EXHIBIT 10.02
LOAN AND SECURITY AGREEMENT
BANKBOSTON RETAIL FINANCE INC.
Administrative Agent
Collateral Agent
BACK BAY CAPITAL FUNDING LLC
Term Lender
JBI APPAREL, INC.
The Borrower
May 21, 1999
TABLE OF CONTENTS
Article 1 - Definitions:
Article 2 - The Revolving Credit:
2-1. Establishment of Revolving Credit .. 19 ..
2-2. Advances in Excess of Borrowing Base. .. 20 ..
2-3. Initial Reserves. Changes to Reserves. .. 21 ..
2-4. Risks of Value of Collateral .. 21 ..
2-5. Loan Requests .. 22 ..
2-6. Making of Loans Under Revolving Credit .. 23 ..
2-7. The Loan Account .. 24 ..
2-8. The Revolving Credit Notes .. 25 ..
2-9. Payment of The Loan Account .. 25 ..
2-10. Interest. .. 25 ..
2-11. Commitment Fee .. 25 ..
2-12. Administrative Agent's Fee .. 26 ..
2-13. Line (Unused) Fee. .. 26 ..
2-14 Concerning Fees. .. 26 ..
2-15. Agent's and Lenders' Discretion .. 26 ..
2-16. Procedures For Issuance of L/C's .. 27 ..
2-17. Fees For L/C's .. 28 ..
2-18. Concerning L/C's .. 28 ..
2-19. Lenders' Commitments .. 31 ..
Article 3 - The Term Loan:
3-1. Commitment To Make Term Loan .. 32 ..
3-2. The Term Note .. 32 ..
3-3. Payment of Principal of the Term Loan. .. 32 ..
3-4. Interest. .. 33 ..
3-5. Term Loan Commitment Fee .. 33 ..
3-6. Term Loan Monitoring Fee .. 33 ..
3-7. Payments .. 33 ..
Article 4 - Conditions Precedent:
4-1. Corporate Due Diligence. .. 34 ..
4-2. Receipt of Proceeds of Permitted SubDebt .. 34 ..
4-3. Acquisition of ▇▇▇▇ Division. .. 34 ..
4-4. Opinion. .. 35 ..
4-5. Additional Documents. .. 35 ..
4-6. Officers' Certificates. .. 35 ..
4-7. Representations and Warranties. .. 35 ..
4-8. Minimum Excess Availability. .. 35 ..
4-9. All Fees and Expenses Paid. .. 35 ..
4-10. No Suspension Event. .. 36 ..
4-11. No Adverse Change. .. 36 ..
Article 5 - General Representations, Covenants and Warranties:
5-1. Payment and Performance of Liabilities. .. 36 ..
5-2. Due Organization - Corporate Authorization - No Conflicts. .. 36 ..
5-3. Trade Names. .. 37 ..
5-4. Infrastructure. .. 38 ..
5-5. Year 2000 Compliance. .. 38 ..
5-6. Locations. .. 38 ..
5-7. Title to Assets. .. 40 ..
5-8. Indebtedness .. 40 ..
5-9. Insurance Policies. .. 41 ..
5-10. Licenses .. 42 ..
5-11. Leases. .. 42 ..
5-12. Requirements of Law .. 42 ..
5-13. Maintain Properties .. 42 ..
5-14. Pay Taxes. .. 43 ..
5-15. No Margin Stock. .. 43 ..
5-16. ERISA .. 43 ..
5-17. Hazardous Materials .. 43 ..
5-18. Litigation .. 44 ..
5-19. Dividends or Investments .. 44 ..
5-20. Loans .. 44 ..
5-21. Protection of Assets .. 45 ..
5-22. Line of Business .. 45 ..
5-23. Affiliate Transactions .. 45 ..
5-24. Additional Assurances .. 45 ..
5-25. Adequacy of Disclosure .. 46 ..
5-26. No Restrictions on Liabilities .. 47 ..
5-27. Other Covenants .. 47 ..
Article 6 - Financial Reporting and Performance Covenants:
6-1. Maintain Records .. 47 ..
6-2. Access to Records .. 48 ..
6-3. Immediate Notice to Administrative Agent .. 48 ..
6-4. Borrowing Base Certificate .. 49 ..
6-5. Weekly Reports .. 49 ..
6-7. Quarterly Reports .. 51 ..
6-8. Annual Reports .. 51 ..
6-9. Officers' Certificates .. 51 ..
6-10. Inventories, Appraisals, and Audits .. 52 ..
6-11. Additional Financial Information .. 53 ..
6-12. Financial Performance Covenants .. 53 ..
Article 7 - Use and Collection of Collateral:
7-1. Use of Inventory Collateral .. 54 ..
7-2. Inventory Quality .. 54 ..
7-3. Adjustments and Allowances .. 54 ..
7-4. Validity of Accounts .. 54 ..
7-5. Notification to Account Debtors .. 55 ..
Article 8 - Cash Management. Payment of Liabilities:
8-1 Depository Accounts .. 55 ..
8-2. Credit Card Receipts .. 56 ..
8-3. The Concentration, Blocked, and Operating Accounts .. 56 ..
8-4. Proceeds and Collection of Accounts .. 57 ..
8-5. Payment of Liabilities .. 57 ..
8-6. The Operating Account .. 58 ..
Article 9 - Grant of Security Interest:
9-1. Grant of Security Interest .. 59 ..
9-2. Extent and Duration of Security Interest .. 60 ..
Article 10 - Collateral Agent As Borrower's Attorney-In-Fact:
10-1. Appointment as Attorney-In-Fact .. 60 ..
10-2. No Obligation to Act .. 61 ..
Article 11 - Events of Default:
11-1. Failure to Pay Revolving Credit or Term Loan .. 61 ..
11-2. Failure To Make Other Payments .. 61 ..
11-3. Failure to Perform Covenant or Liability (No Grace Period) .. 61 ..
11-4. Failure to Perform Covenant or Liability (Grace Period) .. 62 ..
11-5. Misrepresentation .. 62 ..
11-6. Acceleration of Other Debt. .. 62 ..
11-7. Related Party Defaults .. 62 ..
11-8. Default Under Other Agreements .. 62 ..
11-9. Uninsured Casualty Loss .. 63 ..
11-10. Judgment. Restraint of Business .. 63 ..
11-11. Business Failure .. 63 ..
11-12. Bankruptcy .. 63 ..
11-13. Default by Guarantor or Related Entity .. 64 ..
11-14. Indictment - Forfeiture .. 64 ..
11-15. Termination of Guaranty .. 64 ..
11-16. Challenge to Loan Documents .. 64 ..
11-17. Change in Control. .. 64 ..
Article 12 - Rights and Remedies Upon Default:
12-1. Rights of Enforcement .. 65 ..
12-2. Sale of Collateral .. 65 ..
12-3. Occupation of Business Location .. 66 ..
12-4. Grant of Nonexclusive License. .. 66 ..
12-5. Assembly of Collateral .. 67 ..
12-6. Rights and Remedies .. 67 ..
Article 13 - Notices:
13-1. Notice Addresses .. 67 ..
13-2. Notice Given .. 68 ..
Article 14 - Term:
14-1. Termination of Revolving Credit .. 69 ..
14-2. Effect of Termination .. 69 ..
Article 15 - General:
15-1. Protection of Collateral .. 69 ..
15-2. Successors and Assigns. .. 70 ..
15-3. Severability .. 70 ..
15-4. Amendments. Course of Dealing .. 70 ..
15-5. Power of Attorney .. 71 ..
15-6. Application of Proceeds .. 71 ..
15-7. Increased Costs .. 71 ..
15-8. Costs and Expenses of Agents and Of Lenders .. 72 ..
15-9. Copies and Facsimiles .. 72 ..
15-10. Massachusetts Law .. 72 ..
15-11. Consent to Jurisdiction .. 73 ..
15-12. Indemnification .. 73 ..
15-13. Rules of Construction. .. 74 ..
15-14. Intent .. 75 ..
15-15. .. 75 ..
15-16. Right of Set-Off .. 76 ..
15-17. Maximum Interest Rate. .. 76 ..
15-18. Waivers. .. 76 ..
EXHIBITS
2-8 Revolving Credit Note
3-2 Term Note
5-2 Related Entities
5-3 Trade Names
5-5 Year 2000 Compliance
5-6 Locations, Leases, and Landlords
5-7 Encumbrances
5-8 Indebtedness
5-9 Insurance Policies
5-11 Capital Leases
5-18 Litigation
6-4 Borrowing Base Certificate
6-12(a) Financial Performance Covenants
6-12(b) Business Plan
8-1 DDA's.
8-2 Credit Card Arrangements
LOAN AND SECURITY AGREEMENT BankBoston Retail Finance Inc.
Agent
May 21 1999
THIS AGREEMENT is made between
BankBoston Retail Finance Inc. (in such capacity, the
"Administrative Agent"), a Delaware corporation with offices at ▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as agent for the ratable
benefit of the "Working Capital Lenders", who are, at present, those
financial institutions identified on the signature pages of this
Agreement and who in the future are those Persons (if any) who become
"Working Capital Lenders" in accordance with the provisions of Section
2-19, below,
and
BankBoston Retail Finance Inc. (in such capacity, the
"Collateral Agent"), as agent for the ratable benefit of the
Administrative Agent and the Term Lender;
and
Back Bay Capital Funding LLC (in such capacity, the "Term
Lender"), a limited liability company with offices at ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
and
JBI Apparel, Inc. (hereinafter, the "Borrower"), a
Massachusetts corporation with its principal executive offices at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
I. Article 1-Definitions:
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"Accounts" and "Accounts Receivable" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts, accounts
receivable, credit card receivables, notes, drafts, acceptances, and
other forms of obligations and receivables and rights to payment for
credit extended and for goods sold or leased, or services rendered,
whether or not yet earned by performance; all "contract rights" as
formerly defined in the UCC; all Inventory which gave rise thereto,
and all rights associated with such Inventory, including the right of
stoppage in transit; all reclaimed, returned, rejected or repossessed
Inventory (if any) the sale of which gave rise to any Account.
"ACH": Automated clearing house.
"Account Debtor": Has the meaning given that term in the UCC.
"Administrative Agent": Is defined in the Preamble.
"Administrative Agent's Fee": As defined in the Fee Letter.
"Affiliate" With respect to any two Persons, a relationship in which (a)
one holds, directly or indirectly, not less than Twenty Five Percent
(25%) of the capital stock, beneficial interests, partnership
interests, or other equity interests of the other; or (b) one has,
directly or indirectly, the right, under ordinary circumstances, to
vote for the election of a majority of the directors (or other body or
Person who has those powers customarily vested in a board of directors
of a corporation); or (c) not less than Twenty Five Percent (25%) of
their respective ownership is directly or indirectly held by the same
third Person.
"Agent": Collectively and each individually, the Administrative Agent
and the Collateral Agent.
"Agent's Rights and Remedies": Is defined in Section .12-6
"Availability": Is defined in Section .2-1(b)(i)
"Availability Block": Is defined in Section 2-1(e).
"Availability Reserves": Such reserves as the Administrative Agent from
time to time determines in the Administrative Agent's reasonable
discretion as being appropriate to reflect the impediments to the
Administrative Agent's ability to realize upon the Collateral. Without
limiting the generality of the foregoing, Availability Reserves may
include (but are not limited to) reserves based on the following:
(i) Rent (based upon past due rent and/or
whether or not Landlord's Waiver, acceptable
to the Collateral Agent , has been received
by the Agent ).
(ii) In store customer credits.
(iii) Gift Certificates.
(iv) Frequent Shopper Programs.
(v) Layaways and Customer Deposits
(vi) Taxes and other governmental charges,
including, ad valorem, personal property,
and other taxes which might have priority
over the security interests of the
Collateral Agent in the Collateral.
(viii) L/C Landing Costs.
(ix) Year 2000 compliance.
At the execution of this Agreement, the only
Availability Reserves are those described in Section 2-3.
"Bankruptcy Code": Title 11, U.S.C., as amended from time to time.
"Base": The Base Rate announced from time to time by BankBoston, N.A. (or
any successor in interest to BankBoston, N.A.). In the event that said
bank (or any such successor) ceases to announce such a rate, "Base"
shall refer to that rate or index announced or published from time to
time as the Administrative Agent, in good faith, designates as the
functional equivalent to said Base Rate. Any change in "Base" shall be
effective, for purposes of the calculation of interest due hereunder,
when such change is made effective generally by the bank on whose rate
or index "Base" is being set. In all events, interest which is
determined by reference to Base (or any successor to Base) shall be
calculated on a 360 day year and actual days elapsed.
"BaseLine Amount": An amount equal to the following:
(a) The following percentage of the appraised value of
Eligible Inventory:
Until and including August 28, 1999: 95%
Commencing August 29, 1999: 90%
Minus
(b) The aggregate of the unpaid principal balance of the Term
Loan plus accrued and unpaid PIK Interest
"Blocked Account": Is defined in Section 8-3
"Borrower": Is defined in the Preamble.
"Borrowing Base": Is defined in Section 2-1(b)(i)
"BusinessDay": Any day other than (a) a Saturday or Sunday; (b) any day on
which banks in Boston, Massachusetts generally are not open to the
general public for the purpose of conducting commercial banking
business; or (c) a day on which the Administrative Agent is not open
to the general public to conduct business.
"Business Plan": The Borrower's business plan annexed hereto as EXHIBIT
6-12(b) and any revision, amendment, or update of such business plan
to which the Administrative Agent has provided its written sign-off.
"Capital Expenditures": The expenditure of funds or the incurence of
liabilities which may be capitalized in accordance with GAAP.
"Capital Lease": Any lease which may be capitalized in accordance with
GAAP.
"Casual Male": The Casual Male, Inc., a Massachusetts corporation.
"Casual Male Credit Facility": The credit facility established on or about
May 30, 1997 among The Casual Male and others, on the one hand and
Fleet National Bank as Administrative Agent and others, on the other,
as such credit facility may be amended from time to time hereafter.
"Change in Control": (a) The failure of JBI to own, beneficially and of
record, 100% of the capital stock of the Borrower having the right,
under ordinary circumstances, to vote for the election of directors of
the Borrower.
(b) The occurrence of any event or
circumstance such that JBI does not have the power to elect a
majority of the directors of the Borrower.
"Chattel Paper": Has the meaning given that term in the UCC.
"Collateral": Is defined in Section 9-1.
"Collateral Agent": Is defined in the Preamble
"Commitment Fee": As defined in the Fee Letter
"Commitment": Subject to 2-19, as follows:
DOLLAR COMMITMENT
LENDER COMMITMENT PERCENTAGE
------ ---------- ----------
BankBoston Retail Finance Inc. $20,000,000.00 100%
"Concentration Account": Is defined in Section 8-3.
"Cost": The product of (a) one minus that percentage which is derived from
the cumulative purchase markup multiplied by (b) the retail value of
Inventory, as reflected on the Borrower's stock ledger.
("Cost" does not include inventory capitalization
costs or other non-purchase price charges (such as freight
out) used in the Borrower's calculation of cost of goods
sold).
"Costs of Collection": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by any
Administrative Agent's attorneys or any Lender's and all reasonable
costs incurred by any Agent or any Lender in the administration of the
Liabilities and/or the Loan Documents, including, without limitation,
reasonable costs and expenses associated with travel on behalf of any
Agent or any Lender, which costs and expenses are directly or
indirectly related to or in respect of any Administrative Agent's and
any Lender's: administration and management of the Liabilities;
negotiation, documentation, and amendment of any Loan Document; or
efforts to preserve, protect, collect, or enforce the Collateral, the
Liabilities, and/or the Administrative Agent's Rights and Remedies
and/or any of the rights and remedies of any Agent against or in
respect of any guarantor or other person liable in respect of the
Liabilities (whether or not suit is instituted in connection with such
efforts). The Costs of Collection are Liabilities, and at the
Administrative Agent's option may bear interest at the highest
post-default rate which the Administrative Agent may charge the
Borrower hereunder as if such had been lent, advanced, and credited by
the Administrative Agent to, or for the benefit of, the Borrower.
"Credit Card Advance Rate": 75%.
"Customer Credit Liability": Gift certificates, merchandise credits, and
similar liabilities of the Borrower to its retail customers and
prospective customers.
"Current Pay Interest": Is defined in Section 3-4(a)(i).
"DDA": Any checking or other demand daily depository account maintained by
the Borrower.
"Deposit Account": Has the meaning given that term in the UCC.
"Documents": Has the meaning given that term in the UCC.
"Documents of Title": Has the meaning given that term in the UCC.
"Dollar Commitment": As provided in the Definition of "Commitment", above.
"EBITDA": The Borrower's earnings before interest, taxes, depreciation, and
amortization, each as determined in accordance with GAAP.
"Eligible Credit Card Receivables": Those amounts which from time to time
are due and owing to the Borrowers by its credit card processors as
the Agent, in the Agent's discretion, determines to be acceptable for
borrowing purposes.
"Eligible Inventory": Such of the Borrower's Inventory, at such locations,
and of such types, character, qualities and quantities, as the
Administrative Agent, in its sole discretion from time to time
determines to be acceptable for borrowing, as to which Inventory, the
Collateral Agent has a perfected security interest which is prior and
superior to all security interests, claims, and encumbrances. Without
limiting the foregoing, "Eligible Inventory" shall not include (i) any
non-merchandise inventory (such as labels, bags, and packaging
materials); (ii) damaged goods, return to vendor merchandise,
packaways, consigned inventory, and other similar categories which
will be determined following completion of due diligence.
