AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
The CIT Group/Commercial Services, Inc.
(as Lender)
And
The CIT Group/Commercial Services, Inc.
(as Agent)
And
ANDOVER TOGS, INC.
(as Borrower)
Dated: As of May 12, 1997
Table of Contents
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SECTION 1. Definitions......................................... 1
SECTION 2. Revolving Loans.....................................27
2.01. General.............................................27
2.02. Notice of Manner of Borrowing.......................27
2.03. Lenders' Obligations Under the Revolving Line
of Credit...........................................28
2.04. Funding of Loans....................................28
2.05. Mandatory Payments..................................29
2.06. Repayment Upon Termination..........................29
2.07. Increased Costs.....................................30
2.08. Capital Adequacy....................................31
SECTION 3. Sharing of Payments; Applications...................32
3.01. Sharing of Payments, Etc............................32
3.02. Apportionment of Payments...........................32
SECTION 4. Interest, Fees and Expenses and Payments............33
4.01. Interest on the Revolving Loans.....................33
4.02. Default Interest....................................33
4.03. Field Examination Fee...............................33
4.04. Out-of-Pocket Expenses..............................34
4.05. Unused Letter of Credit Line Fee and Unused
Line Fees...........................................34
4.06. Letter of Credit Issuance and
Lock Box Fees.......................................34
4.07. Mandatory Prepayments...............................34
4.08. Statements..........................................34
4.09. Method of Payment...................................35
4.10. Use of Proceeds.....................................35
SECTION 5. Letters of Credit...................................35
5.01. Letters of Credit Guaranty..........................35
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5.02. Participations......................................40
5.03. Issuing Letters of Credit;
Cash Collateral.....................................42
SECTION 6. Conditions Precedent to Revolving
Loans on the Closing Date...........................43
6.01. Delivery of Documents...............................43
6.02. Intercreditor Agreement.............................43
6.03. Field Examination and Due Diligence.................43
6.04. No Violation of Law or Agreement....................43
6.05. Financial Information...............................44
6.06. The Effective Date..................................44
6.07. Licensing and Union Agreements......................44
6.08. Material Adverse Change.............................44
6.09. Corporate Organization..............................44
6.10. Proceedings.........................................44
6.11. Board Resolutions...................................45
6.12. Legal Restraints/Litigation.........................45
6.13. Lock Box Account....................................45
6.14. Disbursement Authorization..........................45
6.15. Fees and Expenses...................................46
6.16. Insurance...........................................46
6.17. Certain Plans.......................................46
6.18. UCC Filings.........................................46
6.19. Security Agreement -
Patents and Trademarks..............................47
6.20. Examination and Verification........................47
6.21. Officer's Certificate...............................47
6.22. Use of Proceeds.....................................47
6.23. Key Man Life Insurance..............................47
6.24. Additional Documents................................47
6.25. No Default..........................................48
6.26. Opinions............................................48
6.27. Confirmation of Plan of Reorganization..............48
6.28. Consummation of Transactions Under Plan of
Reorganization......................................48
6.29. Consents............................................48
6.30. Minimum Availability................................48
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SECTION 7. Conditions Precedent to
Each Revolving Loan.................................49
7.01. Representations and Warranties......................49
7.02. No Default..........................................49
7.03. Additional Documents................................49
7.04. Deemed Representation...............................49
SECTION 8. Management, Collection And Status of Accounts
Receivable And Other Collateral.....................49
8.01. Management of Collateral............................50
8.02. Accounts Documentation..............................52
8.03. Status of Accounts and Other Collateral.............52
8.04. Collateral Custodian................................54
SECTION 9. Collateral..........................................55
9.01. Grant of Lien.......................................55
9.02. Inventory...........................................55
9.03. Equipment...........................................56
9.04. Loan Account........................................56
9.05. Lock Box Accounts...................................57
9.06. Real Estate.........................................58
9.07. Continuance of Security Interests...................58
9.08. Election of Actions by the Lenders..................59
9.09. Credits and Charges.................................59
9.10. Additional Collateral...............................59
SECTION 10. Representations and Warranties......................59
10.01. Corporate Existence.................................59
10.02. Authorization of Agreement and Other
Documents...........................................60
10.03. Financial Statements................................61
10.04. No Violation........................................61
10.05. Full Disclosure.....................................62
10.06. Litigation..........................................62
10.07. Labor Matters.......................................63
10.08. Material Agreements.................................63
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10.09. Compliance with Laws................................63
10.10. Governmental Regulations............................64
10.11. Outstanding Debt; No Default........................64
10.12. Title, Liens........................................64
10.13. Taxes...............................................64
10.14. Collateral; Real Estate.............................64
10.15. Broker's or Finder's Commissions....................66
10.16. Application of Proceeds.............................66
10.17. ERISA...............................................67
10.18. Environmental Compliance............................68
10.19. Capital Structure...................................69
10.20. Subsidiaries........................................70
10.21. Survival of Representations
and Warranties......................................70
SECTION 11. Certain Covenants...................................70
11.01. Collateral Covenants................................70
11.02. Insurance...........................................73
11.03. Taxes...............................................75
11.04. Compliance with Laws................................75
11.05. Financial Statements................................76
11.06. Certain Restrictions................................79
11.07. Negative Pledge.....................................81
11.08. Environmental Compliance............................81
11.09. Transactions with Affiliates; Payment of
Management Fee......................................82
11.10. ERISA Notices.......................................82
11.11. ERISA Covenant......................................83
11.12. Key Man Life Insurance..............................84
11.13. Notice of Default; Notice to Block Class 4
Payments............................................84
11.14. Financial Covenants.................................85
SECTION 12. Events of Default and Remedies......................86
12.01. Events of Default...................................86
12.02. Acceleration of Obligations, etc....................91
12.03. Other Remedies......................................91
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SECTION 13. Powers..............................................93
13.01. Attorney-in-Fact....................................93
13.02. Right to Set-Off....................................94
13.03. Sale and Assignment of Lenders' Interest............94
13.04. Disclosure to Participants..........................96
SECTION 14. Termination.........................................96
14.01. Termination of Revolving Line of Credit.............96
14.02. Termination Upon an Event of Default................97
14.03. Maturity of Obligations Upon Termination............97
14.04. Termination by Lenders..............................97
SECTION 15. Indemnification.....................................98
SECTION 16. Miscellaneous.......................................99
16.01. Waivers.............................................99
16.02. Entire Agreement....................................99
16.03. Amendments..........................................99
16.04. Permitted Interest and Fees.........................99
16.05. Illegality.........................................100
16.06. Jurisdiction of Claims.............................100
16.07. No Subrogation; Continuing Obligation..............101
16.08. Notices............................................102
16.09. Governing Law......................................103
16.10. Satisfaction of Agent..............................103
16.11. Description Headings...............................103
16.12. Counterparts.......................................104
16.13. Further Assurances.................................104
16.14. Confidentiality....................................104
SECTION 17. Agency.............................................104
17.01. The Agent..........................................105
17.02. Delegation of Duties...............................105
17.03. Exculpatory Provisions.............................105
17.04. Reliance by Agent..................................106
17.05. Notice of Default..................................106
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17.06. Non-Reliance on Agent and Other Lenders............107
17.07. Indemnification....................................107
17.08. The Agent in Its Individual Capacity...............108
17.09. Successor Agent....................................108
17.10. Collateral Matters.................................109
17.11. Amendments Concerning Agency Function..............110
17.12. Liability of Agent.................................110
17.13. Transfer of Agency Function........................110
17.14. Withholding Taxes..................................110
SECTION 18. Lender Provisions..................................111
18.01. Lenders' Accounting Statement......................111
18.02. Settlement of Accounts.............................111
18.03. Shared Liability...................................112
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EXHIBITS
Exhibit A - Form of Revolving Loan Promissory Note
Exhibit B - Form of Assignment and Transfer Agreement
Exhibit C - Form of Guaranty
Exhibit D - Form of Security Agreement and Mortgage -
Trademark and Patents
Exhibit E - Form of Opinion
Exhibit F - Form of Subsidiary Security Agreement
Exhibit G - Form of Landlords' Waiver and Consent
SCHEDULES
Schedule 1(a) - Revolving Loan Amount
Schedule 1.01 - Indebtedness not in Financial
Statements
Schedule 5.03 - Existing Letters of Credit
Schedule 9.05 - Lock Box Accounts
Schedule 10.1(d) - Name, Jurisdiction, Shares
Schedule 10.01(e) - Convertibles, Exchangeables,
Options, Calls
Schedule 10.06(a) - Litigation - Material Adverse
Effect
Schedule 10.06(b) - Litigation - All
Schedule 10.07 - Labor Matters
Schedule 10.08 - Material Agreements - Defaulted
or Requiring Consents
Schedule 10.09 - Compliance with laws
Schedule 10.14(a) - Permitted Encumbrances
Schedule 10.14(b)(i) - Fee Properties
Schedule 10.14(b)(ii) - Leased Properties
Schedule 10.14(d) - Intellectual Property
Schedule 10.14(e)(i) - Jurisdictions for UCC filings
(Inventory)
Schedule 10.17 - ERISA
Schedule 10.18 - Environmental Compliance
Schedule 10.19 - Capital Structure
Schedule 10.20 - Assets of Stonehenge
vii
AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
THE CIT GROUP/COMMERCIAL SERVICES, INC., a New York corporation
(hereinafter "CIT/CS"), with offices located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇ (such office, or any other office designated by CIT/CS as its
Head Office for purposes hereof being referred to herein as the "Head Office")
and The CIT Group/Commercial Services, Inc. as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Agent") are
pleased to confirm the terms and conditions under which Lenders shall make
revolving loans, advances and other financial accommodations to Andover Togs,
Inc., a Delaware corporation, with offices located at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Borrower").
BACKGROUND
A. On March 19, 1996, the Borrower and the Guarantors (as
hereinafter defined) filed voluntary petitions for relief under chapter 11 of
the Bankruptcy Code (as hereinafter defined) with the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court").
B. CIT/CS, individually and as Agent, and Borrower have previously
entered into that certain Replacement DIP Financing and Security Agreement dated
as of September 19, 1996 (the "Original Agreement"), pursuant to which Borrower
requested and CIT/CS agreed to provide a secured credit facility to the Borrower
of up to $15,000,000 subject to the terms and conditions set forth therein.
C. In connection with the implementation of Borrower's Plan of
Reorganization (as hereinafter defined) Lender (as hereinafter defined) and
Borrower desires to amend and restate the Original Agreement to provide a
secured credit facility to the Borrower of up to $10,500,000, but only upon the
terms and subject to the conditions contained herein.
SECTION 1. Definitions.
The following terms have the meanings indicated:
Accounts shall have the meaning set forth in the definition of
"Collateral".
Account Debtor shall mean each debtor, customer or obligor in any
way obligated on or in connection with any Account.
Agent shall have the meaning set forth in the introductory paragraph
to this Financing Agreement.
Applicable Lending Office shall mean, for each Lender and for each
Revolving Loan, the lending office of such Lender (or of an Affiliate of such
Lender) designated as such for such type of loan on its signature page hereof or
in the applicable Assignment and Transfer Agreement or such other office of such
Lender (or of an Affiliate of such Lender) as such Lender may from time to time
specify to the Agent and the Borrower in writing as the office by which its
loans of such type are to be made and maintained.
Assignee shall mean any Person to whom a Lender shall assign any of
its Commitment hereunder in accordance with Section 13.03 of this Financing
Agreement.
Assignment and Transfer Agreement shall mean an Assignment and
Transfer Agreement, substantially in the form of Exhibit B hereto, pursuant to
which a Lender assigns and an Assignee assumes rights and obligations in
accordance with Section 13.03 of this Financing Agreement.
Availability shall mean, as to the Borrower, the excess of
(i) 85% of the Eligible Accounts Receivable of the Borrower,
plus
(ii) 50% of the Eligible Inventory of the Borrower but Availability
with respect to Eligible Inventory shall in no event be more
than the Inventory Sublimit,
over
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(iii) the sum of (A) the outstanding aggregate principal amount of
all Revolving Loans of the Borrower and the maximum amount
drawable under the outstanding documentary and standby Letters
of Credit of the Borrower (including unreimbursed amounts
under drawn Letters of Credit) which such maximum amount
drawable and unreimbursed amount shall in no event exceed the
Maximum Letter of Credit Amount, (B) the outstanding amount of
all other interest and fees of the Borrower then due and owing
hereunder and (C) the Availability Reserve, if any.
Availability Reserve shall mean reserves imposed by the Agent in its
reasonable discretion.
Bankruptcy Code shall mean Title 11, United States Code, 11 U.S.C.
ss. 101 et seq.
Bankruptcy Court shall have the meaning assigned to it in the
"Background" section hereof.
Borrower shall have the meaning set forth in the introductory
paragraph to this Financing Agreement.
Borrowing Notice shall mean the notice described in Section 2.02 of
this Financing Agreement.
Business Day shall mean a day other than (A) a Saturday, Sunday or
other day in which commercial banks in New York City are authorized or required
by law to close or (B) a day on which the Agent at its Head Office is closed.
Capital Expenditures shall mean in any fiscal year, the cost of any
fixed asset or improvement, or replacement, substitution, or addition thereto,
having a useful life of more than one year, including as a cost the aggregate
amount of expenses, charges or payments due or arising in connection with the
direct or indirect acquisition of such assets or improvements, replacements,
substitutions or additions or in connection with any lease of property by the
Borrower that, in accordance with GAAP, has been or should be reflected as a
liability on the balance sheet of the Borrower, and the entire
3
principal amount of any Indebtedness assumed or incurred in connection
therewith.
Capital Stock of any Person shall mean any and all shares,
interests, participations, or other equivalents (however designated including
stock appreciation rights) of its capital stock and any rights (other than debt
securities convertible into capital stock), warrants or options to acquire such
capital stock.
CERCLA shall have the meaning set forth in Section 10.18(a) hereof.
Change In Control shall mean a Person, entity or "group" (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) other than the ▇▇▇▇▇ Family shall have acquired direct or indirect
beneficial ownership of 50% or more of any outstanding class of Capital Stock of
the Borrower.
Chapter 11 Cases shall mean the Borrower's and the Guarantors'
jointly administered reorganization cases under chapter 11 of the Bankruptcy
Code, pending in the Bankruptcy Court.
Chase shall mean The Chase Manhattan Bank, formerly known as
Chemical Bank.
Chase Bank Rate shall mean the rate of interest per annum announced
by Chase from time to time as its prime rate in effect at its principal office
in the city of New York (the prime rate is not intended to be the lowest rate of
interest charged by Chase to its borrowers).
Chase Bank Revolving Loan shall mean a Revolving Loan bearing
interest at the Chase Bank Rate plus .85%.
CIT/CS shall have the meaning set forth in the introductory
paragraph to this Financing Agreement.
Class 3 Creditors shall mean the holders of Allowed Class 3 Claims
as defined in the Plan of Reorganization.
Class 4 Creditors shall mean the holders of Allowed Class 4 Claims
as defined in the Plan of Reorganization and from and after the transfer and
assignment of any Allowed Class 4 Claim means any transferee of such Allowed
Class 4 Claim holding a Certificate of Beneficial Interest evidencing such
Allowed Class 4 Claim.
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Class 4 Note shall mean the Class 4 Note of Borrower dated the
Effective Date and due March 31, 2002 issued to the Collateral Trustee for the
benefit of the Class 4 Creditors.
Closing Date shall mean the date set forth in the "IN WITNESS
WHEREOF" paragraph at the end of this Financing Agreement, which date shall in
no event be (x) earlier than the date on which all the conditions set forth in
Section 6 hereof shall have been satisfied or waived or (y) later than May 15,
1997.
Code shall mean the Internal Revenue Code of 1986, as amended.
▇▇▇▇▇ Family shall mean ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, or their spouse or issue or any trust for which any of the foregoing
are beneficiaries.
Collateral shall mean:
(a) all of the Borrower's right, title and interest in and to all
equipment (including Borrower's screen print machinery), vehicles, furniture,
fixtures and machinery wherever located and whether now or hereafter existing
and whether now owned or hereafter acquired, together with all substitutes,
replacements, accessions and additions thereto, and all tools, parts,
accessories and attachments used in connection therewith (hereinafter
collectively referred to as the "Equipment");
(b) all of the Borrower's right, title and interest in and to all
inventory of any kind wherever located and whether now or hereafter existing and
whether now owned or hereafter acquired (including, without limitation, all
types of inventory, merchandise, goods, tangible personal property and other
assets that are held by the Borrower for sale, lease or other disposition in the
ordinary course of the Borrower's business or to be furnished under a contract
for services, whether such inventory, merchandise, goods, tangible personal
property and other assets, are raw, in process or finished, and materials used
or consumed in the business of the Borrower, and goods returned to or
repossessed by the Borrower and goods in which the Borrower has an interest in
mass or in joint or other interest or right of any kind including consigned
goods and goods being possessed), and all accessions thereto and products
thereof and all packing
5
and shipping materials (hereinafter collectively referred to as the
"Inventory");
(c) all of the Borrower's right, title and interest in and to,
whether now or hereafter existing, (i) all present and future accounts, contract
rights, chattel paper, documents and instruments (as such terms are defined in
the UCC); (ii) all monies, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, the Agent from
or for the Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise; (iii) all of the Borrower's right, title and interest,
and all of the Borrower's rights, remedies, security and liens, in, to and in
respect of any credit, insurance, accounts (including, without limitation,
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party), guaranties or
other contracts of suretyship with respect to accounts, and deposits or other
security for the obligation of any Account Debtor; (iv) all rights relating to
the sale or other transfer of property to, or the construction, renovation or
other improvement of property by or for the Borrower; (v) all rights now or
hereafter existing in and to all security agreements, leases and other contracts
now or hereafter existing and securing or otherwise relating to any accounts,
contract rights, chattel paper, instruments, documents, or other rights or
obligations; and (vi) all of the Borrower's 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 or
other documents or instruments with respect to, or otherwise representing or
evidencing, any accounts, and all returned, reclaimed or repossessed goods (any
and all such accounts, contract rights, chattel paper, instruments, documents
and rights and obligations being hereinafter referred to as the "Accounts");
(d) (i) all of the Borrower's right, title and interest in and to
all general intangibles; (ii) all rights, interest, choses in action, causes of
actions, claims and all other intangible property of every kind and nature, in
each instance whether now owned or hereafter acquired by the Borrower,
including, without limitation, all corporate and other business records, all
loans, royalties, and all other forms of obligations receivable whatsoever
(other than Accounts); (iii) all Trademarks, trademark applications, Trademark
Licenses, Patents,
6
patent applications, Patent Licenses, trade secrets, copyrights, goodwill,
inventions, designs, registrations, permits, franchises and licenses; (iv) all
computer programs, software, printouts and other computer materials, customer
lists, credit files, correspondence, and advertising materials; (v) all customer
and supplier contracts, sale orders, rights under license and franchise
agreements, and other contracts and contract rights; (vi) all interests in
partnerships and joint ventures, including all moneys due from time to time in
respect thereof; (vii) all federal, state and local tax refunds and federal,
state and local tax refund claims; (viii) all right, title and interest under
leases, subleases, licenses and concessions and other agreements relating to
personal property, including all moneys due from time to time in respect
thereof; (ix) all payments due or made to the Borrower in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of any property
by any Person or Governmental Authority; (x) all deposit accounts (general or
special) with any bank or other financial institution, including, without
limitation, any depositary or other accounts maintained by the Borrower at the
Agent or any other Lender and all funds on deposit thereon; (xi) all credits
with and other claims against third parties (including carriers and shippers)
(other than Accounts); (xii) all rights to indemnification; (xiii) all
reversionary interests in pension and profit sharing plans and reversionary,
beneficial and residual interests in trusts; (xiv) all proceeds of insurance
(except Excess Key Man Life Insurance Proceeds), including credit insurance, of
which such Borrower is the beneficiary; (xv) all letters of credit, guaranties,
liens, security interests and other security held by or granted to the Borrower;
and (xvi) all other intangible property, whether or not similar to the
foregoing, in each instance, however and wherever and whenever arising and
whether now owned or hereafter acquired (hereinafter collectively referred to as
"General Intangibles");
(e) the books and records of the Borrower relating to any of the
foregoing Collateral, including, without limitation, all customer contracts,
sale orders, minute books, ledgers, records, computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence and advertising materials, in each case indicating, summarizing
or evidencing any of the Collateral; and
7
(f) all cash and non-cash proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Agent is the loss payee thereof) (except Excess
Key Man Life Insurance Proceeds), and any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral;
in each case, howsoever and whensoever the Borrower's interest therein may arise
or appear (whether by ownership, security interest, claim or otherwise).
Collateral Trust Agreement shall mean the Note and Collateral Trust
Agreement dated of even date herewith among the Borrower, the Guarantors and the
Collateral Trustee, as the same may hereafter be amended, modified or
supplemented.
Collateral Trustee shall mean ▇.▇. ▇▇▇▇▇▇▇ & Associates, Inc., as
trustee for the benefit of Class 4 Creditors under the Plan of Reorganization.
Commitment shall mean, as to any Lender at any time, such Lender's
Revolving Loan Amount.
Confirmation Order shall mean the order of the Bankruptcy Court
dated April 10, 1997 confirming the Plan of Reorganization.
Contracts shall mean any agreement relating to the terms of payment
or the terms of performance thereof, including, without limitation, (a) all
rights of the Borrower to receive moneys due and to become due to it thereunder
or in connection therewith, (b) all rights of the Borrower to damages arising
out of, or for, breach or default in respect thereof and (c) all rights of the
Borrower to perform and to exercise all remedies thereunder.
Customarily Permitted Liens shall mean:
(a) liens for franchise taxes which are not yet due or which are
being contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained in accordance with
GAAP and as to
8
which the priority of the liens in favor of the Agent are unaffected;
(b) statutory liens of landlords and liens of carriers, warehousemen
or suppliers (or their lenders) and other like liens imposed by law,
created in the ordinary course of business and for amounts not yet due by
their terms and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to
secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations arising as a result of
progress payments under government contracts; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the real property and
which do not detract from the value of such real property and which do not
interfere in any material respect with the use or enjoyment of such real
property in the ordinary course of business of the Person owning such real
property.
Default shall mean any event specified in Section 12 hereof, whether
or not any requirement for the giving of notice, the lapse of time, or both has
been satisfied.
Default Rate of Interest shall mean a rate of interest per annum
equal to the sum of: (a) two percent (2%) and (b) the rate of interest then
otherwise payable on the relevant Obligations, which the Agent shall be entitled
to charge the Borrower on all Obligations due the Lenders by the Borrower to the
extent provided in Section 12.02 of this Financing Agreement, but in no event in
excess of the maximum amount of interest permitted by law.
9
Dollar(s) and the sign "$" shall mean lawful money of the United
States of America.
Early Termination Fee shall mean the fee the Lenders are entitled to
charge to the Borrower in the event the Borrower terminates the Revolving Line
of Credit or this Financing Agreement at any time on or before one year from the
Closing Date to be determined by calculating for the immediately preceding
thirty day period (x) the average daily outstanding principal of the Revolving
Loans plus (y) the average daily outstanding Letters of Credit multiplied by one
half of one percent (1/2 of 1%).
EBITDA shall mean consolidated net income determined in accordance
with GAAP plus interest expense (paid or accrued), plus depreciation,
amortization and restructuring costs plus extraordinary non-cash expenses minus
extraordinary income determined in accordance with GAAP plus, to the extent
included in determining net income, taxes paid or accrued.
Effective Date shall have the meaning assigned to it in the Plan of
Reorganization.
