INTERCREDITOR AGREEMENT
May 12, 1997
THE CIT GROUP/COMMERCIAL SERVICES,
INC., individually and as Agent
under the Amended and Restated
Financing and Security Agreement
referred to below
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
In order to induce you to extend or to continue to extend credit,
from time to time, to ANDOVER TOGS, INC. ("Andover"), such extensions of credit
to be guaranteed by SPRINGDALE FASHIONS, INC., TORTONI MANUFACTURING CORP. and
STONEHENGE FINANCIAL CORP., (collectively with Andover, the "Debtor"), pursuant
to the Amended and Restated Financing and Security Agreement dated May ___, 1997
(as amended, restated, modified and supplemented, the "Senior Loan Agreement")
by and among THE CIT GROUP/COMMERCIAL SERVICES, INC. ("CITCS"), as a lender and
as agent (in such capacity, the "Agent"), certain lenders (including "CITCS",
each a "Senior Lender" and collectively, the "Senior Lenders") and Andover, and
all other instruments, agreements and documents now or hereafter entered into by
any Debtor in favor of the Agent and/or any Senior Lender in connection with the
Senior Loan Agreement (together with the Senior Loan Agreement, each a "Senior
Loan Document" and collectively, the "Senior Loan Documents") (all such credit
and extensions thereof, and all indebtedness, obligations and liabilities of
every nature of any Debtor to the Agent and/or any Senior Lender pursuant to any
of the Senior Loan Documents, whether now existing or hereafter arising,
together with all extensions, renewals or modifications of any thereof and of
any part of any thereof, and all interest thereon and fees and expenses payable
with respect thereto (including, without
limitation, interest accruing after the commencement of a bankruptcy proceeding
against any Debtor whether or not a claim therefor may be made in such
proceeding), being hereinafter collectively called the "Senior Claims"), the
undersigned (hereinafter referred to as the "undersigned") hereby represents to
and agrees with you as follows:
1. The Collateral Trustee, under and as defined in the Note
Agreement (as hereinafter defined), hereby subordinates the payment of the
Junior Claims (as defined below) to the prior payment in full in cash of the
Senior Claims. As used in this Agreement, "Junior Claims" means the principal of
and interest on all obligations, indebtedness and liabilities of any Debtor to
the undersigned (including, without limitation, the obligations, indebtedness
and liabilities described on Schedule A hereto), together with all extensions
and renewals thereof or of any part of any thereof but excluding (i) all fees
payable to, and reasonable costs and expenses incurred by the undersigned in
accordance with the terms of the Note Agreement, including, but not limited to,
the fees and disbursements of counsel to the undersigned (collectively the "Note
Agreement Fees") but expressly including the Note Agreement Fees, after an Event
of Default as defined in the Note Agreement, in excess of $50,000, and (ii) all
reasonable costs and expenses incurred by the Committee (as defined in the Note
Agreement) in accordance with the terms of the Note Agreement, including, but
not limited to, the fees and disbursements of counsel and accountants to the
Committee. "Note Agreement" means the Note and Collateral Trust Agreement, dated
the date hereof, between X.X. Xxxxxxx & Associates, Inc., as Collateral Trustee,
and the Debtor.
2. Until the Senior Claims shall be paid in full in cash and the
Senior Loan Documents shall be terminated, neither any Class 4 Creditor nor the
undersigned will (x) take, demand or receive, and no Debtor will make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in any other
manner, any payment on or security (other than a secondary lien on the
Collateral) for the whole or any part of the Junior Claims or (y) take any
action to enforce or collect amounts owing under the Junior Claims, take any
action with respect to the Collateral, accelerate the scheduled maturities of
any amounts owing under any of the Junior Claims or act as a petitioning
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creditor in a bankruptcy proceeding filed against any Debtor, except that the
Debtor may make, and the undersigned may receive, quarterly payments of accrued
interest and scheduled principal payments (including but not limited to the
payment of Excess Cash Flow Payments as provided in the Class 4 Note due March
31, 2002 as defined in the Note Agreement (the "Class 4 Note")) on the Junior
Claims, so long as no event of default shall have occurred and then be
continuing under any of the Senior Loan Documents and the undersigned shall not
have received notice thereof from you. Notwithstanding the immediately preceding
sentence, after (and not at any time before) a period of 180 days ("Blockage
Period") following the receipt by CITCS from the undersigned of notice that an
event of default based on a failure to pay principal or interest on the Junior
Claims has occurred and is continuing under the Junior Claims, the undersigned
may take any action to enforce or collect amounts owing under the Junior Claims,
the undersigned may accelerate the scheduled maturities of any amounts owing
under any of the Junior Claims, or any Class 4 Creditor (as defined in the Note
Agreement) may act as a petitioning creditor in any bankruptcy proceeding filed
against any Debtor. There shall be no more than one Blockage Period in any
twelve month period following the date of this Agreement.
