This CREDIT AGREEMENT, is made as of December 10, 1997 (this "Agreement"),
by and between DESIGNS, INC., a Delaware corporation having its principal place
of business at 00 X Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "Company"), and
BANKBOSTON, N.A., a national banking association having its principal place of
business at 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 (the "Bank").
WITNESSETH:
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WHEREAS, the Company is party to an Amended and Restated Credit Agreement
dated July 24, 1996 with BankBoston, N.A. (successor to BayBank, N.A.) and
State Street Bank and Trust Company as Lenders and BankBoston, N.A. (successor
to BayBank, N.A.), as agent for the Lenders (the "Existing Loan"); and
WHEREAS, the Company desires to refinance its obligations to the Lenders
under the Existing Loan and the Bank is willing to so refinance the Existing
Loan.
NOW THEREFORE, it is hereby agreed between the Company and the Bank as
follows:
ARTICLE 1
DEFINITIONS AND RELATED MATTERS
1.1 Definitions. The terms defined elsewhere in this Agreement shall
have the respective meanings ascribed to them where so defined, and the
following terms have the following respective meanings for the purposes of
this Agreement:
"Accounts" means all "accounts" as defined in the UCC, including any
right of the Company to payment for credit extended or for goods sold or
leased or for services rendered not evidenced by an instrument or chattel
paper, whether or not it has been earned by performance.
"ACH" means automated clearing house.
"Account Debtor" has the meaning given that term in the UCC.
"Additional Costs" has the meaning given that term in Section 2.14.
"Affiliate" means, with respect to any Person, (i) any other person
that directly or indirectly through one or more intermediaries, Controls such
Person or (ii) any other Person which is Controlled by or is under common
Control with such Person.
"Applicable Advance Rate" means fifty percent (50%).
"Atlantic Excluded Claim" means the note made by the Company in favor of
Atlantic Harbor, Inc. (f/k/a Boston Trading Ltd., Inc.) dated May 2, 1995.
"Authorized Person" means any person authorized to request Credit Advances
on behalf of the Company by any resolution or other appropriate evidence of
authority which has been furnished to the Bank and that is reasonably
satisfactory to the Bank in form and substance. Initially, Authorized Persons
shall be those persons listed on Schedule 1.1 hereto.
"Beneficial Ownership" has the meaning set forth in Rule 13d-3 of the
Securities Exchange Act of 1934.
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"Borrowing Base" means, at the time of determination, the aggregate amount
determined by (a) multiplying the Company's aggregate Cost of Eligible
Inventory located at Included Stores times the Applicable Advance Rate and (b)
deducting therefrom all Reserves then in effect.
"Business Day" means any day that is not a Saturday or Sunday, or a public
holiday under the law of the United States of America or The Commonwealth of
Massachusetts as applicable to a national banking association.
"Capital Expenditures" means expenditures in respect of fixed or capital
assets by the Company and any of its Subsidiaries, determined on a consolidated
basis, including the capitalized amount of Capital Lease Obligations incurred
during the relevant period.
"Capital Lease Obligations" means the obligations to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) real
and/or personal property which obligations are required to be classified and
accounted for as a capital lease on the Company's balance sheet under GAAP
(including Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board) and, for purposes of this Agreement, the amount of
such obligations shall be the capitalized amount thereof, determined in
accordance with GAAP (including such Statement No. 13).
"Cash Flow" of the Company and its consolidated Subsidiaries means, for
any period, the sum (without duplication) of (a) EBITDA for such period, minus
(b) Cash Taxes for such period, minus (c) Capital Expenditures for such
period, minus (d) all Restricted Payments by the Company and its consolidated
Subsidiaries during such period, plus (e) all Occupancy Costs for such
period, plus (f) Non-Cash Charges.
"Cash Flow Ratio" has the meaning given that term in Section 6.3(b).
"Cash Taxes" means, for any period, the sum of (a) all amounts reflected
on the consolidated income statement of the Company and its Subsidiaries as
tax expense, plus (b) any decrease (and minus any increase) in taxes payable
that would have been reflected on the consolidated balance sheet of the
Company and its Subsidiaries during such period and minus (c) any increase
(and plus any decrease) in deferred tax liability that would have been
reflected on the consolidated balance sheet of the Company and its Subsidiaries
during such period.
"Change in Control" means (a) any Person or group of Persons (within the
meaning of Section 13 or 14 of the Securities Exchange Act of 1934) shall have
acquired Beneficial Ownership of 51% or more of the outstanding shares of
common stock of the Company, or (b) a majority of the board of directors of
the Company is not comprised of Continuing Directors.
"Closing Date" means the first date on which the conditions set forth in
Article 4 have been satisfied and any Credit Advances are to be made hereunder.
"Collateral" means all Accounts, General Intangibles, Deposit Accounts,
and L/S Inventory of the Company, whether now owned or existing or hereafter
acquired or arising.
"Commercial L/C's" means letters of credit issued by the Bank pursuant to
this Agreement, the drawing under which requires the delivery of bills of
lading, airway bills, or other similar types of documents of title.
"Commitment" means the amount of the Bank's obligation to make Credit
Advances hereunder, as the same may be reduced from time to time in accordance
with Sections 2.2 and 8.2 hereof. The initial Commitment of the Bank on the
execution of this Agreement is the sum of Twenty-Five Million Dollars
($25,000,000.00).
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"Concentration Account" has the meaning given that term in Section 7.3.
"Consolidated" or "consolidated" when used with reference to any term
defined herein, unless otherwise expressly stated, means that term as
applied to the accounts of the Company and its wholly-owned Subsidiaries,
consolidated or combined in accordance with GAAP. Notwithstanding the
foregoing, as applied to the accounts of Company and its Subsidiaries for the
purpose of this Agreement, the terms "Consolidated" or "consolidated" shall
expressly exclude the accounts of the Joint Venture (including, without
limitation, the investment of the Company and/or its Subsidiaries in the
Joint Venture).
"Continuing Director" means a member of the board of directors of the
Company who either (a) was a member of such board prior to the date hereof
and continuously thereafter, or (b) became a member of such board after the
date hereof and whose election or nomination for election was approved by a
vote of the majority of the Continuing Directors then members of such board.
"Control" means possession, directly or indirectly of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Cost" means the calculated cost of Inventory, as determined from the
retail stock ledger of the Company, based upon the Company's accounting
practices in effect on the date hereof. "Cost" does not include inventory
capitalization costs or other non-purchase charges (such as freight) used in
the calculation of cost of goods sold.
"Credit Advance(s)" has the meaning given that term in Section 2.1.
"Credit Request" has the meaning given that term in Section 2.6(a).
"Current Fiscal Year" means the fiscal year of the Company ending
January 31, 1998 (which fiscal year is commonly known as "fiscal year 1997").
"Cut-Off Date" means the day immediately preceding the Termination Date.
"DDA" means any checking or other demand depository account maintained
by the Company or any of its Subsidiaries.
"Default" means any Event of Default and any event that would, with the
passage of time or the giving of notice, or both, constitute an Event of
Default.
"Deposit Accounts" has the meaning given that term in the UCC.
"Dollars" or "$" means United States Dollars.
"EBITDA" shall mean, for any period, the sum (without duplication) of
(a) consolidated net income of the Company and its Subsidiaries for such
period plus (b) to the extent deducted in determining consolidated net income
for such period, the sum of (i) depreciation and amortization (including
deferred financing costs, organization costs and non-compete amortization) for
such period, (ii) interest expense for such period, and (iii) the provision for
income taxes for such period, and (iv) for the Current Fiscal Year only, non-
recurring expenses associated with store closings, all as determined in
accordance with GAAP.
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"Eligible Inventory" means such of the Company's L/S Inventory, as the
Bank in its reasonable discretion from time to time determines to be acceptable
for borrowing, as to which L/S Inventory, the Bank has a perfected security
interest which is prior and superior to all Liens.
"Eligible Investments" means any or all of the following:
(a) marketable direct full faith and credit obligations of, or
marketable obligations guaranteed by, the United States of America;
provided that such securities, as a group, may not, on the date of
determination, have a remaining weighted average maturity of more than
five years;
(b) marketable direct full faith and credit obligations of States of
the United States or of political subdivisions or agencies; provided that
such securities, as a group, may not, on the date of determination, have
a remaining weighted average maturity of more than five years; and
provided, further, that such obligations carry a rating of "A" or better
by a Rating Service;
(c) publicly issued bonds or debentures which have a remaining
maturity at the time of purchase of no more than five years issued by a
corporation (other than the Company or an Affiliate thereof), organized
under the laws of a State of the United States or the District of
Columbia; provided, that such obligations carry a rating of "A" or better
by a Rating Service;
(d) open market commercial paper of any corporation (other than the
Company or an Affiliate thereof) incorporated under the laws of the
United States of America or any State thereof or the District of Columbia
rated not less than "P-2" or "A-2" or its equivalent by a Rating Service
and maturing within 270 days after the date on which such commercial paper
is purchased;
(e) certificates of deposit and bankers acceptances maturing within
one year after the acquisition thereof issued by (i) the Bank or (ii) any
commercial bank organized under the laws of the United States of America
or of any political subdivision thereof the long term obligations of which
are rated "A" or better by a Rating Service;
(f) Eurodollar certificates of deposit maturing within one year
after the acquisition thereof issued by any commercial bank having
combined capital, surplus and undivided profits of at least $1 billion;
(g) repurchase agreements, having terms of less than one year, for
government obligations of the type described in (a) or (b) above, with a
commercial bank or trust company meeting the requirements of clause (e)
above;
(h) publicly issued collateralized mortgage obligations which have
a remaining maturity at the time of purchase of no more than five years;
provided, that such obligations carry a rating of "A" or better by a
Rating Service;
-4-
(i) tax-exempt bonds or notes which have a remaining maturity at
the time of purchase of no more than five years issued by any State of
the United States or the District of Columbia, or any political
subdivision thereof; provided, that such obligations carry a rating of
"A" or better by a Rating Service;
(j) publicly issued shares of common or preferred stock issued by a
corporation (other than the Company or an Affiliate thereof), organized
under the laws of any State of the United States or the District of
Columbia, and bonds or debentures convertible into shares of such common
or preferred stock, so long as (A) such securities have been registered
under the Securities Exchange Act of 1934, as amended, and are traded on
the New York Stock Exchange, the American Stock Exchange or NASDAQ, and
(B) the senior debt securities of the issuer thereof (if any) are rated
"A" or better by a Rating Service; provided, however, that the securities
under this clause (j) may not at any time comprise more than 10% of the
total assets of the Company; and
(k) interests in any fund or other pooled "open-end" investment
vehicle which (i) is a registered investment company under the
Investment Company Act of 1940, as amended and (ii) invests principally
in obligations of any of the types described in clauses (a) through (j)
above.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" has the meaning given that term in Section 8.1.
"Existing Loan" has the meaning given that term in the Preamble hereto.
"Federal Funds Effective Rate" means for any day, a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such transactions
received by the Bank from three federal funds brokers of recognized standing
selected by the Bank.