Eligible Accounts Receivable means such Accounts of the Borrower
which are, and at all times shall continue to be, acceptable to the Agent in the
exercise of its reasonable business judgment. Criteria for eligibility may be
fixed and revised from time to time in the exercise of the Agent's reasonable
business judgment (and the Agent shall notify the Borrower as a courtesy of a
change in criteria but a failure to do so shall have no effect hereunder). In
general, Accounts may be deemed to be eligible if: (i) delivery of the
merchandise has been completed; (ii) no return, rejection or repossession has
occurred; (iii) such merchandise has been accepted by the Account Debtor without
dispute, setoff, defense or counterclaim or if such delivered merchandise is
subject to a dispute, setoff, defense or counterclaim (after notification by the
Borrower of same to the Agent), then the Account shall be eligible to the extent
that such Account will be accepted by such Account Debtor; (iv) such Account is
owned by the Borrower free and clear of any lien, security interest or other
encumbrance other than in favor of the Agent and the Lenders and otherwise
continues to be in full conformity with any representation and warranty made
herein by the Borrower to the Agent and the Lenders with respect
10
thereto; (v) such Account is unconditionally payable in U.S. Dollars within
ninety (90) days from the invoice date and is not evidenced by a promissory
note, chattel paper or any other instrument or document; (vi) no more than sixty
(60) days have elapsed from the invoice due date and no more than one hundred
and twenty (120) days have elapsed from the invoice date; (vii) the Account
Debtor with respect thereto is not an Affiliate of the Borrower or any
Guarantor; (viii) such Account does not constitute an obligation of the United
States or any other Governmental Authority, except to the extent that the
aggregate face amount of the subject Accounts so owed exceeds ten percent (10%)
of the aggregate amount of all of the Borrower's Accounts and the Borrower
assigns its right to payment of such excess Accounts to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Subsection 3727 et seq.
and 41 U.S.C. Subsection 15 et seq.) and has otherwise complied with other
applicable statutes or ordinances; (ix) the Account Debtor (or the applicable
office of the Account Debtor) with respect thereto is located in the continental
United States, Hawaii, Puerto Rico or the Virgin Islands unless the Account is
supported by a letter of credit, guaranty, acceptance or other similar
obligation satisfactory to the Agent; (x) the Account Debtor with respect
thereto is not also a supplier to or creditor of the Borrower or Guarantor,
unless such supplier or creditor has executed a no-offset letter satisfactory to
the Agent; (xi) not more than 50% of the aggregate amount of all Accounts of the
Account Debtor with respect to such Account have remained unpaid sixty (60) days
past the invoice due date or one hundred and twenty (120) days past the invoice
date; (xii) the Account Debtor is not the subject of a "Bankruptcy Proceeding"
(for purposes hereof an Account Debtor is subject to a "Bankruptcy Proceeding"
if that Account Debtor has filed a petition for bankruptcy or any other relief
under the United States Bankruptcy Code or any other law relating to bankruptcy,
insolvency, reorganization or relief of debtors, made an assignment for the
benefit of creditors, had filed against it any petition or other application for
relief under the United States Bankruptcy Code or any such other law, has
suspended business operations, called a meeting of its creditors for the purpose
of obtaining any financial concession or accommodation, or had or suffered a
receiver or a trustee to be appointed for all or a significant portion of its
assets or affairs); provided, however, that an Account due from an Account
Debtor which was created subsequent to the commencement of a case under chapter
11 of the Bankruptcy Code by or against that
11
Account Debtor shall not be deemed ineligible solely by virtue of this clause if
such Account would otherwise be deemed eligible by the Agent hereunder; and
(xiii) the Agent is, and continues to be, satisfied with the credit standing of
the Account Debtor in relation to the amount of credit extended.
Eligible Inventory means all tangible personal property, wherever
located, which is owned by the Borrower and held for sale or to be furnished
under contracts of sale, including all piece goods and raw materials which meet
all of the following specifications: (i) the Inventory is lawfully owned by the
Borrower and is not subject to any existing lien, claim, security interest or
prior assignment; (ii) the Borrower has the right to assignment thereof and the
power to grant liens and security interests therein; (iii) the Inventory arose
or was acquired in the ordinary course of the business of the Borrower and such
Inventory does not represent damaged goods; (iv) no Account or, except as
permitted by clause (vi)(B) below, document of title has been created or issued
with respect to such Inventory; (v) the Inventory is readily marketable for sale
by the Borrower; (vi) the Inventory is (A) located in one of the locations
listed on Schedule 10.14(e)(i) hereto as the same may be amended from time to
time in accordance with the terms of the Loan Documents or (B) "in transit",
provided that such "in-transit" Inventory is finished goods inventory that is
shipped under a Letter of Credit issued by the L/C Issuer pursuant to this
Financing Agreement or is "in transit" from a location outside the United
States; (vii) except as permitted by clause (vi)(B) above, such Inventory is
located within the United States; (viii) the Inventory is not work in process or
supplies; and (ix) the Inventory is not otherwise regarded by Agent, in its sole
and absolute discretion exercised reasonably, as unsuitable Collateral for the
Obligations. Finished goods inventory covered by Letters of Credit issued
hereunder shall be included as Eligible Inventory so long as such finished goods
inventory is otherwise deemed to be Eligible Inventory pursuant to the criteria
herein set forth.
Employee Benefit Plan shall mean any plan, agreement, arrangement or
commitment which is an employee benefit plan (other than a Multiemployer Plan),
as defined in Section 3(3) of ERISA, maintained by the Borrower or any ERISA
Affiliate of the Borrower or with respect to which the Borrower or any ERISA
12
Affiliate of the Borrower at any relevant time has any liability or obligation
to contribute.
Environmental Laws shall have the meaning set forth in Section
10.18(a) hereof.
EPA shall have the meaning set forth in Section 10.18(b) hereof.
Equipment shall have the meaning set forth in the definition of
"Collateral".
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended and, unless the context otherwise requires, the rules and
regulations promulgated thereunder from time to time.
ERISA Affiliate shall mean, with respect to the Borrower or any
other Person, any entity required to be aggregated with the Borrower, or Person
under Section 414(b), (c), (m) or (o) of the Code.
Event(s) of Default shall have the meaning set forth in Section 12
of this Financing Agreement.
Excess Key Man Life Insurance Proceeds shall have the meaning set
forth in Section 11.12 hereof.
Executive Officers shall mean the chairman, president, chief
executive officer, chief operating officer, chief financial officer, executive
vice president(s), senior vice president(s), vice president(s) and treasurer of
the Borrower or any one of them, as the context may require.
Existing Letter of Credit shall have the meaning set forth in
Section 5.03(c) hereof.
Fee Property shall have the meaning set forth in Section 10.14(b) of
this Financing Agreement.
Financing Agreement shall mean this Financing and Security
Agreement, as amended, modified or renewed from time to time.
13
GAAP shall mean generally accepted accounting principles in the
United States of America as in effect from time to time and for the period as to
which such accounting principles are to apply.
General Intangibles shall have the meaning set forth in the
definition of "Collateral".
Governmental Authority shall mean any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or hereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial regulatory or administrative function of or pertaining to government.
Guarantors shall mean Springdale Fashions, Inc., Tortoni
Manufacturing Corp. and Stonehenge.
Guaranty shall mean the guaranties of the Obligations by the
Guarantors under each guaranty in favor of the Agent dated as of even date
herewith in the form of Exhibit C attached hereto as the same may be from time
to time amended or modified (collectively, the "Guaranties").
Hazardous Substances shall have the meaning set forth in Section
10.18(b) of this Financing Agreement.
Head Office shall have the meaning set forth in the introductory
paragraph to this Financing Agreement.
Indebtedness of any Person shall mean, without duplication:
(a) all indebtedness of such Person for borrowed money;
(b) all obligations of such Person for the deferred purchase price
of property or services;
(c) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender
14
under such agreement in the event of default are limited to repossession
or sale of such property);
(d) all obligations of such Person with respect to any lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) which is or should be classified and accounted for as a
capital lease on a balance sheet of such Person in accordance with GAAP;
(e) all obligations, contingent or otherwise, of such Person under
acceptances, letters of credit, surety bonds or similar obligations;
(f) all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of
or other ownership or profit interest in such Person or any other Person
or any warrants, rights or options to acquire such capital stock, valued,
in the case of capital stock redeemable at the option of the issuer or
pursuant to the terms thereof at a fixed or determinable date or dates or
upon the occurrence of a condition not solely within the control of the
issuer, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends;
(g) all obligations of such Person in respect of interest rate,
currency hedging or other derivative products;
(h) all Indebtedness of others referred to in clauses (a) through
(g) above guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement, (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make
payment of such indebtedness or to assure the holder of such Indebtedness
against loss, (iii) to supply funds to or in any other manner invest in
the debtor (including, without limitation, any agreement to pay for
property or services irrespective of whether such property is received or
such services are
15
rendered) or (iv) to otherwise assure a creditor against loss;
(i) all Indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness; and
(j) the Class 4 Note.
Indemnified Liabilities shall have the meaning set forth in Section
15 hereof.
Indemnitees shall have the meaning set forth in Section 15 hereof.
Initial Termination Date shall mean the date occurring two (2) years
from the Closing Date and the same date in every year thereafter, if this
Financing Agreement has been renewed, extended or is otherwise in effect.
Insolvency or Insolvent shall mean, with respect to a Multiemployer
Plan, at any particular time, a Multiemployer Plan which is insolvent within the
meaning of Section 4245 of ERISA.
Intangible Assets shall mean the book value of all assets which
would be treated as intangibles under GAAP including, without limitation, good
will, non-competition agreements, transaction costs which are capitalized on the
balance sheet, deferred taxes and licenses.
Intercreditor Agreement shall mean the Intercreditor Agreement dated
of even date herewith between the Collateral Trustee and CIT/CS, individually
and as Agent, as the same may hereafter be amended, modified or supplemented
with the express written consent of the Agent.
Inventory shall have the meaning set forth in the definition of
"Collateral".
16
Inventory Sublimit shall mean up to $3,000,000.
Investments shall have the meaning set forth in Section 11.06(j)
hereof.
Issuing Bank shall have the same meaning as "L/C Issuer" herein.
Landlords' Waiver and Consent shall mean each of the Landlord Waiver
and Consents made by each landlord with respect to the Leased Property in favor
of the Agent in the form of Exhibit G attached hereto.
Leased Property shall have the meaning set forth in Section 10.14(b)
of this Financing Agreement.
Lender(s) shall mean CIT/CS, each Assignee which becomes a Lender
pursuant to Section 13.03 hereof, and its respective successors.
Letter of Credit or Letters of Credit shall mean all letters of
credit issued pursuant to this Financing Agreement with the assistance of the
Lenders by any Issuing Bank for the account of the Borrower, as defined in
Section 5.01(a) hereof.
Letter of Credit Application shall have the meaning set forth in
Section 5.01(a) hereof.
Letter of Credit Guaranties shall mean (i) the guaranties delivered
by CIT/CS to any L/C Issuer, providing the guaranty of the obligations of the
Borrower to such L/C Issuer under the reimbursement and/or application agreement
(or other similar document) between such L/C Issuer and the Borrower and (ii)
the obligation of CIT/CS to any L/C Issuer if the Agent has become a
co-applicant on any Letter of Credit.
Letter of Credit Issuance Fee shall mean the fee the Lenders may
charge the Borrower under Section 4.06 hereof.
Letter of Credit Standby Fee shall mean a fee of two percent (2%)
per annum of the outstanding amount of standby Letters of Credit issued,
guaranteed or replaced hereunder payable monthly.
17
L/C Issuer shall have the meaning set forth in Section 5.01(a)
hereof.
License shall mean any license naming the Borrower as licensee or
licensor.
Loan Account shall have the meaning set forth in Section 9.04
hereof.
Loan Documents shall mean each of this Financing Agreement, the
Revolving Loan Promissory Notes, the Guaranty, the Subsidiary Security
Agreement, the Letters of Credit, the Security Agreement - Patents and
Trademarks, the Landlord Waiver and Consents and the Intercreditor Agreement.
Loans shall mean the Revolving Loans.
Lock Box Account shall have the meaning set forth in Section 9.05(a)
hereof.
Material Adverse Effect shall mean a material adverse effect upon
(i) the business, operations or condition (financial or otherwise) of the
Borrower and the Guarantors taken as a whole, (ii) the ability of the Borrower
and the Guarantors taken as a whole, to perform their obligations hereunder or
under any other Loan Document, (iii) the legality, validity or enforceability of
this Financing Agreement or any other Loan Document, (iv) the aggregate value of
the property included in the calculation of Availability, or (v) the Collateral.
Maximum Letter of Credit Amount shall mean $3,610,000 of Letters of
Credit (of which a maximum of $610,000 may be issued for standby letters of
credit) and shall include (i) the aggregate undrawn face amount of outstanding
Letters of Credit and (ii) the aggregate unreimbursed amount under drawn Letters
of Credit.
Maximum Revolving Loan shall mean $10,500,000 (including sums
directly advanced or charged to the Loan Account in accordance with this
Financing Agreement) minus the sum of the aggregate undrawn face amount of
outstanding standby or documentary Letters of Credit and the unreimbursed amount
under drawn Letters of Credit.
18
Multiemployer Plan shall mean any employee benefit plan which is a
multiemployer plan, as defined in Section 3(37) of ERISA, to which the Borrower
or any ERISA Affiliate of the Borrower at any relevant time has any liability or
obligation to contribute or which covers any employees of the Borrower or any of
its ERISA Affiliates.
Net Worth shall mean assets in excess of liabilities, determined in
accordance with GAAP, on a consistent basis with the latest audited financial
statements of the Borrower and its consolidated subsidiaries.
Note shall mean each Revolving Loan Promissory Note.
Obligations shall mean all loans and advances now or hereafter made
by the Lenders to the Borrower or to others for the Borrower's account; any and
all indebtedness and obligations which may at any time be owing by the Borrower
to the Lenders or the Agent pursuant to this Financing Agreement (including,
without limitation, the Out-of-Pocket Expenses) or any other Loan Document or
any other document entered into in connection herewith or therewith or the
transactions contemplated hereby or thereby, whether now in existence or
incurred by the Borrower from time to time hereafter; whether secured by pledge,
lien upon or security interest in any of the Borrower's assets or property or
the assets or property of any other person, firm, entity or corporation; whether
such obligations and indebtedness are absolute or contingent, joint or several,
matured or unmatured, direct or indirect and whether the Borrower is liable to
the Lenders for such indebtedness as principal, surety, endorser, guarantor or
otherwise and shall include, after a Default or Event of Default, all
obligations incurred by you to any other concern factored or financed by any
Lender. Obligations shall include indebtedness, obligations or liability
incurred by, or imposed on, the Lenders or the Agent as a result of
environmental claims arising out of the Borrower's operation, premises or waste
disposal practices or sites, the Borrower's liability to the Lenders or the
Agent in connection with this Financing Agreement, under any instrument or
guaranty or indemnity entered into, or arising under, any guaranty, endorsement
or undertaking which the Lenders or the Agent may make or issue to others for
the Borrower's account, including any accommodation extended with respect to
applications for Letters of Credit entered into in connection with this
Financing Agreement, the Lenders' or the
19
Agent's acceptance of drafts or endorsement of notes or other instruments for
the Borrower's accounts and benefit in connection with this Financing Agreement.
Officer's Certificate shall mean a certificate signed in the name of
the Borrower by its President, Vice President, Controller or Treasurer.
Original Agreement shall have the meaning set forth in "Background"
clause B.
Out-of-Pocket Expenses shall mean all of the Lenders' and the
Agent's present and future reasonable out-of-pocket expenses incurred relative
to this Financing Agreement and any other Loan Document (and any amendment,
restatement or supplement thereof), whether incurred prior to the date hereof or
hereafter, including, without limitation, such expenses in connection with the
preparation and execution of and closing under this Financing Agreement or any
other Loan Document, any revisions or waivers of this Financing Agreement or any
other Loan Document, any audits or field examinations, the enforcement of any
rights of the Lenders or the Agent under this Financing Agreement or any other
Loan Document, including, without limitation, the perfection and maintenance of
liens and security interests in favor of the Agent pursuant to this Financing
Agreement or any other Loan Document, including, without limitation, any costs,
fees or expenses incurred by the Agent and/or the Lenders in connection with the
loss of or damage to Collateral by fire or other casualty, the cost of record
searches, all costs and expenses incurred by the Lenders or the Agent in opening
bank accounts, depositing checks, receiving and transferring funds, and any
charges imposed on the Lenders or the Agent due to "insufficient funds" of
deposited checks and the Lenders' or the Agent's standard fee relating thereto,
any amounts paid by the Lenders or the Agent incurred by or charged to the
Lenders or the Agent by the Issuing Bank under any Letter of Credit Guaranty or
the Borrower's reimbursement agreement, application for letter of credit or
other like document which pertains either directly or indirectly to such Letters
of Credit (to the extent such expense is paid pursuant to another section of
this Agreement the same expense shall not be deemed an out-of-pocket expense
hereunder), all reasonable fees and expenses of ▇▇▇▇, Scholer, Fierman, ▇▇▇▇ &
Handler, LLP, special counsel to the Agent incurred in connection with this
Financing Agreement and all of the transactions contemplated
20
hereunder, fees and taxes relative to the filing of financing statements and all
such expenses, costs and fees set forth in Section 12.03 of this Financing
Agreement.
Patent License shall mean all agreements, whether written or oral,
providing for the grant by or to the Borrower of any right to manufacture, use
or sell any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule 10.14(d) hereto.
Patents shall mean (a) all letters patent of the United States or
any other country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 10.14(d) hereto, and (b) all
applications for letters patent of the United States and all divisions,
continuations and continuations-in-part thereof or any other country, including,
without limitation, any thereof referred to in Schedule 10.14(d) hereto.
PBGC shall mean Pension Benefit Guaranty Corporation.
Pension Plan shall mean any Employee Benefit Plan which is a
"pension plan" within the meaning of Section 3(2) of ERISA.
Permitted Encumbrances shall mean: (i) existing liens described on
Schedule 10.14(a) hereto (including extensions or renewals thereof, subject to
the limitations on Permitted Indebtedness) and other liens expressly permitted,
or consented to, by the Agent in writing; (ii) Purchase Money Liens; (iii)
Customarily Permitted Liens; (iv) liens granted to the Agent for the benefit of
the Lenders by the Borrower; (v) liens of judgment creditors provided such liens
do not exceed, in the aggregate for the Borrower, at any time, $50,000; (vi)
liens for taxes not yet due and payable or which are being diligently contested
in good faith by the Borrower by appropriate proceedings and which liens are
not pari passu or senior to the liens of the Agent; (vii) liens granted pursuant
to the Letter of Credit Application; and (viii) liens and security interests
granted (A) to First National Bank of Scottsboro as a Class 3 Creditor pursuant
to the Plan of Reorganization, (B) pursuant to the Class 4 Security Agreement
among the Borrower, the Guarantors and the Collateral Trustee and (C) pursuant
to the Subsidiary Security Agreement.
21
Permitted Indebtedness shall mean: (i) Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, services, taxes or labor; (ii) Indebtedness secured by Purchase Money
Liens; (iii) deferred taxes and other expenses incurred in the ordinary course
of business;(iv) Indebtedness arising under the Letters of Credit and this
Financing Agreement; and (v) Reorganized Debt.
Person shall mean and include an individual, a corporation, an
association, a partnership, a trust estate, a government or any department or
agency thereof.
Plan of Reorganization shall mean the Joint Plan of Reorganization
dated January 30, 1997 of Andover Togs, Inc. and certain of its Affiliates and
all exhibits, schedules and attachments thereto as confirmed by Order of the
Bankruptcy Court entered on April 10, 1997, together with all amendments,
modifications and supplements thereto.
Premises shall mean the premises described in Schedule 1.02 hereto,
including all of the easements, rights, privileges and appurtenances (including
air rights) thereunto belonging or in any way appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of the Borrower
therein and in the streets and ways adjacent thereto, either at law or in
equity, in possession or expectancy, now or hereafter acquired, and as used
herein and in the Mortgages shall, unless the context otherwise requires, be
deemed to include the Improvements on such premises.
Proceeds shall mean "proceeds", as such term is defined in Section
9-306(1) of the UCC and, to the extent not included in such definition, shall
include, without limitation, (a) any and all proceeds of any insurance (except
Excess Key Man Life Insurance Proceeds), indemnity, warranty, guaranty or letter
of credit payable to the Borrower from time to time with respect to any of the
Collateral, (b) all payments (in any form whatsoever) paid or payable to the
Borrower from time to time in connection with any taking of all or any part of
the Collateral by any governmental authority or any Person acting under color of
governmental authority, (c) all judgments in favor of the Borrower in respect of
the Collateral and (d) all other amounts from time to time paid or payable or
received or receivable under or in connection with any of the Collateral.
22
Purchase Money Liens shall mean liens on any item of Equipment
existing on the date hereof or acquired after the date of this Financing
Agreement; provided that (i) each such lien shall attach only to the property to
be acquired, (ii) a description of the property so acquired is furnished to the
Lenders and (iii) the debt incurred in connection with such acquisitions after
the date hereof shall not exceed $100,000 in the aggregate in any fiscal year.
Quarterly Operating Reports shall mean a quarterly balance sheet and
a profit and loss statement.
Real Estate shall mean all estate, right, title and interest of the
Borrower in, to and under any and all of the following described property,
whether now held or hereafter acquired: (i) the Premises; (ii) all of the
Borrower's interests, if any, in and to all rents, royalties, issues, profits,
revenue, income and other benefits of the Real Estate (the "Rents") and all
leases of the Real Estate or portions thereof now or hereafter entered into and
all right, title and interest of the Borrower thereunder, including, without
limitation, cash or securities deposited thereunder to secure performance by the
lessees of their obligations thereunder, whether such cash or securities are to
be held until the expiration of the terms of such leases or applied to one or
more of the installments of rent coming due immediately prior to the expiration
of such terms, including any guaranties of such leases; and (iii) all of the
Borrower's interests, if any, in and to all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or liquidated
claims, including, without limitation, proceeds of insurance and condemnation
awards, and all rights of the Borrower to refunds of real estate taxes and
assessments.
Reimbursement Obligation shall have the meaning set forth in Section
5.01(a)(ii) hereof.
Reorganization shall mean with respect to any Multiemployer Plan,
the condition that such plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
Reorganized Debt shall mean all of the Indebtedness of Borrower or
any Guarantor incurred pursuant to the terms of the
23
Plan of Reorganization and any renewal, extension or refinancing of any of the
foregoing.
Reportable Event shall mean an event described in Section 4043(b) of
ERISA or in the regulations thereunder.
Revolving Line of Credit shall mean the Revolving Loan Amounts not
to exceed the Maximum Revolving Loan.
Revolving Line of Credit Termination Date shall mean the earlier of
(a) the Initial Termination Date as of which the Revolving Line of Credit shall
terminate pursuant to Section 14.01 hereof, and (b) such other date as the
Revolving Line of Credit shall terminate hereunder.
Revolving Loan Amount shall mean, as to any Lender, the maximum
amount of the Revolving Loans to the Borrower pursuant to Section 2 hereof, in
an aggregate amount not to exceed the amount set forth under such Lender's name
in Schedule 1(a) under the caption "Revolving Loan Amount" or in Schedule 1 to
the Assignment and Transfer Agreement by which such Lender acquired its
Revolving Loan Amount, collectively, as to all Lenders, the "Revolving Loan
Amounts."
Revolving Loan Percentage shall mean as to any Lender at any time,
the percentage of the aggregate Revolving Loan Amounts attributable to such
Lender.
Revolving Loan Promissory Notes shall mean collectively, the Notes,
in the form of Exhibit A attached hereto, delivered by the Borrower to the
Lenders to evidence the Revolving Loans pursuant to, and repayable in accordance
with, the provisions of this Financing Agreement.
Revolving Loans shall mean the loans made (or at such time as they
are deemed made hereunder, in the case of Letters of Credit) from time to time,
to or for the account of the Borrower by the Lenders pursuant to Section 2 and
Section 5 of this Financing Agreement.
Security Agreement - Trademarks and Patents shall mean each of the
Security Agreement and Mortgages - Trademarks and Patents made by the Borrower
and the Guarantors in favor of the
24
Agent in the form of Exhibit D attached hereto as the same may be from time to
time amended or modified.
Settlement Date shall mean the periodic date, as reasonably
determined by the Agent, on which the Agent shall determine and settle the
amounts owed to the Agent and each Lender such that, after giving effect to such
settlement, the Agent shall be fully reimbursed by the Lenders for (i) all
amounts advanced to the Borrower by the Agent on behalf of the Lenders in
respect of the Loans and (ii) all other amounts owing to the Agent hereunder,
and the Agent will make such distributions to the Lenders that will result in
each Lender having outstanding Revolving Loans to the Borrower in an amount
equal to its Revolving Loan Percentage of the aggregate outstanding principal
amount of all Revolving Loans.
Spill Act shall have the meaning set forth in Section 10.18(a)
hereof.
