1
CREDIT AND SECURITY AGREEMENT
AMONG
REPUBLIC NATIONAL BANK OF NEW YORK,
INDIVIDUALLY AND AS AGENT
000 XXXXX XXXXXX
XXX XXXX, XXX XXXX 00000
NATWEST BANK N.A.
0000 XXXXXX XX XXX XXXXXXXX
XXX XXXX, XXX XXXX 00000
AND
MOVIE STAR, INC.
Republic National Bank of New York, September 14, 1995
Individually and as Agent
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
NatWest Bank N.A.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Ladies and Gentlemen:
This Agreement states the terms and conditions upon which,
effective as of the date of acceptance hereof by each of you, we may obtain
loans and other financial accommodations through the Agent from Republic
National Bank of New York ("RNB") and NatWest Bank N.A. ("NatWest"), on a
several basis, for our general corporate and business purposes upon the
security referred to herein.
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Section
1. DEFINITIONS.
1.1 All terms used herein which are defined in Article 1
or Article 9 of the Uniform Commercial Code of the State of New York ("UCC")
shall have the meanings given therein, unless otherwise defined in this
Agreement, and all references to the plural herein shall also mean the
singular. All accounting terms used herein shall have the meaning assigned to
them by generally accepted accounting principles, unless otherwise defined.
1.2 "Accessions" shall have the meaning ascribed to it in
the UCC, as amended.
1.3 "Accounts" shall mean all of our present and future
accounts, general intangibles, chattel paper, documents and instruments, as
such terms are defined in the UCC, and all of our contract rights, including,
without limitation, all obligations for the payment of money arising out of our
sale, lease or other disposition of goods or other property or rendition of
services.
1.4 "Account Debtor" shall mean each debtor or obligor in
any way obligated on or in connection with any Account.
1.5 "Accounts Advance Percentage" shall have the meaning
set forth in Section 2.2 hereof.
1.6 "Actual Letter of Credit Exposure" shall mean the
aggregate amount, at any one time, of the amounts outstanding under all Letters
of Credit, except Existing RNB Standby Letters of Credit and shall include,
without limitation, the amounts outstanding under the Existing RNB Letters of
Credit and the Existing NatWest Letters of Credit.
1.7 "Actual Total Line Outstanding" shall mean the aggregate
amount, at any one time, of (x) the unpaid principal amounts of the Loans
outstanding, (y) the Actual Letter of Credit Exposure and (z) Existing RNB
Standby Letter of Credit.
1.8 "Affiliate" of a party shall mean any entity
controlling, controlled by or under common control with, the party.
1.9 "Agent" shall have the meaning set forth in Section
10 hereof.
1.10 "Application" shall have the meaning set forth in
Section 2.4 hereof.
1.11 "Bank" shall mean either RNB or NatWest.
1.12 "Business Day" shall mean a day on which the Agent,
RNB and NatWest are each open for the regular transaction of business in New
York, New York.
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1.13 "NatWest Note" shall have the meaning set forth in
Section 2.3 hereof.
1.14 "Closing Date" shall mean the date this Agreement is
accepted by both Banks.
1.15 "Collateral" shall have the meaning set forth in
Section 4.1 hereof.
1.16 "Control" shall mean the power to direct the affairs
of a person or entity, including, without limitation, through the ownership of
a majority of the voting power of a party.
1.17 "Due Date" shall mean December 31, 1995.
1.18 "Eligible Accounts" shall mean Accounts created by us
in the ordinary course of business arising out of our sale and delivery of
goods or rendition of services, which are and at all times shall continue to be
deemed eligible hereunder by the Agent, in all respects in the Agent's sole and
absolute discretion. Standards of and criteria for eligibility may be
established, supplemented and revised from time to time solely by the Agent in
its exclusive judgment, exercised reasonably and in good faith. In determining
eligibility, the Agent may, but need not, rely on agings or reports and
schedules of Accounts furnished by us, but reliance by the Agent, RNB or
NatWest thereon from time to time shall not be deemed to limit the Agent's
right to revise standards of eligibility at any time as to both our present and
future Accounts. Without limiting the generality of the foregoing, in any
event, an Account shall not be deemed eligible unless: (a) the Account Debtor
on such Account, based on financial condition, relative amount of credit
extended, payment history and otherwise, is and continues to be acceptable to
the Agent in its sole and absolute discretion, (b) such Account complies in all
respects with the representations, covenants and warranties hereinafter set
forth, (c) delivery of the goods or rendition of the services has been
completed and accepted by the Account Debtor, (d) such Account is not subject
to any agreement under which any deduction, discount, credit or allowance of
any kind may be granted or allowed, and (e) no more than ninety (90) days have
elapsed since the invoice date of such Account or (60) days past the due date
provided such due date is not more than 90 days from shipment.
1.19 "Events of Default" shall have the meaning set forth
in Section 8.1 hereof.
1.20 "Existing NatWest Letters of Credit" shall mean the
commercial letters of credit issued by NatWest for our account prior to the
Closing Date and currently outstanding, as listed on Schedule B hereto together
with any Steamship Guaranty or Air Release issued by NatWest.
1.21 "Existing RNB Standby Letters of Credit shall mean the
standby letters of credit listed on Schedule C.
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1.22 "Existing RNB Letters of Credit" shall mean the
commercial letters of credit issued by RNB for our account prior to the Closing
Date and currently outstanding, as listed on Schedule C hereto together with
any Steamship Guaranty or Air Release issued by RNB.
1.23 "Inventory" shall mean all imported inventory and all
documents (including, without limitation, all documents of title, transport or
otherwise) and all Records, other property and general intangibles at any time
relating to such inventory, whether now or hereafter existing or acquired and
wherever located, all products and proceeds (including, but not limited to, all
"proceeds," "products," "offspring," "rents," or "profits," as such terms are
used in the United States Bankruptcy Code, as amended), and all insurance
proceeds of such property wherever located and in whatever form. As used
herein, the term "imported inventory" means all inventory of the Debtor of
finished goods imported from outside of the United States for which any bank
has issued a letter of credit.
1.24 "Letter of Credit" shall mean a letter of credit issued
by the Agent for our account under this Agreement together with any Steamship
Guaranty or Air Release.
1.25 "Loan Account" shall have the meaning set forth in
Section 2.3 hereof.
1.26 "Maximum Credit Amount" shall have the meaning set
forth in Section 2.2 hereof.
1.27 "Maximum Rate" shall have the meaning set forth in
Section 3.4 hereof.
1.28 "Net Amount of Eligible Accounts" shall mean the
gross amount of Eligible Accounts, less sales, excise or similar taxes, and
less returns, discounts, claims, credits and allowances of any nature at any
time issued, owing, granted, outstanding, available or claimed.
1.29 "Obligations" shall mean any and all Loans,
indebtedness, liabilities and obligations of any kind owing by us or any
Affiliate of ours to RNB, NatWest or the Agent, however evidenced, whether as
principal, guarantor or otherwise, whether arising under this Agreement
(including, without limitation, all Loans or extensions of credit made to us by
either of you hereunder, whether or not in excess, at any time, of the Maximum
Credit Amount, any supplement hereto, or otherwise, including, without
limitation, any liability of ours to any of you relating to issuance by RNB,
NatWest or the Agent of letters of credit for our account or the payment by any
of you under any such letters of credit of any unreimbursed draws, whether now
existing or hereafter arising, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, original, renewed or extended, and
whether arising directly or acquired from others by purchase, negotiation,
discount, assignment or otherwise (including, without limitation, any
participations or interests of RNB or NatWest in our obligations to others and
all amounts owing by us to any of you by reason of purchases made by us from
other concerns financed or factored by any of you) and including, without
limitation, interest, fees, commissions,
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expenses and costs chargeable by any of you to us or reimbursable by us to any
of you in connection with all of the foregoing.