"Eligible In-Transit Inventory": Such of the Borrower's Inventory (without
duplication as to Eligible Inventory or Eligible L/C Inventory) which
the Administrative Agent determines, in the exercise of the
Administrative Agent's reasonable discretion to be acceptable for
borrowing, which Inventory is then in transit (other than between any
of the Borrower's locations), as to which Inventory, the Collateral
Agent either (a) has a perfected security interest which is prior and
superior to all security interests, claims, and Encumbrances or (b) is
otherwise reasonably satisfied that the interests of the Collateral
Agent therein are sufficiently protected (such as by being named in a
letter from the Borrowers to the Administrative Agent as consignee on,
or having possession or control of the documents of title applicable
to, such Inventory or such inventory's being en route to a customs
broker which is party to an agreement with the Collateral Agent which
is reasonably satisfactory to the Administrative Agent ) so as to
include such Inventory in the calculation of "Availability".
"Eligible L/C Inventory": Such of the Borrower's Inventory (without
duplication as to Eligible Inventory or Eligible In Transit
Inventory), the purchase of which is supported by a documentary L/C
then having an initial expiry of seventy five or less days, provided
that
(a) Such Inventory is of such types, character,
qualities and quantities (net of Inventory Reserves) as the
Administrative Agent in its discretion from time to time
determines to be eligible for borrowing; and
(b) The documentary L/C supporting such purchase
names the Collateral Agent as consignee of the subject
Inventory and the Collateral Agent has control over the
documents which evidence ownership of the subject Inventory.
"Employee Benefit Plan": As defined in ERISA.
"Encumbrance": Each of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale
or other title retention agreement; sale of accounts
receivable or chattel paper; or other arrangement pursuant to
which any Person is entitled to any preference or priority
with respect to the property or assets of another Person or
the income or profits of such other Person or which
constitutes an interest in property to secure an obligation;
each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) The filing of any financing statement under the
UCC or comparable law of any jurisdiction.
"End Date": The date upon which both (a) all Liabilities have been paid in
full and (b) all obligations of any Working Capital Lender and the
Term Lender to make loans and advances and to provide other financial
accommodations to the Borrower hereunder shall have been irrevocably
terminated.
"Environmental Laws": All of the following:
(a) Any and all federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements which regulate or relate to, or impose
any standard of conduct or liability on account of or in
respect to environmental protection matters, including,
without limitation, Hazardous Materials, as are now or
hereafter in effect.
(b) The common law relating to damage to Persons or
property from Hazardous Materials.
"Equipment": Includes, without limitation, "equipment" as defined in the
UCC, and also all motor vehicles, rolling stock, machinery, office
equipment, plant equipment, tools, dies, molds, store fixtures,
furniture, and other goods, property, and assets which are used and/or
were purchased for use in the operation or furtherance of the
Borrower's business, and any and all accessions or additions thereto,
and substitutions therefor.
"ERISA": The Employee Retirement Security Act of 1974, as amended.
"ERISA Affiliate": Any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is part of a
group which includes the Borrower and which would be treated as a
single employer under Section 414 of the Internal Revenue Code of
1986, as amended.
"Events of Default": Is defined in Article 11. Each reference herein to an
"Event of Default" is to an Event of Default not then duly waived by
the Lender (as to which due waiver, see Section 15-4, 15-4(a)). In the
event of such due waiver, the so-waived Event of Default shall be
deemed never to have occurred (other than with respect to any Costs of
Collection incurred by any Lender prior to such waiver).
"Fee Letter": The Commitment Letter (including Exhibit A thereto) dated
April 26, 1999 between BankBoston Retail Finance Inc. and the
Borrower.
"Fixtures": Has the meaning given that term in the UCC.
"GAAP": Principles which are consistent with those promulgated or adopted
by the Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to that accounting period in
respect of which reference to GAAP is being made, provided, however,
in the event of a Material Accounting Change, then unless otherwise
specifically agreed to by the Agent, (a) the Borrower's compliance
with the financial performance covenants imposed pursuant to Section
6-12 shall be determined as if such Material Accounting Change had not
taken place and (b) the Borrower shall include, with its monthly,
quarterly, and annual financial statements a schedule, certified by
the Borrower's chief financial officer, on which the effect of such
Material Accounting Change to the statement with which provided shall
be described.
"General Intangibles": Includes, without limitation, "general intangibles"
as defined in the UCC; and also all: rights to payment for credit
extended; deposits; amounts due to the Borrower; credit memoranda in
favor of the Borrower; warranty claims; tax refunds and abatements;
insurance refunds and premium rebates; all means and vehicles of
investment or hedging, including, without limitation, options,
warrants, and futures contracts; records; customer lists; telephone
numbers; goodwill; causes of action; judgments; payments under any
settlement or other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission;
licenses; franchises; license agreements, including all rights of the
Borrower to enforce same; permits, certificates of convenience and
necessity, and similar rights granted by any governmental authority;
patents, patent applications, patents pending, and other intellectual
property; Internet addresses and domain names; developmental ideas and
concepts; proprietary processes; blueprints, drawings, designs,
diagrams, plans, reports, and charts; catalogs; manuals; technical
data; computer software programs (including the source and object
codes therefor), computer records, computer software, rights of access
to computer record service bureaus, service bureau computer contracts,
and computer data; tapes, disks, semi-conductors chips and printouts;
trade secrets rights, copyrights, mask work rights and interests, and
derivative works and interests; user, technical reference, and other
manuals and materials; trade names, trademarks, service marks, and all
goodwill relating thereto; applications for registration of the
foregoing; and all other general intangible property of the Borrower
in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or
ideas, and any matter related to, or connected with, the design,
development, manufacture, sale, marketing, leasing, or use of any or
all property produced, sold or leased, by the Borrower or credit
extended or services performed, by the Borrower, whether intended for
an individual customer or the general business of the Borrower, or
used or useful in connection with research by the Borrower.
"Goods": Has the meaning given that term in the UCC.
"Guarantor": Collectively, JBI and ▇▇▇▇▇ Shoe, Inc. (a Delaware corporation
with its principal executive offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇, 02021).
"Hazardous Materials": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as to any of
the foregoing) are defined or regulated as a hazardous material in or
under any Environmental Law and (b) oil in any physical state.
"Indebtedness": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) In respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
(b) In connection with any letter of credit or
acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued
for the account of such Person or reimbursement on account of
which such Person would be obligated).
(c) In connection with the sale or discount of
accounts receivable or chattel paper of such Person.
(d) On account of deposits or advances.
(e) As lessee under Capital Leases.
(f) In connection with any sale and leaseback
transaction.
"Indebtedness" also includes:
(x) Indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or
not such Indebtedness is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or
other undertaking pursuant to which that Person may
be liable on account of any obligation of any third
party, other than on account of the endorsement of
checks and other items in the ordinary course.
(z) The Indebtedness of a partnership or
joint venture in which such Person is a general
partner or joint venturer.
"Indemnified Person": Is defined in Section 15-12.
"Instruments": Has the meaning given that term in the UCC.
"Inventory": Includes, without limitation, "inventory" as defined in the
UCC and also all: packaging, advertising, and shipping materials
related to any of the foregoing, and all names or marks affixed or to
be affixed thereto for identifying or selling the same; Goods held for
sale or lease or furnished or to be furnished under a contract or
contracts of sale or service by the Borrower, or used or consumed or
to be used or consumed in the Borrower's business; Goods of said
description in transit: returned, repossessed and rejected Goods of
said description; and all documents (whether or not negotiable) which
represent any of the foregoing.
"Inventory Advance Rate": 65%.
"Inventory Appraisal Cap": 80%.
"Inventory Reserves": Such Reserves as may be established from time to time
by the Administrative Agent in the Administrative Agent's reasonable
discretion with respect to the determination of the saleability, at
retail, of the Eligible Inventory or the Eligible L/C Inventory or
which reflect such other factors as affect the market value of the
Eligible Inventory or the Eligible L/C Inventory. Without limiting the
generality of the foregoing, Inventory Reserves may include (but are
not limited to) reserves based on the following:
(i) Obsolescence (determined based upon
Inventory on hand beyond a given
number of days).
(ii) Seasonality.
(iii) Shrinkage.
(iv) Imbalance.
(v) Change in Inventory character.
(vi) Change in Inventory composition
(vii) Change in Inventory mix.
(viii) Markdowns (both permanent and point
of sale)
(ix) Retail markons and markups
inconsistent with prior period
practice and performance; industry
standards; current business plans;
or advertising calendar and planned
advertising events.
At the execution of this Agreement, the only
Inventory Reserves are as those described in Section 2-3
"Investment Property": Has the meaning given that term in the UCC.
"Issuer": The issuer of any L/C.
"JBI": JBI, Inc. a Massachusetts corporation with its principal executive
offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇.
"L/C": Any letter of credit, the issuance of which is procured by the Agent
for the account of the Borrower and any acceptance made on account of
such letter of credit.
"Landlord Lien States": Those states under whose law, as has been
reasonably determined by the Agent, a landlord may have a claim
against Collateral located on the premises of that landlord for unpaid
rent which may be senior to the security interests created herein.
"Lease": Any lease or other agreement, no matter how styled or structured,
pursuant to which the Borrower is entitled to the use or occupancy of
any space or asset.
"Leasehold Interest": Any interest of the Borrower as lessee under any
Lease.
"Lender ": Collectively and each individually, each Working Capital Lender,
and the Term Lender.
"Liabilities" (in the singular, "Liability"): Includes, without limitation,
all and each of the following, whether now existing or hereafter
arising:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrower to any Agent or any
Lender, each of every kind, nature, and description owing on
account of this Agreement or any other Loan Document or any
service or accommodation provided to, or for the account of
the Borrower pursuant to this Agreement or any other Loan
Document, including cash management services or the issuance
of any L/C.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrower to any Agent or any Lender
(including all future advances whether or not made pursuant to
a commitment by any Agent or any Lender), whether or not any
of such are liquidated, unliquidated, primary, secondary,
secured, unsecured, direct, indirect, absolute, or contingent.
(c) All notes and other obligations of the Borrower
now or hereafter assigned to or held by any Agent or any
Lender, each of every kind, nature, and description, other
than notes or other obligations which constitute Permitted
SubDebt.
(d) All interest, fees, and charges and other amounts
which may be charged by any Agent or any Lender to the
Borrower and/or which may be due from the Borrower to any
Agent or any Lender from time to time.
(e) All costs and expenses incurred or paid by any
Agent or any Lender in respect of any agreement between the
Borrower and Agent or any the Lender or instrument furnished
by the Borrower to any Agent or any Lender (including, without
limitation, Costs of Collection, attorneys' reasonable fees,
and all court and litigation costs and expenses).
(f) Any and all covenants of the Borrower to or with
any Agent or any Lender and any and all obligations of the
Borrower to act or to refrain from acting in accordance with
any agreement between the Borrower and any Agent or any Lender
or instrument furnished by the Borrower to any Agent or any
Lender.
(g) Each of the foregoing as if each reference to the
" any Agent and any Lender " therein were to each Affiliate of
any Agent or any Lender.
"Line (Unused) Fee": Is defined in Section 2-13.
"Loan Account": Is defined in Section 2-7.
"LoanDocuments": This Agreement, each instrument and document executed
and/or delivered as contemplated by Section 3.2 or Article 4, below,
and each other instrument or document from time to time delivered in
connection with the arrangements contemplated by this Agreement.
"Local DDA": A depository account maintained by the Borrower, the only
contents of which may be transfers from the Operating Account and
actually used solely (i) for ▇▇▇▇▇ cash purposes; or (ii) for payroll.
"Material Accounting Change": Any change in GAAP applicable to accounting
periods subsequent to the Borrower's fiscal year most recently
completed prior to the execution of this Agreement, which change has a
material effect on the Borrower's financial condition or operating
results, as reflected on financial statements and reports prepared by
or for the Borrower, when compared with such condition or results as
if such change had not taken place or where preparation of the
Borrower's statements and reports in compliance with such change
results in the breach of a financial performance covenant imposed
pursuant to Section 6-12 where such a breach would not have occurred
if such change had not taken place or visa versa.
"Maturity Date": May 31, 2001.
"Operating Account": Is defined in Section 8-3.
"Participant": Is defined in Section 15-16, hereof.
"Permitted Investments": Any of the following:
(a) Marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the
date of purchase by a Borrower; demand deposits, certificates
of deposit, bankers acceptances and time deposits of United
States banks having total assets in excess of
$1,000,000,000.00; securities commonly known as "commercial
paper" issued by a corporation organized and existing under
the laws of the United States of America or any state thereof
that at the time of purchase have been rated and the ratings
for which are not less than "P 1" if rated by ▇▇▇▇▇'▇
Investors Services, Inc., and not less than "A 1" if rated by
Standard and Poor's; investments in common and preferred stock
traded on national securities exchanges, provided that the
aggregate amount at any one time invested does not exceed
$50,000.00.
(b) Loans permitted pursuant to Section 5-20(c).
"Permitted Encumbrances": Encumbrances on properties to secure taxes,
assessments and other government charges or claims for labor, material
or supplies in respect of obligations not then overdue; deposits or
pledges made in connection with, or to secure payment of, workmen's
compensation, unemployment insurance, old age pensions or other social
security obligations; Encumbrances of carriers, warehousemen,
mechanics and materialmen, and other like Encumbrances on properties
in existence less than 40 days from the date of creation thereof in
respect of obligations not overdue; Encumbrances on properties
consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's
Encumbrances under leases to which the Borrower is a party, and other
minor Encumbrances or encumbrances none of which interferes materially
with the use of the property affected in the ordinary conduct of the
business of the Borrower, which defects do not individually or in the
aggregate have a materially adverse effect on the business of any
Borrower individually or of the Borrowers as a whole; Encumbrances in
favor of the Administrative Agent under the Loan Documents.
"Permitted Overhead Contributions": Payments to JBI towards corporate
overhead, not to exceed the greater of the following (measured on a
fiscal quarterly basis):
(a) Those amounts agreed to by the Borrower and
JBI (subject to those limitations as are
included in the overhead expense allocation
protocol between the Borrower and JBI
or
(b) 110% of such corporate overhead payments, as
reflected on the Business Plan.
"Permitted SubDebt": The Indebtedness evidenced by the Borrower's 13%
Senior Subordinated Notes issued on or about the date of this
Agreement and due December 31, 2001.
"Person": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other enterprise or
entity.
"PIK Interest": Defined in Section 3-4(a)(ii).
"Proceeds": Includes, without limitation, "Proceeds" as defined in the UCC
(defined below), and each type of property described in Section 9-1
hereof.
"Receipts": All cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.
"Receivables Collateral": That portion of the Collateral which consists of
the Borrower's Accounts, Accounts Receivable, General Intangibles,
Chattel Paper, Instruments, Documents of Title, Documents, Investment
Property, letters of credit for the benefit of the Borrower, and
bankers' acceptances held by the Borrower, and any rights to payment.
"Related Entity": (a) Any corporation, limited liability company, trust,
partnership, joint venture, or other enterprise which: is a parent,
brother-sister, subsidiary, or affiliate, of the Borrower; could have
such enterprise's tax returns or financial statements consolidated
with the Borrower's; could be a member of the same controlled group of
corporations (within the meaning of Section 1563(a)(1), (2) and (3) of
the Internal Revenue Code of 1986, as amended from time to time) of
which the Borrower is a member; controls or is controlled by the
Borrower or by any Affiliate of the Borrower.
(b) Any Affiliate.
"▇▇▇▇ Purchase Agreement": The Asset Purchase Agreement, dated as of April
30, 1999 between ▇. ▇▇▇▇▇, Inc. and Edison Brothers Stores, Inc. and
Edison Brothers Apparel Stores, Inc., the rights of ▇. ▇▇▇▇▇, Inc.
under which have been assigned to the Borrower.
"▇▇▇▇ Purchase Documents": ▇▇▇▇ Purchase Agreement and all documents to be
executed or delivered in connection with the purchase and sale
contemplated by the ▇▇▇▇ Purchase Agreement.
"▇▇▇▇ Division": The ▇▇▇▇, LTD and ▇▇▇▇ by Mail divisions of Edison
Brothers Stores, Inc. and Edison Brothers Apparel Stores, Inc.
"Requirement of Law": As to any Person:
(a) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims
jurisdiction over such Person, or any property of such Person,
or of any other Person for whose conduct such Person would be
responsible.
(b) That Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and (c) that Person's
by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"Reserves": All (if any) Availability Reserves and Inventory Reserves.
"Revolving Credit": Is defined in Section 2-1.
"Revolving Credit Notes": Is defined in Section 2-8.
"Revolving Loan Ceiling":
The lesser of
(a) $20,000,000.00; or
(b) the result of:
(i) the BaseLine Amount;
plus
(ii) The lesser of the following:
(A) The Credit Card Advance Rate of the
aggregate face amount of under 5 day Eligible Credit
Card Receivables .
(B) $400,000.00
Plus
(iii) The Special Inventory Advance Rate of
the Cost of Eligible L/C Inventory (net of
Inventory Reserves).
Plus
(iv) The Special Inventory Advance Rate of
the Cost of Eligible In Transit Inventory
(net of Inventory Reserves)
"Sale Order": An order of the Bankruptcy Court entered in the Edison
Brothers Chapter 11 Case, in form satisfactory to the Agent and the
Term Lender, approving the consummation of the transaction
contemplated by the ▇▇▇▇ Purchase Documents.
" Special Inventory Advance Rate": 55%.
"Stated Amount": The maximum amount for which an L/C may be honored.
"Store": A location at which the Borrower regularly offers Inventory for
sale to the public.
"Suspension Event": Any occurrence, circumstance, or state of facts which
(a) is an Event of Default; or (b) would become an Event of Default if
any requisite notice were given and/or any requisite period of time
were to run and such occurrence, circumstance, or state of facts were
not absolutely cured within any applicable grace period.
"Term Lender": Defined in the Preamble to this Agreement.
"Term Loan": Defined in Section 3-1(a).
"Term Loan Commitment Fee": As defined in the Fee Letter.
"Term Loan Monitoring Fee": As defined in the Fee Letter.