Stonehenge shall mean Stonehenge Financial Corp.
Subsidiary shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such Person (all such Persons,
the "Subsidiaries").
Subsidiary Security Agreement shall mean the Security Agreement made
by the Guarantors in favor of the Agent in the form of Exhibit F attached hereto
as the same may be from time to time amended or modified.
Tangible Net Worth shall mean Net Worth minus
Intangible Assets.
Trademark License shall mean any agreement, written or oral,
providing for the grant by or to the Borrower of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 10.14(d)
hereto.
25
Trademarks shall mean (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule 10.14(d) hereto, and (b) all
renewals thereof.
UCC shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
Unused Letter of Credit Line Fee shall mean a fee payable monthly in
arrears in the amount of one quarter of one percent (1/4 of 1%) per annum
multiplied by the difference from time to time of the aggregate amount of all
outstanding Letters of Credit for the immediately preceding 30-day period and
$2,000,000.
Unused Revolving Loans Line Fee shall mean a fee payable monthly in
arrears in the amount of one quarter of one percent (1/4 of 1%) per annum
multiplied by the difference from time to time of the average daily outstanding
principal amount of the Revolving Loans for the immediately preceding 30-day
period and $7,500,000.
Working Capital shall mean the positive difference, if any, of (i)
the amount at which the current assets of the Borrower would be shown on a
consolidated balance sheet of the Borrower and its consolidated subsidiaries,
prepared in accordance with GAAP, over (ii) the amount at which the current
liabilities of the Borrower would be shown on a consolidated
26
balance sheet of the Borrower and its consolidated, prepared in accordance with
GAAP.
SECTION 2. Revolving Loans.
2.01. General. The Lenders agree, subject to the terms and
conditions of this Financing Agreement, on or after the Closing Date, and within
(x) the Availability and (y) the Maximum Revolving Loan, to make loans,
severally, on a pro rata percentage basis among the Lenders as set forth on
Schedule 1(a) hereto, to the Borrower on a revolving basis (i.e., subject to the
limitations set forth herein, the Borrower may borrow, repay and re-borrow
Revolving Loans), but in no event may the aggregate outstanding Revolving Loans
by a Lender exceed the Revolving Loan Amount of such Lender. All Revolving Loans
made by each Lender to the Borrower under this Financing Agreement shall be
evidenced by, and repaid with interest in accordance with, a single Revolving
Loan Promissory Note, in the principal amount equal to the lesser of (a) such
Lender's initial Revolving Loan Amount to the Borrower and (b) the aggregate
unpaid principal amount of all Revolving Loans made by such Lender to the
Borrower payable to the order of such Lender for the account of its Applicable
Lending Office and maturing as to principal on the Revolving Line of Credit
Termination Date. Each Lender is hereby authorized by the Borrower to endorse on
the schedule attached to the Revolving Loan Promissory Note held by it the
amount of each Revolving Loan and payment of principal amount received by such
Lender for the account of its Applicable Lending Office on account of the
Revolving Loans made to the Borrower by such Lender, and whether a specific
Revolving Line of Credit Termination Date has been established pursuant to
action of the Borrower or the Agent taken under Section 14.01 hereof, and, if
so, the specific date so established, which endorsement shall, in the absence of
manifest error, be conclusive as to the outstanding balance of the Revolving
Loans made by such Lender to the Borrower and the accuracy of the other
information so recorded; provided, however, that the failure to make such
notation with respect to any Revolving Loan or payment or other information
shall not limit or otherwise affect the obligations of the Borrower under this
Financing Agreement or the Revolving Loan Promissory Note so held by such
Lender. Each Lender agrees that prior to any assignment of the Revolving Loan
Promissory Note it will endorse the schedule attached to its Revolving Loan
Promissory Note to reflect the current amount of outstanding Revolving Loans.
27
2.02. Notice of Manner of Borrowing. If required by the Agent, a
written or telegraphic or facsimile notice (effective upon receipt) (the
"Borrowing Notice") of any Revolving Loan must be received by the Agent at its
Head Office with a copy to each Lender not later than 12:00 P.M. (New York time)
on the date of such Revolving Loan. Each Borrowing Notice must specify the date
and the amount of such Revolving Loan.
2.03. Lenders' Obligations Under the Revolving Line of Credit. Each
Lender is solely responsible for the portion of the Revolving Line of Credit
comprising its Revolving Loan Amount and neither the Agent nor any Lender shall
be responsible for, nor assume any obligations for, the failure of any Lender to
make available its portion of the Revolving Line of Credit. Should any Lender
refuse to make available its portion of the Revolving Line of Credit, then each
of the other Lenders may, but without obligation to do so, increase,
unilaterally, its portion of the Revolving Line of Credit in which event the
Borrower shall be so obligated to such other Lender for any Revolving Loan made
by such other Lender pursuant to such increase. The parties hereto agree that,
on the Closing Date, CIT/CS, as sole Lender on such date, shall have the
obligation to make available the full portion of the Revolving Line of Credit
being drawn down by the Borrower on such date in accordance with the terms and
conditions set forth herein.
2.04. Funding of Loans. (a) The Agent, for the account of the
Lenders, shall disburse all Revolving Loans to the Borrower and shall handle all
collections with respect to Collateral and the repayment of the Obligations. It
is understood that for purposes of the Loans to the Borrower and for purposes of
this Section 2 and prior to settlement among the Lenders on any Settlement Date,
the Agent is using the funds of CIT/CS.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Borrower that such Lender will not make the
amount which would constitute its share of the borrowing on such date available
to the Agent, the Agent may assume that such Lender shall make such amount
available to the Agent on a Settlement Date, and the Agent may, in reliance upon
such assumption, make available to the Borrower for the benefit of the Borrower
a corresponding amount. Absent such notice each Lender's obligation to make such
share available
28
on such date shall be absolute and unconditional, and such Lender shall
reimburse the Agent upon demand such Lender's ratable portion of such borrowing
made available by the Agent. A certificate of the Agent submitted to any Lender
with respect to any amount owing under this subsection shall be conclusive,
absent manifest error. If such Lender's share of such borrowing is not in fact
made available to the Agent by such Lender on the Settlement Date, the Agent
shall be entitled to charge to the Borrower's account the amount advanced by the
Agent on account of such Lender's share with interest thereon at the rate per
annum applicable to Revolving Loans hereunder, payable within fifteen (15) days
of demand by the Borrower and such charge to Borrower's account and payment
demand with respect thereto shall be without prejudice to any rights which the
Agent or the Borrower may have against such Lender hereunder. Nothing contained
in this subsection shall relieve any Lender which has failed to make available
its ratable portion of any borrowing hereunder from its obligation to do so in
accordance with the terms hereof. Nothing contained herein shall be deemed to
obligate the Agent to make available to the Borrower the full amount of a
requested advance when the Agent has not received any Lender's pro rata share of
such Revolving Loan or if the Agent otherwise has any notice that any of the
Lenders will not advance its ratable portion thereof.
2.05. Mandatory Payments. If the Borrower's Availability is less
than zero as a result of the Agent's change in eligibility criteria or the
Availability Reserve hereunder, the Agent shall provide the Borrower with
written notice thereof. If Borrower has not restored Availability to a number
not less than zero within four (4) Business Days after such notice, the Borrower
shall immediately make a mandatory prepayment on its Revolving Loans in an
amount necessary to restore Availability to a number not less than zero and
shall not have the benefit of any grace periods set forth in Section 12.01
hereof. If the Borrower's Availability is less than zero for any other reason,
upon demand by the Agent the Borrower shall make a mandatory prepayment on its
Revolving Loans in an amount necessary to restore Availability of the Borrower
to zero.
2.06. Repayment Upon Termination. In the event this Financing
Agreement or the Revolving Line of Credit is terminated by either the Lenders or
the Borrower for any reason whatsoever in accordance with the terms hereof, the
Revolving Loans (subject, in the case of Letters of Credit, to 'SS' 5.01(a)(i)
29
hereof) shall become due and payable on the effective date of such termination.
2.07. Increased Costs. In the event that, with respect to any
Lender, (i) any change occurs after the date of this Financing Agreement in any
law, regulation or treaty; or (ii) there is enacted, adopted or made after such
date any law, regulation or treaty or any interpretation, directive or request
applying to a class of lenders including such Lender of or under any law or
regulation (whether or not having the force of law) by any court or governmental
or monetary authority or agency charged with the interpretation thereof, and any
such change, enactment, adoption or making, or compliance by the Lender (or any
corporation directly or indirectly owning or controlling such entity) therewith:
(a) does or shall subject any Lender to any tax of any kind
whatsoever with respect to any Loans or its obligations under this
Financing Agreement to make Loans, or changes the basis of taxation of
payments to any Lender of principal, interest or any other amount payable
hereunder in respect of its Loans (except for imposition of, or change in
the rate of, tax on the overall net income of such Lender, other than a
tax imposed solely or primarily on United States branches or subsidiaries
of foreign corporations); or
(b) does or shall impose, modify or make applicable any reserve,
special deposit, compulsory loan, assessment, increased cost or similar
requirement against assets held by, or deposits of, or advances or loans
by, or other credit extended by, or any other acquisitions of funds by,
any office of such Lender in respect of its Loans which is not otherwise
included in the determination of the applicable rate or rates of interest
hereunder;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining its Loans hereunder, or to reduce any amount
receivable hereunder in respect of its Loans, then, in any such case, the
Borrower shall, on a pro rata basis, promptly pay such Lender, upon its written
demand, any additional amounts necessary to compensate such Lender for such
additional cost or reduction in such amount receivable which such Lender deems
to be material as determined by such Lender. No failure by any Lender to demand
compensation
30
for any increased cost shall constitute a waiver of such Lender's right to
demand such compensation at any time, provided that such Lender shall endeavor
to notify the Borrower of any such increased cost within thirty (30) days after
such increased cost is incurred, provided that failure by such Lender to so
notify the Borrower shall not affect the ability of such Lender to demand such
compensation at any time prior to the Revolving Line of Credit Termination Date.
A statement setting forth in reasonable detail the calculations of any
additional amounts payable pursuant to the foregoing sentence, submitted by a
Lender to the Borrower, shall be conclusive absent manifest error.
2.08. Capital Adequacy. If either (i) the effectiveness of, or any
change or phasing in of any law or regulation or in the interpretation thereof
by any United States or foreign governmental authority charged with the
administration thereof, (ii) compliance with any directive, guideline, decision
or request from any central bank or United States or foreign governmental
authority (whether or not having the force of law) promulgated or made after the
Closing Date, or (iii) compliance with the Risk-Based Capital Guidelines of the
Federal Reserve System as set forth in 12 C.F.R., Parts 208 and 225, or of the
Comptroller of the Currency, Department of Treasury, as set forth in 12 C.F.R.,
Part 3 or similar legislation, rules, guidelines, directives or regulations
issued by any United States or foreign governmental authority affects or would
affect the amount of capital required or expected to be maintained by a Lender
(or any Applicable Lending Office of such Lender), and such Lender shall have
determined that such introduction, change or compliance has or would have the
effect of reducing the rate of return on such Lender's capital or the asset
value to such Lender of any Revolving Loan made by such Lender as a consequence,
directly or indirectly, of its obligations to make and maintain the funding of
Revolving Loans hereunder to a level below that which such Lender could have
achieved but for such introduction, change or compliance (after taking into
account such Lender's policies regarding capital adequacy) by an amount
reasonably deemed by such Lender to be material, then, upon demand by such
Lender, the Borrower shall, within fifteen (15) days after demand, pay to such
Lender such additional amount or amounts as shall be sufficient to compensate
such Lender for such reduction in the rate of return. With respect to an event
to which the provisions of both Section 2.07 and this Section 2.08 may apply,
such payments shall be required only to the extent that they are not
31
duplicative of payments previously made pursuant to Section 2.07 hereof in
respect of such event. A certificate as to the required payments submitted to
the Borrower and the Agent setting forth in reasonable detail the basis for the
determination shall be presumed correct absent manifest error.
SECTION 3. Sharing of Payments; Applications.
3.01. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of any obligation of the Borrower or Guarantor
hereunder or under any other Loan Document in excess of its ratable share of
payments on account of similar obligations obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
such similar obligations held by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid by the purchasing Lender
in respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 3.01
may, to the fullest extent permitted by law, exercise all its rights (including
the Lender's right of set-off) with respect to such participation as fully as if
such Lender were the direct creditor of the Borrower in the amount of such
participation.
3.02. Apportionment of Payments. After the occurrence and during the
continuance of an Event of Default, the Agent may apply all payments in respect
of any Obligations and all proceeds of the Collateral, subject to the provisions
of this Agreement (i) first, to pay the Obligations in respect of any fees,
expense reimbursements or indemnities then due to the Agent; (ii) second, to pay
the Obligations in respect of any fees and indemnities then due to the Lenders;
(iii) third, ratably to pay interest due in respect of the Loans; (iv) fourth,
ratably to pay or prepay principal of the Loans (or, to the extent
32
obligations under the Letters of Credit are contingent, to prepay or provide
cash collateral in respect of such Obligations); (v) fifth, to the ratable
payment of all other Obligations then due and payable and (vi) sixth, any
balance remaining shall be returned to the Borrower. To the extent the Agent or
any Lender is entitled by the terms of this Financing Agreement to apply
payments in respect of any Obligations or proceeds of Collateral prior to an
Event of Default, the Agent or such Lender shall remit any balance remaining
after all of the Obligations are paid in full to the Borrower or Guarantor as
the case may be.
SECTION 4. Interest, Fees and Expenses and Payments.
4.01. Interest on the Revolving Loans. Interest on the Revolving
Loans (including with respect to Letters of Credit at such time as Revolving
Loans are deemed made hereunder) shall be payable monthly, in arrears, on the
last Business Day of each month commencing May 31, 1997 and shall be an amount
equal to the Chase Bank Rate plus eighty-five one hundredths of one percent per
annum, for the Revolving Loans (but in no event in excess of the maximum amount
of interest permitted by law), computed on the average of the net balances owing
by the Borrower to the Lenders in the Borrower's accounts at the close of each
day during such month. In the event of any change in said Chase Bank Rate, the
rate applicable to the Revolving Loans shall change, as of the first day of the
month following any change, so as to remain eighty-five one hundredths of one
percent above the then current Chase Bank Rate. Interest on the Revolving Loans
shall be calculated based on a 360-day year. The Agent shall be entitled to
charge the Borrower's Loan Account for interest on the Revolving Loan at the
rates provided for in this Financing Agreement when due until all Obligations of
the Borrower have been paid in full.
4.02. Default Interest. As set forth in Section 12.02 hereof, when
the Borrower is obligated to pay the Default Rate of Interest, the Loans, and to
the extent permitted by law, interest which is not paid when due, shall be paid
at a fluctuating rate per annum equal at all times to the Default Rate of
Interest. Such Default Rate of Interest shall be payable on demand.
4.03. Field Examination Fee. The Borrower shall pay to the Agent
$500.00 per day per examiner for the cost of any
33
field examination reasonably requested by the Agent, plus any reasonable
out-of-pocket expenses; provided, however, that such examinations shall not, so
long as no Event of Default shall have occurred and be continuing, be conducted
more often than once each fiscal quarter.
4.04. Out-of-Pocket Expenses. The Borrower shall reimburse or pay
the Agent and the Lenders, as the case may be, for all reasonable Out-of-Pocket
Expenses of the Agent and the Lenders.
4.05. Unused Letter of Credit Line Fee and Unused Line Fees. The
Borrower shall pay to the Lenders the Unused Letter of Credit Line Fee and the
Unused Revolving Loans Line Fee.
4.06. Letter of Credit Issuance and Lock Box Fees. The Borrower
shall pay to the Agent for the account of the Lenders, the Letter of Credit
Issuance Fee which shall be .25% for the issuance of each Letter of Credit and
.25% on the average daily balance of outstanding documentary letters of credit
payable monthly plus all customary bank charges as set forth in a schedule from
time to time submitted to the Borrower by the Agent, the Letter of Credit
Standby Fee and all fees pursuant to the lock box agreement.
4.07. Mandatory Prepayments. The Borrower shall make mandatory
prepayments of the Revolving Loans immediately upon receipt by the Borrower of
Proceeds (i) without limiting any prohibitions related thereto, from the sale of
assets of the Borrower subject to the rights of any holder of a Permitted
Encumbrance hereunder senior to the liens granted hereunder or (ii) resulting
from a casualty covered by insurance. All prepayments of any portion of Loans
shall include payment of any interest thereon accrued but unpaid.
4.08. Statements. After the end of each month, the Agent shall
promptly send to the Borrower a statement showing the accounting for the
charges, loans, advances and other transactions occurring between the Lenders
and the Borrower during that month. The monthly statements shall be deemed
correct and binding upon the Agent, the Lenders and the Borrower and shall
constitute an account stated between the Borrower, as the case may be, and the
Lenders absent manifest error unless the
34
Agent receives a written statement of the exceptions within thirty (30) days of
the date of the monthly statement.
4.09. Method of Payment. The Borrower shall make each payment under
this Financing Agreement and under the Notes not later than 12:00 noon (New York
time) on the date when due in Dollars to the Agent at the Agent's office
referred to in Section 2.02 hereof in immediately available funds. The Borrower
hereby authorizes the Agent to charge from time to time against any account it
maintains with the Agent or with any Lender any amount so due to the Agent
and/or the Lenders.
Except to the extent provided in this Financing Agreement, whenever
any payment to be made under this Financing Agreement or under the Notes shall
be stated to be due on any day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of the payment of interest, the Unused
Line and other fees, as the case may be.
4.10. Use of Proceeds. The proceeds of the initial Revolving Loans
shall be used to fund working capital in the ordinary course of business and for
other general corporate purposes.
The Borrower will not, directly or indirectly, use any part of such
proceeds for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or to extend credit to any Person for the purpose of purchasing or carrying any
such margin stock. Nothing herein shall limit the right of the Agent to object
to any use or proposed use of proceeds of Revolving Loans; provided, however,
that the Agent shall not object to any use of proceeds of loans if such use is
expressly permitted under the terms of this Agreement.
SECTION 5. Letters of Credit.
5.01. Letters of Credit Guaranty.
(a) General. In order to assist the Borrower in establishing or
opening letters of credit, which shall not have expiration dates that exceed one
hundred and eighty (180) days (or, with the prior approval of the Agent, such
longer period as
35
may be approved by the Agent) from the date of issuance (the "Letters of
Credit"), with Chase or another issuer selected by the Agent (the "L/C Issuer"),
the Borrower has requested CIT/CS to join in the applications for such Letters
of Credit, and/or guarantee payment or performance of such Letters of Credit
through the issuance of a Letter of Credit Guaranty, thereby lending CIT/CS's
credit to the Borrower. These arrangements shall be handled by CIT/CS subject to
Sections 6 or 7 below, as the case may be (upon the opening of each such Letter
of Credit) and to the terms and conditions set forth below. CIT/CS shall not be
required to be the issuer of any Letter of Credit. The Borrower will be the
account party for any application for a Letter of Credit, which shall be in a
form acceptable to the L/C Issuer and CIT/CS and shall be duly completed in a
manner acceptable to CIT/CS, together with such other certificates, documents
and other papers and information as the L/C Issuer or CIT/CS may request (the
"Letter of Credit Application"). Any collateral security interest granted
pursuant to the Letter of Credit Application is a Permitted Encumbrance
hereunder. In the event of any inconsistency between the Letter of Credit
Application and this Financing Agreement, this Financing Agreement shall govern.
(i) The aggregate amount of all outstanding Letters of Credit
and the unreimbursed portion of drawn Letters of Credit shall not exceed, in the
aggregate, at any one time, the Maximum Letter of Credit Amount. In addition,
changes or modifications of the Letters of Credit by the Borrower and/or the L/C
Issuer of the terms and conditions thereof shall in all respects be subject to
the prior approval of CIT/CS which shall not be unreasonably withheld, provided,
however, that (a) the expiry date of all Letters of Credit shall be no later
than one (1) day prior to the Initial Termination Date or, if notice is given
pursuant to Section 14.01 hereof, such earlier Revolving Line of Credit
Termination Date unless, in the case of Letters of Credit, on or prior to three
(3) Business Days prior to the Revolving Line of Credit Termination Date either
such Letters of Credit shall be cash collateralized in an amount equal to 105%
of the face amount of such Letters of Credit (provided that such cash shall be
returned to the Borrower upon the expiration of such Letter of Credit if such
Letter of Credit has expired without a draw being made thereon (there being no
dispute between the L/C Issuer and the beneficiary with respect to payment on
such Letter of Credit) or upon the payment in full of all
36
reimbursement and other obligations in connection therewith) or the Borrower
shall provide the Lenders with an indemnification, in form and substance
reasonably satisfactory to the Agent, from a commercial bank or other financial
institution acceptable to the Agent for any Letter of Credit obligations with
respect to such Letters of Credit and (b) the Letters of Credit and all
documentation in connection therewith shall be in form and substance
satisfactory to CIT/CS and L/C Issuer.
(ii) The Agent shall have the right, without notice to the
Borrower, to charge the Loan Account with the amount of any and all
indebtedness, liability or obligation of any kind (including indemnification for
breakage costs, capital adequacy and reserve requirement charges) incurred by
CIT/CS under the Letter of Credit Guaranty (the "Reimbursement Obligation") at
the earlier of (A) payment by CIT/CS under the Letter of Credit Guaranty, or (B)
the occurrence of an Event of Default. Any amount charged to the Loan Account
shall be deemed a Revolving Loan hereunder made by the Lenders to the Borrower,
funded by the Agent on behalf of the Lenders. Any charges, fees, commissions,
costs and expenses charged to CIT/CS for the Borrower's account by the L/C
Issuer in connection with or arising out of Letters of Credit issued pursuant to
this Financing Agreement or out of transactions relating thereto will be charged
to the Loan Account in full when charged to or paid by CIT/CS and when charged
shall be conclusive on the Borrower, provided, however, that the Borrower shall
not be required to pay any such charge, fee or commission, cost or expense of
the L/C Issuer if such amounts are duplicative of amounts charged by the Agent
and paid by the Borrower hereunder. Each of the Lenders and the Borrower agree
that the Agent shall have the right to make such charges regardless of whether
any Event of Default or Default shall have occurred and be continuing.
(iii) The Borrower unconditionally indemnifies the Agent,
CIT/CS and each Lender and holds the Agent, CIT/CS and each Lender harmless from
any and all loss, claim or liability incurred by the Agent, CIT/CS or any Lender
arising from any transactions or occurrences relating to Letters of Credit
established or opened for the Borrower's account, the Collateral relating
thereto, and all Obligations thereunder, including any such loss or claim due to
any action taken by the L/C Issuer, other than for any such loss, claim or
liability arising out of the gross negligence or willful misconduct of the
Agent, CIT/CS
37
or any Lender as determined by a final judgment of a court of competent
jurisdiction. The Borrower further agrees to hold the Agent, CIT/CS and each
Lender (other than the L/C Issuer, to the extent the L/C Issuer is a Lender
hereunder) harmless from any errors or omissions, negligence or misconduct by
the L/C Issuer. The Borrower's unconditional obligations to the Agent, CIT/CS
and each Lender hereunder shall not be modified or diminished for any reason or
in any manner whatsoever, other than as a result of the Agent's, CIT/CS's or
such Lender's gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
(iv) None of the Agent, CIT/CS, the Lenders or the L/C Issuer
shall be responsible for the existence, character, quality, quantity, condition,
packing, value or delivery of the goods purporting to be represented by any
documents; any difference or variation in the character, quality, quantity,
condition, packing, value or delivery of the goods from that expressed in the
documents; the validity, sufficiency or genuineness of any documents or of any
endorsements thereof even if such documents should in fact prove to be in any or
all respects invalid, insufficient, fraudulent or forged; the time, place,
manner or order in which shipment is made; partial or incomplete shipments, or
failure or omission to ship any or all of the goods referred to in the Letters
of Credit or documents; any deviation from instructions; delay, default, or
fraud by the shipper and/or anyone else in connection with the Collateral or the
shipping thereof; or any breach of contract between the shipper or vendors and
the Borrower. Furthermore, without being limited by the foregoing, none of the
Agent, CIT/CS or the Lenders shall be responsible for any act or omission with
respect to or in connection with any goods covered by Letters of Credit.