1.30 "Old NatWest Notes" shall mean Interest Bearing Grid
Note dated July 31, 1995 in the amount of $10,000,000.
1.31 "Old Republic Notes" shall mean Demand Grid Note
dated January 31, 1992 in the amount of $20,000,000.
1.32 "Projected Letter of Credit Exposure" shall mean, at
any one time, the aggregate amount projected to be outstanding under all
Letters of Credit (including the amounts projected to be outstanding under the
Existing RNB Letters of Credit, and the Existing NatWest Letters of Credit) at
such time, as set forth in the Projections.
1.33 "Projected Total Line Outstanding" shall mean, at any
one time, the sum of (x) the aggregate unpaid principal amounts of the Loans
projected to be outstanding at such time, (y) the Projected Letter of Credit
Exposure at such time and (z) Existing RNB Standby Letters of Credit.
1.34 "Projections" shall mean our financial projections
dated August 9, 1995 provided by us to RNB and NatWest, a copy of which is
attached hereto as Exhibit A, or revised financial projections, if any,
accepted in writing by both RNB and NatWest, in their sole and absolute
discretion, as constituting the "Projections" for all purposes of this
Agreement.
1.35 "Records" shall have the meaning set forth in Section
4.1(h) hereof.
1.36 "Shortfall Amount" shall mean, for any month, the amount
specified in the Projections for such month by which the aggregate unpaid
principal amounts of the Loans and Existing RNB Standby Letters of Credit
projected to be outstanding for such month exceeds 80% of the projected Net
Amount of Eligible Accounts for such month.
Section 2. EXTENSIONS OF CREDIT.
2.1 Loans and Letters of Credit. Subject to the terms
and conditions hereof, provided there is no Event of Default, at our request
the Agent shall, from time to time until one (1) day prior to Due Date, acting
severally on behalf of RNB and NatWest, make loans to us (each, a "Loan"), and
(ii) issue Letters of Credit on behalf of RNB and NatWest (each, a "Letter of
Credit"), and such Loans may be repaid and re-borrowed hereunder provided,
however, that the Actual Total Line Outstanding shall not exceed the Maximum
Credit Amount and provided that there is no Event of Default. The extension of
any credit to us hereunder in excess of the Maximum Credit Amount or after an
Event of Default shall not be deemed to modify such amount or create any
obligation to make any further extension of credit in excess of such amount or
after an Event of Default.
2.2 Maximum Credit Amount
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(a) The Maximum Credit Amount shall be, at any one time,
(before taking into account the deviances from the Projections expressly
permitted under subsections (b) and (c) of this Section 2.2) the lesser of (i)
$27,040,000.00 or (ii) the sum of (x) eighty percent (80%) (or such greater or
lesser percentage thereof as the Agent, in its sole and absolute discretion,
determine from time to time (such percentage in effect from time to time, the
"Accounts Advance Percentage")) of the Net Amount of Eligible Accounts which
have been validly assigned to the Agent and in which the Agent holds a security
interest pursuant to the terms hereof ranking prior to and free and clear of
the interests, claims and rights of others, (y) the Shortfall Amount, and (z)
the Projected Letter of Credit Exposure.
(b) The Agent may, in its sole and absolute discretion,
deem the Shortfall Amount to be increased by an amount of up to $2,000,000 at
any time during any month (excluding the last day of such month).
(c) The Agent may, in its sole and absolute discretion,
allow the Maximum Credit Amount to be increased by an amount of up to
$2,000,000 at any time during any month (excluding the last day of such month).
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2.3 Loans.
(a) Loan Accounts. All Loans made to us and other amounts
due from us hereunder shall be charged to a loan account in our name on the
Agent's books (the "Loan Account"), and the amount of such Loan Account shall
be allocated on the Agent's books, by notation by the Agent, indicating what
portion of such Loan or other amount due is due to the Agent on behalf of RNB
(the "RNB Loan Account") or NatWest (the "NatWest Loan Account"), as the case
may be. The Agent shall render to us each month a statement of the Loan
Account for the previous month, which shall indicate the amount in the RNB Loan
Account and in the NatWest Loan Account, which statement shall be considered
correct and deemed accepted by and conclusively binding upon us as an account
stated, except to the extent that the Agent receives a written notice of any
specific exceptions by us thereto within five (5) days (or such longer minimum
period as may be required by applicable law) after the date of such statement.
Subject to the foregoing, the Agent may, at its option, maintain one or more
separate accounts for us with respect to any and all Loans, fees, commissions,
expenses and costs chargeable to us hereunder. Maintaining the Loan Account,
the RNB Loan Account, the NatWest Loan Account and other separate accounts
shall not affect the nature or extent of any security interests in Collateral
granted by us to the Agent, RNB or NatWest in that any and all Loans or other
Obligations are secured by any and all security interests in Collateral
heretofore, now or hereafter granted to the Agent, RNB or NatWest. The debit
balance of the Loan Account at any time shall reflect the aggregate amount of
our indebtedness to RNB and NatWest hereunder and the related debit balance of
the RNB Loan Account or NatWest Loan Account at any time shall reflect that
portion of such indebtedness owed to RNB or NatWest, as the case may be.
(b) Promissory Notes. (i) On the Closing Date, we shall
execute and deliver (i) to RNB a Secured Promissory Note in the principal
amount of $16,224,000 maturing on the Due Date in form and substance
satisfactory to RNB (the "RNB Note"), and (ii) to NatWest a Secured Promissory
Note in the principal amount of $10,816,000, maturing on the Due Date in form
and substance satisfactory to NatWest (the "NatWest Note"). The RNB Note and
the NatWest Note shall evidence the Loans made to us hereunder on behalf of RNB
and NatWest, respectively. We hereby unconditionally and irrevocably authorize
each Bank (and any holder of such Bank's Note) to make notations on its books
and records of (i) the date and amount of the portion of each Loan allocable to
such Bank, (ii) the dates and amounts of all principal payments thereon, and
(iii) the remaining unpaid principal amounts thereof, in each case consistent
with the amount set forth on the Agent's books and records as the respective
amounts of the RNB Loan Account and the NatWest Loan Account. The information
entered on such Bank's books and records shall be binding upon us in absence of
manifest error; provided, however, to the extent there is any discrepancy
between the amount set forth on such Bank's books and records and the amount of
the NatWest Loan Account or the RNB Loan Account, the amount of such Loan
Account shall govern. Notwithstanding the foregoing, any failure by a Bank (or
the holder of such Bank's Note), to make notations on its respective books and
records shall in no way mitigate or discharge our obligation to repay any Loans
actually made. (ii) All unpaid principal amounts outstanding pursuant to the
Old RNB Notes
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and the Old NatWest Notes shall be deemed Loans under this Agreement, as of the
Closing Date, and shall be allocated to the Loan Account, and the RNB Loan
Account or the NatWest Loan Account, as the case may be, and shall be evidenced
by and repayable in accordance with the RNB Note or the NatWest Note, as the
case may be, and this Agreement, with appropriate notations made with respect
to such Notes on the books and records of each Bank. Such amounts shall be
deemed included within the terms "Loans" and "Obligations" for all purposes of
this Agreement, including, without limitation, calculating the Actual Total
Line Outstanding. All unpaid interest amounts owing pursuant to the RNB Old
Notes and the NatWest Old Notes, as of the Closing Date, shall be paid by us in
cash on the Closing Date to RNB or NatWest, as the case may be, or, if not so
paid, the full amount thereof shall be deemed to be a Loan hereunder made as of
the Closing Date, and shall be charged to the Loan Account accordingly, and the
Agent shall use the proceeds of such Loan to pay to RNB and NatWest, on the
Closing Date, the amount of such interest due to each of them.
