1
Exhibit 10.24
LOAN AND SECURITY AGREEMENT
by and among
CONGRESS FINANCIAL CORPORATION
and
HANOVER DIRECT PENNSYLVANIA, INC.,
BRAWN OF CALIFORNIA, INC.,
GUMP'S BY MAIL, INC.
GUMP'S CORP.
THE COMPANY STORE, INC.
TWEEDS, INC.
LWI HOLDINGS, INC.
AEGIS CATALOG CORPORATION
HANOVER DIRECT VIRGINIA INC.
HANOVER REALTY, INC.
Dated as of November 14, 1995
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INDEX
SECTION 1. DEFINITIONS........................................................ 2-31
SECTION 2. CREDIT FACILITY.................................................... 34
2.1 Revolving Loans.................................................... 34
2.2 Lending Sublimits.................................................. 37
2.3 Letter of Credit Accommodations.................................... 38
2.4 Term Loans......................................................... 42
2.5 Maximum Credit..................................................... 43
2.6 Reserves........................................................... 43
2.7 Fees............................................................... 44
2.8 Interest........................................................... 45
2.9 Conduct of Accounts; Cross-Collateralization....................... 46
2.10 Use of Proceeds.................................................... 49
SECTION 3. CONDITIONS PRECEDENT TO LOANS
AND OTHER FINANCIAL ACCOMMODATIONS................................. 51
3.1 Conditions to Loans................................................ 51
3.2 Additional and Continuing Condition................................ 54
SECTION 4. COLLATERAL......................................................... 54
4.1 Security Interests in Borrowers' Property.......................... 54
4.2 Guarantees......................................................... 56
4.3 Security Interests in Property of Guarantors....................... 56
SECTION 5. REPRESENTATIONS AND WARRANTIES..................................... 56
5.1 Organization....................................................... 56
5.2 Corporate Power and Authority...................................... 57
5.3 Capitalization; Solvency........................................... 58
5.4 Compliance with Other
Agreements and Applicable Law...................................... 58
5.5 Environmental Compliance........................................... 59
5.6 Governmental Approval.............................................. 61
5.7 Chief Executive Offices; Collateral Locations...................... 61
5.8 Priority of Liens; Title to Properties............................. 62
5.9 Taxes.............................................................. 62
5.10 Litigation......................................................... 63
5.11 Intellectual Property.............................................. 63
5.12 Employee Benefits.................................................. 64
5.13 Investment Company................................................. 65
5.14 Regulation G; Securities
Exchange Act of 1934 ........................................... 65
5.15 No Material Adverse Change......................................... 66
5.16 Financial Statements............................................... 66
5.17 Disclosure......................................................... 66
5.18 Labor Disputes..................................................... 67
5.19 Corporate Name; Prior Transactions................................. 67
5.20 [Reserved]......................................................... 67
5.21 Schedule of Indebtedness........................................... 67
(i)
3
5.22 Certain Affiliated Ownership........................................................ 68
5.23 Common Enterprise................................................................... 68
5.24 Subordination of Certain Obligations................................................ 69
SECTION 6. ADDITIONAL COVENANTS................................................................ 69
6.1 Tradenames.......................................................................... 69
6.2 Subsidiaries........................................................................ 70
6.3 Indebtedness........................................................................ 71
6.4 Limitation on Liens................................................................. 73
6.5 Loans; Investments; Guarantees; Etc................................................. 74
6.6 Transactions with Affiliates........................................................ 77
6.7 Maintenance of Existence............................................................ 79
6.8 Sale and Leasebacks................................................................. 79
6.9 Sale of Assets, Consolidation,
Merger, Dissolution, Etc. .......................................................... 79
6.10 Compliance with Laws, Regulations, Etc.............................................. 80
6.11 Compliance with Environmental Laws.................................................. 80
6.12 Payment of Taxes and Claims......................................................... 82
6.12A Accounts Covenants.................................................................. 83
6.13 Properties in Good Condition........................................................ 85
6.14 Insurance........................................................................... 87
6.15 Appraisals.......................................................................... 88
6.16 Compliance with ERISA............................................................... 89
6.17 Notice of Default................................................................... 90
6.18 Financial Statements and Other Information.......................................... 90
6.19 Consolidated Working Capital........................................................ 94
6.20 Consolidated Net Worth.............................................................. 95
6.21 Further Assurances.................................................................. 95
6.22 Sales of Outdated and Surplus Inventory............................................. 95
6.23 Maintenance and Delivery of Customer Lists; MACS
Software............................................................................ 96
6.24 Rental or License of Customer Lists................................................. 96
6.25 No Termination or Amendment of Credit Card
Agreements.......................................................................... 97
6.26 Obligations to be Senior Indebtedness............................................... 97
6.27 Mail Order Joint Ventures........................................................... 97
6.28 9.25% Notes......................................................................... 99
6.29 Litigation Notices.................................................................. 99
SECTION 7. EVENTS OF DEFAULT AND REMEDIES...................................................... 100
7.1 Events of Default................................................................... 100
7.2 Remedies............................................................................ 102
SECTION 8. COLLECTION AND ADMINISTRATION....................................................... 105
8.1 Receipts............................................................................ 105
8.2 Depository Accounts; Blocked Accounts;
Customer Prepayment Accounts........................................................ 107
8.3 Right of Inspection; Access......................................................... 108
8.4 Specific Powers..................................................................... 108
(ii)
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SECTION 9. EFFECTIVE DATE; TERMINATION; COSTS;
MISCELLANEOUS........................................................................ 109
9.1 Term................................................................................. 109
9.2 Expenses and Additional Fees......................................................... 112
9.3 Survival of Agreement................................................................ 113
9.4 No Waiver; Remedies Cumulative....................................................... 113
9.5 Notices.............................................................................. 114
9.6 Entire Agreement..................................................................... 114
9.7 Amendments and Waivers............................................................... 115
9.8 Applicable Law....................................................................... 115
9.9 Successors and Assigns............................................................... 115
9.10 Severability......................................................................... 115
9.11 Headings............................................................................. 116
9.12 Security Interests of Participants................................................... 116
9.13 WAIVER OF JURY TRIAL................................................................. 116
9.14 Waiver of Counterclaims;
Jurisdiction; Service of Process..................................................... 116
9.15 Counterparts......................................................................... 117
(iii)
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INDEX TO EXHIBITS
EXHIBIT A JURISDICTIONS OF
QUALIFICATION Section 5.1
EXHIBIT B-1 EXISTING SUBSIDIARIES Section 5.1
EXHIBIT B-2 EXISTING MAIL ORDER Section 5.1
JOINT VENTURES
EXHIBIT B-3 EXISTING RESTAURANT Section 5.1
BUSINESS SUBSIDIARIES
EXHIBIT B-4 ADDITIONAL EXISTING NON- SECTION 5.1
GUARANTOR SUBSIDIARIES
EXHIBIT C PRINCIPAL PLACES OF BUSINESS, Sections 1.35, 5.7
CHIEF EXECUTIVE OFFICES
AND LOCATIONS OF COLLATERAL
EXHIBIT D EXISTING LIENS Section 5.8
EXHIBIT E LIST OF HANOVER DEBT Section 3.1(b)
INSTRUMENTS
EXHIBIT F PENDING LITIGATION Section 5.10
EXHIBIT G TRADENAMES Sections 5.19, 6.1
EXHIBIT H-1 EXISTING INDEBTEDNESS Section 5.21
EXHIBIT H-2 EXISTING LETTERS OF CREDIT Section 5.21
UNDER NATIONS BANK CREDIT
AGREEMENT
EXHIBIT H-3 EXISTING INTERCOMPANY Sections 5.21,
INDEBTEDNESS 6.5(b)
EXHIBIT I FORM OF MORTGAGEE/LANDLORD Section 1.35, 6.8
WAIVER, ACCESS AND USE
AGREEMENT
EXHIBIT J LIST OF LABOR DISPUTES Section 5.18
EXHIBIT K ENVIRONMENTAL DISCLOSURE Section 5.5
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LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT, dated as of November __, 1995, by and
among CONGRESS FINANCIAL CORPORATION, a California corporation ("Lender", as
hereinafter further defined), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania
corporation ("HDPI", as hereinafter further defined), BRAWN OF CALIFORNIA, INC.,
a California corporation ("Brawn", as hereinafter further defined), GUMP'S BY
MAIL, INC., a Delaware corporation ("GBM", as hereinafter further defined),
GUMP'S CORP., a California corporation ("Gump's", as hereinafter further
defined), THE COMPANY STORE, INC., a Wisconsin corporation ("TCS", as
hereinafter further defined), TWEEDS, INC., a Delaware corporation ("Tweeds", as
hereinafter further defined), LWI HOLDINGS, INC., a Delaware corporation ("LWI",
as hereinafter further defined), AEGIS CATALOG CORPORATION, a Delaware
corporation ("Aegis", as hereinafter further defined), HANOVER DIRECT VIRGINIA
INC. ("HDV", as hereinafter further defined) and HANOVER REALTY, INC., a
Virginia corporation ("Hanover Realty", as hereinafter further defined; and
together with HDPI, Brawn, GBM, Gump's, TCS, Tweeds, LWI, Aegis and HDV, each
individually a "Borrower" and collectively, "Borrowers", as hereinafter further
defined).
W I T N E S S E T H :
WHEREAS, Borrowers, together with certain other members of the
Affiliated Borrower Group (as hereinafter defined), operate a direct mail order
and retail merchandise business; and
WHEREAS, Borrowers have requested that Lender make loans and advances
and provide other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and advances and provide
such financial accommodations, subject to the terms and conditions set forth
herein and in the other Financing Agreements (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements herein contained and other good and valuable consideration, the
adequacy and receipt of which is hereby acknowledged, Lender and Borrowers
hereby mutually covenant, warrant and agree as follows (the covenants,
warranties and agreements of Borrowers, except as otherwise expressly set forth
herein, being joint and several):
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SECTION 1. DEFINITIONS
For the purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Account Debtor" shall mean account debtor, as such term is defined
in the UCC, including, without limitation, each debtor or obligor in any way
obligated on or in connection with any Account.
1.2 "Accounts" shall mean, as to any Person, all present and future
accounts, contract rights, chattel paper, documents and instruments of such
Person, as such terms are defined in the UCC, including, without limitation, all
obligations for the payment of money arising out of such Person's sale, lease or
other disposition of goods or other property or rendition of services. Such term
also includes, without limitation, credit card receivables and all credit card
charge records and other evidences of credit card transactions.
1.3 "Accounts Loan Financial Test" shall mean Lender's determination,
as to any Program Quarter, whether Hanover's actual consolidated net income or
loss before taxes for the applicable Measurement Quarter represents a positive
net income before taxes equal to or greater than, or a net loss equal to, or a
smaller net loss than, the applicable Adjusted Forecast Amount for such
Measurement Quarter.
1.4 "Accounts Loan Formula" shall have the meaning given in Section
2.1(a) hereof.
1.5 "Adjusted Forecast Amount" shall mean, as to a Measurement Quarter,
Hanover's projected consolidated net income or loss before taxes for such
Measurement Quarter, as shown on the financial budget of Hanover approved by
Hanover's Board of Directors and delivered to Lender prior to the commencement
of the fiscal year in which the Measurement Quarter occurs (or such updated
financial projection for the Measurement Quarter approved by Hanover's Board of
Directors, submitted to and approved by Lender in writing, in its sole
discretion, expressly for purposes of calculating the Adjusted Forecast Amount
for one or more Measurement Quarters, in lieu of the originally-delivered
financial projections as aforesaid), multiplied by (i) eighty-five (85%)
percent, if the projected amount for such Measurement Quarter is a positive
amount, or (ii) one hundred fifteen (115%) percent, if the projected amount for
such Measurement Quarter is a negative amount (loss).
1.6 "Aegis" shall mean Aegis Catalog Corporation, a Delaware
corporation, and its successors and assigns.
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1.7 "Aegis Eligible Inventory" shall mean all finished goods Inventory
of Aegis in the merchandise categories of safety and anti-hazard products,
personal fitness, home and personal care, and comfort and security products,
offered for sale by Aegis in its "The Safety Zone" catalog, or such other
catalogs created or acquired by Aegis covering substantially similar merchandise
which Aegis has requested Lender to include in this Inventory category.
1.8 "Affiliate" shall mean with respect to a specified Person, a
partnership, corporation or any other Person which, directly or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with such Person, and without limiting the generality of the
foregoing, includes, with respect to a Person (a) any other Person which
beneficially owns or holds twenty percent (20%) or more of any class of voting
securities or other securities convertible into voting securities of such Person
or beneficially owns or holds twenty percent (20%) or more of any other equity
interests in such Person, (b) any other Person with respect to which such Person
beneficially owns or holds twenty percent (20%) or more of any class of voting
securities or other securities convertible into voting securities of such
Person, or owns or holds twenty percent (20%) or more of the equity interests of
the other Person, and (c) any director, officer or employee of such Person.
Notwithstanding the foregoing, for so long as any one or more members of the NAR
Group shall have the ability, through ownership of voting securities, by
contract or otherwise, directly or indirectly, to elect a majority of the Board
of Directors of any member of the Affiliated Borrower Group, each member of the
NAR Group shall in any event be deemed an Affiliate of each Person which is a
member of, or an Affiliate of any member of, the Affiliated Borrower Group
pursuant to the preceding definition. For purposes of this definition, the term
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
1.9 "Affiliated Borrower Group" shall mean each of Borrowers, Hanover
and any other entity that is now or hereafter a direct or indirect Subsidiary of
Hanover, other than a Non-Guarantor Subsidiary.
1.10 "Appraisal" the appraisal dated September 28, 1995, prepared by
the Appraiser with respect to Borrowers' Inventory, as updated by the Appraiser
from time to time as provided herein, in each case, in form, scope and
methodology acceptable to Lender.
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1.11 "Appraiser" shall mean ▇▇▇▇▇-▇▇▇▇▇▇ Appraisal Corporation, or such
other appraisal firm acceptable to Lender.
1.12 "Assignment of Partnership Interest" shall mean the Collateral
Assignment and Security Agreement of General Partnership Interest, dated of even
date herewith, made by Tweeds in favor of Lender, as the same now exists or may
hereafter be amended, supplemented, modified, renewed, restated or replaced.
1.13 "▇▇▇▇▇▇" shall mean, individually and collectively, ▇▇▇▇▇▇
Holdings, Inc., a Delaware corporation, and The ▇▇▇▇▇▇ Company, a South Dakota
corporation, and their respective successors and assigns.
1.14 "Banking Day" shall mean any day, other than Saturday or Sunday,
when Lender and commercial banks are open in New York, New York and the place(s)
where the bank account(s) designated by Borrowers and approved by Lender for the
disbursement of loans hereunder are located.
1.15 "Bankruptcy Code" shall mean the United States Bankruptcy Code,
being Title 11 of the United States Code as enacted in 1978, as the same may
have heretofore been or may hereafter be amended, recodified, modified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.16 "Blocked Accounts" shall have the meaning set forth in Section 8.2
hereof.
1.17 "Board" shall mean the Board of Governors of the Federal Reserve
System, and any successor or replacement board, governmental agency or other
entity having the same or similar authority and responsibilities.
1.18 "Borrowers" shall mean, individually and collectively, Revolving
Loan Borrowers and Term Loan Borrowers.
1.19 "Brawn" shall mean Brawn of California, Inc., a California
corporation, and its successors and assigns.
1.20 "Collateral" shall have the meaning set forth in Section 4 hereof.
1.21 "Congress" shall mean Congress Financial Corporation, a California
corporation, and its successors and assigns.
1.22 "Consolidated Net Worth" shall mean, as to any Person, at any
time, in accordance with generally accepted accounting principles, as in effect
from time to time consistently applied, on a consolidated basis for such Person
and its Subsidiaries, the amount equal to the result obtained by
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taking total assets and subtracting therefrom total liabilities of such Person
and its Subsidiaries; provided, however, that solely for purposes of calculating
Consolidated Net Worth of Hanover and its Subsidiaries as at the end of
Hanover's 1995 fiscal year, up to $4,500,000 in write-downs of Hanover's
deferred taxes asset, as required pursuant to Financial Accounting Standards No.
109, due to losses incurred by Hanover and its Subsidiaries in such fiscal year,
shall not be considered reductions of the deferred taxes asset of Hanover.
1.23 "Consolidated Working Capital" shall mean, as to any Person, at
any time, in accordance with generally accepted accounting principles as in
effect from time to time, consistently applied, on a consolidated basis for such
Person and its Subsidiaries, the amount equal to the difference between (a) the
aggregate net book value of all assets of such Person and its Subsidiaries, on a
consolidated basis, which would, in accordance with generally accepted
accounting principles as in effect from time to time, consistently applied, be
classified as current assets, calculating the book value of Inventory for this
purpose on a first-in-first-out basis and (b) all Indebtedness (including, for
this purpose, notwithstanding clause (c) of the definition of Indebtedness,
trade accounts payable incurred in the ordinary course of business whether
current or any number of days past due) of such Person and its Subsidiaries, on
a consolidated basis, which would in accordance with generally accepted
accounting principles as in effect from time to time, consistently applied, be
classified as current liabilities; provided, however, that solely for purposes
of calculating Consolidated Working Capital hereunder, the outstanding balance
of the Revolving Loans and Term Loans shall not be considered current
liabilities.
1.24 "Credit Card Agreements" shall mean, individually and
collectively, the Private Credit Card Agreement, the Third Party Credit Card
Agreements, together with all agreements now or hereafter entered into between
or among Lender and the parties to the Private Credit Card Agreement or Third
Party Credit Card Agreements.
1.25 "Credit Facility" shall mean, individually and collectively, the
Revolving Loans, the Letter of Credit Accommodations and the Term Loans.
1.26 "Customer Lists" shall mean the existing and future mailing and
customer lists used in the direct mail marketing business of Borrowers, together
with all software (including, without limitation, all manuals, upgrades,
modifications, enhancements and additions thereto), computer tapes, disks, other
electronic data storage media, documentation of file and record formats and
source code and all other property useful or necessary to gain access to,
transfer and fully utilize for all
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purposes, including, without limitation, analysis, cross-checking and
compilation of, and the sale, rental or license of such mailing and customer
lists, together with all updates and additions thereto, including, without
limitation, all such mailing and customer lists which may be purchased, created
or compiled in the future, but not including any customer lists owned by third
parties who are not Affiliates of Revolving Loan Borrowers, which are leased to,
or otherwise licensed for use by Revolving Loan Borrowers, with permission of
such third party owners.
1.27 "Customer List Escrow Agreement" shall mean the Customer and
Mailing List Escrow Agreement, dated on or about the date hereof, by and among
HDI on behalf of its Subsidiaries and Affiliates, Lender and a storage and
escrow agent acceptable to Lender, providing for, among other things, the
deposit in escrow of the Customer Lists and source and executable code,
documentation and related media for the then-current MACS system software
utilized by Borrowers ("MACS Software") with, and the storage of such Customer
Lists and MACS Software by, such agent, the obligation of Hanover, on behalf of
its Subsidiaries and Affiliates, including Revolving Loan Borrowers and certain
Guarantors, to update and deposit in escrow updated Customer Lists and MACS
Software periodically and for the storage and escrow agent to hold and store the
updated Customer Lists and MACS Software, and the right of Lender to obtain from
such agent possession of the Customer Lists and MACS Software, as such Escrow
Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.28 "DM Advertising" shall mean ▇.▇. Advertising, Inc., a New Jersey
corporation, and its successors and assigns.
1.29 "Deferred Billing Agreement" shall mean the letter agreement,
dated on or before the date hereof, by and among Litle and Hanover with respect
to Deferred Billing Option Programs of certain Borrowers, as the same now exists
or may hereafter be amended, modified, supplemented, extended, restated, renewed
or replaced.
1.30 "Deferred Billing Borrowers" shall mean, individually and
collectively, each Revolving Loan Borrower who sells goods under a Deferred
Billing Option Program.
1.31 "Deferred Billing Option Program" shall mean a deferred billing
option program from time to time made available by a Revolving Loan Borrower to
its mail order customers who wish to purchase merchandise from such Revolving
Loan Borrower offered for sale in its mail order catalogs pursuant to which (a)
such Revolving Loan Borrower, or Hanover as agent for such Revolving Loan
Borrower, upon the placement of an order by such customer, verifies with the
applicable Third Party Credit Card Issuer or
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its agent that such customer's bank credit card is valid, (b) after such
verification, such Revolving Loan Borrower ships the Inventory purchased by such
customer together with an invoice dated the sale date, (c) such Revolving Loan
Borrower completes the credit card transaction and sales records for such sales
in accordance with the Litle Agreements, (d) such sales are accepted by Litle
for purchase within ninety (90) days from the date of sale, and (e) Litle remits
payment for the sale to the Blocked Accounts one (1) business day following
purchase by Litle in accordance with the Litle Agreements.
1.32 "Early Termination Fee" shall have the meaning set forth in
Section 9.1(f) hereof.
1.33 "Eligible Deferred Billing Receivables" shall mean MasterCard/VISA
Receivables of Deferred Billing Borrowers arising from sales of merchandise
offered for sale under a Deferred Billing Option Program through mail order
catalogs of Deferred Billing Borrowers offering Eligible Inventory of Deferred
Billing Borrowers, and which Master Card/VISA Receivables are and continue to be
acceptable to Lender based on the criteria set forth below. In general, such
MasterCard/VISA Receivables shall be Eligible Deferred Billing Receivables if:
(a) such MasterCard/VISA Receivables arise from the
actual and bona fide sale and delivery to customers by Deferred Billing
Borrowers in the ordinary course of business, which sales are completed in
accordance with the terms and provisions contained in any agreements between
Deferred Billing Borrowers and their customers related thereto;
(b) the credit card transaction and sales records
evidencing such MasterCard/VISA Receivables are submitted to Litle by Deferred
Billing Borrowers and/or Hanover in its capacity as their agent in accordance
with the Deferred Billing Agreement and the other Litle Agreements;
(c) such MasterCard/VISA Receivables are purchased
by Litle at the end of the deferred submission period (which
shall not exceed ninety (90) days from the date of sale);
(d) Litle remits payment of the MasterCard/VISA
Receivables to the Blocked Account specified by Lender, within ninety-one (91)
days from the date of sale and, if earlier, one (1) business day after purchase
by Litle;
(e) such MasterCard/VISA Receivables comply with the
applicable terms and conditions contained in Section 6.12A of
this Agreement;
(f) Litle has not asserted a counterclaim, defense
or dispute, and does not have any right of setoff against such
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MasterCard/VISA Receivables, other than in respect of chargebacks for returns
and customer disputes in the ordinary course of business in accordance with the
terms of the Litle Agreements;
(g) there are no facts, events or occurrences which
would impair the validity, enforceability or collectability of such
MasterCard/VISA Receivables or reduce the amount payable or delay payment by
Litle or the purchase thereof;
(h) such MasterCard/VISA Receivables, until
purchased and paid for in full by Litle, are subject to the first priority,
valid and perfected security interest of Lender and any goods giving rise
thereto are not, and were not at the time of the sale thereof, subject to any
liens except those permitted in this Agreement;
(i) Lender shall have received, in form and
substance reasonably satisfactory to Lender, a Third Party Credit Card
Acknowledgement and a copy of the Deferred Billing Agreement, upon which Lender
is expressly permitted to rely, each duly authorized, executed and delivered by
Litle, and no cancellation, termination, or default by Litle or Hanover or any
Revolving Loan Borrower, or any suspension of Hanover or any Revolving Loan
Borrower, or any institution of or increase in reserves or designation of
special member status, shall have occurred under the Litle Agreements;
(j) neither Litle nor any officer or employee of
Litle with respect to such MasterCard/VISA Receivable is an officer, employee or
agent of or affiliated with a member of the Affiliated Borrower Group directly
or indirectly by virtue of family membership, ownership, control, management or
otherwise;
(k) there are no proceedings or actions which are
threatened or pending against Litle which might result in any material adverse
change in the financial condition of Litle or impair its ability to purchase and
pay for any Master Card/VISA Receivables.
General criteria for Eligible Deferred Billing Receivables may be established
and revised from time to time by Lender in good faith. Any Master Card/VISA
Receivables or other Accounts of Borrowers which are not Eligible Deferred
Billing Receivables shall nevertheless be part of the Collateral.
1.34 "Eligible Inventory" shall be determined by Lender from time to
time, and generally shall consist of Aegis Eligible Inventory, Gump's Eligible
Inventory, GBM Eligible Inventory, General Merchandise Inventory, Home
Furnishings Inventory, LWI Eligible Inventory, Men's Fashion Inventory, TCS
Eligible Inventory, Tweeds Eligible Inventory and Women's Fashion Inventory of
Revolving Loan Borrowers which are first quality,
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finished goods recorded and carried in a computerized perpetual inventory
accounting system, are located at Eligible Inventory Locations and held for
resale in the ordinary course of the business of Revolving Loan Borrowers.
Inventory acquired by Revolving Loan Borrowers under documentary letters of
credit issued as a Letter of Credit Accommodation pursuant to Section 2.3
hereof, which would otherwise be determined by Lender to be Eligible Inventory
in all respects, except that such Inventory is in transit to Eligible Inventory
Locations, shall be considered Eligible Inventory, if documents of title
covering such goods in form and substance satisfactory to Lender are in the
possession of Lender or its agent which shall, for these purposes, include the
bank issuing such Letter of Credit Accommodation if such issuer has been
reimbursed or paid by Lender with respect to drawings paid by the issuer under
such Letter of Credit Accommodation and the loan account of Revolving Loan
Borrower(s) requesting such Letter of Credit Accommodation has been charged for
the amounts so reimbursed or paid by Lender to such issuer. Standards of
eligibility may be fixed and revised from time to time solely by Lender in its
exclusive judgment. In determining eligibility, Lender may, but need not, rely
on reports and schedules of Inventory furnished to Lender by Revolving Loan
Borrowers, but reliance thereon by Lender from time to time shall not be deemed
to limit Lender's right to revise standards of eligibility and amounts of
Inventory deemed Eligible Inventory at any time. In general, except in Lender's
discretion, Eligible Inventory shall exclude (a) raw materials, work-in-process,
packaging and shipping materials, (b) Inventory located at retail stores of
Revolving Loan Borrowers, other than Eligible Inventory of Gump's located at the
Gump's Main Store, or Inventory located at the premises of third parties, except
for Inventory which is otherwise Eligible Inventory and is located on the
premises of any third parties which are Eligible Inventory Locations hereunder,
(c) Inventory subject to any Mail Order Joint Venture or other joint venture or
licensing agreement with a third party, (d) Inventory subject to a security
interest or lien in favor of any third party, including, without limitation, any
Inventory at any time, contrary to the provisions hereof, subject to a lien or
security interest in favor of the Private Credit Card Purchaser or any of the
parties to the Third Party Credit Card Agreements (the exclusion of any such
Inventory from Eligible Inventory shall not limit or impair any other rights of
Lender provided in this Agreement or the other Financing Agreements if any such
liens or security interests exist), (e) ▇▇▇▇ and hold goods, (f) Inventory of
Revolving Loan Borrowers which is not subject to the first priority perfected
security interest of Lender (subject to the provisions of Section 6.4 hereof),
(g) damaged or defective goods, (h) Inventory purchased on consignment, (i)
merchandise of Revolving Loan Borrowers, other than Gump's, that may otherwise
be Eligible Inventory but which is not among the product categories included in
the calculation of the Net Orderly Liquidation Value as set forth in the most
current Appraisal, (j)
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merchandise that may otherwise be Gump's Eligible Inventory but which is not
among the product categories included in the calculation of Net GOB Value as set
forth in the most current Appraisal, and (k) merchandise of Revolving Loan
Borrowers on hand six (6) months after the catalog through which it is offered
is discontinued or disposed of by a Revolving Loan Borrower. Any Inventory of
Revolving Loan Borrowers which Lender determines to be ineligible or
unacceptable for lending purposes at any time shall nevertheless be and remain
at all times part of the Collateral.
1.35 "Eligible Inventory Locations" shall mean (a) the fulfillment
centers or warehouses owned or leased by Revolving Loan Borrowers listed on
Exhibit C attached hereto and the Gump's Main Store, and (b) additional
fulfillment centers or warehouses first leased or owned by Revolving Loan
Borrowers after the date hereof, not located in the State of California, with
respect to the acquisition of which Revolving Loan Borrowers provide thirty (30)
days prior written notice to Lender; provided, however, as to both (a) and (b),
Eligible Inventory Locations shall not include the Gump's Main Store or any
fulfillment center or warehouse owned or leased by Revolving Loan Borrowers,
unless Revolving Loan Borrowers shall have delivered to Lender all instruments
and documents required by Lender to perfect or maintain perfection of Lender's
first priority security interest in and liens upon such Inventory, subject to no
other liens or claims, except those, if any, expressly permitted hereunder,
together with, and without limiting the foregoing, a written agreement in the
form of Exhibit I attached hereto or such other agreement in form and substance
satisfactory to Lender, from each owner, operator and mortgagee of such
location, as the case may be, pursuant to which such owner, operator or
mortgagee, if required by Lender: (i) acknowledges the first priority security
interest of Lender in such Inventory, (ii) agrees to waive any and all liens,
claims and rights of distraint such owner, operator or mortgagee may, at any
time, have against such Inventory, whether for unpaid rent, storage or
otherwise, and (iii) agrees to permit Lender access to the Inventory, and the
premises upon which such Inventory is located, for such time and upon such terms
as Lender shall require to exercise its rights and remedies under this
Agreement.
1.36 "Environmental Laws" shall mean all Federal, State and local laws,
rules, regulations, ordinances, and consent decrees relating to health,
hazardous substances, pollution and environmental matters, as now or at any time
hereafter in effect, applicable to the Affiliated Borrower Group's business and
facilities (whether or not owned by it), including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes into
the environment (including, without limitation, ambient air, surface water,
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16
ground water, land surface or subsurface strata) or otherwise relating to the
generation, manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals, or
hazardous, toxic or dangerous substances, materials or wastes.
1.37 "Equipment" shall mean, as to any Person, all of such Person's now
owned and hereafter acquired equipment and fixtures, of every kind and
description, wherever located, including, without limitation, any and all
equipment, telephones, telex and facsimile machines, machinery, computers,
computer hardware, vehicles, tools, dies, jigs, furniture, trade fixtures and
fixtures, all attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and all substitutions and replacements
thereof that are owned by such Person.
1.38 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same now exists or may hereafter from time to time be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
1.39 "Event of Default" shall have the meaning set forth in Section 7.1
hereof.
1.40 "Excess Availability" shall mean, at any time, the amount, if any,
as determined by Lender, by which:
(i) the amount of the Revolving Loans determined
by Lender to be available to Revolving Loan Borrowers pursuant to the Revolving
Loan Formulas (but not to exceed (A) in the case of each Revolving Loan
Borrower, the applicable lending sublimits hereunder, (B) in the case of
Revolving Loan Borrowers considered together, the Revolving Loan Limit) exceeds
(ii) the sum of:
(A) the amount of all outstanding and unpaid
Obligations of Revolving Loan Borrowers,
plus
(B) the aggregate amount of all reserves
established by Lender hereunder, plus
(C) the aggregate amount of accounts
payable of Borrowers more than sixty
(60) days past due, plus
(D) the aggregate amount of principal
payments due on or prior to, or
within thirty (30) days after, the
date of
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17
calculation, (x) on Indebtedness for
Borrowed Money of Borrowers, (y) on
Indebtedness for Borrowed Money of
any other member of the Affiliated
Borrower Group, and (z) for
dividends declared or otherwise
mandatorily payable by any member of
the Affiliated Borrower Group,
whether or not Borrowers are
obligated on such Indebtedness of,
and dividends declared or payable
by, such other member of the
Affiliated Borrower Group (other
than dividends declared and payable
solely in capital stock of the
Person declaring such dividend), but
excluding (I) any such principal
payments and dividends which are not
and will not be permitted hereunder
to be paid or funded directly or
indirectly by or through Borrowers
and (II) daily revolving loan
repayments due to Lender and to be
made through application of customer
remittances and other sales proceeds
in the ordinary course.
1.41 "Financing Agreements" shall mean this Agreement, the Mortgages,
the HDPI Term Note, the Hanover Realty Term Note, the Supplemental Security
Agreements, the Guarantees, the 9.25% Note Subordination Agreement, the Customer
List Escrow Agreement, the Third Party Credit Card Acknowledgments, the GECC
Lien Clarification Agreement, the Intercompany Subordination Agreement (referred
to in Section 3.1(b)), the General Security Agreements and the Assignment of
Partnership Interest, together with all supplements, agreements, documents and
instruments, heretofore, now or at any time hereafter executed and/or delivered
to Lender in connection therewith or otherwise relating to this Agreement, the
Obligations of Borrowers or Guarantors or the Collateral or Guarantor
Collateral, as this Agreement and the foregoing and such supplements,
agreements, documents and instruments now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.42 "GBM" shall mean Gump's By Mail, Inc., a Delaware corporation, and
its successors and assigns.
