EXHIBIT 10.68
AMENDED AND RESTATED GENERAL SECURITY AGREEMENT
[VALUE CLOTHING, VALUE SLACKS]
AMENDED AND RESTATED GENERAL SECURITY AGREEMENT dated as of this 1st
day of June, 1997, by the undersigned corporations (individually and
collectively "Guarantors") to and in favor of CONGRESS FINANCIAL CORPORATION
(SOUTHWEST), a Texas corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Lender has entered into financing arrangements with Farah
U.S.A., Inc., a Texas corporation, Value Clothing Company, Inc., a Texas
corporation ("Value Clothing") and Farah Manufacturing (U.K.) Limited, a
corporation incorporated under the laws of England ("Farah UK" and together with
Farah USA and Value Clothing, collectively, "Borrower"), pursuant to which
Lender may make loans and advances and provide other financial accommodations to
Borrower; and
WHEREAS, Guarantors originally entered into a General Security
Agreement, dated as of August 2, 1990, which Lender and Guarantors desire hereby
to amend and restate as of the date hereof; and
WHEREAS, Guarantors have executed and delivered to Lender guarantees in
favor of Lender, dated as of August 2, 1990, which Guarantors are confirming as
of the date hereof, pursuant to which Guarantors intend, absolutely and
unconditionally, to guarantee to Lender the payment and performance of all now
existing and hereafter arising obligations, liabilities and indebtedness of
Borrower to Lender; and
WHEREAS, in order to induce Lender to enter into the Financing
Agreements and to make loans and advances and provide other financial
accommodations to Borrower pursuant thereto, each of Guarantors has agreed to
grant to Lender certain collateral security as set forth herein;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, each of Guarantors hereby jointly and severally agrees as follows:
1. DEFINITIONS
As used above and in this General Security Agreement the following
terms shall have the respective meanings given to them below:
(a) All terms used herein which are defined in Article 1 or
Article 9 of the Uniform Commercial Code shall have the meanings set forth
therein unless otherwise defined in this Agreement and all references to the
plural herein shall also mean the singular and all references to the singular
shall also mean the plural.
(b) All references to the term "Guarantors" wherever used
herein shall be deemed to mean the signatories hereto, and each of them,
together with their respective successors and assigns, jointly and severally,
individually and collectively. All references to the term "Lender" and the term
"Borrower" wherever used herein shall be deemed to include their respective
successors and assigns.
(c) "Affiliate" shall mean, with respect to a specified
Person, any other Person (i) who, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
such Person, or (ii) who is a director, officer, shareholder or employee of such
Person.
(d) "Collateral" shall mean all of the now owned and hereafter
acquired property and assets of Guarantors, wherever located, of every kind and
description, mixed, real or personal, tangible or intangible, including, but not
limited to:
(i) all present and future: (A) accounts, contract rights, general
intangibles, chattel paper, documents and instruments (collectively,
"Accounts"), including, without limitation, all obligations for the payment of
money arising out of the sale, lease or other disposition of goods or other
property or rendition of services; (B) all monies, securities and other property
and the proceeds thereof, now or hereafter held or received by, or in transit
to, Lender or any participant from or for Guarantors, whether for safekeeping,
pledge, custody, transmission, collection or otherwise, and all of Guarantors'
deposits (general or special), balances, sums and credits with Lender or any
participant at any time existing; (C) all of Guarantors' right, title and
interest, and all of Guarantors' rights, remedies, security and liens, in, to
and in respect of the Accounts and other collateral, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any account debtor, credit and
other insurance; (D) all of Guarantors' right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in Accounts,
including, without limitation, all goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, any Account or other collateral, including, without limitation, all
returned, reclaimed or repossessed goods; (E) all deposit accounts; and (F) all
other general intangibles of every kind and description, including, without
limitation, (1) trade names and trademarks, and the goodwill of the business
symbolized thereby, (2) patents, (3) copyrights, (4) licenses, (5) claims and
other choses in action, and (6) Federal, State, local and foreign tax refund
claims of all kinds;
(ii) all raw materials, work-in-process, finished goods and all other
inventory of whatsoever kind or nature, wherever located, whether now owned or
hereafter existing or acquired by Guarantors, including, without limitation, all
wrapping, packaging, advertising, shipping materials and all other goods
consumed in Guarantors' businesses, all labels and other devices, names or marks
affixed to or to be affixed thereto for purposes of selling or of identifying
the same or the seller or manufacturer thereof and all of Guarantors' right,
title and interest therein and thereto;
(iii) all equipment, machinery, computers and computer hardware, vehicles,
tool, dies, jigs, furniture, trade fixtures and fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, substitutions and replacements thereof, wherever located, whether now
owned or hereafter acquired by Guarantors;
(iv) all right, title and interest of Guarantors, in, to and in respect of
any real property, including leasehold interests, together with all buildings,
structures, and other improvements located thereon and all licenses, easements
and appurtenances relating thereto, wherever located, whether now owned or
hereafter acquired;
(v) all present and future books, records, ledger cards, computer programs
and other property and general intangibles evidencing or relating to any of the
above, any other collateral or any account debtor, together with the file
cabinets or containers in which the foregoing are stored; and
(vi) all products and proceeds of the foregoing, in any form, including,
without limitation, any insurance proceeds and any claims against third persons
for loss or damage to or destruction of any or all of the foregoing.