"Term Note": Defined in Section 3-2.
"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 11-12 hereof; or (c) date
set by notice by the Agent to the Borrower, which notice sets the
Termination Date on account of the occurrence of any Event of Default
other than as described in Section 11-12 hereof.
"UCC": The Uniform Commercial Code as presently in effect in Massachusetts
(Mass. Gen. Laws, Ch.106).
"Working Capital Lenders": Defined in the Preamble to this Agreement
"Year 2000 Compliant": Computer applications, imbedded microchips, and
other systems and subsystems which properly recognize and perform
their intended function without any adverse effect on account of their
respective inability to recognize certain dates prior to, on, and
after December 31, 1999 or on account of their treating any date prior
to, on, or after December 31, 1999 other than as the specific date in
question.
II. Article 2-The Revolving Credit:
2-1. Establishment of Revolving Credit
(a) The Working Capital Lenders hereby establish a revolving
line of credit (the "Revolving Credit") in the Borrower's favor pursuant to
which each Working Capital Lender, subject to, and in accordance with, this
Agreement, acting through the Administrative Agent, shall make loans and
advances and otherwise provide financial accommodations to and for the account
of the Borrower as provided herein, in each instance equal to that Working
Capital Lender's Commitment Percentage of Availability, up to the maximum amount
of that Working Capital Lender's Dollar Commitment. Subject to the Availability
Block (as to which, see Section 2-1(e)) the amount available for borrowing under
the Revolving Credit shall be determined by the Administrative Agent by
reference to Availability, as determined by the Administrative Agent from time
to time.
(b) As used herein, the following terms have the
following meanings:
(i) "Availability" refers at any time to the
result of the following:
(A) Borrowing Base.
Minus
(B) The then unpaid principal balance of the Loan
Account. Minus (C) The then Stated Amount of all
L/C's.
(ii) "Borrowing Base" refers at any time to the
lesser of 2-1(b)(ii)(A) or 2-1(b)(ii)(B),
where:
(A) is the Revolving Loan Ceiling. (B) is the result
of the following:
(I) The lesser of the following: (1) The
Credit Card Advance Rate of the aggregate
face amount of under 5 day Eligible Credit
Card Receivables .
(2) $400,000.00
Plus
(II) lesser of the following: (1) The
Inventory Advance Rate of the Cost of
Eligible Inventory (net of Inventory
Reserves). (2) The Inventory Appraisal Cap
of the appraised liquidation value of
Eligible Inventory (net of Inventory
Reserves).
Plus
(III) The Special Inventory Advance Rate of
the Cost of Eligible L/C Inventory
(net of Inventory Reserves).
Plus
(IV) The Special Inventory Advance Rate
of the Cost of Eligible In-Transit
Inventory (net of Inventory Reserves).
Minus
(V) The then aggregate of the Availability
Reserves.
(c) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 6-4 hereof.
(d) The proceeds of the initial borrowings under the Revolving
Credit shall be used solely to acquire the assets of the ▇▇▇▇ Division in
accordance with the ▇▇▇▇ Purchase Documents and for the costs of the
establishment of the credit facilities contemplated by the Loan Documents and
thereafter shall be used in accordance with the Business Plan for working
capital purposes of the Borrower and for its Capital Expenditures, in all events
solely to the extent permitted by this Agreement.
(e) At the execution of this Agreement, there shall be an
Availability Block (so referred to herein) of $500,000.00. The Availability
Block shall remain in effect until the validation of the Borrower's Inventory
following the completion of a physical count thereof, as contemplated by the
▇▇▇▇ Purchase Agreement and the release by the Escrow Agent (as defined therein)
of any funds being held by the Escrow Agent pending completion of such physical
count and validation.
2-2. Advances in Excess of Borrowing Base. No Lender has any obligation
to make any loan or advance, or otherwise to provide any credit for the benefit
of the Borrower such that the aggregate of the balance of the Loan Account plus
the then Stated Amount of all L/C's exceeds the Borrowing Base. The making of
loans, advances, and credits and the providing of financial accommodations in
excess of the Borrowing Base is for the benefit of the Borrower and does not
affect the obligations of the Borrower hereunder; such loans, advances, credits,
and financial accommodations constitute Liabilities. The making of any such
loans, advances, and credits and the providing of financial accommodations, on
any one occasion such that the Borrowing Base is exceeded shall not obligate any
Lender to make any such loans, credits, or advances or to provide any financial
accommodation on any other occasion or to permit such loans, credits, or
advances to remain outstanding.
2-3. Initial Reserves. Changes to Reserves.
(a) At the execution of this Agreement, the only Reserves
are as follows:
(i) Availability Reserves:
(A) 50% of the aggregate of Customer Credit
Liabilities.
(B) Three months rent for all locations in Landlord
Lien States for which the Borrower has not
provided the Agent with a landlord lien or
subordination in form reasonably satisfactory
to the Agent.
(ii) Inventory Reserves: A reserve for shrinkage,
initially set at $100,000.00 and increased, on the first day of
each month, by 0.8% of the year to date sales until the Borrower's
inventory is relieved to reflect the results of a physical inventory
(at which time, the Reserve shall be relieved and likewise begin to
accrete).
(b) The Administrative Agent shall provide not less than five
days prior notice to the Borrower of the establishment of any Reserve (other
than those established at the execution of this Agreement) except that a change
to a then existing Reserve, which change reflects changed circumstances (such as
a change to the Inventory Reserve for shrinkage), may be made without such
notice.
2-4. Risks of Value of Collateral. The Administrative Agent's reference
to a given asset in connection with the making of loans, credits, and advances
and the providing of financial accommodations under the Revolving Credit and/or
the monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Administrative Agent or any Working Capital Lender relative
to the actual value of the asset in question. All risks concerning the
saleability of the Borrower's Inventory are and remain upon the Borrower. All
Collateral secures the prompt, punctual, and faithful performance of the
Liabilities whether or not relied upon by the Administrative Agent or by any
Working Capital Lender in connection with the making of loans, credits, and
advances and the providing of financial accommodations under the Revolving
Credit.
2-5. Loan Requests.
(a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Borrower
shall be made pursuant hereto, provided that:
(i) Borrowing Base will not be exceeded; and
(ii) The Revolving Credit has not been suspended
as provided in Section 2-5(h).
(b) Requests for loans and advances under the Revolving
Credit may be requested by the Borrower in such manner as may from time
to time be acceptable to the Administrative Agent.
(c) Subject to provisions of this Agreement, a request for a
loan or advance (in each instance in an amount which is not less than
$10,000.00) shall be made by 1:00 PM on a Business Day will be made by the end
of business on that Business Day; otherwise, by the end of the then next
Business Day.
(d) Any request for a Revolving Credit Loan made after the
applicable deadline therefor, as set forth above, shall be deemed to have been
made at the opening of business on the then next Business Day, as applicable.
Each request for a Revolving Credit Loan shall be made in such manner as may
from time to time be acceptable to the Administrative Agent
(e) The Borrower may request that the Administrative Agent
cause the issuance of L/C's for the account of the Borrower as provided in
Section 2-16.
(f) The Administrative Agent may rely on any request for a
loan or advance, or other financial accommodation under the Revolving Credit
which the Administrative Agent, in good faith, believes to have been made by a
Person duly authorized to act on behalf of the Borrower and may decline to make
any such requested loan or advance, or issuance, or to provide any such
financial accommodation pending the Administrative Agent's being furnished with
such documentation concerning that Person's authority to act as may be
satisfactory to the Administrative Agent.
(g) A request by the Borrower for loan or advance, or other
financial accommodation under the Revolving Credit shall be irrevocable and
shall constitute certification by the Borrower that as of the date of such
request, each of the following is true and correct:
(i) There has been no material adverse change in the
Borrower's financial condition from the most recent financial
information furnished Administrative Agent or any Lender pursuant to
this Agreement.
(ii) The Borrower is in compliance with, and has not
breached any of, its covenants contained in this Agreement.
(iii) Each representation, not relating to a specific
date, made herein or in any of the Loan Documents (defined below) is
then true and correct in all material respects as of and as if made on
the date of such request (except (A) to the extent of changes resulting
from transactions contemplated or permitted by this Agreement or the
other Loan Documents and changes occurring in the ordinary course of
business which singly or in the aggregate are not materially adverse
and (B) to the extent that such representations and warranties
expressly relate to a then earlier date).
(iv) No Suspension Event is then extant.
(h) Upon the occurrence from time to time of any Suspension
Event:
(i) The Administrative Agent may suspend the
Revolving Credit immediately.
(ii) Neither the Administrative Agent nor any
Lender shall be obligated, during
such suspension, to make any loans or advance, or to provide any
financial accommodation hereunder or to seek the issuance of any L/C.
2-6. Making of Loans Under Revolving Credit.
(a) A loan or advance under the Revolving Credit shall be made
by the transfer of the proceeds of such loan or advance to the Operating Account
or as otherwise instructed by the Borrower.
(b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrower shall be indebted to the Administrative
Agent and the Working Capital Lenders for the amount thereof immediately) at the
following:
(i) The Administrative Agent's initiation of the
transfer of the proceeds of such loan or advance in accordance with the
Borrower's instructions (if such loan or advance is of funds requested
by the Borrower).
(ii) The charging of the amount of such loan to the
Loan Account (in all other circumstances).
(c) There shall not be any recourse to or liability of the
Administrative Agent or any Working Capital Lender, on account of:
(i) Any delay, beyond the reasonable control of the
Agents or any Working Capital Lender, in the making of any loan or
advance requested under the Revolving Credit.
(ii) Any delay, beyond the reasonable control of the
Agents or any Working Capital Lender, in the proceeds of any such loan
or advance constituting collected funds.
(iii) Any delay in the receipt, and/or any loss, of
funds which constitute a loan or advance under the Revolving Credit,
the wire transfer of which was properly initiated by the Administrative
Agent in accordance with wire instructions provided to the
Administrative Agent by the Borrower.
2-7. The Loan Account.
(a) An account ("Loan Account") shall be opened on the books
of the Administrative Agent. A record may be kept in the Loan Account of all
loans made under or pursuant to the Revolving Credit and of all payments
thereon.
(b) The Administrative Agent may also keep a record (either in
the Loan Account or elsewhere, as the Administrative Agent may from time to time
elect) of all interest, fees, service charges, costs, expenses, and other debits
owed the Administrative Agent and each Lender on account of the Liabilities and
of all credits against such amounts so owed.
(c) All credits against the Liabilities shall be conditional
upon final payment to the Administrative Agent for the account of each Lender of
the items giving rise to such credits. The amount of any item credited against
the Liabilities which is charged back against Administrative Agent or any Lender
for any reason or is not so paid shall be a Liability and shall be added to the
Loan Account, whether or not the item so charged back or not so paid is
returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrower is obligated hereunder are
payable on demand. In the determination of Availability, the Administrative
Agent may deem fees, service charges, accrued interest, and other payments which
will be due and payable between the date of such determination and the first day
of the then next succeeding month as having been advanced under the Revolving
Credit whether or not such amounts are then due and payable.
(e) The Administrative Agent, without the request of the
Borrower, may advance under the Revolving Credit any interest, fee, service
charge, or other payment to which the Administrative Agent or any Lender is
entitled from the Borrower pursuant hereto and may charge the same to the Loan
Account notwithstanding that such amount so advanced may result in Borrowing
Base's being exceeded. Such action on the part of the Administrative Agent shall
not constitute a waiver of the Administrative Agent's rights and Borrower's
obligations under Section 2-9(b). Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2-7(e) shall bear
interest as provided at the then applicable rate for loans under the Revolving
Credit.
(f) In the absence of manifest error, any statement rendered
by the Administrative Agent or any Working Capital Lender to the Borrower
concerning the Liabilities shall be considered correct and accepted by the
Borrower and shall be conclusively binding upon the Borrower unless the Borrower
provides the Administrative Agent with written objection thereto within Thirty
(30) days from the mailing of such statement, which written objection shall
indicate, with particularity, the reason for such objection. In the absence of
manifest error, the Loan Account and the Administrative Agent's books and
records concerning the loan arrangement contemplated herein and the Liabilities
shall be prima facie evidence and proof of the items described therein.
2-8. The Revolving Credit Notes. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein, shall be
evidenced by Notes (each, a "Revolving Credit Note") in the form of EXHIBIT 2-8,
annexed hereto, executed by the Borrower, one payable to each Working Capital
Lender. Neither the original nor a copy of any Revolving Credit Note shall be
required, however, to establish or prove any Liability. In the event that any
Revolving Credit Note is ever lost, mutilated, or destroyed, the Borrower shall
execute a replacement thereof and deliver such replacement to the Administrative
Agent.
2-9. Payment of The Loan Account.
(a) The Borrower may repay all or any portion of the principal
balance of the Loan Account from time to time until the Termination Date.
(b) The Borrower, without notice or demand from the
Administrative Agent or any Working Capital Lender, shall pay the Administrative
Agent that amount, from time to time, which is necessary so that the unpaid
balance of the Loan Account does not exceed the Borrowing Base.
(c) The Borrower shall repay the then entire unpaid balance of
the Loan Account and all other Liabilities on the Termination Date.
2-10. Interest.
(a) The unpaid principal balance of the Loan Account shall
bear interest, until repaid (calculated based upon a 360-day year and actual
days elapsed), at the aggregate of Base plus 1% per annum.
(b) Following the occurrence of any Event of Default (and
whether or not the Administrative Agent exercises any of the Administrative
Agent's rights on account of such Event of Default), all loans and advances made
under the Revolving Credit shall bear interest, at the option of the
Administrative Agent at a rate which is the aggregate of the rate provided for
in Section 2-10(a), above, plus Two Percent (2%) per annum.
(c) Accrued interest shall be payable:
(i) Monthly in arrears on the first day of the month
next following that during which such interest accrued.
(ii) On the Termination Date.
(iii) On the End Date.
2-11. Commitment Fee As compensation for the respective commitments of
those Persons who are Working Capital Lenders at the execution of this Agreement
to make loans and advances to the Borrower and as compensation for the such
Lenders' respective maintenance of sufficient funds available for such purpose,
the such Lenders have earned the Commitment Fee (so referred to herein) in the
amount and payable as provided in the Fee Letter.
2-12. Administrative Agent's Fee.
(a) In addition to any other fee or expense paid by the
Borrower on account of the Revolving Credit, the Borrower shall pay the
Administrative Agent the Administrative Agent's Fee (so referred to herein) in
the amount and payable as provided in the Fee Letter.
(b) Except as provided in Section 2-12(c), upon the
termination of the Revolving Credit and, at the Administrative Agent's option,
upon the occurrence of any Event of Default described in Section 11-12, any
remaining installments of the Administrative Agent's Fee shall be immediately
due and payable.
(c) In the event of a refinancing of the Revolving Credit in a
credit facility which is agented or fully funded by the Administrative Agent or
any affiliate of the Administrative Agent, the Administrative Agent shall waive
any remaining installments of the Administrative Agent's Fee which would
otherwise be due pursuant to Section 2-12(b).
2-13. Line (Unused) Fee. In addition to any other fee by the Borrower
on account of the Revolving Credit, the Borrower shall pay the Administrative
Agent, for the account of the Working Capital Lenders, a Line (Unused) Fee (so
referred to herein) in arrears, on the first day of each month (and on the
Termination Date). The Line (Unused) Fee shall be equal to 0.5% per annum of the
average difference, during the month just ended (or relevant period with respect
to the payment being made on the Termination Date) between the Revolving Loan
Ceiling and the aggregate of the unpaid principal balance of the Loan Account
plus the Stated Amount of all then outstanding L/C's.
2-14 Concerning Fees. Except as provided in Section 2-12(c), the
Borrower shall not be entitled to any credit, rebate or repayment of the
Commitment Fee, Administrative Agent's Fee, Line (Unused) Fee (but only through
the effective date of such termination), Collateral Monitoring Fee or other fee
previously earned by any Agent or any Lender pursuant to this Agreement
notwithstanding any termination of this Agreement or suspension or termination
of the Administrative Agent's and any Lender's respective obligation to make
loans and advances hereunder.
2-15. Agent's and Lenders' Discretion.
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by any Agent or any Lender shall be to that Person's
exercise of its judgment, in good faith (which shall be presumed), based upon
that Person's consideration of any such factor as that Agent or that Lender,
taking into account information of which that Person then has actual knowledge,
believes:
(i) Will or reasonably could be expected to affect,
in more than a de minimus manner, the value of the Collateral, the
enforceability of the Collateral Administrative Agent's security and
collateral interests therein, or the amount which the Collateral Agent
would likely realize therefrom (taking into account delays which may
possibly be encountered in the Collateral Administrative Agent's
realizing upon the Collateral and likely Costs of Collection).
(ii) Indicates that any report or financial
information delivered to any Agent or any Lender by or on behalf of the
Borrower is incomplete, inaccurate, or misleading in any material
manner or was not prepared in accordance with the requirements of this
Agreement.
(iii) Constitutes a Suspension Event.
(b) In the exercise of such judgment, each Agent and each
Lender also may take into account any of the following factors:
(i) Those included in, or tested by, the
definitions of "Eligible Inventory," "Retail," and "Cost".
(ii) Material changes in or to the mix of the
Borrower's Inventory.
(iii) Seasonality with respect to Borrower's
Inventory and patterns of retail sales.
(c) The burden of establishing the failure of any Agent or any
Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrower's.
2-16. Procedures For Issuance of L/C's.
(a) The Borrower may request that the Administrative Agent
cause the issuance of L/C's for the account of the Borrower. Each such request
shall be in such manner as may from time to time be acceptable to the
Administrative Agent.
(b) The Administrative Agent will endeavor to cause the
issuance of any L/C so requested by the Borrower, provided that, at the time
that the request is made, the Revolving Credit has not been suspended as
provided in Section 2-5(h) and if so issued:
(i) The aggregate Stated Amount of all L/C's then
outstanding, does not exceed Seven Million Dollars ($7,000,000.00).
