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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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FLEET RETAIL FINANCE INC.
Agent for
The Lenders Referenced Herein
DESIGNS, INC.
The Borrower
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December 7, 2000
TABLE OF CONTENTS
ARTICLE 1-DEFINITIONS.........................................................1
ARTICLE 2-THE REVOLVING CREDIT...............................................19
2-1. -Establishment of Revolving Credit........................19
2-2. -Advances in Excess of Borrowing Base.....................20
2-3. -Risks of Value of Collateral.............................20
2-4. -Loan Requests............................................21
2-5. -Making of Loans Under Revolving Credit...................22
2-6. -The Loan Account.........................................22
2-7. -The Revolving Credit Notes...............................23
2-8. -Payment of The Loan Account..............................23
2-9. -Interest.................................................23
2-10. -Commitment Fee; Agent's Fee..............................24
2-11. -Line Fee.................................................24
2-12. -Early Termination Fee....................................25
2-13. -Regarding Fees...........................................25
2-14. -Agent's and Lenders' Discretion..........................25
2-15. -Procedures For Issuance of L/C's.........................26
2-16. -Fees For L/C's...........................................26
2-17. -Concerning L/C's.........................................27
2-18. -Changed Circumstances....................................28
2-19. -Increased Costs..........................................29
2-20. -Lenders' Commitments.....................................30
ARTICLE 3-CONDITIONS PRECEDENT...............................................31
3-1. -Corporate Due Diligence..................................31
3-2. -Opinion..................................................31
3-3. -[Intentionally Omitted]..................................31
3-4. -Guarantors...............................................31
3-5. -Additional Documents.....................................31
3-6. -Officers' Certificates...................................31
3-7. -Representations and Warranties...........................32
3-8. -Intentionally Omitted....................................32
3-9. -All Fees and Expenses Paid...............................32
3-10. -No Suspension Event......................................32
3-11. -No Adverse Change........................................32
ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS................32
4-1. -Payment and Performance of Liabilities...................32
4-2. -Due Organization -Corporate Authorization -No Conflicts..32
4-3. -Trade Names..............................................34
4-4. -Infrastructure...........................................34
4-5. -Locations................................................34
4-6. -Title to Assets..........................................35
4-7. -Indebtedness.............................................36
4-8. -Insurance Policies.......................................36
4-9. -Licenses.................................................37
4-10. -Leases...................................................37
4-11. -Requirements of Law......................................37
4-12. -Maintain Properties......................................37
4-13. -Pay Taxes................................................38
4-14. -No Margin Stock..........................................39
4-15. -ERISA....................................................39
4-16. -Hazardous Materials......................................39
4-17. -Litigation...............................................40
4-18. -Dividends or Investments.................................40
4-19. -Permitted Acquisitions...................................41
4-20. -Loans....................................................41
4-21. -Intentionally Omitted....................................42
4-22. -Restrictions on Sale of Collateral; License Agreements...42
4-23. -Protection of Assets.....................................42
4-24. -Line of Business.........................................42
4-25. -Affiliate Transactions...................................42
4-26. -Additional Assurances....................................43
4-27. -Adequacy of Disclosure...................................43
4-28. -Other Covenants..........................................43
ARTICLE 5-REPORTING REQUIREMENTS / FINANCIAL COVENANTS.......................43
5-1. -Maintain Records.........................................43
5-2. -Access to Records........................................44
5-3. -Notice to Agent..........................................44
5-4. -Borrowing Base Certificate...............................45
5-5. -Weekly Reports...........................................46
5-6. -Monthly Reports..........................................46
5-7. -Quarterly Reports........................................47
5-8. -Annual Reports...........................................47
5-9. -Applicable to Monthly, Quarterly and Annual Reports......48
5-10. -Officers' Certificates...................................48
5-11. - Inventories, Appraisals, and Audits....................48
5-12. -Additional Financial Information.........................49
5-13. -Financial Performance Covenants..........................50
ARTICLE 6-USE AND COLLECTION OF COLLATERAL...................................50
6-1. -Use of Inventory Collateral..............................50
6-2. -Inventory Quality........................................50
6-3. -Adjustments and Allowances...............................50
6-4. -Validity of Accounts.....................................50
6-5. -Notification to Account Debtors..........................51
ARTICLE 7-CASH MANAGEMENT. PAYMENT OF LIABILITIES............................51
7-1. -Depository Accounts......................................51
7-2. -Credit Card Receipts.....................................51
7-3. -The Concentration and the Funding Accounts...............51
7-4. -Proceeds and Collection of Accounts......................52
7-5. -Payment of Liabilities...................................52
7-6. -The Funding Account......................................53
ARTICLE 8 - GRANT OF SECURITY INTEREST.......................................53
8-1. - Grant of Security Interest.............................53
8-2. - Extent and Duration of Security Interest...............54
ARTICLE 9-AGENT AS BORROWER'S ATTORNEY-IN-FACT...............................54
9-1. -Appointment as Attorney-In-Fact..........................54
9-2. -No Obligation to Act.....................................55
ARTICLE 10-EVENTS OF DEFAULT.................................................55
10-1. -Failure to Pay Revolving Credit..........................55
10-2. -Failure To Make Other Payments...........................56
10-3. -Failure to Perform Covenant or Liability(No Grace Period)56
10-4. -Financial Reporting Requirements.........................56
10-5. -Failure to Perform Covenant or Liability (Grace Period)..56
10-6. -Misrepresentation........................................56
10-7. -Acceleration of Other Debt. Breach of Lease..............56
10-8. -Default Under Other Agreements...........................57
10-9. -Uninsured Casualty Loss..................................57
10-10. -Judgment. Restraint of Business.........................57
10-11. -Business Failure.........................................57
10-12. -Bankruptcy...............................................57
10-13. -Indictment -Forfeiture...................................58
10-14. -Default by Guarantor or Related Entity...................58
10-15. -Termination of Guaranty..................................58
10-16. -Challenge to Loan Documents..............................58
10-17. -Lease Default............................................58
10-18. .-Change in Control.......................................58
ARTICLE 11-RIGHTS AND REMEDIES UPON DEFAULT..................................59
11-1. -Rights of Enforcement...................................59
11-2. -Sale of Collateral......................................59
11-3. -Occupation of Business Location.........................60
11-4. -Grant of Nonexclusive License...........................60
11-5. -Assembly of Collateral..................................60
11-6. -Rights and Remedies.....................................60
ARTICLE 12-NOTICES...........................................................61
12-1. -Notice Addresses........................................61
12-2. -Notice Given............................................62
ARTICLE 13-TERM..............................................................62
13-1. -Termination of Revolving Credit.........................62
13-2. -Effect of Termination...................................62
ARTICLE 14-GENERAL...........................................................63
14-1. -Protection of Collateral................................63
14-2. -Successors and Assigns..................................63
14-3. -Severability............................................63
14-4. -Amendments. Course of Dealing..........................63
14-5. -Power of Attorney.......................................64
14-6. -Application of Proceeds.................................64
14-7. -Costs and Expenses of Agent and Of Lenders..............64
14-8. -Copies and Facsimiles...................................64
14-9. -Massachusetts Law.......................................65
14-10. - Consent to Jurisdiction................................65
14-11. -Indemnification.........................................65
14-12. -Rules of Construction...................................66
14-13. -Intent..................................................67
14-14. -Right of Set-Off........................................67
14-15. -Maximum Interest Rate...................................67
14-16. -Waivers.................................................67
14-17. -Confidentiality.........................................68
14-18. -Amendment and Restatement...............................69
EXHIBITS
2-4 : Loan Request
2-7 : Revolving Credit Note
2-20 : Voting Rights
4-2 : Related Entities
4-3 : Trade Names
4-4(b) : Exceptions to Property Rights
4-5 : Locations, Leases, and Landlords
4-5(c) : Form of Landlord's Waiver
4-6 : Encumbrances
4-7 : Indebtedness
4-8 : Insurance Policies
4-10 : Capital Leases
4-13 : Taxes
4-17 : Litigation
5-4 : Borrowing Base Certificate
5-13(a) : Financial Performance Covenants
7-1 : DDA's.
7-2 : Credit Card Arrangements
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT Fleet Retail Finance Inc.
Agent
December 7, 2000
THIS AGREEMENT is made between
Fleet Retail Finance Inc (f/k/a BankBoston Retail Finance Inc.) (in
such capacity, herein the "Agent"), a Delaware corporation with offices at
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, as agent for the ratable
benefit of the "Lenders", who are, at present, those financial institutions
identified on the signature pages of this Agreement and who in the future
are those Persons (if any) who become "Lenders" in accordance with the
provisions of Section 2-20, below,
and
Designs, Inc. (hereinafter, the "Borrower"), a Delaware corporation
with its principal executive offices at ▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
ARTICLE 1 - DEFINITIONS.
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"Acceptable Inventory": Eligible L/C Inventory and all other Inventory
of the Borrower (excluding any supplies, goods returned or
rejected by customers, goods to be returned to suppliers, and
goods in transit to third persons (other than the Borrower's
agents or warehouses)), consisting of casual apparel,
footwear, and related accessories, less any Reserves, as to
which inventory the Lender has a perfected security interest
which is prior and superior to all security interests, claims,
and encumbrances other than Permitted Encumbrances.
"Accounts" and "Accounts Receivable" "Accounts" as defined in the UCC,
and also all: accounts, accounts receivable, credit card
receivables, notes, drafts, acceptances, and other forms of
obligations and receivables and rights to payment for credit
extended and for goods sold or leased, or services rendered,
whether or not yet earned by performance; all "contract
rights" as formerly defined in the UCC; all Inventory which
gave rise thereto, and all rights associated with such
Inventory, including the right of stoppage in transit; all
reclaimed, returned, rejected or repossessed Inventory (if
any) the sale of which gave rise to any Account.
"Account Debtor": Has the meaning given that term in the UCC.
"ACH": Automated clearing house.
"Acquisition": The purchase or other acquisition, by the Borrower or by
any Subsidiary (no matter how structured in one transaction or
in a series of transactions) , of: (a) equity interests in any
other Person which would constitute or which results in a
Change in Control of such other Person, or (b) such of the
assets of any Person as would permit the Borrower or such
Subsidiary to operate one or more retail locations of such
Person or to conduct other business operations with such
assets (provided, however, none of the following shall
constitute an "Acquisition": purchases of inventory in the
ordinary course of the Borrower's business; purchases, leases
or other acquisitions of Equipment in the ordinary course of
the Borrower's business; and capital expenditures permitted
hereunder).
"Administrative Costs": All attorneys' reasonable fees and reasonable
out-of-pocket expenses incurred by the Agent's and any
Lender's attorneys, and all reasonable costs incurred by the
Agent or any Lender (but excluding the Agent's or any Lender's
overhead expense), in the administration of the Liabilities
and/or the Loan Documents, including, without limitation,
reasonable costs and expenses associated with travel on behalf
of the Agent or any Lender, which costs and expenses are
directly or indirectly related to or in respect of the Agent's
and any Lender's: administration and management of the
Liabilities; negotiation, documentation, and amendment of any
Loan Document; or efforts to preserve, protect, collect, or
enforce the Collateral, the Liabilities, and/or the Agent's
Rights and Remedies and/or any of the Agent's rights and
remedies against or in respect of any guarantor or other
person liable in respect of the Liabilities (whether or not
suit is instituted in connection with such efforts). The
Administrative Costs are Liabilities, and at the Agent's
option may bear interest at the rate which the Agent may then
charge the Borrower hereunder as if such had been lent,
advanced, and credited by the Agent to, or for the benefit of,
the Borrower.
"Affiliate": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than Fifty-One
Percent (51%) of the capital stock, beneficial interests,
partnership interests, or other equity interests of the other;
or (b) one has, directly or indirectly, the right, under
ordinary circumstances, to vote for the election of a majority
of the directors (or other body or Person who has those powers
customarily vested in a board of directors of a corporation);
or (c) not less than Fifty-One Percent (51%) of their
respective ownership is directly or indirectly held by the
same third Person.
"Agent": Is defined in the Preamble.
"Agent's Fee": Is defined in Section 2-10.
"Agent's Rights and Remedies": Is defined in Section 11-6.
"Amendment Fee": Is defined in Section 2-10(a).
"Amendment Fee Letter": That letter, styled the "Amendment Fee Letter"
between the Borrower and the Agent dated December 7, 2000, as
such letter may from time to time be amended.
"Applicable Margin": The rates for Base Margin Loans and LIBOR Loans
determined as of the date of this Agreement based upon the
following criteria:
------------ ---------------------------- ---------------- ----------------
Level Availability Base Margin LIBOR
Applicable Applicable
Margin Margin
------------ ---------------------------- ---------------- ----------------
1 Less than 15% of the 0% 2.50%
Borrowing Base
------------ ---------------------------- ---------------- ----------------
2 Greater than or equal 15% 0% 2.25%
of the Borrowing Base but
less than or equal to 30%
of the Borrowing Base
------------ ---------------------------- ---------------- ----------------
3 Greater than 30% of the 0% 2.00%
Borrowing Base but less
than or equal to 70% of
the Borrowing Base
------------ ---------------------------- ---------------- ----------------
4 Greater than 70% of the 0% 1.75%
Borrowing Base
------------ ---------------------------- ---------------- ----------------
The Applicable Margin shall be adjusted monthly as of the first
day of each calendar month based upon the average Availability
for the immediately preceding calendar month. Upon the
occurrence of an Event of Default, interest shall accrue at
the rate set forth in Section 2-9(f).
"Appraised Inventory Liquidation Value": The product of (a) the Cost of
Eligible Inventory (net of Inventory Reserves) multiplied by
(b) that percentage, determined from the then most recent
appraisal of the Borrowers' Inventory undertaken at the
request of the Agent, to reflect the appraiser's estimate of
the net recovery on the Borrowers' Inventory in the event of
an in-store liquidation of that Inventory.
"Appraised Inventory Percentage": 90%.
"Availability": Is defined in Section 2-1(b).
"Availability Reserves": Such reserves as the Agent from time to time
reasonably determines in the Agent's discretion as being
appropriate to reflect the impediments to the Agent's ability
to realize upon the Collateral. Without limiting the
generality of the foregoing, Availability Reserves may include
(but are not limited to) reserves based on the following
(notwithstanding that certain of the following may constitute
Permitted Encumbrances):
(i) Rent (based upon past due rent
and/or whether or not Landlord's
Waiver, acceptable to the Agent ,
has been received by the Agent for
those states in which the Agent
reasonably believes the landlord(s)
may have a statutory lien). Without
limiting the Agent's rights, at the
execution of this Agreement, the
Availability Reserve for rent shall
be in the sum of $400,000.00.
(ii) In store customer credits and Gift
Certificates: Without limiting the
Agent's rights, at the execution of
this Agreement, the Availability
Reserve for such items shall be in
the sum of $250,000.00.
(iii) Frequent Shopper Programs.
(iv) Layaways and Customer Deposits
(v) Taxes and other governmental
charges, including, ad valorem,
personal property, and other taxes
which might have priority over the
security interests of the Agent in
the Collateral.
"Bankruptcy Code": Title 11, U.S.C., as amended from time to time.
"Base": The Base Rate announced from time to time by Fleet National
Bank (or any successor in interest to Fleet National Bank). In
the event that said bank (or any such successor) ceases to
announce such a rate, "Base" shall refer to that rate or index
announced or published from time to time as the Agent, in good
faith, designates as the functional equivalent to said Base Rate.
Any change in "Base" shall be effective, for purposes of the
calculation of interest due hereunder, when such change is made
effective generally by the bank on whose rate or index "Base" is
being set. In all events, interest which is determined by
reference to Base (or any successor to Base) shall be calculated
on a 360 day year and actual days elapsed.
"Base Margin Loan": Each Revolving Credit Loan while bearing interest
at the Base Margin Rate.
"Base Margin Rate": Base plus the Applicable Margin for Base Margin
Loans.
"Borrower": Is defined in the Preamble.
"Borrowing Base": The lesser, on any day, of
(a) the amount determined in accordance with
Section 2-1(b)(i); or
(b) the amount determined in accordance with
Section 2-1(b)(ii) hereof,
in each instance ((a) or (b)) determined without deduction
from said amount of the unpaid principal balance of the Loan
Account on that day.
"BusinessDay": Any day other than (a) a Saturday or Sunday; (b) any
day on which banks in Boston, Massachusetts or Needham,
Massachusetts, generally are not open to the general public
for the purpose of conducting commercial banking business; or
(c) a day on which the Agent is not open to the general public
to conduct business.
"BusinessPlan": The Borrower's annual business plan dated
November 2, 2000, which has been furnished to the Agent, and
any annual business plan hereafter furnished the Agent in
accordance with the provisions of Section 5-12(c) hereof.
"Capital Expenditures": The expenditure of funds or the incurrence
of liabilities which are capitalized in accordance with GAAP,
consistent with the Borrower's prior practices.
"Capital Lease": Any lease which is capitalized in accordance with
GAAP, consistent with the Borrower's prior practices.
"Change in Control": The occurrence of any of the following:
(a) The acquisition, by any group of persons (within
the meaning of the Securities Exchange Act of 1934, as
amended) or by any Person, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission) of 50% or more of the issued and outstanding
capital stock of the Borrower having the right, under ordinary
circumstances, to vote for the election of directors of the
Borrower.
(b) More than one-third of the persons who were
directors of the Borrower on the first day of any period
consisting of Twelve (12) consecutive calendar months (the
first of which Twelve (12) month periods commences on the
first day of November, 1999), cease, for any reason other than
death or disability, to be directors of the Borrower.
(c) The persons who are directors of the Borrower as
of October 28, 1999 cease, for any reason, to constitute a
majority of the board of directors of the Borrower.
"Chattel Paper": Has the meaning given that term in the UCC.
"Collateral": Is defined in Section 8-1.
"Commitment Fee": Is defined in Section 2-10.
"Commitment": Subject to Section 2-20, as follows:
------------------------ ----------------------------- -------------------------
Lender Dollar Commitment Commitment Percentage
------------------------ ----------------------------- -------------------------
Fleet Retail Finance Inc. $31,500,000.00 70%
------------------------ ----------------------------- -------------------------
▇▇▇▇▇ Fargo Business $13,500,000.00 30%
Credit, Inc.
------------------------ ----------------------------- -------------------------
"Commitment Percentage": Subject to Section 2-20, as set forth in the
definition of "Commitment".
"Concentration Account": Is defined in Section 7-3.
"Cost": The lower of
(a) the calculated cost of purchases, as
determined from invoices received by the Borrower,
the Borrower's purchase journal or stock ledger,
based upon the Borrower's accounting practices, known
to the Lender, which practices are in effect on the
date on which this Agreement was executed; or
(b) the lowest ticketed or promoted price at
which the subject inventory is offered to the public,
after all ▇▇▇▇-▇▇▇▇▇ (whether or not such price is
then reflected on the Borrower's accounting system).
"Cost" does not include inventory capitalization
costs or other non-purchase price charges used in the
Borrower's calculation of cost of goods sold (other
than freight, which may be capitalized consistent
with GAAP and the Borrower's prior practices).
"DDA": Any checking or other demand daily depository account
maintained by any Obligor.
"Deposit Account": Has the meaning given that term in the UCC.
"Documents": Has the meaning given that term in the UCC.
"Documents of Title": Has the meaning given that term in the UCC.
"Dollar Commitment": As provided in the Definition of
"Commitment", above.
"Early Termination Fee": Is defined in Section 2-12.
