LOAN AND SECURITY AGREEMENT
BY AND AMONG
CONGRESS FINANCIAL CORPORATION
AS LENDER
AND
LONDON FOG INDUSTRIES, INC.
PACIFIC TRAIL, INC.
THE SCRANTON OUTLET CORPORATION
AS BORROWERS
DATED: AS OF MAY ___, 1997
TABLE OF CONTENTS
SECTION 1. DEFINITIONS...................................................... 1
SECTION 2. CREDIT FACILITIES............................................... 16
2.1 Loans.......................................................... 16
2.2 Letter of Credit Accommodations................................ 19
2.3 Availability Reserves.......................................... 23
SECTION 3. INTEREST AND FEES............................................... 23
3.1 Interest....................................................... 23
3.2 Closing Fee.................................................... 26
3.3 Servicing Fee.................................................. 26
3.4 Unused Line Fee................................................ 26
3.5 Supplemental B Loan Fee........................................ 27
3.6 Changes in Laws and Increased Costs of Loans................... 27
SECTION 4. CONDITIONS PRECEDENT............................................. 28
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations....................................... 28
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations.......................................... 31
SECTION 5. SECURITY INTEREST............................................... 31
SECTION 6. COLLECTION AND ADMINISTRATION................................... 33
6.1 Borrowers' Loan Accounts....................................... 33
6.2 Statements..................................................... 33
6.3 Collection of Accounts......................................... 33
6.4 Payments....................................................... 35
6.5 Authorization to Make Loans.................................... 36
6.6 Use of Proceeds................................................ 36
SECTION 7. COLLATERAL REPORTING AND COVENANTS.............................. 37
7.1 Collateral Reporting........................................... 37
7.2 Accounts Covenants............................................. 38
7.3 Inventory Covenants............................................ 40
7.4 Equipment Covenants............................................ 41
7.5 Appraisals of Intellectual Property Intangibles................ 42
7.6 Power of Attorney.............................................. 42
7.7 Right to Cure.................................................. 43
7.8 Access to Premises............................................. 43
SECTION 8. REPRESENTATIONS AND WARRANTIES.................................. 43
8.1 Corporate Existence, Power and Authority;
Subsidiaries................................................... 44
8.2 Financial Statements; No Material Adverse Change............... 44
8.3 Chief Executive Office; Collateral Locations................... 44
8.4 Priority of Liens; Title to Properties......................... 45
8.5 Tax Returns.................................................... 45
8.6 Litigation..................................................... 45
(i)
8.7 Compliance with Other Agreements and Applicable
Laws........................................................... 46
8.8 Environmental Compliance....................................... 47
8.9 Credit Card Agreements......................................... 48
8.10 Employee Benefits.............................................. 48
8.11 Bank Accounts.................................................. 49
8.12 Interrelated Businesses........................................ 49
8.13 Accuracy and Completeness of Information....................... 50
8.14 Survival of Warranties; Cumulative............................. 50
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.............................. 50
9.1 Maintenance of Existence....................................... 50
9.2 New Collateral Locations....................................... 51
9.3 Compliance with Laws, Regulations, Etc......................... 51
9.4 Payment of Taxes and Claims.................................... 51
9.5 Insurance...................................................... 52
9.6 Financial Statements and Other Information..................... 52
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc............................................... 54
9.8 Encumbrances................................................... 55
9.9 Indebtedness................................................... 56
9.10 Loans, Investments, Guarantees, Etc............................ 58
9.11 Dividends and Redemptions...................................... 59
9.12 Transactions with Affiliates................................... 59
9.13 Credit Card Agreements......................................... 59
9.14 Compliance with ERISA.......................................... 60
9.15 Additional Bank Accounts....................................... 61
9.16 Capital Expenditures........................................... 61
9.17 EBITA.......................................................... 61
9.18 Cleanup and Excess Availability................................ 62
9.19 Costs and Expenses............................................. 62
9.20 Certain Notices................................................ 63
9.21 Further Assurances............................................. 63
SECTION 10. EVENTS OF DEFAULT AND REMEDIES................................. 64
10.1 Events of Default.............................................. 64
10.2 Remedies....................................................... 66
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW ... 68
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver..................................... 68
11.2 Waiver of Notices.............................................. 69
11.3 Amendments and Waivers......................................... 70
11.4 Waiver of Counterclaims........................................ 70
11.5 Indemnification................................................ 70
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS................................ 71
12.1 Term........................................................... 71
12.2 Appointment of Borrowers' Agent................................ 72
12.3 Notices........................................................ 73
12.4 Partial Invalidity............................................. 73
(ii)
12.5 Successors..................................................... 73
12.6 Entire Agreement............................................... 74
(iii)
INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Schedule 6.3 Bank Accounts
Schedule 8.4 Existing Liens
Schedule 8.7 Permits
Schedule 8.8 Environmental Disclosure
Schedule 8.9 Credit Card Agreements
Schedule 8.10 Employee Benefits
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Loans, Investments, Guarantees
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated May __, 1997 is entered into by and
among Congress Financial Corporation, a California corporation ("Lender") and
London Fog Industries, Inc., a Delaware corporation ("LFI"), Pacific Trail,
Inc., a Washington corporation ("PTI"), and The Scranton Outlet Corporation, a
Delaware corporation ("SOC"; and together with LFI and PTI, individually
referred to as a "Borrower" and collectively, as "Borrowers").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lender enter into certain financing
arrangements with Borrowers pursuant to which Lender may make loans and provide
other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
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
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. 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. All references to Borrowers shall, unless the context
otherwise expressly provides, mean each and all of them, individually and
collectively, jointly and severally. All references to Borrowers and Lender
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns. 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. The word "including" when used in this Agreement shall mean
"including, without limitation". 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 cured in a manner
satisfactory to Lender, if such Event of Default is capable of being cured as
determined by Lender. Any accounting term used herein unless otherwise defined
in this Agreement shall have the meanings customarily given to such term in
accordance with GAAP. 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, all present and future
rights of such Borrower to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and whether
or not earned by performance, and including, without limitation, Credit Card
Receivables.
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 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Loans and Letter of Credit Accommodations that would
otherwise be available to Borrowers under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks that, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii)
the assets or business of any Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect or (c) in respect
of any state of facts which Lender determines in good faith constitutes an Event
of Default or may, with notice or passage of time or both, constitute an Event
of Default, or (d) to reflect outstanding Letter of Credit Accommodations as
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provided in Section 2.2 hereof or (e) as otherwise provided in Section 2.3
hereof or elsewhere in this Agreement.
1.4 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.5 "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 New York or the Commonwealth of Pennsylvania, and a day
on which the Reference Bank and Lender are 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.
1.6 "Capital Expenditures" shall mean all expenditures for any fixed or
capital assets or improvements, or for replacements, substitutions or additions
thereto, which should be capitalized on a balance sheet in accordance with GAAP,
whether acquired by way of purchase, capital or finance lease, increased product
service charges, offset items or otherwise.
1.7 "Capital Stock" shall mean any and all shares, interests,
participations, or other equivalents (however designated) of corporate stock or
partnership interests and any options or warrants with respect to any of the
foregoing.
1.8 "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.
1.9 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.10 "Cost" shall mean, as to Inventory as of any date, the cost of such
Inventory as of such date, determined on a first-in- first-out basis in
accordance with GAAP.
1.11 "Credit Card Acknowledgments" shall mean, individually and
collectively, the agreements by Credit Card Issuers or Credit Card Processors
who are parties to Credit Card Agreements in favor of Lender acknowledging
Lender's first priority security interest in the monies due and to become due to
a Borrower (including, without limitation, credits and reserves) under the
Credit Card Agreements, and agreeing to transfer all such amounts to the Blocked
Accounts, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
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1.12 "Credit Card Agreements" shall mean all agreements (oral or written)
now or hereafter entered into by a Borrower with any Credit Card Issuer or any
Credit Card Processor, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, including, but
not limited to, the agreements identified on Schedule 8.9 hereto.
1.13 "Credit Card Issuer" shall mean any person (other than a Borrower) who
issues or whose members issue credit cards, including, without limitation,
MasterCard or VISA bank credit or debit cards or other bank credit or debit
cards issued through MasterCard International, Inc., Visa, U.S.A., Inc. or Visa
International and American Express, Discover, Diners Club, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
other non-bank credit or debit cards, including, without limitation, credit or
debit cards issued by or through American Express Travel Related Services
Company, Inc. and NOVUS Services, Inc.
1.14 "Credit Card Processor" shall mean any servicing or processing agent
or any factor or financial intermediary who facilitates, services, processes or
manages the credit authorization, billing transfer and/or payment procedures
with respect to any of a Borrower's sales transactions involving credit card or
debit card purchases by customers using credit cards or debit cards issued by
any Credit Card Issuer (including, but not limited to, National Data Payment
Systems, Inc., American Express Travel Related Services Company, Inc. and NOVUS
Services, Inc.)
1.15 "Credit Card Receivables" shall mean collectively, (a) all present and
future rights of a Borrower to payment from any Credit Card Issuer, Credit Card
Processor or other third party arising from sales of goods or rendition of
services to customers who have purchased such goods or services using a credit
or debit card and (b) all present and future rights of a Borrower to payment
from any Credit Card Issuer, Credit Card Processor or other third party in
connection with the sale or transfer of Accounts arising pursuant to the sale of
goods or rendition of services to customers who have purchased such goods or
services using a credit card or a debit card, including, but not limited to, all
amounts at any time due or to become due from any Credit Card Issuer or Credit
Card Processor under the Credit Card Agreements or otherwise.
1.16 "EBITA" shall mean, for any measurement period, the Net Income (Loss)
for such period, plus (a) to the extent deducted in arriving at Net Income
(Loss) for such period, Interest Expense, write-off or amortization of deferred
financing costs, provision for Federal, state, local and foreign income taxes,
amortization expense, and any non-cash charges or non-cash losses (other than
inventory write-downs, but including, without
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limitation, increases in the amount of multiemployer pension plan liabilities,
loss attributable to changes in accounting principles and loss on sale or other
disposition of assets not in the ordinary course of business (other than loss on
sale or other disposition of inventory), and the amount of non-cash
restructuring expenses), minus (b) to the extent included in determining Net
Income (Loss) for such period, gains attributable to the effect of change in
accounting principles adopted by Borrowers, income tax benefit, extraordinary
gains and other non-operating income, such as, but not limited to, gains from
the sale or other disposition of assets other than in the ordinary course of
business, or from the sale of shares of Capital Stock, or income or gains from
forgiveness of indebtedness or from reduction of multiemployer pension plan
liabilities or from reversal of restructuring or other expenses and any non-cash
gains, minus (c) any payments made during such period in respect of
multiemployer pension plan liabilities in excess of the amount equal to $500,000
multiplied by the number of fiscal quarters included in such period, plus (d)
with respect to the determination of EBITA for any period during or comprising
the fiscal year ending the last Saturday in February, 1998, up to an aggregate
of $2,000,000 of cash restructuring charges relating to the closing of LFI's
Baltimore, Maryland manufacturing facility, in each case under clauses (a), (b)
and (d), determined for Borrowers and their subsidiaries for such period, on a
consolidated basis in accordance with GAAP.
1.17 "Eligible Accounts" shall mean, as to each Borrower, Accounts created
by such Borrower which are and continue to be acceptable to Lender based on the
criteria set forth below. In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by such Borrower in the ordinary course of the business of
Borrowers 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 seventy-five (75) days
after the original maturity date of the invoice therefor or more than one
hundred fifty (150) days after the date of the original invoice for them;
(c) such Accounts do not consist of Credit Card Receivables;
(d) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
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(e) 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;
(f) the chief executive office of the account debtor with respect to
such Accounts is located in the United States of America, or at Lender's option,
if the chief executive office of the account debtor with respect to such Account
is not located in the United States of America, Lender may deem such Accounts to
be Eligible Accounts if: (i) such Account is payable only in the United States
of America and in U.S. dollars and (ii) either: (A) the account debtor has
delivered to such Borrower an irrevocable letter of credit issued or confirmed
by a bank satisfactory to Lender, sufficient to cover such Account, in form and
substance satisfactory to Lender and, if required by Lender, the original of
such letter of credit has been delivered to Lender or Lender's agent and the
issuer thereof has been notified of the assignment of the proceeds of such
letter of credit to Lender, (B) such Account is subject to credit insurance
payable to Lender issued by an insurer and on terms and in an amount acceptable
to Lender, or (C) such Account is otherwise acceptable in all respects to Lender
(subject to such lending formula with respect thereto as Lender may determine);
(g) such Accounts do not consist of progress ▇▇▇▇▇▇▇▇, ▇▇▇▇ and hold
invoices or retainage invoices, except, as to ▇▇▇▇ and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Lender, confirming the unconditional obligation of the
account debtor to take delivery of the goods related thereto and pay such
invoice;
(h) the account debtor with respect to such Accounts has not asserted
a counterclaim, chargeback, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff 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);
(i) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(j) such Accounts are subject to the first priority, valid and
perfected security interest of Lender 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 in this Agreement;
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(k) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is any other Borrower or a
subsidiary thereof or an officer, employee or agent or an affiliate of such
Borrower directly or indirectly by virtue of family membership, ownership,
control, management or otherwise;
(l) 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, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, if upon Lender's
request, such Borrower has complied with the Federal Assignment of Claims Act of
1940, as amended or any similar State or local law, if applicable, in a manner
satisfactory to Lender;
(m) 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;
(n) such Accounts of a single account debtor or its affiliates do not
constitute more than twenty (20%) percent of all otherwise Eligible Accounts or,
in the case of each of Federated Department Stores, Inc., May Department Stores
Company, ▇▇▇▇▇▇-▇▇▇▇▇▇ Corporation and ▇▇▇▇▇▇▇ Department Stores, Inc., or its
respective affiliates, more than forty (40%) percent of all otherwise Eligible
Accounts, of all Borrowers considered in the aggregate (but the portion of the
Accounts not in excess of the applicable percentage set forth in this subsection
may be deemed Eligible Accounts);
(o) such Accounts are not owed by an account debtor whose Accounts
owed to one or more Borrowers that are unpaid more than seventy-five (75) days
after the original maturity date of the invoice therefor or more than one
hundred fifty (150) days after the date of the original invoice for them,
constitute more than fifty (50%) percent of the total Accounts of such account
debtor owed to all Borrowers considered in the aggregate;
(p) such Accounts are owed by account debtors whose total indebtedness
to all Borrowers, considered in the aggregate, does not exceed the credit limit
with respect to such account debtors, if any, as determined by Lender from time
to time (but the portion of the Accounts not in excess of such credit limit may
still be deemed Eligible Accounts); and
(q) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender.
