EXHIBIT 10.16.14
GUARANTY AND SECURITY AGREEMENT
Borrowers: Tarrant Company Limited ("TCL"), Marble Limited ("ML") and
Trade Link Holdings Limited ("TLHL"), each corporations
organized under the laws of Hong Kong (TCL, ML and TLHL may
hereinafter be referred to collectively as "BORROWERS" and
individually as "BORROWER")
WHEREAS, the undersigned, TARRANT APPAREL GROUP, a California
corporation ("TAG"), FASHION RESOURCE (TCL), INC., a California corporation
("FR" and, together with TAG, collectively "PARENTS" and each individually, a
"PARENT") have requested that UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION
(herein called "LENDER") extend credit or make certain financial accommodations
to Borrowers, or renew or extend, in whole or in part, existing indebtedness or
financial accommodations of Borrowers to Lender, and Lender has extended credit
or extended or renewed existing indebtedness or made financial accommodations
and/or may in the future extend credit or extend or renew existing indebtedness
or make certain financial accommodations by reason of such request and in
reliance upon this Guaranty and Security Agreement;
NOW, THEREFORE, in consideration of ten dollars and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged the parties hereto agree as follows:
1. GUARANTEE. Each Parent hereby unconditionally guarantees to
Lender the punctual payment when due, whether by acceleration or otherwise, and
at all times thereafter, of all indebtedness and other obligations of Borrowers,
or any of them, or any other person, to Lender (herein called the "GUARANTEED
OBLIGATIONS") arising pursuant to that certain Loan Agreement relating to a
US$5,000,000 loan, dated the date hereof, among Borrowers and Lender, as it may
be modified, amended, restated, supplemented or expanded from time to time (the
"LOAN Agreement"), and the other Finance Documents. References herein to
Borrowers, or any of them, shall be deemed to include, without limitation, any
successor corporations to such Borrower or Borrowers. Any other capitalized
terms used herein, but not expressly defined herein, shall have the meanings
given to such terms in the Loan Agreement; provided that references therein to
"Borrower," "Borrowers," "Obligor" or "Obligors" shall be deemed references to
Parent or Parents for purposes hereof.
2. CONSENT OF PARENTS. Each of the Parents consents that, at any
time, and from time to time, either with or without consideration, the whole or
any part of any security now or hereafter held for any Guaranteed Obligations
may be substituted, exchanged, compromised, impaired, released, or surrendered
with or without consideration; the time or place of payment of any Guaranteed
Obligations or of any security thereof may be changed or extended, in whole or
in part; Borrowers, or any of them, may be granted indulgences generally; any of
the provisions of any note or other instrument evidencing any Guaranteed
Obligations or any security therefor may be modified or waived; any party liable
for the payment thereof (including but not being limited to any co-guarantor)
may be granted indulgences or released; neither the termination of existence,
bankruptcy nor lack of authority of Borrowers, or any of them, or any one or
more of the guarantors, including any of Parents, shall affect the continuing
obligation of any other guarantor, including any of the Parents, and that no
claim need be asserted against the personal representative, guardian, custodian,
trustee or debtor in bankruptcy or receiver of any deceased, incompetent,
bankrupt or insolvent guarantor; any deposit balance to the credit of Borrowers,
or any of them, or any other party liable for the payment of the Guaranteed
Obligations or liable upon any security therefor may be released, in whole or in
part, at, before and/or after the stated, extended or accelerated maturity of
any Guaranteed Obligations; and Lender may release, discharge, compromise or
enter into any accord and satisfaction with respect to any collateral for the
Guaranteed Obligations, or the liability of Borrowers, or any of them, or any of
the Parents, or any liability of any other person primarily or secondarily
liable on any of the Guaranteed Obligations, all without notice to or further
assent by the Parents, who shall remain bound hereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration, modification,
indulgence, release, discharge or accord and satisfaction.
3. PAYMENT UPON DEFAULT; SECURITY FOR GUARANTEED OBLIGATIONS. The
security interest and security title granted by each Parent under this Guaranty
and Security Agreement secures the payment of all of the Guaranteed Obligations.
Without limiting any of the foregoing, upon demand by Lender, made at any time
hereafter during which an "Event of Default" (as that term is defined and
described in the Loan Agreement) has occurred and is continuing, each Parent
agrees to pay to Lender upon demand the full amount which would be payable
hereunder by the Parents if all such Guaranteed Obligations were then due and
payable and this Guaranty and Security Agreement secures the payment of all
amounts which constitute part of the Guaranteed Obligations and would be owed by
the Borrowers or the Parents to the Lender but for the fact that they are
unenforceable or not allowable due to the existence of an insolvency proceeding
involving the Borrowers or the Parents.
4. GUARANTY OF PAYMENT. THIS IS A GUARANTY OF PAYMENT AND NOT OF
COLLECTION. The liability of the Parents on this Guaranty and Security Agreement
shall be continuing, direct and immediate and not conditional or contingent upon
either the pursuit of any remedies against Borrowers, or any of them, or any
other person or foreclosure of any security interests or liens available to
Lender, its successors, endorsees or assigns. Lender may accept any payment(s),
plan for adjustment of debts, plan of reorganization or liquidation, or plan of
composition or extension proposed by, or on behalf of, Borrowers, or any of
them, or any other guarantor without in any way affecting or discharging the
liability of the Parents hereunder. If the Guaranteed Obligations are partially
paid, the Parents shall remain jointly and severally liable for any balance of
such Guaranteed Obligations. This Guaranty and Security Agreement shall be
revived and reinstated in the event any payment received by Lender on any
Obligation is required to be repaid or rescinded under present or future federal
or state law or regulation relating to bankruptcy, insolvency or other relief of
debtors.
5. GRANT OF SECURITY. Each Parent hereby grants, assigns and
pledges to Lender a security interest in and security title to (together with a
right of setoff) the following property of such Parent, including, without
limitation, such Parent's right, title and interest in and to the following,
whether now owned and existing or hereafter created or acquired and wherever
located, and all substitutions therefor, accessions thereto and improvements
thereon (collectively, the "COLLATERAL"), to secure prompt repayment of any and
all of the Guaranteed Obligations and to secure prompt performance by such
Parent of its covenants and duties under the Guaranty and the other Finance
Documents to which it is a party:
(a) any and all Inventory (as defined in the Uniform
Commercial Code) financed pursuant to the Facility Agreement, acquired directly
or indirectly by such Parent from one or more Borrowers (the "Inventory");
(b) that certain deposit account maintained by TAG at
Union Bank of California, N.A., Account Number 2100716472 and any proceeds
thereof; and
(c) proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance covering
any or all of the foregoing, and any and all accounts, books, general
intangibles, inventory, investment property, negotiable collateral, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
To the extent not prohibited by law, each of the Parents hereby grants
to Lender a security interest in and security title and hereby assigns, pledges,
transfers and conveys to Lender any balance or deposit accounts of such Parent,
whether such accounts be general or special, or individual or multiple party,
and upon all drafts, notes, or other items deposited for collection or presented
for payment by such Parent with Lender, exclusive of any such property in the
possession or control of Lender as a fiduciary other than as agent, and Lender
may at any time, without demand or notice, appropriate and apply any of such to
the payment of any of the Guaranteed Obligations, as and when due, except for
other indebtedness, obligations and liabilities owing to Lender.