"Eligible Investments": Any or all of the following:
(a) marketable direct full faith and credit obligations of, or
marketable obligations guaranteed by, the United States of America;
provided that such securities, as a group, may not, on the date of
determination, have a remaining weighted average maturity of more than
five years;
(b) marketable direct full faith and credit obligations of
States of the United States or of political subdivisions or agencies;
provided that such securities, as a group, may not, on the date of
determination, have a remaining weighted average maturity of more than
five years; and provided, further, that such obligations carry a rating
of "A" or better by a Rating Service;
(c) publicly issued bonds or debentures which have a remaining
maturity at the time of purchase of no more than five years issued by a
corporation (other than the Company or an Affiliate thereof), organized
under the laws of a State of the United States or the District of
Columbia; provided, that such obligations carry a rating of "A" or
better by a Rating Service;
(d) open market commercial paper of any corporation (other
than the Company or an Affiliate thereof) incorporated under the laws
of the United States of America or any State thereof or the District of
Columbia rated not less than "P-2" or "A-2" or its equivalent by a
Rating Service and maturing within 270 days after the date on which
such commercial paper is purchased;
(e) certificates of deposit and bankers acceptances maturing
within one year after the acquisition thereof issued by (i) Fleet
National Bank, or (ii) any commercial bank organized under the laws of
the United States of America or of any political subdivision thereof
the long term obligations of which are rated "A" or better by a Rating
Service;
(f) Eurodollar certificates of deposit maturing within one
year after the acquisition thereof issued by any commercial bank having
combined capital, surplus and undivided profits of at least $1 billion;
(g) repurchase agreements, having terms of less than one year,
for government obligations of the type described in (a) or (b) above,
with a commercial bank or trust company meeting the requirements of
clause (e) above;
(h) publicly issued collateralized mortgage obligations which
have a remaining maturity at the time of purchase of no more than five
years; provided, that such obligations carry a rating of "A" or better
by a Rating Service;
(i) tax-exempt bonds or notes which have a remaining maturity
at the time of purchase of no more than five years issued by any State
of the United States or the District of Columbia, or any political
subdivision thereof; provided, that such obligations carry a rating of
"A" or better by a Rating Service;
(j) publicly issued shares of common or preferred stock issued
by a corporation (other than the Borrower or an Affiliate thereof,
unless otherwise permitted pursuant to Section 4-18 hereof), organized
under the laws of any State of the United States or the District of
Columbia, and bonds or debentures convertible into shares of such
common or preferred stock, so long as (A) such securities have been
registered under the Securities Exchange Act of 1934, as amended, and
are traded on the New York Stock Exchange, the American Stock Exchange
or NASDAQ, and (B) the senior debt securities of the issuer thereof (if
any) are rated "A" or better by a Rating Service; provided, however,
that the securities under this clause (j) may not at any time comprise
more than 10% of the total assets of the Borrower; and
(k) interests in any fund or other pooled "open-end"
investment vehicle which (i) is a registered investment company under
the Investment Company Act of 1940, as amended and (ii) invests
principally in obligations of any of the types described in clauses (a)
through (j) above.
"Eligible L/C Inventory": Inventory, the purchase of which is
supported by a documentary L/C then having an initial expiry
of forty-five or less days, provided that
(a) Such Inventory is of such types,
character, qualities and quantities (net of Inventory
Reserves) as the Agent in its reasonable discretion
from time to time reasonably determines to be
eligible for borrowing; and
(b) The documentary L/C supporting such
purchase names the Agent or any Issuer as consignee
of the subject Inventory and the Agent has control
over the documents which evidence ownership of the
subject Inventory (such as by the providing to the
Agent of a customs brokers agreement in form
reasonably satisfactory to the Agent).
"Employee Benefit Plan": As defined in ERISA.
"Encumbrance": Each of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale
or other title retention agreement; sale of accounts
receivable or chattel paper; or other arrangement pursuant to
which any Person is entitled to any preference or priority
with respect to the property or assets of another Person or
the income or profits of such other Person or which
constitutes an interest in property to secure an obligation;
each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) The filing of any financing statement under
the UCC or comparable law of any jurisdiction.
"End Date": The date upon which both (a) all Liabilities have been
paid in full and (b) all obligations of any Lender to make
loans and advances and to provide other financial
accommodations to the Borrower hereunder shall have been
irrevocably terminated.
"Environmental Laws": All of the following:
(a) Any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements which regulate or
relate to, or impose any standard of conduct or liability on
account of or in respect to environmental protection matters,
including, without limitation, Hazardous Materials, as are now
or hereafter in effect.
(b) The common law relating to damage to Persons
or property from Hazardous Materials.
"Equipment": Means "equipment" as defined in the UCC, and also all
motor vehicles, rolling stock, machinery, office equipment,
plant equipment, tools, dies, molds, store fixtures,
furniture, and other goods, property, and assets which are
used and/or were purchased for use in the operation or
furtherance of the Borrower's business, and any and all
accessions or additions thereto, and substitutions therefor.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate": Any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is
part of a group which includes the Borrower and which would be
treated as a single employer under Section 414 of the Internal
Revenue Code of 1986, as amended.
"Events of Default": Is defined in Article 10.
"Fee Letter": That letter, styled the "Fee Letter" between the
Borrower and the Agent dated June 4, 1998, as such letter may
from time to time be amended.
"Fixtures": Has the meaning given that term in the UCC.
"Funding Account": Is defined in Section 7-3.
"GAAP": Principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and
its predecessors (or successors) in effect and applicable
to that accounting period in respect of which reference to
GAAP is being made, provided, however, in the event of a
Material Accounting Change, then unless otherwise
specifically agreed to by the Agent, (a) the Borrower's
compliance with the financial performance covenants
imposed pursuant to Section 5-13 shall be determined as if
such Material Accounting Change had not taken place (except
for changes resulting from the conversion from the LIFO
method of accounting to a method in which assets are
reported at the lower of cost or market value), and (b)
the Borrower shall include, with its monthly, quarterly, and
annual financial statements a schedule, certified by the
Borrower's chief financial officer, on which the effect of
such Material Accounting Change to the statement with which
provided shall be described.
"General Intangibles": Means "general intangibles" as defined in the
UCC; and also all: rights to payment for credit extended;
deposits; amounts due to the Borrower; credit memoranda in
favor of the Borrower; warranty claims; tax refunds and
abatements; insurance refunds and premium rebates; all means
and vehicles of investment or hedging, including, without
limitation, options, warrants, and futures contracts; records;
customer lists; telephone numbers; goodwill; causes of action;
judgments; payments under any settlement or other agreement;
literary rights; rights to performance; royalties; license
and/or franchise fees; rights of admission; licenses;
franchises; license agreements, including all rights of the
Borrower to enforce same; permits, certificates of convenience
and necessity, and similar rights granted by any governmental
authority; patents, patent applications, patents pending, and
other intellectual property; internet addresses and domain
names; developmental ideas and concepts; proprietary
processes; blueprints, drawings, designs, diagrams, plans,
reports, and charts; catalogs; manuals; technical data;
computer software programs (including the source and object
codes therefor), computer records, computer software, rights
of access to computer record service bureaus, service bureau
computer contracts, and computer data; tapes, disks,
semi-conductors chips and printouts; trade secrets rights,
copyrights, mask work rights and interests, and derivative
works and interests; user, technical reference, and other
manuals and materials; trade names, trademarks, service marks,
and all goodwill relating thereto; applications for
registration of the foregoing; and all other general
intangible property of the Borrower in the nature of
intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts
or ideas, and any matter related to, or connected with, the
design, development, manufacture, sale, marketing, leasing, or
use of any or all property produced, sold, or leased, by the
Borrower or credit extended or services performed, by the
Borrower, whether intended for an individual customer or the
general business of the Borrower, or used or useful in
connection with research by the Borrower.
"Goods": Has the meaning given that term in the UCC.
"Guarantors": All Subsidiaries of the Borrower, which now or
hereafter own any assets, rights and interests in property,
whether tangible or intangible.
"Hazardous Materials": Any (a) hazardous materials, hazardous
waste, hazardous or toxic substances, petroleum products,
which (as to any of the foregoing) are defined or regulated as
a hazardous material in or under any Environmental Law and (b)
oil in any physical state.
"Indebtedness": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) In respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
(b) In connection with any letter of credit or
acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued
for the account of such Person or reimbursement on account of
which such Person would be obligated).
(c) In connection with the sale or discount of
accounts receivable or chattel paper of such Person.
(d) On account of deposits or advances.
(e) As lessee under Capital Leases.
(f) Indebtedness of others secured by an Encumbrance
on any asset of such Person, whether or not such Indebtedness
is assumed by such Person.
(g) Any guaranty, endorsement, suretyship or other
undertaking pursuant to which that Person may be liable on
account of any obligation of any third party (other than (i)
contingent and unliquidated indemnities delivered in the
ordinary course of business and (ii) guarantees and
endorsements resulting from the endorsement of negotiable
instruments for collection in the ordinary course of
business).
(h) The Indebtedness of a partnership or joint
venture in which such Person is a general partner or joint
venturer.
"Indemnified Person": Is defined in Section 14-11.
"Instruments": Has the meaning given that term in the UCC.
"Interest Payment Date": With reference to:
(a) Each LIBOR Loan: (i) Having an Interest Period of
one, two or three months, the last day of the Interest Period
relating thereto; the Termination Date, and the End Date; (ii)
Having an Interest Period of six months, the last day of the
third month of such Interest Period, the last day of the
Interest Period, the Termination Date and the End Date.
(b) Each Base Margin Loan: the first day of each
month; the Termination Date; and the End Date.
"Interest Period": (a) With respect to each LIBOR Loan: Subject to
Subsection (c), below, the period commencing on the date of
the making or continuation of, or conversion to, such LIBOR
Loan and ending on (but excluding) the day which corresponds
numerically to such date, one, two, three or six months
thereafter, as the Borrower may elect by notice to the Agent.
(b) With respect to each Base Margin Loan:
Subject to Subsection (c), below, the period commencing on the
date of the making or continuation of or conversion to such
Base Margin Loan and ending on that date (i) as of which the
subject Base Margin Loan is converted to a LIBOR Loan, as the
Borrower may elect by notice to the Agent, or (ii) on which
the subject Base Margin Loan is paid by the Borrower.
(c) The setting of Interest Periods is in all
instances subject to the following:
(i) Any Interest Period for a Base
Margin Loan which would otherwise end on a day which
is not a Business Day shall be extended to the next
succeeding Business Day.
(ii) Any Interest Period for a LIBOR Loan
which would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is
in the next calendar month, in which event such
Interest Period shall end on the last Business Day of
the month during which the Interest Period ends.
(iii) Any Interest Period applicable to a
LIBOR Loan, which Interest Period begins on a day for
which there is no numerically corresponding day in
the calendar month during which such Interest Period
ends, shall end on the last Business Day of the month
during which that Interest Period ends.
(iv) Any Interest Period which would
otherwise end after the Termination Date shall end on
the Termination Date.
(v) Subject to Section (iii), above, no
Interest Period applicable to a LIBOR Loan may be
less than one (1) month.
(vi) The number of Interest Periods
applicable to LIBOR Loans in effect at any one time
is subject to Section 2-9 hereof.
"Investment Property": Has the meaning given that term in the UCC.
"Inventory": Means "inventory" as defined in the UCC and also all:
packaging and shipping materials related to any of the
foregoing; Goods held for sale or lease or furnished or to be
furnished under a contract or contracts of sale or service by
the Borrower, or used or consumed or to be used or consumed in
the Borrower's business; Goods of said description in transit:
returned, repossessed and rejected Goods of said description;
and all documents (whether or not negotiable) which represent
any of the foregoing.
"Inventory Advance Rate": Such percentage as the Agent in its
reasonable discretion may establish from time to time, but in
no event in excess of seventy percent(70%) or less than
sixty-eight percent (68%). The initial Inventory Advance Rate
shall be sixty-eight percent (68%).
"Inventory Reserves": Such Reserves as may be reasonably
established from time to time by the Agent in the Agent's
discretion with respect to the determination of the
saleability, at retail, of the Acceptable Inventory or which
reflect such other factors as affect the market value of the
Acceptable Inventory. Without limiting the generality of the
foregoing, Inventory Reserves may include (but are not limited
to) reserves based on the following:
(i) Seasonality.
(ii) Shrinkage.
(iii) Imbalance.
(iv) Change in Inventory character that
could have an adverse impact on the
appraised value of the Inventory as
determined by the Agent in its
reasonable discretion.
(v) Change in Inventory composition that
could have an adverse impact on the
appraised value of the Inventory as
determined by the Agent in its
reasonable discretion.
(vi) Change in Inventory mix that could
have an adverse impact on the
appraised value of the Inventory as
determined by the Agent in its
reasonable discretion.
(vii) Markdowns (both permanent and point
of sale) not in the ordinary course
of business and inconsistent with
the Borrower's prior practices.
(viii) Retail markons and markups
inconsistent with the Borrower's
prior practices.
"Issuer": The issuer of any L/C.
"June 2000 Resolution": Means the June 26, 2000 resolution of the
Board of Directors of the Borrower pursuant to which, among
other things, the Board of Directors authorized the Borrower
to pay an amount not to exceed $2,500,000.00 in the aggregate
to repurchase certain shares of the Borrower's capital stock.
"L/C": Any letter of credit, the issuance of which is procured by the
Agent for the account of the Borrower and any acceptance made
on account of such letter of credit.
"Lease": Any lease or other agreement, no matter how styled or
structured, pursuant to which the Borrower is entitled to the
use or occupancy of any space.
"Leasehold Interest": Any interest of the Borrower as lessee under
any Lease.
"Lenders": Defined in the Preamble to this Agreement.
"Letter-of-Credit Right": Has the meaning given that term in UCC 9'99
and also refers to any right to payment or performance under
an L/C, whether or not the beneficiary has demanded or is at
the time entitled to demand payment or performance.
"Liabilities" (in the singular, "Liability"): Means all and each of
the following, whether now existing or hereafter arising under
this Agreement or any other Loan Document:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrower to the Agent or any
Lender, each of every kind, nature, and description.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrower to the Agent or any Lender
(including all future advances whether or not made pursuant to
a commitment by the Agent or any Lender), whether or not any
of such are liquidated, unliquidated, primary, secondary,
secured, unsecured, direct, indirect, absolute, contingent, or
of any other type, nature, or description, or by reason of any
cause of action which the Agent or any Lender may hold against
the Borrower.
(c) All notes and other obligations of the Borrower
now or hereafter assigned to or held by the Agent or any
Lender, each of every kind, nature, and description.
(d) All interest, reasonable fees, and charges and
other amounts which may be charged by the Agent or any Lender
to the Borrower and/or which may be due from the Borrower to
the Agent or any Lender from time to time.
(e) All reasonable costs and expenses incurred or
paid by the Agent or any Lender in respect of any agreement
between the Borrower and Agent or any Lender or instrument
furnished by the Borrower to the Agent or any Lender
(including, without limitation, Administrative Costs,
attorneys' reasonable fees, and all court and litigation costs
and expenses).
(f) Each of the foregoing as if each reference to the
"Agent and each Lender" therein were to each Affiliate of the
Agent or any Lender.
"LIBOR Business Day": Any day which is both a Business Day and a day
on which the principal interbank market for LIBOR deposits in
London in which Fleet National Bank participates is open for
dealings in United States Dollar deposits.
"LIBOR Loan": Any Revolving Credit Loan which bears interest at a
LIBOR Rate.
"LIBOR Offer Rate": That rate of interest (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by the Agent to
be the prevailing rate per annum at which deposits on U.S.
Dollars are offered to Fleet National Bank, by first-class
banks in the London interbank market in which Fleet National
Bank participates at or about 10:00 AM (Boston Time) Two (2)
LIBOR Business Days before the first day of the Interest
Period for the subject LIBOR Loan, for a deposit approximately
in the amount of the subject loan for a period of time
approximately equal to such Interest Period.
"LIBOR Rate": That per annum rate determined as the aggregate of the
LIBOR Offer Rate plus the LIBOR Margin except that, in the
event that it is determined by the Agent that any Lender may
be subject to the Reserve Percentage, the "LIBOR Rate" shall
mean, with respect to any LIBOR Loans then outstanding (from
the date on which that Reserve Percentage first became
applicable to such loans), and with respect to all LIBOR Loans
thereafter made, an interest rate per annum equal to the sum
of (a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
LIBOR Offer Rate
_________________
1 minus Reserve Percentage
(b) the Applicable Margin for LIBOR Loans.
"Line (Unused) Fee": Is defined in Section 2-11.
"Loan Account": Is defined in Section 2-6.
"Loan Ceiling": $45,000,000.00.
"Loan Documents": This Agreement, each instrument and document
executed and/or delivered as contemplated by Article 3, below,
and each other instrument or document from time to time
executed and/or delivered in connection with the arrangements
contemplated hereby, the Master Lease Agreement between the
Borrower and Winthrop Resources Corporation (which has been
assigned to an Affiliate of the Agent), and any other
instruments, documents, agreements and facilities heretofore
or hereafter entered into in connection with or relating to
any transaction which arises out of any cash management,
depository, investment, letter of credit, or interest rate
protection services provided by the Agent or any Lender or any
Affiliate of the Agent or any Lender, as each may be amended
from time to time.
"Material Accounting Change": Any change in GAAP applicable to
accounting periods subsequent to the Borrower's fiscal year
most recently completed prior to the execution of this
Agreement, which change has a material effect on the
Borrower's financial condition or operating results, as
reflected on financial statements and reports prepared by or
for the Borrower, when compared with such condition or results
as if such change had not taken place or where preparation of
the Borrower's statements and reports in compliance with such
change results in the breach of a financial performance
covenant imposed pursuant to Section 5-13 where such a breach
would not have occurred if such change had not taken place or
vice versa.
"Maturity Date": November 30, 2003.
"Obligors": Collectively, the Borrower and the Guarantors.
"Participant": Is defined in Section 14-14, hereof.
"Payment Intangible": Has the meaning given that term in UCC 9'99
and also refers to any general intangible under which the
Account Debtor's primary obligation is a monetary obligation.
"Permitted Acquisition": An Acquisition complying with the following:
(A) Such acquisition shall be of assets
ancillary, incidental or necessary to the retail sale
of apparel and related activities, or of 100% of the
stock of a corporation whose assets consist
substantially of such assets, or through the merger
of such a corporation with the Borrower (with the
Borrower as the surviving corporation), or with a
Subsidiary of the Borrower where, giving effect to
such merger, such corporation becomes a wholly-owned
Subsidiary of the Borrower; and
(B) If such acquisition includes the
acquisition of assets by, or the merger of, the
Borrower, there shall have been no change in the
identity of the president, chief financial officer or
any executive vice president of the Borrower as a
consequence of such acquisition, or if there has been
such a change, the Lender shall have consented in
writing to such change in identity within thirty (30)
days thereafter (which consent shall not be
unreasonably withheld or delayed); and
(C) If a new Subsidiary is formed or
acquired as a result of such Acquisition, such
Subsidiary shall execute documentation, reasonably
satisfactory in form and substance to the Agent,
guarantying payment and performance of the
Liabilities and granting a first lien, subject only
to Permitted Encumbrances, in its assets in favor of
the Agent, for the ratable benefit of the Lenders,
"Permitted Encumbrances": Those Encumbrances permitted as provided in
Section 4-6(a) hereof.
"Person": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other
enterprise or entity.
"Proceeds": Means "Proceeds" as defined in the UCC (defined below), and
each type of property described in Section 8-1 hereof.
"Rating Service": Either or both of ▇▇▇▇▇'▇ Investors Services, Inc.
or Standard & Poor's Corporation.
"Receipts": All cash, cash equivalents, checks, and credit card slips
and receipts as arise out of the sale of the Collateral or any
collateral granted by the Borrower to the Agent.
"Receivables Collateral": That portion of the Collateral which consists
of the Borrower's Accounts, Accounts Receivable, contract
rights, General Intangibles, Payment Intangibles, Letter of
Credit Rights, Chattel Paper, Instruments, Documents of Title,
Documents, Investment Property, letters of credit for the
benefit of the Borrower, and bankers' acceptances held by the
Borrower, and any rights to payment.
"Related Entity": (a) Any corporation, limited liability company,
trust, partnership, joint venture, or other enterprise which:
is a parent, brother-sister, or Subsidiary, of the Borrower;
could have such enterprise's tax returns or financial
statements consolidated with the Borrower's; could be a member
of the same controlled group of corporations (within the
meaning of Section 1563(a)(1), (2) and (3) of the Internal
Revenue Code of 1986, as amended from time to time) of which
the Borrower is a member; controls or is controlled by the
Borrower or by any Affiliate of the Borrower.
(b) Any Affiliate.
"Requirement of Law": As to any Person:
(a)(i) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims
jurisdiction over such Person, or any property of such Person,
or of any other Person for whose conduct such Person would be
responsible.