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General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.18 "Eligible Inventory" shall mean, as to each Borrower, Inventory of
such Borrower consisting of finished goods (including Warehouse In-Transit Goods
and Non-Warehouse In- Transit Goods) held for resale in the ordinary course of
the business of Borrowers and raw materials of such Borrower for the production
of such finished goods, in each case that are acceptable to Lender based on the
criteria set forth below. In general, Eligible Inventory shall not include (a)
packaging and shipping materials; (b) supplies used or consumed in Borrowers'
business; (c) Inventory at premises other than those owned and controlled by a
Borrower located in the United States, except for (i) Inventory at retail store
locations (including temporary sites used for closeout liquidation events) of a
Borrower in the United States which are leased by it if either (A) Lender shall
have received a Landlord Agreement (as defined below) duly authorized, executed
and delivered by the owner and lessor of such premises or (B) if Lender has not
received such Landlord Agreement, then Lender shall have established an
Availability Reserve in an amount acceptable to Lender in respect of amounts due
or to become due to the owner and lessor of such retail store location;
provided, that, such Borrower shall use its reasonable best efforts to obtain
the Landlord Agreement with respect to each of such locations, (ii) Inventory at
other locations of a Borrower in the United States which are leased by it or
operated by third party warehousemen or that are owned by it subject to a
mortgage in favor of any Person other than Lender and otherwise permitted
hereunder, if Lender shall have received an agreement in writing from the owner
and lessor, or operator of such premises, or in the case of mortgaged premises,
from the mortgagee thereof, in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral
(such agreement, a "Landlord Agreement", "Warehouseman's Agreement" or
"Mortgagee Agreement", as applicable) and (iii) Inventory consisting of finished
goods sold on consignment to third parties and located at retail stores in the
United States that are operated by the consignee, if Lender shall have received
an agreement in writing from the consignee of such Inventory acknowledging
Lender's first priority security interest in such Inventory, waiving claims by
such person against such Inventory unless paid for and provided Lender is
satisfied with the creditworthiness of the consignee and shall have received
such other legal documentation (including a Landlord Agreement or Mortgagee
Agreement from the consignee's landlord and mortgagee
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and acknowledgements from consignee's secured parties) deemed necessary to
Lender, all of which to be acceptable to Lender; (d) Inventory subject to a
security interest or lien in favor of any person other than Lender except those
permitted in this Agreement; (e) ▇▇▇▇ and hold goods; (f) slow-moving Inventory
to the extent of increases thereof since the most recent field examination
conducted by Lender prior to the date of determination of Eligible Inventory;
(g) Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (h) damaged and/or defective Inventory to the
extent not written-down to an amount acceptable to Lender; (i) returned
Inventory that is not first quality and held for resale without the need for
further preparation or processing (other than normal cleaning and pressing), to
the extent not written-down to an amount acceptable to Lender (j) Inventory to
be returned to vendors; (k) Inventory subject to deposits made by customers for
sales of Inventory that has not been delivered; (l) Inventory that is in transit
to a Borrower's location in the United States unless Lender has a first priority
security interest and control of the documents of title covering such goods; and
(m) samples. General criteria for Eligible Inventory may be established and
revised from time to time by Lender in good faith. Any Inventory which is not
Eligible Inventory shall nevertheless be part of the Collateral.
1.19 "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 a Borrower 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
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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.
1.20 "Equipment" shall mean, as to each Borrower, all of such Borrower's
now owned and hereafter acquired equipment, machinery, computers and computer
hardware and software (whether owned or licensed), 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.
1.21 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.22 "ERISA Affiliate" shall mean any person required to be aggregated with
a Borrower or any of its subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.23 "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 and approved by Lender) 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 or by LFI on behalf
of and available to Borrowers in accordance with this Agreement, with a maturity
of comparable duration to the Interest Period selected by a Borrower.
1.24 "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.
1.25 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.
1.26 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the aggregate amount of
the Primary Loans available to Borrowers as of such time based on the applicable
lending formulas multiplied by the Net Amount of Eligible Accounts and the Value
of Eligible Inventory, as determined by Lender, plus
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the amount of Supplemental A Loans and Supplemental B Loans then available to
Borrowers, subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder and (ii) the Maximum Credit less the face amount
of outstanding Letter of Credit Accommodations, minus (b) the sum of: (i) the
amount of all then outstanding and unpaid Obligations (other than the face
amount of outstanding Letter of Credit Accommodations), plus (ii) the aggregate
amount of all trade payables of Borrowers that are more than sixty (60) days
past due as of such time, other than those that are being disputed by Borrowers
in good faith.
1.27 "Existing Senior Lenders" shall mean the existing secured working
capital lenders to LFI, and The Chase Manhattan Bank, a New York banking
corporation, as agent for such lenders, pursuant to that certain Amended and
Restated Credit Agreement dated as of May 31, 1995, as amended.
1.28 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements, intercreditor and/or subordination
agreements, and other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by any Borrower or any Obligor in connection
with this Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.29 "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(s) which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.17 hereof, 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 audited financial statements delivered to Lender prior to
the date hereof.
1.30 "Guarantors" shall mean, individually and collectively, each Person
that at any time guarantees payment or performance of all or any portion of the
Obligations, including, as of the date hereof, PTI Holding Corp., a Nevada
corporation, PTI Top Company, Inc., a Nevada corporation, Star Sportswear
Manufacturing Corp., a Delaware corporation, ▇▇▇▇▇▇▇ Manufacturing Co., Inc., a
Maryland corporation, Washington Holding Company, a Georgia corporation, Clipper
Mist, Inc., a Maryland corporation, London Fog Sportswear, Inc., a Delaware
corporation and The ▇▇▇▇▇▇▇ Corporation, a Washington corporation, and their
respective successors and assigns.
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1.31 "Information Certificate" shall mean, collectively, the Information
Certificates of Borrowers constituting Exhibit A hereto containing material
information with respect to Borrowers, their business and assets, provided by or
on behalf of Borrowers to Lender in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
1.32 "Intellectual Property Intangibles" shall mean, as to each Borrower,
trademarks, tradenames and patents owned by such Borrower and royalties payable
to such Borrower under licenses with respect thereto.
1.33 "Interest Expense" shall mean, for any period, the amount which would,
in conformity with GAAP, be set forth opposite the caption "interest expense" or
any like caption on a consolidated statement of operations of Borrowers and
their subsidiaries prepared on a consolidated basis in accordance with GAAP,
excluding amortization of deferred financing costs.
1.34 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrowers may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrowers may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.35 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of
three-quarters of one (3/4%) percent per annum in excess of the Prime Rate and,
as to Eurodollar Rate Loans, subject to adjustment pursuant to the provisions of
Section 3.1(e) hereof, a rate of two and three-quarters (2 3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by Borrowers or by LFI on behalf of
Borrowers as in effect three (3) Business Days after the date of receipt by
Lender of the request by Borrowers or by LFI on behalf of Borrowers for such
Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is
higher or lower than any rate previously quoted to such Borrower); provided,
that: the Interest Rate shall be increased to a rate two (2%) percent per annum
in excess of the pre-default variable rate as to Prime Rate Loans and to a rate
two (2%) percent per annum in excess of the pre-default variable rate as to
Eurodollar Rate Loans, at Lender's option, without notice, (a) for the period on
and after (i) the date of termination or non-renewal hereof and until such time
as all non-contingent Obligations are fully and finally paid (notwithstanding
entry of any judgment against any Borrower), or (ii) the date of the occurrence
of any Event of Default or act, condition or event which with notice or passage
of time or both would constitute an Event of Default, and for so long as such
Event of Default or
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other event is continuing as determined by Lender and (b) on the Loans at any
time outstanding in excess of the amounts available to a Borrower under Section
2 (whether or not such excess(es), arise or are made with or without Lender's
knowledge or consent and whether made before or after an Event of Default).
1.36 "Inventory" shall mean, as to each Borrower, all of such Borrower's
now owned and hereafter existing or acquired raw materials, work in process,
finished goods and all other inventory of whatsoever kind or nature, wherever
located.
1.37 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of any Borrower or, in Lender's
discretion, any Obligor or (b) with respect to which Lender has agreed to
indemnify the issuer or guaranteed to the issuer the performance by a Borrower
of its obligations to such issuer.
1.38 "Loans" shall mean, collectively, the Primary Loans, the Supplemental
A Loans and the Supplemental B Loans.
1.39 "Maximum Credit" shall mean $150,000,000, except that for the period
from the date hereof through April 30, 1998, such term shall mean $140,000,000.
1.40 "MetLife" shall mean MetLife Capital Financial Corp., a Delaware
corporation, and its successors and assigns.
1.41 "Net Amount of Eligible Accounts" shall mean, as to each Borrower, (a)
the aggregate gross amount of Eligible Accounts of such Borrower less (b) sales,
excise or similar taxes included in the amount thereof and less (c) without
duplication of amounts deemed excluded from Eligible Accounts pursuant to the
criteria set forth herein or established by Lender hereunder, returns (including
accruals for unprocessed returns that have been received by Borrowers),
discounts (including cash discount reserves), claims, credits and allowances
(including cooperative advertising allowances) of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto.
1.42 "Net Income (Loss)" shall mean, for any fiscal period, the aggregate
net income (or loss) after provision (benefit) for federal, state, local and
foreign income taxes of Borrowers and their subsidiaries, if any, for such
period, determined on a consolidated basis in accordance with GAAP.
1.43 "Net Recovery Cost Percentage" as to Inventory at any time shall mean
the fraction, expressed as a percentage, (a) the numerator of which is the
amount equal to the recovery on the aggregate amount of the Inventory at such
time on a "going out of business sale" basis as set forth as the mid-range
recovery
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amount in the most recent acceptable appraisal of Inventory received by Lender
in accordance with Section 7.3, net of operating and occupancy expenses,
liquidation expenses and commissions, and (b) the denominator of which is the
original Cost of the aggregate amount of the Inventory subject to appraisal.
1.44 "Non-Warehouse In-Transit Goods" shall mean Eligible Inventory of a
Borrower consisting of finished goods in transit to a warehouse, retail store of
a Borrower or third party location, in each case maintained as an Eligible
Inventory location hereunder covered by documents of title with respect to which
Lender has possession or control.
1.45 "Obligations" shall mean 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 Borrowers to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, 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 any or all Borrowers under the United States Bankruptcy
Code or any similar statute (including, without limitation, 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, secured or unsecured, and however acquired by Lender.
1.46 "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, other than a Borrower.
1.47 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.48 "Permits" shall have the meaning set forth in Section 8.7 hereof.
1.49 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, 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
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government or any agency or instrumentality or political subdivision thereof.
1.50 "Primary Loans" shall mean the loans made to or for the benefit of
Borrowers by Lender on a revolving basis (including advances, repayments and
readvances) as set forth in Sections 2.1(a)(i) and 2.1(a)(ii) hereof.
1.51 "Prime Rate" shall mean the rate from time to time publicly announced
by CoreStates Bank, N.A., or its successors, at its office in Philadelphia,
Pennsylvania, as its prime rate, whether or not such announced rate is the best
rate available at such bank.
1.52 "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 hereof.
1.53 "Real Property" shall mean all now owned and hereafter acquired real
property of a Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.
1.54 "Records" shall mean, as to each Borrower, all of such Borrower'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 such
Borrower with respect to the foregoing maintained with or by any other person).
1.55 "Reference Bank" shall mean CoreStates Bank, N.A. or such other bank
as Lender may designate from time to time.
1.56 "Renewal Date" shall have the meaning set forth in Section 12.1
hereof.
1.57 "Supplemental A Loans," shall mean the loans made to or for the
benefit of Borrowers on a revolving basis (including advances, repayments and
readvances) as set forth in Section 2.1(a)(iii) hereof.
1.58 "Supplemental B Loans" shall mean the loans made to or for the benefit
of Borrowers on a revolving basis (including advances, repayments and
readvances) as set forth in Section 2.1(a)(iv) hereof.
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1.59 "Subordinated Lenders" shall mean, individually and collectively, the
subordinated lenders to LFI and The Chase Manhattan Bank as agent for such
lenders pursuant to the Subordinated Loan Documents, and their respective
successors and assigns.
1.60 "Subordinated Loan Documents" shall mean, collectively, the Term Loan
Agreement and the Note Agreement, each dated as of May 31, 1995, and the Credit
Agreement dated as of May 20, 1994, each as amended, among the Subordinated
Lenders and LFI, together with all documents and instruments that from time to
time evidence the indebtedness of LFI and its subsidiaries to the Subordinated
Lenders or secure or support payment or performance thereof.
1.61 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) Cost or (b) market value.
1.62 "Warehouse In-Transit Goods" shall mean Eligible Inventory of a
Borrower consisting of finished goods located in a warehouse of a Borrower
maintained as a location of Eligible Inventory hereunder prior to such Inventory
being entered into the warehouse computer inventory system of Borrowers as goods
on hand in such warehouse.
SECTION 2. CREDIT FACILITIES
2.1 Loans.
(a) Subject to, and upon the terms and conditions contained herein,
Lender agrees to make Loans to Borrowers, from time to time in amounts requested
by Borrowers or LFI as agent for Borrowers, up to the amount equal to the sum
of:
(i) eighty (80%) percent of the Net Amount of Eligible Accounts
of LFI and PTI; plus
(ii) the sum of: (A) fifty (50%) percent of the Value of Eligible
Inventory of Borrowers consisting of raw materials, plus (B) the amount equal
to: (1) sixty-eight (68%) percent during the period January 1 through and
including April 30 in each calendar year, or (2) eighty-three (83%) percent
during the period May 1 through and including December 31 in each calendar year,
of the Value of Eligible Inventory of Borrowers consisting of finished goods;
plus
(iii) the amount equal to: (A) $10,000,000 during the months of
March and September in each calendar year, or (B) $20,000,000 during the period
of April 1 through and including August 31 in each calendar year; plus
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(iv) subject to the limitations set forth in Section 2.1(d)
hereof, available in the calendar years 1998 and 1999, for any one period in
each such calendar year not to exceed thirty (30) consecutive days during the
period of May 1 through and including July 31 of the same calendar year, an
amount not to exceed the lesser of: (A) $10,000,000 or (B) fifteen (15%) percent
of the Value of Eligible Inventory consisting of finished goods; less
(v) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to LFI as agent for Borrowers, reduce the
lending formula with respect to (i) Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts for
any period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (B)
the general creditworthiness of account debtors has declined in any material
respect, or (ii) Eligible Inventory to the extent that Lender determines in good
faith that: (A) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the nature, quality or mix of
the Inventory has deteriorated or (C) there is a decrease in the Net Recovery
Cost Percentage after the date hereof. In determining whether to reduce the
lending formula(s), Lender may consider events, conditions, contingencies or
risks which are also considered in determining Eligible Accounts, Eligible
Inventory or in establishing Availability Reserves. Notwithstanding the
foregoing, at no time shall the applicable lending percentage set forth above in
Section 2.1(a)(ii)(B) exceed the percentage, rounded to the nearest whole
percent, equal to ninety (90%) percent multiplied by the Net Recovery Cost
Percentage of Inventory of Borrowers at such time; provided, that in the case of
the lending percentages applicable in the calendar months of May and June in any
year, the Net Recovery Percentage for the "peak season" (as referred to in the
most recent appraisal received by Lender in accordance with Section 7.3) shall
be used instead of the Net Recovery Cost Percentage otherwise applicable to such
calendar months, notwithstanding that such months do not fall within the "peak
season" as identified in such appraisal.