(e) "Event of Default" shall mean the occurrence or existence of any act,
event or condition described in Section 4 hereof.
(f) "Financing Agreements" shall mean, collectively, the
Amended and Restated Accounts Financing Agreement [Security Agreement], dated of
even date, between Borrower and Lender and all agreements, documents and
instruments now or at any time hereafter executed and/or delivered in connection
therewith or related thereto, including, but not limited to, each Guarantee and
this Agreement, as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced from time to
time.
(g) "Guarantee" shall mean the Guarantee and Waiver, dated as
of August 2, 1990, herewith, as confirmed as of the date hereof, by each of
Guarantors in favor of Lender absolutely and unconditionally guaranteeing all of
the now existing and hereafter arising obligations, liabilities and indebtedness
of Borrower to Lender, including, without limitation, those arising under,
related to or evidenced by the Financing Agreements (as the same may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced from
time to time).
(h) "Indebtedness" shall mean, as to any Person, all items
which, in accordance with generally accepted accounting principles as in effect
on the date hereof, consistently applied, would be included in determining total
liabilities, shown on the liability side of its balance sheet as at the date
such Indebtedness is to be calculated and, in any event, shall include any
liabilities secured by any mortgage, pledge, lien or security interest existing
on such person's owned or acquired property.
(i) "Obligations" shall mean all now existing and hereafter
arising obligations, liabilities and indebtedness of each of Guarantors to
Lender and/or its affiliates or participants, of every kind and description,
however evidenced, including, without limitation, the Obligations, whether
direct or indirect, absolute or contingent, joint or several, secured or
unsecured, due or not due, primary or secondary, liquidated or unliquidated,
whether arising before, during or after the initial or any renewal term of the
Financing Agreements, or after the commencement of any case with respect to
either of Guarantors or Borrower under the Bankruptcy Code or any similar
statute, whether arising directly or acquired by Lender from any other person,
conditionally or as collateral security, by assignment, merger with any other
person, assumption, subrogation or otherwise (including, without limitation,
participations or interests of Lender in the obligations of any of Guarantors to
others), whether arising under this Agreement, the Guarantee, the other
Financing Agreements, by operation of law or otherwise, and whether incurred by
Guarantors as principal, surety, endorser, guarantor or otherwise and including,
without limitation, all principal, interest, financing charges, early
termination and other fees, commissions, costs, expenses and attorneys' and
accountants' fees and legal expenses incurred in connection with any of the
foregoing.
(j) "Person" or "person" shall mean an individual, a sole
proprietorship, a partnership, a corporation (including a business trust), a
joint stock company, a trust, an unincorporated association, a joint venture or
other entity or a government or any agency, instrumentality or political
subdivision thereof.
(k) "Subsidiary" or "subsidiary" shall mean any corporation,
association or organization, active or inactive, as to which more than fifty
(50%) percent of the outstanding voting stock or shares or interests shall now
or hereafter be owned or controlled, directly or indirectly by any Person, any
Subsidiary of such Person, or any Subsidiary of such Subsidiary.
2. GRANT OF SECURITY INTEREST
(a) As collateral security for the prompt performance,
observance and indefeasible payment in full of all of the Obligations, each of
Guarantors hereby grants to Lender a continuing security interest in and a lien
upon and hereby pledges, assigns and transfers to Lender all of the Collateral
and each of Guarantors hereby grants to Lender a right of setoff against any
Collateral consisting of money, securities and other property of Guarantors now
or hereafter in the possession of or on deposit with Lender or any other person,
whether held in a general or special account or deposit or for safekeeping or
otherwise. All Collateral shall be security for the performance, observance and
indefeasible payment in full of all of the Obligations notwithstanding the
maintenance of separate accounts by Lender or the existence of any instruments
evidencing any of the Obligations.
