COVENANT SUPPLEMENT TO
ACCOUNTS FINANCING AGREEMENT
[SECURITY AGREEMENT]
June 16, 1992
Congress Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
This Covenant Supplement ("Supplement") is a supplement to the Accounts
Financing Agreement [Security Agreement] between I.C. Xxxxxx & Company L.P.,
a Delaware limited partnership, (together with its successors and assigns,
"Borrower") and Congress Financial Corporation, a California corporation
(together with its successors and assigns, "Congress"), dated as of the date
hereof (the "Accounts Agreement", and together with this Supplement, any and
all other supplements thereto, and all other agreements, documents and
instruments now or at any time hereafter executed and/or delivered in
connection therewith or related thereto, including, without limitation the
Term Note and the Mortgages (each as hereinafter further defined) as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, individually and collectively, the "Financing
Agreements"). This Supplement is (a) hereby incorporated into the Accounts
Agreement, (b) made a part thereof and (c) subject to the terms, conditions,
covenants and warranties thereof. All terms (including capitalized terms)
used herein shall have the meanings ascribed to them respectively in the
Accounts Agreement, unless otherwise defined in this Supplement.
Section 1. ADDITIONAL DEFINITIONS
As used herein:
1.1 "Affiliate" shall mean, with respect to a specified Person, any
other Person (a) who, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
such Person, or (b) who is a limited partner, general partner (including
managing general partner), director, officer, shareholder or employee of such
Person.
1.2 "Xxxxx" shall mean Xxxxxx Xxxxx.
1.3 "Xxxxxxxx" shall mean Xxxx Xxxxxxxx.
1.4 "Capital Expenditures" shall mean all expenditures for, or
contracts for expenditures for, any fixed assets or improvements, or for
replacements, substitutions or additions thereto, which have a useful life of
more than one (1) year, including, but not limited to, the direct or indirect
acquisition of such assets by way of increased product service charges,
offset items or otherwise, and shall include capitalized lease payments.
1.5 "CEA/EEI" shall mean CEA/EEI Portfolio Liquidation, L.P. a
Delaware limited partnership and its successors and assigns.
1.6 "Chase" shall mean Chase Manhattan Bank (National Association), a
national banking corporation and its successors and assigns.
1.7 "EEI" shall mean EEI Portfolio Liquidation L.P., a Delaware
limited partnership and its successors and assigns.
1.8 "Excess Availability" shall mean at any time an amount equal to
the loan availability from Congress, as determined by Congress, pursuant to
the advance formula with respect to Eligible Accounts of Borrower, subject to
the Maximum Credit or any sublimits with respect thereto, after deducting the
amount of all then outstanding Obligations and reserves under and pursuant to
the Financing Agreements.
1.9 "Financing Agreements" shall have the meaning set forth in the
first paragraph hereof.
1.10 "GAAP" shall mean generally accepted accounting principles as in
effect on the date hereof consistently applied.
1.11 "Xxxxxxx" shall mean Xxx Xxxxxxx.
1.12 "Indebtedness" shall mean, as to any Person, all items which, in
accordance with GAAP, would be included in determining total liabilities
shown on the liability side of its balance sheet as at the date such
Indebtedness is to be calculated and, in any event, shall include any
liabilities secured by any mortgage, pledge, lien or security interest
existing on such person's owned or acquired property.
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1.13 "Xxxxxx" shall mean Xxxxxxx Xxxxxx.
1.14 "Xxxx" shall mean Xxxxxx Xxxx.
1.15 "Mortgages" shall mean that certain Mortgage and Security
Agreement with respect to Borrower's Milford, Delaware premises, that certain
Deed of Trust with respect to Borrower's Baltimore, Maryland premises, that
certain Collateral Leasehold Assignment with respect to Borrower's Carthage,
Mississippi premises, that certain Leasehold Assignment with respect to
Borrower's Newton, Mississippi premises and that certain Collateral Leasehold
Assignment with respect to Borrower's Raleigh, Mississippi premises as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed or replaced.
1.16 "NatWest" shall mean National Westminister Bank USA, a national
banking corporation and its successors and assigns.
1.17 "Net Worth" shall mean, as to any Person at any time, in
accordance with GAAP, the amount equal to the difference between: (a) the
aggregate net book value of all assets, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting
from such book values all appropriate reserves (including all reserves for
doubtful receivables, bad debts, obsolescence, depreciation and amortization)
and (b) the aggregate Indebtedness of such Person (including tax and other
proper accruals).
1.18 "Payment Blockage Event" shall mean the occurrence of any one or
more of the following:
(a) Borrower shall fail to pay to Congress when due any amounts
owing under the Obligations;
(b) Borrower shall breach any of the material representations,
warranties or covenants contained in the Financing Agreements relating to any
material part of the Collateral; or
(c) Borrower shall fail to comply with any of the provisions of
Sections 4.12, 4.13, 4.14 or 4.15 of this Supplement; or
(d) Borrower shall fail to deliver to Congress, within the
required time period, any financial statements required to be delivered by
Borrower pursuant to Section 6.4 of the Accounts Agreement; or
(e) Any Event of Default arising from the willful misconduct of
the Borrower; or
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(f) Borrower shall become insolvent, fail to pay its debts as
they mature, call a meeting of its creditors or have a creditors' committee
appointed, make an assignment for the benefit proceeding for relief under any
bankruptcy law, or Borrower shall suspend or discontinue doing business, or a
receiver, custodian or trustee of any kind is appointed for Borrower or all
or any party of its properties.