(b) That Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and (c) that Person's
by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"Reserves": All (if any) Availability Reserves and Inventory Reserves.
"Reserve Percentage": The decimal equivalent of that rate applicable to
a Lender under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Lender
with respect to "Eurocurrency liabilities" as defined in such
regulations. The Reserve Percentage applicable to a particular
LIBOR Loan shall be based upon that in effect during the
subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to
take effect (and to consequently change any interest rate
determined with reference to the Reserve Percentage) if and
when such change is applicable to such loans. As of the date
hereof, the Agent acknowledges that the Reserve Percentage is
zero.
"Revolving Credit": Is defined in Section 2-1.
"Revolving Credit Note": Is defined in Section 2-7.
"SEC": The Securities and Exchange Commission.
"Stated Amount": The maximum amount for which an L/C may be honored.
"Subsidiary": With respect to any Person, any corporation, partnership
or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such
Person.
"Supporting Obligation": Has the meaning given that term in UCC 9'99
and also refers to a Letter-of-Credit Right or secondary
obligation which supports the payment or performance of an
Account, Chattel Paper, a Document, a General Intangible, an
Instrument, or Investment Property.
"Suspension Event": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) would become an Event
of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence,
circumstance, or state of facts were not cured within any
applicable grace period.
"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10-12 hereof; or
(c) date set by notice by the Agent to the Borrower, which
notice sets the Termination Date on account of the occurrence
of any Event of Default other than as described in Section
10-12 hereof.
"UCC": The Uniform Commercial Code as in effect in Massachusetts from
time to time (Mass. Gen. Laws, Ch. 106).
"UCC9'99": The Uniform Commercial Code, Article 9, 1999 Official Text,
except that following the effectiveness, in Massachusetts, of
the revision of Article 9 of the Uniform Commercial Code
contemplated by UCC9'99 (with such nonuniform variations as
may be adopted as part of the enactment of that revision),
each reference to "UCC9'99" shall be to the UCC.
ARTICLE 2- THE REVOLVING CREDIT
2-1. ESTABLISHMENT OF REVOLVING CREDIT.
(a) The Lenders hereby establish a revolving line of credit (the
"Revolving Credit") in the Borrower's favor pursuant to which each Lender,
subject to, and in accordance with, this Agreement, acting through the
Agent, shall make loans and advances and otherwise provide financial
accommodations to and for the account of the Borrower as provided herein,
in each instance equal to that Lender's Commitment Percentage of
Availability, up to the maximum amount of that Lender's Dollar Commitment.
The amount of the Revolving Credit shall be reasonably determined by the
Agent by reference to Availability, as determined by the Agent from time to
time hereafter. All loans made under this Agreement, and all of the
Borrower's other Liabilities, are payable as provided herein.
(b) As used herein, the term "Availability" refers at any time to the
lesser of (i) or (ii), below, where:
(i) Is the result of:
(A) The Loan Ceiling.
MINUS
(B) The then unpaid principal balance of the Loan Account.
MINUS
(C) The then aggregate of such Availability Reserves as
may have been established by the Agent as provided herein.
MINUS
(D) The then outstanding Stated Amount of all L/C's.
(ii) Is the result of:
(A) The lesser of (1) the Appraised Inventory Percentage
of the Appraised Inventory Liquidation Value, or (2) up
to the then applicable Inventory Advance Rate of the Cost
of Acceptable Inventory.
MINUS
(B) The then unpaid principal balance of the Loan Account.
MINUS
(C) The then aggregate of such Availability Reserves as
may have been established by the Agent as provided herein.
MINUS
(D) The then outstanding Stated Amount of all L/C's.
(c) Availability shall be based upon Borrowing Base Certificates
furnished as provided in Section 5-4 hereof.
(d) The proceeds of borrowings under the Revolving Credit shall be
used solely for working capital purposes of the Borrower, for Permitted
Acquisitions, for redemption, retirement, purchase or acquisition of any of
the Borrower's Capital Stock, and for Capital Expenditures, all solely to
the extent permitted by this Agreement.
2-2. ADVANCES IN EXCESS OF BORROWING BASE. No Lender has any obligation to
make any loan or advance, or otherwise to provide any credit for the benefit of
the Borrower such that the balance of the Loan Account exceeds the Borrowing
Base. The making of loans, advances, and credits and the providing of financial
accommodations in excess of the Borrowing Base is for the benefit of the
Borrower and does not affect the obligations of the Borrower hereunder; such
loans, advances, credits, and financial accommodations constitute Liabilities.
The making of any such loans, advances, and credits and the providing of
financial accommodations, on any one occasion such that the Borrowing Base is
exceeded shall not obligate any Lender to make any such loans, credits, or
advances or to provide any financial accommodation on any other occasion nor to
permit such loans, credits, or advances to remain outstanding.
2-3. RISKS OF VALUE OF COLLATERAL. The Agent's reference to a given asset
in connection with the making of loans, credits, and advances and the providing
of financial accommodations under the Revolving Credit and/or the monitoring of
compliance with the provisions hereof shall not be deemed a determination by the
Agent or any Lender relative to the actual value of the asset in question. All
risks concerning the saleability of the Borrower's Inventory are and remain upon
the Borrower. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities whether or not relied upon by the Agent or by any
Lender in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit.
2-4. LOAN REQUESTS.
(a) Subject to the provisions of this Agreement, a loan or advance
under the Revolving Credit duly and timely requested by the Borrower shall
be made by the Lenders pursuant hereto, provided that:
(i) Borrowing Base will not be exceeded; and
(ii)The Revolving Credit has not been suspended as
provided in Section 2-4(i).
(b) Subject to the provisions of this Agreement, the Borrower may
request a Revolving Credit Loan and elect an interest rate and Interest
Period to be applicable to that Revolving Credit Loan by giving the Agent
written notice or telephonic notice confirmed in writing (in the form of
EXHIBIT 2-4 hereof) no later than the following:
(i) If such Loan is or is to be converted to a Base Margin Loan:
By 11:30 AM on the Business Day on which the subject
Revolving Credit Loan is to be made or is to be so
converted.
` (ii) If such Loan is or is to be continued as a LIBOR Loan:
By 1:00 PM Three (3) Business Days before the end of the
then applicable Interest Period or before the day on which
such Loan is to be made.
(iii) If such Loan is to be converted to a LIBOR Loan: By 1:00 PM
Three (3)Business Days before the day on which such
conversion is to take place.
(c) (i) Base Margin Loans and conversions to Base Margin Loans
shall be in a minimum amount of $10,000.00 each.
(ii) LIBOR Loans and conversions to LIBOR Loans shall each be not
less than $500,000.00 and in $500,000.00 increments in
excess of such minimum.
(d) Any request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan which is made after the applicable deadline therefor,
as set forth above, shall be deemed to have been made at the opening of
business on the next Business Day or LIBOR Business Day, as applicable.
Each request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan shall be made in such manner as may from time to time
be acceptable to the Agent
(e) If, during the Sixty (60) days immediately preceding the day on
which a loan request is made there has been no unpaid principal balance in
the Loan Account on account of loans and advances under the Revolving
Credit, the loan so requested shall be made (subject to all other
provisions of this Agreement) no later than the Second Business Day after
(and not counting) the day on which the loan otherwise would have been made
as provided above.
(f) The Borrower may request that the Agent cause the issuance of
L/C's for the account of the Borrower as provided in Section 2-15.
(g) The Agent may rely on any request for a loan or advance, or other
financial accommodation under the Revolving Credit which the Agent, in good
faith, believes to have been made by a person duly authorized to act on
behalf of the Borrower and may decline to make any such requested loan or
advance, or issuance, or to provide any such financial accommodation
pending the Agent's being furnished with such documentation concerning that
person's authority to act as may be reasonably satisfactory to the Agent.
(h) A request by the Borrower for loan or advance, or other financial
accommodation under the Revolving Credit shall be irrevocable and shall
constitute certification by the Borrower that as of the date of such
request, each of the following is true and correct:
(i) There has been no material adverse change in the Borrower's
financial condition from the most recent financial information furnished
Agent or any Lender pursuant to this Agreement.
(ii) The Borrower is in compliance with, and has not breached
any of, its covenants contained in this Agreement.
(iii) Each representation which is made herein or in any of
the Loan Documents (defined below) is then true and complete as of and as
if made on the date of such request.
(iv) No Suspension Event is then extant.
(i) Upon the occurrence from time to time of any Suspension Event:
(i) The Agent may suspend the Revolving Credit immediately.
(ii) Neither the Agent nor any Lender shall be obligated, during
such suspension, to make any loans or advance, or to provide
any financial accommodation hereunder or to seek the issuance
of any L/C.
2-5. MAKING OF LOANS UNDER REVOLVING CREDIT.
(a) A loan or advance under the Revolving Credit shall be made by the
transfer of the proceeds of such loan or advance to the Funding Account or
as otherwise instructed by the Borrower.
(b) A loan or advance shall be deemed to have been made under the
Revolving Credit (and the Borrower shall be indebted to the Agent for the
amount thereof immediately) at the following:
(i) The Agent's initiation of the transfer of the proceeds of such
loan or advance in accordance with the Borrower's instructions
(if such loan or advance is of funds requested by the Borrower).
(ii)The charging of the amount of such loan to the Loan Account (in
all other circumstances).
(c) There shall not be any recourse to or liability of the Agent or
any Lender, on account of any delay in the receipt, and/or any loss, of
funds which constitute a loan or advance under the Revolving Credit, the
wire transfer of which was properly initiated by the Agent in accordance
with wire instructions provided to the Agent by the Borrower.
2-6. THE LOAN ACCOUNT.
(a) An account ("Loan Account") shall be opened on the books of the
Agent. A record shall be kept in the Loan Account of all loans made under
or pursuant to this Agreement and of all payments thereon.
(b) The Agent shall also keep a record (either in the Loan Account or
elsewhere, as the Agent may from time to time elect) of all interest, fees,
service charges, costs, expenses, and other debits owed the Lender on
account of the Liabilities and of all credits against such amounts so owed.
(c) All credits against the Liabilities shall be conditional upon
final payment to the Agent for the Account of each Lender of the items
giving rise to such credits. The amount of any item credited against the
Liabilities which is charged back against Agent or any Lender for any
reason or is not so paid shall be a Liability and shall be added to the
Loan Account, whether or not the item so charged back or not so paid is
returned.
(d) Except as otherwise provided herein, all fees, service charges,
costs, and expenses for which the Borrower is obligated hereunder are
payable on demand. In the determination of Availability, the Agent may deem
fees, service charges, accrued interest, and other payments as having been
advanced under the Revolving Credit whether or not such amounts are then
due and payable.
(e) The Agent, without the request of the Borrower, may advance under
the Revolving Credit any interest, fee, service charge, or other payment to
which the Agent or any Lender is entitled from the Borrower pursuant hereto
and may charge the same to the Loan Account notwithstanding that such
amount so advanced may result in Borrowing Base's being exceeded. Such
action on the part of the Agent shall not constitute a waiver of the
Agent's rights and Borrower's obligations under Section 2-8(b). Any amount
which is added to the principal balance of the Loan Account as provided in
this Section 2-6(e) shall bear interest.
(f) Any statement rendered by the Agent or any Lender to the Borrower
concerning the Liabilities shall be considered correct and accepted by the
Borrower and shall be conclusively binding upon the Borrower unless the
Borrower provides the Agent with written objection thereto within thirty
(30) days from the mailing of such statement, which written objection shall
indicate, with particularity, the reason for such objection. The Loan
Account and the Agent's books and records concerning the loan arrangement
contemplated herein and the Liabilities shall be prima facie evidence and
proof of the items described therein, absent manifest error.
2-7. THE REVOLVING CREDIT NOTES. The obligation to repay loans and advances
under the Revolving Credit, with interest as provided herein, shall be evidenced
by Notes (each, a "Revolving Credit Note") in the form of EXHIBIT 2-7, annexed
hereto, executed by the Borrower, one payable to each Lender. Neither the
original nor a copy of any Revolving Credit Note shall be required, however, to
establish or prove any Liability. In the event that any Revolving Credit Note is
ever lost, mutilated, or destroyed, the Borrower shall execute a replacement
thereof and deliver such replacement to the Agent.
2-8. PAYMENT OF THE LOAN ACCOUNT.
(a) The Borrower may repay all or any portion of the principal balance
of the Loan Account from time to time until the Termination Date.
(b) The Borrower, without notice or demand from the Agent or any
Lender, shall pay the Agent that amount, from time to time, which is
necessary so that the unpaid balance of the Loan Account does not exceed
the Borrowing Base.
(c) The Borrower shall repay the then entire unpaid balance of the
Loan Account and all other Liabilities on the Termination Date.
2-9. INTEREST.
(a) Each Revolving Credit Loan shall bear interest (determined based
on a 360 day year and actual days elapsed) at the Base Margin Rate unless
timely notice is given (as provided in Section 2-4(a)) that the subject
Revolving Credit Loan (or a portion thereof) is, or is to be converted to,
a LIBOR Loan.
(b) Each Revolving Credit Loan which consists of a LIBOR Loan shall
bear interest at the applicable LIBOR Rate.
(c) Subject to the provisions hereof, the Borrower, by notice to the
Agent, may cause all or a part of the unpaid principal balance of the Loan
Account to bear interest at the Base Margin Rate or the LIBOR Rate as
specified from time to time by the Borrower. For ease of reference and
administration, each part of the Loan Account which bears interest at the
same interest and for the same Interest Period is referred to herein as if
it were a separate "Revolving Credit Loan".
(d) The Borrower shall not select, renew, or convert any interest rate
for a Revolving Credit Loan such that there are more than seven (7)
Interest Periods applicable to the LIBOR Loans at any one time.
(e) The Borrower shall pay accrued and unpaid interest on each
Revolving Credit Loan in arrears
(i) On the applicable Interest Payment Date for that Revolving Credit
Loan.
(ii) On the Termination Date and on the End Date.
(iii)Following the occurrence, and during the continuance, of any
Event of Default, with such frequency as may be determined by the
Agent.
(f) Following the occurrence, and during the continuance, of any Event
of Default (whether or not the Agent exercises the Agent's rights on
account thereof), all Revolving Credit Loans shall bear interest, at the
option of the Agent, at the aggregate of the Base Margin Rate plus Two
Percent (2%) per annum. The Agent shall furnish the Borrower with prompt
written notice of the Agent's election to institute the default rate of
interest hereunder.
(g) In addition, in the event of the occurrence of any of the
circumstances described in Section 2-18 hereof, and during the continuance
thereof, each Revolving Credit Loan shall bear interest (determined based
on a 360 day year and actual days elapsed) at the Base Margin Rate.
2-10. COMMITMENT FEE; AGENT'S FEE.
(a) As compensation for the commitment of Fleet Retail Finance Inc. to
make loans and advances to the Borrower and as compensation for its
maintenance of sufficient funds available for such purpose, Fleet Retail
Finance Inc. has earned a Commitment Fee (so referred to herein) at the
times and in the amounts as set forth in the Fee Letter and an Amendment
Fee (so referred to herein) at the times and in the amounts as set forth in
the Amendment Fee Letter.
(b) As compensation for Fleet Retail Finance Inc.'s serving as Agent
hereunder, Fleet Retail Finance Inc. will earn an Agent's Fee (so referred
to herein) payable by the Borrower at the times and in the amounts as set
forth in the Fee Letter.
2-11. LINE FEE.
In addition to any other fee by the Borrower on account of the Revolving
Credit, the Borrower shall pay the Agent a Line (Unused) Fee (so referred
to herein) in arrears, on the first day of each month (and on the
Termination Date). The Line Fee shall be equal to 0.375% per annum of the
average daily difference, during the month just ended (or relevant period
with respect to the payment being made on the Termination Date), between
the Loan Ceiling and the unpaid principal balance of the Loan Account.
2-12. EARLY TERMINATION FEE.
In the event that the Termination Date occurs, for any reason, prior to
November 30, 2002, the Borrower shall pay the Agent, for the benefit of the
Lenders, the Early Termination Fee (so referred to herein) in an amount
equal to (a) one percent (1%) of the Loan Ceiling if the Termination Date
occurs prior to November 30, 2001, or (b) one-half of one percent (0.50%)
of the Loan Ceiling if the Termination Date occurs on or after November 30,
2001 and prior to November 30, 2002, provided that, the Early Termination
Fee shall be waived if the Liabilities are refinanced by a facility
furnished by Fleet Retail Finance Inc. or any of its Affiliates (nothing
herein being deemed the commitment or agreement of Fleet Retail Finance
Inc. or any of its Affiliates to so refinance the Liabilities).
2-13. REGARDING FEES.
The Borrower shall not be entitled to any credit, rebate or repayment of
the Commitment Fee, Line (Unused) Fee, Early Termination Fee, Agent's Fee
or other fee previously earned by the Agent or any Lender pursuant to this
Agreement notwithstanding any termination of this Agreement or suspension
or termination of the Agent's and any Lender's respective obligation to
make loans and advances hereunder.
2-14. AGENT'S AND LENDERS' DISCRETION.
(a) Each reference in the Loan Documents to the exercise of discretion
or the like by the Agent or any Lender shall be to that Person's exercise
of its reasonable judgement, in good faith, based upon that Person's
consideration of any such factor as the Agent or that Lender, taking into
account information of which that Person then has actual knowledge,
believes:
(i) Will or reasonably could be expected to affect the value
of the Collateral, the enforceability of the Agent's
security and collateral interests therein, or the amount
which the Agent would likely realize therefrom (taking into
account delays which may possibly be encountered in the
Lender's realizing upon the Collateral and likely
Administrative Costs).
(ii) Indicates that any report or financial information
delivered to the Agent or any Lender by or on behalf of the
Borrower is incomplete, inaccurate, or misleading in any
material manner or was not prepared in accordance with the
requirements of this Agreement.
(iii)Would likely result in the Borrower's becoming the subject
of a bankruptcy or insolvency proceeding.
(iv) Constitutes a Suspension Event.
(b) In the exercise of such judgement, the Agent and each Lender also
may take into account any of the following factors:
(i) Those included in, or tested by, the definitions of
"Acceptable Inventory," "Retail," and "Cost".
(ii) Material changes in or to the mix of the Borrower's
Inventory.
(iii)Seasonality with respect to the Borrower's Inventory and
patterns of retail sales.
(iv) Such other factors as the Agent and each Lender determines
as having a material bearing on credit risks associated with
the providing of loans and financial accommodations to the
Borrower.
(c) The burden of establishing the failure of the Agent or any Lender
to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrower's.
2-15. PROCEDURES FOR ISSUANCE OF L/C'S.
(a) The Borrower may request that the Agent cause the issuance of
L/C's for the account of the Borrower. Each such request shall be in such
manner as may from time to time be acceptable to the Agent.
(b) The Agent will cause the issuance of any L/C so requested by the
Borrower, provided that , at the time that the request is made, the
Revolving Credit has not been suspended as provided in Section 2-4(i) and
if so issued:
(i) The aggregate Stated Amount of all L/C's then outstanding, does
not exceed Ten Million Dollars ($10,000,000.00).
(ii)The expiry of the L/C is not later than the earlier of Thirty
(30) days prior to the Maturity Date (unless the Borrower
provides cash collateral reasonably acceptable to the Agent in an
amount equal to 103% of the Stated Amount of any L/C having an
expiry after that date) or the following:
(A) Standby's: One (1) year from initial issuance.
(B) Documentary's: One Hundred (100) days from issuance.
(iii) Borrowing Base would not be exceeded.
(c) The Borrower shall execute such documentation to apply for and
support the issuance of an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the Agent or
any Lender on account of
(i) Any delay or refusal by an Issuer to issue an L/C;
(ii) Any action or inaction of an Issuer on account of or in respect
to, any L/C.
(e) The Agent, without the request of the Borrower, may advance under
the Revolving Credit (and charge to the Loan Account) the amount of any
honoring of any L/C and other amount for which the Borrower, the Issuer, or
the Lenders become obligated on account of, or in respect to, any L/C. Such
advance shall be made whether or not a Suspension Event is then extant or
such advance would result in Borrowing Base's being exceeded. Such action
shall not constitute a waiver of the Agent's rights under Section 2-8(b)
hereof.
2-16. FEES FOR L/C'S.