(b) Each of Guarantors hereby constitutes Lender and its agent
and any designee of Lender as their attorney-in-fact and authorizes Lender or
such agent or designee, at Guarantors' cost and expense, to exercise at any time
or times in Lender's discretion all or any of the following powers, which
power-of-attorney being coupled with an interest shall be irrevocable until all
Obligations have been paid in full: (i) receive, take, endorse, assign, deliver,
accept and deposit, in the name of Lender or any of Guarantors, any and all
cash, checks, drafts, remittances and other instruments and documents relating
to the Collateral, (ii) on or after the occurrence of an Event of Default,
receive and open all mail addressed to any of Guarantors and notify postal
authorities to change the address for delivery thereof to such address as Lender
may designate, (iii) transmit to account debtors notice of the interest of
Lender in the Collateral or request from such account debtors at any time, in
the name of any of Guarantors, Lender or any designee of Lender, information
concerning the Collateral and any amounts owing with respect thereto, (iv) on or
after the occurrence of an Event of Default, notify account debtors to make
payment directly to Lender, (v) on or after the occurrence of an Event of
Default, take or bring, in the name of Lender or any of Guarantors, all steps,
actions, suits or proceedings deemed by Lender necessary or desirable to effect
collection of the Collateral, (vi) enter the premises of any of Guarantors for
the purpose of inspecting, verifying, auditing, maintaining, preserving,
protecting and removing the Collateral, and execute in the name and on behalf of
any of Guarantors one or more Uniform Commercial Code financing statements or
amendments with respect to the Collateral, naming any of Guarantors as debtor
and Lender as secured party and indicating and describing therein the types and
the items of Collateral. Each of Guarantors hereby releases Lender, its
officers, employees and designees, from any liability arising from any act or
acts taken under such power-of-attorney under the Guarantee, this Agreement, the
other Financing Agreements or in furtherance hereof or thereof, whether of
omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for Lender's own gross negligence or willful misconduct.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
Each of Guarantors hereby jointly and severally represents, warrants
and covenants to Lender the following (which shall survive the execution and
delivery of this Agreement), the truth and accuracy of which, or compliance
with, being a continuing condition of the making of loans by Lender to Borrower
under the Financing Agreements:
(a) Guarantors will not directly or indirectly sell, lease,
transfer, abandon or otherwise dispose of all or any substantial portion of
their respective properties or assets or consolidate or merge with or into any
other entity or permit any other entity to consolidate or merge with or into it;
provided, however, that, on at least ten (10) days prior written notice to
Lender, (i) Guarantor may merge with and into a wholly-owned subsidiary of Farah
Incorporated or (ii) a wholly-owned subsidiary of Guarantor may merge with and
into another Guarantor, so long as the surviving corporation is a Borrower or
has executed an absolute and unconditional guaranty and other agreements
reasonably requested by Lender, in favor of, and in form and substance
satisfactory to, Lender. Each of Guarantors will at all times preserve, renew
and keep in full force and effect its existence as a corporation and the rights
and franchises with thereto and continue to engage in business of the same type
as they are engaged as of the date hereof. Guarantors will give Lender thirty
(30) days prior written notice of any proposed change in any of their corporate
names which notice shall set forth the new name.
(b) The addresses of the principal places of business and
chief executive offices of Guarantors are set forth on the signature page
hereof, which addresses are the mailing addresses for such principal places of
business and chief executive offices. The books and records relating to the
Collateral are located at such addresses.
(i) The only locations of any Collateral are those addresses listed on
Exhibit A hereto and those new locations which may hereafter be opened in
accordance with Section 3(b)(ii) hereof. Guarantors will not remove any
Collateral from such locations, without Lender's prior written consent, except
for sales of inventory in the ordinary course of Guarantors' businesses and
except to move Collateral directly to any other location listed on Exhibit A or
to a new location opened in accordance with Section 3(b)(ii)hereof.
(ii) Each of Guarantors may open any new location within the continental
United States provided it (A) gives Lender ten (10) days prior written notice of
the intended opening of any such new location, and (B) executes and delivers, or
causes to be executed and delivered, to Lender such agreements, documents, and
instruments as Lender may deem reasonably necessary or desirable to protect its
interests in the Collateral to be located in such location, (except for landlord
waivers with respect to the stores of Value Clothing and Value Slacks)
including, without limitation, UCC financing statements and agreements from
appropriate Persons acknowledging Lender's liens on the Collateral to be located
in such location, in each case in form and substance satisfactory to Lender.
(c) Guarantors will maintain their books, records and accounts
in accordance with generally accepted accounting principles consistently
applied. Each of Guarantors agrees to furnish Lender with interim financial
statements (including balance sheets, statements of income and retained earnings
and cash flow statements), and to furnish Lender, at any time or from time to
time with such other information regarding its business affairs and financial
condition as Lender may reasonably request, including, without limitation,
balance sheets, statements of income, financial statements of cash flow,
projections, forecasts, schedules, agings and reports. Each of Guarantors hereby
irrevocably authorizes and directs all accountants, auditors or other third
parties to deliver to Lender, at Guarantors' expense, copies of its financial
statements, papers related thereto, and other accounting records of any nature
in their possession and to disclose to Lender any information they may have
regarding its business affairs and financial conditions. Guarantors will furnish
Lender with audited financial statements on an annual basis certified by
independent public accounts selected by Guarantors and acceptable to Lender. All
such statements and information will fairly present Guarantors' financial
condition as of the dates and the results of Guarantors' operations for the
periods, for which the same are furnished. Any documents, schedules or other
papers delivered to Lender may be destroyed or otherwise disposed of by Lender
one (1) year after the same are delivered to Lender, unless Guarantors make
written request therefor and pay all expenses attendant to their return, in
which event Lender shall return same when Lender's actual or anticipated need
therefor has ceased.
(d) Guarantors will duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against either of
Guarantors or its properties or assets prior to the date on which penalties
attach thereto. Guarantors will be liable for any tax or penalty imposed upon
any transaction under this Agreement or giving rise to the Accounts or any other
Collateral or which Lender may be required to withhold or pay for any reason and
each of Guarantors agrees to indemnify and hold Lender harmless with respect
thereto, and to repay to Lender on demand the amount thereof, and until paid by
Guarantors such amount shall be added to and deemed part of the Obligations.