1.43 "GBM Eligible Inventory" shall mean all Inventory of GBM in the
merchandise categories or gifts, tabletop, interior design, outdoor furnishings,
stationery, decorative art, collectibles, home furnishings, home textiles,
apparel, jewelry and fashion, offered for sale by GBM in its "Gump's" and
"Gump's Interiors" catalog, or such other catalogs created or acquired by GBM
covering substantially similar merchandise which GBM has requested Lender to
include in this Inventory category.
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1.44 "GECC" shall mean General Electric Capital Corporation, a New York
corporation, and its successors and assigns.
1.45 "GECC Collateral" shall mean the following, wherever located,
unless excluded in the proviso below: (a) all GECC Accounts, including GECC
Accounts purchased by Borrowers from GECC pursuant to the GECC Account Purchase
Agreement, (b) the Written-off Accounts, (c) Account Documentation to the extent
pertaining to the GECC Accounts and the Written-off Accounts, (d) guaranties,
security interests, or other security held by or granted to Borrowers, any
Lessee or GECC by the Retail Sale Account Debtor or a guarantor of the Retail
Sale Account Debtor (other than Borrowers or any of their affiliates), as
security for or guaranteeing payment or performance of, any of the GECC Accounts
and the Written-off Accounts, (e) the GECC Reserve Balance, (f) all Borrowers'
right, title and interest in and to any and all contracts, whether now or
hereafter existing or acquired, with Lessees, but only the provisions of such
contracts, if any, which allow Borrowers to charge such Lessees for the unpaid
amount of GECC Accounts and the Written-off Accounts, (g) all Merchandise, the
Retail Sale of which has given rise to a GECC Account or a Written-off Account,
but only to the extent that such Merchandise is subject to a lien or security
interest in favor of Borrowers and then only to the extent such Merchandise is
not, and does not become, returned, repossessed or reclaimed goods in the
possession or under the control of Borrowers or Lender or other Inventory of
Borrowers, and (h) the proceeds of the foregoing in any form whatsoever not
excluded in the proviso below; provided, however, that the following property of
Borrowers, now owned or hereafter arising or acquired, shall not, in any event,
be included in the term GECC Collateral and shall be part of the Collateral of
Lender covered by this Agreement:
(i) all returned, repossessed or reclaimed goods in the
possession or under the control of Borrowers or Lender or other Inventory of
Borrowers;
(ii) all Customer Lists, mailing lists, catalogs,
promotional materials, trademarks, trade names, copyrights or other intellectual
property or the goodwill symbolized thereby;
(iii) all accounts, contract rights, instruments or
chattel paper which do not arise from the Retail Sale of Merchandise pursuant to
a Credit Agreement or a Lender Credit Card Agreement and all general intangibles
which do not consist of an obligation for the payment of money arising from the
Retail Sale of Merchandise pursuant to a Credit Agreement or Lender Credit Card
Agreement, except this clause (iii) shall not exclude the GECC Reserve Balance
and the Written-off Accounts (but the
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19
GECC Reserve Balance shall nevertheless be part of the Collateral);
(iv) all accounts, contract rights, instruments,
chattel paper or general intangibles arising from the Retail Sale of Merchandise
pursuant to a Credit Agreement or a Lender Credit Card Agreement which neither
(A) are purchased by GECC from Borrowers for New Value, nor (B) are established
or added by GECC for New Value under a Lender Credit Card Agreement, nor (C)
constitute security upon which New Value has otherwise been given by GECC to
Borrowers, in each case, pursuant to the GECC Account Purchase Agreement, except
this clause (iv) shall not exclude the Written-off Accounts or accounts charged
back to Borrowers by GECC or purchased by Borrowers pursuant to the GECC Account
Purchase Agreement;
(v) all accounts, contract rights, instruments,
chattel paper or general intangibles arising from the Retail Sale of Merchandise
under a Credit Agreement or a Lender Credit Card Agreement after non-renewal or
any termination of the GECC Account Purchase Agreement, whether at maturity or
by reason of default by Borrowers or otherwise, except for accounts, contract
rights, instruments and chattel paper arising from the Retail Sale of
Merchandise pursuant to a Credit Agreement or a Lender Credit Card Agreement, or
general intangibles which consist of an obligation for the payment of money
arising from the Retail Sale of Merchandise pursuant to a Credit Agreement or a
Lender Credit Card Agreement, which accounts, contract rights, instruments,
chattel paper or general intangibles are purchased by GECC from Borrowers for
New Value, or established or added by GECC for New Value under a Lender Credit
Card Agreement, or upon the security of which GECC has otherwise given New Value
to Borrowers, in any case during the ten (10) day period following the effective
date of non-renewal or any termination of the GECC Account Purchase Agreement,
provided that, in respect of the underlying Retail Sales, GECC has, prior to
such effective date of non-renewal or termination, given Borrowers its credit
authorization;
(vi) all accounts, contract rights, general
intangibles, chattel paper or instruments generated pursuant to
layaway plans;
(vii) all Non-Tendered Accounts; and
(viii) all products and proceeds, in whatever form,
of the foregoing types or items of property described in subparagraphs (i)
through (vii) above, other than the items or types of property expressly
excepted therefrom.
For purposes of the definition of GECC Collateral contained in this
Section 1.45, the following terms shall have the following meanings:
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(a) "Account Documentation" shall mean any and all
documentation of Borrowers relating to accounts, contract rights, instruments,
chattel paper and, to the extent consisting of an obligation for the payment of
money, general intangibles, in each case arising from the Retail Sale of
Merchandise, including, without limitation, customer applications, Credit
Agreements, Lender Credit Card Agreements, sales slips, delivery receipts,
billing statements, checks and stubs, and all correspondence, memoranda,
computer printouts, magnetic tapes, disks, or hardcopy formats, or any other
computer-readable data transmissions or software related thereto, all other
written material relating thereto, and any microfilm or microfiche copy of any
of the foregoing.
(b) "Borrowers" as used in the definition of GECC
Collateral and in the other definitions set forth in this Section 1.45 and in
the definition of GECC Lien Clarification Agreement, shall mean HDPI, Brawn, GBM
and Gump's (but such definition shall not limit the definition of Borrowers set
forth in Section 1.45 hereof for purposes of all other provisions of this
Agreement and the other Financing Agreements).
(c) "Credit Agreement" shall mean a credit agreement
initially between Borrowers and an Account Debtor pursuant to which an Account
Debtor may be permitted to purchase, from time to time, Merchandise from
Borrowers or any Lessee on credit, whether or not there is a finance charge
computed from time to time, and includes, without limitation, revolving charge
plans, extended payment plans and interest free plans.
(d) "GECC Account Purchase Agreement" shall mean that
certain Account Purchase Agreement, dated December 21, 1992, by and among
Debtor, Brawn, Hanover Direct, Inc. and GECC, as amended by that certain
Amendment to Account Purchase Agreement, dated as of July 12, 1993, as amended,
restated and renamed by that certain Amended and Restated Account Purchase
Agreement, dated as of April 25, 1994, as amended by Amendment No. 1 to Amended
and Restated Account Purchase Agreement, dated as of November, 1994, and as
amended by that certain Second Amendment to Account Purchase Agreement, made and
entered into as of June 1, 1995, and as amended by that certain Amendment No. 3
to Amended and Restated Account Purchase Agreement dated on or about the date
hereof, as the same may hereafter be amended and/or restated from time to time.
(e) "GECC Accounts" shall mean all Borrowers' accounts,
contract rights, instruments and chattel paper arising from the Retail Sale of
Merchandise pursuant to a Credit Agreement or a Lender Credit Card Agreement,
and general intangibles which consist of an obligation for the payment of money
arising from the Retail Sale of Merchandise pursuant to a Credit Agreement or a
Lender Credit Card Agreement, whether now
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existing or hereafter coming into existence, which accounts, contract rights,
instruments, chattel paper and general intangibles are purchased by GECC from
Borrowers for New Value, or established or added by GECC for New Value under a
Lender Credit Card Agreement, or upon the security of which GECC has otherwise
given New Value to Borrowers, in any case so purchased, established, added or
given pursuant to and during the term of the GECC Account Purchase Agreement or
during the ten (10) day period following the effective date of non-renewal or
any termination of the GECC Account Purchase Agreement, provided that, in
respect of the underlying Retail Sales, GECC has, prior to such effective date
of non-renewal or any termination of the GECC Account Purchase Agreement, given
Borrowers its credit authorization. Anything contained herein to the contrary
notwithstanding, in no event shall the "GECC Accounts" include any accounts,
contract rights, instruments, chattel paper or general intangibles for the
payment of money, which are not, following their creation, actually submitted by
Borrowers to GECC, and accepted by GECC, for purchase by GECC under the terms of
the GECC Account Purchase Agreement, whether or not the failure by Borrowers to
actually so submit the same shall be a breach or default under the GECC Account
Purchase Agreement (the "Non-Tendered Accounts").
(f) "GECC Reserve Balance" shall mean all credit balances
and reserve balances now or hereafter due Borrowers from GECC, and other monies
now or hereafter due Borrowers from GECC or held by GECC, to the extent of the
terms of the GECC Account Purchase Agreement.
(g) "Lender Credit Card Agreement" shall mean an agreement
between GECC and an Account Debtor who is issued a card or device by GECC in
connection with Borrowers' private label credit card programs giving such
Account Debtor the privilege of purchasing Merchandise from Borrowers or any
Lessee on credit to be paid in accordance with such agreement.
(h) "Lessee" shall mean any person or entity who, now or
hereafter, leases or licenses space in any of Borrowers' Stores and who has an
agreement with Borrowers authorizing such person to sell Merchandise.
(i) "Merchandise" shall mean those goods and services,
including accessories and delivery services sold in conjunction therewith, sold
at retail by Borrowers or any Lessee through its mail-order catalog business and
in Stores to the general public for personal, family, or household use, and,
without limitation, also includes returned, repossessed and reclaimed goods
which are resold by Borrowers in a Retail Sale.
(j) "New Value" shall have the meaning set forth in
Section 547(a)(2) of the Bankruptcy Code. For purposes
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hereof, Reserve Adjustments shall be considered New Value, but any other amounts
credited to the GECC Reserve Balance shall not be considered New Value.
(k) "Reserve Adjustments" shall mean amounts
credited to the GECC Reserve Balance under the terms of the GECC Account
Purchase Agreement.
(l) "Retail Sale" shall mean any sale by
Borrowers or a Lessee in the ordinary course of Borrowers' business through
Borrowers' direct mail catalogs or Stores (including "closeout" or outlet
stores), but shall not include a sale to a liquidator or other bulk purchaser.
(m) "Stores" shall mean Borrowers retail stores
operated as of the date hereof or thereafter by Borrowers directly or through
another Revolving Loan Borrower or operating under the trade name "Hanover
Direct" or "International Male" or "Gump's" or any other trade name hereafter
used by Borrowers.
(n) "Written-off Accounts" shall mean those
accounts, chattel paper, instruments, and general intangibles consisting of an
obligation for the payment of money, written-off by (1) HDPI or Brawn prior to
December 21, 1992, which are subject to recovery efforts by GECC pursuant to
Section 3.6 of the GECC Account Purchase Agreement as in effect on December 21,
1992, or (2) written-off by Gump's or GBM or their predecessors in interest
prior to the date of the initial purchase by GECC of accounts from GBM and
Gump's, which are subject to recovery efforts by GECC pursuant to Section 3.6 of
the GECC Account Purchase Agreement as in effect on such date of the initial
purchase by GECC of accounts from GBM and Gump's.
1.46 "GECC Lien Clarification Agreement" shall mean that certain
Agreement by and between GECC and Lender, dated of even date herewith, setting
forth, among other things, the respective rights of each party to certain
collateral of Borrowers, as the same now exists or may hereafter be amended,
supplemented, renewed, restated or replaced.
1.47 "General Merchandise Inventory" shall mean all Inventory of
Borrowers offered for sale in the "Hanover House" and "Colonial Garden
Kitchens", "Kitchen & Home" catalogs of HDPI, or such other catalogs created or
acquired by any Revolving Loan Borrower covering substantially similar
merchandise, that such Revolving Loan Borrower has requested Lender to include
in this Inventory category, which Inventory shall include, among other items,
novelties and housewares, kitchen, cookware and storage items, and merchandise
for senior citizens.
1.48 "General Security Agreement" shall have the meaning set forth in
Section 4.3 hereof.
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1.49 "Guarantee" or "Guarantees" shall have the meaning set forth in
Section 4.2 hereof.
1.50 "Guarantor Collateral" shall have the meaning set forth in Section
4.3 hereof.
1.51 "Guarantors" shall mean, jointly and severally, individually and
collectively (i) Hanover and each existing and future direct or indirect
Subsidiary of Hanover which owns any assets in excess of Ten Thousand Dollars
($10,000), other than Non-Guarantor Subsidiaries, and (ii) each of their
respective successors and assigns.
1.52 "Gump's" shall mean Gump's Corp., formerly known as GSF
Acquisition Corp., a California corporation, and its successors and assigns.
1.53 "Gump's Eligible Inventory" shall mean all Inventory of Gump's in
the merchandise categories of gifts, tabletop, interior design, outdoor
furnishings, stationery, decorative art, collectibles, home furnishings, home
textiles, apparel, jewelry and fashion, offered for sale by Gump's at the Gump's
Main Store.
1.54 "Gump's Main Store" shall mean the retail store operated by
Gump's, known as Gump's San Francisco, located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
1.55 "Hanover" or "HDI" shall mean Hanover Direct, Inc., a Delaware
corporation, as successor by merger to The Horn & Hardart Company, a Nevada
corporation, and The Hanover Companies, a Nevada corporation, and its successors
and assigns.
1.56 "Hanover Catalog Holdings" shall mean Hanover Catalog Holdings,
Inc., a Delaware corporation, and its successors and assigns.
1.57 "Hanover Finance" shall mean Hanover Finance Corporation, a
Delaware corporation, d/b/a Horn & Hardart Finance Corporation, and its
successors and assigns.
1.58 "Hanover Realty" shall mean Hanover Realty, Inc., a Virginia
corporation, and its successors and assigns.
1.59 "Hanover Realty Term Loan" shall mean the term loan made by Lender
to Hanover Realty as provided for in Section 2.4(b) hereof.
1.60 "Hanover Ventures" shall mean Hanover Ventures, Inc., a Delaware
corporation, and its successors and assigns.
1.61 "Hazardous Materials" shall mean any hazardous, toxic
or dangerous substances, materials and wastes, including, without
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limitation, hydrocarbons (excluding hydrocarbons naturally occurring on the
premises), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation any that are or become classified as hazardous or
toxic under any Environmental Law).
1.62 "HDI Floating Rate Bond Financing" shall mean the Twenty-Million
Dollar ($20,000,000) Series A and Series B floating rate notes of Hanover due
October 1, 2009 in connection with the acquisition and development of the
warehouse and distribution center owned by Hanover Realty located in Roanoke,
Virginia, and for improvements to the Gump's Main Store, and all agreements,
documents and instruments relating thereto, as such bonds and related
agreements, documents and instruments now exist or may hereafter be amended,
supplemented, extended, renewed, restated or replaced.
1.63 "HDPI" shall mean Hanover Direct Pennsylvania, Inc., a
Pennsylvania corporation, f/k/a Hanover Direct Fulfillment, Inc. and prior
thereto known as Hanover Direct, Inc. and, prior thereto known as Hanover House
Industries, Inc., and its successors and assigns.
1.64 "HDPI Pennsylvania IRB Financing" shall mean the Eight Million
Dollar ($8,000,000) Industrial Revenue Bond financing arrangements of HDPI
involving secured financing of the acquisition, construction or improvement of a
fulfillment center located at ▇▇▇▇▇▇ ▇▇▇▇, in Conewago Township, ▇▇▇▇▇ County,
Pennsylvania, and the ground lease held by HDPI as lessee of the underlying
land, as such arrangements now exist or may hereafter be amended, supplemented,
extended, renewed, restated or replaced.
1.65 "HDPI Term Loan" shall mean the term loan made by Lender to HDPI
as provided for in Section 2.4(a) hereof.
1.66 "Home Furnishings Inventory" shall mean all Inventory of Revolving
Loan Borrowers offered for sale in the "Domestications" and "Tapestry" catalogs
of HDPI, or such other catalogs created or acquired by any Revolving Loan
Borrower covering substantially similar merchandise which such Revolving Loan
Borrower has requested Lender to include in this Inventory category, which
Inventory shall include, among other items, home textiles (including sheets,
towels, curtains, comforters,
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blankets, pillows, featherbeds and other such items) and decorative home
products and loungewear.
1.67 "IMR" shall mean Intercontinental Mining & Resources Incorporated,
a British Virgin Islands corporation, its successors and assigns.
1.68 "Incipient Default" shall mean the occurrence of an event or
existence of a condition which, upon the lapse of time or giving of notice or
both, would constitute an Event of Default.
1.69 "Indebtedness" shall mean, as to any Person, any obligation or
liability which is required by generally accepted accounting principles to be
shown as part of liabilities on a balance sheet of such Person (other than trade
accounts payable, incurred in the ordinary course of business that are sixty
(60) days or less past due) and, in any event, shall also include: (a)
obligations for borrowed money or capital leases; (b) obligations evidenced by
bonds, debentures, notes or other similar instruments; (c) obligations to pay
the deferred purchase price of property or for services (other than trade
accounts payable incurred in the ordinary course of business that are sixty (60)
days or less past due); (d) obligations or liabilities secured by a lien on any
asset of the obligor thereunder, whether or not such obligation or liability is
assumed; (e) contingent obligations (other than those incurred in the ordinary
course of business); (f) obligations under or in connection with letters of
credit; (g) obligations under acceptance facilities; and (h) any guarantees of
any of the foregoing obligations.
1.70 "Indebtedness for Borrowed Money" shall mean, as to any Person,
Indebtedness of the kind described in clauses (a), (b), (c), (f) or (g)
described in the definition of Indebtedness, and guarantees thereof.
1.71 "Interest Rate" shall mean (a) a rate of one and one quarter
percent (1.25%) per annum in excess of the Prime Rate on all Revolving Loans or,
after the occurrence and during the continuance of any Event of Default, or
after termination or non-renewal hereof, a rate of three and one quarter percent
(3.25%) per annum in excess of the Prime Rate and (b) a rate of one and one half
percent (1.5%) per annum in excess of the Prime Rate on all Term Loans or, after
the occurrence and during the continuance of any Event of Default, or after
termination or non-renewal hereof, a rate of three and one half percent (3.5%)
per annum in excess of the Prime Rate. In the event that the aggregate amount of
Revolving Loans and Letter of Credit Accommodations to one or more Revolving
Loan Borrowers exceeds the amounts determined by Lender to be available pursuant
to the Revolving Loan Formulas, net of reserves and subject to the applicable
lending sublimits as to each Revolving Loan Borrower,
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and subject to the Revolving Loan Limit as to all Revolving Loan Borrowers
considered together, the Interest Rate hereunder shall be three and one half
percent (3.5%) per annum in excess of the Prime Rate as to the amount of any
such excess(es) (whether or not such excess(es) arise or are made with or
without Lender's knowledge or consent and whether made before or after an Event
of Default); provided, however, that if such excess(es) arise solely by virtue
of the exercise of Lender's discretion under this Agreement to reduce the
Revolving Loan Formulas in the absence of an Event of Default which is
continuing, the Interest Rate hereunder shall be one and one half percent (1.5%)
per annum greater than the Prime Rate as to the amount of any such excess(es)
for a period of five (5) days after Lender notifies the affected Revolving Loan
Borrowers of such discretionary reduction in the Revolving Loan Formulas and, at
and after the expiration of such period of five (5) days, the Interest Rate
hereunder shall be three and one half percent (3.5%) per annum in excess of the
Prime Rate as to the amount of any such excess(es) then remaining. The Interest
Rate shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs.
1.72 "Inventory" shall mean, as to any Person, all of such Person's raw
materials, work-in-process, finished goods and all other inventory of any kind,
nature or description, wherever located, whether now owned or hereafter existing
or acquired by such Person, including, without limitation, any parts or
accessories, all wrapping, packaging, advertising and shipping materials, and
all other goods used or consumed in the business of such Person, all labels and
other devices, names or marks affixed to or to be affixed thereto for purposes
of identifying the same or the seller or manufacturer thereof and all of such
Person's right, title and interest therein and thereto.
1.73 "Inventory Loan Formulas" shall have the meaning set forth in
Section 2.1(b) hereof.
1.74 "IRC" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.75 "Lender" shall mean Congress Financial Corporation, a California
corporation, its successors and assigns.
1.76 "Letter of Credit Accommodations" shall have the meaning set forth
in Section 2.3(a) hereof.
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1.77 "Litle" shall mean, collectively, Litle & Company, Inc., a
Delaware corporation, and First USA Merchant Services, a Nevada corporation, and
their respective successors and assigns.
1.78 "Litle Agreements" shall mean (a) the Member Agreement, dated May
26, 1995, by and among Litle and Hanover and its Affiliates, (b) the Deferred
Billing Agreement, and (c) the Third Party Credit Card Acknowledgment, dated of
even date herewith, by and among Litle and Hanover, as each of the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.79 "LWI" shall mean LWI Holdings, Inc., a Delaware corporation, and
its successors and assigns.
1.80 "LWI Eligible Inventory" shall mean all Inventory of LWI in the
merchandise categories of do-it-yourself, home care and convenience and
woodworking products offered for sale by LWI in its "Improvements" and
"Leichtung Workshops" catalogs, or such other catalogs created or acquired by
LWI covering substantially similar merchandise which LWI has requested Lender to
include in this Inventory category.
1.81 "Mail Order Joint Venture" shall mean one or more Persons, not
Affiliate(s) of Revolving Loan Borrowers, engaged in a joint undertaking with
Revolving Loan Borrowers or their Subsidiaries, including, without limitation, a
joint venture, a partnership, business trust or other jointly owned and
controlled entity for the purpose of jointly engaging in research, marketing and
development of the mail order business of Revolving Loan Borrowers, with respect
to products or markets not previously sold or engaged in by Revolving Loan
Borrowers at the time of formation.
1.82 "MasterCard/VISA Receivables" shall mean Third Party Credit Card
Receivables that arise solely from goods sold by Revolving Loan Borrowers or
Guarantors to customers who have purchased goods using a valid MasterCard or
VISA bank-issued credit card, which are processed, purchased and paid for by
Litle.
1.83 "Maximum Credit" shall mean the aggregate principal amount of
Seventy-Five Million Dollars ($75,000,000), less payments and prepayments in
respect of the Term Loans.
1.84 "Measurement Quarter" shall mean, as to a Program Quarter, the
second preceding fiscal quarter of Hanover ending prior to the commencement of
such Program Quarter.
1.85 "Men's Fashion Inventory" shall mean all Inventory of Revolving
Loan Borrowers offered for sale in the "International Male", "Undergear",
"Outtakes" catalogs of Brawn, or such other
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catalogs created or acquired by any Revolving Loan Borrower covering
substantially similar merchandise that such Revolving Loan Borrower has
requested Lender to include in this Inventory category, including, without
limitation, men's activewear and fashion underwear, discount men's fashions,
contemporary men's fashions, shoes, costume jewelry and accessories, and other
apparel offered in such catalogs.
1.86 "Mortgages" shall mean, individually and collectively, each of the
following (as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced): (a) the Open-End Fee and
Leasehold Mortgage and Security Agreement, dated of even date herewith, by HDPI
in favor of Lender with respect to the Real Property and related assets of HDPI
located in Hanover, Pennsylvania, (b) the Credit Line Deed of Trust, Assignment
and Security Agreement, dated of even date herewith, by Hanover Realty in favor
of Lender with respect to the Real Property and related assets of Hanover Realty
in Roanoke, Virginia, and (c) the Open-End Fee and Leasehold Mortgage and
Security Agreement, dated of even date herewith, by LWI in favor of Lender with
respect to the Real Property and related assets of LWI in Cleveland, Ohio.
1.87 "NAR" shall mean North American Resources Limited, a British
Virgin Islands corporation, its successors and assigns.
1.88 "NAR Group" shall mean NAR and each Person who is now or hereafter
controlled by NAR, including, but not limited to, Westmark, Quadrant Group, IMR,
QCC and their successors and assigns.
1.89 "NationsBank" shall mean, collectively, NationsBank, National
Association, formerly known as NationsBank, National Association (Carolinas), as
successor-in-interest to NationsBank of North Carolina, National Association,
individually as lender and as agent for Chemical Bank, The First National Bank
of Maryland, Fleet Bank and The Bank of Tokyo Trust Company under the
NationsBank Credit Agreements, and each of their respective successors and
assigns.
1.90 "NationsBank Credit Agreements" shall mean the Credit Facilities
and Reimbursement Agreement, dated as of October 12, 1994, by and among Hanover
and NationsBank (the "NationsBank Credit Agreement"), together with any
agreements, documents and instruments executed and/or delivered in connection
therewith or related thereto and any amendments, supplements, extensions,
renewals, restatements of any of the foregoing, including, without limitation
all of the security agreements, documents and instruments executed and/or
delivered by Hanover and certain Borrowers and Guarantors, as guarantors of the
NationsBank Credit Agreement, being held in escrow pursuant to the Waiver
Letter, dated September 29, 1995, among NationsBank, Hanover and certain
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other Borrowers and subsidiaries, as guarantors of the NationsBank Credit
Agreement, under the Escrow Agreement, dated September 29, 1995 by and among
Hanover, those Borrowers and Guarantors, NationsBank and Smith, Helms, Mulliss &
▇▇▇▇▇, L.L.P.
1.91 "Net Amount of Eligible Deferred Billing Receivables" shall mean
the gross amount of Eligible Deferred Billing Receivables, less (a) discounts
and fees payable by Deferred Billing Borrowers to Litle or claimed by Litle with
respect thereto, and (b) to the extent not included under clause (a) any
prepayments, holdbacks, chargeback deposits, chargeback reserves, refund
reserves, processing fees and other reserves, claims, credits (including credits
for returned goods), allowances or other charges payable to or claimed by Litle.
1.92 "Net GOB Percentage" shall mean, as to Gump's Eligible Inventory,
the Net GOB Value thereof, expressed as a percentage of cost thereof.
1.93 "Net GOB Value" shall mean, as to Gump's Eligible Inventory, an
amount equal to (a) the amount of gross proceeds that could be realized in cash
if such Inventory were sold within a ninety (90) day period in a going out of
business liquidation sale, as set forth or calculated in the most recent
Appraisal, minus (b) the estimated costs, expenses, fees, including reasonable
attorneys fees, taxes and other charges which would be incurred in connection
with such sale, and estimated returns, all as set forth in, or calculated using,
the most recent Appraisal.
1.94 "Net Orderly Liquidation Value" shall mean, as to Eligible
Inventory other than Gump's Eligible Inventory, an amount equal to (a) eighty
(80%) percent of the gross proceeds that could be realized in cash if such
Inventory were sold within a six (6) to nine (9) month period in an orderly
liquidation sale, minus (b) the estimated costs, expenses, fees, including
reasonable attorneys fees, taxes and other charges which would be incurred in
connection with such sales, and estimated returns, all as set forth in, or
calculated using, the most recent Appraisal.
1.95 "Net OLV Percentage" shall mean, as to Eligible Inventory other
than Gump's Eligible Inventory, the Net Orderly Liquidation Value thereof,
expressed as a percentage of cost thereof.
1.96 "9.25% Guarantors" shall mean those Subsidiaries of Hanover and
any other entity which now or hereafter has guaranteed payment or performance of
the obligations of Hanover under the 9.25% Notes.
1.97 "9.25% Notes" shall mean the aggregate of $14,000,000 in principal
amount of outstanding 9.25% Senior Subordinated
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Notes of Hanover due August 1, 1998, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, exchanged, restated or
replaced.
1.98 "9.25% Note Assignment" shall mean the Repurchase and Option
Agreement dated as of September 29, 1995 among Sun America Life Insurance
Company, IMR and Hanover with respect to the 9.25% Notes, Hanover and the 9.25%
Note Guarantors, together with all instruments and agreements delivered
thereunder, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.99 "9.25% Subordination Agreement" shall mean the Subordination
Agreement, dated of even date herewith, between Lender and acknowledged by the
Indenture Trustee (as defined therein), Hanover and the 9.25% Guarantors, as the
same may now exist or may hereafter be amended, modified, supplemented, restated
or replaced.
1.100 "Non-Guarantor Subsidiary" shall mean each of (a) ▇▇▇▇▇▇, (b) the
Restaurant Business Subsidiaries and (c) any direct Subsidiary of Hanover that,
on the date hereof, owns assets having an aggregate value of less than Ten
Thousand Dollars ($10,000). In addition, Non-Guarantor Subsidiaries shall mean
any Subsidiary of Hanover that:
(i) is formed or acquired after the date hereof on
not less than thirty (30) days prior written notice to Lender that is received
by Lender prior to the occurrence of an Event of Default or Incipient Default
which is continuing at the time of receipt of such notice;
(ii) is not a direct or indirect Subsidiary of or in
the same business as any Borrower or any Guarantor, other than Hanover, and is
not a Mail Order Joint Venture or a party thereto;
(iii) has been formed or acquired without any direct
or indirect investment, whether in cash or in property, other than capital stock
of any member of the Affiliated Borrower Group upon which no dividends are paid
or payable (except dividends paid or payable in additional capital stock
similarly restricted as to dividends), by Borrowers or any other member of the
Affiliated Borrower Group and without the incurrence of any Indebtedness in
connection with such acquisition, or the business to be engaged in by such
Subsidiary, directly or indirectly, by any of Borrowers or any other member of
the Affiliated Borrower Group;
(iv) engages in no transaction, direct or indirect,
with Borrowers or any other member of the Affiliated Borrower Group, other than
such Subsidiary's declaration and
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payment to members of the Affiliated Borrower Group of dividends in its own
capital stock, or the payment by such Subsidiary to Borrowers or any other
member of the Affiliated Borrower Group, of overhead and other administrative
charges in the ordinary course of business; and
(v) obtains financing, if any, on a completely stand
alone basis, i.e., not requiring any direct or indirect guarantee or other form
of financial support or credit enhancement from Borrowers or any other member of
the Affiliated Borrower Group, other than the non-recourse pledge of the capital
stock of another Non-Guarantor Subsidiary and cross-corporate guaranties between
or among Non-Guarantor Subsidiaries formed or acquired at the same time as part
of a single transaction upon the consummation of which such cross-guaranties are
executed in favor of the provider of such stand alone financing; and provides
Lender with a thirty (30) day right of first refusal to elect to provide
financing to such Subsidiary on the same terms as set forth in any bona fide
commitment, proposal or offer solicited or received by such Subsidiary or an
Affiliate thereof. If Lender elects to exercise its right of first refusal, by
written notice, within such thirty (30) day period, of Lender's willingness to
provide such financing on such terms, the Six Hundred Dollar ($600) per person
per diem field examination charges of Lender plus all out-of-pocket expenses of
Lender incurred in respect of its initial field work or other preliminary review
and due diligence shall be payable by such Subsidiary or charged to Borrowers'
loan accounts hereunder whether or not the transaction closes. If Lender does
not exercise its right of first refusal, such charges and expenses of Lender
shall not be charged to such Subsidiary or Borrowers' loan accounts hereunder.
If any Subsidiary of Hanover formed or acquired after the date hereof at any
time, or ▇▇▇▇▇▇, with respect to clauses (ii), (iv) or (v), at any time, does
not meet or no longer meets any of the foregoing requirements, such Subsidiary
or ▇▇▇▇▇▇ shall not be considered, for purposes hereof, or if initially so
considered, shall lose its status as, a Non-Guarantor Subsidiary and shall be
subject to all of the requirements set forth herein with respect to Subsidiaries
which are members of the Affiliated Borrower Group.
1.101 "Obligations" shall mean, as to any Person, any and all now
existing and hereafter arising obligations, liabilities and Indebtedness of such
Person to Lender of every kind and description, however evidenced, whether
direct or indirect, absolute or contingent, joint or several, secured or
unsecured, due or not due, primary or secondary, liquidated or unliquidated,
whether arising before, during or after the initial or any renewal term hereof
or any other Financing Agreement, or after the commencement of any bankruptcy,
reorganization, insolvency, receivership or similar proceeding with respect to
such Person
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under the Bankruptcy Code or any similar statute, whether arising directly or
acquired by Lender from any other Person, conditionally or as collateral
security, by assignment, merger with any other Person, assumption, subrogation
or otherwise (excluding participations or interests of Lender in the obligations
of such Person to others), whether arising under this Agreement, the other
Financing Agreements, by operation of law or otherwise and whether incurred by
such Person as principal, surety, endorser, guarantor or otherwise. Without
limiting the generality of the foregoing, "Obligations" shall include: (a) such
Person's liability to Lender for all balances owing to Lender in any account
maintained on Lender's books under this Agreement, the other Financing
Agreements or under any other agreement or arrangement now or hereafter entered
into between such Person and Lender, (b) such Person's liability to Lender as
maker or endorser of any promissory note or other instrument for the payment of
money, (c) such Person's liability to Lender under any instrument of guaranty or
indemnity, or arising under or with respect to any letter of credit, acceptance,
instrument, guarantee, endorsement or undertaking which Lender may make, endorse
or issue to others for the account of such Person, (d) Indebtedness owing by
such Person to Lender or to present or future parents, subsidiaries, affiliates
or Participants of or with Lender arising under or in connection with any of the
foregoing types of agreements, instruments or transactions, and (e) all
principal, interest, financing charges, letter of credit fees, closing fees,
facility fees, unused line fees, servicing fees, early termination and other
fees, commissions and expenses payable or reimbursable to Lender, including, but
not limited to, reasonable attorneys', paralegals' and accountants' fees and
disbursements, chargeable to such Person and due from such Person under this
Agreement, the other Financing Agreements, or under any other agreement or
arrangement which was heretofore or may be now or hereafter entered into between
such Person and Lender. Unless the context otherwise requires, the term
"Obligations" refers to Obligations of Borrowers.