(v) The Borrower agrees that any action taken by the Agent,
CIT/CS or any Lender, if taken in good faith, or any action taken by the L/C
Issuer, under or in connection with the Letters of Credit, the Letter of Credit
Guaranty, or the Collateral, shall be binding on the Borrower (with respect to
the L/C Issuer, the Agent, CIT/CS and the Lenders) and shall not put the Agent,
CIT/CS or the Lenders in any resulting liability to the Borrower. In furtherance
thereof, CIT/CS shall have the full right and authority to clear and resolve any
questions of non-compliance of documents; to give any instructions as to
acceptance or rejection of any documents or goods; to execute any
38
and all steamship or airways guaranties (and applications therefor), indemnities
or delivery orders; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit or
drafts; all in CIT/CS's sole name, and the L/C Issuer shall be entitled to
comply with and honor any and all such documents or instruments executed by or
received solely from CIT/CS, all without any notice to or any consent from the
Borrower. CIT/CS shall use reasonable efforts to consult with the Borrower
before taking any action pursuant to this Section 5.01(a)(v).
(vi) Without CIT/CS's express consent, which consent shall not
be unreasonably withheld (it being agreed that if the L/C Issuer's consent is
required, and it declines to give such consent, then if CIT/CS declines to
consent on that basis, it shall not be deemed unreasonable hereunder), the
Borrower agrees: (x) not to execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders; to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts or
documents; or to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit or drafts; and (y) after the occurrence and
during the continuance of an Event of Default not to (A) clear and resolve any
questions of non-compliance of documents, or (B) give any instructions as to
acceptances or rejection of any documents or goods.
(vii) The Borrower agrees that any necessary and material
import, export or other license or certificates for the import or handling of
Inventory will have been promptly procured; all foreign and domestic material
governmental laws and regulations in regard to the shipment and importation of
Inventory or the financing thereof will have been promptly and fully complied
with; and any certificates in that regard that CIT/CS may at any time reasonably
request will be promptly furnished. In this connection, the Borrower warrants
and represents that all shipments made under any Letters of Credit are in
accordance with the laws and regulations of the countries in which the shipments
originate and terminate, and are not prohibited by any such laws and
regulations. As between the
39
Borrower, on the one hand, and the Agent, CIT/CS, the Lenders and the L/C
Issuer, on the other hand, the Borrower assumes all risk, liability and
responsibility for, and agrees to pay and discharge, all present and future
local, state, federal or foreign taxes, duties or levies. As between the
Borrower, on the one hand, and the Agent, CIT/CS, the Lenders and the L/C
Issuer, on the other hand, any embargo, restriction, laws, customs or
regulations of any country, state, city, or other political subdivision, where
such Inventory is or may be located, or wherein payments are to be made, or
wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely the
Borrower's risk, liability and responsibility.
(viii) Upon any payments made to the L/C Issuer under the
Letter of Credit Guaranty, CIT/CS or the Lenders, as the case may be, shall,
without prejudice to its rights under this Agreement (including that such
unreimbursed amounts shall constitute Loans hereunder), acquire by subrogation,
any rights, remedies, duties or obligations granted or undertaken by the
Borrower to the L/C Issuer in any application for Letters of Credit or any
outstanding agreement relating to Letters of Credit, all of which shall be
deemed to have been granted to the Agent and apply in all respects to the Agent
and shall be in addition to any rights, remedies, duties or obligations
contained herein.
5.02. Participations.
(a) Purchase of Participations. Immediately upon issuance by the L/C
Issuer of any Letter of Credit, each Lender shall be deemed to have irrevocably
and unconditionally purchased and received from CIT/CS, without recourse or
warranty, an undivided interest and participation, to the extent of such
Lender's pro rata share, in all obligations of CIT/CS with respect to such
Letter of Credit (including, without limitation, all reimbursement obligations
of the Borrower with respect thereto pursuant to the Letter of Credit Guaranty
or otherwise).
(b) Sharing of Payments. In the event that CIT/CS makes any payment
in respect of the Letter of Credit Guaranty and the Borrower shall not have
repaid such amount to the Agent for the account of CIT/CS (or such L/C Issuer),
the Agent shall charge the Loan Account in the amount of the Reimbursement
Obligation in accordance with Section 5.01(a)(ii).
40
(c) Obligations Irrevocable. The obligations of a Lender to make
payments to the Agent for the account of the Agent, CIT/CS or an L/C Issuer with
respect to a Letter of Credit shall be irrevocable, not subject to any
qualification or exception whatsoever and shall be made in accordance with, but
not subject to, the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Financing
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a beneficiary named in a
Letter of Credit or any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting) , the Agent, L/C Issuer, any
Lender, or any other Person, whether in connection with this Agreement,
any Letter of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transactions between the
Borrower or any other party and the beneficiary named in any Letter of
Credit);
(iii) any draft, certificate or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;
(v) any failure by the Agent to provide any notices required
pursuant to this Agreement relating to Letters of Credit; or
(vi) the occurrence of any Event of Default or Default.
41
5.03. Issuing Letters of Credit; Cash Collateral.
(a) Request for Issuance. The Borrower may from time to time, upon
notice not later than 12:00 noon, New York City time, at least three (3)
Business Days in advance, request CIT/CS to assist the Borrower in establishing
or opening a Letter of Credit by delivering to the Agent, with a copy to the L/C
Issuer, a Letter of Credit Application, together with any necessary related
documents. Nothing herein shall preclude the Borrower from modifying any Letter
of Credit Application within such three Business Days; however, the Borrower
acknowledges hereunder that any such modification may cause a delay in the
issuance of such Letter of Credit by the L/C Issuer (the Agent agreeing to use
its best efforts to cause the issuance of such Letter of Credit in one (1)
Business Day from the day the L/C Issuer is notified in writing of such
modification but a failure to do so shall give rise to no liability hereunder).
(b) Charges to Loan Account. The Borrower hereby authorizes the
Agent to, and the Agent may, from time to time, charge the Loan Account pursuant
to Section 5.01(a)(ii) of this Agreement with the amount of any Letter of Credit
Issuance Fee, the Letter of Credit Standby Fee or charges due hereunder.
(c) Existing Letters of Credit. Schedule 5.03 hereto contains a
description of all letters of credit issued and outstanding on the Closing Date.
Each such letter of credit, including any extension or renewal thereof (each, as
amended from time to time in accordance with the terms thereof and hereof, an
"Existing Letter of Credit") shall constitute a "Letter of Credit" for all
purposes of this Agreement as if originally issued hereunder.
(d) Cash Collateral. Upon demand by the Agent after the occurrence
and continuance of any Event of Default, the Borrower shall deposit with the
Agent with respect to each Letter of Credit then outstanding cash or
equivalents, acceptable to the Agent, readily convertible into cash in an amount
equal to the greatest amount for which such Letter of Credit may be drawn. Such
deposits shall be held by the Agent in an interest bearing account maintained at
the payment office of the Agent as security for, and to provide for the payment
of, the Letters of Credit or the Letter of Credit Guaranty. If such Event of
Default has been cured or if such Letter of Credit shall have expired without a
42
draw being made thereon (there being no dispute between the L/C Issuer and the
beneficiary with respect to payment on such Letter of Credit), the Agent shall
return such cash collateral to the Borrower. In the event that insurance
proceeds on the life of ▇▇▇▇▇▇▇ ▇▇▇▇▇ are delivered to the Agent at a time when
there are outstanding Letters of Credit and no Revolving Loans, the Borrower
hereby directs the Agent to hold such proceeds as cash collateral until there
are Revolving Loans (at which time such cash collateral shall be applied to
reduce the Revolving Loans), or if there are no Revolving Loans until any
Reimbursement Obligation is satisfied.
SECTION 6. Conditions Precedent to Revolving Loans on the Closing Date.
The obligation of the Lenders to make Revolving Loans or to cause
Letters of Credit to be issued pursuant to the terms hereof to the Borrower on
the Closing Date is subject to the satisfaction of immediately prior to or
concurrently with the making of such Loans or the causing such Letters of Credit
to be opened, the following conditions precedent:
6.01. Delivery of Documents. The Agent shall have received the Loan
Documents in form and substance satisfactory to the Agent.
6.02. Intercreditor Agreement. The Agent shall have received an
Intercreditor Agreement (in form and substance satisfactory to the Agent in its
sole discretion), duly executed by each of the respective parties thereto.
6.03. Field Examination and Due Diligence. All field examinations
and due diligence conducted by the Agent shall have been completed and the
results thereof shall have been satisfactory to the Agent in all respects.
6.04. No Violation of Law or Agreement. The Agent shall be satisfied
that the transactions contemplated by this Financing Agreement or related
thereto do not present any exposure under any laws relating to bulk sales,
fraudulent conveyances or similar matters or could have a material adverse
effect on any distributing, agency, supplier, license agreement or any other
contractual agreement of the Borrower.
43
6.05. Financial Information. The Agent shall have received in form
and substance satisfactory to the Agent:
(a) projected balance sheets, income statements and cash flow
projections, with applicable assumptions, all prepared on a monthly basis for
the remaining 1997 fiscal year; and
(b) the most recent available Quarterly Operating Report.
6.06. Effective Date. The Effective Date shall have occurred and the
closing conditions set forth in this Section 6 shall have been satisfied on or
before May 15, 1997.
6.07. Licensing and Union Agreements. The Agent shall have received
information as to the status of the Borrower's existing licensing agreements and
union agreements and such information shall be reasonably satisfactory to the
Agent in all material respects.
6.08. Material Adverse Change. There has not occurred or become
known to the Agent any material adverse change with respect to the condition,
financial or otherwise, operations, assets or prospects of the Borrower since
March 19, 1996 except for the filing of the Chapter 11 petition and changes
attendant thereto.
6.09. Corporate Organization. The Agent shall have received (a) a
copy of the Certificate of Incorporation of the Borrower and each Subsidiary
certified by the Secretary of State of the state of its incorporation, (b) a
certificate as to the good standing of the Borrower and each Subsidiary
certified by such Secretary of State, and (c) a copy of the By-Laws (as amended
through the Closing Date) of the Borrower and each Subsidiary and certified by
the Secretary or Assistant Secretary of the Borrower and each Subsidiary. The
Borrower is duly incorporated and in good standing under the laws of the State
of Delaware and is qualified to do business in all of the states in which such
qualification is necessary to conduct business or own property.
6.10. Proceedings. On or prior to the Closing Date, all corporate
and other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all
44
documents incident thereto shall be satisfactory in form and substance to the
Agent, and the Agent shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
6.11. Board Resolutions. The Agent shall have received a copy of the
resolutions of the Board of Directors of each Guarantor with respect to each
Guaranty and the Borrower authorizing the execution, delivery and performance of
(a) the Loan Documents, and (b) any related agreements, in each case certified
by the Secretary or Assistant Secretary of the Borrower or of the Guarantor, as
the case may be, as of the Closing Date, together with a certificate of the
Secretary or Assistant Secretary of the Borrower or of the Guarantor, as the
case may be, as to the incumbency and signature of the officers of the Borrower
or of the Guarantor, as the case may be, executing the Loan Documents on behalf
of the Borrower or the Guaranty on behalf of the Guarantor and any certificate
or other documents to be delivered by the Borrower or any Guarantor, as the case
may be pursuant hereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
6.12. Legal Restraints/Litigation. There shall be no (x) litigation,
investigation or proceeding (judicial or administrative) pending or, to the
knowledge of the Borrower, threatened against the Borrower, or its assets, by
any governmental authority arising out of the transactions contemplated by the
Loan Documents (including the proposed use of proceeds), (y) injunction, writ or
restraining order restraining or prohibiting the transactions contemplated by
the financing arrangements contemplated under the Loan Documents or (z) suit,
action, investigation or proceeding (judicial or administrative) pending or, to
the best knowledge of the Borrower threatened against the Borrower, or its
assets, which, in the opinion of the Agent (after full disclosure to the Agent
of the existence of any such suit, action, investigation or proceeding), if
adversely determined could have a Material Adverse Effect.
6.13. Lock Box Account. The lock box account shall have been
established with agreements in form and substance satisfactory to the Agent and
the Lenders.
6.14. Disbursement Authorization. The Borrower shall have delivered
to the Agent all information necessary for the
45
Agent to issue wire transfer instructions on behalf of the Borrower for the
initial and subsequent Loans to be made under this Financing Agreement,
including, but not limited to, disbursement authorizations in form acceptable to
the Agent.
6.15. Fees and Expenses. On the Closing Date, the Borrower shall
have reimbursed CIT/CS for all fees and Out-of-Pocket Expenses incurred in
connection herewith and for any fees and expenses owed by the Borrower in
connection with the Original Agreement for which a written request for payment
(the delivery of a narrative billing statement containing detail of the work
performed or charges incurred shall constitute such written request) shall have
been made at or prior to the Closing Date.
6.16. Insurance. The Borrower shall have delivered to the Agent a
certificate from each of its insurance carriers in form satisfactory to the
Agent evidencing that the coverage required by Section 11.02 hereof and the
endorsements thereof listing the Agent, for the benefit of the Lenders, as loss
payee or mortgagee, as the case may be, are in full force and effect, all as set
forth in Section 11.02 of this Financing Agreement.
6.17. Certain Plans. The Agent shall have received a copy of each
agreement or plan or, if not available, a summary thereof, providing for
employment, severance, deferred payments, bonus payments or accruals, profit
sharing arrangements, stock option or stock appreciation rights, incentive
payments, pension or employment benefit contributions or similar payments or
arrangements for the benefit of Borrower's or any of its Subsidiaries'
management personnel, in form and substance as has been approved by Lender.
6.18. UCC Filings. Any documents (including, without limitation,
financing statements) required to be filed in order to create, in favor of the
Agent for the benefit of the Lenders, a first priority perfected security
interest in the Collateral with respect to which a security interest may be
perfected by a filing under the UCC shall have been properly filed in each
office in each jurisdiction required in order to create in favor of the Agent
for the benefit of the Lenders, a perfected lien on the Collateral and all
recording or "intangibles" taxes shall have been paid. The Agent shall have
received acknowledgment copies of all such filings (or, in lieu thereof, the
Agent shall have received other evidence satisfactory to the Agent that all
46
such filings have been made); and the Agent shall have received evidence that
all necessary filing fees and all taxes or other expenses related to such
filings have been paid in full.
6.19. Security Agreement - Patents and Trademarks. The Security
Agreement - Patents and Trademarks, substantially in the form of Exhibit G
hereto, shall have been duly executed by each of the Borrower and the Guarantors
and the Agent, and delivered to the Agent.
6.20. Examination and Verification. The Agent shall have completed
to its satisfaction an updated examination and verification of the Accounts,
Inventory, Equipment, other assets, books and records of the Borrower.
6.21. Officer's Certificate. The Agent shall have received an
executed officer's certificate of the Borrower signed in the name of the
Borrower by one of its Executive Officers, satisfactory in form and substance to
the Agent certifying that: (i) the representations and warranties contained
herein are true and correct in all material respects on and as of the Closing
Date; (ii) the Borrower is in compliance with all of the terms and provisions
set forth herein; and (iii) no Default or Event of Default has occurred.
6.22. Use of Proceeds. The Borrower shall have furnished the Lenders
with evidence reasonably satisfactory to them that all proceeds of the Loans are
being applied on the Closing Date as described in Section 4.10 hereof.
6.23. Key Man Life Insurance. The Agent shall have been named as a
beneficiary of at least $500,000 of insurance proceeds from the life insurance
policy on the life of ▇▇▇▇▇▇▇ ▇▇▇▇▇ as its interest may appear, and a copy of
such policy evidencing Agent as beneficiary shall be delivered within thirty
days after the date hereof.
6.24. Additional Documents. The Borrower shall have executed and
delivered to the Agent all other approvals, opinions or documents as the Agent
may reasonably request in order to consummate the transactions contemplated
hereby.
47
6.25. No Default. No Default or Event of Default shall have occurred
and be continuing, or would result from providing the Loans.
6.26. Opinions. Counsel for the Borrower and the Guarantors shall
have delivered to the Agent for the benefit of the Lenders opinions dated the
Closing Date in the forms of Exhibit E attached hereto.
6.27. Confirmation of Plan of Reorganization. The Agent shall have
received evidence reasonably satisfactory to it that (either prior to or
simultaneously with the making of the initial Revolving Loans hereunder) the
Plan of Reorganization shall have been confirmed under Section 1129 of the
Bankruptcy Code pursuant to the Confirmation Order, as to which no order
modifying or vacating the Confirmation Order shall have been entered, and no
appeal regarding the Confirmation Order shall have been timely filed or, if such
an appeal has been taken, no stay of the Confirmation Order pending such appeal
has been granted.
6.28. Consummation of Transactions Under Plan of Reorganization. The
Agent shall have received evidence satisfactory to it that (either prior to or
simultaneously with the making of the initial Revolving Loans hereunder) the
transactions contemplated by the Plan of Reorganization shall have been
consummated in accordance with the terms of the Plan of Reorganization as
confirmed pursuant to the Confirmation Order.
6.29. Consents. All necessary consents (contractual, regulatory or
otherwise) with respect to the transactions contemplated by this Financing
Agreement shall have been received in form and substance satisfactory to the
Agent.
6.30. Minimum Availability. After giving effect to (a) the Revolving
Loans and the Letters of Credit issued on the Closing Date and (b) the
incurrence of all indebtedness and the payment of all fees and expenses in
connection with the transactions contemplated hereby, there shall be a minimum
of $2,000,000 undrawn Availability under the Revolving Line of Credit.
Upon the execution of this Financing Agreement and the initial disbursement of
Loans hereunder, all of the above conditions
48
precedent shall have been deemed satisfied except as the Borrower and the Agent
shall otherwise agree in a separate writing.
SECTION 7. Conditions Precedent to Each Revolving Loan.
The obligations of the Lenders to make each Revolving Loan or to
cause Letters of Credit to be issued hereunder shall be subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of such Revolving Loans, the following further conditions precedent:
7.01. Representations and Warranties. All the representations and
warranties contained in this Financing Agreement and in each other Loan Document
shall be true and correct on and as of the date of providing such Revolving Loan
as though made on and as of such date, except representations and warranties
made with respect to a specified earlier date in which case such representation
and warranty shall be correct on and as of such specified earlier date.
7.02. No Default. No Default or Event of Default shall have occurred
and be continuing, or could result from providing such Revolving Loan.
7.03. Additional Documents. Upon the request of the Agent, the
Borrower shall have executed and delivered to the Agent a certificate of an
Executive Officer of the Borrower stating that the conditions set forth in
Sections 7.01 and 7.02 hereof have been satisfied as of the date of the
requested Revolving Loan.
7.04. Deemed Representation. Each delivery of a Borrowing Notice by
the Borrower requesting a Revolving Loan shall constitute a representation and
warranty that the statements contained in Section 7.01 hereof are true and
correct both on the date of such delivery of the Borrowing Notice and, unless
the Borrower otherwise notifies the Agent prior to the receipt of such Revolving
Loan, as of the date of the providing of such Revolving Loan.
SECTION 8. Management, Collection And Status of Accounts Receivable And Other
Collateral.
49
8.01. Management of Collateral. (a) After the occurrence and during
the continuance of an Event of Default, the Agent may, in its sole discretion,
send a notice of assignment and/or notice of the Agent's security interest to
any and all Account Debtors or any third party holding or otherwise concerned
with any of the Collateral, and thereafter the Agent shall have the sole right
to collect the Accounts and/or take possession of the Collateral and the books
and records relating thereto. The Borrower and the Guarantors shall not without
prior written consent of the Agent, grant any extension of time of payment of
any Account, compromise or settle any Account for less than the full amount
thereof, release, in whole or in part, any Person or property liable for the
payment thereof, or allow any credit or discount whatsoever thereon, except,
prior to the occurrence and continuance of an Event of Default and in the normal
course of business.
(b) (i) The Borrower and the Guarantors hereby constitute the Agent
or its designee on behalf of the Agent as the Borrower's and the Guarantors'
attorney-in-fact with power to endorse the Borrower's or Guarantor's name upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment or Collateral that may come into its possession, to sign the Borrower's
or Guarantor's name (but in all instances before an Event of Default in the name
of the Borrower or a Guarantor and not the Agent) on any invoice or ▇▇▇▇ of
lading relating to any of the Accounts, drafts against Account Debtors,
assignments and verifications of Accounts and notices to Account Debtors, to
send verification of Accounts, and following an Event of Default to notify the
postal service authorities to change the address for delivery of mail addressed
to the Borrower and the Guarantors to such address as the Agent may designate
and to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
(other than acts or omissions constituting gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction), nor for any error of judgment or mistake of fact or law; this
power being coupled with an interest is irrevocable until all of the Loans and
any other Obligations under the Loan Documents are paid in full and all of the
Loan Documents are terminated.
50
(ii) The Agent, without notice to or consent of the Borrower
or any Guarantor upon the occurrence and during the continuance of an Event of
Default (A) may ▇▇▇ upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any of the
Accounts or any securities, instruments or insurance applicable thereto and/or
release the Account Debtor thereon; (B) is authorized and empowered to accept
the return of the goods represented by any of the Accounts, and (C) shall have
the right to receive, endorse, assign and/or deliver in its name or the name of
any Borrower or Guarantor any and all checks, drafts, and other instruments for
the payment of money relating to the Accounts. The Borrower and the Guarantors
hereby waive notice of presentment, protest and non-payment of any instrument so
endorsed, all in a commercially reasonable manner and without discharging or in
any way affecting liability hereunder.
(c) Nothing herein contained shall be construed to constitute the
Borrower or any Guarantor as agent of the Agent or the Lenders for any purpose
whatsoever, and the Agent and the Lenders shall not be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof
(other than from acts or omissions of the Agent or the Lenders constituting
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction). The Agent or the Lenders shall not, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Accounts or any instrument received in payment thereof or for any
damage resulting therefrom (other than acts or omissions of the Agent or the
Lenders constituting gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction). The Agent or the Lenders,
by anything herein or in any assignment or otherwise, do not assume the
Borrower's or any Guarantor's obligations under any contract or agreement
assigned to the Agent and the Agent or the Lenders shall not be responsible in
any way for the performance by such Borrower or Guarantor of any of the terms
and conditions thereof.
(d) If any of the Accounts includes a charge for any tax payable to
any Governmental Authority, the Agent is hereby authorized (but in no event
obligated) in its discretion to pay
51
the amount thereof to the proper taxing authority for the Borrower's or any
Guarantor's account and to charge the Borrower or Guarantors therefor. The
Borrower or Guarantors shall notify the Agent if any Accounts include any taxes
due to any such authority and, in the absence of such notice, the Agent shall
have the right to retain the full proceeds of such Accounts and shall not be
liable for any taxes that may be due from such Borrower or Guarantor by reason
of the sale and delivery creating such Accounts.
8.02. Accounts Documentation. The Borrower and the Guarantors will
at such intervals as the Agent may require, execute and deliver confirmatory
written assignments of the Accounts to the Agent and furnish such further
schedules and/or information as the Agent may require relating to the Accounts,
including, without limitation, sales invoices or the equivalent, credit memos
issued, remittance advises, reports and copies of deposit slips and copies of
original shipping or delivery receipts for all merchandise sold. In addition,
the Borrower or Guarantor shall notify the Agent of any non-compliance in
respect of the representations, warranties and covenants contained in Section
8.03 below. The items to be provided under this Section 8.02 are to be in form
reasonably satisfactory to the Agent and are to be executed and delivered to the
Agent from time to time solely for its convenience in maintaining records of the
Collateral. The Borrower's or any Guarantor's failure to give any of such items
to the Agent shall not affect, terminate, modify or otherwise limit the Agent's
lien or security interest in the Collateral. The Borrower or Guarantor shall not
re-date any invoice or sale or make sales on extended dating beyond that
customary in the Borrower's or Guarantors' industry, and shall not re-▇▇▇▇ any
Accounts without promptly disclosing the same to the Agent and providing the
Agent with a copy of such re-billing, identifying the same as such. If the
Borrower or any Guarantor becomes aware of anything materially detrimental to
any of the Borrower's or the Guarantors' customers' credit, the Borrower or the
relevant Guarantor will promptly advise the Agent thereof.