"Fixed Charges" of the Company and its consolidated Subsidiaries, for
any period, means the sum, determined on a consolidated basis (without
duplication), of (a) all scheduled payments of principal of Indebtedness of
the Company and its consolidated Subsidiaries and mandatory prepayments of
the principal of such Indebtedness during such period, (b) to the extent not
included in (a) and (c), all payments by the Company and its consolidated
Subsidiaries of rent under Capital Lease Obligations during such period, (c)
cash interest expense of the Company and its consolidated Subsidiaries during
such period, and (d) all Occupancy Costs during such period.
"Funding Account" has the meaning given that term in Section 7.3.
"GAAP" means generally accepted accounting principles consistently
applied.
"General Intangibles" means "general intangibles" as defined in the UCC;
and also all: rights to payment for credit extended; deposits; amounts due to
the Company; credit memoranda in favor of the Company; warranty claims; tax
refunds and abatements; insurance refunds and premium rebates; all means and
vehicles of investment or hedging, including, without limitation, options,
warrants, and futures contracts; records; customer lists; telephone numbers;
causes of action; judgments; payments under any settlement or other agreement;
literary rights; rights to performance; computer records, computer software,
rights of access to computer record service bureaus, service bureau computer
contracts, and computer data; and any matter related to, or connected with,
the design, development, manufacture, sale, marketing, leasing, or use of any
or all property produced, sold, or leased, by the Company or credit extended
or services performed, by the Company, whether intended for an individual
customer or the general business of the Company. Notwithstanding the foregoing,
"General Intangibles" shall not include any interest of the Company in the
Joint Venture; licenses; franchises; license agreements; royalties; license
and/or franchise fees; permits and similar rights granted by any governmental
authority; trade names, trademarks, service marks, and all goodwill relating
thereto; and all other general intangible property of the Company in the nature
of intellectual property.
-5-
"Guarantee" by any Person means any obligation of such Person
("Guarantor") directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person that would be classified as a liability on the
balance sheet of the Guarantor in accordance with GAAP, and, without limiting
the generality of the foregoing, any obligation, direct or indirect, of the
Guarantor (a) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other liability (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (b) entered into for the purpose of
assuring in any other manner the obligee of such Indebtedness or other
liability of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Included Stores" means retail stores and warehouses of the Company for
which either: (i) a Landlord's Agreement has been duly executed and delivered;
or (ii) the Bank is satisfied, in its sole discretion, based on the terms of
store leases or otherwise, that the subject landlord will not have a Lien on
the Collateral superior to the Lien of the Bank.
"Indebtedness" means, as respects the Company or any of its Subsidiaries,
liabilities or obligations:
(i) for borrowed money (whether by loan or by the issuance and
sale of notes, bonds or other debt securities); or
(ii) incurred for the deferred purchase price of property or
services under any contract or commitment, whether or not in writing, and
not subject to cancellation without penalty or other expense (except for
trade indebtedness incurred in the ordinary course of business which is
not connected with the borrowing of money); or
(iii) secured by (or for which the creditor has an existing right,
contingent or otherwise, to be secured by) any mortgage, pledge, security
interest or other lien, charge or encumbrance upon or with respect to its
property or assets (including, without limitation, Accounts), whether or
not the Company or such Subsidiary has otherwise assumed or become liable
for the payment of such liabilities or obligations; or
(iv) in connection with any letter of credit or acceptance
transaction; or
(v) all Capital Lease Obligations; or
(vi) all Guarantees.
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"Interest Period" means, with respect to any LIBOR Credit Advance, the
period commencing on the date such LIBOR Credit Advance is made or converted
from a Prime Rate Credit Advance or the last day of the next preceding Interest
Period with respect to such LIBOR Credit Advance and ending on the numerically
corresponding day in the first, second, third or sixth calendar month
thereafter, as the Company may select as provided in Section 2.13 hereof,
except that each such Interest Period which commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on
the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Termination Date; (ii) each Interest Period which would otherwise end on a day
which is not a Business Day shall end on the next succeeding Business Day (or,
if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (iii) notwithstanding clause
(i) above, no Interest Period shall have a duration of less than one month and,
if the Interest Period therefor would otherwise be a shorter period, such LIBOR
Credit Advance shall not be available hereunder.
"Inventory" means "inventory" as defined in the UCC, and all goods held
for sale at retail; goods of such description in transit to the Company; goods
of such description returned to the Company; and all documents which represent
any of the foregoing.
"Investment" has the meaning given that term in Section 6.2(f).
"Joint Venture" means, collectively, (a) the joint venture among
Affiliates of the Company and Levi Xxxxxxx & Co., and (b) the wholly-owned
subsidiary of the Company formed to hold the partnership interest in such
joint venture.
"Landlord's Agreements" means agreements with the lessors of real property
to the Company and its Subsidiaries (other than the Joint Venture) regarding
the rights in the Collateral and the Bank's rights to use and occupy the leased
premises to dispose of the Collateral, each in form and substance reasonably
satisfactory to the Bank.
"Letters of Credit" and "L/C's" means, collectively, Commercial L/Cs and
Standby L/Cs, and shall include all L/Cs heretofore issued by the Bank for
the account of the Company and its Subsidiaries which are outstanding on the
date hereof, as if such L/Cs were issued hereunder.
"L/C Fees" has the meaning given that term in Section 2.17(g).
"L/C Reimbursement Obligation" has the meaning given that term in Section
2.17(f).
"L/S Inventory" means Inventory of the Company held for sale at retail
under the trademarks of Levi Xxxxxxx & Co. or any of its Affiliates (including,
without limitation, products bearing the "Levi's", "Dockers", "501", "505" and
"550", "silverTab", and "560").
"LIBOR Base Rate" means, with respect to any LIBOR Credit Advance, the
rate per annum quoted to the Company by the Bank at approximately 11:00 a.m.
Eastern time (or as soon thereafter as practicable) on the day two Business
Days prior to the first day of the Interest Period for such Credit Advance to
be the prevailing rate per annum at which Dollar deposits having a term
comparable to such Interest Period and in an amount comparable to the
principal amount of the LIBOR Credit Advance to which such Interest Period
relates are offered to the Bank by leading banks in the interbank eurodollar
market in which the Bank normally participates.
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"LIBOR Credit Advance" means a Loan, the interest on which is determined
on the basis of rates referred to in the definition of "LIBOR Base Rate" in
this Section 1.1.
"LIBOR Rate" shall mean, for any LIBOR Credit Advance, a rate per annum
(rounded upwards, if necessary, to the nearest 1/16 of 1%) equal to (i) the
LIBOR Base Rate for such Credit Advance for the Interest Period for such
Credit Advance divided by (ii) 1 minus the Reserve Requirement for such Credit
Advance for such Interest Period.
"Lien" means with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, the Company or any of its Subsidiaries shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset. The purchase and sale rights under the governing documents for the
Joint Venture shall not constitute a Lien.
"Loans" means the aggregate principal amount of all advances by way of
Dollars loaned to the Company by the Bank under this Agreement.
"Loan Documents" means this Agreement, the Note, the Security Agreement,
the UCC Financing Statements, the Landlord's Agreements, and all other
instruments or documents from time to time executed in connection with this
Agreement, as each may be amended from time to time.
"Long-Term Lease" means a lease of (or other agreement conveying the
right to use) real property that is not cancelable on less than 90 days
notice, without penalty, by the lessee.
"Maximum Loan Exposure" means the lesser, on any day, of
(a) the amount determined in accordance with Section
2.1(a)(i);
or
(b) the amount determined in accordance with Section
2.1(a)(ii) hereof
in each instance ((a) or (b)) determined without deduction from said amount
of the Outstanding Credit Advances and Outstanding L/Cs on that day.
"Net Worth" of the Company and its consolidated Subsidiaries, means: (i)
the sum (determined on a consolidated basis) of preferred stock, common stock,
capital in excess of par value and retained earnings; less (ii) treasury
stock; less (iii) the book value of all assets, if any, that are classified
as intangibles in accordance with GAAP (without duplication of items already
deducted in arriving at retained earnings), but in any event including,
without limitation, good-will, research and development costs, trademarks,
trade names, copyrights, patents and franchises, unamortized debt discount and
expenses, and all similar items; less (iv) the balance, if any, of the note
receivable due from the Joint Venture.
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"Non-Cash Charges" means charges not involving the expenditure of cash
related to Inventory and store closings taken in the second fiscal quarter of
the Current Fiscal Year only, but in no event in excess of $13,900,000.00.
"Note" has the meaning given that term in Section 2.4.
"Obligations" means any and all liabilities, obligations and undertakings
of the Company to the Bank, of every kind and description, direct or indirect,
absolute or contingent, primary or secondary, due or to become due, sole,
joint or several, secured or unsecured, now existing or hereafter arising
under this Agreement or under any other Loan Document.
"Occupancy Costs" means common area maintenance costs, mall dues, real
estate taxes, all rent (including additional rent determined by reference to
the revenues of the tenant) paid by the Company and its Subsidiaries
(determined on a consolidated basis) under Long Term Leases, and sales taxes
on Occupancy Costs, excluding, however, utilities and telephone charges
"Origination Fee" has the meaning set forth in Section 2.3(b) hereof.
"Outstanding Credit Advances" means, as of any date, the unpaid
aggregate principal amount of all Credit Advances on such date.
"Outstanding L/C's" means, as of any particular date, the aggregate of
all face amounts (or such lesser amounts up to which drafts may be presented,
or for which any other demands for payment may be made) of all L/C's issued
and outstanding for the account of the Company on such date.
"Parent" has the meaning given that term in Section 2.16.
"Permitted Acquisition" has the meaning given that term in Section 6.2(d).
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization, entity or enterprise, or a government
or any agency or political subdivision thereof.
"Plan" means any current or future employee benefit plan or other plan
maintained for employees of the Company or any of its Subsidiaries and
covered by Title IV of ERISA, as now or hereafter amended from time to time.
"Post-Default Rate" means, in respect of any principal of any Loan or
any other amount payable by the Company under this Agreement which is not paid
when due (whether at stated maturity, by acceleration or otherwise), a rate
per annum during the period commencing on the due date until such amount is
paid in full equal to the sum of 2% plus the interest rate that would
otherwise then be applicable to Prime Rate Credit Advances.
"Prime Rate" means the greater of (a) the annual rate of interest
announced by the Bank (or its successors) from time to time at its Principal
Office as its "base rate" (which may or may not be the lowest rate available
from the Bank at a given time), or (b) the Federal Funds Effective Rate plus
2 of 1% per annum (rounded upward, if necessary, to the next 1/16 of 1%).
Each change in the Prime Rate shall be effective for the purposes of this
Agreement and the Note on and as of the date such change becomes effective.
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"Prime Rate Credit Advances" means Loans which bear interest at a rate
based upon the Prime Rate.
"Principal Office" means the office of the Bank identified in Section
9.3(b).
"Prior Fiscal Year" means the fiscal year of the Company ended
February 1, 1997 (which fiscal year is commonly known as "fiscal year 1996").
"Rating Service" means either or both of Xxxxx'x Investors Service, Inc.
or Standard & Poor's Corporation.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time
to time.