2.4 Letters of Credit.
(a) Each Letter of Credit shall be issued pursuant to RNB's
standard form of application and reimbursement agreement for a commercial
letter of credit (the "Application"), and shall expire on a date no later than
180 days from the date of issuance or April 30, 1996, (except Existing RNB
Standby Letters of Credit,) whichever is earlier. We shall pay RNB's standard
fixed fees, as established from time to time, for opening and amending any
Letter of Credit, payable at the time of such opening or amendment. We shall
also pay, for each sight draft presented to the Agent in accordance with the
terms of any Letter of Credit, a negotiation fee equal to 1/4% of the face
amount of such sight draft. Such negotiation fee shall be payable when such
draft is presented to and honored by the Agent, all as more fully set forth in
the Application.
(b) The Existing RNB Letters of Credit and Existing RNB
Standby Letters of Credit, shall be deemed, from and after the Closing Date, to
be Letters of Credit issued by the Agent under this Agreement and the related
application and reimbursement agreements shall be deemed, from and after the
Closing Date, to run to the Agent for the benefit of RNB and NatWest. The
fixed and negotiation fees payable in respect of the Existing RNB Letters of
Credit shall be as set forth in subsection (a) of this Section 2.4. The
Existing NatWest Letters of Credit shall continue as letters of credit issued
by NatWest, and the fees in respect thereof shall be as set forth in the
related application and reimbursement agreements between us and NatWest.
(c) The outstanding amounts of the Existing RNB Letters of
Credit and the Existing NatWest Letters of Credit shall be included for all
purposes in calculating the Actual Letter of Credit Exposure, and such amounts
shall be deemed included in the term Obligations, for all purposes of this
Agreement and the Existing RNB Standby Letter of Credit shall be deemed for
purposes of this Agreement to be included in the term Obligations.
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2.5 At the Agent's option, all principal, interest, fees,
commissions, expenses and costs (including, without limitation, field
examination fees) chargeable by the Agent, RNB or NatWest to us or reimbursable
by us to such party in connection with this Agreement, or any supplement hereto
(all of which shall be cumulative and not exclusive) shall be due and payable
on demand, and, at the Agent's option, all such fees, commissions, expenses and
costs may be charged by the Agent directly to the Loan Account and allocated to
the RNB Loan Account and NatWest Loan Account, by the Agent.
2.6 All Loans shall be payable at the Agent's office
specified above or at such other place as the Agent may hereafter designate
from time to time.
Section 3. INTEREST AND FEES.
3.1 Interest shall be payable by us to the Agent, for the
account of RNB and NatWest, as the case may be, on the last day of each month
upon the closing daily balances in the Loan Account for each day during such
month, at a rate equal to one percent (1%) per annum in excess of the rate from
time to time established by the Agent at its principal domestic office as its
reference rate for domestic commercial loans, whether or not such established
reference rate is the best rate available from the Agent for commercial loans.
The rate charged hereunder shall increase or decrease by an amount equal to
each increase or decrease, respectively, in said reference rate, effective on
the first day of the month after any change in said reference rate based on the
reference rate in effect on the last day of the month in which any such change
occurs. The rate of interest in effect hereunder on the date hereof in
accordance with the foregoing, expressed in terms of simple interest, is nine
and three quarters percent (9 3/4%) per annum. Notwithstanding the foregoing,
in no event shall the interest rate payable under this Section 3.1 be less than
six percent (6%) per annum.
3.2 On and after the date of any Event of Default (and so
long as such Event of Default is continuing) interest on all outstanding unpaid
Loans shall accrue at a rate equal to two percent (2%) per annum above the rate
that would otherwise apply from the date of such Event of Default or
termination, and all interest accruing hereunder shall thereafter be payable on
demand.
3.3 Interest shall be calculated on the basis of a
360-day year and the actual number of days elapsed, and shall be included in
each monthly statement of the Loan Account. The Agent shall have the right, at
its option, to charge all interest to the Loan Account, and allocate it to the
RNB Loan Account and the NatWest Loan Account on the first day of each month,
and such interest shall be deemed to be paid by the first amounts subsequently
credited thereto.
3.4 Notwithstanding any provision herein or in any
related document, neither the Agent, RNB nor NatWest shall ever be entitled to
receive, collect, or apply, as interest on the Loan Account, any amount in
excess of the maximum rate of interest ("Maximum Rate") permitted to by charged
from time to time by applicable law (if such law imposes any
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maximum rate), and in the event the Agent, RNB or NatWest ever receives,
collects, or applies as interest any amount in excess of the Maximum Rate, such
amount shall be deemed and treated as a partial prepayment of the principal of
the Loan Account; and, if the principal of the Loan Account and all other of
your charges other than interest are paid in full, any remaining excess shall
forthwith be paid to us. In determining whether or not the interest paid or
payable under any specified contingency exceeds the Maximum Rate, we shall, to
the extent permitted under applicable law, spread the total amount of interest
throughout the longer of: (a) the entire contemplated term hereof or (b) the
term during which this Agreement has been in effect; provided, however, that if
the Loan Account is paid in full prior to the end of the full contemplated term
hereof, and if the interest received for the actual period of existence hereof
exceeds the maximum lawful rate under applicable law, the Agent shall refund to
us the amount of such excess or credit the amount of such excess against the
principal of the Loan Account and, in such event, neither the Agent nor RNB or
NatWest shall be subject to any penalties provided by any laws for contracting
for, charging, or receiving interest in excess of the maximum lawful rate.
3.5 We shall pay the Agent monthly a loan management fee
of 1/4 of 1% per annum on the last day of each month upon the average daily
balances in the Loan Accounts for such month. Said payment to the Agent is
solely for the account of the Agent.
Section 4. SECURITY INTEREST.
4.1 As security for the prompt performance, observance
and payment in full of all Obligations, we hereby grant to the Agent on behalf
of itself, RNB and NatWest, a continuing security interest in, a lien upon and
a right of setoff against, and we hereby assign, transfer, pledge and set over
to the Agent on behalf of itself, RNB and NatWest, all of our right, title and
interest in and to the following (which together with any of our other property
in which you may now or at any time hereafter have a security interest or lien,
whether pursuant to any security or other agreement previously executed by us
in favor of RNB or NatWest, or any supplement hereto, or otherwise, are herein
collectively referred to as the "Collateral"): All present and future (a)
Accounts; (b) Inventory; (c) moneys, securities and other property and the
proceeds thereof, now or hereafter held or received by, or in transit to, the
Agent, RNB or NatWest from or for us, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of our deposits (general or
special), balances, sums and credits with you or any other party at any time
existing; (d) all of our rights, remedies, security and liens, in, to and in
respect of the Accounts, Inventory, and other Collateral described herein,
including, without limitation, rights of stoppage in transit, replevin,
repossession and reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, all proceeds of any letter of credit naming us as
beneficiary, guaranties or other contracts of suretyship with respect to the
Accounts, deposits or other security for the obligation of any Account Debtor,
and credit and other insurance; (e) all goods relating to, or which by sale
have resulted in, Accounts, including, without limitation, all goods described
in invoices, documents, contracts or instruments, including, without
limitation, promissory notes, with respect to, or otherwise representing or
evidencing, any Accounts or other Collateral, including without limitation, all
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returned, reclaimed or repossessed goods; (f) all additional amounts due to us
from any Account Debtor; (g) all books, records, ledger cards, computer
programs, tapes and related data processing software, and other property of any
kind or nature, whether general intangibles or otherwise, recording, evidencing
or relating to the Accounts, Inventory, any other above-mentioned Collateral or
any Account Debtor, together with the file cabinets or containers in which the
foregoing are stored ("Records"); (h) all other general intangibles of every
kind and description, whether or not arising out of the sale, leasing or other
disposition of goods or the rendition of services, including, without
limitation, causes of action, reversions from pension plans, trade names, trade
styles, trademarks and the goodwill of the business symbolized thereby,
patents, copyrights, licenses and Federal, State and local tax refunds and
claims of all kinds; and (i) all proceeds of the foregoing, in any form,
including, without limitation, cash, non- cash items, checks, notes, drafts and
other instruments for the payment of money, insurance proceeds, and any claims
against third parties for loss or damage to or destruction of any or all of the
foregoing. Such general assignment, pledge and security interest (i) shall
continue during the term of this Agreement and thereafter until payment in full
of the Obligations, whether or not this Agreement shall have sooner terminated,
and (ii) shall be in addition to and cumulative with any and all assignments,
pledges and security interests heretofore made or granted by us in favor of RNB
or NatWest pursuant to any security or other agreement previously executed by
us in favor of RNB or NatWest.
