as Agent may request;
and
(n) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Agent, in form and substance satisfactory to Agent.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
the Loans and/or providing Letter of Credit Accommodations to Borrowers,
including the initial Loans and Letter of Credit Accommodations and any future
Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto, except to the
extent that such representations and warranties expressly relate solely to an
earlier date (in which case such representations and warranties shall have been
true and accurate on and as of such earlier date);
(b) no law, regulation, order, judgment or decree of any
Governmental Authority shall exist, and no action, suit, investigation,
litigation or proceeding shall be pending or threatened in any court or before
any arbitrator or Governmental Authority, which (i) purports to enjoin,
prohibit, restrain or otherwise affect (A) the making of the Loans or providing
the Letter of Credit Accommodations, or
44
(B) the consummation of the transactions contemplated pursuant to the terms
hereof or the other Financing Agreements or (ii) has or has a reasonable
likelihood of having a Material Adverse Effect; and
(c) no Default or Event of Default shall exist or have occurred and be
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, each Borrower and Guarantor hereby grants to Agent, for itself and
the ratable benefit of Lenders, a continuing security interest in, a lien upon,
and a right of set off against, and hereby assigns to Agent, for itself and the
ratable benefit of Lenders, as security, all personal property and interests in
personal property, of each Borrower and Guarantor, whether now owned or
hereafter acquired or existing, and wherever located (together with all other
collateral security for the Obligations at any time granted to or held or
acquired by Agent or any Lender, collectively, the "Collateral"), including:
(a) all Accounts;
(b) all general intangibles, including, without limitation, all
Intellectual Property;
(c) all goods, including, without limitation, Inventory and Equipment;
(d) all chattel paper, including, without limitation, all tangible and
electronic chattel paper;
(e) all instruments, including, without limitation, all promissory
notes;
(f) all documents;
(g) all deposit accounts;
(h) all letters of credit, banker's acceptances and similar
instruments for which any Borrower or Guarantor is a beneficiary or otherwise
entitled to any payment (contingent or otherwise), and including all
letter-of-credit rights;
(i) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods
45
described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Receivables or other Collateral, including
returned, repossessed and reclaimed goods, and (iv) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
(j) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of any Borrower or Guarantor now or hereafter held
or received by or in transit to Agent, any Lender or its Affiliates or at any
other depository or other institution from or for the account of any Borrower or
Guarantor, whether for safekeeping, pledge, custody, transmission, collection or
otherwise;
(k) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;
(l) to the extent not otherwise described above, all Receivables;
(m) all Records; and
(n) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.
5.2 Perfection of Security Interests.
(a) Each Borrower and Guarantor irrevocably and unconditionally
authorizes Agent (or its agent) to file at any time and from time to time such
financing statements with respect to the Collateral naming Agent or its designee
as the secured party and such Borrower or Guarantor as debtor, as Agent may
require, and including any other information with respect to such Borrower or
Guarantor or otherwise required by part 5 of Article 9 of the Uniform Commercial
Code or required pursuant to any other legislation of such jurisdiction as Agent
may determine, together with any amendment and continuations with respect
thereto, which authorization shall apply to all financing statements filed on,
prior to or after the date hereof. Each Borrower and Guarantor hereby ratifies
and approves all financing statements (or other registrations or filings) naming
Agent or its designee as secured party and such Borrower or Guarantor, as the
case may be, as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Agent prior to
the date hereof and ratifies and confirms the authorization of Agent to file
such financing statements (and amendments, if any). Each Borrower and Guarantor
hereby authorizes Agent to adopt on behalf of such Borrower and Guarantor any
symbol required for authenticating any electronic filing. In the event that the
description of the collateral in any financing statement (or other registrations
or filings) naming Agent or its designee as the secured party and any Borrower
or Guarantor as debtor includes assets and properties of such Borrower or
Guarantor that do not at any time constitute
46
Collateral, whether hereunder, under any of the other Financing Agreements or
otherwise, the filing of such financing statement (or other registrations or
filings) shall nonetheless be deemed authorized by such Borrower or Guarantor to
the extent of the Collateral included in such description and it shall not
render the financing statement ineffective as to any of the Collateral or
otherwise affect the financing statement (or other registrations or filings) as
it applies to any of the Collateral. In no event shall any Borrower or Guarantor
at any time file, or permit or cause to be filed, any correction statement or
termination statement with respect to any financing statement (or other
registrations or filings) (or amendment or continuation with respect thereto)
naming Agent or its designee as secured party and such Borrower or Guarantor as
debtor.
(b) Each Borrower and Guarantor does not have any chattel paper
(whether tangible or electronic) or instruments as of the date hereof, except as
set forth in the Information Certificate. In the event that any Borrower or
Guarantor shall be entitled to or shall receive any chattel paper or instrument
after the date hereof, Borrowers and Guarantors shall promptly notify Agent
thereof in writing. Promptly upon the receipt thereof by or on behalf of any
Borrower or Guarantor (including by any agent or representative), such Borrower
or Guarantor shall deliver, or cause to be delivered to Agent, all tangible
chattel paper and instruments that such Borrower or Guarantor has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree. At Agent's option, each Borrower and Guarantor shall,
or Agent may at any time on behalf of any Borrower or Guarantor, cause the
original of any such instrument or chattel paper to be conspicuously marked in a
form and manner acceptable to Agent with the following legend referring to
chattel paper or instruments as applicable: "This [chattel paper][instrument] is
subject to the security interest of Congress Financial Corporation, as Agent and
any sale, transfer, assignment or encumbrance of this [chattel
paper][instrument] violates the rights of such secured party."
(c) In the event that any Borrower or Guarantor shall at any time hold
or acquire an interest in any electronic chattel paper or any "transferable
record" (as such term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or in Section 16 of the Uniform
Electronic Transactions Act as in effect in any relevant jurisdiction), such
Borrower or Guarantor shall promptly notify Agent thereof in writing. Promptly
upon Agent's request, such Borrower or Guarantor shall take, or cause to be
taken, such actions as Agent may request to give Agent control of such
electronic chattel paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such jurisdiction.
(d) Each Borrower and Guarantor does not have any deposit accounts as
of the date hereof, except as set forth in the Information Certificate.
Borrowers and Guarantors shall not, directly or indirectly, after the date
hereof open, establish or maintain any deposit account unless each of the
following conditions is satisfied: (i) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of any Borrower or
Guarantor to open or establish such account which
47
notice shall specify in reasonable detail and specificity acceptable to Agent
the name of the account, the owner of the account, the name and address of the
bank at which such account is to be opened or established, the individual at
such bank with whom such Borrower or Guarantor is dealing and the purpose of the
account, (ii) the bank where such account is opened or maintained shall be
acceptable to Agent, and (iii) on or before the opening of such deposit account,
such Borrower or Guarantor shall deliver to Agent a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by such Borrower or Guarantor and the bank at which such deposit
account is opened and maintained. The terms of this subsection (d) shall not
apply to deposit accounts specifically and exclusively used for payroll, payroll
taxes and other employee wage and benefit payments to or for the benefit of any
Borrower's or Guarantor's salaried employees.
(e) No Borrower or Guarantor owns or holds, directly or indirectly,
beneficially or as record owner or both, any investment property, as of the date
hereof, or have any investment account, securities account, commodity account or
other similar account with any bank or other financial institution or other
securities intermediary or commodity intermediary as of the date hereof, in each
case except as set forth in the Information Certificate.
(i) In the event that any Borrower or Guarantor shall be entitled to
or shall at any time after the date hereof hold or acquire any certificated
securities, other than certificated securities consisting of Parent's common
stock purchased by Parent for cancellation to the extent such repurchases are
permitted hereunder, such Borrower or Guarantor shall promptly endorse, assign
and deliver the same to Agent, accompanied by such instruments of transfer or
assignment duly executed in blank as Agent may from time to time specify. If any
securities, now or hereafter acquired by any Borrower or Guarantor are
uncertificated and are issued to such Borrower or Guarantor or its nominee
directly by the issuer thereof, such Borrower or Guarantor shall immediately
notify Agent thereof and shall cause the issuer to agree to comply with
instructions from Agent as to such securities, without further consent of any
Borrower or Guarantor or such nominee.
(ii) Borrowers and Guarantors shall not, directly or indirectly, after
the date hereof open, establish or maintain any investment account, securities
account, commodity account or any other similar account (other than a deposit
account) with any securities intermediary or commodity intermediary unless each
of the following conditions is satisfied: (A) Agent shall have received not less
than five (5) Business Days prior written notice of the intention of such
Borrower or Guarantor to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the
account, the owner of the account, the name and address of the securities
intermediary or commodity intermediary at which such account is to be opened or
established, the individual at such intermediary with whom such Borrower or
Guarantor is dealing and the purpose of the account, (B) the securities
intermediary or commodity intermediary (as the case may be) where such account
is opened or maintained shall be acceptable to Agent, and (C) on or before the
opening of such investment account, securities account or other similar account
with a securities intermediary or commodity intermediary, such Borrower or
Guarantor shall execute and deliver, and cause to be executed and delivered to
Agent, an Investment Property Control Agreement with respect thereto duly
48
authorized, executed and delivered by such Borrower or Guarantor and such
securities intermediary or commodity intermediary.
(f) Borrowers and Guarantors are not the beneficiary or otherwise entitled
to any right to payment under any letter of credit, banker's acceptance or
similar instrument as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower or Guarantor shall be entitled to or
shall receive any right to payment under any letter of credit, banker's
acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Agent thereof in writing. Such Borrower or Guarantor shall immediately
deliver, or cause to be delivered to Agent, with respect to any such letter of
credit, banker's acceptance or similar instrument, the written agreement of the
issuer and any other nominated person obligated to make any payment in respect
thereof (including any confirming or negotiating bank), in form and substance
satisfactory to Agent, consenting to the assignment of the proceeds of the
letter of credit to Agent by such Borrower or Guarantor and agreeing to make all
payments thereon directly to Agent or as Agent may otherwise direct.
(g) Borrowers and Guarantors do not have any commercial tort claims as of
the date hereof, except as set forth in the Information Certificate. In the
event that any Borrower or Guarantor shall at any time after the date hereof
have any commercial tort claims, such Borrower or Guarantor shall promptly
notify Agent thereof in writing, which notice shall (i) set forth in reasonable
detail the basis for and nature of such commercial tort claim and (ii) include
the express grant by such Borrower or Guarantor to Agent of a security interest
in such commercial tort claim (and the proceeds thereof). In the event that such
notice does not include such grant of a security interest, the sending thereof
by such Borrower or Guarantor to Agent shall be deemed to constitute such grant
to Agent. Upon the sending of such notice, any commercial tort claim described
therein shall constitute part of the Collateral and shall be deemed included
therein. Without limiting the authorization of Agent provided in Section 5.2(a)
hereof or otherwise arising by the execution by such Borrower or Guarantor of
this Agreement or any of the other Financing Agreements, Agent is hereby
irrevocably authorized from time to time and at any time to file such financing
statements naming Agent or its designee as secured party and such Borrower or
Guarantor as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower and
Guarantor shall promptly upon Agent's request, execute and deliver, or cause to
be executed and delivered, to Agent such other agreements, documents and
instruments as Agent may require in connection with such commercial tort claim.
(h) Borrowers and Guarantors do not have any goods, documents of title or
other Collateral in the custody, control or possession of a third party as of
the date hereof, except as set forth in the Information Certificate and except
for goods located in the United States in transit to a location of a Borrower or
Guarantor permitted herein in the ordinary course of business of such Borrower
or Guarantor in the possession of the carrier transporting such goods. In the
event that any goods, documents of title or other Collateral are at any time
after the date hereof in the custody, control or possession of any other person
not referred to in the Information Certificate or such carriers,
49
Borrowers and Guarantors shall promptly notify Agent thereof in writing.
Promptly upon Agent's request, Borrowers and Guarantors shall deliver to Agent a
Collateral Access Agreement duly authorized, executed and delivered by such
person and the Borrower or Guarantor that is the owner of such Collateral.
(i) Borrowers and Guarantors shall take any other actions reasonably
requested by Agent from time to time to cause the attachment, perfection and
first priority of, and the ability of Agent to enforce, the security interest of
Agent in any and all of the Collateral, including, without limitation, (i)
executing, delivering and, where appropriate, filing financing statements and
amendments relating thereto under the UCC or other applicable law, to the
extent, if any, that any Borrower's or Guarantor's signature thereon is required
therefor, (ii) causing Agent's name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of Agent to enforce, the
security interest of Agent in such Collateral, (iii) complying with any
provision of any statute, regulation or treaty of the United States (or Canada
or any province thereof) as to any Collateral if compliance with such provision
is a condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iv) obtaining the
consents and approvals of any Governmental Authority or third party, including,
without limitation, any consent of any licensor, lessor or other person
obligated on Collateral, and taking all actions required by any earlier versions
of the UCC or by other law, as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of any Borrower or Guarantor and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be made
in accordance with Agent's customary practices as in effect from time to time.
6.2 Statements. Agent shall render to Borrower Agent each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Agent
for Borrowers pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Agent but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and Guarantors and
conclusively binding upon Borrowers and Guarantors as an account stated except
to the extent that Agent receives a written notice from Borrower Agent of any
specific exceptions of Borrower Agent thereto within thirty (30) days after the
date such statement has been received by Parent. Until such time as Agent shall
have rendered to Borrower Agent a written statement as provided above, the
balance in any Borrower's loan account(s) shall be presumptive evidence of the
amounts due and owing to Agent and Lenders by Borrowers and Guarantors.
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6.3 Collection of Accounts.
(a) Borrowers and Guarantors shall establish and maintain, at their
expense, blocked accounts or lockboxes and related blocked accounts (in either
case, "Blocked Accounts"), as Agent may specify, with such banks as are
acceptable to Agent into which Borrowers and Guarantors shall promptly deposit
and direct their respective account debtors to directly remit all payments on
Receivables and all payments constituting proceeds of Inventory or other
Collateral in the identical form in which such payments are made, whether by
cash, check or other manner. Borrowers and Guarantors shall deliver, or cause to
be delivered to Agent a Deposit Account Control Agreement duly authorized,
executed and delivered by each bank where a Blocked Account is maintained as
provided in Section 5.2 hereof or at any time. Agent shall instruct the
depository banks at which the Blocked Accounts are maintained to transfer the
funds on deposit in the Blocked Accounts to such operating bank account of
Parent or Borrowers as Borrower Agent may specify in writing to Agent until such
time as Agent shall notify the depository bank otherwise. Without limiting any
other rights or remedies of Agent or Lenders, Agent may, at its option, instruct
the depository banks at which the Blocked Accounts are maintained to transfer
all available funds received or deposited into the Blocked Accounts to the Agent
Payment Account at any time that either: (i) an Event of Default shall exist or
have occurred and be continuing, or (ii) Excess Availability is less than
$20,000,000. Agent shall send to Borrower Agent a copy of any such written
instruction sent by Agent to the depository bank promptly thereafter. In the
event that at any time after Agent has instructed such depository banks to
transfer such funds to the Agent Payment Account, each of the conditions set
forth in clauses (i) and (ii) above do not exist or have not occurred and are
not continuing for a period of thirty (30) consecutive days, upon Borrower
Agent's written request received by Agent within five (5) Business Days after
the end of such thirty (30) day period, Agent shall instruct such depository
banks to transfer the funds on deposit in such accounts to such operating
deposit account of Parent or a Borrower as Borrower Agent may specify in writing
to Agent until such time as Agent is entitled to notify and shall notify the
depository bank otherwise as provided above. Borrowers and Guarantors agree that
all payments made to such Blocked Accounts or other funds received and collected
by Agent or any Lender, whether in respect of the Receivables, as proceeds of
Inventory or other Collateral or otherwise shall be treated as payments to Agent
and Lenders in respect of the Obligations and therefore shall constitute the
property of Agent and Lenders to the extent of the then outstanding Obligations.
(b) For purposes of calculating the amount of the Loans available to
each Borrower, such payments will be applied (conditional upon final collection)
to the Obligations on the Business Day of receipt by Agent of immediately
available funds in the Agent Payment Account provided such payments and notice
thereof are received in accordance with Agent's usual and customary practices as
in effect from time to time and within sufficient time to credit such Borrower's
loan account on such day, and if not, then on the next Business Day.
(c) Each Borrower and Guarantor and their respective directors,
employees, agents, Subsidiaries or other Affiliates shall, acting as trustee for
Agent, receive, as the property of Agent, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other
51
Collateral which come into their possession or under their control and
immediately upon receipt thereof, shall deposit or cause the same to be
deposited in the Blocked Accounts, or remit the same or cause the same to be
remitted, in kind, to Agent. In no event shall the same be commingled with any
Borrower's or Guarantor's own funds. Borrowers agree to reimburse Agent on
demand for any amounts owed or paid to any bank at which a Blocked Account or
any other deposit account is established or any other bank or person involved in
the transfer of funds to or from the Blocked Accounts arising out of Agent's
payments to or indemnification of such bank or person. The obligations of
Borrowers to reimburse Agent for such amounts pursuant to this Section 6.3 shall
survive the termination of this Agreement.
6.4 Payments.
(a) All Obligations shall be payable to the Agent Payment Account as
provided in Section 6.3 or such other place as Agent may designate from time to
time. Agent shall apply payments received or collected from any Borrower or
Guarantor or for the account of any Borrower or Guarantor (including the
monetary proceeds of collections or of realization upon any Collateral) as
follows: first, to pay any fees, indemnities or expense reimbursements then due
to Agent and Lenders from any Borrower or Guarantor; second, to pay interest due
in respect of any Loans (and including any Special Agent Advances); third, to
pay principal in respect of Special Agent Advances; fourth, to pay principal in
respect of the Loans and to pay or prepay Obligations arising under or pursuant
to any Interest Rate Protection Agreements of a Borrower or Guarantor with an
Affiliate of Agent (up to the amount of any then effective Reserve established
in respect of such Obligations), on a pro rata basis; fifth, to pay or prepay
any other Obligations whether or not then due, in such order and manner as Agent
determines or to be held as cash collateral in connection with any Letter of
Credit Accommodations or other contingent Obligations (but not including for
this purpose any Obligations arising under or pursuant to any Interest Rate
Protection Agreements) and sixth, to pay or prepay any Obligations arising under
or pursuant to Interest Rate Protection Agreements (other than to the extent
provided for above) on a pro rata basis. Notwithstanding anything to the
contrary contained in this Agreement, (i) unless so directed by Borrower Agent,
or unless a Default or an Event of Default shall exist or have occurred and be
continuing, Agent shall not apply any payments which it receives to any
Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period
applicable to any such Eurodollar Rate Loans or (B) in the event that there are
no outstanding Prime Rate Loans, provided, that, notwithstanding that there are
no Prime Rate Loans outstanding, so long as no Default or Event of Default shall
exist or have occurred and be continuing, unless Borrower Agent shall direct
that such payments be applied to the Eurodollar Rate Loans, Agent shall not
apply such payments to Eurodollar Rate Loans but shall in such circumstances
hold such funds as cash collateral up to $5,000,000 before applying such
payments to the Eurodollar Rate Loans and only apply any payments thereafter to
the Eurodollar Rate Loans and (ii) to the extent any Borrower uses any proceeds
of the Loans or Letter of Credit Accommodations to acquire rights in or the use
of any Collateral or to repay any Indebtedness used to acquire rights in or the
use of any Collateral, payments in respect of the Obligations shall be deemed
applied first to the Obligations arising from Loans and Letter of Credit
Accommodations that were not used for such purposes and second to the
Obligations arising from Loans and Letter of Credit
52
Accommodations the proceeds of which were used to acquire rights in or the use
of any Collateral in the chronological order in which such Borrower acquired
such rights in or the use of such Collateral. Such cash collateral shall
constitute part of the Collateral. Such cash collateral shall be held by Agent
in an account designated by Agent for such purposes in its books and records and
may be commingled with Agent's own funds. Borrowers shall receive a credit on a
monthly basis to their loan accounts maintained by Agent on the funds so held by
Agent at a rate equal to three and one-half (3 1/2%) percent per annum less than
the Prime Rate (adjusted effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs) as calculated by Agent.
So long as no Default or Event of Default shall exist or have occurred and be
continuing and the aggregate amount of the Excess Availability of Borrowers is
more than $1.00 after giving effect thereto, amounts received by Agent from
Borrowers pursuant to the foregoing which are not applied to the Obligations or
are not held as cash collateral pursuant to the provisions of this Section 6.4
shall, upon the request of Borrower Agent received by Agent be remitted to
Borrower Agent or as Borrower Agent may direct in accordance with the terms
hereof.
(b) At Agent's option, all principal, interest, fees, costs, expenses and
other charges provided for in this Agreement or the other Financing Agreements
may be charged directly to the loan account(s) of any Borrower maintained by
Agent.
(c) Any and all payments by or on behalf of any Borrower or Guarantor
hereunder and under any other Financing Agreement shall be made, in accordance
with Section 6.4 hereof, free and clear of and without deduction for any and all
Taxes, excluding (i) income taxes imposed on the net income of any Lender (or
any transferee or assignee of such Lender, including any Participant, any such
transferee or assignee being referred to as a "Transferee") and (ii) franchise
or similar taxes imposed on or determined by reference to the net income of any
Lender (or Transferee), in each case by the United States of America or by the
jurisdiction under the laws of which such Lender (or Transferee) (A) is
organized or any political subdivision thereof or (B) has its applicable lending
office located. In addition, Borrowers agree to pay to the relevant Governmental
Authority in accordance with applicable law any Other Taxes.
(d) If any Borrower or Guarantor shall be required by law to deduct or
withhold in respect of any Taxes or Other Taxes from or in respect of any sum
payable hereunder to Agent or any Lender, then:
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such
Lender (or Agent on behalf of such Lender) receives an amount equal to the sum
it would have received had no such deductions or withholdings been made;
(ii) such Borrower or Guarantor shall make such deductions and
withholdings;
53
(iii) such Borrower or Guarantor shall pay the full amount deducted
or withheld to the relevant taxing authority or other authority in accordance
with applicable law; and
(iv) to the extent not paid to Agent and Lenders pursuant to
clause (i) above, such Borrower or Guarantor shall also pay to Agent or any
Lender, at the time interest is paid, all additional amounts which Agent or any
Lender specifies as necessary to preserve the after-tax yield such Lender would
have received if such Taxes or Other Taxes had not been imposed.
(e) Within thirty (30) days after the date of any payment by any
Borrower or Guarantor of Taxes or Other Taxes, upon Agent's request, such
Borrower or Guarantor shall furnish to Agent the original or a certified copy of
a receipt evidencing payment thereof, or other evidence of payment reasonably
satisfactory to Agent.
(f) Borrowers will indemnify Agent and each Lender (or Transferee) for
the full amount of Taxes and Other Taxes paid by Agent or such Lender (or
Transferee, as the case may be). If Agent or such Lender (or Transferee)
receives a refund in respect of any Taxes or Other Taxes for which Lender (or
Transferee) has received payment from any Borrower or Guarantor hereunder, so
long as no Default or Event of Default shall exist or have occurred and be
continuing, Agent or such Lender (as the case may be) shall credit to the loan
account of Borrowers the amount of such refund plus any interest received (but
only to the extent of indemnity payments made, or additional amounts paid, by
Borrowers or Guarantors under this Section 6.4 with respect to the Taxes or
Other Taxes giving rise to such refund). If a Lender (or any Transferee) claims
a tax credit in respect of any Taxes for which it has been indemnified by
Borrowers or Guarantors pursuant to this Section 6.4, such Lender will apply the
amount of the actual dollar benefit received by such Lender as a result thereof,
as reasonably calculated by Lender and net of all expenses related thereto, to
the Loans. If Taxes or Other Taxes were not correctly or legally asserted, Agent
or such Lender shall, upon Borrower Agent's request and at Borrowers' expense,
provide such documents to Borrower Agent in form and substance reasonably
satisfactory to both Borrower Agent and Agent, as Borrower Agent may reasonably
request, to enable Borrowers to contest such Taxes or Other Taxes pursuant to
appropriate proceedings then available to such Borrower (so long as providing
such documents shall not, in the good faith determination of Agent, have a
reasonable likelihood of resulting in any liability of Agent or any Lender).
(g) If after receipt of any payment of, or proceeds of Collateral
applied to the payment of, any of the Obligations, Agent or any Lender is
required to surrender or return such payment or proceeds to any Person for any
reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Agent or such Lender. Borrowers and Guarantors shall be liable to pay to Agent,
and do hereby indemnify and hold Agent and Lenders harmless for the amount of
any payments or proceeds surrendered or returned. This Section 6.4(b) shall
remain effective notwithstanding any contrary action which may be taken by Agent
or any Lender in reliance upon such payment or proceeds. This Section 6.4 shall
survive the payment of the Obligations and the termination of this Agreement.
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6.5 Authorization to Make Loans.
(a) Agent and Lenders are authorized to make the Loans and provide the
Letter of Credit Accommodations based upon telephonic or other instructions
received from anyone purporting to be an officer of Borrower Agent or any
Borrower or other authorized person or, at the discretion of Agent, if such
Loans are necessary to satisfy any Obligations. All requests for Loans or Letter
of Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan. Requests received
after 11:00 a.m. Miami time on any day shall be deemed to have been made as of
the opening of business on the immediately following Business Day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of, any
Borrower or Guarantor when deposited to the credit of any Borrower or Guarantor
or otherwise disbursed or established in accordance with the instructions of any
Borrower or Guarantor or in accordance with the terms and conditions of this
Agreement.
(b) Borrower Agent or any Borrower may from time to time request that
proceeds of Loans be disbursed directly to the deposit accounts of any
Guarantor. Any such proceeds of Loans disbursed to PEI Licensing or ▇▇▇▇▇▇▇
Apparel, as the case may be, shall first be deemed payments by Borrowers to PEI
Licensing or ▇▇▇▇▇▇▇ Apparel, as the case may be, in respect of the obligations
of such Borrower to such persons in connection with the Intellectual Property
owned by such persons licensed to Borrowers. Agent and Lenders are authorized to
so disburse proceeds of the Loans. Agent may from time to time, at its option,
transfer such of the Loans or Letter of Credit Accommodations (or Reserves
related thereto) in the loan account of a Borrower to the loan account of the
other Borrower, so that any Loans or Letter of Credit Accommodations maintained
in the loan account of the one Borrower in excess of the Borrowing Base of such
Borrower shall be deemed Loans or Letter of Credit Accommodations to the other
Borrower.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
provided by Agent to Borrowers hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrowers to
Agent on or about the date hereof and (b) costs, expenses and fees in connection
with the preparation, negotiation, execution and delivery of this Agreement and
the other Financing Agreements. All other Loans made or Letter of Credit
Accommodations provided to or for the benefit of any Borrower or Guarantor
pursuant to the provisions hereof shall be used by such Borrower or Guarantor
only for general operating, working capital and other proper corporate purposes
of such Borrower or Guarantor not otherwise prohibited by the terms hereof
(including for the funding of certain acquisitions permitted hereunder). None of
the proceeds will be used, directly or indirectly, for the purpose of purchasing
or carrying any margin security (other than open-market repurchases of the
common stock of Parent for cancellation) or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans to
be considered a "purpose credit" within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, as amended.