6. EACH PARENT REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) each Parent shall remain liable under any contracts and
agreements relating to the Collateral to the extent set forth therein to perform
all of the duties and obligations thereunder to the same extent as if this
Guaranty and Security Agreement had not been executed, (b) the exercise by
Lender of any of the rights hereunder shall not release either Parent from any
of its duties or obligations under any contracts and agreements relating to the
Collateral, and (c) Lender Group
2
shall not have any obligation or liability under any contracts and agreements
relating to the Collateral by reason of this Guaranty and Security Agreement,
nor shall Lender be obligated to perform any of the obligations or duties of
either Parent thereunder or to take any action to collect or enforce any claim
for payment assigned hereunder.
7. WAIVER. Each of the Parents expressly waives: (a) notice of
acceptance of this Guaranty and Security Agreement and of all extensions or
renewals of credit or other financial accommodations to Borrowers, or any of
them; (b) presentment and demand for payment of any of the Guaranteed
Obligations; (c) protest and notice of dishonor or of default to the Parents or
to any other party with respect to any of the Guaranteed Obligations or with
respect to any security therefor; (d) any invalidity or disability in whole or
in part at the time of the acceptance of, or at any time with respect to, any
security for the Guaranteed Obligations or with respect to any party primarily
or secondarily liable for the payment of Guaranteed Obligations to Lender; (e)
the fact that any security for the Guaranteed Obligations may at any time or
from time to time be in default or be inaccurately estimated or may deteriorate
in value for any cause whatsoever; (f) any diligence in the creation or
perfection of a security interest or collection or protection of or realization
upon the Guaranteed Obligations or any security therefor, any liability
hereunder, or any party primarily or secondarily liable for the Guaranteed
Obligations or any lack of commercial reasonableness, except to the extent
required by applicable law, in dealing with any security for the Guaranteed
Obligations; (g) any duty or obligation on the part of Lender to ascertain the
extent or nature of any security for the Guaranteed Obligations, or any
insurance or other rights respecting such security, or the liability of any
party primarily or secondarily liable for the Guaranteed Obligations, or to take
any steps or actions to safeguard, protect, handle, obtain or convey information
respecting, or otherwise follow in any manner, any such security, insurance or
other rights; (h) all benefits and defenses it may have under California Civil
Code Sections 2845, 2849 and 2850 or any similar laws of Georgia or any other
jurisdiction with respect to its obligations under this guaranty, including any
duty or obligation of Lender to proceed to collect the Guaranteed Obligations
from, or to commence an action against, Borrowers, or any of them, any other
guarantor, or any other person, or to resort to any security or to any balance
of any deposit account or credit on the books of Lender in favor of Borrowers,
or any of them, or any other person, or pursue any other rights or remedy for
the undersigned's benefit, despite any notice or request of the Parents to do
so; (i) any rights of the Parents pursuant to Official Code of Georgia Section
10-7-24 or any similar or subsequent law; (j) the right to assert any of the
benefits under any statute providing appraisal or other rights which may reduce
or prohibit any deficiency judgments in any foreclosure or other action; (k) all
other notices to which the Parents might otherwise be entitled; and (l) demand
for payment under this Guaranty and Security Agreement. Each of the Parents
hereby expressly waives, for Lender's benefit and the benefit of Borrowers, or
any of them, and any other guarantor, maker or endorser of the Guaranteed
Obligations, until the termination of this Guaranty and Security Agreement and
the full payment of the Guaranteed Obligations any and all claims or actions
against Borrowers, or any of them, any other guarantor, maker or endorser of the
Guaranteed Obligations and any and all rights of recourse against any property
or assets of Borrowers, or any of them, any other guarantor, maker or endorser
of the Guaranteed Obligations (including, without limitation, any security for
the Guaranteed Obligations) arising out of or related to any payment made by the
Parents under this Guaranty and Security Agreement, including, without
limitation, any claim of the Parents for subrogation, reimbursement, exoneration
or indemnity that the Parents may have against Borrowers, or any of them, or any
other guarantor, maker or endorser of the Guaranteed Obligations and any benefit
of, and any other right to participate in, any security for the Guaranteed
Obligations or any guaranty of the Guaranteed Obligations now or hereafter held
by Lender.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Parent hereby
represents, warrants and covenants as follows:
(a) The exact legal name of such Parent is set forth in
the introductory paragraph of this Guaranty and Security Agreement, and such
Parent does not conduct as of the date hereof, and, during the five-year period
immediately preceding the date hereof, has not conducted, business under any
trade name or other fictitious name other than those that may be set forth on
SCHEDULE 1 attached hereto. The Internal Revenue Service taxpayer identification
number of each Parent is set forth on SCHEDULE 1.
(b) All of the Inventory of each Parent, other than
Inventory in transit, is located in the United States at the places specified in
SCHEDULE 2 attached hereto. The chief place of business and chief executive
office of each Parent is at the address set forth on SCHEDULE 2. The offices
where each Parent keeps records concerning its Collateral are located at the
addresses specified in SCHEDULE 2 attached hereto. None of the Collateral of
either Parent is evidenced by a promissory note or other instrument, other than
a note or other
3
instrument which has been delivered to Lender. Each Parent covenants and agrees
that it will not (i) maintain Collateral at any location other than those listed
on SCHEDULE 2 or in transit between such locations, (ii) otherwise change or add
to any of such locations, or (iii) change the location of its principal place of
business or chief executive office from the locations identified as such on
SCHEDULE 2, unless it gives Lender at least twenty (20) days' prior written
notice thereof and executes any and all financing statements and other documents
that Lender reasonably requests in connection therewith.
(c) SCHEDULE 3 attached hereto sets forth a true,
complete and correct list of (i) all leases for real property on which Inventory
of such Parent is stored (together with the name and mailing address of each
lessor with respect thereto) and (ii) the name and address of each location at
which Inventory of such Parent is stored with a reprocessor, warehouseman or
other bailee (together with the name and address of each reprocessor,
warehouseman or bailee with respect thereto).
(d) As of the date hereof, no Parent owns any real
property.
