JOINDER
AND AMENDMENT NO. 1
TO
FINANCING AGREEMENT
JOINDER AND AMENDMENT NO. 1 TO FINANCING AGREEMENT (this "Joinder
Agreement") is entered into as of November 27, 2002, by and among S.L. XXXXXXXX
ACQUISITION, LLC, a New York limited liability company ("Xxxxxxxx Acquisition"),
XXXXXXX CHAUS, INC. a New York corporation ("Chaus") and THE CIT
GROUP/COMMERCIAL SERVICES, INC. ("CIT") as agent (in such capacity, "Agent") for
itself and the various other financial institutions (together with CIT,
collectively, the "Lenders") named in or which hereafter become a party to the
Financing Agreement (as hereafter defined).
BACKGROUND
Chaus, Agent and Lenders are parties to a Financing Agreement dated as of
September 27, 2002 (as amended, modified, restated or supplemented from time to
time, the "Financing Agreement") pursuant to which Agent and Lenders provide
financial accommodations to Chaus.
Pursuant to the terms of an Asset Purchase Agreement, dated as of November
27, 2002 between Xxxxxxxx Acquisition and S.L. Xxxxxxxx, Inc. ("Seller"), a New
York corporation, Xxxxxxxx Acquisition, a wholly-owned subsidiary of Chaus, is
purchasing substantially all of the assets and assuming none of the liabilities
(other than as set forth therein) of Seller.
Chaus has requested that Agent and Lenders consent to the addition of
Xxxxxxxx Acquisition as a party to all Obligations under the Financing Agreement
and provide financial accommodations to Xxxxxxxx Acquisition thereunder, and
Agent and Lenders have agreed to do so on the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of any loan or advance or grant of credit
heretofore or hereafter made to or for the account of Chaus by Agent and
Lenders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Financing Agreement.
2. Joinder Agreement.
(a) As of the date hereof, Xxxxxxxx Acquisition is hereby added as a
party to all Obligations under the Financing Agreement, and all references to
"Company" hereunder and thereunder shall (except as otherwise provided herein)
hereafter be deemed to
include, severally and collectively, as the context may require, Chaus and
Xxxxxxxx Acquisition. For the avoidance of doubt, Xxxxxxxx Acquisition shall not
have any several obligations under Sections 7.8 or 7.10 of the Financing
Agreement. As of the date hereof, and only in those cases in which the phrase
the "Company and its Subsidiaries" is used in the Financing Agreement, the term
"Company" shall be deemed to mean "Chaus" and the term "Subsidiaries" shall be
deemed to include "Xxxxxxxx Acquisition."
(b) Xxxxxxxx Acquisition hereby adopts the Financing Agreement, assumes
in full, and acknowledges that it is jointly and severally liable for, the
payment, discharge, satisfaction and performance of all Obligations under the
Financing Agreement and the Loan Documents as if it were an original signatory
thereunder. Without limiting the generality of the foregoing, in order to secure
the prompt payment and performance of the Obligations, Xxxxxxxx Acquisition
hereby assigns, pledges and grants to Agent for its benefit and for the ratable
benefit of Lenders a continuing security interest in and to all Collateral (as
such term is defined in the Financing Agreement) owned by Xxxxxxxx Acquisition
(the "Xxxxxxxx Acquisition Collateral"), whether now owned or existing or
hereafter acquired or arising and wherever located. For avoidance of doubt, in
no event shall Collateral include the accounts receivable of Seller (which Chaus
is assisting Seller with collecting) arising from all goods shipped prior to
September 1, 2002, as well as those certain goods shipped between September 1,
2002 and September 10, 2002, which such accounts receivable are in amount of
less than $5,000, including reversals of any chargebacks, allowances or
deductions previously taken by any customers with respect to the receivables
referred to in this clause.
(c) As of the date hereof, Exhibit A and Exhibit B to this Joinder
Agreement shall replace Exhibits A and B to the Financing Agreement in their
entirety.
3. Amendments to Financing Agreement.
(a) The following defined term is added in its appropriate alphabetical
order:
"BORROWING AGENT" shall mean Xxxxxxx Chaus, Inc.
(b) The following defined terms are amended in their entirety to
provide as follows:
"FACTORING AGREEMENT" shall mean, severally and collectively (i)
that certain Factoring Agreement dated as of September 27, 2002 by
and between the Company and CIT, as amended by Amendment No. 1 to
such Factoring Agreement dated the date hereof and (ii) that
certain Factoring Agreement dated as of November 27, 2002 by and
between S.L. Xxxxxxxx Acquisition, LLC and CIT, as such agreements
may be amended, modified and supplemented from time to time.