(ii) The expiry of the L/C is not later than the
earlier of Thirty (30) days prior to the Maturity Date or the
following:
(A) Standby's: One (1) year from initial
issuance. (B) Documentary's: One Hundred
Eighty (180) days from issuance. Borrowing
Base would not be exceeded.
(c) The Borrower shall execute such documentation to apply for
and support the issuance of an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Administrative Agent or any Lender on account of any delay or refusal by an
Issuer to issue an L/C or any action or inaction of an Issuer on account of or
in respect to, any L/C, except where there is a specific finding in a judicial
proceeding (in which the Administrative Agent has had an opportunity to be
heard), from which finding no further appeal is available, that the subject
action or omission to act had been in actual bad faith or grossly negligent or
constituted willful misconduct.
(e) The Borrower shall reimburse the Issuer for the amount of
any honoring of a drawing under an L/C on the same day on which such honoring
takes place. The Administrative Agent, without the request of the Borrower, may
advance under the Revolving Credit (and charge to the Loan Account) the amount
of any honoring of any L/C and other amount for which the Borrower, the Issuer,
or the Lenders become obligated on account of, or in respect to, any L/C. Such
advance shall be made whether or not a Suspension Event is then extant or such
advance would result in Borrowing Base's being exceeded. Such action shall not
constitute a waiver of the Administrative Agent's rights under Section hereof.
2-17. Fees For L/C's.
(a) The Borrower shall pay to the Administrative Agent a fee,
on account of L/C's, the issuance of which had been procured by the
Administrative Agent, monthly in arrears, and on the Termination Date and on the
End Date, equal to 2.0 % per annum of the weighted average Stated Amount of all
L/C's outstanding during the period in respect of which such fee is being paid.
(b) In addition to the fee to be paid as provided in
Subsection 2-17(a), above, the Borrower shall pay to the Administrative Agent
(or to the Issuer, if so requested by Administrative Agent), on demand, all
issuance, processing, negotiation, amendment, and administrative fees and other
amounts charged by the Issuer on account of, or in respect to, any L/C.
2-18. Concerning L/C's.
(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any L/C
of that beneficiary's obligations to the Borrower.
(ii) The form, sufficiency, correctness, genuineness,
authority of any person signing; falsification; or the legal effect of;
any documents called for under any L/C if (with respect to the
foregoing) such documents on their face appear to be in order.
(b) The Issuer may honor, as complying with the terms of any
L/C and of any drawing thereunder, any drafts or other documents otherwise in
order, but signed or issued by an administrator, executor, conservator, trustee
in bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, or other legal representative of the party authorized
under such L/C to draw or issue such drafts or other documents.
(c) The Borrower may instruct the Issuer concerning the
designation of any advising bank, paying bank, and negotiating bank, it being
understood that the Issuer shall honor such designation to the extent then
practicable.
(d) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrower. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). None of the Administrative
Agent, any Lender, nor the Issuer shall have any responsibility for any
inaccuracy, interruption, error, or delay in transmission or delivery by post,
telegraph or cable, or for any inaccuracy of translation.
(e) The Administrative Agent's, each Working Capital Lender's,
and the Issuer's rights, powers, privileges and immunities specified in or
arising under this Agreement are in addition to any heretofore or at any time
hereafter otherwise created or arising, whether by statute or rule of law or
contract.
(f) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrower, the L/C will
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or regulation,
or any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect to which
the Administrative Agent, any or any Issuer has an obligation to lend
to fund drawings under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit;
and the result of any event referred to in Section 2-18(g)(i) or 2-18(g)(ii),
above, shall be to increase the cost to any Issuer of issuing or maintaining any
L/C (which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the aggregate of
such cost increases resulting from such events), then, upon demand by the
Administrative Agent and delivery by the Administrative Agent to the Borrower of
a certificate of an officer of the subject Issuer describing such change in law,
executive order, regulation, directive, or interpretation thereof, its effect on
such Issuer, and the basis for determining such increased costs and their
allocation, the Borrower shall immediately pay to the Administrative Agent, from
time to time as specified by the Administrative Agent, such amounts as shall be
sufficient to compensate such Issuer for such increased cost. In the absence of
manifest error, any Issuer's determination of costs incurred under Section
2-18(g)(i) or 2-18(g)(ii), above, and the allocation, if any, of such costs
among the Borrower and other letter of credit customers of such Issuer, if done
in good faith and made on an equitable basis and in accordance with such
officer's certificate, shall be conclusive and binding on the Borrower.
(h) The obligations of the Borrower under this Agreement with
respect to L/C's are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all circumstances,
whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement,
any L/C, or any other agreement or instrument relating thereto.
(ii) The Borrower's consent to the amendment or
waiver of or any departure from, any L/C.
(iii) The existence of any claim, set-off, defense,
or other right which the Borrower may have at any time against the
beneficiary of any L/C.
(iv) Any good faith honoring of a drawing under any
L/C, which drawing possibly could have been dishonored based upon a
strict construction of the terms of the L/C.
(i) Each Issuer shall be deemed to have agreed as follows:
(i) That any action taken or omitted by that Issuer,
that Issuer's correspondents, or any advising, negotiating or paying bank with
respect to any L/C and the related drafts and documents, shall be done in good
faith and in compliance with foreign or domestic laws.
(ii) That the Borrower shall not be required to
indemnify the Issuer, the Issuer's correspondents, or any advising, negotiating
or paying bank with respect to any L/C for any claims, damages, losses,
liabilities, costs or expenses to the extent, caused by (x) the willful
misconduct or gross negligence of the Issuer, the Issuer's correspondents, or
any advising, negotiating or paying bank with respect to any L/C in determining
whether a request presented under any Letter of Credit complied with the terms
of such Letter of Credit or (y) the Issuer's failure to pay under any Letter of
Credit after the presentation to it of a request strictly complying with the
terms and conditions of such Letter of Credit.
2-19 Lenders' Commitments.
(a) The obligations of each Working Capital Lender are several
and not joint. No Working Capital Lender shall have any obligation to make any
loan or advance under the Revolving Credit in excess of the lesser of
(i) that Working Capital Lender's Commitment
Percentage of the subject loan or advance or of Availability; or
(ii) that Working Capital Lender's Dollar Commitment,
(b) No Working Capital Lender shall have any liability to the
Borrower on account of the failure of any other Working Capital Lender to
provide any loan or advance under the Revolving Credit nor any obligation to
make up any shortfall which may be created by such failure.
(c) The Dollar Commitments, Commitment Percentages, and
identities of the Working Capital Lenders (but not the overall Commitment) may
be changed, from time to time by the reallocation or assignment of Dollar
Commitments and Commitment Percentages amongst the Lenders or with other Persons
who determine to become "Lenders", provided, however, any such assignment or
reallocation shall be on a pro-rata basis such that each reallocated or assigned
Dollar Commitment to any Person remains the same percentage of the overall
Commitment (in terms of dollars) as the reallocated Commitment Percentage is to
such Person.
(d) Upon written notice given the Borrower from time to time
by the Administrative Agent, of any assignment or allocation referenced in
Section 2-19(c):
(i) The Borrower shall execute one or more
replacement Revolving Credit Notes to reflect such changed Dollar
Commitments, Commitment Percentages, and identities and shall deliver
such replacement Revolving Credit Notes to the Administrative Agent
(which promptly thereafter shall deliver to the Borrower the Revolving
Credit Notes so replaced) provided however, in the event that a
Revolving Credit Note is to be exchanged following its acceleration or
the entry of an order for relief under the Bankruptcy Code with respect
to the Borrower, the Administrative Agent, in lieu of causing the
Borrower to execute one or more new Revolving Credit Notes, may issue
the Administrative Agent's Certificate confirming the resulting
Commitments and Commitment Percentages.
(ii) Such change shall be effective from the
effective date specified in such written notice and any Person added as
a Working Capital Lender shall have all rights and privileges of a
Lender hereunder thereafter as if such Person had been a signatory to
this Agreement and any other Loan Document to which a Working Capital
Lender is a signatory and any person removed as a Lender shall be
relieved of any obligations or responsibilities of a Working Capital
Lender hereunder thereafter.
(e) The Borrower recognizes that the Administrative Agent's
exercise of any discretion accorded to the Administrative Agent herein and of
its rights, remedies, powers, privileges, and discretions with respect to the
Borrower is subject to a certain Agency Agreement amongst the Administrative
Agent and the Working Capital Lenders. The "voting rights" which are included in
that Agency Agreement shall include the following:
(i) Except for those matters as to which Section
2-19(e)(ii), applies, the consent of 51% of the Dollar Commitments of
non-delinquent Lenders for amendment of or waiver of compliance with,
provisions of the Loan Documents or the Agency Agreement.
(ii) The following provisions of the Loan Documents
and the Agency Agreement shall require the consent of 100% of the
Dollar Commitment of non-delinquent Working Capital Lenders:
(A) Increase in any Working Capital
Lender's Commitment.
(B) Decrease in any interest rate or
fee payable hereunder (other than
the Administrative Agent's Fee, for
which consent of the Administrative
Agent shall also be required).
(C) Extension of the Maturity Date.
(D) Release of a substantial portion of
the Collateral.
(E) Increase in the Inventory Advance
Rate or in the Inventory Appraisal
Cap.
III. Article 3-The Term Loan.
3-1. Commitment To Make Term Loan.
(a) Subject to satisfaction of the Conditions Precedent
(Article 4) on or before May 24, 1999, the Borrower shall borrow from the Term
Lender and the Term Lender shall lend to the Borrower the sum of $5,000,000.00
(the "Term Loan"), repayable with interest as provided herein.
(b) The proceeds of the Term Loan shall be used solely to
acquire the assets of the ▇▇▇▇ Division in accordance with the ▇▇▇▇ Purchase
Documents.
3-2.The Term Note. The obligation to repay the Term Loan, with interest
as provided herein, shall be evidenced by a Note (the "Term Note") in the form
of EXHIBIT 3-2, annexed hereto, executed by the Borrower. Neither the original
nor a copy of the Term Note shall be required, however, to establish or prove
any Liability. In the event that the Term Note is ever lost, mutilated, or
destroyed, the Borrower shall execute a replacement thereof and deliver such
replacement to the Lender.
3-3. Payment of Principal of the Term Loan. The Borrower may not repay
all or any portion of the principal balance of the Term Loan prior to the
repayment in full of all Liabilities under the Revolving Credit and the
termination of any obligation, under the Revolving Credit, of the Administrative
Agent, or any Working Capital Lender to make any loans or to provide any
financial accommodations.
(a) On the Maturity Date, the Borrower shall repay the then
entire unpaid balance of the Term Loan and all other Liabilities.
(b) The Borrower shall pay an early termination fee of 2% of
any principal of the Term Loan which is prepaid for any reason prior to the
first anniversary of this Agreement.
3-4. Interest.
(a) The unpaid principal balance of the Term Loan shall bear
interest, until repaid (calculated based upon a 360-day year and actual days
elapsed), fixed at 19.0% per annum, payable as follows:
(i) Interest on the unpaid principal balance of the
Term Loan, equal to 16.0% per annum ("Current Pay Interest") shall be
payable monthly in arrears, on the first day of each month, and on the
Maturity Date.
(ii) Accrued Interest on the unpaid principal balance
of the Term Loan, equal to 3.0% per annum ("PIK Interest") , shall be
added to the then unpaid principal balance of the Term Note monthly, on
the first day of each month, commencing with June 1, 1999 or may be
paid by the Borrower on the first day of each month. The aggregate
balance of PIK Interest so added to the Term Note shall bear interest
(determined based on a 360 day year and actual days elapsed) at 16% per
annum.
(b) Following the occurrence of any Event of Default (and
whether or not the Lender exercises any of the Lender's rights on account of
such Event of Default), Current Pay Interest shall be 18% per annum and PIK
Interest shall remain equal to 3% per annum.
3-5. Term Loan Commitment Fee. As compensation for the Lender's having
committed to make the Term Loan, the Term Lender has earned the "Term Loan
Commitment Fee" (so referred to herein) in the amount and payable as provided in
the Fee Letter.
3-6. Term Loan Monitoring Fee. As compensation for its monitoring the
Borrower's compliance with this Agreement, the Term Lender shall be paid a "Term
Loan Monitoring Fee" (so referred to herein) in the amount and payable as
provided in the Fee Letter.
3-7. Payments. The Borrower authorizes the Term Loan Lender to request
that the Administrative Agent pay over directly to the Term Loan Lender any and
all amounts due from time to time under this Agreement as advances under the
Revolving Credit and hereby instructs the Administrative Agent to honor such
request. The Term Loan Lender shall provide the Borrower with prompt written
notice of any amount the Lender receives from the Administrative Agent pursuant
to a request made under this Section 3-7.
IV. Article 4-Conditions. Precedent:
I. As a condition to the effectiveness of this Agreement, the establishment of
the Revolving Credit, the making of the first loan under the Revolving Credit,
and the making of the Term Loan, each of the documents respectively described in
Sections 4-1 through and including 4-6, (each in form and substance satisfactory
to the Administrative Agent) shall have been delivered to the Administrative
Agent, and the conditions respectively described in Sections 4-7 through and
including 4-11, shall have been satisfied:
4-1. Corporate Due Diligence.
(a) A Certificate of corporate good standing issued by the
Secretary of State of The Commonwealth of Massachusetts.
(b) A Certificate of the Borrower's Secretary of the due
adoption, continued effectiveness, and setting forth the texts of, each
corporate resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.
4-2. Receipt of Proceeds of Permitted SubDebt. The Borrower shall have
received not less than $10 Million on account of the Permitted SubDebt.
4-3. Acquisition of ▇▇▇▇ Division.
(a) The ▇▇▇▇ Purchase Documents, each in form satisfactory to
the Administrative Agent and the Term Lender, shall have been executed.
(b) Written evidence, in form satisfactory to the
Administrative Agent and the Term Lender,. that the Sale Order has been entered
and that, at the execution of this Agreement, the Sale Order was effective; had
not been modified or its effect limited; and that no notice of appeal or motion
seeking the stay, delay, or modification of the Sale Order had been filed in the
Edison Brothers Chapter 11 Case.
(c) All conditions to the Borrower's acquisition of the ▇▇▇▇
Division, in accordance with the ▇▇▇▇ Purchase Documents (with the exception of
the purchase price therefor), shall have been satisfied.
(d) The Borrower shall have consummated (or shall consummate
contemporaneous with the closing on the Revolving Credit and the Term Loan) the
sale, which is contemplated by an agreement (in form satisfactory to the
Administrative Agent and the Term Lender) of the Canadian operation of the ▇▇▇▇
Division for a cash purchase price which nets the Borrower not less than US$2.2
Million.
(e) The Agents shall have entered into such agreement with the
Escrow Agent under the ▇▇▇▇ Purchase Agreement as is satisfactory to the
Agents).
4-4. Opinion. An opinion of counsel to the Borrower in form and
substance satisfactory to the Administrative Agent.
4-5. Additional Documents. Such additional instruments and
documents as the Administrative Agent or its counsel reasonably may require or
request.
4-6. Officers' Certificates. Certificates executed by the President and
the Chief Financial Officer of the Borrower and stating that the representations
and warranties made by the Borrower to the Administrative Agent and the Lenders
in the Loan Documents are true and complete in all material respects as of the
date of such Certificate, and that no event has occurred which is or which,
solely with the giving of notice or passage of time (or both) would be an Event
of Default.
4-7. Representations and Warranties. Each of the representations made
by or on behalf of the Borrower in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of the Borrower shall be true and complete in all material respects as
of the date as of which such representation or warranty was made.
4-8. Minimum Excess Availability. The Borrowing Base, after giving
effect to the first funding under the Revolving Credit; any charges to the Loan
Account made in connection with the establishment of the credit facility
contemplated hereby; and L/C's to be issued at, or immediately subsequent to,
such establishment, is not less than $2,000,000.00.
4-9, All Fees and Expenses Paid. All fees due at or immediately after
the first funding under the Revolving Credit and all costs and expenses incurred
by the Administrative Agent, the Collateral Agent, and the Term Lender in
connection with the establishment of the credit facility contemplated hereby
(including the fees and expenses of counsel to the Administrative Agent, the
Collateral Agent, and the Term Lender and fees then due as provided in the Fee
Letter) shall have been paid.
4-10. No Suspension Event. No Suspension Event shall then exist.
4-11. No Adverse Change. No event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon any Guarantor's financial condition when compared with such financial
condition at January 31, 1999.
No document shall be deemed delivered to any Agent or any Lender until received
and accepted by the Administrative Agent at its head offices in Boston,
Massachusetts. Under no circumstances will this Agreement take effect until
executed and accepted by the Agents at said head office.
V. Article 5-General Representations, Covenants and Warranties.
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) and the Term Loan, the Borrower, in addition to all
other representations, warranties, and covenants made by the Borrower in any
other Loan Document, makes those representations, warranties, and covenants
included in this Agreement.
5-1. Payment and Performance of Liabilities. The Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.
5-2. Due Organization - Corporate Authorization - No Conflicts
(a) The Borrower
(i) Presently is and shall hereafter remain in good
standing as a Massachusetts corporation.
(ii) On or before August 2, 1999, the Borrower shall
duly qualify in every State in which, by reason of the nature or
location of the Borrower's assets or operation of the Borrower's
business, such qualification may be necessary, except where the failure
to so qualify would not have a material adverse effect on the business
or assets of that Borrower and shall provide the Administrative Agent
with Certificates of such qualification from the Secretaries of State
of each State in which the Borrower so qualified.
(iii) Remain in good standing as a Massachusetts
corporation and after August 2, 1999, duly qualify in every State in
which, by reason of the nature or location of the Borrower's assets or
operation of the Borrower's business, such qualification may be
necessary, except where the failure to so qualify would not have a
Material Adverse Effect on the business or assets of that Borrower.