(e) This Guaranty and Security Agreement creates a valid
security interest in the Collateral of such Parent to the extent a security
interest therein can be created under Article 9 of the Uniform Commercial Code
(the "CODE"), securing the payment of the Guaranteed Obligations, and all
filings and other actions necessary or desirable to perfect and protect such
security interest have been duly taken or will have been taken upon the filing
of Uniform Commercial Code financing statements listing the applicable Parent,
as debtor, and Lender, as secured party, with the Secretary of State of the
State of California, except for any action necessary to perfect Lender's
security interest in any Collateral to the extent a security interest therein is
not perfected by the filing of a financing statement under the Code. Upon the
making of such filings, Lender shall have a perfected security interest in the
Collateral of the applicable Parent to the extent such security interest can be
perfected by the filing of a financing statement under the Code.
(f) The parties intend that all of the Collateral shall
remain personal property regardless of the manner of its attachment or
affixation to real property.
(g) At any time upon the request of Lender, such Parent
shall execute and deliver to Lender all financing statements, continuation
financing statements, fixture filings, security agreements, pledges,
assignments, endorsements of certificates of title, applications for title,
affidavits, reports, notices, schedules of accounts, letters of authority and
all other documents that Lender reasonably may request, in form satisfactory to
Lender, to perfect and continue perfected the liens of Lender in the Collateral,
and in order to fully consummate all of the transactions contemplated by the
Loan Agreement and under the other Finance Documents.
(h) Each Parent is a corporation duly incorporated or a
corporation duly organized and validly existing and in good standing under the
laws of the State of California having the power and authority to own its assets
and to conduct the business and operations which it conducts or proposes to
conduct.
(i) Each Parent has full power and authority to enter
into and perform this Guaranty and Security Agreement and any other document to
be entered into by it pursuant thereto and has taken all necessary corporate or
other action to authorize the execution, delivery and performance of each such
document.
(j) All actions, conditions and things required by all
applicable laws and regulations to be taken, fulfilled, obtained or done in
order (i) to enable each Parent lawfully to enter into, exercise its rights
under and perform and comply with its obligations under this Guaranty and
Security Agreement and any other document to be entered into pursuant thereto
and (ii) to ensure that those obligations are valid, legally binding and
enforceable in accordance with their respective terms.
(k) The execution by each Parent of, and the exercise by
such Parent of its rights and performance of or compliance with its obligations
under this Guaranty and Security Agreement do not and will not (i) violate (A)
any law or regulation to which it or any of its assets is subject or (B), to an
extent or in a manner which has or could have a material adverse effect on it,
any agreement to which it is a party or which is binding on it or its assets or
(ii) conflict with its organizational documents and in particular will not cause
any limit on the
4
borrowing or other powers of any of the Parents or the exercise of such powers
by its board of directors to be exceeded.
(l) The obligations of each Parent under this Guaranty
and Security Agreement are legal, valid and binding and enforceable in
accordance with their respective terms;
(m) Except as disclosed in writing and attached hereto
and agreed by Lender prior to the date of this Guaranty and Security Agreement,
no Parent is involved or engaged in any litigation, arbitration or
administrative proceedings (whether as plaintiff or defendant) which, if
adversely determined, would be reasonably likely to have a material adverse
effect on the Parents taken as a whole nor, to the best of its knowledge is any
such litigation, arbitration or administrative proceedings threatened, nor are
there any circumstances likely to give rise to any such litigation, arbitration
or proceedings.
(n) No Parent is in breach of or default under any
agreement or arrangement or any statutory or legal requirement to an extent or
in a manner which has or could reasonably be expected to have a material adverse
effect on the Parents taken as a whole and no Event of Default has occurred and
is continuing.
(o) No encumbrance exists over the present or future
assets of any Parent except for encumbrances permitted in Section 8(jj)(vii).
(p) The execution by each Parent of each of this Guaranty
and Security Agreement and the exercise by each such Parent of its rights and
performance of or compliance with its obligations thereunder will not result in
the existence of or oblige any Parent to create any encumbrance over all or any
of its present or future assets except for encumbrances permitted herein.
(q) The financial statements of each Parent were prepared
in accordance with GAAP and give a true and fair view of the financial condition
of the Parents at the date as of which they were prepared and the results of the
Parent's business and operations during the financial year then ended and
disclose or reserve against all liabilities (contingent or otherwise) of each
Parent as at that date and all unrealized or anticipated losses from any
commitment entered into by each member of the Group and which existed on that
date.
(r) No Parent has any indebtedness except for
indebtedness permitted herein and indebtedness as of the date hereof disclosed
in such Parent's most recent 10-K filed with the Securities and Exchange
Commission for the most recent Financial Year and the 10-Qs and 8-Ks filed with
the Securities and Exchange Commission for the most recent Financial Year,
copies of which has been provided to Lender.
(s) Each Parent is in compliance in all material respects
with applicable Environmental Laws and no condition exists or act or event has
occurred which could give rise to any material breach of, or any material
liability of any kind under, any Environmental Laws.
(t) Each Parent is in possession of all Environmental
Authorizations required for the conduct of its business or operations (or any
part thereof) and no Parent has breached any of the terms or conditions of any
such Environmental Authorization, except where any failure to possess any such
Environmental Authorization or any breach thereof could not reasonably be
expected to have a material adverse effect on the Parents taken as a whole.
(u) No Parent has received any summons, complaint, order
or similar written notice that it is not in compliance with, or any public
authority is investigating its compliance with, any Environmental Laws or that
it is or may be liable to any other person as a result of a potential or actual
discharge of a Hazardous Substance; and
(v) No Parent has received notice that its present or
past operations is the subject of any investigation by any public authority
evaluating whether any remedial action is needed to respond to a potential or
actual discharge of a Hazardous Substance.
5
(w) To the knowledge of the Parents, upon due inquiry, no
Hazardous Substance has at any time been used, disposed of, generated, stored,
transported, dumped, released, deposited, buried, discharged or emitted at, on,
from or under any premises owned, leased, occupied or controlled by any Parent.
(x) No Parent has entered into any negotiations or
settlement agreements with any person (including, without limitation, any prior
owner of its property) imposing material obligations or liabilities on it with
respect to any remedial action in response to the potential or actual discharge
of a Hazardous Substance or environmentally related claim;
(y) Each Parent has filed all tax returns and other
reports required to be filed and has paid all taxes due and payable by it (save
where the same are being contested in good faith and by appropriate proceedings
and where adequate reserves are being maintained with respect thereto) and no
material claims are being asserted with respect to taxes save for normal
assessments.
(z) There has been no material adverse change in the
financial condition of any Parent since the date to which the most recent
financial statements delivered to Lender were made up nor in the consolidated
financial condition, business, assets or operations of the Parents since that
date.
(aa) All information provided by any Parent to Lender from
time to time in connection herewith was true and correct in all material
respects as at its date or as at the date it was provided and did not at that
date omit anything material and no adverse change has occurred since such date
which renders any such information misleading in a material respect; in addition
full disclosure has been made to Lender prior to the date hereof of all other
facts in relation to the assets of the Parents as are material and ought
properly to be made known to any person proposing to advance moneys or make
facilities available to the Parents and to enable a true and correct view of
such assets to be obtained and all expressions of expectation, intention, belief
and opinion contained therein were correct in all material respects and honestly
made on reasonable grounds after due and careful enquiry.