(c) Notwithstanding the foregoing, at no time shall the amount of
Supplemental A Loans exceed an amount equal to seventy (70%) percent of the fair
market value of the Intellectual Property Intangibles as determined by the most
recent acceptable appraisal of Intellectual Property Intangibles received by
Lender in accordance with Section 7.5 hereof, or, in lieu of such maximum amount
in the case only of Supplemental A
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Loans available during any period specified in Section 2.1(a)(iii) which falls
within the period from the date hereof through the date of receipt by Lender of
the first such appraisal of Intellectual Property Intangibles delivered or
caused to be delivered after the date hereof under Section 7.5 hereof, the
amount of $20,000,000.
(d) In addition to the other terms and provisions of this Agreement
(including the conditions precedent to Loans and Letter of Credit Accommodations
set forth herein), Supplemental B Loans shall only be available to Borrowers in
any calendar year referred to in Section 2.1(a)(iv), if each of the following
additional conditions precedent are satisfied, as determined by Lender:
(i) there shall have been no outstanding Loans for at least
thirty (30) consecutive days during the period from December 1 of the calendar
year ending prior to the request for Supplemental B Loans through and including
March 31 of the then-current calendar year;
(ii) Excess Availability shall have been greater than $15,000,000
for each of at least thirty (30) consecutive days during which there were no
outstanding Loans, as referred to in Section 2.1(d)(i) above;
(iii) the EBITA of Borrowers and their subsidiaries for the
fiscal year most recently ended prior to the request for Supplemental B Loans,
shall have been not less than $10,000,000, as shown in the unaudited
consolidated financial statements prepared by Borrowers in accordance with GAAP
and delivered to Lender, subject to confirmation by the annual audited financial
statements delivered to Lender within the time, in the form and accompanied by
the audit report and opinion required under Section 9.6(a)(ii) hereof;
(iv) Lender shall have received updated appraisals of Inventory
and Intellectual Property Intangibles, each acceptable to Lender, on or prior to
April 15th of such year, the results of which shall confirm that there has been
no decline in the values or anticipated recovery from those set forth in the
appraisal reports by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Associates, Inc. as of February 22, 1997
as to the Inventory and by ▇▇▇▇▇-▇▇▇▇▇▇ Appraisal Corporation as of April 1997
as to the Intellectual Property Intangibles, each received by Lender prior to
the date hereof;
(v) Lender shall have received at or before the end of the fiscal
year most recently ended prior to the request for Supplemental B Loans,
financial projections for the next fiscal year of Borrowers based on the
reasonable good faith assumptions of senior management of Borrowers, reflecting
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borrowing availability under the lending formulas set forth herein for such
fiscal year deemed by Lender in good faith to be adequate in light of the
anticipated needs of the business; and
(vi) the Value of Inventory of Borrowers at the end of the March
fiscal month ending in such calendar year, as reported to Lender in the
financial report for such month delivered under Section 9.6(a) hereof (and which
shall be received by Lender prior to the request for Supplemental B Loans),
shall be no more than fifteen (15%) percent greater than the Value for such
month set forth in the financial projections applicable to such March fiscal
month, as provided by Borrowers to Lender on or before the end of the fiscal
year most recently ended prior thereto.
(e) The aggregate amount of Primary Loans outstanding at any time with
respect to Eligible Inventory, plus the aggregate amount of Supplemental B Loans
outstanding at any time, shall not exceed $125,000,000.
(f) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit. In the event that the outstanding amount of the Loans, or
the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimit under Section 2.1(e), the sublimits for Letter of Credit Accommodations
set forth in Section 2.2(d) or the Maximum Credit, as applicable, such event
shall not limit, waive or otherwise affect any rights of Lender in that
circumstance or on any future occasions and Borrowers shall, upon demand by
Lender, which may be made at any time or from time to time, immediately repay to
Lender the entire amount of any such excess(es) for which payment is demanded.
(g) For purposes of applying the sublimit set forth in Section 2.1(e)
hereof, Lender may treat the amount of its reliance on Eligible Inventory that
is to be purchased under, or finished with labor the costs of which are to be
paid under, outstanding Letter of Credit Accommodations, as a Primary Loan based
on Eligible Inventory pursuant to Section 2.1(a)(ii). In determining the amount
of such reliance, the outstanding Loans and Availability Reserves shall first be
attributed to any available components of the lending formulas in Section 2.1(a)
that are not subject to such sublimit, before being attributed to available
components of the lending formulas subject to such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained herein, at
the request of Borrowers or LFI as agent for
-▇▇-
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ agrees to provide or arrange for Letter of Credit
Accommodations for the account of Borrowers containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Loans to Borrowers pursuant to this
Section 2. Notwithstanding that any Letter of Credit Accommodation may
designate, or any application therefor may designate or be signed by, only one
Borrower as account party, each of the Borrowers shall be jointly and severally
liable for all Obligations in respect of all Letter of Credit Accommodations or
relating thereto (in addition to all other Obligations).
(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 Lender a letter of credit fee at a rate equal to one and one-half
(1 1/2%) 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
Borrowers shall pay to Lender such letter of credit fee, at Lender's option,
without notice, at a rate equal to three and one-half (3 1/2%) percent per annum
for (i) the period from and after the date of termination or non-renewal hereof
until Lender has received full and final payment of all non-contingent
Obligations and cash collateral (or a standby letter of credit in favor of
Lender acceptable to Lender in all respects) sufficient to cover all Obligations
in respect of outstanding Letter of Credit Accommodations or relating thereto
(notwithstanding entry of a judgment against such Borrower) and (ii) the period
from and after the date of the occurrence of an Event of Default and for so long
as such Event of Default is continuing. 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 or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available to Borrowers
unless on the date of the proposed issuance of any Letter of Credit
Accommodations, the Loans available to Borrowers (subject to the Maximum Credit,
applicable sublimits and any Availability Reserves in effect immediately prior
to such proposed issuance) are equal to or greater than (i) if the proposed
Letter of Credit Accommodation is for the purpose of purchasing Eligible
Inventory consisting of goods that are finished at the time of purchase or for
the purposes of purchasing raw materials, in each case under terms requiring, as
a condition of any drawing, the presentation of acceptable evidence of shipment
of the subject goods to the United States in the form purchased, the percentage
equal to one hundred (100%) percent minus the lending percentage applicable to
such Eligible
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Inventory under Section 2.1(a)(ii) above, multiplied by the sum of (A) the Value
of such Eligible Inventory, plus (B) freight, taxes, duty and other amounts that
Lender estimates must be paid in connection with such Inventory upon arrival and
for delivery to one of Borrowers' locations for Eligible Inventory; (ii) if the
proposed Letter of Credit Accommodations is for the purpose of paying labor
costs related to the production of Eligible Inventory using raw materials
located outside of the United States which are owned and have already been paid
for by Borrowers, an amount equal to zero (0%) percent of the face amount
thereof; and (iii) if the proposed Letter of Credit Accommodation is for any
purpose, other than those set forth in Sections 2.2(c)(i) or 2.2(c)(ii), an
amount equal to one hundred (100%) percent of the face amount thereof and all
other commitments and obligations made or incurred by Lender with respect
thereto. Effective on the issuance of each Letter of Credit Accommodations, an
Availability Reserve shall be established in the applicable amount set forth in
Sections 2.2(c)(i) or 2.2(c)(iii) hereof, subject to increase or decrease in the
case of Letter of Credit Accommodations described in Section 2.2(c)(i), based on
any change in the lending percentage applicable to such Eligible Inventory.
(d) Except in Lender's discretion, the aggregate amount of all
outstanding Letter of Credit Accommodations and any other commitments and
obligations made or incurred by Lender in connection therewith, shall not at any
time exceed $80,000,000. At any time an Event of Default exists or has occurred
and is continuing, upon Lender's request, Borrowers will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations, and in either case, or, if at any other
time Borrowers furnish cash collateral to Lender for the Letter of Credit
Accommodations, the Loans otherwise available to Borrowers shall not be reduced
as provided in Section 2.2(c) to the extent of such cash collateral.
(e) Borrowers shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, 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. Borrowers assume 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 the agent of Borrowers. Borrowers assume all risks for, and agree to pay,
all foreign, Federal, State and local taxes, duties and levies relating to any
goods subject to
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any Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder. Borrowers hereby release and hold Lender harmless from and against
any acts, waivers, errors, delays or omissions, whether caused by Borrowers, by
any issuer or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation. The provisions of this Section 2.2(e) shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrowers any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender 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 shall be bound by any interpretation made in good faith by Lender, 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 a Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrowers shall not: (i) at any time an Event of Default
exists or has occurred and is continuing, (A) approve or resolve any questions
of non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) 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. Lender may take such actions either in its
own name or in the name of a Borrower. Prior to an Event of Default, Lender
shall cooperate reasonably with Borrowers in considering and presenting to the
issuer Borrowers' requests regarding the matters described in clause (ii) of
this Section 2.2(f).
(g) Any rights, remedies, duties or obligations granted or undertaken
by a Borrower 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 Accommodation, shall be deemed to
have been granted or undertaken by all Borrowers to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of
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Credit Accommodation, shall be deemed to have been undertaken by all Borrowers
to Lender and to apply in all respects to all Borrowers.
2.3 Availability Reserves. All Loans otherwise available to Borrowers
pursuant to the lending formulas and subject to the Maximum Credit and other
applicable limits hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves. Without limiting any other rights or
remedies of Lender under this Agreement or any of the other Financing Agreements
with respect to the establishment of Availability Reserves or otherwise, Lender
may establish and revise Availability Reserves to reflect: (a) inventory
shrinkage; (b) the aggregate amount of deposits, if any, received by a Borrower
from its retail customers in respect of unfilled orders for merchandise; (c)
amounts past due in respect of sales, use and/or withholding taxes; (d) any
rental payments, service charges or other amounts due to lessors, mortgagees or
operators of real or personal property to the extent Inventory or Records are
located in or on property or such Records are needed to monitor or otherwise
deal with the Collateral, but limited, in the case of property covered by a
Landlord Agreement, Mortgagee Agreement or Warehouseman's Agreement acceptable
to Lender to amounts estimated by Lender as necessary to be paid in connection
with the future exercise by Lender of its rights pursuant to such agreements or
(e) amounts owing by any Borrower to Credit Card Issuers or Credit Card
Processors in connection with the Credit Card Agreements.
SECTION 3. INTEREST AND FEES
3.1 Interest.
(a) Borrowers shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination or non-renewal hereof shall be payable on demand.
(b) Borrowers or LFI as agent for Borrowers may from time to time
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 or on behalf of Borrowers shall specify the amount of the Prime
Rate Loans which will constitute Eurodollar Rate Loans (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 Lender of such a request from or on behalf of
Borrowers, such Prime Rate Loans shall be converted to Eurodollar Rate Loans or
such Eurodollar Rate Loans shall continue, as the
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case may be, provided, that, as of such date each of the following conditions is
satisfied as determined by Lender: (i) no Event of Default, or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing, (ii) no party hereto shall have sent any notice
of termination or non-renewal of this Agreement, (iii) Borrowers shall have
complied with such customary procedures as are established by Lender and
specified by Lender to Borrowers from time to time for requests by or on behalf
of Borrowers for Eurodollar Rate Loans, (iv) no more than six (6) Interest
Periods may be in effect at any one time, (v) the aggregate amount of the
Eurodollar Rate Loans must be in an amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof, (vi) the maximum amount of
the Eurodollar Rate Loans at any time requested by or on behalf of Borrowers
shall not exceed the amount equal eighty-five (85%) percent of the lowest
principal amount of the Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender (but with
no obligation of Lender to make such Loans by virtue of this provision) and
(vii) Lender shall have determined that the Interest Period and Adjusted
Eurodollar Rate is available to Lender through the Reference Bank and can be
readily determined as of the date of the request for such Eurodollar Rate Loan
by or on behalf of Borrowers. Any request by or on behalf of Borrowers 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, Lender and Reference Bank 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 Lender and Reference Bank 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 Lender
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 Lender's option, upon notice
by Lender to Borrowers or LFI as agent for Borrowers, convert to Prime Rate
Loans upon the last day of the respective then-current Interest Period(s), in
the event that (i) an Event of Default or act, condition or event which with the
notice or passage of time or both would constitute an Event of Default, shall
exist or have occurred, (ii) this Agreement shall terminate or not be renewed,
or (iii) the aggregate principal amount of the Prime Rate Loans which have
previously been converted to Eurodollar Rate Loans or existing Eurodollar Rate
Loans continued, as the case may be, at the beginning of an Interest Period
shall at any time during such Interest Period exceed either (A) the aggregate
principal amount of the Loans then
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outstanding, or (B) the Loans then available to Borrowers under Section 2
hereof. Borrowers shall pay to Lender, upon demand by Lender (or Lender may, at
its option, charge any loan account of Borrowers) any amounts required to
compensate Lender, the Reference Bank or any participant with Lender 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 Lender 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 Lender 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.
(e) The Interest Rate with respect to Eurodollar Rate Loans is subject
to adjustment as follows:
(i) If the EBITA of Borrowers and their subsidiaries is greater
than $12,000,000 for the fiscal year of Borrowers ending the last Saturday in
February, 1998 or any fiscal year commencing after the last Saturday in
February, 1998, then the pre-default Interest Rate for Eurodollar Rate Loans
will be reduced to two and one-half (2 1/2%) percent per annum above the
Adjusted Eurodollar Rate.