"Regulatory Change" means, with respect to the Bank, any change on or
after the date of this Agreement in United States federal or Massachusetts
laws or regulations, including Regulation D, or the adoption or making on or
after such date of any interpretations, directives or requests applying to a
class of lenders including the Bank of or under any United States federal or
Massachusetts laws or regulations (whether or not having the force of law) by
any court or governmental or monetary authority charged with the
interpretation or administration thereof.
"Relevant Asset" has the meaning set forth in Section 6.2(e).
"Reportable Event" shall have the meaning assigned to that term in Title
IV of ERISA, as now or hereafter amended from time to time.
"Reserves" means such reserves as the Bank may, from time to time,
determine in the Bank's reasonable discretion as being appropriate to reflect
the impediments, if any, to the Bank's ability to realize upon the Collateral
or affect the market value of the L/S Inventory.
"Reserve Requirement" means, for any Interest Period for a LIBOR Credit
Advance, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
Interest Period under Regulation D against "Eurocurrency liabilities" (as such
term is used in Regulation D) by member banks of the Federal Reserve System.
Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by the Bank by reason of
any Regulatory Change against (i) any category of liabilities which includes
deposits by reference to which the LIBOR Rate is to be determined as provided
in the definition of "LIBOR Base Rate" in this Section 1.1 or (ii) any category
of extensions of credit or other assets which include LIBOR Credit Advances.
"Restricted Guarantee" has the meaning given that term in Section 6.2(c).
"Restricted Payment" means, with respect to the Company or any Subsidiary
thereof, any dividend or other distribution on any shares of capital stock of
the Company or such Subsidiary (except dividends payable solely in shares of
capital stock or rights to acquire capital stock of the Company, and dividends
payable solely to the Company or to a wholly-owned Subsidiary thereof).
"Security Agreement" means a security agreement or other documents
granting the Bank a security interest in the Collateral, in form and substance
reasonably satisfactory to the Bank.
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"Standby L/C's" means letters of credit issued by the Bank pursuant to
this Agreement, the drawing under which does not require the delivery of bills
of lading, airway bills, or other similar types of documents of title, or
which are customarily referred to as "standby letters of credit".
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors
or other Persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Termination Date" shall mean June 30, 1999 unless sooner accelerated
pursuant to the provisions of Section 8.2 hereof.
"Total Liabilities" means, at any time, the sum (determined on a
consolidated basis) without duplication of (a) the consolidated liabilities of
the Company and its Subsidiaries at such time, determined in accordance with
GAAP and (b) all Guarantees of the Company and its consolidated Subsidiaries
(other than any obligations of the Company to the Joint Venture, or any real
property leases heretofore assigned by the Company to the Joint Venture) at
such time.
"Type" of a Credit Advance refers to the determination whether such
Credit Advance is a LIBOR Credit Advance or a Prime Rate Credit Advance.
"UCC" means the Uniform Commercial Code as enacted in the Commonwealth
of Massachusetts.
"UCC Financing Statements" means financing statements in compliance with
the UCC (or the laws of any other jurisdiction where filed) describing the
Collateral and to be filed to perfect the Bank's interest in the Collateral,
in form and substance reasonably satisfactory to the Bank.
1.2 Interpretation.
(a) Words of the masculine gender include correlative words of the
feminine and neuter genders.
(b) Unless the context shall otherwise indicate, words importing
the singular include the plural and vice versa.
(c) Articles and Sections referred to by number mean the
corresponding Articles and Sections of this Agreement. References to
Schedules and Exhibits are to the Schedules and Exhibits hereto.
(d) The terms "hereby", "hereof", "hereto", "herein", "hereunder"
and any similar terms as used in this Agreement, refer to this Agreement as
a whole unless otherwise expressly stated.
(e) The table of contents and the headings of Articles and
Sections are for convenience of reference only and do not limit, define or
otherwise affect the scope or content of any provision hereof.
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1.3 Accounting Terms and Determinations.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, all determinations with respect to accounting
matters hereunder shall be made, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Banks
hereunder shall be prepared, in accordance with GAAP; provided that if any
change in GAAP in itself materially affects the calculation of any financial
covenant in this Agreement, the Company may by notice to the Bank, or the Bank
may by notice to the Company, require that such covenant thereafter be
calculated in accordance with GAAP as in effect, and applied by the Company,
immediately before such change in GAAP occurs. If such notice is given, the
compliance certificates delivered pursuant to Section 6.4 after such change
occurs shall be accompanied by reconciliations of the difference between the
calculation set forth therein and a calculation made in accordance with GAAP
as in effect from time to time after such change occurs.
ARTICLE 2
CREDIT ADVANCES
2.1 The Credit Advances. (a) The Bank agrees, subject to the terms of
this Agreement, to extend the following credit (hereinafter together referred
to as the "Credit Advances"), from time to time to and including the Cut-Off
Date, in the respective aggregate amounts at any one time outstanding not to
exceed the lesser of (i) or (ii), below, where:
(i) Is the result of:
(A) The Commitment.
Minus
(B) The then Outstanding Credit Advances.
Minus
(C) The then aggregate of such Reserves as may have been
established by the Bank as provided herein.
Minus
(D) The then Outstanding L/Cs.
(ii) Is the result of:
(A) the Borrowing Base.
Minus
(B) The then Outstanding Credit Advances.
Minus
(C) The then Outstanding L/Cs.
provided that: the Outstanding Credit Advances (excluding Outstanding L/C's)
shall be paid in full, and there shall be no Outstanding Credit Advances
(excluding Outstanding L/C's), for a period of at least thirty (30)
consecutive days during the fourth quarter of the Company's fiscal year ending
January 30, 1999.
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(b) The Bank has no obligation to make any Credit Advance such that
after making such Credit Advance, the sum of the Outstanding Credit Advances
and the Outstanding L/Cs exceeds Maximum Loan Exposure. The making of Credit
Advances in excess of Maximum Loan Exposure is for the benefit of the Company
and does not affect the obligations of the Company hereunder; such Credit
Advances constitute Obligations. The making of any such Credit Advances on
any one occasion such that Maximum Loan Exposure is exceeded shall not
obligate any Bank to make any such Credit Advances on any other occasion nor
to permit such Credit Advances to remain outstanding.
(c) Upon the occurrence of any Default, the Bank may suspend its
obligation to make Credit Advances or to issue L/Cs hereunder.
2.2 Reductions of Commitments.
(a) Optional Reductions. The Company shall have the right to
terminate in full or reduce in part the unused portions of the Commitment at
any time or from time to time, upon prior notice to the Bank as provided in
Section 2.13. Each partial reduction of the Commitment shall be in an
aggregate amount at least equal to $1,000,000.
(b) No Reinstatement. The Commitment, once terminated or reduced,
may not be reinstated.
2.3 Fees.
(a) Commencing on the date of this Agreement, the Company shall pay
to the Bank a facility fee equal to three-tenths of one percent (0.30% or 30
basis points) per annum of the daily average of the aggregate amount of the
Commitment then in effect, payable in quarterly installments, in arrears, on
the first day of each October, January, April and July, to and including the
earlier of the date the Commitment is terminated or the Termination Date.
(b) The Company shall pay to the Bank an origination fee for
providing the Commitment in the amount of $62,500.00 (the "Origination Fee"),
due and payable on the date of this Agreement by each of the parties hereto.
The Origination Fee shall be deemed earned upon the execution and delivery of
this Agreement, and no portion thereof shall be subject to refund, reduction
or proration.
2.4 Note. The Credit Advances made by the Bank shall be evidenced by a
single revolving credit note of the Company (the "Note") in substantially the
form of Exhibit A hereto (and otherwise duly completed) payable to the order
of the Bank in a principal amount equal to the Commitment. All Credit
Advances, repayments thereof, the Type of and Interest Period (if any) for
each Credit Advance, and payments of interest shall be recorded by the Bank in
its books and records kept by it in the normal course of its banking business,
and such books and records shall be conclusive as to the matters stated
therein in the absence of manifest error. Prior to any transfer of the Note
by the Bank in accordance with the terms of this Agreement, no notation need
be made thereon by the Bank as to any Credit Advance, repayments thereof, the
Type of and Interest Period (if any) for such Credit Advance and payments of
interest. At the time of transfer of the Note, the Bank shall endorse thereon
the unpaid principal amount of each Credit Advance, the date each such Credit
Advance was made, the Type of and Interest Period (if any) for such Credit
Advance and the date to which interest thereon has been paid in full. The Bank
is authorized to so endorse the Note and to attach to, and make a part of, such
Note a continuation of the schedule to the Note as and when required.
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2.5 Use of Proceeds. The Letters of Credit (and the proceeds of any and
all draws or other payments thereunder) and the proceeds of the Loans shall be
used by the Company and its Subsidiaries to refinance existing Indebtedness of
the Company due to the Bank and State Street Bank and Trust Company and for
their general corporate purposes.
2.6 Borrowings.
(a) Except as provided in Section 2.6(b) below, the Company shall
give the Bank notice of each Loan borrowing to be made hereunder, except
for Loans made to pay L/C Reimbursement Obligations in accordance with
Section 2.17, by a written or telephonic request from an Authorized
Person (a "Credit Request") to the Bank in accordance with Section 2.13
hereof. Each Credit Request made by telephone shall be confirmed by an
Authorized Person (who need not be the same Authorized Person who made
the related telephonic request) in writing and sent on the day that such
Credit Request was made by telephone. Each Credit Request made in writing
and each confirmation of a Credit Request made by telephone shall be in
the form of Exhibit B. Not later than 4:00 p.m. Boston time on the date
specified for each such Credit Request hereunder, the Bank shall make
available the amount of the Loan to be made by it on such date by
delivering or crediting the amount thereof in immediately available funds
to the Company's account with the Bank designated in Section 7.3(a)(ii).
(b) Notwithstanding the provisions of Section 2.6(a), above, until
the occurrence, and during the continuance, of an Event of Default, the
Company may request (or shall be deemed to have requested upon the
presentation of drafts) loans through, and in accordance with the
procedures of, the "Client Network System" (so-called) established by the
Bank from time to time.
2.7 Prepayments and Conversions. (a) The Company shall pay the Bank,
upon demand, that amount from time to time which is necessary so that the
Outstanding Credit Advances do not exceed the Maximum Loan Exposure and,
if as a result thereof, any LIBOR Credit Advances are prepaid on other
than the last day of an Interest Period therefor, the Company shall pay
the Bank the amount payable to the Bank under Section 2.15 hereof in
respect of such prepayment.
(b) The Company shall prepay the Loans, daily, in accordance with the
provisions of Section 7.5 hereof, all such prepayments to be first applied to
Prime Rate Credit Advances; provided that until the occurrence, and during the
continuance, of an Event of Default, the Bank shall not prepay any LIBOR
Credit Advances prior to the expiration of the applicable Interest Period
therefor. If as a result of any such prepayment, after the occurrence, and
during the continuance, of an Event of Default, any LIBOR Credit Advances are
prepaid on other than the last day of an Interest Period therefor, the Company
shall pay the Bank the amount payable to the Bank under Section 2.15 hereof in
respect of such prepayment. Loans prepaid pursuant to this Section 2.7(b) may
be reborrowed in accordance with the terms and conditions of this Agreement.