1.102 "Participant" shall mean any Person which at any time
participates with Lender in respect of the Revolving Loans, the Term Loans, the
Letter of Credit Accommodations or other Obligations of Borrowers or any portion
thereof.
1.103 "Person" or "person" shall mean an individual, a partnership, a
limited partnership, a corporation (including a business trust), a joint stock
company, a trust, an unincorporated association, a joint venture, a limited
liability company, a limited liability partnership or other entity or a
government or any agency, instrumentality or political subdivision thereof.
1.104 "Prime Rate" shall mean the prime commercial interest rate from
time to time publicly announced by CoreStates Bank,
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N.A., Philadelphia, Pennsylvania, whether or not such announced rate is the best
rate available at such bank.
1.105 "Private Credit Card Agreement" shall mean (a) that certain
Account Purchase Agreement, dated December 21, 1992, by and among Debtor, Brawn,
Hanover Direct, Inc. and GECC, as amended by that certain Amendment to Account
Purchase Agreement, dated as of July 12, 1993, as amended, restated and renamed
by that certain Amended and Restated Account Purchase Agreement, dated as of
April 25, 1994, as amended by Amendment No. 1 to Amended and Restated Account
Purchase Agreement, dated as of November, 1994, and as amended by that certain
Second Amendment to Account Purchase Agreement, made and entered into as of June
1, 1995, and as amended by that certain Amendment No. 3 to Amended and Restated
Account Purchase Agreement dated on or about the date hereof, as the same may
hereafter be amended and/or restated from time to time and (b) any extended,
renewal or replacement Private Credit Card Receivables purchase arrangement with
GECC or a Private Credit Card Purchaser who replaces or succeeds GECC on terms
acceptable to Lender as set forth in agreements in form and substance
satisfactory to Lender.
1.106 "Private Credit Card Programs" shall mean the Hanover Shop at
Home Card of HDPI and the International Male Card of Brawn, or such other
private credit card issued by Revolving Loan Borrowers and approved for
inclusion in this definition by Lender, in writing, in Lender's sole discretion.
1.107 "Private Credit Card Purchaser" shall mean GECC, its successors
and assigns, or such other successor or replacement purchaser under the Private
Credit Card Agreement.
1.108 "Private Credit Card Receivables" shall mean all Accounts
representing the rights of certain Revolving Loan Borrowers to payment for
Inventory sold and delivered to customers who have purchased such goods under
the Private Credit Card Programs, together with all finance charges and late
fees payable therewith, and the proceeds thereof, but excluding returned,
repossessed or reclaimed goods relating to such Accounts and excluding all other
Inventory of Revolving Loan Borrowers.
1.109 "Program Quarter" shall mean each fiscal quarter of Hanover
during which a Deferred Billing Option Program is commenced or remains in effect
as to new sales.
1.110 "Purchase Money Lien" shall mean the liens meeting the
requirements in Section 6.4(d) hereof.
1.111 "Real Property" shall mean all now owned and hereafter acquired
real property of Borrowers, together with all buildings, structures, and other
improvements located thereon and
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all licenses, easements and appurtenances relating thereto, wherever located,
including without limitation, the real property, leasehold interests and related
assets more particularly described in the Mortgages, located in Hanover,
Pennsylvania, Roanoke, Virginia and Warrensville Heights, Ohio.
1.112 "Renewal Date" shall have the meaning set forth in Section 9.1(a)
hereof.
1.113 "Restaurant Business Subsidiaries" shall mean, the Subsidiaries
of Hanover listed on Exhibit B-3 attached hereto.
1.114 "Responsible Officer" shall mean any one or more of the
following: the President, Chief Financial Officer, Treasurer, Controller,
Secretary or General Counsel of Hanover or any Borrower.
1.115 "Revolving Accounts Loans" shall mean the outstanding Obligations
owed to Lender by Deferred Billing Borrowers consisting of the secured loans and
advances, heretofore, now or hereafter made by Lender to Deferred Billing
Borrowers as provided for in Section 2.1(a) hereof, on a revolving basis
(involving advances, repayments and readvances), subject to the terms and
conditions of this Agreement and the other Financing Agreements.
1.116 "Revolving Inventory Loans" shall mean the outstanding
Obligations owed to Lender by Revolving Loan Borrowers consisting of the secured
loans and advances, heretofore, now or hereafter made by Lender to Revolving
Loan Borrowers as provided for in Section 2.1(b) hereof, on a revolving basis
(involving advances, repayments and readvances), subject to the terms and
conditions of this Agreement and the other Financing Agreements.
1.117 "Revolving Loan Borrowers" shall mean, individually and
collectively, HDPI, Brawn, GBM, Gump's, TCS, Tweeds, LWI, HDV and Aegis.
1.118 "Revolving Loan Formulas" shall mean, collectively, the Accounts
Loan Formula and the Inventory Loan Formulas.
1.119 "Revolving Loan Limit" shall mean, at any time, the amount of
Sixty Five Million ($65,000,000) Dollars, less the amount of outstanding Letter
of Credit Accommodations at such time.
1.120 "Revolving Loans" shall mean, individually and collectively,
Revolving Accounts Loans and Revolving Inventory Loans.
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35
1.121 "Sears" shall mean Sears Shop At Home Services, Inc., a Delaware
corporation, together with its affiliates, and its and their successors and
assigns.
1.122 "Sears Agreements" shall mean (a) the License Agreement,
effective January 1, 1994, between Hanover Ventures and Sears, together with any
agreements, operating policies and procedures, guidelines, advertising policies,
information transfer requirements, settlement procedures and schedules thereto
and any other documents, instruments or agreements executed and/or delivered in
connection therewith or relating thereto, (b) the letter agreement, dated April
5, 1995, between LWI and Sears, and (c) any license or other agreement between
Sears and a member of the Affiliated Borrower Group providing for substantially
similar arrangements as those contemplated by the agreements referred to in
clauses (a) and (b) of this definition, together with all agreements, documents
and instruments executed and/or delivered in connection therewith or related
thereto, as each of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed or restated.
1.123 "SEC" shall mean the United States Securities and Exchange
Commission.
1.124 "Specified Action" shall mean the meaning set forth in Section
9.1(g) hereof.
1.125 "Subsidiary" or "subsidiary" shall mean, as to any Person, any
corporation, association or organization, active or inactive, as to which fifty
percent (50%) or more of the outstanding voting stock or shares or interests
shall now or hereafter be owned or controlled, directly or indirectly, by such
Person or any direct or indirect Subsidiary of such Person, but excluding any
such corporation, association, or organization which is itself a Mail Order
Joint Venture, unless more than fifty percent (50%) of the outstanding voting
stock or shares, or interests are now or hereafter owned or controlled, directly
or indirectly, by such Person or any direct or indirect Subsidiary of such
Person.
1.126 "Tax Sharing Agreement" shall mean that certain Tax Sharing
Agreement, dated as of February 1, 1987, presently by and among Hanover and
HDPI, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.127 "TCS Factory" shall mean The Company Factory, Inc., a Wisconsin
corporation, and its successors and assigns.
1.128 "TCS Office" shall mean The Company Office, Inc., a Wisconsin
corporation and its successors and assigns.
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1.129 "TCS" shall mean The Company Store, Inc., a Wisconsin
corporation, and successors and assigns.
1.130 "TCS Eligible Inventory" shall mean: all Inventory of TCS in the
merchandise categories of comforters, blankets, sheets, towels, curtains,
pillows, featherbeds, decorative home products, loungewear and outer garments
offered for sale by TCS in its "The Company Store" catalog, or such other
catalog created by TCS covering substantially similar merchandise which TCS has
requested Lender to include in this Inventory category.
1.131 "Term" shall have the meaning set forth in Section 9.1(a) hereof.
1.132 "Term Loans" shall mean the HDPI Term Loan and
Hanover Realty Term Loan.
1.133 "Term Loan Borrowers" shall mean, individually and collectively,
HDPI and Hanover Realty.
1.134 "Third Party Credit Card Acknowledgments" shall mean those
certain letter agreements addressed to the parties to the Third Party Credit
Card Agreements setting forth such parties' acknowledgment of the security
interest of Lender in the monies due and to become due, including, credits and
reserves, under the Third Party Credit Card Agreements, and such parties'
agreement to transfer to the Blocked Accounts established pursuant to Section
8.2 hereof, all monies due and other funds payable to or for the account of
Revolving Loan Borrowers under the Third Party Credit Card Agreements, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.135 "Third Party Credit Card Agreements" shall mean all agreements
now or hereafter entered into by Revolving Loan Borrowers with any Third Party
Credit Card Issuer or any servicing or processing agent or any factor or
financial intermediary in order to facilitate, service and manage the credit
authorization, billing, transfer and/or payment procedures with respect to
Revolving Loan Borrowers' sales transactions involving credit card purchases by
customers using credit cards issued by any Third Party Credit Card Issuer. Such
term includes, but is not limited to the following, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced:
(a) the agreements referred to in subparagraphs (a) and
(b) of the definition of Litle Agreements;
(b) the Agreement for American Express Card Acceptance,
effective April 1, 1995, between American Express Travel Related Services
Company, Inc. and HDPI;
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(c) the Diners Club Establishment Application and
Agreement, dated effective April 27, 1990, by and between HDPI and Citicorp
Diners Club Inc., supplementing and replacing all prior agreements between HDPI
(or its trade names) and Citicorp Diners Club Inc. covering individual catalogs
of HDPI; and
(d) the Merchant Services Agreement, made as of October
14, 1986, by and between Discover Card Services, Inc. and Hanover.
1.136 "Third Party Credit Card Issuer" shall mean an entity or
organization which issues or whose members issue credit cards, including,
without limitation, MasterCard and VISA bank credit cards, and American Express,
Discover, Diners Club, ▇▇▇▇▇ ▇▇▇▇▇▇▇, and Sears Card non-bank credit cards.
1.137 "Third Party Credit Card Receivables" shall mean all Accounts
representing the Revolving Loan Borrowers' and Guarantors' rights to payment for
Inventory sold and delivered to customers who have purchased such goods using a
credit card issued by a Third Party Credit Card Issuer, including, without
limitation, rights to payment from the customer and from any Third Party Credit
Card Issuer or party to a Third Party Credit Card Agreement, together with the
proceeds of the foregoing, but excluding returned, repossessed or reclaimed
goods relating to such Accounts and excluding other Inventory of Revolving Loan
Borrowers.
1.138 "Trademark Security Agreements" shall mean the Trademark
Collateral Assignment and Security Agreements, by and between each of Hanover
Catalog Holdings, Company Store Holdings, Inc., Scandia Down Corporation,
Hanover, Aegis Safety Holdings, Inc., Gump's, Tweeds and Brawn, and each other
Borrower or Guarantor who at any time owns any registered trademarks or service
marks, in favor of Lender, and instruments thereunder, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.139 "Tradename" shall have the meaning set forth in Section 6.1
hereof.
1.140 "Tweeds Eligible Inventory" shall mean all Inventory of Tweeds in
the merchandise categories of men's and women's apparel, shoes, hosiery, costume
jewelry, accessories and outerwear offered for sale by Tweeds in its "Tweeds"
catalog or such other catalogs created or acquired by Tweeds covering
substantially similar merchandise which Tweeds has requested Lender to include
in this Inventory category.
1.141 "UCC" shall mean the Uniform Commercial Code as from time to time
in effect in the State of New York.
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1.142 "Value" shall mean, as determined by Lender, with respect to
Eligible Inventory, the lower of (a) cost computed for Eligible Inventory of
Revolving Loan Borrowers other than Gump's, on a first-in-first-out basis in
accordance with generally accepted accounting principles consistently applied,
and, in the case of Eligible Inventory of Gump's, computed under a retail
accounting methodology acceptable to Lender, (excluding, in any event, and as to
all Eligible Inventory, indirect costs such as purchasing, warehousing,
distribution, but including incoming freight costs) or (b) market value, as
determined by Lender.
1.143 "Voluntary Termination Notice" shall have the meaning given in
Section 9.1(g).
1.144 "Westmark" shall mean Westmark Holdings Limited, a British Virgin
Islands corporation, its successors and assigns.
1.145 "Women's Fashion Inventory" shall mean all Inventory of Revolving
Loan Borrowers offered for sale in the "Silhouettes" catalog of HDPI, or such
other catalogs created or acquired by any Revolving Loan Borrower covering
substantially similar merchandise that such Revolving Loan Borrower has
requested Lender to include in this Inventory category, including, without
limitation, women's apparel, shoes, hosiery, costume jewelry, accessories and
outerwear (including moderately priced, discount, contemporary women's fashions,
contemporary apparel for larger sized women and unique and other women's
fashions).
1.146 Accounting Terms
All accounting terms not specifically defined herein shall be construed
in accordance with generally accepted accounting principles from time to time in
effect, consistently applied, except as otherwise stated herein. To the extent
generally accepted accounting principles require a change in accounting
practices, references herein to "generally accepted accounting principles from
time to time in effect, consistently applied", shall include such required
changes.
1.147 Other Defined Terms
The words "hereof", "herein", "hereunder", "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced. Whether or not expressly so provided herein or in a
separate amendment, all references to the "Loan Agreement" or the "Loan and
Security Agreement" or words of similar import contained in the Supplemental
Security Agreements or other Financing Agreements shall mean this Agreement and
references therein to the respective parties to and borrowers
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under the "Loan Agreement" or the "Loan and Security Agreement" or words of
similar import are each hereby amended to refer to the respective parties and
Borrowers under this Agreement.
1.148 Uniform Commercial Code Definitions
All terms not specifically defined herein which are defined in the UCC
shall have the meanings as defined in the UCC.
1.149 Interpretation
For purposes of this Agreement, unless the context otherwise requires,
all other terms hereinbefore or hereinafter defined, including but not limited
to those terms defined in the recitals hereto, shall have the meanings herein
assigned to such terms. All references to Borrowers, Guarantors and other
Persons pursuant to the definitions set forth in the recitals hereto shall
include their respective successors and assigns. All references to Borrowers and
Guarantors shall mean each of them, and all of them, jointly and severally,
individually and collectively. All references to any term in the plural shall
include the singular and all references to any term in the singular shall
include the plural.
SECTION 2. CREDIT FACILITY
2.1 Revolving Loans
(a) Revolving Accounts Loans. Subject to and upon the
terms and conditions contained herein and in the other Financing Agreements,
Lender shall, from time to time, make Revolving Loans to each of the Deferred
Billing Borrowers, at its request, of up to eighty percent (80%) of their
respective Net Amounts of Eligible Deferred Billing Receivables, or such greater
or lesser percentages thereof as Lender shall, in its sole discretion, determine
from time to time (the "Accounts Loan Formula"); provided, however, that no
Revolving Accounts Loans shall be made available or be permitted to remain
outstanding, unless (a) Lender receives written notification from the applicable
Deferred Billing Borrowers of their intention to commence or continue as to new
sales one or more Deferred Billing Option Programs, which notice shall describe
the program in reasonable detail and be received by Lender not less than thirty
(30) days prior to the commencement of each applicable Program Quarter, and (b)
with respect to each Program Quarter commencing after the first fiscal quarter
of 1996, Lender determines that the Deferred Billing Borrowers meet the Accounts
Loan Financial Test with respect to such Program Quarter.
(b) Revolving Inventory Loans. Subject to, and upon the
terms and conditions contained herein and in the other
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Financing Agreements, Lender shall, from time to time, make Revolving Inventory
Loans (i) to each Revolving Loan Borrower, other than Gump's, at such Revolving
Loan Borrower's request, of up to the lesser of (A) sixty percent (60%) of the
Value of the Eligible Inventory of such Revolving Loan Borrower or (B) the Net
OLV Percentage of the Value of such Eligible Inventory and (ii) to Gump's, at
its request, of up to the lesser of (A) sixty percent (60%) of the Value of
Eligible Inventory of Gump's or (B) the Net GOB Percentage of the Value of
Eligible Inventory of Gump's, or, in each of clauses (b)(i) or (b)(ii), such
greater or lesser percentages thereof as Lender shall, in its sole discretion,
determine from time to time (the "Inventory Loan Formulas"). Without limiting
the foregoing, the sixty (60%) percent lending formula component referred to in
clauses (b)(i)(A) and (b)(ii)(A) may be adjusted downward by Lender based upon
any adverse change, individually or in the aggregate, in the turnover of
Eligible Inventory or deterioration in mix, nature or quality of Eligible
Inventory in the respective categories of Eligible Inventory, and any such
downward adjustment made for such reason(s) (or on the basis of the lending
formula component set forth in clauses (b)(i)(B) or (b)(ii)(B) above) shall not
be considered solely discretionary for purposes of the provision contained in
the definition of Interest Rate and Section 2.7(c) hereof.
(c) Borrowing Procedures. For each Revolving Loan
requested by Revolving Loan Borrowers, a Responsible Officer or other authorized
Person of such respective Revolving Loan Borrower(s) shall give Lender
telephonic notice of its request not later than 11:00 a.m., New York, New York
time, on the Banking Day on which the disbursement is requested to be made.
Lender shall not be responsible for determining whether the Person making the
telephonic request purportedly on behalf of a Revolving Loan Borrower is a
Responsible Officer or other authorized Person of such Revolving Loan Borrower.
Lender may, but shall have no duty to, require borrowing requests to be made or
confirmed in writing.
(d) Approval and Disbursement of Loans. Upon Lender's
receipt of a borrowing request pursuant to Section 2.1(b) hereof, Lender shall
determine whether the Revolving Loan Borrower(s) making the request for a
Revolving Loan is entitled to such loan, based upon and subject to all of the
other terms and conditions hereof. If Lender determines that the Revolving Loan
Borrower(s) making the request is not so entitled hereunder to a requested loan,
Lender shall so advise such Revolving Loan Borrower(s) by telephonic or other
notice by no later than 2:00 p.m. New York, New York time on the same Banking
Day that Lender receives such borrowing request, if received by Lender on the
same Banking Day prior to 11:00 a.m. New York, New York time. If such borrowing
request shall have been received by Lender on a Banking Day prior to 11:00 a.m.,
New York, New York time, and if
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Lender approves a requested loan, or if Lender fails to notify such Revolving
Loan Borrower(s) by 2:00 p.m. New York, New York time that Lender declines to
make the requested loan(s), as provided above, Lender shall take steps through
Lender's disbursing banks to arrange, by not later than 4:00 p.m. New York, New
York time, a wire or other transfer of funds (in the amount of such approved
borrowing request or request for which Lender fails to timely notify Revolving
Loan Borrowers that it declines to make such loan) from Lender's disbursing bank
or banks to the respective Revolving Loan Borrower's bank account from time to
time designated and approved by Lender and Revolving Loan Borrowers for receipt
of loan proceeds disbursed under this Agreement; provided, that no Event of
Default or Incipient Default shall have occurred and be continuing. As to any
borrowing requests received by Lender after 11:00 a.m. New York, New York time
on a Banking Day, Lender shall use reasonable efforts to review, and if
approved, effectuate, a disbursement by 4:00 p.m. New York, New York time on the
Banking Day so received.
(e) Liability of Lender. Lender shall not have any
liability to Revolving Loan Borrowers for any delay or failure on the part of
any bank or banks to transfer the funds to Revolving Loan Borrowers in
accordance with the instructions of Lender, or for any delay or failure by
Lender or any such bank or banks in the approval of borrowing requests, or the
initiation or transfer of such funds. Notwithstanding the foregoing, if Lender
shall have advised Revolving Loan Borrower(s) that it has approved, or is deemed
under Section 2.1(d) hereof to have approved, a request to make a Revolving Loan
which request was timely made by such Revolving Loan Borrower(s) as provided in
Section 2.1(c) hereof, then, unless an Event of Default or Incipient Default has
occurred and is continuing, if, by reason of Lender's own negligence, such
Revolving Loan Borrower(s) shall fail to receive the wire or other transfer of
funds to its bank account previously designated and approved by Lender for such
purposes by no later than 4:00 p.m. local time of the recipient bank, on the
same Banking Day requested and approved, Lender shall reimburse such Revolving
Loan Borrower(s) for any customary and reasonable administrative service charges
and overdraft interest charges, if any, actually imposed on such Revolving Loan
Borrower(s) by its bank in connection with any permitted overdrafts or
dishonored instruments which would not have arisen had such wire or other
transfer been received by 4:00 p.m. such local time on such Banking Day;
provided, however, in no event shall Lender incur any liability to such
Revolving Loan Borrower(s) or any other Person for direct or consequential
losses or damages by reason of any such failure or delay, whether or not
foreseeable and whether or not the possibility of incurring such damages or
losses is communicated to or otherwise known by Lender.
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2.2 Lending Sublimits
(a) Subject to, and upon the terms and conditions
contained herein (i) the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to Brawn shall not exceed
Eight Million Dollars ($8,000,000) at any one time outstanding.
(b) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to HDPI shall not exceed, in
the aggregate (i) until HDPI and HDV have notified lender in writing, that the
"Domestications" catalog business has been transferred to HDV, Forty Million
Dollars ($40,000,000) at any one time outstanding, and (ii) following Lender's
receipt of such notice, Twenty Million Dollars ($20,000,000), at any one time
outstanding.
(c) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to GBM shall not exceed Seven
Million Dollars ($7,000,000).
(d) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to Gump's shall not exceed
Five Million Dollars ($5,000,000) at any one time outstanding.
(e) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to TCS shall not exceed
Fifteen Million Dollars ($15,000,000) at any one time outstanding.
(f) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to Tweeds shall not exceed
Eight Million Dollars ($8,000,000) at any one time outstanding.
(g) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to Aegis shall not exceed One
Million Five Hundred Thousand Dollars ($1,500,000) at any one time outstanding.
(h) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to LWI shall not exceed Three
Million Dollars ($3,000,000) at any one time outstanding.
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(i) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving Inventory Loans
and Letter of Credit Accommodations made available to HDV shall not exceed, in
the aggregate (i) until HDPI and HDV have notified Lender in writing that the
"Domestications" catalog business has been transferred to HDV, zero ($0); and
(ii) following Lender's receipt of such notice, Twenty Million Dollars
($20,000,000), at any one time outstanding.
(j) Without limiting the foregoing lending sublimits, (i)
the aggregate amount of Revolving Loans shall not at any one time outstanding
exceed the Revolving Loan Limit for all Revolving Loan Borrowers and (ii) the
aggregate amount of Revolving Accounts Loans for all Deferred Billing Borrowers
shall not at any one time outstanding exceed Ten Million Dollars ($10,000,000).
Lender shall have the right, from time to time, to establish and revise
Revolving Accounts Loan sublimits for each Deferred Billing Borrower, within the
overall Ten Million Dollar ($10,000,000) sublimit applicable to all Revolving
Accounts Loans.
2.3 Letter of Credit Accommodations
(a) Lender shall, from time to time, on terms and
conditions acceptable to Lender, at the request of a Revolving Loan Borrower,
provide one or more of the following financial accommodations to such Borrower
("Letter of Credit Accommodations"): (i) issue, open or cause the issuance or
opening of letters of credit or purchase or other guarantees for the purchase of
goods and services in the ordinary course of a Revolving Loan Borrower's
business or for any other purpose approved by Lender or provide for the
amendment or extension of any of the foregoing or (ii) assist a Revolving Loan
Borrower in establishing or opening letters of credit for such purposes by
indemnifying the issuer thereof or guaranteeing the payment or performance of
such Borrower to such issuer in connection therewith, including standby letters
of credit (collectively, the "Distribution Center Standby LCs") issued to
replace, or issued to NationsBank as sole security for, letters of credit
previously issued by NationsBank for the account of Hanover or its subsidiaries,
not to exceed the aggregate amount of Thirty Million Dollars ($30,000,000), to
secure the HDPI Pennsylvania IRB Financing and the HDI Floating Rate Bond
Financing.
(b) Without limiting Lender's continuing discretion under
Section 2.3(a) hereof, the extension of such Letter of Credit Accommodations by
Lender shall be subject to the satisfaction of each of the following additional
conditions precedent: (i) additional Revolving Loans pursuant to the Revolving
Loan Formulas, subject to reserves against availability established by Lender
hereunder and within all applicable lending sublimits and the Revolving Loan
Limit, shall be available to the
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respective Revolving Loan Borrower immediately before giving effect to the
proposed issuance of the Letter of Credit Accommodation as follows: (A) if the
proposed Letter of Credit Accommodation is for the purpose of purchasing
Eligible Inventory, such additional availability to such Revolving Loan Borrower
must be in an amount equal to or greater than the sum of (1) forty percent (40%)
of the landed cost of such Eligible Inventory (or such greater percentage as
shall equal one hundred percent (100%) minus the applicable Inventory Loan
Formula determined by Lender under Section 2.1(b) hereof), plus (2) the freight,
duty and other amounts which Lender estimates must be paid for or in connection
with such Inventory upon arrival or for delivery to or within the United States;
and (B) if the proposed Letter of Credit Accommodation is in the form of a
Distribution Center Standby LC or for any other purpose, such additional
availability of Revolving Loans to such Revolving Loan Borrower must be in an
amount not less than one hundred percent (100%) of the face amount thereof; (ii)
if such Letter of Credit Accommodation is for the purpose of purchasing goods,
Lender shall have, upon passage of title to Revolving Loan Borrower purchasing
same, a valid and perfected first security interest in and lien upon goods being
acquired in connection therewith subject to the provisions of Section 6.4
hereof; (iii) the form and content of all such Letter of Credit Accommodations
shall be satisfactory to Lender and the issuer, and all documents, instruments,
notices and statements relating thereto, if any, which Lender or the issuer may
request, shall be promptly delivered to Lender; and (iv) Revolving Loan
Borrowers shall have fully complied to Lender's satisfaction with all terms and
provisions hereof and of the terms and provisions of any agreements relating to
the Letter of Credit Accommodations heretofore, now or hereafter entered into
between Revolving Loan Borrowers and Lender, or between Lender and/or Revolving
Loan Borrowers and any issuer, including the payment of all fees, commissions
and charges set forth herein and therein.
(c) Revolving Loan Borrowers hereby agree to and do
indemnify and hold harmless, Lender, and its officers, directors, employees,
attorneys and agents, with respect to all loss, cost, liability or expense which
Lender may suffer or incur in connection with the Letter of Credit
Accommodations. Revolving Loan Borrowers further agree that payments made or
other obligations incurred by, and all indemnities given by, Lender in
connection with Letter of Credit Accommodations are part of the Obligations of
Revolving Loan Borrowers, and shall be payable in accordance with the terms
hereof and of the other Financing Agreements. Any such payments made by Lender,
including, without limitation, any of the same made after termination or
non-renewal of this Agreement or the other Financing Agreements with respect to
Letter of Credit Accommodations provided to Revolving Loan Borrowers prior to
such termination or non-renewal, shall automatically be treated for
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purposes hereof as Revolving Loans and shall accrue interest at the Interest
Rate then payable by Revolving Loan Borrowers commencing on the date such
payment is made by Lender.
(d) The aggregate amount of Revolving Loans which may
otherwise be made available to the respective Revolving Loan Borrowers by Lender
pursuant to the Revolving Loan Formulas and within the Revolving Loan Limit and
subject to the applicable lending sublimits for the respective Revolving Loan
Borrowers, shall be reduced from time to time as follows: (i) as to Letter of
Credit Accommodations for the purpose of purchasing Eligible Inventory, by an
amount equal to the sum of (A) forty (40%) percent of the value of Eligible
Inventory purchased with such Letter of Credit Accommodations (or such greater
percentage as shall equal one hundred percent (100%) minus the applicable
Inventory Loan Formula applied by Lender under Section 2.1(b) hereof), plus (B)
the freight, duty and other amounts which Lender estimates must be paid for or
in connection with such Inventory upon arrival or for delivery to or within the
United States, and (ii) as to Letter of Credit Accommodations in the form of the
Distribution Center Standby LCs or for any other purpose, one hundred percent
(100%) of the then outstanding aggregate amount thereof and all other
commitments and obligations made or incurred by Lender with respect thereto.
(e) In the case of any Letter of Credit Accommodation for
the purchase of Inventory, one hundred percent (100%) of the amount thereof,
plus the freight, duty and other amounts which Lender estimates must be paid for
or in connection with such Inventory upon arrival or for delivery to or within
the United States, shall be considered as outstanding Obligations hereunder for
purposes of applying the respective Revolving Loan Borrowers' lending sublimits,
and the aggregate lending sublimit set forth in Section 2.2 hereof.
(f) In addition to any charges, fees or expenses charged
by any bank or issuer in connection with the Letter of Credit Accommodations,
Revolving Loan Borrowers agree to pay to Lender a letter of credit fee at a rate
equal to (i) one and one-half percent (1.5%) per annum on the daily outstanding
balance of the Distribution Center Standby LCs and (ii) two percent (2%) per
annum on the daily outstanding balance of all other Letter of Credit
Accommodations, in each case payable monthly in arrears and (iii) any other
commissions, fees and charges set forth herein.
(g) Notwithstanding anything to the contrary contained
herein or in any of the other Financing Agreements, the aggregate amount of all
Letter of Credit Accommodations pursuant hereto and all other commitments and
obligations made or incurred by Lender pursuant hereto for the account or
benefit of Revolving Loan Borrowers in connection therewith shall not, at any
one time
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outstanding, exceed Forty Million Dollars ($40,000,000). Lender shall have the
right, from time to time, to establish and revise sublimits for Letter of Credit
Accommodations for the account of the respective Revolving Loan Borrowers,
within the overall Forty Million Dollar ($40,000,000) limit on Letter of Credit
Accommodations.
(h) In connection with, in addition to, and without
limiting that which is otherwise set forth in this Section 2.3, from time to
time each Revolving Loan Borrower shall execute and deliver such applications
and other agreements relating to the Letter of Credit Accommodations, in form
and substance satisfactory to Lender, and, as applicable, the issuer of any
Letter of Credit Accommodation.
(i) At any time upon or after the occurrence and during
the continuance of an Event of Default, upon Lender's request, Revolving Loan
Borrowers shall either furnish cash collateral to secure the reimbursement
obligations to the issuer in connection with any Letter of Credit Accommodations
or furnish cash collateral to Lender for the Letter of Credit Accommodations,
and in either case, the Revolving Loans otherwise available to Revolving Loans
Borrowers shall not be reduced as provided in Section 2.3(c) to the extent of
such cash collateral. Revolving Loan Borrowers shall indemnify and hold Lender
harmless from and against any and all losses, claims, damages, liabilities,
costs and expenses which Lender may suffer or incur in connection with any
Letter of Credit Accommodations and any documents, drafts or acceptances
relating thereto, including, but not limited to, any losses, claims, damages,
liabilities, costs and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation. Revolving Loan
Borrowers assume all risks with respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit Accommodation and for such purposes
the drawer or beneficiary shall be deemed the agent of Revolving Loan Borrowers.
Revolving Loan Borrowers assume all risks for, and agree to pay, all foreign,
Federal, State and local taxes, duties and levies relating to any goods subject
to any Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder. Revolving Loan Borrowers hereby release and hold Lender harmless
from and against any acts, waivers, errors, delays or omissions, whether caused
by Revolving Loan Borrowers, by any issuer or correspondent or otherwise with
respect to or relating to any Letter of Credit Accommodation. The provisions of
this Section 2.3(i) shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.
(j) Nothing contained herein shall be deemed or construed
to grant Revolving Loan Borrowers any right or authority to pledge the credit of
Lender in any manner. Lender shall have no liability of any kind with respect to
any Letter of
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Credit Accommodation provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Revolving Loan Borrowers shall be bound by any interpretation made in good faith
by Lender, or any issuer or correspondent under or in connection with any Letter
of Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Revolving Loan Borrowers. Lender shall have the sole and
exclusive right and authority to, and Revolving Loan Borrowers shall not: (i) at
any time an Event of Default exists or has occurred and is continuing, (A)
approve or resolve any questions of non-compliance of documents, (B) give any
instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders, and (ii) at all times, (A) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents, and (B) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit included in
the Collateral. Lender may take such actions either in its own name or in any
Borrower's name.
(k) Any rights, remedies, duties or obligations granted or
undertaken by Revolving Loan Borrowers to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement in
favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by Revolving
Loan Borrowers to Lender. Any duties or obligations undertaken by Lender to any
issuer or correspondent in any application for any Letter of Credit
Accommodation, or any other agreement by Lender in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been undertaken by Revolving Loan Borrowers to Lender and to apply in all
respects to Revolving Loan Borrowers.