8.03. Status of Accounts and Other Collateral. With respect to
Collateral of the Borrower or any Guarantor, the Borrower or such Guarantor
covenants, represents and warrants: (a) the Borrower or such Guarantor shall be
the sole owner, free and clear of all liens, mortgages, pledges or other
encumbrances except in the favor of the Agent for the benefit of the Lenders
52
or otherwise permitted hereunder (including Collateral subject to Permitted
Encumbrances), of and fully authorized to sell, transfer, pledge and/or grant a
security interest in each and every item of said Collateral; (b) on the date an
Account becomes an Eligible Account Receivable and is included in the borrowing
base, each Account shall be a good and valid account representing an undisputed
bona fide indebtedness incurred or an amount indisputably owed by the Account
Debtor therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to any absolute sale and delivery upon the specified terms
of goods sold by the Borrower or such Guarantor, or work, labor and/or services
theretofore rendered by the Borrower and such Guarantor; (c) on the date an
Account becomes an Eligible Account Receivable and is included in the borrowing
base, no Account is subject to any defense, offset, counterclaim, discount or
allowance except as may be stated in the invoice relating thereto or discounts
and allowances as may be customary in the Borrower's or such Guarantor's
business, and each of such Accounts will be, to the best of the Borrower's
knowledge, paid when due; (d) none of the transactions underlying or giving rise
to any Accounts shall violate any applicable state or federal laws or
regulations, and all documents relating thereto shall be legally sufficient
under such laws or regulations and shall be legally enforceable in accordance
with their terms; (e) no agreement under which any deduction or offset of any
kind, other than normal trade discounts, may be granted or shall have been made
by the Borrower or such Guarantor at or before the time such Account is created;
(f) all documents and agreements relating to Accounts shall be true and correct
and in all respects what they purport to be; (g) all signatures and endorsements
of the Borrower, or to the best of the Borrower's knowledge of any other party
that appear on all documents and agreements relating to Accounts shall be
genuine and all signatories and endorsers shall have full capacity to contract;
(h) the Borrower and such Guarantor shall maintain books and records pertaining
to said Collateral in such detail, form and scope as the Agent shall reasonably
require; (i) the Borrower or such Guarantor will immediately notify the Agent if
any of their accounts arise out of contracts with the United States or any
department, agency, or instrumentality thereof and will execute any instruments
and take any steps required by the Agent in order that all monies due or to
become due under any such contract shall be assigned to the Agent and notice
thereof given to the United States Government under the Federal Assignment of
Claims Act; (j) the Borrower and
53
such Guarantor will, immediately upon learning thereof, report to the Agent any
material loss or destruction of, or substantial damage to, any of the
Collateral, and any other matters affecting the value, enforceability or
collectibility of any of the Collateral; (k) if any amount payable under or in
connection with any Account is evidenced by a promissory note or other
instrument, as such term is defined in the UCC, such promissory note or
instrument shall be immediately pledged, endorsed, assigned and delivered to the
Agent as additional Collateral; (l) the Borrower and such Guarantor shall not
redate any invoice or sale or make sales on extended dating beyond that which is
customary in the ordinary course of its business and in the industry; (m) the
Borrower and such Guarantor shall conduct a physical count of its Inventory each
May and November and after the occurrence and during the continuance of an Event
of Default, at such intervals as the Agent may request and the Borrower and such
Guarantor shall promptly supply the Agent with a copy of such count accompanied
by a report of the value (based on the lower of cost (on a FIFO basis) or market
value) of such Inventory; and (n) the Borrower and such Guarantor are not and
shall not be entitled to pledge the Agent's or the Lenders' credit on any
purchases for or any purpose whatsoever, except as otherwise provided herein
with respect to a Letter of Credit Guaranty.
8.04. Collateral Custodian. Upon the occurrence of and during the
continuance of an Event of Default or Default, the Agent may at any time and
from time to time employ and maintain in the premises of the Borrower or the
Guarantors a custodian selected by the Agent who shall have full authority to do
all acts reasonably necessary to protect the Agent's interest in the Collateral.
The Borrower and Guarantors hereby agree to cooperate with any such custodian
and to do whatever the Agent may reasonably request to preserve the Collateral.
All costs and expenses incurred by the Agent, by reason of the employment of the
custodian shall be charged to the Loan Account and the Borrower shall be
provided with a written statement describing such costs and expenses.
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SECTION 9. Collateral.
9.01. Grant of Lien. As security for the prompt payment in full of
all Loans made and to be made to the Borrower from time to time by the Lenders
pursuant hereto, as well as to secure the payment in full of all other
Obligations, the Borrower hereby pledges and grants to the Agent for the benefit
of the Lenders a continuing general lien upon and first priority, perfected
security interest in all of the Collateral whether presently in existence or
hereafter acquired or created, however acquired or created, and which is owned
by the Borrower or in which the Borrower has any interest, whether held by the
Borrower or others for its account; provided, however, that if any Collateral is
subject to a Permitted Encumbrance, and as a matter of law the lien reflected
thereby is senior to the lien of the Agent hereunder, then the lien of the Agent
hereunder shall be subject to such Permitted Encumbrance.
9.02. Inventory. The Borrower agrees to hold all Inventory subject
to the liens of the Agent and make no disposition of any Inventory except in the
ordinary course of the business of the Borrower. Until the Agent has given the
Borrower notice to the contrary, as provided for below, any Inventory may be
sold and shipped by the Borrower to its customers in the ordinary course of the
Borrower's business, on open account and on terms currently being extended by
the Borrower to its customers, provided that all proceeds of all sales
(including cash, accounts receivable, checks, notes, instruments for the payment
of money and similar proceeds) are forthwith transferred, endorsed, and turned
over and delivered to the Agent by deposit to the Lock Box Account. The Lenders
shall have the right to withdraw this permission at any time upon the occurrence
and during the continuance of an Event of Default, in which event no further
disposition shall be made of the Inventory by the Borrower without the Agent's
prior written approval. The proceeds of sales of Inventory, in cash, check or
other form of payment shall be deposited in the Lock Box Account and all cash
amounts so deposited shall be reflected on a weekly cash report (or on a more
frequent basis as may be requested by the Agent in its sole discretion). Upon
the sale, exchange, or other disposition of Inventory, as herein provided, the
security interest in the Borrower's Inventory provided for herein shall, without
break in continuity and without further formality or act, continue in, and
attach to, all Proceeds, including any
55
instruments for the payment of money, accounts receivable, contract rights,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sale, exchange or disposition. As to any such sale,
exchange or other disposition, the Agent shall have all of the same rights as
the Borrower as an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation.
9.03. Equipment. The Borrower will, at its own cost and expense,
keep its Equipment in as good and substantial repair and condition as the same
is now or at the time the lien and security interest granted herein shall attach
thereto, reasonable wear and tear excepted, making any and all repairs and
replacements when and where necessary. The Borrower also agrees to hold all of
its Equipment subject to the liens of the Agent and make no disposition of
Equipment, whether by sale, exchange or otherwise, unless the Borrower first
obtains the prior written approval of the Agent (provided, however, that the
Borrower may sell up to $250,000 of Equipment in any fiscal year without the
Agent's prior written approval) and the proceeds of any such sales shall not be
commingled with the Borrower's other property but shall be segregated, held by
the Borrower in trust for the Agent as the Lenders' exclusive property, and
shall be delivered immediately by the Borrower to the Agent in the identical
form received by the Borrower by deposit to the Lock Box Account. Upon the sale,
exchange, or other disposition of the Equipment as herein provided, the security
interest provided for herein shall, without break in continuity and without
further formality or act, continue in, and attach to, all Proceeds, including
any instruments for the payment of money, accounts receivable, contract rights,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sales, exchange or disposition. As to any such sale,
exchange or other disposition, the Lenders shall have all of the same rights as
the Borrower as an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation.
9.04. Loan Account. The Agent shall maintain a separate account (the
"Loan Account") on its books in the name of the Borrower in which the Borrower
will be charged with loans and advances made by the Lenders to the Borrower or
for the Borrower's account, and with any other Obligations, including (i) in the
case of a Lender party to this Agreement on the Closing Date, any and all costs,
expenses and reasonable
56
attorney's fees which such Lenders or the Agent may reasonably incur in
connection with the exercise by or for such Lenders or the Agent of any of the
rights or powers herein conferred upon the Lenders or the Agent, or in the
prosecution or defense of any action or proceeding to enforce or protect any
rights of the Lenders or the Agent in connection with this Financing Agreement
or the Collateral, or any Obligations and (ii) in the case of any Lender who
becomes party to this Agreement after the Closing Date, any of the foregoing
costs and expenses, but only after the occurrence and during the continuance of
an Event of Default. The Borrower will be credited with all amounts received by
the Agent from the Borrower or from others for the Borrower's account,
including, as above set forth, all amounts received by the Agent in payment of
assigned Accounts, and such amounts will be applied to payment of the
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Borrower be a prerequisite to the Lenders' or the Agent's
right to demand payment of any Obligation. Further, it is understood that
neither the Lenders nor the Agent shall have any obligation whatsoever to
perform in any respect any of the Borrower's Contracts or other obligations
relating to the Accounts.
9.05. Lock Box Accounts. (a) The Borrower shall maintain lock box
bank accounts (the "Lock Box Accounts") in accordance with lock box agreements
and arrangements which shall be satisfactory to the Agent hereunder in the name
of the Agent with the Agent or an Affiliate of the Agent to be designated as the
Lock Box Accounts. The Lock Box Accounts on the Closing Date are identified on
Schedule 9.05 hereto. The Borrower shall instruct its customers to remit payment
of all Accounts on which such customers are debtors directly to the Lock Box
Account, and the Borrower shall promptly deposit in the Lock Box Accounts all
amounts nevertheless or otherwise remitted to the Borrower on the Accounts and
all other amounts received by the Borrower, whether from a disposition of assets
or otherwise, on or after the Closing Date. Notwithstanding anything to the
contrary in this Financing Agreement or in any lock box agreements, in the event
there are no Revolving Loans, or there are Revolving Loans in an amount less
than amounts then contained in the Lock Box Accounts, as the case may be, the
Agent shall remit directly to the Borrower for working capital purposes and not
as a Revolving Loan hereunder any funds in the Lock Box Account in excess of the
sum of the (x) then outstanding Revolving Loans and (y) the maximum
57
amount drawable under outstanding Letters of Credit (to the extent not already
deemed a Revolving Loan hereunder).
(b) On or prior to the Closing Date, the Borrower shall have
established the Lock Box Accounts required by the Agent pursuant to agreements
and subject to terms satisfactory to Agent, into which the Proceeds shall be
deposited.
(c) The Agent shall credit (based on two collection Business Days)
all amounts deposited in the Lock Box Accounts created under this Financing
Agreement pursuant to this Section 9.05 which are "good funds" in New York City
to the repayment of Revolving Loans and to the repayment of other outstanding
Obligations due and payable from time to time. The Lock Box Accounts created
under this Financing Agreement are, and shall remain, under the sole dominion
and control of the Agent. Subject to subsection (a) above, the Borrower
acknowledges and agrees that (A) the Borrower has no right of withdrawal from
any Lock Box Account and (B) the funds on deposit in any Lock Box Account shall
continue to be Collateral for all of the Obligations.
9.06. Real Estate. The Borrower will, at its sole cost and expense,
do, execute, acknowledge and deliver all and every such acts, information
reports, returns and withholding of monies as shall be necessary or appropriate
to comply fully, or to cause full compliance, with applicable law in respect of
the Real Estate and all transactions related to the Real Estate, and will to the
extent reasonably requested by the Agent provide the Agent with satisfactory
evidence of such compliance and notify the Agent of the information reported in
connection with such compliance.
9.07. Continuance of Security Interests. The rights and security
interests granted to the Agent and the Lenders hereunder are to continue in full
force and effect, notwithstanding the termination of this Financing Agreement or
the fact that the account maintained in the name of the Borrower on the books of
the Agent or the Lenders may from time to time be temporarily in a credit
position, until the final payment in full to the Lenders of all Loans and other
amounts due and payable hereunder and the termination of this Financing
Agreement.
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9.08. Election of Actions by the Lenders. To the extent that the
Obligations are now or hereafter secured by any assets or property other than
the Collateral or by the guaranty, endorsement, assets or property of any other
person, then the Agent shall have the right in its sole discretion to determine
which rights, security, liens, security interests or remedies the Lenders shall
at any time pursue, foreclose upon, relinquish, subordinate, modify or take any
other action with respect to, without in any way modifying or affecting any of
them, or any of the Lenders' rights hereunder.
9.09. Credits and Charges. Any reserves or balances to the credit of
the Borrower and any other property or assets of the Borrower in the possession
of the Lenders and/or the Agent shall be held by the Lenders and/or the Agent as
security for any Obligations and applied in whole or partial satisfaction of
such Obligations when due and payable. The liens and security interests granted
herein and any other lien or security interest the Lenders and/or the Agent may
have in any other assets of the Borrower, shall secure payment and performance
of all now existing and future Obligations. The Agent may in its discretion
charge any or all of the Obligations to the Loan Account of the Borrower when
due.
9.10. Additional Collateral. This Financing Agreement and the
obligation of the Borrower to perform all of its covenants and obligations
hereunder are further secured by the Loan Documents.
SECTION 10. Representations and Warranties.
The Borrower represents and warrants to the Lenders and the Agent as
follows:
10.01. Corporate Existence. (a) The Borrower is a corporation duly
organized and existing in good standing under the laws of the state in which the
Borrower is incorporated and is duly qualified and in good standing as a foreign
corporation to do business in every jurisdiction where the character of the
properties owned or leased by it or the nature of any business transacted by it
makes such qualification necessary and where such nonqualification or lack of
good standing would have a Material Adverse Effect.
59
(b) The Borrower has the corporate power to own its property and to
carry on its business as now being conducted. The Borrower has delivered to the
Agent and has caused each Guarantor to deliver to the Agent true, complete and
correct copies of the Borrower's and each such Guarantor's Certificate of
Incorporation and By-laws, as amended and in full force and effect on the
Closing Date.
(c) The Borrower has all requisite power and authority to enter into
and perform all its obligations under this Financing Agreement and the other
Loan Documents.
(d) The Borrower has identified on Schedule 10.01(d) (i) the name
and jurisdiction of incorporation or organization of the Borrower and each
Guarantor; (ii) each jurisdiction where the Borrower and each Guarantor is
qualified to do business as of the Closing Date; and (iii) the number of shares
of Capital Stock and other equity securities authorized, issued and outstanding
as of the Closing Date and the percentage of the issued and outstanding Capital
Stock of each Subsidiary owned by the Borrower as of the Closing Date. All such
shares of Capital Stock and other equity securities have been validly issued and
are fully paid and nonassessable and all such shares and securities of a
Subsidiary are owned by the Borrower indicated on Schedule 10.01(d) beneficially
and of record, free and clear of any lien or other encumbrance, except for
Permitted Encumbrances.
(e) The Borrower has no outstanding stock or securities convertible
into or exchangeable or exercisable for any shares of its Capital Stock, nor
does it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, any shares of its Capital Stock or any securities
convertible into or exchangeable or exercisable for any shares of its Capital
Stock other than as set forth on Schedule 10.01(e).
10.02. Authorization of Agreement and Other Documents. The Borrower
has taken all actions necessary to authorize it to enter into and perform its
obligations under this Financing Agreement and the other Loan Documents to which
it is a party, and to consummate the transactions contemplated hereby and
thereby. This Financing Agreement and the other Loan Documents
60
to which the Borrower is a party, when executed and delivered by the Borrower as
provided in this Financing Agreement, will be, legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms, subject as to enforcement, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally and limitations imposed by federal or state law or
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions hereof and thereof.
10.03. Financial Statements. (a) The financial statements (otherwise
required to be delivered hereunder) of the Borrower (including any related
schedules and/or notes) have been prepared in accordance with GAAP consistently
applied. Such information fairly presents the financial condition of the
Borrower and its Subsidiaries on a consolidated basis as at the date thereof.
(b) There have been no material adverse changes in the properties,
business, operations, earnings, assets, liabilities or condition (financial or
otherwise) of the Borrower, since March 31, 1997, except as disclosed in the
Quarterly Operating Reports.
10.04. No Violation. Neither the execution or delivery of this
Financing Agreement or any other Loan Document nor the performance by the
Borrower of its obligations under this Financing Agreement or any other Loan
Document nor the consummation by the Borrower of the transactions contemplated
hereby and thereby will:
(a) violate any provision of the charter or by-laws of the
Borrower;
(b) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority to which the
Borrower or any of its properties may be subject; or
(c) require any consent, approval or other action by any court or
administrative or governmental body or any other Person pursuant to the
charter or by-laws (other than such as have been obtained or taken) of the
Borrower, or any
61
post-petition agreement, instrument, order, judgment or decree to which
the Borrower is subject, unless the Agent has been notified in writing and
such consent has been obtained.
The Borrower is not a party to, or otherwise subject to any
provision contained in, any instrument evidencing Indebtedness of the Borrower,
any agreement relating thereto or any other contract or agreement (including its
charter) which, except to the extent complied with by the Borrower or consented
to in connection with the execution of this Financing Agreement or any other
Loan Document, restricts or otherwise limits the incurring of the Indebtedness
evidenced by this Financing Agreement.
10.05. Full Disclosure. Neither this Financing Agreement or any
other Loan Document, nor any of the other documents, certificates or statements
furnished to the Agent in writing by or on behalf of the Borrower in connection
herewith contains any untrue statement of a material fact or, when read
together, omits to state a material fact respecting the Borrower or any
Guarantor necessary to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading in any material
respect. There is no fact known to the Borrower respecting the Borrower or any
Guarantor, which the Borrower has not disclosed to the Lenders which materially
adversely affects, or insofar as the Borrower can reasonably foresee will
materially adversely affect, the properties, business, prospects, operations,
earnings, assets, liabilities or condition (financial or otherwise) of the
Borrower or the Borrower and the Guarantors taken as a whole or the ability of
the Borrower to perform its obligations under this Financing Agreement, any
other Loan Document or any other document contemplated hereby or thereby.
10.06. Litigation. (a) Except as set forth on Schedules 10.06(a) and
(b), there is no action, proceeding or investigation pending, or to the best
knowledge of the Executive Officers of the Borrower, threatened, against or
affecting the Borrower in any court or before any governmental authority or
arbitration board or tribunal, foreign or domestic, except for such actions
which, if adversely determined, singly and in the aggregate, would not have a
Material Adverse Effect and there is no such action seeking to restrain, enjoin,
prevent the
62
consummation of or otherwise challenge this Financing Agreement, any other Loan
Document or any of the other documents or the transactions contemplated hereby
or thereby. All actions, proceedings or investigations (pending or threatened
against the Borrower) are set forth on Schedules 10.06(a) and (b).
(b) The Borrower is not subject to any judgment, order, decree, rule
or regulation of any court, governmental authority or arbitration board or
tribunal which has had or which can reasonably be expected to have a Material
Adverse Effect.
10.07. Labor Matters. Except as set forth on Schedule 10.07 hereto,
there are no strikes or other material labor disputes against the Borrower or,
to the knowledge of the Borrower, threatened against the Borrower. To the
knowledge of the Borrower, hours worked by and payments made to employees of the
Borrower have not been in violation of the Fair Labor Standards Act or any other
applicable law dealing with such matters, except to the extent that any such
violation would not result in a Material Adverse Effect.
10.08. Material Agreements. Except as set forth on Schedule 10.08
hereto, all material leases and other material agreements (including Licenses)
to which the Borrower is a party are valid and binding and in full force and
effect and, to the knowledge of the Borrower, no default has occurred or is
continuing thereunder which would have a Material Adverse Effect and no consent
need be obtained (other than consents which have been or will be obtained prior
to the Closing Date) from any Person in respect of any such lease or agreement
in connection with the transactions contemplated hereby. The Borrower enjoys
peaceful and undisturbed possession of all leases necessary or in any respect
material to the business of the Borrower for the operation of its properties and
assets, unless the Borrower has made other lease arrangements for the operation
of its properties and assets.
10.09. Compliance with Laws. Except as set forth on Schedule 10.09,
the Borrower (a) is not in violation of any statutes, laws, ordinances,
governmental rules or regulations or any judgment, order, writ, injunction,
decree, rule or regulation (federal, state, local or foreign) to which it is
subject or (b) has not failed to obtain any licenses, permits, franchises or
63
other governmental authorizations necessary to the ownership or operation of its
properties or the conduct of its business.
10.10. Governmental Regulations. The Borrower is not subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to incur indebtedness for borrowed money.
10.11. Outstanding Debt; No Default. The Borrower has no outstanding
Indebtedness other than Permitted Indebtedness. No event has occurred or failed
to occur which would constitute a Default or Event of Default under this
Financing Agreement or any other Loan Document.
10.12. Title, Liens. Except for Permitted Encumbrances, the Borrower
has good and marketable title to its properties and assets.
10.13. Taxes. The Borrower has filed all Federal, State and other
income tax returns that are required to have been filed, and has paid all taxes
as shown on said returns and on all assessments received by it to the extent
that such taxes have become due, except any such taxes that are being diligently
contested in good faith by appropriate proceedings, for which adequate reserves
in accordance with GAAP are set aside on its books and as to which no liens have
been asserted which are or may be pari passu or senior to the liens of the
Agent.
10.14. Collateral; Real Estate. (a) Security Interest and Liens.
Except for Permitted Encumbrances, the security interests and liens granted
herein and in the Loan Documents constitute and shall at all times constitute
valid first priority perfected liens and the only liens on the Collateral; the
Borrower is the absolute owner of its Collateral with full right to pledge,
sell, consign, transfer and create a security interest therein, free and clear
of any and all claims or liens in favor of others, except for the Permitted
Encumbrances; and the Equipment does not comprise a part of the Inventory of the
Borrower and the Equipment is and will only be used by the Borrower in its
business and will not be held for sale or lease, or removed from its premises,
or otherwise disposed of by the Borrower without the prior written approval of
64
the Agent, except as otherwise permitted under Section 9.03 hereof.
(b) Real Estate. With respect to real property or interests in real
property the Borrower has (i) good and marketable fee title to all of its real
property which is listed on Schedule 10.14(b)(i) under the heading "Fee
Properties" and such other real property title to which it may acquire after the
Closing Date (each, a "Fee Property"), and (ii) good and valid title to the
leasehold estates in all of the real property leased by it and which is listed
in Schedule 10.14(b)(ii) under the heading "Leased Properties" and such other
real property to which it may acquire a leasehold interest after the Closing
Date, in each case free and clear of all mortgages, liens, security interests,
easements, covenants, rights-of-way and other similar restrictions of any nature
whatsoever, except Permitted Encumbrances. The Fee Properties so listed in
respect of the Borrower constitute all of the real property owned in fee by the
Borrower and, a true, correct and complete legal description for each such Fee
Property has been previously delivered to the Agent.
(c) Possession of Trademarks. The Borrower possesses or has the
right to the use of all the trademarks, trade names, service marks, licenses and
other rights free from burdensome restrictions that are currently used by it or
are necessary in any material respect for the ownership, maintenance and
operation of its respective businesses, properties and assets. The Borrower is
not in violation of any thereof in any material respect or has received notice
from or has knowledge of any material claim by any Person that it is now
infringing any of the foregoing which if adversely determined would have a
Material Adverse Effect.
(d) Intellectual Property. To the best knowledge of the Borrower,
except as set forth on Schedule 10.14(d) hereto, the Borrower has no Trademarks,
Patents or registered copyrights or any applications pending for any Trademarks,
Patents or copyrights.
(e) Collateral Information. (I) Schedule 10.14(e)(i) lists (i) the
chief place of business and chief executive office of the Borrower and each
Guarantor, (ii) all of the locations of Equipment and Inventory owned by the
Borrower and each Guarantor,
65
(iii) the place where the Borrower and each Guarantor maintains its books and
records concerning its Accounts and its other Collateral, and all locations
presently occupied or used by the Borrower with respect to which it is necessary
to file UCC financing statements to perfect a security interest in the
Collateral in favor of the Lenders to the extent such interest can be perfected
by such filings; UCC searches have been completed for all such locations and the
results have been delivered to the Agent.