4.2 We shall keep and maintain, at our cost and expense,
satisfactory and complete books and records of all Accounts, all payments
received or credits granted thereon, and all other dealings therewith. At such
times as the Agent may request, in its sole and absolute discretion, we shall
xxxx our ledger cards, books of account and other records relating to Accounts
with appropriate notations satisfactory to the Agent in its sole and absolute
discretion, disclosing that such Accounts have been assigned to it. We shall
not assign, or attempt to assign, or otherwise grant any rights in or otherwise
encumber any of our Accounts to or in favor of any party other than the Agent.
At such time as the Agent may request, in its sole and absolute discretion, we
shall deliver to the Agent all original documents evidencing the sale, lease or
other disposition of goods or the rendition of services which created any
Accounts, including, but not limited to, all original contracts, orders,
invoices, bills of lading, warehouse receipts, delivery tickets and shipping
receipts, together with schedules describing the Accounts and/or written
confirmatory assignments to the Agent of each Account, in form and substance
satisfactory to the Agent, RNB and NatWest and duly executed by us, together
with such other information as the Agent may request. In no event shall the
making or the failure to make, or the content of, any schedule or assignment or
our failure to comply with the provisions hereof be deemed or construed as a
waiver, limitation or modification of the Agent's security interest in, lien
upon and assignment of the Collateral or our representations, warranties or
covenants under this Agreement or any supplement hereto.
Section 5. COLLECTION AND ADMINISTRATION.
5.1 Until our authority to do so is curtailed or
terminated at any time by notice from the Agent (which the Agent may give at
any time in its sole and absolute discretion), we
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shall, at our expense and on the Agent's behalf, collect, as the Agent's
property, on behalf of the Agent, RNB and NatWest, and in trust for the Agent,
RNB and NatWest, all remittances and all amounts unpaid on Accounts, and we
shall not commingle such collections with our own funds. We shall on the day
received remit all such collections to the Agent in the form received duly
endorsed by us for deposit with the Agent, unless you shall direct us
otherwise. All amounts collected on Accounts when received by the Agent
(including all prepayments in respect thereof or otherwise by Account Debtors)
shall be credited to the Loan Account, and further credited by allocation made
by the Agent, in its sole discretion, to the RNB Loan Account and the NatWest
Loan Account, as the case may be, after adding two (2) Business Days for
collection, clearance and transfer of remittances, conditional upon final
payment to the Agent.
5.2 All Records shall be kept in appropriate containers
in safe places, bearing suitable legends identifying them as being under the
Agent's dominion and control. The Agent, RNB and NatWest, or their
representatives, shall at all times have free access to and right of inspection
of the Collateral and have full access to and the right to examine and make
copies of our Records, to confirm and verify all Accounts, to perform general
audits and to do whatever else any of you deem necessary to protect any of your
interests. The Agent may at any time remove from our premises or require us or
any accountants and auditors employed by us to deliver to the Agent, RNB or
NatWest any Records and the Agent may, without cost or expense to the Agent,
RNB or NatWest, use such of our personnel, supplies, computer equipment and
space at our places of business as may be reasonably necessary for the handling
of collections.
5.3 We shall promptly upon obtaining knowledge thereof
report to the Agent all reclaimed, repossessed or returned goods, Account
Debtor claims and any other matter affecting the value, enforceability or
collectibility of Accounts. At the Agent's request, any goods reclaimed or
repossessed by or returned to us will be set aside, marked with the Agent's
name and held by us for the Agent's account and subject to your security
interest. All claims and disputes relating to Accounts are to be promptly
adjusted within a reasonable time, at our own cost and expense. The Agent may,
at your option, settle, adjust or compromise claims and disputes relating to
Accounts which are not adjusted by us within a reasonable time.
5.4 We shall, in the manner requested by the Agent from
time to time, direct that all proceeds of Accounts, letters of credit, bankers'
acceptances and other proceeds of Collateral shall be paid to a lock box or
post office box designated by the Agent and under the Agent's control and/or
deposited into a blocked account under the Agent's control and/or deposited
into an account maintained in the Agent's name and under the Agent's control
and in connection therewith shall execute such lock box, blocked account or
other agreement as the Agent in its sole and absolute discretion shall specify.
Section 6. REPRESENTATIONS, WARRANTIES AND COVENANTS.
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We hereby represent, warrant and covenant to each of the
Agent, RNB and NatWest the following (which shall survive the execution and
delivery of this Agreement), the truth and accuracy of which, or compliance
with, being a continuing condition of the making of Loans and the issuance of
Letters of Credit by the Agent on behalf of each of RNB and NatWest, severally,
hereunder or under any supplement hereto:
6.1 We are, and shall be, with respect to all Collateral
now existing or hereafter acquired, the owner of such Collateral free from any
lien, security interest, claim or encumbrance of any kind, except in the
Agent's favor and as otherwise consented to in writing by the Agent, and we
shall defend the same against the claims of all persons.
6.2 The only location of any Collateral hereunder are
those addresses listed on Schedule A annexed hereto and made a part hereof.
Schedule A sets forth the owner and/or operator of the premises at such
addresses for all locations which we do not own and operate, and all mortgages,
if any, with respect to such premises. We shall not remove any such Collateral
from such locations or sell, lease, transfer, assign or otherwise dispose of
any Inventory, and we have not, and shall not consign any Inventory with any
party, or store any Inventory with any bailee, warehouseman or similar party,
without (a) ten (10) business days' prior written notice to the Agent, RNB and
NatWest and the Agent's written consent, and (b) first making all arrangements
and delivering or causing to be delivered to the Agent, RNB and NatWest such
agreements and other documentation requested by you for the protection and
preservation of the Agent's security interests and liens, in form and substance
satisfactory to the Agent, in its sole and absolute discretion, except for
sales of Inventory in the ordinary course of our business.
6.3 We shall at all times maintain, with financially
sound and reputable insurers, casualty and hazard insurance with respect to the
Inventory for not less than its full market value and against all risks to
which it may be exposed. All such insurance policies shall be in such form,
substance and coverage as may be satisfactory to the Agent in its sole and
absolute discretion and shall provide for thirty (30) days' minimum prior
cancellation notice in writing to the Agent. The Agent may act as
attorney-in-fact for us in obtaining, adjusting, settling, amending and
canceling such insurance without liability to us. We shall promptly (a) obtain
endorsements to all existing and future insurance policies with respect to the
Inventory specifying that the proceeds of such insurance shall be payable to
the Agent, on behalf of RNB and NatWest, and us as their and our interests may
appear and further specifying that the Agent shall be paid regardless of any
act, omission or breach of warranty by us, (b) deliver to the Agent an original
executed copy of, or executed certificate of the insurance carrier with respect
to, such endorsement and, at the Agent's request, the original or a certified
duplicate copy of the underlying insurance policy, and (c) deliver to the Agent
such other evidence which is satisfactory to the Agent in its sole and absolute
discretion of compliance with the provisions hereof.