2.4 Term Loans.
(a) Subject to and upon the terms and conditions contained
herein and in the other Financing Agreements, Lender shall make a term loan to
HDPI in the aggregate original principal amount of Four Million Dollars
($4,000,000) (the "HDPI Term Loan"). The HDPI Term Loan is (a) evidenced by the
HDPI Term Note in such original principal amount duly executed and delivered by
Borrower to Lender concurrently herewith; (b) to be repaid, together with
interest and other amounts, in accordance with this Agreement, the HDPI Term
Note, and the other Financing Agreements and (c) secured by all of the
Collateral.
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(b) Subject to and upon the terms and conditions contained
herein and in the other Financing Agreements, Lender shall make a term loan to
Hanover Realty in the aggregate original principal amount of Six Million Dollars
($6,000,000) (the "Hanover Realty Term Loan"). The Hanover Realty Term Loan is
(a) evidenced by the Hanover Term Hanover Realty Note in such original principal
amount duly executed and delivered by Borrower to Lender concurrently herewith;
(b) to be repaid, together with interest and other amounts, in accordance with
this Agreement, the Hanover Realty Term Note, and the other Financing Agreements
and (c) secured by all of the Collateral.
2.5 Maximum Credit
(a) The aggregate principal amount of the Revolving Loans,
Term Loans and Letter of Credit Accommodations, at any one time outstanding,
shall not exceed the Maximum Credit.
(b) Lender may, from time to time, in its discretion,
permit the outstanding amount of any component of the Revolving Loans or Letter
of Credit Accommodations, or the aggregate amount of the outstanding Revolving
Loans and/or Letter of Credit Accommodations to exceed the amounts available
under the Revolving Loan Formulas, or the applicable lending sublimits or the
Revolving Loan Limit; provided, that, should Lender so permit any such
excess(es) in any one instance such event shall not operate to limit, waive or
otherwise affect any rights of Lender on any future occasions. In the event
Lender so permits any such excess(es), and without limiting the right of Lender
to demand payment of the Obligations of Revolving Loan Borrowers, or any portion
thereof, in accordance with any other term of this Agreement or the other
Financing Agreements, Revolving Loan Borrowers shall remain liable therefor and
Revolving Loan Borrowers shall, upon demand by Lender, which may be made at any
time and from time to time, immediately repay to Lender the entire amount of any
such excess(es).
2.6 Reserves
(a) Without limiting any other rights or remedies of
Lender hereunder or under the other Financing Agreements, all Revolving Loans
and Letter of Credit Accommodations made or otherwise available to Revolving
Loan Borrowers hereunder shall be subject to Lender's continuing right, in its
discretion, to establish a reserve against the availability of such Revolving
Loans and Letter of Credit Accommodations, and to increase and decrease such
reserve from time to time, if and to the extent that, in Lender's good faith
belief, such reserve is necessary to protect Lender against any material
liability to third parties or impairment of the Collateral or its value, or an
Event of Default or Incipient Default has occurred and is continuing.
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(b) With respect to sales and/or use taxes, the right of
Lender to establish reserves shall be limited to sales and use taxes owed or
claimed plus interest and penalties, if any, thereon (i) for which a judgment,
warrant or levy in favor of any taxing authority of the United States or
territory or possession thereof, or of any State or political subdivision
thereof, has been obtained and any enforcement proceeding, action or suit has
been taken or commenced against any Revolving Loan Borrower; or (ii) for which a
lien exists by statute or at common law or which has arisen by any filing,
assessment, recording or other action by any such taxing authority against any
property of any Revolving Loan Borrower and in respect of which lien any
enforcement proceeding, action or suit has been taken or commenced; or (iii) for
which, under generally accepted accounting principles, any Borrower should take
a charge or record an accrual or reserve; or (iv) that are required to be
collected (or have been collected and are required to be remitted) under the
laws of any State in which any Borrower owns any Inventory or owns or leases any
property, including, without limitation, the States of Pennsylvania, New Jersey,
California, Ohio, Virginia and Wisconsin. Nothing contained in this Section
2.6(b) or in Section 2.6(c) shall be construed to limit the continuing right of
Lender to establish reserves against availability in respect of any other
matters or to limit any other rights and remedies of Lender hereunder or under
the other Financing Agreements.
(c) Lender shall be entitled to establish and maintain a
reserve against Revolving Loan availability of Revolving Loan Borrowers in the
amount of $2,000,000, being the maximum amount of the obligations of Hanover
Ventures to Sears for unpaid royalties owed by Hanover Ventures to Sears under
the Sears Agreements, as to which obligations (but as to no other obligations to
Sears) Lender has, at the request of Borrowers and Guarantors, subordinated its
rights to payment from Hanover Ventures of the Obligations of Hanover Ventures
to Lender.
2.7 Fees
(a) Closing Fee. Borrowers shall pay to Lender,
contemporaneously herewith, a closing fee in the amount of Seven Hundred Fifty
Thousand Dollars ($750,000), which fee is fully earned as of the date hereof;
provided, that Borrowers shall be entitled to a credit of Two Hundred Fifty
Thousand Dollars ($250,000) against such closing fee in respect of the
commitment fee paid by Hanover in consideration of the issuance of the
Commitment Letter, dated November 9, 1995, among Hanover, Borrowers and Lender.
(b) Facility Fees. Borrowers shall pay to Lender an annual
facility fee of One Hundred Eighty-Seven Thousand Five Hundred Dollars
($187,500), for each year or part thereof during
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the Term of this Agreement, which fee shall be fully earned and payable in
advance on the date hereof and on each anniversary date of this Agreement during
the Term and for so long thereafter as any of the Obligations are outstanding.
(c) Unused Line Fee. With respect to each calendar month
(or part thereof) during the Term, Borrowers shall pay to Lender monthly an
unused line fee, fully earned and payable on the first day of each month, at a
rate equal to one half of one percent (.5%) per annum, calculated upon the
excess, if any, of (i) Sixty-Five Million Dollars ($65,000,000) over (ii) the
average of the daily aggregate principal balances of the outstanding Revolving
Loans and Letter of Credit Accommodations during the preceding month (or part
thereof); provided, however, that if Lender, solely on the basis of the exercise
of its discretion, reduces any Inventory Loan Formula for any calendar month (or
part thereof) in the absence of an Event of Default or Incipient Default which
is continuing, the amount of the unused line fee shall be calculated for such
month by decreasing the base amount of Sixty-Five Million Dollars ($65,000,000)
set forth in clause (i) by a percentage thereof equal to the difference between
the Inventory Loan Formula otherwise applicable under Section 2.1(b) and the
Inventory Loan Formula as so reduced solely by virtue of Lender's discretion.
(d) Servicing Fee. With respect to each calendar month (or
part thereof) during the Term, Borrowers shall pay to Lender a servicing fee in
the amount of Twenty Thousand Dollars ($20,000) per calendar month, fully earned
and payable in advance on the date hereof and on the first day of each month (or
part thereof) hereafter.
(e) Fees as Obligations. The fees provided for in this
Section 2.7 shall be in addition to all other amounts payable by Borrowers under
this Agreement and the other Financing Agreements and shall constitute part of
the Obligations of Borrowers. Such fees may, at Lender's option, be charged
directly to any of the loan accounts of Borrowers maintained by Lender.
2.8 Interest
(a) Interest on all of the Revolving Loans, the Term Loans
and other non-contingent Obligations of Borrowers shall be payable by Borrowers
to Lender at the applicable Interest Rate, calculated on the basis of a year
consisting of three hundred and sixty (360) days and actual days elapsed.
(b) In no event shall the Interest Rate and other charges
hereunder exceed the highest rate or amount permissible under any law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that a
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court determines that Lender has received interest or other charges hereunder in
excess of the highest rate or amount applicable hereto, such excess shall be
deemed received on account of, and shall automatically be applied to reduce, the
Obligations of Borrowers other than interest in the inverse order of maturity,
and the provisions hereof shall be deemed amended to provide for the highest
permissible rate or amount. If there are no Obligations of Borrowers
outstanding, Lender shall refund to Borrowers such excess.
(c) Subject to the foregoing, all interest charges
hereunder or in connection herewith shall be (i) computed as provided herein and
in the other Financing Agreements and (ii) paid monthly to Lender on the first
day of each calendar month, or, at Lender's option, charged to Borrowers' loan
accounts maintained by Lender as of the first day of each calendar month and
deemed paid by the first amounts subsequently credited thereto.
(d) With respect to each day during a given calendar month
during the Term that the closing daily balance in each of the Revolving Loan
accounts maintained by Lender for Borrowers hereunder is a credit balance,
Lender shall monthly, on the first day of the next succeeding calendar month,
credit the respective revolving loan accounts with an amount equal to interest
on the respective credit balances therein, at a per annum rate equal to the
Prime Rate minus three percent (3%) per annum.
(e) Without limiting Lender's continuing right to demand
payment of the Revolving Loans, the Term Loans, the Letter of Credit
Accommodations and other Obligations of Borrowers, or any portion thereof, in
accordance with the terms of this Agreement, or any of the other Financing
Agreements, all interest accruing hereunder during the continuance of any Event
of Default, and on and after termination or non-renewal hereof, shall be payable
on demand.
2.9 Conduct of Accounts; Cross-Collateralization
(a) Lender may maintain one or more accounts reflecting
the Revolving Loans, the Term Loans, the Letter of Credit Accommodations,
repayments of the Revolving Loans, the Term Loans, Obligations relating to
Letter of Credit Accommodations and the other Obligations of Borrowers and/or
Guarantors and any of the Collateral or Guarantor Collateral contemplated under
this Agreement or the other Financing Agreements as Lender shall, in its
discretion, determine. All Revolving Loans and Term Loans shall be charged to a
loan account in the name of the respective Borrower on Lender's books. The
outstanding amount of Obligations relating to Letter of Credit Accommodations
may be reflected on Lender's books as a cash loan
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the proceeds of which are held as cash Collateral or in such other manner as
Lender shall determine. All Collateral, Guarantor Collateral or other collateral
security held by or granted to Lender by Borrowers, Guarantors or any third
persons shall be security for the payment and performance of any and all
Obligations of Borrowers, Guarantors or such third persons to Lender, as the
case may be, notwithstanding the maintenance of separate accounts for Borrowers,
Guarantors or third persons or the existence of any notes.
(b) All Revolving Loans, Term Loans, Obligations relating
to Letter of Credit Accommodations, and other Obligations of Borrowers and
Guarantors shall be payable to Lender at its address specified herein or at such
other place in the United States as Lender may hereafter designate in writing
from time to time. Lender may apply payments received or collected from
Borrowers or Guarantors or for the account of Borrowers or Guarantors
(including, without limitation, the proceeds of sale, collection or other
realization upon any Collateral or Guarantor Collateral) to such of the
Obligations of Borrowers and/or Guarantors then due, in whatever order and
manner Lender, in its discretion, determines. Lender shall have the continuing
and exclusive right to apply and reverse and reapply any and all such proceeds
and payments to any portion of the Obligations of Borrowers and/or Guarantors
then or thereafter due. Upon the request of Lender, Borrowers shall execute and
deliver to Lender one or more promissory notes, in form and substance
satisfactory to Lender, to further evidence the Revolving Loans and the
Obligations of Borrowers with respect to the Letter of Credit Accommodations or
any portion(s) thereof.
(c) Subject to the terms and conditions of this Agreement,
the Term Loan Borrowers may prepay the Term Loans, in whole or in part, at any
time prior to an Event of Default and not in contemplation of the termination of
the Credit Facility, without payment of any separate prepayment premium or
prepayment penalty. Any such partial prepayment of the Term Loans shall be
applied to principal payments coming due thereunder in the inverse order of
maturity. No proceeds of any Revolving Loans shall be used for the prepayment of
all or any part of the Term Loans. Any amounts paid or prepaid in respect of the
Term Loans may not be thereafter reborrowed.
(d) If Lender is for any reason required to surrender any
payment of, or proceeds of Collateral or Guarantor Collateral applied to the
payment of, all or any part of the Obligations of Borrowers and/or Guarantors to
any Person (including any creditor or creditors' representative of any Borrower
or any Guarantor), or if any interest of Lender in any Collateral or Guarantor
Collateral is set aside or avoided, whether because such payment or proceeds is
invalidated, declared fraudulent as to any Person (including any creditor or
creditors'
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representative of any Borrower or any Guarantor), set aside, determined to be
void or voidable as a preference, or a diversion of trust funds, or for any
other reason, or are determined to be subject to a claim for restitution, or
otherwise are required to be surrendered, set aside or avoided, then the
Obligations of Borrowers and/or Guarantors or any part thereof intended to be
reduced, paid or satisfied, as a result of such payment or application of
proceeds or the apparent interests of Lender in such Collateral and Guarantor
Collateral shall be revived and reinstated, and the Guarantees, shall be revived
and reinstated and this Agreement and the Guarantees shall continue in full
force and effect as if such payment or proceeds had not been received by Lender,
and such reductions in or release of liability under any Guarantees, Borrowers
and Guarantors shall be jointly and severally liable to pay to Lender, and shall
jointly and severally indemnify Lender and hold Lender harmless for, the amount
of such payment or proceeds surrendered and the value of any such Collateral or
Guarantor Collateral set aside or avoided, plus any interest and other amounts
paid and all costs and expenses (including reasonable attorneys' fees and
disbursements incurred by Lender in connection therewith). The provisions of
this Section 2.9(d) shall be and remain effective notwithstanding any contrary
action which may have been taken by Lender in reliance upon such payment or
proceeds, and any such contrary action so taken shall be without prejudice to
Lender's rights under this Agreement and shall be deemed to have been
conditioned upon such payment or proceeds having become final and indefeasible.
The provisions of this Section 2.9(d) shall survive the termination of this
Agreement and the other Financing Agreements.
(e) At Lender's option, all principal, interest, fees,
commissions, costs, expenses or other charges hereunder, under the other
Financing Agreements or in connection herewith or therewith, may be charged
directly to any loan account or other account of Borrowers and/or Guarantors
maintained by Lender. Revolving Loan Borrowers expressly agree that principal,
interest, fees and other obligations of Term Loan Borrowers in respect of the
Term Loans may, at Lender's sole option, be charged to the Revolving Loan
accounts of Revolving Loan Borrowers who may thereafter obtain reimbursement
from the Term Loan Borrowers.
(f) Lender shall deliver to Hanover, on behalf of the
Borrowers at the address set forth in Section 9.5 hereof, each calendar month,
one or more statements with respect to any loan account maintained by Lender
with respect to Borrowers pursuant to the provisions hereof, as of the end of
each calendar month while this Agreement is in effect. Such statements of
account shall be considered correct, and deemed accepted by and conclusively
binding upon Borrowers and Guarantors, except to the extent Lender shall have
received from Borrowers or any Guarantor
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written notice of all exceptions to such statement of account with specificity,
within forty-five (45) days after the date of such statement.
2.10 Use of Proceeds
(a) Borrowers shall use the proceeds of all Revolving
Loans, Term Loans and Letter of Credit Accommodations made or arranged by Lender
on the date hereof (i) for the repayment by Borrowers of intercompany
indebtedness to Hanover, to be used by Hanover to satisfy, or as sole security
for, the outstanding obligations of Hanover to NationsBank, and to satisfy, or
as sole security for, the outstanding obligations of Borrowers as guarantors of
all outstanding obligations of Hanover to NationsBank and (ii) for the costs,
expenses and fees incurred by Borrowers in connection with this Agreement and
the other Financing Agreements.
(b) All Revolving Loans and Letter of Credit
Accommodations provided on or after the date hereof to Revolving Loan Borrowers
pursuant to the provisions hereof shall be used to purchase Inventory and for
general operating, working capital and capital expenditures of Revolving Loan
Borrowers, and other proper corporate purposes of Revolving Loan Borrowers, not
otherwise prohibited by the terms hereof.
2.11 Additional Borrower.
(c) The parties hereto contemplate that The ▇▇▇▇▇▇ Company
may become a Revolving Loan Borrower hereunder, and that certain Accounts of The
▇▇▇▇▇▇ Company under future Deferred Billing Option Programs and certain
Inventory of The ▇▇▇▇▇▇ Company held for sale through its mail order catalogs
may be considered by Lender to be Eligible Deferring Billing Receivables and
Eligible Inventory, respectively, conditioned upon the following:
(i) Lender shall have determined, after a field
examination of ▇▇▇▇▇▇ conducted by Lender at Revolving Loan Borrowers' expense
(including payment by Revolving Loan Borrowers of per diem charges of Six
Hundred Dollars ($600.00) per person per day plus reimbursement of out-of-pocket
expenses) (A) that such Accounts and such Inventory of The ▇▇▇▇▇▇ Company meet
Lender's criteria for Eligible Deferred Billing Receivables and Eligible
Inventory, respectively, and (B) that the results of such field examination of
▇▇▇▇▇▇, its property, business and operations are in all other respects
satisfactory to Lender;
(ii) Lender shall have received a current
Appraisal with respect to the Inventory of The ▇▇▇▇▇▇ Company, prepared at
Revolving Loan Borrowers' expense by the Appraiser in form, scope and
methodology acceptable to Lender and addressed to
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Lender or upon which Lender is expressly permitted to rely, that is satisfactory
to Lender and will enable Lender to calculate the Net Orderly Liquidation Value
of such Inventory and the Net OLV Percentage with respect thereto;
(iii) The ▇▇▇▇▇▇ Company shall have executed and
delivered to and in favor of Lender such documents and instruments as Lender
requires in order for The ▇▇▇▇▇▇ Company (A) to become a Revolving Loan Borrower
hereunder by, inter alia, assuming the Obligations of a Revolving Loan Borrower
hereunder, making the representations, warranties and covenants of the Borrowers
hereunder in favor of Lender and granting Lender a security interest in and lien
upon its Collateral and (B) to guarantee payment to Lender of the Obligations of
all other Borrowers, all in form and substance satisfactory to Lender;
(iv) ▇▇▇▇▇▇ Holdings Inc. shall become a
Guarantor hereunder with respect to the Obligations to Lender of The ▇▇▇▇▇▇
Company and all other Borrowers, and shall have executed and delivered to and in
favor of Lender such guaranties, security agreements, mortgages, documents and
instruments as are required to be delivered by a Guarantor under Sections 4.2
and 4.3 hereof, all in form and substance satisfactory to Lender;
(v) Each other Borrower and Guarantor shall have
executed and delivered to Lender a supplemental or amended Guarantee with
respect to the Obligations to Lender of The ▇▇▇▇▇▇ Company;
(vi) ▇▇▇▇▇▇ shall deliver or cause to be
delivered to and in favor of Lender, all agreements, documents and instruments,
including, without limitation, agreements, documents and instruments executed by
third parties, of the kinds required to be delivered by Borrowers and Guarantors
under Section 3.1 hereof, and such other agreements, documents and instruments
from ▇▇▇▇▇▇ and third parties as Lender requires to perfect and protect Lender's
interests in the Collateral and Guarantor Collateral of ▇▇▇▇▇▇ and its rights
thereto;
(vii) Lender shall have received Secretary's
Certificates of Directors' Resolutions with Shareholders' Consent evidencing the
adoption and subsistence of corporate resolutions approving the execution,
delivery and performance by ▇▇▇▇▇▇ and the other Borrowers and Guarantors of the
agreements, documents and instruments to be delivered pursuant to this Section
2.11, together with such opinions of counsel to ▇▇▇▇▇▇, Borrowers and Guarantors
with respect thereto, addressed to Lender as Lender shall reasonably require,
all in form and substance and satisfactory to Lender; and
(viii) No Event of Default or Incipient Default
shall have occurred, after giving effect to the assumption of
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Obligations, representations, warranties and covenants made by ▇▇▇▇▇▇ as
provided above.
(d) Notwithstanding the foregoing, Lender shall have, at
all times, the rights (i) to determine those portions (if any) of the Accounts
and Inventory of The ▇▇▇▇▇▇ Company that are and remain Eligible Deferred
Billing Receivables or Eligible Inventory, respectively, pursuant to the other
provisions of this Agreement, (ii) to establish sublimits for Revolving Loans
and/or Letter of Credit Accommodations requested by The ▇▇▇▇▇▇ Company, (iii) to
determine initially whether the Inventory Loan Formula and the Accounts Loan
Formula, or some lesser percentage(s), shall apply to The ▇▇▇▇▇▇ Company (and
thereafter to adjust such percentage(s) as permitted herein) and (iv) to
establish initially such availability reserves as Lender shall require in
respect of The ▇▇▇▇▇▇ Company and thereafter to establish and adjust additional
availability reserves as permitted herein.
(e) Nothing set forth in this Section 2.11 shall in any
manner be construed to limit or impair any other rights or remedies of Lender
hereunder or under any of the other Financing Agreements.
SECTION 3. CONDITIONS PRECEDENT TO LOANS
AND OTHER FINANCIAL ACCOMMODATIONS
3.1 Conditions to Loans
The making and providing of Revolving Loans, the Term Loans and Letter
of Credit Accommodations heretofore, on the date hereof or hereafter were, are
and shall be subject to the satisfaction of each of the following conditions
precedent (any of which may be waived, in whole or in part, only by Lender in
writing):
(a) Termination of NationsBank Credit Agreements.
Borrowers shall have provided evidence to Lender of the termination of the
NationsBank Credit Agreements as in effect immediately prior to the date hereof
and the release and termination of the NationsBank Credit Agreements held in
escrow prior to the date hereof, except only such surviving obligations to
NationsBank as are set forth in the Amended and Restated Reimbursement Agreement
dated as of the date hereof among NationsBank, Hanover, Borrowers and
Guarantors, in form and substance satisfactory to Lender.
(b) Subordination of Certain Obligations. The Indebtedness
owed by any member of the Affiliated Borrower Group to holders of the Hanover
debt instruments described on Exhibit E attached hereto shall be subordinate in
right of payment to the Obligations of such members of the Affiliated Borrower
Group to
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Lender. In addition, Hanover shall have executed and delivered in favor of
Lender an Intercompany Subordination Agreement subordinating, to the extent
provided therein, their rights to payment of all Obligations of Borrowers and
Guarantors to them, to the prior indefeasible payment and satisfaction of all
Obligations of Borrowers and Guarantors to Lender.
(c) Delivery of Financing Agreements. Borrowers and
Guarantors shall have delivered the Financing Agreements required by Lender and
all instruments and documents hereunder and thereunder shall have been executed
and delivered to Lender, in form and substance satisfactory to Lender, and all
UCC financing statements relating and other necessary filings, if any, to the
Collateral and Guarantor Collateral shall have been duly filed and recorded.
(d) Private Credit Card Agreement. Borrowers shall have
delivered, in form and substance satisfactory to Lender, (i) the Private Credit
Card Agreement (ii) an irrevocable payment instruction issued by Borrowers party
to the Private Credit Card Agreement directing the Private Credit Card Purchaser
to remit to (and only to) an account designated from time to time by Lender, all
monies from time to time to be remitted to Borrowers under the Private Credit
Card Agreement, and (iii) the GECC Lien Clarification Agreement excluding and
releasing from any liens or security interests of the Private Credit Card
Purchaser, the Collateral (or such parts thereof as to which Lender shall
require clarification or express exclusion and release, each in form and
substance satisfactory to Lender).
(e) Closing Excess Availability. Borrowers shall have
Excess Availability, as of the date hereof, in the aggregate amount of not less
than Five Million Two Hundred Thousand Dollars ($5,200,000).
(f) Consents; Waivers; Acknowledgements. Lender shall have
received, in form and substance satisfactory to Lender, all consents, waivers,
acknowledgements and other agreements from third Persons which Lender may deem
necessary or desirable to permit, protect and perfect its security interest in
liens upon the Collateral and the Guarantor Collateral and which Lender shall
have requested from Borrowers, including, but not limited to: (i) waivers by
lessors, operators and mortgagees of any security interests or other claims
against personal property located at their premises and agreements to grant
access to Lender and the right to remain thereon to exercise all remedies with
respect to any Collateral and Guarantor Collateral located on each premise,
including, without limitation, the Eligible Inventory Locations and (ii)
agreements from lessors and licensors of distribution equipment and computer
software, granting Lender the right to use such equipment and software.
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(g) Opinions of Counsel. Lender shall have received, in
form and substance satisfactory to Lender, one or more opinion letters of
independent counsel to Borrowers, Guarantors and IMR in respect of the Financing
Agreements, the Collateral and Guarantor Collateral and such other matters as
Lender may reasonably request.
(h) Perfection. Lender's lien on and security interests in
each item of Collateral and Guarantor Collateral shall have been granted and
perfected by the filing, recording or registration of documents, instruments, or
financing statements in the appropriate governmental offices or by possession or
such other action as is necessary to perfect each such lien or security
interest, and Lender shall have received evidence satisfactory to it that all
such liens and security interests are of first priority, subject only to
permitted liens set forth in Section 6.4 hereof.
(i) Insurance. Lender shall have received evidence of
insurance required hereunder and under the other Financing Agreements, and
mortgagee's and lender's loss payable endorsements in favor of Lender with
respect thereto, all in form and substance satisfactory to Lender.
(j) Appraisals. Lender shall have received (i) the
Appraisal, (ii) a current appraisal, conducted at Borrowers' expense by an
appraiser acceptable to Lender and in form, scope and methodology acceptable to
Lender, addressed to Lender or upon which Lender is expressly permitted to rely,
setting forth a current orderly liquidation value of not less than Six Million
Dollars ($6,000,000) with respect to the Equipment owned by Borrowers and
Guarantors at Eligible Inventory Locations that will be subject to Lender's
first priority liens and security interests as provided herein and (iii) current
appraisals conducted at Borrowers' expense by an appraiser or appraisers
acceptable to Lender and in form, scope and methodology acceptable to us,
addressed to Lender or upon which Lender is expressly permitted to rely, setting
forth the fair market value of the Real Property owned by Term Loan Borrowers,
which shall not be less than an aggregate of Seventeen Million Dollars
($17,500,000).
(k) Environmental Audits. Lender shall have received
environmental audits of Borrowers' plants and the Real Property conducted by an
independent environmental engineering firm acceptable to Lender, and in form,
scope and methodology satisfactory to Lender, confirming to the satisfaction of
Lender and its environmental consultant (who shall review such audits and
follow-up work requested by such consultant at Borrowers' expense) (i) Borrowers
are in compliance with all material applicable Environmental Laws and (ii) the
absence of any material environmental problems.
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(l) Title Insurance. Lender shall have received, in form
and substance satisfactory to Lender, a valid and effective title insurance
policy issued by a company and agent acceptable to Lender (i) insuring the
priority, amount and sufficiency of the Mortgages, (ii) insuring against matters
that would be disclosed by surveys and (iii) containing any legally available
endorsements, assurances or affirmative coverage requested by Lender for
protection of its interests.
3.2 Additional and Continuing Condition
Each Revolving Loan and each Letter of Credit Accommodation to be made
on the date hereof and hereafter is subject to the prior or contemporaneous
satisfaction of the additional condition precedent (which may be waived, in
whole or in part, only by Lender in writing) that no Event of Default or
Incipient Default shall have occurred and be continuing.
SECTION 4. COLLATERAL
4.1 Security Interests in Borrowers' Property
As collateral security for the prompt performance, observance and
payment in full of all of the Obligations of Borrowers, Borrowers hereby grant
to Lender, a continuing security interest in, and liens upon, and rights of
setoff against, and Borrowers hereby pledge and assign to Lender, all now owned
and hereafter acquired and arising assets and properties of Borrowers (which
assets and properties, together with all other collateral security for the
Obligations of Borrowers heretofore, now or hereafter granted to or otherwise
held or acquired by Lender are referred to herein as the "Collateral"),
including, but not limited to, the following:
(i) all of the following, whether now owned or
hereafter acquired or arising: (A) all Accounts, including, without limitation,
all MasterCard/VISA Receivables and all other Third Party Credit Card
Receivables, and all monies, credit balances and other amounts due from or
through or held by Third Party Credit Card Issuers, or other parties to the
Third Party Credit Card Agreements, all monies paid by or through the Private
Credit Card Purchaser, all rentals or license fees receivable in respect of
sale, lease, or license of Customer Lists, all monies, securities and other
property and the proceeds thereof, now or hereafter held or received by, or in
transit to, Lender from or for Borrowers, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of Borrowers' deposits
(general or special), balances, sums and credits with Lender at any time
existing; (B) all right, title and interest, and all rights, remedies, security
and liens, in, to and in respect of the Accounts and other Collateral,
including, without
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limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guarantees or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligations of any Account Debtor, all credit
and other insurance; (C) all right, title and interest in, to and in respect of
all goods relating to, or which by sale have resulted in, Accounts, including,
without limitation, all goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or evidencing, any
Account or other Collateral, including, without limitation, all returned,
reclaimed or repossessed goods; (D) all deposit accounts; and (E) all other
general intangibles of every kind and description, including, without
limitation, (1) tradenames and trademarks, and the goodwill of the business
symbolized thereby, (2) patents, (3) copyrights, (4) licenses, (5) Federal,
State and local tax and duty refund claims of all kinds, (6) catalogs and
promotional materials, (7) all Customer Lists, and (8) all right, title and
interest of Borrowers in and to Mail Order Joint Ventures, and other joint
ventures, partnerships and other Persons;
(ii) Inventory;
(iii) Equipment;
(iv) Real Property;
(v) all present and future books, records,
ledger cards, computer software (including all manuals, upgrades, modifications,
enhancements and additions thereto), computer tapes, disks, other electronic
data storage media, documentation of file and record formats and source code,
documents, other property and general intangibles evidencing or relating to any
of the above, any other Collateral or any Account Debtor, together with the file
cabinets or containers in which the foregoing are stored;
(vi) all present and future real property owned
by Borrowers; and
(vii) all present and future products and proceeds
of the foregoing, in any form whatsoever, including, without limitation, any
insurance proceeds and any claims against third persons for loss or damage to or
destruction of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include (a) the GECC
Collateral, other than the GECC Reserve Balance or (b) any leasehold interests
in real property other than the ground leases with respect to the ▇▇▇▇▇▇ ▇▇▇▇,
Conewago Township, ▇▇▇▇▇ County, Pennsylvania facility of HDPI and the
Warrensville Heights, Ohio facility of LWI.
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4.2 Guarantees
Concurrently herewith, in order to induce Lender to enter into this
Agreement and the other Financing Agreements to be entered into on the date
hereof, the Guarantees by the Guarantors and the Guarantees by Borrowers, each
Borrower shall execute and deliver to Lender, and Borrowers shall cause
Guarantors, in form and substance satisfactory to Lender, as provided therein
(as all of such Guarantees, now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, individually a
"Guarantee" and collectively the "Guarantees").
4.3 Security Interests in Property of Guarantors
As collateral security for the prompt performance, observance and
payment in full of all of the Obligations of Guarantors, under their respective
Guarantees and otherwise, Borrowers shall cause to be delivered to Lender a
general security agreement by Guarantors in favor of Lender, providing for a
grant of a security interest in and pledge of all assets of such Guarantor,
except for (i) any capital stock of any Non-Guarantor Subsidiary owned by
Hanover, and (ii) all now owned and hereafter acquired fixtures and real
property in LaCrosse, Wisconsin owned by TCS Factory and TCS Office in form and
substance satisfactory to Lender (each, a "General Security Agreement"). (All of
the collateral security now or hereafter granted to or held by Lender by the
Guarantors pursuant to the General Security Agreements, or otherwise, and the
products and proceeds thereof, herein the "Guarantor Collateral".)
SECTION 5. REPRESENTATIONS AND WARRANTIES
Borrowers, jointly and severally, represent and warrant to Lender, as
follows, (a) which representations and warranties shall survive the execution
and delivery hereof, and, except those, if any, expressly limited to the date
hereof, or other specified dates, are continuing representations and warranties
deemed repeated on each day this Agreement is in effect, and (b) the truth and
accuracy of each of which, together with the representations and warranties in
the other Financing Agreements shall be a continuing condition precedent of
loans and other financial accommodations hereunder and under the other Financing
Agreements:
5.1 Organization
(a) Each Borrower and Guarantor is a duly organized and
validly existing corporation in good standing under the laws of its State or
jurisdiction of incorporation, with perpetual corporate existence, and has the
corporate power and authority to own its properties and to transact the business
in
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which it is engaged or presently proposes to engage. Each Borrower and Guarantor
has qualified to do business as a foreign corporation in the States and other
jurisdictions listed on Exhibit A attached hereto, which constitute all States
or other jurisdictions where the nature of its business or the ownership or use
of property requires such qualification and failure to so qualify would have a
material adverse affect on either Borrower or on the rights and interests of
Lender in the Collateral or Guarantor Collateral.
(b) All of the direct and indirect Subsidiaries of NAR and
Borrowers that are Guarantors are set forth on Exhibit B-1.
(c) None of the Borrowers, or any of their Subsidiaries or
Hanover has any direct or indirect interest in or is a party to any Mail Order
Joint Venture as of the date hereof, except as set forth on Exhibit B-2 attached
hereto.