(ii) Each adjustment in the Interest Rate for Eurodollar Rate
Loans shall be applicable to each then-operative Interest Period, effective as
of the first day of the month in which Lender receives the delivery of audited
financial statements of Borrowers and their subsidiaries for the applicable
fiscal year showing that the required financial results were achieved, which
audited financial statements shall be in the form required by Section 9.6(a)
hereof, accompanied by the unqualified audit report and opinion thereon of
independent certified public accountants acceptable to Lender, and such
adjustment shall continue to be applicable to all Interest Periods commencing
thereafter, subject to Section 3.1(e)(iv).
(iii) No reduction in the pre-default Interest Rate for
Eurodollar Rate Loans as described in this Section 3.1(e) shall become effective
if, at the time a reduction would
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otherwise be made under this Section 3.1(e), an Event of Default exists or has
occurred and is continuing.
(iv) After the occurrence of a reduction in the pre-default
Interest Rate for Eurodollar Rate Loans pursuant to this Section 3.1(e), in the
event the EBITA of Borrowers and their subsidiaries shall be less than
$12,000,000 with respect to any subsequent fiscal year, or if the audited
financial statements are not timely delivered in the form and accompanied by the
accountants report required under Section 3.1(e)(ii), the pre-default Interest
Rate for Eurodollar Rate Loans shall revert to two and three-quarters (2 3/4%)
percent per annum above the Adjusted Eurodollar Rate, applicable to all
then-operative Interest Periods, effective as of the ninetieth (90th) day
following the end of such fiscal year, and applicable to all Interest Periods
thereafter, subject to the re-application of this Section 3.1(e) in subsequent
fiscal years and (subject to Lender's default rights) as to the remainder of the
then-current fiscal year upon the delivery after its due date of the audited
financial statements in such form and accompanied by such report.
(f) Without Lender's prior written consent, Borrowers and their
subsidiaries shall not change their fiscal year from the period of fifty-two or
fifty-three weeks ending the last Saturday in February.
3.2 Closing Fee. Borrowers shall pay to Lender as a closing fee the amount
of $1,125,000 which shall be fully earned as of the date hereof, $375,000 of
which shall be payable on the date hereof, $375,000 of which shall be payable on
the first anniversary of the date hereof, and $375,000 of which shall be payable
on the second anniversary of the date hereof.
3.3 Servicing Fee. Borrowers shall pay to Lender monthly a servicing fee in
an amount equal to $10,000 for each month (or part thereof) while this Agreement
is in effect and for so long thereafter as any of the Obligations (other than
Obligations fully covered by cash collateral held by Lender or a standby letter
of credit in favor of Lender acceptable to Lender in all respects) are
outstanding, which fee shall be fully earned as of and payable in advance on the
date hereof and on the first day of each month hereafter.
3.4 Unused Line Fee. Borrowers shall pay to Lender with respect to the
calendar months of May through and including November (or part thereof) in each
year while this Agreement is in effect, an unused line fee at a rate equal to
one-half (1/2%) percent per annum calculated upon the amount by which
$110,000,000 exceeds the average daily principal balance of the outstanding
Loans and Letter of Credit Accommodations during such month (or part thereof),
which fee shall be payable on the first day following each applicable month, in
arrears.
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3.5 Supplemental B Loan Fee. If any Supplemental B Loans are made at any
time in any calendar year, or if any Supplemental B Loan availability is at any
time in any calendar year necessary to cover Availability Reserves or otherwise
maintain the outstanding Obligations within the lending formulas and subject to
the sublimits and Availability Reserves provided herein (each such Supplemental
B Loan or other such use of Supplemental B Loan availability, a "Supplemental B
Usage"), Borrowers shall pay to Lender, with respect to each such calendar year,
a fee equal to $100,000, which fee shall be earned and payable with respect to
any calendar year as of the date of the initial Supplemental B Loan made or
other Supplemental B Usage occurring in such calendar year.
3.6 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, or to LFI as
agent for Borrowers, convert to Prime Rate Loans in the event that (i) any
change in applicable law or regulation (or the interpretation or administration
thereof) shall either (A) make it unlawful for Lender, Reference Bank or any
participant to make or maintain Eurodollar Rate Loans or to comply with the
terms hereof in connection with the Eurodollar Rate Loans, or (B) shall result
in the increase in the costs to Lender, Reference Bank or any participant of
making or maintaining any Eurodollar Rate Loans or by an amount deemed by Lender
to be material, or (C) reduce the amounts received or receivable by Lender in
respect thereof, by an amount deemed by Lender to be material or (ii) the cost
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans shall otherwise increase by an amount deemed by Lender to
be material. Borrowers shall pay to Lender, upon demand by Lender (or Lender
may, at its option, charge any loan account of Borrowers) any amounts required
to compensate Lender, the Reference Bank or any participant with Lender for any
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of the foregoing, including, without limitation, any such
loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain the
Eurodollar Rate Loans or any portion thereof. A certificate of Lender setting
forth the basis for the determination of such amount necessary to compensate
Lender as aforesaid shall be delivered to Borrowers and shall be conclusive,
absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral,
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Borrowers shall pay to Lender upon demand by Lender (or Lender may, at its
option, charge any loan account of Borrowers) any amounts required to compensate
Lender, the Reference Bank or any participant with Lender for any additional
loss (including loss of anticipated profits), cost or expense incurred by such
person as a result of such prepayment or payment, including, without limitation,
any loss, cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
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 Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory to
Lender, a release agreement and all releases, terminations and such other
documents as Lender may request to evidence and effectuate the termination by
the Existing Senior Lenders of their financing arrangements with LFI and its
Subsidiaries and the termination and release by the Existing Senior Lenders of
any interest in and to any assets and properties of Borrowers and its
subsidiaries, duly authorized, executed and delivered by it, including, but not
limited to, (i) UCC termination statements for all UCC financing statements
previously filed by them or their predecessors, as secured party, and any
Borrower or any of its subsidiaries, as debtor, (ii) satisfactions and
discharges of any mortgages, deeds of trust or deeds to secure debt by Borrowers
or any Obligor in favor of the Existing Senior Lenders or a trustee acting on
its behalf, in form acceptable for recording in the appropriate governmental
office, and (iii) foreign termination and release documents with respect to all
documents executed and/or filed in connection with foreign interests granted by
Borrowers and/or any Obligor in favor of Existing Senior Lenders, if any;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) Lender shall have received, in form and substance satisfactory to
Lender, unlimited guarantees of payment of the Obligations by each Guarantor in
favor of Lender, and, with respect to each Guarantor, (i) a security agreement
by each such
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Guarantor in favor of Lender, granting Lender a first priority security interest
in each such Guarantor's assets, and (ii) UCC-1 financing statements with
respect thereto, in each case duly authorized, executed and delivered by the
parties thereto;
(d) Lender shall have received, in form and substance satisfactory to
Lender, an intercreditor and subordination agreement from the Subordinated
Lenders acknowledged and agreed to by Borrowers, providing for, among other
things, (i) the subordination in priority of all security interests of the
Subordinated Lenders in assets of Borrowers and Obligors to the security
interests of Lender in such assets and the agreement of the Subordinated Lenders
not to enforce or exercise their rights or remedies with respect to such
security interests and claims against Borrowers and Obligors until the
indefeasible payment and satisfaction in full of the Obligations, except as
expressly permitted therein and (ii) the subordination in right of payment of
all amounts now or hereafter owing by Borrowers and Obligors to the Subordinated
Lenders to the indefeasible payment and satisfaction in full of the Obligations,
except as expressly provided therein;
(e) all requisite corporate action and proceedings in connection with
this Agreement and the other Financing Agreements shall be satisfactory in form
and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(f) no material adverse change shall have occurred in the assets,
business or prospects of any Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair in any
material amount or to any material extent the ability of any Borrower or any
Obligor to perform its obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce the Obligations or
realize upon the Collateral;
(g) Lender shall have completed a field review of the Records and such
other information with respect to the Collateral as Lender may require to
determine the amount of Loans available to Borrowers, including, without
limitation, current agings of Accounts (setting forth Accounts outstanding at
thirty (30), sixty (60) and seventy-five (75) day intervals), current perpetual
inventory records and/or roll-forwards of Accounts and Inventory through the
date of closing, together with such supporting documentation as may be necessary
or appropriate, and other documents and information that will enable Lender to
accurately identify and verify the Collateral, the results of
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which shall be satisfactory to Lender, not more than three (3) Business Days
prior to the date hereof;
(h) Lender shall have received, in form and substance satisfactory to
Lender, all consents, waivers, acknowledgments and other agreements from third
persons which Lender 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, acknowledgements by lessors,
mortgagees, consignees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral;
(i) Borrowers shall have established the Blocked Accounts and Lender
shall have received, in form and substance satisfactory to Lender, all
agreements with the depository banks and Borrowers with respect to such Blocked
Accounts as Lender may require pursuant to Section 6.3 hereof, duly authorized,
executed and delivered by such depository banks and Borrowers;
(j) Lender shall have received evidence, in form and substance
satisfactory to Lender, that each Borrower has (i) directed the banks at which
such Borrower maintains deposit accounts for the initial receipt of cash, checks
and other items from such Borrower's retail store locations to transfer all
immediately available funds deposited in such bank only to the Blocked Accounts
as required pursuant to Section 6.3 hereof or as otherwise directed by Lender
and (ii) notified such banks of the security interests of Lender in such funds
and the other Collateral;
(k) Lender shall have received Credit Card Acknowledgements in each
case, duly authorized, executed and delivered by the Credit Card Issuers and
Credit Card Processors;
(l) Lender shall have received a copy of an amendment to the
Subordinated Loan Documents, in form and substance satisfactory to Lender,
setting forth amended terms and provisions for the indebtedness evidenced by the
Subordinated Loan Documents not inconsistent with the terms hereof and otherwise
acceptable to Lender;
(m) the Excess Availability as determined by Lender, as of the date
hereof, shall not be less than $12,000,000 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;
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(n) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(o) Lender shall have received, in form and substance satisfactory to
Lender, the opinion letters of counsel to Borrowers with respect to the
Financing Agreements and the security interests and liens of Lender with respect
to the Collateral and such other matters and Lender may reasonably request and
of special trademark counsel to Lender with respect to the Intellectual Property
Intangibles; and
(p) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
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; and
(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an 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. SECURITY INTEREST
To secure payment and performance of all Obligations, each Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of such Borrower, whether now owned or
hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
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5.1 Accounts;
5.2 all present and future contract rights, general intangibles (including,
but not limited to, tax and duty refunds, registered and unregistered patents,
trademarks, service marks, copyrights, trade names, applications for the
foregoing, trade secrets, goodwill, processes, drawings, blueprints, customer
lists, licenses, whether as licensor or licensee, choses in action and other
claims and existing and future leasehold interests in equipment and fixtures),
chattel paper, documents, instruments, securities and other investment property,
credit card sales drafts, credit card sales slips or charge slips or receipts
and other forms of store receipts, letters of credit, bankers' acceptances and
guaranties;
5.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of such Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of such Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including,
without limitation, (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 described in invoices, documents, credit
card sales drafts, credit card sales slips or charge slips or receipts and other
forms of store receipts, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other Collateral, including, without
limitation, returned, repossessed and reclaimed goods, and (iv) deposits by and
property of account debtors or other persons securing the obligations of account
debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
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SECTION 6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Accounts. Lender 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 Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2 Statements. Lender shall render to Borrowers each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
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 Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from any Borrower of any specific exceptions of such Borrower
thereto within forty-five (45) days after the date such statement has been
mailed by Lender. Until such time as Lender shall have rendered to Borrowers a
written statement as provided above, the balance in Borrowers' loan account(s)
shall be presumptive evidence of the amounts due and owing to Lender by
Borrowers.
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense, deposit
account arrangements and merchant payment arrangements with the banks set forth
on Schedule 6.3 hereto and after prior written notice to Lender, subject to
Section 9.15, such other banks as Borrowers may hereafter select as are
acceptable to Lender. The banks set forth on Schedule 6.3 constitute all of the
banks with whom any Borrower has deposit account arrangements and merchant
payment arrangements as of the date hereof and identifies each of the deposit
accounts at such banks to a retail store location of a Borrower or otherwise
describes the nature of the use of such deposit account by the applicable
Borrower.
(i) Borrowers shall deposit all proceeds from sales of Inventory
in every form, including, without limitation, cash, checks, credit card sales
drafts, credit card sales or charge slips or receipts and other forms of daily
store receipts, from each retail store location of Borrowers on each business
day into the deposit accounts of Borrowers used solely for such purpose and
identified to each retail store location as set forth on Schedule 6.3. All such
funds deposited into the separate deposit accounts shall be sent by wire
transfer or via Automated
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ transfer on a daily basis and all other proceeds of Collateral
shall be sent by wire transfer, to the Blocked Accounts as provided in Section
6.3(a)(ii) below. Borrowers shall irrevocably authorize and direct in writing,
in form and substance satisfactory to Lender, each of the banks into which
proceeds from sales of Inventory from each retail store locations of Borrowers
are at any time deposited as provided above to send all funds deposited in such
accounts by wire transfer on a daily basis to the Blocked Accounts and, if at
any time required by Lender, Borrowers shall obtain the written agreement by
such banks to do so. Such authorization and direction shall not be rescinded,
revoked or modified without the prior written consent of Lender.
(ii) Borrowers shall establish and maintain, at its expense,
deposit accounts with such banks as are acceptable to Lender (the "Blocked
Accounts") into which Borrowers shall promptly either cause all amounts on
deposit in its deposit accounts used by each retail store location to be sent as
provided in Section 6.3(a)(i) above or shall themselves deposit or cause to be
deposited all proceeds from sales of Inventory, all amounts payable to Borrowers
from Credit Card Issuers and Credit Card Processors and all other proceeds of
Collateral. The banks at which the Blocked Accounts are established shall enter
into an agreement, in form and substance satisfactory to Lender, providing that
all items received or deposited in the Blocked Accounts are the property of
Lender, that the depository bank has no lien upon, or right of setoff against,
the Blocked Accounts, the items received for deposit therein, or the funds from
time to time on deposit therein and that the depository bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis, all funds
received or deposited into the Blocked Accounts to such bank account of Lender
as Lender may from time to time designate for such purpose ("Payment Account").
Each Borrower agrees that all amounts deposited in such Blocked Accounts or
other funds received and collected by Lender, whether as proceeds of inventory
or other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating the amount of the Loans available to
Borrowers, such payments under Section 6.3(a) will be applied (conditional upon
final collection) to the Obligations on the Business Day of receipt by Lender of
immediately available funds in the Payment Account provided such payments and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrowers' loan account(s) on such day, and if not, then on the next Business
Day. For purposes of calculating interest on the Obligations, such payments or
other funds received will be applied (conditional upon final collection) to the
Obligations on the Business Day of receipt of immediately available funds by
Lender
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in the Payment Account provided such payments or other funds and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit the Borrowers'
loan account(s) on such day, and if not, then on the next Business Day.