(a) The Borrower shall pay to the Agent a fee, on account of L/C's,
the issuance of which had been procured by the Agent, monthly in arrears,
and on the Termination Date and on the End Date, equal to 2 % per annum of
the weighted average Stated Amount of all L/C's outstanding during the
period in respect of which such fee is being paid.
(b) In addition to the fee to be paid as provided in Subsection
2-16(a), above, the Borrower shall pay to the Agent (or to the Issuer, if
so requested by Agent), on demand, all issuance, processing, negotiation,
amendment, and administrative fees and other amounts charged by the Issuer
on account of, or in respect to, any L/C.
2-17. CONCERNING L/C'S.
(a) None of the Issuer, the Issuer's correspondents, or any advising,
negotiating, or paying bank with respect to any L/C shall be responsible in
any way for:
(i) The performance by any beneficiary under any L/C of
that beneficiary's obligations to the Borrower.
(ii) The form, sufficiency, correctness, genuineness, authority
of any person signing; falsification; or the legal effect
of; any documents called for under any L/C if (with respect
to the foregoing) such documents on their face appear to be
in order.
(b) The Issuer may honor, as complying with the terms of any L/C and
of any drawing thereunder, any drafts or other documents otherwise in
order, but signed or issued by an administrator, executor, conservator,
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, liquidator, receiver, or other legal representative of the party
authorized under such L/C to draw or issue such drafts or other documents.
(c) Unless otherwise agreed to, in the particular instance, the
Borrower hereby authorizes any Issuer to:
(i) Select an advising bank, if any.
(ii) Select a paying bank, if any.
(iii) Select a negotiating bank.
(d) All directions, correspondence, and funds transfers relating to
any L/C are at the risk of the Borrower. The Issuer shall have discharged
the Issuer's obligations under any L/C which, or the drawing under which,
includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). None of the Agent, any
Lender, nor the Issuer shall have any responsibility for any inaccuracy,
interruption, error, or delay in transmission or delivery by post,
telegraph or cable, or for any inaccuracy of translation.
(e) The Agent's, each Lender's, and the Issuer's rights, powers,
privileges and immunities specified in or arising under this Agreement are
in addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.
(f) Except to the extent otherwise expressly provided hereunder or
agreed to in writing by the Issuer and the Borrower, each L/C will be
governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or regulation, or any
directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect
to which the Agent, any Lender or any Issuer has an
obligation to lend to fund drawings under any L/C; or
(ii) impose on any Issuer any other condition or requirements
relating to any such letters of credit;
and the result of any event referred to in Section 2-17(g)(i) or 2-17(g)(ii),
above, shall be to increase the cost to any Issuer of issuing or maintaining
any L/C (which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the aggregate of
such cost increases resulting from such events), then, upon demand by the Agent
and delivery by the Agent to the Borrower of a certificate of an officer of the
subject Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Issuer, and the basis
for determining such increased costs and their allocation, the Borrower shall
immediately pay to the Agent, from time to time as reasonably specified by the
Agent, such amounts as shall be sufficient to compensate such Issuer for
such increased cost. Any Issuer's determination of costs incurred under
Section 2-17(g)(i) or 2-17(g)(ii), above, and theallocation, if any, of
such costs among the Borrower and other letter of credit customers of such
Issuer, if done in good faith and made on an equitable basis and in
accordance with such officer's certificate, shall be conclusive and binding on
the Borrower.
(h) The obligations of the Borrower under this Agreement with respect
to L/C's are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all
circumstances, whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or restriction,
restraint, or stay in the enforcement of this Agreement, any
L/C, or any other agreement or instrument relating thereto.
(ii) Any amendment or waiver of, or consent to the departure
from, any L/C.
(iii) The existence of any claim, set-off, defense, or other right
which the Borrower may have at any time against the
beneficiary of any L/C.
(iv) Any good faith honoring of a drawing under any L/C, which
drawing possibly could have been dishonored based upon a
strict construction of the terms of the L/C.
2-18. CHANGED CIRCUMSTANCES.
(a) The Agent may give the Borrower notice of the occurrence of the
following:
(i) The Agent shall have determined in good faith on any day on
which the rate for a LIBOR Loan would otherwise be set, that,
by reason of changes affecting the London interbank market,
adequate and fair means do not exist for ascertaining such
rate on the basis provided for in the definition of LIBOR
Offer Rate.
(ii)The Agent shall have determined in good faith that:
(A) The continuation of or conversion of any Revolving Credit
Loan to a LIBOR Loan has been made impracticable or
unlawful by the occurrence of a change in law occurring
after the date of this Agreement that materially and
adversely affects the applicable market or compliance
by the Agent or any Lender in good faith with any
applicable law or governmental regulation, guideline or
order or interpretation or change thereof by any
governmental authority charged with the interpretation
or administration thereof or with any request or
directive of any such governmental authority (whether or
not having the force of law).
(B) The indices on which the interest rates for LIBOR Loans
are determined shall no longer represent the effective
cost to the Agent or any Lender for U.S. dollar deposits
in the interbank market for deposits in which it
regularly participates.
(b) In the event that the Agent gives the Borrower notice of an
occurrence described in Section 2-18(a), then, until the Agent notifies the
Borrower that the circumstances giving rise to such notice no longer apply:
(i) The obligation of the Agent and of each Lender to make
LIBOR Loans of the type affected by such changed
circumstances or to permit the Borrower to select the
affected interest rate as otherwise applicable to any
Revolving Credit Loans shall be suspended.
(ii)Any notice which the Borrower had given the Agent with
respect to any LIBOR Loan, the time for action with respect
to which has not occurred prior to the Agent's having given
notice pursuant to Section 2-18(a), shall be deemed at the
option of the Agent to not having been given and such loan
shall be made or continued as, or converted into, as
appropriate, a Base Margin Loan.
(iii)Subject to the provisions of Section 2-11, the Borrower may
(and shall, with respect to the occurrence of any event
described in Section 2-18(a)(ii)), cancel the relevant
borrowing or conversion notice on the same date the Borrower
was notified of such event, or if the LIBOR Loan is then
outstanding, prepay the affected LIBOR Loan.
2-19. INCREASED COSTS.
If, as a result of any requirement of law, or of the interpretation or
application thereof by any court or by any governmental or other authority or
entity charged with the administration thereof, whether or not having the force
of law, which:
(a) subjects any Lender to any taxes or changes the basis of taxation,
or increases any existing taxes, on payments of principal, interest or
other amounts payable by the Borrower to the Agent or any Lender under this
Agreement (except for taxes on the Agent or any Lender's overall net income
or capital imposed by the jurisdiction in which the Agent or that Lender's
principal or lending offices are located);
(b) imposes, modifies or deems applicable any reserve, cash margin,
special deposit or similar requirements against assets held by, or deposits
in or for the account of or loans by or any other acquisition of funds by
the relevant funding office of any Lender;
(c) . imposes on any Lender any other condition with respect to any
Loan Document; or
(d) imposes on any Lender a requirement to maintain or allocate
capital in relation to the Liabilities; and the result of any of the
foregoing, in such Lender's reasonable opinion, is to increase the cost to
that Lender of making or maintaining any loan, advance or financial
accommodation or to reduce the income receivable by such Lender in respect
of any loan, advance or financial accommodation by an amount which the such
Lender deems to be material, then the Agent shall furnish the Borrower with
written notice of any event entitling any Lender to compensation hereunder
(a "Change Notice"). Thereafter, upon ten (10) days written notice from the
Agent, from time to time, to the Borrower (such notice to set out in
reasonable detail the facts giving rise to and a summary calculation of
such increased cost or reduced income), the Borrower shall pay to the
Agent, for the benefit of the subject Lender, that amount which shall
compensate the subject Lender for such additional cost or reduction in
income accruing after the date of the Change Notice.
2-20. LENDERS' COMMITMENTS.
(a) The obligations of each Lender are several and not joint. No
Lender shall have any obligation to make any loan or advance under the
Revolving Credit in excess of the lesser of
(i) that Lender's Commitment Percentage of the subject loan or
advance or of Availability; or
(ii)that Lender's Dollar Commitment,
(b) No Lender shall have any liability to the Borrower on account of
the failure of any other Lender to provide any loan or advance under the
Revolving Credit nor any obligation to make up any shortfall which may be
created by such failure.
(c) The Dollar Commitments, Commitment Percentages, and identities of
the Lenders (but not the overall Commitment) may be changed, from time to
time by the reallocation or assignment of Dollar Commitments and Commitment
Percentages amongst the Lenders or with other Persons who determine to
become "Lenders", provided, however,
(i) Unless an Event of Default has occurred and is continuing (in
which event, no consent of the Borrower is required) any
assignment to a Person not then a Lender shall be subject to the
prior consent of the Borrower (not to be unreasonably withheld),
which consent will be deemed given unless the Borrower provides
the Agent with written objection, not more than Five (5) Business
Days after the Agent shall have given the Borrower written notice
of a proposed assignment.
(ii) Any such assignment or reallocation shall be on a pro-rata
basis such that each reallocated or assigned Dollar Commitment
to any Person remains the same percentage of the overall
Commitment (in terms of dollars) as the reallocated Commitment
Percentage is to such Person.
(iii) Unless an Event of Default has occurred and is continuing
(in which event, no consent of the Borrower is required), any
appointment of an agent for the Lenders to replace the Agent
shall be subject to the prior consent of the Borrower (not to be
unreasonably withheld), which consent will be deemed given unless
the Borrower provides the Agent with written objection, not more
than five (5) Business Days after the Agent shall have given the
Borrower written notice of such proposed replacement.
(d) Upon written notice given the Borrower from time to time by the
Agent, of any assignment or allocation referenced in Section 2-20(c):
(i) The Borrower shall execute replacements for one or more
Revolving Credit Notes to reflect such changed Dollar
Commitments, Commitment Percentages, and identities and shall
deliver such replacement Revolving Credit Notes to the Agent
(which promptly thereafter shall deliver to the Borrower the
Revolving Credit Notes so replaced) provided however, in the
event that a Revolving Credit Note is to be exchanged following
its acceleration or the entry of an order for relief under the
Bankruptcy Code with respect to the Borrower, the Agent, in lieu
of causing the Borrower to execute one or more new Revolving
Credit Notes, may issue the Agent's Certificate confirming the
resulting Commitments and Commitment Percentages.
(ii) Such change shall be effective from the effective date
specified in such written notice and any Person added as a Lender
shall have all rights and privileges of a Lender hereunder
thereafter as if such Person had been a signatory to this
Agreement and any other Loan Document to which a Lender is a
signatory and any person removed as a Lender shall be relieved of
any obligations or responsibilities of a Lender hereunder
thereafter.
(e) The Borrower recognizes that the Agent's exercise of any
discretion accorded to the Agent herein and of its rights, remedies,
powers, privileges, and discretions with respect to the Borrower is subject
to a certain Agency Agreement amongst the Agent and the Lenders. The
provisions of the Agency Agreement relating to voting rights of the Lenders
shall be subject to the approval of the Borrower, which approval shall not
be unreasonably delayed or withheld. The Borrower acknowledges that the
Borrower's approval of the voting rights shall be deemed furnished if the
voting rights provisions described in EXHIBIT 2-20 hereto are incorporated
in the Agency Agreement.
ARTICLE 3- CONDITIONS PRECEDENT.
As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit, and the making of the first loan under
the Revolving Credit, each of the documents respectively described in Sections
3-1 through and including 3-6, (each in form and substance reasonably
satisfactory to the Agent) shall have been delivered to the Agent, and the
conditions respectively described in Sections 3-7 through and including 3-11,
shall have been satisfied:
3-1. CORPORATE DUE DILIGENCE.
A Certificate of each Obligor's Secretary of the due adoption,
continued effectiveness, and setting forth the texts of, each corporate
resolution adopted in connection with the establishment of the loan arrangement
contemplated by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents.
3-2. OPINION.
An opinion of counsel to the Obligors in form and substance reasonably
satisfactory to the Agent .
3-3. [Intentionally Omitted]
3-4. GUARANTORS.
Each Guarantor shall have (a) executed and delivered to the
Agent and the Lenders its guaranty of the Liabilities, and (b) granted the Agent
for the ratable benefit of the Lenders, a first lien on all of its assets, and
(c) shall have executed such other documents and undertaken such other action as
the Agent may have reasonably requested.
3-5. ADDITIONAL DOCUMENTS.
Such additional instruments and documents as the Agent or its counsel
reasonably may require or request, including, without limitation an
Intercreditor and Subordination Agreement with Winthrop Resources,Inc.
3-6. OFFICERS' CERTIFICATES.
Certificates executed on behalf of the Borrower by the President and the
Chief Financial Officer of the Borrower and stating that the representations
and warranties made by the Borrower to the Agent and the Lenders in the Loan
Documents are true and complete in all material respects as of the date of such
Certificate, and that no event has occurred which is or which, solely with the
giving of notice or passage of time (or both) would be an Event of Default.
3-7. REPRESENTATIONS AND WARRANTIES.
Each of the representations made by or on behalf of the Obligors in this
Agreement or in any of the other Loan Documents or in any other report,
statement, document, or paper provided by or on behalf of the Obligors shall be
true and complete in all material respects as of the date as of which such
representation or warranty was made.
3-8. Intentionally Omitted.
3-9. ALL FEES AND EXPENSES PAID.
All fees due at or immediately after the first funding under the Revolving
Credit and all costs and expenses incurred by the Agent in connection with the
establishment of the credit facility contemplated hereby (including the fees
and expenses of counsel to the Agent) shall have been paid.
3-10. NO SUSPENSION EVENT.
No Suspension Event shall then exist.
3-11. NO ADVERSE CHANGE.
No event shall have occurred or failed to occur, which occurrence or
failure is or could have a materially adverse effect upon the Borrower's
financial condition when compared with such financial condition at the fiscal
month ended September 30, 2000.
No document shall be deemed delivered to the Agent or any Lender until received
and accepted by the Agent at its head offices in Boston, Massachusetts. Under no
circumstances will this Agreement take effect until executed and accepted by the
Agent at said head office.
ARTICLE 4- GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) the Borrower, in addition to all other
representations, warranties, and covenants made by the Obligors in any other
Loan Document, makes those representations, warranties, and covenants included
in this Agreement.
4-1. PAYMENT AND PERFORMANCE OF LIABILITIES. The Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.
4-2. DUE ORGANIZATION - Corporate Authorization - No Conflicts.
(a) The Borrower presently is and shall hereafter remain in good
standing as a Delaware corporation and is and shall hereafter remain duly
qualified and in good standing in every other State in which, by reason of
the nature or location of the Borrower's assets or operation of the
Borrower's business, such qualification may be necessary, except where the
failure to so qualify would not have a material adverse effect on the
Borrower's business, assets or financial condition.
(b) Each Related Entity is listed on EXHIBIT 4-2, annexed hereto. Each
Related Entity is and shall hereafter remain in good standing in the State
in which incorporated and is and shall hereafter remain duly qualified in
which other State in which, by reason of that entity's assets or the
operation of such entity's business, such qualification may be necessary,
except where the failure to so qualify would not have a material adverse
effect on the Related Entity's business, assets or financial condition,
provided that, the Borrower may dissolve any Related Entity if
(i) upon such dissolution, all of such Related Entity's assets are
transferred to the Borrower and
(ii) as a result of such dissolution, the Borrower does not, expressly
or by operation of law, assume any liabilities of such Related
Entity that would, in accordance with GAAP, be classified as
liabilities, whether absolute or contingent, and whether or not
they would be reflected on a balance sheet and the notes thereto
of the Borrower, unless the Agent shall have consented to the
assumption of such liabilities. The Borrower shall provide the
Agent with prior written notice of any entity's becoming or
ceasing to be a Related Entity.
(c) Each Obligor has all requisite corporate power and authority to
execute and deliver all Loan Documents to which such Obligor is a party and
has and will hereafter retain all requisite corporate power to perform all
Liabilities.
(d) The execution and delivery by each Obligor of each Loan Document
to which it is a party; the Obligor's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the
creation of security interests by the Obligors as contemplated hereby);
each Obligor's performance under those of the Loan Documents to which it is
a party; the borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary corporate action.
(ii) Do not, and will not, contravene in any material respect any
provision of any Requirement of Law or obligation of the
Obligors.
(iii)Will not result in the creation or imposition of, or the
obligation to create or impose, any Encumbranc upon any
assets of the Obligors pursuant to any Requirement of Law
or obligation, except pursuant to the Loan Documents.
(e) The Loan Documents have been duly executed and delivered by
Obligors and are the legal, valid and binding obligations of the Obligors,
enforceable against the Obligors in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency, or other
laws relating to or affecting generally the enforcement of creditors'
rights and except to the extent that the availability of the remedy of
specific performance or injunctive relief is subject to the discretion of
the court before which any proceeding therefor may be brought.
(f) The Borrower's respective organizational identification number
assigned to it by the State of its incorporation and its respective federal
employer identification number is stated on EXHIBIT 4-2, annexed hereto.
The Borrower shall not change its State of organization; any organizational
identification number assigned to the Borrower by that State; or that
Borrower's federal taxpayer identification number.
4-3. TRADE NAMES.
(a) EXHIBIT 4-3, annexed hereto, is a listing of:
(i) All names under which the Borrower conducted its business
within the past five (5) years.
(ii)All entities and/or persons with whom within the past five
(5)years the Borrower consolidated or merged, or from whom
within the past five (5) years the Borrower acquired in a
single transaction or in a series of related transactions
substantially all of such entity's or person's assets.
(b) Except (i) upon not less than fifteen (15) days prior written
notice given the Agent , and (ii) in compliance with all other provisions
of this Agreement, the Borrower will not undertake or commit to undertake
any action such that the results of that action, if undertaken prior to the
date of this Agreement, would have been reflected on EXHIBIT 4-3.
4-4. INFRASTRUCTURE.
(a) To the Obligors' knowledge, except as set forth in EXHIBIT 4-4(b),
the Obligors own and possess, or have the right to use (and will hereafter
own, possess, or have such right to use) all patents, industrial designs,
trademarks, trade names, trade styles, brand names, service marks, logos,
copyrights, trade secrets, know-how, confidential information, and other
intellectual or proprietary property of any third Person necessary for each
Obligor's conduct of its business.
(b) To the Obligors' knowledge, the conduct by the Obligors of the
Obligors' business does not presently infringe (nor will the Obligors
conduct their business in the future so as to infringe) the patents,
industrial designs, trademarks, trade names, trade styles, brand names,
service marks, logos, copyrights, trade secrets, know-how, confidential
information, or other intellectual or proprietary property of any third
Person.
4-5. LOCATIONS.
(a) The Collateral, and the books, records, and papers of Borrower
pertaining thereto, are kept and maintained solely at the Borrower's chief
executive offices at
(i) ▇▇ ▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
(ii)those locations which are listed on EXHIBIT 4-5, annexed hereto,
which EXHIBIT includes, with respect to each such location, the
name and address of the landlord on the Lease which covers such
location (or an indication that the Borrower owns the subject
location) and of all service bureaus with which any such records
are maintained.
(b) The Borrower shall not remove any of the Collateral from said
chief executive office or those locations listed on EXHIBIT 4-5 except to
(i) accomplish sales of Inventory in the ordinary course of business;
(ii) move Inventory from one such location to another such location;
(iii)utilize such of the Collateral as is removed from such locations
in the ordinary course of business (such as motor vehicles).
(iv) return Inventory to the Borrower's suppliers in the ordinary
course of business, consistent with the Borrower's past
practices;
(v) move Inventory to third parties to complete alterations
thereon; or
(vi) move Inventory and other Collateral to a new store or warehouse,
provided the Borrower furnishes the Agent with at least ten (10)
days prior notice thereof.
(c) The Obligors will not execute, alter, modify, or amend any Lease
other than in the ordinary course of business and not otherwise in
violation of this Agreement; provided that
(i) no such amendment shall result in any Obligor's granting a
landlord an Encumbrance on any of the Obligors' assets; and
(ii) the Borrower shall not execute, alter, modify or amend any Lease,
whether or not in the ordinary course of business, without first
furnishing the Agent with ten (10) days prior notice thereof
(provided that no such notice need be furnished if the sole
purpose of the amendment is to extend the term of the Lease) and
using its best efforts to obtain a landlord's waiver in favor of
the Agent, in form reasonably satisfactory to the Agent.