(bb) No Parent has done or omitted to do or suffered
anything to be done or not to be done which has or might render any policies of
insurance taken out by it void or voidable and, to the best of its knowledge,
information and belief, there are no circumstances which would or might give
rise to any material claim under any such policies of insurance.
(cc) All necessary licenses, consents and authorizations
have been obtained by each Parent for the carrying on of its business and
operations as the same are currently carried on in all material respects and are
in full force and effect and there are no circumstances which indicate that any
of such licenses, consents and authorizations are likely to be revoked in whole
or in part in the ordinary course of events the effect of which revocation would
be likely to have a material adverse effect on any Parent.
(dd) No Parent has taken any corporate action nor have any
other steps been taken or legal proceedings been started or (to the best of such
Parent's knowledge and belief) threatened against any Parent for its winding-up,
dissolution or re-organization (other than for the purposes of a bona fide
solvent scheme of reconstruction or amalgamation previously approved in writing
by Lender) or for the appointment of a receiver, administrator, administrative
receiver, trustee or similar officer of it or of any or all of its assets.
(ee) The Parents shall maintain, at all times, books,
records and accounts which are complete and correct in all material respects and
in relation to which timely entries are made of their transactions in accordance
with GAAP. The Parents shall, by means of appropriate entries, reflect in such
accounts and in all financial statements proper liabilities and reserves for all
taxes and proper provision for depreciation and amortization of any property or
asset and bad debts, all in accordance with GAAP.
(ff) The Parents shall without notice following the
occurrence of a Default which is continuing, or otherwise upon receiving not
less than forty-eight (48) hours' notice from Lender at any reasonable time and
by arrangement with the relevant Parent, permit and procure that each Parent
permits Lender or any person authorized by Lender to have access to its premises
and accounting records and to make extracts from and ▇▇▇▇
▇
copies of its accounting records and to discuss any matter with any of its
personnel and officers and make such inquiries as Lender may reasonably require
from time to time, the reasonable costs and expenses properly incurred thereby
to be for the account of the relevant Parent.
(gg) [Intentionally omitted].
(hh) Each of the Parents shall deliver to Lender in
sufficient copies for Lender:
(i) as soon as the same become available, but in
any event within 100 days after the end of each Financial Year, its financial
statements for such Financial Year together with the audited accounts of each
Parent for such Financial Year;
(ii) as soon as the same become available, but in
any event within 45 days of the end of each Management Accounting Period, its
Management Accounts as at the end of and for that Management Accounting Period,
and a consolidation of those Management Accounts showing the financial position
for the Financial Year to date;
(iii) together with the delivery of the Management
Accounts, a compliance certificate duly signed by one of its directors and its
chief financial or accounting officer confirming that, at all times during the
relevant Management Accounting Period, all the financial covenants set out
herein have been fully complied with;
(iv) at the same time as sent to its shareholders
or creditors generally, any circular, document or other written information sent
to its shareholders or creditors as such; and
(v) from time to time on the request of Lender,
such information about the business, operations and financial condition of each
Parent as Lender may reasonably require.
(ii) Each Parent shall ensure that:
(i) each set of financial statements delivered
by it is prepared using the same accounting principles and policies as were used
in the preparation of its original financial statements delivered to Lender and
gives a true and fair view of the financial condition of the relevant Parent and
of the result of its business and operations during such period;
(ii) each set of financial statements delivered
by it to Lender pursuant to (gg)(i) above has been audited by its Auditors and
each set of Management Accounts delivered by it has been certified as being
correct by the relevant Parent, acting through its chief financial or accounting
officer, subject to normal year-end adjustments.
(jj) Each Parent undertakes that:
(i) it will obtain, comply with the terms of and
do all that is necessary to maintain in full force and effect all
authorizations, approvals, licenses and consents required by all applicable laws
and regulations to enable it lawfully to enter into, perform and comply with its
obligations hereunder or any document to be entered into pursuant hereto or to
ensure the legality, validity, enforceability or admissibility in evidence of
such documents and, if different, its jurisdiction of incorporation and any
jurisdiction in which any of its assets may be situated;
(ii) it will maintain policies of insurance on
and in relation to its business and assets with financially sound and reputable
insurers acceptable to Lender against such risks and to such extent as is usual
for companies carrying on a business such as that carried on by each Parent
whose practice is not to self insure;
7
(iii) it will comply in all material respects with
all applicable laws and regulations including, without limitation, any
applicable Environmental Laws;
(iv) it has the right to conduct its business and
operations as they are conducted in all applicable jurisdictions and will do all
things necessary (including compliance with all terms and conditions of any
licenses and consents) to obtain, preserve and keep in full force and effect all
rights, licenses and authorizations (including, without limitation, all
Environmental Authorizations) and consents as are necessary for the conduct of
such business and operations;
(v) it will duly and punctually pay and
discharge (A) all taxes imposed upon it or its properties (save where the same
are being contested in good faith and by appropriate proceedings and where
adequate reserves are being maintained with respect thereto) and (B) all lawful
claims which, if unpaid, would by law become encumbrances upon any of the
Collateral;
(vi) it will promptly notify Lender in writing
(in reasonable detail and setting out the action that is proposed to be taken in
relation to it) of the occurrence of any Default and, as soon as reasonably
practicable following receipt of a written request to that effect from Lender,
confirm to Lender that, save as previously notified to Lender or as notified in
such confirmation, no Default has occurred.
(vii) it will not, without the prior consent of
Lender, create, agree to create or permit to subsist any encumbrance on or over
its respective assets to secure any indebtedness of any person other than the
following:
(A) any encumbrance on or over the
assets of any Parent subsisting at the date of this Guaranty
and Security Agreement and agreed to by Lender (including the
security in favor of GMAC as specified or referred to in the
Intercreditor Agreement and the security interest of ▇.▇.
▇▇▇▇▇▇▇ & Company, as agent, in the Subordinated Collateral
(as defined in that certain Intercreditor Agreement dated
December 14, 2004, among GMAC, the Lender, ▇.▇. ▇▇▇▇▇▇▇ &
Company, as agent for itself and the Debenture Holders (as
defined therein), and TAG), provided that, except with the
prior consent of Lender, the principal, capital or nominal
amount secured by any such encumbrance may not be increased
beyond the maximum amount which may be secured by the relevant
encumbrance at the date hereof;
(B) liens arising solely by operation
of law incurred in the ordinary course of business and not in
connection with the borrowing of money, for sums not yet
overdue;
(C) encumbrances arising out of title
retention provisions in a supplier's standard conditions of
supply (any such standard conditions to have been approved by
Lender) in respect of goods acquired by the relevant person in
the ordinary course of trading; and
(D) any other encumbrance created or
outstanding with the prior written consent of Lender.