(c) Borrowers and all of their affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender, receive, as
the property of Lender, any cash, checks, credit card sales drafts, credit card
sales or charge slips or receipts, notes, drafts, all forms of store receipts or
any other payment relating to and/or proceeds of Accounts or other 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
Lender; provided, that, if at any time the Excess Availability shall be less
than $1,000,000, Borrowers shall promptly upon Lender's request cause the
portion thereof representing sales and/or use taxes payable in connection with
such sales or otherwise to be deposited into a separate bank account or accounts
established for such purpose. In no event shall any such cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts, notes, drafts
or other payments be commingled with Borrowers' own funds. Borrowers agree to
reimburse Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The Obligation of
Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrowers or for the
account of Borrowers (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the non-contingent
Obligations, whether or not then due, in such order and manner as Lender
determines. At Lender'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 Borrowers.
Borrowers shall make all payments to Lender on the Obligations free and clear
of, and without deduction or withholding for or on account of, any setoff,
counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to
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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 Lender. Borrowers
shall be liable to pay to Lender, and each Borrower does hereby indemnify and
hold Lender harmless for the amount of any payments or proceeds surrendered or
returned. This Section 6.4 shall remain effective notwithstanding any contrary
action which may be taken by Lender in reliance upon such payment or proceeds.
This Section 6.4 shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is 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 Borrowers or
LFI as agent for Borrowers or other authorized person or, at the discretion of
Lender, 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. New York 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, Borrowers when deposited to the credit of a
Borrower or LFI as agent for Borrowers, or otherwise disbursed or established in
accordance with the instructions of a Borrower or LFI as agent for Borrowers or
in accordance with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
and Letter of Credit Accommodations provided by Lender to Borrowers hereunder
only for: (a) payments to each of the persons listed in the disbursement
direction letter furnished by Borrowers to Lender on or about the date hereof,
(b) a back-up letter of credit, for the joint and several account of Borrowers,
designating LFI as the account party thereon and having terms acceptable to
Lender and the issuer thereof, in favor of the agent for the Existing Senior
Lenders with respect to outstanding letters of credit issued pursuant to the
existing working capital financing arrangements between LFI and the Existing
Senior Lenders, and (c) 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 by Lender to Borrowers pursuant to the provisions hereof shall be used
by Borrowers only for general operating, working capital and other proper
corporate purposes of Borrowers not otherwise
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prohibited by the terms hereof. None of the proceeds will be used, directly or
indirectly, for the purpose of purchasing or carrying any margin security 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 G of the Board of Governors of the Federal Reserve System,
as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting. Borrowers shall provide Lender with the following
documents in a form satisfactory to Lender: (a) on a monthly basis or more
frequently as Lender may request, (i) perpetual inventory reports, (ii)
inventory reports by category, (iii) agings of accounts payable, (iv) reports of
sales for each category of Inventory, and (v) reports on sales and use tax
collections, deposits and payments, including monthly sales and use tax
accruals, (b) on a daily basis as required by Lender, a schedule of Accounts,
credits and collections, (c) on a weekly basis or more frequently as Lender may
request, (i) reports of sales of Inventory, indicating gross sales, returns,
allowances and net sales, (ii) reports of aggregate Inventory purchases
(including all costs related thereto, such as freight, duty and taxes) and
identifying items of Inventory in transit to Borrowers related to the applicable
documentary letter of credit and/or ▇▇▇▇ of lading number, if possible, (iii)
reports of amounts of consigned Inventory held by consignees of Borrowers by
consignor, (iv) reports of the Cost of the Inventory and of markdowns taken with
respect to Inventory in Borrowers' retail stores, and (v) reports of outstanding
Letter of Credit Accommodations identifying the applicable purposes of each
based on the categories referred to in Section 2.2(c) hereof, (d) upon Lender's
request, (i) copies of customer statements and credit memos, remittance advices
and reports, and copies of deposit slips and bank statements, (ii) copies of
shipping and delivery documents, (iii) copies of purchase orders, invoices and
delivery documents for Inventory and Equipment acquired by Borrowers and (iv)
reports by retail store location of sales and operating profits for each such
retail store location; (e) agings of accounts receivable on a monthly basis or
more frequently as Lender may request, setting forth the outstanding Accounts of
each Borrower at thirty (30), sixty (60) and seventy-five (75) day intervals;
(f) as soon as available, but in any event not later than five (5) days after
receipt by Borrowers, the monthly statements received by Borrowers from any
Credit Card Issuers or Credit Card Processors, together with such additional
information with respect thereto as shall be sufficient to enable Lender to
monitor the transactions pursuant to the Credit Card Agreements; and (g) such
other reports as to the Collateral as Lender shall request from time to time. If
any of Borrowers' records or
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reports of the Collateral are prepared or maintained by an accounting service,
contractor, shipper or other agent, Borrowers hereby irrevocably authorize such
service, contractor, shipper or agent to deliver such records, reports, and
related documents to Lender and to follow Lender'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 Lender promptly of (i) any material delay
in any Borrower's performance of any of its obligations to any account debtor or
the assertion of any claims, offsets, defenses or counterclaims by any account
debtor, Credit Card Issuer or Credit Card Processor or any disputes with any of
such persons or any settlement, adjustment or compromise thereof, in any
instance involving an amount of $250,000 or more, (ii) all material adverse
information relating to the financial condition of any account debtor, Credit
Card Issuer or Credit Card Processor, and (iii) any event or circumstance which,
to any Borrower's knowledge, would cause Lender to consider any Accounts in an
amount of $250,000 or more previously considered to be Eligible Accounts as no
longer constituting Eligible Accounts. No credit, discount, allowance or
extension or agreement for any of the foregoing shall be granted to any account
debtor, Credit Card Issuer or Credit Card Processor except in the ordinary
course of Borrowers' business in accordance with the current practices of
Borrowers as previously disclosed in writing to Lender. So long as no Event of
Default exists or has occurred and is continuing, Borrowers shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor, Credit Card Issuer, Credit Card Processor. At any time that an Event of
Default exists or has occurred and is continuing, Lender shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors, Credit Card Issuers or Credit Card
Processors or grant any credits, discounts or allowances.
(b) Without limiting the other reporting obligations of Borrowers
hereunder, Borrowers shall promptly report to Lender on a separate basis any
return of Inventory by any one account debtor if the Inventory so returned has a
value in excess of $250,000. At any time that Inventory is returned, reclaimed
or repossessed, the Account (or portion thereof) which arose from the sale of
such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrowers shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any
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credits, discounts or allowances with respect thereto without Lender's prior
written consent. Each Borrower shall notify Lender promptly of: (x) any notice
of a material default by such Borrower under any of the Credit Card Agreements
or of any default which might result in the Credit Card Issuer or Credit Card
Processor ceasing to make payments or suspending payments to Borrowers, (y) any
notice from any Credit Card Issuer or Credit Card Processor that such person is
ceasing or suspending, or will cease or suspend, any present or future payments
due or to become due to any Borrower from such person, or that such person is
terminating or will terminate any of the Credit Card Agreements, and (z) the
failure of any Borrower to comply with any material terms of the Credit Card
Agreements or any terms thereof which might result in the Credit Card Issuer or
Credit Card Processor ceasing or suspending payments to any Borrower.
(c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Lender or schedule thereof delivered to Lender shall be true and
complete, (ii) no payments shall be made thereon except payments delivered to
Lender pursuant to the terms of this Agreement, (iii) no credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted by
a Borrower to any account debtor, Credit Card Issuer or Credit Card Processor,
except as reported to Lender in accordance with this Agreement and except for
credits, discounts, allowances or extensions made or given in the ordinary
course of such Borrower's business in accordance with practices and policies
previously disclosed in writing to Lender, (iv) there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Lender in accordance with the terms
of this Agreement, (v) none of the transactions giving rise thereto will violate
any applicable State or Federal 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.
(d) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing: (i) notify any or all account debtors, Credit
Card Issuers and Credit Card Processors that the Accounts have been assigned to
Lender and that Lender has a security interest therein and Lender may direct any
or all account debtors, Credit Card Issuers and Credit Card Processors to make
payments of Accounts directly to Lender, (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 Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such
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other obligations, but without any duty to do so, and Lender shall not be liable
for its 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 Lender may deem necessary or desirable for the protection of its
interests. At any time that an Event of Default exists or has occurred and is
continuing, at Lender's request, all invoices and statements sent to any account
debtor, Credit Card Issuer or Credit Card Processor shall state that the
Accounts owed by such account debtor, Credit Card Issuer or Credit Card
Processor and such other obligations have been assigned to Lender and are
payable directly and only to Lender and Borrowers shall deliver to Lender such
originals of documents evidencing the sale and delivery of goods or the
performance of services giving rise to any Accounts as Lender may require.
(e) Lender shall have the right at any time or times, in Lender's name
or in the name of a nominee of Lender, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(f) Each Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to such
Borrower, all chattel paper and instruments which such Borrower now owns or may
at any time acquire immediately upon such Borrower's receipt thereof, except as
Lender may otherwise agree.
7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, such Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) each Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) no Borrower shall remove any Inventory from the
locations set forth or permitted herein, without the prior written consent of
Lender, except for sales of Inventory in the ordinary course of Borrowers'
business and except to move Inventory directly from one location set forth or
permitted herein to another such location; (d) Borrowers shall, at their
expense, once in every six (6) month period, but at any time or times as Lender
may request at Lender's expense, or at Borrowers' expense any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Inventory in form,
scope and methodology acceptable to Lender and by an appraiser
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acceptable to Lender, addressed to Lender or upon which Lender is expressly
permitted to rely; (e) upon Lender's request, Borrowers shall, at their expense,
conduct through RGIS Inventory Specialists, Inc. or another inventory counting
service acceptable to Lender, a physical count of the Inventory in form, scope
and methodology acceptable to Lender no more than once in any twelve (12) month
period, but at any time or times as Lender may request on or after an Event of
Default, the results of which shall be reported directly by such inventory
counting service to Lender and Borrowers shall promptly deliver confirmation in
a form satisfactory to Lender that appropriate adjustments have been made to the
inventory records of Borrowers to reconcile the inventory count to Borrowers'
inventory records; (f) Borrowers shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including, but not limited to, the requirements of the Federal Fair Labor
Standards Act of 1938, as amended and all rules, regulations and orders related
thereto); (g) each Borrower assumes all responsibility and liability arising
from or relating to the production, use, sale or other disposition of the
Inventory; (h) no Borrower shall sell Inventory to any customer on approval, or
any other basis which entitles the customer to return or may obligate such
Borrower to repurchase such Inventory, except for (A) consignment arrangements
in the ordinary course of business, with respect to which there exists
appropriate legal documentation evidencing the terms of consignment and
consignment filings against the consignee in favor of such Borrower assigned to
Lender, and (B) the right of return given to retail customers of such Borrower
in the ordinary course of the business of such Borrower in accordance with the
then-current return policy of such Borrower; (i) Borrowers shall keep the
Inventory in good and marketable condition; and (j) no Borrower shall, without
prior written notice to Lender, acquire or accept any Inventory on consignment
or approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon Lender's
request, Borrowers shall, at their expense, at any time or times as Lender may
request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrowers shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrowers shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrowers' business and not for personal,
family, household or farming use; (e) no Borrower shall 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
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the business of such Borrower 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 in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrowers shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) each Borrower assumes all
responsibility and liability arising from its use of the Equipment.
7.5 Appraisals of Intellectual Property Intangibles. Borrowers shall at
their expense, once in every twelve (12) month period, but at any time or times
as Lender may request at Lender's expense, or at any time or times as Lender may
request at Borrowers' expense on or after an Event of Default, deliver or cause
to be delivered to Lender written reports or appraisals as to the Intellectual
Property Intangibles, in form, scope and methodology acceptable to Lender and by
an appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely.
7.6 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in such Borrower's or
Lender's name, to: (a) at any time an Event of Default or event which with
notice or passage of time or both would constitute an Event of Default exists or
has occurred and is continuing (i) demand payment on Accounts or other proceeds
of Inventory or other Collateral, (ii) enforce payment of Accounts by legal
proceedings or otherwise, (iii) exercise all of such Borrower's rights and
remedies to collect any Account or other Collateral, (iv) sell or assign any
Account upon such terms, for such amount and at such time or times as the Lender
deems advisable, (v) settle, adjust, compromise, extend or renew an Account,
(vi) discharge and release any Account, (vii) prepare, file and sign such
Borrower's name on any proof of claim in bankruptcy or other similar document
against an account debtor, (viii) notify the post office authorities to change
the address for delivery of such Borrower's mail to an address designated by
Lender, and open and dispose of all mail addressed to such Borrower, and (ix) do
all acts and things which are necessary, in Lender's determination, to fulfill
such Borrower's obligations under this Agreement and the other Financing
Agreements and (b) at any time to (i) take control in any manner of any item of
payment or proceeds thereof, (ii) have access to any lockbox or postal box into
which such Borrower's mail is deposited, (iii) endorse such Borrower's name upon
any items of payment or proceeds thereof and deposit the same in the Lender's
account for application to the Obligations, (iv) endorse such Borrower's name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Account or any goods pertaining thereto or any other
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Collateral, (v) sign such Borrower's name on any verification of Accounts and
notices thereof to account debtors and (vi) execute in such Borrower's name and
file any UCC financing statements or foreign equivalents thereof or amendments
thereto. Each Borrower hereby releases Lender and its 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 Lender's own gross negligence or wilful misconduct as determined
pursuant to a final non-appealable judgment of a court of competent
jurisdiction.