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6.7 Appointment of Borrower Agent as Agent for Requesting Loans and
Receipts of Loans and Statements.
(a) Each Borrower and Guarantor hereby irrevocably appoints and
constitutes Borrower Agent as its agent to request and receive Loans and Letter
of Credit Accommodations pursuant to this Agreement and the other Financing
Agreements from Agent or any Lender in the name or on behalf of such Borrower.
Agent and Lenders may disburse the Loans to such bank account of Borrower Agent
or a Borrower or Guarantor (including bank accounts of PEI Licensing or ▇▇▇▇▇▇▇
Apparel with proceeds of Loans for application to the obligations of Borrowers
to PEI Licensing or ▇▇▇▇▇▇▇ Apparel in respect of royalties payable to them for
Intellectual Property licensed by PEI Licensing or ▇▇▇▇▇▇▇ Apparel to Borrowers)
or otherwise make such Loans to a Borrower and provide such Letter of Credit
Accommodations to a Borrower as Borrower Agent may designate or direct, without
notice to any other Borrower or Obligor. Notwithstanding anything to the
contrary contained herein, Agent may at any time and from time to time require
that Loans to or for the account of any Borrower be disbursed directly to an
operating account of such Borrower.
(b) Borrower Agent hereby accepts the appointment by Borrowers to act
as the agent of Borrowers and Guarantors pursuant to this Section 6.7.
(c) Each Borrower and other Guarantor hereby irrevocably appoints and
constitutes Borrower Agent as its agent to receive statements on account and all
other notices from Agent and Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements.
(d) Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by Borrower
Agent shall be deemed for all purposes to have been made by such Borrower or
Guarantor, as the case may be, and shall be binding upon and enforceable against
such Borrower or Guarantor to the same extent as if made directly by such
Borrower or Guarantor.
(e) No purported termination of the appointment of Borrower Agent as
agent as aforesaid shall be effective, except after ten (10) days' prior written
notice to Agent.
6.8 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each
payment on account of any Obligations to or for the account of one or more of
the Lenders in respect of any Obligations due on a particular day shall be
allocated among the Lenders entitled to such payments based on their respective
Pro Rata Shares and shall be distributed accordingly.
6.9 Sharing of Payments, Etc.
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(a) Each Borrower and Guarantor agrees that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim Agent
or any Lender may otherwise have, each Lender shall be entitled, at its option
(but subject, as among Agent and Lenders, to the provisions of Section 12.3(b)
hereof), to offset balances held by it for the account of such Borrower or
Guarantor at any of its offices, in dollars or in any other currency, against
any principal of or interest on any Loans owed to such Lender or any other
amount payable to such Lender hereunder, that is not paid when due (regardless
of whether such balances are then due to such Borrower or Guarantor), in which
case it shall promptly notify Borrower Agent and Agent thereof; provided, that,
such Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender (including Agent) shall obtain from any Borrower or
Guarantor payment of any principal of or interest on any Loan owing to it or
payment of any other amount under this Agreement or any of the other Financing
Agreements through the exercise of any right of setoff, banker's lien or
counterclaim or similar right or otherwise (other than from Agent as provided
herein), and, as a result of such payment, such Lender shall have received more
than its Pro Rata Share of the principal of the Loans or more than its share of
such other amounts then due hereunder or thereunder by any Borrower or Guarantor
to such Lender than the percentage thereof received by any other Lender, it
shall promptly pay to Agent, for the benefit of Lenders, the amount of such
excess and simultaneously purchase from such other Lenders a participation in
the Loans or such other amounts, respectively, owing to such other Lenders (or
such interest due thereon, as the case may be) in such amounts, and make such
other adjustments from time to time as shall be equitable, to the end that all
Lenders shall share the benefit of such excess payment (net of any expenses that
may be incurred by such Lender in obtaining or preserving such excess payment)
in accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders. To such end all Lenders shall make appropriate adjustments among
themselves (by the resale of participation sold or otherwise) if such payment is
rescinded or must otherwise be restored.
(c) Each Borrower and Guarantor agrees that any Lender purchasing a
participation (or direct interest) as provided in this Section may exercise, in
a manner consistent with this Section, all rights of setoff, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
right of setoff, banker's lien, counterclaims or similar rights or shall affect
the right of any Lender to exercise, and retain the benefits of exercising, any
such right with respect to any other Indebtedness or obligation of any Borrower
or Guarantor. If, under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, assign such
rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.
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6.10 Settlement Procedures.
(a) In order to administer the Credit Facility in an efficient manner
and to minimize the transfer of funds between Agent and Lenders, Agent may, at
its option, subject to the terms of this Section, make available, on behalf of
Lenders, the full amount of the Loans requested or charged to any Borrower's
loan account(s) or otherwise to be advanced by Lenders pursuant to the terms
hereof, without requirement of prior notice to Lenders of the proposed Loans.
(b) With respect to all Loans made by Agent on behalf of Lenders as
provided in this Section, the amount of each Lender's Pro Rata Share of the
outstanding Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Loans as of 5:00 p.m.
Miami time on the Business Day immediately preceding the date of each settlement
computation; provided, that, Agent retains the absolute right at any time or
from time to time to make the above described adjustments at intervals more
frequent than weekly, but in no event more than twice in any week. Agent shall
deliver to each of the Lenders after the end of each week, or at such lesser
period or periods as Agent shall determine, a summary statement of the amount of
outstanding Loans for such period (such week or lesser period or periods being
hereinafter referred to as a "Settlement Period"). If the summary statement is
sent by Agent and received by a Lender prior to 12:00 p.m. Miami time, then such
Lender shall make the settlement transfer described in this Section by no later
than 3:00 p.m. Miami time on the same Business Day and if received by a Lender
after 12:00 p.m. Miami time, then such Lender shall make the settlement transfer
by not later than 3:00 p.m. Miami time on the next Business Day following the
date of receipt. If, as of the end of any Settlement Period, the amount of a
Lender's Pro Rata Share of the outstanding Loans is more than such Lender's Pro
Rata Share of the outstanding Loans as of the end of the previous Settlement
Period, then such Lender shall forthwith (but in no event later than the time
set forth in the preceding sentence) transfer to Agent by wire transfer in
immediately available funds the amount of the increase. Alternatively, if the
amount of a Lender's Pro Rata Share of the outstanding Loans in any Settlement
Period is less than the amount of such Lender's Pro Rata Share of the
outstanding Loans for the previous Settlement Period, Agent shall forthwith
transfer to such Lender by wire transfer in immediately available funds the
amount of the decrease. The obligation of each of the Lenders to transfer such
funds and effect such settlement shall be irrevocable and unconditional and
without recourse to or warranty by Agent. Agent and each Lender agrees to ▇▇▇▇
its books and records at the end of each Settlement Period to show at all times
the dollar amount of its Pro Rata Share of the outstanding Loans and Letter of
Credit Accommodations. Each Lender shall only be entitled to receive interest on
its Pro Rata Share of the Loans to the extent such Loans have been funded by
such Lender. Because the Agent on behalf of Lenders may be advancing and/or may
be repaid Loans prior to the time when Lenders will actually advance and/or be
repaid such Loans, interest with respect to Loans shall be allocated by Agent in
accordance with the amount of Loans actually advanced by and repaid to each
Lender and the Agent and shall accrue from and including the date such Loans are
so advanced to but excluding the date such Loans are either repaid by Borrowers
or actually settled with the applicable Lender as described in this Section.
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(c) To the extent that Agent has made any such amounts available and
the settlement described above shall not yet have occurred, upon repayment of
any Loans by a Borrower, Agent may apply such amounts repaid directly to any
amounts made available by Agent pursuant to this Section. In lieu of weekly or
more frequent settlements, Agent may, at its option, at any time require each
Lender to provide Agent with immediately available funds representing its Pro
Rata Share of each Loan, prior to Agent's disbursement of such Loan to Borrower.
In such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender's obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender's obligation to make a Loan hereunder.
(d) If Agent is not funding a particular Loan to a Borrower (or
Borrower Agent for the benefit of such Borrower or any Guarantor) pursuant to
this Section on any day, Agent may assume that each Lender will make available
to Agent such Lender's Pro Rata Share of the Loan requested or otherwise made on
such day and Agent may, in its discretion, but shall not be obligated to, cause
a corresponding amount to be made available to or for the benefit of such
Borrower on such day. If Agent makes such corresponding amount available to a
Borrower and such corresponding amount is not in fact made available to Agent by
such Lender, Agent shall be entitled to recover such corresponding amount on
demand from such Lender together with interest thereon for each day from the
date such payment was due until the date such amount is paid to Agent at the
Federal Funds Rate for each day during such period (as published by the Federal
Reserve Bank of New York or at Agent's option based on the arithmetic mean
determined by Agent of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that day by each of
the three leading brokers of Federal funds transactions in New York City
selected by Agent) and if such amounts are not paid within three (3) days of
Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof
applicable to Prime Rate Loans. During the period in which such Lender has not
paid such corresponding amount to Agent, notwithstanding anything to the
contrary contained in this Agreement or any of the other Financing Agreements,
the amount so advanced by Agent to or for the benefit of any Borrower shall, for
all purposes hereof, be a Loan made by Agent for its own account. Upon any such
failure by a Lender to pay Agent, Agent shall promptly thereafter notify
Borrower Agent of such failure and Borrowers shall pay such corresponding amount
to Agent for its own account within five (5) Business Days of Borrower Agent's
receipt of such notice. A Lender who fails to pay Agent its Pro Rata Share of
any Loans made available by the Agent on such Lender's behalf, or any Lender who
fails to pay any other amount owing by it to Agent, is a "Defaulting Lender".
Agent shall not be obligated to transfer to a Defaulting Lender any payments
received by Agent for the Defaulting Lender's benefit, nor shall a Defaulting
Lender be entitled to the sharing of any payments hereunder (including any
principal, interest or fees). Amounts payable to a Defaulting Lender shall
instead be paid to or retained by Agent. Agent may hold and, in its discretion,
relend to a Borrower the amount of all such payments received or retained by it
for the account of such Defaulting Lender. For purposes of voting or consenting
to matters with respect to this Agreement and the other Financing Agreements and
determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a
"Lender" and such
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Lender's Commitment shall be deemed to be zero (0). This Section shall remain
effective with respect to a Defaulting Lender until such default is cured. The
operation of this Section shall not be construed to increase or otherwise affect
the Commitment of any Lender, or relieve or excuse the performance by any
Borrower or Obligor of their duties and obligations hereunder.
(e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that any Borrower may have
against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
6.11 Obligations Several; Independent Nature of Lenders' Rights. The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to Section 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Borrowers shall provide Agent with the following documents in a
form satisfactory to Agent:
(i) as soon as possible after the end of each week (but in any
event within three (3) Business Days after the end thereof) or more frequently
as Agent may request at any time that the aggregate amount of the Excess
Availability of Borrowers is less than $20,000,000 or a Default or Event of
Default shall exist or have occurred and be continuing, a summary report of the
value of inventory by location, sales made, collections received and credit
memos issued for such period and any Factor Receivables, together with such
supporting documentation and detail with respect thereto, as Agent may
reasonably request;
(ii) as soon as possible after the end of each month (but in any
event within twenty-five (25) days after the end thereof), on a monthly basis or
more frequently as Agent may request at any time that the aggregate amount of
the Excess Availability of Borrowers is less than $20,000,000 or a Default or
Event of Default shall exist or have occurred and be continuing, a borrowing
base certificate (as defined below) setting forth the calculation of the
Borrowing Base of each Borrower as of the last
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Business Day of the immediately preceding period as to the Accounts and
Inventory duly completed and executed by the chief financial officer, treasurer,
controller or other senior financial officer of Borrower Agent, togther with
such supporting documentation and detail with respect thereto, as Agent may
reasonably request;
(iii) as soon as possible after the end of each month (but in any
event within twenty-five (25) days after the end thereof), on a monthly basis or
more frequently as Agent may request at any time that the aggregate amount of
the Excess Availability of Borrowers is less than $20,000,000 or a Default or
Event of Default shall exist or have occurred and be continuing, (A) perpetual
inventory reports, (B) inventory reports by location and category (and including
the amounts of Eligible Inventory and the value thereof at any leased locations
and at premises of warehouses or other third parties (or if any Inventory that
is not Eligible Inventory having a value of more than $250,000 is at any such
leased location or third party location, then including such Inventory and the
value thereof in such report) and specifically the Inventory purchased with the
Letter of Credit Facilities or otherwise constituting Letter of Credit Issuer
Priority Collateral and including the amounts of Inventory using Intellectual
Property that is licensed by Borrowers other than from PEI Licensing or ▇▇▇▇▇▇▇
Apparel or otherwise not owned by them), (C) agings of accounts receivable
(together with a reconciliation to the previous month's aging and general
ledger), (D) agings of accounts payable (and including information indicating
the amounts owing to owners and lessors of leased premises, warehouses,
processors and other third parties from time to time in possession of any
Collateral and amounts due to licensors or other owners of Intellectual Property
used by any Borrower or Guarantor, other than to PEI Licensing or ▇▇▇▇▇▇▇
Apparel), and (E) the undrawn amounts under letters of credit issued under the
Letter of Credit Facilities, identified by Letter of Credit Issuer;
(iv) upon Agent's reasonable request, such reasonable samples of
the following as Agent may specify: (A) copies of customer statements and credit
memos, remittance advices and reports, and copies of deposit slips and bank
statements, (B) copies of shipping and delivery documents, and (C) copies of
purchase orders, invoices and delivery documents for Inventory and Equipment
acquired by any Borrower or Guarantor;
(v) such other reports as to the Collateral as Agent shall
reasonably request from time to time.
(b) Nothing contained in any borrowing base certificate shall be
deemed to limit, impair or otherwise affect the rights of Agent contained herein
and in the event of any conflict or inconsistency between the calculation of the
Borrowing Base as set forth in any borrowing base certificate and as determined
by Agent in good faith, the determination of Agent shall govern and be
conclusive and binding upon Borrowers and Guarantors. Without limiting the
foregoing, Borrowers shall furnish to Agent any information which Agent may
reasonably request regarding the determination and calculation of any of the
amounts set forth in any borrowing base certificate. The term "borrowing base
certificate" used in this Section 7.1 shall mean a certificate substantially in
the form of Exhibit C hereto, as such form may from time to time be reasonably
modified by Agent which is duly completed (including all
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schedules thereto) and executed by the chief financial officer, treasurer,
controller or other senior financial officer of Borrower Agent and delivered to
Agent.
(c) If any Borrower's or Guarantor's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, such Borrower and Guarantor hereby irrevocably
authorizes such service, contractor, shipper or agent to deliver such records,
reports, and related documents to Agent and to follow Agent's instructions with
respect to further services at any time that an Event of Default exists or has
occurred and is continuing.
7.2 Accounts Covenants.
(a) Borrowers shall notify Agent promptly of: (i) any material delay
in any Borrower's performance of any of its material obligations to any material
account debtor or the assertion of any material claims, offsets, defenses or
counterclaims by any material account debtor, or any material disputes with
material account debtors or any Factor, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information known to any Borrower
or Guarantor relating to the financial condition of any material account debtor
and (iii) any event or circumstance which, to any Borrower's or Guarantor's
knowledge, would cause Agent to consider any then existing Accounts as no longer
constituting Eligible Accounts or Eligible Factor Receivables. No credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor without Agent's consent, except in the ordinary
course of a Borrower's or Guarantor's business in accordance with its current
practices and policies as of the date hereof and as set forth in the schedules
delivered to Agent pursuant to Section 7.1(a)(i) or 7.1(a)(ii) above. So long as
no Event of Default exists or has occurred and is continuing, Borrowers and
Guarantors shall settle, adjust or compromise any claim, offset, counterclaim or
dispute with any account debtor. At any time that an Event of Default exists or
has occurred and is continuing, Agent shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or dispute
with account debtors or grant any credits, discounts or allowances.
(b) With respect to each Account: (i) the amounts shown on any
invoice delivered to Agent or schedule thereof delivered to Agent shall be true
and complete, (ii) no payments shall be made thereon except payments immediately
delivered to Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except in the ordinary course of a Borrower's or
Guarantor's business in accordance with its current practices and policies as of
the date hereof and as set forth in the schedules delivered to Agent pursuant to
Section 7.1(a)(i) or 7.1(a)(ii) above, (iv) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Agent in accordance with the terms of
this Agreement, (v) none of the transactions giving rise thereto will violate
any applicable foreign, Federal, State or local laws or regulations, all
documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
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(c) Agent shall have the right at any time or times, in Agent's
name or in the name of a nominee of Agent, in a manner substantially consistent
with the current customary practices of Agent, to verify the validity, amount or
any other matter relating to any Receivables or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
7.3 Inventory Covenants. With respect to the Inventory: (a) each
Borrower and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower's or
Guarantor's cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantors shall conduct a physical count of the Inventory,
either through periodic cycle counts or otherwise so that all Inventory is
subject to such counts at least once each year but at any time or times as Agent
may request on or after an Event of Default, and promptly following such
physical inventory (whether pursuant to a cycle count or otherwise) shall supply
Agent with a report in the form and with such reasonable specificity as may be
satisfactory to Agent concerning the results of such count; (c) Borrowers and
Guarantors shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Agent, except for sales
of Inventory in the ordinary course of its business and except to move Inventory
directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the manufacturer thereof to such
Borrower or Guarantor which is in transit to the locations set forth or
permitted herein; (d) upon Agent's request, Borrowers shall, at their expense,
no more than one (1) time in any twelve (12) month period (or if at any time the
aggregate amount of the Excess Availability of Borrowers is less than
$20,000,000, then two (2) times in any twelve (12) month period), but at any
time or times as Agent may request on or after an Event of Default or at any
time as Agent may request at its expense (for the account of Lenders), deliver
or cause to be delivered to Agent written appraisals as to the Inventory in
form, scope and methodology reasonably acceptable to Agent and by an appraiser
reasonably acceptable to Agent, addressed to Agent and Lenders and upon which
Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors
shall produce, use, store and maintain the Inventory with reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto); (f) none of the Inventory or other Collateral constitutes farm
products or the proceeds thereof; (g) each Borrower and Guarantor assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (h) Borrowers and Guarantors shall
not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate any Borrower or Guarantor to
repurchase such Inventory; (i) Borrowers and Guarantors shall keep the Inventory
in good and marketable condition; and (j) Borrowers and Guarantors shall not,
without prior written notice to Agent or the specific identification of such
Inventory in a report with respect thereto provided by Borrower Agent to Agent
pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on
consignment or approval.
7.4 Equipment and Real Property Covenants. With respect to the
Equipment and Real Property: (a) Borrowers and Guarantors shall keep the
Equipment in good order, repair, running and
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marketable condition (ordinary wear and tear excepted); (b) Borrowers and
Guarantors shall use the Equipment and Real Property with reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity in all material respects with all applicable laws; (c) the Equipment
is and shall be used in the business of Borrowers and Guarantors and not for
personal, family, household or farming use; (d) Borrowers and Guarantors shall
not remove any Equipment from the locations set forth or permitted herein,
except to the extent necessary to have any Equipment repaired or maintained in
the ordinary course of its business, to sell or dispose of Equipment as
permitted by Section 9.7(b)(ii) hereof or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of such Borrower or
Guarantor in the ordinary course of business; (e) the Equipment is now and shall
remain personal property and Borrowers and Guarantors shall not permit any of
the Equipment to be or become a part of or affixed to real property; and (f)
each Borrower and Guarantor assumes all responsibility and liability arising
from the use of the Equipment and Real Property.
7.5 Power of Attorney. Each Borrower and Guarantor hereby irrevocably
designates and appoints Agent (and all persons designated by Agent) as such
Borrower's and Guarantor's true and lawful attorney-in-fact, and authorizes
Agent, in such Borrower's, Guarantor's or Agent's name, to: (a) at any time an
Event of Default exists or has occurred and is continuing (i) demand payment on
Receivables or other Collateral, (ii) enforce payment of Receivables by legal
proceedings or otherwise, (iii) exercise all of such Borrower's or Guarantor's
rights and remedies to collect any Receivable or other Collateral, (iv) sell or
assign any Receivable upon such terms, for such amount and at such time or times
as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an
Account, (vi) discharge and release any Receivable, (vii) prepare, file and sign
such Borrower's or Guarantor's name on any proof of claim in bankruptcy or other
similar document against an account debtor or other obligor in respect of any
Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Agent, and open and dispose of all mail addressed to such Borrower
or Guarantor and handle and store all mail relating to the Collateral; and (ix)
do all acts and things which are necessary, in Agent's determination, to fulfill
such Borrower's or Guarantor's obligations under this Agreement and the other
Financing Agreements and (b) at all times that Agent has exercised its right to
instruct the depository banks at which Blocked Accounts are maintained to
transfer funds to the Agent Payment Account as provided in Section 6.3 hereto
(or at any time that any item of payment referred to below may be received by
Agent or any Lender), to (i) take control in any manner of any item of payment
in respect of Receivables or constituting Collateral or otherwise received in or
for deposit in the Blocked Accounts, (ii) have access to any lockbox or postal
box into which remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral are sent or received, (iii) endorse
such Borrower's or Guarantor's name upon any items of payment in respect of
Receivables or constituting Collateral or otherwise received by Agent and any
Lender and deposit the same in Agent's account for application to the
Obligations, and (c) at any time to (i) endorse such Borrower's or Guarantor's
name upon any of the following that may then be in the possession or control of
Agent (or its affiliates) or any Lender: chattel paper, document, instrument,
invoice, or similar document or agreement relating to any
64
Receivable or any goods pertaining thereto or any other Collateral, including
any warehouse or other receipts, or bills of lading and other negotiable or
non-negotiable documents, (ii) clear Inventory the purchase of which was
financed with Letter of Credit Accommodations through U.S. Customs or foreign
export control authorities in such Borrower's or Guarantor's name, Agent's name
or the name of Agent's designee, and to sign and deliver to customs officials
powers of attorney in such Borrower's or Guarantor's name for such purpose, and
to complete in such Borrower's or Guarantor's or Agent's name, any order, sale
or transaction, obtain the necessary documents in connection therewith and
collect the proceeds thereof, and (iii) sign such Borrower's or Guarantor's name
on any verification of Receivables and notices thereof to account debtors or any
secondary obligors or other obligors in respect thereof. Each Borrower and
Guarantor hereby releases Agent and Lenders and their respective officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except as a result of Agent's or any Lender's own gross negligence
or wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 Right to Cure. Agent may, at its option, upon notice to Borrower
Agent, (a) cure any default by any Borrower or Guarantor under any material
agreement with a third party that adversely affects Collateral in any material
respect having a value of more than $2,000,000, its value or the ability of
Agent to collect, sell or otherwise dispose of the Collateral or adversely
affects in any material respect the rights and remedies of Agent or any Lender
therein or the ability of any Borrower or Guarantor to perform its obligations
hereunder or under any of the other Financing Agreements, (b) pay or bond on
appeal any judgment entered against any Borrower or Guarantor, (c) discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and pay any amount, incur any expense or
perform any act which, in Agent's judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of Agent and
Lenders with respect thereto. Agent may add any amounts so expended to the
Obligations and charge any Borrower's account therefor, such amounts to be
repayable by Borrowers on demand. Agent and Lenders shall be under no obligation
to effect such cure, payment or bonding and shall not, by doing so, be deemed to
have assumed any obligation or liability of any Borrower or Guarantor. Any
payment made or other action taken by Agent or any Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 Access to Premises. From time to time as reasonably requested by
Agent, at the cost and expense of Borrowers, (a) Agent or its designee shall
have complete access to all of each Borrower's and Guarantor's premises during
normal business hours and after notice to Borrower Agent, or at any time and
without notice to Borrower Agent if an Event of Default exists or has occurred
and is continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of each Borrower's and Guarantor's books and records,
including the Records, and (b) each Borrower and Guarantor shall promptly
furnish to Agent such copies of such books and records or extracts therefrom as
Agent may request, and Agent or any Lender or Agent's designee may use during
normal business hours such of any Borrower's and Guarantor's personnel,
equipment, supplies and premises as may be
65
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Receivables and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Each Borrower and Guarantor hereby represents and warrants to Agent and
Lenders the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which are a continuing condition of the
making of Loans and providing Letter of Credit Accommodations to Borrowers:
8.1 Corporate Existence, Power and Authority. Each Borrower and
Guarantor is a corporation or limited liability company duly organized and in
good standing under the laws of its state, province or other jurisdiction of
organization and is duly qualified as a foreign corporation or limited liability
company, as applicable, and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder (a) are all within each Borrower's and Guarantor's corporate or
limited liability company powers, (b) have been duly authorized, (c) are not in
contravention of law or the terms of any Borrower's or Guarantor's certificate
of incorporation, by-laws, certificate of formation, operating agreement or
other organizational documentation, or any indenture, agreement or undertaking
to which any Borrower or Guarantor is a party or by which any Borrower or
Guarantor or its property are bound and (d) will not result in the creation or
imposition of, or require or give rise to any obligation to grant, any lien,
security interest, charge or other encumbrance upon any property of any Borrower
or Guarantor. This Agreement and the other Financing Agreements to which any
Borrower or Guarantor is a party constitute legal, valid and binding obligations
of such Borrower and Guarantor enforceable in accordance with their respective
terms.
8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
(a) The exact legal name of each Borrower and Guarantor is as set
forth on the signature page of this Agreement and in the Information
Certificate. No Borrower or Guarantor has, during the past five years, been
known by or used any other corporate or fictitious name or been a party to any
merger or consolidation, or acquired all or substantially all of the assets of
any Person, or acquired any of its property or assets outside of the ordinary
course of business, except as set forth in the Information Certificate.
(b) Each Borrower and Guarantor is an organization of the type
and organized in the jurisdiction set forth in the Information Certificate. The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such
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Borrower or Guarantor has none and accurately sets forth the federal employer
identification number of each Borrower and Guarantor.
(c) The chief executive office and mailing address of each
Borrower and Guarantor and each Borrower's and Guarantor's Records concerning
Accounts are located only at the address identified as such in Schedule 8.2 to
the Information Certificate and its only other places of business and the only
other locations of Collateral, if any, are the addresses set forth in Schedule
8.2 to the Information Certificate, subject to the rights of any Borrower or
Guarantor to establish new locations in accordance with Section 9.2 below. The
Information Certificate correctly identifies any of such locations which are not
owned by a Borrower or Guarantor and sets forth the owners and/or operators
thereof.