3. Upon any liquidation, dissolution or other winding up of any
Debtor or its business or any sale, receivership, insolvency, reorganization or
bankruptcy proceedings, assignment for the benefit of creditors, arrangement or
the commencement of any proceeding by or against any Debtor for any relief under
any bankruptcy, reorganization or insolvency law or laws, Federal or state, or
any other law, Federal or state, relating to the relief of debtors, readjustment
of indebtedness, reorganization, composition, or extension, or in the event of
the occurrence and during the continuation of any event of default under the
Senior Loan Documents of which the Debtor and the undersigned have received
notice from you, then and in any such event, any payment or distribution of any
kind or character, whether in cash, property or securities which, but for the
subordination provisions contained herein, would otherwise be payable or
deliverable to the undersigned upon or in respect of the Junior Claims, shall
instead be paid over or delivered to you for application as a payment or
prepayment on account of the Senior Claims, and the undersigned shall not
receive any such payment or
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distribution or any benefit therefrom unless and until the Senior Claims shall
have been fully paid and satisfied in cash. In the event that, notwithstanding
the foregoing, any Debtor shall offer any payment with respect to the Junior
Claims, the undersigned will direct that the same be made or delivered to you,
and in the event of any moneys coming into the hands of the undersigned on
account of any Junior Claim from any source whatsoever, the undersigned will
receive the same solely as your agent and will immediately turn the same, in the
form received, except for the endorsement of the undersigned where appropriate,
over to you for application on account of the Senior Claims, and until so turned
over, the undersigned will hold the same in trust for you. If the undersigned
shall fail to endorse any such instrument for the payment of money payable to
the undersigned or on the undersigned's order, which has been turned over to
you, you are hereby irrevocably constituted and appointed attorney-in-fact for
the undersigned with full power to make any such endorsement, and with full
power of substitution. All actions taken by such attorney-in-fact are hereby
ratified and approved.
4. The undersigned irrevocably authorizes and empowers you under the
circumstances set forth in paragraph 3 of this Agreement, to demand, xxx for,
collect and receive every such payment or distribution referred to in such
paragraph and give acquittance therefor, and file claims and proofs of claim in
any statutory or non-statutory proceeding, vote such claims in any such
proceeding and take such other actions, in your name, in any Senior Lender's
name or in the name of the undersigned or otherwise, as you may deem necessary
or advisable for the enforcement of the provisions of this Agreement. The
undersigned hereby agrees, under the circumstances set forth in paragraph 3,
duly and promptly to take such action as may be requested at any time and from
time to time by you to collect the Junior Claims for your account and to file
appropriate proofs of claim in respect thereof, and to execute and deliver such
powers of attorney, assignments or other instruments as you may request in order
to enable you to enforce any and all claims upon or in respect of the Junior
Claims and to collect and receive any and all payments or distributions which
may be payable or deliverable at any time upon or in respect of the Junior
Claims. Any and all moneys so collected or received by you shall be retained
indefeasibly by you for application to the payment in full of the
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Senior Claims then outstanding; provided, however, that upon the indefeasible
payment to you in cash of moneys collected or received on account of Junior
Claims and on account of Senior Claims aggregating an amount equivalent to all
the matured and unmatured Senior Claims, you shall pay over to the undersigned
the excess, if any, of all moneys so received or collected on the Junior Claims
and on the Senior Claims and assign and deliver to the undersigned any and all
instruments and documents evidencing any remaining Senior Claims, without any
representations or warranties of any nature or type whatsoever in respect
thereof (endorsed to the undersigned without recourse in the case of negotiable
instruments). If you receive oral or written notice of any claim or demand,
whether reasonable or unreasonable, adverse to the rights or interests, as
hereinabove set forth, of the undersigned in and to either the Junior Claims or
the Senior Claims, or any moneys held by you in respect thereof, you shall be
entitled to retain any and all such moneys, and documents and instruments
evidencing such Junior Claims and Senior Claims without incurring any liability
or debt to the undersigned, until the adjudication or final settlement of the
rights of such claimant against the undersigned, and the undersigned hereby
agrees to indemnify and save you and each Senior Lender harmless from any and
all liability and expenses incurred in connection with the assertion of such
claims or demands.