6.4 We shall promptly notify the Agent, RNB and NatWest
in writing of the details of any loss, damage, investigation, action, suit,
proceeding or claim relating to the
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Inventory or which would result in any material adverse change in our business,
properties, assets, goodwill or condition, financial or otherwise.
6.5 At the Agent's option, it may apply insurance monies
received at any time to the cost of repairs to or replacement of the Inventory
and/or to payment of any of the Obligations, whether or not due, in any order
and in such manner as the Agent, in its sole and absolute discretion, may
determine.
6.6 Upon the request of the Agent, RNB or NatWest, at any
time and from time to time, we shall, at our sole cost and expense, execute and
deliver to the Agent, RNB and NatWest written reports or appraisals as to the
Inventory listing all items and categories thereof, describing the condition of
the same and setting forth the value thereof (the lower of cost or market
value), in such form as is satisfactory to the Agent in its sole and absolute
discretion. We shall at all times during normal business hours allow the
Agent, RNB or NatWest, or their agents, to examine and inspect the Inventory,
as well as our Records relating thereto, and to make extracts and copies of
such Records.
6.7 We shall (a) use, store and maintain the Inventory
with all reasonable care and caution, and (b) use the Inventory for lawful
purposes only and in conformity with applicable laws, ordinances and
regulations.
6.8 All Inventory shall be produced in accordance with
the requirements of the Federal Fair Labor Standards Act of 1938, as amended,
and all rules, regulations and orders related thereto.
6.9 The Inventory is and shall be used in our business
and not for personal, family, household or farming use.
6.10 We assume all responsibility and liability arising
from or relating to the use, sale or other disposition of the Inventory.
6.11 We shall pay when due all taxes, license fees and
assessments relating to the Inventory.
6.12 We shall not directly or indirectly sell, lease,
transfer, abandon or otherwise dispose of all or any substantial portion of our
property or assets or consolidate or merge with or into any other entity or
permit any other entity to consolidate or merge with or into us. We have not
previously changed our corporate name, been the surviving entity in a merger or
acquired any business except as disclosed to the Agent, RNB and NatWest in
writing. We will at all times preserve, renew and keep in full force and
effect our existence as a corporation and the rights and franchises with
respect thereto and continue to engage in business of the same type as we are
engaged in as of the date hereof. We utilize no trade names in the conduct of
our business except as set forth on Schedule D annexed hereto and made a part
hereof. We shall give the Agent, RNB and NatWest thirty (30) days prior
written notice of any
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proposed change in our corporate name, or the intended use of any other trade
name, which notice shall set forth the new name, and, prior to making any such
change, we agree to execute any additional financing statements or other
documents or notices which the Agent may require in its sole and absolute
discretion.
6.13 Our Records and chief executive office are maintained
at the address referred to below and have been so on a continuous basis for at
least six (6) months. We shall not change such location without the Agent's
prior written consent and, prior to making any such change, we agree to execute
any additional financing statements or other documents or notices which the
Agent may require in its sole and absolute discretion.
6.14 (a) We shall maintain our shipping forms,
invoices and other related documents in a form satisfactory to the Agent and
shall maintain our books, records and accounts in accordance with generally
accepted accounting principles consistently applied. We agree to furnish the
Agent, RNB and NatWest, on a daily basis, with a schedule of accounts and
assignments, a schedule of credits and adjustments and debit assignments, and a
lockbox collection report, and, on a weekly basis, with a report of agings of
accounts and an inventory report (including breakdowns of inventory by location
and according to whether such inventory constitutes raw materials, work in
process, or finished goods). All such schedules and reports shall be on RNB's
standard forms or on forms otherwise satisfactory to the Agent, RNB and
NatWest.
(b) We shall furnish the Agent, RNB and NatWest with audited
financial statements for each fiscal year, within 90 days of the end of such
year, certified by independent public accountants selected by us and acceptable
to the Agent, RNB and NatWest, in such scope and detail as the Agent, RNB and
NatWest may require in such party's sole and absolute discretion. All such
statements and information shall fairly present our financial condition as of
the dates and the results of our operations for the periods for which the same
are furnished.
(c) We shall furnish the Agent, RNB and NatWest with copies of
each 10-K Report and 10-Q Report filed by us with the Securities and Exchange
Commission (the "SEC"), at the same time as such Reports are filed with the
SEC.
(d) We also agree to furnish the Agent, RNB and NatWest, at any time
or from time to time with such other information and reports regarding our
business affairs and financial condition, in such scope and detail, and such
other financial statements, certified, reviewed or prepared by such accountants
or our personnel, as the Agent or such bank may require in its sole and
absolute discretion, including, without limitation, balance sheets, statements
of profit and loss, financial statements, cash flow and other projections,
earnings forecasts, schedules, agings and reports.
(e) We hereby irrevocably authorize and direct all accountants,
auditors or other third parties to deliver to the Agent, RNB and NatWest, at
our expense, copies of our financial statements, management letters, papers
related thereto, and other accounting records of any
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nature relating to us in their possession and to disclose to the Agent, RNB and
NatWest any information they may have regarding our business affairs and
financial condition.
(f) All such information furnished by us under this Section 6.14
shall be, at the time the same is so furnished, accurate and correct in all
material respects and complete insofar as completeness may be necessary to give
the Agent, RNB and NatWest a true and accurate knowledge of the subject matter
thereof. Any documents, schedules, invoices or other papers delivered to the
Agent, RNB and NatWest may be destroyed or otherwise disposed of by such party
one (1) year after the date the same are delivered to such party, unless we
make written request therefor and pay all expenses attendant to their return,
in which event such party shall return same when its actual or anticipated need
therefor has ceased.
6.15 Each Eligible Account represents a valid and legally
enforceable indebtedness based upon an actual and bona fide sale and delivery
of goods or rendition of services in the ordinary course of our business which
has been finally accepted by the Account Debtor and for which the Account
Debtor is unconditionally liable to make payment of the amount stated in each
invoice, document or instrument evidencing the Eligible Account in accordance
with the terms thereof, without offset, defense, counterclaim, discount or
allowance, and will be paid in full at maturity, and no agreement under which
any deduction, discount, credit or allowance of any kind may be granted or
allowed shall have been or shall thereafter be made by us with any Account
Debtor. We shall accept no promissory note representing the indebtedness in
respect of any Account without the Agent's prior written approval, and any such
note shall immediately be endorsed by us to the Agent with recourse and
delivered to it.
6.16 All statements made and all unpaid balances appearing
in the invoices, documents and instruments evidencing each Eligible Account are
true and correct and are in all respects what they purport to be and all
signatures and endorsements that appear thereon are genuine and all signatories
and endorsers have full capacity to contract therefor. We are not and shall
not be entitled to pledge the credit of the Agent, RNB or NatWest on any
purchase or for any purpose whatsoever. None of the transactions underlying or
giving rise to any Eligible Account shall violate any state or federal laws or
regulations, and all documents relating to the Eligible Accounts shall be
legally sufficient under such laws or regulations and shall be legally
enforceable in accordance with their terms and all recording, filing and other
requirements of giving public notice under any applicable law have been duly
complied with.
6.17 We shall duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against us or our
properties or assets or otherwise due from us, including FICA and withholding
taxes, prior to the date on which penalties attach thereto. The Agent, RNB or
NatWest shall be entitled to pay any such taxes, assessments, contributions and
charges for our account and the Agent may charge any such payment to the Loan
Account. We shall be liable for any tax or penalty imposed upon any
transaction under this Agreement or any supplement hereto or giving rise to the
Accounts or any other Collateral or which the Agent, RNB or NatWest may be
required to withhold or pay for any
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reason and we agree to indemnify and hold the Agent, RNB and NatWest harmless
with respect thereto, and to repay to the Agent, RNB or NatWest, as the case
may be, on demand the amount thereof, and until paid by us such amount shall be
added to and deemed part of the Loans under this Agreement.