8.3 Financial Statements; No Material Adverse Change. All financial
statements relating to any Borrower or Guarantor which have been or may
hereafter be delivered by any Borrower or Guarantor to Agent and Lenders have
been prepared in accordance with GAAP (except as to any interim financial
statements, to the extent such statements are subject to normal year-end
adjustments and do not include any notes) and fairly present in all material
respects the financial condition and the results of operation of such Borrower
and Guarantor as at the dates and for the periods set forth therein. Except as
disclosed in any interim financial statements furnished by Borrowers and
Guarantors to Agent prior to the date of this Agreement, there has been no act,
condition or event which has had or is reasonably likely to have a Material
Adverse Effect since the date of the most recent audited financial statements of
any Borrower or Guarantor furnished by any Borrower or Guarantor to Agent prior
to the date of this Agreement.
8.4 Priority of Liens; Title to Properties. The security interests
and liens granted to Agent under this Agreement and the other Financing
Agreements constitute valid and perfected first priority liens and security
interests in and upon the Collateral (other than the Senior Note Priority
Collateral and the Letter of Credit Issuer Priority Collateral) and valid and
perfected second priority liens and security interests in and upon the Senior
Note Priority Collateral and the Letter of Credit Issuer Priority Collateral,
subject only to the liens indicated on Schedule 8.4 to the Information
Certificate and the other liens permitted under Section 9.8 hereof. Each
Borrower and Guarantor has good and marketable fee simple title to or valid
leasehold interests in all of its Real Property and good, valid and merchantable
title to all of its other properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
granted to Agent and such others as are specifically listed on Schedule 8.4 to
the Information Certificate or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower and Guarantor has filed, or caused to
be filed, in a timely manner all tax returns, reports and declarations which are
required to be filed by it. All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
and Guarantor has paid or caused to be paid all taxes due and payable or claimed
due and payable in any assessment received by it, except taxes the validity of
which are being contested in good
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faith by appropriate proceedings diligently pursued and available to such
Borrower or Guarantor and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on Schedule 8.6 to the
Information Certificate, (a) there is no investigation by any Governmental
Authority pending, or to any Borrower's or Guarantor's knowledge threatened,
against or affecting any Borrower or Guarantor, its or their assets or business
and (b) there is no action, suit, proceeding or claim by any Person pending, or
to any Borrower's or Guarantor's knowledge threatened, against any Borrower or
Guarantor or its or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, in each case, which could
reasonably be expected to have a Material Adverse Effect.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) Borrowers and Guarantors are not in default in any respect
under, or in violation in any respect of the terms of, any material agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrowers and Guarantors are in
compliance in all material respects with the requirements of all applicable
laws, rules, regulations and orders of any Governmental Authority relating to
their respective businesses.
(b) Borrowers and Guarantors have obtained all material permits,
licenses, approvals, consents, certificates, orders or authorizations of any
Governmental Authority required for the lawful conduct of its business (the
"Permits"). All of the Permits are valid and subsisting and in full force and
effect. There are no actions, claims or proceedings pending or to any Borrower's
or Guarantor's knowledge, threatened that seek the revocation, cancellation,
suspension or modification of any of the Permits.
8.8 Environmental Compliance.
(a) Except as set forth on Schedule 8.8 to the Information
Certificate, Borrowers, Guarantors and any Subsidiary of any Borrower or
Guarantor have not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in any manner which at any time violates in any
material respect any applicable Environmental Law or Permit, and the operations
of Borrowers, Guarantors and any Subsidiary of any Borrower or Guarantor
complies in all material respects with all Environmental Laws and all Permits.
(b) Except as set forth on Schedule 8.8 to the Information
Certificate, there has been no investigation by any Governmental Authority or
any proceeding, complaint, order, directive, claim, citation or notice by any
Governmental Authority or any other person nor is any pending or to any
Borrower's or Guarantor's knowledge threatened, with respect to any
non-compliance with or violation
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of the requirements of any Environmental Law by any Borrower or Guarantor and
any Subsidiary of any Borrower or Guarantor or the release, spill or discharge,
threatened or actual, of any Hazardous Material or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety matter, which
adversely affects or could reasonably be expected to adversely affect in any
material respect any Borrower or Guarantor or its or their business, operations
or assets or any properties at which such Borrower or Guarantor has transported,
stored or disposed of any Hazardous Materials.
(c) Except as set forth on Schedule 8.8 to the Information Certificate,
Borrowers, Guarantors and their Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
(d) Borrowers, Guarantors and their Subsidiaries have all Permits
required to be obtained or filed in connection with the operations of Borrowers
and Guarantors under any Environmental Law and all of such licenses,
certificates, approvals or similar authorizations and other Permits are valid
and in full force and effect.
8.9 Employee Benefits.
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or State law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the Internal Revenue Service and to any
Borrower's or Guarantor's knowledge, nothing has occurred which would cause the
loss of such qualification. Each Borrower and its ERISA Affiliates have made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending, or to any Borrower's or Guarantor's
knowledge, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan.
(c) (i) No ERISA Event has occurred or is reasonably expected to occur;
(ii) the current value of each Plan's assets (determined in accordance with the
assumptions used for funding such Plan pursuant to Section 412 of the Code) are
not less than such Plan's liabilities under Section 4001(a)(16) of ERISA; (iii)
each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and
do not reasonably expect to incur, any liability under Title IV of ERISA with
respect to any Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA Affiliates,
have not incurred and do not reasonably expect to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of
69
ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with
respect to a Multiemployer Plan; and (v) each Borrower and Guarantor, and their
ERISA Affiliates, have not engaged in a transaction that would be subject to
Section 4069 or 4212(c) of ERISA.
8.10 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower or Guarantor maintained at
any bank or other financial institution are set forth on Schedule 8.10 to the
Information Certificate, subject to the right of each Borrower and Guarantor to
establish new accounts in accordance with Section 5.2 hereof.
8.11 Intellectual Property. Each Borrower and Guarantor owns or licenses or
otherwise has the right to use all Intellectual Property necessary for the
operation of its business as presently conducted or proposed to be conducted. As
of the date hereof, Borrowers and Guarantors do not have any Intellectual
Property registered, or subject to pending applications, in the United States
Patent and Trademark Office or any similar office or agency in the United
States, any State thereof, any political subdivision thereof or in any other
country, other than those described in Schedule 8.11 to the Information
Certificate and has not granted any licenses with respect thereto other than as
set forth in Schedule 8.11 to the Information Certificate. No event has occurred
which permits or would permit after notice or passage of time or both, the
revocation, suspension or termination of such rights. To any Borrower's and
Guarantor's knowledge, no Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by any
Borrower or Guarantor infringes any patent, trademark, servicemark, tradename,
copyright, license or other intellectual property owned by any other Person
presently and no claim or litigation is pending or threatened against or
affecting any Borrower or Guarantor contesting its right to sell or use any such
Intellectual Property. Schedule 8.11 to the Information Certificate sets forth
all of the agreements or other arrangements of each Borrower and Guarantor
pursuant to which such Borrower or Guarantor has a license or other right to use
any trademarks, logos, designs, representations or other intellectual property
owned by another person as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of such Borrower or
Guarantor as in effect on the date hereof (collectively, together with such
agreements or other arrangements as may be entered into by any Borrower or
Guarantor after the date hereof, collectively, the "License Agreements" and
individually, a "License Agreement"). No trademark, servicemark, copyright or
other Intellectual Property at any time used by any Borrower or Guarantor which
is owned by another person, or owned by such Borrower or Guarantor is subject to
any security interest, lien, collateral assignment, pledge or other encumbrance
in favor of any person other than Agent, is affixed to any Eligible Inventory,
except (a) to the extent permitted under the term of the license agreements
listed on Schedule 8.11 to the Information Certificate and (b) to the extent the
sale of Inventory to which such Intellectual Property is affixed is permitted to
be sold by such Borrower or Guarantor under applicable law (including the United
States Copyright Act of 1976).
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
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(a) Each Borrower and Guarantor does not have any direct or indirect
Subsidiaries or Affiliates and is not engaged in any joint venture or
partnership except as set forth in Schedule 8.12 to the Information Certificate.
(b) Each Borrower and Guarantor is the record and beneficial owner of
all of the issued and outstanding shares of Capital Stock (including membership
interests as to limited liability companies) of each of the Subsidiaries listed
on Schedule 8.12 to the Information Certificate as being owned by such Borrower
or Guarantor and there are no proxies, irrevocable or otherwise, with respect to
such shares or membership interests and no equity securities of any of the
Subsidiaries are or may become required to be issued by reason of any options,
warrants, rights to subscribe to, calls or commitments of any kind or nature and
there are no contracts, commitments, understandings or arrangements by which any
Subsidiary is or may become bound to issue additional shares or membership
interests or securities convertible into or exchangeable for such shares.
(c) The issued and outstanding shares of Capital Stock of each Borrower
and Guarantor (other than Parent) are directly and beneficially owned and held
by the persons indicated in the Information Certificate, and in each case all of
such shares have been duly authorized and are fully paid and non-assessable,
free and clear of all claims, liens, pledges and encumbrances of any kind,
except as disclosed in writing to Agent prior to the date hereof.
(d) Each Borrower and Guarantor is Solvent and will continue to be
Solvent after the creation of the Obligations, the security interests of Agent
and the other transaction contemplated hereunder.
8.13 Labor Disputes.
(a) Set forth on Schedule 8.13 to the Information Certificate is a list
(including dates of termination) of all collective bargaining or similar
agreements between or applicable to each Borrower and Guarantor and any union,
labor organization or other bargaining agent in respect of the employees of any
Borrower or Guarantor on the date hereof.
(b) There is (i) no significant unfair labor practice complaint pending
against any Borrower or Guarantor or, to any Borrower's or Guarantor's
knowledge, threatened against it, before the National Labor Relations Board, and
no significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the date hereof against
any Borrower or Guarantor or, to any Borrower's or Guarantor's knowledge,
threatened against it, and (ii) no significant strike, labor dispute, slowdown
or stoppage is pending against any Borrower or Guarantor or, to any Borrower's
or Guarantor's knowledge, threatened against any Borrower or Guarantor.
8.14 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of any
Borrower or Guarantor permitted hereunder as in
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effect on the date hereof, there are no contractual or consensual restrictions
on any Borrower or Guarantor or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between any
Borrower or Guarantor and any of its or their Subsidiaries or (ii) between any
Subsidiaries of any Borrower or Guarantor or (b) the ability of any Borrower or
Guarantor or any of its or their Subsidiaries to incur Indebtedness or grant
security interests to Agent or any Lender in the Collateral.
8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets
forth all Material Contracts to which any Borrower or Guarantor is a party or is
bound as of the date hereof. Borrowers and Guarantors have delivered to Agent on
or before the date hereof true, correct and complete copies of such Material
Contracts that are in written form. Borrowers and Guarantors are not in breach
or in default in any material respect of or under any Material Contract and have
not received any notice of the intention of any other party thereto to terminate
any Material Contract.
8.16 Payable Practices. Each Borrower and Guarantor have not made any
material change in the historical accounts payable practices from those in
effect immediately prior to the date hereof.
8.17 Accuracy and Completeness of Information. All information furnished by
or on behalf of any Borrower or Guarantor in writing to Agent or any Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate is true and correct in all material respects on the date
as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a Material Adverse Affect, which has not been fully and accurately
disclosed to Agent in writing prior to the date hereof.
8.18 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Agent and Lenders on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Agent and Lenders regardless of any investigation made or
information possessed by Agent or any Lender. The representations and warranties
set forth herein shall be cumulative and in addition to any other
representations or warranties which any Borrower or Guarantor shall now or
hereafter give, or cause to be given, to Agent or any Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence.
(a) Each Borrower and Guarantor shall at all times preserve, renew and
keep in full force and effect its existence as a corporation or limited
liability company, as applicable, and rights and
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franchises with respect thereto and maintain in full force and effect all
licenses, trademarks, tradenames, approvals, authorizations, leases, contracts
and Permits necessary to carry on in all material respects the business as
presently or proposed to be conducted, except as to any Guarantor other than
Parent as permitted in Section 9.7 hereto; provided, that, PEI Licensing and
▇▇▇▇▇▇▇ Apparel may from time to time in the ordinary course of business
consistent with current practices and policies determine not to maintain certain
licenses of trademarks owned by it to third parties or not to maintain certain
trademark registrations in each case to the extent permitted under Section 9.7
hereof or not to maintain certain licenses of trademarks owned by third parties
to a Borrower or Guarantor to the extent permitted under Section 9.18 hereof.
(b) No Borrower or Guarantor shall change its name unless each of the
following conditions is satisfied: (i) Agent shall have received not less than
thirty (30) days prior written notice from Borrower Agent of such proposed
change in its corporate or limited liability company name, which notice shall
accurately set forth the new name; and (ii) Agent shall have received a copy of
the amendment to the Certificate of Incorporation (or certificate of formation,
as the case may be) of such Borrower or Guarantor providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation or
organization of such Borrower or Guarantor as soon as it is available.
(c) No Borrower or Guarantor shall change its chief executive
office or its mailing address or organizational identification number (or if it
does not have one, shall not acquire one) unless Agent shall have received not
less than thirty (30) days' prior written notice from Borrower Agent of such
proposed change, which notice shall set forth such information with respect
thereto as Agent may require and Agent shall have received such agreements as
Agent may reasonably require in connection therewith. No Borrower or Guarantor
shall change its type of organization, jurisdiction of organization or other
legal structure.
9.2 New Collateral Locations. Each Borrower and Guarantor may only open
any new location within the continental United States provided such Borrower or
Guarantor (a) gives Agent five (5) days prior written notice of the intended
opening of any such new location and (b) executes and delivers, or causes to be
executed and delivered, to Agent such agreements, documents, and instruments as
Agent may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location.
9.3 Compliance with Laws, Regulations, Etc.
(a) Each Borrower and Guarantor shall, and shall cause any Subsidiary
to, at all times, comply in all material respects with all laws, rules,
regulations, licenses, approvals, orders and other Permits applicable to it and
duly observe all requirements of any foreign, Federal, State or local
Governmental Authority.
(b) Borrowers and Guarantors shall give written notice to Agent
immediately upon any Borrower's or Guarantor's receipt of any notice of, or any
Borrower's or Guarantor's otherwise
73
obtaining knowledge of, (i) the occurrence of any event involving the release,
spill or discharge, threatened or actual, of any Hazardous Material or (ii) any
investigation, proceeding, complaint, order, directive, claims, citation or
notice with respect to: (A) any non-compliance with or violation of any
Environmental Law by any Borrower or Guarantor or (B) the release, spill or
discharge, threatened or actual, of any Hazardous Material other than in the
ordinary course of business and other than as permitted under any applicable
Environmental Law. Copies of all environmental surveys, audits, assessments,
feasibility studies and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by such Borrower or Guarantor to Agent.
Each Borrower and Guarantor shall take prompt action to respond to any material
non-compliance with any of the Environmental Laws and shall regularly report to
Agent on such response.
(c) Without limiting the generality of the foregoing, whenever Agent
reasonably determines that there is any material non-compliance, or any
condition which requires any action by or on behalf of any Borrower or Guarantor
in order to avoid any material non-compliance, with any Environmental Law,
Borrowers shall, at Agent's request and Borrowers' expense: (i) cause an
independent environmental engineer reasonably acceptable to Agent to conduct
such tests of the site where material non-compliance or alleged material
non-compliance with such Environmental Laws has occurred as to such
non-compliance and prepare and deliver to Agent a report as to such material
non-compliance setting forth the results of such tests, a proposed plan for
responding to any environmental problems described therein, and an estimate of
the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such material non-compliance, or such Borrower's
or Guarantor's response thereto or the estimated costs thereof, shall change in
any material respect.
(d) Each Borrower and Guarantor shall indemnify and hold harmless
Agent and Lenders and their respective directors, officers, employees, agents,
invitees, representatives, successors and assigns, from and against any and all
losses, claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of any Borrower or
Guarantor and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.
9.4 Payment of Taxes and Claims. Each Borrower and Guarantor shall, and
shall cause any Subsidiary to, duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or Subsidiary, as the case may be, and with respect to which adequate
reserves have been set aside on its books. Each Borrower and Guarantor shall be
liable for any tax or penalties imposed on Agent or any Lender as a result of
the financing arrangements provided for herein and each Borrower and Guarantor
74
agrees to indemnify and hold Agent harmless with respect to the foregoing, and
to repay to Agent, for the benefit of Lenders, on demand the amount thereof, and
until paid by such Borrower or Guarantor such amount shall be added and deemed
part of the Loans, provided, that, nothing contained herein shall be construed
to require any Borrower or Guarantor to pay any income or franchise taxes
attributable to the income of Lenders from any amounts charged or paid hereunder
to Lenders. The foregoing indemnity shall survive the payment of the Obligations
and the termination of this Agreement.
9.5 Insurance. Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, at all times, maintain with financially sound and reputable
insurers insurance with respect to the Collateral against loss or damage and all
other insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or similar
businesses and similarly situated (including self-insurance). Said policies of
insurance shall be reasonably satisfactory to Agent as to form, amount and
insurer (including as to insurance other than with respect to loss or damage to
Collateral, self-insurance as to form, amount, coverage and administrator
reasonably satisfactory to Agent). Borrowers and Guarantors shall furnish
certificates, policies or endorsements to Agent as Agent shall reasonably
require as proof of such insurance, and, if any Borrower or Guarantor fails to
do so, Agent is authorized, but not required, to obtain such insurance at the
expense of Borrowers. All policies shall provide for at least thirty (30) days
prior written notice to Agent of any cancellation or reduction of coverage and
that Agent may act as attorney for each Borrower and Guarantor in obtaining, and
at any time an Event of Default exists or has occurred and is continuing,
adjusting, settling, amending and canceling such insurance. Borrowers and
Guarantors shall cause Agent to be named as a loss payee and an additional
insured (but without any liability for any premiums) under such insurance
policies and Borrowers and Guarantors shall obtain non-contributory lender's
loss payable endorsements to all insurance policies in form and substance
satisfactory to Agent. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Agent as its interests
may appear and further specify that Agent and Lenders shall be paid regardless
of any act or omission by any Borrower, Guarantor or any of its or their
Affiliates. Without limiting any other rights of Agent or Lenders, any insurance
proceeds received by Agent at any time may be applied to payment of the
Obligations, whether or not then due, in any order and in such manner as Agent
may determine. Upon application of such proceeds to the Loans, Loans may be
available subject and pursuant to the terms hereof to be used for the costs of
repair or replacement of the Collateral lost or damages resulting in the payment
of such insurance proceeds.
9.6 Financial Statements and Other Information.
(a) Each Borrower and Guarantor shall, and shall cause any
Subsidiary to, keep proper books and records in which true and complete entries
shall be made of all dealings or transactions of or in relation to the
Collateral and the business of such Borrower, Guarantor and its Subsidiaries in
accordance with GAAP. Borrowers and Guarantors shall promptly furnish to Agent
and Lenders all such financial and other information as Agent shall reasonably
request relating to the Collateral and the assets, business and operations of
Borrowers and Guarantors, and Borrowers and Guarantors shall notify the auditors
and accountants of Borrowers and Guarantors that Agent is authorized to obtain
75
such information directly from them. Without limiting the foregoing, Borrowers
and Guarantors shall furnish or cause to be furnished to Agent, the following:
(i) within thirty (30) days after the end of each fiscal month (except that, in
the case of any fiscal month that is the last month of a fiscal quarter,
forty-five (45) days after the end of such month), monthly unaudited
consolidated financial statements, and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders' equity), all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Parent and its Subsidiaries as of the end of and through such
fiscal month, certified to be correct by the chief financial officer of Parent,
subject to normal year-end adjustments and no footnotes and accompanied by a
compliance certificate substantially in the form of Exhibit D hereto, along with
a schedule in a form satisfactory to Agent of the calculations used in
determining, as of the end of such month, whether Borrowers and Guarantors are
in compliance with the covenant set forth in Section 9.17 of this Agreement for
such month and (ii) within ninety (90) days after the end of each fiscal year,
audited consolidated financial statements and unaudited consolidating financial
statements of Parent and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders' equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Parent and its Subsidiaries as of the end of and for such fiscal
year, together with the unqualified opinion of independent certified public
accountants with respect to the audited consolidated financial statements, which
accountants shall be an independent accounting firm selected by Borrowers and
acceptable to Agent, that such audited consolidated financial statements have
been prepared in accordance with GAAP, and present fairly the results of
operations and financial condition of Parent and its Subsidiaries as of the end
of and for the fiscal year then ended.
(b) Borrowers and Guarantors shall promptly notify Agent in
writing of the details of (i) any loss, damage, investigation, action, suit,
proceeding or claim relating to Collateral having a value of more than
$5,000,000 or which can reasonably be expected to result in any material adverse
change in any Borrower's or Guarantor's business, properties, assets, goodwill
or condition, financial or otherwise, (ii) any Material Contract being
terminated or amended or any new Material Contract entered into (in which event
Borrowers and Guarantors shall provide Agent with a copy of such Material
Contract), (iii) any order, judgment or decree in excess of $5,000,000 shall
have been entered against any Borrower or Guarantor any of its or their
properties or assets, (iv) any notification of a material violation of laws or
regulations received by any Borrower or Guarantor, (v) any ERISA Event, and (vi)
the occurrence of any Default or Event of Default.
(c) Borrowers and Guarantors shall promptly after the sending
or filing thereof furnish or cause to be furnished to Agent copies of all
reports which any Borrower or Guarantor sends to its stockholders generally and
copies of all reports and registration statements which any Borrower or
Guarantor files with the Securities and Exchange Commission, any national
securities exchange or the National Association of Securities Dealers, Inc.