(e) Except as otherwise disclosed to Lender in writing, there
is no present investigation by any governmental agency pending or threatened
against any of Guarantors and there is no action, suit, proceeding or claim
pending or threatened against either of Guarantors or its assets or goodwill, or
affecting any transactions contemplated by this Agreement or the other Financing
Agreements, or any instruments or documents delivered in connection herewith or
therewith before any court, arbitrator, or governmental or administrative body
or agency which if adversely determined with respect to Guarantors would result
in any material adverse change in Guarantors' businesses, properties, assets,
goodwill, or condition, financial or otherwise.
(f) The execution, delivery and performance of this Agreement
are within Guarantors' corporate powers, have been duly authorized, are not in
contravention of law or the terms of Guarantors' Charter, By-Laws or other
incorporation papers, or of any material indenture, agreement or undertaking to
which Guarantors are a party or by which Guarantors are bound.
(g) Guarantors do not have any Subsidiaries as of the date hereof except as
set forth on Exhibit B hereto. Value Slacks, Inc. is a wholly-owned subsidiary
of Farah Incorporated, a Texas corporation. Value Clothing Company, Inc. is a
wholly-owned Subsidiary of Value Slacks, Inc. Guarantors will not form or
acquire any Subsidiaries without the prior written consent of Lender.
(h) Guarantors will not, and will not permit any subsidiary
to, create, incur, assume or permit to exist, contingently or otherwise, any
Indebtedness, except:
(i) Indebtedness to Lender;
(ii) Indebtedness consisting of unsecured current liabilities incurred in
the ordinary course of its business which are not past due;
(iii) Indebtedness incurred in the ordinary course of its business secured
only by liens permitted under Sections 3(i)(ii) and 3(i)(iii) hereof;
(iv) Indebtedness owing to any one person existing on the date hereof in an
amount less than $100,000 and any other Indebtedness existing on the date hereof
equal to or in excess of such amount which is described on Exhibit C hereto,
provided, that: (A) Guarantors may only make regularly scheduled payments of
principal and interest in respect of such Indebtedness as set forth on Exhibit
C, (B) Guarantors will not, directly or indirectly, (1) make any prepayments or
other non-mandatory payments in respect of any such Indebtedness or (2) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose or (3) amend, modify,
alter or change the terms of the arrangements relating thereto or any agreement
or instrument evidencing such Indebtedness, and (C) Guarantors will furnish to
Lender all notices, demands or other materials concerning such Indebtedness,
promptly after receipt thereof or concurrently with the sending thereof, as the
case may be.
(i) Guarantors will not, and will not permit any subsidiary to, create or
suffer to exist any mortgage, pledge, security interest, lien, encumbrance,
defect in title or restriction upon the use of their real or personal
properties, whether now owned or hereafter acquired, except:
(i) the liens or security interests in favor of Lender;
(ii) tax, mechanics and other like statutory liens arising in the ordinary
course of Guarantors' businesses to the extent (A) such liens secure
Indebtedness which is not overdue or (B) until foreclosure or similar
proceedings shall have been commenced, such liens secure Indebtedness relating
to claims or liabilities which are being contested in good faith by appropriate
proceedings available to Guarantors prior to the commencement of foreclosure or
other similar proceedings and are adequately escrowed for or reserved against in
Lender's judgment;
(iii) purchase money mortgages or other purchase money liens or security
interests upon any specific fixed assets now existing or hereafter acquired, or
mortgages, liens or security interests existing on any such fixed assets at the
time of acquisition thereof (including, without limitation, capitalized or
finance leases) or in connection with the refinancing of the existing
capitalized leases with respect to specific assets, provided, that, (A) no such
purchase money or other mortgage, lien or security interest (or capitalized or
finance lease, as the case may be) with respect to specific future fixed assets
or as refinanced shall extend to or cover any other property, other than the
specific fixed assets so acquired, or acquired or refinanced subject to such
mortgage, lien or security interest (or lease) and the proceeds thereof, (B)
such mortgage, lien or security interest secures the obligation to pay the
purchase price of such specific fixed assets only (or the obligations under the
capitalized or finance lease), and (C) the principal amount secured thereby
shall not exceed one hundred (100%) percent of the cost of the fixed assets so
acquired; and
(iv) the existing liens, encumbrances or security interests described on
Exhibit D hereto.
(j) Guarantors will not, and will not permit any subsidiary to, directly or
indirectly, make any loans or advance money or property to any Person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or Indebtedness or all or a substantial part of the assets or property
of any Person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the Indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except:
(i) guarantees in favor of Lender;
(ii) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(iii) investments by Guarantors in the stock of any Subsidiary existing as
of the date hereof or as otherwise approved by Lender;
(iv) after written notice thereof to Lender, investments in the following
instruments, which shall be pledged and delivered to Lender upon Lender's
request, (A) marketable obligations issued or guaranteed by the United States of
America or an instrumentality or agency thereof, maturing not more than one (1)
year after the date of acquisition thereof, (B) certificates of deposit or other
obligations maturing not more than one (1) year after the date of acquisition
thereof issued by any bank or trust company organized under the laws of and
located in the United States of America or any State thereof and having capital,
surplus and undivided profits of at least $100,000,000, and (C) open market
commercial paper with a maturity not in excess of two hundred seventy (270) days
from the date of acquisition thereof which have the highest credit rating by
either Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.; and
(v) the guarantees by Value Slacks, Inc. of the obligations of Value
Clothing, pursuant to certain real property leases, provided, that, (A) in no
event shall the aggregate liability of Value Slacks, Inc. thereunder exceed
$4,000,000; (B) Value Slacks, Inc. will not, and will not permit Value Clothing
to, amend, modify, alter or change the terms of such guarantees or leases in any
material respect so as to increase the liabilities of Value Slacks, Inc. or
Value Clothing thereunder; and (C) Value Slacks, Inc. will furnish to Lender all
material notices, demands or other materials concerning such guarantees and
leases, promptly after receipt thereof or concurrently with the sending thereof,
as the case may be.