6.18 Except as otherwise disclosed to the Agent in
writing, there is no present investigation by any governmental agency pending
or threatened against us and there is no action, suit, proceeding or claim
pending or threatened against us or our business, assets or goodwill, or
affecting any transactions contemplated by this Agreement, or any supplement
hereto, or any agreements, instruments or documents delivered in connection
herewith or therewith before any court, arbitrator, or governmental or
administrative body or agency which if adversely determined with respect to us
would result in any material adverse change in our business, assets, goodwill,
or condition, financial or otherwise, or adversely affect any of the Collateral
or the rights of the Agent, RNB or NatWest therein.
6.19 We are a corporation duly organized and validly
existing and in good standing under the laws of the state of incorporation
listed on the signature page below, and are duly qualified and existing and in
good standing in every other state or other jurisdiction in which the nature of
our business or the location of our assets requires us to be so qualified.
6.20 The execution, delivery and performance of the
Agreement, any supplement hereto, or any agreements, instruments and documents
executed and delivered in connection herewith, are within our corporate powers,
have been duly authorized by all necessary corporate action, and are not in
contravention of law or the terms of our Certificate of Incorporation, By-Laws
or other governing documents, or of any indenture, agreement or undertaking to
which we are a party or by which we or any of our properties are bound, and
each of them is our binding act and deed, enforceable against us in accordance
with its respective terms. We are, and shall remain, solvent at all times
while this Agreement is in effect or any Obligation remains unpaid.
6.21 We shall, at our expense, duly execute and deliver,
or shall cause to be duly executed and delivered, such further agreements,
instruments and documents, including, without limitation, additional security
agreements, mortgages, deeds of trust, deeds to secure debt, collateral
assignments, UCC financing statements or amendments or continuations thereof,
landlord's or mortgagee's waivers of liens and consents to the exercise by the
Agent, RNB and NatWest of all such party's rights and remedies hereunder, under
any supplement hereto or applicable law with respect to the Collateral, and
shall do or cause to be done such further acts and shall observe such other
formalities as may be necessary or proper in the sole and absolute discretion
of the Agent, RNB or NatWest to evidence, perfect, maintain and enforce the
Agent's security interest and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any
supplement hereto. Where permitted by law, we hereby authorize the Agent to
execute and file one or more UCC financing statements evidencing its rights in
the Collateral signed only by the Agent.
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6.22 All Loans requested by us under this Agreement shall
be used for our general corporate and business purposes and shall in no event
be requested or used by us for the specific purpose of: (a) making payments to
Affiliates of any nature whatsoever, except in the ordinary course of business;
(b) purchasing or carrying of any "margin security"; or (c) otherwise in
violation of Regulation U or Regulation X promulgated by the Board of Governors
of the Federal Reserve System or any other Federal, State or local law or
regulation.
6.23 We shall at all times remain in compliance with each
and every item set forth in the Projections (including, without limitation, all
amounts set forth therein for working capital, tangible net worth, quarterly
profit or loss, and monthly cash flows), subject only to the deviances from the
Projections expressly permitted pursuant to Section 2.2 hereof.
6.24 We shall not expend for salaries, bonuses, or other
compensation for our executive officers more than the amounts payable as of the
date hereof.
6.25 We shall permit the Agent, RNB and NatWest to conduct
field examinations at our offices and at each location where any of the
Collateral is located, at any time and from time to time as the Agent, RNB and
NatWest, in their sole and absolute discretion, deem necessary, and we shall
pay on demand all expenses of the Agent, RNB and NatWest related thereto. You
have advised us that it is anticipated that no additional field examinations
will be conducted during the term of this Agreement.
Section 7. SPECIFIC POWERS.
7.1 We hereby constitute the Agent and its agents and
designees as our attorneys-in-fact, at our own cost and expense, to exercise at
any time all or any of the following powers at such time or from time to time,
as the Agent may determine, in its sole and absolute discretion, which, being
coupled with an interest, shall be irrevocable until all Obligations have been
paid in full: (a) to receive, take, endorse, assign, deliver, accept and
deposit, in the Agent's or our name, any and all checks, notes, drafts,
remittances and other instruments and documents relating to the Collateral; (b)
to receive, open and dispose of all mail addressed to us and to notify postal
authorities to change the address for delivery thereof to such address as the
Agent may designate; (c) to transmit to Account Debtors notice in the Agent's
or our name of the Agent's interest therein and to request from such Account
Debtors at any time, in the Agent's or our name or that of your designee,
information concerning the Accounts and the amounts owing thereon; (d) to
notify in the Agent's or our name Account Debtors to make payment directly to
the Agent; (e) to take or bring, in the Agent's or our name, all steps,
actions, suits or proceedings deemed by you necessary or desirable to effect
collection of the Collateral; and (f) to the extent permitted by applicable
law, to execute in our name and on our behalf any UCC financing statements or
amendments thereto naming us as debtor and the Agent as secured party and
describing the Collateral evidencing your rights in the Collateral. Without
limiting the generality of the foregoing, the Agent is hereby authorized to
accept and to deposit all collections (including prepayments) in any form
relating to Accounts received from or for the account of Account Debtors
(whether such collections
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are remitted directly to you or are forwarded to you by us), including
remittances which may reflect deductions taken by Account Debtors, regardless
of amount, the Loan Account to be credited only with amounts actually collected
on Accounts in accordance with Section 5.1. We hereby release: (a) any bank,
trust company or other firm receiving or accepting such collections in any
form, and (b) the Agent, RNB and NatWest and their respective officers,
employees and designees, from any liability arising from any act or acts
hereunder in furtherance hereof, whether of omission or commission, and whether
based upon any error of judgment or mistake of law or fact.
7.2 Nothing herein contained shall be construed to
constitute us as the agent for the Agent, RNB or NatWest for any purpose
whatsoever. Neither the Agent, RNB nor NatWest shall be responsible or liable
for any shortage, discrepancy, damage, loss or destruction of any Collateral
wherever the same may be located and regardless of the cause thereof. Neither
the Agent, RNB nor NatWest shall, 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. The Agent may, without notice to or consent from us, xxx 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 release the Account
Debtor thereon. The Agent is authorized and empowered to accept the return of
the goods represented by any of the Accounts, without notice to or consent by
us, all without discharging or in any way affecting our liability hereunder.
Neither the Agent, RNB nor NatWest, by anything herein or in any assignment or
otherwise, assumes any of our obligations under any contract or agreement
assigned to any such party, and you shall not be responsible in any way for the
performance by us of any of the terms and conditions thereof.
Section 8. DEMAND, EVENTS OF DEFAULT AND REMEDIES.
8.1 All Obligations shall be, at the Agent's option,
exercisable in the Agent's sole and absolute discretion, immediately due and
payable, and any provision of this Agreement or any supplement hereto, as to
future Loans and Letters of Credit shall, at the Agent's option, exercisable in
such party's sole and absolute discretion, terminate forthwith upon: (a) the
occurrence of any one or more of the following ("Events of Default"): (i) if we
shall fail to pay when due any amounts owing under any Obligation, or shall
fail to perform or shall otherwise breach any of the terms, covenants,
conditions or provisions of this Agreement, any supplement hereto or any other
agreement given by us in favor of the Agent, RNB or NatWest; (ii) if any
representation, warranty, or statement of fact made to any of you at any time
by us or on our behalf is false or misleading in any material respect; (iii) if
we, or any guarantor, endorser or other person liable on the Obligations, shall
become insolvent, fail to meet our or their debts as they mature, call a
meeting of creditors or have a creditors' committee appointed, make an
assignment for the benefit of creditors, commence or have commenced against us
or them any action or proceeding for relief under any bankruptcy, insolvency,
moratorium or similar law, or if a final and non-appealable judgment in excess
of
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$100,000.00 not covered by insurance is rendered against us or them, or if we
or they suspend or discontinue doing business for any reason, or if a receiver,
custodian or trustee of any kind is appointed for us or them or any of our or
their respective properties; (iv) if there is any change in our control or
ownership; (v) if there shall be a material adverse change in our business,
assets or condition (financial or otherwise) from the date hereof; or (vi) if
at any time any of you shall, in such party's sole discretion, consider the
Obligations insecure or any part of the Collateral unsafe, insecure or
insufficient.