(b) Each Related Entity is listed on EXHIBIT 5-2, annexed
hereto. Each Related Entity is and shall hereafter remain in good standing in
the State in which incorporated and is and shall hereafter remain duly qualified
in which other State in which, by reason of that entity's assets or the
operation of such entity's business, such qualification may be necessary. The
Borrower shall provide the Administrative Agent with prior written notice of any
entity's becoming or ceasing to be a Related Entity.
(c) The Borrower shall not change its State of incorporation
nor its taxpayer identification number.
(d) The Borrower has all requisite corporate power and
authority to execute and deliver all Loan Documents to which the Borrower is a
party and has and will hereafter retain all requisite corporate power to perform
all Liabilities.
(e) The execution and delivery by the Borrower of each Loan
Document to which it is a party; the Borrower's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Borrower as contemplated hereby); the Borrower's
performance under those of the Loan Documents to which it is a party; the
borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary
corporate action.
(ii) Do not, and will not, contravene in any
material respect any provision of any Requirement of Law or obligation
of the Borrower where such contravention would have more than a de
minimus adverse effect on the Borrower.
(iii) Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any
assets of the Borrower pursuant to any Requirement of Law or
obligation, except pursuant to the Loan Documents.
(f) The Loan Documents have been duly executed and delivered
by Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.
5-3. Trade Names.
(a) EXHIBIT 5-3, annexed hereto, is a listing of:
(i) All names under which the Borrower ever
conducted its business.
(ii) All entities and/or persons with whom
the Borrower ever consolidated or merged, or from whom the Borrower
ever acquired in a single transaction or in a series of related
transactions substantially all of such entity's or person's assets.
(b) The Borrower will not change its name or conduct its
business under any name not listed on EXHIBIT 5-3 except (i) upon not less than
twenty-one (21) days prior written notice (with reasonable particularity) to the
Administrative Agent and (ii) in compliance with all other provisions of this
Agreement.
5-4. Infrastructure.
(a) The Borrower has and will maintain a sufficient
infrastructure to conduct its business as presently conducted and as
contemplated to be conducted as described in the Business Plan.
(b) The Borrower owns and possesses, or has the right to use
(and will hereafter own, possess, or have such right to use) all patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, and
other intellectual or proprietary property of any third Person necessary for the
Borrower's conduct of the Borrower's business.
(c) The conduct by the Borrower of the Borrower's business
does not , in any material respect, presently infringe (nor will the Borrower
conduct its business in the future so as to infringe) the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person.
5-5. Year 2000 Compliance
(a) Based upon a diligent inquiry undertaken by the Borrower,
it appears that, except as set forth on EXHIBIT 5-5, annexed hereto, the
Borrower's operations are Year 2000 Compliant.
(b) The Borrower has developed a detailed plan and timetable
with respect to the Borrower's operations becoming fully Year 2000 Compliant as
set forth on EXHIBIT 5-5 and has committed adequate resources to execute that
plan and to meet such timetable.
(c) Following the Borrower's operations becoming Year 2000
Compliant, the Borrower will not suffer or permit its operations thereafter to
cease to be Year 2000 Compliant in any manner which might have more than a de
minimus effect on its operations.
5-6. Locations.
(a) The Collateral, and the books, records, and papers of
Borrower pertaining thereto, are kept and maintained solely at the Borrower's
chief executive offices at
(i) ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇;
and
(ii) those locations listed on EXHIBIT 5-6,
annexed hereto, which EXHIBIT 5-6 includes, with
respect to each such location, the name and address
of the landlord on the Lease which covers such
location (or an indication that the Borrower owns the
subject location)and of all service bureaus with
which any such records are maintained and the names
and addresses of each of the Borrower's landlords.
(b) The Borrower shall not remove any of the Collateral from
said chief executive office or those locations listed on EXHIBIT 5-6 except to:
(i) accomplish sales of Inventory in the ordinary
course of business; or (ii) move Inventory from one
such location to another such location; or (iii)
utilize such of the Collateral as is removed from
such locations in the ordinary course of business
(such as motor vehicles).
(c) The Borrower will not:
(i) Alter, modify, or amend any Lease other than in
the ordinary course and conduct of the Borrower's
business.
(ii) Close more than the following number of Stores:
(A) Thirty-One (31) Stores at which ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ is to conduct going out of
business sales promptly after Borrower's
acquisition of the ▇▇▇▇ Division.
(B) Not more than 5% of the Borrower's
Stores (other than those described in
Section 5-6(c)(ii)(A)) in any twelve (12)
month period.
(iii) Commit to or open any retail location other
than as permitted by Section 5-6(d).
(d) The Borrower may commit to or become legally obligated to
open additional Stores, provided that, with respect to each additional Store,
each of the following conditions has been or is then satisfied:
(i) The aggregate of all other additional Stores for
which Borrower has committed or become legally
obligated, during the then current fiscal year is not
more than the greater of
(A) 10% of the number of Stores on the first
day of such fiscal year; or
(B) The number of additional Stores to be
committed to for such fiscal year, as
contemplated by the Business Plan.
(ii) The Borrower is in compliance with Section 5-24
of this Agreement (which Section provides, among other things, that
Borrower shall not be the owner of, nor have any interest in, any
property or asset which is not, immediately upon such acquisition,
subject to a perfected security interest in favor of the Lender,
subject only to Permitted Encumbrances) and shall have executed such
additional financing statements, on account of the subject new
location, as may then be required by the Lender.
(iii) If the Store is located in a Landlord Lien
State, the Borrower has used reasonable efforts to provide the Lender
with a Landlord's Waiver (in form reasonably satisfactory to the
Administrative Agent) duly executed by the landlord for that new Store.
(iv) No Event of Default has occurred; no Suspension
Event is extant; and no Suspension Event will occur by reason of the
Borrower's so becoming obligated.
(e) Except as otherwise disclosed pursuant to, or permitted
by, this Section , no tangible personal property of the Borrower is in the care
or custody of any third party or stored or entrusted with a bailee or other
third party and none shall hereafter be placed under such care, custody,
storage, or entrustment.
5-7. Title to Assets.
(a) The Borrower is, and shall hereafter remain, the owner of
the Collateral free and clear of all Encumbrances with the exceptions of the
following:
(i) Encumbrances in favor of the Collateral Agent.
(ii) Permitted Encumbrances.
(iii) Those Encumbrances (if any) listed on
EXHIBIT 5-7, annexed hereto.
(b) The Borrower does not and shall not have possession of any
property on consignment to the Borrower.
(c) The Borrower shall not acquire or obtain the right to use
any Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement, in which Equipment any third party has an interest,
except for:
(i) Equipment which is merely incidental to the
conduct of the Borrower's business.
(ii) Equipment, the acquisition or right to
use of which has been consented to by the Administrative Agent,
which consent may be conditioned upon the Administrative Agent's
receipt of such agreement with the third party which has an interest
in such Equipment as is satisfactory to the Administrative Agent.
5-8. Indebtedness. The Borrower does not and shall not hereafter
have any Indebtedness with the exceptions of:
(a) Any Indebtedness to the Lenders .
(b) Indebtedness consisting of Permitted SubDebt. The Borrower
may not make any prepayment of any Permitted SubDebt.
(C) The Indebtedness (if any) listed on EXHIBIT 5-8, annexed
hereto.
5-9. Insurance Policies.
(a) EXHIBIT 5-9, annexed hereto, is a schedule of all
insurance policies owned by the Borrower or under which the Borrower is the
named insured. Each of such policies is in full force and effect. Neither the
issuer of any such policy nor the Borrower is in default or violation of any
such policy.
(b) The Borrower shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be satisfactory to
the Administrative Agent. The coverage reflected on EXHIBIT 5-9 presently
satisfies the foregoing requirements, it being recognized by the Borrower,
however, that such requirements may change hereafter in the Administrative
Agent's reasonable discretion, to reflect changing circumstances. All insurance
carried by the Borrower shall provide for a minimum of Twenty (20) days' written
notice of cancellation to the Administrative Agent and all such insurance which
covers the Collateral shall include an endorsement in favor of the Collateral
Agent, which endorsement shall provide that the insurance, to the extent of the
Collateral Agent's interest therein, shall not be impaired or invalidated, in
whole or in part, by reason of any act or neglect of the Borrower or by the
failure of the Borrower to comply with any warranty or condition of the policy.
In the event of the failure by the Borrower to maintain insurance as required
herein, the Administrative Agent, at its option, may obtain such insurance,
provided, however, the Administrative Agent's obtaining of such insurance shall
not constitute a cure or waiver of any Event of Default occasioned by the
Borrower's failure to have maintained such insurance. The Borrower shall furnish
to the Administrative Agent certificates or other evidence satisfactory to the
Administrative Agent regarding compliance by the Borrower with the foregoing
insurance provisions.
(c) The Borrower shall advise the Administrative Agent of each
claim in excess of $250,000.00 made by the Borrower under any policy of
insurance which covers the Collateral and following the occurrence of an Event
of Default, will permit the Administrative Agent , at the Administrative Agent's
option in each instance, to the exclusion of the Borrower, to conduct the
adjustment of each such claim (and of all claims following the occurrence of any
Suspension Event). The Borrower hereby appoints the Administrative Agent as the
Borrower's attorney in fact, effective upon the occurrence of an Event of
Default, to obtain, adjust, settle, and cancel any insurance described in this
section and to endorse in favor of the Administrative Agent any and all drafts
and other instruments with respect to such insurance. The within appointment,
being coupled with an interest, is irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Administrative Agent . The Administrative Agent shall not be liable on account
of any exercise pursuant to said power except for any exercise in bad faith or
in a grossly negligent manner or for willful misconduct. The Administrative
Agent may apply any proceeds of such insurance against the Liabilities, whether
or not such have matured, in such order of application as the Administrative
Agent may determine.
5-10. Licenses. Each license, distributorship, franchise, and similar
agreement issued to, or to which the Borrower is a party is in full force and
effect. No party to any such license or agreement is in default or violation
thereof. The Borrower has not received any notice or threat of cancellation of
any such license or agreement.
5-11. Leases. EXHIBIT 5-11, annexed hereto, is a schedule of all
presently effective Capital Leases. Exhibit 5-11includes a list of all other
presently effective Leases. Each of such Leases and Capital Leases is in full
force and effect. No party to any such Lease or Capital Lease is in default or
violation of any such Lease or Capital Lease and the Borrower has not received
any notice or threat of cancellation of any such Lease or Capital Lease. The
Borrower hereby authorizes the Administrative Agent at any time and from time to
time to contact any of the Borrower's landlords in order to confirm the
Borrower's continued compliance with the terms and conditions of the Lease(s)
between the Borrower and that landlord and, with the consent of the Borrower and
at any time after the occurrence of an Event of Default, to discuss such issues,
concerning the Borrower's occupancy under such Lease(s), as the Administrative
Agent may determine.
5-12. Requirements of Law. Borrower is in compliance with, and shall
hereafter comply with and use its assets in compliance with, all Requirements of
Law. The Borrower has not received any notice of any violation of any
Requirement of Law which violation has not been cured or otherwise remedied,
which violation, if not so cured or remedied, could have a material adverse
effect on the Borrower.
5-13. Maintain Properties. The Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral.
(c) Not use any of the Collateral in violation of any
policy of insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the
Collateral, other than the following:
(i) The sale of Inventory in compliance with
this Agreement.
(ii) The disposal of Equipment which is obsolete,
worn out, or damaged beyond repair, which Equipment
is replaced to the extent necessary to preserve or
improve the operating efficiency of the Borrower.
(iii) The turning over to the Administrative Agent
of all Receipts as provided herein.
5-14. Pay Taxes.
(a) The Borrower has not commenced operations and, at the date
of this Agreement, does not have any state or federal tax liabilities.
(b) The Borrower shall pay, as they become due and payable,
all taxes and unemployment contributions and other charges of any kind or nature
levied, assessed or claimed against the Borrower or the Collateral by any person
or entity whose claim could result in an Encumbrance upon any asset of the
Borrower or by any governmental authority; properly exercise any trust
responsibilities imposed upon the Borrower by reason of withholding from
employees' pay or by reason of the Borrower's receipt of sales tax or other
funds for the account of any third party; timely make all contributions and
other payments as may be required pursuant to any Employee Benefit Plan now or
hereafter established by the Borrower; and timely file all tax and other returns
and other reports with each governmental authority to whom the Borrower is
obligated to so file, except where the failure to file could have a material
adverse effect on the Borrower.
(c) At its option, the Administrative Agent may, but shall not
be obligated to, pay any taxes, unemployment contributions, and any and all
other charges levied or assessed upon the Borrower or the Collateral by any
person or entity or governmental authority, and make any contributions or other
payments on account of the Borrower's Employee Benefit Plan as the
Administrative Agent , in the Administrative Agent's discretion, may deem
necessary or desirable, to protect, maintain, preserve, collect, or realize upon
any or all of the Collateral or the value thereof or any right or remedy
pertaining thereto, provided, however, the Administrative Agent's making of any
such payment shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrower's failure to have made such payment.
5-15. No Margin Stock. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
5-16. ERISA. The Borrower is and shall hereafter remain in
compliance, in all material respects, with ERISA.
5-17. Hazardous Materials. To the Borrower's knowledge, none
of the real property used or operated by any Borrower contains any material
amount of Hazardous Materials.
5-18. Litigation. Except as described in EXHIBIT 5-18 annexed hereto,
there is not presently pending or threatened in writing by or against the
Borrower any suit, action, proceeding, or investigation which, if determined
adversely to the Borrower, would have a material adverse effect upon the
Borrower's financial condition or ability to conduct its business as such
business is presently conducted or is contemplated to be conducted in the
foreseeable future.
5-19. Dividends or Investments. The Borrower shall not:
(a) Pay any cash dividend or make any other distribution in
respect of any class of the Borrower's capital stock other than Permitted
Overhead Contributions.
(b) Own, redeem, retire, purchase, or acquire any of the
Borrower's capital stock.
(c) Invest in or purchase any stock or securities or
rights to purchase any such stock or securities, of any corporation or other
entity, other than Permitted Investments, provided that Permitted Investments
may be held by the Borrower
(i) only at a time when the unpaid principal
balance of the Loan Account is zero;
and
(ii) only if the Collateral Agent has a first
perfected security interest therein. Merge or
consolidate or be merged or consolidated with or into
any other corporation other entity.
(d) Consolidate any of the Borrower's operations with those of
any other corporation or other entity.
(e) Organize or create any Related Entity.
(f) Subordinate any debts or obligations owed to the Borrower
by any third party to any other debts owed by such third party to any other
Person.
(g) Acquire any assets other than in consummation of the ▇▇▇▇
Purchase Documents and in the ordinary course and conduct of the Borrower's
business.
5-20. Loans. The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:
(a) Advance payments made to the Borrower's suppliers in
the ordinary course.
(b) Advances to the Borrower's officers, employees,
and salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrower, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrower.
(c) Loans to employees not exceeding $75,000.00 outstanding at
any time to any employee nor exceeding $300,000.00 in the aggregate outstanding
at any time.
(d) Permitted Investments.
5-21. Protection of Assets. The Administrative Agent, in the
Administrative Agent's discretion, and from time to time, may discharge any tax
or Encumbrance on any of the Collateral, or take any other action that the
Administrative Agent may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The
Administrative Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Administrative Agent has had an opportunity to be heard), from which finding no
further appeal is available, that the Administrative Agent had acted in actual
bad faith or in a grossly negligent manner. The Borrower shall pay to the
Administrative Agent, on demand, or the Administrative Agent, in its discretion,
may add to the Loan Account, all amounts paid or incurred by the Administrative
Agent pursuant to this section. The obligation of the Borrower to pay such
amounts is a Liability.
5-22. Line of Business. The Borrower shall not engage in any business
other than the business in which the ▇▇▇▇ Division had been engaged or a
business reasonably related thereto (the conduct of which reasonably related
business is reflected in the Business Plan).
5-23. Affiliate Transactions. With the exception of Permitted Overhead
Contributions, the Borrower shall not make any payment, nor give any value to
any Related Entity except for goods and services actually purchased by the
Borrower from, or sold by the Borrower to, such Related Entity for a price and
on terms which shall
(a) be competitive and fully deductible as an "ordinary and
necessary business expense" and/or fully depreciable under the Internal Revenue
Code of 1986 and the Treasury Regulations, each as amended; and
(b) not be less favorable from those which would have been
charged in an arms length transaction.
5-24. Additional Assurances.
(a) The Borrower is not the owner of, nor has it any interest
in, any property or asset (other than any Lease) which, immediately upon the
satisfaction of the conditions precedent to the effectiveness of the credit
facility contemplated hereby (Article 4) will not be subject to a perfected
security or other collateral interest in favor of the Administrative Agent
(subject only to Permitted Encumbrances) to secure the Liabilities.
(b) The Borrower will not hereafter acquire any asset or any
interest in property which is not, immediately upon such acquisition, subject to
such a perfected security or other collateral interest in favor of the
Collateral Agent to secure the Liabilities (subject only to Permitted
Encumbrances).
(c) The Borrower shall execute and deliver to the
Administrative Agent such instruments, documents, and papers, and shall do all
such things from time to time hereafter as the Administrative Agent may request
to carry into effect the provisions and intent of this Agreement; to protect and
perfect the Collateral Agent's security interests in the Collateral; and to
comply with all applicable statutes and laws, and facilitate the collection of
the Receivables Collateral. The Borrower shall execute all such instruments as
may be required by the Collateral Agent with respect to the recordation and/or
perfection of the security interests created herein.
(d) The Borrower hereby designates the Collateral Agent as and
for the Borrower's true and lawful attorney, with full power of substitution, to
sign and file any financing statements in order to perfect or protect the
Collateral Agent's security and other collateral interests in the Collateral.