(k) Guarantors will not, and will not permit any subsidiary
to, directly or indirectly, purchase, acquire or lease any property or receive
any services from, or sell, transfer or lease any property or services to, any
Affiliate of any of Guarantors, except on prices and terms no less favorable
than would have been obtained in an arm's length transaction with a
non-affiliated person.
(1) Guarantors will permit representatives of Lender at any
time to inspect their inventory, equipment and other tangible Collateral and to
have free access to and right of inspection of any papers, instruments and
records pertaining to any of the Collateral and make abstracts or photocopies
from Guarantors' books and records, at the expense of Guarantors, pertaining to
inventory, accounts, contract rights, chattel paper, instruments, documents and
other Collateral. The foregoing rights shall be in addition to and shall not
limit Lender's rights and remedies with respect to the Collateral upon or at any
time after the occurrence of an Event of Default (as provided hereunder).
(m) Guarantors will at all times maintain, with financially
sound and reputable insurers, casualty and hazard insurance with respect to the
Collateral for not less than its full market value and against all risks to
which it may be exposed except to the extent Guarantors are self insured for
losses up to $250,000. All such insurance policies shall be in such form,
substance, amounts and coverage as may be satisfactory to Lender and shall
provide for thirty (30) days' minimum prior cancellation notice in writing to
Lender. Lender may act as attorney for Guarantors in obtaining, adjusting,
settling, amending and cancelling such insurance. Guarantors will promptly (i)
obtain endorsements to all existing and future insurance policies with respect
to the Collateral specifying that the proceeds of such insurance shall be
payable to Lender and Guarantors as their interests may appear and further
specifying that Lender shall be paid regardless of any act, omission or breach
of warranty by Guarantors, (ii) deliver to Lender an original executed copy of,
or executed certificate of the insurance carrier with respect to, such
endorsement and, at the Lender's request, the original or a certified duplicate
copy of the underlying insurance policy, and (iii) deliver to Lender such other
evidence which is satisfactory to Lender of compliance with the provisions
hereof. Guarantors will promptly notify Lender in writing of the details of any
material loss, damage, investigation, action, suit, proceeding or claim relating
to the Collateral or which would result in any material adverse change in
Guarantors' businesses, properties, assets, goodwill or condition, financial or
otherwise. At Lender's option, Lender may apply any insurance monies received at
any time to the cost of repairs to or replacement for the Collateral and/or to
payment of any of the Obligations, whether or not due, in any order and in such
manner as Lender, in its discretion, may determine.
(n) Upon Lender's request, on or after the occurrence of an
Event of Default at any time and from time to time, but in no event prior to the
occurrence of an Event of Default more than once in any twelve (12) consecutive
month period, Guarantors will, at their sole cost and expense, execute and
deliver to Lender written reports or appraisals as to the Collateral consisting
of inventory and equipment listing all items and categories thereof, describing
the condition of same and setting forth the value thereof (the lower of cost or
market value of the inventory and the lower of net cost less depreciation, fair
market value and/or liquidation value of the equipment), in such form as is
satisfactory to Lender.
(o) Guarantors will, at their own expense, keep the Collateral
consisting of equipment in good order, repair, running and marketable condition,
ordinary wear and tear excepted and except for Collateral consisting of
equipment which is not used or useful in the conduct of Guarantors' businesses
as of the date hereof.
(p) Guarantors will (i) use, store and maintain the Collateral
consisting of inventory and equipment with all reasonable care and caution, and
(ii) use such Collateral for lawful purposes only and in conformity with
applicable laws, ordinances and regulations.
(q) At its option, Lender may discharge taxes, liens or
security interests or other encumbrances at any time levied or placed on the
Collateral and may pay for the maintenance and preservation of the Collateral
and Guarantors agree to reimburse Lender on demand, together with interest
therein at the rate specified in the Financing Agreements, for any payment made
or expense incurred by Lender in connection with the foregoing and any such
payment or expense shall constitute a part of the Obligations secured hereby.
(r) All Collateral consisting of inventory shall be produced
in accordance with the requirements of the Federal Fair Labor Standards Act of
1938, as amended and all rules, regulations and orders related thereto. The
Collateral consisting of inventory and equipment is and will be used in
Guarantors' businesses and not for personal, family, household or farming use.