(c) The Company may prepay Loans and/or convert Loans of one Type into
Loans of the other Type, at any time or from time to time, provided that (i)
the Company shall give the Bank notice of each such prepayment or conversion
as provided in Section 2.13, and (ii) if any LIBOR Credit Advances are prepaid
or converted on other than the last day of an Interest Period therefor, the
Company shall have paid the Bank the amount payable to the Bank under Section
2.15 hereof in respect of such prepayment. Loans prepaid pursuant to this
Section 2.7(c) may be reborrowed in accordance with the terms and conditions
of this Agreement.
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2.8 Repayment of Credit Advances. The Loans shall mature on, and the
Outstanding Credit Advances shall be repaid in full on, the Termination Date.
In addition, if not sooner terminated, the Commitment shall terminate on the
Termination Date.
2.9 Interest. The Company will pay to the Bank interest on the unpaid
principal amount, if any, of each Loan at a rate per annum, initially, (a) if
a LIBOR Credit Advance, at the rate equal to the LIBOR Rate plus 2.75 percent
per annum and (b) if a Prime Rate Credit Advance, the Prime Rate per annum.
Commencing on the 51st day after the end of the Company's fiscal quarter
ending January 31, 1998 and thereafter, the Company will pay to the Bank
interest on the unpaid principal amount, if any, of each Loan at a rate per
annum equal to: (a) if a LIBOR Credit Advance, the LIBOR Rate plus the LIBOR
Credit Advance Applicable Margin determined by reference to the table which
appears below (in each case, such Margin to be determined on the 51st day
after the end of each fiscal quarter of the Company (based upon the
calculation of the Cash Flow Ratio at the dates required by Section 6.3(b))
and to be effective from that date until the 50th day after the end of the
next succeeding fiscal quarter, provided that interest on LIBOR Credit
Advances will only change, if at all, at the end of the respective Interest
Periods applicable thereto), and (b) if a Prime Rate Credit Advance, the Prime
Rate.
LIBOR Credit
Cash Flow Ratio Advance Applicable
(as defined in Section 6.3(b)) Margin
------------------------------ -------------------
Less than 0.75-to-1.00, 2.75%
inclusive
Greater than 0.75-to- 2.50%
1.00 up to 1.00-to-
1.00, inclusive
Greater than 1.00-to- 2.25%
1.00 up to 1.25-to-
1.00, inclusive
Greater than 1.25-to- 2.00%
1.00
Notwithstanding any of the foregoing, after the occurrence of an Event of
Default, at the Bank's option, the Company will pay to the Bank interest at
the Post-Default Rate on all Obligations (but, as to the portion of the
Obligations consisting of interest, only to the extent legally enforceable),
until all such Obligations are paid in full. Accrued interest on each Loan
shall be payable (i) if such Loan is a Prime Rate Credit Advance, on the
first day of each calendar month during the term hereof, (ii) if such Loan is
a LIBOR Credit Advance, on the last day of the Interest Period for such Loan
(and, if such Interest Period exceeds three months' duration, quarterly, on
the last day of each three-month period during such Interest Period), and
(iii) in any event, upon the payment, prepayment or conversion thereof, but
only on the principal so paid or prepaid or converted; provided that interest
payable at the Post-Default Rate shall be payable from time to time on demand
of the Bank.
2.10 Payments. Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Company
hereunder and under the Note shall be made in Dollars and in immediately
available funds to the Bank at the Principal Office, not later than 12:00
noon Eastern time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day). The Bank may (but shall not be
obligated to) debit the amount of such payment which is not made by such time
to any ordinary deposit account of the Company with the Bank. The Bank will
give the Company telephonic or written notice of any amount to be charged
prior to charging such deposit account; however, the failure of the Bank so to
charge such account or to so notify the Company shall not affect the
obligation of the Company to pay interest, principal or other sums as provided
herein or in the Note. The Company shall, at the time of making each payment
hereunder or under the Note, specify to the Bank the Credit Advances or other
amounts payable by the Company hereunder to which such payment is to be
applied (and in the event that it fails to so specify, or if an Event of
Default has occurred and is continuing, the Bank may apply such payment as it
may elect in its sole discretion, but subject to the other terms and
conditions of this Agreement). If the due date of any payment hereunder or
under the Note would otherwise fall on a day which is not a Business Day, such
date shall be extended to the next succeeding Business Day and interest shall
be payable for any principal so extended for the period of such extension.
-15-
2.11 Computations. Interest and fees hereunder and under the Note shall
be computed on the basis of a year of 360 days and actual days elapsed
(including the first day but excluding the last day) occurring in the period
for which payable.
2.12 Minimum and Maximum Amounts; Types. Each borrowing and conversion
of principal of Loans shall be in an aggregate principal amount equal to (a)
in the case of LIBOR Credit Advances, $500,000 or a larger multiple thereof
and (b) in the case of Prime Rate Credit Advances made through the Client
Network System described in Section 2.6(b) hereof, $100,000 or a larger
multiple thereof (borrowings or conversions of Loans of different Types or, in
the case of LIBOR Credit Advances, having different Interest Periods,
outstanding at the same time hereunder to be deemed separate borrowings and
conversions for purposes of the foregoing); provided that (i) any Loans may be
in the aggregate amount of the unused portion of the Commitment and (ii) any
payment or prepayment in full of the Loans may be in the aggregate outstanding
principal amount thereof. Notwithstanding anything to the contrary contained
in this Agreement, there shall not be, at any one time, more than seven
Interest Periods in effect with respect to the LIBOR Credit Advances.
2.13 Certain Notices. Notices to the Bank of terminations or reductions
of the Commitment, of borrowings, conversions and prepayments of Loans and of
the duration of Interest Periods shall be irrevocable and shall be effective
only if received in writing by the Bank not later than the applicable Eastern
time deadline on the number of Business Days prior to the date that is the
date of the relevant termination, reduction, borrowing, conversion and/or
prepayment specified below:
Number of
Eastern Time Business Days
Notice Deadline Prior
------ ------------ -------------
Termination or reduction of 2:00 p.m. 2
the Commitment
Borrowing or prepayment of 2:00 p.m. 0
Prime Rate Credit Advances (same day)
Borrowing or prepayment of, 11:00 a.m. 2
conversion of or into, or
duration of Interest Period
for, LIBOR Credit Advances
Each such notice of termination or reduction shall specify the amount of the
Commitment to be terminated or reduced. Each such notice of borrowing,
conversion or prepayment shall specify the amount and Type of the Credit
Advances to be borrowed, converted or prepaid, the date of borrowing,
conversion or prepayment (which shall be a Business Day) and, in the case of
LIBOR Credit Advances, the duration of the Interest Period therefor (subject
to the definition of Interest Period). Each such notice of duration of an
Interest Period shall specify the LIBOR Credit Advances to which such Interest
Period is to relate. In the event that the Company fails to select the
duration of any Interest Period for any LIBOR Credit Advances within the time
period and otherwise as provided in this Section 2.13, such Credit Advances
(if outstanding as LIBOR Credit Advances) will be automatically converted into
Prime Rate Credit Advances on the last day of the then current Interest Period
for such Credit Advances or (if outstanding as Prime Rate Credit Advances) will
remain as, or (if not then outstanding) will be made as, Prime Rate Credit
Advances.
-16-
2.14 Additional Costs.
(a) Subject to paragraph (b) of this Section 2.14, the Company
shall pay to the Bank, upon demand by the Bank from time to time such amounts
as the Bank may reasonably determine to be necessary to compensate it for any
costs incurred by the Bank that the Bank determines are attributable to its
making or maintaining of any LIBOR Credit Advances hereunder or its obligation
to make any of such LIBOR Credit Advances hereunder, or any reduction in any
amount receivable by the Bank hereunder in respect of any of such LIBOR Credit
Advances or such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), in each case resulting
from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to
the Bank under this Agreement or the Note in respect of any of such LIBOR
Credit Advances (other than changes which affect taxes measured by or
imposed on the overall net income of the Bank or its lending office for
any of such LIBOR Credit Advances by the jurisdiction in which the Bank
has its Principal Office or such lending office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of, the Bank (including any
of such Credit Advances or any deposits referred to in the definition of
"LIBOR Base Rate" in Section 1.1 hereof), other than any such reserve or
other requirement with respect to LIBOR Credit Advances that are reflected
in the definition of "LIBOR Rate" in Section 1.1 hereof; or
(iii) imposes any other condition affecting this Agreement (or
any of such extensions of credit or liabilities).
(b) Notwithstanding paragraph (a) above, the Company shall be
liable for the payment of Additional Costs of the Bank only to the extent that
such Additional Costs accrue following the commencement of the first Interest
Period which commences following the date that the Bank notifies the Company
of an event entitling the Bank to compensation under paragraph (a) above.
(c) When making a claim for Additional Costs, the Bank shall furnish
to the Company a certificate setting forth in reasonable detail the basis and
and amount of each request by the Bank for such compensation. Determinations
and allocations by the Bank for purposes of this Section of the effect of any
Regulatory Change on its costs of maintaining LIBOR Credit Advances or on
amounts receivable by it in respect of LIBOR Credit Advances, and of the
Additional Amounts required to compensate the Bank under this Section 2.14,
shall be conclusive absent manifest error,provided that such determinations
and allocations are made on a reasonable basis.
-17-
2.15 Compensation. The Company shall pay to the Bank, upon the request
of the Bank, such amount or amounts as shall be sufficient (in the reasonable
opinion of the Bank) to compensate it for any loss, cost or expense incurred
by it as a result of:
(a) any payment, prepayment or conversion of a LIBOR Credit Advance
made by the Bank on a date other than the last day of an Interest Period
for such Credit Advance; and
(b) any failure by the Company to borrow a LIBOR Credit Advance to
be made by the Bank on the date for such borrowing specified in the
relevant notice of borrowing under Section 2.13 hereof;
but excluding, in any event, loss of margin for the period after any such
payment, prepayment or conversion or failure to borrow; provided that the Bank
shall have delivered to the Company a certificate as to the amount of such loss
and expense along with the basis for calculation thereof.
2.16 Capital Adequacy. If the Bank shall determine that the adoption
or implementation of any applicable law, rule, regulation or treaty regarding
capital adequacy, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof,
or compliance by the Bank (or its applicable lending office) with any request
or directive regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on capital of the Bank or any
Person controlling the Bank (a "Parent") in respect of LIBOR Credit Advances
to a level below that which the Bank (or its Parent) could have achieved but
for such adoption, change or compliance (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by the Bank to
be material, then from time to time, within 15 days after demand by the Bank,
the Company shall pay to the Bank such additional amount or amounts as will
compensate the Bank for such reduction. A statement of the Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder in reasonable detail shall be conclusive
absent manifest error; provided that the determination thereof is made on a
reasonable basis.
2.17 Letters of Credit.
(a) (i) Subject to the terms and conditions of this Agreement,
the Bank agrees to issue for the account of the Company:
(A) Commercial L/C's for the purpose of supporting
inventory purchases by the Company; and
(B) Standby L/C's for the Company's general corporate
purposes.