(e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 5-24 shall be sufficient for filing to perfect the security
interests granted herein.
5-25. Adequacy of Disclosure.
(a) All financial statements furnished to the Administrative
Agent and each Lender by the Borrower have been prepared in accordance with GAAP
consistently applied and present fairly the condition of the Borrower at the
date(s) thereof and the results of operations and cash flows for the period(s)
covered. There has been no change in the financial condition, results of
operations, or cash flows of the Borrower since the date(s) of such financial
statements, other than changes in the ordinary course of business, which changes
have not been materially adverse, either singularly or in the aggregate.
(b) The Borrower does not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the Borrower's
financial statements furnished to the Administrative Agent and each Lender prior
to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given the Administrative Agent or any Lender by or on behalf of the
Borrower or any guarantor of the Liabilities in connection with the execution of
this Agreement by the Administrative Agent and each Lender contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements therein not misleading.
With the exception of general market and economic conditions, there is no fact
known to any officer of the Borrower, on the date on which this Agreement was
executed, which has, or which, in the foreseeable future could reasonably be
expected to have, a material adverse effect on the financial condition of the
Borrower or any guarantor of the Liabilities which has not been disclosed in
writing to the Administrative Agent and each Lender.
5-26. No Restrictions on Liabilities. The Borrower shall not enter into
or directly or indirectly become subject to any agreement which prohibits or
restricts, in any manner, the Borrower's:
(a) Creation of, and granting of security and other collateral
interests in favor of the Collateral Agent.
(b) Incurrence of Liabilities.
5-27. Other Covenants. The Borrower shall not indirectly do or cause to
be done any act which, if done directly by the Borrower, would breach any
covenant contained in this Agreement.
VI. Article 6-Financial Reporting and Performance Covenants
6-1. Maintain Records. The Borrower shall:
(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Borrower's transactions,
all in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its results
of operations for, the periods in question.
(b) Timely provide the Administrative Agent with those
financial reports, statements, and schedules required by this Article 6 or
otherwise, each of which reports, statements and schedules shall be prepared, to
the extent applicable, in accordance with GAAP applied consistently with prior
periods to fairly reflect the financial condition of the Borrower at the close
of, and its results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public
accountants who are reasonably satisfactory to the Administrative Agent and
instruct such accountants to fully cooperate with, and be available to, the
Administrative Agent and each Lender to discuss the Borrower's financial
performance, financial condition, operating results, controls, and such other
matters, within the scope of the retention of such accountants, as may be raised
by the Administrative Agent or that Lender.
(e) Not change the Borrower's fiscal year.
6-2. Access to Records.
(a) The Borrower shall accord the Administrative Agent and the
Administrative Agent's representatives with access from time to time as the
Administrative Agent and such representatives may require to all properties
owned by or over which the Borrower has control. The Administrative Agent and
the Administrative Agent's representatives shall have the right, and the
Borrower will permit the Administrative Agent and such representatives from time
to time as the Administrative Agent and such representatives may request, to
examine, inspect, copy, and make extracts from any and all of the Borrower's
books, records, electronically stored data, papers, and files. The Borrower
shall make all of the Borrower's copying facilities available to the
Administrative Agent.
(b) The Borrower hereby authorizes the Administrative Agent
and the Administrative Agent's representatives to:
(i) Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates to
the Borrower, or any service bureau, contractor, accountant, or other
person, and directs any such service bureau, contractor, accountant, or
other person fully to cooperate with the Administrative Agent and the
Administrative Agent's representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrower's computer billing companies, collection agencies, and
accountants and to sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Collateral.
6-3. Immediate Notice to Administrative Agent
(a) The Borrower shall provide the Administrative Agent with
written notice immediately upon the occurrence of any of the following events,
which written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:
(i) Any change in the Borrower's officers.
(ii) Any ceasing of the Borrower's making of payment,
in the ordinary course, to a material number of its creditors or,
except where there is a bona fide dispute with the relevant creditor, a
creditor to which a material amount is owed.
(iii) Except where the same has arisen out of a bona
fide dispute, any failure by the Borrower to pay rent at more than ten
percent (10%) of the Borrower's stores, which failure continues for
more than five (5) Business Days following the day on which such rent
first came due.
(iv) Any material change in the business, operations,
or financial affairs of the Borrower.
(v) The occurrence of any Suspension Event.
(vi) Any intention on the part of the Borrower to
discharge the Borrower's present independent accountants or any
withdrawal or resignation by such independent accountants from their
acting in such capacity (as to which, see Subsection 6-1(d)).
(vii) Any litigation which, if determined adversely
to the Borrower, might have a material adverse effect on the financial
condition of the Borrower.
(viii) Any delay in the Borrower's meeting the
timetable for its operations becoming Year 2000 Compliant as described
on EXHIBIT 5-5 or maintaining such operations as Year 2000 Compliant,
except where such delay or failure to so maintain will have no more
than a de minimus effect on the Borrower's operations.
(b) The Borrower shall:
(i) At the request of the Administrative Agent,
provide the Administrative Agent with a copy of the results of any
physical count of the Borrower's Inventory.
(ii) Provide the Administrative Agent, when so
distributed, with copies of any materials distributed to the
shareholders of the Borrower (qua such shareholders).
(iii) Add the Administrative Agent as an addressee on
all mailing lists maintained by or for the Borrower.
(iv) At the request of the Administrative Agent, from
time to time, provide the Administrative Agent with copies of all
advertising (including copies of all print advertising and duplicate
tapes of all video and radio advertising).
(v) Provide the Administrative Agent, when received
by the Borrower, with a copy of any management letter or similar
communications from any accountant of the Borrower.
6-4. Borrowing Base Certificate. The Borrower shall provide the
Administrative Agent by 1:00PM daily, with a Borrowing Base Certificate (in the
form of EXHIBIT 6-4 annexed hereto, as such form may be revised from time to
time by the Administrative Agent), on which Borrowing Base Certificate,
collateral values shall be rolled forward weekly. Such Certificate may be sent
to the Administrative Agent by facsimile transmission, provided that the
original thereof is forwarded to the Administrative Agent on the date of such
transmission.
6-5. Weekly Reports. Weekly, on Wednesday of each week (as of the then
immediately preceding Saturday) the Borrower shall provide the Administrative
Agent with the following (each in such form as may be specified from time to
time by the Administrative Agent):
(a) A Report of In transit Inventory at Cost (Summary
Page Only).
(b) A Credit Card Receivable Summary.
(c) A ▇▇▇▇ by Mail Inventory Report
Each of such reports shall be sent to the Administrative Agent by facsimile
transmission, provided that the original thereof is forwarded to the
Administrative Agent on the date of such transmission.
6-6. Monthly Reports.
(a) Monthly, the Borrower shall provide the Administrative
Agent with original counterparts of the following (each in such form as the
Administrative Agent from time to time may specify):
(i) Within Fifteen (15)days of the end of the
previous month, for both ▇▇▇▇ Retail and ▇▇▇▇ By Mail:
(A) Inventory Certificate for ▇▇▇▇ Retail
(signed by the Borrower's President or Chief
Financial Officer).
(B) Inventory Certificate for ▇▇▇▇ by Mail
(signed by the Borrower's President or Chief
Financial Officer) which shall provide year to date
sales, cost of goods sold and ending inventory at
cost and retail by department.
(C) An aging of the Borrower's Inventory.
(D) An Open to Buy Report on which is
shown whether inventory levels are
adequate to meet sales projections.
(E) An Inventory Position Report.
(F) A Merchandise Analysis Summary by
Hierarchy (for ▇▇▇▇ Retail, only).
(G) A Report of Year to Date Sales and
Markdowns by Department (for ▇▇▇▇
Retail, only).
(H) A Report of Year to Date Damages by
Department in Total (for ▇▇▇▇ Retail, only).
(ii) Within Thirty (30) days of the end of the
previous month:
(A) Reconciliations of the above described
Inventory Reports and inventory Certificate (Section
6-6(a)(i)(A), 606(a)(i)(B)) to Availability and to
the general ledger as of the end of the subject
month.
(B) A Gross Margin Reconciliation and
Inventory/Gross Margin Report.
(C) A schedule of purchases from the
Borrower's ten largest vendors (in
terms of year to date purchases), which schedule
shall be in such form as may be satisfactory to the
Administrative Agent and shall include year to date
cumulative purchases and an aging of payables to each
such vendor.
(D) An aging of the Borrower's accounts
payable.
(E) A Store Activity Report.
(iii) Within thirty-five (35) days of the end of the
previous month, an internally prepared financial statement of
the Borrower's financial condition and the results of its
operations for, the period ending with the end of the subject
month, which financial statement shall include, at a minimum,
a balance sheet, income statement, and after the completion
of one year's operations, a of same store sales for the
corresponding month of the then immediately previous year,
as well as to the Business Plan, with said balance sheet and
income statement to show amortization, depreciation, and
capital expenditures.
(b) For purposes of Section 6-6(a), above, the first "previous
month" in respect of which the items required by that Section shall be provided
shall be June, 1999.
6-7. Quarterly Reports. Quarterly, within Forty Five (45) days
following the end of each of the Borrower's first three fiscal quarters, the
Borrower shall provide the Administrative Agent with an original counterpart of
a management prepared consolidated financial statement of the Borrower for the
period from the beginning of the Borrower's then current fiscal year through the
end of the subject quarter, with comparative information for the same period of
the previous fiscal year, which statement shall include, at a minimum, a balance
sheet, income statement, and cash flows and after the completion of one year's
operations, a comparison of same store sales for the corresponding month of the
then immediately previous year, as well as to the Business Plan.
6-8. Annual Reports. Annually, within ninety (90) days following the
end of the Borrower's fiscal year, the Borrower shall furnish the Administrative
Agent with the following:
(a) The following financial statements for the Borrower for
the prior fiscal year (each prepared by the Borrower's independent accountants:
Balance sheet, income statement, statement of changes in stockholders' equity
and cash flow.
(b) A certificate of the Borrower's independent accountant
which states that in connection with their preparation of such annual financial
statements, such accountants did not note or encounter any fact or circumstance
which would lead them to believe that an Event of Default has occurred.
6-9. Officers' Certificates. The Borrower shall cause the Borrower's
President and Chief Financial Officer respectively to provide such Person's
Certificate with those monthly, quarterly, and annual statements to be furnished
pursuant to this Agreement, which Certificate shall:
(a) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied and presents fairly the financial
condition of the Borrower at the close of, and the results of the Borrower's
operations and cash flows for, the period(s) covered, subject, however to the
following:
(i) usual year end adjustments (this exception shall
not be included in the Certificate which accompanies such annual
statement).
(ii) Material Accounting Changes (in which event,
such Certificate shall include a schedule (in reasonable detail) of the
effect of each such Material Accounting Change) not previously
specifically taken into account in the determination of the financial
performance covenant imposed pursuant to Section 6-12.
(b) Indicate either that (i) no Suspension Event has occurred
or (ii) if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrower to be taken on
account thereof.
(c) Include calculations concerning the Borrower's compliance
(or failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section hereof.
6-10. Inventories, Appraisals, and Audits.
(a) The Administrative Agent and each Lender, at the expense
of the Borrower, may participate in and/or observe each physical count and/or
inventory of so much of the Collateral as consists of Inventory which is
undertaken on behalf of the Borrower.
(b) The Borrower, at its own expense, shall cause at least one
(1), and on average, two (2) physical inventories to be undertaken on a cycle
count basis in each twelve (12) month period during which this Agreement is in
effect (the spacing of the scheduling of which inventories shall be subject to
the Administrative Agent's discretion) conducted by such inventory takers as are
satisfactory to the Administrative Agent and following such methodology as may
be satisfactory to the Administrative Agent.
(i) On the Administrative Agent's request, the
Borrower shall provide the Administrative Agent with a copy of the
preliminary results of each such inventory (as well as of any other
physical inventory undertaken by the Borrower) within ten (10) days
following the completion of such inventory.
(ii) On the Administrative Agent's request, the
Borrower shall provide the Administrative Agent with a reconciliation
of the results of each such inventory (as well as of any other physical
inventory undertaken by the Borrower) to the Borrower's books and
records within thirty (30) days following the completion of such
inventory.
(iii) The Administrative Agent, in its discretion,
following the occurrence of a Suspension Event, may cause such
additional inventories to be taken as the Administrative Agent
determines (each, at the expense of the Borrower).
(c) Upon the Administrative Agent's request from time to time,
the Borrower shall permit the Administrative Agent to obtain appraisals (in all
events, at the Borrower's expense) conducted by such appraisers as are
satisfactory to the Administrative Agent .
(d) The Administrative Agent contemplates conducting Four (4)
commercial finance audits (in each event, at the Borrower's expense) of the
Borrower's books and records during any Twelve (12) month period during which
this Agreement is in effect, but in its discretion, may undertake additional
such audits during such period.
(e) The Administrative Agent from time to time (in all events,
at the Borrower's expense) may undertake "mystery shopping" (so-called) visits
to all or any of the Borrower's business premises. The Administrative Agent
shall provide the Borrower with a copy of any non-company confidential results
of such mystery shopping.
6-11. Additional Financial Information.
(a) In addition to all other information required to be
provided pursuant to this Article 6, the Borrower promptly shall provide the
Administrative Agent (and any guarantor of the Liabilities), with such other and
additional information concerning the Borrower, the Collateral, the operation of
the Borrower's business, and the Borrower's financial condition, including
original counterparts of financial reports and statements, as the Administrative
Agent may from time to time request from the Borrower.
(b) The Borrower may provide the Administrative Agent, from
time to time hereafter, with updated projections of the Borrower's anticipated
performance and operating results.
(c) In all events, the Borrower, no sooner than Ninety (90)
nor later than Sixty (60) days prior to the end of each of the Borrower's fiscal
years, shall furnish the Administrative Agent with an updated and extended
projection which shall go out at least through the end of the then next fiscal
year.
(d) Such updated and extended projections shall be prepared
pursuant to a methodology and shall include such assumptions as are satisfactory
to the Administrative Agent.
(e) The Borrower recognizes that all appraisals, inventories,
analysis, financial information, and other materials which the Administrative
Agent or any Lender may obtain, develop, or receive with respect to the Borrower
is confidential to the Administrative Agent and the Lenders and that, except as
otherwise provided herein, the Borrower is not entitled to receipt of any of
such appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.
6-12. Financial Performance Covenants. The Borrower shall observe and
comply with those financial performance covenants set forth on EXHIBIT 6-12(a),
annexed hereto, certain of which covenants are based on the Business Plan set
forth on EXHIBIT6-12 (b), annexed hereto. Such financial performance covenants
are subject to change, revision, roll over, and extension as provided in Section
hereof. Compliance with such financial performance covenants shall be made as if
no Material Accounting Changes had been made (other than any Material Accounting
Changes specifically taken into account in the setting of such covenants). The
Administrative Agent may determine the Borrower's compliance with such covenants
based upon financial reports and statements provided by the Borrower to the
Administrative Agent or any Lender (whether or not such financial reports and
statements are required to be furnished pursuant to this Agreement) as well as
by reference to interim financial information provided to, or developed by, the
Administrative Agent.
VII. Article 7-Use and Collection of Collateral.
7-1. Use of Inventory Collateral.
(a) The Borrower shall not engage in any sale of the Inventory
other than for fair consideration in the conduct of the Borrower's business in
the ordinary course and shall not engage in sales or other dispositions to
creditors; sales or other dispositions in bulk (other than in the ordinary
course); and any use of any of the Inventory in breach of any provision of this
Agreement.
(b) No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, with the exception of the Borrower's
customary return policy applicable to the return of inventory purchased by the
Borrower's retail customers in the ordinary course, such Inventory may be
returned to the Borrower without the consent of the Administrative Agent .
7-2. Inventory Quality. All Inventory now owned or hereafter acquired
by the Borrower is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).
7-3. Adjustments and Allowances. The Borrower may grant such allowances
or other adjustments to the Borrower's Account Debtors (exclusive of extending
the time for payment of any Account or Account Receivable, which shall not be
done without first obtaining the Administrative Agent's prior written consent in
each instance) as the Borrower may reasonably deem to accord with sound business
practice, provided, however, the authority granted the Borrower pursuant to this
Section may be limited or terminated by the Administrative Agent at any time in
the Administrative Agent's discretion while any Suspension Event is extant.
7-4. Validity of Accounts.
(a) The amount of each Account shown on the books, records,
and invoices of the Borrower represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrower.
(b) The Borrower has no knowledge of any impairment of the
validity or collectibility of any of the Accounts and shall notify the
Administrative Agent of any such fact immediately after Borrower becomes aware
of any such impairment.
(c) The Borrower shall not post any bond to secure the
Borrower's performance under any agreement to which the Borrower is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of the Borrower (other than to the Administrative Agent )
in the event of the Borrower's failure so to perform.
7-5. Notification to Account Debtors. The Collateral Agent shall have
the right at any time that a Suspension Event has occurred, to notify any of the
Borrower's Account Debtors to make payment directly to the Administrative Agent
and to collect all amounts due on account of the Collateral.
VIII. Article 8-Cash Management. Payment of Liabilities:
8-1 Depository Accounts.
(a) Annexed hereto as EXHIBIT 8-1 is a Schedule of all present
DDA's, which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such depository.
(b) The Borrower shall deliver to the Administrative Agent, as
a condition to the effectiveness of this Agreement:
(i) Notification, executed on behalf of the Borrower,
to each depository institution with which any DDA is maintained (other
than the Operating Account or any Local DDA), in form satisfactory to
the Administrative Agent, of the Collateral Agent's interest in such
DDA.
(ii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the
Administrative Agent with any depository institution at which both any
DDA (other than the Operating Account) and the Operating Account is
maintained.