(d) All of the direct or indirect Restaurant Business
Subsidiaries are set forth on Exhibit B-3 attached hereto.
(e) As of the date hereof, there are no Non-Guarantor
Subsidiaries, except for the Restaurant Business Subsidiaries, ▇▇▇▇▇▇ and those
Subsidiaries, if any, set forth on Exhibit B-4 attached hereof.
(f) None of the Borrowers or Hanover has any
direct or indirect Subsidiaries as of the date hereof, except as set forth on
Exhibit B-1 attached hereto, which sets forth the owner and ownership
percentages as to each member of the Affiliated Borrower Group.
(g) As of the date hereof, each of the Non-Guarantor
Subsidiaries, other than the Restaurant Subsidiaries and ▇▇▇▇▇▇, has less than
Ten Thousand Dollars ($10,000) of assets.
5.2 Corporate Power and Authority
Each Borrower and Guarantor has the corporate power and authority to
execute, deliver and carry out the terms of the Financing Agreements to which it
is a party and all other agreements, instruments and documents delivered by
Borrowers and Guarantors pursuant hereto and thereto applicable to each, and
each Borrower and Guarantor has taken or caused to be taken all necessary
corporate action to authorize the execution, delivery and performance of the
Financing Agreements and the other agreements relating hereto to which it is a
party, the present and future borrowings and other financial accommodations
which may be obtained by Borrowers hereunder and thereunder, and the
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execution, delivery and performance of the instruments and documents delivered
and to be delivered by it pursuant hereto and thereto. This Agreement and the
other Financing Agreements constitute the legal, valid and binding obligations
of each Borrower and Guarantor signatory thereto, enforceable in accordance with
their respective terms, except (i) to the extent the availability of equitable
remedies may be subject to judicial discretion and (ii) to the extent that
enforcement of certain rights and remedies of Lender may be limited by
provisions of the Bankruptcy Code or other laws affecting the rights of
creditors generally.
5.3 Capitalization; Solvency
(a) All of the outstanding shares of common stock of each
Borrower have been duly authorized, validly issued and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of
any kind.
(b) Hanover and its Subsidiaries, including Borrowers, on
a consolidated basis, have sufficient capital to carry on all businesses and
transactions in which they now engage or propose to engage, are solvent and will
continue to be solvent after the creation or incurrence of the Obligations and
the security interests in favor of Lender, and are able to pay their debts as
they mature.
5.4 Compliance with Other
Agreements and Applicable Law
(a) Each Borrower and Guarantor is not in default in any
respect under any indenture, mortgage, deed of trust, deed to secure debt,
material lease, material license agreement or other material agreement or
instrument to which it is a party or by which it or any of its assets or
properties may be or are bound.
(b) Neither the execution nor delivery of this Agreement,
the other Financing Agreements, or any of the instruments and documents to be
delivered pursuant hereto or thereto, nor the consummation of the transactions
herein or therein contemplated, nor compliance with the provisions hereof or
thereof, violates any law or regulation or any order or decree of any court or
governmental instrumentality in any respect or does or will conflict with or
result in the breach of, or constitute a default in any respect under, any
indenture, mortgage, deed of trust, deed to secure debt, lease or agreement or
instrument to which any Borrower or any Guarantor is a party or may be bound,
which violation, breach or default could have or result in a material adverse
effect on or change in the assets or business of Hanover and its Subsidiaries
taken as a whole, or result in the creation or imposition of any lien, charge or
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encumbrance upon any of the property of any Borrower or any Guarantor (except as
specifically contemplated hereunder or under the other Financing Agreements) or
violate any provision of the Certificates of Incorporation or By-Laws of any
Borrower or any Guarantor.
(c) Subject to Sections 5.5 and 5.9 hereof as to the
matters described therein, each Borrower and Guarantor has obtained all material
permits, licenses, approvals, consents, orders or authorizations of any
governmental regulatory authority or other governmental body or authority
required for the lawful conduct of its business and is in compliance in all
material respects with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority relating to its business
(including, without limitation, those set forth in or promulgated pursuant to
ERISA, the IRC, the Occupational Safety and Health Act of 1970, as amended, all
Federal, State and local statutes, regulations, rules and orders relating to
consumer credit (including, without limitation, as each has been amended, the
Truth-in-Lending Act, the Fair Credit Billing Act, the Equal Credit Opportunity
Act and the Fair Credit Reporting Act and regulations, rules and orders
promulgated thereunder), the Fair Labor Standards Act of 1938, as amended, all
Federal, State and local statues, regulations, rules and orders pertaining to
sales of consumer goods and mail order sales (including, without limitation, the
Consumer Products Safety Act of 1972, as amended, and the Federal Trade
Commission Act of 1914, as amended, and all regulations, rules and orders
promulgated thereunder).
5.5 Environmental Compliance
(a) Except as set forth on Exhibit K hereto, to the
knowledge of each Responsible Officer of Borrowers and Guarantors, no Borrower
or Guarantor has generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off its premises
(whether or not owned by it) in violation of any applicable Environmental Law or
any license, permit, certificate, approval or similar authorization thereunder,
and the operations of each Borrower and Guarantor complies with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder, except to the extent that any violation or
non-compliance, would not result in either (i) a fine, judgment, penalty, loss
or liability, including any remediation expenses and including costs and
engineering and attorneys' fees, not covered by insurance, which exceeds
$250,000 with respect to any individual violation or non-compliance, or series
of related violations or non-compliance or (ii) a restraint on operations of any
Borrower which prevents such Borrower from conducting its operations in the
ordinary course, or (iii) any adverse effect on any Collateral having a value of
$250,000 or more, or a material
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adverse effect on the business, assets, liabilities or financial condition of
any Borrower or of the Affiliated Borrower Group taken as a whole.
(b) Except as set forth on Exhibit K hereto, no
Responsible Officer of any Borrower or Guarantor has knowledge of any
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor, to the best of any
such Responsible Officer's knowledge, is any of the same pending or threatened
with respect to any non-compliance with or violation of the requirements of any
Environmental Law by any Borrower, or the release, spill or discharge,
threatened or actual, of any Hazardous Material or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety matter, which
affects any Borrower or Guarantor or its business, operations or assets or any
properties at which any Borrower or Guarantor has transported, stored or
disposed of any Hazardous Materials, except to the extent that any such matter,
if adversely determined, would not result in either (i) a fine, judgment,
penalty, loss or liability, including remediation expenses and including costs
and engineering and attorneys' fees, not covered by insurance, which exceeds
$250,000 with respect to any individual violation or non-compliance or series of
related violations or non-compliance or (ii) a restraint on operations of any
Borrower which prevents such Borrower from conducting its operations in the
ordinary course, or (iii) any adverse effect on any Collateral having a value of
$250,000 or more, or a material adverse effect on the business, assets,
liabilities or financial condition of any Borrower or of the Affiliated Borrower
Group taken as a whole.
(c) Except as set forth on Exhibit K hereto, no
Responsible Officer of any Borrower or Guarantor has knowledge of any liability
(contingent or otherwise) of any one or more Borrowers and Guarantors in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials, except
to the extent the potential liability (contingent or otherwise) of any Borrowers
or Guarantors with respect thereto (including any fines, liabilities,
remediation expenses, costs and engineering and attorneys' fees), does or would
not exceed $250,000 as to any individual releases, spill or discharge,
threatened or actual, or any series of related releases, spills or discharges,
threatened or actual, or any generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Each Borrower and Guarantor has all licenses, permits,
certificates, approvals or similar authorizations
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required to be obtained or filed in connection with the operations of such
Borrower or Guarantor under any Environmental Law and all of such licenses,
permits, certificates, approvals or similar authorizations are valid and in full
force and effect, except where the failure to obtain the same would not have an
adverse effect upon any Collateral having a value of $250,000 or more, or a
material adverse effect upon business, assets, liabilities or financial
condition of any Borrower or of the Affiliated Borrower Group taken as a whole.
5.6 Governmental Approval
No action of, or filing with, any governmental or public body or
authority is required in connection with the execution, delivery and performance
by Borrowers and Guarantors of this Agreement, the other Financing Agreements or
any of the instruments or documents to be delivered pursuant hereto or thereto,
except for filing of UCC financing statements and the recording of the Mortgages
and other instruments required to perfect security interests or liens in certain
property constituting Collateral or Guarantor Collateral.
5.7 Chief Executive Offices; Collateral Locations
(a) The addresses of the principal places of business and
chief executive offices of each Borrower and each member of the Affiliated
Borrower Group are set forth on Exhibit C attached hereto, which addresses are
the mailing addresses for said principal places of business and chief executive
offices. The books and records of each Borrower and each member of the
Affiliated Borrower Group are located at said addresses. Subject to Section
5.7(b) hereof, as of the date hereof, the Collateral and Guarantor Collateral is
located only at the addresses set forth on Exhibit C attached hereto.
(b) A Borrower or Guarantor may open any new location
within the continental United States, provided it (i) gives Lender thirty (30)
days prior written notice of the intended opening of any such new location and
(ii) executes and delivers, or causes to be executed and delivered, to Lender
such mortgages, security agreements, and other agreements, documents and
instruments as Lender may deem necessary or desirable to protect its interests
in the Collateral or Guarantor Collateral to be located in or with respect to
such location, including, without limitation, leasehold mortgages, UCC financing
statements and agreements from appropriate Persons acknowledging the liens of
Lender on the Collateral or Guarantor Collateral to be located in such location,
waiving any lien or claim by such Person to the Collateral or Guarantor
Collateral and permitting Lender access to the premises to exercise its rights
and remedies and otherwise deal with the Collateral or Guarantor Collateral, as
the case may be.
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5.8 Priority of Liens; Title to Properties
(a) The security interests and liens granted to Lender
under this Agreement and the other Financing Agreements constitute valid and
perfected first priority liens and security interests in and upon the Collateral
and Guarantor Collateral, subject only to the liens indicated on Exhibit D
attached hereto and the liens permitted under Section 6.4 hereof or permitted
under the other Financing Agreements.
(b) Each Borrower and Guarantor has good and marketable
title to all of its properties and assets subject to no liens, mortgages,
pledges, security interests, encumbrances or charges of any kind, except those
in favor of Lender and those specifically permitted under the provisions of this
Agreement or the other Financing Agreements. Each Borrower and Guarantor has
peaceful and undisturbed possession of all of its Inventory, Equipment and such
other assets as may be necessary for its business as presently conducted or
proposed to be conducted and has all leases, licenses and easements necessary
for the operation of its properties and business. All such leases, licenses and
easements are valid and subsisting and in full force and effect.
5.9 Taxes
(a) Each Borrower and Guarantor has filed, or has caused
to be filed all Federal, State, county, local, foreign and other tax returns,
reports and declarations which are required to be filed by it and as to which an
extension has not been granted, and has paid or caused to be paid all such taxes
due and payable, and has collected, deposited and remitted all taxes applicable
to the conduct of its business, except, in each case, taxes the validity or
applicability of which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set aside on
its books, in the determination of Lender, or if requested by Lender, to protect
Lender's security interests or liens in any Collateral or Guarantor Collateral,
adequate amounts have been escrowed with or reserved against availability by
Lender or other arrangements satisfactory to Lender have been made to cover all
amounts which are claimed due plus interest and possible penalties thereon
(subject in the case of sales and/or use taxes, to the provisions of Section
2.6(b) hereof).
(b) Each Borrower, and to the extent applicable each
member of the Affiliated Borrower Group, has collected, deposited and remitted
all sales and/or use taxes applicable to its business required to be collected
under the valid laws of the United States and each possession or territory
thereof, and each State or political subdivision thereof, including any State in
which any Revolving Loan Borrower owns any Inventory or owns or
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leases property, including, without limitation, the States of Pennsylvania, New
Jersey, California, Ohio, Virginia and Wisconsin; provided, however, the
representations and warranties as to sales and use taxes contained in this
Section 5.8(b) shall be considered materially untrue if, but only if, the
aggregate amount of such applicable sales and use taxes not collected, deposited
or remitted shall in the aggregate be equal to or greater than Two Hundred Fifty
Thousand Dollars ($250,000).
5.10 Litigation
Except as set forth in Exhibit F attached hereto, as of the date hereof
there is no investigation by any governmental agency pending or threatened
against or affecting any Borrower or any other member of the Affiliated Borrower
Group or their properties or business, and there is no action, suit, proceeding
or claim by any Person pending or threatened against any Borrower or any other
member of the Affiliated Borrower Group or their properties or business (other
than future pending or threatened litigation involving the enforcement of lease
obligations by or against Hanover as successor to The Horn & Hardart Company as
to leased properties not used in or related to the business of Borrowers), or
against or affecting any transactions contemplated by this Agreement, the other
Financing Agreements, or other instruments, agreements or documents delivered in
connection herewith or therewith, which could reasonably be expected to result
in a determination adverse to any Borrower or any other member of the Affiliated
Borrower Group, and which, if so adversely determined with respect to any of
them, would result in either (i) a fine, judgment, penalty, loss or liability,
including costs and attorneys' fees, not covered by insurance, which,
individually, exceeds Three Hundred Thousand Dollars ($300,000) or (ii) any
material adverse change in the business, assets, liabilities or financial
condition of any Borrower or of the Affiliated Borrower Group taken as a whole.
Except as set forth on Exhibit F attached hereto, (i) there are no product
recall directives presently in effect, and (ii) to the knowledge of any
Responsible Officer of Borrowers and Guarantors, there are no investigations by
any governmental agency, pending or threatened, in each instance concerning a
possible product recall involving goods of or sold by Borrowers or Guarantors
having an aggregate value of Three Hundred Thousand Dollars ($300,000) or more.
5.11 Intellectual Property
Each Borrower individually and the other members of the Affiliated
Borrower Group taken as a whole, own or license all patents, trademarks and
copyrights and holds all licenses, which are necessary for the operation of
their business as presently conducted or proposed to be conducted. No product,
process, method, substance, part or other material presently sold by or employed
by Borrowers or the other members of the Affiliated
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Borrower Group, infringes any patent, trademark, service-▇▇▇▇, trade name,
copyright, license or other right owned by any other Person, except as set forth
on Exhibit F attached hereto and no claim or litigation is pending or threatened
against or affecting any Borrower or the other members of the Affiliated
Borrower Group, contesting its right to sell or use any such product, process,
method, substance, part or other material, except for any claims or litigation,
which if adversely determined against any one of them, would result in either
(i) a fine, judgment, penalty, loss or liability, including costs and attorneys'
fees not covered by insurance, which, individually exceeds Three Hundred
Thousand Dollars ($300,000) or (ii) any material adverse change in the business,
assets, liabilities or financial condition of any Borrower or of the Affiliated
Borrower Group taken as a whole. No patent, invention, device or application is
pending, or, to the best of Borrowers' knowledge, proposed which would
substantially reduce the projected revenues of, or otherwise materially
adversely affect the business, assets, liabilities, or financial condition of
any Borrower individually, or the other members of the Affiliated Borrower Group
taken as a whole.
5.12 Employee Benefits
(a) None of the Borrowers or any other member of the
Affiliated Borrower Group, has engaged in any transaction in connection with
which any Borrower or any other member of the Affiliated Borrower Group could be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the IRC, which, individually or in the
aggregate, is greater than Two Hundred Fifty Thousand Dollars ($250,000).
(b) No liability to the Pension Benefit Guaranty
Corporation has been or is expected by Borrowers or any other member of the
Affiliated Borrower Group to be incurred with respect to any employee pension
benefit plan of any Borrower or any other member of the Affiliated Borrower
Group, except for insurance premiums that are required to be paid to the Pension
Benefit Guaranty Corporation that are not past due. There has been no reportable
event (within the meaning of Section 4043(b) of ERISA) or any other event or
condition with respect to any employee pension benefit plan which presents a
risk of (i) termination of any such plan by the Pension Benefit Guaranty
Corporation and (ii) potential liability of any Borrower or any other member of
the Affiliated Borrower Group to the Pension Benefit Guaranty Corporation in
connection with such termination which in the aggregate potential liability may
be greater than Two Hundred Fifty Thousand ($250,000).
(c) Full payment has been made of all amounts which any
Borrower or any other member of the Affiliated Borrower
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Group is required to have paid under the terms of each employee pension benefit
plan as contributions to such plan as of the last day of the most recent fiscal
year of such plan, and no accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the IRC), whether or not waived, exists with
respect to any employee pension benefit plan.
(d) The current value of all vested accrued benefits under
all employee pension benefit plans of Borrowers or any other member of the
Affiliated Borrower Group does not exceed the current value of the assets of
such plans allocable to such vested accrued benefits. The terms "current value"
and "accrued benefit" have the meanings specified in Section 3(26) and Section
3(23) of ERISA, respectively.
(e) None of the Borrowers or any other member of the
Affiliated Borrower Group is or has ever been obligated to contribute to any
"multiemployer plan" (as such term is defined in Section 3(37) or 4001(a)(3) of
ERISA or Section 414 of the IRC) that is subject to Title IV of ERISA.
5.13 Investment Company
None of the Borrowers or any Guarantor is an "investment company", or
an "affiliated person" or "promoter" or "principal underwriter", as such terms
are defined in the Investment Company Act of 1940, as amended (15 U.S.C.
sub-section 80a-1, et seq.). The making of the loans and provisions of the other
financial accommodations hereunder by Lender, the application of the proceeds
and the repayment thereof by Borrowers and/or Guarantors and the performance of
the transactions contemplated herein and in the other Financing Agreements will
not violate any provision of said Act, or any rule, regulation or order issued
pursuant thereto.
5.14 Regulation G; Securities
Exchange Act of 1934
None of the Borrowers or any Guarantor owns any "margin stock" as such
term is defined in Regulation G, as amended (12 C.F.R. Part 207) of the Board.
The proceeds of the borrowings and other financial accommodations made pursuant
to the Existing Loan Agreement, this Agreement and the other Financing
Agreements have been and will be used by Borrowers only for the purposes
contemplated thereunder and hereunder. None of the proceeds have been or will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin stock or for the purpose of reducing or retiring any Indebtedness which
was originally incurred to purchase or carry any margin stock or for any other
purpose which might cause any portion of the loans and other financial
accommodations under the Existing Loan Agreement or hereunder to be considered a
"purpose credit" within the meaning of Regulation G of the Board, as amended.
None of the Borrowers
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or any Guarantor will take, nor will they permit any agent acting in any of
their behalves to take, any action which might cause this Agreement or the other
Financing Agreements, or instruments delivered pursuant hereto or thereto, to
violate any regulation of the Board or to violate the Securities Exchange Act of
1934 or any state or other securities laws, in each case as in effect on the
date hereof or as amended hereafter.
5.15 No Material Adverse Change
There has been no material adverse change in the business, assets,
liabilities or financial condition of the Affiliated Borrower Group taken as a
whole since September 30, 1995.
5.16 Financial Statements
(a) None of the financial statements, reports and other
information furnished or to be furnished by Borrowers to Lender with respect to
Borrowers, Guarantors or other members of the Affiliated Borrower Group
contains, as of their respective dates, any untrue statement of material fact or
omits to state any material fact necessary to make the information therein not
misleading. Such financial statements and reports were and shall be prepared in
accordance with generally accepted accounting principles, in effect on the date
thereof, consistently applied, and shall fairly, completely and accurately
present the financial condition and results of operations of the applicable
Persons, as of the dates and for the periods indicated thereon.
(b) The cash flow projections for Borrowers (together with
any summaries of assumptions and projected assumptions, based on historical
performance with respect thereto) furnished by Borrowers to Lender have been
prepared in a manner consistent with the generally accepted accounting
principles used to prepare their financial statements, and represent the
reasonable, good faith opinion of Borrowers and their management as to the
subject matter thereof and based on assumptions as set forth therein which
Borrowers have determined to be fair and reasonable in view of current and
reasonably foreseeable business conditions.
5.17 Disclosure
(a) The information contained in, and the representations
and warranties set forth in this Agreement, the other Financing Agreements, or
in any other instrument, document, list, certificate, written statement, oral
statement by a Responsible Officer, schedule or exhibit delivered or to be
delivered to Lender, as contemplated in this Agreement or in the other Financing
Agreements, does not contain any untrue statement of a material fact and does
not omit and will not omit to state a
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material fact necessary in order to make the information contained herein or
therein not misleading.
(b) After giving effect to the transactions contemplated
by this Agreement, the other Financing Agreements, and the other instruments or
documents delivered in connection herewith and therewith, there does not exist
and there has not occurred any condition or event which constitutes an Event of
Default or Incipient Default.
5.18 Labor Disputes
As of the date hereof, there is no collective bargaining agreement or
other labor contract covering employees of Borrowers or any other member of the
Affiliated Borrower Group. Except as set forth on Exhibit K attached hereto, as
of the date hereof, no Borrower has any knowledge that any union or other labor
organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of Borrowers or any other member of the Affiliated
Borrower Group. As of the date hereof, there is no pending or, to the best
knowledge of each Borrower, threatened strike, work stoppage, material unfair
labor practice claims, or other material labor dispute against or affecting any
Borrower or any other member of the Affiliated Borrower Group or any of their
respective employees.
5.19 Corporate Name; Prior Transactions
Borrowers and Guarantors have not, during the one (1) year period
ending on the date hereof, been known by or used any other corporate or
fictitious name or been a party to any merger or consolidation, or acquired all
or substantially all of the assets of any Person, or acquired any material
amount of their property or assets out of the ordinary course of business,
except as set forth on Exhibit G attached hereto.
5.20 [Reserved]
5.21 Schedule of Indebtedness
(a) Exhibit H-1 attached hereto is a complete and correct
list of (i) all credit agreements, notes, indentures, debt purchase agreements,
purchase agreements, agreements involving aggregate deferred payment obligations
for the purchase of assets in excess of Two Hundred Fifty Thousand Dollars
($250,000), capitalized leases and other investments, arrangements and
agreements in effect as of the date hereof providing for or relating to
extensions of credit in which Hanover or any Subsidiaries of Hanover (including
Borrowers and any of their Subsidiaries) are in any manner directly or
contingently liable; (ii) the maximum principal amounts of the credit and the
current amount outstanding under all such
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agreements; and (iii) an accurate description of any security interest, lien,
mortgage or other charge or encumbrance whatsoever given as security therefor.
(b) Exhibit H-2 attached hereto is a complete and correct
list of all (i) letters of credit made available under the NationsBank Credit
Agreements in effect as of the date hereof pursuant to which Hanover or any
Subsidiary of Hanover are directly or contingently liable; (ii) the expiration
date of each such letter of credit; and (iii) an accurate description of any
security interest, lien, mortgage or other charge or encumbrance whatsoever
given as security therefor and not released on or prior to the date hereof.
(c) Exhibit H-3 attached hereto is a complete and correct
list of all intercompany balances each of Borrowers owed to Hanover and each
other Subsidiary of Hanover as of September 30, 1995, all of which constitute
the unpaid balances as of such date of legal, valid and binding Indebtedness
incurred for fair consideration consisting of money or property or rendition of
services, in each case in the amounts and owed by the Persons as indicated on
such Exhibit H-3 attached hereto; and there have been no changes in such
balances since that date and through the date hereof, except for payments and
advances in the ordinary course of business of the kinds that would be permitted
hereunder.
5.22 Certain Affiliated Ownership
As of the date hereof, based upon a certificate of the
Secretary of NAR, NAR is the direct beneficial owner of all of the issued and
outstanding voting shares of Westmark and IMR, which own, in the aggregate,
directly and beneficially, approximately fifty and two-tenths (50.2%) percent of
all of the issued and outstanding voting shares of Hanover, and NAR is entitled,
through Westmark and IMR, to elect a majority of the members of the Board of
Directors of Hanover.
5.23 Common Enterprise
Borrowers and the other members of the Affiliated Borrower Group
collectively operate as interdependent businesses and constitute a unitary
business enterprise for the retail sale through direct mail marketing and stores
of, among other things, men's fashions, women's fashions, home furnishings,
general merchandise and giftware, down comforters, blankets, sheets, towels,
outer garments, woodworking products, and safety equipment in which, among other
things: (i) certain Borrowers effect the processing of orders and the collection
and disbursement of funds by virtue of the same Private Credit Card Agreement
and certain Borrowers are joint parties to, or have jointly appointed Hanover to
act as their agent under, Third
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Party Credit Card Agreements in order to facilitate administrative efficiency
and cost savings; (ii) the collections of customer payments of certain Borrowers
are remitted to and otherwise deposited into a common account, (iii) the
Borrowers and other members of the Affiliated Borrower Group share office and
warehouse space, computer and accounting systems, distribution and other
equipment; (iv) Borrowers operate a common telephonic answering, order taking
and transmission service for the mail order business of Borrowers; (v) DM
Advertising Inc., a Guarantor, assists in the development and production of the
mail order catalogs of each of Borrowers and of other promotional and
advertising materials; (vi) Hanover furnishes managerial and other services on
behalf of Borrowers and the other Subsidiaries of Hanover; (vii) Hanover and the
Subsidiaries of Hanover file consolidated tax returns; (viii) certain Borrowers
have made, and Borrowers may in the future make, intercompany loans to and
borrow money from each other, and HDPI has made, and may in the future make
loans to and borrow money from Hanover and the other Subsidiaries of Hanover;
and (ix) Hanover and its Subsidiaries have many common officers and directors.
5.24 Subordination of Certain Obligations
The payment terms and subordination provisions contained in the debt
instruments of Hanover described in Exhibit E attached hereto have not been
amended, modified or revised and shall not be amended, modified or revised
without the prior written consent of Lender, except for extensions of the
maturity date beyond the then current Term which do not involve any increase in
the principal amount outstanding greater than the amount outstanding as of the
date hereof as set forth on Exhibit H-1 attached hereto.
SECTION 6. ADDITIONAL COVENANTS
In addition to the covenants set forth in the other Financing
Agreements, Borrowers hereby, jointly and severally, covenant to and agree with
Lender that Borrowers shall comply with the following covenants, or cause the
same to be complied with, unless Lender shall otherwise consent in writing:
6.1 Tradenames
Borrowers may from time to time use the tradenames listed on Exhibit G
attached hereto (which, together with any new tradenames used after the date
hereof are referred to collectively as the "Tradenames" and individually, as a
"Tradename"). As to the respective Tradenames used by each of them, each
Revolving Loan Borrower hereby agrees that:
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(a) Each Tradename is a tradestyle (and not an independent
corporation or other legal entity) by which such Borrower may identify and sell
or lease certain of its goods or services and conduct a portion of its
respective business.
(b) All proceeds (including any returned merchandise)
which arise from the sale or lease of goods sold under a Tradename, including
proceeds of goods sold through catalogs bearing a Sears tradename pursuant to
the Sears Agreements, shall, except to the extent indicated on Exhibit G hereto,
be owned solely by the respective Borrower whose goods were sold either directly
or as assignee pursuant to an intercompany assignment (and further assignment to
Lender) pursuant to Section 8.1(c) hereof, and shall be subject to the security
interests of Lender and the other terms of this Agreement and the other
Financing Agreements.
(c) New Tradenames may be used by Borrowers, but only if
(i) Lender is given at least thirty (30) days prior written notice of the
intended use of any new Tradename and (ii) such supplemental financing
statements or similar instruments Lender may request shall be executed and
delivered to Lender by the respective Borrower intending to use same for filing
or recording by Lender prior to the use of such new Tradename.
6.2 Subsidiaries
Borrowers shall not form or acquire, and Hanover shall not form or
acquire, any direct or indirect Subsidiaries without the prior written consent
of Lender, other than Non-Guarantor Subsidiaries acquired or formed by Hanover
and other than Mail Order Joint Ventures which are Subsidiaries of Borrowers. In
the sole discretion of Lender, in the event Lender's consent is required and
Lender so consents, and in the case of Mail Order Joint Ventures which are
Subsidiaries of Borrowers, upon such formation or acquisition, each Borrower or
Hanover, as the case may be, shall cause each such Subsidiary, so formed or
acquired by it, that owns, or is contemplated to own, assets having a fair
market value greater than Ten Thousand Dollars ($10,000) to execute and deliver
to Lender, in form and substance satisfactory to Lender: (a) an absolute and
unconditional guarantee of payment of any and all present and future Obligations
of Borrowers to Lender, (b) an agreement to be bound by the terms of this
Agreement as though it were an original party hereto or a General Security
Agreement, as Lender may require, (c) related UCC financing statements, and (d)
such other mortgages, security and other agreements, documents and instruments
as Lender may require, including, but not limited to, supplements and amendments
hereto and other loan agreements or instruments evidencing Indebtedness of such
new Subsidiary to Lender. With respect to each direct or indirect Subsidiary of
Hanover listed on Exhibit B-1 attached hereto that owns assets
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with a fair market value greater than Ten Thousand Dollars ($10,000), Borrowers
shall cause each such Subsidiary to execute and deliver to Lender each of the
items referred to in subsections (a) through (d) of this Section 6.2, unless
such Subsidiary is dissolved by December 31, 1995.
6.3 Indebtedness
Borrowers shall not, and shall not permit any of their respective
Subsidiaries, and Hanover shall not permit any of its Subsidiaries, other than
Non-Guarantor Subsidiaries, to incur, create, assume or permit to exist any
Indebtedness for Borrowed Money, except:
(a) the Obligations of Borrowers and any Subsidiary to
Lender;
(b) Indebtedness of Borrowers or such Subsidiary where
payment is secured solely by liens permitted under Section 6.4 hereof;
(c) Indebtedness of Borrowers to the Private Credit Card
Purchaser under the Private Credit Card Agreement and Indebtedness of Borrowers
to the parties to the Third Party Credit Card Agreements pursuant to the terms
thereof;
(d) Indebtedness described on Exhibits H-1 through H-3
attached hereto and any successor or replacement financing with terms and
evidenced by documents, instruments or agreements in form and substance
acceptable to Lender in its discretion;
(e) Intercompany loans or advances permitted under Section
6.5 hereof;
(f) Indebtedness of Borrowers or other Subsidiaries of
Hanover, and guaranties thereof by Hanover, incurred for the establishment or
acquisition of, and improvements to, new Eligible Inventory Locations, first
leased or acquired by Borrowers after the date hereof, or incurred in connection
with the ongoing upgrading of Borrowers' computer system, provided (i) the
aggregate amount of all such Indebtedness at any one time outstanding does not
exceed Five Million Dollars ($5,000,000) and (ii) the principal amounts or
components of debt service and/or lease payments in respect of such Indebtedness
and related expenditures for improvements do not exceed One Million Two Hundred
Fifty Thousand Dollars ($1,250,000) in the aggregate in any one fiscal year of
Borrowers; provided, however, that any Indebtedness incurred by Borrowers or
other Subsidiaries of Hanover, and guaranties thereof by Hanover, for the
purposes of refinancing or repaying the Term Loans shall not be subject to the
restrictions set forth
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in clauses (i) and (ii) of this Section 6.3(f), so long as Lender has granted
its prior written consent to the incurrence of such Indebtedness, including the
form of the transaction, its terms and the form and content of any agreements to
be entered into by Borrowers or any other member of the Affiliated Borrower
Group in connection therewith, and Borrowers and Guarantors execute and deliver,
or cause to be executed and delivered, to Lender, such agreements, documents and
instruments, as Lender shall require as a condition of its consent (if Lender
determines to provide its consent); and
(g) Indebtedness of the 9.25% Guarantors to IMR as holder
of the 9.25% Notes, as guarantors thereof, provided the 9.25% Notes and all
Indebtedness evidenced thereby or related thereto, including the guarantees
thereof by the 9.25% Guarantors, shall be subordinated in right of payment to
the Obligations of Hanover and of the 9.25% Guarantors upon the terms set forth
in the 9.25% Subordination Agreement and shall be secured only by a junior
security interest upon customer lists to the extent permitted in and subject to
restrictions on enforcement and other restrictions set forth in the 9.25%
Subordination Agreement; provided, that, (i) the aggregate principal amount of
such Indebtedness at any time outstanding shall not exceed Fourteen Million
Dollars ($14,000,000), (ii) Hanover shall promptly furnish to the Lender such
information and documents with respect thereto and as Lender may, from time to
time, reasonably request, (iii) the 9.25% Guarantors and Hanover shall not,
directly or indirectly, (A) make any payments or prepayments in respect of
principal or interest in respect of such Indebtedness, or any expenses related
thereto, except as expressly permitted under the 9.25% Subordination Agreement,
or (B) amend, modify, alter or change the terms of the arrangements or any
agreements with respect to such Indebtedness, or (C) redeem, retire, defease,
purchase or otherwise acquire any such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose; except that, so long as no Event of
Default or Incipient Default has occurred that is continuing, the 9.25% Notes
may be (x) repaid or prepaid with the proceeds of an equity offering of Hanover,
(y) repaid at scheduled maturity on August 1, 1998, and (z) refinanced on the
same subordinated basis, with Hanover as the borrower and no additional obligors
within the Affiliated Borrower Group, in an amount not to exceed the
then-outstanding principal balance of the 9.25% Notes in the aggregate for such
refinancing(s) provided (I) the proceeds are used to repay the 9.25% Notes and
(II) there is no increase in the rate of interest above twelve (12%) percent per
annum or in the frequency of interest payments or any change in the scope or
terms of subordination and limitations on collateral (which terms of
subordination and limitations on collateral shall be set forth in a
subordination agreement having the same terms as the 9.25% Subordination
Agreement, modified as appropriate, to refer to the debt and the holders and
other parties thereto, the proceeds of
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which are used for such refinancing) other than any changes which are not
adverse to Lender, and (iv) Hanover and the 9.25% Guarantors shall furnish to
Lender all notices, demands or other materials in connection with such
Indebtedness promptly after the receipt thereof by them or concurrently with the
sending thereof by them or on their behalf, as the case may be.