(viii) without the prior consent of Lender (which
may be subject to, inter alia, the application of all proceeds of a disposal
towards prepayment of the Obligations in such manner as Lender may reasonably
require), it will not (whether by a single transaction or a number of related or
unrelated transactions and whether at one time or over a period of time), sell,
transfer, assign, lease out, lend or otherwise dispose of (whether outright, by
a sale and repurchase or sale and leaseback arrangement or otherwise) any part
of its assets (other than any sale of goods or services in the ordinary course
of its business) having an aggregate value in excess of $1,000,000 in any one
Financial Year.
(ix) it will not incur or maintain any
indebtedness other than:
(A) indebtedness guaranteed hereunder;
8
(B) the guarantee by the Parents of the
indebtedness under the Facility Agreement and the Facility
Documents (as defined in the Facility Agreement);
(C) suppliers' credit extended in the
ordinary course of trading and on arms' length terms;
(D) indebtedness between members of the
Group as disclosed to and permitted by Lender;
(E) loans from its major shareholders
(provided that all such loans are subordinated to the
guaranteed indebtedness hereunder;
(F) indebtedness to GMAC as specified
or referred to in the Intercreditor Agreement;
(G) indebtedness of TAG to the
Debenture Holders in an aggregate principal amount outstanding
not to exceed the sum of $10,000,000 at any time; and
(H) loans by the Parents, or either of
them, to any other person not in excess of $1,000,000 in the
aggregate at any given time.
(x) it will not make any loans, grant any credit
(save in the ordinary course of trading) or give any guarantee to or for the
benefit of any person or otherwise voluntarily assume any liability, whether
actual or contingent, in respect of any obligation of any other person (save as
required hereunder) in excess of US$1 million in aggregate.
(xi) it will ensure that there is no material
change in the nature of its business or operations or the business or operations
of the Group taken as a whole (whether by a single transaction or a number of
related or unrelated transactions, whether at one time or over a period of time
and whether by disposal, acquisition or otherwise).
(xii) it will not, without the prior approval of
Lender, change, and will procure that no other member of the Group changes, its
accounting reference date.
(xiii) save with Lender's prior written consent, it
will not, directly or indirectly, organize or acquire any Subsidiary (other than
those in existence as at the date hereof and which have been advised to Lender
in writing).
(xiv) save with Lender's prior written consent, it
will not make any acquisitions of a capital asset, enter into any finance lease
or any other capital asset commitment, or otherwise make any capital expenditure
involving payments in excess of $5,000,000 in the aggregate in any Financial
Year, other than any budgeted capital expenditure which has been approved by
Lender.
(xv) Unless Lender shall be satisfied in its
reasonable determination of the compliance and anticipated continued compliance
with all financial ratios set out herein, it will not pay, make or declare any
dividend or other distribution nor repay or permit to be repaid any unsecured
loan stock or other subordinated indebtedness.
(xvi) it will not make any change in its capital
structure or its jurisdiction of formation save where made with the prior
consent of Lender, not to be unreasonably withheld or delayed.
Each of the representations and warranties set forth herein will be correct and
complied with on the date hereof and will also be correct and complied with each
date on which a Letter of Credit is issued or requested to be issued as if
repeated then by reference to the then existing circumstances. The undertakings
herein shall remain in force from the date hereof and so long as any amount is
outstanding hereunder.
9
9. FURTHER ASSURANCES.
(a) Each Parent agrees that from time to time, at its own
expense, such Parent will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary or that Lender
may reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable Lender to exercise and
enforce its rights and remedies hereunder with respect to any of the Collateral.
Without limiting the generality of the foregoing, each Parent shall upon
Lender's request, execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or as Lender may request, in order to perfect and preserve the security interest
granted or purported to be granted hereby.
(b) Each Parent hereby authorizes Lender and appoints
Lender its attorney-in-fact to file one or more financing or continuation
statements, and amendments thereto, relating to all or any part of the
Collateral without its signature where permitted by law. A photocopy or other
reproduction of this Guaranty and Security Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
10. CONSIDERATION. Each of the Parents expressly represents and
acknowledges that any loans or other financial accommodations by Lender to
Borrowers, or any of them, are and will be to the direct interest and advantage
of such Parent.
11. AGENT APPOINTED ATTORNEY-IN-FACT. Each Parent hereby
irrevocably makes, constitutes and appoints Lender, and its successors or
assigns, as its attorney-in-fact, with full authority in the place and stead of
such Parent and in the name of such Parent or otherwise, at such time as an
Event of Default has occurred and is continuing under the Loan Agreement, to
take any action and to execute any instrument which Lender may deem necessary or
advisable to accomplish the purposes of this Guaranty and Security Agreement,
including, without limitation:
(a) to ask, demand, collect, ▇▇▇ for, recover,
compromise, receive and give acquittance and receipts for moneys due and to
become due under or in connection with the Collateral of such Parent;
(b) to receive and open all mail addressed to such Parent
and to notify postal authorities to change the address for the delivery of mail
to such Parent to that of Lender;
(c) to file any claims or take any action or institute
any proceedings which Lender may deem necessary or desirable for the collection
of any of the Collateral of such Parent or otherwise to enforce the rights of
Lender with respect to any of the Collateral of such Parent;
(d) make, settle and adjust all claims under such
Parent's policies of insurance and make all determinations and decisions with
respect to such policies of insurance; and
(e) to use any labels, patents, trademarks, trade names,
URLs, domain names, industrial designs, copyrights, advertising matter or other
industrial or intellectual property rights, in advertising for sale and selling
Inventory and other Collateral of such Parent.
12. NO WAIVER BY LENDER. No delay or failure on the part of Lender
in the exercise of any right or remedy shall operate as a waiver thereof, and no
single or partial exercise by Lender of any right or remedy shall preclude other
or further exercise thereof or the exercise of any other right or remedy. For
purposes of this Guaranty and Security Agreement, the term "Guaranteed
Obligations" shall include all obligations arising under the Loan Agreement and
the other Finance Documents, notwithstanding any right or power of Borrowers, or
any of them, or anyone else to assert any claim or defense as to the invalidity
or unenforceability thereof, and no such claim or defense shall impair or affect
the obligations and liabilities of the Parents hereunder. Without limiting the
generality of the foregoing, this Guaranty and Security Agreement covers all
Guaranteed Obligations purporting to
10
be made on behalf of such Borrowers by any officer or agent of the same, without
regard to the actual authority of such officer or agent.