7.7 Right to Cure. Lender may, at its option, (a) cure any default by a
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against a Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge such
Borrower's account therefor, such amounts to be repayable by such Borrower on
demand. Lender 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. Any payment made or other action taken by Lender
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
7.8 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrowers, (a) Lender or its designee shall have complete
access to all of Borrowers' premises during normal business hours and after
notice to Borrowers, or at any time and without notice to Borrowers 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 Borrowers' books
and records, including, without limitation, the Records, and (b) Borrowers shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) use during normal business hours such
of Borrowers' personnel, equipment, supplies and premises as may be reasonably
necessary for the foregoing and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrowers hereby, jointly and severally, represent and warrant to Lender
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy
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of which is a continuing condition of the making of Loans and providing Letter
of Credit Accommodations by Lender to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Each Borrower
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation 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 on such Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within each Borrower's corporate powers, have been duly authorized and
are not in contravention of law or the terms of each Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which any Borrower is a party or by which any
Borrower or its property is bound. This Agreement and the other Financing
Agreements constitute legal, valid and binding obligations of Borrowers
enforceable in accordance with their respective terms. Borrowers do not have any
subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers which have been or may hereafter be delivered
by Borrowers to Lender have been prepared in accordance with GAAP and fairly
present the financial condition and the results of operation of Borrowers as at
the dates and for the periods set forth therein. Except as disclosed in any
interim financial statements furnished by Borrowers to Lender prior to the date
of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of Borrowers, on
a consolidated basis, since the date of the most recent audited financial
statements furnished by Borrowers to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of each Borrower is located at the address set forth below and each
Borrower's Records concerning Accounts and Inventory are located at the address
set forth below and its only other places of business and the only other
locations of Collateral, if any, are the addresses set forth in the Information
Certificate, subject to the right of Borrowers to establish new locations in
accordance with Section 9.2 below. The Information Certificate correctly
identifies as of the date hereof any of such locations which are not owned by
Borrowers and sets forth the owners and/or operators thereof and, to the best
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of each Borrower's knowledge, the holders of any mortgages on such locations.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral, subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each Borrower has
good and marketable title to all of its properties and assets, subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Each Borrower 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 (in the case of returns for sales and/or use taxes and, if the
estimated liability of Borrowers is $250,000 or more, returns for any other
taxes, without requests for extension, except as previously disclosed in writing
to Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Each Borrower has paid or caused
to be paid all taxes due and payable or claimed due and payable in any
assessment received by it, and has collected, deposited and remitted in
accordance with all applicable laws all sales and/or use taxes applicable to the
conduct of its business, except taxes the validity of which are being contested
in good faith by appropriate proceedings diligently pursued and available to
such Borrower 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. Each Borrower has collected and,
when and if required by this Agreement, deposited in a separate bank account,
and, in all events timely remitted when due to the appropriate tax authority all
sales and/or use taxes applicable to its business required to be collected under
the laws of the United States and each possession or territory thereof, and each
State or political subdivision thereof, including any State in which such
Borrower owns any Inventory or owns or leases any other property, and under the
applicable laws of any foreign jurisdiction.
8.6 Litigation. Except as set forth on the Information Certificate, as of
the date hereof, there is no present investigation by any governmental agency
pending, or to the best of any Borrower's knowledge threatened, against or
affecting any Borrower, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of any
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Borrower's knowledge threatened, against any Borrower or its assets or goodwill,
or against or affecting any transactions contemplated by this Agreement, which
has a reasonable likelihood of an adverse determination and which, if adversely
determined against any Borrower, would result in any material adverse change in
the assets, business or prospects of Borrowers, on a consolidated basis or would
impair the ability of any Borrower to perform its Obligations hereunder or under
any of the other Financing Agreements to which it is a party or of Lender to
enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws.
(a) No Borrower is in default in any respect under, or in violation in
any respect of any 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 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 business, including,
without limitation, those set forth in or promulgated pursuant to the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards
Act of 1938, as amended, ERISA, the Code, as amended, and the rules and
regulations thereunder, all federal, state and local statutes, regulations,
rules and orders relating to consumer credit (including, without limitation, as
each has been amended, the Truth-in-Lending Act, the Fair Credit Billing Act,
the Equal Credit Opportunity Act and the Fair Credit Reporting Act, and
regulations, rules and orders promulgated thereunder), all federal, state and
local and foreign statutes, regulations, rules and orders pertaining to sales of
consumer goods (including, without limitation, the Consumer Products Safety Act
of 1972, as amended, and the Federal Trade Commission Act of 1914, as amended,
and all regulations, rules and orders promulgated thereunder).
(b) Each Borrower has obtained all material permits, licenses,
approvals, consents, certificates, orders or authorizations of any governmental
agency required for the lawful conduct of its business. Schedule 8.7 hereto sets
forth all material permits, licenses, approvals, consents, certificates, orders
or authorizations (the "Permits") issued to or held by Borrowers as of the date
hereof by any federal, state, local or foreign governmental agency and any
applications pending by Borrowers with such federal, state, local or foreign
governmental agency. The Permits constitute all permits, licenses, approvals,
consents, certificates, orders or authorizations necessary for each Borrower to
own and operate its business as presently conducted or proposed to be conducted
where the failure to have such Permits would have a material adverse effect on
the business, performance, operations or properties of such Borrower or the
legality, validity or enforceability of this Agreement or the other Financing
Agreements or the ability of such Borrower to
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perform its obligations under this Agreement or any of the other Financing
Agreements or the rights and remedies of Lender under this Agreement or any of
the other Financing Agreements. All of the Permits are valid and subsisting and
in full force and effect. There are no actions, claims or proceedings pending or
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 hereto, no Borrower has
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 any applicable
Environmental Law in any material respect or any license, permit, certificate,
approval or similar authorization issued to a Borrower thereunder and the
operations of Borrowers comply in all material respects with all applicable
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there is no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person pending or to the best
of each Borrower's knowledge threatened, with respect to any non-compliance with
or violation of the requirements of any applicable Environmental Law by such
Borrower nor has there been any release, spill or discharge, overtly threatened
or actual, of any Hazardous Material on any properties of Borrowers, or to the
best of each Borrower's knowledge, releases, spills or discharges from any
properties at which any Borrower has transported, stored or disposed of any
Hazardous Materials, or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental matter which affects any Borrower or its business,
operations or assets in any material respect.
(c) Except as set forth in Schedule 8.8 hereto, no Borrower has
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) Each Borrower has all licenses, permits, certificates, approvals
or similar authorizations required to be obtained or filed in connection with
the operations of such Borrower under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect in each case where the failure
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to obtain or maintain such licenses, permits, certificates, approvals or similar
authorizations would have a material adverse effect on the assets or business of
such Borrower or would impair the ability of such Borrower to perform its
obligations hereunder or under any of the other Financing Agreements to which it
is a party or of Lender to enforce any Obligations or realize upon any
Collateral.
8.9 Credit Card Agreements. Set forth on Schedule 8.9 hereto is a correct
and complete list of (a) all of the Credit Card Agreements and all other
agreements, documents and instruments existing as of the date hereof between or
among each Borrower, any of its affiliates, the Credit Card Issuers, the Credit
Card Processors and any of their affiliates, (b) the percentage of each sale
payable to the Credit Card Issuer or Credit Card Processor under the terms of
the Credit Card Agreements, (c) all other fees and charges payable by Borrowers
under or in connection with the Credit Card Agreements and (d) the term of such
Credit Card Agreements. The Credit Card Agreements constitute all of such
agreements necessary for each Borrower to operate its business as presently
conducted with respect to credit cards and debit cards and no Accounts of
Borrowers arise from purchases by customers of Inventory with credit cards or
debit cards, other than those which are issued by Credit Card Issuers with whom
Borrowers shall have entered into one of the Credit Card Agreements set forth on
Schedule 8.9 hereto or with whom Borrowers shall have entered into a Credit Card
Agreement in accordance with Section 9.13 hereof. Each of the Credit Card
Agreements constitutes the legal, valid and binding obligation of each Borrower
party thereto and, to the best of each Borrower's knowledge, the other parties
thereto, is enforceable in accordance with its respective terms and is in full
force and effect. No default or event of default, or act, condition or event
which after notice or passage of time or both, would constitute a default or an
event of default under any of the Credit Card Agreements exists or has occurred.
Borrowers and the other parties thereto have complied with all of the terms and
conditions of the Credit Card Agreements to the extent necessary for Borrowers
to be entitled to receive all payments thereunder. Borrowers have delivered, or
caused to be delivered to Lender, true, correct and complete copies of all of
the Credit Card Agreements.
8.10 Employee Benefits.
(a) No Borrower has engaged in any transaction in connection with
which any Borrower or any of its ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to ERISA or a tax imposed the Code, including
any accumulated funding deficiency described in Section 8.10(c) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.10(d)
hereof.
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(b) No liability to the Pension Benefit Guaranty Corporation has been
or is expected by any Borrower to be incurred with respect to any employee
benefit plan of any Borrower or any of its ERISA Affiliates. There has been no
reportable event (within the meaning of ERISA) or any other event or condition
with respect to any employee benefit plan of any Borrower or any of its ERISA
Affiliates which presents a risk of termination of any such plan by the Pension
Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which each Borrower or
any of its ERISA Affiliates is required under ERISA and the Code to have paid
under the terms of each employee benefit plan as contributions to such plan as
of the last day of the most recent fiscal year of such plan ended prior to the
date hereof, and no accumulated funding deficiency (as defined in ERISA and the
Code), whether or not waived, exists with respect to any employee pension
benefit plan, including any penalty or tax described in Section 8.10(a) hereof
and any deficiency with respect to vested accrued benefits described in Section
8.10(d) hereof.
(d) Except as set forth on Schedule 8.10 hereto, the current value of
all vested accrued benefits under all employee benefit plans maintained by each
Borrower that are subject to Title IV of ERISA does not exceed the current value
of the assets of such plans allocable to such vested accrued benefits, including
any penalty or tax described in Section 8.10(a) hereof and any accumulated
funding deficiency described in Section 8.10(c) hereof. The terms "current
value" and "accrued benefit" have the meanings specified in ERISA.
(e) Except as disclosed on Schedule 8.10 hereto, no Borrower or any
ERISA Affiliate of a Borrower is or has ever been obligated to contribute to any
"multiemployer plan" (as such term is defined in ERISA) that is subject to Title
IV of ERISA, and, except as disclosed on Schedule 8.10 hereto, no Borrower has
any existing or future liability under any such multiemployer plan.
8.11 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrowers maintained at any bank or
other financial institution are set forth on Schedule 6.3 hereto, subject to the
right of Borrowers to establish new accounts in accordance with Section 9.15
below.
8.12 Interrelated Businesses. Borrowers and Guarantors make up an
interrelated organization of various entities constituting a single economic and
business enterprise in which each of Borrowers and Guarantors shares an identity
of interests such that any benefit received by any one of the Borrowers and
Guarantors benefits the other Borrowers and Guarantors. Each of
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Borrowers and Guarantors purchases or sells and supplies goods and renders or
receives services to or from, or for the benefit of, the other such Persons and
provides or receives other financial accommodations to or for the benefit of the
other such Persons and administrative, marketing, payroll and management
services to or from or for the benefit of, the other Borrowers and Guarantors.
Borrowers and Guarantors have (i) substantially consolidated accounting,
administrative, financial, computer, credit, legal and other services, and (ii)
substantially common officers and directors and are identified to creditors as a
common entity.
8.13 Accuracy and Completeness of Information. All information furnished by
or on behalf of any Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, 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 on the business, assets or prospects of any
Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.14 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 Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed to have been
relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
any Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on its business as presently or proposed to be
conducted. Each Borrower shall give Lender thirty (30) days prior written notice
of any proposed change in its corporate name, which notice shall set forth the
new name and such Borrower shall deliver to Lender a copy of the amendment to
the Certificate of Incorporation of such Borrower
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providing for the name change certified by the Secretary of State of the
jurisdiction of incorporation of such Borrower as soon as it is available.
9.2 New Collateral Locations. Subject to Section 9.16 hereof with respect
to certain Capital Expenditures, any Borrower may open any new location within
the continental United States provided such Borrower (a) gives Lender thirty
(30) days prior written notice of the intended opening of any such new location,
other than temporary sites for closeout liquidation events established on
reasonable advance notice to Lender and (b) executes and delivers, or causes to
be executed and delivered, to Lender such agreements, documents, and instruments
as Lender may deem reasonably necessary or desirable to protect its interests in
the Collateral at such location, including UCC financing statements, Landlord
Agreements, Mortgagee Agreements and Warehouseman's Agreements, as applicable.
9.3 Compliance with Laws, Regulations, Etc. Each Borrower shall at all
times comply in all material respects with all applicable provisions of laws,
rules, regulations, licenses, permits, approvals and orders applicable to it and
duly observe all requirements, of any foreign, Federal, State or local
governmental authority, including, without limitation, the Occupational Safety
and Health Act of 1970, as amended, the Code, the Fair Labor Standards Act of
1938, as amended, and the rules and regulations thereunder, all Federal, State
and local statutes, regulations, rules and orders relating to consumer credit
(including, without limitation, as each has been amended, the Truth-in-Lending
Act, the Fair Credit Billing Act, the Equal Credit Opportunity Act and the Fair
Credit Reporting Act, and regulations, rules and orders promulgated thereunder),
all Federal, State and local statutes, regulations, rules and orders pertaining
to sales of consumer goods (including, without limitation, the Consumer Products
Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914, as
amended, and all regulations, rules and orders promulgated thereunder) and all
statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all Environmental Laws.
9.4 Payment of Taxes and Claims. Each Borrower shall 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 and with respect to which adequate reserves have been
set aside on its books. Each Borrower shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for herein
and Borrowers agree to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand
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the amount thereof, and until paid by Borrowers such amount shall be added and
deemed part of the Loans, provided, that, nothing contained herein shall be
construed to require any Borrower to pay any income or franchise taxes
attributable to the income of Lender from any amounts charged or paid hereunder
to Lender. The foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
9.5 Insurance. Each Borrower shall, 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. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Each Borrower shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if any Borrower fails to
do so, Lender 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 Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrowers 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 shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by any Borrower or any of its affiliates.
At its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations.
9.6 Financial Statements and Other Information.
(a) Each Borrower shall 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 and its
subsidiaries (if any) in accordance with GAAP, and Borrowers shall furnish or
cause to be furnished to Lender: (i) within thirty (30) days after the end of
each fiscal month, monthly unaudited consolidated financial statements
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of
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shareholders' equity), and an unaudited consolidating statement of operations by
business unit, all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrowers and their subsidiaries
as of the end of and through such fiscal month and (ii) within ninety (90) days
after the end of each fiscal year, audited consolidated financial statements
(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 Borrowers and their
subsidiaries as of the end of and for such fiscal year, together with the
unqualified opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Borrowers and
reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrowers and their subsidiaries as of the end of and
for the fiscal year then ended.
(b) Borrowers shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations, in each case having a value of $250,000 or more, or which would
result in any material adverse change in any Borrower's business, properties,
assets, goodwill or condition, financial or otherwise and (ii) the occurrence of
any Event of Default or act, condition or event which, with the passage of time
or giving of notice or both, would constitute an Event of Default.