1.19 "Permitted Lien" shall have the meaning set forth in Section 4.4
hereof.
1.20 "Person" or "person" shall mean any individual, sole
proprietorship, limited partnership, general partnership, corporation
(including a business trust), unincorporated association, joint stock
corporation, trust, joint venture or other entity or government or any agency
or instrumentality or political subdivision thereof.
1.21 "Subordinated Notes" shall mean those certain notes further
described on Exhibit A annexed hereto and made a part hereof.
1.22 "Subsidiary" or "subsidiary" shall mean any corporation,
association or organization, active or inactive, as to which more than fifty
(50%) percent of the outstanding voting stock or shares or shares or
interests shall now or hereafter be owned or controlled, directly or
indirectly by any Person, any Subsidiary of such Person, or any Subsidiary of
such Subsidiary.
1.23 "Sunburst" shall mean Sunburst Bank, a Mississippi banking
association and its successors and assigns.
1.24 "Term Loan" shall mean the outstanding Obligations owed to
Congress by Borrower related to the secured term loan made by Congress to
Borrower as provided for in Section 3.2 hereof.
1.25 "Term Note" shall mean the Term Promissory Note, dated of even
date herewith, made by Borrower and payable to Lender in the original
principal amount of One Million ($1,000,000) Dollars, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.26 "Tradestyle" shall have the meaning set forth in Section 4.3
hereof.
1.27 "Wielepski" shall mean Xxxxxx Xxxxxxxxx.
1.28 "Working Capital" shall mean, as to any Person, at any time, the
amount equal to the difference between: (a) the aggregate net book value of
all assets of such Person and its subsidiaries, on a consolidated basis,
which would, in accordance with GAAP, be classified as current assets,
calculating the book
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value of inventory for this purpose on a first-in-first-out basis), and (b)
all Indebtedness of such Person and its subsidiaries, on a consolidated
basis, which would, in accordance with GAAP, be classified as current
liabilities.
Section 2. ADDITIONAL CONDITIONS PRECEDENT
Each of the following, unless specifically waived by Congress in
writing, is an additional condition precedent to Congress making any loans to
Borrower pursuant to the Accounts Agreement, this Agreement and any other
supplement thereto and the other Financing Agreements, including the making
of the initial and any future loans (including the Term Loan), advances and
other financial accommodations contemplated hereunder or thereunder:
2.1 Congress shall have received, in form and substance satisfactory
to Congress, all consents, waivers, releases, terminations and other
documents as Congress may request to evidence and effectuate the termination
and release by NatWest, Chase and/or Sunburst of any and all Indebtedness and
guarantees owed by Borrower to NatWest, Chase and/or Sunburst, respectively,
and any and all security interests and liens of NatWest, Chase and/or
Sunburst, respectively, in the Collateral, including but not limited to, UCC
termination statements for all UCC financing statements and releases,
reassignments and/or satisfactions of all real property mortgages, deeds of
trust and assignments of leaseholds previously filed or recorded by NatWest,
Chase and/or Sunburst, as secured party, against Borrower, as debtor;
2.2 Congress shall have received, in form and substance satisfactory
to Congress, evidence that Borrower has exercised its purchase option and
repurchased the limited partnership interests of EEI and CEA/EEI in Borrower,
together with all indebtedness owed to EEI and CEA/EEI by Borrower, and, in
full consideration for such purchases, has issued subordinated notes in the
aggregate principal amount of $2,600,000 to EEI and CEA/EEI, payment of such
notes being subordinated to the Obligations, and related matters duly
authorized, executed and delivered by EEI, CEA/EEI and Borrower;
2.3 Borrower shall have an Excess Availability, as determined by
Congress as of the date hereof in an amount not less than $750,000;
2.4 Congress shall have received, in form and substance satisfactory
to Congress, a Limited Guarantee and Waiver in favor of Congress regarding
the Obligations of Borrower to Congress by each of Xxxxx, Brashers, Keller,
and Xxxx, each limited to $55,000 of the Obligations, and of Wielepski,
limited to $30,000 of the Obligations, and of Xxxxxxx, limited to $750,000 of
the Obligations;
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2.5 Congress shall have received, in form and substance satisfactory to
Congress, Subordination Agreements in favor of Congress executed by the
payees or other holders of each of the Subordinated Notes;
2.6 Congress shall have received, in form and substance satisfactory to
Congress, all consents, waivers, acknowledgements and other agreements from
third persons which Congress may deem necessary or desirable, in its good
faith judgment, in order to permit, protect and perfect its security
interests in and liens upon the Collateral or to effectuate the provisions or
purposes of this Agreement and the other Financing Agreements, including,
without limitation, waivers by lessors, mortgagees and warehousemen of any
security interests, liens or other claims by such person to the Collateral
and agreements permitting Congress access to the premises to exercise its
rights and remedies and otherwise deal with the Collateral;
2.7 Congress shall have received evidence of insurance and loss payee
endorsements in favor of Congress required hereunder and under the other
Financing Agreements, including without limitation, title insurance with
respect to the Mortgages, as required by Congress, in form and substance
satisfactory to Congress, and certificates of insurance policies and/or
endorsements naming Congress as loss payee, all at Borrower's cost and
expense;
2.8 Congress shall have received, in form and substance satisfactory to
Congress, such opinion letters of counsel to Borrower with respect to the
Financing Agreements and such other matters as Congress may reasonably
request; PROVIDED, that such opinion letters shall only be a condition to the
initial advance under the Accounts Agreement and the initial Credit provided
under the Trade Financing Supplement thereto;
2.9 the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to
Congress, in form and substance reasonably satisfactory to Congress;
2.10 all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material
respects; and
2.11 no Event of Default shall have occurred and no event shall have
occurred or condition be existing which, with notice or passage of time or
both, would constitute an Event of Default.