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(d) Borrowers and Guarantors shall furnish or cause to be
furnished to Agent such budgets, forecasts, projections and other information
respecting the Collateral and the business of Borrowers and Guarantors, as Agent
may, from time to time, reasonably request. Agent is hereby authorized to
deliver a copy of any financial statement or any other information relating to
the business of Borrowers and Guarantors to any court or other Governmental
Authority or to any Lender or Participant or prospective Lender or Participant
or any Affiliate of any Lender or Participant. Each Borrower and Guarantor
hereby irrevocably authorizes and directs all accountants or auditors to deliver
to Agent, at Borrowers' expense, copies of the financial statements of any
Borrower and Guarantor and any reports or management letters prepared by such
accountants or auditors on behalf of any Borrower or Guarantor and to disclose
to Agent and Lenders such information as they may have regarding the business of
any Borrower and Guarantor. Any documents, schedules, invoices or other papers
delivered to Agent or any Lender may be destroyed or otherwise disposed of by
Agent or such Lender one (1) year after the same are delivered to Agent or such
Lender, except as otherwise designated by Borrower Agent to Agent or such Lender
in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
directly or indirectly,
(a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it;
(b) sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for
(i) sales of Inventory in the ordinary course of
business,
(ii) the sale or other disposition of worn-out or
obsolete Equipment or Equipment no longer used or useful in the business of any
Borrower or Guarantor so long as all proceeds of such sales or other
dispositions are paid to Agent for application to the Obligations, and
(iii) the issuance and sale by any Borrower or Guarantor
of Capital Stock of such Borrower or Guarantor, including the issuance of shares
of the Capital Stock of Parent pursuant to a public or private offering, after
the date hereof; provided, that, (A) Agent shall have received not less than ten
(10) Business Days' prior written notice of such issuance and sale by such
Borrower or Guarantor, which notice shall specify the parties to whom such
shares are to be sold (and if in a public offering, then specifying the same or
in a private offering to multiple parties where such parties are not known, then
specifying the same), the terms of such sale, the total amount which it is
anticipated will be realized from the issuance and sale of such stock and the
net cash proceeds which it is anticipated will be received by such Borrower or
Guarantor from such sale, (B) such Borrower or Guarantor shall not be required
to pay any cash dividends or repurchase or redeem such Capital Stock or make any
other payments in respect thereof, except as otherwise permitted in Section 9.11
hereof, (C) the terms of such Capital Stock, and the terms and conditions of the
purchase and sale thereof, shall not include any
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terms that include any limitation on the right of any Borrower to request or
receive Loans or Letter of Credit Accommodations or the right of any Borrower
and Guarantor to amend, modify or supplement any of the terms and conditions of
this Agreement or any of the other Financing Agreements or otherwise in any way
limit or restrict the arrangements of Borrowers and Guarantors with Agent and
Lenders, (D) except as Agent may otherwise agree in writing or as is otherwise
permitted in Section 9.9(f)(v) and Section 9.9(g)(v) hereof, all of the proceeds
of the sale and issuance of such Capital Stock shall be paid to Agent for
application to the Obligations in such order and manner as Agent may determine
(but as to any Eurodollar Rate Loans then outstanding, subject to the terms of
Section 6.4(a) with respect to the application of payments to such Eurodollar
Rate Loans) and (E) as of the date of such issuance and sale and after giving
effect thereto, no Default or Event of Default shall exist or have occurred,
(iv) the issuance of Capital Stock of any Borrower or Guarantor
consisting of common stock pursuant to an employee stock option or grant or
similar equity plan (including the issuance of shares of Parent's common stock
upon the exercise by directors or employees of such options) or 401(k) plans of
such Borrower or Guarantor for the benefit of its employees, directors and
consultants, provided, that, in no event shall such Borrower or Guarantor be
required to issue, or shall such Borrower or Guarantor issue, Capital Stock
pursuant to such stock plans or 401(k) plans which would result in a Change of
Control or other Event of Default,
(v) the grant by any Borrower or Guarantor of a non-exclusive license
or an exclusive license after the date hereof to any person (other than another
Borrower or Guarantor) for the use of any Intellectual Property consisting of
trademarks owned by such Borrower or Guarantor; provided, that, as to any such
license, each of the following conditions is satisfied: (A) within forty-five
(45) days after the end of each fiscal quarter or more frequently from time to
time as Agent may reasonably request, Borrowers and Guarantors shall provide to
Agent a list of the licenses then in effect, together with such other
information with respect thereto as Agent may reasonably request, (B) each such
license shall be on commercially reasonable prices and terms in a bona fide
arms'-length transaction, (C) such license shall only be for the use of
trademarks in the manufacture, distribution or sale of products outside the
United States of America and Canada or if such license is for the use of such
trademarks in the manufacture, distribution or sale of products within the
United States of America or Canada, at Agent's option, any Inventory bearing the
trademark that is subject to such license or for which such trademark is used in
the manufacture, distribution or sale thereof shall cease to be Eligible
Inventory to the extent that it can no longer be sold using such trademark or in
the reasonable determination of Agent, is not reasonably anticipated to be sold
during the remaining period that such Borrower or Guarantor may use such
trademark prior to the termination of its rights to do so in accordance with the
terms of the applicable agreement (and after giving effect to the reduction in
the Borrowing Base as a result of such Inventory ceasing to be Eligible
Inventory, the aggregate amount of the Excess Availability of Borrowers shall be
not less than $5,000,000), (D) upon Agent's reasonable request, Borrowers and
Guarantors shall deliver to Agent true, correct and complete copies of such
agreements, documents and instruments in connection with such license as Agent
may reasonably
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specify, and (E) at the time of the grant of the license and after giving effect
thereto, no Default or Event of Default shall exist or have occurred and be
continuing;
(vi) the licensing by a Borrower or Guarantor of Intellectual
Property owned by it to another Borrower or Guarantor; provided, that, as to any
such license: (A) any rights of such Borrower or Guarantor shall be subject to
the rights of Agent in such Intellectual Property (including the rights of Agent
to use such Intellectual Property upon an Event of Default), and (B) such
license shall not impair, hinder or otherwise adversely affect the rights of
Agent;
(vii) the abandonment or cancellation of trademarks or the failure to
maintain or not renew, or the allowing to lapse of, any trademarks as registered
under the laws of any country which are not material and are no longer used or
useful in any material respect in the business of any Borrower, Guarantor or
their Subsidiaries and does not appear on or is otherwise not affixed to or
incorporated in any Inventory or Equipment or necessary in connection with the
Records and Borrowers and Guarantors have determined in good faith in the
ordinary course of its business that such trademark being abandoned or
cancelled, or not maintained or renewed, or allowed to lapse, as the case may
be, under the laws of the jurisdiction of any country does not have a value in
excess of $100,000 as to such trademark in such country;
(viii) the existing licenses of trademarks owned by a Borrower or
Guarantor to a person that is not a Borrower or Guarantor set forth on Schedule
9.7(b) hereto; provided, that, as to each such license: (A) Agent shall have
received true, correct and complete copies of all agreements relating to such
license arrangements and such other information with respect thereto as Agent
may reasonably request from time to time and (B) in no event shall any Borrower
or Guarantor amend or change such arrangements so as to limit or impair the
rights of any Borrower or Guarantor (or Agent) to use the trademarks subject to
such license arrangements or to increase or create any liabilities of any
Borrower or Guarantor in connection with such license arrangements;
(ix) the sale and assignment by a Borrower to a Factor of Accounts
of such Borrower, in accordance with the terms and conditions of the Factoring
Agreements of such Borrower with such Factor; provided, that, (A) Agent shall
have received true, correct and complete copies of all of the Factoring
Agreements and all related agreements, documents and instruments (and as to any
Factoring Agreements entered into after the date hereof, the terms and
conditions shall be reasonably satisfactory to Agent), (B) in no event shall the
aggregate face amount of all Accounts sold by Borrowers to Factors outstanding
at any one time exceed $5,000,000, (C) Agent shall have received in reasonable
detail a report of the Accounts to be so sold and assigned to the Factor and the
date of any such sale and assignment not less than every two (2) weeks or more
frequently as Agent may request at any time that the aggregate amount of the
Excess Availability of Borrowers is less than $20,000,000 or a Default or Event
of Default shall exist or have occurred and be continuing, (D) as of the date of
any such sale and assignment and after giving effect thereto (including giving
effect to the reduction in the Borrowing Base of the Borrower making such sale
and assignment as a result thereof), the aggregate amount of the Excess
Availability of Borrowers plus the Excess Cash shall be not less than
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$15,000,000, (E) Agent shall have received a Factoring Assignment Agreement in
form and substance satisfactory to Agent duly authorized, executed and delivered
by each Factor, Borrowers and Guarantors, (F) Borrowers and Guarantors shall not
obtain any advance payments from a Factor in respect of Accounts to be sold or
assigned or any loans or other advances or other financial accommodations and
the only Indebtedness of Borrowers and Guarantors to a Factor, contingent or
otherwise, shall consist of the commissions and other fees and charges of such
Factor under the terms of the Factoring Agreements, (G) Borrowers and Guarantors
shall not, directly or indirectly, amend, modify, alter or change in any
material respect any of the Factoring Agreements or any related agreements,
documents and instruments, except that Borrowers may, after prior written notice
to Agent, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof, or to reduce any rates, commissions or fees in connection
therewith, (H) Agent shall have received not less than ten (10) Business Days'
prior written notice of the intention of any Borrower or Guarantor to enter into
a new Factoring Agreement after the date hereof, which notice shall set forth in
reasonable detail, the name and address of the proposed Factor, the proposed
rates, commissions and fees, and the maturity date with respect thereto,
together with such other information with respect thereto as Agent may
reasonably request and any Factor pursuant to such new Factoring Agreement shall
be reasonably acceptable to Agent, and (I) Borrowers and Guarantors shall
furnish to Agent all material written notices or demands in connection with such
arrangements with a Factor either received by any Borrower or Guarantor or on
its behalf, promptly after the receipt thereof, or sent by any Borrower or
Guarantor or on its behalf, concurrently with the sending thereof, as the case
may be,
(x) the transfer or assignment after the date hereof of license
agreements with respect to trademarks owned by Parent, or the right to receive
royalties or payments under such license agreements, to ▇▇▇▇▇ ▇▇▇▇▇
International Group Holdings Limited, a corporation organized under the laws of
Ireland and having its principal place of business in the Bahamas, or any other
wholly-owned direct or indirect Subsidiary of Parent that is not organized under
the laws of the United States of America or Canada, provided, that, (A) as to
any such transfer or assignment: (1) Agent shall have received true, correct and
complete copies of all agreements relating to such transfer or assignment and
such other information with respect thereto as Agent may reasonably request from
time to time, (2) in no event shall such arrangements limit or impair the rights
of any Borrower or Guarantor (or Agent) to use the trademarks subject to such
license arrangements (except in jurisdictions outside the United States and
Canada) or create any material liabilities of any Borrower or Guarantor in
connection with such license arrangements, (3) as of the date of any such
transfer or assignment and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing, (4) the trademarks
subject to such licenses shall only be registered under and for use in
jurisdictions outside the United States and Canada, (5) such transfer or
assignment shall be permitted under the Senior Note Indenture and Borrowers and
Guarantors shall have complied with all requirements with respect to such
transfer or assignment provided for therein and such transfer and assignment
shall not result in the breach of, or constitute a default under, any indenture,
agreement or instrument to which any Borrower or Guarantor is a party or by
which it or its assets may be bound, and (B) upon the satisfaction of each of
the conditions set forth in this clause (x) above as to any such transfer or
assignment, upon the written request of Borrower Agent, Agent shall, at
Borrowers' expense, execute and deliver to
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Borrower Agent a release instrument with respect to the license agreements or
rights to be so transferred and assigned in form and substance reasonably
satisfactory to Agent, provided, that, (1) the release pursuant to such release
instrument shall only be effective immediately prior to the effectiveness of
such transfer and assignment and so long as any other party with a security
interest, lien or encumbrance with respect to such license agreements or rights
to be so transferred and assigned has released and terminated such interests,
(2) Agent shall have received evidence that Senior Note Trustee and any other
party with a security interest therein has on or before the effectiveness of the
release by Agent of such security interest unconditionally executed and
delivered to Borrower Agent a release instrument with respect thereto, and (3)
if such transfer or assignment is not effective within ten (10) Business Days
after the delivery by Agent of such release instrument to Borrower Agent, then
Borrower Agent shall promptly return such release instrument to Agent;
(c) wind up, liquidate or dissolve except that any Guarantor (other
than Parent) may wind up, liquidate and dissolve, provided, that, each of the
following conditions is satisfied, (i) the winding up, liquidation and
dissolution of such Guarantor shall not violate any law or any order or decree
of any court or other Governmental Authority in any material respect and shall
not conflict with or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, or any other agreement or instrument to
which any Borrower or Guarantor is a party or may be bound, (ii) such winding
up, liquidation or dissolution shall be done in accordance with the requirements
of all applicable laws and regulations, (iii) effective upon such winding up,
liquidation or dissolution, all of the assets and properties of such Guarantor
shall be duly and validly transferred and assigned to a Borrower or another
Guarantor, free and clear of any liens, restrictions or encumbrances other than
the security interest and liens of Agent (and Agent shall have received such
evidence thereof as Agent may reasonably require) and Agent shall have received
copies of such deeds, assignments or other agreements as Agent may request to
evidence and confirm the transfer of such assets to of such Guarantor to a
Borrower, (iv) Agent shall have received all documents and agreements that any
Borrower or Guarantor has filed with any Governmental Authority or as are
otherwise required to effectuate such winding up, liquidation or dissolution,
(v) no Borrower or Guarantor shall assume any Indebtedness, obligations or
liabilities as a result of such winding up, liquidation or dissolution, or
otherwise become liable in respect of any obligations or liabilities of the
entity that is winding up, liquidating or dissolving, unless such Indebtedness
is otherwise expressly permitted hereunder, (vi) Agent shall have received not
less than ten (10) Business Days prior written notice of the intention of such
Guarantor to wind up, liquidate or dissolve, and (vii) as of the date of such
winding up, liquidation or dissolution and after giving effect thereto, no
Default or Event of Default shall exist or have occurred; or
(d) agree to do any of the foregoing.
9.8 Encumbrances. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, create, incur, assume or suffer to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the
81
Collateral, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any security interest or lien
with respect to any such assets or properties, except:
(a) the security interests and liens of Agent for itself and the
benefit of Lenders;
(b) liens securing the payment of taxes, assessments or other
governmental charges or levies either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower, or Guarantor or Subsidiary, as the case may be
and with respect to which adequate reserves have been set aside on its books;
(c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower's, Guarantor's
or Subsidiary's business to the extent: (i) such liens secure Indebtedness which
is not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower,
Guarantor or such Subsidiary, in each case prior to the commencement of
foreclosure or other similar proceedings and with respect to which adequate
reserves have been set aside on its books;
(d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of such Borrower, Guarantor or such Subsidiary as presently conducted
thereon or materially impair the value of the Real Property which may be subject
thereto;
(e) purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property to secure
Indebtedness permitted under Section 9.9(b) hereof;
(f) pledges and deposits of cash by any Borrower or Guarantor after
the date hereof in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security benefits
consistent with the current practices of such Borrower or Guarantor as of the
date hereof;
(g) pledges and deposits of cash by any Borrower or Guarantor after
the date hereof to secure the performance of tenders, bids, leases, trade
contracts (other than for the repayment of Indebtedness), statutory obligations
and other similar obligations in each case in the ordinary course of business
consistent with the current practices of such Borrower or Guarantor as of the
date hereof; provided, that, in connection with any performance bonds issued by
a surety or other person, the issuer of such bond shall have waived in writing
any rights in or to, or other interest in, any of the Collateral in an
agreement, in form and substance satisfactory to Agent;
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(h) liens arising from (i) operating leases and the precautionary
UCC financing statement filings (or similar filings in any foreign jurisdiction)
in respect thereof and (ii) equipment or other materials which are not owned by
any Borrower or Guarantor located on the premises of such Borrower or Guarantor
(but not in connection with, or as part of, the financing thereof) from time to
time in the ordinary course of business and consistent with current practices of
such Borrower or Guarantor and the precautionary UCC financing statement filings
(or similar filings in any foreign jurisdiction) in respect thereof;
(i) judgments and other similar liens arising in connection with
court proceedings that do not constitute an Event of Default, provided, that,
(i) such liens are being contested in good faith and by appropriate proceedings
diligently pursued, (ii) adequate reserves or other appropriate provision, if
any, as are required by GAAP have been made therefor, (iii) a stay of
enforcement of any such liens is in effect and (iv) Agent may establish a
Reserve with respect thereto;
(j) purchase money security interests of a Letter of Credit
Issuer under the Letter of Credit Facility of such Letter of Credit Issuer with
a Borrower in the Letter of Credit Issuer Priority Collateral Inventory
purchased with the proceeds of a letter of credit issued pursuant to such Letter
of Credit Facility, the documents pertaining thereto and any insurance proceeds
relating thereto; provided, that, (i) the security interest in any such Letter
of Credit Issuer Priority Collateral shall at all times only secure the
reimbursement obligations of the Borrower for the letter of credit used to
purchase the specific Inventory constituting such Letter of Credit Issuer
Priority Collateral, (ii) Agent shall have received a Letter of Credit
Intercreditor Agreement from such Letter of Credit Issuer, in form and substance
satisfactory to Agent, duly authorized, executed and delivered by such Letter of
Credit Issuer, Borrowers and Guarantors and (iii) in no event shall any Letter
of Credit Issuer Priority Collateral be included in any report of Inventory
provided by any Borrower or Guarantor to Agent as Eligible Inventory and shall
in all cases be separately identified in any report of Inventory provided to
Agent;
(k) the security interests and liens of each existing Letter of
Credit Issuer pursuant to the terms of the Letter of Credit Facility Agreements
of Borrowers with each of such Letter of Credit Issuers, as each is in effect on
the date hereof, on the assets of Borrowers (other than Letter of Credit Issuer
Priority Collateral) consisting of accounts, chattel paper, deposit accounts,
documents, equipment, fixtures, general intangibles, instruments, inventory,
investment property and letter-of-credit rights of Borrowers to secure the
Indebtedness of Borrowers to such Letter of Credit Issuer permitted under
Section 9.9 hereof, provided, that, (i) such security interests and liens as to
all existing and hereafter acquired or arising assets and properties of
Borrowers (except to the extent of the purchase money security interests of such
Letter of Credit Issuer permitted under clause (j) above) are and shall at all
times be subject and subordinate to the security interests and liens of Agent
pursuant to the terms of the Letter of Credit Intercreditor Agreement of Agent
with such Letter of Credit Issuer and (ii) the Letter of Credit Intercreditor
Agreement of Agent with each such Letter of Credit Issuer shall at all times be
in full force and effect and each Letter of Credit Issuer shall at all times be
in compliance with the terms thereof;
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(l) the security interests and liens of the Senior Note Trustee in
the Senior Note Priority Collateral as of the date hereof to secure the
Indebtedness of Parent evidenced by the Senior Notes and Senior Note Guarantors
under the Senior Note Indenture as to such Indebtedness permitted hereunder,
together with the security interests and liens of the Senior Note Trustee
arising after the date hereof in trademarks of Borrowers and Guarantors or
license agreements or other intangible assets of Borrowers and Guarantors of the
same type or category as the Senior Note Priority Collateral to secure such
Indebtedness, provided, that, as to any such security interests and liens
arising after the date hereof: (i) such Borrower or Guarantor shall be required
to grant such security interests or liens under the terms of the Pledge and
Security Agreement, dated as of March 22, 2002, by Parent and Senior Note
Guarantors in favor of the Senior Note Trustee (as in effect as of the date
hereof), (ii) such security interests and liens shall be subject and subordinate
in priority to the security interests and liens of Agent in any such trademarks
or other intangible assets pursuant to the terms of an intercreditor agreement
between Senior Note Trustee and Agent in form and substance satisfactory to
Agent, as duly executed, authorized and delivered by Senior Note Trustee and
acknowledged and agreed to by Borrowers and Guarantors, (iii) Agent shall have
received prior written notice of the intention of Parent or Senior Note
Guarantors to grant such security interests or liens and true, correct and
complete copies of all agreements, documents and instruments related thereto,
together with such other information with respect thereto as Agent may request;
(m) the security interests and liens of Agent for the benefit of the
bank or other financial institution that is party to the Interest Rate
Protection Agreements to the extent provided for herein and subject to the terms
hereof;
(n) the security interests and liens of a Factor in the Factor
Priority Collateral to secure the Indebtedness of Borrowers to such Factor
permitted under Section 9.9(k) hereof; provided, that, such security interests
and liens of the Factors shall be subject to the terms and conditions of the
Factor Assignment Agreements;
(o) the security interests in and liens and mortgages upon the Real
Property of PE Real Estate located in Seneca, South Carolina arising after the
date hereof to secure the Indebtedness of PE Real Estate permitted under Section
9.9(l) hereof;
(p) the security interests and liens set forth on Schedule 8.4 to the
Information Certificate.
9.9 Indebtedness. Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, incur, create, assume, become or be liable in any
manner with respect to, or permit to
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exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly), the Indebtedness, performance,
obligations or dividends of any other Person, except:
(a) the Obligations;
(b) purchase money Indebtedness (including Capital Leases) arising
after the date hereof to the extent secured by purchase money security interests
in Equipment (including Capital Leases) and purchase money mortgages on Real
Property not to exceed $10,000,000 in the aggregate at any time outstanding so
long as such security interests and mortgages do not apply to any property of
such Borrower, Guarantor or Subsidiary other than the Equipment or Real Property
so acquired, and the Indebtedness secured thereby does not exceed the cost of
the Equipment or Real Property so acquired, as the case may be;
(c) guarantees by any Borrower or Guarantor of the Obligations of the
other Borrowers or Guarantors in favor of Agent for the benefit of Lenders;
(d) the Indebtedness of any Borrower or Guarantor to any other
Borrower or Guarantor arising after the date hereof pursuant to Loans by any
Borrower or Guarantor permitted under Section 9.10(g) hereof;
(e) Indebtedness of any Borrower or Guarantor entered into in the
ordinary course of business pursuant to Interest Rate Protection Agreements or
Currency Exchange Agreements; provided, that, such arrangements are either with
a Lender or an Affiliate thereof or with banks or other financial institutions
that have combined capital and surplus and undivided profits of not less than
$250,000,000 and are acceptable to Agent, are not for speculative purposes and
such Indebtedness shall be unsecured, except as to obligations under Interest
Rate Protection Agreements with a Lender or an Affiliate of a Lender or another
financial institution, in each case approved by Agent, to the extent of the
security interest of Agent in the Collateral as provided herein;
(f) Indebtedness of Parent evidenced by the Senior Notes as in effect
on the date hereof or as permitted to be amended pursuant to the terms hereof,
provided, that:
(i) the aggregate amount of such Indebtedness shall not
exceed $75,000,000, less the aggregate amount of all repayments or redemptions,
whether optional or mandatory, in respect thereof, plus interest thereon at the
rate provided for in the Senior Notes as in effect on the date hereof, provided,
that, Borrowers and Guarantors shall give Agent prior written notice of the
intention of Parent to issue additional Senior Notes after the date hereof and
incur such Indebtedness in excess of the current outstanding principal amount of
$57,000,000,
(ii) the Credit Facility is and shall at all times continue
to be the "Senior Credit Facility" as such term is defined in the Senior Note
Indenture as in effect on the date hereof and is and
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shall be entitled to all of the rights and benefits thereof under the Senior
Note Indenture as in effect on the date hereof,
(iii) Borrowers and Guarantors shall not, directly or
indirectly, make any payments in respect of such Indebtedness, except that they
may make (A) regularly scheduled payments of interest and fees, if any, in
respect of such Indebtedness when due in accordance with the terms of the Senior
Notes and the Senior Note Indenture, in each case as in effect on the date
hereof and (B) payments of principal in respect of such Indebtedness when
scheduled to mature in accordance with the terms of the Senior Note Indenture as
in effect on the date hereof and earlier to the extent permitted under Section
9.9(f)(v) below,
(iv) Borrowers and Guarantors shall not, directly or
indirectly, amend, modify, alter or change in any material respect any terms of
such Indebtedness or any of the Senior Notes, the Senior Note Indenture or any
related agreements, documents and instruments, except that Parent may, after
prior written notice to Agent, amend, modify, alter or change the terms thereof
so as to extend the maturity thereof or defer the timing of any payments in
respect thereof, or to forgive or cancel any portion of such Indebtedness other
than pursuant to payments thereof, or to reduce the interest rate or any fees in
connection therewith,
(v) Borrowers and Guarantors shall not, directly or
indirectly, redeem, retire, defease, purchase or otherwise acquire all or any
part of such Indebtedness other than at maturity (as set forth in the Senior
Note Indenture as in effect on the date hereof or as extended after the date
hereof), or set aside or otherwise deposit or invest any sums for such purpose,
except that
(A) Borrowers or Guarantors may redeem or purchase
all or any part of such Indebtedness, provided, that, as of the date of any such
redemption or purchase or any payment in respect thereof and after giving effect
thereto, (1) Agent shall have received prior written notice of the intention of
Borrowers or Guarantors to so redeem or purchase all or any part of such
Indebtedness no later than two (2) Business Days' prior to any such purchase or
redemption, which notice shall specify the time period within which Borrowers or
Guarantors will redeem or purchase such Indebtedness (which shall be no earlier
than the second Business Day thereafter and no later than five (5) Business Days
after the receipt by Agent of the notice), the maximum amount that Borrowers or
Guarantors will pay in respect thereof and the range of the principal amount of
the Senior Notes Borrowers or Guarantors anticipate will be so redeemed or
purchased, (2) the aggregate amount of the Excess Availability of Borrowers for
each of the immediately preceding ten (10) consecutive days shall have been not
less than $15,000,000 and as of the date of any such payment and after giving
effect thereto, the aggregate amount of the Excess Availability of Borrowers
shall be not less than $15,000,000, and (3) as of the date of any such payment
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred and be continuing, and
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(B) Borrowers or Guarantors may redeem or purchase such
Indebtedness with Refinancing Indebtedness with respect thereto to the extent
permitted under Section 9.9(p) hereof, and
(C) Borrowers or Guarantors may redeem or purchase such
Indebtedness with the proceeds of the issuance and sale of Capital Stock of
Parent pursuant to a public or private offering permitted hereunder, provided,
that, as of the date of any such redemption or purchase or any payment in
respect thereof and after giving effect thereto, (1) Borrowers and Guarantors
shall have complied with all of the requirements of Section 9.7(b)(iii) with
respect to such issuance and sale of common stock and in addition to such
requirements, the notice provided to Agent pursuant thereto shall specify that
the proceeds are to be used for the redemption or purchase of such Indebtedness,
the maximum amount that Borrowers and Guarantors will pay in respect thereof and
the range of the principal amount of the Senior Notes Borrowers and Guarantors
anticipate will be so redeemed or purchased, (2) the redemption or repurchase
shall be substantially contemporaneous with the issuance and sale of the common
stock of Parent pursuant to such public or private offering, (3) the aggregate
amount of the Excess Availability of Borrowers for each of the immediately
preceding ten (10) consecutive days shall have been not less than $15,000,000
and as of the date of any such payment and after giving effect thereto, the
aggregate amount of the Excess Availability of Borrowers shall be not less than
$15,000,000, and (4) as of the date of any such payment and after giving effect
thereto, no Default or Event of Default shall exist or have occurred and be
continuing, and
(vi) Agent shall have received true, correct and complete copies of
the Senior Note Indenture (including all amendments and supplemental indentures
with respect thereto) and all related agreements, documents and instruments at
any time entered into in connection therewith,
(vii) Borrowers and Guarantors shall furnish to Agent all material
written notices or demands in connection with such Indebtedness either received
by any Borrower or Guarantor or on its behalf, promptly after the receipt
thereof, or sent by any Borrower or Guarantor or on its behalf, concurrently
with the sending thereof, as the case may be;
(g) Indebtedness of Parent evidenced by the Subordinated Notes as in effect
on the date hereof or as permitted to be amended pursuant to the terms hereof,
provided, that:
(i) the aggregate amount of such Indebtedness shall not exceed