6.4 Limitation on Liens
Each Borrower shall not, and shall not permit any of its respective
Subsidiaries, and Hanover shall not permit any of its Subsidiaries, other than
Non-Guarantor Subsidiaries, to, create, incur, assume, or permit to exist any
mortgage, pledge, security interest, lien, encumbrance, defect in title or
restriction upon the use of its respective real or personal properties, whether
now owned or hereafter acquired, except:
(a) the liens, encumbrances, or security interests in
favor of Lender;
(b) tax, mechanics and other non-consensual statutory
liens arising in the ordinary course of Borrowers' or such Subsidiary's business
to the extent: (i) such liens secure Indebtedness which is not overdue or (ii)
until foreclosure or similar proceedings shall have been commenced, such liens
secure Indebtedness relating to claims or liabilities which are (A) fully
insured and being defended at the sole cost and expense and at the sole risk of
the insurer or (B) being contested in good faith by appropriate proceedings
available to each Borrower and are adequately escrowed for or reserved against
loan availability by Lender (subject in the case of reserves established for
sales and/or use taxes to the provisions of Section 2.6(b) hereof), or as
otherwise provided for under arrangements satisfactory to Lender;
(c) liens arising in connection with worker's
compensation, unemployment insurance, surety, insurance or financial
responsibility, appeal and release bonds, in each case limited to securities
pledged as collateral for any of the foregoing;
(d) liens or security interests constituting purchase
money liens or security interests upon specific fixed assets acquired, or liens
or security interests existing on any such fixed assets at the time of
acquisition thereof and including capital leases; provided, that:
(i) no such purchase money lien or security
interest (or capital lease, as the case may be) with respect to specific fixed
assets shall extend to or cover any other property other than the specific fixed
assets so acquired, or acquired
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79
subject to such lien or security interest (or lease), or accessions thereto and
the proceeds thereof;
(ii) such lien or security interest only secures
the obligation to pay the purchase price of such specific fixed assets (or the
obligations under the capital lease);
(iii) the principal amount secured thereby shall
not exceed one hundred percent (100%) of the cost of the fixed assets so
acquired; and
(iv) no Event of Default or Incipient Default
shall have occurred and be continuing;
(e) liens of the Private Credit Card Purchaser on the GECC
Collateral;
(f) liens or rights of set off against credit balances,
but not liens on or rights of set off against other property of Borrowers,
arising under the Third Party Credit Card Agreements; and
(g) liens on equipment or leasehold improvements securing
the Indebtedness under the capital lease obligations and incurred for leasehold
establishment and improvements as permitted by Section 6.3(g) and (h) hereof;
(h) liens on the real property and fixtures of TCS Office
and TCS Factory, each located in LaCrosse, Wisconsin; and
(i) liens on customer lists of the Borrowers, junior in
priority to Lender's liens thereon, to the extent permitted by and subject to
the restrictions on enforcement and other restrictions set forth in the 9.25%
Subordination Agreement.
6.5 Loans; Investments; Guarantees; Etc.
Borrowers shall not, and shall not permit any of their respective
Subsidiaries, and Hanover shall not permit any of its Subsidiaries, other than
Non-Guarantor Subsidiaries, to, directly or indirectly, make any loans or
advance money or property to any Person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the stock or Indebtedness or
all or a substantial part of the assets or properties of any Person, or
guarantee, assume, endorse, or otherwise become responsible for (directly or
indirectly) or pay the Indebtedness, performance, obligations, stock or
dividends of any person or agree to do any of the foregoing, except:
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(a) the Guarantees of the Obligations of Borrowers in
favor of Lender;
(b) Provided no Event of Default or Incipient Default has
occurred and is continuing:
(i) short-term loans or advances of money by one
Borrower to another Borrower in the ordinary course of business, or by a
Borrower to any other Subsidiary of Hanover, other than to a Non-Guarantor
Subsidiary, in the ordinary course of business;
(ii) repayment by Borrowers to Hanover of valid
intercompany Indebtedness described on Exhibit H-3 attached hereto:
(A) in the aggregate amount during
Borrowers' fiscal year ending on or about December
31, 1996 not to exceed One Hundred Sixty Thousand
Dollars ($160,000), solely to be used by Hanover to
pay (x) dividends, sinking fund payments or
redemption payments required under the terms and
conditions existing on the date hereof of the Series
A and Series B Convertible Additional Preferred Stock
of Hanover, and (y) interest on The Horn & Hardart
Company 7 1/2% Convertible Subordinated Debentures
according to their terms existing as of the date
hereof;
(B) in the aggregate amount during
Borrowers' fiscal year ending on or about December
31, 1997 not to exceed Fifty Seven Thousand Dollars
($57,000), solely to be used by Hanover to pay (x)
dividends, sinking fund payments or redemption
payments required under the terms and conditions
existing on the date hereof of the Series A and
Series B Convertible Additional Preferred Stock of
Hanover, and (y) interest on The Horn & Hardart
Company 7 1/2% Convertible Subordinated Debentures
according to their terms existing as of the date
hereof;
(C) in the aggregate amount necessary to
pay, and so used by Hanover to pay, the regularly
scheduled payments of principal and interest upon,
and annual placement and remarketing agent fees
payable under, the HDI Floating Rate Bond Financing;
and
(D) in the aggregate amount necessary to
pay, and so used by Hanover to pay, a portion of
the regularly scheduled payments of interest under
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the 9.25% Notes, but not to exceed such interest upon
Fourteen Million Dollars ($14,000,000) in principal
amount of the 9.25% Notes, or up to Fourteen Million
Dollars ($14,000,000) in principal of the 9.25%
Notes, if and to the extent permitted to be repaid
pursuant hereto, or in the amount necessary to pay
the out-of-pocket expenses of IMR and the Indenture
Trustee in respect of the 9.25% Notes, in each case
according to the terms of the 9.25% Notes as in
effect on the date hereof and provided that such
payments are permitted to be made and received under
the terms of the 9.25% Subordination Agreement.
(c) the endorsement of instruments for collection or
deposit in the ordinary course of business;
(d) investments in any new Mail Order Joint Venture that
is formed in accordance with Section 6.2 hereof or, if not a Subsidiary of a
Revolving Loan Borrower, is permitted under Section 6.27 hereof;
(e) the guarantee by any of the Revolving Loan Borrowers
in favor of American Express Travel Related Services Company,. Inc., a Third
Party Credit Card Issuer, of any Indebtedness of any of the other Revolving Loan
Borrowers arising under the Agreement for American Express Card Acceptance,
effective April 1, 1995, among Revolving Loan Borrowers and American Express
Travel Related Services Company, Inc. with respect to rights of chargeback or
setoff or otherwise, subject nevertheless to the rights of Lender under the
Third Party Credit Card Acknowledgments to which such Third Party Credit Card
Issuer (or its Affiliates) is a party; and
(f) investments in the following instruments, which shall
be pledged and delivered to Lender upon Lender's request, (i) marketable
obligations issued or guaranteed by the United States of America or an
instrumentality or agency thereof, maturing not more than one (1) year after the
date of acquisition thereof, (ii) certificates of deposit or other obligations
maturing not more than one (1) year after the date of acquisition thereof issued
by any bank or trust company organized under the laws of and located in the
United States of America or any State thereof and having capital, surplus and
undivided profits of at least One Hundred Million Dollars ($100,000,000), and
(iii) open market commercial paper with a maturity not in excess of two hundred
seventy (270) days from the date of acquisition thereof which have the highest
credit rating by either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors
Service, Inc.
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6.6 Transactions with Affiliates
Borrowers shall not, and shall not permit any of their respective
Subsidiaries, and Hanover shall not permit any of its Subsidiaries, other than
Non-Guarantor Subsidiaries, to, directly or indirectly:
(a) purchase, acquire or lease any property from, or sell,
transfer or lease any property to, any shareholder, officer, director, agent,
employee or Affiliate, except on prices or terms no less favorable than would
have been obtained in an arm's length transaction with a non-Affiliated Person,
unless such transaction either (i) involves the sale of Inventory in the
ordinary course of business at no less than cost by a Borrower to another
Borrower or to a Guarantor who has assigned its rights to the proceeds of any
resale of such Inventory pursuant to an intercompany assignment (subject to
further assignment to Lender) pursuant to Section 8.1(c) hereof, or (ii) is
permitted by another provision of this Section 6.6 or Section 6.5 hereof, but in
no event shall any such transaction be engaged in by Borrowers or other members
of the Affiliated Borrower Group with a Non-Guarantor Subsidiary without
Lender's prior written consent in each instance; or
(b) make any payment of management fees, tax sharing
payments, dividends, distributions (other than its own capital stock), or the
principal amount of or interest on any Indebtedness owing to any Affiliate,
except
(i) with respect to any entire fiscal year of
Borrowers for which a consolidated Federal income tax return is filed by Hanover
that includes Borrowers and a positive consolidated tax liability is due, as
calculated and shown in the consolidated federal income tax return as filed by
Hanover, as the case may be, each Borrower may pay to Hanover, as the case may
be, an amount, not to exceed the lesser of (x) such Borrower's allocable share
of the consolidated Federal income tax liability for each such year and (y) the
accrued and unpaid liability of such Borrower to Hanover arising under the Tax
Sharing Agreement in respect of the prior use by such Borrower of Hanover's net
operating losses to reduce the amount of Federal income tax liability otherwise
payable for any prior fiscal year of such Borrower had its Federal income tax
liability for such year been computed on a separate Federal income tax return
instead of a consolidated Federal income tax return with Hanover, as the case
may be; provided, that, such Borrower is required to make each such payment to
Hanover pursuant to the Tax Sharing Agreement;
(ii) payments of interest and principal to IMR as
the holder of the 9.25% Notes, to the extent permitted under this Agreement and
under the 9.25% Subordination Agreement;
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(iii) management fees to NAR or an Affiliate of
NAR in the aggregate amount of not greater than Seven Hundred Fifty Thousand
Dollars ($750,000) in each calendar year during the Term;
(iv) customary and reasonable directors' fees to
directors of Borrowers or Hanover, in the same amounts as are paid to its
non-Affiliate directors, not to exceed $500,000 in the aggregate for all
directors' fees in any calendar year;
(v) payments of legal expenses incurred by
Hanover on behalf of Borrowers, not to exceed Five Hundred Thousand Dollars
($500,000) in any one fiscal year of Borrowers; and
(vi) payments of corporate expenses of Hanover
incurred for the joint benefit of Borrowers and Guarantors in the ordinary
course of business in accordance with past practices, in the amount of up to Six
Hundred Thousand Dollars ($600,000) in Hanover's 1995 fiscal year, One Million
Three Hundred Fifty Thousand Dollars ($1,350,000) in Hanover's 1996 fiscal year,
and One Million Five Hundred Thousand Dollars ($1,500,000) in Hanover's 1997
fiscal year; and
(vii) payments made by one Borrower to another
Borrower to reconcile the payments posted in due course to the respective
Accounts of such Borrower and other receipts with the application of daily
collections and receipts to the respective loan accounts of Borrowers hereunder
or payments by Term Loan Borrowers to reimburse a Revolving Loan Borrower for
payments in respect of its Obligations in respect of the Term Loan that are
charged to such Revolving Loan Borrower's Revolving Loan account; provided,
however, in each case under clauses (i) through (v) of Section 6.6(b) hereof
that no Event of Default or Incipient Default has occurred and is continuing; or
(c) declare or pay any dividend on account of any share of
any class of capital stock of Borrowers or any Subsidiary of Hanover, or any
other Person, now or hereafter outstanding, or set aside or otherwise deposit or
invest any sum for such purpose, or redeem, retire, defease, purchase,
repurchase or otherwise acquire for value any share of any class of capital
stock of Borrowers or any Subsidiary of Hanover (or set aside, pay into a
sinking fund or otherwise deposit or invest any sum for such purpose) for any
consideration other than its own capital stock or apply or set apart any sum, or
make any other distribution (by reduction of capital or otherwise) in respect of
any such shares or agree to do any of the foregoing, except that dividends may
be declared and paid by Hanover on any preferred stock of Hanover issued or
outstanding on the date hereof in accordance with its terms as of the date
hereof, in
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each case out of legally available funds therefor, and provided no Event of
Default or Incipient Default has occurred and is continuing.
6.7 Maintenance of Existence
Each Borrower and each Guarantor shall at all times preserve, renew and
keep in full force and effect its corporate existence and rights and franchises
with respect thereto and each Borrower and each Guarantor shall maintain in full
force and effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on the business as
presently or proposed to be conducted, provided that (i) any Guarantor, other
than Hanover, may be dissolved at such time as it ceases to conduct business and
owns less than Ten Thousand Dollars ($10,000) of assets, (ii) the assets of
▇▇▇▇▇▇▇ Advertising Agency, Inc. and Ring Response Ltd. shall be liquidated into
Hanover by no later than December 31, 1995 and (iii) on not less than ten (10)
days' prior written notice to Lender, (A) DM Advertising may be merged into
Hanover Direct New Jersey, Inc. and the name of the surviving corporation
changed to DM Advertising, Inc., (B) TW Acquisitions, Inc. may be merged into
Tweeds, Inc. and (C) Hanover Realty may be merged into HDV. None of the
Borrowers or any Guarantor shall engage, directly or indirectly, in any line of
business other than the business in which it is engaged on the date hereof.
6.8 Sale and Leasebacks
None of the Borrowers shall enter into, and Hanover shall not permit
any of its Subsidiaries to enter into, any arrangement, directly or indirectly,
with any Person whereby such Borrower or Subsidiary shall sell or transfer any
property, real or personal, whether now owned or hereafter acquired, and
thereafter rent or lease such property which it intends to use for substantially
the same purpose or purposes as the property being sold or transferred, unless
such sale and leaseback relates to real property first acquired and occupied
after the date hereof and such Borrower delivers to Lender all applicable
mortgagee and landlord waivers, access and use agreements, in the form of
Exhibit I attached hereof.
6.9 Sale of Assets, Consolidation,
Merger, Dissolution, Etc.
None of the Borrowers, or any of their respective Subsidiaries or Mail
Order Joint Ventures or any Subsidiary of Hanover shall, directly or indirectly,
merge into or with or consolidate with any other Person or permit any other
Person to merge into or with or consolidate with Borrowers, any of their
respective Subsidiaries or Mail Order Joint Ventures or any Subsidiary of
Hanover, or sell, assign, lease, transfer, abandon
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85
or otherwise dispose of any stock or Indebtedness of Borrowers, any of their
respective Subsidiaries or Mail Order Joint Ventures or of any Subsidiary of
Hanover to any other Person, or any of their property or assets to any other
Person (other than sales of Inventory in the ordinary course of business and
sales of Equipment as permitted under Section 6.13 hereof and except as
permitted under Sections 6.22 and 6.24 hereof) or wind up, liquidate or dissolve
or agree to do any of the foregoing; provided, however, that (i) the foregoing
shall not restrict transactions otherwise permitted by the terms of Section
6.5(b), 6.6(b) or 6.7 hereof, as applicable, and (ii) any Subsidiary of
Borrowers which is a Guarantor, shall be dissolved at such time as it ceases to
actively conduct business and owns less than Ten Thousand Dollars ($10,000) of
assets.
6.10 Compliance with Laws, Regulations, Etc.
Each Borrower and each member of the Affiliated Borrower Group shall at
all times comply in all material respects with all applicable provisions of
laws, rules, regulations, licenses, permits, approvals and orders and duly
observe all requirements, of any foreign, Federal, State or local governmental
authority, including, without limitation, ERISA, the IRC, the Occupational
Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938,
as amended, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit (including, without limitation, as each has been or
may be amended the Truth-in-Lending Act, the Fair Credit Billing Act, the Equal
Credit Opportunity Act and the Fair Credit Reporting Act and the regulations,
rules and orders promulgated thereunder), all Federal, State and local statutes,
rules and orders relating to sale of consumer goods and mail order sales
(including, without limitation, the Consumer Product Safety Act of 1972, as
amended, and the Federal Trade Commission Act of 1914, as amended, and the
rules, regulations and orders promulgated thereunder) subject, in the case of
any such law relating to the payment or collection and remittance of sales
and/or use taxes, to the provisions of Sections 5.9(b) and 2.6(b) hereof, which
shall control with respect to such matters in lieu of this Section 6.10.
6.11 Compliance with Environmental Laws
(a) Each Borrower and Guarantor shall, at all times,
comply in all material respects with all the Environmental Laws.
(b) Each Borrower and Guarantor shall establish and
maintain, at its expense, a system to assure and monitor its continued
compliance with all Environmental Laws in all of its operations, which system
shall include annual reviews of such compliance by employees or agents of each
Borrower and Guarantor
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who are familiar with the requirements of the Environmental Laws. Copies of all
environmental surveys, audits, assessments, feasibility studies and results of
remedial investigations shall be promptly furnished, or caused to be furnished,
by Borrowers and Guarantors to Lender. Each Borrower and Guarantor shall take
prompt and appropriate action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such response.
(c) Each Borrower and Guarantor shall give both oral and
written notice to Lender, as soon as practicable after a Responsible Officer's
receipt of any notice of, or his or her otherwise obtaining knowledge of, (i)
the occurrence of any event involving the release, spill or discharge,
threatened or actual, of any Hazardous Material or (ii) any investigation,
proceeding, complaint, order, directive, claims, citation or notice with respect
to: (A) any non-compliance with or violation of any Environmental Law by any
Borrower or Guarantor or (B) the release, spill or discharge, threatened or
actual, of any Hazardous Material or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or (D) any other environmental matter, which can reasonably
be expected to (1) involve any potential liability (contingent or otherwise) of
any Borrowers or Guarantors with respect thereto (including any fines,
liabilities, remediation expenses, costs and engineering and attorneys' fees)
greater than Two Hundred Fifty Thousand Dollars ($250,000), or (2) result in a
restraint on operations of any Borrower which prevents such Borrower from
conducting its operations in the ordinary course, or (3) have an adverse effect
on any Collateral having a value of Two Hundred Fifty Thousand Dollars
($250,000) or more, or a material adverse effect on the business, assets,
liabilities or financial condition of any Borrower or of the Affiliated Borrower
Group taken as a whole, or on any properties at or to which any Borrower or
Guarantor transported, stored or disposed of any Hazardous Materials.
(d) Without limiting the generality of the foregoing,
whenever Lender reasonably determines that there is non-compliance, or any
condition which requires any action by or on behalf of any Borrower or Guarantor
in order to avoid any material non-compliance with any Environmental Law, which
could reasonably be expected to (i) involve any potential liability (contingent
or otherwise) of any Borrowers or Guarantors with respect thereto (including any
fines, liabilities, remediation expenses, costs and engineering and attorneys'
fees) greater than Two Hundred Fifty Thousand Dollars ($250,000), or (ii) result
in a restraint on operations of any Borrower which prevents such Borrower from
conducting its operations in the ordinary course, or (iii) have an adverse
effect on any Collateral having a value of Two Hundred Fifty Thousand Dollars
($250,000) or more, or a material adverse effect on the business, assets,
liabilities or
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financial condition of any Borrower or of the Affiliated Borrower Group taken as
a whole, each Borrower and Guarantor shall, at Lender's request and Borrowers'
and Guarantors' expense: (i) cause an independent environmental engineer
acceptable to Lender to conduct such tests as are reasonably necessary of the
site where such non-compliance or alleged non-compliance with such Environmental
Laws has occurred as to such non-compliance and prepare and deliver to Lender a
report as to such non-compliance setting forth the results of such tests, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (ii) provide to Lender a supplemental
report of such engineer whenever the scope of such non-compliance, or such
Borrower's or Guarantor's response thereto or the estimated costs thereof, shall
change in any material respect.
(e) Each Borrower and Guarantor shall indemnify and hold
harmless Lender, its directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including reasonable
attorneys' fees and legal expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including, without limitation, the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
any Borrower or Guarantor and the preparation and implementation of any closure,
remedial or other required plans. All representations, warranties, covenants and
indemnifications in this Section 6.11 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
(f) Borrowers and Guarantors may contest the assertion by
any governmental authority or any third party of any obligation or liability for
alleged non-compliance with Environmental Laws or otherwise relating to the
release, spill or discharge, threatened or actual, of Hazardous Materials, or
the generation use, storage, treatment, transportation, manufacturing, handling,
production or disposal of Hazardous Materials, but no such contest shall relieve
Borrowers and Guarantors from their obligations to Lender in regard to such
matters as provided in this Agreement and the other Financing Agreements.
6.12 Payment of Taxes and Claims
Borrowers shall duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against them or their properties
or assets, except for taxes which are being contested in good faith by
appropriate proceedings and with respect to which reserves have been set
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aside in accordance with generally accepted accounting principles consistently
applied, in the determination of Lender, or if requested by Lender to protect
Lender's security interests or liens in any Collateral or Guarantor Collateral,
adequate amounts have been escrowed with or reserved against by Lender or other
arrangements satisfactory to Lender are made to cover all amounts which are
claimed due plus interest and possible penalties thereon; provided, however,
that with respect to sales and/or use taxes the provisions of Sections 5.9(b)
and 2.6(b) hereof shall control with respect to such matters in lieu of this
Section 6.12. Borrowers shall be liable for any tax or penalty imposed upon any
transaction under this Agreement or any of the other Financing Agreements or
giving rise to any Collateral or Guarantor Collateral or which Lender may be
required to withhold or pay for any reason and Borrowers shall indemnify and
hold Lender harmless with respect thereto, and shall repay to Lender on demand
the amount thereof, and, until paid by Borrowers, such amount shall be added and
deemed part of the Obligations, provided, that, nothing contained herein shall
be construed to require Borrowers to pay any income tax attributable to the
income of Lender in respect of any compensation charged or paid hereunder to
Lender.
6.12A Accounts Covenants
(a) Borrower shall notify Lender promptly, but in any
event within two (2) Banking Days after any Responsible Officer of Borrower
knows of: (i) any delay of more than five (5) days attributable to computer
breakdown or processing errors, or any delay of more than one (1) Banking Day
for any other reason, or any default in performance by any Borrower or Guarantor
of, any of its obligations to any party to a Credit Card Agreement, or by any
party to a Credit Card Agreement, to any Revolving Loan Borrower or Hanover, or
any suspension or cessation by any party to Credit Card Agreement in purchasing
or refusal by any party to a Credit Card Agreement to purchase credit card sales
transactions, or the assertion of any claims, offsets, defenses or counterclaims
by, or existence of any disputes with, any party to a Credit Card Agreement, or
any settlement, adjustment or compromise thereof, (ii) all material adverse
information relating to the financial condition of any party to a Credit Card
Agreement, and (iii) any event or circumstance which, to Borrower's knowledge
would cause Lender to consider any MasterCard/VISA Receivables as no longer
constituting Eligible Deferred Billing Receivables. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to
any party to a Credit Card Agreement except in the ordinary course of Borrowers'
or any other Borrowers' business in accordance with its then current practices
and policies consistently applied. So long as no Event of Default exists or has
occurred and is continuing, Borrowers shall settle, adjust or compromise any
claim, offset,
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counterclaim or dispute with any party to a Credit Card Agreement. At any time
that an Event of Default exists or has occurred and is continuing, Lender shall,
at its option, have the exclusive right to settle, adjust or compromise any
claim, offset, counterclaim or dispute with any party to a Credit Card
Agreement, or grant any credits, discounts or allowances.
(b) At any time that Inventory sold under a Deferred
Billing Option Program is returned, reclaimed or repossessed, the related
Account shall not be deemed an Eligible Deferred Billing Receivable.
(c) At any time an Event of Default exists or has occurred
and is continuing, Borrower shall, upon Lender's request, (i) hold any returned
Inventory in trust for Lender, (ii) dispose of the returned Inventory solely
according to Lender's instructions, and (iii) not issue any credits, discounts
or allowances with respect thereto without Lender's prior written consent.
(d) With respect to each Credit Card Agreement: (i) no
payments shall be made thereunder except payments delivered to Lender pursuant
to the terms of this Agreement, (ii) there shall be no material setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except as reported to Lender in accordance with the terms
of this Agreement, and (iii) none of the transactions giving rise thereto will
violate any applicable State or Federal laws or regulations in any material
respect, all documentation relating thereto will be legally sufficient under
such laws and regulations in all material respects and all such documentation
will be legally enforceable in accordance with its terms.
(e) Each Account represents a valid and legally
enforceable indebtedness based upon an actual bona fide sale and delivery of
goods or lease or license of customer or mailing lists or rendition of services,
in each case in the ordinary course of the business of Borrowers which has been
finally accepted by the Account Debtor and for which the Account Debtor is
unconditionally liable to make payment of the amount stated in each invoice,
customer or mailing list rental or license agreement, credit card transaction
record, instrument or other document evidencing the Account in accordance with
the terms thereof, without any offset, defense or counterclaim known to
Borrowers, except those offsets, defenses or counterclaims, related to Accounts
not in excess of the applicable amount set forth in Section 6.12A(g) hereof,
disclosed in writing to Lender upon Borrowers' acquiring knowledge thereof
(which disclosure need only be made by disclosing the gross amount of
non-conforming Accounts).
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(f) To the best of Borrowers' knowledge, all statements
made and all unpaid balances appearing in the invoices, customer or mailing list
rental or license agreements, credit card transaction records, instruments or
other documentation evidencing each Account are true and correct and are in all
respects what they purport to be and all signatures and endorsements that appear
thereon are genuine and all signatories and endorsers have full capacity to
contract and each Account Debtor, and each issuer, purchaser or factor thereof
under the Credit Card Agreements, is solvent and financially able to pay in full
the Account when it matures, except as disclosed in writing to Lender upon
Borrowers' acquiring information to the contrary involving Accounts not in
excess of the applicable amount set forth in Section 6.12A(g) hereof (which
disclosure need only be made by disclosing the gross amount of non-conforming
Accounts).
(g) The representations and warranties as to the Accounts
contained in Sections 6.12A(e) and (f) hereof shall be considered materially
untrue if, but only if, there are non-conforming Accounts of Borrowers, whether
or not known to Borrower or disclosed to Lender, which, on an aggregate basis at
any one time outstanding, shall be equal to or greater than Two Hundred Fifty
Thousand Dollars ($250,000).
(h) None of the transactions underlying or giving rise to
any Account violates on the part of any Borrower any State, Federal or foreign
laws or regulations, and all documents relating to the Accounts are legally
sufficient under such laws or regulations and shall be legally enforceable in
accordance with their terms, subject to the bankruptcy of the Account Debtor and
judicial discretion affecting equitable remedies, and all recording, filing and
other requirements of giving public notice under any applicable law have been
duly satisfied, including, without limitation, the filing of any report in the
States of New Jersey, Minnesota and Indiana with the New Jersey Division of
Taxation, the Minnesota Department of Revenue and the Indiana Department of
State Revenue, respectively.
(i) Each Revolving Loan Borrower shall give Lender written
notice of its intention to commence or continue as to new sales any Deferred
Billing Option Program at least thirty (30) days prior to the commencement of
each Program Quarter (whether or not the Accounts Loan Financial Test would be
satisfied and whether or not such Revolving Loan Borrower intends to request
Revolving Accounts Loans with respect to such Program.)
6.13 Properties in Good Condition
(a) Each Borrower and Guarantor shall keep its properties
in good repair, working order and condition (reasonable wear and tear excepted)
and, from time to time, make
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all needful and proper repairs, renewals, replacements, additions and
improvements thereto, so that the business carried on may be properly and
advantageously conducted at all times in accordance with prudent business
management. The Inventory and the Equipment of each Borrower and Guarantor shall
be used in its business and not for personal, family, household or farming use.
(b) All of the Inventory of each Borrower is and shall be
held for sale in the ordinary course of such Borrower's mail order and retail
business and is and shall be fit for such purposes. Borrowers shall not sell or
otherwise dispose of any Inventory except for mail order and retail sales in the
ordinary course of business and except for sales of outdated and surplus
Inventory in the absence of an Event of Default or Incipient Default which is
continuing that comply with the provisions of Section 6.22 hereof. Borrowers
shall maintain all Inventory according to a computerized perpetual inventory
accounting system. Borrowers shall keep the Inventory in good and marketable
condition, at their own expense. Borrowers shall not, without the prior written
notice to Lender, acquire or accept any Inventory on consignment or approval.
Borrowers shall conduct a physical count of the Inventory of Borrowers, at their
expense, at least annually prior to an Event of Default and at least twice a
year during the continuance of an Event of Default, and shall promptly supply
Lender with a copy of each such count. Borrowers shall not, without the prior
written consent of Lender, sell any Inventory on a ▇▇▇▇-and-hold, guaranteed
sale, sale and return, sale on approval, or other repurchase or return basis,
except for Borrowers' existing return policies for their mail order sales and
retail store sales, in each case in the ordinary course of business and prior to
an Event of Default.
(c) Borrowers shall use the Equipment with all reasonable
care and caution and in accordance with applicable standards of any insurance
and in conformity with all applicable laws.
(d) Borrowers shall not remove any Equipment from the
locations set forth for the respective Borrowers on Exhibit C hereto or
otherwise permitted herein for the applicable Borrower, except to the extent
necessary to have any Equipment repaired or maintained in the ordinary course of
the business of Borrowers or to move Equipment directly from one location set
forth on Exhibit C hereto for that Borrower or otherwise permitted herein for
that Borrower, to another such location and except for the movement of motor
vehicles used by or for the benefit of the Borrowers in the ordinary course of
business.
(e) The Equipment of Borrowers is now and shall remain
personal property and Borrowers shall not permit any of their Equipment to be or
become a part of or affixed to real property.
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(f) The Equipment of each Borrower, other than any
Equipment constituting fixtures as of the date hereof, is now and shall remain
personal property and Borrowers shall not permit any material part of such
Equipment to be or become a part of or affixed to real property without (i)
prior written notice to Lender and the written consent of Lender and (ii) first
making all arrangements, and delivering or causing to be delivered to Lender,
such agreements and other documentation requested by Lender for the protection
and preservation of its security interests and liens, in form and substance
satisfactory to Lender.
(g) Borrowers shall not, without Lender's prior written
consent, sell, lease as a lessor, or otherwise dispose of any part of their
Equipment that has a fair market value greater than Two Hundred Fifty Thousand
Dollars ($250,000) in the aggregate for all such transactions in any fiscal year
of Borrowers. In the event any such Equipment is sold, transferred or otherwise
disposed of with Lender's prior written consent or as permitted hereunder
without such consent and: (i) such sale, transfer or disposition is effected
without replacement of such Equipment, or such Equipment is replaced by
Equipment leased by Borrowers, or by Equipment purchased by Borrowers subject to
a Purchase Money Lien, then Borrowers shall deliver all of the cash proceeds of
any such sale, transfer or disposition to Lender, which proceeds shall be (A)
applied to the repayment of the Obligations of Borrowers as applicable, in such
order and manner as Lender shall determine or (B) retained by Lender as cash
Collateral; or (ii) such sale, transfer or disposition is made in connection
with the purchase by Borrowers of replacement Equipment, then Borrowers shall
use the proceeds of such sale, transfer or disposition to finance the purchase
by Borrowers of replacement Equipment and shall deliver to Lender written
evidence of the use of the proceeds for such purchase. All replacement Equipment
purchased by Borrowers shall be free and clear of all liens, claims and
encumbrances, except as otherwise permitted hereunder.
(h) Borrowers assume and shall indemnify Lender from and
against all responsibility and liability arising from or relating to the use,
sale or other disposition of their respective Inventory and Equipment.
6.14 Insurance
Borrowers and Guarantors shall at all times maintain, with financially
sound and reputable insurers, insurance with respect to the Collateral and
Guarantor Collateral, insuring the same and their business against loss or
damage of the kind and in the amounts customarily insured against by
corporations of established reputation engaged in the same or similar business
and similarly situated, and Borrowers and Guarantors shall
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maintain public liability insurance against claims for personal injury, death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by them and occurring in connection
with the use (or otherwise) of any products manufactured or sold by them,
worker's compensation insurance, and business interruption insurance. Said
policies of insurance shall be satisfactory to Lender as to form, amount and
insurer. Borrowers and Guarantors shall furnish certificates, policies or
endorsements to Lender as proof of such insurance, and, if they fail to do so,
Lender is authorized, but not required, to obtain such insurance at the expense
of Borrowers and Guarantors. All policies shall provide for at least thirty (30)
days prior written notice to Lender of any cancellation or reduction of
coverage. Lender, and its designees, are hereby irrevocably appointed to act as
attorney-in-fact for Borrowers and Guarantors in obtaining, and at any time
during the continuance of an Event of Default, adjusting, settling, amending and
canceling such insurance. Borrowers and each Guarantor shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender specifying that the proceeds of such
insurance shall be payable to Lender and further specifying that Lender shall be
paid regardless of any act or omission by Borrowers and/or any Guarantor. At its
option, Lender may apply any insurance proceeds received by Lender at any time
to the cost of repairs or replacement of Collateral and/or to payment of the
Obligations of Borrowers and/or any Guarantor, whether or not then due, in any
order and in such manner as Lender, in its discretion, may determine. Lender may
retain such proceeds as cash Collateral for the Obligations.