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Section 3. ADDITIONAL LOAN PROVISIONS
3.1 TERMINATION. Notwithstanding anything to the contrary contained in
in Section 9 of the Accounts Agreement, the Accounts Agreement may not be
terminated by Borrower pursuant to Section 9.1 or at Borrower's request
pursuant to Section 9.2 thereof unless each of the other Financing Agreements
is terminated simultaneously therewith in accordance with their terms. No
termination of the Financing Agreements shall relieve or discharge Borrower
of its duties, obligations and covenants until all Obligations have been
indefeasibly paid in full and Congress' continuing security interests shall
remain in effect until such Obligations have been so discharged.
3.2 TERM LOAN. Subject to, and upon the terms and conditions contained
herein, Congress shall make the Term Loan to Borrower in the original
principal amount of One Million ($1,000,000) Dollars. The Term Loan shall be
(a) evidenced by the Term Note, (b) repaid, together with interest and other
amounts due thereunder, in accordance with the terms and provisions of the
Term Note and the other Financing Agreements, and (c) secured by all of the
Collateral.
3.3 RESERVES. Without limiting any other rights or remedies of Congress
hereunder or under the other Financing Agreements, the availability of all
loans, advances and other financial accommodations otherwise available to
Borrower by Congress shall be subject to Congress' continuing right, in its
discretion, exercised in good faith, to withhold a reserve, and to increase
and decrease such reserve from time to time, if and to the extent that, in
Congress' discretion, exercised in good faith, Congress believes such reserve
is necessary to protect Congress against possible non-payment for any reason
by any Account Debtor, possible non-payment of any Indebtedness owed by
Borrower to third parties, or in respect of any state of facts which does or
would, with the passage of time or notice or both, constitute an Event of
Default under any of the Financing Agreements.
Section 4. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
In addition to the representations, warranties and covenants contained
in the Accounts Agreement and the other Financing Agreements, Borrower hereby
represents, warrants and covenants to Congress the following, the truth and
accuracy of which in all material respects are, and compliance therewith
being, in accordance with Section 2.10 hereof, a continuing condition of the
making of loans and providing other financial accommodations to Borrower by
Congress under the Accounts Agreement or under any supplement thereto:
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4.1 USE OF PROCEEDS AND OTHER FINANCIAL ACCOMMODATIONS.
Borrower shall use a portion of the initial proceeds of the loans and
advances by Congress to repay all of the outstanding and unpaid Indebtedness
consisting of loans to Borrower by NatWest, Chase and Sunburst, respectively.
All other loans, advances and other financial accommodations provided by
Congress to Borrower pursuant to the Accounts Agreements, this Agreement and
any other supplement thereto and the other Financing Agreements shall be used
by Borrower for general operating and working capital purposes of Borrower
and such other purposes as are permitted hereunder.
4.2 SUBSIDIARIES.
(a) Borrower does not have any Subsidiaries as of the date hereof
except for Topper Fabrics, Inc., which is an inactive corporation with no
material assets.
(b) Borrower shall not form or acquire any Subsidiaries without the
prior written consent of Congress. In the event Congress so consents,
promptly upon such formation or acquisition, Borrower will execute and
deliver, or will cause any such Subsidiary to execute and deliver, to
Congress, in form and substance satisfactory to Congress and its counsel:
(i) an absolute and unconditional guarantee of payment of any and all present
and future Obligations of Borrower to Congress, (ii) a general security
agreement granting to Congress a first and only lien (except as otherwise
consented to by Congress in writing and as permitted pursuant to Section 4.4
hereof) upon all of such Subsidiary's assets, (iii) related Uniform
Commercial Code Financing Statements, and (iv) such other agreements,
documents and instruments as Congress may require, including, but not limited
to, supplements and amendments hereto and other loan agreements or
instruments evidencing the obligations and Indebtedness of such new
Subsidiary to Congress.
4.3 TRADE NAMES. Some of Borrower's invoices may from time to time be
rendered to customers under the trade names or tradestyles listed on Exhibit
B hereto (which, together with any new trade names or tradestyles used after
the date hereof are referred to collectively as the "Tradestyles" and
individually, as a "Tradestyle"). As to the Tradestyles used by it, and the
related Accounts, Borrower hereby agrees that:
(a) each Tradestyle is a trade name and style (and not an
independent corporation or other legal entity) by which Borrower may
identify and sell certain of its goods or services and conduct a portion of
its business;
(b) all Accounts and proceeds thereof (including any returned
merchandise) which arise from the sale of goods or rendition of services
invoiced under the Tradestyle shall be
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owned solely by Borrower and shall be subject to the security interests of
Congress and other terms of the Accounts Agreement and the other Financing
Agreements;
(c) all assignments or confirmatory schedules of Accounts delivered
to Congress by Borrower, whether in the name of any of the Tradestyles or
Borrower, shall be executed by Borrower as owner of such assigned Accounts;
and
(d) new Tradestyles may be used by Borrower, but only if
(i) Congress is given at least thirty (30) days prior written notice of the
intended use of any new Tradestyle, which notice shall set forth the proposed
new Tradestyle and (ii) such supplemental financing statements as Congress
shall request shall be executed and delivered by Borrower for filing by
Congress prior to the use of such new Tradestyle.