$125,000,000, less the aggregate amount of all repayments or redemptions,
whether optional or mandatory, in respect thereof, plus interest thereon at the
rate provided for in the Subordinated Notes as in effect on the date hereof,
provided, that, Borrowers and Guarantors shall give Agent prior written notice
of the intention of Parent to issue additional Subordinated Notes after the date
hereof and incur such Indebtedness in excess of the current outstanding
principal amount of $100,000,000,
(ii) the Obligations are and shall at all times continue to be
"Designated Senior Indebtedness" and "Senior Indebtedness" under the "Senior
Credit Facility" as each of such terms is
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defined in the Subordinated Note Indenture as in effect on the date hereof and
are and shall at all times be entitled to all of the rights and benefits thereof
under the Subordinated Note Indenture as in effect on the date hereof and there
is not, and shall not be, any other "Designated Senior Indebtedness" except with
the prior written consent of Agent;
(iii) Borrowers and Guarantors shall not, directly or indirectly, make
any payments in respect of such Indebtedness, except that they may make (A)
regularly scheduled payments of interest and fees, if any, in respect of such
Indebtedness when due in accordance with the terms of the Subordinated Notes and
the Subordinated Note Indenture as in effect on the date hereof, and (B)
payments of principal in respect of such Indebtedness when scheduled to mature
in accordance with the terms of the Subordinated Note Indenture as in effect on
the date hereof and earlier to the extent permitted under Section 9.9(g)(v)
below,
(iv) Borrowers and Guarantors shall not, directly or indirectly,
amend, modify, alter or change in any material respect any terms of such
Indebtedness or any of the Subordinated Notes, the Subordinated Note Indenture
or any related agreements, documents and instruments, except that Parent may,
after prior written notice to Agent, amend, modify, alter or change the terms
thereof so as to extend the maturity thereof or defer the timing of any payments
in respect thereof, or to forgive or cancel any portion of such Indebtedness
other than pursuant to payments thereof, or to reduce the interest rate or any
fees in connection therewith,
(v) Borrowers and Guarantors shall not, directly or indirectly,
redeem, retire, defease, purchase or otherwise acquire all or any part of such
Indebtedness other than at maturity (as set forth in the Subordinated Note
Indenture as in effect on the date hereof or as extended after the date hereof),
or set aside or otherwise deposit or invest any sums for such purpose, except
that
(A) Borrowers or Guarantors may redeem or purchase all or any
part of such Indebtedness, provided, that, as of the date of any such redemption
or purchase or any payment in respect thereof and after giving effect thereto,
(1) Agent shall have received prior written notice of the intention of Borrowers
to so redeem or purchase all or any part of such Indebtedness no later than two
(2) Business Days' prior to any such purchase or redemption, which notice shall
specify the time period within which Borrowers will redeem or purchase such
Indebtedness (which shall be no earlier than the second Business Day thereafter
and no later than five (5) Business Days after the receipt by Agent of the
notice), the maximum amount that Borrower will pay in respect thereof and the
range of the principal amount of the Subordinated Notes Borrowers anticipate
will be so redeemed or purchased, (2) the aggregate amount of the Excess
Availability of Borrowers for each of the immediately preceding ten (10)
consecutive days shall have been not less than $15,000,000 and as of the date of
any such payment and after giving effect thereto, the aggregate amount of the
Excess Availability of Borrowers shall be not less than $15,000,000, and (3) as
of the date of any such payment and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing, and
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(B) Borrowers may redeem or purchase all or any part of such
Indebtedness with Refinancing Indebtedness with respect thereto to the extent
permitted under Section 9.9(p) hereof,
(C) Borrowers or Guarantors may redeem or purchase such
Indebtedness with the proceeds of the issuance and sale of Capital Stock of
Parent pursuant to a public or private offering permitted hereunder, provided,
that, as of the date of any such redemption or purchase or any payment in
respect thereof and after giving effect thereto, (1) Borrowers and Guarantors
shall have complied with all of the requirements of Section 9.7(b)(iii) with
respect to such issuance and sale of common stock and in addition to such
requirements, the notice provided to Agent pursuant thereto shall specify that
the proceeds are to be used for the redemption or purchase of such Indebtedness,
the maximum amount that Borrowers and Guarantors will pay in respect thereof and
the range of the principal amount of the Subordinated Notes Borrowers and
Guarantors anticipate will be so redeemed or purchased, (2) the redemption or
repurchase shall be substantially contemporaneous with the issuance and sale of
the common stock of Parent pursuant to such public or private offering, (3) the
aggregate amount of the Excess Availability of Borrowers for each of the
immediately preceding ten (10) consecutive days shall have been not less than
$15,000,000 and as of the date of any such payment and after giving effect
thereto, the aggregate amount of the Excess Availability of Borrowers shall be
not less than $15,000,000, and (4) as of the date of any such payment and after
giving effect thereto, no Default or Event of Default shall exist or have
occurred and be continuing, and
(vi) Agent shall have received true, correct and complete copies of
the Subordinated Note Indenture (including all amendments and supplemental
indentures with respect thereto) and all related agreements, documents and
instruments at any time entered into in connection therewith,
(vii) Borrowers and Guarantors shall furnish to Agent all material
written notices or demands in connection with such Indebtedness either received
by any Borrower or Guarantor or on its behalf, promptly after the receipt
thereof, or sent by any Borrower or Guarantor or on its behalf, concurrently
with the sending thereof, as the case may be;
(h) Indebtedness consisting of the guarantees by Senior Note Guarantors set
forth in the Senior Note Indenture as in effect on the date hereof of the
Indebtedness of Parent evidenced by the Senior Notes permitted hereunder;
(i) Indebtedness consisting of the guarantees by Subordinated Note
Guarantors set forth in the Subordinated Note Indenture as in effect on the date
hereof of the Indebtedness of Parent evidenced by the Subordinated Notes
permitted hereunder;
(j) Indebtedness of Borrowers to each Letter of Credit Issuer under the
Letter of Credit Facility of Borrowers with such Letter of Credit Issuer;
provided, that, (i) Agent shall have received true, correct and complete copies
of all of the Letter of Credit Facility Agreements and all
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related agreements, documents and instruments, (ii) in no event shall the
aggregate amount of all such Indebtedness exceed $60,000,000 outstanding at any
time, (iii) Agent shall have received a Letter of Credit Intercreditor Agreement
in form and substance satisfactory to Agent duly authorized, executed and
delivered by each Letter of Credit Issuer, Borrowers and Guarantors, (iv)
Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter
or change in any material respect any terms of such Indebtedness or any of the
Letter of Credit Facility Agreements or any related agreements, documents and
instruments, except that Borrowers may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof or defer the timing of any payments in respect thereof, or to forgive or
cancel any portion of such Indebtedness other than pursuant to payments thereof,
or to reduce the interest rate or any fees in connection therewith, (v) Agent
shall have received not less than ten (10) Business Days' prior written notice
of the intention of any Borrower or Guarantor to enter into any new Letter of
Credit Facility after the date hereof, which notice shall set forth in
reasonable detail, the amount of such Letter of Credit Facility, the name and
address of the proposed Letter of Credit Issuer, the proposed rates and fees,
and the maturity date with respect thereto, together with such other information
with respect thereto as Agent may reasonably request and any Letter of Credit
Issuer pursuant to such new Letter of Credit Facility shall be reasonably
acceptable to Agent, and (vi) Borrowers and Guarantors shall furnish to Agent
all material written notices or demands in connection with such Indebtedness
either received by any Borrower or Guarantor or on its behalf, promptly after
the receipt thereof, or sent by any Borrower or Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be;
(k) Indebtedness of Borrowers to Factors consisting of the commissions,
fees and other charges payable by Borrowers to Factors under the Factoring
Agreements of Borrowers with such Factors; provided, that, such Indebtedness
arises in connection with sales and assignments permitted under Section
9.7(b)(ix) hereof;
(l) Indebtedness of PE Real Estate arising after the date hereof pursuant
to a mortgage loan in immediately available funds by a financial institution to
PE Real Estate based on the value of the Real Property of PE Real Estate located
in Seneca, South Carolina, provided, that, as to such Indebtedness, (i) Agent
shall have received not less than thirty (30) days prior written notice of the
intention of PE Real Estate to incur such Indebtedness, which notice shall set
forth in reasonable detail satisfactory to Agent, the amount of such proposed
Indebtedness, the person to whom such Indebtedness is proposed to be owed, the
proposed interest rate, schedule of repayments and maturity date with respect
thereto and such other information with respect thereto as Agent may request,
(ii) Agent shall have received true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, as duly authorized, executed and delivered by the parties thereto,
(iii) Agent shall have received a Collateral Access Agreement with respect to
the Real Property subject to the mortgage and lien to secure such Indebtedness
from the person to whom such Indebtedness is owed, duly authorized, executed and
delivered by such person, in form and substance satisfactory to Agent, (iv) such
Indebtedness shall be incurred by PE Real Estate at commercially reasonable
rates and terms in a bona fide arm's length transaction, (v) such Indebtedness
shall not be owed to any shareholder, officer, director, agent, employee or
other Affiliate
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of any Borrower or Guarantor, (vi) PE Real Estate shall cause the person to whom
such Indebtedness is owed to remit all of the proceeds of the loan giving rise
to such Indebtedness directly to Agent for application to the Obligations, (vii)
in no event shall PE Real Estate or any other Borrower or Obligor make, or be
required to make, payments in respect of the principal balance of such
Indebtedness in any twelve (12) consecutive month period that in the aggregate
exceed the amount equal to twenty (20%) percent of the original principal amount
of such Indebtedness, (viii) the Real Property owned by PE Real Estate in
Seneca, South Carolina as of the date hereof, the value of which is the basis
for such loan, shall be the only collateral for such Indebtedness, (ix) as of
the date of incurring such Indebtedness and after giving effect thereto, no
Default or Event of Default shall exist or have occurred, and (x) Borrowers and
Guarantors shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf, concurrently with the sending thereof, as the case may be; and
(m) guarantees by a Borrower or Guarantor of the obligations of a Guarantor
arising pursuant to a lease or license by such Guarantor, of real or personal
property in the ordinary course of the business of such Guarantor, provided,
that, (i) the person issuing such guarantee is permitted hereunder to incur
directly the obligation that is being guaranteed and (ii) the aggregate amount
of the lease or license payments in any fiscal year that are subject to such
guarantee by a Borrower shall not exceed $5,000,000;
(n) contingent Indebtedness owing to the issuers of surety bonds in an
aggregate amount not to exceed $100,000 at any time;
(o) Indebtedness consisting of obligations owed by a Borrower or Guarantor
in the ordinary course of its business under License Agreements for trademarks
owned by third parties with respect to non-refundable, advance or minimum
guarantee royalty payments up to $10,000,000 in the aggregate under all such
License Agreements payable in any twelve (12) month period;
(p) Indebtedness of Parent arising after the date hereof issued in exchange
for, or the proceeds of which are used to extend, refinance, replace or
substitute for Indebtedness permitted under Section 9.9(b), Section 9.9(f) and
Section 9.9(g) hereof (the "Refinancing Indebtedness"); provided, that, as to
any such Refinancing Indebtedness, each of the following conditions is
satisfied: (i) Agent shall have received not less than ten (10) Business Days'
prior written notice of the intention to incur such Indebtedness, which notice
shall set forth in reasonable detail satisfactory to Agent, the amount of such
Indebtedness, the schedule of repayments and maturity date with respect thereto
and such other information with respect thereto as Agent may reasonably request,
(ii) promptly upon Agent's request, Agent shall have received true, correct and
complete copies of all agreements, documents and instruments evidencing or
otherwise related to such Indebtedness, as duly authorized, executed and
delivered by the parties thereto, (iii) the Refinancing Indebtedness shall have
a Weighted Average Life to Maturity and a final maturity equal to or greater
than the Weighted Average Life to Maturity and the final maturity, respectively,
of the Indebtedness being extended, refinanced, replaced, or substituted for,
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(iv) the Refinancing Indebtedness shall rank in right of payment no more senior
than, and be at least subordinated (if subordinated) to, the Obligations as the
Indebtedness being extended, refinanced, replaced or substituted for, (v) the
Refinancing Indebtedness shall not include terms and conditions with respect to
any Borrower or Guarantor which are more burdensome or restrictive in any
material respect than those included in the Indebtedness so extended,
refinanced, replaced or substituted for, (vi) such Indebtedness incurred by any
Borrower or Guarantor shall be at rates and with fees or other charges that are
commercially reasonable, (vii) the incurring of such Indebtedness shall not
result in an Event of Default, (viii) the principal amount of such Refinancing
Indebtedness shall not exceed the principal amount of the Indebtedness so
extended, refinanced, replaced or substituted for (plus the amount of
refinancing fees and expenses incurred in connection therewith outstanding on
the date of such event), (ix) the Refinancing Indebtedness shall be secured by
substantially the same assets (or less of such assets) that secure the
Indebtedness so extended, refinanced, replaced or substituted for, provided,
that, such security interests with respect to the Refinancing Indebtedness shall
have a priority no more senior than, and be at least as subordinated, if
subordinated (on terms and conditions substantially similar to the subordination
provisions applicable to the Indebtedness so extended, refinanced, replaced or
substituted for or as is otherwise acceptable to Agent) as the security interest
with respect to the Indebtedness so extended, refinanced, replaced or
substituted for, (x) Borrowers and Guarantors may only make payments of
principal, interest and fees, if any, in respect of such Indebtedness to the
extent such payments would have been permitted hereunder in respect of the
Indebtedness so extended, refinanced, replaced or substituted for (and except as
otherwise permitted below), (xi) Borrowers and Guarantors shall not, directly or
indirectly, (A) amend, modify, alter or change any terms of the agreements with
respect to such Refinancing Indebtedness, except that Borrowers and Guarantors
may, after prior written notice to Agent, amend, modify, alter or change the
terms thereof to the extent permitted with respect to the Indebtedness so
extended, refinanced, replaced or substituted for, or (B) redeem, retire,
defease, purchase or otherwise acquired such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose (other than with
Refinancing Indebtedness to the extent permitted herein and to the extent
permitted with respect to the Indebtedness so extended, refinanced, replaced or
substituted for), and (xii) Borrowers and Guarantors shall furnish to Agent
copies of all material notices or demands in connection with Indebtedness
received by any Borrower or Guarantor or on its behalf promptly after the
receipt thereof or sent by any Borrower or Guarantor or on its behalf
concurrently with the sending thereof, as the case may be; and
(q) the Indebtedness set forth on Schedule 9.9 to the Information
Certificate; provided, that, (i) Borrowers and Guarantors may only make
regularly scheduled payments of principal and interest in respect of such
Indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such Indebtedness as in effect on the date hereof,
(ii) Borrowers and Guarantors shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such Indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof except,
that, Borrowers and Guarantors may, after prior written notice to Agent, amend,
modify, alter or change the terms thereof so as to extend the maturity thereof,
or defer the timing of any payments in respect thereof, or to forgive or cancel
any portion of such Indebtedness (other than pursuant to
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payments thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers and Guarantors shall furnish to Agent all notices
or demands in connection with such Indebtedness either received by any Borrower
or Guarantor or on its behalf, promptly after the receipt thereof, or sent by
any Borrower or Guarantor or on its behalf, concurrently with the sending
thereof, as the case may be.
9.10 Loans, Investments, Etc. Each Borrower and Guarantor shall not, and
shall not permit any Subsidiary to, directly or indirectly, make any Loans or
advance money or property to any person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the Capital Stock or
Indebtedness or all or a substantial part of the assets or property of any
person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
(a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(b) investments in cash or Cash Equivalents, provided, that, (i) no
Loans are then outstanding, except that, notwithstanding that any Loans are
outstanding, Borrowers and Guarantors may from time to time in the ordinary
course of business consistent with the current practices of Borrowers and
Guarantors as of the date hereof make deposits of cash or other immediately
available funds in operating demand deposit accounts used for disbursements to
the extent required to provide funds for amounts drawn or anticipated to be
drawn shortly on such accounts and such funds may be held in Cash Equivalents
consisting of overnight investments until so drawn (so long as such funds and
Cash Equivalents are not held more than five (5) Business Days from the date of
the initial deposit thereof and do not exceed $5,000,000 at any time) and (ii)
the terms and conditions of Section 5.2 hereof shall have been satisfied with
respect to the deposit account, investment account or other account in which
such cash or Cash Equivalents are held;
(c) the existing equity investments of each Borrower and Guarantor as
of the date hereof in its Subsidiaries, provided, that, no Borrower or Guarantor
shall have any further obligations or liabilities to make any capital
contributions or other additional investments or other payments to or in or for
the benefit of any of such Subsidiaries;
(d) loans and advances by any Borrower or Guarantor to employees of
such Borrower or Guarantor not to exceed the principal amount of $1,000,000 in
the aggregate at any time outstanding for: (i) reasonably and necessary
work-related travel or other ordinary business expenses to be incurred by such
employee in connection with their work for such Borrower or Guarantor and (ii)
reasonable and necessary relocation expenses of such employees (including home
mortgage financing for relocated employees);
(e) stock or obligations issued to any Borrower or Guarantor by any
Person (or the representative of such Person) in respect of Indebtedness of such
Person owing to such Borrower or
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Guarantor in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Agent, upon Agent's
request, together with such stock power, assignment or endorsement by such
Borrower or Guarantor as Agent may request;
(f) obligations of account debtors to any Borrower or Guarantor
arising from Accounts which are past due evidenced by a promissory note made by
such account debtor payable to such Borrower or Guarantor; provided, that,
promptly upon the receipt of the original of any such promissory note by such
Borrower or Guarantor, such promissory note shall be endorsed to the order of
Agent by such Borrower or Guarantor and promptly delivered to Agent as so
endorsed;
(g) loans by a Borrower or Guarantor to another Borrower or
Guarantor after the date hereof, provided, that,
(i) as to all of such loans, (A) within thirty (30) days after
the end of each fiscal month, Borrowers shall provide to Agent a report in form
and substance satisfactory to Agent of the outstanding amount of such loans as
of the last day of the immediately preceding month and indicating any loans made
and payments received during the immediately preceding month, (B) the
Indebtedness arising pursuant to any such loan shall not be evidenced by a
promissory note or other instrument, unless the single original of such note or
other instrument is promptly delivered to Agent upon its request to hold as part
of the Collateral, with such endorsement and/or assignment by the payee of such
note or other instrument as Agent may require, (C) as of the date of any such
loan and after giving effect thereto, the Borrower or Guarantor making such loan
shall be Solvent, and (D) as of the date of any such loan and after giving
effect thereto, no Default or Event of Default shall exist or have occurred and
be continuing,
(ii) as to loans by a Guarantor to a Borrower, (A) the
Indebtedness arising pursuant to such loan shall be subject to, and subordinate
in right of payment to, the right of Agent and Lenders to receive the prior
final payment and satisfaction in full of all of the Obligations on terms and
conditions acceptable to Agent, (B) promptly upon Agent's request, Agent shall
have received a subordination agreement, in form and substance satisfactory to
Agent, providing for the terms of the subordination in right of payment of such
Indebtedness of such Borrower to the prior final payment and satisfaction in
full of all of the Obligations, duly authorized, executed and delivered by such
Guarantor and such Borrower, and (C) such Borrower shall not, directly or
indirectly make, or be required to make, any payments in respect of such
Indebtedness prior to the end of the then current term of this Agreement;
(iii) as to loans by a Borrower to a Guarantor or another
Borrower, as of the date of any such loan and after giving effect thereto,
Borrower making such Loan shall have Excess Availability of not less than
$5,000,000, except as Agent may otherwise agree;
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(h) loans of money or property (other than Collateral) after the date
hereof by any Borrower or Guarantor to any Person (other than to a Borrower or
Guarantor) or investment after the date hereof by any Borrower or Guarantor by
capital contribution in any Person, or the formation or acquisition after the
date hereof by any Borrower or Guarantor of any direct wholly-owned Subsidiary
of such Borrower or Guarantor after the date hereof organized under the laws of
a jurisdiction in the United States of America; provided, that, as to any such
loans or investments, or the formation or acquisition of any such Subsidiary,
each of the following conditions is satisfied as determined by Agent:
(i) as of the date of any such loan or investment, or the
formation or acquisition of such Subsidiary or any payments in connection with
the formation or acquisition of such Subsidiary, and in each case after giving
effect thereto, no Default or Event of Default shall exist or have occurred,
(ii) as of the date of any such loan or investment, or the
formation or acquisition of such Subsidiary or any payments in connection with
the formation or acquisition of such Subsidiary, and in each case after giving
effect thereto, the aggregate amount of the Excess Availability of Borrowers
shall have been not less than $15,000,000 for each of the immediately preceding
ten (10) consecutive days and as of the date of any such loan or investment or
formation or acquisition or any payment in connection therewith and after giving
effect thereto, the aggregate amount of the Excess Availability of Borrowers
shall be not less than $15,000,000,
(iii) the Person receiving such loan or investment or the
Subsidiary formed or acquired, as the case may be, shall be engaged in a
business related, ancillary or complementary to the business of Borrowers
permitted in this Agreement,
(iv) in the case of an investment by capital contribution, at
Agent's option, the original stock certificate or other instrument evidencing
such capital contribution (or such other evidence as may be issued in the case
of a limited liability company) shall be promptly delivered to Agent, together
with such stock power, assignment or endorsement as Agent may request, and
promptly upon Agent's request, the Borrower or Guarantor making such investment
shall execute and deliver to Agent a pledge and security agreement, in form and
substance satisfactory to Agent, granting to Agent a first priority pledge of,
security interest in and lien upon all of the issued and outstanding shares of
such stock or other instrument or interest (and in the case of a limited
liability company take such other actions as Agent shall require with respect to
Agent's security interests therein),
(v) in the case of loans of money or property, the original of
any promissory note or other instrument evidencing the Indebtedness arising
pursuant to such loans shall be delivered, or caused to be delivered, to Agent,
at Agent's option, together with an appropriate endorsement, in form and
substance satisfactory to Agent,
(vi) in the case of the formation or acquisition by a Borrower
or Guarantor of any Subsidiary, as to any such Subsidiary, (A) the Borrower or
Guarantor forming such Subsidiary shall cause any such Subsidiary to execute and
deliver to Agent, the following (each in form and substance
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satisfactory to Agent), (1) an absolute and unconditional guarantee of payment
of the Obligations, (2) a security agreement granting to Agent a first security
interest and lien (except as otherwise consented to in writing by Agent) upon
all of the assets of any such Subsidiary, and (3) such other agreements,
documents and instruments as Agent may require, including, but not limited to,
supplements and amendments hereto and other loan agreements or instruments
evidencing Indebtedness of such new Subsidiary to Agent and (B) the Borrower or
Guarantor forming such Subsidiary shall (1) execute and deliver to Agent, a
pledge and security agreement, in form and substance satisfactory to Agent,
granting to Agent a first pledge of and lien on all of the issued and
outstanding shares of Capital Stock of any such Subsidiary, and (C) deliver the
original stock certificates evidencing such shares of Capital Stock (or such
other evidence as may be issued in the case of a limited liability company),
together with stock powers with respect thereto duly executed in blank (or the
equivalent thereof in the case of a limited liability company in which such
interests are certificated, or otherwise take such actions as Agent shall
require with respect to Agent's security interests therein),
(vii) Agent shall have received (A) not less than ten (10)
Business Days' prior written notice thereof setting forth in reasonable detail
the nature and terms thereof, (B) true, correct and complete copies of all
agreements, documents and instruments relating thereto and (C) such other
information with respect thereto as Agent may request;
(i) the purchase by any Borrower or Guarantor of all or a substantial
part of the assets or property of any Person located in the United States (other
than Capital Stock), provided, that, each of the following conditions is
satisfied as determined by Agent in good faith;
(i) as of the date of such purchase and after giving effect
thereto, no Default or Event of Default shall exist or have occurred and be
continuing,
(ii) as of the date of any payment in connection with such
acquisition and after giving effect thereto, the aggregate amount of the Excess
Availability of Borrowers shall have been not less than $15,000,000 for each of
the immediately preceding ten (10) consecutive days and the aggregate amount of
the Excess Availability of Borrowers shall be not less than $15,000,000,
(iii) Agent shall have received not less than ten (10) Business
Days' prior written notice of the proposed acquisition and such information with
respect thereto as Agent may reasonably request, including (A) the proposed date
and amount of the acquisition, (B) a list and description of the assets to be
acquired, and (C) the total purchase price for the assets to be purchased (and
the terms of payment of such purchase price),
(iv) promptly upon Agent's request, the Borrower or Guarantor
purchasing such assets shall deliver, or cause to be delivered to Agent, true,
correct and complete copies of all agreements, documents and instruments
relating to such acquisition,
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(v) the assets and properties being acquired by any Borrower
or Guarantor shall be substantially consistent with, and related to, the
business of such Borrower or Guarantor permitted in this Agreement,
(vi) the assets acquired by any Borrower or Guarantor shall be
free and clear of any security interest, mortgage, pledge, lien, charge or other
encumbrance (other than those permitted in this Agreement) and Lender shall have
received evidence satisfactory to it of the same,
(vii) the acquisition by any Borrower or Guarantor of such
assets shall not violate any law or regulation or any order or decree of any
court or Governmental Authority in any material respect and shall not and will
not conflict with or result in the breach of, or constitute a default in any
respect under, any material agreement, document or instrument to which such
Borrower, or Guarantor or any Affiliate is a party or may be bound, or result in
the creation or imposition of, or the obligation to grant, any lien, charge or
encumbrance upon any of the property of such Borrower, or Guarantor or any
Affiliate or violate any provision of the certificate of incorporation, by-laws,
certificate of formation, operating agreement or other organizational
documentation of such Borrower or Guarantor,
(viii) such purchase shall be in a bona fide arms' length
transaction with a person that is not an Affiliate of any Borrower or Guarantor,
(ix) no Borrower or Guarantor shall become obligated with
respect to any Indebtedness, nor any of its property become subject to any
security interest or lien, pursuant to such acquisition unless such Borrower or
Guarantor could incur such Indebtedness or create such security interest or lien
hereunder or under the other Financing Agreements,
(x) Agent shall have received, in form and substance
satisfactory to Agent, (A) evidence that Agent has valid and perfected security
interests in and liens upon all purchased assets to the extent such assets
constitute Collateral hereunder, (B) UCC financing statements or other similar
registrations required in any foreign jurisdiction), (C) all Collateral Access
Agreements and other consents, waivers, acknowledgments and other agreements
from third persons which Agent may reasonably deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the assets purchased, (D) the agreement of the seller consenting to the
collateral assignment by the Borrower or Guarantor purchasing such assets of all
rights and remedies and claims for damages of such Borrower or Guarantor
relating to the Collateral under the agreements, documents and instruments
relating to such acquisition and (E) such other agreements, documents and
instruments as Agent may request in connection therewith,
(xi) in no event shall any Accounts or Inventory so acquired by
any Borrower pursuant to such acquisition be deemed Eligible Accounts or
Eligible Inventory unless and until Agent shall have conducted a field
examination with respect thereto (and at Agent's option, at Borrowers' expense,
obtained an appraisal of such Inventory by an appraiser reasonably acceptable to
Agent and in form, scope and methodology reasonably acceptable to Agent and
addressed to Agent and upon
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which Agent is expressly permitted to rely, which appraisal shall be in addition
to any appraisals which Agent may obtain pursuant to its rights under Section
7.3 hereof) and then only to the extent the criteria for Eligible Accounts and
Eligible Inventory set forth herein are satisfied with respect thereto in
accordance with this Agreement (or such other or additional criteria as Agent
may, at its option, establish with respect thereto in accordance with this
Agreement and subject to such Reserves as Agent may establish in accordance with
this Agreement), and upon the request of Agent, the Accounts and Inventory
acquired by such Borrower or Guarantor pursuant to such acquisition shall at all
times after such acquisition be separately identified and reported to Agent in a
manner satisfactory to Agent;
(j) the loans and advances set forth on Schedule 9.10 to the
Information Certificate; provided, that, as to such Loans and advances,
Borrowers and Guarantors shall not, directly or indirectly, amend, modify, alter
or change the terms of such Loans and advances or any agreement, document or
instrument related thereto and Borrowers and Guarantors shall furnish to Agent
all notices or demands in connection with such Loans and advances either
received by any Borrower or Guarantor or on its behalf, promptly after the
receipt thereof, or sent by any Borrower or Guarantor or on its behalf,
concurrently with the sending thereof, as the case may be.