6.15 Appraisals
(a) Borrowers shall, at Borrowers' expense and after
Lender's request, deliver to Lender at least one (1) time per location during
each calendar year during the Term (excluding the delivery of the Appraisal or
any update in connection with the closing hereunder), or permit Lender, with the
same frequency, to obtain, written reports, Appraisals or updated appraisals by
the Appraiser of any or all of the Inventory of Borrower, in form, scope and
methodology acceptable to Lender, and including, but not limited to, a report as
to the Net Orderly Liquidation Value of the Inventory of Borrowers, other than
Inventory of Gump's at the Gump's Main Store, and of the Net GOB Value of the
Inventory of Gump's at the Gump's main store; provided, however, that if an
Event of Default or Incipient Default shall have occurred and be continuing,
Borrowers shall, at Borrowers' expense, deliver to Lender, at Lender's request,
additional and more frequent written reports or appraisals by the Appraiser of
any or all of the Inventory of Borrowers, including, but not limited to, reports
as to the Net Orderly Liquidation Value and Net GOB Value of the Inventory of
Borrowers, as
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applicable, or such other reports in such form, scope and methodology acceptable
to Lender.
(b) Upon Lender's request, Borrowers shall, at their
expense, once in any calendar year during the Term (excluding any such reports
or appraisals delivered in connection with the closing hereunder) and at any
time or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as to their
Equipment in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender.
6.16 Compliance with ERISA
None of the Borrowers or any other member of the Affiliated Borrower
Group shall, with respect to all "employee pension benefit plans" maintained by
Borrowers or any other member of the Affiliated Borrower Group:
(a) (i) terminate any of such employee pension benefit
plans so as to incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any prohibited
transaction involving any of such employee pension benefit plans or any trust
created thereunder which would subject Borrowers or any member of the Affiliated
Borrower Group to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the IRC or under ERISA, (iii) fail to pay to any
such employee pension benefit plan any contribution which it is obligated to pay
under the terms of such plan, (iv) allow or suffer to exist any accumulated
funding deficiency, whether or not waived, with respect to any such employee
pension benefit plan, (v) allow or suffer to exist any occurrence of a
reportable event or any other event or condition which presents a material risk
of termination by the Pension Benefit Guaranty Corporation of any such employee
pension benefit plan that is a single employer plan, which termination could
result in any liability to the Pension Benefit Guaranty Corporation, or (vi)
incur any withdrawal liability with respect to any multiemployer plan which is
not fully bonded; except only, in the case of any of the foregoing, if the
resulting liability or potential liability of Borrowers or other member(s) of
the Affiliated Borrower Group, would not, individually or in the aggregate,
exceed Two Hundred Fifty Thousand Dollars ($250,000).
(b) As used in this Section 6.16, the terms "employee
pension benefit plan," "employee benefit plan", "single employer plan",
"multiemployer plan", "accumulated funding deficiency" and "reportable event"
shall have the respective meanings assigned to them in ERISA, and the term
"prohibited transaction" shall have the meaning assigned to it in Section 4975
of the IRC or under ERISA.
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6.17 Notice of Default
Promptly upon any Responsible Officer becoming aware of the existence
of any condition or event which constitutes an Event of Default or Incipient
Default, Borrowers shall give Lender written notice thereof specifying the
nature of such condition or event.
6.18 Financial Statements and Other Information
(a) Borrowers shall promptly furnish to Lender all such
financial information regarding each Borrower and each member of the Affiliated
Borrower Group as Lender shall reasonably request, and notify the auditors and
accountants of Borrowers and each member of the Affiliated Borrower Group that
Lender is authorized to obtain such information directly from them. Without
limiting the foregoing, Borrowers shall furnish to Lender, in such detail as
Lender shall request, the following:
(i) As soon as available, but in any event not later
than ninety (90) days after the close of each fiscal year, consolidated audited
balance sheets, and statements of income and expense, cash flows and
stockholders' equity for Hanover and its Subsidiaries for such fiscal year, and
the accompanying notes thereto, setting forth in each case, in comparative form,
figures for the previous fiscal year, all in reasonable detail, fairly
presenting the financial position and the results of operations of Hanover and
its Subsidiaries, as at the date thereof and for the fiscal year then ended, and
prepared in accordance with generally accepted accounting principles,
consistently applied. Such statements shall be examined in accordance with
generally accepted auditing standards by and accompanied by an unqualified
report and opinion thereon by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. or one of the following
independent certified public accountants selected by Hanover: Coopers and
▇▇▇▇▇▇▇; Ernst & Young; Deloitte & Touche; KPMG Peat Marwick; or Price
Waterhouse & Co.
(ii) As soon as available, but in any event not later
than forty-five (45) days after the close of each fiscal quarter, the
consolidated and consolidating unaudited balance sheets of Hanover and its
Subsidiaries as at the end of such quarter, consolidated and consolidating
unaudited statements of income and expense and changes in financial position for
Hanover and its Subsidiaries for such quarter and for the period from the
beginning of the fiscal year to the end of such quarter, together with the
accompanying notes thereto, if any, all in reasonable detail, fairly presenting
the financial position and results of operation of Hanover and its Subsidiaries
as at the date thereof and for such periods, prepared in accordance with
generally accepted accounting principles, consistently applied. The foregoing
financial statements shall be certified to comply with this Section 6.18 by the
chief financial officer(s) of
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Hanover and Borrowers, as the case may be, subject to normal year-end
adjustments.
(iii) (A) As soon as available, but in any event not
later than (x) thirty (30) days after the end of each fiscal month (other than
the January fiscal month, in which case not later than forty-five (45) days
after the end of such fiscal month), the consolidated unaudited balance sheet of
Hanover and its Subsidiaries as at the end of such month, and (y) sixty (60)
days after the end of each fiscal month, the consolidating unaudited balance
sheets of Hanover and its Subsidiaries as at the end of such month.
(B) As soon as available, but in any event not
later than thirty (30) days after the end of each fiscal month (other than the
January fiscal month, in which case not later than ninety (90) days after the
end of such fiscal month, and other than the March, June and September fiscal
months, in which case not later than forty-five (45) days after the end of such
fiscal months), the consolidated unaudited statements of income and expense of
Hanover and its Subsidiaries for such month and for the period from the
beginning of the fiscal year to the end of such month.
All such statements in Sections 6.18(a)(iii)(A) and (B) hereof shall be in
reasonable detail, fairly presenting the financial position and results of
operation of Hanover and its Subsidiaries, as at the dates thereof and for such
periods, and prepared in accordance with generally accepted accounting
principles consistently applied. All such statements in Sections 6.18(a)(iii)(A)
and (B) shall be certified to comply with this Section by the chief financial
officer(s) of Borrowers, or of Hanover and Borrowers, as the case may be,
subject to normal year-end adjustments.
(iv) With each of the audited financial statements
delivered pursuant to Section 6.18(a)(i) above, a certificate of the independent
certified public accountants who examined such statements to the effect that
they have reviewed and are familiar with the Financing Agreements and that, in
examining such financial statements, they did not become aware of any fact or
condition which then constituted an Event of Default or Incipient Default,
except for those, if any, described in reasonable detail in such certificate.
(v) Simultaneously with the delivery of each of the
annual audited and quarterly and monthly unaudited financial statements as set
forth herein, Lender shall receive a certificate of the chief financial officer
of Borrowers:
(A) setting forth in reasonable detail the
calculations required to establish that Borrowers were in
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compliance with the covenants set forth in Sections 6.19 and 6.20 hereof during
the period covered in such financial statements; and
(B) stating that, except as explained in
reasonable detail in such certificate, (1) all of the representations,
warranties and covenants of Borrowers contained in this Agreement and the other
Financing Agreements are correct and complete as at the date of such certificate
and (2) no Event of Default then exists or existed during the period covered by
such financial statements.
If such certificate discloses that a representation or warranty is not correct
or complete, or that a covenant has not been complied with, or that an Event of
Default existed or exists, such certificate shall set forth what action
Borrowers have taken or propose to take with respect thereto (but without
prejudice to Lender's rights to declare an Event of Default immediately with
respect thereto and/or exercise any of its rights and remedies hereunder or
otherwise with respect thereto). At such time, Borrowers shall also provide a
narrative describing and analyzing in reasonable detail all material trends,
changes and developments in each and all financial statements.
(vi) Promptly after delivery thereof, any management
letters and reports by such independent certified public accountants to Hanover
and its Subsidiaries and Mail Order Joint Ventures.
(vii) Reports on sales, including:
(A) Weekly reports of sales, indicating for each
Borrower gross sales, returns, allowances and net sales;
(B) Monthly reports of sales for each category of
Inventory of each Borrower, indicating for such Inventory category, the sales
for each catalog of each Borrower and of each retail store of Borrowers and
Guarantors; and
(C) Quarterly reports of sales and operating
profits for that quarter with a comparison to the immediately preceding quarter
for each category of Inventory of each Borrower, indicating for such Inventory
category, the sales for each catalog of each Borrower and each retail store of
Borrowers and Guarantors.
(viii) Reports on Inventory, including:
(A) Weekly reports as to Inventory, indicating the
aggregate Value of each category of Inventory of each Borrower (showing catalog
and retail store Inventory of Borrowers and Guarantors separately);
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(B) Monthly reports as to Inventory, including
each category of Inventory of each Borrower, and each catalog of each Borrower
and each retail store of Borrowers and Guarantors on a perpetual basis by Value;
(C) Monthly reports in respect of each catalog of
each Borrower in respect of unfilled orders in the aggregate, indicating the
number of days that orders have not been filled for each catalog of each
Borrower; and
(D) Weekly reports as to Inventory by Borrowers
indicating items of Inventory in transit to Borrowers grouped according to the
documentary letter of credit and/or ▇▇▇▇ of lading number.
(ix) Monthly reports on sales and use tax collections,
deposits and payments, including a written analysis prepared by Borrowers in
respect of monthly sales and use tax accruals and, if requested by Lender,
copies of sales and use tax return, filed by Borrowers.
(x) Daily reports on the Accounts of each Borrower and
Guarantor under Deferred Billing Option Programs and other deferred billing
Accounts of Borrowers and Guarantors and monthly agings with respect to all
other Accounts of each Borrower and Guarantor, including, as to the foregoing,
the aggregate outstanding amounts, prepayments, accruals and returns and other
credits.
(xi) Any other financial and other information
regardingthe Collateral or Guarantor Collateral as Lender may reasonably request
from time to time.
(xii) As soon as available, but in any event not later
than five (5) days after receipt by Borrowers, any statements, reports, notices
or documents furnished to Borrowers by Sears under the Sears Agreements, the
Private Credit Card Purchaser or the parties to any of the Third Party Credit
Card Agreements, including any Third Party Credit Card Issuer or servicing agent
or purchaser or financial intermediary, together with such additional
information as shall be sufficient to enable Lender to monitor the transactions
pursuant to the Private Credit Card Agreement and the Third Party Credit Card
Agreements.
(b) Borrowers shall promptly notify Lender in writing when
any Responsible Officer becomes aware that any investigation, action, suit,
proceeding or claim involving a potential loss or liability to any Borrower or
any other member of the Affiliated Borrower Group in excess of Two Hundred Fifty
Thousand Dollars ($250,000), which exposure is not covered by insurance.
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(c) Borrowers and each Guarantor shall promptly provide
Lender with any material information, notices, requests or reports filed with,
or furnished to, or received from any governmental or regulatory authority,
including all Forms 10-K, 10-Q and 8-K, and proxy materials and other disclosure
materials filed with the SEC, or furnished to the shareholders of Borrowers
and/or Guarantors.
(d) In addition to and not by way of limiting the other
provisions of this Section 6.18, Borrowers and each Guarantor will promptly
provide Lender with such budgets, forecasts, projections, business plans, cash
flows and other information respecting the business operations and financial or
other condition of Borrowers and Guarantors, including information about
Borrowers' arrangements with trade creditors and such trade creditors' support
for the coming seasons, as Lender may, from time to time, request.
(e) Lender is authorized to deliver a copy of any financial
statement or any other information relating to the business, operations or
financial condition of Borrowers and any member of the Affiliated Borrower
Group, which may be furnished to it hereunder or otherwise, to any court,
regulatory body or agency having jurisdiction over Lender or to any other person
which shall, or shall have any right or obligation to, succeed to all or any
part of Lender's interests in any of the Obligations, this Agreement, the other
Financing Agreements, or the Collateral or Guarantor Collateral, including,
without limitation, any Participant.
(f) Each Borrower and each Guarantor hereby irrevocably
authorizes and directs all accountants, auditors and other third parties (but
excluding Borrower's and Guarantor's attorneys) to deliver to Lender at
Borrowers' expense, copies of the financial statements, papers related thereto
or other accounting records of any nature in their possession and to disclose to
Lender any information they may have regarding the business affairs and
financial condition of Borrowers and each other member of the Affiliated
Borrower Group. Lender shall obtain the applicable Borrower's or Guarantor's
prior written consent before making any request pursuant to this Section
6.18(f), which consent such Borrower or Guarantor shall not unreasonably
withhold or delay.
6.19 Consolidated Working Capital
Hanover shall, as at the end of each fiscal month, maintain
Consolidated Working Capital, calculated on a consolidated basis for Hanover and
its Subsidiaries, of not less than Twenty Six Million Dollars ($26,000,000).
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6.20 Consolidated Net Worth
Hanover shall, as at the end of each fiscal month, maintain
Consolidated Net Worth, calculated on a consolidated basis for Hanover and its
Subsidiaries, of at least Eighty Million Dollars ($80,000,000).
6.21 Further Assurances
Each Borrower and Guarantor has executed or shall execute and deliver
to Lender such of the other Financing Agreements to which it is a party and
financing statements pursuant to the UCC, in form and substance satisfactory to
Lender. Borrowers and each Guarantor shall, at their expense, at any time or
times duly execute and deliver, or shall cause to be duly executed and
delivered, such further agreements, instruments and documents, including,
without limitation, additional security agreements, mortgages, deeds of trust,
deeds to secure debt, collateral assignments, pledge agreements, Uniform
Commercial Code financing statements or amendments or continuations thereof,
landlord's or mortgagee's waivers of liens and consents to the exercise by
Lender of all the rights and remedies hereunder, under any of the other
Financing Agreements or applicable law with respect to the Collateral and/or
Guarantor Collateral, and do or cause to be done such further acts as may be
necessary or proper in Lender's opinion to evidence, perfect, maintain and
enforce the security interest and the priority thereof in the Collateral and
Guarantor Collateral and to otherwise effectuate the provisions or purposes of
this Agreement or any of the other Financing Agreements. Where permitted by law,
Borrowers and each Guarantor hereby authorize Lender to execute and file one or
more Uniform Commercial Code financing statements signed only by Lender. Upon
the request of Lender, at any time and from time to time, Borrowers and each
Guarantor shall, at their cost and expense, do, make, execute, deliver and
record, register or file financing statements, mortgages, deeds of trust, deeds
to secure debt, and other instruments, acts, pledges, assignments and transfers
(or cause the same to be done) and will deliver to Lender such instruments
evidencing items of Collateral or Guarantor Collateral as may be requested by
any of them.
6.22 Sales of Outdated and Surplus Inventory
(a) Borrowers may sell, transfer or dispose of outdated and
surplus Inventory to jobbers or other third parties only to the extent that any
one transaction or series of related transactions does not involve Inventory
having an aggregate original cost to Borrowers of greater than Four Million
Dollars ($4,000,000); provided, that (i) Borrowers remit, or
cause to be remitted, to Lender all the proceeds of such sales; (ii) Borrowers
account for all such sales separately in the weekly Inventory reports provided
to Lender; (iii) Borrowers provide to
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Lender written notice within five (5) calendar days after each such sale; and
(iv) no Event of Default or Incipient Default has occurred and is continuing.
(b) In the event that any sale by Borrowers referred to in
Section 6.22(a) hereof could result in the Excess Availability falling below One
Dollar ($1.00), Borrowers shall notify Lender in writing at least five (5)
business days prior to the consummation of such sale.
6.23 Maintenance and Delivery of Customer Lists; MACS Software
Borrowers shall create and maintain all Customer Lists in industry
standard formats stored on industry standard electronic data storage media and
accessible using industry standard hardware and software. Customer Lists shall
be updated and delivered to the storage and escrow agent under the Customer List
Escrow Agreement, not less frequently than monthly, on or before the tenth
(10th) day of each month. Updated revisions of the MACS Software shall be
delivered to the storage and escrow agent as soon as practicable following the
installation and use of such updated versions on Borrowers' systems (other than
testing). Receipt of the delivery of such updated Customer Lists and, as
applicable, updated MACS Software shall be acknowledged in writing by the
storage and escrow agent and a copy of each receipt delivered to Lender on or
before such tenth (10th) day of each month. Lender shall have the access to and
the right to inspect the Customer Lists and MACS Software in Borrowers'
possession or in the possession of the storage and escrow agent, at any time
during normal business hours. Upon and at any time after the occurrence and
during the continuance of an Event of Default or Incipient Default, Lender shall
have the right to direct the storage and escrow agent to deliver the Customer
Lists and MACS Software in its possession to Lender and Lender shall have the
right to require Borrowers to deliver all Customer Lists and MACS Software and
periodic updates thereof directly to Lender, without, in any case, limiting
Lender's other rights and remedies hereunder or under the other Financing
Agreements.
6.24 Rental or License of Customer Lists
Borrowers are and shall be the sole owners of all Customer Lists used
in Borrowers' business, except for the customer lists of Sears used under the
Sears Agreement until Hanover Ventures acquires rights to the lists of "Program
Customers" as provided in the Sears Agreement. No portion of the Customer Lists
shall be sold, leased, licensed or otherwise disposed of by Borrowers,
except, that so long as no Event of Default or Incipient Default has
occurred and is continuing, Borrowers may, in the ordinary course of business in
accordance with past practices, enter into non-exclusive rental agreements or
license agreements permitting
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the use of Borrowers' mailing and customer lists; provided, that (a)
such agreements do not impair the value, salability or disposability of the
Customer Lists as a whole; and (b) all proceeds of such rentals or licensing by
Borrowers are remitted to Lender hereunder. In addition, prior to an Event of
Default or Incipient Default that has occurred and is continuing, Borrowers may
sell outright to non-Affiliates such portions of the Customer Lists having a
fair market value aggregating not more than Two Hundred Fifty Thousand Dollars
($250,000) in any one fiscal year for all such sales to non-Affiliates;
provided, that all proceeds of such sale are remitted to Lender
hereunder.
6.25 No Termination or Amendment of Credit Card Agreements
Borrowers shall not, without Lender's prior written consent, terminate
or not renew any of the Credit Card Agreements, unless replacement agreements
satisfactory to Lender are entered into by Borrowers. Borrowers shall not,
without Lender's prior written consent, enter into any amendment or supplement
to the Credit Card Agreements which could in any manner adversely affect the
Collateral, the Obligations or the rights and interests of Lender hereunder or
under the other Financing Agreements.
6.26 Obligations to be Senior Indebtedness
Notwithstanding anything to the contrary in this Agreement, the
Indebtedness, if any, of Borrowers, Guarantors or any other direct or indirect
Subsidiary of Hanover in respect of any debt instruments Hanover described on
Exhibit E attached hereto shall be subordinated in right of payment to the
Obligations of Borrowers and Guarantors to Lender, and the Obligations of
Borrowers and Guarantors to Lender shall at all times be deemed senior in right
of payment to all such Indebtedness.
6.27 Mail Order Joint Ventures
Borrowers may directly or through a Subsidiary of Borrowers establish
or continue to own an interest in a Mail Order Joint Venture that is not a
Subsidiary of Borrowers, only to the extent that:
(a) the aggregate amount of capital, investments, equity,
loans, payments or assets of any kind contributed, directly or indirectly, by
Borrowers and its Subsidiaries to all Mail Order Joint Ventures shall not exceed
Five Hundred Thousand Dollars ($500,000) for the period from the date hereof
through the end of the Term, except that the foregoing limitations shall not
apply to sales of Inventory in the ordinary course of business by Borrowers
directly or through a Subsidiary of Borrowers to any Mail Order Joint Venture
under arrangements satisfactory to Lender such that timely payment to Borrowers
is made on normal trade terms, in cash, of the cost of such
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Inventory; provided, that in the case of Eligible Inventory so sold (but
not in the case of such sales of Inventory which is Eligible Inventory),
Borrowers shall receive and deposit each such payment to the Blocked Accounts
provided for in Section 8.2 hereof.
(b) Borrowers shall and shall cause each Subsidiary of
Borrowers owning an interest in such Mail Order Joint Venture to (i) grant a
security interest in and to, and pledge and assign to Lender, its interest in or
to such Mail Order Joint Venture; (ii) obtain and deliver to Lender any
necessary consents by the Mail Order Joint Venture or other Persons to the
security interest, pledge and assignment under clause (i); (iii) obtain an
acknowledgment from the Mail Order Joint Venture and each Person having an
interest therein waiving and releasing Lender from any liability for any
proceeds of Inventory or other assets owned by the Mail Order Joint Venture
commingled with or deposited to any of the Blocked Accounts maintained by Lender
hereunder or otherwise received by Lender; (iv) provide Lender written notice
thirty (30) days prior to the formation of each Mail Order Joint Venture; and
(v) agree in favor of Lender not to cause or permit such Mail Order Joint
Venture or any Person having an interest therein to encumber any assets of the
Mail Order Joint Venture, (all of the foregoing in clauses (i) through (v) shall
be evidenced by documents, instruments and/or agreements in form and substance
satisfactory to Lender). Borrowers shall at all times maintain all Inventory or
other assets of each Mail Order Joint Venture segregated and not commingled with
any of Borrowers' Inventory or other assets. Notwithstanding the foregoing, the
requirements of clauses (iii) and (iv) shall not apply to the Essence Joint
Venture.
(c) In the event a Mail Order Joint Venture is able to
obtain financing for its operations from a nonAffiliated lender on a completely
stand alone basis, i.e., not involving any investment (other than as
permitted herein), guarantee or other direct or indirect financial or credit
support or enhancement by Borrowers or any other member of the Affiliated
Borrower Group or any Non-Guarantor Subsidiary, then, provided Lender has been
given and has not exercised a thirty (30) day right of first refusal to elect to
provide such financing itself to such Mail Order Joint Venture on the same
economic terms as set forth in any bona fide financing
commitment, proposal or offer solicited or received by such Mail Order Joint
Venture and upon such other terms satisfactory to Lender, and provided no Event
of Default or Incipient Default has occurred and is continuing, Lender shall
release the Mail Order Joint Venture from the restriction on liens set forth in
subsection 6.27(b)(v) hereof to the extent required by the non-Affiliated lender
providing such stand alone financing.
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6.28 9.25% Notes
(a) Anything contained in this Agreement to the contrary
notwithstanding, if any existing or future member of the Affiliated Borrower
Group shall at any time guarantee, assume or otherwise become liable for all or
any part of the obligations under the 9.25% Notes, such member shall execute and
deliver to Lender all of the instruments and documents required under Section
6.2 hereunder and shall be treated as a Guarantor hereunder.
(b) Anything set forth in the 9.25% Subordination Agreement
to the contrary notwithstanding, Lender shall not cure any default or event of
default claimed to exist by the "Junior Creditor" under the 9.25% Notes or the
other "Junior Creditor Agreements" (as such quoted terms are defined in the
9.25% Subordination Agreement), without the prior written consent of Hanover if
and so long as the claimed default or event of default is being contested in
good faith by appropriate proceedings by Hanover or any other obligor against
whom a claim is made by reason of such claimed default or event of default,
Lender has been notified in writing of such contest, adequate reserves have been
set aside on the books of Hanover or such other obligor, as appropriate, in
accordance with generally accepted accounting principles consistently applied,
and no judgment or other enforcement action against any property of any member
of the Affiliated Borrower Group has been or is about to be obtained, enforced
or taken.
6.29 Litigation Notices
Borrowers and Guarantors shall provide written notice to Lender of each
investigation by any governmental agency that, to the knowledge of any
Responsible Officer, is pending or threatened against or affects any Borrower or
any other member of the Affiliated Borrower Group or their properties or
business, and of each action, suit, proceeding or claim by any Person that, to
the knowledge of any Responsible Officer, is pending or threatened against any
Borrower or any other member of the Affiliated Borrower Group or their
properties or business (other than future pending or threatened litigation
involving the enforcement of lease obligations by or against Hanover as
successor to The Horn & Hardart Company as to leased properties not used in or
related to the business of Borrowers), or against or affecting any transaction
contemplated by this Agreement, the other Financing Agreements, or other
instruments, agreements or documents delivered in connection herewith or
therewith, which could reasonably be expected to result in a determination
adverse to any Borrower or any other member of the Affiliated Borrower Group,
and which, if so adversely determined with respect to any of them, would result
in either (i) a fine, judgment, penalty, loss or liability, including costs and
attorneys' fees, not
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covered by insurance, which, individually, exceeds Three Hundred Thousand
Dollars ($300,000) or (ii) any material adverse change in the business, assets,
liabilities or financial condition of any Borrower or of the Affiliated Borrower
Group taken as a whole. Borrowers and Guarantors shall also provide written
notice to Lender of each investigation by any governmental agency or supplier
that, to the knowledge of any Responsible Officer, is pending or threatened
concerning a possible product recall, or that actually results in, a product
recall, of goods of or sold by Borrowers or Guarantors having an aggregate value
of Three Hundred Thousand dollars ($300,000) or more.
SECTION 7. EVENTS OF DEFAULT AND REMEDIES
7.1 Events of Default
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) Any Borrower shall fail to pay to Lender when due any
amounts owing to Lender under any Obligation; or
(b) Any Borrower shall breach any of the terms, covenants,
conditions or provisions of this Agreement, any supplement hereto or any other
agreement between Lender and Borrowers, including any of the other Financing
Agreements or any other default or Event of Default occurs or exists under any
of the foregoing; or
(c) Any of the Guarantors or other endorser or other Person
liable on the Obligations of Borrowers shall terminate or breach any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such Person with, or in favor of, Lender; or
(d) Any representation, warranty or statement of fact made
to Lender at any time by any Borrower or any Guarantor or on behalf of any
Borrower or any Guarantor is false or misleading in any material respect; or
(e) Any Borrower, any Guarantor or any other Person at any
time liable on or in respect of the Obligations shall default in the payment of
an amount greater than Two Hundred Fifty Thousand Dollars ($250,000),
individually or in the aggregate, at any time due or any Indebtedness at any
time owing to any Person other than Lender or in the performance of any other
terms or covenants or any evidence of same or other agreement relating thereto
or securing same, or with respect to any material contract, lease (other than
leases under which Hanover, as successor to The Horn & Hardart Company, is the
sole obligor relating to property not used in the business of
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Borrowers), license or other obligation owed to any Person other than Lender,
which default continues for more than the applicable cure period, if any, with
respect thereto, but in no event more than thirty (30) days after the occurrence
of any such default; or
(f) The aggregate amount outstanding at any one time under
the Third Party Credit Card Agreements collectively owed to Borrowers and not
paid after the date such payment is due shall exceed Five Million Dollars
($5,000,000); or reserves or any other mechanism effecting a reduction of the
amount actually paid to Borrowers pursuant to any such Third Party Credit Card
Agreement have been implemented or imposed after the date hereof in an amount
exceeding One Hundred Thousand Dollars ($100,000) in the aggregate; or Borrowers
shall default in the performance of their obligations under any of the Credit
Card Agreements; or any of the Credit Card Agreements shall be terminated or not
renewed; or the Private Credit Card Purchaser shall suspend or cease purchasing
Private Credit Card Receivables; or any party to the Third Party Credit Card
Agreements shall cease purchasing and/or processing transactions involving Third
Party Credit Card Receivables; or
(g) Any Borrower or Hanover or any other Guarantor having
assets in excess of Two Hundred Fifty Thousand Dollars ($250,000), shall become
insolvent, fail to meet its debts as they mature, call a meeting of creditors or
have a creditors' committee appointed, make an assignment for the benefit of
creditors, commence or have commenced against it any action or proceeding for
relief under the Bankruptcy Code or any other bankruptcy law or similar statute
or statutes providing for reorganization, adjustment of debts, liquidation or
dissolution (except in the case of any such action or proceeding commenced
against any Borrower, Hanover or any other Guarantor having assets in excess of
Two Hundred Fifty Thousand Dollars ($250,000), such action or proceeding is
dismissed within thirty (30) days from the date such action or proceeding was
commenced, unless such Borrower, Hanover or Guarantor against whom such action
was brought shall acquiesce to the relief sought or such relief sought is sooner
granted; provided, however, that during such thirty (30) day
period Lender shall have no obligation to make or provide any Revolving Loans or
Letter of Credit Accommodations), or if any Borrower or Hanover or any other
Guarantor having assets in excess of Two Hundred Fifty Thousand Dollars
($250,000) suspends or discontinues doing business for any reason, (other than
as permitted in Section 6.7 hereof), or if a receiver, custodian or trustee of
any kind is appointed for any Borrower or Hanover or any other Guarantor having
assets in excess of Two Hundred Fifty Thousand Dollars ($250,000) or any of
their respective properties; or
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(h) One (1) or more judgments, decrees or orders for the
payment of damages in an amount greater than Two Hundred Fifty Thousand Dollars
($250,000) in the aggregate at any time shall be issued by one or more courts,
governmental agencies, administrative tribunals or other bodies having
jurisdiction against any Borrower, Hanover or any other Guarantor with assets
greater than Two Hundred Fifty Thousand Dollars ($250,000) and a stay of
execution thereof shall not be procured within thirty (30) days after the date
of entry thereof, or such judgment(s), decree(s) or order(s) shall not be fully
bonded within such period of thirty (30) days, unless sooner enforced; or
(i) If there shall be a material adverse change in the
business, assets, liabilities or condition of the Affiliated Borrower Group,
taken as a whole, after September 30, 1995; or
(j) NAR shall cease, directly or through its Subsidiaries,
to be the direct or indirect beneficial owner of a sufficient number of issued
and outstanding shares of capital stock of Hanover and its Subsidiaries on a
fully diluted basis, to elect a majority of the members of the respective Boards
of Directors of Hanover and each member of the Affiliated Borrower Group.
7.2 Remedies
(a) Without limiting Lender's rights to demand payment
sooner as provided in this Agreement, upon or at any time after the occurrence
or existence of any one or more of such Events of Default, upon termination of
this Agreement or any of the other Financing Agreements, or if this Agreement
and the other Financing Agreements are not renewed, in addition to any other
rights Lender may have under the Financing Agreements or otherwise:
(i) Lender may, at any time thereafter, at its option,
without presentment for payment, demand, notice of dishonor or notice of protest
or any other or further notice, all of which are hereby expressly waived by
Borrowers and Guarantors, declare any or all of the Obligations of Borrowers
and/or Guarantors to be immediately due and payable, together with interest at
the highest rate of interest hereunder until fully and indefeasibly paid;
(ii) each Participant, to the fullest extent permitted
by applicable law, shall have the right to (A) set off against the Obligations
of Borrowers and Guarantors any and all deposits (whether general or special,
time or demand, provisional or final), credits, balances, accounts, monies or
other assets which are the property of Borrowers or any Guarantor and held by
such Participant or owed by such Participant to Borrowers or any
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Guarantor and (B) remit the same to Lender for application to the Obligations of
Borrowers and/or Guarantors;
(iii) without further notice to Borrowers or
Guarantors, Lender may appropriate, set off and apply to the payment of any or
all of the Obligations of Borrowers and/or Guarantors, any or all Collateral, in
such manner as Lender shall determine, enforce payment of any Collateral and/or
Guarantor Collateral, settle, compromise or release in whole or in part, any
amounts owing on the Collateral and/or Guarantor Collateral, make allowances and
adjustments with respect thereto, issue credits in Lender's or Borrowers' name,
sell, assign and deliver the Collateral and/or Guarantor Collateral (or any part
thereof), at public or private sale, at broker's board, for cash, upon credit or
otherwise, at Lender's option and discretion, and Lender may bid or become
purchaser at any such sale, if public, free from any right of redemption which
is hereby expressly waived;
(iv) without limiting the generality of the foregoing,
Lender is hereby authorized at any time and from time to time, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other Indebtedness at any time owing by any Lender
or any Affiliate of Lender to or for the credit or the account of Borrowers or
any Guarantor against any and all of the Obligations of Borrowers and/or
Guarantors, whether or not then due and payable; and
(v) Lender shall have the right, without notice to
Borrowers or any Guarantor (except as otherwise expressly provided herein), at
any time and from time to time in its discretion, with or without judicial
process or the aid or assistance of others and without cost to Lender (A) to
enter upon any premises on or in which any of the Inventory or Equipment of
Borrowers and/or Guarantors may be located and, without resistance or
interference by Borrowers or any Guarantor, take possession of such Inventory or
Equipment; (B) to sell, foreclose or otherwise dispose of any part or all of
such Inventory or Equipment on or in any premises of Borrowers, any Guarantor or
premises of any other party; (C) to require Borrowers and/or Guarantors, at
their expense, to assemble and make available to Lender any part or all of such
Inventory or Equipment at any place and time designated by Lender; and (D) to
remove any or all of such Inventory or Equipment from any premises on or in
which the same may be located, for the purpose of effecting the sale,
foreclosure or other disposition thereof or for any other purpose.