4.4 LIMITATION ON LIENS. Borrower shall not, and Borrower shall not
permit any subsidiary to create or suffer to exist any mortgage, pledge,
security interest, lien, encumbrance, defect in title or restriction upon the
use of their real or personal properties, including, without limitation its
existing and hereafter acquired inventory, whether now owned or hereafter
acquired, except the following, each being a "Permitted Lien":
(a) the liens or security interests in favor of Congress;
(b) tax, mechanics' and other like statutory liens arising in the
ordinary course of Borrower's or its Subsidiaries' respective businesses to
the extent (i) such liens secure Indebtedness which is not overdue or
(ii) until foreclosure or similar proceedings shall have been commenced, such
liens secure Indebtedness relating to claims or liabilities which are being
contested in good faith by appropriate proceedings available to Borrower or
its subsidiaries prior to the commencement of foreclosure or other similar
proceedings and are adequately escrowed for or reserved against in Congress'
judgment;
(c) purchase money mortgages or other purchase money liens or
security interests upon any specific fixed assets hereafter acquired, or
mortgages, liens or security interests existing on such such future fixed
assets at the time of acquisition thereof (including, without limitation,
capitalized or finance leases), PROVIDED, THAT, (i) no such purchase money or
other mortgage, lien or security interest (or capitalized or finance lease,
as the case may be) with respect to specific future fixed assets or as
refinanced shall extend to or cover any other property, other than the
specific fixed assets so acquired and normal and customary parts and
accessions to such specific fixed assets, or acquired subject to such
mortgage, lien or security interest (or lease) and the proceeds thereof,
(ii) such mortgage, lien or security interest secures the obligation to pay
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the purchase price of such specific fixed assets only (or the obligations
under the capitalized or finance lease), (iii) the principal amount secured
thereby shall not exceed one hundred (100%) percent of the cost of the fixed
assets so acquired and (iv) the acquisition of such specified fixed assets
shall not violate the provisions of Section 4.12 hereof; and
(d) the existing liens, encumbrances or security interests described
on Exhibit C hereto.
4.5 INDEBTEDNESS. Borrower shall not, and shall not permit any
Subsidiary to, create, incur, assume or permit to exist, contingently or
otherwise, any Indebtedness, except:
(a) Indebtedness to Congress;
(b) Indebtedness consisting of unsecured current liabilities
incurred in the ordinary course of its business which are not unpaid more
than thirty (30) days after their original or extended due dates;
(c) Indebtedness incurred in the ordinary course of its business
secured only by liens permitted under Section 4.4(b) and 4.4(c) hereof;
(d) Indebtedness of Borrower, evidenced by the Subordinated Notes,
which Indebtedness is, and shall be, in all respects, subject and subordinate
to the Obligations; PROVIDED, THAT,: (i) Borrower shall not, directly or
indirectly, (A) make any payments in respect of such Indebtedness except as
permitted pursuant to Section 4.15 hereof, (B) redeem, retire, defease,
purchase or otherwise acquire such Indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, or (C) amend, modify, alter or
change the terms of such Indebtedness or any agreement or instrument related
thereto in any material respect; and (ii) Borrower shall furnish to Congress
all notices, demands or other materials concerning such Indebtedness, after
receipt thereof or sent by it concurrently with the sending thereof, as the
case may be; and
(e) Indebtedness existing on the date hereof which is described on
Exhibit D hereto; PROVIDED, THAT: (i) Borrower and its Subsidiaries may only
make regularly scheduled payments of principal and interest in respect of
such Indebtedness as set forth in Exhibit D; (ii) Borrower and its
Subsidiaries shall not, directly or indirectly, (A) make any prepayments or
other non-mandatory payments in respect of such Indebtedness or (B) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, or
(C) materially amend, modify, alter or change the terms of such Indebtedness
or any agreement or instrument related thereto; and (iii) Borrower and its
Subsidiaries shall furnish to
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Congress all notices, demands or other materials concerning such Indebtedness,
after receipt thereof or sent by any of them concurrently with the sending
thereof, as the case may be.
4.6 TRANSACTIONS WITH AFFILIATES. Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly:
(a) purchase, acquire or lease any property or receive any services
from, or sell, transfer or lease any property or services to, any Affiliate of
Borrower, except on prices and terms no less favorable than would have been
obtained in an arm's length transaction with a non-affiliated person; or
(b) lend or advance money or property to any Affiliate or pay or
agree to be liable for the Indebtedness of any Affiliate; or
(c) make any payment of salaries, management fees or the principal
amount of or interest on any Indebtedness owing to any Affiliate of Borrower;
PROVIDED, HOWEVER, this Section 4.6(c) shall not restrict or prohibit payments
of salaries or other customary compensation in reasonable amounts to any person
who is an employee of Borrower notwithstanding that such person may be an
Affiliate of Borrower.
4.7 LOANS, INVESTMENTS, GUARANTIES, ETC. Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, make any loans or advance
money or property to any Person, or invest in (by capital contribution or
otherwise) or purchase or repurchase the stock or Indebtedness or all or a
substantial part of the assets or property of any Person, or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly) the
Indebtedness, performance, obligations or dividends of any Person or agree to do
any of the foregoing, EXCEPT:
(a) distributions described in Section 4.10 of this Agreement;
(b) guarantees by any Affiliate or Subsidiary of Borrower of the
Obligations in favor of Congress;
(c) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(d) after written notice thereof to Congress, investments in the
following instruments, which shall be pledged and delivered to Congress upon
Congress' request, (i) marketable obligations issued or guaranteed by the United
States of America or an instrumentality or agency thereof, maturing not more
than one (1) year after the date of acquisition thereof, (ii) certificates of
deposit or other obligations maturing not more than one (1) year after the date
of acquisition thereof issued by
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any bank or trust company organized under the laws of and located in the United
States of America or any State thereof and having capital, surplus and undivided
profits of at least $50,000,000, and (iii) open market commercial paper with a
maturity not in excess of two hundred seventy (270) days from the date of
acquisition thereof which have the highest credit rating by either Standard &
Poor's Corporation or Xxxxx'x Investors Service, Inc.; and
(e) loans and advances permitted under Section 4.6(b) and Section
4.6(c) of this Agreement.