(b) The Bank's agreement hereunder to issue L/Cs is subject to
the following:
(i) The Outstanding L/Cs, after giving effect to the issuance
of the requested L/C, shall not exceed $2,000,000.00;
-18-
(ii) With respect to a Commercial L/C, the expiry of such L/C
is not later than the earlier of the Termination Date or one hundred
twenty (120) days from the date of issuance;
(iii) With respect to a Standby L/C, the expiry of such L/C is
not later than the Termination Date;
(iv) The aggregate of the then Outstanding L/Cs (after giving
effect to the issuance of the requested L/C) and the Outstanding Credit
Advances will not exceed Maximum Loan Exposure.
(c) In connection with the issuance of any L/C, the Company shall
provide all reasonable, customary and necessary instructions, documents and
information necessary for the proper preparation of the L/C; (ii) the Bank
shall approve the form of the L/C (which approval shall be based on usual and
customary commercial and administrative standards and shall not be
unreasonably withheld or delayed); (iii) the Company shall pay the applicable
fees as hereinafter provided for the issuance of the L/C; and (iv) the
conditions set forth in Section 4.2 below shall have been satisfied as of the
date of the issuance of the L/C.
(d) The Company's obligations under this Section 2.17 shall be
absolute and unconditional under any and all circumstances and irrespective of
the occurrence of any Default or Event of Default or any conditions precedent
whatsoever or any setoff, counterclaim or defense to payment which the Company
may have or have had against the Bank or any beneficiary of a Letter of
Credit. The Company further agrees that the Bank shall not be responsible
for, and the Company's L/C Reimbursement Obligations (as defined below) shall
not be affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents should
in fact prove to be in any or all respects invalid, fraudulent or forged, or
any dispute between or among the Company, the beneficiary of any Letter of
Credit or any financing institution or other party to which any Letter of
Credit may be transferred or any claims or defenses whatsoever of the Company,
against the beneficiary of any Letter of Credit or any such transferee. The
Bank shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Company agrees that
any action taken or omitted by the Bank under or in connection with each
Letter of Credit and the related drafts and documents, if done in good faith
and without manifest error, willful misconduct or gross negligence on the part
of the Bank shall be binding upon the Company and shall not result in any
liability on the part of the Bank to the Company; provided, however, in no
event shall the Bank be liable for any consequential, special or punitive
damages.
(e) To the extent not inconsistent with Section 2.17(c), the Bank
shall be entitled to rely, and shall be fully protected in relying upon, any
Letter of Credit, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement order or other document reasonably believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel and other experts selected by
the Bank.
(f) If any draft shall be presented or other demand for payment
shall be made under any Letter of Credit, the Bank promptly shall notify the
Company of the date and amount of the draft presented or demand for payment
and of the date and time when it expects to pay such draft or honor such
demand for payment. The Company agrees to pay to the Bank, ON DEMAND, the
amount required to pay each draft or other applicable demand for payment
pursuant to any L/C in immediately available Dollars (the "L/C Reimbursement
Obligation"). If a draft or other demand for payment is payable in foreign
currency, the Company's payment shall be made in Dollars at the Bank's selling
rate for telecommunication transfers of such foreign currency at the place of
payment in effect on the date of payment by the Company or the date of the
Bank's settlement of the obligation, whichever the Bank may require. If there
is no selling rate in effect for making such transfers on the date of payment
or settlement, as the case may be, the Company shall pay to the Bank, ON
DEMAND, an amount in Dollars equal to the Bank's actual and direct costs of
settlement of its obligations. The Company agrees to comply with all
applicable government regulations concerning foreign currency exchange that
apply to the L/C's and any drafts or other payments thereunder. Any L/C
Reimbursement Obligation not paid in advance or on the same Business Day as
the payment related thereto by the Bank: (i) shall be paid, at the Bank's
option, by the making of a Loan without further notice to or instruction from
the Company, as a Prime Rate Credit Advance; or (ii) to the extent that the
same is not paid by the making of a Loan pursuant to Clause (i) above, shall
be immediately due and payable without further notice or demand, and, until
paid in full, shall accrue interest from the date arising until paid in full
at the Post-Default Rate.
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(g) With respect to each L/C, the Company shall pay the applicable
fees indicated on the Letter of Credit Fee Table annexed hereto as Schedule
2.17(g) (together the "L/C Fees"). All L/C fees with respect to a particular
L/C shall be paid to the Bank by the Company, which shall discharge the
Company's obligation to the full extent of each such payment.
(h) The Bank shall be entitled to administer each Letter of Credit
in the ordinary course of business and in accordance with its usual practices,
modified from time to time as it deems appropriate under the circumstances,
and shall be entitled to use its discretion in taking or refraining from taking
any action in connection herewith as if it were the sole party involved. Any
action taken or omitted to be taken by the Bank under or in connection with any
Letter of Credit, if taken or omitted in the absence of manifest error, gross
negligence or willful misconduct, shall not create for the Bank any resulting
liability to the Company or any of its Subsidiaries and in no event shall the
Bank be liable for any consequential, special or punitive damages.
ARTICLE 3
COLLATERAL SECURITY
3.1 Security. Subject to the provisions of Section 3.2 hereof, the
Obligations shall be secured by a perfected first priority security interest
in the Collateral.
3.2 Release of Collateral. The Bank shall release and terminate its
security interest in the Collateral at such time as the Company and its
Subsidiaries have achieved a Cash Flow Ratio (calculated on a rolling four
quarters basis) of at least 1.25:1.00 for three consecutive fiscal quarters of
the Company and its Subsidiaries; provided that for purposes of calculating
Cash Flow (which is a component of the Cash Flow Ratio) under this Section
3.2, Non-Cash Charges shall be added back only through the fiscal quarter
ending April 30, 1998 and not thereafter; and further provided that if a
Default exists at the time that Bank would otherwise be obligated to release
and terminate its security interest, the Bank may retain its interest in the
Collateral and shall not be obligated to so release and terminate its security
interest. Any release and termination of the Bank's security interest shall
be without prejudice to the Bank's rights, as an unsecured creditor, to seek
to reach and realize upon the Collateral or any other assets of the Company to
satisfy the Obligations upon the occurrence of an Event of Default.
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ARTICLE 4
CONDITIONS OF CREDIT ADVANCES
4.1 Closing Requirements. The obligation of the Bank to make its
initial Credit Advance hereunder is subject to the fulfillment of each of the
following conditions precedent to the satisfaction of the Bank:
(a) Corporate Action. The Bank shall have received certified
copies of the corporate charter and by-laws of the Company and all
corporate action taken by the Company authorizing the execution, delivery
and performance of this Agreement and the other Loan Documents (including,
without limitation, a certificate of the Company setting forth the
resolutions of its Board of Directors authorizing the transactions
contemplated hereby).
(b) Incumbency. The Company shall have delivered to the Bank a
certificate in respect of the name and signature of each of the officers
(i) who is authorized to sign on its behalf this Agreement and the other
Loan Documents and (ii) who will, until replaced by another officer or
officers duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other
communications in connection with this Agreement and the other Loan
Documents. The Bank may conclusively rely on such certificates until it
receives notice in writing from the Company to the contrary.
(c) Note. The Bank shall have received the Note, duly completed
and executed.
(d) Fees. The Bank shall have received the Origination Fee.
(e) Amendment to Leases. The Company shall have entered into an
amendment of its Master Lease Agreement with Winthrop Resources
Corporation and shall have secured its obligations thereunder, in a
manner in all respects satisfactory to the Bank.
(f) Opinion of Counsel to the Company. The Bank shall have received
an opinion of Xxxxx, Xxxx & Xxxxx LLP, counsel to the Company, addressed
to the Bank, covering such matters related to this Agreement and the Note
as the Bank may reasonably request.
(g) Counterparts. The Bank shall have received duly executed
counterparts of this Agreement, executed by the Company and the Bank.
(h) Security. The Bank shall have received the Security Agreement
and the UCC Financing Statements duly completed and executed, and the UCC
Financing Statements shall have been filed in the appropriate filing
offices.
(i) Minimum Availability. The Company shall be able to borrow
pursuant to Section 2.1(a) hereof an amount sufficient to satisfy the
obligations due to the Bank and State Street Bank and Trust Company under
the Existing Loan.
(j) Additional Documents. The Company and its Subsidiaries shall
have executed and delivered such additional documents as the Bank and its
counsel may reasonably require.
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4.2 Conditions Precedent to Credit Advances. The obligation of the Bank
to make any Credit Advance (including the initial Credit Advance) is subject
to the conditions precedent that on the date of such Credit Advance (and
giving effect thereto):
(a) The representations and warranties made in this Agreement shall
continue to be correct in all material respects as of such date as if
made on and as of such date except (i) as otherwise permitted or
contemplated in this Agreement or (ii) as to which the Bank has received
written notice and as to which the Bank has given its written consent; and
(b) No Default shall have occurred and be continuing.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to execute this Agreement and to agree to
make the Credit Advances, the Company hereby represents and warrants to the
Bank as follows:
5.1 Corporate Existence. The Company and each of its corporate
Subsidiaries:
(i) is duly incorporated, validly existing and in good standing
under the laws of the state of its incorporation and is duly qualified
and in good standing as a foreign corporation in each jurisdiction in
which the failure to qualify would have a materially adverse effect upon
the financial condition, business or properties of the Company and its
Subsidiaries taken as a whole; and
(ii) has all requisite corporate power and authority to conduct
its business and to own its property, as now conducted or owned or as
proposed to be conducted or owned.
5.2 Performance of Loan Documents. The execution, delivery and
performance by the Company of the Loan Documents are within its corporate
powers, have been duly authorized by all necessary corporate and other action
and do not and will not:
(i) violate any provision of its certificate of incorporation or
by-laws, as amended to date;
(ii) constitute or result in the Company or any of its Subsidiaries
being in breach of or default under or conflict with any material statute
or other law, or any material order, regulation or ruling of any court or
other tribunal or of any governmental or administrative authority or
agency of which the Company has knowledge, or any material provision of
any material indenture, agreement, lease, instrument or other undertaking
to which the Company or any of its Subsidiaries is a party or by which it
or its property or assets may be bound or affected; or
(iii) result in the imposition of any Liens on any property or assets
of the Company or any of its Subsidiaries other than in favor of the Bank.
5.3 Governmental Approval.
(a) The Company and each of its Subsidiaries possesses all consents,
licenses, franchises and permits of governmental and administrative authorities
and agencies as are necessary for the conduct of their respective businesses
and the ownership of their respective properties and assets, as now conducted
and owned or as proposed to be conducted and owned, except where the absence
of same will have no material adverse effect on the ability of the Company to
perform its obligations under any Loan Document.
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(b) No authorization, consent, exemption of or filing or
registration with any court or other tribunal or any governmental or
administrative authority or agency is or will be necessary to the valid
execution, delivery or performance, in any material way, by the Company of any
Loan Document.
5.4 Binding Obligations. Each of the Loan Documents constitutes, and
when duly executed and delivered for value, will constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with the respective terms thereof, subject to bankruptcy, insolvency
and similar laws of general application affecting the rights and remedies of
creditors and, with respect to the availability of the remedies of specific
enforcement, injunctive relief or other equitable remedies, to the discretion
of the court before which any proceeding therefor may be brought.