(iii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the
Administrative Agent, with any depository institution at which a
Blocked Account is maintained
(c) The Borrower will not establish any DDA hereafter (other
than a Local DDA) unless, contemporaneous with such establishment, the Borrower
delivers to the Administrative Agent an agreement (in form satisfactory to the
Administrative Agent) executed on behalf of the depository with which such DDA
is being established.
8-2. Credit Card Receipts.
(a) Annexed hereto as EXHIBIT 8-2, is a Schedule, which
describes all arrangements to which the Borrower is a party with respect to the
payment to the Borrower of the proceeds of all credit card charges for sales by
the Borrower.
(b) The Borrower shall deliver to the Administrative Agent, as
a condition to the effectiveness of this Agreement, notification, executed on
behalf of the Borrower, to each of the Borrower's credit card clearinghouses and
processors of notice (in form satisfactory to the Administrative Agent ), which
notice provides that payment of all credit card charges submitted by the
Borrower to that clearinghouse or other processor and any other amount payable
to the Borrower by such clearinghouse or other processor shall be directed to
the Concentration Account or as otherwise designated from time to time by the
Administrative Agent. The Borrower shall not change such direction or
designation except upon and with the prior written consent of the Administrative
Agent.
8-3. The Concentration, Blocked, and Operating Accounts.
(a) The following checking accounts have been or will be
established (and are so referred to herein):
(i) The Concentration Account: Established
by the Administrative Agent with BankBoston, N.A.
(ii) The Blocked Account: Established by the
Borrower with Fleet National Bank.
(iii) The Operating Account: Established by the
Borrower with BankBoston, N.A..
(b) The contents of each DDA (other than the Operating
Account) and of the Blocked Account constitutes Collateral and Proceeds of
Collateral. The contents of the Concentration Account constitutes the Collateral
Agent's property.
(c) The Borrower:
(i) Contemporaneous with the execution of this
Agreement, shall provide the Administrative Agent with such agreement
(generally referred to as a "Blocked Account Agreement") of the
depository with which the Blocked Account is maintained as may be
satisfactory to the Administrative Agent; and
(ii) Shall not establish any Blocked Account
hereafter except upon not less than Thirty (30) days prior written
notice to the Administrative Agent and the delivery to the
Administrative Agent of a similar such agreement.
(d) The Borrower shall pay all fees and charges of, and
maintain such impressed balances as may be required by the Administrative Agent
or by any bank in which any account is opened as required hereby (even if such
account is opened by and/or is the property of the Administrative Agent).
8-4. Proceeds and Collection of Accounts.
(a) All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Borrower for the Collateral Agent;
shall not be commingled with any of the Borrower's other funds; and shall be
deposited and/or transferred only to the Blocked Account.
(b) The Borrower shall cause the ACH or wire transfer to the
Blocked Account, no less frequently than daily (and whether or not there is then
an outstanding balance in the Loan Account) of
(i) the then contents of each DDA (other than (A) any
Local DDA and (B) the Operating Account), each such transfer to be net
of any minimum balance, not to exceed that amount (not to exceed
$2,500.00), as the Borrower, in its best business judgment, determines
as being required to be maintained in the subject DDA by the bank at
which such DDA is maintained); and
(ii) the proceeds of all credit card charges not
otherwise provided for pursuant hereto.
Telephone advice (confirmed by written notice) shall be provided to the
Administrative Agent on each Business Day on which any such transfer is made.
(c) Whether or not any Liabilities are then outstanding, the
Borrower shall cause the ACH or wire transfer to the Concentration Account, no
less frequently than daily, of then entire ledger balance of the Blocked
Account, net of such minimum balance, not to exceed that amount (not to exceed
$2,500.00), as the Borrower, in its best business judgment, determines as being
required to be maintained in the subject DDA by the bank at which such DDA is
maintained
(d) In the event that, notwithstanding the provisions of this
Section 8-4, the Borrower receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrower for the
Administrative Agent and shall not be commingled with any of the Borrower's
other funds or deposited in any account of the Borrower other than as instructed
by the Administrative Agent.
8-5. Payment of Liabilities.
(a) On each Business Day, the Administrative Agent shall
apply, towards the Revolving Credit, the then collected balance of the
Concentration Account (net of fees charged, and of such impressed balances as
may be required by the bank at which the Concentration Account is maintained),
provided, however, for purposes of the calculation of interest on the unpaid
principal balance of the Loan Account, such payment shall be deemed to have been
made One (1) Business Day after such transfer.
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to
the Concentration Account on the Business Day on which
deposited, provided that notice of such deposit is available
to the Administrative Agent by 2:00PM on that Business Day.
(ii) Funds paid to the Administrative Agent, other
than by deposit to the Concentration Account, shall be deemed
to have been received on the Business Day when they are good
and collected funds, provided that notice of such payment is
available to the Administrative Agent by 2:00PM on that
Business Day.
(iii) If notice of a deposit to the Concentration
Account (Section 8-5(b)(I)) or payment (Section 8-5(b)(ii)) is
not available to the Administrative Agent until after 2:00PM
on a Business Day, such deposit or payment shall be deemed to
have been made at 9:00AM on the then next Business Day.
(iv) All deposits to the Concentration
Account and other payments to the Administrative Agent
are subject to and collection.
(c) The Administrative Agent shall transfer to the
Operating Account any surplus in the Concentration Account remaining after
the application towards the Liabilities referred to in Section 8-5(a), above
(less those amount which are to be netted out, as provided therein) provided,
however, in the event that
(i) a Suspension Event has occurred; and
(ii) either
(A) one or more L/C's are then outstanding; or
(B) there is any amount unpaid on account of the
Term Loan,
the Administrative Agent may establish a funded reserve of up to 110% of (x) the
aggregate Stated Amounts of such L/C's and (y) such amount unpaid on account of
the Term Loan (which amount, the Administrative Agent shall turn over to the
Collateral Agent following the occurrence of any Event of Default described in
Section 11-12 and following the acceleration of the Liabilities on account of
the occurrence of any other Event of Default.
8-6. The Operating Account. Except as otherwise specifically provided
in or permitted by this Agreement, all checks shall be drawn by the Borrower
upon, and other disbursements shall be made by the Borrower solely from, the
Operating Account.
IX. Article 9-Grant of Security Interest:
9-1. Grant of Security Interest. To secure the Borrower's prompt,
punctual, and faithful performance of all and each of the Liabilities, the
Borrower hereby grants to the Collateral Agent, for the ratable benefit of the
Lenders, a continuing security interest in and to, and assigns to the Collateral
Agent, for the ratable benefit of the Lenders, the following, and each item
thereof, whether now owned or now due, or in which the Borrower has an interest,
or hereafter acquired, arising, or to become due, or in which the Borrower
obtains an interest, and all products, Proceeds, substitutions, and accessions
of or to any of the following (all of which, together with any other property in
which the Collateral Agent may in the future be granted a security interest, is
referred to herein as the "Collateral"):
(a) All Accounts and Accounts Receivable.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the Collateral and/or
to the operation of the Borrower's business, and all rights of access
to such books, records, and information, and all property in which
such books, records, and information are stored, recorded, and
maintained.
(i) All Investment Property, Instruments, Documents, Deposit Accounts,
policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.
(j) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any
of such proceeds, refunds, and premium rebates arise out of any of the
foregoing.( through ) or otherwise.
(k) All liens, guaranties, rights, remedies, and privileges pertaining to
any of the foregoing ( through ), including the right of stoppage in
transit.
(l) All Leasehold Interests.
9-2. Extent and Duration of Security Interest. The security interest
created and granted herein is in addition to, and supplemental of, any security
interest previously granted by the Borrower to the Collateral Agent and shall
continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full and the security interest
granted herein is specifically terminated in writing by a duly authorized
officer of the Collateral Agent .
X. Article 10-Collateral Agent As Borrower's Attorney-In-Fact:
10-1. Appointment as Attorney-In-Fact. The Borrower hereby irrevocably
constitutes and appoints the Collateral Agent as the Borrower's true and lawful
attorney, effective upon the occurrence of an Event of Default, with full power
of substitution, to convert the Collateral into cash at the sole risk, cost, and
expense of the Borrower, but for the sole benefit of the Collateral Agent. The
rights and powers granted the Collateral Agent by the within appointment include
but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) Sign change of address forms to change the address
to which the Borrower's mail is to be sent to such address as the Collateral
Agent shall designate; receive and open the Borrower's mail; remove any
Receivables Collateral and Proceeds of Collateral therefrom and turn over the
balance of such mail either to the Borrower or to any trustee in bankruptcy,
receiver, assignee for the benefit of creditors of the Borrower, or other legal
representative of the Borrower whom the Collateral Agent determines to be the
appropriate person to whom to so turn over such mail.
(c) Endorse the name of the Borrower in favor of the
Collateral Agent upon any and all checks, drafts, notes, acceptances, or other
items or instruments; sign and endorse the name of the Borrower on, and receive
as secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Receivables Collateral; sign
the Borrower's name on any Proof of Claim in Bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the Borrower
is a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrower.
(g) Use, license or transfer any or all General
Intangibles of the Borrower.
10-2. No Obligation to Act. The Collateral Agent shall not be obligated
to do any of the acts or to exercise any of the powers authorized by Section
herein, but if the Collateral Agent elects to do any such act or to exercise any
of such powers, it shall not be accountable for more than it actually receives
as a result of such exercise of power, and shall not be responsible to the
Borrower for any act or omission to act except for any act or omission to act as
to which there is a final determination made in a judicial proceeding (in which
proceeding the Collateral Agent has had an opportunity to be heard) which
determination includes a specific finding that the subject act or omission to
act had been grossly negligent or in actual bad faith, or constituted willful
misconduct.
XI. Article 11-Events of Default:
The occurrence of any event described in this Article 11 respectively
shall constitute an "Event of Default" herein. Upon the occurrence of any Event
of Default described in Section 11-12, any and all Liabilities shall become due
and payable without any further act on the part of any Agent or any Lender. Upon
the occurrence of any other Event of Default, any and all Liabilities shall
become immediately due and payable, at the option of the Administrative Agent
and without notice or demand. The occurrence of any Event of Default shall also
constitute, without notice or demand, a default under all other agreements
between the any Agent or any Lender and the Borrower and instruments and papers
given any Administrative Agent or any Lender by the Borrower, whether such
agreements, instruments, or papers now exist or hereafter arise.
11-1. Failure to Pay Revolving Credit or Term Loan. The failure by the
Borrower to pay any amount when due under the Revolving Credit or the Term Loan.
11-2. Failure To Make Other Payments. The failure by the Borrower,
within three (3) days of when due, to pay any payment Liability other than under
the Revolving Credit or the Term Loan.
11-3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by the Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
Section 11-1 or Section 11-2 hereof, and included in any of the following
provisions hereof:
Section Relates to:
5-2(c) Taxpayer Identification and State of Incorporation
5-3(b) Notice of Name Change
5-6 Location of Collateral
5-7 Title to Assets
5-8 Indebtedness
5-9 Insurance Policies
5-14 Pay taxes
5-23 Affiliate Transactions
5-24 Additional Assurances
7-1 Use of Collateral
Article 6 Reporting Requirements* and Financial Covenants
Article 8 Cash Management
(*) Two days grace for all financial reports other than the Borrower's
daily borrowing base certificate required pursuant to Section 6-4.
11-4. Failure to Perform Covenant or Liability (Grace Period). The
failure by the Borrower, , within Twenty (20) days of the sooner of (i) the
Borrower's knowledge of the subject failure or (ii) the Administrative Agent's
written notice to the Borrower, to cure the Borrower's failure to promptly,
punctually and faithfully perform, discharge, or comply with any covenant or
Liability not described in any of Sections 11-1, 11-2 or 11-3 hereof.
11-5. Misrepresentation. The determination by the Administrative Agent
that any representation or warranty at any time made by the Borrower to any
Agent or any Lender was not true or complete in all material respects when
given.
11-6. Acceleration of Other Debt. The occurrence of any event such that
Indebtedness of the Borrower in excess of $1,000,000.00 to any creditor other
than any Agent or any Lender could be accelerated unless, prior to the
acceleration of the Liabilities on account of such occurrence, the other
creditor duly waives such default and evidence of such written waiver is
provided to the Administrative Agent.
11-7. Related Party Defaults.
(a) The occurrence of any event such that the indebtedness of
Casual Male under the Casual Male Credit Facility could be accelerated.
(b) The entry of an order for relief under the Bankruptcy
Code with respect to The Casual Male.
11-8. Default Under Other Agreements. The occurrence of any breach or
default under any agreement between any Agent or any Lender and the Borrower or
instrument or paper given any Agent or any Lender by the Borrower (and not
constituting a Loan Document), whether such agreement, instrument, or paper now
exists or hereafter arises (notwithstanding that any Agent or the subject Lender
may not have exercised its rights upon default under any such other agreement,
instrument or paper).
11-9. Uninsured Casualty Loss. The occurrence of any uninsured
loss, theft, damage, or destruction of or to any material portion of the
Collateral.
11-10. Judgment. Restraint of Business.
(a) The service of process upon any Agent or any Lender or any
Participant seeking to attach, by trustee, mesne, or other process, any of the
Borrower's funds on deposit with, or assets of the Borrower in the possession
of, any Agent or any Lender or such Participant.
(b) The entry of judgments against the Borrower, not fully
covered by insurance (subject to a reasonable deductible) aggregating more than
$500,000.00, which judgments are not satisfied (if a money judgment) or appealed
from (with execution or similar process stayed) within fifteen (15) days of its
entry.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by the Borrower of its business in the ordinary course.
11-11. Business Failure. Any act by, against, or relating to the
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
person, pursuant to court action or otherwise, over all, or any material part of
the Borrower's property; or execution of an assignment for the benefit of the
creditors of the Borrower, or the occurrence of any other voluntary or
involuntary liquidation of the Borrower; the offering by or entering into by the
Borrower of any composition, extension, or any other arrangement seeking relief
from or extension of the debts of the Borrower; or the initiation of any
judicial or non-judicial proceeding or agreement by, against, or including the
Borrower which seeks or intends to accomplish a reorganization or arrangement
with creditors; and/or the initiation by or on behalf of the Borrower of the
liquidation or winding up of all or any part of the Borrower's business or
operations.
11-12. Bankruptcy. The adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower initiating any matter in which the
Borrower is or may be granted any relief from the debts of the Borrower pursuant
to the Bankruptcy Code or any other insolvency statute or procedure, which
complaint, application, or petition is not timely contested in good faith by the
Borrower by appropriate proceedings or, if so contested, is not dismissed within
thirty (30) days of when filed.
11-13. Default by Guarantor or Related Entity. The occurrence of any of
the foregoing events described in Sections 11-11 or 11-12 with respect to any
guarantor of the Liabilities, or the occurrence of any of the foregoing Events
of Default with respect to any parent (if the Borrower is a corporation),
subsidiary, or Related Entity, as if such guarantor, parent, or Related Entity
were the "Borrower" described therein.
11-14. Indictment - Forfeiture. The indictment of, or institution of
any legal process or proceeding against, the Borrower, under any federal, state,
municipal, and other civil or criminal statute, rule, regulation, order, or
other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of more than a de minimus
part of the property of the Borrower and/or the imposition of any stay or other
order, the effect of which could be to restrain in any material way the conduct
by the Borrower of its business in the ordinary course.
11-15. Termination of Guaranty. The termination or attempted
termination of any guaranty by any guarantor of the Liabilities.
11-16. Challenge to Loan Documents.
(a) Any challenge by or on behalf of the Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject Loan Document's terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan
Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable strictly in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.
11-17. Change in Control Any Change in Control.
XII. Article 12-Rights and Remedies Upon Default:
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Administrative Agent is provided prior to the occurrence
of an Event of Default, the Collateral Agent shall have the following rights and
remedies upon the occurrence of any Event of Default and at any time thereafter.
12-1 . Rights of Enforcement. The Collateral Agent shall have all of
the rights and remedies of a secured party upon default under the UCC, in
addition to which the Collateral Agent shall have all and each of the following
rights and remedies:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(b) To take possession of all or any portion of the
Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Collateral Agent deems advisable and with or without the taking of
possession of any of the Collateral.
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
12-2. Sale of Collateral.
(a) Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Collateral
Agent deems advisable, having due regard to compliance with any statute or
regulation which might affect, limit, or apply to the Collateral Agent's
disposition of the Collateral.
(b) The Collateral Agent, in the exercise of the Collateral
Agent's rights and remedies upon default, may conduct one or more going out of
business sales, in the Collateral Agent's own right or by one or more agents and
contractors. Such sale(s) may be conducted upon any premises owned, leased, or
occupied by the Borrower. The Collateral Agent and any such Agent or contractor,
in conjunction with any such sale, may augment the Inventory with other goods
(all of which other goods shall remain the sole property of the Collateral Agent
or such Agent or contractor). Any amounts realized from the sale of such goods
which constitute augmentations to the Inventory (net of an allocable share of
the costs and expenses incurred in their disposition) shall be the sole property
of the Collateral Agent or such Agent or contractor and neither the Borrower nor
any Person claiming under or in right of the Borrower shall have any interest
therein.
(c) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Collateral Agent shall provide the Borrower with such
notice as may be practicable under the circumstances), the Collateral Agent
shall give the Borrower at least seven (7) days prior written notice of the
date, time, and place of any proposed public sale, and of the date after which
any private sale or other disposition of the Collateral may be made. The
Borrower agrees that such written notice shall satisfy all requirements for
notice to the Borrower which are imposed under the UCC or other applicable law
with respect to the exercise of the Collateral Agent's rights and remedies upon
default.
(d) Any Agent and any Lender may purchase the Collateral, or
any portion of it at any sale held under this Article.
(e) If any of the Collateral is sold, leased, or otherwise
disposed of by the Collateral Agent on credit, the Liabilities shall not be
deemed to have been reduced as a result thereof unless and until payment is
finally received thereon by the Collateral Agent.