4.8 ENVIRONMENTAL COMPLIANCE. The representations, warranties and
covenants of this Section 4.8 are made to the best of Borrower's knowledge,
information and belief.
(a) Borrower and its Affiliates have not generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
hazardous materials, on or off Borrower's premises (whether or not owned by it)
in any manner which at any time violates any materially applicable statute, rule
or regulation relating to environmental pollution and employee health and
safety, or any license, permit, certificate, approval or similar authorization
thereunder and the operations of Borrower and its Affiliates comply in all
material respects with all such statutes, rules and regulations and all
licenses, permits, certificates, approvals and similar authorizations
thereunder.
(b) There is no pending or threatened investigation, proceeding,
complaint, order, directive, claim, citation or notice by any governmental
authority or any other Person with respect to any alleged non-compliance with or
violation of the requirements of any statute, rule or regulation relating to
environmental pollution and employee health and safety, by Borrower or any of
its Affiliates or the release, spill or discharge, threatened or actual, of any
hazardous material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any hazardous materials or any
other environmental, health or safety matter, which affects Borrower or any of
its Affiliates or any of their businesses, operations or assets or any
properties at which Borrower or any of its Affiliates transported, stored or
disposed of any hazardous materials.
(c) Borrower and its Affiliates have no material liability
(contingent or otherwise) in connection with hazardous materials or the
generation, use, storage, treatment, transportation, manufacture, handling,
production or disposal of any hazardous materials.
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(d) Borrower and its Affiliates have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower and its Affiliates under any
statute, rule or regulation relating to environmental pollution and employee
health and safety, and all of such licenses, permits, certificates, approvals or
similar authorizations are valid and in full force and effect.
4.9 COMPLIANCE WITH LAWS, REGULATIONS, ETC. Borrower shall, and shall
cause each Subsidiary to, at all times comply in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders and duly observe all material requirements, of any foreign, federal,
state or local governmental authority, including, without limitation, the
Employee Retirement Income Security Act of 1974, as amended, the Internal
Revenue Code of 1986, as amended, the Occupational Safety and Health Act of
1970, as amended, the Fair Labor Standards Act of 1938, as amended and the rules
and regulations thereunder and all other statutes, rules, regulations, orders,
permits and stipulations relating to environmental pollution and employee health
and safety, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended and the Resource
Conservation and Recovery Act of 1976 and any similar state or local statutes
with respect thereto.
4.10 DISTRIBUTIONS. Borrower will not, and will not permit any Subsidiary
to, directly or indirectly, during any fiscal year, commencing with the current
fiscal year, declare or pay any distribution to its partners in respect of the
general and limited partnership interests now or hereafter outstanding, or set
aside or otherwise deposit or invest any sums for such purpose, or redeem,
retire, defease, purchase or otherwise acquire (or set aside or otherwise
deposit or invest any sums for such purpose) any such general or limited
partnership interest or capital stock of any partner, general or limited, or
agree to do any of the foregoing. Notwithstanding the foregoing, unless there
exists any Event of Default or any condition or event which with notice or the
passage of time or both would constitute an Event of Default hereunder or under
any of the Financing Agreements, Borrower shall be permitted to make
distributions to its general and limited partners (including such distributions
to EEI and CEA/EEI with respect to their former partnership interests) for the
payment of federal and state income taxes for which they are liable solely as a
result of their respective partnership interests in Borrower's income, PROVIDED
that Borrower gives Congress thirty (30) days prior written notice of any such
intended distribution and, upon Congress' request, promptly furnishes
documentation reasonably satisfactory to Congress evidencing compliance of any
such intended distribution with the provisions hereof.
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4.11 INDEMNIFICATION FOR RETURNED ITEMS. Borrower agrees that Congress may
pay any and all amounts demanded by any person which Borrower has given an
indemnification for returned items and Congress may treat such amounts as
advances to Borrower and change such amounts to any account of Borrower with
Congress, all without inquiry as to whether such amounts are actually due and
owing to such person and without regard to any dispute or claim that Borrower
may have or assert against such person and/or other parties.
4.12 CAPITAL EXPENDITURES. Borrower will not, in the aggregate, directly
or indirectly, expend or commit to expend, Capital Expenditures in excess of
$300,000 in any fiscal year of Borrower.
4.13 NET WORTH. Borrower will, at all times, until all Obligations have
been indefeasibly paid in full, maintain a Net Worth of not less than $8,000,000
on the date hereof and at all times thereafter.
4.14 WORKING CAPITAL. Borrower will, at all times, maintain a Working
Capital of not less than $5,000,000.