5. Without notice to or consent by the undersigned, (a) any demand
for payment of the Senior Claims or any of them may be rescinded in whole or in
part and any of the Senior Claims may be continued, and the Senior Claims, or
the liability of any Debtor or any other party upon or for any part thereof, or
any collateral security or guaranty therefor or right of offset with respect
thereto, or any obligation or liability of any Debtor or any other party under
any of the Senior Claims may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised, waived, surrendered, or
released or (b) the instruments evidencing the Senior Claims or any loan
agreements, collateral security documents, guaranties or other documents in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as you may deem advisable from time to time, and any
collateral security at any time held for the payment of the Senior Claims may be
sold, exchanged, waived, surrendered or released, in each case all
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without notice to or further assent by the undersigned, which will remain bound
under this Agreement, and all without impairing, abridging, releasing or
affecting the subordination provided for herein, notwithstanding any such
renewal, extension, modification, acceleration, compromise, amendment,
supplement, termination, sale, exchange, waiver, surrender or release. The
undersigned waives any and all notice of the creation, renewal, extension or
accrual of any of the Senior Claims and notice of or proof of reliance by the
Agent and/or any Senior Lender upon this Agreement, and the Senior Claims shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Agreement, and all dealings between any Debtor and you shall be deemed
to have been consummated in reliance upon this Agreement.
6. At your request, the undersigned hereby further agrees (i) to
make notations on the undersigned's books beside all accounts or on other
statements evidencing or recording any Junior Claim to the effect that such
Junior Claim is subject to the provisions of this Agreement, (ii) to give you,
upon request from time to time, access to the undersigned's books with respect
to such accounts and the right to make copies of such books, and (iii) to
furnish you, upon request from time to time, with statements of such accounts
between the undersigned and any Debtor.
7. The undersigned hereby represents to you that (i) the undersigned
has not heretofore assigned, transferred, created a security interest in, or
otherwise encumbered such Junior Claims, and (ii) the Junior Claims are not
represented by any instruments or documents other than as described on Schedule
A annexed hereto. The undersigned agrees with you that any Junior Claim now or
hereafter existing will not be represented by any instruments or documents other
than those that have been caused to indicate that they are subject to this
Agreement.
8. Upon (i) the payment in full in cash of all Senior Claims and
(ii) the termination of all agreements under which you are obligated to extend
credit, make advances, loans or other financial accommodations to any Debtor,
this Agreement shall automatically terminate, except that this Agreement shall
continue in full force and effect as to all Junior Claims and all Senior Claims
outstanding at the date of such termination, until
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such Senior Claims have been fully and irrevocably paid in cash and discharged.
9. In the event of a breach by any Debtor or the undersigned in the
observance and due fulfillment of any of the terms and obligations of this
Agreement, you may, if such breach is not cured or waived within ten (10) days
from the written notice thereof to the undersigned and the Debtor, declare the
Senior Claims to be due and payable, and thereupon the same shall become and
shall be immediately due and payable.
10. Any notice by either party to the other shall be effective only
if in writing and directed to the recipient's address set forth below the
signature line hereto, or to such other address as either party may notify the
other in writing.
11. No delay on your part in exercising any right or rights
hereunder or in failing to exercise the same shall operate as a waiver of such
right or rights; and no notice to or demand on any Debtor or the undersigned
shall be deemed a waiver of any obligation or duty of any Debtor or the
undersigned or of your right to take further action without notice; nor in any
event shall any modification, alteration or waiver of any of the provisions
hereof be effective unless in writing and signed by the parties hereto and then
only in the specific instance for which given.
12. The undersigned waives trial by jury in any litigation arising
out of or relating to this Agreement.
13. Subject to the payment in full of all Senior Claims in cash, the
undersigned shall be subrogated to your rights to receive payments or
distributions of cash, property or securities of any Debtor applicable to the
Senior Claims until the principal of and interest on the Junior Claims shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions of any cash, property or securities to which the undersigned would
be entitled, except for the provisions of this Agreement, and no payment over
pursuant to the provisions of this Agreement to or for your benefit by the
undersigned, shall, as between any Debtor, its creditors other than you and the
undersigned, be deemed to be a payment by any Debtor to or on
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account of the Senior Claims. It is understood that the provisions of this
Agreement are intended solely for the purpose of defining the relative rights of
the undersigned, on the one hand, and you, on the other hand.