(d) None of the Obligors shall cease the conduct of business from any
of their present or future locations without first furnishing the Agent
with at least ten (10) days prior notice thereof.
(e) Except as otherwise disclosed pursuant to, or permitted by, this
Section 4-5, no tangible personal property of any Obligor of more than de
minimis value is in the care or custody of any third party or stored or
entrusted with a bailee or other third party and no property of more than
de minimis value shall hereafter be placed under such care, custody,
storage, or entrustment.
4-6. TITLE TO ASSETS.
(a) The Borrower is, and shall hereafter remain, the owner of the
Collateral free and clear of all Encumbrances with the exceptions of the
following (the "Permitted Encumbrances"):
(i) Encumbrances in favor of the Agent.
(ii) Those Encumbrances (if any) listed on EXHIBIT 4-6, annexed
hereto.
(iii) Encumbrances for taxes, assessments or other governmental
charges which are being contested in good faith by appropriate
proceedings, and for which adequate reserves are being
maintained, as to which no Encumbrance which may have priority
over the Agent's Encumbrance shall have arisen.
(iv) Statutory liens of carriers, warehousemen, mechanics,
materialmen, repairmen, landlords, and others arising in the
ordinary course of business for sums not overdue, or which are
being contested in good faith by appropriate proceedings.
(v) Liens incurred or deposits or pledges made in connection with
worker's compensation, health or unemployment insurance, social
security laws, or similar legislation or in connection with or
to secure the payment or performance of bids, tenders, sale
agreements, leases, trade agreements, statutory obligations or
surety bonds, or other liens incidental to the ordinary conduct
of its business or the ownership of its property and assets,
which are not incurred in connection with the borrowings of
money; or judgment liens in proceedings which are being appealed
and with respect to which there has been a stay of execution;
provided that all of the foregoing do not in the aggregate
materially adversely affect the value of its property or assets
or impair the use thereof in the operation of the Borrower's
business.
(vi) Encumbrances on property hereafter acquired (either in
connection with purchase money mortgages, rental purchase
agreements, including capital leases, or conditional sale or
other title retention agreements), which are restricted to the
property so acquired and do not secure Indebtedness exceeding
the fair value (at the time of acquisition) thereof.
(vii) Easements, rights of way, restrictions, minor defects,
encroachments or irregularities in title and other similar
charges or encumbrances not interfering in any material respect
with the ordinary conduct of the business of the Borrower or any
of its Related Entities.
(viii)License agreements pursuant to which the Borrower licenses any
of its trademarks, trade names, service marks, trade dress, or
other intellectual property.
(b) The Borrower does not and shall not have possession of any
property on consignment to the Borrower.
(c) The Borrower shall not acquire or obtain the right to use any
Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement, in which Equipment any third party has an
interest, except for:
(i) Equipment which is used in the conduct of the Borrower's
business.
(ii) Equipment, the acquisition or right to use of which has been
consented to by the Agent, which consent may be conditioned upon
the Agent's receipt of such agreement with the third party which
has an interest in such Equipment as is satisfactory to the
Agent.
4-7. INDEBTEDNESS. The Obligors do not and shall not hereafter have any
Indebtedness with the exceptions of:
(a) Any Indebtedness to the Lenders .
(b) The Indebtedness (if any) listed on EXHIBIT 4-7, annexed
hereto.
(c) Any Indebtedness secured by Permitted Encumbrances.
4-8. INSURANCE POLICIES.
(a) EXHIBIT 4-8, annexed hereto, is a schedule of all insurance
policies owned by the Obligors or under which any of the Obligors is the
named insured. To the Obligors' knowledge, each of such policies is in full
force and effect. To the Obligors' knowledge, neither the issuer of any
such policy nor any Obligor is in default or violation of any such policy.
(b) The Obligors shall have and maintain at all times insurance
covering such risks, in such amounts, containing such terms, in such form,
for such periods, and written by such companies as may be reasonably
satisfactory to the Agent . The coverage reflected on EXHIBIT 4-8 presently
satisfies the foregoing requirements, it being recognized by the Borrower,
however, that such requirements may change hereafter to reflect changing
circumstances. All insurance carried by the Obligors shall provide for a
minimum of Ten (10) days' written notice of cancellation to the Agent due
to non-payment of premiums, and Thirty (30) days' written notice of
cancellation to the Agent in all other circumstances, and all such
insurance which covers the Collateral shall include an endorsement in favor
of the Agent, which endorsement shall provide that the insurance, to the
extent of the Agent's interest therein, shall not be impaired or
invalidated, in whole or in part, by reason of any act or neglect of any
Obligor or by the failure of any Obligor to comply with any warranty or
condition of the policy. In the event of the failure by the Obligors to
maintain insurance as required herein, the Agent , at its option, may
obtain such insurance, provided, however, the Agent's obtaining of such
insurance shall not constitute a cure or waiver of any Event of Default
occasioned by the Obligors' failure to have maintained such insurance. The
Borrower shall furnish to the Agent certificates or other evidence
satisfactory to the Agent regarding compliance by the Obligors with the
foregoing insurance provisions.
(c) The Borrower shall advise the Agent of each claim in excess of
$500,000.00 made by the Borrower under any policy of insurance which covers
the Collateral. Following the acceleration of the time for payment of the
Liabilities, the Borrower will permit the Agent , at the Agent's option in
each instance, to the exclusion of the Borrower, to conduct the adjustment
of all claims regardless of the amount thereof. The Borrower hereby
appoints the Agent as the Borrower's attorney in fact to obtain, adjust,
settle, and cancel any insurance described in this section and to endorse
in favor of the Agent any and all drafts and other instruments with respect
to such insurance. This appointment, being coupled with an interest, is
irrevocable until this Agreement is terminated by a written instrument
executed by a duly authorized officer of the Agent . The Agent shall not be
liable on account of any exercise pursuant to said power except for any
exercise with gross negligence or in actual willful misconduct and bad
faith. The Agent may apply any proceeds of such insurance against the
Liabilities, whether or not such have matured, in such order of application
as the Agent may determine.
4-9. LICENSES. Each license, distributorship,franchise, and similar
agreement issued to, or to which any Obligor is a party is in full force
and effect. To the Obligors' knowledge, no party to any such license or
agreement is in default or violation thereof. The Obligors have not
received any notice of cancellation of any such license or agreement.
4-10.LEASES. EXHIBIT 4-10, annexed hereto, is a schedule of all presently
effective Capital Leases. EXHIBIT 4-5 includes a list of the locations of
properties that are the subject of all other presently effective Leases. To the
Obligors' knowledge, each of such Leases and Capital Leases is in full force and
effect. To the Obligors' knowledge, no party to any such Lease or Capital Lease
is in default or violation of any such Lease or Capital Lease, and the Obligors
have not received any notice of cancellation of any such Lease or Capital Lease.
The Obligors hereby authorize the Agent at any time and from time to time after
the occurrence, and during the continuance, of an Event of Default to contact
any of the Obligor's landlords in order to confirm the Obligor's continued
compliance with the terms and conditions of the Lease(s) between such Obligor
and that landlord and to discuss such issues, concerning the Obligor's occupancy
under such Lease(s), as the Agent may determine.
4-11. REQUIREMENTS OF LAW. The Obligors are in compliance with, and shall
hereafter comply with and use their assets in compliance with, all Requirements
of Law, except where such non-compliance would not have a material adverse
effect on the Borrower, its business or assets. The Obligors have not received
any notice of any violation of any Requirement of Law (whether or not such
violation is material), which violation has not been cured or otherwise
remedied.
4-12. MAINTAIN PROPERTIES. The Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary reasonable
wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any material part
of the Collateral.
(c) Not use any of the Collateral in violation of any policy of
insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the Collateral,
other than the following:
(i) The sale of Inventory in compliance with this Agreement.
(ii) The disposal of Equipment which is obsolete, worn out, or
damaged beyond repair, which Equipment is replaced to the extent
necessary to preserve or improve the operating efficiency of
the Borrower.
(iii) The turning over to the Agent of all Receipts as provided
herein.
(iv) The sale, liquidation or other disposition of Inventory at any
locations from which the Borrower determines to cease the
conduct of its business, provided that such sales, liquidations,
or other dispositions shall be on terms reasonably satisfactory
to the Agent (whose consent shall not be unreasonably delayed or
withheld), and further provided that notwithstanding the Agent's
furnishing of any such consent, the Agent may, in the exercise
of its reasonable discretion, impose Inventory Reserves, as a
result of the occurrence of any such sale, liquidation, or
disposition.
4-13. PAY TAXES.
(a) Except as described EXHIBIT 4-13, the Borrower has filed all
material tax returns and reports (federal, state and local) required to be
filed by it, and paid all material taxes, assessments and other
governmental charges imposed upon it and its property and assets, other
than (i) such as are presently payable without interest or penalty, (ii)
such as are being contested in good faith by appropriate proceedings, and
for which adequate reserves are being maintained in accordance with GAAP,
or (iii) with respect to local taxes, such local taxes payable by the
Borrower which (A) the chief financial officer of the Borrower has no
knowledge of the Borrower's obligation to pay and (B) the failure to pay
does not have a material adverse effect on the business, property, assets
or condition, financial or otherwise, of the Borrower. Except as described
on EXHIBIT 4-13, the federal income tax returns of the Borrower have not
been audited by the Internal Revenue Service within the last three years,
all prior audits have been closed, and there are no unpaid assessments,
penalties or other charges arising from such prior audits. Except as
described on EXHIBIT 4-13, no agreement is extant which waives or extends
any statute of limitations applicable to the right of the Internal Revenue
Service or any state taxing authority to assert a deficiency or make any
other claim for or in respect to federal or state taxes. No issue has been
raised in any examination which, by application of similar principles,
reasonably could be expected to result in the assertion of a deficiency for
any fiscal year open for examination, assessment, or claim by the Internal
Revenue Service or any state taxing authority.
(b)Except as set forth in Section 4-6(a)(iii) hereof, the Borrower
hereafter shall: pay, as they become due and payable, all taxes and
unemployment contributions and other charges of any kind or nature levied,
assessed or claimed against the Obligors or the Collateral by any person or
entity whose claim could result in an Encumbrance upon any asset of any
Obligor or by any governmental authority; properly exercise any trust
responsibilities imposed upon the Obligors by reason of withholding from
employees' pay or by reason of any Obligor's receipt of sales tax or other
funds for the account of any third party; timely make all contributions and
other payments as may be required pursuant to any Employee Benefit Plan now
or hereafter established by any Obligor; and timely file all tax and other
returns and other reports with each governmental authority to whom any
Obligor is obligated to so file.
(c) At its option, after the occurrence, and during the continuance,
of an Event of Default, the Agent may, but shall not be obligated to, pay
any taxes, unemployment contributions, and any and all other charges levied
or assessed upon any Obligor or the Collateral by any person or entity or
governmental authority, and make any contributions or other payments on
account of any Obligor's Employee Benefit Plan as the Agent , in the
Agent's discretion, may deem necessary or desirable, to protect, maintain,
preserve, collect, or realize upon any or all of the Collateral or the
value thereof or any right or remedy pertaining thereto, provided, however,
the Agent's making of any such payment shall not constitute a cure or
waiver of any Event of Default occasioned by the Borrower's failure to have
made such payment.
4-14. NO MARGIN STOCK.
The Obligors are not engaged in the business of extending credit for the
purpose of purchasing or carrying any margin stock (within the meaning of
Regulations G,U,T, and X of the Board of Governors of the Federal Reserve
System of the United States). Except as permitted elsewhere in this
Agreement, no part of the proceeds of any borrowing hereunder will be used
at any time to purchase or carry any such margin stock or to extend credit
to others for the purpose of purchasing or carrying any such margin stock.
4-15. ERISA. Neither the Borrower nor any ERISA Affiliate:
(a) Is in violation of or hereafter shall violate, or has failed or
hereafter shall fail to be in material compliance with, the Borrower's
Employee Benefit Plan.
(b) Has failed or hereafter shall fail timely to file all reports and
filings required by ERISA to be filed by the Borrower.
(c) Has engaged or hereafter shall engage in any "prohibited
transactions" or "reportable events" (respectively as described in ERISA).
(d) Has engaged or hereafter shall engage in, or commit, any act such
that a tax or penalty could be imposed upon the Borrower on account thereof
pursuant to ERISA.
(e) Has accumulated or hereafter shall accumulate any material funding
deficiency within the meaning of ERISA.
(f) Has terminated or hereafter shall terminate any Employee Benefit
Plan such that a lien could be asserted against any assets of the Borrower
on account thereof pursuant to ERISA.
(g) Is or hereafter shall be a member of, contribute to, or have any
obligation under any Employee Benefit Plan which is a multiemployer plan
within the meaning of Section 4001(a) of ERISA.
4-16. HAZARDOUS MATERIALS.
(a) The Obligors have never:
(i) been legally responsible for any release or threat of release of
any Hazardous Material; or
(ii) received notification of any release or threat of release of any
Hazardous Material from any site or vessel occupied or operated
by any Obligor and/or of the incurrence of any expense or loss in
connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from any
such site or vessel.
(b) The Obligors shall:
(i) dispose of any Hazardous Material only in compliance with all
Environmental Laws in all material respects; and
(ii) not store on any site or vessel occupied or operated by any
Obligor and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the
ordinary course of such Obligor's business and is in compliance
with all Environmental Laws in all material respects.
(c) The Borrower shall provide the Agent with written notice upon the
Borrower's obtaining knowledge of any incurrence of any expense or loss by
any governmental authority or other Person in connection with the
assessment, containment, or removal of any Hazardous Material, for which
expense or loss any Obligor may be liable.
4-17. LITIGATION. Except as described in EXHIBIT 4-17, annexed hereto,
there is not presently pending or threatened by or against any Obligor any suit,
action, proceeding, or investigation which, if determined adversely to such
Obligor, would have a material adverse effect upon the Obligors' financial
condition or ability to conduct their business as such business is presently
conducted or is contemplated to be conducted in the foreseeable future.
4-18. DIVIDENDS OR INVESTMENTS. The Obligors shall not:
(a) Pay any cash dividend or make any other distribution in respect of
any class of the Borrower's capital stock.
(b) Redeem, retire, purchase, or acquire any of the Borrower's capital
stock involving the expenditure of cash after the date of this Agreement at
any time that a Suspension Event has occurred and is continuing.
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity,
other than (i) Permitted Acquisitions, and (ii) other Eligible Investments
provided that no Revolving Credit Loans are then outstanding and each such
Eligible Investment is pledged to the Agent to secure the Liabilities).
(d) Except as permitted pursuant to Section 4-19 hereof, merge or
consolidate or be merged or consolidated with or into any other corporation
or other entity.
(e) Except as permitted pursuant to Section 4-19 hereof, consolidate
any of the Borrower's operations with those of any other corporation or
other entity.
(f) Organize or create any Related Entity, other than in connection
with a Permitted Acquisition and in compliance with the provisions of
Section 4-19(e) hereof.
(g) Subordinate any debts or obligations owed to the Borrower by any
third party to any other debts owed by such third party to any other Person
other than subordination, attornment, and non-disturbance agreements
required pursuant to any Leases.
(h) Except as permitted pursuant to Section 4-19 hereof, acquire any
assets other than in the ordinary course and conduct of the Borrower's
business as conducted at the execution of this Agreement
4-19. PERMITTED ACQUISITIONS. The Borrower may make Permitted Acquisitions
without the consent of the Agent or the Lenders; provided that:
(a) Not less than Fifteen (15) days prior written notice (with
reasonable particularity as to the facts and circumstances in respect of
which such notice is being given) of such Permitted Acquisition is given to
the Agent.
(b) The aggregate purchase price (exclusive of the portion of the
purchase price paid for with capital stock of the Borrower) of all such
Permitted Acquisitions undertaken from and after October 31, 1998 is not
greater than Nine Million Dollars ($9,000,000.00).
(c) The aggregate consideration paid in cash for all such Permitted
Acquisitions does not exceed the difference between Five Million Dollars
($5,000,000.00) and the amount of cash expended by the Borrower after the
date of this Agreement pursuant to Section 4-18(b) hereof (provided that
the aggregate consideration paid in cash for Permitted Acquisitions in any
twelve month period after the date of this Agreement shall not exceed the
difference between (i) $2,500,000.00 and (ii) the amount of cash expended
by the Borrower during such twelve month period pursuant to Section
4-18(b)).
(d) No Event of Default then exists or would result from any such
Acquisition.
(e) With respect, to and in the event of any Permitted Acquisition
which consists of, or results in the creation of, a Subsidiary, Agent shall
be provided with such Subsidiary's Unlimited Guaranty (in form and
substance satisfactory to the Agent), which Unlimited Guaranty shall be
secured by first perfected security interests and liens on substantially
all of the assets of such Subsidiary, subject to the same limitations set
forth in Section 8-1 hereof and subject to Permitted Encumbrances.
(f) The Agent and the Lenders shall have no obligation to include any
Inventory acquired in such Permitted Acquisition (or Inventory of a similar
type and nature acquired after the Permitted Acquisition) as "Acceptable
Inventory".
4-20. LOANS. The Obligors shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:
(a) Advance payments made to the Borrower's suppliers in the ordinary
course.
(b) Advances to the Borrower's officers, employees, and salespersons
with respect to reasonable expenses to be incurred by such officers,
employees, and salespersons for the benefit of the Borrower, which expenses
are properly substantiated by the person seeking such advance and properly
reimbursable by the Borrower.
(c) Loans to the Borrower's officers and employees not exceeding
$400,000 in the aggregate at any one time outstanding, provided that each
such loan is for a term of not more than 90 days from the date on which it
is made and is paid within such 90-day period; provided that, all amounts
due on account of loans permitted under this clause
(c) shall constitute Collateral and shall be pledged to the Agent for
the ratable benefit of the Lenders; and
(d) Advances to contractors for the construction or renovation of
stores, buildings or improvements for use in the business of the Borrower.
4-21. Intentionally Omitted.
4-22. RESTRICTIONS ON SALE OF COLLATERAL; LICENSE AGREEMENTS. To the
Obligors' knowledge, the Obligors are not, and shall not become, party to any
agreement or understanding which limits, impairs, or otherwise restricts the
ability of the Agent to freely sell and dispose of any of the Collateral
(including, without limitation, any repurchase agreements, rights of first
refusal or other agreements which limit or condition the time, manner, place or
price for the sale or disposition of the Collateral), other than certain
Trademark License Agreements with Levi ▇▇▇▇▇▇▇ & Co. dated November 1, 1991 and
November 15, 1996. The Borrower shall not effect or permit any material change
or amendment to the terms of such License Agreements which would impose further
restrictions to the Agent's disposition of the Collateral or would shorten the
term of such License Agreements, other than as contemplated in the Amendment and
Distribution Agreement dated as of October 31, 1988 by and among Designs JV
Corp., LDJV, Inc. and The Designs/OLS Partnership.
4-23. PROTECTION OF ASSETS. The Agent, in the Agent's discretion, and from
time to time, may discharge any tax or Encumbrance on any of the Collateral
(other than Permitted Encumbrances unless an Event of Default has occurred and
is continuing), or take any other action that the Lender may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral. The Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Agent has had an opportunity to be heard), from which finding no further appeal
is available, that the Agent had acted in actual bad faith or in a grossly
negligent manner. The Borrower shall pay to the Agent, on demand, or the Agent,
in its discretion, may add to the Loan Account, all amounts paid or incurred by
the Lender pursuant to this section. The obligation of the Borrower to pay such
amounts is a Liability.
4-24. LINE OF BUSINESS. The Obligors shall not engage in any business other
than the business in which they are currently engaged or a business reasonably
related thereto provided that the foregoing shall not prohibit the expansion or
contraction of the Borrower's business so long as the Borrower is still engaged
solely in the retail sale of apparel, footwear and related accessories and other
activities, ancillary, incidental or necessary thereto.
4-25. AFFILIATE TRANSACTIONS. The Obligors shall not make any payment, nor
give any value to any Related Entity except for goods and services actually
purchased by the Obligors from, or sold by the Obligors to, such Related Entity
for a price and on terms which shall
(a) be competitive and fully deductible as an "ordinary and necessary
business expense" and/or fully depreciable under the Internal Revenue Code
of 1986 and the Treasury Regulations, each as amended; and
(b) not be less favorable than those which would have been charged in
an arms length transaction.