4.15 PAYMENTS PERMITTED UNDER SUBORDINATED NOTES. Provided that there
exists no Event of Default, or condition or event which with notice or passage
of time or both would constitute an Event of Default hereunder or under any of
the Financing Agreements:
(a) Borrower may make regularly scheduled payments of interest, on an
unaccelerated basis, with respect to the Subordinated Notes in accordance with
the terms of each Subordinated Note as in effect on the date hereof (but not any
prepayments or payments pursuant to acceleration or claims of breach or
otherwise);
(b) Borrower may make regularly scheduled payments of principal, on
an unaccelerated basis with respect to the Subordinated Notes payable to the
Estate of Xxxxx Xxxxxx (but not any prepayments or payments pursuant to
acceleration or claims of breach or otherwise); and
(c) notwithstanding the foregoing provisions of this Section 4.15,
Borrower may make regularly scheduled payments of principal and interest on an
unaccelerated basis, with respect to the Subordinated Notes payable to EEI and
CEA/EEI (but not any prepayments or payments pursuant to acceleration or claims
of breach or otherwise) PROVIDED, that a Payment Blockage Event does not then
exist or arise as a result thereof and Borrower shall have an Excess
Availability:
-14-
(i) in an average daily amount during the thirty (30) day
period immediately upon prior to September 30, 1992, the due date of the first
scheduled principal payment under the Subordinated Notes payable to EEI and
CEA/EEI ("First Principal Payment") in an amount not less than $1,600,000 and an
Excess Availability of an amount equal to or greater than $1,600,000 immediately
before making the First Principal Payment;
(ii) in an average daily amount during the thirty (30) day
period immediately prior to September 30, 1993, the due date of the second
scheduled principal payment under the Subordinated Notes payable to EEI and
CEA/EEI ("Second Principal Payment") in an amount not less than $2,000,000 and
an Excess Availability of an amount equal to or greater than $2,000,000
immediately before making the Second Principal Payment; and
(iii) not less than $500,000 immediately after making each of the
First Principal Payment and Second Principal Payment;
and, PROVIDED, FURTHER, that immediately before Borrower makes the First
Principal Payment and immediately before Borrower makes the Second Principal
Payment, not more than $200,000 in the aggregate of Borrower's outstanding and
unpaid accounts payable are delinquent past the maturity date thereof or their
stated payment terms, and at Congress' request, compliance with such accounts
payable status is confirmed to Congress' satisfaction by Congress' auditors
before the making of the First Principal Payment and the Second Principal
Payment, PROVIDED, FURTHER, such delinquent accounts payable shall not be deemed
to include outstanding and unpaid accounts payable of Borrower which are
disputed in good faith by Borrower and as to which the same are adequately
reserved against by Borrower in Congress' judgment, exercised in good faith.
4.16 APPLICATION OF PROCEEDS. Any and all proceeds earned or collected by
Borrower with respect to the Collateral, including but not limited to, in
connection with the Settlement Agreement between Borrower and VF, Inc. with
respect to trademark infringement litigation, shall be applied to the
outstanding Obligations.
Section 5. ADDITIONAL REMEDIES AND RELATED PROVISIONS.
5.1 ADDITIONAL REMEDIES. Without limiting any rights or remedies of
Congress at any time on or after an Event of Default pursuant to the other
Financing Agreements or applicable law, Congress may, at its option, cure any
default by Borrower or any of its Affiliates under any agreement, law,
regulation, permit, license or approval with, or issued or promulgated by, any
Person, which constitutes, or with notice or passage of time or both would
constitute an Event of Default hereunder or under any
-15-
of the other Financing Agreements, or pay or bond on appeal any judgment, order,
directive, claim or citation entered or made against Borrower (irrespective of
the amount of said judgment or the time elapsed since entry thereof) and charge
Borrower's account therefor, such amounts to be repayable by Borrower to
Congress on demand, together with interest thereon at the rate of interest then
payable by Borrower under the Accounts Agreement; PROVIDED, HOWEVER, Congress
shall be under no obligation to effect such cure, payment or bonding and shall
not, by making any payment for Borrower's account, be deemed to have assumed any
obligation or liability of Borrower or any such Affiliate.
Very truly yours,
I.C. XXXXXX & COMPANY L.P.
By: ISBUYCO, INC., General Partner
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Title: Chairman
-----------------------------
ACCEPTED:
CONGRESS FINANCIAL CORPORATION
By: /s/ Xxxxxx Xxxxx
---------------------------
Title: VP
------------------------
-16-
EXHIBIT A TO COVENANT SUPPLEMENT
SUBORDINATED NOTES
EEI PORTFOLIO LIQUIDATION, L.P.
1. $549,500.00 Junior Subordinated Note dated June ____, 1992, payable on
or before September 30, 1992
2. $750,000.00 Junior Subordinated Note dated June ____, 1992, payable on
or before June 30, 1993
CEA/EEI PORTFOLIO LIQUIDATION, L.P.2.