(II) All documents (including, without limitation, financing
statements) required to be filed or instruments required to be delivered to the
Agent in order to create, in favor of the Agent for the benefit of the Lenders,
a perfected security interest in the Collateral with respect to which a security
interest may be perfected by filing or delivery under the UCC have been, in the
case of such filing, delivered to the Agent for filing in the appropriate office
in the jurisdictions set forth on Schedule 10.14(e) to this Financing Agreement
and, in the case of such delivery, delivered to the Agent, and all other
procedures otherwise required in order to create in favor of the Agent, for the
benefit of the Lenders, a perfected lien on the Collateral have been taken by or
on behalf of the Borrower.
10.15. Broker's or Finder's Commissions. To the extent that any
broker's or finder's or placement fee or commission is payable with respect to
this Financing Agreement or any other Loan Document or the transactions
contemplated hereby or thereby, it has been paid in full and the Borrower will
hold the Lenders and the Agent harmless from any claim, demand or liability for
broker's or finder's or placement fees or commissions alleged to have been
incurred in connection with this Financing Agreement or any other Loan Document
or such transactions.
10.16. Application of Proceeds. The Borrower does not own any
"margin security" within the meaning of Regulation G (12 C.F.R. Part 207) of the
Board of Governors of the Federal Reserve System (herein called a "margin
security"). The proceeds of the Revolving Loans will be used by the Borrower
only for the purposes described in Section 4.10 hereof. Neither the Borrower nor
any agent acting on its behalf has taken or will take any action which might
cause the Loans made pursuant to this Financing Agreement to violate Regulation
G, Regulation T,
66
Regulation U, Regulation X or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Securities Exchange Act of 1934, as
amended in each case as in effect now or as the same hereafter may be in effect.
10.17. ERISA. The Borrower has not engaged in any transaction prohibited by
Section 4975 of the Code or Section 406 of ERISA which could subject the
Borrower, or any entity which the Borrower has an obligation to indemnify, to
any material tax or penalty imposed under Section 4975 of the Code or Section
502 of ERISA. Except as set forth on Schedule 10.17 hereto, each Pension Plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service that it is so
qualified and nothing has occurred since the date of such determination letter
that could reasonably be expected to adversely affect the qualification of such
Pension Plan. Each Employee Benefit Plan is administered in all material
respects in accordance with its terms and applicable law. With respect to any
Employee Benefit Plan, the Borrower has not failed to make any contribution due
under the terms of such plan or as required by law. Except as set forth on
Schedule 10.17 hereto, as of the Closing Date, the fair market value of the
assets of each Pension Plan are at least equal to the present value of all
benefit liabilities under each such Pension Plan, determined as if each such
Pension Plan terminated as of the Closing Date and using interest rates and
assumptions adopted by the PBGC for such purpose. There is no lien outstanding
or security interest imposed under the Code or ERISA in connection with a
Pension Plan. The Borrower and each ERISA Affiliate of the Borrower has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Pension Plan subject to Section 412 of the Code or
Section 302 of ERISA. Except as disclosed on Schedule 10.17 hereto, as of the
Closing Date, neither the Borrower nor any ERISA Affiliate of the Borrower has
incurred or expects to incur any liability under Title IV of ERISA (other than
the payment of premiums, none of which are overdue). Except as set forth on
Schedule 10.17 hereto, neither the Borrower nor any ERISA Affiliate of the
Borrower has liability for retiree medical, life insurance or other death
benefits (contingent or otherwise) other than as a result of a continuation of
medical coverage required under Section 4980B of the Code.
67
10.18. Environmental Compliance. (a) Except as set forth in Schedule
10.18 hereto, the Borrower is not (i) in violation, or alleged to be in
violation, of any judgment, decree, order, or license, and is in compliance with
all laws, rules and regulations pertaining to environmental matters, including,
without limitation, those arising under the Resource Conservation and Recovery
Act, title III of the Superfund Amendments and Reauthorization Act of 1986, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, the New Jersey Spill Compensation and Control Act, N.J.S. 58:10-23.11 et
seq. (the "Spill Act") or any other federal, state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment or (ii)
subject to a remedial response obligation or other liability under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or any state law of similar effect (hereinafter collectively
"Environmental Laws"), which violation or obligation or liability (as described
in (a)(i) and (ii) of this subsection (a)) would have an adverse effect on the
Collateral or a Material Adverse Effect.
(b) Except as set forth in Schedule 10.18 hereto, the Borrower has
no knowledge from any third party, including, without limitation, any federal,
state or local governmental authority, (i) that the Borrower has been identified
by the United States Environmental Protection Agency ("EPA") or the New Jersey
Department of Environmental Protection as a potentially responsible party under
CERCLA or the Spill Act with respect to a site listed on the National Priorities
List or The Comprehensive Environmental Response, Compensation and Liability
Information Systems list; (ii) that any hazardous waste, as defined by 42 U.S.C.
'SS' 6903(5), any hazardous substances as defined by 42 U.S.C. 'SS' 9601(14),
any pollutant or contaminant as defined by 42 U.S.C. 'SS' 9601(33), any medical
waste and any toxic substances or extremely hazardous substances as defined in
or appearing on a list compiled under The Federal Emergency Planning and
Community Right-to-Know Act, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances") which
the Borrower has generated, transported or disposed of has been released at any
site at which a federal, state or local agency has conducted or has ordered
that the Borrower conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law or has named the Borrower as a
potentially responsible party or is seeking
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contributions from the Borrower or (iii) that it is or shall be a named party to
any claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind whatsoever
in connection with the release of Hazardous Substances; and
(c) To the knowledge of the Borrower, except as set forth on
Schedule 10.18 hereto: (i) no portion of the property of the Borrower has been
used for the handling, processing, storage or disposal of Hazardous Substances,
except in accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is located on
any portion of the property; (ii) in the course of any activities conducted by
the Borrower or operators of its properties, no Hazardous Substances have been
generated or are being used on the property except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the property of the Borrower, which releases
would have a material adverse effect on the value of any of the property or
adjacent properties or the environment; and (iv) in addition, any Hazardous
Wastes as defined by 42 U.S.C. 'SS' 6903(5), if any, that have been generated on
any of the property have been transported offsite only by carriers having an
identification number issued by the EPA, and treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, and such carrier and facilities have been and
are, to the best of the Borrower's knowledge, operating in material compliance
with such permits and applicable Environmental Laws.
10.19. Capital Structure. On the Closing Date, (i) the authorized
capital stock of the Borrower consists of 7,500,000 shares of Common Stock, $.10
par value, of which 4,470,815 shares are issued and outstanding and (ii) there
are no outstanding options, warrants, rights or convertible securities providing
for the issuance of any Capital Stock of the Borrower, except as set forth on
Schedule 10.19. All outstanding shares of Common Stock of the Borrower have been
duly and validly issued and are fully paid and nonassessable.
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10.20. Subsidiaries. The Guarantors are the Borrower's only
Subsidiaries. Stonehenge is an inactive entity and holds no assets except as set
forth on Schedule 10.20. The Borrower shall form no new Subsidiary without the
prior consent of the Agent.
10.21. Survival of Representations and Warranties. All statements
contained in any certificate or other document delivered to the Lenders or the
Agent by or on behalf of the Borrower pursuant to or in connection with this
Financing Agreement or under any other Loan Document shall be deemed to
constitute representations and warranties under this Financing Agreement with
the same force and effect as the representations and warranties expressly set
forth herein. All the Borrower's representations and warranties thereunder and
hereunder shall survive the execution and delivery of the same and any
investigation by the Lenders.
SECTION 11. Certain Covenants.
11.01. Collateral Covenants. (a) The Borrower hereby covenants that,
except for the Permitted Encumbrances, and in the case of General Intangibles,
the rights of third parties from which such General Intangibles are derived, the
Borrower will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create a security interest therein, free and clear of any and all
claims or liens in favor of others; that the Borrower will at its expense
forever warrant and, at the Lenders' and/or the Agent's request, defend the same
from any and all claims and demands of any other person other than the Permitted
Encumbrances. At any time and from time to time, upon the request of the Agent,
the Borrower will, at the sole expense of the Borrower, promptly and duly
execute and deliver such further instruments and documents and take such further
action as the Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Financing Agreement and the Loan Documents
and of the rights and powers herein and therein granted for the benefit of the
Agent and the Lenders.
(b) The Borrower will maintain books and records pertaining to the
Collateral in such detail, form and scope as is consistent with current
practices and will not change such record-keeping practices without the prior
written consent of the
70
Agent, which consent will not be unreasonably withheld. The Borrower agrees that
its books and records will reflect the Lenders' interest in the Collateral. The
Borrower further agrees that all of the books and records of the Borrower,
including records handled or maintained for the Borrower by any other company or
entity, will be available to the Agent and the Lenders and that the Agent, the
Lenders or their respective agents, accountants and attorneys may, upon prior
notice (which shall be not less than one Business Day unless a Default or Event
of Default shall have occurred and be continuing), enter on a Business Day upon
the Borrower's premises or any other properties on or in which any of the
Borrower's Collateral may be located at any time during normal business hours,
and from time to time, for the purpose of inspecting the Collateral, and any and
all records pertaining thereto, including, without limitation, copies of
agreements with, or purchase orders from, the Borrower's customers, and copies
of invoices to customers, proof of shipment or delivery and such other
documentation and information relating to the Accounts and other Collateral as
the Agent may reasonably require. The Borrower hereby further agrees that the
Lenders may, from and after the Closing Date, request any information relating
to the Collateral or the business operations or condition of the Borrower from,
and have reasonable access to the Borrower's officers and its independent public
accountants, and the Borrower will cause such officers and direct such
accountants to make available to the Lenders such information.
(c) The Borrower will not sell, transfer, lease or otherwise dispose
of any of the Collateral, or attempt, offer or contract to do so, except for the
sale of Inventory in the ordinary course of business or as otherwise expressly
provided hereunder. In the event of such permitted sales, the security interest
created by this Financing Agreement shall in any event continue in the Proceeds
of Collateral. The Borrower shall pay all of the Agent's reasonable
Out-of-Pocket expenses in connection with any release of Collateral.
(d) The Borrower will not (i) amend, modify, terminate or waive any
provision of any contract, license or agreement in any manner which could
reasonably be expected to materially adversely affect the value of such
contract, license or agreement as Collateral, (ii) fail to exercise promptly and
diligently each and every material right which it may have under each material
contract, license or agreement (other than any right of
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termination), except in a manner consistent with the ordinary and customary
conduct of its business or (iii) fail to deliver to the Agent upon its
reasonable request a copy of each material demand, notice or document received
by it relating in any way to any material contract, license or agreement.
(e) Other than in the ordinary course of business as generally
conducted by the Borrower, the Borrower will not grant any extension of the time
of payment of any of the Accounts, compromise, compound or settle the same for
less than the full amount thereof, release, wholly or partially, any Person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon.
(f) The Borrower will not (i) change the location of its chief
executive office/chief place of business from that specified in Schedule
10.14(e) or remove its books and records from the location specified in such
Schedule 10.14(e), (ii) permit any of the Inventory or Equipment to be kept at a
location other than those listed on such Schedule 10.14(e) hereto or (iii)
change its name (including the adoption of any new trade name), identity or
corporate structure unless, in each case, it shall have provided at least ten
(10) days' prior written notice to the Agent of any such change. The Borrower
will, from time to time, notify the Agent of each location at which any material
amount of the Collateral or such books and records are to be kept including for
temporary processing, storage or similar purposes. The Borrower shall not remove
any Collateral or such books or records to a location not set forth on Schedule
10.14(e) or otherwise keep any Collateral at a location not set forth on
Schedule 10.14(e) unless, not less than ten (10) days prior to the day such
removal or other change occurs, the Borrower shall give written notice to the
Agent of such removal or other change and the new location of such Collateral or
such books and records. No action requiring notice to the Agent under this
paragraph (f) shall be effected until such filings and other measures required
under applicable law to continue uninterrupted the first perfected security
interest and lien of the Agent in the Collateral affected thereby shall have
been taken, and until the Agent shall have received such opinions of counsel
with respect to the liens granted hereunder thereto as it shall have reasonably
requested. The Borrower also agrees to advise the Agent promptly, in sufficient
detail, of any material adverse change relating to the type, quantity or quality
of the
72
Collateral or to the security interests granted to the Lenders or the Agent
therein. The Borrower as to itself hereby authorizes the Agent to regard its
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by one of its authorized officers or
agents.
(g) The Borrower will execute and deliver to the Agent, from time to
time, such written statements and schedules as the Agent may reasonably require,
designating, identifying or describing the Collateral pledged to the Lenders or
the Agent hereunder, including, without limitation, such schedules of Accounts
as the Agent may reasonably request to support or confirm any information
previously given, and such other appropriate reports designating, identifying
and describing the Accounts as the Agent may reasonably require. The Borrower's
failure, however, to promptly give the Agent such statements or schedules shall
not affect, diminish, modify or otherwise limit the Lenders' or the Agent's
security interests in the Collateral.
(h) The Borrower will comply with the requirements of all state and
federal laws in order to grant to the Agent for the benefit of the Lenders valid
and perfected first priority security interests and liens in the Collateral,
subject only to the Permitted Encumbrances. The Agent is hereby authorized by
the Borrower to file any financing statements covering the Collateral whether or
not the Borrower's signature appears thereon. The Borrower will do whatever the
Agent may reasonably request, from time to time, by way of: filing notices of
liens, financing statements, amendments, renewals and continuations thereof;
cooperating with the Agent; keeping stock records; and performing such further
acts as the Agent may reasonably require in order to perfect the liens
contemplated by this Financing Agreement in favor of the Agent for the benefit
of the Lenders.
(i) The Borrower will use its best efforts to obtain mortgagee,
landlord and bailee waivers on all properties owned or leased by the Borrower
within thirty (30) days of the date hereof or within thirty (30) days from the
date of entering into new mortgages, leases or warehouse arrangements.
11.02. Insurance. (a) The Borrower will maintain, with financially
sound and reputable companies, insurance policies (i) insuring the Borrower and
the Agent (on behalf of the Lenders) against comprehensive general liability for
personal
73
injury and property damage relating to the Premises, Equipment and Inventory of
the Borrower, workers' compensation, auto liability and auto physical damage
(comprehensive and collision) and (ii) all risk insurance insuring the Premises,
Equipment and Inventory of the Borrower against loss by fire, explosion, theft
and such other casualties as may be satisfactory to the Agent, such policies
(and any deductibles related thereto) to be in such amounts and on such terms as
are currently in effect. All policies covering the Real Estate, Equipment and
Inventory are to be made payable to the Agent for the benefit of the Lenders, in
case of loss, under a standard non-contributory "lender" or "secured party"
clause and are to contain such other provisions as the Lenders may require to
fully protect the Lenders' interest therein and any payments to be made under
such policies. All original policies or true copies thereof are to be delivered
to the Agent, premium prepaid, with the loss payable endorsement in the Agent's
favor for the benefit of the Lenders, and shall provide for not less than thirty
(30) days' prior written notice to the Agent of the exercise of any right of
cancellation and a breach of warranty clause keeping the interests of the Agent
and the Lenders insured notwithstanding a breach by the Borrower of any
warranty, representation or other provision contained in any policy. At the
request of the Borrower or if the Borrower fails to maintain such insurance, the
Agent may arrange for such insurance, but at the Borrower's expense and without
any responsibility on the Lenders' part for: obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence and during the continuance of an Event
of Default, the Agent shall have the sole right, in the name of the Agent for
the benefit of the Lenders or the Borrower, to file claims under any insurance
policies, to receive, receipt and give acquittance for any payments that may be
payable thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies. The Agent and the Lenders have no obligation to pay any premiums
hereunder and shall not be deemed to have made or to make any representation or
warranty to any insurance company or underwriter.
(b) (i) In the event of any loss or damage by fire, theft or other
casualty, insurance proceeds relating to Inventory shall first reduce the
outstanding Revolving Loans and any other
74
outstanding amounts due hereunder and then be paid over to the Borrower or to
the Collateral Trustee, as their interests may appear.
(ii) In the event any part of the Borrower's Equipment as to
which there is a first priority security interest in favor of the Agent is
damaged by fire or other casualty and the insurance Proceeds for such damage or
other casualty is more than $250,000, the Agent shall either (A) promptly apply
such Proceeds to reduce the outstanding balances of the Revolving Loans and then
pay the balance to the Borrower or (B) in its sole discretion permit the
Borrower to repair or restore such Equipment.
(iii) As long as no Event of Default shall have occurred and
be continuing, and the Proceeds are $250,000 or less, the Borrower may elect (by
delivering written notice to the Agent) to repair or restore such Equipment to
substantially the equivalent condition prior to such fire or other casualty as
set forth herein, or to acquire other equivalent or functionally equivalent
Equipment. If the Borrower does not, or cannot, elect to use the Proceeds as set
forth above, the Agent may apply the Proceeds to the payment of the Obligations
in accordance with Section 4.07 hereof.
11.03. Taxes. The Borrower will pay, when due, all taxes,
assessments, claims and other charges (herein "taxes") lawfully levied or
assessed upon the Borrower or the Collateral and (i) if such taxes remain unpaid
after the date fixed for the payment thereof unless such taxes are being
diligently contested in good faith by the Borrower by appropriate proceedings or
(ii) if any lien shall be claimed thereunder (x) for taxes due the United States
of America or (y) which in the Lenders' reasonable opinion might reasonably be
expected to create a valid obligation having priority over the rights granted to
the Lenders herein, the Agent may, on the Borrower's behalf, pay such taxes, and
the amount thereof shall be charged to the Borrower as a Revolving Loan and
shall be an Obligation secured hereby. If the amount of taxes paid by the Agent
pursuant to this Section 11.03 is in excess of Availability, then the Borrower
shall be deemed to be in default of Section 2.05 hereof and this Section.
11.04. Compliance with Laws. (a) The Borrower (i) will comply with
all statutes, acts, rules, regulations and
75
orders of any legislative, administrative or judicial body or official, except
to the extent that failure to do so would not have a material and adverse impact
on the Collateral, or any material part thereof, or on the properties, business,
operations, earnings, assets, liabilities or condition (financial or otherwise)
of the Borrower; provided that the Borrower may contest any acts, rules,
regulations, orders and directions of such bodies or officials in any reasonable
manner which will not, in the Lenders' reasonable opinion, adversely affect the
Lenders' rights or priority in the Collateral and with respect to which adequate
reserves have been maintained; (ii) will comply with all Environmental Laws or
any other environmental statutes, acts, rules, regulations or orders as
presently existing or as adopted or amended in the future, applicable to the
ownership and/or use of its real property and operation of its business, except
to the extent that failure to do so would not have an adverse effect on the
Collateral, or any material part thereof, or a Material Adverse Effect.
(b) The Borrower hereby agrees to indemnify the Lenders and the
Agent and agrees to defend and hold the Lenders and the Agent harmless from and
against any and all loss, damage, claim, liability, injury or expense which the
Lenders or the Agent may sustain or incur (other than as a result of wilful
misconduct or gross negligence of the Lenders or the Agent) in connection with:
the transactions contemplated hereby, and proposed or actual sale of the
Borrower or any claim or expense asserted against the Lenders or the Agent as a
result of any environmental pollution, hazardous material or environmental
clean-up of the Borrower's real property; or any claim or expense which results
from the Borrower's operations (including, but not limited to, the Borrower's
off-site disposal practices) and the Borrower further agrees that this
indemnification shall survive termination of this Financing Agreement as well as
the payment of all Obligations.
11.05. Financial Statements. The Borrower shall furnish to the
Agent:
(i) as soon as available, and in any event within one hundred and
five (105) days after the end of each fiscal year of the Borrower (commencing
with the year ending November 30, 1996), unless otherwise agreed to by the
Agent, consolidated balance sheets, consolidated statements of income and
retained
76
earnings and consolidated statements of cash flow of the Borrower and the
Guarantors as at the end of such fiscal year, setting forth in comparative form
the corresponding figures for the immediately proceeding fiscal year, all in
reasonable detail and prepared in accordance with GAAP, and accompanied by a
report and an unqualified opinion, prepared in accordance with generally
accepted auditing standards, of Deloitte & Touche or other independent certified
public accountants of recognized standing selected by the Borrower and
satisfactory to the Agent (it being understood that the firm of Mahoney, Cohen,
Rashba & Pokart, CPA, PC, is satisfactory to the Agent), together with a written
statement of such accountants (1) to the effect that, in making the examination
necessary for their certification of such financial statements they have not
obtained any knowledge of the existence of Default or an Event of Default and
(2) if such accountants shall have obtained any knowledge of the existence of a
Default or an Event of Default, describing the nature thereof;
(ii) simultaneously with the delivery of the financial statements
required by clause (i) of this Section 11.05, a certificate of the chief
financial officer of the Borrower, stating that such officer has reviewed the
provisions of this Agreement and the other Loan Documents to which the Borrower
and the Guarantors are a party and has made or caused to be made under his
supervision a review of the condition and operations of the Borrower and the
Guarantors during the period covered by such financial statements with a view to
determining whether the Borrower and the Guarantors were in compliance with all
of the provisions of such agreements at the times such compliance is required by
such agreements, and that such review has not disclosed, and such officer has no
knowledge of, the existence during such period of a Default or an Event of
Default or, if a Default or an Event of Default existed, describing the nature
and period of existence thereof and the action which the Borrower and the
Guarantors propose to take or took with respect thereto;
(iii) within fifteen (15) days after the end of each month, a
schedule and computer report, in form and substance reasonably satisfactory to
the Agent, current as of the close of business on the last day of such month,
certified by the chief financial officer of the Borrower, containing a breakdown
of the Borrower's and the Guarantors' Inventory by amount and valued at cost
(which shall include dollar valuation by location) and
77
warehouse and production facility location, appropriately completed with
information satisfactory to the Agent, incorporating all appropriate month-end
adjustments and current as of the close of business on the last day of such
month immediately prior to such date;
(iv) the Quarterly Operating Reports;
(v) on each Business Day on which a request is made for a
Revolving Loan or to cause a Letter of Credit to be issued, but in any case not
less frequently than once a week, a borrowing base certificate;
(vi) within five (5) Business Days of the end of each month, a
monthly receivable trial balance with reconciliation from the previous month;
(vii) on or before November 1 of each calendar year, financial
projections, in form and substance satisfactory to the Agent, for the succeeding
calendar year for the Borrower and the Guarantors, such financial projections to
be reasonable, to be prepared on a reasonable basis and in good faith, and to be
based on assumptions believed by the Borrower and the Guarantors to be
reasonable at the time made and from the best information then available to the
Borrower and the Guarantors;
(viii) promptly after submission to any Governmental Authority, all
documents and information furnished to such Governmental Authority in connection
with any investigation of any Borrower or Guarantor other than routine inquiries
by such Governmental Authority;
(ix) as soon as possible, and in any event within five (5) days
after the occurrence of an Event of Default or Default, or a material adverse
change in the condition or operations, financial or otherwise, of the Borrower
or the Guarantors, the written statement of the chief executive officer or the
chief financial officer of the Borrower, setting forth the details of such Event
of Default, Default or material adverse change and the action which the Borrower
and the Guarantors propose to take with respect thereto;
78
(x) promptly as prepared, copies of public filings made by the
Borrower or any Subsidiary under any state or federal securities law;
(xi) promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of the Borrower or the
Guarantors as the Agent from time to time may reasonably request.