(b) Lender shall have all of the rights and remedies of a
secured party under the UCC or applicable law of any other State in which any
Collateral or Guarantor Collateral
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may be situated, in addition to all of the rights and remedies set forth in this
Agreement and the other Financing Agreements, and in any instrument or document
referred to herein or therein, and/or under any other applicable law relating to
this Agreement, the other Financing Agreements, the Obligations of Borrowers
and/or Guarantors, the Collateral or the Guarantor Collateral.
(c) Each Borrower and Guarantor agrees that in any case
where the giving of notice of sale or other disposition of Collateral and/or
Guarantor Collateral is required by law, the giving of ten (10) days notice to
such Borrower or Guarantor by Lender at their addresses set forth below,
designating the place and time of any public sale or of the time after which any
private sale or other intended disposition of the Collateral and/or Guarantor
Collateral, as the case may be, is to be made, shall be deemed to be reasonable
notice thereof and each Borrower and Guarantor waives any other notice with
respect thereto.
(d) The net cash proceeds resulting from the exercise of any
of the foregoing rights or remedies shall be applied by Lender to the payment of
the Obligations of Borrowers and/or Guarantors in such order as Lender may
elect, and Borrowers and Guarantors shall remain liable to Lender for any
deficiency. Without limiting the generality of the foregoing, if Lender enters
into any credit transaction, directly or indirectly, in connection with the
disposition of any Collateral and/or Guarantor Collateral, Lender shall have the
option, at any time, in its discretion, to reduce the Obligations of Borrowers
and/or Guarantors by the principal amount of such credit transaction or to defer
the reduction thereof until actual receipt by Lender of cash or other
immediately available funds in connection therewith.
(e) In the event Lender institutes an action to recover any
Collateral and/or Guarantor Collateral or seeks recovery of any Collateral
and/or Guarantor Collateral by way of prejudgment remedy or otherwise, Borrowers
and Guarantors hereby irrevocably waive (i) the posting of any bond, surety or
security with respect thereto which might otherwise be required, (ii) any demand
for possession prior to the commencement of any suit or action to recover the
Collateral and/or Guarantor Collateral, and (iii) any requirement that Lender
retain possession and not dispose of any Collateral or Guarantor Collateral
until after trial or final judgment.
(f) Lender may, at its option, cure any default by Borrowers
under any agreement, law, regulation, permit, license or approval with, or
issued or promulgated by, any Person, which constitutes an Event of Default or
Incipient Default hereunder or under any of the other Financing Agreements, or
pay or bond on appeal any judgment entered against Borrowers (irrespective of
the amount of said judgment or the time elapsed
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since entry thereof), and charge Borrowers' loan account(s) therefor, such
amounts to be repayable by Borrowers on demand, together with interest thereon
at the highest rate of interest hereunder; provided, however,
Lender shall be under no obligation to effect such cure, payment or bonding and
shall not, by making any payment for Borrowers' account, be deemed to have
assumed any obligation or liability of Borrowers.
(g) The enumeration of the foregoing rights and remedies is
not intended to be exclusive, and such rights and remedies are in addition to
and not by way of limitation of any other rights or remedies Lender may have
under the other Financing Agreements, the UCC or other applicable law. Lender
shall have the right to determine which rights and remedies, and in which order
any of the same, are to be exercised, and to determine which Collateral or
Guarantor Collateral is to be proceeded against and in which order, and the
exercise of any right or remedy shall not preclude the exercise of any others,
all of which shall be cumulative.
(h) No act, failure or delay by Lender shall constitute a
waiver of any of the rights and remedies of Lender. No single or partial waiver
by Lender of any provision of this Agreement or any of the other Financing
Agreements, or breach or default thereunder, or of any right or remedy which
Lender may have, shall operate as a waiver of any other provision, breach,
default, right or remedy or of the same provision, breach, default, right or
remedy on a future occasion.
(i) Each Borrower and Guarantor waives presentment, notice
of dishonor, protest and notice of protest of all instruments included in or
evidencing any of the Obligations of Borrowers and/or Guarantors or the
Collateral or Guarantor Collateral and any and all notices or demands whatsoever
(except as expressly provided herein). Lender may, at all times, proceed
directly against any of the Borrowers or any of the Guarantors to enforce
payment of the Obligations of Borrowers and/or Guarantors and shall not be
required to take any action of any kind to preserve, collect or protect any
rights in the Collateral or Guarantor Collateral.
SECTION 8. COLLECTION AND ADMINISTRATION
8.1 Receipts
(a) Borrowers shall, at their expense and on behalf of
Lender, receive, as the property of Lender and in trust for Lender, all proceeds
from the sale of Borrowers' Inventory, in whatever form, including, without
limitation, all cash, checks, credit or debit card transaction records, and all
forms of retail store receipts (other than daily receipts of Brawn
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retail stores located in California used to fund the ordinary course of business
operations of such retail stores of Brawn), as well as all other proceeds of
Collateral, and Borrowers shall not commingle such proceeds with Borrowers' own
funds. Borrowers shall on the day received deposit all such proceeds into
blocked or other deposit accounts according to the provisions set forth below
for the collection and transfer of proceeds to Lender. All proceeds of
Collateral when received by Lender at such place as Lender may designate from
time to time shall be credited to the loan accounts of Borrowers one (1) Banking
Day after Lender's receipt at its designated bank account for such purposes of
federal funds wire transfers and one (1) Banking Day for all other remittances,
in each instance conditional upon final payment to Lender.
(b) Unless Borrowers shall, in fact, identify, at the time
of receipt by Lender, the amounts of proceeds of Inventory or Accounts received
by Lender which arise from sales of Inventory and collection of Accounts of each
Borrower, in view of the impracticality and difficulty of identifying at the
time of receipt the respective Borrowers' Accounts or other Collateral to which
proceeds relate, including, but not limited to, combined payments received under
the Credit Card Agreements, Lender shall be entitled to apply such proceeds to
the respective loan accounts of Borrowers based on the relative percentages of
sales of Inventory made by the Borrowers during the week ending immediately
preceding the week of receipt, as reported by Borrowers to Lender. Borrowers
shall on a monthly basis reconcile such application of proceeds with the posting
of payment to the proper Accounts and receipts, and adjust between themselves by
intercompany transfers for any excess application of proceeds to the loan
account of one or another Borrower as permitted in Section 6.6(b) hereof;
provided, however, that Lender shall not be required to adjust
its loan accounts nor shall Lender be required to provide funds for such
intercompany transfers, other than on the terms and subject to the conditions
set forth herein.
(c) Each Guarantor whose sale proceeds are remitted to one
of the Blocked Accounts shall enter into an intercompany assignment of its
Accounts and other proceeds of the sale of goods in favor of those of the
Revolving Loan Borrowers from whom such Guarantor acquired the goods sold. Such
assigned rights and agreements therefor shall in turn, be deemed further
assigned by the Revolving Loan Borrowers to Lender as part of the Collateral.
All such proceeds collected in the Blocked Accounts or otherwise applied to the
Revolving Loan shall be treated as payments (or prepayments) for good sold (or
to be sold) by Revolving Loan Borrowers to the respective Guarantors.
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8.2 Depository Accounts; Blocked Accounts;
Customer Prepayment Accounts
(a) Borrowers shall, in a manner satisfactory to Lender from
time to time, enter into deposit account arrangements and merchant payment
arrangements with respect to all sales of Inventory, including sales at
Borrowers' retail stores, such that all proceeds of the sale of Borrowers'
Inventory in every form, subject to the sale and transfer of credit card
transaction records pursuant to the Credit Card Agreements to the extent
permitted hereunder, and all amounts payable upon Accounts, letters of credit,
banker's acceptances and all other proceeds of Collateral, shall be deposited
into a blocked account under the control of Lender or deposited into deposit
accounts approved by Lender with respect to which irrevocable instructions from
Borrowers have been accepted by the depository bank to transfer all collected
funds to a blocked account under the control of Lender (all such blocked
accounts and such deposit accounts, collectively, the "Blocked Accounts"). In
connection therewith Borrowers shall execute and shall cause the depository
bank(s) to execute or accept such irrevocable instructions, blocked account and
other agreements as Lender in its discretion shall specify. Without limiting the
provisions of Section 8.4 below in favor of Lender, each of the Borrowers and
Guarantors hereby irrevocably appoints Hanover and HDPI, acting jointly or
singly, as its agent for all purposes in connection with the Blocked Accounts,
including, without limitation, the execution, delivery and performance on its
behalf of all Blocked Account agreements, Third Party Credit Card
Acknowledgments and the performance of such obligations thereunder as Lender,
the depository, or any other party thereto shall require.
(b) Without limiting any of the rights of Lender or
obligations of Borrowers under this Section 8, Borrowers shall also establish
separate deposit accounts subject to the lien and security interest of Lender,
according to such agreements with the depository bank as Lender shall require,
into which Borrowers shall deposit checks, gift certificate receipts, deposits
and other customer prepayments in any other form representing customer
prepayments, including prepayments for merchandise ordered but not yet delivered
or received. Nothing set forth herein shall impair any right which Borrowers
would otherwise have under applicable law to utilize amounts deposited in such
accounts for expenditures, investments or other purposes in the ordinary course
of business of Borrowers. Any balances remaining in such accounts on the last
business day of each week, representing amounts of prior prepayments earned by
performance or otherwise, shall be transferred to Borrowers' blocked account for
transfer thereafter to Lender for credit to the respective loan accounts of each
Borrower in accordance with Section 8.1 hereof.
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8.3 Right of Inspection; Access
Lender and its representatives shall at any time have free access to
and right of inspection of the Collateral and Guarantor Collateral and have full
access to and the right to examine and make copies of Borrowers' and each
Guarantor's books and records, to confirm and verify all purchases and sales of
Borrowers' Inventory and proceeds thereof including Accounts, to perform general
audits and to do whatever else Lender deems necessary to protect the interests
of Lender. Without limiting any of Lender's rights under this Section 8.3 or
elsewhere herein or in the other Financing Agreements, upon and after the
occurrence of an Event of Default that is continuing, Lender may, if Lender
reasonably believes such action is necessary to preserve the books and records
or to protect or effect Lender's rights and remedies with respect thereto,
remove from the premises of Borrowers or Guarantors any books and records and
Lender may, without cost or expense to it, use such of Borrowers' or any of the
Guarantors' personnel, supplies, computer equipment (to the extent permitted by
the lessor thereof, as to leased computer equipment or software) and space at
their places of business as may be reasonably necessary for the handling of
proceeds from the sale of Borrowers' Inventory or other proceeds of any
Collateral or Guarantor Collateral.
8.4 Specific Powers
Each Borrower and Guarantor hereby constitutes Lender, and its
designees, as its attorney-in-fact, at Borrowers' and Guarantors' own cost and
expense, to exercise at any time all or any of the following powers which, being
coupled with an interest, shall be irrevocable until all Obligations of
Borrowers and Guarantors have been paid in full: (i) to receive, take, endorse,
assign, deliver, accept and deposit, in the name of Lender, or such Borrower or
Guarantor, as the case may be, any and all checks, notes, drafts, remittances
and other instruments and documents relating to any Collateral and Guarantor
Collateral as the case may be; (ii) after the occurrence and upon and during the
continuance of an Event of Default or Incipient Default, to receive, open and
dispose of all mail addressed to such Borrower or Guarantor, as the case may be,
and to notify postal authorities to change the address for delivery thereof to
such address as Lender may designate; (iii) to transmit to Account Debtors
obligated in respect of any Collateral notice of Lender's interest therein and
to request from such Account Debtors at any time, in the name of Lender, or such
Borrower or Guarantor, as the case may be, or that of Lender's or designee,
information concerning the Accounts that are part of any Collateral and the
amounts owing thereon; (iv) after the occurrence and upon and during the
continuance of an Event of Default or Incipient Default, to notify Account
Debtors obligated in respect of the Collateral to make payment directly to
Lender; (v) after the
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occurrence and upon and during the continuance of an Event of Default or
Incipient Default, to take or bring, in the name of Lender, or such Borrower or
Guarantor, as the case may be, all steps, actions, suits or proceedings deemed
by Lender necessary or desirable to effect collection of the Collateral and
Guarantor Collateral; and (vi) to execute in such Borrower's or such Guarantor's
name and on its behalf any UCC financing statements or amendments thereto. Each
Borrower and Guarantor hereby releases Lender, and its officers, employees,
attorneys, agents and designees, from any liability arising from any act or acts
under this Agreement or in furtherance thereof, whether of omission or
commission, and whether based upon any error of judgment or mistake of law or
fact, other than for Lender's own gross negligence or wilful misconduct.
SECTION 9. EFFECTIVE DATE; TERMINATION; COSTS; MISCELLANEOUS
9.1 Term
(a) This Agreement and the other Financing Agreements shall
become effective as of the date hereof and this Agreement shall continue in full
force and effect for a term ending on the date three (3) years from the date
hereof (the "Renewal Date"), and from year-to-year thereafter, unless sooner
terminated pursuant to the terms hereof; provided, that, Lender
may, at its option extend the Renewal Date four (4) years from the date hereof
by giving Borrowers notice at least sixty (60) days prior to the third
anniversary of this Agreement. (Such initial term together with all extensions
and renewals thereof, the "Term".)
(b) Lender may, or all Borrowers (but not less than all
Borrowers) may (subject to Lender's right to extend the Renewal Date as provided
in Section 9.1(a) hereof), terminate this Agreement and the other Financing
Agreements effective on the Renewal Date or on the anniversary of the Renewal
Date in any year by giving to the other parties at least sixty (60) days prior
written notice; provided, that, this Agreement and all other Financing
Agreements must be terminated simultaneously.
(c) In addition, Lender shall have the right to terminate
this Agreement and the other Financing Agreements immediately at any time after
the occurrence and during the continuance of an Event of Default. Lender shall
have no obligation to make additional loans or provide additional credit
accommodations hereunder at any time after and during the continuance of an
Event of Default or Incipient Default.
(d) Upon the effective date of termination of the Financing
Agreements, Borrowers shall pay to Lender in full, by wire transfer in federal
funds to such bank account of Lender as
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Lender may, in its discretion, designate in writing to Borrowers for such
purpose, all outstanding and unpaid non-contingent Obligations of Borrowers
(including, but not limited to the Revolving Inventory Loans, the Term Loans and
all interest, fees (including the Early Termination Fees, if any, provided
herein), charges, expenses and other amounts provided for hereunder, under the
other Financing Agreements or otherwise) and shall furnish cash Collateral to
Lender, or a clean irrevocable letter of credit issued in Lender's favor by a
bank acceptable to Lender in its discretion and having documentary requirements
and other terms acceptable to Lender in its discretion, in order to secure and
provide for payment in full of all contingent Obligations, including all undrawn
amounts available pursuant to previously issued and outstanding Letter of Credit
Accommodations, and all other contingent Obligations. Interest at the Interest
Rate shall be due until and including the next business day, if the amounts so
paid by Borrowers to the bank account designated by Lender are received in such
bank account later than 12:00 noon, New York, New York time.
(e) No termination of the Financing Agreements shall relieve
or discharge Borrowers or any Guarantor of their respective duties, obligations
and covenants under the Financing Agreements until all Obligations of Borrowers
and Guarantors have been fully indefeasibly paid and discharged, and following
such termination, Lender's continuing security interests in the Collateral and
Guarantor Collateral shall remain in effect until all such Obligations have been
fully indefeasibly paid and discharged. At Borrowers' written request, following
termination of this Agreement as provided herein, and after all Obligations have
been fully and indefeasibly paid and discharged, Lender shall execute and
deliver to Borrowers and Guarantors any and all documents and instruments
reasonably required to terminate all liens and security interests granted to
Lender pursuant hereto and pursuant to the other Financing Agreements, all at
Borrowers' and Guarantors' expense; provided, however, that,
following termination of this Agreement as provided herein, upon Lender's
receipt of full and final payment in immediately available funds of all unpaid
non-contingent Obligations and Borrower's compliance with Section 9.1(d) as to
all contingent Obligations, Lender shall notify the depository bank(s) with
which blocked accounts have been established under Section 8 hereof, that Lender
has relinquished its control over such blocked accounts and that such banks may
follow the instructions of Borrowers with respect to the disposition of funds
thereafter received in or deposited to such previously blocked accounts.
(f) If Lender terminates this Agreement or the other
Financing Agreements after the occurrence and during the continuance of an Event
of Default or at the request of Borrowers prior to the Termination Date, in view
of the impracticality and extreme difficulty of ascertaining actual damages, and
by mutual
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agreement of the parties as to a reasonable calculation of Lender's lost profits
as a result thereof, Borrowers hereby agree to pay to Lender, upon the effective
date of such termination, a fee (the "Early Termination Fee") in an amount equal
to:
(i) five percent (5%) of the Maximum Credit, if such
termination is effective on or prior to the first anniversary of this Agreement;
(ii) one percent (1%) of the Maximum Credit, if such
termination is effective after the first anniversary of this Agreement, but on
or prior to the second anniversary of this Agreement; or
(iii) one-half of one percent (.5%) of the Maximum
Credit, if such termination is effective after the second anniversary of this
Agreement but prior to the third anniversary of this Agreement, or, if the
Renewal Date is extended by Lender provided in Section 9.1(a) hereof, prior to
the fourth anniversary of this Agreement.
The Early Termination Fee shall be presumed to be the amount of damages
sustained by said early termination and each Borrower and Guarantor agrees that
it is reasonable under the circumstances currently existing. The Early
Termination Fee provided for in this Section 9.1 shall be deemed included in the
Obligations of Borrowers.
(g) Notwithstanding the foregoing provisions of this Section
9.1, the Early Termination Fee otherwise payable by Borrowers to Lender in
connection with the termination of this Agreement upon Borrowers' written
request shall not be payable if such termination is effected and all of the
Obligations of Borrowers are fully and indefeasibly paid and satisfied within
ninety (90) days following Lender's receipt of written notice from Borrowers
("Voluntary Termination Notice") requesting voluntary termination of this
Agreement by reason of the occurrence, not more than sixty (60) days prior to
Lender's receipt of the Voluntary Termination Notice, of a Specified Action (as
defined below); provided, however, that at the time of any such
Specified Action (i) no Event of Default or Incipient Default had occurred and
was continuing, and (ii) the Excess Availability, after adding back, for these
purposes only, the aggregate amount of principal payments on direct Indebtedness
for Borrowed Money of Hanover subtracted under clause (ii)(D) of the definition
of Excess Availability, was at least One Dollar ($1.00); provided,
further, that Borrowers have obtained replacement financing upon
termination under this Section 9.1(g) from an asset-based lender on terms
affording Borrowers an aggregate amount of loans, advances and other financial
accommodations greater by at least One Million Dollars ($1,000,000) than the
aggregate amount of loans, advances and
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other financial accommodations available under the Credit Facility, based on the
same items of Collateral and Guarantor Collateral as under the Credit Facility,
after giving effect to the reduced Inventory Loan Formula. For purposes hereof,
the term "Specified Action" shall mean the reduction by Lender of a Inventory
Loan Formula to a percentage less than the Inventory Loan Formula otherwise
applicable under Section 2.1(b) in respect of Eligible Inventory, other than
Eligible Inventory of Gump's, based on the exercise of its discretionary rights
to do so at any time and from time to time.
9.2 Expenses and Additional Fees
(a) Borrowers and Guarantors shall pay to Lender on demand
all costs and expenses that Lender pays or incurs in connection with the
negotiation, preparation, consummation, administration, enforcement, and
termination of this Agreement and the other Financing Agreements, including,
without limitation: (i) reasonable attorneys' and paralegals' fees and
disbursements of counsel to Lender and any Participant; (ii) costs and expenses
(including reasonable attorneys' and paralegals' fees and disbursements) for any
amendment, supplement, waiver, consent, or subsequent closing in connection with
the Financing Agreements and the transactions contemplated thereby; (iii) costs
and expenses of lien and title searches; (iv) taxes, fees and other charges for
recording the Mortgages or any agreements or documents with the United States
Office of Patents and Trademarks, The United States Office of Copyrights or any
other governmental authority, and the filing of UCC financing statements and
continuations, and other actions to perfect, protect, and continue the security
interests and liens of Lender in the Collateral and/or Guarantor Collateral; (v)
sums paid or incurred to take any action required of Borrowers and/or any
Guarantors under the Financing Agreements that Borrowers and/or any Guarantors
fail to pay or take; (vi) costs of appraisals, environmental audits,
inspections, and verifications of the Collateral and/or Guarantor Collateral,
including, without limitation, travel and lodging, plus a per
diem charge at a rate of Six Hundred Dollars ($600) per person for
periodic field examinations of the Collateral and/or Guarantor Collateral and
Borrowers' and/or any Guarantor's operations by Lender, or its agents; (vii)
costs and expenses of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining Blocked Accounts including,
without limitation, wire transfer fees and check dishonor fees; (viii) costs and
expenses of preserving and protecting the Collateral and/or Guarantor
Collateral; (ix) costs and expenses and fees for title insurance and other
insurance premiums, environmental audits, surveys, assessments, engineering
reports and inspections, appraisal fees and search fees; and (x) costs and
expenses (including reasonable attorneys' and paralegals' fees and
disbursements) paid or incurred to obtain payment of the
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Obligations of Borrowers and/or Guarantors, enforce the security interests and
liens of Lender, sell or otherwise realize upon the Collateral and/or Guarantor
Collateral, and otherwise enforce the provisions of this Agreement and the other
Financing Agreements (including, without limitation, premiums on bonds and
undertakings, fees of marshals, sheriffs, custodians, auctioneers and others,
travel expenses and all court costs and collection charges), or to defend any
claims made or threatened against Lender arising out of the transactions
contemplated hereby (including, without limitation, preparations for and
consultations concerning any such matters). The foregoing shall not be construed
to limit any other provisions of the Financing Agreements regarding costs and
expenses to be paid by Borrowers and/or Guarantors.
(b) All sums provided for in this Section 9.2 shall be part
of the Obligations of Borrowers and Guarantors, shall be payable on demand, and
shall accrue interest after demand for payment thereof at the highest rate of
interest then payable hereunder. Lender is hereby irrevocably authorized to
charge any amounts payable hereunder directly to any of the account(s)
maintained by Lender with respect to Borrowers and/or any Guarantors.
9.3 Survival of Agreement
All agreements, representations and warranties contained herein or made
in writing by the parties hereto in connection with the transactions
contemplated hereby shall survive the execution and delivery of this Agreement,
the other Financing Agreements and the consummation of the transactions
contemplated herein or therein regardless of any investigation made by or on
behalf of Lender.
9.4 No Waiver; Remedies Cumulative
No failure to exercise, and no delay in exercising on the part of
Lender of, any right, power or privilege under this Agreement or under any of
the other Financing Agreements or other documents referred to herein or therein
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power and
privilege. No notice to or demand on Borrowers or any Guarantor not required
hereunder or any of the other Financing Agreements shall entitle Borrowers or
Guarantors to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of Lender to any other or
further action in any circumstances without notice or demand. The rights and
remedies of Lender under this Agreement, the other Financing Agreements and any
other present and future agreements between or among Lender, Borrowers and
Guarantors, as the case
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may be, are cumulative and not exclusive of any rights or remedies provided by
law or under any of the Financing Agreements or such other agreements and all
such rights and remedies may be exercised successively or concurrently in
whatever order and manner Lender shall elect.
9.5 Notices
All notices, requests and demands to or upon the respective parties
hereto shall be in writing and shall be deemed to have been duly given or made:
if by hand, immediately upon delivery; if by telex, telecopier or telegram,
immediately upon sending; if by express mail or any other overnight delivery
service, one (1) day after dispatch; and if by registered or certified mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following addresses and
telecopier numbers (or to such other address or telecopier number as any party
may designate by notice in accordance with this Section):
If to HDPI: Hanover Direct Pennsylvania, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to any other
Borrower: c/o Hanover Direct Pennsylvania, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to any Guarantor: c/o Hanover Direct, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
If to Lender: Congress Financial Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: ▇▇▇-▇▇▇-▇▇▇▇
9.6 Entire Agreement
This Agreement, the other Financing Agreements, any supplements and any
other instruments or documents delivered or to be delivered in connection
herewith or therewith represent the entire agreement and understanding
concerning the subject matter
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hereof among the parties hereto, and supersede all prior proposals, agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, offers and contracts concerning the subject matter hereof, whether
oral or written.
9.7 Amendments and Waivers
Neither this Agreement, nor any of the other Financing Agreements or
any other instrument or document referred to herein or therein may be changed,
waived, discharged or terminated orally, except by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought.
9.8 Applicable Law
This Agreement and the other Financing Agreements and all other
documents referred to herein or therein are being executed and delivered in New
York, New York and together with all transactions and the obligations and rights
thereunder, shall be governed by, construed and interpreted in accordance with
the laws of the State of New York.
9.9 Successors and Assigns
This Agreement, the other Financing Agreements and any other document
referred to herein or therein shall be binding upon Borrowers and Guarantors and
their respective successors or assigns and inure to the benefit of and be
enforceable by Lender and its successors and assigns. None of the Borrowers or
any Guarantor may assign its respective rights under this Agreement, the other
Financing Agreements and any other document referred to herein or therein
without the prior written consent of Lender. Lender may assign its rights and
delegate its obligations under this Agreement and the other Financing Agreements
and further may assign, or sell participations in, all or any part of the
Revolving Loans, Term Loans and Letter of Credit Accommodations or any other
interest herein, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation. Lender may furnish any information
concerning Borrowers or Guarantors in the possession of Lender from time to time
to assignees and Participants (including prospective assignees and
Participants).
9.10 Severability
If any provision of this Agreement or the other Financing Agreements is
held to be invalid or unenforceable, such invalidity or unenforceability shall
not invalidate this
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Agreement or the other Financing Agreements as a whole but this Agreement or the
particular Financing Agreement, as the case may be, shall be construed as though
it did not contain the particular provision or provisions held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by law.
9.11 Headings
The headings used herein are for convenience only and do not constitute
matters to be considered in interpreting this Agreement.
9.12 Security Interests of Participants
If a Participant shall at any time participate with Lender in the
Credit Facility or any portion thereof, Borrowers and Guarantors hereby grant to
such Participant and Lender and such Participant shall have and is hereby given,
a continuing lien on and security interest in any money, securities and other
property of Borrowers and Guarantors in the custody or possession of the
Participant, including the right of setoff, to the extent of the Participant's
participation in the Obligations of Borrowers and Guarantors and such
Participant shall be deemed to have the same right of setoff to the extent of
its participation in the Obligations, as it would have if it were a direct
lender.
9.13 WAIVER OF JURY TRIAL
THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR
PROCEEDING OF ANY KIND WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF
THIS AGREEMENT, THE OTHER FINANCING AGREEMENTS, THE OBLIGATIONS OF BORROWERS AND
GUARANTORS, THE COLLATERAL, THE GUARANTOR COLLATERAL, OR ANY INSTRUMENT,
DOCUMENT OR GUARANTY DELIVERED PURSUANT HERETO OR TO ANY OF THE FOREGOING, OR
THE VALIDITY, PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR
ENFORCEMENT HEREOF OR THEREOF, OR ANY OTHER CLAIM OR DISPUTE HEREUNDER OR
THEREUNDER.
9.14 Waiver of Counterclaims;
Jurisdiction; Service of Process
Each Borrower and Guarantor hereby waives all rights of setoff and
rights to impose counterclaims (other than compulsory counterclaims) in the
event of any litigation with respect to any matter connected with this
Agreement, the other Financing Agreements, the Obligations of Borrowers and
Guarantors, the Collateral, the Guarantor Collateral or any transaction between
the parties hereto, and irrevocably consents and submits to the non-exclusive
jurisdiction of the Supreme Court of the State of New York in New York County,
and of the United States District
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Court for the Southern District of New York and the courts of any State in which
any of the Collateral and/or Guarantor Collateral is located and of any Federal
Court located in such States in connection with any action, proceeding or claim
arising out of or relating to this Agreement, the other Financing Agreements,
the Obligations of Borrowers and Guarantors, the Collateral, the Guarantor
Collateral or any document, instrument or guaranty delivered pursuant hereto or
to any of the foregoing. In any such litigation, each Borrower and Guarantor
waives personal service of any summons, complaint or other process and agrees
that the service thereof may be made by certified or registered mail, return
receipt requested, directed to it at its chief executive office set forth
herein, or designated in writing pursuant to this Agreement, or in any other
manner permitted by the rules of said Courts. Within thirty (30) days after such
mailing, Borrowers and any Guarantor named in any such summons, complaint or
other process shall appear to answer such summons, complaint or other process,
failing which Borrowers and such Guarantors shall be deemed in default and
judgment may be entered by Lender against Borrowers and/or such Guarantors for
the amount of the claim and other relief requested therein.
9.15 Counterparts
This Agreement may be executed in any number of counterparts, and by
Lender and Borrowers and any of the Guarantors in separate counterparts, each of
which shall be an original, but all of which shall together constitute one and
the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their duly authorized officers as of the day and year
first above written.
CONGRESS FINANCIAL CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
Title: Senior Vice President
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title: Executive VP
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BRAWN OF CALIFORNIA, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Title: Vice President
GUMP'S BY MAIL, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title: Executive ▇▇
▇▇▇▇'▇ CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title: President
THE COMPANY STORE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Title: Vice President
TWEEDS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title: Vice President
LWI HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Title: President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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124
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AEGIS CATALOG CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Title: President
HANOVER DIRECT VIRGINIA INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Title: President
HANOVER REALTY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Title: President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
By their signatures below, the
undersigned Guarantors acknowledge
and agree to be bound by the
applicable provisions of this
Agreement:
HANOVER DIRECT, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Executive VP
AEGIS RETAIL CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
AEGIS SAFETY HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
AEGIS VENTURES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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126
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BRAWN WHOLESALE CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Vice President
THE COMPANY FACTORY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Vice President
THE COMPANY OFFICE, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Vice President
COMPANY STORE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Vice President
▇.▇. ADVERTISING, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Vice President
GUMP'S CATALOG, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Executive Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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127
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: Vice President
HANOVER CASUALS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
HANOVER CATALOG HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
HANOVER DIRECT NEW JERSEY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
HANOVER FINANCE CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
HANOVER HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------
Title: President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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128
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER LIST MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: Vice President
HANOVER VENTURES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: President
LEICHTUNG OF MICHIGAN, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: President
LWI RETAIL, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: President
SCANDIA DOWN CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: Vice President
SKANDIA DOWN SALES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: Vice President
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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129
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
TW ACQUISITIONS, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: President
TWEEDS OF VERMONT, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: President
YORK FULFILLMENT COMPANY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------
Title: President
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130
EXHIBIT A
JURISDICTIONS OF QUALIFICATION
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131
EXHIBIT B-1
EXISTING SUBSIDIARIES
- 126 -
132
EXHIBIT B-2
EXISTING MAIL ORDER JOINT VENTURES
- 127 -
133
EXHIBIT B-3
EXISTING RESTAURANT BUSINESS SUBSIDIARIES
- 128 -
134
EXHIBIT B-4
ADDITIONAL NON-GUARANTOR SUBSIDIARIES
- 129 -
135
EXHIBIT C
PRINCIPAL PLACES OF BUSINESS, CHIEF
EXECUTIVE OFFICES AND LOCATIONS
OF COLLATERAL
- 130 -
136
EXHIBIT D
EXISTING LIENS
- 131 -
137
EXHIBIT E
LIST OF HANOVER DEBT INSTRUMENTS
- 132 -
138
EXHIBIT F
PENDING LITIGATION
- 133 -
139
EXHIBIT G
TRADENAMES
- 134 -
140
EXHIBIT H-1
EXISTING INDEBTEDNESS OTHER THAN LETTERS OF CREDIT
- 135 -
141
EXHIBIT H-2
EXISTING LETTERS OF CREDIT
UNDER NATIONSBANK CREDIT AGREEMENT
- 136 -
142
EXHIBIT H-3
EXISTING INTERCOMPANY INDEBTEDNESS
- 137 -
143
EXHIBIT I
FORM OF MORTGAGEE/LANDLORD
WAIVER, ACCESS AND USE AGREEMENT
- 138 -
144
EXHIBIT J
LIST OF LABOR DISPUTES
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145
EXHIBIT K
ENVIRONMENTAL DISCLOSURE
- 140 -