14. This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with the internal
laws of the State of New York applicable to contracts executed and to be
performed in such State without regard to the conflict of law principles of such
State.
15. By your acceptance of this Agreement set forth below, you hereby
consent to the granting by the Debtor to the undersigned of liens on and
security interests in all of the Debtor's assets and property on and in which
you have been, or may hereafter be granted a lien and security interest
(collectively, the "Collateral") as security for the payment of the Junior
Claims, provided that the Collateral shall not secure any other obligations of
the Debtor to the undersigned. Your security interest in the Collateral shall be
deemed to have a priority senior to any security interest of the undersigned in
such Collateral or any other of the Debtor's assets on and in which you may
hereafter be granted an interest. Your priority in respect of the Collateral
shall be irrespective of the time, order or method of attachment or perfection
of security interests, or the time or order of the filing of financing
statements, or the giving of or failure to give notice of purchase money
security interests. The undersigned further acknowledges that the indebtedness
of Debtor under the Senior Claims is revolving in nature and that the amount
thereof which may be outstanding at any time or from time to time may be
increased or reduced and subsequently reborrowed. The terms of the Senior Claims
may be modified, extended or amended from time to time, and the amount thereof
may be increased or reduced, all without notice to or consent by the undersigned
and without affecting the provisions of this Agreement. Until such time as all
Senior Claims shall have been paid in full and the Senior Loan Documents
referred to above shall have been terminated, the undersigned agrees that it
will not commence or continue any default, foreclosure or liquidation
proceedings or remedies in respect of any of the Collateral. In the event any
Collateral,
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or any collections or other proceeds thereof (other than payments on the Class 4
Note expressly permitted to be made under Section 2 hereof), shall be received
by the undersigned at any time for any reason, such Collateral and proceeds
shall be held in trust for the benefit of, and promptly remitted to, you. If the
undersigned shall desire to assign or transfer any mortgages or security
agreements between the undersigned and any Debtor relating to the Collateral, or
the benefits thereof or the obligations secured thereby, to any other person,
the undersigned shall notify you thereof and shall advise such person of this
Agreement. On or prior to the date of such assignment or transfer, the
undersigned shall obtain an undertaking from such person to be bound hereby in
form and substance satisfactory to you.
16. Each reference herein to you or to the undersigned shall be
deemed to include, except where inconsistent with the context, your and the
undersigned's respective legal representatives, successors and assigns.
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17. This Agreement shall not inure to the benefit of any other
creditor of the Debtor.
X.X. Xxxxxxx & Associates, Inc.,
as Collateral Trustee on Behalf
of Class 4 Creditors
By: /s/ Xxxx Xxxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxx
Title: Vice President
Address: 000 X. 00xx Xx.
XX, XX 00000
Accepted:
THE CIT GROUP/COMMERCIAL SERVICES,
INC., individually and as Agent
under the Amended and Restated
Financing and Security Agreement
By: /s/ Xxxx Xxxxxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxxxx
Title: Vice President
Address: 0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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SCHEDULE A
JUNIOR CLAIMS
Junior Claims mean any obligations, indebtedness and liabilities at
any time owed by any Debtor and secured by Collateral Documents as defined in
the Note Agreement, including, but not limited to, the Class 4 Note, expenses,
charges and other sums owing pursuant to the Class 4 Note, the Note Agreement,
and all related documents, agreements and instruments evidencing or creating the
Junior Claims or the mortgages or security interests in the Collateral granted
to secure the Junior Claims, but excluding (i) the Note Agreement Fees but
expressly including the Note Agreement Fees, after an Event of Default as
defined in the Note Agreement, in excess of $50,000, and (ii) all costs and
expenses incurred by the Committee (as defined in the Note Agreement) in
accordance with the terms of the Note Agreement, including, but not limited to,
the fees and disbursements of counsel and accountants to the Committee.
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DEBTOR ACKNOWLEDGMENT
The undersigned, the Debtor referred to in the within Intercreditor
Agreement (herein called the "Agreement"), hereby jointly and severally accepts
notice of the execution and delivery thereof and of the terms and provisions
thereof, and, in consideration of the extension of credit to it by the holders
of the Senior Claims as therein described, agrees to refrain from doing any act
or thing which would cause a violation by the signer of the Agreement or of any
of the signer's obligations thereunder.
Dated: May 12, 1997
ANDOVER TOGS, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
STONEHENGE FINANCIAL CORP.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
TORTONI MANUFACTURING CORP.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
SPRINGDALE FASHIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
---------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
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