5.5 Capital Stock; Subsidiaries.
(a) All outstanding capital stock of the Company and each of its
corporate Subsidiaries has been validly issued and is fully paid and non-
assessable. As of the date of this Agreement, the Company does not have any
Subsidiaries other than as indicated on Schedule 5.5 hereto. The Company
owns, free and clear of all Liens, all of the outstanding shares of each
corporate Subsidiary.
(b) None of Company's subsidiaries (other than the Joint Venture)
owns or has any interest in any assets (i) which, if owned by the Company,
would constitute Collateral (other than Deposit Accounts maintained at the
Bank with de minimis balances) or (ii) which are necessary or useful to the
Bank in connection with its realization upon any Collateral.
5.6 Financial Statements.
(a) The audited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of the Prior Fiscal Year, and the
related audited statements of consolidated income and retained earnings and
consolidated changes in cash flows, for the Prior Fiscal Year then ended,
reported on by Coopers & Xxxxxxx, independent accountants (correct and
complete copies of which have been furnished to the Banks), fairly present the
consolidated financial condition of the Company and its consolidated
Subsidiaries as of such date and the results of consolidated operations for
the Prior Fiscal Year, all in accordance with GAAP.
(b) The unaudited consolidated balance sheets of the Company and
its consolidated Subsidiaries as of November 1, 1997 and the related unaudited
statements of consolidated income and consolidated changes in cash flows, for
the nine month period then ended (correct and complete copies of which have
been furnished to the Banks), fairly present the consolidated financial
condition of the Company and its consolidated Subsidiaries as of such date and
the results of consolidated operations for the nine month period ended on such
date, all in accordance with GAAP, subject to year-end audit adjustments and
the absence of footnotes.
(c) Except as described in Schedule 5.6(c), since November 1, 1997,
there has been:
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(i) no change in the consolidated assets or liabilities
of the Company and its consolidated Subsidiaries, other than changes in
the ordinary course of business, none of which has been, either singly or
in the aggregate, materially adverse;
(ii) no materially adverse depletion of cash (other than
through the payment of long-term debt of the Company prior to the date
hereof) or material decrease of working capital other than such as result
from seasonal variations or other changes in the ordinary course of
business;
(iii) no material damage, destruction or loss (whether or
not covered by insurance) adversely affecting a material portion of its
property, assets or business;
(iv) no material controversy with its employees or with any
labor organization; or
(v) no other occurrence or development whatsoever
materially affecting adversely its business, operations or condition,
financial or otherwise, or a material portion of its property or assets,
other than seasonal variations in the ordinary course of business.
5.7 Litigation. Except as described in Schedule 5.7, to the knowledge of
any executive officer (as defined in Rule 405 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended) of the
Company, there are no actions, suits, investigations or proceedings pending
or, to the knowledge of any officer or inside director of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any
of the respective property or assets of any of them, by or before any court or
other tribunal or any governmental or administrative authority or agency,
which, if determined adversely to the Company or its Subsidiaries would,
singly or in the aggregate, have a material adverse effect on the condition,
financial or otherwise, of the Company or its Subsidiaries, considered as a
whole or which calls into question the validity of any Loan Document.
5.8 Regulations U and X. None of the Company or any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U or X of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Credit Advance
hereunder will be used to purchase or carry any such margin stock.
5.9 Encumbrances. The Company and each of its Subsidiaries has good
and clear record and marketable title to all of its respective property and
assets, and there are no Liens on any of such property or assets, except those
permitted in Section 6.2(a).
5.10 Defaults. Neither the Company nor any of its Subsidiaries is, to
the knowledge of the Company, in violation of or default under any statute or
other law or under any order, regulation or ruling of any court or other
tribunal or any governmental or administrative authority or agency, or in any
material respect under any indenture, agreement, lease, instrument or other
undertaking to which the Company or such Subsidiary is a party or by which it
or its respective property or assets may be bound or affected, which violation
or default would have a material adverse effect on the business of the Company
and such Subsidiary, considered as a whole.
5.11 Taxes. Except as described in Schedule 5.11, the Company and each
of its Subsidiaries has filed all material tax returns and reports (federal,
state and local) required to be filed by it, and paid all material taxes,
assessments and other governmental charges imposed upon it and its respective
property and assets, other than (i) such as are presently payable without
interest or penalty, (ii) such as are being contested in good faith by
appropriate proceedings, and for which adequate reserves are being maintained
in accordance with GAAP, or (iii) with respect to local taxes, such local
taxes payable by the Company which (A) the chief financial officer of the
Company has no knowledge of the Company's obligation to pay and (B) the
failure to pay does not have a material adverse effect on the business,
property, assets, or condition, financial or otherwise, of the Company and its
Subsidiaries. Except as described on Schedule 5.11, the federal income tax
returns of the Company and its Subsidiaries have not been audited by the
Internal Revenue Service within the last three years, all prior audits have
been closed, and there are no unpaid assessments, penalties or other charges
arising from such prior audits.
-24-
5.12 Information. The certificates, reports and other papers furnished by
or on behalf of the Company to the Bank in connection with this Agreement and
the Existing Loan, taken as a whole, do not contain any material misstatement
of fact or fail to state a material fact necessary to make the statements
contained therein not misleading.
5.13 Employee Benefit Plans. Except as described on Schedule 5.13,
neither the Company nor any Subsidiary has any Plan or is a sponsor of any
multi-employer Plan; and no Reportable Event, which is now continuing, has
occurred with respect to any Plan.
5.14 Investment Company Act. Neither the Company nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
investment company, within the meaning of the Investment Company Act of 1940,
as amended.
5.15 Restrictions on Sale of Collateral. The Company is not party to any
agreement or understanding which limits, impairs, or otherwise restricts the
ability of the Bank to freely sell and dispose of any of the Collateral
(including, without limitation, any repurchase agreements, rights of first
refusal or other agreements which limit or condition the time, manner, place
or price for the sale or disposition of the Collateral), other than certain
Trademark License Agreements with Levi Xxxxxxx & Co. dated November 1, 1991
and November 15, 1996.
5.16 Store Closures. The Company intends to close, or is in the process
of closing, those retail store locations described on Schedule 6.1(j).
ARTICLE 6
COVENANTS OF THE COMPANY
6.1 Affirmative Covenants. So long as any Credit Advance or any other
Obligation shall remain unpaid, or the Commitment is outstanding, the Company
will, unless the Bank shall otherwise consent in writing:
(a) Taxes - Accrue, and cause each of its Subsidiaries to accrue,
all tax liabilities according to GAAP, and pay and discharge and cause
each of its Subsidiaries to pay and discharge, all taxes, assessments and
other governmental charges imposed upon the Company and each Subsidiary
and its respective property and assets, prior to the date on which
interest, penalties or liens accrue or attach in a material amount, and
all other known material liabilities and obligations, when due (including,
without limitation, all Obligations), provided that neither the Company
nor any Subsidiary shall be required to pay any such tax, assessment,
governmental charge or other liability (other than Obligations) which is
being contested in good faith by appropriate proceedings, so long as
adequate reserves therefor are maintained, and provided further that
payments to trade creditors shall be deemed paid when due if made within
such period of time as payments are made to trade creditors in the
customary course of business of the Company and its Subsidiaries unless
the failure to make such payments to trade creditors within such period
of time would have a material adverse effect on the business of the
Company and its Subsidiaries, considered as a whole.
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(b) Insurance - Maintain, and cause each of its Subsidiaries to
maintain, insurance with responsible insurance companies, in such amounts
and against such risks and to such extent as is usually carried by
companies engaged in a similar business and owning similar property in
the same general areas in which the Company and each of its Subsidiaries
conducts its respective business or owns its respective property and under
similar circumstances; and furnish to the Bank appropriate evidence of the
maintenance of such insurance at such times as the Bank may reasonably
request.
(c) Corporate Existence - Maintain, and, unless done in a
transaction permitted by Section 6.2(d), cause each of its Subsidiaries
to maintain, its good standing in the state of its incorporation or
formation, as the case may be, and qualify and remain qualified and in
good standing in each other jurisdiction where the failure to qualify in
such other jurisdiction would have a material adverse effect upon the
financial condition, business or properties of the Company and its
Subsidiaries taken as a whole; provided however, the Company may, with
the prior written consent of the Bank (which consent shall not be
unreasonably withheld or delayed), dissolve a Subsidiary if such
Subsidiary is no longer actively conducting its business; and maintain in
good standing all material consents, licenses, franchises and permits of
public and private authorities as are necessary for the conduct of its
respective business and the ownership of its respective property and
assets.
(d) Compliance with Law - Comply, and cause each of its Subsidiaries
to comply, with the requirements of all statutes and other laws and all
rules, regulations and orders of any court or other tribunal or
governmental or administrative authority or agency applicable to the
Company or any of its Subsidiaries, or their respective businesses,
properties or assets, the failure to comply with which would have a
material adverse effect on the business of the Company and its
Subsidiaries, considered as a whole.
(e) Maintenance of Property - Maintain, and cause each of its
Subsidiaries to maintain, all property, which is necessary in the proper
conduct of its respective business, in good working order and condition
for such use, and make all necessary repairs thereto and replacements
thereof, reasonable wear and tear excepted.
(f) Maintenance of Books and Records - Maintain, and cause each of
its Subsidiaries to maintain, proper and accurate corporate, financial
and other records and books of account.
(g) Inspection - Upon reasonable notice and at all reasonable times
during normal business hours, permit, and cause each of its Subsidiaries
(other than the Joint Venture) to permit, the Bank, and Bank's
accountants, auditors, attorneys and other representatives of the Bank,
to examine and make copies of and abstracts from its respective books of
account, correspondence (other than correspondence with its respective
attorneys that is subject to the attorney-client privilege or that is not
permitted to be disclosed pursuant to a confidentiality agreement between
the Company and/or any Subsidiary, on the one hand, and any other Person
that is not an Affiliate of the Company, on the other) and other records,
to examine its property and to discuss its respective financial and other
affairs with any of its respective officers, and any accountants or
auditors hired by it, it being understood that the Bank will not divulge
information obtained from such examination or received from the Company
or any of its Subsidiaries to other persons, except in connection with
the proper administration of the Loan Documents and the regulation and
examination of the Bank's banking business by state and federal
authorities.
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(h) Further Assurances - From time to time, execute and deliver all
such instruments and documents, and do or cause to be done all such acts
and things, as the Banks may reasonably request, more completely to
assure to the Bank its rights hereunder and to effectuate the intent of
this Agreement.
(i) Bank as Principal Depository - Maintain the Bank as its
principal depository, bank of account and lending bank.