9.11 Dividends and Redemptions. Each Borrower and Guarantor shall
not, directly or indirectly, declare or pay any dividends on account of any
shares of class of any Capital Stock of such Borrower or Guarantor now or
hereafter outstanding, or set aside or otherwise deposit or invest any sums for
such purpose, or redeem, retire, defease, purchase or otherwise acquire any
shares of any class of Capital Stock (or set aside or otherwise deposit or
invest any sums for such purpose) for any consideration or apply or set apart
any sum, or make any other distribution (by reduction of capital or otherwise)
in respect of any such shares or agree to do any of the foregoing, except that:
(a) any Borrower or Guarantor may declare and pay such
dividends or redeem, retire, defease, purchase or otherwise acquire any shares
of any class of Capital Stock for consideration in the form of shares of common
stock (so long as after giving effect thereto no Change of Control or other
Default or Event of Default shall exist or occur);
(b) Borrowers and Guarantors may pay dividends to the extent
permitted in Section 9.12 below;
(c) any Subsidiary of a Borrower or Guarantor may pay
dividends to a Borrower;
(d) Borrowers and Guarantors may repurchase Capital Stock
consisting of common stock held by employees pursuant to any employee stock
ownership plan thereof upon the termination, retirement or death of any such
employee in accordance with the provisions of such plan, provided, that, as to
any such repurchase, each of the following conditions is satisfied: (i) as of
the date of the payment for such repurchase and after giving effect thereto, no
Default or Event of Default shall exist or have occurred and be continuing, (ii)
such repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or
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undertaking to which such Borrower or Guarantor is a party or by which such
Borrower or Guarantor or its or their property are bound, and (iv) the aggregate
amount of all payments for such repurchases in any calendar year shall not
exceed $1,000,000;
(e) Parent may from time to time pay dividends in respect of
its outstanding shares of Capital Stock consisting of common stock or repurchase
outstanding shares of Capital Stock consisting of its common stock; provided,
that,
(i) as of the date of the payment for any such dividend
or repurchase and after giving effect thereto, no Default or Event of Default
shall exist or have occurred and be continuing,
(ii) as of the date of the payment for any such dividend
or repurchase and after giving effect thereto, the aggregate amount of the
Excess Availability of Borrowers shall have been not less than $15,000,000 for
each of the immediately preceding ten (10) consecutive days and the aggregate
amount of the Excess Availability of Borrowers shall be not less than
$15,000,000,
(iii) such dividend or repurchase shall not violate any
law or regulation or the terms of any indenture, agreement or undertaking to
which any Borrower or Guarantor or its or their property are bound,
(iv) such dividend or repurchase shall be paid out of
legally available funds therefor, and
(v) Agent shall have received not less than ten (10)
Business Days' prior written notice thereof setting forth in reasonable detail
the amount of the dividend or the shares to be repurchased and the amount that
Parent anticipates that it will be required to pay for such repurchase and such
other information with respect thereto as Agent may request;
9.12 Transactions with Affiliates. Each Borrower and Guarantor
shall not, directly or indirectly:
(a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any officer, director or other Affiliate of
such Borrower or Guarantor, except in the ordinary course of and pursuant to the
reasonable requirements of such Borrower's or Guarantor's business (as the case
may be) and upon fair and reasonable terms no less favorable to such Borrower or
Guarantor than such Borrower or Guarantor would obtain in a comparable arm's
length transaction with an unaffiliated person; or
(b) make any payments (whether by dividend, loan or otherwise)
of management, consulting or other fees for management or similar services, or
of any Indebtedness owing to any officer, employee, shareholder, director or any
other Affiliate of such Borrower or Guarantor, except (i) reasonable
compensation to officers, employees and directors for services rendered to such
Borrower or Guarantor in the ordinary course of business, and (ii) payments by
any such Borrower
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or Guarantor to Parent for actual and necessary reasonable out-of-pocket legal
and accounting, insurance, marketing, payroll and similar types of services paid
for by Parent on behalf of such Borrower or Guarantor, in the ordinary course of
their respective businesses or as the same may be directly attributable to such
Borrower or Guarantor and for the payment of taxes by or on behalf of Parent.
9.13 Compliance with ERISA. Each Borrower and Guarantor shall, and
shall cause each of its ERISA Affiliates, to: (a) maintain each Plan in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other Federal and State law; (b) cause each Plan which is qualified
under Section 401(a) of the Code to maintain such qualification; (c) not
terminate any of such Plans so as to incur any material liability to the Pension
Benefit Guaranty Corporation; (d) not allow or suffer to exist any prohibited
transaction involving any of such Plans or any trust created thereunder which
would subject such Borrower, Guarantor or such ERISA Affiliate to a material tax
or penalty or other liability on prohibited transactions imposed under Section
4975 of the Code or ERISA; (e) make all required contributions to any Plan which
it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or
the terms of such Plan; (f) not allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such Plan; or (g) allow
or suffer to exist any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the Pension Benefit
Guaranty Corporation of any such Plan that is a single employer plan, which
termination could result in any material liability to the Pension Benefit
Guaranty Corporation.
9.14 End of Fiscal Years; Fiscal Quarters. Each Borrower and Guarantor
shall, for financial reporting purposes, cause its, and each of its
Subsidiaries' (a) fiscal years to end on January 31 of each year except that the
fiscal year of Supreme Canada shall end on May 31 of each year (provided that
upon prior written notice to Agent, the end of the fiscal year of Supreme Canada
may be changed to January 31) and (b) fiscal quarters to end on April 30, July
31, October 31 and January 31 of each year except that the fiscal quarters of
Supreme Canada shall end on August 30, November 30, February 28 and May 31 of
each year (provided that upon prior written notice to Agent, the fiscal quarters
of Supreme Canada may be changed to end on April 30, July 31, October 31 and
January 31 in connection with the change of the end of its fiscal year to
January 31).
9.15 Change in Business. Each Borrower and Guarantor shall not engage
in any business other than the business of such Borrower or Guarantor on the
date hereof and any business reasonably related, ancillary or complementary to
the business in which such Borrower or Guarantor is engaged on the date hereof.
9.16 Limitation of Restrictions Affecting Subsidiaries. Each Borrower
and Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or
make other distributions or pay any Indebtedness owed to such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor; (b) make Loans or
advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its properties or assets
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to such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor;
or (d) create, incur, assume or suffer to exist any lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other
than encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of such Borrower or Guarantor or any
Subsidiary of such Borrower or Guarantor, (iv) customary restrictions on
dispositions of real property interests found in reciprocal easement agreements
of such Borrower or Guarantor or any Subsidiary of such Borrower or Guarantor,
(v) any agreement relating to permitted Indebtedness incurred by a Subsidiary of
such Borrower or Guarantor prior to the date on which such Subsidiary was
acquired by such Borrower or such Guarantor and outstanding on such acquisition
date, and (vi) the extension or continuation of contractual obligations in
existence on the date hereof; provided, that, any such encumbrances or
restrictions contained in such extension or continuation are no less favorable
to Agent and Lenders than those encumbrances and restrictions under or pursuant
to the contractual obligations so extended or continued.
9.17 Minimum EBITDA. At any time that the aggregate amount of the Excess
Availability of Borrowers is less than $15,000,000, (a) the EBITDA of Parent and
its Subsidiaries (on a consolidated basis) for the preceding twelve (12)
consecutive months (treated as a single accounting period) as of the end of the
most recent fiscal month for which Agent or any Lender has received financial
statements of Borrowers or Guarantors, shall be not less than $27,500,000 and
(b) the EBITDA of Parent and its Subsidiaries (on a consolidated basis) as of
the end of the most recent two (2) fiscal months, on a combined basis, for which
Agent or any Lender has received financial statements of Borrowers or Guarantors
shall be positive.
9.18 License Agreements.
(a) With respect to a License Agreement applicable to Intellectual
Property that is owned by a third party and licensed to a Borrower or Guarantor
and that is affixed to or otherwise used in connection with the manufacture,
sale or distribution of any Inventory, each Borrower and Guarantor shall (i)
give Agent not less than ninety (90) days prior written notice of its intention
to not renew or to terminate, cancel, surrender or release its rights under any
such License Agreement, or to amend any such License Agreement or related
arrangements to limit the scope of the right of such Borrower or Guarantor to
use the Intellectual Property subject to such License Agreement, either with
respect to product, territory, term or otherwise, or to increase the amounts to
be paid by such Borrower or Guarantor thereunder or in connection therewith (and
Agent may establish such Reserves as a result of any of the foregoing as Agent
may reasonably determine), (ii) give Agent prompt written notice of any such
License Agreement entered into by such Borrower or Guarantor after the date
hereof, or any material amendment to any such License Agreement existing on the
date hereof, in each case together with a true, correct and complete copy
thereof and such other information with respect thereto as Agent may in good
request, (iii) give Agent prompt written notice of any material breach of any
obligation, or any default, by the third party that is the licensor or by the
Borrower or Guarantor that is the licensee or any other party under any such
License Agreement, and deliver to Agent (promptly upon the receipt thereof by
such Borrower or Guarantor in the case of a notice to such
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Borrower or Guarantor and concurrently with the sending thereof in the case of a
notice from such Borrower or Guarantor) a copy of each notice of default and any
other notice received or delivered by such Borrower or Guarantor in connection
with any such a License Agreement that relates to the scope of the right, or the
continuation of the right, of such Borrower or Guarantor to use the Intellectual
Property subject to such License Agreement or the amounts required to be paid
thereunder.
(b) With respect to a License Agreement applicable to Intellectual
Property that is owned by a third party and licensed to a Borrower or Guarantor
and that is affixed to or otherwise used in connection with the manufacture,
sale or distribution of any Inventory, at any time an Event of Default shall
exist or have occurred and be continuing or if after giving effect to any
Reserves, or the reduction in the applicable Borrowing Base as a result of
Eligible Inventory using such licensed Intellectual Property ceasing to be
Eligible Inventory, the aggregate amount of the Excess Availability of Borrowers
is less than $5,000,000, Agent shall have, and is hereby granted, the
irrevocable right and authority, at its option, to renew or extend the term of
such License Agreement, whether in its own name and behalf, or in the name and
behalf of a designee or nominee of Agent or in the name and behalf of such
Borrower or Guarantor, subject to and in accordance with the terms of such
License Agreement. Agent may, but shall not be required to, perform any or all
of such obligations of such Borrower or Guarantor under any of the License
Agreements, including, but not limited to, the payment of any or all sums due
from such Borrower or Guarantor thereunder. Any sums so paid by Agent shall
constitute part of the Obligations.
9.19 Costs and Expenses. Borrowers and Guarantors shall pay to Agent on
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, Agent's rights in the Collateral, this Agreement, the other
Financing Agreements and all other documents related hereto or thereto,
including any amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect hereof and
thereof, including: (a) all costs and expenses of filing or recording (including
Uniform Commercial Code financing statement filing taxes and fees or other
registrations or filing fees, documentary taxes, intangibles taxes and mortgage
recording taxes and fees, if applicable); (b) costs and expenses and fees for
insurance premiums, environmental audits, title insurance premiums, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees, costs and expenses of remitting loan proceeds, collecting checks and other
items of payment, and establishing and maintaining the Blocked Accounts,
together with Agent's customary charges and fees with respect thereto; (c)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (d) costs and expenses of preserving and
protecting the Collateral; (e) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Agent, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Agent or any
Lender arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Agent during the course of periodic field
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examinations of the Collateral and such Borrower's or Guarantor's operations,
plus a per diem charge at Agent's then standard rate for Agent's examiners in
the field and office (which rate as of the date hereof is $750 per person per
day); and (g) the fees and disbursements of counsel (including legal assistants)
to Agent in connection with any of the foregoing.
9.20 Further Assurances. At the request of Agent at any time and from time
to time, Borrowers and Guarantors shall, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Agent may at any time and from time to time request a certificate
from an officer of any Borrower or Guarantor representing that all conditions
precedent to the making of Loans and providing Letter of Credit Accommodations
contained herein are satisfied. In the event of such request by Agent, Agent and
Lenders may, at Agent's option, cease to make any further Loans or provide any
further Letter of Credit Accommodations until Agent has received such
certificate and, in addition, Agent has determined that such conditions are
satisfied.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) any Borrower fails to pay any of the Obligations within three
(3) Business Days after when due or (ii) any Borrower or Obligor fails to
perform any of the covenants contained in Sections 9.1, 9.2, 9.3, 9.4, 9.13,
9.14, 9.15, 9.16 and 9.18 of this Agreement and such failure shall continue for
twenty (20) days; provided, that, such twenty (20) day period shall not apply in
the case of: (A) any failure to observe any such covenant which is not capable
of being cured at all or within such twenty (20) day period or which has been
the subject of a prior failure within a six (6) month period or (B) an
intentional breach by any Borrower or Obligor of any such covenant or (iii) any
Borrower or Obligor fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements
other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above,
provided, that, in the case of any failure to comply with the second sentence of
Section 9.5 hereof, such failure continues for a period of ten (10) Business
Days after written notice thereof by Agent to Borrower Agent;
(b) any representation, warranty or statement of fact made by any
Borrower or Guarantor to Agent in this Agreement, the other Financing Agreements
or any other written agreement, schedule, confirmatory assignment or otherwise
shall when made or deemed made be false or misleading in any material respect;
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(c) any Obligor revokes or terminates or purports to revoke or
terminate or fails to perform in any material respect any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Agent or any Lender;
(d) any judgment for the payment of money is rendered against
any Borrower or Obligor in excess of $5,000,000 in any one case or in excess of
$5,000,000 in the aggregate (to the extent not covered by insurance where the
insurer has assumed responsibility in writing for such judgment) and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any judgment other
than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against any Borrower or Obligor or any of the Collateral
having a value in excess of $5,000,000;
(e) any Obligor (being a natural person or a general partner of
an Obligor which is a partnership) dies or any Borrower or Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) any Borrower or Obligor makes an assignment for the benefit
of creditors or calls a meeting of its creditors or principal creditors in
connection with a moratorium or adjustment of the Indebtedness due to them;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or any Borrower or Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Obligor or for all or any part of its
property;
(i) any default in respect of any Indebtedness of any Borrower
or Obligor (other than Indebtedness owing to Agent and Lenders hereunder), in
any case in an amount in excess of $5,000,000, which default continues for more
than the applicable cure period, if any, with respect thereto or any default by
any Borrower or Obligor under any Material Contract, which default continues for
more than the applicable cure period, if any, with respect thereto and/or is not
waived in writing by the other parties thereto;
(j) any material provision hereof or of any of the other
Financing Agreements shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto (other
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than Agent) in accordance with its terms, or any such party shall challenge the
enforceability hereof or thereof, or shall assert in writing, or take any action
or fail to take any action based on the assertion that any material provision
hereof or of any of the other Financing Agreements has ceased to be or is
otherwise not valid, binding or enforceable in accordance with its terms, or any
security interest provided for herein or in any of the other Financing
Agreements shall cease to be a valid and perfected first priority security
interest in any of the Collateral purported to be subject thereto (except as
otherwise permitted herein or therein);
(k) an ERISA Event shall occur which results in or could
reasonably be expected to result in liability of any Borrower in an aggregate
amount in excess of $5,000,000;
(l) any Change of Control;
(m) the indictment by any Governmental Authority, or as Agent may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower or Obligor of which any Borrower, Obligor
or Agent receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Agent, under any criminal statute, or commencement or threatened commencement of
criminal or civil proceedings against such Borrower or Obligor, pursuant to
which statute or proceedings the penalties or remedies sought or available
include forfeiture of (i) any of the Collateral having a value in excess of
$5,000,000 or (ii) any other property of any Borrower or Guarantor which is
necessary or material to the conduct of its business;
(n) there shall be a material adverse change in the business,
assets or prospects of any Borrower or Obligor after the date hereof; or
(o) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent's discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or Obligor of this
Agreement or any of the other Financing Agreements. Subject to Section 12
hereof, Agent may, and at the direction of the Required Lenders shall, at any
time or times, proceed directly against any Borrower or Obligor to collect the
Obligations without prior recourse to the Collateral.
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(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Agent may, in its discretion,
and upon the direction of the Required Lenders, shall (i) accelerate the payment
of all Obligations and demand immediate payment thereof to Agent for itself and
the ratable benefit of Lenders (provided, that, upon the occurrence of any Event
of Default described in Sections 10.1(g) and 10.1(h), all Obligations shall
automatically become immediately due and payable), (ii) terminate the
Commitments and this Agreement.
(c) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Agent may, in its discretion,
(i) with or without judicial process or the aid or assistance of others, enter
upon any premises on or in which any of the Collateral may be located and take
possession of the Collateral or complete processing, manufacturing and repair of
all or any portion of the Collateral, (ii) require any Borrower or Obligor, at
Borrowers' expense, to assemble and make available to Agent any part or all of
the Collateral at any place and time designated by Agent, (iii) collect,
foreclose, receive, appropriate, setoff and realize upon any and all Collateral,
(iv) remove any or all of the Collateral from any premises on or in which the
same may be located for the purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, (v) sell, lease, transfer, assign,
deliver or otherwise dispose of any and all Collateral (including entering into
contracts with respect thereto, public or private dispositions at any exchange,
broker's board, at any office of Agent or elsewhere) at such prices or terms as
Agent may deem reasonable, for cash, upon credit or for future delivery, with
the Agent having the right to purchase the whole or any part of the Collateral
at any such public disposition, all of the foregoing being free from any right
or equity of redemption of any Borrower or Obligor, which right or equity of
redemption is hereby expressly waived and released by Borrowers and Obligors
and/or (vi) terminate this Agreement. If any of the Collateral is sold or leased
by Agent upon credit terms or for future delivery, the Obligations shall not be
reduced as a result thereof until payment therefor is finally collected by
Agent. If notice of disposition of Collateral is required by law, ten (10) days
prior notice by Agent to Borrower Agent designating the time and place of any
public sale or the time after which any private sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrowers and Obligors waive any other notice. In the event Agent
institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, each Borrower and Obligor waives the
posting of any bond which might otherwise be required. At any time an Event of
Default exists or has occurred and is continuing, upon Agent's request,
Borrowers will either, as Agent shall specify, furnish cash collateral to the
issuer to be used to secure and fund Agent's reimbursement obligations to the
issuer in connection with any Letter of Credit Accommodations or furnish cash
collateral to Agent for the Letter of Credit Accommodations. Such cash
collateral shall be in the amount equal to one hundred ten (110%) percent of the
amount of the Letter of Credit Accommodations plus the amount of any fees and
expenses payable in connection therewith through the end of the latest
expiration date of such Letter of Credit Accommodations.
(d) At any time or times that an Event of Default exists or has
occurred and is continuing, Agent may, in its discretion, enforce the rights of
any Borrower or Obligor against any account debtor, secondary obligor or other
obligor in respect of any of the Accounts or other
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Receivables. Without limiting the generality of the foregoing, Agent may, in its
discretion, and upon the direction of the Required Lenders, Agent shall, at such
time or times (i) notify any or all account debtors, secondary obligors or other
obligors in respect thereof that the Receivables have been assigned to Agent and
that Agent has a security interest therein and Agent may direct any or all
accounts debtors, secondary obligors and other obligors to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for any failure to collect or enforce the payment thereof
nor for the negligence of its agents or attorneys with respect thereto and (iv)
take whatever other action Agent may deem necessary or desirable for the
protection of its interests and the interests of Lenders. At any time that an
Event of Default exists or has occurred and is continuing, at Agent's request,
all invoices and statements sent to any account debtor shall state that the
Accounts and such other obligations have been assigned to Agent and are payable
directly and only to Agent and Borrowers and Obligors shall deliver to Agent
such originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Agent may require. In the
event any account debtor returns Inventory when an Event of Default exists or
has occurred and is continuing, Borrowers shall, upon Agent's request, hold the
returned Inventory in trust for Agent, segregate all returned Inventory from all
of its other property, dispose of the returned Inventory solely according to
Agent's instructions, and not issue any credits, discounts or allowances with
respect thereto without Agent's prior written consent.
(e) To the extent that applicable law imposes duties on Agent or
any Lender to exercise remedies in a commercially reasonable manner (which
duties cannot be waived under such law), each Borrower and Guarantor
acknowledges and agrees that it is not commercially unreasonable for Agent or
any Lender (i) to fail to incur expenses reasonably deemed significant by Agent
or any Lender to prepare Collateral for disposition or otherwise to complete raw
material or work in process into finished goods or other finished products for
disposition, (ii) to fail to obtain third party consents for access to
Collateral to be disposed of, or to obtain or, if not required by other law, to
fail to obtain consents of any Governmental Authority or other third party for
the collection or disposition of Collateral to be collected or disposed of,
(iii) to fail to exercise collection remedies against account debtors, secondary
obligors or other persons obligated on Collateral or to remove liens or
encumbrances on or any adverse claims against Collateral, (iv) to exercise
collection remedies against account debtors and other persons obligated on
Collateral directly or through the use of collection agencies and other
collection specialists, (v) to advertise dispositions of Collateral through
publications or media of general circulation, whether or not the Collateral is
of a specialized nature, (vi) to contact other persons, whether or not in the
same business as any Borrower or Guarantor, for expressions of interest in
acquiring all or any portion of the Collateral, (vii) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (viii) to dispose of Collateral
by utilizing Internet sites that provide for the auction of assets of the types
included
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in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (ix) to dispose of assets in
wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower and Guarantor acknowledges that the purpose of this
Section is to provide non-exhaustive indications of what actions or omissions by
Agent or any Lender would not be commercially unreasonable in the exercise by
Agent or any Lender of remedies against the Collateral and that other actions or
omissions by Agent or any Lender shall not be deemed commercially unreasonable
solely on account of not being indicated in this Section. Without limitation of
the foregoing, nothing contained in this Section shall be construed to grant any
rights to any Borrower or Guarantor or to impose any duties on Agent or Lenders
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this Section.
(f) Subject to those terms and conditions of any applicable
License Agreement as to trademarks licensed by a Borrower or Guarantor from a
third party, for the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower and Obligor hereby grants to Agent, to the
extent assignable, an irrevocable, non-exclusive license (exercisable at any
time an Event of Default shall exist or have occurred and for so long as the
same is continuing) without payment of royalty or other compensation to any
Borrower or Obligor, to use, assign, license or sublicense any of the
trademarks, service-marks, trade names, business names, trade styles, designs,
logos and other source of business identifiers and other Intellectual Property
and general intangibles now owned or hereafter acquired by any Borrower or
Obligor, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
Nothing contained herein shall limit the application of 679.4081 of the UCC or
Section 9-408 of the Uniform Commercial Code of any other applicable
jurisdiction to the terms of any License Agreement.
(g) Agent may apply the cash proceeds of Collateral actually
received by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Agent may elect, whether or not then due. Borrowers and Guarantors shall
remain liable to Agent and Lenders for the payment of any deficiency with
interest at the highest rate provided for herein and all costs and expenses of
collection or enforcement, including attorneys' fees and expenses.
(h) Without limiting the foregoing, upon the occurrence of a
Default or an Event of Default, (i) Agent and Lenders may, at Agent's option,
and upon the occurrence of an Event of Default at the direction of the Required
Lenders, Agent and Lenders shall, without notice, (A) cease making Loans or
arranging for Letter of Credit Accommodations or reduce the lending formulas or
amounts of Loans and Letter of Credit Accommodations available to Borrowers
and/or (B) terminate any provision of this Agreement providing for any future
Loans or Letter of Credit Accommodations to be
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made by Agent and Lenders to Borrowers and (ii) Agent may, at its option,
establish such Reserves as Agent determines, without limitation or restriction,
notwithstanding anything to the contrary contained herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of Florida but
excluding any principles of conflicts of law or other rule of law that would
cause the application of the law of any jurisdiction other than the laws of the
State of Florida.
(b) Borrowers, Guarantors, Agent and Lenders irrevocably consent
and submit to the non-exclusive jurisdiction of the Circuit Court of Miami-Dade
County, Florida and the United States District Court for the Southern District
of Florida, whichever Agent may elect, and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Agent and Lenders shall have the right to bring any
action or proceeding against any Borrower or Guarantor or its or their property
in the courts of any other jurisdiction which Agent deems necessary or
appropriate in order to realize on the Collateral or to otherwise enforce its
rights against any Borrower or Guarantor or its or their property).
(c) Each Borrower and Guarantor hereby waives personal service
of any and all process upon it and consents that all such service of process may
be made by certified mail (return receipt requested) directed to its address set
forth herein and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Agent's
option, by service upon any Borrower or Guarantor (or Borrower Agent on behalf
of such Borrower or Guarantor) in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, such Borrower or
Guarantor shall appear in answer to such process, failing which such Borrower or
Guarantor shall be deemed in default and judgment may be entered by Agent
against such Borrower or Guarantor for the amount of the claim and other relief
requested.
(d) BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY WAIVES
ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER
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FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE
OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT,
EQUITY OR OTHERWISE. BORROWERS, GUARANTORS, AGENT AND LENDERS EACH HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY GUARANTOR,
AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Agent and Lenders shall not have any liability to any Borrower or
Guarantor (whether in tort, contract, equity or otherwise) for losses suffered
by such Borrower or Guarantor in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Agent and such Lender, that the losses were the result of acts or omissions
constituting gross negligence or willful misconduct. In any such litigation,
Agent and Lenders shall be entitled to the benefit of the rebuttable presumption
that it acted in good faith and with the exercise of ordinary care in the
performance by it of the terms of this Agreement. Each Borrower and Guarantor:
(i) certifies that neither Agent, any Lender nor any representative, agent or
attorney acting for or on behalf of Agent or any Lender has represented,
expressly or otherwise, that Agent and Lenders would not, in the event of
litigation, seek to enforce any of the waivers provided for in this Agreement or
any of the other Financing Agreements and (ii) acknowledges that in entering
into this Agreement and the other Financing Agreements, Agent and Lenders are
relying upon, among other things, the waivers and certifications set forth in
this Section 11.1 and elsewhere herein and therein.
11.2 Waiver of Notices. Each Borrower and Guarantor hereby expressly waives
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments and chattel paper, included in or evidencing
any of the Obligations or the Collateral, and any and all other demands and
notices of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement, except such as are expressly provided for herein.
No notice to or demand on any Borrower or Guarantor which Agent or any Lender
may elect to give shall entitle such Borrower or Guarantor to any other or
further notice or demand in the same, similar or other circumstances.
11.3 Amendments and Waivers.
(a) Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be amended, waived, discharged or terminated unless
such amendment, waiver, discharge
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or termination is in writing signed by Agent and the Required Lenders or at
Agent's option, by Agent with the authorization of the Required Lenders, and as
to amendments to any of the Financing Agreements (other than with respect to any
provision of Section 12 hereof), by any Borrower; except, that, no such
amendment, waiver, discharge or termination shall:
(i) reduce the interest rate or any fees or extend the time of
payment of principal, interest or any fees or reduce the principal amount of any
Loan or Letter of Credit Accommodations, in each case without the consent of
each Lender directly affected thereby,
(ii) increase the Commitment of any Lender over the amount
thereof then in effect or provided hereunder, in each case without the consent
of the Lender directly affected thereby,
(iii) release any Collateral (except as expressly required
hereunder or under any of the other Financing Agreements or applicable law and
except as permitted under Section 12.11(b) hereof), without the consent of Agent
and all of Lenders,
(iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all of Lenders,
(v) consent to the assignment or transfer by any Borrower or
Guarantor of any of their rights and obligations under this Agreement, without
the consent of Agent and all of Lenders,
(vi) amend, modify or waive any terms of this Section 11.3
hereof, without the consent of Agent and all of Lenders, or
(vii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all of Lenders.
(b) Agent and Lenders shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its or their
rights, powers and/or remedies unless such waiver shall be in writing and signed
as provided herein. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by Agent or any Lender of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which Agent or any Lender would
otherwise have on any future occasion, whether similar in kind or otherwise.