The Collateral consisting of equipment is now and will remain personal property
and Guarantors will not permit any of the equipment to be or become a part of or
affixed to real property without (i) prior written notice to Lender and Lender's
written consent and (ii) first making all arrangements, and delivering or
causing to be delivered to Lender, such agreements and other documentation
requested by Lender for the protection and preservation of Lender's security
interests and liens, in form and satisfactory to Lender, including, without
limitation, waivers and subordination agreements by any landlords or mortgagees
of statutory and non-statutory liens and rights of distraint. Guarantors assume
all responsibility and liability arising from or relating to the use, sale or
other disposition of its inventory and equipment as between Guarantors and
Lender.
(s) Guarantors will, at their expense, duly execute and
deliver, or cause to be duly executed and delivered, such further agreements,
instruments and documents, including, without limitation, additional security
agreements, mortgages, deeds of trust, deeds to secure debt, collateral
assignments, Uniform Commercial Code financing statements or amendments or
continuations thereof, landlords or mortgagee's waivers of liens (except for
landlords waivers as to the retail stores of Guarantors) and consents to the
exercise by Lender of all Lender's rights and remedies hereunder, under any of
the other Financing Agreements or applicable law with respect to the Collateral,
and do or cause to be done such further acts as may be necessary or proper in
Lender's opinion to evidence, perfect, maintain and enforce Lender's security
interest and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Where permitted by law, each of Guarantors hereby authorizes Lender
to execute and file one or more Uniform Commercial Code financing statements
signed only by Lender.
(t) Guarantors will promptly pay Lender any and all sums,
costs and expenses which Lender may pay or incur in connection with the
preparation and negotiation of this Agreement, the Guarantee, any of the other
Financing Agreements, and any related agreements or instruments, or in
defending, protecting or enforcing the security interest granted herein or in
enforcing payment of the Obligations or otherwise in connection with the
provisions hereof, including, without limitation, all search, filing and
recording fees, taxes, and attorneys' fees and all fees and expenses for the
service and filing of papers, marshals, sheriffs, custodians, auctioneers and
others, and all court costs and collection charges, all of which shall be part
of the Obligations secured hereby and shall be payable on demand.
4. EVENTS OF DEFAULT
All Obligations shall be, at Lender's option, immediately due and
payable without notice or demand (notwithstanding any deferred or installment
payments allowed, if any, by any instrument evidencing or relating to the
Obligations) and any provision of the Financing Agreements as to future loans
and advances by Lender to Borrower shall, at Lender's option, terminate
forthwith, upon the occurrence of any one or more of the following ("Events of
Default"):
(a) Guarantors shall be in default in the payment of any of the Obligations
when due, which default shall continue for three (3) days; or
(b) Guarantors shall fail to observe or perform any covenant or agreement
contained herein or in any of the other Financing Agreements other than as
described in subsection (a) above and such failure shall continue for five (5)
business days, provided, that, such five (5) business day period shall not apply
in the case of: (i) any failure to observe any such covenant or agreement which
is not capable of being cured at all or within such five (5) business day period
or which has been the subject of a prior failure within a six (6) month period
or (ii) an intentional breach by Guarantors or their management of any such
covenant or agreement; or
(c) any other guarantor, endorser or person liable on the Obligations shall
terminate or breach any of the terms, covenants, conditions or provisions of any
guarantee, endorsement or other agreement of such person with, or in favor of,
Lender; or
(d) any representation, warranty or statement of fact when made to Lender
at any time by or on behalf of Guarantors is false or misleading in any material
respect: or
(e) Guarantors or any other guarantor, endorser or person liable on the
Obligations shall become insolvent, generally unable to pay its debts as they
mature, call a meeting of creditors or have a creditors' committee appointed,
make a general assignment for the benefit of creditors, suspend or discontinue
doing business for any reason, or shall commence or have commenced against it
any action or proceeding for the appointment of any trustee, receiver, custodian
or liquidator of it or all or any part of its properties or assets; or
(f) a judgment is rendered against Guarantors or any other
guarantor, endorser or person liable on the Obligations in excess of $250,000 in
any one case or in excess of $500,000 in the aggregate and the same shall remain
undischarged for a period in excess of thirty (30) days or execution shall at
any time not be effectively stayed; or
(g) Guarantors or any other guarantor, endorser or person
liable on the Obligations shall commence any action or proceeding for relief
under the Bankruptcy Code or any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Bankruptcy
Code or any other present or future statute, law or regulation or shall take any
corporate action to authorize any of such actions or proceedings; or
(h) Guarantors or any other guarantor, endorser or person
liable on the Obligations shall have commenced against it any action or
proceeding for relief under the Bankruptcy Code or any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under the Bankruptcy Code or any other present or future statute, law or
regulation which is not dismissed within thirty (30) days of its commencement,
or Guarantors, any other guarantor, endorser or person shall file any answer
admitting or not contesting the allegations of a petition filed against it in
any such proceeding or by any act or omission indicates its consent to,
acquiescence in or approval of, any such action or proceeding or if the relief
requested is granted sooner; or
(i) there shall be a material adverse change in the business, assets or
condition (financial or otherwise) of Guarantors from the date hereof; or
(j) there is any change in the majority control or ownership of Guarantors;
or
(k) at any time, Lender shall, in its reasonable discretion,
consider the Obligations insecure or all or any part of the Collateral unsafe,
insecure or insufficient and Guarantors shall not on Lender's demand furnish
other Collateral or make payment on account, reasonably satisfactory to Lender;
or
(1) Guarantors or any other guarantor, endorser or person
liable on the Obligations shall default in the payment of any amounts at any
time due on any indebtedness owed by it or in the performance of any of the
other terms or covenants of any evidence of such indebtedness or of any material
mortgage, security agreement, indenture, pledge or other agreement relating
thereto or securing such indebtedness or with respect to any material contract,
lease, license or other agreement with any person other than Lender, which
default continues for more than the applicable cure period, if any, with respect
thereto; or
(m) the occurrence of an event of default under any of the other Financing
Agreements.