"GUARANTORS" shall mean (i) Xxxxxxx Chaus International (Hong
Kong), Inc., a Delaware corporation, (ii) Xxxxxxx Chaus
International (Korea),
Inc., a Delaware corporation, (iii) Xxxxxxx Chaus International
(Taiwan), Inc., a Delaware corporation and (iv) Chaus Retail,
Inc., a New Jersey corporation.
"PERMITTED INDEBTEDNESS" (a) current Indebtedness maturing in less
than one year and incurred in the ordinary course of business for
raw materials, supplies, equipment, services, Taxes or labor; (b)
the Indebtedness secured by Purchase Money Liens; (c) Indebtedness
arising under the Letters of Credit and this Financing Agreement;
(d) deferred Taxes and other expenses incurred in the ordinary
course of business; (e) the Indebtedness arising by and between
the Company and the Guarantors so long as the aggregate amount of
such Indebtedness does not exceed $5,000,000 per annum and such
Indebtedness is used solely to cover operating expenses and /or
expenses incurred in the ordinary course of business, (f) the
Indebtedness arising by and between the Company and Xxxxxxxx
Acquisition, and (g) other Indebtedness existing on the date of
execution of this Financing Agreement and listed in the most
recent financial statement delivered to the Agent and the Lenders
or otherwise disclosed to the Agent and the Lenders in writing
prior to the Closing Date.
(c) Section 7.9(e) is amended in its entirety to provide as follows:
"(e) Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation, except
(i) by the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of
business or (ii) with respect to the guaranty of the Company of
the Obligations of Xxxxxxxx Acquisition to S.L. Xxxxxxxx, Inc."
(d) Section 7.14 is amended in its entirety to provide as follows:
"7.14. The Company hereby (a) represents that each of Xxxxxxx
Chaus International (Philippines), Inc. and Chaus Specialists,
Inc. are inactive corporations and have no material assets (the
"Inactive Subsidiaries"), and (b) agrees to dissolve the corporate
existence of each of the Inactive Subsidiaries by not later than
December 24, 2002."
(e) Section 7.15 is amended in its entirety to provide as follows:
"7.15. The Company shall maintain life insurance on Xxxxxxxxx
Xxxxx (the "JC Life Insurance Policy") in the amount of not less
than $18,000,000 and shall assign the JC Life Insurance Policy to
the Agent (in form and substance satisfactory to the Agent) all
rights under the Life Insurance Policy as additional collateral
for the Obligations (the "JC Life Insurance Assignments"),
provided that the JC Life Insurance Assignment
shall be delivered to Agent not later than December 10, 2002. In
the event of a collection upon the life insurance policy, the
proceeds thereof up to $18,000,000 shall be applied to the
Obligations in such order as Agent shall determine in its
reasonable discretion. Should the Agent collect more than
$18,000,000 with respect to the JC Insurance Policy, the Agent and
Lenders shall return to the Company that portion of the proceeds
which exceeds $18,000,000."
(f) A new Section is hereby added to the Financing Agreement as Section
15 in the appropriate sequential order to provide as follows:
"SECTION 15. BORROWING AGENT
15.1. (a) The Company hereby irrevocably designates Borrowing
Agent to be its attorney and agent and in such capacity to borrow,
sign and endorse notes, and execute and deliver all instruments,
documents, writings and further assurances now or hereafter
required hereunder, on behalf of the Company, and hereby
authorizes Agent to pay over or credit all loan proceeds hereunder
in accordance with the request of Borrowing Agent.
(b) The handling of this credit facility as a co-borrowing
facility with a borrowing agent in the manner set forth in this
Agreement is solely as an accommodation to the Company and at its
request. Neither Agent nor any Lender shall incur liability to the
Company as a result thereof except due to willful misconduct or
gross (not mere) negligence by the Agent or Lender. To induce
Agent and Lenders to do so and in consideration thereof, the
Company hereby indemnifies Agent and each Lender and holds Agent
and each Lender harmless from and against any and all liabilities,
expenses, losses, damages and claims of damage or injury asserted
against Agent or any Lender by any Person arising from or incurred
by reason of the handling of the financing arrangements of the
Company as provided in this Section 15.1, reliance by Agent or any
Lender on any request or instruction from Borrowing Agent or any
other action taken by Agent or any Lender with respect to this
Section 15 except due to willful misconduct or gross (not mere)
negligence by the indemnified party.