13. REMEDIES. Upon the occurrence and during the continuance of an
Event of Default:
(a) Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, in the other Finance
Documents, or otherwise available to it, all the rights and remedies of a
secured party on default under the Code in effect in the State of Georgia from
time to time or any other applicable jurisdiction. Without limiting the
generality of the foregoing, each Parent expressly agrees that in any such event
Lender without demand for performance or other demand, advertisement or notice
of any kind (except a notice specified below of time and place of public or
private sale or as expressly required by the Loan Agreement) to or upon such
Parent or any other person (all and each of which demands, advertisements and
notices are hereby expressly waived to the maximum extent permitted by the Code
and other applicable law), may take immediate possession of the Collateral and
(i) require such Parent to, and such Parent hereby agrees that it will at its
own expense and upon request of Lender forthwith, assemble all or part of the
Collateral as directed by Lender and make it available to Lender at one or more
locations where such Parent regularly maintains Inventory and (ii) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Lender's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as Lender may deem commercially reasonable. Each Parent agrees that, to the
extent notice of sale shall be required by law, at least ten (10) calendar days'
notice to such Parent of the time and place of any public sale or the time after
which any private sale is to be made shall constitute a reasonable
"authenticated notification of disposition" within the meaning of Section 9-611
of the Uniform Commercial Code, as in effect from time to time in any applicable
jurisdiction. Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Lender may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned. Lender is hereby granted a license or other
right to use, without charge, such Parent's labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks and
advertising matter, URLs, domain names, industrial designs, other industrial or
intellectual property or any property of a similar nature, whether owned by such
Parent or with respect to which such Parent has rights under license, sublicense
or other agreements, as it pertains to the Collateral, in preparing for sale,
advertising for sale and selling any Collateral, and such Parent's rights under
all licenses and all franchise agreements shall inure to the benefit of Lender.
(b) Any cash held by Lender as Collateral and all cash
proceeds received by Lender in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral may, in the discretion of
Lender, be held by Lender as Collateral for, and/or then or at any time
thereafter be applied in whole or in part by Lender against, all or any part of
the Guaranteed Obligations in such order as may be set forth in the Loan
Agreement. Any surplus of such cash or cash proceeds held by Lender and
remaining after payment in full of all the Guaranteed Obligations shall be
delivered to either Parent.
(c) Each Parent hereby acknowledges that the Guaranteed
Obligations arose out of a commercial transaction, and agrees that if an Event
of Default shall occur and be continuing Lender shall have the right to an
immediate writ of possession without notice of a hearing. Lender shall have the
right to the appointment of a receiver for the properties and assets of such
Parent, and such Parent hereby consents to such rights and such appointment and
hereby waives any objection such Parent may have thereto or the right to have a
bond or other security posted by Lender in connection therewith.
14. REMEDIES CUMULATIVE. Each right, power, and remedy of Lender
as provided for in this Guaranty and Security Agreement or in the other Finance
Documents or now or hereafter existing at law or in equity or by statute or
otherwise shall be cumulative and concurrent and shall be in addition to every
other right, power, or remedy provided for in this Guaranty and Security
Agreement or in the other Finance Documents or now or hereafter existing at law
or in equity or by statute or otherwise, and the exercise or beginning of the
exercise by Lender of any one or more of such rights, powers or remedies shall
not preclude the simultaneous or later exercise by Lender of any or all such
other rights, powers or remedies.
11
15. APPLICATION OF PAYMENTS. Any amount received by Lender from
whatever source and applied by it toward the payment of the Guaranteed
Obligations shall be applied in such order of application as Lender may from
time to time elect.
16. INDEMNITY AND EXPENSES.
(a) Each Parent agrees upon demand to pay to Lender the
amount of any and all reasonable expenses, including, without limitation, the
fees and expenses of its counsel incurred and of any experts and agents, which
Lender may incur in connection with (i) the administration of this Guaranty and
Security Agreement, (ii) the custody, preservation, use or operation of, or,
upon an Event of Default, the sale of, collection from, or other realization
upon, any of the Collateral in accordance with this Guaranty and Security
Agreement and the other Finance Documents, (iii) the exercise or enforcement of
any of the rights of Lender hereunder or (iv) the failure by either Parent to
perform or observe any of the provisions hereof.
(b) Each Parent agrees to indemnify Lender from and
against all claims, lawsuits and liabilities (including reasonable attorneys'
fees actually incurred) growing out of or resulting from this Guaranty and
Security Agreement (including, without limitation, enforcement of this Guaranty
and Security Agreement) or any other Finance Document to which such Parent is a
party, except claims, losses or liabilities resulting from the gross negligence
or willful misconduct of the party seeking indemnification as determined by a
final non-appealable order of a court of competent jurisdiction.
17. POSSESSION UNTIL DEFAULT. Until an Event of Default shall
occur and be continuing, except as otherwise provided in this Guaranty and
Security Agreement, the Loan Agreement or other Finance Documents, each Parent
shall have the right to possession and enjoyment of the Collateral for the
purpose of conducting the ordinary course of its business, subject to and upon
the terms hereof and of the Loan Agreement and other Finance Documents.
18. AMENDMENTS; ETC. No waiver of any provision of this Guaranty
and Security Agreement, and no consent to any departure by the Parents herefrom,
shall in any event be effective unless the same shall be in writing and signed
by Lender, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No amendment of
any provision of this Guaranty and Security Agreement shall be effective unless
the same shall be in writing and signed by Lender and the Parents.
19. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be given in the form and manner prescribed for
notices in the Loan Agreement at the address for the Parents set forth on
Schedule 2 hereto and at the at Lender's address specified in the Loan
Agreement, or, as to any party, at such other address as shall be designated by
such party in a written notice to the other party.
20. CONTINUING SECURITY INTEREST: ASSIGNMENTS UNDER LOAN
AGREEMENT. This Guaranty and Security Agreement shall create a continuing
security interest in the Collateral and shall (i) terminate only when the
Guaranteed Obligations (other than those Guaranteed Obligations which may
survive termination of the Loan Agreement as provided for therein) have been
paid in full and the Loan Agreement shall have been terminated, (ii) be binding
upon the Parents, their successors and assigns and (iii) inure to the benefit
of, and be enforceable by, Lender and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (iii), Lender may assign
or otherwise transfer all or any portion of its rights and obligations under the
Loan Agreement (including, without limitation, all, or any ratable part, of the
Guaranteed Obligations) and the other rights and obligations of Lender under the
Loan Agreement and the other Finance Documents to any other Person, and such
other Person shall thereupon become vested with all the benefits in respect
thereof granted to Lender herein or otherwise. Upon the payment in full of the
Guaranteed Obligations and all other amounts payable under this Guaranty and
Security Agreement and the expiration or termination of the Loan Agreement, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the applicable Parent. No transfer or renewal,
extension, assignment or termination of this Guaranty and Security Agreement or
of the Loan Agreement, any other Finance Document or any other instrument or
document executed and delivered by the Parents to Lender nor any additional
extension of credit by Lender to the Borrowers, nor the taking of further
security, nor the retaking or re-delivery of the Collateral to the Parents by
Lender, nor any other act of Lender shall release the Parents, or either of
them, from any obligation, except a release or discharge executed in writing by
Lender with respect to such
12
obligation or payment of such obligation or upon full satisfaction of all the
Guaranteed Obligations. Lender shall not by any act, delay, omission or
otherwise, be deemed to have waived any of their rights or remedies hereunder,
unless such waiver is in writing and signed by Lender and then only to the
extent therein set forth. A waiver by Lender of any right or remedy on any
occasion shall not be construed as a bar to the exercise of any such right or
remedy which Lender would otherwise have had on any other occasion.