(c) Borrowers shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrowers
send to their stockholders generally and copies of all reports and registration
statements which Borrowers file with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(d) Borrowers shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrowers, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrowers to any
court or other government agency or to any participant or assignee or
prospective participant or assignee. Each Borrower hereby irrevocably authorizes
and directs all accountants or auditors to deliver to Lender, at Borrowers'
expense, copies of the financial statements of Borrowers and any reports or
management letters prepared by such accountants or auditors on behalf of
Borrowers and to disclose to Lender such
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information as they may have regarding the business of any Borrower. Any
documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrowers to Lender in
writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. No Borrower
shall, 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, or
(b) sell, assign, lease, transfer, abandon or otherwise dispose of any
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 or
consignments of Inventory permitted hereunder,
(ii) the disposition of worn-out or obsolete Equipment, so long
as (A) if an Event of Default exists or has occurred and is continuing, any
proceeds are paid to Lender and (B) such sales do not involve Equipment having
an aggregate fair market value in excess of $500,000 for all such Equipment
disposed of in any fiscal year of Borrowers, but excluding for purposes of such
$500,000 limitation, the value of any Equipment that was previously used in
LFI's manufacturing facility in Baltimore, Maryland and is disposed of in any
such fiscal year,
(iii) sales or other dispositions by a Borrower of assets in
connection with the closing or sale of a retail store location of such Borrower
in the ordinary course of Borrowers' business which consist of leasehold
interests in the premises of such store, the Equipment and fixtures located at
such premises and the books and records relating exclusively and directly to the
operations of such store; provided, that, as to each and all such sales, (A) on
the date of, and after giving effect to, any such sale, Borrowers shall not have
closed or sold retail store locations accounting for more than twenty-five (25%)
of all retail store sales of Borrowers in the immediately preceding twelve (12)
month period, (B) Lender shall have received not less than ten (10) Business
Days prior written notice of such sale, which notice shall set forth in
reasonable detail satisfactory to Lender, the parties to such sale or other
disposition, the assets to be sold or otherwise disposed of, the purchase price
and the manner of payment thereof and such other information with respect
thereto as Lender may request, (C) as of the date of such sale or other
disposition and after giving effect thereto, no Event of Default, or act,
condition or event which with notice or passage of time would constitute an
Event of Default, shall exist or have occurred and be continuing, (D) such sale
shall be on
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commercially reasonable prices and terms in a bona fide arm's length
transaction, and (E) any and all net proceeds payable or delivered to a Borrower
in respect of such sale or other disposition shall be paid or delivered, or
caused to be paid or delivered, to Lender in accordance with the terms of this
Agreement either, at Lender's option, for application to the Obligations in
accordance with the terms hereof (except to the extent such proceeds reflect
payment in respect of indebtedness secured by a properly perfected first
priority security interest in the assets sold, in which case, such proceeds
shall be applied to such indebtedness secured thereby) or to be held by Lender
as cash collateral for the Obligations on terms and conditions acceptable to
Lender; or
(c) form or acquire any subsidiaries, or
(d) wind up, liquidate or dissolve (except for dissolution of any
inactive Guarantors upon not less than twenty (20) days prior written notice to
Lender), or
(e) agree to do any of the foregoing.
9.8 Encumbrances. No Borrower shall 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, without
limitation, the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrowers and with respect to which adequate reserves
have been set aside on their books; (c) non-consensual statutory liens (other
than liens securing the payment of taxes) arising in the ordinary course of
Borrowers' 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 Borrowers, 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 their 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 Borrowers 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 estate not to exceed $5,000,000 in the aggregate at any time outstanding
so long as such security interests and mortgages do not apply to any property of
Borrowers
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other than the Equipment or real estate so acquired, and the indebtedness
secured thereby does not exceed the cost of the Equipment or real estate so
acquired, as the case may be; (f) subordinate liens and security interests of
the Subordinated Lenders securing indebtedness and subject to the intercreditor
and subordination agreement in favor of Lender referred to in Section 9.9(d)
hereof; (g) liens and security interests with respect to the Real Property of
LFI located in Eldersburg, Maryland securing indebtedness permitted under
Section 9.9(e) or (f) hereof; (h) liens or rights of setoff on or against credit
balances of Borrowers with Credit Card Issuers (but not liens on or rights of
setoff against any other property or assets of Borrowers) pursuant to the Credit
Card Agreements to secure the obligations of Borrowers to the Credit Card
Issuers as a result of fees and chargebacks; (i) deposits of cash with the owner
or lessor of premises leased and operated by a Borrower in the ordinary course
of the business of Borrowers' to secure the performance by such Borrower of its
obligations under the terms of the lease for such premises; and (j) the liens
and security interests set forth on Schedule 8.4 hereto.
9.9 Indebtedness. No Borrower shall incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any indebtedness,
except:
(a) the Obligations;
(b) short-term intercompany loans by one Borrower to another Borrower
in the ordinary course of business;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;
(d) fully subordinated indebtedness of Borrowers to the Subordinated
Lenders pursuant to the financing arrangements and documents, agreements and/or
instruments described on Schedule 9.9 hereto; provided, that, (i) Borrowers may
only make payments in respect of such indebtedness in accordance with the terms
of the Subordinated Loan Documents as in effect on the date hereof, and provided
each such payment is permitted under the intercreditor and subordination
agreement executed by the Subordinated Lenders in favor of Lender with respect
thereto, (ii) Borrowers shall not, directly or indirectly, (A) amend, modify,
alter or change in any way adverse to Lender or any Borrowers or Obligor, the
terms of such indebtedness or any agreement, document or instrument related
thereto as in effect on the date hereof, 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 shall furnish
to Lender all notices or demands in connection with
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such indebtedness either received by Borrowers or on their behalf, promptly
after the receipt thereof, or sent by Borrowers or on their behalf, concurrently
with the sending thereof, as the case may be;
(e) indebtedness of LFI to MetLife pursuant to the financing
arrangements and documents, agreements and/or instruments described on Schedule
9.9 hereto; provided, that, (i) LFI may only make regularly scheduled payments
of principal and interest in respect of such indebtedness in accordance with the
terms of the document, agreement and/or instrument evidencing or giving rise to
such indebtedness as in effect on the date hereof, (ii) LFI shall not, directly
or indirectly, (A) amend, modify, alter or change in any way adverse to Lender
or any Borrower or Obligor, the terms of such indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof, 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) LFI
shall furnish to Lender all notices or demands in connection with such
indebtedness either received by LFI or on its behalf, promptly after the receipt
thereof, or sent by LFI or on its behalf, concurrently with the sending thereof,
as the case may be;
(f) indebtedness that refinances the indebtedness described in Section
9.9(e) on terms not involving an increased principal amount of such indebtedness
as so refinanced, or a shorter maturity, or a larger amortization of principal
required in any period, or an increased interest rate, or any additional
collateral or other provisions adverse to Lender or any Borrower or Obligor, and
provided the holder of any lien on the Real Property described in Section 9.8(g)
that secures such refinancing indebtedness executes and delivers a Mortgagee
Agreement in favor of Lender containing the same provisions for Lender's benefit
as the Mortgagee Agreement delivered by MetLife or such other terms as Lender
shall require or approve;
(g) indebtedness to certain employees of LFI evidenced by notes
required to be delivered by LFI if such employee exercises such employee's put
option in respect of shares of and options to purchase Capital Stock of LFI
subject thereto and LFI is not, for any reason, permitted to or able to pay the
purchase price for the shares and options subject to such exercise, in all
events limited by the terms of the Stockholders' Agreement dated as of June 27,
1990, as amended, as in effect on the date hereof; provided such indebtedness is
fully subordinated in right of payment to the prior indefeasible payment and
satisfaction of all Obligations; and
(h) indebtedness existing as of the date hereof set forth on Schedule
9.9 hereto, provided, that, (i) the applicable Borrower may only make regularly
scheduled payments of principal
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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) such Borrower 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, 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) such Borrower shall furnish to Lender all notices or demands
in connection with such indebtedness either received by such Borrower or on its
behalf, promptly after the receipt thereof, or sent by such Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. None of the Borrowers shall
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 stock or indebtedness or all or a substantial part of
the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person 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: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of any
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; provided, that, as to any of the foregoing, unless waived in writing
by Lender, Borrowers shall take such actions as are deemed necessary by Lender
to perfect the security interest of Lender in such investments; (c) loans and
advances by one Borrower to another Borrower constituting permitted indebtedness
under Section 9.9 hereof; (d) advances to employees of Borrowers for travel and
relocation expenses, in the ordinary course of business, not to exceed $500,000
in the aggregate for all such advances by any and all Borrowers at any one time
outstanding; and (e) the existing loans, advances and guarantees by Borrowers
outstanding as of the date hereof as set forth on Schedule 9.10 hereto;
provided, that, as to such loans, advances and guarantees, (i) Borrowers shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such loans, advances or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire any such guarantee or set aside or otherwise deposit or
invest any sums for such purpose and (ii) Borrowers shall furnish to Lender all
notices, demands or other material in connection with such loans, advances or
guarantees either received by Borrowers or on their behalf, promptly after
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the receipt thereof, or sent by Borrowers or on their behalf, concurrently with
the sending thereof, as the case may be.
9.11 Dividends and Redemptions. No Borrower shall, directly or indirectly,
declare or pay any dividends on account of any shares of class of Capital Stock
of any Borrower 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
other than common stock 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 LFI may, out of legally
available funds therefor, redeem and/or repurchase certain shares and options to
purchase shares of Capital Stock of LFI owned by certain employees of LFI,
pursuant to the exercise of the put options described in Section 9.9(g) hereof
("Management Put Repurchases"), but not to exceed the amount of $250,000 so
expended in any fiscal year of LFI and provided no Event of Default, and no
event or state of facts that would, with notice or passage of time or both,
constitute an Event of Default, exists or has occurred and is continuing, or
would exist or occur after giving effect to such redemption or repurchase or any
payment therefor (other than by delivery of a subordinated note evidencing
indebtedness permitted under Section 9.9(g) hereof). Any amount permitted to be
paid for Management Put Repurchases and not so used in any fiscal year may be
carried over to succeeding fiscal years, but in no event may the amount so paid,
including any amount carried over from prior years, exceed $500,000 in the
aggregate in any fiscal year of Borrowers.
9.12 Transactions with Affiliates. No Borrower shall, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, employee, shareholder, director, agent or
any other affiliate of such Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of Borrowers' business and upon fair and
reasonable terms no less favorable to such Borrower than such Borrower would
obtain in a comparable arm's length transaction with an unaffiliated person or
(b) make any payments of management, consulting or other fees for management or
similar services, or of any indebtedness owing, to any officer, employee,
shareholder, director or other person affiliated with such Borrower except
reasonable compensation to officers, employees and directors for services
rendered to such Borrower in the ordinary course of business.
9.13 Credit Card Agreements. Each Borrower shall (a) observe and perform
all material terms, covenants, conditions and provisions of the Credit Card
Agreements to be observed and performed by it at the times set forth therein;
(b) not do,
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permit, suffer or refrain from doing anything, as a result of which there could
be a default under or breach of any of the terms of any of the Credit Card
Agreements and (c) at all times maintain in full force and effect the Credit
Card Agreements and not terminate, cancel, surrender, modify, amend, waive or
release any of the Credit Card Agreements, or consent to or permit to occur any
of the foregoing; except, that, each Borrower may terminate or cancel any of the
Credit Card Agreements in the ordinary course of the business of Borrowers;
provided, that, such Borrower shall give Lender not less than fifteen (15) days
prior written notice of its intention to so terminate or cancel any of the
Credit Card Agreements; (d) not enter into any new Credit Card Agreements with
any new Credit Card Issuer unless (i) Lender shall have received not less than
thirty (30) days prior written notice of the intention of a Borrower to enter
into such agreement (together with such other information with respect thereto
as Lender may request) and (ii) such Borrower delivers, or causes to be
delivered to Lender, a Credit Card Acknowledgment in favor of Lender; (e) give
Lender immediate written notice of any Credit Card Agreement entered into by
such Borrower after the date hereof, together with a true, correct and complete
copy thereof and such other information with respect thereto as Lender may
request; and (f) furnish to Lender, promptly upon the request of Lender, such
information and evidence as Lender may require from time to time concerning the
observance, performance and compliance by such Borrower or the other party or
parties thereto with the terms, covenants or provisions of the Credit Card
Agreements.
9.14 Compliance with ERISA.
(a) No Borrower shall with respect to any "employee benefit plans"
maintained by a Borrower or any ERISA Affiliate of a Borrower: (i) terminate any
of such employee benefit plans so as to incur any liability to the Pension
Benefit Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer
to exist any prohibited transaction involving any of such employee benefit plans
or any trust created thereunder which would subject a Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under the Code or ERISA, (iii) fail to pay to any such employee benefit
plan any contribution which it is obligated to pay under ERISA, the Code or the
terms of such plan, (iv) allow or suffer to exist any accumulated funding
deficiency, whether or not waived, with respect to any such employee benefit
plan, (v) 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 employee benefit plan that is a
single employer plan, which termination could result in any liability to the
Pension Benefit Guaranty Corporation, or (vi) except as described in Schedule
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8.10 hereto, incur any withdrawal liability with respect to any multiemployer
pension plan.
(b) As used in this Section 9.14, the terms "employee benefit plans",
"accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in the Code and ERISA.
9.15 Additional Bank Accounts. No Borrower shall, directly or indirectly,
open, establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the Blocked
Accounts and the accounts set forth in Schedule 6.3 hereto, except: (a) as to
any new or additional Blocked Accounts and other such new or additional accounts
which contain any Collateral or proceeds thereof, with the prior written consent
of Lender and subject to such conditions thereto as Lender may establish and (b)
as to any accounts used by Borrowers to make payments of payroll, taxes or other
obligations to third parties, after prior written notice to Lender.
9.16 Capital Expenditures. Borrowers and their subsidiaries shall not,
directly or indirectly, make any Capital Expenditures, during any measurement
period listed below, in excess of the amounts listed below for such period, on
an aggregate basis for all Borrowers and their subsidiaries:
Fiscal Year Ending the
Last Saturday in February Amount
1998 $12,000,000
1999 $20,000,000
2000 and, unless otherwise
agreed in writing by the
parties hereto, each year
thereafter $20,000,000
Up to $2,000,000 in the aggregate for Borrowers and their subsidiaries of
amounts permitted to be expended for Capital Expenditures as provided above, if
not expended in the fiscal year for which permitted, may be carried forward for
Capital Expenditures in the next following fiscal year.