(c) All Obligations shall be joint and several, and the
Company shall make payment upon the maturity of the Obligations by
acceleration or otherwise, and such obligation and liability on
the part of the Company shall in no way be affected by any
extensions, renewals and forbearance granted to Agent or any
Lender to the Company, failure of Agent or any Lender to give the
Company notice of borrowing or any other notice, any failure of
Agent or any Lender to pursue or preserve its rights against the
Company, the release by Agent or any Lender of any Collateral now
or thereafter acquired from the Company, and such agreement by the
Company to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by Agent or any
Lender to the Company or any Collateral for the Company's
Obligations or the lack thereof. The Company waives all suretyship
defenses with respect to its relationship to Xxxxxxxx Acquisition.
15.2. Xxxxxxx Chaus, Inc. ("Chaus") and S.L. Xxxxxxxx
Acquisition, LLC ("Xxxxxxxx Acquisition") expressly waive any and
all rights of subrogation, reimbursement, indemnity, exoneration,
contribution of any other claim which either Chaus or Xxxxxxxx
Acquisition, as the case may be, may now or hereafter have against
either Xxxxxxxx Acquisition or Chaus, as the case may be, directly
or contingently liable for the Obligations hereunder, or against
or with respect to either Xxxxxxxx Acquisition or Chaus' property
(including, without limitation, any property which is Collateral
for the Obligations), as the case may be, arising from the
existence or performance of this Agreement, until termination of
this Agreement and repayment in full of the Obligations."
4. Conditions of Effectiveness. This Joinder Agreement shall become
effective as of the date hereof upon satisfaction of the following conditions:
(a) Agent's receipt of five (5) copies of this Joinder Agreement duly
executed by the Company and Agent;
(b) Agent's receipt of the Amended and Restated Term Loan Promissory
Note and Amended and Restated Revolving Credit Note, which have been
executed by the Company in the form of Exhibit A and Exhibit B attached
hereto;
(c) Agent shall have received a copy of the resolutions in form and
substance reasonably satisfactory to Agent, of the Sole Member of Xxxxxxxx
Acquisition authorizing (1) the execution, delivery and performance of this
Joinder Agreement, (2) the execution, delivery and performance of the
Factoring Agreement dated the date hereof between Xxxxxxxx Acquisition and
CIT and (3) the granting by Xxxxxxxx Acquisition of the Liens upon the
Xxxxxxxx Acquisition Collateral, certified by the Secretary or an Assistant
Secretary of Xxxxxxxx Acquisition, as of the date of this Joinder
Agreement; and, such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded as of the
date of such certificate;
(d) Agent shall have received a copy of the Articles of Organization
and Operating Agreement of Xxxxxxxx Acquisition, and all amendments
thereto, such Articles of Organization shall have been certified by the
Secretary of State or other appropriate official of its jurisdiction of
formation;
(e) Agent shall have received good standing certificates for Xxxxxxxx
Acquisition dated not more than thirty (30) days prior to the date of this
Joinder Agreement, issued by the Secretary of State or other appropriate
official of Xxxxxxxx Acquisition's jurisdiction of formation;
(f) Agent shall have received a Factoring Agreement executed by
Xxxxxxxx Acquisition, and all agreements, instruments and documents
executed in connection with such Factoring Agreement;
(g) Agent shall have received (i) a Stock Pledge Agreement executed by
Chaus in regards to Xxxxxxx Chaus International (Taiwan), Inc., together
with stock certificates and stock powers duly executed in blank and (ii) a
Membership Interest Pledge Agreement executed by Chaus in regards to
Xxxxxxxx Acquisition;
(h) Agent shall have received (i) a Security Agreement - Accounts,
Inventory, General Intangibles, Equipment and Other Collateral and (ii) a
Guaranty, both executed by Xxxxxxx Chaus International (Taiwan), Inc.;
(i) Agent shall have received in form and substance satisfactory to
Agent, updated Certificates of Insurance which add Xxxxxxxx Acquisition as
an insured party and cover the Xxxxxxxx Acquisition Collateral, wheresoever
located and in amounts and on terms acceptable to Agent and updated Loss
Payee Policy Endorsements naming Agent as an additional insured;
(j) Agent shall have received the executed opinion of counsel from
Xxxxxxx Berlin Shereff Xxxxxxxx LLP in form and substance satisfactory to
Agent, which shall cover such matters incident to the transactions
contemplated by this Joinder Agreement and the Financing Agreement, as
amended;
(k) Agent shall have received, in form and substance satisfactory to
Agent, executed copies of the Asset Purchase Agreement, the Consulting
Agreement, the documentation with respect to the asset purchase of Seller,
and all agreements, instruments and documents executed in connection with
each of the foregoing;
(l) Each document (including, without limitation, any Uniform
Commercial Code financing statement) required by this Joinder Agreement or
under law or reasonably requested by Agent to be filed, registered or
recorded in order to create, in favor of Agent, a perfected security
interest in or lien upon the Xxxxxxxx Acquisition Collateral shall have
been properly filed, registered or recorded in each jurisdiction in which
the filing, registration or recordation thereof is so required or
requested, and Agent shall have received an acknowledgment copy, or other
evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary fee,
tax or expense relating thereto;
(m) Agent shall have received an executed copy of the Payoff Letter
between the Company and The Merchants Bank of New York; and
(n) Agent shall have received such other certificates, instruments,
documents and agreements as may reasonably be required by Agent or its
counsel, each of which shall be in form and substance satisfactory to Agent
and its counsel.