(c) Notwithstanding anything to the contrary contained in Section
11.3(a) above, in connection with any amendment, waiver, discharge or
termination, in the event that any Lender whose consent thereto is required
shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a "Non-Consenting Lender"), but the consent of any other
Lenders to such amendment, waiver, discharge or termination that is required are
obtained, if any, then Congress shall have the right, but not the obligation, at
any time thereafter, and upon the exercise by Congress of such
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right, such Non-Consenting Lender shall have the obligation, to sell, assign and
transfer to Congress or such Eligible Transferee as Congress may specify, the
Commitment of such Non-Consenting Lender and all rights and interests of such
Non-Consenting Lender pursuant thereto. Congress shall provide the
Non-Consenting Lender with prior written notice of its intent to exercise its
right under this Section, which notice shall specify the date on which such
purchase and sale shall occur. Such purchase and sale shall be pursuant to the
terms of an Assignment and Acceptance (whether or not executed by the
Non-Consenting Lender), except that on the date of such purchase and sale,
Congress, or such Eligible Transferee specified by Congress, shall pay to the
Non-Consenting Lender the amount equal to: (i) the principal balance of the
Loans held by the Non-Consenting Lender outstanding as of the close of business
on the Business Day immediately preceding the effective date of such purchase
and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees
payable to the Non-Consenting Lender to the effective date of the purchase (but
in no event shall the Non-Consenting Lender be deemed entitled to any early
termination fee), minus (iii) the amount of the closing fee received by the
Non-Consenting Lender pursuant to the terms hereof or of any of the other
Financing Agreements multiplied by the fraction, the numerator of which is the
number of months remaining in the then current term of the Credit Facility and
the denominator of which is the number of months in the then current term
thereof. Such purchase and sale shall be effective on the date of the payment of
such amount to the Non-Consenting Lender and the Commitment of the
Non-Consenting Lender shall terminate on such date.
(d) The consent of Agent shall be required for any amendment, waiver
or consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section and the exercise by Agent of any of its rights
hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory
shall not be deemed an amendment to the advance rates provided for in this
Section 11.3.
11.4 Waiver of Counterclaims. Each Borrower and Guarantor waives all rights
to interpose any claims, deductions, setoffs or counterclaims of any nature
(other than compulsory counterclaims) in any action or proceeding with respect
to this Agreement, the Obligations, the Collateral or any matter arising
therefrom or relating hereto or thereto.
11.5 Indemnification. Each Borrower and Guarantor shall, jointly and
severally, indemnify and hold Agent and each Lender, and its officers,
directors, agents, employees, advisors and counsel and their respective
Affiliates (each such person being an "Indemnitee"), harmless from and against
any and all losses, claims, damages, liabilities, costs or expenses (including
attorneys' fees and expenses) imposed on, incurred by or asserted against any of
them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the fees and expenses of counsel except that Borrowers and Guarantors shall
not have any obligation under this Section 11.5 to indemnify an Indemnitee with
respect to a matter covered hereby resulting from the gross negligence or wilful
misconduct of such Indemnitee as
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determined pursuant to a final, non-appealable order of a court of competent
jurisdiction (but without limiting the obligations of Borrowers or Guarantors as
to any other Indemnitee). To the extent that the undertaking to indemnify, pay
and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrowers and Guarantors shall pay the
maximum portion which it is permitted to pay under applicable law to Agent and
Lenders in satisfaction of indemnified matters under this Section. To the extent
permitted by applicable law, no Borrower or Guarantor shall assert, and each
Borrower and Guarantor hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct or actual damages) arising out of, in connection with, or
as a result of, this Agreement, any of the other Financing Agreements or any
undertaking or transaction contemplated hereby. All amounts due under this
Section shall be payable upon demand. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
11.6 Currency Indemnity. If, for the purposes of obtaining judgment in
any court in any jurisdiction with respect to this Agreement or any of the other
Financing Agreements, it becomes necessary to convert into the currency of such
jurisdiction (the "Judgment Currency") any amount due under this Agreement or
under any of the other Financing Agreements in any currency other than the
Judgment Currency (the "Currency Due"), then conversion shall be made pursuant
to the Currency Exchange Convention at which Agent is able, on the relevant
date, to purchase the Currency Due with the Judgment Currency prevailing on the
Business Day before the day on which judgment is given. In the event that there
is a change in the rate pursuant to the Currency Exchange Convention prevailing
between the Business Day before the day on which the judgment is given and the
date of receipt by Agent of the amount due, Borrowers and Guarantors will, on
the date of receipt by Agent, pay such additional amounts, if any, or be
entitled to receive reimbursement of such amount, if any, as may be necessary to
ensure that the amount received by Agent on such date is the amount in the
Judgment Currency which when converted at the rate of exchange prevailing on the
date of receipt by Agent is the amount then due under this Agreement or such
other of the Financing Agreements in the Currency Due. If the amount of the
Currency Due which Agent is able to purchase is less than the amount of the
Currency Due originally due to it, Borrowers and Guarantors shall indemnify and
save Agent and Lenders harmless from and against loss or damage arising as a
result of such deficiency. The indemnity contained herein shall constitute an
obligation separate and independent from the other obligations contained in this
Agreement and the other Financing Agreements, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by Agent or any Lender from time to time and shall continue in full force and
effect notwithstanding any judgment or order for a liquidated sum in respect of
an amount due under this Agreement or any of the other Financing Agreements or
under any judgment or order. The term "Currency Exchange Convention" as used
herein shall mean the procedure used by Agent to value in US Dollars (i) the
obligations or assets of Borrower or Guarantor that are originally measured in
Canadian Dollars and (ii) any other amount expressed in Canadian Dollars or any
other currency, other than US Dollars, in each case by using the spot price for
the purchase of US Dollars with Canadian Dollars (or such other currency)
provided to Agent by the Reference Bank (or such other bank as Agent may specify
for such purpose) for the immediately preceding Business Day.
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SECTION 12. THE AGENT
12.1 Appointment, Powers and Immunities. Each Lender irrevocably
designates, appoints and authorizes Congress to act as Agent hereunder and under
the other Financing Agreements with such powers as are specifically delegated to
Agent by the terms of this Agreement and of the other Financing Agreements,
together with such other powers as are reasonably incidental thereto. Agent (a)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason of
this Agreement or any other Financing Agreement be a trustee or fiduciary for
any Lender; (b) shall not be responsible to Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in any
of the other Financing Agreements, or in any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Financing Agreement, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Financing Agreement or any other document referred to or provided for herein or
therein or for any failure by any Borrower or any Obligor or any other Person to
perform any of its obligations hereunder or thereunder; and (c) shall not be
responsible to Lenders for any action taken or omitted to be taken by it
hereunder or under any other Financing Agreement or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful misconduct
as determined by a final non-appealable judgment of a court of competent
jurisdiction. Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. Agent may deem and treat the
payee of any note as the holder thereof for all purposes hereof unless and until
the assignment thereof pursuant to an agreement (if and to the extent permitted
herein) in form and substance satisfactory to Agent shall have been delivered to
and acknowledged by Agent.
12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent in good faith. As to any matters
not expressly provided for by this Agreement or any other Financing Agreement,
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or thereunder in accordance with instructions given by the
Required Lenders or all of Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all Lenders.
12.3 Events of Default.
(a) Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or an Event of Default or other failure of a condition
precedent to the Loans and Letter of Credit Accommodations hereunder, unless and
until Agent has received written notice from a Lender,
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or a Borrower specifying such Event of Default or any unfulfilled condition
precedent, and stating that such notice is a "Notice of Default or Failure of
Condition". In the event that Agent receives such a Notice of Default or Failure
of Condition, Agent shall give prompt notice thereof to the Lenders and Borrower
Agent. Agent shall (subject to Section 12.7) take such action with respect to
any such Event of Default or failure of condition precedent as shall be directed
by the Required Lenders; provided, that, unless and until Agent shall have
received such directions, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to or by reason of such
Event of Default or failure of condition precedent, as it shall deem advisable
in the best interest of Lenders. Without limiting the foregoing, and
notwithstanding the existence or occurrence and continuance of an Event of
Default or any other failure to satisfy any of the conditions precedent set
forth in Section 4 of this Agreement to the contrary, Agent may, but shall have
no obligation to, continue to make Loans and issue or cause to be issued Letter
of Credit Accommodations for the ratable account and risk of Lenders from time
to time if Agent believes making such Loans or issuing or causing to be issued
such Letter of Credit Accommodations is in the best interests of Lenders.
(b) Except with the prior written consent of Agent, no Lender
may assert or exercise any enforcement right or remedy in respect of the Loans,
Letter of Credit Accommodations or other Obligations, as against any Borrower or
Obligor or any of the Collateral or other property of any Borrower or Obligor.
12.4 Congress in its Individual Capacity. With respect to its
Commitment and the Loans made and Letter of Credit Accommodations issued or
caused to be issued by it (and any successor acting as Agent), so long as
Congress shall be a Lender hereunder, it shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include Congress in its individual capacity as Lender
hereunder. Congress (and any successor acting as Agent) and its Affiliates may
(without having to account therefor to any Lender) lend money to, make
investments in and generally engage in any kind of business with Borrowers (and
any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and
Congress and its Affiliates may accept fees and other consideration from any
Borrower or Guarantor and any of its Subsidiaries and Affiliates for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.
12.5 Indemnification. Lenders agree to indemnify Agent (to the extent
not reimbursed by Borrowers hereunder and without limiting any obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of Agent as determined by a final
non-appealable judgment of
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a court of competent jurisdiction. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has, independently and without reliance on Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis of Borrowers and Obligors and has made its own decision to enter
into this Agreement and that it will, independently and without reliance upon
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Financing Agreements. Agent shall not be required to keep itself informed
as to the performance or observance by any Borrower or Obligor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect the
properties or books of any Borrower or Obligor. Agent will use reasonable
efforts to provide Lenders with any information received by Agent from any
Borrower or Obligor which is required to be provided to Lenders hereunder or
which is reasonably requested by a Lender and with a copy of any Notice of
Default or Failure of Condition received by Agent from any Borrower or any
Lender; provided, that, Agent shall not be liable to any Lender for any failure
to do so, except to the extent that such failure is attributable to Agent's own
gross negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. Except for notices, reports and
other documents expressly required to be furnished to Lenders by Agent
hereunder, Agent shall not have any duty or responsibility to provide any Lender
with any other credit or other information concerning the affairs, financial
condition or business of any Borrower or Obligor that may come into the
possession of Agent.
12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
12.8 Additional Loans. Agent shall not make any Loans or provide any Letter
of Credit Accommodations to any Borrower on behalf of Lenders intentionally and
with actual knowledge that such Loans or Letter of Credit Accommodations would
cause the aggregate amount of the total outstanding Loans and Letter of Credit
Accommodations to such Borrower to exceed the Borrowing Base of such Borrower,
without the prior consent of all Lenders, except, that, Agent may make such
additional Loans or provide such additional Letter of Credit Accommodations on
behalf of Lenders, intentionally and with actual knowledge that such Loans or
Letter of Credit Accommodations will cause the total outstanding Loans and
Letter of Credit Accommodations to such Borrower to exceed the Borrowing Base of
such Borrower, as Agent may deem necessary or advisable in its discretion,
provided, that: (a) the total principal amount of the additional Loans or
additional Letter of Credit Accommodations to any Borrower which Agent may make
or provide after obtaining such actual knowledge that the aggregate principal
amount of the Loans equal or exceed the Borrowing Bases of
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Borrowers, plus the amount of Special Agent Advances made pursuant to Section
12.11(a)(ii) hereof then outstanding, shall not exceed the aggregate amount
equal to ten (10%) of the Maximum Credit outstanding at any time and shall not
cause the total principal amount of the Loans and Letter of Credit
Accommodations to exceed the Maximum Credit and (b) no such additional Revolving
Loan or Letter of Credit Accommodation shall be outstanding more than ninety
(90) days after the date such additional Revolving Loan or Letter of Credit
Accommodation is made or issued (as the case may be), except as the Required
Lenders may otherwise agree. Each Lender shall be obligated to pay Agent the
amount of its Pro Rata Share of any such additional Loans or Letter of Credit
Accommodations.
12.9 Concerning the Collateral and the Related Financing Agreements. Each
Lender authorizes and directs Agent to enter into this Agreement and the other
Financing Agreements. Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements and the exercise by Agent or Required Lenders of their
respective powers set forth therein or herein, together with such other powers
that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
12.10 Field Audit, Examination Reports and other Information; Disclaimer by
Lenders. By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report and such report with respect to the Borrowing Base prepared by Agent or
prepared by Borrowers or Guarantors and provided to Agent (each field audit or
examination report and report with respect to the Borrowing Base being referred
to herein as a "Report" and collectively, "Reports");
(b) expressly agrees and acknowledges that Agent (i) does not make
any representation or warranty as to the accuracy of any Report, or (ii) shall
not be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Guarantors and will rely significantly upon Borrowers' and
Guarantors' books and records, as well as on representations of Borrowers' and
Guarantors' personnel; and
(d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.5 hereof, and not to
distribute or use any Report in any other manner.
12.11 Collateral Matters.
(a) Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to
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the Loans and Letter of Credit Accommodations hereunder, make such disbursements
and advances ("Special Agent Advances") which Agent, in its sole discretion, (i)
deems necessary or desirable either to preserve or protect the Collateral or any
portion thereof or (ii) to enhance the likelihood or maximize the amount of
repayment by Borrowers and Guarantors of the Loans and other Obligations,
provided, that, the aggregate principal amount of the Special Agent Advances
pursuant to this clause (ii), plus the then outstanding principal amount of the
additional Loans and Letter of Credit Accommodations which Agent may make or
provide as set forth in Section 12.8 hereof, shall not exceed the aggregate
amount of ten (10%) percent of the Maximum Credit outstanding at any time or
(iii) to pay any other amount chargeable to any Borrower or Guarantor pursuant
to the terms of this Agreement or any of the other Financing Agreements
consisting of costs, fees and expenses and payments to any issuer of Letter of
Credit Accommodations. Special Agent Advances shall be repayable on demand and
be secured by the Collateral. Special Agent Advances shall not constitute Loans
but shall otherwise constitute Obligations hereunder. Without limitation of its
obligations pursuant to Section 6.10, each Lender agrees that it shall make
available to Agent, upon Agent's demand, in immediately available funds, the
amount equal to such Lender's Pro Rata Share of each such Special Agent Advance.
If such funds are not made available to Agent by such Lender, such Lender shall
be deemed a Defaulting Lender and Agent shall be entitled to recover such funds,
on demand from such Lender together with interest thereon for each day from the
date such payment was due until the date such amount is paid to Agent at the
Federal Funds Rate for each day during such period (as published by the Federal
Reserve Bank of New York or at Agent's option based on the arithmetic mean
determined by Agent of the rates for the last transaction in overnight Federal
funds arranged prior to 9:00 a.m. (New York City time) on that day by each of
the three leading brokers of Federal funds transactions in New York City
selected by Agent) and if such amounts are not paid within three (3) days of
Agent's demand, at the highest Interest Rate provided for in Section 3.1 hereof
applicable to Prime Rate Loans.
(b) Lenders hereby irrevocably authorize Agent, at its option and in its
discretion to release any security interest in, mortgage or lien upon, any of
the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 below, or (ii) constituting property being
sold or disposed of if Borrower Agent or any Borrower or Guarantor certifies to
Agent that the sale or disposition is made in compliance with Section 9.7 hereof
(and Agent may rely conclusively on any such certificate, without further
inquiry), or (iii) constituting property in which any Borrower or Guarantor did
not own an interest at the time the security interest, mortgage or lien was
granted or at any time thereafter, or (iv) having a value in the aggregate in
any twelve (12) month period of less than $5,000,000, or (v) if required or
permitted under the terms hereof or under the terms of any of the other
Financing Agreements, including any intercreditor agreement, or (vi) approved,
authorized or ratified in writing by all of Lenders. Except as provided above,
Agent will not release any security interest in, mortgage or lien upon, any of
the Collateral without the prior written authorization of all of Lenders. Upon
request by Agent at any time, Lenders will promptly confirm in writing Agent's
authority to release particular types or items of Collateral pursuant to this
Section.
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(c) Without in any manner limiting Agent's authority to act without
any specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent's opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of any Borrower or
Guarantor in respect of) the Collateral retained by such Borrower or Guarantor.
(d) Agent shall have no obligation whatsoever to any Lender or any
other Person to investigate, confirm or assure that the Collateral exists or is
owned by any Borrower or Guarantor or is cared for, protected or insured or has
been encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letter of Credit Accommodations
hereunder, or whether any particular reserves are appropriate, or that the liens
and security interests granted to Agent pursuant hereto or any of the Financing
Agreements or otherwise have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent in this Agreement or in any
of the other Financing Agreements, it being understood and agreed that in
respect of the Collateral, or any act, omission or event related thereto, Agent
may act in any manner it may deem appropriate, in its discretion, given Agent's
own interest in the Collateral as a Lender and that Agent shall have no duty or
liability whatsoever to any other Lender.
12.12 Agency for Perfection. Each Lender hereby appoints Agent and each
other Lender as agent and bailee for the purpose of perfecting the security
interests in and liens upon the Collateral of Agent in assets which, in
accordance with Article 9 of the UCC can be perfected only by possession (or
where the security interest of a secured party with possession has priority over
the security interest of another secured party) and Agent and each Lender hereby
acknowledges that it holds possession of any such Collateral for the benefit of
Agent as secured party. Should any Lender obtain possession of any such
Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent's
request therefor shall deliver such Collateral to Agent or in accordance with
Agent's instructions.
12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days'
notice to Lenders and Parent. If Agent resigns under this Agreement, the
Required Lenders shall appoint from among the Lenders a successor agent for
Lenders. If no successor agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with Lenders and
Parent, a successor agent from among Lenders. Upon the acceptance by the Lender
so selected of its appointment as successor agent hereunder, such successor
agent shall succeed to all of the rights, powers and duties of the retiring
Agent and the term "Agent" as used herein and in the other Financing Agreements
shall mean
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such successor agent and the retiring Agent's appointment, powers and duties as
Agent shall be terminated. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Section 12 shall inure to its benefit as to any
actions taken or omitted by it while it was Agent under this Agreement. If no
successor agent has accepted appointment as Agent by the date which is thirty
(30) days after the date of a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nonetheless thereupon become effective and
Lenders shall perform all of the duties of Agent hereunder until such time, if
any, as the Required Lenders appoint a successor agent as provided for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
13.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof; provided, that, except as Agent
and Borrower Agent may otherwise agree, in the event that the term of this
Agreement shall continue for any additional year after the date three (3) years
from the date hereof, Borrowers and Guarantors shall pay to Agent an extension
fee in the amount of one-sixth (1/6%) percent of the Maximum Credit which fee
shall be earned and payable in full on the date that is three (3) years from the
date hereof in respect of the extension for each year after the Renewal Date.
Agent may, at its option (or shall at the direction of any Lender in writing
received by Agent at least ninety (90) days prior to the Renewal Date or the
anniversary of any Renewal Date, as the case may be), terminate this Agreement
and the other Financing Agreements effective on the Renewal Date or any
anniversary of the Renewal Date in any year by giving to Borrower Agent at least
sixty (60) days prior written notice. In addition, Borrowers may terminate this
Agreement at any time upon ten (10) days prior written notice to Agent (which
notice shall be irrevocable) and Agent may, at its option, and shall at the
direction of Required Lenders, terminate this Agreement at any time on or after
an Event of Default. Upon any effective date of termination of the Financing
Agreements (including the Renewal Date), Borrowers shall pay to Agent all
outstanding and unpaid Obligations and shall furnish cash collateral to Agent
(or at Agent's option, a letter of credit issued for the account of Borrowers
and at Borrowers' expense, in form and substance satisfactory to Agent, by an
issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts
as Agent determines are reasonably necessary to secure Agent and Lenders from
loss, cost, damage or expense, including attorneys' fees and expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Agent or any Lender has not yet
received final and indefeasible payment. The amount of such cash collateral (or
letter of credit, as Agent may determine) as to any Letter of Credit
Accommodations shall be in the amount equal to one hundred ten (110%) percent of
the amount of the Letter of Credit Accommodations plus the amount of any fees
and expenses payable in connection therewith through the end of the latest
expiration date of such Letter of Credit Accommodations. Such payments in
respect of the Obligations and cash
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collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Borrower Agent for such purpose. Interest
shall be due until and including the next Business Day, if the amounts so paid
by Borrowers to the Agent Payment Account or other bank account designated by
Agent are received in such bank account later than 12:00 noon, Miami time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or the other
Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Agent's continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid. Accordingly, each
Borrower and Guarantor waives any rights it may have under the UCC to demand the
filing of termination statements with respect to the Collateral and Agent shall
not be required to send such termination statements to Borrowers or Guarantors,
or to file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations paid and
satisfied in full in immediately available funds.
13.2 Interpretative Provisions.
(a) All terms used herein which are defined in Article 1, Article 8
or Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
(b) All references to the plural herein shall also mean the singular
and to the singular shall also mean the plural unless the context otherwise
requires.
(c) All references to any Borrower, Guarantor, Agent and Lenders
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.
(d) The words "hereof", "herein", "hereunder", "this Agreement" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(e) The word "including" when used in this Agreement shall mean
"including, without limitation".
(f) An Event of Default shall exist or continue or be continuing
until such Event of Default is waived in accordance with Section 11.3 or is
cured in a manner satisfactory to Agent, if such Event of Default is capable of
being cured as reasonably determined by Agent.
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(g) All references to the term "good faith" used herein when applicable
to Agent or any Lender shall mean, notwithstanding anything to the contrary
contained herein or in the UCC, honesty in fact in the conduct or transaction
concerned. Borrowers and Guarantors shall have the burden of proving any lack of
good faith on the part of Agent or any Lender alleged by any Borrower or
Guarantor at any time.
(h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Parent most recently received
by Agent prior to the date hereof.
(i) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each mean "to but excluding" and the word "through" means "to and
including".
(j) All references to the term "knowledge" used herein when applicable
to any Borrower or Guarantor shall mean the actual knowledge of any officer,
director, agent or employee of a Borrower or Guarantor or constructive knowledge
of such facts that such person should have known in the course of the
performance of their respective duties on behalf of a Borrower or Guarantor but
without requiring specific inquiries as to the applicable circumstances as to a
representation or warranty set forth herein each time such representation or
warranty is made or deemed made hereunder.
(k) Unless otherwise expressly provided herein, (i) references herein
to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (ii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
(l) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(m) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
(n) This Agreement and the other Financing Agreements are the result of
negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all
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parties. Accordingly, this Agreement and the other Financing Agreements shall
not be construed against Agent or Lenders merely because of Agent's or any
Lender's involvement in their preparation.
13.3 Notices. All notices, requests and demands hereunder shall be in
writing and deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):
If to any Borrower ▇▇▇▇▇ ▇▇▇▇▇ International, Inc.
or Guarantor: ▇▇▇▇ ▇▇ ▇▇▇/▇▇/ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: 305-594-2307
with a copy to: Broad and ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
If to Agent: Congress Financial Corporation (Florida)
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
13.4 Partial Invalidity. If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
13.5 Confidentiality.
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(a) Agent and each Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by any Borrower pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information is
furnished by such Borrower to Agent or such Lender, provided, that, nothing
contained herein shall limit the disclosure of any such information: (i) to the
extent required by statute, rule, regulation, subpoena or court order, (ii) to
bank examiners and other regulators, auditors and/or accountants, in connection
with any litigation to which Agent or such Lender is a party, (iii) to any
Lender or Participant (or prospective Lender or Participant) or to any Affiliate
of any Lender so long as such Lender or Participant (or prospective Lender or
Participant) or Affiliate shall have been instructed to treat such information
as confidential in accordance with this Section 13.5, or (iv) to counsel for
Agent or any Lender or Participant (or prospective Lender or Participant).
(b) In the event that Agent or any Lender receives a request or
demand to disclose any confidential information pursuant to any subpoena or
court order, Agent or such Lender, as the case may be, agrees (i) to the extent
permitted by applicable law or if permitted by applicable law, to the extent
Agent or such Lender determines in good faith that it will not create any risk
of liability to Agent or such Lender, Agent or such Lender will promptly notify
Borrower Agent of such request so that Borrower Agent may seek a protective
order or other appropriate relief or remedy and (ii) if disclosure of such
information is required, disclose such information and, subject to reimbursement
by Borrowers of Agent's or such Lender's expenses, cooperate with Borrower Agent
in the reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be accorded to such portion of the disclosed
information which Borrower Agent so designates, to the extent permitted by
applicable law or if permitted by applicable law, to the extent Agent or such
Lender determines in good faith that it will not create any risk of liability to
Agent or such Lender.
(c) In no event shall this Section 13.5 or any other provision of
this Agreement, any of the other Financing Agreements or applicable law be
deemed: (i) to apply to or restrict disclosure of information that has been or
is made public by any Borrower, Guarantor or any third party or otherwise
becomes generally available to the public other than as a result of a disclosure
in violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Agent or any Lender (or any Affiliate of any Lender)
on a non-confidential basis from a person other than a Borrower or Guarantor,
(iii) to require Agent or any Lender to return any materials furnished by a
Borrower or Guarantor to Agent or a Lender or prevent Agent or a Lender from
responding to routine informational requests in accordance with the Code of
Ethics for the Exchange of Credit Information promulgated by The ▇▇▇▇▇▇ ▇▇▇▇▇▇
Associates or other applicable industry standards relating to the exchange of
credit information. The obligations of Agent and Lenders under this Section 13.5
shall supersede and replace the obligations of Agent and Lenders under any
confidentiality letter signed prior to the date hereof.
13.6 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Lenders, Borrowers, Guarantors and
their respective successors and assigns, except that
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Borrower may not assign its rights under this Agreement, the other Financing
Agreements and any other document referred to herein or therein without the
prior written consent of Agent and Lenders. Any such purported assignment
without such express prior written consent shall be void. No Lender may assign
its rights and obligations under this Agreement without the prior written
consent of Agent, except as provided in Section 13.7 below. The terms and
provisions of this Agreement and the other Financing Agreements are for the
purpose of defining the relative rights and obligations of Borrowers,
Guarantors, Agent and Lenders with respect to the transactions contemplated
hereby and there shall be no third party beneficiaries of any of the terms and
provisions of this Agreement or any of the other Financing Agreements.
13.7 Assignments; Participations.
(a) Each Lender may, with the prior written consent of Agent,
assign all or, if less than all, a portion equal to at least $10,000,000 in the
aggregate for the assigning Lender, of such rights and obligations under this
Agreement to one or more Eligible Transferees (but not including for this
purpose any assignments in the form of a participation), each of which assignees
shall become a party to this Agreement as a Lender by execution of an Assignment
and Acceptance; provided, that, (i) such transfer or assignment will not be
effective until recorded by Agent on the Register and (ii) Agent shall have
received for its sole account payment of a processing fee from the assigning
Lender or the assignee in the amount of $5,000.