4-26. ADDITIONAL ASSURANCES.
(a) The Borrower shall execute and deliver to the Agent such
instruments, documents, and papers, and shall do all such things from time
to time hereafter as the Agent may reasonably request to carry into effect
the provisions and intent of this Agreement; to protect and perfect the
Agent's security interests in the Collateral; and to comply with all
applicable statutes and laws, and facilitate the collection of the
Receivables Collateral. The Borrower shall execute all such instruments as
may be required by the Agent with respect to the recordation and/or
perfection of the security interests created herein.
(b) The Borrower hereby designates the Agent as and for the Borrower's
true and lawful attorney, with full power of substitution, to sign and file
any financing statements in order to perfect or protect the Agent's
security and other collateral interests in the Collateral.
(c) A carbon, photographic, or other reproduction of this Agreement or
of any financing statement or other instrument executed pursuant to this
Section 4-26 shall be sufficient for filing to perfect the security
interests granted herein.
4-27. ADEQUACY OF DISCLOSURE.
(a) All financial statements furnished to the Agent and each Lender by
the Borrower have been prepared in accordance with GAAP consistently
applied and present fairly the condition of the Borrower at the date(s)
thereof and the results of operations and cash flows for the period(s)
covered. There has been no change in the financial condition, results of
operations, or cash flows of the Borrower since the date(s) of such
financial statements, other than changes in the ordinary course of
business, which changes have not been materially adverse, either singularly
or in the aggregate.
(b) The Borrower does not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the
Borrower's annual certified financial statements and Form 10K and 10Q
reports furnished to the Agent and each Lender prior to the execution of
this Agreement.
(c) No document, instrument, agreement, or paper now or hereafter
given the Agent by or on behalf of the Borrower or any guarantor of the
Liabilities in connection with the execution of this Agreement by the
Agent, taken as a whole, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in
order to make the statements therein not misleading.
4-28. OTHER COVENANTS. The Borrower shall not indirectly do or cause to be
done any act which, if done directly by the Borrower, would breach any covenant
contained in this Agreement.
ARTICLE 5- REPORTING REQUIREMENTS / FINANCIAL COVENANTS.
5-1. MAINTAIN RECORDS. The Borrower shall:
(a) At all times, keep proper books of account, in which full, true,
and accurate entries shall be made of all of the Borrower's transactions,
all in accordance with GAAP applied consistently with prior periods to
fairly reflect the financial condition of the Borrower at the close of, and
its results of operations for, the periods in question.
(b) Timely provide the Agent with those financial reports, statements,
and schedules required by this Article 5 or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent
applicable, in accordance with GAAP applied consistently with prior periods
to fairly reflect the financial condition of the Borrower at the close of,
and its results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the Collateral
including, without limitation, accurate current stock, cost, and sales
records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public accountants who
are reasonably satisfactory to the Agent and instruct such accountants to
fully cooperate with, and be available to, the Agent to discuss the
Borrower's financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Agent.
(e) Not change the Borrower's fiscal year.
(f) Not change the Borrower's taxpayer identification number.
5-2. ACCESS TO RECORDS.
(a) Upon reasonable prior notice from the Agent to the Borrower, the
Borrower shall accord the Agent and the Agent's representatives with access
from time to time as the Agent and such representatives may require to all
properties owned by or over which the Borrower has control. The Agent and
the Agent's representatives shall have the right, and the Borrower will
permit the Agent and such representatives from time to time as the Agent
and such representatives may request, to examine, inspect, copy, and make
extracts from any and all of the Borrower's books, records, electronically
stored data, papers, and files. The Borrower shall make all of the
Borrower's copying facilities available to the Agent.
(b) The Borrower hereby authorizes the Agent and the Agent's
representatives to:
(i) Except to the extent prohibited by the Borrower's contractual
obligations, inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any
and all computer or electronically stored information or data
which relates to the Borrower, or any service bureau, contractor,
accountant, or other person, and directs any such service bureau,
contractor, accountant, or other person fully to cooperate with
the Agent and the Agent's representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion thereof,
including verification with Account Debtors, and/or with the
Borrower's computer billing companies, collection agencies, and
accountants and to sign the name of the Borrower on any notice to
the Borrower's Account Debtors or verification of the Collateral.
5-3. NOTICE TO AGENT.
(a) The Borrower shall provide the Agent with written notice promptly
upon the occurrence of any of the following events, which written notice
shall be with reasonable particularity as to the facts and circumstances in
respect of which such notice is being given:
(i) Any change in the Borrower's officers.
(ii) The completion of any physical count of the Borrower's
Inventory (together with a copy of the results thereof
certified by the Borrower's chief financial officer).
(iii) Any ceasing of the Borrower's making of payment, in the ordinary
course, to any of its creditors, on account of obligations
aggregating in excess of $180,000.00 (including the ceasing of
the making of such payments on account of a dispute with the
subject creditor).
(iv) Any failure by the Borrower to pay rent at any of the Borrower's
locations which rent in the aggregate exceeds $180,000.00, which
failure continues for more than Ten (10) days following the day
on which such rent first came due.
(v) Any material change in the business, operations, or financial
affairs of the Borrower.
(vi) The Borrower's obtaining knowledge of any fact which has, or in
the foreseeable future, is likely to have, a material adverse
effect on the financial condition of the Borrower or any
Guarantor.
(vii) The occurrence of any Suspension Event.
(viii)Any intention on the part of the Borrower to discharge the
Borrower's present independent accountants or any withdrawal or
resignation by such independent accountants from their acting in
such capacity (as to which, see Subsection 5-1(d)).
(ix) Any litigation which, if determined adversely to the Borrower,
is likely to have a material adverse effect on the financial
condition of the Borrower.
(b) The Borrower shall:
(i) Provide the Agent, when so distributed, with copies of any
materials distributed to the shareholders of the Borrower (qua
such shareholders).
(ii) Provide the Agent:
(A)When filed, copies of all filings with the SEC.
(B)When received, copies of all correspondence from the SEC,
asserting that the Borrower is in violation of any
Requirement of Law.
(iii)Add the Agent as an addressee on all mailing lists maintained by
or for the Borrower.
(iv) At the request of the Agent, from time to time, provide the Agent
with copies of all advertising (including copies of all print
advertising and duplicate tapes of all video and radio
advertising).
(v) Provide the Agent, when received by the Borrower, with a copy of
any management letter or similar communications from any
accountant of the Borrower.
5-4. BORROWING BASE CERTIFICATE. The Borrower shall provide the Agent
by 5:00 PM, daily, (unless no Revolving Credit Loans are outstanding, in
which event weekly, by the close of business on Monday of each week) with a
Borrowing Base Certificate (in the form of EXHIBIT 5-4 annexed hereto, as
such form may be revised from time to time by the Agent). Such Certificate
may be sent to the Agent by facsimile transmission, provided that the
original thereof is forwarded to the Agent on the date of such
transmission. It is understood that in furnishing the Borrowing Base
Certificate to the Agent, the Borrower will update Inventory values on a
weekly basis (at a minimum).
5-5. WEEKLY REPORTS. If any Revolving Credit Loans are outstanding, or
if the Stated Amount of outstanding L/Cs exceed $3,000,000.00, weekly, on
Wednesday of each week (as of the then immediately preceding Saturday), the
Borrower shall provide the Agent with a sales audit report (in such form as
may be reasonably specified from time to time by the Agent). Such report
may be sent to the Agent by facsimile transmission, provided that the
original thereof is forwarded to the Agent on the date of such
transmission.
5-6. MONTHLY REPORTS.
(a) Monthly, the Borrower shall provide the Agent with the following
(each in such form as the Agent from time to time may specify):
(i) Within Fifteen (15) days of the end of the previous month:
(A) A "Stock Ledger Inventory Report" by department for each
division and a Certificate by department for each division
(signed on behalf of the Borrower by the Borrower's President
or Chief Financial Officer) concerning the Borrower's
Inventory.
(B) An aging of the Borrower's Inventory.
(ii) Within Thirty (30) days of the end of the previous month:
(A) Reconciliations of the above described Report and inventory
Certificate (Section 5-6(a)(i)(A)) to Availability and to
the general ledger as of the end of the subject month.
(B) A gross margin reconciliation.
(C) A schedule of purchases from the Borrower's ten largest
vendors (in terms of year to date purchases), which schedule
shall be in such form as may be satisfactory to the Agent
and shall include year to date cumulative purchases and an
aging of payables to each such vendor.
(D) An aging of the Borrower's accounts payable.
(E) A store activity report.
(F) An internally prepared consolidated and consolidating
financial statement of the Obligors' financial condition the
results of its operations for, the period ending with the
end of the subject month, which financial statement shall
include, at a minimum, a balance sheet, income statement (on
a store specific and on a "consolidated" basis), cash flow
and comparison of same store sales for the corresponding
month of the then immediately previous year, as well as to
the Business Plan.
(G) The following portions of the Borrower's monthly financial
closing package:
(i) Executive Summary/Press releases.
(ii) Monthly and year to date sales reporting package.
(iii) A comparison of actual sales to the prior year's sales and
to the Borrower's projections for the subject month and for
the year to date.
(iv) A Gross Margin analysis by segment for the subject month
and fiscal quarter to date.
(v) An Inventory Reconciliation of the Borrower's retail stock
ledger to the Borrower's general ledger.
(vi) A Shrink analysis and accruals by division.
(b) For purposes of Section 5-6(a)(i), above, the first "previous
month" in respect of which the items required by that Section shall be
provided shall be the fiscal month ended April, 1998 and for purposes of
Section 5-6(a)(ii), above, the first "previous month" in respect of which
the items required by that Section shall be provided shall be the fiscal
month ended April, 1998.
5-7. QUARTERLY REPORTS. Quarterly, within Fifty (50) days following
the end of each of the Borrower's fiscal quarters (except for the last
fiscal quarter of each fiscal year), the Borrower shall provide the Agent
with an original counterpart of a management prepared consolidated and
consolidating financial statement of the Borrower and its Subsidiaries for
the period from the beginning of the Borrower's then current fiscal year
through the end of the subject quarter, with comparative information for
the same period of the previous fiscal year, which statement shall include,
at a minimum, a balance sheet, income statement (on a store specific and on
a "consolidated" basis), statement of changes in shareholders' equity, and
cash flows and comparisons for the corresponding quarter of the then
immediately previous year, as well as to the Business Plan, (ii) the
Borrower's Form 10-Q report filed with the SEC.
5-8. ANNUAL REPORTS.
(a) Annually, within ninety-five (95) days following the end of the
Borrower's fiscal year, the Borrower shall furnish the Agent with
(i) an original signed counterpart of the Borrower's annual
consolidated financial statement, which statement shall bear the
unqualified opinion of, the Borrower's independent certified
public accountants (i.e. said statement shall be "certified" by
such accountants). Such annual statement shall include, at a
minimum (with comparative information for the then prior fiscal
year) a balance sheet, income statement, statement of changes in
shareholders' equity, and cash flows, and
(ii) the Borrower's Form 10-K report filed with the SEC.
(b) No later than the earlier of Fifteen (15) days prior to the end of
each of the Borrower's fiscal years or the date on which such accountants
commence their work on the audit of the Borrower's annual financial
statement, the Borrower shall give written notice to such accountants (with
a copy of such notice, when sent, to the Agent) that:
(i) Such annual financial statement will be delivered by the Borrower
to the Agent (for subsequent distribution to each Lender).
(ii) It is the intention of the Borrower, in its engagement of such
accountants, to satisfy the financial reporting requirements set
forth in this Article 5.
(iii)The Agent (and each Lender) will rely thereon with respect to the
administration of, and transactions under, the credit facility
contemplated by this Agreement.
(c) Each annual statement shall be accompanied by such accountant's
certificate indicating that, in the preparation of such annual statement,
such accountants did not conclude that any Suspension Event had occurred
during the subject fiscal year as a result of the Borrower's breach of the
financial performance covenants set forth on EXHIBIT 5-13(a) hereto (or if
one or more had occurred, the facts and circumstances thereof).
5-9. APPLICABLE TO MONTHLY, QUARTERLY AND ANNUAL REPORTS. All financial
reports furnished by the Borrower under Sections 5-6, 5-7, and 5-8 hereof shall
be prepared on the following basis:
(a) The Borrower and its Subsidiaries on a consolidated basis; and
(b) The Borrower and its Subsidiaries on a consolidated basis.
5-10. OFFICERS' CERTIFICATES. The Borrower shall cause the Borrower's
President and Chief Financial Officer respectively to provide such Person's
Certificate on behalf of the Borrower with those monthly, quarterly, and
annual statements to be furnished pursuant to this Agreement, which
Certificate shall:
(a) Indicate that the subject statement was prepared in accordance
with GAAP consistently applied and presents fairly the financial condition
of the Obligors at the close of, and the results of their respective
operations and cash flows for, the period(s) covered, subject, however to
the following:
(i) usual year end adjustments and footnotes (this exception shall
not be included in the Certificate which accompanies such annual
statement).
(ii)Material Accounting Changes (in which event, such Certificate
shall include a schedule (in reasonable detail) of the effect of
each such Material Accounting Change) not previously specifically
taken into account in the determination of the financial
performance covenant imposed pursuant to Section 5-13.
(b) Indicate either that during the relevant period
(i) no Suspension Event has occurred or
(ii) if such an event has occurred, its nature (in reasonable detail)
and the steps (if any) being taken or contemplated by the
Borrower to be taken on account thereof.
(c) Include calculations concerning the Borrower's compliance (or
failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 5-13 hereof.
5-11. INVENTORIES, APPRAISALS, AND AUDITS.
(a) The Agent and each Lender, at the expense of the Borrower, may
participate in and/or observe each physical count and/or inventory of so
much of the Collateral as consists of Inventory which is undertaken on
behalf of the Borrower.
(b) Upon the Agent's request from time to time, the Borrower shall
obtain (in all events, at the Borrower's expense) physical counts and/or
inventories of the Collateral, conducted by such inventory takers as are
satisfactory to the Agent and following such methodology as may be required
by the Agent, each of which physical counts and/or inventories shall be
observed by the Borrower's accountants. The Agent contemplates requiring
the Borrower to conduct one such count and/or inventory for each of the
Borrower's locations during each Twelve (12) month period during which this
Agreement is in effect. The Borrower shall promptly furnish the Agent with
copies of the results and adjusting entries for each such count or
inventory. In the Agent's discretion, after the occurrence of an Event of
Default, the Agent may undertake or cause the Borrower to undertake
additional such counts or inventories during any such period.
(c) Upon the Agent's request from time to time, the Borrower shall
permit t he Agent to obtain appraisals (in all events, at the Borrower's
expense) conducted by such appraisers as are satisfactory to the Agent.
(d) The Agent contemplates conducting up to Four (4) commercial
finance audits (in each event, at the Borrower's expense) of the Borrower's
books and records during any Twelve (12) month period during which this
Agreement is in effect, but in its discretion, may undertake additional
such audits during such period.
(e) The Agent from time to time (in all events, at the Borrower's
expense) may undertake "mystery shopping" (so-called) visits to all or any
of the Borrower's business premises. The Agent shall provide the Borrower
with a copy of any non-company confidential results of such mystery
shopping.
(f) The maximum aggregate cost for the following which the Agent
conducts or causes to be conducted in any Twelve (12) month period for
which the Borrower shall reimburse the Agent shall not exceed the aggregate
of following, it being understood, however, that (x) the maxima are subject
to Borrower's having made available, as appropriate, upon reasonable prior
notice and during normal business hours, its facilities, financial
information, and personnel to facilitate completion in the ordinary course
of the following and (y) no Event of Default having occurred and continuing
(and that if either (x) or (y) is not fulfilled, there shall not be any
such limitation on the aggregate of such costs):
(i) Appraisals pursuant to Section 5-11(c): $65,000.00 .
(ii) Commercial finance audits pursuant to Section 5-11(d):
$20,000.00, plus travel expenses.
(iii) Mystery Shopping pursuant to Section 5-11(e): $1,000.00
5-12. ADDITIONAL FINANCIAL INFORMATION.
(a) In addition to all other information required to be provided
pursuant to this Article 5, the Borrower promptly shall provide the Agent,
with such other and additional information concerning the Obligors, the
Collateral, the operation of the Obligors' business, and the Obligors'
financial condition, including original counterparts of financial reports
and statements, as the Agent may from time to time reasonably request from
the Borrower.
(b) The Borrower may provide the Agent, from time to time hereafter,
with updated projections of the Obligors' anticipated performance and
operating results.
(c) In all events, the Borrower, no sooner than Ninety (90) nor later
than Sixty (60) days prior to the end of each of the Borrower's fiscal
years, shall furnish the Agent with an updated and extended projection for
the Obligors which shall go out at least through the end of the next fiscal
year.
(d) The Obligors recognize that all appraisals, inventories, analysis,
financial information, and other materials which the Agent or any Lender
may obtain, develop, or receive with respect to the Obligors is
confidential to the Agent and the Lenders and that, except as otherwise
provided herein, the Obligors are not entitled to receipt of any of such
appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.
5-13. FINANCIAL PERFORMANCE COVENANTs. The Borrower shall observe and
comply with those financial performance covenants set forth on EXHIBIT
5-13(a), annexed hereto. Compliance with such financial performance
covenants shall be made as if no Material Accounting Changes had been made.
The Agent may determine the Borrower's compliance with such covenants based
upon financial reports and statements provided by the Borrower to the Agent
(whether or not such financial reports and statements are required to be
furnished pursuant to this Agreement) as well as by reference to interim
financial information provided to, or developed by, the Agent. If the Agent
determines, based upon information developed by the Agent, that an Event of
Default exists as a result of the Borrower's failure to comply with such
covenants, the Agent shall furnish such information which the Agent has
developed to the Borrower upon the Borrower's request therefor.
ARTICLE 6- USE AND COLLECTION OF COLLATERAL.
6-1. USE OF INVENTORY COLLATERAL.
(a) The Borrower shall not engage in any sale of the Inventory other
than for fair consideration in the conduct of the Borrower's business in
the ordinary course and shall not engage in sales or other dispositions to
creditors; sales or other dispositions in bulk; and any use of any of the
Inventory in breach of any provision of this Agreement.
(b) No sale of Inventory shall be on consignment, approval, or under
any other circumstances such that, with the exception of the Borrower's
customary return policy applicable to the return of inventory purchased by
the Borrower's retail customers in the ordinary course, such Inventory may
be returned to the Borrower without the consent of the Agent.
6-2. INVENTORY QUALITY. All Inventory now owned or hereafter acquired
by the Borrower is and will be of good and merchantable quality and free
from defects (other than defects within customary trade tolerances), other
than Inventory owned or acquired for the Levi's Outlet By Designs Stores,
which in the ordinary course sells manufacturer's overruns, discontinued
lines, and irregulars purchased directly from Levi ▇▇▇▇▇▇▇ & Company.
6-3. ADJUSTMENTS AND ALLOWANCES. The Borrower may grant such
allowances or other adjustments to the Borrower's Account Debtors
(exclusive of extending the time for payment of any Account or Account
Receivable, which shall not be done without first obtaining the Agent's
prior written consent in each instance) as the Borrower may reasonably deem
to accord with sound business practice, provided, however, the authority
granted the Borrower pursuant to this Section 6-3 may be limited or
terminated by the Lender at any time in the Agent's discretion.
6-4. -VALIDITY OF ACCOUNTS.
(a) The amount of each Account shown on the books, records, and
invoices of the Borrower represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall
have been fully earned by performance by the Borrower.
(b) The Borrower has no knowledge of any impairment of the validity or
collectibility of any of the Accounts and shall notify the Agent of any
such fact immediately after Borrower becomes aware of any such impairment.
(c) The Borrower shall not post any bond to secure the Borrower's
performance under any agreement to which the Borrower is a party nor cause
any surety, guarantor, or other third party obligee to become liable to
perform any obligation of the Borrower (other than to the Agent ) in the
event of the Borrower's failure so to perform.