1. $549,500.00 Junior Subordinated Note dated June ____, 1992, payable on
or before September 30, 1992
2. $750,000.00 Junior Subordinated Note dated June ____, 1992, payable on
or before June 30, 1993
XXXXX X. XXXXXX
1. $600,000.00 Senior Subordinated Note dated May 4, 1990; outstanding
principal balance $250,000.00
XXX X. XXXXXXX
1. $ 64,055.56 Senior Subordinated Note dated November 19, 1990
2. $ 62,777.78 Senior Subordinated Note dated April 30, 1991
3. $ 61,250,00 Senior Subordinated Note dated July 2, 1991
4. $ 43,384.00 Junior Subordinated Note dated December 20, 1984
5. $ 7,737.42 Junior Subordinated Note dated March 31, 1988
6. $ 9,259.42 Junior Subordinated Note dated September 30, 1990
7. $ 4,941.15 Junior Subordinated Note dated June 30, 1991
XXXX XXXXXXX
1. $ 9,001.00 Junior Subordinated Note dated December 20, 1984
2. $ 1,605.30 Junior Subordinated Note dated March 31, 1988
3. $ 1,921.08 Junior Subordinated Note dated September 30, 1990
4. $ 1,025.15 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXX
1. $ 9,001.00 Junior Subordinated Note dated December 20, 1984
2. $ 1,605.30 Junior Subordinated Note dated March 31, 1988
3. $ 1,921.08 Junior Subordinated Note dated September 30, 1990
4. $ 1,025.15 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXXXXX
1. $ 900.00 Junior Subordinated Note dated December 20, 1984
2. $ 160.52 Junior Subordinated Note dated March 31, 1988
3. $ 192.09 Junior Subordinated Note dated September 30, 1990
4. $ 102.50 Junior Subordinated Note dated June 30, 1991
XXXXX XXXX
1. $ 338.00 Junior Subordinated Note dated December 20, 1984
2. $ 60.28 Junior Subordinated Note dated March 31, 1988
3. $ 72.14 Junior Subordinated Note dated September 30, 1990
4. $ 38.50 Junior Subordinated Note dated June 30, 1991
XXXXXXX VENTURES
1. $ 12,376.00 Junior Subordinated Note dated December 20, 1984
2. $ 2,207.23 Junior Subordinated Note dated March 31, 1988
3. $ 2,641.40 Junior Subordinated Note dated September 30, 1990
4. $ 1,409.54 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXX
1. $ 15,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 2,675.23 Junior Subordinated Note dated March 31, 1988
3. $ 3,201.44 Junior Subordinated Note dated September 30, 1990
4. $ 1,708.40 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXXX
1. $ 24,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 4,280.32 Junior Subordinated Note dated March 31, 1988
3. $ 5,122.30 Junior Subordinated Note dated September 30, 1990
4. $ 2,733.44 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXX
1. $ 24,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 4,280.32 Junior Subordinated Note dated March 31, 1988
3. $ 5,122.30 Junior Subordinated Note dated September 30, 1990
4. $ 2,733.44 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXXXX
1. $ 12,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 2,140.16 Junior Subordinated Note dated March 31, 1988
3. $ 2,561.15 Junior Subordinated Note dated September 30, 1990
4. $ 1,366.72 Junior Subordinated Note dated June 30, 1991
XXXX XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 3,000.00 Junior Subordinated Note dated December 20, 1984
3. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
4. $ 535.04 Junior Subordinated Note dated March 31, 1988
5. $ 1,280.58 Junior Subordinated Note dated September 30, 1990
6. $ 640.29 Junior Subordinated Note dated September 30, 1990
7. $ 683.36 Junior Subordinated Note dated June 30, 1991
8. $ 341.68 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30, 1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30, 1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXX X. XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30, 1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30, 1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXX
1. $ 4,500.00 Junior Subordinated Note dated December 20, 1984
2. $ 802.57 Junior Subordinated Note dated March 31, 1988
3. $ 960.43 Junior Subordinated Note dated September 30, 1990
4. $ 512.52 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXXXXX
1. $ 3,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 535.04 Junior Subordinated Note dated March 31, 1988
3. $ 640.29 Junior Subordinated Note dated September 30, 1990
4. $ 341.68 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXX
1. $ 3,000.00 Junior Subordinated Note dated December 20, 1984
2. $ 535.04 Junior Subordinated Note dated March 31, 1988
3. $ 640.29 Junior Subordinated Note dated September 30, 1990
4. $ 341.68 Junior Subordinated Note dated June 30, 1991
EXHIBIT B
TRADESTYLES FOR BILLING
I.C. Xxxxxx & Co. L.P.
-18-
EXHIBIT C TO COVENANT SUPPLEMENT
ADDITIONAL PERMITTED LIENS
Outstanding
A. Financing Statements Amount Secured
--------------
DEBTOR I.C. XXXXXX & COMPANY L.P.
MARYLAND - STATE DEPARTMENT
1. 5/2/88 - Liber 3018, folio 1987, I.D. No.
81237962; Secured Party: Storage Technology $4,586.95/month
Corporation; Collateral: STC equipment Balance: $101,132.00
lease to Xxxxxx.
2. 5/8/89 - Liber 3132, folio 1854, I.D. No.
91287666; Secured Party; Storage Technology Same as No. A.1.
Corporation; Collateral: STC equipment above
leased to Xxxxxx.
3. 3/5/90 - Liber 3220, folio 1398, I.D. No.
100648427; Secured Party/Assignee; $1,261.51/month
The CIT Group; Collateral: Specific Balance: $10,088.00
equipment. (approx.)
4. 6/18/90 - Liber 3248, folio 2282, I.D. No.
101698361; Secured Party/Assignee: The CIT
Group; Collateral: Specific equipment with Same as No. A.3.
additional note "Assignments of Inventory above
According to TAX PROPERTY ARTICLE #12-108(k) -
Conditional Sales Contract."
MASSACHUSETTS - SECRETARY OF STATE
1. 2/16/90 - File No. 938546; Secured Same as No. A.3.
Party/Assignee: The CIT Group; above
Collateral: Specific equipment.
MASSACHUSETTS - CITY OF BOSTON
1. 2/15/90 - File No. 343185; Secured
Party/Assignee: The CIT Group; Same as No. A.3.
Collateral: Specific Equipment. above
B. Judgments
I.C. XXXXXX & COMPANY L.P.