5. Representations and Warranties. The Company hereby represents and
warrant as follows:
(a) This Joinder Agreement and the Financing Agreement, as modified
hereby, constitute legal, valid and binding obligations of the Company and
are enforceable against the Company in accordance with their respective
terms.
(b) The Company hereby reaffirms all covenants, representations and
warranties made in the Financing Agreement as amended herein are true and
correct in all material respects and agrees that all such covenants,
representations and warranties, as applicable, shall be deemed to have been
remade as of the effective date of this Joinder Agreement (except to the
extent of changes resulting from transactions contemplated or permitted by
the Financing Agreement and the other Loan Documents and except to the
extent that such representations and warranties relate expressly to an
earlier date).
(c) No Event of Default or Default has occurred and is continuing or
would exist after giving effect to this Joinder Agreement.
(d) As of the date hereof, the Company has no defense, counterclaim or
offset with respect to the Financing Agreement.
6. Additional Representations and Warranties of Xxxxxxxx Acquisition.
Xxxxxxxx Acquisition hereby further represents and warrants as follows:
(a) Upon the effectiveness of this Joinder Agreement, all covenants,
representations and warranties made in the Financing Agreement shall be
deemed to have been made by Xxxxxxxx Acquisition as of the effective date
of this Joinder Agreement.
(b) Except as set forth on Schedule 6(b) hereto, each of the
representations and warranties set forth in Section 7 of the Financing
Agreement is true and correct in all material respects with respect to
Xxxxxxxx Acquisition as of the date hereof (except to the extent of changes
resulting from transactions contemplated or permitted by the Financing
Agreement and the other Loan Documents and except to the extent that such
representations and warranties relate expressly to an earlier date);
(c) Xxxxxxxx Acquisition is duly organized and in good standing under
the laws of the State of New York and is qualified to do business and is in
good standing in such states which constitute all states in which
qualification and good standing are necessary for Xxxxxxxx Acquisition to
conduct its business and own its property and where the failure to so
qualify would have a material adverse effect on Xxxxxxxx Acquisition or its
business. Xxxxxxxx Acquisition has delivered to Agent true and
complete copies of its organizational documents and will promptly notify
Agent of any amendments or changes thereto.
7. Governing Law. This Joinder Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
and shall be governed by and construed in accordance with the laws of the State
of New York without regard to any conflicts of laws principles thereto that
would call for the application of the laws of any other jurisdiction.
8. Headings. Section headings in this Joinder Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Joinder Agreement for any other purpose.
9. Counterparts, Facsimile Signatures. This Joinder Agreement may be
executed by the parties hereto in one or more counterparts, each of which shall
be deemed an original and all of which taken together shall be deemed to
constitute one and the same agreement. Any signature delivered by a party by
facsimile transmission shall be deemed to be an original signature hereto.
10. Effect on the Financing Agreement.
(a) Upon the effectiveness of this Agreement, each reference in the
Financing Agreement to "this Agreement," "hereunder," "hereof," "herein" or
words of like import shall mean and be a reference to the Financing Agreement as
modified hereby.
(b) Except as specifically modified hereby, the Financing Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Joinder Agreement
shall not operate as a waiver of any right, power or remedy of Agent or any
Lender, nor constitute a waiver of any provision of the Financing Agreement, or
any other documents, instruments or agreements executed and/or delivered under
or in connection therewith.
(d) The security interests and liens and rights securing payment of the
Obligations are hereby ratified and confirmed by the Company in all respects.
IN WITNESS WHEREOF, this Joinder Agreement has been duly executed as of the
day and year first written above.
S.L. XXXXXXXX ACQUISITION, LLC
By: /s/ Xxxxxxxx X. XxXxxxx
------------------------------------
XXXXXXX CHAUS, INC.
By: /s/ Xxxxxxxx X. XxXxxxx
-------------------------------------
THE CIT GROUP/COMMERCIAL SERVICES, INC.,
as Agent and a Lender
By: /s/ Xxxx Xxxxxxx
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