(j) Landlord's Agreements - Use its best efforts to cause to be
executed and delivered to the Bank, Landlord's Agreements for each of the
Company's real property leases and warehousing arrangements (other than
the Joint Venture, those locations described in Schedule 6.1(j) hereto,
and locations presently doing business under the "Boston Traders" name),
in each case in form and substance satisfactory to the Bank:
(i) with respect to those locations and warehouses described
on Schedule 6.1(j)(i), on or before December 19, 1997; and
(ii) with respect to those locations described on Schedule
6.1(j)(ii), on or before January 31, 1998
provided, however, that nothing contained herein shall obligate the
Company to pay such landlords any amounts in addition to the payments
reserved in the leases with such landlords and reasonable attorneys' fees
incurred by the landlords in reviewing the Landlord's Agreements in order
to obtain such Landlord's Agreements.
6.2 Negative Covenants. So long as any Credit Advance or any other
Obligation remains unpaid, or the Commitment remains outstanding, the Company
will not, and will not permit any Subsidiary (other than the Joint Venture)
to, unless the Bank shall otherwise consent in writing:
(a) Liens - Create, incur, assume or suffer to exist, any Lien on
or with respect to any of its respective property or assets, whether now
owned or hereafter acquired, or income or profits therefrom, except the
following:
(i) Liens for taxes, assessments or other governmental
charges which are being contested in good faith by appropriate
proceedings, and for which adequate reserves are being maintained, as to
which no Lien having priority over the Bank's Lien shall have arisen;
(ii) Statutory Liens of carriers, warehousemen, mechanics,
materialmen, repairmen and others arising in the ordinary course of
business for sums not overdue, or which are being contested in good faith
by appropriate proceedings;
(iii) Liens incurred or deposits or pledges made in
connection with worker's compensation, health or unemployment insurance,
social security laws, or similar legislation or in connection with or to
secure the payment or performance of bids, tenders, sale agreements,
leases, trade agreements, statutory obligations or surety bonds, or other
Liens incidental to the ordinary conduct of its respective business or
the ownership of its respective property and assets, which are not
incurred in connection with the borrowings of money; or judgment liens in
proceedings which are being appealed and with respect to which there has
been a stay of execution; provided that all of the foregoing do not in
the aggregate materially adversely affect the value of its respective
property or assets or impair the use thereof in the operation of its
respective business;
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(iv) Landlord's Liens arising under real property leases,
or Liens on property hereafter acquired (either in connection with
purchase money mortgages, rental purchase agreements, including capital
leases, or conditional sale or other title retention agreements), which
are restricted to the property so acquired and do not secure Indebtedness
exceeding the fair value (at the time of acquisition) thereof;
(v) Liens in favor of the Bank;
(vi) Liens described on Schedule 6.2(a);
(vii) Easements, rights of way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Company or any of its Subsidiaries; and
(viii) License agreements pursuant to which the Company
licenses any of its trademarks, trade names, service marks, trade dress,
or other intellectual property.
(b) Indebtedness - Create, incur, assume or suffer to exist any
Indebtedness, except the following:
(i) Indebtedness to the Bank, whether arising hereunder
or otherwise;
(ii) Indebtedness described on Schedule 6.2(b), and
extensions or renewals thereof provided that there is no increase in
the unpaid principal amount thereof; and
(iii) Indebtedness secured by Liens as described in Section
6.2(a)(iv).
(c) Guarantees - Create or become or remain liable with respect to
any Guarantee; provided that (i) the Company may guaranty the payment of
amounts due under corporate credit cards issued to the Company and any of
its employees, provided such cards are only intended for use in respect
of expenses incurred in the ordinary course of the Company's business;
(ii) the Company may guaranty store leases entered into by a Subsidiary
of the Company as tenant; (iii) Guarantees in favor of the Bank; (iv) the
Company may enter into and remain liable under Guarantees of other
obligations of its wholly-owned Subsidiaries, provided that the underlying
obligation could have been incurred by the Company as primary obligor,
without violation of the provisions hereof; and (v) the Company may enter
into and remain liable under any Guarantee of Indebtedness and/or other
liabilities of its Subsidiaries not otherwise permitted under clauses (i)
through (iv) above (hereinafter a "Restricted Guarantee"), so long as,
giving effect to the creation of such Restricted Guarantee, (A) the
aggregate amount of all Indebtedness and liabilities guaranteed under all
Restricted Guarantees entered into after the date hereof by the Company
does not exceed ten percent (10%) of the consolidated total liabilities
of the Company and its wholly-owned Subsidiaries at the time that any
such Restricted Guarantee is created, and (B) at the time of the creation
of such Restricted Guarantee (and giving effect thereto) no Default shall
have occurred and be continuing.
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(d) Consolidation, Mergers or Acquisition - The Company will not,
and will not permit any of its Subsidiaries (other than the Joint Venture)
to, be a party to any merger or consolidation, or acquire the business of
any Person except (i) the merger of any wholly-owned Subsidiary of the
Company into the Company or any other wholly-owned Subsidiary of the
Company; and (ii) so long as no Default shall have occurred and be
continuing hereunder at the time of such acquisition or after giving
effect thereto, Permitted Acquisitions (as defined below).
For purposes of this Section 6.2(d), a "Permitted Acquisition" shall mean
an acquisition complying with the following:
(A) Such acquisition shall be of assets ancillary, incidental or
necessary to the retail sale of apparel and related activities, or of
100% of the stock of a corporation whose assets consist substantially of
such assets, or through the merger of such a corporation with the Company
(with the Company as the surviving corporation), or with a Subsidiary of
the Company, where, giving effect to such merger, such corporation becomes
a wholly-owned Subsidiary of the Company; and
(B) If such acquisition includes the acquisition of assets by,
or the merger of, the Company, there shall have been no change in the
identity of the chief financial officer or the chief executive officer of
the Company as a consequence of such acquisition, or if there has been
such a change, the Bank shall have consented in writing to such change in
identity within thirty (30) days thereafter (which consent shall not be
unreasonably withheld or delayed).
(e) Sales of Assets - Sell, assign, lease to another or otherwise
transfer, convey or dispose of any Relevant Assets (as hereinafter
defined), the book value of which, when added to the book value of all
other Relevant Assets sold, assigned, leased, transferred, conveyed or
disposed of during any fiscal year of the Company equals or exceeds
$500,000. The term "Relevant Asset" shall mean any asset of the Company
or any Subsidiary thereof (other than the Joint Venture) other than (i)
inventory, and obsolete or worn-out property and equipment, disposed of
in the ordinary course of business, (ii) any assets of the Company
disposed of in connection with any store closings that are charged against
the reserve established for the Company's Current Fiscal Year, and (iii)
the assets described on Schedule 6.2(e) hereof. Notwithstanding the
foregoing provisions of this paragraph (e), (A) any Subsidiary may make
any sale, assignment, lease or other transfer otherwise prohibited by
this paragraph if the same is to a Person with whom such Subsidiary may
merge with or into pursuant to paragraph (d) above; and (B) the Company
and any Subsidiary may contribute assets to partnerships and joint
ventures to the extent permitted by permitted by Section 6.2(f)(viii) or
(ix).
(f) Investments - Make any loan or advance to any person, or
purchase or otherwise acquire, the capital stock or a substantial portion
of the assets or obligations of, or any interest in, any Person (an
"Investment"), except for the following:
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(i) (A) loans to officers and employees not exceeding
$400,000 in the aggregate at any one time outstanding, provided that
each such loan is for a term of not more than 90 days from the date
on which it is made and is paid within such 90-day period; and (B)
loans to the Joint Venture not exceeding $7,500,000 in the aggregate
at any one time outstanding, provided that no such loans to the Joint
Venture are outstanding on the last day of each fiscal year of the
Company or during any so-called "clean-up period" set forth in an
agreement to which the Company and the Joint Venture are parties
relating to any such loans;
(ii) advances to employees or officers, with respect to
reimbursable expenses incurred in the ordinary course of business;
(iii) acquisition of property, subject to other limitations
set forth in this Agreement, to be used in the ordinary course of
its respective business;
(iv) as long as no Loans are outstanding and no Defaults
then exist Eligible Investments made at or with the Bank; provided
that such Eligible Investments shall be pledged to the Bank as
additional collateral for the Obligations;
(v) advances to vendors or suppliers, for the purpose of
obtaining services or supplies, in the ordinary course of business;
(vi) advances to contractors for the construction or
renovation of stores, buildings or improvements for use in the
business of the Company;
(vii) Investments by the Company in its wholly-owned
Subsidiaries, Investments by such Subsidiaries in the Company, and
Investments by the Company in its treasury stock;
(viii) the contribution by the Company and/or any Subsidiary
to the Joint Venture of (A) "Original Levi's Stores", leases for
such Stores and related assets in connection with the creation of
the Joint Venture or (B) other assets from time to time thereafter;
provided that, in the case of any contribution described in clause
(B) hereof, no Default shall have occurred and be continuing at the
time of such contribution (and giving effect thereto); and
(ix) any other Investment by the Company or any Subsidiary
(other than the Joint Venture); provided that, giving effect to the
making of such other Investment, (A) the aggregate amount of all
such other Investments made after the date hereof by the Company does
not exceed ten percent (10%) of the consolidated total assets of the
Company and its wholly-owned Subsidiaries at the time that such other
Investment is made and (B) at the time of such other Investment (and
giving effect thereto) no Default shall have occurred and be
continuing.
(g) Line of Business - Fail to continue (or, subject to Section
6.1(c) or Section 6.2(d), allow its Subsidiaries (other than the Joint
Venture) to fail to continue) to carry on substantially the same business
as carried on during the Prior Fiscal Year, and engage in no business
other than such business and activities that are ancillary, incidental or
necessary thereto; provided, that the foregoing shall not prohibit the
expansion or contraction of the Company's business so long as the Company
is still engaged solely in the retail sale of apparel, footwear and
related accessories and other activities, ancillary, incidental or
necessary thereto.
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(h) Restricted Payments - Declare or make any Restricted Payment if
at the time of such declaration or payment, or after giving effect
thereto, a Default or Event of Default shall have occurred and be
continuing.
(i) Agreements Regarding Sale of Collateral. Enter into any
agreement or understanding which limits, impairs, or otherwise restricts
the ability of the Bank to freely sell and dispose of any of the
Collateral (including, without limitation, any repurchase agreements,
rights of first refusal, or other agreements which limit or condition the
time, manner, place or price for the sale or disposition of the
Collateral).
(j) Subsidiaries Assets. Permit any of the Company's Subsidiaries
(other than the Joint Venture) to operate any retail or wholesale business
or to own or have any interest in any assets (i) which, if owned by the
Company, would constitute Collateral (other than Deposit Accounts
maintained at the Bank with de minimis balances), or (ii) which are
necessary or useful to the Bank in connection with its realization upon
the Collateral.
6.3 Financial Covenants. So long as any Credit Advance or any other
Obligation remains unpaid, or a request for a borrowing hereunder remains
outstanding, the Company shall not, unless the Bank shall otherwise consent in
writing:
(a) Ratio of Total Liabilities to Net Worth - Permit the ratio of
Total Liabilities to Net Worth at the end of any fiscal quarter of the
Company and its consolidated Subsidiaries to be more than 0.65-to-1.0.