New York County - State tax lien dated October 21, 1991 in the amount of
$6,370.68
SRK42a/I117/prf
- 2 -
EXHIBIT D TO COVENANT SUPPLEMENT
PERMITTED INDEBTEDNESS
----------------------
EEI PORTFOLIO LIQUIDATION, L.P.
1. $549,500.00 Junior Subordinated Note dated June ____,
1992, payable on or before September 30, 1992
2. $750,000.00 Junior Subordinated Note dated June ____,
1992, payable on or before June 30, 1993
CEA/EEI PORTFOLIO LIQUIDATION, L.P.2.
1. $549,500.00 Junior Subordinated Note dated June ____,
1992, payable on or before September 30, 1992
2. $750,000.00 Junior Subordinated Note dated June ____,
1992, payable on or before June 30, 1993
XXXXX X. XXXXXX
1. $600,000.00 Senior Subordinated Note dated May 4, 1990;
outstanding principal balance $250,000.00
XXX X. XXXXXXX
1. $ 64,055.56 Senior Subordinated Note dated November 19,
1990
2. $ 62,777.78 Senior Subordinated Note dated April 30, 1991
3. $ 61,250.00 Senior Subordinated Note dated July 2, 1991
4. $ 43,384.00 Junior Subordinated Note dated December 20,
1984
5. $ 7,737.42 Junior Subordinated Note dated March 31, 1988
6. $ 9,259.42 Junior Subordinated Note dated September 30,
1990
7. $ 4,941.15 Junior Subordinated Note dated June 30, 1991
XXXX XXXXXXX
1. $ 9,001.00 Junior Subordinated Note dated December 20,
1984
2. $ 1,605.30 Junior Subordinated Note dated March 31, 1988
3. $ 1,921.08 Junior Subordinated Note dated September 30,
1990
4. $ 1,025.15 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXX
1. $ 9,001.00 Junior Subordinated Note dated December 20,
1984
2. $ 1,605.30 Junior Subordinated Note dated March 31, 1988
3. $ 1,921.08 Junior Subordinated Note dated September 30,
1990
4. $ 1,025.15 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXXXXX
1. $ 900.00 Junior Subordinated Note dated December 20,
1984
2. $ 160.52 Junior Subordinated Note dated March 31, 1988
3. $ 192.09 Junior Subordinated Note dated September 30,
1990
4. $ 102.50 Junior Subordinated Note dated June 30, 1991
XXXXX XXXX
1. $ 338.00 Junior Subordinated Note dated December 20,
1984
2. $ 60.28 Junior Subordinated Note dated March 31, 1988
3. $ 72.14 Junior Subordinated Note dated September 30,
1990
4. $ 38.50 Junior Subordinated Note dated June 30, 1991
XXXXXXX VENTURES
1. $ 12,376.00 Junior Subordinated Note dated December 20,
1984
2. $ 2,207.23 Junior Subordinated Note dated March 31, 1988
3. $ 2,641.40 Junior Subordinated Note dated September 30,
1990
4. $ 1,409.54 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXX
1. $ 15,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 2,675.23 Junior Subordinated Note dated March 31, 1988
3. $ 3,201.44 Junior Subordinated Note dated September 30,
1990
4. $ 1,708.40 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXXX
1. $ 24,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 4,280.32 Junior Subordinated Note dated March 31, 1988
3. $ 5,122.30 Junior Subordinated Note dated September 30,
1990
4. $ 2,733.44 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXX
1. $ 24,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 4,280.32 Junior Subordinated Note dated March 31, 1988
3. $ 5,122.30 Junior Subordinated Note dated September 30,
1990
4. $ 2,733.44 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXXXX
1. $ 12,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 2,140.16 Junior Subordinated Note dated March 31, 1988
3. $ 2,561.15 Junior Subordinated Note dated September 30,
1990
4. $ 1,366.72 Junior Subordinated Note dated June 30, 1991
XXXX XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 3,000.00 Junior Subordinated Note dated December 20,
1984
3. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
4. $ 535.04 Junior Subordinated Note dated March 31, 1988
5. $ 1,280.58 Junior Subordinated Note dated September 30,
1990
6. $ 640.29 Junior Subordinated Note dated September 30,
1990
7. $ 683.36 Junior Subordinated Note dated June 30, 1991
8. $ 341.68 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30,
1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30,
1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXX X. XXXXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30,
1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXX
1. $ 6,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 1,070.09 Junior Subordinated Note dated March 31, 1988
3. $ 1,280.58 Junior Subordinated Note dated September 30,
1990
4. $ 683.36 Junior Subordinated Note dated June 30, 1991
XXXXXX XXXXXXX
1. $ 4,500.00 Junior Subordinated Note dated December 20,
1984
2. $ 802.57 Junior Subordinated Note dated March 31, 1988
3. $ 960.43 Junior Subordinated Note dated September 30,
1990
4. $ 512.52 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXXXXX
1. $ 3,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 535.04 Junior Subordinated Note dated March 31, 1988
3. $ 640.29 Junior Subordinated Note dated September 30,
1990
4. $ 341.68 Junior Subordinated Note dated June 30, 1991
XXXXXXX XXXXX
1. $ 3,000.00 Junior Subordinated Note dated December 20,
1984
2. $ 535.04 Junior Subordinated Note dated March 31, 1988
3. $ 640.29 Junior Subordinated Note dated September 30,
1990
4. $ 341.68 Junior Subordinated Note dated June 30, 1991
CARTHAGE IRB
$299,000.00