5. RIGHTS AND REMEDIES
(a) Upon the occurrence of any Event of Default and at any
time thereafter, in addition to all other rights and remedies of Lender, whether
provided under the Uniform Commercial Code or other applicable law, this
Agreement, the Guarantee, the other Financing Agreements or otherwise, Lender
shall have the following rights and remedies which may be exercised, in its
discretion, at any time or times, with or without judicial process, with or
without the assistance of others and without notice to or consent by Guarantors
except as such notice or consent or judicial process is expressly provided for
hereunder or required by law:
(i) accelerate payment of all Obligations and demand immediate payment
thereof to Lender;
(ii) enter upon any premises on or in which any of the Collateral may be
located and, without resistance or interference by Guarantors, take possession
of the Collateral;
(iii) complete processing, manufacturing and repair of all or any portion
of the Collateral;
(iv) require any of Guarantors, at their expense, to assemble and make
available to Lender any part or all of the Collateral at any place and time
designated by Lender; and
(v) remove any or all of the Collateral from any premises on or in which
the same may be located, for the purpose of effecting the sale, foreclosure or
other disposition thereof or for any other lawful purpose;
(vi) appropriate, set off and apply to the payment of any or all of the
Obligations, any or all Collateral, in such manner as Lender shall in Lender's
sole discretion determine, and enforce payment of any Collateral, settle,
compromise or release in whole or in part any amounts owing on the Collateral,
prosecute any action, suit or proceeding with respect to the Collateral, extend
the time of payment of any and all Collateral, make allowances and adjustments
with respect thereto, and issue credits in Lender's or either of Guarantor's
names; and
(vii) sell, assign, foreclose or otherwise dispose of and deliver any or
all of the Collateral, at public or private sale, at broker's board, for cash,
upon credit or otherwise, at Lender's sole option and discretion, on or in any
of Guarantor's premises or premises of any other person, and Lender may bid or
become purchaser at any such sale, if public, free from any right of redemption
which is hereby expressly waived.
(b) In the event Lender seeks to take possession of all or any
portion of the Collateral by judicial process, each of Guarantors irrevocably
waives: (i) the posting of any bond, surety or security with respect thereto
which might otherwise be required, (ii) any demand for possession prior to the
commencement of any suit or action to recover the Collateral, and (iii) any
requirement that Lender retain possession and not dispose of any Collateral
until after trial or final judgment.
(c) Each of Guarantors agrees that the giving of five (5) days
notice by Lender to either of Guarantors' addresses set forth below, designating
the place and time of any public sale or of the time after which any private
sale or other intended disposition of the Collateral is to be made, shall be
deemed to be reasonable notice thereof and each of Guarantors waives any other
notice with respect thereto.
(d) The net cash proceeds resulting from the exercise of any
of the foregoing rights or remedies shall be applied by Lender to the payment of
the Obligations in such order as Lender may elect, and each of Guarantors shall
remain liable to Lender for any deficiency. Without limiting the generality of
the foregoing, if Lender enters into any credit transaction, directly or
indirectly, in connection with the disposition of any Collateral, Lender shall
have the option, at any time, in its sole discretion, to reduce the Obligations
by the principal amount of such credit transaction or to defer the reduction
thereof until actual receipt by Lender of cash or other immediately available
funds in connection therewith.
(e) The enumeration of the foregoing rights and remedies is
not intended to be exclusive, and such rights and remedies are in addition to
and not by way of limitation of any other rights or remedies Lender may have
under the Uniform Commercial Code or other applicable law. Lender shall have the
right, in Lender's sole discretion, to determine which rights and remedies, and
in which order any of the same, are to be exercised, and to determine which
Collateral is to be proceeded against and in which order, and the exercise of
any right or remedy shall not preclude the exercise of any others. Lender may at
any time pursue, relinquish, subordinate, modify or take any other action with
respect thereto, without in any way modifying or affecting any of the
Obligations. Lender may, at any time or times, proceed directly against any of
Guarantors or any other person liable on the Obligations to enforce payment of
the Obligations and shall not be required to take any action of any kind to
preserve, collect or protect Lender's or, any of Guarantor's rights in the
Collateral.
(f) No act, failure or delay by Lender shall constitute a
waiver of any of Lender's rights and remedies. No single or partial waiver by
Lender of any provision of this Agreement or any supplement hereto, or breach or
default thereunder, or of any right or remedy which Lender may have shall
operate as a waiver of any other provision, breach, default, right or remedy or
of the same provision, breach, default, right or remedy on a future occasion.