6-5. NOTIFICATION TO ACCOUNT DEBTORS. The Agent shall have the right
at any time after the occurrence, and during the continuance, of an Event
of Default to notify any of the Borrower's Account Debtors to make payment
directly to the Agent and to collect all amounts due on account of the
Collateral.
ARTICLE 7- CASH MANAGEMENT. PAYMENT OF LIABILITIES.
7-1. DEPOSITORY ACCOUNTS.
(a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present DDA's,
which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such
depository.
(b) The Borrower shall deliver to the Agent, as a condition to the
effectiveness of this Agreement a notification, executed on behalf of the
Obligors, to each depository institution (other than Fleet National Bank)
with which any DDA is maintained, in form satisfactory to the Agent, of the
Agent's interest in such DDA.
(c) The Obligors will not establish any DDA hereafter, unless the
Borrower shall have furnished at least ten (10) days prior written notice
to the Agent and unless the Borrower shall deliver to the Agent a
notification to the depository institution with which such DDA is to be
maintained, in form satisfactory to the Agent, of the Agent's interest in
such DDA.
7-2. CREDIT CARD RECEIPTS.
(a) Annexed hereto as EXHIBIT 7-2, is a Schedule which describes all
arrangements to which any Obligor is a party with respect to the payment to
such Obligor of the proceeds of all credit card charges for sales by the
Obligors.
(b) The Borrower shall deliver to the Agent, as a condition to the
effectiveness of the Agreement, notification, executed on behalf of the
Obligors, to each of the Obligors' credit card clearinghouses and
processors of notice (in form satisfactory to the Agent ), which notice
provides that payment of all credit card charges submitted by the Obligors
to that clearinghouse or other processor and any other amount payable to
the Obligors by such clearinghouse or other processor shall be directed to
the Concentration Account or as may be otherwise directed by the Agent. The
Obligors shall not change such direction or designation except upon and
with the prior written consent of the Agent .
7-3. THE CONCENTRATION AND THE FUNDING ACCOUNTS.
(a) The following checking accounts have been or will be established
(and are so referred to herein):
(i) The Concentration Account: Established by the Agent with Fleet
National Bank.
(ii)The Funding Account: Established by the Borrower with Fleet
National Bank (Account No. ▇▇▇▇▇▇▇ and Account No. 80-048-046).
(b) The contents of each DDA (other than the Funding Account)
constitutes Collateral and Proceeds of Collateral. The contents of the
Concentration Account constitutes the Agent's property.
(c) The Borrower shall pay all fees and charges of, and maintain such
balances as may be required by the Lender or by any bank in which any
account is opened as required hereby (even if such account is opened by
and/or is the property of the Agent).
7-4. PROCEEDS AND COLLECTION OF ACCOUNTS.
(a) All Receipts constitute Collateral and proceeds of Collateral and
shall be held in trust by the Obligors for the Agent; and shall be
deposited and/or transferred only to the Concentration Account.
(b) The Borrower shall cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily (and whether or not
there is then an outstanding balance in the Loan Account) of the then
contents of each DDA (other than the Funding Account), each such transfer
to be net of any minimum balance, not to exceed $750.00, as may be required
to be maintained in the subject DDA by the bank at which such DDA is
maintained).
(c) In the event that, notwithstanding the provisions of this Section
7-4, any Obligor receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by such Obligor for the
Agent and shall not be commingled with any of the Obligors' other funds or
deposited in any account of the Obligors other than as instructed by the
Agent.
7-5. PAYMENT OF LIABILITIES.
(a) On each Business Day, the Agent shall apply, towards the
Liabilities, the then collected balance of the Concentration Account (net
of fees charged, and of such impressed balances as may be required by the
bank at which the Concentration Account is maintained), provided, however,
for purposes of the calculation of interest on the unpaid principal balance
of the Loan Account, such payment shall be deemed to have been made One (1)
Business Day after such transfer, and further provided that until the
occurrence, and during the continuance, of an Event of Default, unless the
Borrower otherwise instructs the Agent, the balance of the Concentration
Account shall not be applied to any LIBOR Loans until the end of the
applicable Interest Period therefor.
(b) The following rules shall apply to deposits and payments under and
pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to the Concentration
Account on the Business Day on which deposited, provided that
notice of such deposit is available to the Agent by 2:00 PM on
that Business Day.
(ii) Funds paid to the Agent, other than by deposit to the
Concentration Account, shall be deemed to have been received on
the Business Day when they are good and collected funds, provided
that notice of such payment is available to the Agent by 2:00 PM
on that Business Day.
(iii)If notice of a deposit to the Concentration Account (Section
7-5(b)(i)) or payment (Section 7-5(b)(ii)) is not available to
the Agent until after 2:00 PM on a Business Day, unless caused by
the Agent's bank's error, such deposit or payment shall be deemed
to have been made at 9:00 AM on the next Business Day.
(iv) All deposits to the Concentration Account and other payments to
the Agent are subject to clearance and collection.
(c) The Agent shall transfer to the Funding Account any surplus in the
Concentration Account remaining after the application towards the
Liabilities referred to in Section 7-5(a), above (less those amount which
are to be netted out, as provided therein) provided, however, in the event
that both (i) an Event of Default has occurred and is continuing, and (ii)
one or more L/C's are then outstanding, the Agent may establish a funded
reserve of up to 103% of the aggregate Stated Amounts of such L/C's.
7-6. THE FUNDING ACCOUNT. Except as otherwise specifically provided in,
or permitted by, this Agreement, all checks shall be drawn by the Borrower upon
and other disbursements made by the Borrower solely from, the Funding Account.
ARTICLE 8- GRANT OF SECURITY INTEREST
8-1. GRANT OF SECURITY INTEREST. To secure the Borrower's prompt,
punctual, and faithful performance of all and each of the Liabilities, the
Borrower hereby grants to the Agent, for the ratable benefit of the Lenders
and their respective Affiliates, a continuing security interest in and to,
and assigns to the Agent, for the ratable benefit of the Lenders and their
respective Affiliates, the following, and each item thereof, whether now
owned or now due, or in which the Borrower has an interest, or hereafter
acquired, arising, or to become due, or in which the Borrower obtains an
interest, and all products, Proceeds, substitutions, and accessions of or
to any of the following (all of which, together with any other property in
which the Agent may in the future be granted a security interest, is
referred to herein as the "Collateral"):
(a) All Accounts and accounts receivable.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All Letter-of-Credit Rights.
(i) All Payment Intangibles.
(j) All Supporting Obligations.
(k) All books, records, and information relating to the Collateral
and/or to the operation of the Borrower's business, and all rights of
access to such books, records, and information, and all property in which
such books, records, and information are stored, recorded, and maintained.
(l) All Investment Property (including, without limitation, stock in
the Guarantors), Instruments, Documents, Deposit Accounts, policies and
certificates of insurance, deposits, impressed accounts, compensating
balances, money, cash, or other property.
(m) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of
such proceeds, refunds, and premium rebates arise out of any of the
foregoing (8-1(a) through 8-1(l)) or otherwise.
(n) All liens, guaranties, rights, remedies, and privileges pertaining to
any of the foregoing (8-1(a) through 8-1(m)), including the right of
stoppage in transit.
(o) All Leasehold Interests.
Notwithstanding anything in this Agreement to the contrary, with
respect to each item of Collateral constituting equipment subject to a Capital
Lease, or constituting an agreement, license, permit or other instrument of the
Borrower, such item shall be subject to the security interest created hereby
only to the extent that the granting of such security interest, under the terms
of such Capital Lease, agreement, license, permit or other instrument, or as
provided by law, does not cause any default under or termination of such Capital
Lease, agreement, license, permit or other instrument or the loss of any
material right of the Borrower thereunder; provided, however, that in no event
shall the foregoing be construed to exclude from the security interest created
by this agreement, proceeds or products of any such Capital Lease, agreement,
license, permit or other instrument of the Borrower or any accounts receivable
or the right to payments due or to become due the Borrower under any such
agreement or other instrument.
8-2. EXTENT AND DURATION OF SECURITY INTEREST. The grant of a security
interest herein is in addition to, and supplemental of, any security
interest previously granted by the Borrower to the Agent and shall continue
in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full and the security
interest granted herein is specifically terminated in writing by a duly
authorized officer of the Agent. It is further intended that, with respect
to any term used herein to describe Collateral, which term is defined in
either (or both) the UCC as in effect on the date when this Agreement was
executed by the Borrowers or in UCC9'99, the meaning given that term shall
be the more encompassing of the two definitions.
ARTICLE 9- AGENT AS BORROWER'S ATTORNEY-IN-FACT.
9-1. -APPOINTMENT AS ATTORNEY-IN-FACT. The Borrower hereby irrevocably
constitutes and appoints the Agent as the Borrower's true and lawful attorney,
with full power of substitution, exercisable after the occurrence, and during
the continuance, of an Event of Default, to convert the Collateral into cash at
the sole risk, cost, and expense of the Borrower, but for the sole benefit of
the Agent. The rights and powers granted the Agent by such appointment include
but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action relating to
the Collateral.
(b) Sign change of address forms to change the address to which the
Borrower's mail is to be sent to such address as the Agent shall designate;
receive and open the Borrower's mail; remove any Receivables Collateral and
Proceeds of Collateral therefrom and turn over the balance of such mail
either to the Borrower or to any trustee in bankruptcy, receiver, assignee
for the benefit of creditors of the Borrower, or other legal representative
of the Borrower whom the Agent determines to be the appropriate person to
whom to so turn over such mail.
(c) Endorse the name of the Borrower in favor of the Agent upon any
and all checks, drafts, notes, acceptances, or other items or instruments;
sign and endorse the name of the Borrower on, and receive as secured party,
any of the Collateral, any invoices, schedules of Collateral, freight or
express receipts, or bills of lading, storage receipts, warehouse receipts,
or other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrower on any notice to the Borrower's
Account Debtors or verification of the Receivables Collateral; sign the
Borrower's name on any Proof of Claim in Bankruptcy against Account
Debtors, and on notices of lien, claims of mechanic's liens, or assignments
or releases of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the payment of
any letter of credit and/or banker's acceptance of which the Borrower is a
beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver, alter
or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrower.
(g) Use, license or transfer any or all General Intangibles of the
Borrower.
9-2. NO OBLIGATION TO ACT. The Agent shall not be obligated to do any of
the acts or to exercise any of the powers authorized by Section 9-1 herein,
but if the Agent elects to do any such act or to exercise any of such
powers, it shall not be accountable for more than it actually receives as a
result of such exercise of power, and shall not be responsible to the
Borrower for any act or omission to act except for any act or omission to
act as to which there is a final determination made in a judicial
proceeding (in which proceeding the Agent has had an opportunity to be
heard) which determination includes a specific finding that the subject act
or omission to act had been grossly negligent or in actual bad faith.
ARTICLE 10- EVENTS OF DEFAULT.
The occurrence of any event described in this Article 10 respectively
shall constitute an "Event of Default" herein. Upon the occurrence of any Event
of Default described in Section 10-12, any and all Liabilities shall become due
and payable without any further act on the part of the Agent or any Lender. Upon
the occurrence of any other Event of Default, any and all Liabilities shall
become immediately due and payable, at the option of the Agent and without
notice or demand. The occurrence of any Event of Default shall also constitute,
without notice or demand, a default under all other agreements between the Agent
or any Lender and the Borrower and instruments and papers given the Agent or any
Lender by the Borrower, whether such agreements, instruments, or papers now
exist or hereafter arise.
10-1. FAILURE TO PAY REVOLVING CREDIT. The failure by the Borrower to pay
when due any principal or interest hereunder, or fees payable under Sections
2-10, 2-11, 2-12, or 2-16 of this Agreement.
10-2. FAILURE TO MAKE OTHER PAYMENTS. The failure by the Borrower to pay
within Five (5) Business Days after the date when due (or upon demand, if
payable on demand) any payment Liability other than those set forth in Section
10-1 hereof.
10-3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD).
The failure by the Borrower to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability not otherwise
described in Section 10-1 or Section 10-2 hereof, and included in any of the
following provisions hereof:
SECTION: RELATES TO:
4-5 Location of Collateral
4-6 Title to Assets
4-7 Indebtedness
4-8(b) Insurance Policies
4-13 Pay taxes
4-25 Affiliate Transactions
4-26 Additional Assurances
5-13 Financial Covenants
6-1 Use of Collateral
Article 7 Cash Management
10-4. FINANCIAL REPORTING REQUIREMENTS.
The failure by the Borrower to promptly, punctually, faithfully and timely
perform, discharge, or comply with the financial reporting requirements
included in Article 5, subject, however, to the following limited number of
grace periods applicable to certain of those requirements:
------------------------- ---------- ------------------- -----------------------
REPORT / STATEMENT REQUIRED GRACE PERIOD NUMBER OF GRACE
BY SECTION PERIODS
------------------------- ---------- ------------------- -----------------------
Borrowing Base Three per fiscal
Certificates 5-4 One Business Day Quarter
------------------------- ---------- ------------------- -----------------------
Weekly Report 5-5 Two Business Days Six in any 12 months
------------------------- ---------- ------------------- -----------------------
Monthly Report (15 Days) 5-6(a)(i) Three Business Days Three in any 12 months
------------------------- ---------- ------------------- -----------------------
Monthly Reports (30 Days) 5-6(a)(ii) Three Business Days Three in any 12 months
------------------------- ---------- ------------------- -----------------------
10-5. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD).
The failure by the Borrower, upon Thirty (30) days written notice by the
Agent , to cure the Borrower's failure to promptly, punctually and faithfully
perform, discharge, or comply with any covenant or Liability not described
in any of Sections 10-1, 10-2, 10-3 or 10-4 hereof.
10-6. MISREPRESENTATION. The determination by the Agent that any
representation or warranty at any time made by the Borrower to the Agent or any
Lender, was not true or complete in all material respects when given.
10-7. ACCELERATION OF OTHER DEBT. BREACH OF LEASE. The occurrence of any
event such that any Indebtedness of the Borrower to any creditor in excess of
$500,000.00 other than the Agent or any Lender could be accelerated or, without
the consent of the Borrower, Leases with aggregate monthly rents of at least
$180,000.00 could be terminated prior to the stated termination date thereof
(whether or not the subject creditor or lessor takes any action on account of
such occurrence).
10-8. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach or
default under any agreement between the Agent or any Lender and the Borrower or
instrument or paper given the Agent or any Lender by the Borrower not
constituting a Loan Document, whether such agreement, instrument, or paper now
exists or hereafter arises, with respect to Indebtedness in excess of
$500,000.00 (notwithstanding that the Agent or the subject Lender may not have
exercised its rights upon default under any such other agreement, instrument or
paper).
10-9. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any substantial portion of the
Collateral.
10-10. JUDGMENT. RESTRAINT OF BUSINESS.
(a) The attachment by trustee or other process, of any of the
Borrower's funds on deposit with, or assets of the Borrower in the
possession of, the Agent or any Lender or such Participant.
(b) The entry of any judgment against the Borrower in excess of
$500,000.00, which judgment is not satisfied (if a money judgment) or
appealed from (with execution or similar process stayed) within thirty (30)
days of its entry.
(c) The entry of any order or the imposition of any other process
having the force of law, the effect of which is to restrain in any material
way the conduct by the Borrower of its business in the ordinary course.
10-11. BUSINESS FAILURE. Any act by, against, or relating to the Borrower,
or its property or assets, which act constitutes the application for, consent
to, or sufferance of the appointment of a receiver, trustee, or other person,
pursuant to court action or otherwise, over all, or any part of the Borrower's
property; the granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower, or the occurrence of any other
voluntary or involuntary liquidation or extension of debt agreement for the
Borrower; the offering by or entering into by the Borrower of any composition,
extension, or any other arrangement seeking relief from or extension of the
debts of the Borrower; or the initiation of any judicial or non-judicial
proceeding or agreement by, against, or including the Borrower which seeks or
intends to accomplish a reorganization or arrangement with creditors; and/or the
initiation by or on behalf of the Borrower of the liquidation or winding up of
all or any part of the Borrower's business or operations.
10-12. BANKRUPTCY. The failure by the Borrower to generally pay the debts
of the Borrower as they mature; adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower initiating any matter in which
the Borrower is or may be granted any relief from the debts of the Borrower
pursuant to the Bankruptcy Code or any other insolvency statute or procedure,
which complaint, application, or petition is not timely contested in good faith
by the Borrower by appropriate proceedings or, if so contested, is not dismissed
within ninety (90) days of when filed.
10-13. INDICTMENT-FORFEITURE. The indictment of, or institution of any
legal process or proceeding against, the Borrower, under any federal, state,
municipal, and other civil or criminal statute, rule, regulation, order, or
other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of any property of the
Borrower and/or the imposition of any stay or other order, the effect of which
could be to restrain in any material way the conduct by the Borrower of its
business in the ordinary course.
10-14. DEFAULT BY GUARANTOR OR RELATED ENTITY. The occurrence of any of the
foregoing Events of Default with respect to any Guarantor of the Liabilities, or
the occurrence of any of the foregoing Events of Default with respect to any
parent (if the Borrower is a corporation), subsidiary, or Related Entity, as if
such Guarantor, parent, or Related Entity were the "Borrower" described therein.
10-15. TERMINATION OF GUARANTY. The termination or attempted termination
of any guaranty by any Guarantor of the Liabilities.
10-16. CHALLENGE TO LOAN DOCUMENTS.
(a) Any challenge by or on behalf of the Borrower or any
Guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document in accordance with the
subject Loan Document's material terms or which seeks to void, avoid, limit, or
otherwise materially adversely affect the security interest created by or in the
Loan Documents or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable in accordance
with the subject Loan Document's material terms or which voids, avoids, limits,
or otherwise materially adversely affects the security interest created by the
Loan Documents or any payment made pursuant thereto.
10-17. LEASE DEFAULT. The occurrence of any default, after any applicable
grace or cure period, pursuant to that certain Master Lease Agreement of the
Borrower with Winthrop Resources Corporation and all Schedules thereto,
as such may be amended and in effect from time to time.
10-18. CHANGE IN CONTROL. Any Change in Control.
10-19 MATERIAL ADVERSE CHANGE. An event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon the Borrower's financial condition when compared with such financial
condition as of September 30, 2000.
▇▇-▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ CHANGES. There shall have occurred any material adverse
change in or to the Borrower's business relationship with Levi ▇▇▇▇▇▇▇ & Co.
when compared to such relationship as of October 8, 1999.
ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT.
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the following rights and remedies upon the
occurrence of any Event of Default and at any time thereafter. No stay which
otherwise might be imposed pursuant to Section 362 of the Bankruptcy Code or
otherwise shall stay, limit, prevent, hinder, delay, restrict, or otherwise
prevent the Agent's exercise of any of such rights and remedies.
11-1. RIGHTS OF ENFORCEMENT. The Agent shall have all of the rights and
remedies of a secured party upon default under the UCC, in addition to which
the Agent shall have all and each of the following rights and remedies:
(a) To collect the Receivables Collateral with or without the taking
of possession of any of the Collateral.
(b) To take possession of all or any portion of the Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or
processing as the Agent deems advisable and with or without the taking of
possession of any of the Collateral.
(d) To conduct one or more going out of business sales which include
the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11-2. SALE OF COLLATERAL.
(a) Any sale or other disposition of the Collateral may be at public
or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation
which might affect, limit, or apply to the Agent's disposition of the
Collateral.
(b) The Agent, in the exercise of the Agent's rights and remedies upon
default, may conduct one or more going out of business sales, in the
Agent's own right or by one or more agents and contractors. Such sale(s)
may be conducted upon any premises owned, leased, or occupied by the
Borrower. The Agent and any such agent or contractor, in conjunction with
any such sale, may augment the Inventory with other goods (all of which
other goods shall remain the sole property of the Agent or such agent or
contractor). Any amounts realized from the sale of such goods which
constitute augmentations to the Inventory (net of an allocable share of the
costs and expenses incurred in their disposition) shall be the sole
property of the Agent or such agent or contractor and neither the Borrower
nor any Person claiming under or in right of the Borrower shall have any
interest therein.