11.06. Certain Restrictions. Until termination of this Financing
Agreement and payment of all Loans and other amounts then due and payable
hereunder, the Borrower will not, and will cause each Subsidiary to not, without
the written consent of the Agent:
(a) Mortgage, assign, pledge or otherwise permit any lien, charge,
security interest, encumbrance or judgment (whether as a result of a
purchase money or title retention transaction, or other security interest,
or otherwise) to exist on any of its assets or goods, whether real,
personal or mixed, whether now owned or hereafter acquired, except for the
Permitted Encumbrances;
(b) Incur or create any Indebtedness other than Permitted
Indebtedness;
(c) Borrow any money (other than Permitted Indebtedness) on the
security of the Collateral from sources other than the Lenders pursuant to
the Financing Agreement;
(d) Sell, lease, assign, transfer or otherwise dispose of
Collateral, except as otherwise specifically permitted by this Financing
Agreement;
(e) Merge or consolidate with or into any other Person;
(f) Enter into or engage in any business other than businesses of
the types conducted by the Borrower (including the sleepwear business) on
the Closing Date;
(g) Change its corporate name, principal place of business or
structure;
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(h) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any Person, except for the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business;
(i) Declare or pay any dividend of any kind on, or purchase,
acquire, redeem or retire, any of its Capital Stock or equity interest, of
any class whatsoever, whether now or hereafter outstanding, or make any
other distribution;
(j) Make any advance or loan to, any investment in or acquisition
(directly or indirectly) of the stock, Indebtedness or the assets of
(collectively, "Investments"), any Person other than (i) with respect to
the purchase of inventory in the ordinary course of the Borrower's
business and (ii) Investments in certificates of deposit or banker's
acceptances issued by any commercial bank located in the United States
which is owned by a bank holding company, the commercial paper of which is
rated A2 or P2, respectively by Standard & Poor's Corporation or ▇▇▇▇▇'▇
Investors Service, or higher, and which has capital, surplus and undivided
profits aggregating at least $100,000,000; provided, however, no Default
or Event of Default has occurred and is continuing prior to making any of
the foregoing Investments or after giving effect thereto; or
(k) (A) Optionally prepay, retire, redeem, purchase, defease or
exchange, or make any optional deposits or segregation of funds in respect
of, any principal of or interest on or other amounts payable in respect of
any Indebtedness of the Borrower or subordinated debt of the Borrower or
make any other payment on account of such subordinated debt (unless it is
a regularly scheduled payment of principal or interest pursuant to the
Class 4 Note or payment on account of "excess cash flow" as more fully
described in the Class 4 Note and related documents in effect on the
Closing Date and there is no Default or Event of Default hereunder) or (B)
amend, supplement or otherwise modify such subordinated debt without
obtaining the prior written consent of the Agent.
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11.07. Negative Pledge. In the event there are any assets of the
Borrower or any Guarantor now existing or hereafter acquired for which the Agent
does not obtain a security interest or lien, the Borrower and any such Guarantor
shall not pledge, assign, transfer or grant any interest in such asset to any
party other than the Agent, without the Agent's prior written consent which
shall not be unreasonably withheld.
11.08. Environmental Compliance. (a) The Borrower will not, except
in compliance with applicable Environmental Laws, or in the event of any
noncompliance with applicable Environmental Laws, only to the extent to which
such noncompliance would not have an adverse effect on the Collateral nor a
Material Adverse Effect, (i) use any of the property of the Borrower or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, (ii) cause or permit to be located on any of the property any
underground tank or other underground storage receptacle for Hazardous
Substances, (iii) generate any Hazardous Substances on any of the property, (iv)
conduct any activity on the property or use any property in any manner so as to
cause a release (i.e., releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping) or
threatened release of Hazardous Substances on, upon or into the property or (v)
otherwise conduct any activity on the property or use any property in any manner
that would lead to any environmental claim or violate any Environmental Law or
bring such property in violation of any Environmental Law.
(b) The Borrower will advise the Agent in writing of: (i) all
expenditures (actual or anticipated) in excess of $100,000 for (A) environmental
clean-up, (B) environmental compliance or (C) environmental testing and the
impact of said expenses on the Borrower's working capital; and (ii) any written
notices the Borrower receives involving potential or actual liability in excess
of $100,000 from any local, state or federal authority or any notice from any
other third party advising the Borrower of any environmental liability (real or
potential) stemming from the Borrower's operations, its premises, its waste
disposal practices, or waste disposal sites used by the Borrower.
(c) The Borrower hereby agrees to defend, indemnify, and hold
harmless the Agent, the Lenders and the L/C Issuer, their employees, agents,
officers, and directors, from and
81
against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs, or expenses (including, without limitation, attorney and
consultant fees, investigation and laboratory fees, court costs, and litigation
expenses) arising out of (i) the presence, disposal, release, or threatened
release of any Hazardous Substances on any property at any time owned or
occupied by the Borrower or the Guarantors (or its predecessors in interest or
title); (ii) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to such Hazardous Substances; (iii)
any investigation, lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Substances; (iv) any violation of
any Environmental Laws, and/or (v) the breach of any representation or warranty
made by the Borrower and the Guarantors in Section 10.18 hereof or the breach of
any covenant made by any of the Borrowers in this Section 11.08.
11.09. Transactions with Affiliates; Payment of Management Fee. (a)
Without the prior written consent of the Agent, which consent shall not be
unreasonably withheld, the Borrower will not enter into any transaction,
including, without limitation, any purchase, sale, lease, loan or exchange of
property with any Subsidiary or Affiliate of the Borrower unless such
transaction shall be on terms no less favorable to the Borrower than would be
obtainable at the time in a comparable arm's-length transaction with an
unrelated third party.
(b) Without the prior written consent of the Agent, the Borrower
will not pay any management or similar fees, except in connection with existing
arrangements which have been approved by the Bankruptcy Court prior to the date
hereof.
11.10. ERISA Notices. The Borrower will deliver to the Agent, if and
when (but within ten (10) Business Days from the date of such event) (i) the
Borrower or any ERISA Affiliate of the Borrower gives or is required to give
notice to the PBGC of any Reportable Event (other than a Reportable Event not
subject to the provision for 30-day notice to the PBGC) with respect to any
Pension Plan, a copy of the notice of such Reportable Event; (ii) the Borrower
or any ERISA Affiliate of the Borrower becomes obligated to contribute to a
Multiemployer Plan to which such entity was not obligated to contribute on the
Closing Date; (iii) the Borrower or any ERISA Affiliate of the Borrower receives
notice of complete or partial withdrawal
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liability with respect to a Multiemployer Plan or receives notice that a
Multiemployer Plan may be or has been terminated, in Reorganization or
Insolvency, a copy of such notice, or receives notice from the administrator of
a Multiemployer Plan that indicates the existence of potential withdrawal
liability in excess of $200,000 under a Multiemployer Plan, a copy of such
notice; (iv) the Borrower or any ERISA Affiliate of the Borrower receives notice
from the PBGC of an intent to terminate or appoint a trustee to administer any
Pension Plan, a copy of such notice; (v) the Borrower or any ERISA Affiliate of
the Borrower fails to make a timely contribution to a Pension Plan which may
give rise or has given rise to an accumulated funding deficiency or a lien, a
letter of an Executive Officer describing such event; (vi) the Borrower or any
ERISA Affiliate of the Borrower adopts or proposes to adopt an amendment which
requires the granting of a security interest within the meaning of Section 307
of ERISA, a letter of an Executive Officer describing such event; (vii) the
Borrower or any ERISA Affiliate of the Borrower fails to make a contribution
required under the terms of an Employee Benefit Plan or as required by law, a
letter of an Executive Officer describing such event; (viii) the Borrower
becomes liable for material increases in retiree medical, life insurance or
other death benefits (contingent or otherwise) (other than as a result of a
continuation of medical coverage required under Section 4980B of the Code), a
letter of an Executive Officer describing such event; (ix) any Pension Plan
intending to qualify under Section 401(a) of the Code as determined by the
Internal Revenue Service fails to so qualify and such failure to qualify cannot
be retroactively eliminated within the remedial amendment period, a letter of an
Executive Officer describing such event; (x) a transaction prohibited under
Section 4975 of the Code or Section 406 of ERISA occurs resulting in material
liability to the Borrower or any entity which the Borrower has an obligation to
indemnify, a letter of an Executive Officer describing such event. Upon the
request of the Lenders made from time to time, the Borrower will deliver a copy
of the most recent actuarial report and annual report completed with respect to
any Employee Benefit Plan or any other financial information the Borrower or any
ERISA Affiliate has with respect to any Employee Benefit Plan.
11.11. ERISA Covenant. The Borrower will, and will cause each of its
ERISA Affiliates to, maintain all Employee Benefit Plans, if any, in compliance
in all material respects
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with all applicable law, including any reporting requirements, and make all
contributions due under the terms of each Employee Benefit Plan, if any, and
Multiemployer Plan, if any, or as otherwise required by law.
11.12. Key Man Life Insurance. The Borrower shall maintain key man
life insurance on the life of ▇▇▇▇▇▇▇ ▇▇▇▇▇ in the amount of at least $500,000,
and in the event a claim is made by the Agent under such life insurance policy,
the Agent shall have the right to apply $500,000 of the proceeds received
thereunder to the Revolving Loans under this Financing Agreement and the
Borrower shall be entitled to receive and retain an amount, if any, in excess of
$500,000 (such excess amount of key man life insurance, the "Excess Key Man Life
Insurance Proceeds"). Notwithstanding the foregoing, in the event there are no
Revolving Loans and no outstanding Letters of Credit at the time when insurance
proceeds on the life of ▇▇▇▇▇▇▇ ▇▇▇▇▇ are received by the Agent, the Agent shall
deliver such proceeds to the Borrower and the Borrower may retain such proceeds
and use the same for working capital purposes. If there are no Revolving Loans
and there are outstanding Letters of Credit, such proceeds shall cash
collateralize outstanding Letters of Credit and Availability shall be restored
in respect of such Letters of Credit.
11.13. Notice of Default; Notice to Block Class 4 Payments. Promptly
upon becoming aware of a Default or an Event of Default, the Borrower shall give
the Agent notice thereof, together with a written statement of the chief
financial officer of the Borrower setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by the Borrower.
The Agent shall have no obligation to provide to the Borrower a notice of a
Default or an Event of Default; provided, however, that if the Agent makes a
determination that, based on an Event of Default, it elects to notify the
Borrower not to make a payment on the Class 4 Note, the Agent must so notify the
Borrower and the Collateral Trustee in writing at least 5 days in advance of the
due date of any such payment.
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11.14. Financial Covenants.
(a) The Company shall maintain EBITDA of not less than:
For the six months
ending 5/31/97 ($300,000);
For the nine months
ending 8/31/97 $325,000;
For the twelve months
ending 11/30/97 $231,000;
For the three months
ending 2/28/98 $187,000;
For the six months
ending 5/31/98 $152,000;
For the nine months
ending 8/31/98 $350,000; and
For the twelve months
ending 11/30/98 $300,000.
(b) The Company shall maintain Working Capital of not less than:
For the quarters ending:
5/31/97 $4,800,000;
8/31/97 $5,200,000;
11/30/97 $5,600,000;
2/28/98 $5,300,000;
5/31/98 $5,200,000;
8/31/98 $5,500,000; and
11/30/98 $5,600,000.
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(c) The Company shall maintain Tangible Net Worth of not less than:
For the quarters ending:
5/31/97 $3,500,000;
8/31/97 $3,900,000;
11/30/97 $3,600,000;
2/28/98 $3,400,000;
5/31/98 $3,400,000;
8/31/98 $3,600,000; and
11/30/98 $3,600,000.
(d) The Borrower may make Capital Expenditures for each of the 1997
and 1998 fiscal years of not more than $300,000; provided, however, that amounts
not used in 1997 may be used in 1998; provided, further, that, in such case,
Capital Expenditures for 1998 shall not exceed $500,000.
(e) No later than October 31, 1997, the Borrower shall deliver to
the Agent revised projections and cash flows for the 1998 fiscal year.
SECTION 12. Events of Default and Remedies.
12.01. Events of Default. Notwithstanding anything hereinabove to
the contrary, and subject to Section 12.02 hereof, the Agent may terminate this
Financing Agreement immediately upon the occurrence of any of the following
(herein "Events of Default"):
(a) the Borrower fails to pay when due any of the principal or
interest of any of the Loans, or shall fail to pay or
reimburse the Agent or any Lender any fee or other amount due
hereunder when due and such failure shall continue unremedied
for more than four (4) Business Days;
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(b) any representation or warranty of the Borrower or any
Guarantor contained herein or in any other Loan Document shall
prove to have been false in any material respect when made,
unless the fact resulting in such breach of representation or
warranty is capable of cure and is cured within ten (10) days
of the occurrence of an Event of Default based on such breach;
(c) breach by the Borrower of any covenant in this Financing
Agreement (other than those referred to in sub-paragraph (a)
above or (d) below) or by the Borrower or any Guarantor in any
other Loan Document (other than those referred to in
sub-paragraphs (e) through (k) below) or written agreement
entered into in connection with this Financing Agreement,
between the Borrower and the Lenders or the Agent or delivered
by the Borrower to any of the Lenders or the Agent in
connection herewith or the transactions contemplated hereby,
if such breach shall not have been remedied within thirty (30)
days after such breach;
(d) breach by the Borrower of any covenant contained in Article 9
(other than Section 9.06 as to which sub-paragraph (c) above
is applicable) and Article 11 (other than Section 11.04 as to
which sub-paragraph (c) above is applicable);
(e) The Borrower or any Subsidiary shall have entered into any
consent or settlement decree or agreement or similar
arrangement with a Governmental Authority or any judgment,
order, decree or similar action shall have been entered
against any such Person based on or arising from the violation
of or pursuant to any Environmental Law, or the generation,
storage, transportation, treatment, disposal or release of any
Hazardous Material and, in connection with any of the
foregoing, any such Person shall incur Environmental
Liabilities and Costs which are unstayed, due and owing in an
amount in excess of $250,000; or
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(f) The Borrower or any Subsidiary shall fail to pay any principal
or interest on any of its Indebtedness in excess of $100,000
(excluding Indebtedness evidenced by the Note), or any premium
thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) (except that a
failure to pay the Class 4 Notes shall not constitute a
default hereunder if the time for payment has been extended or
the default for a failure to pay has been waived) and such
failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such
Indebtedness, or any other default under any agreement or
instrument relating to any such Indebtedness, or any other
event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration to the maturity of,
such Indebtedness; or any such Indebtedness in excess of such
amount shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(g) The Borrower or any Subsidiary (i) shall institute any
proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other
similar official for the Borrower or any Subsidiary or for any
substantial part of its property, (ii) shall be generally not
paying its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, (iii) shall
make a general assignment for the benefit of creditors, or
(iv) shall take any
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action to authorize or effect any of the actions set forth
above in this subsection (g); or
(h) Any proceeding shall be instituted against the Borrower or any
Subsidiary seeking to adjudicate it a bankrupt or insolvent,
or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for the Borrower or any Subsidiary or for any
substantial part of its property, and either such proceeding
shall remain undismissed or unstayed for a period of
forty-five (45) days or any of the actions sought in such
proceeding (including, without limitation, the entry of an
order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur; or
(i) Any material provision of any Loan Document shall at any time
for any reason be declared to be null and void, or the
validity or enforceability thereof shall be contested by the
Borrower, or a proceeding shall be commenced by the Borrower,
or by any Governmental Authority or other regulatory body
having jurisdiction over the Borrower, seeking to establish
the invalidity or unenforceability thereof, or the Borrower
shall deny in writing that the Borrower has any liability or
obligation purported to be created under any Loan Document
(unless the Borrower is questioning in good faith a
computational error); or
(j) Any Loan Document pursuant to which a security interest is
granted after delivery thereof pursuant hereto, shall for any
reason fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security
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interest in any Collateral purported to be covered thereby; or
(k) One or more judgments or orders for the payment of money
exceeding any applicable insurance or bond coverage by more
than $100,000 in the aggregate shall be rendered against the
Borrower or any Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor upon any
such judgment or order or (ii) there shall be any period of
twenty (20) consecutive days during which a stay of
enforcement of any such judgment or order by reason of a
pending appeal or otherwise shall not be in effect; or
(l) A modification to the Confirmation Order to which Lender has
not consented or a determination shall have been made
regarding the Confirmation Order that is materially adverse to
Lender in its discretion;
(m) (i) the Borrower or any other Person engages in a transaction
in connection with which the Borrower or any entity which the
Borrower has an obligation to indemnify, could be subject to
liability for either a civil penalty assessed pursuant to
Section 502 of ERISA or a tax imposed under Section 4975 of
the Code; (ii) an accumulated funding deficiency (as defined
in Section 302 of ERISA or Section 412 of the Code) exists
with respect to any Pension Plan; (iii) a lien arises or
security interest is granted under the Code or ERISA with
respect to any Pension Plan; (iv) a Pension Plan is
terminated; (v) a Reportable Event occurs or proceedings
commence to terminate or to have a trustee appointed to
terminate any Pension Plan which Reportable Event or
commencement of proceedings or appointment is likely to result
in the termination of any such Pension Plan; (vi) the Borrower
or any ERISA Affiliate of the Borrower incurs or is likely to
incur any liability in connection with a withdrawal from or
the Insolvency, Reorganization or termination of a
Multiemployer Plan or with respect to Section 515
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of ERISA; (vii) any other similar event or condition shall
occur or exist with respect to any Employee Benefit Plan; and
in each case in clauses (i), (ii), (iv), (vi) and (vii) of
this subsection (m), such event or condition, together with
all other such events or conditions, if any, could, in the
opinion of the Agent, subject the Borrower to any taxes,
penalties or liabilities (including, without limitation, any
joint and several liability of the Borrower for a tax, penalty
or liability imposed on an ERISA Affiliate of the Borrower or
any penalty or tax imposed on any entity which the Borrower
has an obligation to indemnify) which exceed $100,000 in any
year (on a non-cumulative basis with any other year);
(n) a Change in Control occurs; or
(o) a change in the condition or operations, financial or
otherwise, of the Borrower or any Guarantor that may have a
Material Adverse Effect, as determined by the Agent in its
sole discretion, shall have occurred after the Closing Date
and written notice thereof shall have been given to the
Borrower or Guarantor by the Agent.
12.02. Acceleration of Obligations, etc. If an Event of Default
shall occur and be continuing, the Agent may (i) declare this Financing
Agreement to be, and the same shall thereafter be, terminated and all
Obligations shall become immediately due and payable; and (ii) charge the
Borrower the Default Rate of Interest from the date such Event of Default
occurred on all then outstanding or thereafter incurred Obligations in lieu of
the interest provided for in Section 4 of this Financing Agreement; provided,
however, that no notice of the foregoing matters is required if the Event of
Default is the event listed in paragraphs (g) and (h) of Section 12.01 hereof.
The exercise by the Lenders of any option or remedy hereunder is not exclusive
of any other option or remedy which may be exercised at any time by the Lenders,
acting through the Agent.
12.03. Other Remedies. Upon the occurrence of any Event of Default
and so long as such Event of Default is continuing, the Agent may to the extent
permitted by law:
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(a) remove from any premises where same may be located any and all documents,
instruments, files and records, and any receptacles or cabinets containing same,
relating to the Accounts, or the Agent may use, at the Borrower's expense, such
of the Borrower's personnel, supplies or space at the Borrower's places of
business or otherwise, as may be necessary to properly administer and control
the Accounts or the handling of collections and realizations thereon; (b) bring
suit, in the name of the Borrower or the Agent, and generally shall have all
other rights respecting said Accounts, including, without limitation, the right
to: accelerate or extend the time of payment, settle, compromise, release in
whole or in part any amounts owing on any Accounts and issue credits in the name
of the Borrower or the Agent; (c) sell, assign and deliver the Collateral and
any returned, reclaimed or repossessed merchandise, with or without
advertisement, at public or private sale, for cash, on credit or otherwise, at
the Lenders' sole option and discretion, and the Agent may bid or become a
purchaser at any such public sale, free from any right of redemption, which
right is hereby expressly waived by the Borrower to the extent permitted by law;
(d) foreclose the security interests created herein by any available judicial
procedure, or take possession of any or all of the Inventory and Equipment
without judicial process, and to enter any premises where any Inventory and
Equipment may be located for the purpose of taking possession of or removing the
same and (e) exercise any other rights and remedies provided in law, in equity,
by contract or otherwise. Upon four Business Days' written notice, the Agent
shall have the right, without advertisement, to sell, lease, or otherwise
dispose of all or any part of the Collateral whether in its then condition or
after further preparation or processing, in the name of the Borrower or the
Agent, or in the name of such other party as the Agent may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash or
for credit, with or without warranties or representations, and upon such other
terms and conditions as the Lenders in its sole discretion may deem advisable.
If any Inventory and Equipment shall require rebuilding, repairing, maintenance
or preparation, the Agent shall have the right, at its option, to do such of the
aforesaid as is necessary, for the purpose of putting the Inventory and
Equipment in such saleable form as the Agent shall deem appropriate. The
Borrower agrees, at the request of the Lenders, to assemble the Inventory and
Equipment and to make it available to the Agent at premises of the Borrower or
elsewhere and to make
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available to the Agent the premises and facilities of the Borrower for the
purpose of the Agent's taking possession of, removing or putting the Inventory
and Equipment in saleable form. The net cash proceeds resulting from the
Lenders' or the Agent's exercise of any of the foregoing rights (after deducting
all charges, costs and expenses, including attorneys' fees) shall be applied by
the Agent to the payment of the Borrower's Obligations, whether due or to become
due, in such order as the Lenders may elect, and the Borrower shall remain
liable to the Lenders for any deficiencies, and the Agent in turn agrees to
remit to the Borrower or its successors or assigns any surplus resulting
therefrom. The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
SECTION 13. Powers.
13.01. Attorney-in-Fact. The Borrower hereby authorizes the Agent or
any person or agent the Agent may designate as its attorney-in-fact, at the
Borrower's cost and expense, to exercise all of the following powers, which
being coupled with an interest, shall be irrevocable until all of the Borrower's
Obligations to the Lenders have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in
the name of the Agent or the Borrower, any and all checks,
notes, drafts, and other documents or instruments relating to
the Collateral;
(b) To receive, open and dispose of all mail addressed to the
Borrower and to notify postal authorities to change the
address for delivery thereof to such address as the Agent may
designate;
(c) To request from customers indebted or obligated on Accounts,
Contracts or Licenses at any time, in the name of the Agent or
the Borrower or that of the Agent's designee, information
verifying the amounts owing on the Accounts, Contracts or
Licenses or other terms relating to such Accounts, Contracts
or Licenses;
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(d) To transmit to customers indebted or obligated on Accounts,
Contracts or Licenses notice of the Lenders' interest therein
and to notify customers indebted on Accounts, Contracts or
Licenses to make payment directly to the Agent for the benefit
of the Lenders for the Borrower's account; and
(e) To take or bring, in the name of the Agent or the Borrower,
all steps, actions, suits or proceedings deemed by the Agent
necessary or desirable to enforce or effect collection of the
Accounts, Contracts or Licenses.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (c), (d) and (e) above may only be exercised after the
occurrence and during the continuance of an Event of Default.
13.02. Right to Set-Off. The Borrower authorizes the Lenders, and
the Lenders shall have the right upon any amount becoming due and payable
hereunder, to set-off and apply against any and all property held by, or in the
possession of the Lenders or the Collateral, the Obligations due and payable the
Lenders.
13.03. Sale and Assignment of Lenders' Interest.
(a) Each Lender, with the consent of the Agent, may assign its
rights and delegate its obligations under this Financing
Agreement and further may assign, or sell participations in,
all or any part of the Obligations, its Revolving Loan Amount
and its Revolving Loans and any other interest herein or
therein to one or more other Persons; provided, however, that,
(i) any such partial assignment or participation shall be of a
pro rata interest in all portions of such Lender's rights and
obligations hereunder, (ii) no Lender shall assign or sell
participations in any of its interests under this Financing
Agreement (A) in an amount less than $2,000,000, additional
increments thereto of $500,000, (B) without the consent of the
Borrower, which such consent shall not be unreasonably
withheld and (C) if such transfer would result in any Lender
or participant having
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an aggregate interest in loans and commitments in an amount
less than $2,000,000, and (iii) in connection with any such
assignment such Lender shall have delivered to the Agent and
the Borrower a duly executed Assignment and Transfer
Agreement. Any agreement pursuant to which any Lender may
grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder and under
any other Loan Document including, without limitation, the
right to approve any amendment, modification or waiver of any
provision of this Financing Agreement or any other Loan
Document.
(b) Upon the execution and delivery of an Assignment and Transfer
Agreement, after notice thereof to, and consent thereto by,
the Borrower, and the payment of the purchase price as agreed
between the assigning party and such Assignee, such Assignee
shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a party
hereunder and the assigning party shall be relieved of its
obligations hereunder with respect to the assigned portion of
its Revolving Loan Amounts and its Revolving Loans, on and
after the date of such assignment. The Borrower hereby
acknowledges and agrees that any assignment permitted
hereunder will give rise to a direct obligation of the
Borrower to the Assignee and that the Assignee shall be
considered to be a Lender under this Financing Agreement. Upon
the consummation of any assignment pursuant to this paragraph,
a new Note or Notes shall be issued by the Borrower, provided
that any "old" Note(s) is marked "canceled" and returned to
the Borrower. If the Assignee is not incorporated under the
laws of the United States of America or a state thereof or the
District of Columbia, it shall, prior to the first date on
which interest or fees are payable hereunder for its account,
deliver to the Borrower and the Agent certification as to its
exemption from deduction or withholding of any
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United States federal income taxes in accordance with Section
17.14 hereof.