21. SUCCESSORS AND ASSIGNS; JOINT AND SEVERAL UNDERTAKING. This
Guaranty and Security Agreement shall bind and inure to the benefit of Lender,
its successors and assigns, and likewise shall bind and inure to the benefit of
the Parents, their heirs, executors, administrators, successors and assigns. If
more than one person shall execute this Guaranty and Security Agreement or a
similar, contemporaneous guaranty, the term "undersigned" shall mean, as used
herein, all parties executing this Guaranty and Security Agreement and such
similar guaranties and all such parties shall be liable, jointly and severally,
one with the other with Borrowers, or any of them, for each of the undertakings,
agreements, obligations, covenants and liabilities provided for herein with
respect to the Parents. This Guaranty and Security Agreement contains the entire
agreement and there is no understanding that any other person shall execute this
or a similar guaranty. Furthermore, no course of dealing between the parties, no
usage of trade, and no parol or extrinsic evidence shall be used to supplement
or modify any terms of this Guaranty and Security Agreement; nor are there any
conditions to the complete effectiveness of this Guaranty and Security
Agreement.
22. GOVERNING LAW; SEVERABILITY. This Guaranty and Security
Agreement shall be deemed accepted by Lender in the State of Georgia. The
parties agree that this Guaranty and Security Agreement shall be deemed, made,
delivered, performed and accepted by Lender in the State of Georgia and shall be
governed by the laws of the State of Georgia. Wherever possible each provision
of this Guaranty and Security Agreement shall be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Guaranty and Security Agreement shall be prohibited by or invalid under such
law, such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty and Security Agreement.
23. JURISDICTION. Each of the Parents (a) submits to personal
jurisdiction in the State of New York, the courts thereof and any United States
District Court sitting therein, for the enforcement of this Guaranty and
Security Agreement, (b) waives any and all personal rights under the law of any
jurisdiction to object on any basis (including, without limitation,
inconvenience of forum) to jurisdiction or venue within the State of New York
for the purpose of litigation to enforce this Guaranty and Security Agreement,
(c) agrees that service of process may be made upon the Parents by first class
mail, postage prepaid, addressed to either Parent at the latest address of
either Parent known to Lender (or at such other address as the Parents may
specify for such purpose by notice to Lender) and (d) to the extent permitted by
law, waives trial by jury in any action or proceeding with respect hereto.
Nothing herein contained, however, shall prevent Lender from bringing any action
or exercising any rights against any security and against Borrowers, or any of
them, and against any assets of Borrower, within any other state or
jurisdiction.
24. COLLECTION COSTS. Each of the Parents agrees, in the event
that this Guaranty and Security Agreement is enforced or collected by law or
through an attorney at law, to pay all costs of collection actually incurred by
Lender, including, without limitation, attorneys' fees actually incurred.
25. VOIDED PAYMENTS. Notwithstanding anything herein to the
contrary, to the extent that any of the Parents makes any payment on the
Guaranteed Obligations which, within twelve (12) months of the date of such
payment, is subsequently invalidated, declared to be fraudulent, avoidable or
preferential, set aside or is required to be repaid to a trustee, receiver, the
estate of such undersigned or any other party under any bankruptcy act, state or
Federal law, common law or equitable cause (such payment being hereinafter
referred to as a "VOIDED PAYMENT"), then to the extent of such Voided Payment
that portion of the Guaranteed Obligations which had been previously satisfied
by such Voided Payment shall be revived and continue in full force and effect as
if such Voided Payment had never been made. In the event that a Voided Payment
is sought to be recovered from Lender, an "Event of Default" under the Loan
Agreement shall be deemed to have occurred and to be continuing from the date of
such recovery from Lender of such Voided Payment until the full amount of such
Voided Payment is fully and finally restored to Lender and until such time the
provisions of this Guaranty and Security Agreement, and the guaranty provided
herein, shall be in full force and effect.
13
26. PAYMENTS. All payments made by any Parent hereunder will be
made without setoff, counterclaim, or other defense, except as required by
applicable law other than for Taxes (as defined below). All such payments will
be made free and clear of, and without deduction or withholding for, any present
or future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction (other than the
United States) or by any political subdivision or taxing authority thereof or
therein (other than of the United States) with respect to such payments and all
interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as "TAXES"). If any Taxes are so levied or
imposed, each Parent agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due
under this Guaranty and Security Agreement or under any note, including any
amount paid pursuant to this Section 265 after withholding or deduction for or
on account of any Taxes, will not be less than the amount provided for herein;
PROVIDED, HOWEVER, that Parents shall not be required to increase any such
amounts payable to Lender if the increase in such amount payable results from
Lender's own willful misconduct or gross negligence. Parents will furnish to
Lender as promptly as possible after the date the payment of any Taxes is due
pursuant to applicable law certified copies of tax receipts evidencing such
payment by Parents.
27. ADDITIONAL WAIVERS.
(a) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER
OR OTHER PROVISION SET FORTH IN THIS GUARANTY AND SECURITY AGREEMENT, EACH OF
THE PARENTS HEREBY WAIVES, TO THE MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY
LAW, ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY
ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2787 THROUGH AND INCLUDING SECTION
2855, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580A, 580B, 580C, 580D, AND
726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE OR ANY SIMILAR LAWS
OF GEORGIA OR ANY OTHER JURISDICTION.
(b) Without waiving the generality of any other waiver or
other provision set forth in this Guaranty and Security Agreement, each of the
Parents also agrees to the following waivers:
(i) each of the Parents agrees that Lender's
right to enforce this Guaranty and Security Agreement is absolute and is not
contingent upon the genuineness, validity or enforceability of the Loan
Agreement or any of the Security Documents. Each of the Parents waives all
benefits and defenses it may have under California Civil Code Section 2810 or
any similar laws of Georgia or any other jurisdiction and agrees that Lender's
rights under this Guaranty and Security Agreement shall be enforceable even if
no Borrower had any liability at the time of execution of the Loan Agreement or
any of the other Finance Documents or later ceases to be liable;
(ii) each of the Parents waives all benefits and
defenses it may have under California Civil Code Section 2809 or any similar
laws of Georgia or any other jurisdiction with respect to its obligations under
this Guaranty and Security Agreement and agrees that Lender's rights under the
Loan Agreement and the other Finance Documents will remain enforceable even if
the amount secured by the Security Documents is larger in amount and more
burdensome than that for which Borrowers are responsible; and
(iii) each of the Parents agrees that Lender may
exercise its rights under this Guaranty and Security Agreement without taking
any action against any Borrower, any other guarantor of any Borrower's
obligations under the Loan Agreement or any of the other Finance Documents, any
pledgor of collateral for any person's obligations to Lender or any other person
in connection with the Obligations, and without proceeding against or exhausting
any security or collateral Lender holds.