(c) Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market
(in which event the Agent shall provide the Borrower with such notice as
may be practicable under the circumstances), the Agent shall give the
Borrower at least seven (7) days prior written notice of the date, time,
and place of any proposed public sale, and of the date after which any
private sale or other disposition of the Collateral may be made. The
Borrower agrees that such written notice shall satisfy all requirements for
notice to the Borrower which are imposed under the UCC or other applicable
law with respect to the exercise of the Agent's rights and remedies upon
default.
(d) The Agent and any Lender may purchase the Collateral, or any
portion of it at any sale held under this Article.
(e) The Agent shall apply the proceeds of any exercise of the Agent's
Rights and Remedies under this Article 11 towards the Liabilities in such
manner, and with such frequency, as the Agent determines.
11-3. OCCUPATION OF BUSINESS LOCATION.
In connection with the Agent's exercise of the Agent's rights under this Article
11, the Agent may enter upon, occupy, and use any premises owned or occupied by
the Borrower, and may exclude the Borrower from such premises or portion thereof
as may have been so entered upon, occupied, or used by the Agent. The Agent
shall not be required to remove any of the Collateral from any such premises
upon the Agent's taking possession thereof, and may render any Collateral
unusable to the Borrower. In no event shall the Agent be liable to the Borrower
for use or occupancy by the Agent of any premises pursuant to this Article 11,
nor for any charge (such as wages for the Borrower's employees and utilities)
incurred in connection with the Agent's exercise of the Agent's Rights and
Remedies.
11-4. GRANT OF NONEXCLUSIVE LICENSE. Except to the extent prohibited by the
Borrower's contractual obligations, the Borrower hereby grants to the Agent a
royalty free nonexclusive irrevocable license to use, apply, and affix any
trademark, trade name, logo, or the like in which the Borrower now or hereafter
has rights, such license being with respect to the Agent's exercise of the
rights hereunder including, without limitation, in connection with any
completion of the manufacture of Inventory or sale or other disposition of
Inventory.
11-5. ASSEMBLY OF COLLATERAL. The Agent may require the Borrower to
assemble the Collateral and make it available to the Agent at the Borrower's
sole risk and expense at a place or places which are reasonably convenient to
both the Agent and Borrower.
11-6. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges, and
discretions of the Agent hereunder (herein, the " Agent's Rights and Remedies")
shall be cumulative and not exclusive of any rights or remedies which it would
otherwise have. No delay or omission by the Agent in exercising or enforcing any
of the Agent's Rights and Remedies shall operate as, or constitute, a waiver
thereof. No waiver by the Agent of any Event of Default or of any default under
any other agreement shall operate as a waiver of any other default hereunder or
under any other agreement. No single or partial exercise of any of the Agent's
Rights or Remedies, and no express or implied agreement or transaction of
whatever nature entered into between the Agent and any person, at any time,
shall preclude the other or further exercise of the Agent's Rights and Remedies.
No waiver by the Agent of any of the Agent's Rights and Remedies on any one
occasion shall be deemed a waiver on any subsequent occasion, nor shall it be
deemed a continuing waiver. All of the Agent's Rights and Remedies and all of
the Agent's rights, remedies, powers, privileges, and discretions under any
other agreement or transaction are cumulative, and not alternative or exclusive,
and may be exercised by the Agent at such time or times and in such order of
preference as the Agent in its sole discretion may determine. The Agent's Rights
and Remedies may be exercised without resort or regard to any other source of
satisfaction of the Liabilities.
ARTICLE 12- NOTICES.
12-1. NOTICE ADDRESSES. All notices, demands, and other communications
made in respect of this Agreement (other than a request for a loan or advance
or other financial accommodation under the Revolving Credit) shall be made to
the following addresses, each of which may be changed upon seven (7) days
written notice to all others given by certified mail, return receipt requested:
If to the Agent:
Fleet Retail Finance Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇. ▇▇▇▇▇ ▇▇▇▇
Director
Fax : ▇▇▇ ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire
Fax : ▇▇▇ ▇▇▇-▇▇▇▇
If to the Borrower:
Designs, Inc.
▇▇ ▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Senior
Vice President and Chief
Financial Officer
Fax : (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Kramer, Levin, Naftalis & ▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention : ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Fax : (▇▇▇) ▇▇▇-▇▇▇▇
12-2. NOTICE GIVEN.
(a) Except as otherwise specifically provided herein, notices shall be
deemed made and correspondence received, as follows (all times being local
to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or Three (3) days
following deposit in the United States mail, postage prepaid.
(ii) By recognized overnight express delivery: the Business Day
following the day when sent.
(iii) By Hand: If delivered on a Business Day after 9:00 AM and no
later than Three (3) hours prior to the close of customary
business hours of the recipient, when delivered. Otherwise, at
the opening of the next Business Day.
(v) By Facsimile transmission (which must include a header on which
the party sending such transmission is indicated): If sent on a
Business Day after 9:00 AM and no later than Three (3) hours
prior to the close of customary business hours of the recipient,
one(1) hour after being sent. Otherwise, at the opening of the
next Business Day.
(b) Rejection or refusal to accept delivery and inability to deliver
because of a changed address or Facsimile Number for which no due notice
was given shall each be deemed receipt of the notice sent.
ARTICLE 13- TERM.
13-1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall remain
in effect (subject to suspension as provided in Section 2-4(i) hereof) until the
Termination Date.
13-2. EFFECT OF TERMINATION. Upon the termination of the Revolving Credit,
the Borrower shall pay the Agent (whether or not then due), in immediately
available funds, all then Liabilities including, without limitation: the entire
balance of the Loan Account; any accrued and unpaid Line Fee; and all
unreimbursed costs and expenses of the Agent and of each Lender for which the
Borrower is responsible; and shall make such arrangements concerning any L/C's
then outstanding are reasonably satisfactory to the Agent. Until such payment,
all provisions of this Agreement, other than those contained in Article 2 which
place an obligation on the Agent and any Lender to make any loans or advances or
to provide financial accommodations under the Revolving Credit or otherwise,
shall remain in full force and effect until all Liabilities shall have been paid
in full. The release by the Agent of the security and other collateral interests
granted the Agent by the Borrower hereunder may be upon such conditions and
indemnifications as the Agent may require.
ARTICLE 14- GENERAL.
14-1. PROTECTION OF COLLATERAL. The Agent has no duty as to the collection
or protection of the Collateral beyond the safe custody of such of the
Collateral as may come into the possession of the Agent and shall have no duty
as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agent may include reference to the Borrower (and may
utilize any logo or other distinctive symbol associated with the Borrower) in
connection with any advertising, promotion, or marketing undertaken by the
Agent.
14-2. SUCCESSORS AND ASSIGNS.This Agreement shall be binding upon the
Borrower and the Borrower's representatives, successors, and assigns and shall
enure to the benefit of the Agent and each Lender and the respective successors
and assigns of each provided, however, no trustee or other fiduciary appointed
with respect to the Borrower shall have any rights hereunder. In the event that
the Agent or any Lender assigns or transfers its rights under this Agreement,
the assignee shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of such assignor hereunder and such assignor
shall thereupon be discharged and relieved from its duties and obligations
hereunder.
14-3. SEVERABILITY. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement.
14-4. AMENDMENTS. COURSE OF DEALING.
(a) This Agreement and the other Loan Documents incorporate all
discussions and negotiations between the Borrower and the Agent and each
Lender, either express or implied, concerning the matters included herein
and in such other instruments, any custom, usage, or course of dealings to
the contrary notwithstanding. No such discussions, negotiations, custom,
usage, or course of dealings shall limit, modify, or otherwise affect the
provisions thereof. No failure by the Agent or any Lender to give notice to
the Borrower of the Borrower's having failed to observe and comply with any
warranty or covenant included in any Loan Document shall constitute a
waiver of such warranty or covenant or the amendment of the subject Loan
Document. No change made by the Agent in the manner by which Availability
is determined shall obligate the Agent to continue to determine
Availability in that manner.
(b) The Borrower may undertake any action otherwise prohibited hereby,
and may omit to take any action otherwise required hereby, upon and with
the express prior written consent of the Agent. No consent, modification,
amendment, or waiver of any provision of any Loan Document shall be
effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is
the Agent, then by a duly authorized officer thereof). Any modification,
amendment, or waiver provided by the Agent shall be in reliance upon all
representations and warranties theretofore made to the Agent by or on
behalf of the Borrower (and any guarantor, endorser, or surety of the
Liabilities) and consequently may be rescinded in the event that any of
such representations or warranties was not true and complete in all
material respects when given.
14-5. POWER OF ATTORNEY. In connection with all powers of attorney
included in this Agreement, the Borrower hereby grants unto the Agent full
power to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as the Borrower might or
could do, herebyratifying all that said attorney shall do or cause to be done
by virtue of this Agreement. No power of attorney set forth in this Agreement
shall be affected by any disability or incapacity suffered by the Borrower and
each shall survive the same. All powers conferred upon the Agent by this
Agreement, being coupled with an interest, shall be irrevocable until this
Agreement is terminated by a written instrument executed by a duly authorized
officer of the Agent.
14-6. APPLICATION OF PROCEEDS. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Agent
determines in its sole discretion. The Borrower shall remain liable for any
deficiency remaining following such application.
14-7. COSTS AND EXPENSES OF AGENT AND OF LENDERS.
(a) The Borrower shall pay on demand all Administrative Costs and all reasonable
expenses of the Agent in connection with the preparation, execution, and
delivery of this Agreement and of any other Loan Documents, whether now existing
or hereafter arising, and all other reasonable expenses which may be incurred by
the Agent in preparing or amending this Agreement and all other agreements,
instruments, and documents related thereto, or otherwise incurred with respect
to the Liabilities, and all costs and expenses of the Agent which relate to the
credit facility contemplated hereby.
(b) The Borrower shall pay on demand all costs and expenses (including
attorneys' reasonable fees) incurred, following the occurrence of any Event of
Default, by each Lender in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or any other
Loan Document, as well as any such costs and expenses in connection with any
"workout", forbearance, or restructuring of the credit facility contemplated
hereby.
(c) The Borrower authorizes the Agent to pay all such fees and expenses and in
the Agent's discretion, to add such fees and expenses to the Loan Account.
(d) The undertaking on the part of the Borrower in this Section 14-7 shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Agent in favor of the Borrower, other than a termination,
release, or discharge which makes specific reference to this Section 14-7.
14-8. COPIES AND FACSIMILES. This Agreement and all documents which relate
thereto, which have been or may be hereinafter furnished the Agent or any Lender
may be reproduced by that Person or by the Agent by any photographic, microfilm,
xerographic, digital imaging, or other process, and that Person may destroy any
document so reproduced. Any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or not
the original is in existence and whether or not such reproduction was made in
the regular course of business). Any facsimile which bears proof of transmission
shall be binding on the party which or on whose behalf such transmission was
initiated and likewise shall be so admissible in evidence as if the original of
such facsimile had been delivered to the party which or on whose behalf such
transmission was received.
14-9. MASSACHUSETTS LAW.
This Agreement and all rights and obligations hereunder, including matters of
construction, validity, and performance, shall be governed by the laws of The
Commonwealth of Massachusetts.
14-10. CONSENT TO JURISDICTION.
(a) The Borrower agrees that any legal action, proceeding, case, or
controversy against the Borrower with respect to any Loan Document may be
brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent's sole discretion. By
execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
(b) The Borrower WAIVES personal service of any and all process upon
it, and irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to the Borrower at the
Borrower's address for notices as specified herein, such service to become
effective five (5) Business Days after such mailing.
(c) The Borrower WAIVES any objection based on forum non conveniens
and any objection to venue of any action or proceeding instituted under any
of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Agent to bring legal
actions or proceedings in any other competent jurisdiction.
(e) The Borrower agrees that any action commenced by the Borrower
asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States
District Court, District of Massachusetts, sitting in Boston,
Massachusetts, and that such Courts shall have exclusive jurisdiction with
respect to any such action.
14-11. INDEMNIFICATION. The Borrower shall indemnify, defend, and hold the
Agent and each Lender and any employee, officer, or agent of any of the
foregoing (each, an "Indemnified Person") harmless of and from any claim
brought or threatened against any Indemnified Person by the Borrower, any
guarantor or endorser of the Liabilities, or any other Person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of
the relationship of the Borrower or of any other guarantor or endorser of the
Liabilities with the Agent, the Funding Agent, or any Lender (each of claims
which may be defended, compromised, settled, or pursued by the Indemnified
Person with counsel of the Lender's selection, but at the expense of the
Borrower) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Agent and any other Indemnified Person has had
an opportunity to be heard), which determination includes a specific finding
that the Indemnified Person seeking indemnification had acted in a grossly
negligent manner or in actual bad faith. This indemnification shall survive
payment of the Liabilities and/or any termination, release, or discharge
executed by the Agent in favor of the Borrower, other than a termination,
release, or discharge which makes specific reference to this Section 14-11.
14-12. RULES OF CONSTRUCTION. The following rules of construction shall be
applied in the interpretation, construction, and enforcement of this Agreement
and of the other Loan Documents:
(a) Words in the singular include the plural and words in the plural
include the singular.
(b) Headings (indicated by being underlined) and the Table of Contents
are solely for convenience of reference and do not constitute a part of the
instrument in which included and do not affect such instrument's meaning,
construction, or effect.
(c) The words "includes" and "including" are not limiting.
(d) Text which follows the words "including, without limitation" (or
similar words) is illustrative and not limitational.
(e) Text which is underlined, shown in italics, shown in bold, shown
IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be
deemed to be conspicuous.
(f) The words "may not" are prohibitive and not permissive.
(g) The word "or" is not exclusive.
(h) Terms which are defined in one section of an instrument are used
with such definition throughout the instrument in which so defined.
(i) The symbol "$" refers to United States Dollars.
(j) References to "herein", "hereof", and "within" are to this entire
Loan Agreement and not merely to the provision in which such reference is
included.
(k) References to "this Agreement" or to any other Loan Document is to
the subject instrument as amended to the date on which application of such
reference is being made.
(l) Except as otherwise specifically provided, all references to time
are to Boston time.
(m) In the determination of any notice, grace, or other period of time
prescribed or allowed hereunder:
(i) Unless otherwise provided (I) the day of the act, event, or
default from which the designated period of time begins to run shall
not be included and the last day of the period so computed shall be
included unless such last day is not a Business Day, in which event
the last day of the relevant period shall be the next Business Day and
(II) the period so computed shall end at 5:00 PM on the relevant
Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but excluding".
(iv) The work "through" means "to and including".
(n) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section
14-13 hereof, provided, however, in the event of any inconsistency between
the provisions of this Agreement and any other Loan Document, the
provisions of this Agreement shall govern and control.
(o) The words "during the continuance of an Event of Default" shall
mean the occurrence of an Event of Default which has not been waived by the
Agent.
14-13. INTENT. It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this Agreement be
broadly construed in favor of the Agent.
(c) The security interests created by this Agreement secure all
Liabilities, whether now existing or hereafter arising.
(d) Unless otherwise explicitly provided herein, the Agent's consent
to any action of the Borrower which is prohibited unless such consent is
given may be given or refused by the Agent in its sole discretion and
without reference to Section 2-14 hereof.
(e) Any term used herein to describe Collateral or a Person, which
term is defined in either (or both) the UCC as in effect on the date when
this Agreement was executed by the Borrowers or in UCC9'99, shall be given
the meaning which is the more encompassing of the two definitions.
14-14. RIGHT OF SET-OFF. Any and all deposits or other sums at any
time credited by or due to the Borrower from the Agent or any Lender or
from any Affiliate of the Agent or any Lender and any cash, secuities,
instruments or other property of the Borrower in the possession of the
Agent or any Lender or any such Affiliate, whether for safekeeping or
otherwise (regardless of the reason such Person had received the same)
shall at all times constitute security for all Liabilities and for any and
all obligations of the Borrower to the Agent and each Lender and any such
Affiliate and may be applied or set off against the Liabilities and against
such obligations at any time, after the occurrence, and during the
continuance, of an Event of Default, whether or not such are then due and
whether or not other collateral is then available to the Agent, any Lender
or any such Affiliate.
14-15. MAXIMUM INTEREST RATE. Regardless of any provision of any Loan
Document, none of the Agent or any Lender shall be entitled to contract
for, charge, receive, collect, or apply as interest on any Liability, any
amount in excess of the maximum rate imposed by applicable law. Any payment
which is made which, if treated as interest on a Liability would result in
such interest's exceeding such maximum rate shall be held, to the extent of
such excess, as additional collateral for the Liabilities as if such excess
were "Collateral."
14-16. WAIVERS.
(a) The Borrower (and all guarantors, endorsers, and sureties of the
Liabilities) make each of the waivers included in Section 14-16(b), below,
knowingly, voluntarily, and intentionally, and understands that the Agent
and each Lender, in entering into the financial arrangements contemplated
hereby and in providing loans and other financial accommodations to or for
the account of the Borrower as provided herein, whether not or in the
future, is relying on such waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby, notice of
non-payment, demand, presentment, protest and all forms of demand and
notice, both with respect to the Liabilities and the Collateral.
(ii) Except as otherwise specifically required hereby, the right
to notice and/or hearing prior to the Agent's exercising of the
Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY
IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY (WHETHER SUCH
CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR ANY LENDER
OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY LITIGANT),
WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY
RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON AND
THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER LIKEWISE WAIVES
THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).
(iv) The benefits or availability of any stay, limitation,
hindrance, delay, or restriction (including, without limitation, any
automatic stay which otherwise might be imposed pursuant to Section
362 of the Bankruptcy Code) with respect to any action which the Agent
may or may become entitled to take hereunder.
(v) Any defense, counterclaim, set-off, recoupment, or other
basis on which the amount of any Liability, as stated on the books and
records of the Agent or any Lender, could be reduced or claimed to be
paid otherwise than in accordance with the tenor of and written terms
of such Liability.
(vi) Any claim to consequential, special, or punitive damages.
14-17. CONFIDENTIALITY. The Agent and each of the Lenders agrees that
it will not disclose without the prior consent of the Borrower (other than
to its employees, Affiliates, advisors or counsel, each of whom shall be
directed to observe this confidentiality obligation) any information with
respect to the Borrower or any of its Subsidiaries which is now or in the
future furnished pursuant to this Agreement or any other Loan Document and
which is designated by the Borrower in writing as confidential, provided,
however, that the Agent may disclose any such information (i) as has become
generally available to the public, (ii) as may be required in any report,
statement or testimony submitted to any municipal, state, or federal
regulatory body having or claiming to have jurisdiction over the Agent or
any Lender, (iii) as may be required in respect to any summons or subpoena
or in connection with any litigation, (iv) in order to comply with any law,
order, regulation or ruling applicable to the Agent or any Lender, (v) to
any prospective or actual transferee or participant in connection with any
contemplated transfer or participation of this Agreement, the Liabilities,
or any interest therein by the Agent, provided, however, that such
prospective transferee or participant executes a confidentiality agreement
with the Agent for the benefit of the Borrower and its Subsidiaries
containing similar provisions to those set forth in this Section 14-17, and
(vi) as may be reasonably required in connection with the Agent's
enforcement of this Agreement or the other Loan Documents against the
Borrower and/or its Subsidiaries.
14-18. AMENDMENT AND RESTATEMENT. This Agreement amends and restates
the June 4, 1998 Amended and Restated Credit Agreement between Fleet Retail
Finance Inc., as agent, the lenders party thereto and the Borrower in its
entirety. All of the other documents executed in connection with the
existing Credit Agreement remain in full force and effect, provided that In
the event of any inconsistency between the terms thereof and the terms of
the Loan Documents, the Loan Documents shall control. Without limiting the
foregoing, the Borrower ratifies and confirms that the collateral granted
to the Agent under the Trademark Security Agreement and the Stock Pledge
Agreement dated as of June 4, 1998 (as well as under this Agreement)
continues to secure all Liabilities.
DESIGNS, INC.
("Borrower")
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Print Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: SR VP
FLEET RETAIL FINANCE INC.
("Agent")
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: DIRECTOR
The "Lenders"
FLEET RETAIL FINANCE INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
Print Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: DIRECTOR
▇▇▇▇▇ FARGO BUSINESS CREDIT INC.
By:/s/ ▇▇▇▇▇ ▇▇▇▇▇
Print Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: VICE PRESIDENT
605510.5