9.17 EBITA. Borrowers shall not permit EBITA of Borrowers and their
subsidiaries for any period commencing on the first day of the applicable fiscal
year set forth below and ending on the last day of the applicable fiscal quarter
set forth below (each such period, a year-to-date ("YTD") or full fiscal year,
as
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applicable) to be less than the respective amount set forth below opposite such
fiscal quarter:
================================================================================
Fiscal Year Ending Last
Saturday in February, 1998 Minimum EBITA
--------------------------------------------------------------------------------
First Quarter YTD ($12,000,000)
--------------------------------------------------------------------------------
Second Quarter YTD ($12,000,000)
--------------------------------------------------------------------------------
Third Quarter YTD $ 1,000,000
--------------------------------------------------------------------------------
Full Fiscal Year $ 6,000,000
================================================================================
================================================================================
Fiscal Year Ending Last
Saturday in February, 1999
--------------------------------------------------------------------------------
First Quarter YTD ($12,000,000)
--------------------------------------------------------------------------------
Second Quarter YTD ($12,000,000)
--------------------------------------------------------------------------------
Third Quarter YTD $ 3,000,000
--------------------------------------------------------------------------------
Full Fiscal Year $ 8,000,000
================================================================================
================================================================================
Fiscal Year Ending Last Saturday in February, 2000 and, unless otherwise agreed
in writing by the parties hereto, each year thereafter
--------------------------------------------------------------------------------
First Quarter YTD ($12,000,000)
--------------------------------------------------------------------------------
Second Quarter YTD ($12,000,000)
--------------------------------------------------------------------------------
Third Quarter YTD $ 5,000,000
--------------------------------------------------------------------------------
Full Fiscal Year $10,000,000
================================================================================
9.18 Cleanup and Excess Availability. For at least thirty (30) consecutive
days during the period between December 1 of each calendar year and March 31 of
the immediately following calendar year, Borrowers (i) shall not permit the
aggregate principal amount of all outstanding Loans to be greater than
$10,000,000 and (ii) shall maintain Excess Availability of greater than
$15,000,000.
9.19 Costs and Expenses. Borrowers shall pay to Lender on demand all costs,
expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation,
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enforcement and defense of the Obligations, Lender'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,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) all insurance premiums, appraisal fees and search fees; (c)
costs and expenses of remitting loan proceeds, collecting checks and other items
of payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (d) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, 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 Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (g) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrowers'
operations, plus a per diem charge at the rate of $600 per person per day for
Lender's examiners in the field and office; and (h) the fees and disbursements
of counsel (including legal assistants) to Lender in connection with any of the
foregoing.
9.20 Certain Notices. Borrowers or LFI as agent for Borrowers shall
promptly send to Lender a copy of each default or termination notice sent by or
on behalf of any Borrower to, or to any Borrower by, any operator of a warehouse
where Eligible Inventory is kept, or any lessor of a material number of retail
store locations of Borrowers, or any mortgagee of Real Property of any Borrower,
or any Credit Card Issuer or Credit Card Processor, or any trademark licensor or
licensee of any Borrower, or any customs broker or similar agent for a Borrower,
or any material Equipment lessor, with respect to the existing or any future
arrangements or agreements between any Borrower and any such person(s).
9.21 Further Assurances. At the request of Lender at any time and from time
to time, Borrowers shall, at Borrowers' 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
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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. Lender may at any time and from time to time request
a certificate from an officer of each Borrower and/or LFI as agent for Borrowers
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 Lender, Lender may, at its option, cease to make any further
Loans or provide any further Letter of Credit Accommodations until Lender has
received such certificate and, in addition, Lender has determined that such
conditions are satisfied. Where permitted by law, each Borrower hereby
authorizes Lender to execute and file one or more UCC financing statements
signed only by Lender.
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) any Borrower fails to pay when due any of the Obligations or fails
to perform any of the terms, covenants, conditions or provisions contained in
this Agreement or any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by any
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of $250,000 in any one case or in excess of
$1,000,000 in the aggregate 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 any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
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corporation, dissolves or suspends or discontinues doing business;
(f) any Borrower or any Obligor is generally unable to meet its debts
as they become due during the then-current term or renewal term of this
Agreement, makes an assignment for the benefit of creditors, or makes or sends
notice of a bulk transfer;
(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 any 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 any 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 any Obligor or for all or any part of its
property; or
(i) any default by any Borrower or any Obligor under any of the
Subordinated Loan Documents or any default by any Borrower or any Obligor under
any other agreement, document or instrument relating to any indebtedness for
borrowed money owing to any person other than Lender, or any capitalized lease
obligations, contingent indebtedness in connection with any guarantee, letter of
credit, indemnity or similar type of instrument in favor of any person other
than Lender, where the agreement, document or instrument under which the default
arises or exists, relates to such indebtedness or obligations in an amount in
excess of $1,000,000, which default continues for more than the applicable cure
period, if any, with respect thereto, or any default by any Borrower or any
Obligor under any material contract, lease, license or other obligation to any
person other than Lender, which default continues for more than the applicable
cure period, if any, with respect thereto;
(j) (i) any change in its controlling ownership occurs with respect to
any Borrower other than LFI, or (ii) with respect to LFI, if, other than as a
result of a public offering of the common stock of LFI, any person, or two or
more persons
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acting in concert, acquires ownership or control of shares of Capital Stock of
LFI representing more than fifty (50%) percent of the combined voting power of
all outstanding Capital Stock of LFI, or the power to designate or elect a
majority of the members of the Board of Directors of LFI, excluding, however,
(x) ownership or control of Capital Stock of LFI, or power to designate or elect
a majority of the members of the Board of Directors of LFI, whether or not
acquired after the date hereof by any or all of the existing holders of the
Capital Stock of LFI as of the date hereof, and (y) ownership or control of
Capital Stock of LFI or the power to designate or elect a majority of the
members of the Board of Directors of LFI, to the extent acquired by persons that
are not holders of the Capital Stock of LFI as of the date hereof but are
financial institutions or institutional investors acceptable to Lender;
(k) the indictment or threatened indictment of any Borrower or any
Obligor under any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against any Borrower or any Obligor, pursuant
to which statute or proceedings the penalties or remedies sought or available
include forfeiture of any of the property of such Borrower or such Obligor;
(l) each of the persons holding the offices of chief executive
officer, chief operating officer and chief financial officer of LFI as of the
date hereof, shall cease to act in such capacities, unless each is replaced
within a reasonable period of time with persons of comparable experience and
capability as reasonably determined by Lender;
(m) there shall be a material adverse change after the date hereof in
the business or assets of the Borrowers and Obligors, taken as a whole; or
(n) 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, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or
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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. Lender may, at any time or times, proceed directly against any
Borrower or any Obligor to collect the Obligations without prior recourse to the
Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (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) 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, (iii) require Borrowers, at Borrowers' expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) 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, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including, without limitation,
entering into contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or elsewhere) at such prices
or terms as Lender may deem reasonable, for cash, upon credit or for future
delivery, with the Lender having the right to purchase the whole or any part of
the Collateral at any such public sale, all of the foregoing being free from any
right or equity of redemption of any Borrower, which right or equity of
redemption is hereby expressly waived and released by each Borrower and/or (vii)
terminate this Agreement. If any of the Collateral is sold or leased by Lender
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by Lender. If
notice of disposition of Collateral is required by law, ten (10) days prior
notice by Lender to Borrowers, or to LFI as agent for Borrowers, 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 to Borrowers and each Borrower, and LFI as agent for
Borrowers, waives any other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, each Borrower waives the posting of any bond which might otherwise be
required.
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(c) Lender may apply the cash proceeds of Collateral actually received
by Lender 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 Lender may elect, whether or not then due. Each Borrower shall remain liable
to Lender 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 reasonable attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
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 (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrowers.
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 New York (without giving
effect to principles of conflicts of law).
(b) Each Borrower and Lender irrevocably consents and submits to the
non-exclusive jurisdiction of the Supreme Court of the State of New York and the
United States District Court for the Southern District of New York and waives
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 Lender shall have the
right to bring any action or proceeding against any Borrower or its property in
the courts of any other jurisdiction which Lender deems necessary or appropriate
in order to realize on the
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Collateral or to otherwise enforce its rights against such Borrower or its
property).
(c) Each Borrower 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 on
the signature pages hereof 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 Lender's option, by service upon such Borrower in any other manner provided
under the rules of any such courts. Within thirty (30) days after such service,
such Borrower shall appear in answer to such process, failing which such
Borrower shall be deemed in default and judgment may be entered by Lender
against such Borrower for the amount of the claim and other relief requested.
(d) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) 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. EACH BORROWER AND
LENDER 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
OR 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) Lender shall not have any liability to any Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by any Borrower 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 binding on Lender, that the losses were the result of
acts or omissions of Lender constituting gross negligence or willful misconduct.
In any such litigation, Lender 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 and the
other Financing Agreements.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and
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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 on LFI as agent for Borrowers, which
Lender may elect to give shall entitle such Borrower or any other Borrower or
LFI as agent for Borrowers to any other or further notice or demand in the same,
similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of each
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by 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 Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
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. Borrowers shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or 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, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel, except for any of such losses, claims, damages,
liabilities, costs and expenses resulting from Lender's own gross negligence or
wilful misconduct as determined by a final, non-appealable judgment of a court
of competent jurisdiction. 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, each Borrower shall pay the maximum portion
which it is permitted to pay under applicable law to Lender in satisfaction of
indemnified
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matters under this Section. The foregoing indemnity shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 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 April 30, 2000 (the "Renewal
Date"), and from year to year thereafter, unless sooner terminated pursuant to
the terms hereof. Lender or Borrowers may terminate this Agreement and the other
Financing Agreements effective on the Renewal Date or on the anniversary of the
Renewal Date in any year by giving to the other parties at least sixty (60) days
prior written notice; provided, that, this Agreement and all other Financing
Agreements must be terminated simultaneously. Upon the effective date of
termination or non-renewal of the Financing Agreements, Borrowers shall pay to
Lender, in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender from loss, cost, damage or expense, including
reasonable attorneys' fees and legal 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 Lender has not yet received final and indefeasible payment. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrowers for such purpose. Interest
shall be due until and including the next business day, if the amounts so paid
by Borrowers to the bank account designated by Lender are received in such bank
account later than 12:00 noon, New York time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge any Borrower 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 Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender 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.
(c) If for any reason this Agreement is terminated prior to the end of
the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty
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of ascertaining actual damages and by mutual agreement of the parties as to a
reasonable calculation of Lender's lost profits as a result thereof, Borrowers
agree to pay to Lender, upon the effective date of such termination, an early
termination fee in the amount set forth below if such termination is effective
in the period indicated:
Amount Period
(i) Two (2%) percent of $150,000,000 From the date hereof to
and including April 30,
1998.
(ii) One (1%) percent of $150,000,000 From May 1, 1998 to
and including April 30,
1999.
(iii) One (1%) percent of the daily From May 1, 1999 to
average of outstanding Loans and but not including
and Letter of Credit April 30, 2000.
Accommodations for the
twelve (12) months immediately
preceding the effective date of
termination.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and each Borrower
agrees that it is reasonable under the circumstances currently existing. In
addition, Lender shall be entitled to such early termination fee upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h)
hereof, even if Lender does not exercise its right to terminate this Agreement,
but elects, at its option, to provide financing to one or more Borrowers or
permit the use of cash collateral under the United States Bankruptcy Code. The
early termination fee provided for in this Section 12.1 shall be deemed included
in the Obligations. Notwithstanding the foregoing, no early termination fee
shall be payable if all Borrowers request the termination of the Agreement and
repay all of the Obligations with the proceeds of refinancing provided by
CoreStates Bank, N.A. and otherwise comply with the provisions of this Section
12.1.
12.2 Appointment of Borrowers' Agent.
(a) Each Borrower hereby irrevocably appoints LFI as agent for such
Borrower hereunder and under the other Financing Agreements, to act in such
capacity as agent for such Borrower hereunder and LFI hereby accepts such
appointment. Each Borrower further irrevocably authorizes LFI as agent for such
purposes to take such action on such Borrower's behalf and to exercise such
rights and powers hereunder and under the other Financing
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Agreements as are delegated to LFI in such capacity by the terms hereof and
thereof, together with such rights and powers as are reasonably incidental
thereto.
(b) LFI as agent for each Borrower is hereby expressly and irrevocably
authorized by each Borrower, without hereby limiting any implied or express
authority, (i) to give and receive on behalf of such Borrower all notices and
other materials delivered or provided to be delivered by Lender to such Borrower
or by such Borrower to Lender pursuant to the Financing Agreements, (ii) to
request Loans and Letter of Credit Accommodations on behalf of such Borrower,
(iii) to receive disbursements of Loans and other financing accommodations on
behalf of such Borrower, and (iv) to pay, on behalf of such Borrower, all
Obligations of such Borrower at any time due Lender pursuant to the terms of
this Agreement.
12.3 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
at their chief executive offices set forth below, or to such other address as
any party may designate by written notice to the other parties in accordance
with this provision, and (b) 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.
12.4 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.
12.5 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 Lender, Borrowers and their respective
successors and assigns, except that Borrowers may not assign their rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrowers, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein
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to another financial institution or other person, in which event, the assignee
or participant shall have, to the extent of such assignment or participation,
the same rights and benefits as it would have if it were the Lender hereunder,
except as otherwise provided by the terms of such assignment or participation;
provided, however, that, unless an Event of Default exists or has occurred and
is continuing, and except at any time in favor of its affiliates or any entity
that acquires or succeeds to all or substantially all of its business, Lender
will not, without obtaining Borrowers' written consent (not to be unreasonably
withheld or delayed), grant any participation or assign any of its interests in
the Loans or Letter of Credit Accommodations under terms permitting any or all
such non-affiliated participants or non-affiliated assignees to determine or
restrict the right of Congress Financial Corporation or its existing or future
affiliates or any entity that acquires or succeeds to all or substantially all
of its business to determine, whether in its capacity as Lender, agent for the
then-Lender or Lenders or otherwise, the amounts of Eligible Accounts, Eligible
Inventory or Availability Reserves as provided herein, except that the foregoing
agreement by Lender contained in this proviso shall not apply to any
participation or assignment granted or made by Lender after the occurrence of an
Event of Default.
12.6 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.
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IN WITNESS WHEREOF, Lender and Borrowers have caused these presents to be
duly executed as of the day and year first above written.
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LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION LONDON FOG INDUSTRIES, INC.
By:___________________________ By:___________________________
Title:________________________ Title:________________________
Address: Chief Executive Office:
1133 Avenue of the Americas ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
PACIFIC TRAIL, INC.
By:___________________________
Title:________________________
Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
THE SCRANTON OUTLET
CORPORATION
By:___________________________
Title:________________________
Chief Executive Office:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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