8.2 Upon the occurrence of any Event of Default and at
any time thereafter, the Agent shall have the right (in addition to any other
rights the Agent may have under this Agreement, any supplement hereto or
otherwise) without further notice to us, to appropriate, set off and apply to
the payment of any or all of the Obligations, any or all Collateral, in such
manner as such party shall in its sole and absolute discretion determine, to
enforce payment of any Collateral, to settle, compromise or release in whole or
in part, any amounts owing on the Collateral, to prosecute any action, suit or
proceeding with respect to the Collateral, to extend the time of payment of any
and all Collateral, to make allowances and adjustments with respect thereto, to
issue credits in the Agent's or our name, to enter upon any premises on or in
which any of the Inventory may be located and, without resistance or
interference by us, take possession of the Inventory; to complete processing,
manufacturing and repair of all or any portion of the Inventory; to sell,
foreclose or otherwise dispose of any part or all of the Inventory on or in any
of our premises or premises of any other party, in connection with which we
hereby waive any and all notices of any such sale or other intended disposition
if said Inventory is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market; to require us, at our
expense, to assemble and make available to the Agent any part or all of the
Inventory at any place and time designated by the Agent; to remove any or all
of the Inventory from any premises on or in which the same may be located, for
the purpose of effecting the sale, foreclosure or other disposition thereof or
for any other purpose; to sell, assign and deliver the Collateral (or any part
thereof), at public or private sale, at broker's board, for cash, upon credit
or otherwise, at the Agent's sole option and discretion, and may bid or become
purchaser at any such sale, if public, free from any right of redemption, which
is hereby expressly waived.
8.3 In the event the Agent seeks to take possession of
all or any portion of the Collateral by judicial process, we irrevocably waive:
(a) the posting of any bond, surety or security with respect thereto which
might otherwise be required, (b) any demand for possession prior to the
commencement of any suit or action to recover the Collateral, and (c) any
requirement that you retain possession and not dispose of any Collateral until
after trial or final judgment.
8.4 We agree that neither the Agent, nor RNB or NatWest
shall have any obligation to give us notice of any proposed sale, or the place
or time thereof, of any Collateral for which there is a recognized market and a
readily ascertainable market price, and that with respect to other Collateral,
the giving of five (5) days notice by any of you, sent by ordinary mail,
postage prepaid, to our address set forth below, designating the place and time
of any
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public sale or of such time after which any private sale or other intended
disposition of the Collateral is to be made, shall be deemed to be reasonable
notice thereof, and we waive any other notice with respect thereto.
8.5 The net cash proceeds resulting from the exercise of
any of the foregoing rights or remedies shall be applied by the Agent to the
payment of the Obligations in ratio to the RNB Loan Account and the NatWest
Loan Account and we shall remain liable for any deficiency. Without limiting
the generality of the foregoing, if the Agent enters into any credit
transaction, directly or indirectly, in connection with the disposition of any
Collateral, the Agent shall have the option, at any time, in its sole and
absolute discretion, to reduce the Obligations by the principal amount of such
credit transaction or to defer the reduction thereof until actual receipt by
such party of cash or other immediately available funds in connection
therewith.
8.6 We shall be liable to each of the Agent, RNB and
NatWest for any expenditures made by such party for the maintenance and
preservation of the Collateral hereunder, including for taxes, levies,
insurance and repairs, removal of liens and satisfaction of charges and claims,
including, but not limited to any of the foregoing relating to warehouse
charges, dyeing, finishing and processing charges, or landlord claims, and for
the repossession, holding, preparation and sale or other disposition of such
Collateral (including reasonable attorneys' and accountants' fees and legal
expenses), as well as all damages for any breach of warranty,
misrepresentation, or breach of covenant by us, and all such liabilities shall
be added to and included as part of the Obligations and shall be payable upon
demand.
8.7 Neither the Agent, nor RNB or NatWest, shall be
liable for the safekeeping of any of the Inventory or for any loss, damage or
diminution in the value thereof or for any act or default of any warehouseman,
carrier or other person dealing in or with said Inventory, whether as your
agent or otherwise, or for the collection of any proceeds thereof, and the same
shall at all times be at our sole risk.
8.8 Each of the Agent, RNB and NatWest is hereby
authorized at any time and from time to time, without notice to us (any such
notice being expressly waived by us) to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such party to or for our credit or our
account against any and all of the Obligations, irrespective of whether or not
such party shall have made any demand thereon.
8.9 The enumeration of the foregoing rights and remedies
is not intended to be exclusive or exhaustive, and such rights and remedies are
in addition to and not by way of limitation of any other rights or remedies
each of you may have under the UCC or other applicable law. The Agent shall
have the right, in its sole and absolute discretion, to determine which rights
and remedies, and in which order any of the same, are to be exercised, and to
determine which Collateral is to be proceeded against and in which order, and
the exercise of any right or remedy shall not preclude the exercise of any
others, all of which shall be cumulative, and may be exercised concurrently or
seriatim.
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8.10 No act, failure or delay by you shall constitute a
waiver of any of the rights and remedies of the Agent, RNB or NatWest. No
single or partial waiver by the Agent, RNB or NatWest of any provision of this
Agreement or any supplement hereto, or breach or default thereunder, or of any
right or remedy which it may have shall operate as a waiver of any other
provision, breach, default, right or remedy, or of the same provision, breach,
default, right or remedy on a future occasion.
8.11 We waive presentment, notice of dishonor, protest and
notice of protest of all instruments included in or evidencing any of the
Obligations or the Collateral and any and all notices or demands whatsoever
(except as expressly provided herein). Any of you may, at all times, proceed
directly against us to enforce payment of the Obligations and shall not be
required to take any action of any kind to preserve, collect or protect your or
our rights in the Collateral.
Section 9. EFFECTIVE DATE; TERMINATION; COSTS.
9.1 This Agreement shall become effective upon acceptance
by each of you and shall continue in full force and effect for a term ending on
December 31, 1995, unless sooner terminated pursuant to the terms hereof. No
termination of this Agreement, however, whether pursuant to this Section 9.1 or
upon demand or the occurrence of an Event of Default in accordance with Section
8.1 shall relieve or discharge us of our duties, obligations and covenants
hereunder until all Obligations have been indefeasibly paid in full, and the
continuing security interest of the Agent, RNB and NatWest in the Collateral
shall remain in effect until such Obligations have been fully and finally
discharged and notwithstanding the fact that at any time or from time to time
the Loan Account may be temporarily in a credit position.
9.2 This Agreement, any supplement hereto, and any
agreements, instruments or documents delivered or to be delivered in connection
herewith represent our entire agreement and understanding concerning the Loans
contemplated to be made and the Letters of Credit contemplated to be issued
hereunder, and supersede all other prior and contemporaneous agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, offers, contracts, whether oral or written with respect to such
Loans and Letters of Credit; provided, however, that any security or other
agreements granting to RNB or NatWest security interests in any of the
Collateral shall continue in full force and effect, and provided, further, that
this Section 9.2 shall in no respect terminate, cancel, reduce, or otherwise
limit our liability to the Agent, RNB or NatWest in respect of any Obligations,
if any, other than such Loans and Letters and Credit, existing on and as of the
date hereof, or otherwise arising after the date hereof.