(c) The Borrower may not assign or transfer any of its rights
and/or obligations hereunder.
(d) The Borrower agrees to provide all assistance reasonably
requested by a Lender to enable such Lender either to sell the
participations or make the assignments permitted by this
Section 13.03.
13.04. Disclosure to Participants. Subject to Section 16.14 hereof,
the Borrower authorizes each Lender to disclose to any actual or prospective
participant or purchasing lender, after consent by the Borrower, any and all
financial information in such Lender's possession concerning the Borrower, any
Guarantor and its Affiliates which has been delivered to such Lender by or on
behalf of the Borrower or any Guarantor pursuant to this Financing Agreement or
which has been delivered to such Lender by or on behalf of the Borrower or any
Guarantor in connection with such Lender's credit evaluation of the Borrower or
any Guarantor and its Affiliates prior to entering into this Financing
Agreement. The Agent shall request that any such materials shall be promptly
returned by any prospective purchaser who does not consummate a purchase.
SECTION 14. Termination.
14.01. Termination of Revolving Line of Credit.
(a) Subject to Section 14.02 hereof, the Agent on behalf of the
Lenders may terminate the Revolving Line of Credit as of the
Initial Termination Date and by giving the Borrower at least
fifteen (15) Business Days' prior written notice of
termination.
(b) The Borrower may terminate the Revolving Line of Credit prior
to the Initial Termination Date upon fifteen (15) Business
Days' prior written notice by the Borrower to the Agent,
provided that the Borrower pays to the Agent for the account
of the
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Lenders, on or prior to such termination (if such termination
is on or before one year from the Closing Date), the Early
Termination Fee.
14.02. Termination Upon an Event of Default. Notwithstanding the
foregoing, the Agent may terminate this Financing Agreement upon the occurrence
of an Event of Default as provided in Section 12.01 hereof.
14.03. Maturity of Obligations Upon Termination. All Obligations
shall become due and payable as of any termination hereunder or under Section 12
hereof and, pending a final accounting, if the Agent determines in its good
faith judgment that there is a reasonable basis for doing so, the Agent may
withhold any balances in the Borrower's account (unless supplied with an
indemnity satisfactory to the Agent) to cover all of the Obligations then due
and payable hereunder. All of the Lenders' and the Agent's rights, liens and
security interests shall continue after any termination until payment in full of
all Loans and other amounts then due and payable hereunder at the date of such
termination. Notwithstanding the foregoing, the Borrower may upon such
termination cash collateralize outstanding Letters of Credit as provided in
Section 5.01(a)(i) hereof.
14.04. Termination by Lenders. All or any Lender's obligations under
this Financing Agreement shall terminate with respect to such Lender on the
Initial Termination Date by such Lender giving the Agent and the other Lenders
at least ninety (90) days' prior written notice of termination. Without limiting
Section 14.01(a), within sixty (60) days of receipt of such notice from any
Lender, the Agent shall either: (i) give notice to the Borrower that such Lender
(other than CIT/CS) has given the Agent a notice of termination in which event
the obligations of the Lenders hereunder and thereunder (subject to the notice
required by Section 14.01(a)) shall terminate as of the Initial Termination
Date, or (ii) if the other Lenders so elect, they shall have the right to
purchase the terminating Lender's or Lenders' pro rata share of its or their
interest hereunder for the full amount thereof on a pro rata basis among such
electing Lenders, together with any accrued interest. Termination of this
Financing Agreement by any Lender as herein provided shall not affect the
Lenders' respective rights and obligations under this
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Financing Agreement incurred prior to the effective date of termination as set
forth in the preceding sentence.
SECTION 15. Indemnification.
In addition to the payment of expenses pursuant to Section 4 of this
Financing Agreement, whether or not the transactions contemplated hereby shall
be consummated, the Borrower agrees to indemnify (which such agreement shall
survive the termination of the Financing Agreement), pay and hold the Lenders
and the Agent and the officers, directors, partners, employees, agents,
affiliates and attorneys of the Lenders and the Agent (collectively called the
"Indemnitees") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the fees and
disbursements of counsel and accountants for such Indemnitees in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto)
that may be imposed on, incurred by, or asserted against that Indemnitee, in any
manner relating to or arising out of this Financing Agreement or any other Loan
Document or the consummation of the transactions contemplated hereby or
thereby, the use or intended use of the proceeds of the Revolving Loans or the
exercise of any right or remedy hereunder, including, without limitation, any
obligations which may become due and payable after the termination of this
Financing Agreement (the "Indemnified Liabilities"); provided that the Borrower
shall not have any obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities to the extent arising solely from the gross negligence
or willful misconduct of such Indemnitee as determined by a final non-appealable
determination of a court of competent jurisdiction. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower will contribute the maximum portion that it is permitted to
pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitee or any of them.
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SECTION 16. Miscellaneous.
16.01. Waivers. The Borrower hereby waives diligence, demand,
presentment and protest and any notices thereof as well as notice of nonpayment.
No delay or omission of the Agent or the Lenders or the Borrower to exercise any
right or remedy hereunder, whether before or after the happening of any Event of
Default, shall impair any such right or shall operate as a waiver thereof or as
a waiver of any such Event of Default or be deemed a waiver of any other right,
unless such waiver be in writing and signed by the Agent. No single or partial
exercise by the Agent or the Lenders of any right or remedy precludes any other
or further exercise thereof, or precludes any other right or remedy.
16.02. Entire Agreement. This Financing Agreement, including its
exhibits, and the documents executed and delivered in connection herewith,
constitute the entire agreement among the Borrower, the Agent and the Lenders,
supersede any prior agreements of the parties as to the subject matter hereof,
and shall bind and benefit the Borrower, the Agent and the Lenders and their
respective successors and assigns.
16.03. Amendments. This Financing Agreement may be amended, and the
Borrower may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Borrower shall obtain the written
consent to such amendment, action or omission to act given by the Agent, except
that, without the written consent of all of the Lenders, no amendment to this
Financing Agreement shall (a) increase the Revolving Line of Credit; (b) reduce
the interest rate; (c) reduce or waive (1) any fees or (2) the repayment of any
Obligations due the Lenders; (d) extend the maturity of the Obligations; (e)
alter or amend this Section 16.03; or (f) release Collateral in bulk without a
corresponding reduction in the Obligations secured thereby. Each Lender shall be
bound by any consent authorized by this Section 16.03.
16.04. Permitted Interest and Fees. In no event shall the Borrower,
upon demand by the Lenders for payment of any indebtedness relating hereto, by
acceleration of the maturity thereof, or otherwise, be obligated to pay interest
and fees in
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excess of the maximum amount permitted by law. Regardless of any provision
herein or in any agreement made in connection herewith, the Lenders shall never
be entitled to receive, charge or apply, as interest on any indebtedness
relating hereto, any amount in excess of the maximum amount of interest
permissible under applicable law. If the Lenders ever receive, collect or apply
any such excess, it shall be deemed a partial repayment of principal and treated
as such; and if principal is paid in full, any remaining excess shall be
refunded to the Borrower. This paragraph shall control every other provision
hereof and of any other agreement made in connection herewith.
16.05. Illegality. If any provision hereof or of any other agreement
made in connection herewith is held to be illegal or unenforceable, such
provision shall be fully severable, and the remaining provisions of the
applicable agreement shall remain in full force and effect and shall not be
affected by such provision's severance. Furthermore, in lieu of any such
provision, there shall be added automatically as a part of the applicable
agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.
16.06. Jurisdiction of Claims. (a) THE BORROWER, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS FINANCING AGREEMENT, OR ANY OF THE OTHER DOCUMENTS ENTERED
INTO IN CONNECTION WITH THIS FINANCING AGREEMENT, TO WHICH THE BORROWER IS A
PARTY, AND THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AGREE THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE COURT OR IN SUCH FEDERAL COURT. THE BORROWER, THE AGENT
AND THE LENDERS HEREBY IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. THE BORROWER, THE AGENT AND THE
LENDERS AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL LIMIT THE BORROWER'S
OR GUARANTORS' ABILITY TO BE HEARD IN THE BANKRUPTCY COURT.
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(b) THE BORROWER, THE AGENT AND THE LENDERS EACH HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
FINANCING AGREEMENT. THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY
WAIVE PERSONAL SERVICE OF PROCESS AND CONSENT TO SERVICE OF PROCESS BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE BORROWER, THE
AGENT AND THE LENDERS, AS THE CASE MAY BE, AT THE ADDRESS PROVIDED HEREIN FOR
NOTICES.
16.07. No Subrogation; Continuing Obligation. (a) The Borrower will
not exercise any rights which it may acquire by way of subrogation hereunder, by
any payment made by it hereunder or otherwise, until this Financing Agreement is
terminated and all of the Obligations and all other expenses to be paid by the
Borrower pursuant hereto shall have been satisfied in full. If any amount shall
be paid to the Borrower on account of such subrogation rights at any time when
all of the Obligations and all such other expenses shall not have been paid in
full or this Financing Agreement shall not have been terminated, such amount
shall be held in trust for the benefit of the Agent, shall be segregated from
the other funds of the Borrower and shall forthwith be paid over to the Agent to
be applied in whole or in part by the Agent against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of this Financing Agreement.
(b) Notwithstanding anything contained herein to the contrary, if
after receipt of any payment for all or any part of the Obligations, the Agent
or any Lender is for any reason compelled to surrender such payment to any
Person or entity because such payment is determined to be void or voidable as a
preference, an impermissible setoff, a diversion of trust funds or for any other
reason, this Financing Agreement shall continue in full force, and the Borrower
shall be liable to, and shall indemnify and hold such Lender or the Agent
harmless for, the amount of such payment surrendered until such Lender or the
Agent, as the case may be, shall have been finally and irrevocably paid in full.
The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lenders or
the Agent in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to the Lenders' or the
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Agent's rights under this Financing Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
16.08. Notices. Except as otherwise herein provided, any notice or
other communication required hereunder shall be in writing, and shall be deemed
to have been validly served, given or delivered when (i) hand delivered, (ii)
sent by telegram or telex, (iii) by telecopy if receipt is confirmed by
receiving party, (iv) by overnight courier, the next Business Day after delivery
to such overnight courier or (v) three (3) days after deposit in the United
States mails, with proper first class postage prepaid and addressed to the party
to be notified as follows:
(A) if to the Agent, at:
The CIT Group/Commercial Services, Inc.
1211 Avenue of the Americas
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇, Scholer, Fierman, ▇▇▇▇ & Handler, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
(B) if to the Borrower, at:
Andover Togs, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Chairman
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with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ Breed ▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇. Shack, Esq.
Shack & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
(C) if to any Lender, at the address set forth in the
applicable Assignment and Transfer Agreement
or to such other address as any party may designate for itself by
like notice.
16.09. Governing Law. THE VALIDITY, INTERPRETATION AND ENFORCEMENT
OF THIS FINANCING AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (OTHER THAN CONFLICTS OF LAWS PRINCIPLES THEREOF).
16.10. Satisfaction of Agent. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Financing
Agreement required to be satisfactory to the Agent, the determination of such
satisfaction shall, unless expressly stated otherwise, be made by the Agent in
its sole and exclusive judgment exercised in good faith.
16.11. Description Headings. The descriptive headings of the several
paragraphs of this Financing Agreement and the table of contents are inserted
for convenience only and do not constitute a part of this Financing Agreement.
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16.12. Counterparts. This Financing Agreement may be executed in two
or more counterparts, all of which shall be deemed but one and the same
instrument and each of which shall be deemed an original, and it shall not be
necessary in making proof of this Financing Agreement to produce or account for
more than one such counterpart.
16.13. Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Financing Agreement and the
consummation of the transactions contemplated hereby. The assurances
contemplated by this Section 16.13 shall be given under applicable nonbankruptcy
law as well as the Bankruptcy Code, it being the intention of the parties that
the Agent may request assurances under applicable nonbankruptcy law, and such
request shall be complied with.
16.14. Confidentiality. Any information disclosed by or on behalf of
the Borrower to the Agent or any of the Lenders and any information obtained by
the Agent or any of the Lenders pursuant to or in connection with this Financing
Agreement shall be used solely for purposes of this Financing Agreement and not
in any other manner, and, if such information is not otherwise in the public
domain, shall not be disclosed by the Agent or such Lender to any other Person
except (i) to its independent accountants and legal counsel, (ii) pursuant to
statutory and regulatory requirements or otherwise as required by law, (iii)
pursuant to any court order, subpoena or other legal process or (iv) subject to
an agreement containing provisions substantially the same as those of this
Section, to any participant in or assignee of, or prospective participant in or
assignee of, any Loan. Notwithstanding anything to the contrary contained
herein, this Section 16.14 shall not apply to any communication between CIT
Group/Commercial Services, Inc. and any of its Affiliates.
SECTION 17. Agency.
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17.01. The Agent. Each Lender hereby irrevocably designates and
appoints CIT/CS as the Agent for the Lenders under this Financing Agreement and
any ancillary loan documents and irrevocably authorizes CIT/CS as Agent for such
Lender, to take such action on its behalf under the provisions of the Financing
Agreement and all ancillary documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of the
Financing Agreement and all ancillary documents together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Financing Agreement, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the
Financing Agreement, any other Loan Document or any of the ancillary documents
or otherwise exist against the Agent.
17.02. Delegation of Duties. The Agent may execute any of its duties
under this Financing Agreement or any other Loan Document and all ancillary
documents by or through agents or attorneys-in-fact and shall be entitled to the
advice of counsel concerning all matters pertaining to such duties.
17.03. Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, or attorneys-in-fact shall be liable to
any Lender for any action lawfully taken or omitted to be taken by it or such
person under or in connection with the Financing Agreement or any other Loan
Document and all ancillary documents (except for its or such person's own gross
negligence or willful misconduct), or responsible in any manner to any of the
Lenders for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in the Financing Agreement or any
other Loan Document and all ancillary documents or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, the Financing Agreement or any other Loan
Document and all ancillary documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Financing Agreement or any
other Loan Document and all ancillary documents or for any failure of the
Borrower to perform its obligations
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thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Financing Agreement or any other
Loan Document and ancillary documents or to inspect the properties, books or
records of the Borrower.
17.04. Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
person or persons and upon advice and statements of legal counsel (including,
without limitation, an opinion of counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under the Financing
Agreement or any other Loan Document and all ancillary documents unless it shall
first receive such advice or concurrence of all of the Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by all of the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under the
Financing Agreement or any other Loan Document and all ancillary documents in
accordance with a request of any of the Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders.
17.05. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower describing such Default or Event of Default. In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by one hundred percent (100%)
of the Lenders; provided that unless and until the Agent shall have received
such direction, the Agent may in the interim (but shall not be
106
obligated to) take such action, or refrain from taking any such action, with
respect to such Default or Event of Default as it shall deem advisable and in
the best interests of the Lenders.
17.06. Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents or attorneys-in-fact has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to enter into this Financing Agreement and
any other Loan Document. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under the Financing Agreement or any other Loan Document and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition or creditworthiness of the
Borrower. The Agent, however, shall provide the Lenders with copies of all
financial statements, projections and business plans which come into the
possession of the Agent or any of its officers, employees, agents or
attorneys-in-fact.
17.07. Indemnification. The Lenders agree to indemnify the Agent in
its capacity as such, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Financing Agreement, any other Loan Document or any ancillary documents
or any documents contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted by the Agent under or in
connection with
107
any of the foregoing; provided, however, that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the Agent's gross negligence or willful misconduct. The agreements
in this paragraph shall survive the payment of the Obligations.
17.08. The Agent in Its Individual Capacity. With respect to the
Loans made by it and in connection with any Letters of Credit Guaranty (and any
Letter of Credit hereunder), CIT/CS and its Affiliates shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or "any Lenders"
shall, unless otherwise expressly indicated, include CIT/CS in its individual
capacity. CIT/CS and its Affiliates may accept deposits from, lend money to, act
as trustee or paying agent under indentures of, and generally engage in any kind
of business with, the Borrower or any Guarantor, any of their Affiliates, or any
person who may do business with or own securities of the Borrower or Guarantor,
or any of their Affiliates, all as if CIT/CS were not the Agent and without any
duty to account therefor to any Lenders. The Lenders acknowledge and agree that
the L/C Issuer which may be an Affiliate of the Agent, may take actions which
are not in the interests of, or may have an adverse effect on, the Lenders, or
may omit to take actions which would be in the interests of, or would have a
favorable effect on, the Lenders, and the Lenders will not assert any claim
against the Agent based on actions or omissions by the L/C Issuer (if an
Affiliate thereof) and will not assert any such actions or omissions as a
defense or offset to the Lender's obligations hereunder.
17.09. Successor Agent. The Agent may resign as Agent upon thirty
(30) days' notice to the Lenders and such resignation shall be effective upon
the appointment of a successor Agent acceptable to the Borrower. If the Agent
shall resign as Agent, then one hundred percent (100%) of the Lenders shall,
subject to the consent of the Borrower, such consent not to be unreasonably
withheld, appoint a successor agent for the Lenders whereupon such successor
agent shall succeed to the rights, powers and duties of the Agent and the term
"Agent" shall mean such successor agent effective upon its appointment, and the
108
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Financing Agreement. In the event that the Lenders do not
appoint a successor agent for the Lenders within forty-five (45) days of notice
to the Lenders of the Agent's resignation, the resigning Agent shall be
authorized to appoint a successor Agent in its good faith judgment. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
17 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent.
17.10. Collateral Matters.
(a) The Agent may from time to time, make such disbursements and
advances ("Agent Advances") which the Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the Collateral or any portion
thereof, to enhance the likelihood or maximize the amount of repayment by the
Borrower, any Guarantor or other Person of the Loans, and other obligations or
to pay any other amount chargeable to the Borrower or Guarantor pursuant to the
terms of this Agreement, including, without limitation, costs, fees and
expenses. The Agent Advances shall be repayable on demand and be secured by the
Collateral. Each Lender agrees that it shall make available to the Agent, upon
the Agent's demand, in Dollars in immediately available funds, the amount equal
to such Lender's pro rata share of such Agent Advance. If such funds are not
made available to the Agent by such Lender the Agent shall be entitled to
recover such funds, on demand from Lender together with interest thereon, for
each day from the date such payment was due until the date such amount is paid
to the Agent, at the federal funds rate for three (3) Business Days and
thereafter at the Chase Bank Rate.
(b) The Agent shall have no obligation whatsoever to any Lenders to
assure that the Collateral exists or is owned by the Borrower or any Guarantor
or is cared for, protected or insured or has been encumbered or that the liens
granted to the Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of
109
care, disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Agent in this Section 17.10
or in any of the Loan Documents, it being understood and agreed that in respect
of the Collateral, or any act, omission or event related thereto, the Agent may
act in any manner it may deem appropriate, in its sole discretion, given the
Agent's own interest in the Collateral as one of the Lenders and that the Agent
shall have no duty or liability whatsoever to any other Lender.
17.11. Amendments Concerning Agency Function. The Agent shall not be
bound by any waiver, amendment, supplement or modification of this Financing
Agreement or any other Loan Document which affects its duties hereunder or
thereunder unless it shall have given its prior consent thereto.
17.12. Liability of Agent. The Agent shall not have any liabilities
or responsibilities to the Borrower on account of the failure of any Lender to
perform its obligations hereunder or to any Lender on account of the failure of
the Borrower to perform its obligations hereunder or under any other Loan
Document.
17.13. Transfer of Agency Function. Without the consent of any
Lender, the Agent may at any time or from time to time transfer its functions as
Agent hereunder to any of its offices wherever located within the United States,
provided that the Agent shall promptly notify the Borrower and the Lenders
thereof and obtain the consent of the Borrower, which such consent shall not be
unreasonably withheld.
17.14. Withholding Taxes. Each Lender will furnish to the Agent and
to the Borrower such forms, certifications, statements and other documents as
the Agent or the Borrower may request from time to time to evidence such
Lender's exemption from the withholding of any tax imposed by any jurisdiction
or to enable the Agent or the Borrower to comply with any applicable laws or
regulations relating thereto. Without limiting the effect of the foregoing, if
any Lender is not created or organized under the laws of the United States of
America or any state thereof, such Lender will furnish to the Agent and to the
Borrower two copies of (i) Form 4224 or Form 1001 of the Internal
110
Revenue Service, or such other forms, certifications, statements or documents,
duly executed and completed by such Lender as evidence of such Lender's complete
exemption from the withholding of U.S. tax with respect to any payments of
interest made hereunder in respect of any Loan or such Lender's Revolving Loan
Amount and (ii) new Forms 4224 or 1001, as applicable, or any successor forms
thereto, upon the expiration or obsolescence of any previously entered form. If
the Agent or such Lender fails to provide the required forms, certifications or
documents, then (i) the Borrower shall be entitled to deduct or withhold on
payments to the Agent or such Lender as a result of such failure, as required by
law, and (ii) to the extent such withholding is required solely by reason of the
failure of the Agent or such Lender to provide the necessary form or other
required evidence of exemption from withholding, the Borrower shall not be
liable for any increased costs with respect to such withheld amounts under
Section 2.07 hereof.
SECTION 18. Lender Provisions.
18.01. Lenders' Accounting Statement. The Agent shall forward to
each Lender, at the end of each month, a copy of the account statement rendered
by the Agent to the Borrower.
18.02. Settlement of Accounts. (a) Unless otherwise provided herein,
the Agent shall promptly, after receipt of any interest earned under the
Financing Agreement, remit to each Lender interest, computed at the rate and as
provided for in Section 4 of this Financing Agreement on all outstanding amounts
advanced by such Lender on each Settlement Date, prior to adjustment, that
predate the last remittance by the Agent to such Lender of its interest.
(b) On the Settlement Date, the Agent and each Lender shall each
remit to the other, in immediately available funds, all amounts necessary so as
to ensure that, as of the Settlement Date, the Lenders shall have pro rata and
undivided portion of all outstanding Revolving Loans.
(c) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to any Lender hereunder that the
Borrower will not make such payment in
111
full, the Agent may assume that the Borrower has made such payment in full to
the Agent on such date and the Agent in its sole discretion may, but shall not
be obligated to, in reliance upon such assumption, cause to be distributed to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent the Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Chase Bank Rate.
18.03. Shared Liability. In the event that the Agent, the Lenders or
any one of them is sued or threatened with suit by the Borrower, or by any
receiver, trustee, creditor or any committee of creditors of the Borrower on
account of any preference, voidable transfer or lender liability issue, alleged
to have occurred or been received as a result of, or during the transactions
contemplated under this Financing Agreement or any other Loan Document, then in
such event any money paid in satisfaction or compromise of such suit, action,
claim or demand and any expenses, costs and attorneys' fees paid or incurred in
connection therewith, whether by the Agent, the Lenders or any one of them,
shall be shared pro rata by the Lenders. In addition, any costs, expenses, fees
or disbursements incurred by outside agencies or attorneys retained by the Agent
to effect collection or enforcement of any rights in the Collateral, including
enforcing (including, without limitation, appearing, monitoring and
participating as a party-in-interest in any bankruptcy case involving the
Borrower), preserving or maintaining rights under this Financing Agreement or
any other Loan Document shall be shared pro rata between the Lenders to the
extent not reimbursed by the Borrower, or from the proceeds of Collateral. The
provisions of this paragraph shall not apply to any suits, actions, proceedings
or claims that are based on transactions, actions or omissions unrelated hereto
that predate the date of this Financing Agreement.
112
This Financing Agreement, including its Exhibits, supersedes all
prior written or oral agreements of the parties as to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by its proper and duly authorized
officers as of May __, 1997.
LENDER:
THE CIT GROUP/COMMERCIAL SERVICES,
INC. as Lender and Agent
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President
BORROWER:
ANDOVER TOGS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
The Guarantors by their respective signatures below acknowledge receipt and
review of the Financing Agreement and the provisions thereof applicable to each
Guarantor, respectively.
GUARANTORS:
SPRINGDALE FASHIONS, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
113
TORTONI MANUFACTURING CORP.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
STONEHENGE FINANCIAL CORP.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
114
EXHIBITS AND SCHEDULES OMITTED
115