(f) The Collateral Agent shall turn over to the Administrative
Agent the proceeds of any exercise of the Collateral Agent's Rights and Remedies
under this Article 12. The Administrative Agent shall apply such proceeds
towards the Liabilities in such manner, and with such frequency, as the
Administrative Agent determines.
12-3. Occupation of Business Location. In connection with the
Collateral Agent's exercise of the Collateral Agent's rights under this Article
12, the Collateral Agent may enter upon, occupy, and use any premises owned or
occupied by the Borrower, and may exclude the Borrower from such premises or
portion thereof as may have been so entered upon, occupied, or used by the
Collateral Agent. The Collateral Agent shall not be required to remove any of
the Collateral from any such premises upon the Collateral Agent's taking
possession thereof, and may render any Collateral unusable to the Borrower. In
no event shall the any Agent be liable to the Borrower for use or occupancy by
the Collateral Agent of any premises pursuant to this Article 12, nor for any
charge (such as wages for the Borrower's employees and utilities) incurred in
connection with the Collateral Agent's exercise of the Collateral Agent's Rights
and Remedies.
12-4. Grant of Nonexclusive License. The Borrower hereby grants to the
Collateral Agent a royalty free nonexclusive irrevocable license to use, apply,
and affix any trademark, trade name, logo, or the like in which the Borrower now
or hereafter has rights, such license being with respect to the Administrative
Agent's exercise of the rights hereunder including, without limitation, in
connection with any completion of the manufacture of Inventory or sale or other
disposition of Inventory.
12-5. Assembly of Collateral. The Administrative Agent may require the
Borrower to assemble the Collateral and make it available to the Administrative
Agent at the Borrower's sole risk and expense at a place or places which are
reasonably convenient to both the Administrative Agent and Borrower.
12-6. Rights and Remedies. The rights, remedies, powers, privileges,
and discretions of the Agents hereunder (herein, the " Agent's Rights and
Remedies") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by any Agent in exercising or
enforcing any of that Agent's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Administrative Agent of any Event
of Default or of any default under any other agreement shall operate as a waiver
of any other default hereunder or under any other agreement. No single or
partial exercise of any of the Agent's Rights or Remedies, and no express or
implied agreement or transaction of whatever nature entered into between any
Agent and any person, at any time, shall preclude the other or further exercise
of any of the Agent's Rights and Remedies. No waiver any Agent of any of that
Agent's Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver. All of the
Agent's Rights and Remedies and all of each Agent's rights, remedies, powers,
privileges, and discretions under any other agreement or transaction are
cumulative, and not alternative or exclusive, and may be exercised by any Agent
at such time or times and in such order of preference as that Agent in its sole
discretion may determine. The Agent's Rights and Remedies may be exercised
without resort or regard to any other source of satisfaction of the Liabilities.
XIII. Article 13- Notices:
13-1. Notice Addresses. All notices, demands, and other communications
made in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given by certified mail, return receipt requested:
If to the Administrative Agent
or the Collateral Agent:
BankBoston Retail Finance Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇. ▇▇▇▇▇ ▇▇▇▇▇
Managing Director
Fax : ▇▇▇ ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Fax : ▇▇▇ ▇▇▇ ▇▇▇▇
If to the Borrower:
JBI Apparel, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax : ▇▇▇ ▇▇▇ ▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇, Procter & ▇▇▇▇ ▇▇
Exchange Place
Boston, Massachusetts 02109-2881
Attention : ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, P.C.
Fax: : ▇▇▇ ▇▇▇ ▇▇▇▇
13-2. Notice Given.
(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or
Three (3) days following deposit in the United States mail, postage
prepaid.
(ii) By recognized overnight express delivery:
the Business Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after
9:00 AM and no later than Three (3) hours prior to the close of
customary business hours of the recipient, when delivered. Otherwise,
at the opening of the then next Business Day.
(iv) By Facsimile transmission (which must include a
header on which the party sending such transmission is indicated): If
sent on a Business Day after 9:00 AM and no later than Three (3) hours
prior to the close of customary business hours of the recipient, one
(1) hour after being sent. Otherwise, at the opening of the then next
Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or Facsimile Number for which no due notice
was given shall each be deemed receipt of the notice sent.
XIV. Article 14-Term:
14-1. Termination of Revolving Credit. The Revolving Credit
shall remain in effect (subject to suspension as provided in Section 2-5(h)
hereof) until the Termination Date.
14-2. Effect of Termination. On the Termination Date, the Borrower
shall pay the Administrative Agent (whether or not then due), in immediately
available funds, all then Liabilities including, without limitation: the entire
balance of the Loan Account (including the unpaid balance of the Revolving
Credit); any remaining balance of the Administrative Agent's Fee; any accrued
and unpaid Line Fee; any then remaining installments of the Term Loan Commitment
Fee; any then remaining installments of the Term Loan Monitoring Fee; and all
unreimbursed costs and expenses of each Agent and of each Lender for which the
Borrower is responsible; and shall make such arrangements concerning any L/C's
then outstanding are reasonably satisfactory to the Administrative Agent . Until
such payment, all provisions of this Agreement, other than those contained in
Article 2 which place an obligation on the Administrative Agent and any Lender
to make any loans or advances or to provide financial accommodations under the
Revolving Credit or otherwise, shall remain in full force and effect until all
Liabilities shall have been paid in full.
XV. Article 15-General:
15-1. Protection of Collateral. No Agent has a duty as to the
collection or protection of the Collateral beyond the safe custody of such
of the Collateral as may come into the possession of that nor any duty as
to the preservation of rights against prior parties or any other rights
pertaining thereto. Each Agent and each Lender may include reference to the
Borrower (and may utilize any logo or other distinctive symbol associated
with the Borrower) in connection with any advertising, promotion, or
marketing undertaken by that Agent.
15-2. Successors and Assigns. This Agreement shall be binding upon the
Borrower and the Borrower's representatives, successors, and assigns and shall
enure to the benefit of each Agent and each Lender and the respective successors
and assigns of each provided, however, no trustee or other fiduciary appointed
with respect to the Borrower shall have any rights hereunder. In the event that
any Agent or any Lender assigns or transfers its rights under this Agreement,
the assignee shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of such assignor hereunder and such assignor
shall thereupon be discharged and relieved from its duties and obligations
hereunder.
15-3. Severability. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
15-4. Amendments. Course of Dealing.
(a) This Agreement and the other Loan Documents incorporate
all discussions and negotiations between the Borrower and each Agent and each
Lender, either express or implied, concerning the matters included herein and in
such other instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof. No
failure by any Agent or any Lender to give notice to the Borrower of the
Borrower's having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document. No change made by the
Administrative Agent in the manner by which Availability is determined shall
obligate the Administrative Agent to continue to determine Availability in that
manner.
(b) The Borrower may undertake any action otherwise prohibited
hereby, and may omit to take any action otherwise required hereby, upon and with
the express prior written consent of the Administrative Agent. No consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is an
Agent, then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by any Agent shall be in reliance upon all representations
and warranties theretofore made to that Agent by or on behalf of the Borrower
(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.
15-5. Power of Attorney. In connection with all powers of attorney
included in this Agreement, the Borrower hereby grants unto each Agent full
power to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as the Borrower might or could
do, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement.
15-6. Application of Proceeds. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the
Administrative Agent determines in its sole discretion. The Borrower shall
remain liable for any deficiency remaining following such application.
15-7. Increased Costs. If, as a result of any change to any requirement
of law, or of the interpretation or application thereof by any court or by any
governmental or other authority or entity charged with the administration
thereof, whether or not having the force of law, which:
(a) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by the Borrower to the Administrative
Agent or any Lender under this Agreement (except for taxes on the
Administrative Agent or any Lender's overall net income or capital
imposed by the jurisdiction in which the Administrative Agent or that
Lender's principal or lending offices are located);
(b) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements against assets held by,
or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Lender;
(c) imposes on any Lender any other condition with
respect to any Loan Document; or
(d) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in the such Lender's reasonable opinion,
is to increase the cost to that Lender of making or maintaining any loan,
advance or financial accommodation or to reduce the income receivable by such
Lender in respect of any loan, advance or financial accommodation by an amount
which the such Lender deems to be material, then upon the Administrative Agent's
giving written notice thereof, from time to time, to the Borrower (such notice
to set out in reasonable detail the facts giving rise to and a summary
calculation of such increased cost or reduced income), the Borrower shall
forthwith pay to the Administrative Agent, for the benefit of the subject
Lender, upon receipt of such notice, that amount which shall compensate the
subject Lender for such additional cost or reduction in income.
15-8. Costs and Expenses of Agents and Of Lenders.
(a) The Borrower shall pay on demand all Costs of Collection
and all reasonable expenses of each Agent in connection with the preparation,
execution, and delivery of this Agreement and of any other Loan Documents,
whether now existing or hereafter arising, and all other reasonable expenses
which may be incurred by each Agent in preparing or amending this Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
incurred with respect to the Liabilities, and all costs and expenses of each
Agent which relate to the credit facility contemplated hereby.
(b) The Borrower shall pay on demand all reasonable costs and
expenses (including attorneys' reasonable fees) incurred, following the
occurrence of any Event of Default, by each Lender in connection with the
enforcement, attempted enforcement, or preservation of any rights and remedies
under this, or any other Loan Document, as well as any such reasonable costs and
expenses in connection with any "workout", forbearance, or restructuring of the
credit facility contemplated hereby.
(c) The Borrower authorizes the Administrative Agent to pay
all such fees and expenses and in the Administrative Agent's discretion, to add
such fees and expenses to the Loan Account.
(d) The undertaking on the part of the Borrower in this
Section 15-8 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by any Agent in favor of the Borrower, other than
a termination, release, or discharge which makes specific reference to this
Section 15-8.
15-9. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished each Agent or
any Lender may be reproduced by that Person or by each Agent by any
photographic, microfilm, xerographic, digital imaging, or other process, and
that Person may destroy any document so reproduced. Any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business).
Any facsimile which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise shall be
so admissible in evidence as if the original of such facsimile had been
delivered to the party which or on whose behalf such transmission was received.
15-10. Massachusetts Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.
15-11. Consent to Jurisdiction.
(a) The Borrower agrees that any legal action, proceeding,
case, or controversy against the Borrower with respect to any Loan Document may
be brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Administrative Agent may elect in the Administrative
Agent's sole discretion. By execution and delivery of this Agreement, the
Borrower, for itself and in respect of its property, accepts, submits, and
consents generally and unconditionally, to the jurisdiction of the aforesaid
courts.
(b) The Borrower WAIVES personal service of any and all
process upon it, and irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to the Borrower at the
Borrower's address for notices as specified herein, such service to become
effective five (5) Business Days after such mailing.
(c) The Borrower WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of any Agent to
bring legal actions or proceedings in any other competent jurisdiction.
(e) The Borrower agrees that any action commenced by the
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.
15-12. Indemnification. The Borrower shall indemnify, defend, and hold
each Agent and each Lender and any employee, officer, or Administrative Agent of
any of the foregoing (each, an "Indemnified Person") harmless of and from any
claim brought or threatened against any Indemnified Person by the Borrower, any
guarantor or endorser of the Liabilities, or any other Person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of
the relationship of the Borrower or of any other guarantor or endorser of the
Liabilities with any Agent or any Lender (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with single counsel
of the Administrative Agent's selection, but at the expense of the Borrower)
other than any claim as to which a final determination is made in a judicial
proceeding (in which the Administrative Agent and any other Indemnified Person
has had an opportunity to be heard), which determination includes a specific
finding that the Indemnified Person seeking indemnification had acted in a
grossly negligent manner or in actual bad faith or willful misconduct. This
indemnification shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by any Agent in favor of the Borrower, other than
a termination, release, or discharge which makes specific reference to this
Section 15-12.
15-13. Rules of Construction. The following rules of construction shall
be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(a) Words in the singular include the plural and
words in the plural include the singular.
(b) Titles, headings (indicated by being underlined or shown
in Small Capitals) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
(c) The words "includes" and "including" are not limiting.
(d) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(e) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.
(f) Text which is shown in italics, shown in bold, shown IN
ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to
be conspicuous.
(g) The words "may not" are prohibitive and not permissive.
(h) The word "or" is not exclusive.
(i) Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person has
undertaken reasonable and diligent investigation with respect to the subject of
such "knowledge" (whether or not such investigation has actually been
undertaken).
(j) Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.
(k) The symbol "$" refers to United States Dollars.
(l) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.
(m) References to "this Agreement" or to any other Loan
Document is to the subject instrument as amended to the date on which
application of such reference is being made.
(n) Except as otherwise specifically provided, all
references to time are to Boston time.
(o) In the determination of any notice, grace, or
other period of time prescribed or allowed hereunder:
(i) Unless otherwise provided (I) the day of the act,
event, or default from which the designated period of time begins to
run shall not be included and the last day of the period so computed
shall be included unless such last day is not a Business Day, in which
event the last day of the relevant period shall be the then next
Business Day and (II) the period so computed shall end at 5:00 PM on
the relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to,
but excluding".
(iv) The word "through" means "to and including".
(p) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 15-14,
15-15 hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.
15-14. Intent. It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Collateral Agent.
(c) The security interests created by this Agreement secure
all Liabilities, whether now existing or hereafter arising.
(d) All reasonable costs and expenses incurred by each Agent
and, to the extent provide in Section 15-18 each Lender in connection with such
Person's relationship(s) with the Borrower shall be borne by the Borrower.
(e) Unless otherwise explicitly provided herein, any Agent's
consent to any action of the Borrower which is prohibited unless such consent is
given may be given or refused by the Administrative Agent in its sole discretion
and without reference to Section 2-15 hereof.
15-15. Liabilities Are Senior Indebtedness. No principal, premium (if
any), and interest (including any interest accruing subsequent to the entry of
an order for relief under the Bankruptcy Code, with respect to the Borrower, at
the rate provided for in the Loan Documents, whether or not such interest is an
allowed claim under applicable law) on, and all reasonable fees, reimbursement
and indemnity obligations, and all other obligations arising in connection with,
any indebtedness hereunder or under any of the Loan Documents is subordinated in
right of payment to any other Indebtedness of the Borrower. Without limiting the
generality of the foregoing, no Liability is subordinate to any liability,
obligation, or indebtedness of the Borrower under or on account of its 13%
Senior Subordinated Notes issued on or about the date of the Loan Agreement and
due December 31, 2001.
15-16. Right of Set-Off. Any and all deposits or other sums at any time
credited by or due to the Borrower from any Agent, any Lender, or any
participant (a "Participant") in the credit facility contemplated hereby or any
from any Affiliate of any Agent, any Lender, or any Participant and any cash,
securities, instruments or other property of the Borrower in the possession of
any Agent, any Lender, any Participant or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same), to the extent permitted by law, shall at all times constitute security
for all Liabilities and for any and all obligations of the Borrower to the
Agents and each Lender or any Participant or any such Affiliate and may be
applied or set off against the Liabilities and against such obligations at any
time, whether or not such are then due and whether or not other collateral is
then available to any Agent, any Lender, or any Participant or any such
Affiliate.
15-17. Maximum Interest Rate. Regardless of any provision of any Loan
Document, no Agent and no Lender shall be entitled to contract for, charge,
receive, collect, or apply as interest on any Liability, any amount in excess of
the maximum rate imposed by applicable law. Any payment which is made which, if
treated as interest on a Liability would result in such interest's exceeding
such maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were "Collateral."
15-18. Waivers.
(a) The Borrower (and all guarantors, endorsers, and sureties
of the Liabilities) make each of the waivers included in Section 15-18(b),
below, knowingly, voluntarily, and intentionally, and understands that each
Agent and each Lender, in entering into the financial arrangements contemplated
hereby and in providing loans and other financial accommodations to or for the
account of the Borrower as provided herein, whether not or in the future, is
relying on such waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND
SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) Except as otherwise specifically required
hereby, the right to notice and/or hearing prior to any Agent's
exercising of that Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH ANY AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY AGENT
OR ANY LENDER OR IN WHICH ANY AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON
AND ANY AGENT OR ANY LENDER (AND ANY AGENT AND EACH LENDER LIKEWISE
WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR
CONTROVERSY).
(iv) Any defense, counterclaim, set-off, recoupment,
or other basis on which the amount of any Liability, as stated on the
books and records of the Administrative Agent or any Lender, could be
reduced or claimed to be paid otherwise than in accordance with the
tenor of and written terms of such Liability.
(v) Any claim to consequential, special, or punitive
damages.
JBI APPAREL, INC.
Borrower
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
BANKBOSTON RETAIL FINANCE INC.
Administrative Agent
Collateral Agent
By /s/▇▇▇▇▇ ▇▇▇▇▇
Print Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
BACK BAY CAPITAL FUNDING LLC.
Term Lender
By /s/▇▇▇▇▇ ▇▇▇▇▇
Print Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
BANKBOSTON RETAIL FINANCE INC.
Working Capital Lender
By /s/▇▇▇▇▇ ▇▇▇▇▇
Print Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
EXHIBIT 6-12 (a)
FINANCIAL PERFORMANCE COVENANTS
1. EBITDA: The Borrower shall not permit or suffer its EBITDA, tested
monthly, on a cumulative year to date basis, to be less than one of the
following, nor less than such minima as may be set by the Administrative
Agent for subsequent fiscal periods based upon the Administrative
Agent's review of the Business Plan and annual forecast for such
subsequent fiscal periods:
MINIMUM EBITDA: $ Million
-------------------------
Fiscal Month Minimum EBITDA
1999 June 1.0
July 1.0
August 1.0
September 1.5
October 2.0
November 3.0
December 6.0
2000 January 5.5
2. Trade Support: The Borrower will not suffer or permit the aggregate of
its accounts payable, at the end of any month beginning with June, 1999,
to be less than 15% of its cost inventory.