(g) Each of Guarantors waives presentment, notice of dishonor,
protest and notice of protest of all instruments included in or evidencing any
of the Obligations or the Collateral and any and all notices or demands
whatsoever (except as expressly provided herein).
(h) All rights, remedies, powers and benefits granted to
Lender by any of Guarantors or any other person liable on or in respect of the
Obligations under this Agreement, the Guarantee, the other Financing Agreements,
or any other agreement, or granted by applicable law, whether expressly granted
or implied in law, are cumulative, not exclusive and enforceable alternatively,
successively, or concurrently on any one or more occasions and shall include,
without limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by Guarantors or any other person liable
on or in respect of the Obligations of this Agreement, the Guarantee, the other
Financing Agreements or such other agreements.
6. MISCELLANEOUS
(a) Notwithstanding that Lender, whether on its own behalf
and/or on behalf of others, may continue to hold Collateral, and regardless of
the value thereof, each of Guarantors and each other person liable on or in
respect of the Obligations shall be and remain jointly and severally liable for
the payment in full, including principal and interest, of any balance of the
Obligations and expenses hereunder at any time unpaid.
(b) Each of Guarantors and Lender waive all rights to trial by
jury in any action or proceeding instituted by either of them against the other
arising on, out of or by reason of this Agreement, the Guarantee, the other
Financing Agreements, the Obligations, the Collateral, any alleged tortious
conduct by either party hereto or in any way arising out of or related to the
relationship between either of Guarantors and Lender or Borrower and Lender. In
no event will Lender be liable for lost profits or other special or
consequential damages.
(c) Each of Guarantors waives all rights to interpose any
claims, defenses, deductions, setoffs or counterclaims of any kind, nature or
description in any action or proceeding instituted by Lender with respect to
this Agreement, the Guarantee, the other Financing Agreements, the Obligations,
the Collateral or any matter arising therefrom or relating hereto or thereto,
except compulsory counterclaims.
(d) Each of Guarantors hereby expressly submits and
irrevocably consents to the non-exclusive jurisdiction of the District Courts of
the State of Texas and the United States District Court for the Northern
District of Texas in connection with any action or proceeding arising out of or
relating to this Agreement, the Guarantee, the other Financing Agreements, the
Obligations, the Collateral or any document or instrument delivered pursuant
hereto or thereto. Each of Guarantors hereby waives personal service of the
summons and complaint or other process or notice of motion or other application
or papers issued therein, and agrees that the service of such summons and
complaint or other process or papers may be served: (i) inside or outside the
State of Texas by registered or certified mail, return receipt requested,
addressed to either of Guarantors at its chief executive office set forth below
and service or notice so served shall be deemed complete five (5) business days
after the same shall have been posted or (ii) in such other manner as may be
permissible under the rules of said Courts.
(e) All notices, requests and demands hereunder shall be in
writing and (i) made to Lender at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and to
Guarantors at their chief executive offices set forth below, or to such other
address as each party may designate by written notice to the other in accordance
with this provision, and (ii) deemed to have been given or made: if by hand,
telex, telecopy or telegram, immediately upon sending; if by Federal Express,
Express Mail or other overnight delivery service, one (1) day after dispatch;
and if by certified mail, return receipt requested, five (5) days after mailing.
(f) The provisions of this Agreement are severable, and if any
clause or provision hereof shall be held invalid or unenforceable in whole or in
part in any jurisdiction, then such invalidity or unenforceability shall attach
only to such clause or provision in any such jurisdiction or part thereof, and
shall not in any manner affect such clause or provision in any other
jurisdiction or any other clause or provision in this Agreement or the other
Financing Agreements in any jurisdiction.
(g) Under no circumstances shall Lender be deemed to have
assumed any responsibility for or obligation or duty of any nature or kind with
respect to any Collateral, or any matter or proceedings arising out of or
relating thereto, but the same shall be at the sole risk of Guarantors at all
times. Each of Guarantors hereby releases Lender from any claims, causes of
action and demands at any time arising out of, relating to or with respect to
this Agreement, the Guarantee, the other Financing Agreements, the Obligations,
the Collateral and/or any actions taken or omitted to be taken by Lender with
respect thereto, and each of Guarantors hereby agrees to indemnify and hold
Lender harmless from and with respect to any and all such claims, causes of
action and demands by any person, other than Lender's own acts of gross
negligence or willful misconduct.
(h) This Agreement shall inure to the benefit of each of
Guarantors and Lender and their respective successors and assigns and shall be
binding upon each of Guarantors and its successors and assigns.
(i) This Agreement and any other agreement, document or
instrument delivered in connection herewith, and the obligations of the parties
hereunder or thereunder shall be governed by, and construed and interpreted in
accordance with the laws of the state of Texas, except to the extent that the
law of any other jurisdiction is required to be applied with respect to the
enforcement of Lender's rights in Collateral located in such jurisdiction.
IN WITNESS WHEREOF, each of Guarantors has caused these presents to be
duly executed and delivered on the day and year first above written.
VALUE SLACKS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
VALUE CLOTHING COMPANY, INC.,
a Texas corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Chief Executive Office of Signatories
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▇▇▇▇▇▇▇▇ ▇
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▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