9.3 Neither this Agreement, nor any provision hereof
shall be waived, terminated (except as expressly provided herein) or changed,
modified or amended orally or by course of conduct except by a written
instrument expressly referring hereto signed by us and each of you. Any of you
may assign your rights in and to this Agreement, the Collateral,
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or any interest herein or therein, including, without limitation, through the
sale of one or more participations to other lenders, and the benefits hereof
and thereof shall inure to the benefit of any such assignee.
9.4 Upon your request we shall pay to the Agent, RNB or
NatWest, as the case may be, or reimburse any of you for, all sums, costs and
expenses which such party may pay or incur in connection with or related to the
administration and enforcement of this Agreement, any supplement hereto, and
all other agreements, instruments and documents in connection herewith and
therewith, and the transactions contemplated hereunder and thereunder, together
with any amendments, supplements, consents or modifications which may be
hereafter made or entered into in respect hereof or thereof, and all efforts
made to defend, protect or enforce the security interest granted herein or
therein or in enforcing payment of the Obligations, including, without
limitation, in actions or proceedings which may involve any person asserting a
claim or priority with respect to the Collateral, and including without
limitation, appraisal fees, stenographers charges, filing fees and taxes, title
insurance premiums, recording taxes, expenses for title, lien and other
searches and examination thereof, expenses heretofore incurred by such party
and from time to time hereafter incurred during the course of periodic field
examinations of the Collateral after December 31, 1995 and our operations, wire
transfer fees, check dishonor fees, the fees and disbursements of counsel to
each or any of you in connection with any of the foregoing or otherwise related
to this Agreement and the transactions contemplated hereby, including without
limitation, for rendering opinion letters, the fees and commissions of
collection agencies, all fees and expenses for the service and filing of
papers, premiums or bonds and undertakings, fees of marshals, sheriffs,
custodians, auctioneers and others, travel expenses and all court costs and
collection charges, all of which shall be part of the Obligations and shall
accrue interest after demand therefor at a rate equal to the highest rate then
payable on any of the Obligations.
Section 10. THE AGENT.
10.1 Appointment of Agent. RNB and NatWest each hereby
designates RNB, as Agent (the "Agent") to act as specified herein, including
with respect to the Collateral. RNB and NatWest each hereby irrevocably
authorizes the Agent to take such action on its behalf under the provisions of
this Agreement and any other loan and security documents and any other
instruments and agreements referred to herein or related thereto and to
exercise such powers and to perform such duties hereunder and thereunder as are
specifically delegated to or required of the Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through its agents or employees.
10.2 Nature of Duties of Agent. The Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement.
Neither the Agent nor any of its officers, directors, employees or agents shall
be liable for any action taken or omitted by it as such hereunder or in
connection herewith, unless caused by its or their gross negligence or willful
misconduct.
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10.3 Certain Rights of the Agent. If the Agent shall
request instructions from RNB or NatWest or both with respect to any act or
action (including the failure to act) in connection with this Agreement or any
of the other related loan and security documents, the Agent shall be entitled
to refrain from such act or taking such or any action unless and until the
Agent shall have received instructions from RNB or NatWest or both, as the
Agent in its sole discretion shall determine, and the Agent shall not incur
liability to any person by reason of so refraining.
10.4 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, statement, certificate, telex, teletype or telecopier
message, order or other documentary, teletransmission or telephone message
believed by it to be genuine and correct and to have been signed, set or made
by the proper Person. The Agent may consult with legal counsel (including our
counsel or counsel to any guarantor), independent public accountants (including
those retained by us or any guarantor) and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.
10.5 Agent in its Individual Capacity. RNB, in its
individual capacity and not as Agent, shall have the same rights and powers
hereunder as the other lender hereunder and may exercise the same as though it
were not performing the duties specified herein, as Agent.
10.6 Successor Agent.
(a) The Agent may resign at any time by giving
written notice thereof to RNB, NatWest and us. Upon any such resignation RNB
and NatWest shall have the right to jointly appoint a successor Agent. If no
successor Agent shall have been so appointed, and shall have accepted such
appointment, within thirty (30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent may, on behalf of RNB and
NatWest, appoint a successor Agent, which shall be a bank which maintains an
office in the United States of America, or a commercial bank organized under
the laws of the United States of America or of any State thereof, or any
affiliate of such bank, having a combined capital and surplus of at least
$2,000,000.00.
(b) Upon the acceptance of any appointment as
Agent hereunder by a successor agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agents shall be discharged from its
duties and obligations under this Agreement and the other related loan and
security documents. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Agreement relating to the Agent
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement and the other related loan and security
documents.
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Section 11. NOTICES.
11.1 Except as expressly otherwise provided herein, all
notices, requests and demands to or upon the respective parties hereto shall be
given or made only by hand, Federal Express, Express Mail or other recognized
overnight delivery service or by certified or registered mail, and shall be
deemed to have been duly given or made: if by hand, immediately upon delivery;
if by Federal Express, Express Mail or overnight delivery service, one (1) day
after dispatch; and if mailed by certified or registered mail, return receipt
requested, five (5) days after mailing. All notices, requests and demands are
to be given or made to the respective parties at the address (or to such other
addresses as either party may designate by notice in accordance with the
provisions of this paragraph) set forth herein.
Section 12. JURISDICTION; CHOICE OF LAW; WAIVER OF JURY TRIAL.
12.1 In any action or proceeding of any kind arising out
of or relating to this Agreement, any supplement hereto, the Obligations, the
Collateral or any such other transaction, we waive personal service of any
summons, complaint or other process and agree that service thereof may be made
by certified or registered mail directed to us at our address set forth below.
Within thirty (30) days after such mailing, we shall appear in answer to such
summons, complaint or other process, failing which we shall be deemed in
default and judgment may be entered by you against us for the amount of the
claim and other relief requested therein.
12.2 This Agreement and all transactions hereunder shall
be deemed to be consummated in the State of New York and shall be governed by
and interpreted in accordance with the laws of that State without giving effect
to principles governing conflicts of laws. If any part or provision of this
Agreement is invalid or in contravention of any applicable law or regulation,
such part or provision shall be severable without affecting the validity of any
other part or provision of this Agreement.
12.3 WE AND EACH OF YOU HEREBY WAIVE ALL RIGHTS TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING TO
THIS AGREEMENT, ANY SUPPLEMENT HERETO, THE OBLIGATIONS, THE COLLATERAL OR ANY
SUCH OTHER TRANSACTION. We hereby waive the right to interpose any defense and
all rights of setoff and all rights to interpose counterclaims in the event of
any litigation with respect to any matter connected with this Agreement, any
supplement hereto, the Obligations, the Collateral or any other transaction
between the parties, and we hereby irrevocably consent and submit to the
jurisdiction of the Supreme Court of the State of New York and the United
States District Court for the Southern District of New York in connection with
any action or
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proceeding of any kind arising out of or relating to this Agreement, any
supplement hereto, the Obligations, the Collateral or any such other
transaction.
Very truly yours,
MOVIE STAR, INC.
a NY corporation
--
By: /s/ Xxxx X. Xxxxx
------------------
Title: Chairman
----------
Address: 000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Accepted and Agreed to at
New York, New York
on Sept. 14, 1995:
----- --
REPUBLIC NATIONAL BANK OF NEW YORK,
individually and as Agent
By: /s/ Xxxx Xxxxxxx
-----------------
Title: Sr. VP
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NATWEST BANK N.A.
By: /s/ Xxxxxxx Xxxxx
------------------
Title: VP
---
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