(b) Agent shall maintain a register of the names and addresses
of Lenders, their Commitments and the principal amount of their Loans (the
"Register"). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and any Borrowers,
Obligors, Agent and Lenders may treat each Person whose name is recorded in the
Register as a Lender hereunder for all purposes of this Agreement. The Register
shall be available for inspection by Borrower Agent and any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(c) Upon such execution, delivery, acceptance and recording,
from and after the effective date specified in each Assignment and Acceptance,
the assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Accommodations) of a Lender hereunder and thereunder and the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement.
(d) By execution and delivery of an Assignment and Acceptance,
the assignor and assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning Lender makes no
125
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, Obligor or any of their
Subsidiaries or the performance or observance by any Borrower or Obligor of any
of the Obligations; (iii) such assignee confirms that it has received a copy of
this Agreement and the other Financing Agreements, together with such other
documents and information it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance, (iv) such
assignee will, independently and without reliance upon the assigning Lender,
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Financing
Agreements, (v) such assignee appoints and authorizes Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement and the
other Financing Agreements as are delegated to Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto, and
(vi) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement and the other
Financing Agreements are required to be performed by it as a Lender. Agent and
Lenders may furnish any information concerning any Borrower or Obligor in the
possession of Agent or any Lender from time to time to assignees and
Participants.
(e) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement and the other Financing Agreements (including, without
limitation, all or a portion of its Commitments and the Loans owing to it and
its participation in the Letter of Credit Accommodations, without the consent of
Agent or the other Lenders); provided, that, (i) such Lender's obligations under
this Agreement (including, without limitation, its Commitment hereunder) and the
other Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Guarantors, the other Lenders and Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and the other Financing
Agreements, and (iii) the Participant shall not have any rights under this
Agreement or any of the other Financing Agreements (the Participant's rights
against such Lender in respect of such participation to be those set forth in
the agreement executed by such Lender in favor of the Participant relating
thereto) and all amounts payable by any Borrower or Obligor hereunder shall be
determined as if such Lender had not sold such participation.
(f) Nothing in this Agreement shall prevent or prohibit any
Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank.
(g) Borrowers and Guarantors shall assist Agent or any Lender
permitted to sell assignments or participations under this Section 13.7 in
whatever manner reasonably necessary in order
126
to enable or effect any such assignment or participation, including (but not
limited to) the execution and delivery of any and all agreements, notes and
other documents and instruments as shall be requested and the delivery of
informational materials, appraisals or other documents for, and the
participation of relevant management in meetings and conference calls with,
potential Lenders or Participants. Borrowers shall certify the correctness,
completeness and accuracy, in all material respects, of all descriptions of
Borrowers and Guarantors and their affairs provided, prepared or reviewed by any
Borrower or Guarantor that are contained in any selling materials and all other
information provided by it and included in such materials.
13.8 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
13.9 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.
127
IN WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused
these presents to be duly executed as of the day and year first above written.
AGENT BORROWERS
----- ---------
CONGRESS FINANCIAL CORPORATION SUPREME INTERNATIONAL, INC.
(FLORIDA), as Agent
By:_____________________________ By:_____________________________
Title:__________________________ Title:__________________________
▇▇▇▇▇▇▇, INC.
By:_____________________________
Title:__________________________
LENDERS
-------
CONGRESS FINANCIAL CORPORATION
(FLORIDA)
By:_____________________________
Title:__________________________
Commitment: $___________
Title:__________________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
[SIGNATURES CONTINUED FROM PRECEDING PAGE]
GUARANTORS
----------
▇▇▇▇▇ ▇▇▇▇▇ INTERNATIONAL, INC.
PEI LICENSING, INC.
▇▇▇▇▇▇▇ APPAREL CORP.
SUPREME REAL ESTATE I, LLC
SUPREME REAL ESTATE II, LLC
SUPREME REALTY, LLC
BBI RETAIL, L.L.C.
▇▇▇▇▇ ▇▇▇▇▇ REAL ESTATE CORPORATION
By:______________________________
Title: __________________________
SUPREME MUNSINGWEAR CANADA INC.
By:______________________________
Title:___________________________
EXHIBIT A
to
LOAN AND SECURITY AGREEMENT
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and
Acceptance") dated as of _____________, 200_ is made between
________________________ (the "Assignor") and ____________________ (the
"Assignee").
W I T N E S S E T H:
WHEREAS, Congress Financial Corporation (Florida), in its capacity as
agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on
behalf of the parties thereto as lenders (in such capacity, "Agent"), and the
parties to the Loan Agreement as lenders (individually, each a "Lender" and
collectively, "Lenders") have entered or are about to enter into financing
arrangements pursuant to which Agent and Lenders may make loans and advances and
provide other financial accommodations to Supreme International, Inc. and
▇▇▇▇▇▇▇, Inc. (collectively, "Borrowers") as set forth in the Loan and Security
Agreement, dated October __, 2002, by and among Borrowers, certain of their
affiliates, Agent and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement"), and the other agreements, documents and instruments referred
to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, being collectively referred to herein as the
"Financing Agreements");
WHEREAS, as provided under the Loan Agreement, Assignor committed to
making Loans (the "Committed Loans") to Borrowers in an aggregate amount not to
exceed the principal amount of $___________ at any time outstanding (the
"Commitment");
WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights
and obligations of Assignor under the Loan Agreement in respect of its
Commitment in an amount equal to $______________ (the "Assigned Commitment
Amount") on the terms and subject to the conditions set forth herein and
Assignee wishes to accept assignment of such rights and to assume such
obligations from Assignor on such terms and subject to such conditions;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Assignment and Acceptance.
(a) Subject to the terms and conditions of this Assignment and
Acceptance, Assignor hereby sells, transfers and assigns to Assignee, and
Assignee hereby purchases, assumes and undertakes from Assignor, without
recourse and without representation or warranty (except as provided in this
Assignment and Acceptance) an interest in (i) the Commitment and each of the
Committed Loans of Assignor and (ii) all related rights, benefits, obligations,
liabilities and indemnities of the Assignor under and in connection with the
Loan Agreement and the other Financing Agreements, so that after giving effect
thereto, the Commitment of Assignee shall be as set forth below and the Pro Rata
Share of Assignee shall be _______ (__%) percent.
(b) With effect on and after the Effective Date (as defined in
Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed
to all of the rights and be obligated to perform all of the obligations of a
Lender under the Loan Agreement, including the requirements concerning
confidentiality and the payment of indemnification, with a Commitment in an
amount equal to the Assigned Commitment Amount. Assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Agreement are required to be performed by it as a Lender. It is the
intent of the parties hereto that the Commitment of Assignor shall, as of the
Effective Date, be reduced by an amount equal to the Assigned Commitment Amount
and Assignor shall relinquish its rights and be released from its obligations
under the Loan Agreement to the extent such obligations have been assumed by
Assignee; provided, that, Assignor shall not relinquish its rights under
Sections 2.1, 6.4, 6.8 and 6.9 of the Loan Agreement to the extent such rights
relate to the time prior to the Effective Date.
(c) After giving effect to the assignment and assumption set
forth herein, on the Effective Date Assignee's Commitment will be
$_____________.
(d) After giving effect to the assignment and assumption set
forth herein, on the Effective Date Assignor's Commitment will be
$______________ (as such amount may be further reduced by any other assignments
by Assignor on or after the date hereof).
2. Payments.
(a) As consideration for the sale, assignment and transfer
contemplated in Section 1 hereof, Assignee shall pay to Assignor on the
Effective Date in immediately available funds an amount equal to $____________,
representing Assignee's Pro Rata Share of the principal amount of all Committed
Loans.
(b) Assignee shall pay to Agent the processing fee in the
amount specified in Section 13.7(a) of the Loan Agreement.
3. Reallocation of Payments. Any interest, fees and other payments
accrued to the Effective Date with respect to the Commitment, Committed Loans
and outstanding Letter of Credit Accommodations shall be for the account of
Assignor. Any interest, fees and other payments accrued on and after the
Effective Date with respect to the Assigned Commitment Amount shall be for the
account of Assignee. Each of Assignor and Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.
4. Independent Credit Decision. Assignee acknowledges that it has
received a copy of the Loan Agreement and the Schedules and Exhibits thereto,
together with copies of the most recent financial statements of _____________
and its Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter into
this Assignment and Acceptance and agrees that it will, independently and
without reliance upon Assignor, Agent or any Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit and legal decisions in taking or not taking action under the Loan
Agreement.
5. Effective Date; Notices.
(a) As between Assignor and Assignee, the effective date for
this Assignment and Acceptance shall be _______________, 200_ (the "Effective
Date"); provided, that, the following conditions precedent have been satisfied
on or before the Effective Date:
(i) this Assignment and Acceptance shall be executed and
delivered by Assignor and Assignee;
(ii) the consent of Agent as required for an effective
assignment of the Assigned Commitment Amount by Assignor to Assignee shall have
been duly obtained and shall be in full force and effect as of the Effective
Date;
(iii) written notice of such assignment, together with
payment instructions, addresses and related information with respect to
Assignee, shall have been given to Borrower Agent and Agent;
(iv) Assignee shall pay to Assignor all amounts due to
Assignor under this Assignment and Acceptance; and
(v) the processing fee referred to in Section 2(b)
hereof shall have been paid to Agent.
(b) Promptly following the execution of this Assignment and
Acceptance, Assignor shall deliver to Borrower Agent and Agent for
acknowledgment by Agent, a Notice of Assignment in the form attached hereto as
Schedule 1.
[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT]
(a) Assignee hereby appoints and authorizes Assignor in its
capacity as Agent to take such action as agent on its behalf to exercise such
powers under the Loan Agreement as are delegated to Agent by Lenders pursuant to
the terms of the Loan Agreement.
(b) Assignee shall assume no duties or obligations held by
Assignor in its capacity as Agent under the Loan Agreement.]
7. Withholding Tax. Assignee (a) represents and warrants to Assignor,
Agent and Borrowers that under applicable law and treaties no tax will be
required to be withheld by Assignee, Agent or Borrowers with respect to any
payments to be made to Assignee hereunder or under any of the Financing
Agreements, (b) agrees to furnish (if it is organized under the laws of any
jurisdiction other than the United States or any State thereof) to Agent and
Borrowers prior to the time that Agent or Borrowers are required to make any
payment of principal, interest or fees hereunder, duplicate executed originals
of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue
Service Form 1001 (wherein Assignee claims entitlement to the benefits of a tax
treaty that provides for a complete exemption from U.S. federal income
withholding tax on all payments hereunder) and agrees to provide new Forms 4224
or 1001 upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by Assignee, and (c) agrees to comply with
all applicable U.S. laws and regulations with regard to such withholding tax
exemption.
8. Representations and Warranties.
(a) Assignor represents and warrants that (i) it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any security interest, lien, encumbrance or other
adverse claim, (ii) it is duly organized and existing and it has the full power
and authority to take, and has taken, all action necessary to execute and
deliver this Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with this Assignment
and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance, and (iv) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignor, enforceable against Assignor in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors' rights and to general equitable principles.
(b) Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any of the other Financing
Agreements or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Agreement or any other instrument or document
furnished pursuant thereto. Assignor makes no representation or warranty in
connection with, and assumes no
responsibility with respect to, the solvency, financial condition or statements
of Borrowers, Guarantors or any of their respective Affiliates, or the
performance or observance by Borrowers, Guarantors or any other Person, of any
of its respective obligations under the Loan Agreement or any other instrument
or document furnished in connection therewith.
(c) Assignee represents and warrants that (i) it is duly organized
and existing and it has full power and authority to take, and has taken, all
action necessary to execute and deliver this Assignment and Acceptance and any
other documents required or permitted to be executed or delivered by it in
connection with this Assignment and Acceptance, and to fulfill its obligations
hereunder, (ii) no notices to, or consents, authorizations or approvals of, any
Person are required (other than any already given or obtained) for its due
execution, delivery and performance of this Assignment and Acceptance, and apart
from any agreements or undertakings or filings required by the Loan Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance; and (iii) this Assignment and
Acceptance has been duly executed and delivered by it and constitutes the legal,
valid and binding obligation of Assignee, enforceable against Assignee in
accordance with the terms hereof, subject, as to enforcement, to bankruptcy,
insolvency, moratorium, reorganization and other laws of general application
relating to or affecting creditors' rights and to general equitable principles.
9. Further Assurances. Assignor and Assignee each hereby agree to
execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including the delivery of any
notices or other documents or instruments to Borrowers or Agent, which may be
required in connection with the assignment and assumption contemplated hereby.
10. Miscellaneous
(a) Any amendment or waiver of any provision of this Assignment
and Acceptance shall be in writing and signed by the parties hereto. No failure
or delay by either party hereto in exercising any right, power or privilege
hereunder shall operate as a waiver thereof and any waiver of any breach of the
provisions of this Assignment and Acceptance shall be without prejudice to any
rights with respect to any other for further breach thereof.
(b) All payments made hereunder shall be made without any set-off
or counterclaim.
(c) Assignor and Assignee shall each pay its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
performance of this Assignment and Acceptance.
(d) This Assignment and Acceptance may be executed in any number
of counterparts and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA.
Assignor and Assignee each irrevocably submits to the non-exclusive jurisdiction
of any State or Federal court sitting in Miami-Dade County, Florida over any
suit, action or proceeding arising out of or relating to this Assignment and
Acceptance and irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such Florida State or Federal court.
Each party to this Assignment and Acceptance hereby irrevocably waives, to the
fullest extent it may effectively do so, the defense of an inconvenient forum to
the maintenance of such action or proceeding.
(f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH
THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING
AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN).
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment
and Acceptance to be executed and delivered by their duly authorized officers as
of the date first above written.
[ASSIGNOR]
By: _____________________
Title: __________________
[ASSIGNEE]
By: _____________________
Title: __________________
SCHEDULE 1
NOTICE OF ASSIGNMENT AND ACCEPTANCE
___, 20__
__________________
__________________
__________________
Attn.:____________
Re: _____________
Ladies and Gentlemen:
Congress Financial Corporation (Florida), in its capacity as agent
pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf
of the parties thereto as lenders (in such capacity, "Agent"), and the parties
to the Loan Agreement as lenders (individually, each a "Lender" and
collectively, "Lenders") have entered or are about to enter into financing
arrangements pursuant to which Agent and Lenders may make Loans and advances and
provide other financial accommodations to Supreme International, Inc. and
▇▇▇▇▇▇▇, Inc. (collectively, "Borrowers") as set forth in the Loan and Security
Agreement, dated October __, 2002, by and among Borrowers, certain of their
affiliates, Agent and Lenders (as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement"), and the other agreements, documents and instruments referred
to therein or at any time executed and/or delivered in connection therewith or
related thereto (all of the foregoing, together with the Loan Agreement, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, being collectively referred to herein as the
"Financing Agreements"). Capitalized terms not otherwise defined herein shall
have the respective meanings ascribed thereto in the Loan Agreement.
1. We hereby give you notice of, and request your consent to, the
assignment by __________________________ (the "Assignor") to
___________________________ (the "Assignee") such that after giving effect to
the assignment Assignee shall have an interest equal to ________ (__%) percent
of the total Commitments pursuant to the Assignment and Acceptance Agreement
attached hereto (the "Assignment and Acceptance"). We understand that the
Assignor's Commitment shall be reduced by $_____________, as the same may be
further reduced by other assignments on or after the date hereof.
2. Assignee agrees that, upon receiving the consent of Agent to such
assignment, Assignee will be bound by the terms of the Loan Agreement as fully
and to the same extent as if the Assignee were the Lender originally holding
such interest under the Loan Agreement.
3. The following administrative details apply to Assignee:
(A) Notice address:
Assignee name:___________________
Address: ___________________
___________________
Attention: ___________________
Telephone: ___________________
Telecopier: ___________________
(B) Payment instructions:
Account No.: ___________________
At: ___________________
___________________
___________________
___________________
Reference: ___________________
Attention: ___________________
4. You are entitled to rely upon the representations, warranties and
covenants of each of Assignor and Assignee contained in the Assignment and
Acceptance.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of
Assignment and Acceptance to be executed by their respective duly authorized
officials, officers or agents as of the date first above mentioned.
Very truly yours,
[NAME OF ASSIGNOR]
By:__________________________
Title:_______________________
[NAME OF ASSIGNEE]
By:__________________________
Title:_______________________
ACKNOWLEDGED AND ASSIGNMENT
CONSENTED TO:
CONGRESS FINANCIAL CORPORATION
(FLORIDA), as Agent
By:____________________
Title:_________________
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
Borrowing Base Certificate
000's omitted
Date: __________, 200_
Number: _______________
Pursuant to the Loan and Security Agreement by and among Congress Financial
Corporation as agent ("Agent"), the parties thereto as lenders ("Lenders"),
▇▇▇▇▇ ▇▇▇▇▇ International, Inc. and certain of its subsidiaries, and any
amendments thereto (the "Loan Agreement"), each hereby certifies to Agent and
Lenders, as of the above date, as follows:
Reconciliation of Collateral Balance Supreme ▇▇▇▇▇▇▇ Combined
Accounts Availability
________________________________
1. Gross Accounts as of prior Certificate:
2. Gross Sales:
3. Add Debit Adjustments:
4. Less: Credit Memos
5. Less: Credit Adjustments
6. Less: Net Collections
7. Less: Discounts and Deductions
8. Total Accounts
(a) Trade Accounts
(b) Factor Receivables
9. Less: Ineligible Accounts (see Schedule 1):
10. Net Eligible Accounts
11. Accounts Receivable Advance Rate
12. Accounts Availability
Inventory Availability
13. Gross Inventory as of ________:
(a) Raw Materials
(b) Work in Process
(c) Finished Goods
(d) In Transit
C-1
14. Less Ineligible Inventory (see Schedule 2)
15. Inventory Advance Rate
16. Inventory Availability
17. Inventory Sublimit
18. Total Inventory Availability
19. Availability based on Accounts and Inventory
20. Line Limit $60,000,000
21. Gross Availability
22. Reserves
(a) Licensing Reserves
(b) Factor Charges
(c) Dilution Reserve
(d) Other
Reconciliation of Loan Balance
23. Amount of outstanding Loans as of the date of prior Certificate
24. Less: Net cash collections since date of prior Certificate
25. Add: Amount of Loans and Interest Charges since date of prior Certificate
26. Current amount of outstanding Loans
27. Documentary LC
28. Inverse of Inventory Advance Rate
29. Reserve for Documentary LC
30. Standby LC's
31. Total Loan Balance and Reserves for LC's
32. Net Availability
As of the date of this Certificate, no Event of Default exists or has occurred
and is continuing. Each Borrower acknowledges that the Loans and Letter of
Credit Accommodations by Agent and Lenders to Borrowers are based upon the
reliance of Agent and Lenders on the information contained herein and all
representations and warranties with respect to Accounts and Inventory in the
Loan Agreement are applicable to the Accounts and Inventory included in this
Certificate. The reliance by Agent and Lenders on this Certificate should not be
deemed to limit the right of Agent to establish or revise criteria of
eligibility or Reserves or otherwise limit, impair, or affect in any manner the
rights of Agent under the Loan Agreement. In the event of any conflict between
the determination of Agent of the amount of the Loans and Letter of Credit
Accommodations available to Borrowers in accordance with the terms of the Loan
Agreement and the determination by Borrowers of such amounts, the determination
of Agent shall govern. All capitalized terms used in this Certificate shall have
the meaning assigned to them in the Loan Agreement.
By:_______________________
Title:____________________
C-2
SCHEDULE 1
to
BORROWING BASE CERTIFICATE
Ineligible Accounts
C-3
SCHEDULE 2
to
BORROWING BASE CERTIFICATE
Ineligible Inventory
C-4
EXHIBIT D
TO
LOAN AND SECURITY AGREEMENT
Compliance Certificate
To: Congress Financial Corporation
(Florida), as Agent
_________________________
_________________________
Ladies and Gentlemen:
I hereby certify to you pursuant to Section 9.6 of the Loan Agreement (as
defined below) as follows:
1. I am the duly elected Chief Financial Officer of ______________, a
_________ corporation, _____________, a __________ corporation and ___________,
a __________ corporation (collectively, "Borrowers"). Capitalized terms used
herein without definition shall have the meanings given to such terms in the
Loan and Security Agreement, dated ______, 20__, by and among Congress Financial
Corporation ( _____________ ) as agent for the financial institutions party
thereto as lenders (in such capacity, "Agent") and the financial institutions
party thereto as lenders (collectively, "Lenders"), Borrowers and certain of
their affiliates (as such Loan and Security Agreement is amended, modified or
supplemented, from time to time, the "Loan Agreement").
2. I have reviewed the terms of the Loan Agreement, and have made, or
have caused to be made under my supervision, a review in reasonable detail of
the transactions and the financial condition of Borrowers and Guarantors, during
the immediately preceding fiscal month.
3. The review described in Section 2 above did not disclose the
existence during or at the end of such fiscal month, and I have no knowledge of
the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto. Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and
D-1
the action which any Borrower or Guarantor has taken, is taking, or proposes to
take with respect to such condition or event.
4. I further certify that, based on the review described in Section 2
above, no Borrower or Guarantor has not at any time during or at the end of such
fiscal month, except as specifically described on Schedule II attached hereto or
as permitted by the Loan Agreement, done any of the following:
(a) Changed its respective corporate name, or transacted business
under any trade name, style, or fictitious name, other than
those previously described to you and set forth in the
Financing Agreements.
(b) Changed the location of its chief executive office, changed
its jurisdiction of incorporation, changed its type of
organization or changed the location of or disposed of any of
its properties or assets (other than pursuant to the sale of
Inventory in the ordinary course of its business or as
otherwise permitted by Section 9.7 of the Loan Agreement), or
established any new asset locations.
(c) Materially changed the terms upon which it sells goods
(including sales on consignment) or provides services, nor has
any vendor or trade supplier to any Borrower or Guarantor
during or at the end of such period materially adversely
changed the terms upon which it supplies goods to any Borrower
or Guarantor.
(d) Permitted or suffered to exist any security interest in or
liens on any of its properties, whether real or personal,
other than as specifically permitted in the Financing
Agreements.
(e) Received any notice of, or obtained knowledge of any of the
following not previously disclosed to Agent: (i) the
occurrence of any event involving the release, spill or
discharge of any Hazardous Material in violation of applicable
Environmental Law in a material respect or (ii) any
investigation, proceeding, complaint, order, directive,
claims, citation or notice with respect to: (A) any
non-compliance with or violation of any applicable
Environmental Law by any Borrower or Guarantor in any material
respect or (B) the release, spill or discharge of any
Hazardous Material in violation of applicable Environmental
Law in a material respect or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production
or disposal of any Hazardous Materials in violation of
applicable Environmental Laws in a material respect or (D) any
other environmental, health or safety matter, which has a
material adverse effect on any
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Borrower or Guarantor or its business, operations or assets or
any properties at which such Borrower or Guarantor transported,
stored or disposed of any Hazardous Materials.
(f) Become aware of, obtained knowledge of, or received notification
of, any breach or violation of any material covenant contained in
any instrument or agreement in respect of Indebtedness for money
borrowed by any Borrower or Guarantor.
5. Attached hereto as Schedule III are the calculations used in
determining, as of the end of such fiscal month, whether Borrowers were in
compliance with the covenant set forth in Section 9.17 of the Loan Agreement for
such fiscal month and the calculations used in determining the Leverage Ratio
for purposes of determining the Interest Rate as of the last day of the
immediately preceding fiscal quarter as provided for in the Loan Agreement.
The foregoing certifications are made and delivered this day of
___________, 20__.
Very truly yours,
__________________________
By:_______________________
Title:____________________
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SCHEDULE 1.43
to
LOAN AND SECURITY AGREEMENT
Existing Lenders
Bank of America, N.A., formerly NationsBank, N.A., in its capacity as agent
Bank of America, N.A., formerly NationsBank, N.A.
Wachovia Bank, National Association, formerly First Union National Bank
Fleet Capital Corporation
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SCHEDULE 1.44
to
LOAN AND SECURITY AGREEMENT
Existing Letters of Credit
1. Irrevocable standby letter of credit number 3047185 dated March 20, 2002
issued to VF Corporation, as beneficiary by Bank of America, N.A. for the
account of ▇▇▇▇▇ ▇▇▇▇▇ International, Inc. in the amount of USD$2,000,000.
2. Irrevocable standby letter of credit number 3039972 dated August 15, 2001
issued to Nautica Apparel, Inc., as beneficiary, by Bank of America, N.A. for
the account of ▇▇▇▇▇ ▇▇▇▇▇ International, Inc. ("▇▇▇▇▇ ▇▇▇▇▇") in the amount of
USD$750,000.
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SCHEDULE 1.108 to
LOAN AND SECURITY AGREEMENT
Senior Note Priority Collateral
The Senior Note Priority Collateral consists of all of Borrowers' and
Guarantors' (collectively, "Debtor") right, title and interest in and to each of
the following, in each case, as to each type of property described below, owned
by the Debtor as of March 22, 2002, wherever located and existing (collectively,
the "Senior Note Priority Collateral"):
(a) all trademarks, service marks, collective marks, trade dress, logos,
slogans, designs, domain names, trade names, business names, corporate
names and other source identifiers, whether or not registered, whether
currently in use or not, including, without limitation, all common law
rights and registrations and applications for registration thereof, and all
other marks registered in or applied for in the U.S. Patent and Trademark
Office or in any office or agency of any State or Territory of the United
States or any foreign country (but excluding any United States
intent-to-use trademark applications to the extent that, and solely during
the period in which, the grant of a security interest therein would impair
the validity and enforceability of such intent-to-use trademark
applications under applicable law) and all rights therein provided by
international treaties or conventions, all extensions and renewals of any
of the foregoing, together in each case with the good will of the business
connected therewith and symbolized thereby, and all rights corresponding
thereto throughout the world and all other rights of any kind whatsoever of
the Debtor accruing thereunder or pertaining thereto (the "Trademarks");
(b) all agreements, permits, consents, orders and franchise, in each case
relating to the Trademarks and all proceeds, income, royalties and other
payments now or hereafter due and/or payable with respect thereto, subject,
in each case, to the terms of such agreements, permits, authorizations and
franchises;
(c) any and all claims for damages and injunctive relief for past, present and
future infringement, dilution, misappropriation, violation, misuse or
breach with respect to the Senior Note Priority Collateral with the right,
but not the obligation, to ▇▇▇ for and collect, or otherwise recover, such
damages; and
(d) all proceeds of the Senior Note Priority Collateral for, and supporting
obligations relating to, any and all of the Senior Note Priority Collateral
(including, without limitation, the proceeds, collateral and supporting
obligations that constitute property of the types described in clauses (a)
through
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(c) and, to the extent not otherwise included, all (i) payments under insurance
with respect to the Senior Note Priority Collateral (whether or not the Secured
Party is the loss payee thereof), or any damages, indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Senior Note Priority Collateral and (ii) cash proceeds of
the foregoing.
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