(c) Each of the Parents waives all rights and defenses
arising out of an election of remedies by Lender, even though that election of
remedies, such as a nonjudicial foreclosure with respect to security for a
guaranteed obligation, has destroyed Lender's rights of subrogation and
reimbursement against Borrowers or the Parents, or any of them, by the operation
of Section 580(d) of the California Code of Civil Procedure or otherwise. Each
of the Parents waives all rights and defenses that the Parents to the extent the
Guaranteed Obligations may be secured by real property. This means, among other
things: (i) Lender may collect from the
14
Parents without first foreclosing on any real or personal property collateral
pledged by any other obligor; (ii) If Lender forecloses on any real property
collateral pledged by any other obligors: (A) the amount of the Guaranteed
Obligations may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth more than the sale
price and (B) Lender may collect from the Parents even if Lender, by foreclosing
on the real property collateral, has destroyed any right the Parents may have to
collect from the other obligors. This is an unconditional and irrevocable waiver
of any rights and defenses the Parents may have because the Guaranteed
Obligations are secured by real property. These rights and defenses include, but
are not limited to, any rights or defenses based upon Section 580a, 580b, 580d
or 726 of the California Code of Civil Procedure.
(d) The paragraphs in this Guaranty and Security
Agreement which refer to certain sections of the California Civil Code and the
California Code of Civil Procedure are included in this Guaranty and Security
Agreement solely out of an abundance of caution and shall not be construed to
mean that any of the above-referenced provisions of California law are in any
way applicable to this Guaranty and Security Agreement.
28. LENDER'S DUTIES. The powers conferred on Lender hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon Lender to exercise any such powers. Except for the safe custody of any
Collateral in its actual possession and the accounting for moneys actually
received by it hereunder, Lender shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral. Lender shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its actual possession if such Collateral is accorded treatment substantially
equal to that which Lender accords its own property. If either Parent fails to
perform any agreement contained herein, Lender may itself perform, or cause
performance of, such agreement, and the reasonable expenses of Lender incurred
in connection therewith shall be payable by such Parent and the Borrowers as
part of the Guaranteed Obligations.
29. BLOCKED ACCOUNT AGREEMENT. All amounts which shall be
deposited into the deposit account described in Section 5(b) (the "Blocked
Account") hereof shall be under the dominion and control of TAG unless and until
the occurrence and continuance of an Event of Default, whereupon amounts
deposited in such Blocked Account shall immediately be under the dominion and
exclusive control of Lender pursuant to the terms of the applicable blocked
account agreement, and as provided in the applicable blocked account agreement,
TAG shall have no right to withdraw such amounts thereafter without the consent
of Lender.
30. LANDLORD AGREEMENTS. Each Parent agrees that it shall not
renew (nor permit any automatic renewal of) any existing lease, or enter into
any new lease, for real property unless prior to executing or effecting such
renewal or proposed lease such Parent shall have delivered to Lender evidence
that such lessor shall execute and deliver to Lender a collateral access and
landlord subordination agreement in form and substance reasonably satisfactory
to Lender.
31. QUARTERLY FIELD AUDITS: Lender shall be entitled to conduct a
quarterly field audit of the books and accounting records of any of the Parents,
such field audits to be conducted at any time within the fourteen (14) day
period following the end of each calendar quarter (namely 31st March, 30th June,
30th September and 31st December). Each of the Parents shall permit Lender or
any person authorized by Lender to have access to its premises and accounting
records and to make extracts from and take copies of its accounting records and
to discuss any matter with any of its personnel and officers and make such
inquiries as Lender may reasonably require from time to time, the reasonable
costs and expenses properly incurred thereby to be for the account of the
relevant Parent, provided that such costs and expenses in respect of each
quarterly field audit conducted by Lender shall not exceed $750 per person per
day plus any out-of-pocket costs and expenses.
32. MISCELLANEOUS.
(a) This Guaranty and Security Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original,
but all such separate counterparts shall together constitute but one and the
same instrument. Delivery of an executed counterpart of this Guaranty and
Security
15
Agreement by facsimile shall be equally as effective as delivery of an original
executed counterpart of this Guaranty and Security Agreement.
(b) The paragraph titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
(c) Time is of the essence of this Guaranty and Security
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
16
IN WITNESS WHEREOF, each of the Parents has executed this Guaranty and
Security Agreement under seal, as of December 31, 2004.
"GUARANTORS"
Signed and delivered TARRANT APPAREL GROUP
in the presence of:
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
Address:
Notary Public
----------------------------------
My Commission Expires:
-------------------------
[NOTARY SEAL]
Signed and delivered FASHION RESOURCE (TCL), INC.
in the presence of:
By: /S/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: CHIEF FINANCIAL OFFICER
Address:
Notary Public
----------------------------------
My Commission Expires:
-------------------------
[NOTARY SEAL]
Accepted and agreed:
UPS CAPITAL GLOBAL TRADE FINANCE CORPORATION
By: /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: DIRECTOR OF PORTFOLIO MANAGEMENT
17
SCHEDULE 1
NAME AND FEIN FOR PARENTS
NAME FEIN
---------------------------- ----------
Tarrant Apparel Group ▇▇-▇▇▇▇▇▇▇
Fashion Resource (TCL), Inc. ▇▇-▇▇▇▇▇▇▇
18
SCHEDULE 2
CHIEF EXECUTIVE OFFICES, RECORDS LOCATIONS
CHIEF EXECUTIVE OFFICES, RECORDS LOCATION:
------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
INVENTORY LOCATIONS:
------------------------------------------
Please see Schedule 3
19
SCHEDULE 3
LEASES OF REAL PROPERTY; INVENTORY LOCATIONS
LEASED REAL PROPERTY:
---------------------
Lease, dated as of January 1, 1994, by and between GET, a California
corporation, as Lessor and Fashion Resource, Inc. (now known as Tarrant
Apparel Group), as Lessee. The premises are located at ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇. Contact: ▇▇▇▇▇▇
▇▇▇▇, as President of Lessor, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
INVENTORY LOCATIONS:
--------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ITC Warehouse
▇▇▇ ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FARO Services, Inc./FARO Logistics Solutions, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Vista Industrial Package, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
UPS - New Jersey
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
UPS - Columbus
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ #▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ADI Pacific
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Transgroup
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
FMI NJ
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
20