(b) Cash Flow Ratio - Permit the ratio ("Cash Flow Ratio"),
calculated as of the end of any fiscal quarter of the Company and its
consolidated Subsidiaries for the period of four fiscal quarters then
ended, of (i) Cash Flow to (ii) Fixed Charges for such period to be less
than 1.0-to-1.0; provided that for purposes of this Section 6.3(b), Non-
Cash Charges shall not be added back in determining Cash Flow; and further
provided that, the Company shall not be obligated to comply with this
covenant until the fiscal quarter ending January 30, 1999.
(c) Inventory Turnover Ratio - Permit the ratio, calculated as at
the end of any fiscal quarter of the Company and its consolidated
Subsidiaries, of (i) the aggregate consolidated cost of goods sold of the
Company and its consolidated Subsidiaries for the period of four fiscal
quarters then ended to (ii) total Inventory (on a FIFO basis) of the
Company and its consolidated Subsidiaries at the end of such fiscal
quarter, to be less than 1.50:1.00.
(d) Levi's Outlet by Designs Inventory Turnover Ratio - Permit the
ratio, calculated as at the end of any fiscal quarter of the Company and
its consolidated Subsidiaries, of (i) the aggregate consolidated cost of
goods sold of the Company and its consolidated Subsidiaries for the period
of four fiscal quarters then ended to (ii) total Inventory at the Levi's
Outlet by Designs stores (on a FIFO basis) of the Company and its
consolidated Subsidiaries to be less than (x) 1.75:1.00 as of the end of
the fiscal quarter ending January 31, 1998, and (y) 2.00:1.00 at the end
of each fiscal quarter thereafter.
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(e) Minimum EBITDA - Permit EBITDA of the Company and its
consolidated Subsidiaries to be less than the following amounts for the
periods indicated:
Period Minimum EBITDA
------ --------------
Fiscal Quarter Ending ($6,000,000.00)
January 31, 1998
Fiscal Quarters Ending
April 30, 1998 and July 31, 1998 ($2,500,000.00)
on a cumulative basis
Fiscal Quarters Ending
July 31, 1998 and October 31, 1998 $6,250,000.00
on a cumulative basis
Fiscal Year Ending January 30, 1999 $7,700,000.00
It is expressly understood by the Company and the Bank that the above-described
ratios shall be calculated excluding the effect of the accounts of the Joint
Venture (including, without limitation, the investment of the Company and/or
its Subsidiaries in the Joint Venture).
6.4 Reporting Requirements. So long as any Loan or any other Obligation
shall remain unpaid or any Commitment remains outstanding, the Company will,
unless the Bank shall otherwise consent in writing, furnish to the Bank:
(a) Promptly after an executive officer or inside director of the
Company has knowledge of the occurrence of a Default, which is then
continuing, a certificate of the chief executive officer or the chief
financial officer of the Company setting forth the details thereof and
the action which the Company has taken or proposes to take with respect
thereto.
(b) Within 50 days after the end of each fiscal quarter of each
fiscal year of the Company, a quarterly report on Form 10-Q (or successor
form) of the Company and its consolidated Subsidiaries with respect to
such fiscal quarter.
(c) Within 95 days after the end of each fiscal year of the Company,
commencing with the Current Fiscal Year, an annual report on Form 10-K (or
successor form) of the Company and its consolidated Subsidiaries with
respect to such fiscal year, accompanied by the report of Coopers &
Xxxxxxx, or other independent accountants reasonably satisfactory to the
Bank, that the financial statements included therein have been prepared
in accordance with GAAP, and that the audit in connection therewith has
been made in accordance with generally accepted auditing standards,
together with a report of such accountants that:
(i) they do not have knowledge of the existence, as at the date
of such report, of any Event of Default that is continuing on such
date, or, if an Event of Default has occurred and is continuing, a
statement as to the nature and period of existence thereof; and
(ii) the calculations contained in the certificate referred to
in clause (ii) of paragraph (d), below are correct.
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(d) Each set of financial statements furnished pursuant to
paragraph (b) or (c) of this Section shall be accompanied by a certificate
of the chief executive officer or chief financial officer of the Company
(i) stating, to the best of such officer's knowledge after reasonable
investigation, whether any Default exists on the date of such certificate
and, if any Default then exists, setting forth the details thereof and the
action which the Company is taking or proposes to take with respect
thereto and (ii) setting forth in reasonable detail the calculations
necessary to show whether the Company and its Subsidiaries were in
compliance with each of the financial ratios and restrictions contained
in this Article 6 on the date of such financial statements, including
certification of compliance with the provisions of Section 6.2(f)(i)(B).
(e) Each set of financial statements furnished pursuant to
paragraph (b) or (c) above as to any fiscal quarter or fiscal year of the
Company, shall be accompanied by a profit and loss statement for such
fiscal quarter or fiscal year, as the case may be, with respect to each
store operated by the Company or its Subsidiaries (including the Joint
Venture), in substantially the form customarily furnished to the Bank by
the Company prior to the date hereof.
(f) Within 95 days of the end of each fiscal year of the Company, a
projected budget for the Company and its consolidated Subsidiaries for the
period commencing the beginning of the subsequent fiscal year and
continuing for a period of three total fiscal years or the remaining years
to the Termination Date, whichever is less, such budget to include
quarterly and annual consolidated cash flow statements, balance sheets,
and profit and loss statements, all in reasonable detail and duly
certified by the chief financial officer of the Company. In addition, the
Company will provide a description of the material assumptions made in the
preparation of such financial statements and a certification by the chief
financial officer that such assumptions are reasonable.
(g) Promptly after any officer or inside director of the Company has
knowledge thereof, written notice of:
(i) Any action, suit, investigation or proceeding pending
or threatened against or affecting either it or any Subsidiary or any
respective property or assets of the Company or any Subsidiary, by or
before any court or other tribunal or any governmental or
administrative authority or agency, which, if successful, would
adversely affect materially the business, property, assets or
condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole;
(ii) Termination or potential termination of any material
consent, license, permit or franchise necessary for the conduct of
the business or the ownership of the properties and assets of the
Company and its Subsidiaries taken as a whole, which, if terminated,
would have a materially adverse affect on the business, property,
assets or condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole;
(iii) Any material loss, damage or destruction (regardless
of whether the same is covered by insurance) to or of a material
portion of any of the properties or assets of the Company and its
Subsidiaries taken as a whole;
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(iv) Any material controversy with the respective employees
of the Company or any Subsidiary or with any labor organization; and
(v) Any other development, adversely affecting materially
the business, property, assets or condition, financial or otherwise
of the Company and its Subsidiaries taken as a whole.
(h) Promptly upon receipt thereof, copies of all management and
other reports issued by the independent accountants to the Company or its
Board of Directors.
(i) Promptly upon the occurrence of any change in the identity of
any of the President and Chief Executive Officer, the Executive Vice
President, General Counsel and Secretary, and the Chief Financial Officer
of the Company, notice of such change.
(j) Promptly after the Company knows or has reason to know that any
Reportable Event with respect to any Plan has occurred, the statement of
the chief financial officer of the Company setting forth details as to
such Reportable Event and the action which the Company has taken or
proposes to take with respect thereto, together with a copy of the notice
of such Reportable Event to the Pension Benefit Guaranty Corporation.
(k) Promptly after the filing thereof with the Secretary of Labor or
the Pension Benefit Guaranty Corporation, copies of each annual report
which is filed with respect to each Plan for each Plan year.
(l) Promptly after the transmission or filing thereof, copies of all
notices of annual or special meetings of stockholders, proxy statements,
and other statements which the Company sends to its stockholders or other
holders of any of its securities, or files with the Securities and
Exchange Commission; provided, however, the Company shall be under no
obligation to file with the Bank any such statements filed with the
Securities and Exchange Commission which are not public information.
(m) With reasonable promptness, such other information respecting
the Company or any of its Subsidiaries (other than the Joint Venture,
except to the extent expressly provided in Section 6.4(n) hereof) as the
Bank may from time to time reasonably request, it being understood that
the Bank will not divulge any such information obtained from the Company
or any of its Subsidiaries except in connection with the proper
administration and the enforcement of the Loan Documents and the
regulation and examination by federal or state authorities of the Bank's
banking business, or as the Bank believes in good faith is otherwise
required by law.
(n) Within 50 days after the end of each fiscal quarter of each
fiscal year of the Joint Venture a quarterly report consisting of a
balance sheet, income statement and cash flow statement comparing the
current fiscal quarter, comparable fiscal quarter of the previous year
and current fiscal quarter budget, and, within 95 days after the end of
each fiscal year of the Joint Venture, an annual financial statement
prepared by an independent certified public accountant.
(o) On Monday of each week (as of the preceding Saturday), a
certificate, substantially in the form of Schedule 6.4(o) annexed hereto,
calculating and certifying to the Bank the Borrowing Base as provided
herein, and the resulting respective availabilities for Credit Advances.
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ARTICLE 7
CASH MANAGEMENT
7.1 Depository Accounts.
(a) Annexed hereto as Schedule 7.1 is a Schedule of all
present DDA's of the Company and its Subsidiaries, which Schedule
includes, with respect to each depository (i) the name and address of
that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) if available, a contact
person at such depository.
(b) The Company and its Subsidiaries will not establish any
DDA hereafter unless, contemporaneous with such establishment, the
Company delivers to the Bank a notification to the institution in
which such DDA is to be established of the Bank's security interest
in the DDA (in form reasonably satisfactory to the Bank).
7.2 Credit Card Receipts; Collections of Accounts.
(a) Annexed hereto as Schedule 7.2 is a Schedule which
describes all arrangements to which the Company or any of its
Subsidiaries is a party with respect to the payment to the Company
or its Subsidiaries of the proceeds of all credit card charges for
sales by the Company and its Subsidiaries.
(b) The Company and its Subsidiaries shall deliver to the Bank
agreements with each of the Company's and its Subsidiaries' credit
card clearinghouses and processors (in form reasonably satisfactory
to the Bank), which provides that payment of all credit card charges
submitted by the Company and its Subsidiaries to that clearinghouse
or other processor and any other amount payable to the Company and
its Subsidiaries by such clearinghouse or other processor shall be
directed to such account as may be designated by the Bank.
7.3 The Concentration and the Funding Accounts.
(a) The following accounts have been or will be established
(and are so referred to herein):
(i) The CONCENTRATION ACCOUNT: Established by the Company with
the Bank (Account No. 0000000).
(ii) The FUNDING ACCOUNT: Established by the Company with the
Bank (Account No. 0000000 and as soon as open and being utilized Account
No. 80-048-046).
(b) The contents of each DDA and the Concentration Account
constitutes Collateral and Proceeds of Collateral.
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7.4 Proceeds and Collection of Accounts.
(a) All cash, cash equivalents, checks, credit card slips and
receipts arising from the sale of the Inventory of the Company and
its Subsidiaries and all General Intangibles shall be held in trust
by the Company and its Subsidiaries for the Bank; and shall be
deposited and/or transferred only to the Concentration Account.
(b) The Company shall cause the ACH or wire transfer to the
Concentration Account, on each Business Day (and whether or not there
are then Outstanding Credit Advances) of
(i) the then available contents of each DDA (other than the
Funding Account), each such transfer to be net of a balance, not to exceed
$500.00, to be maintained in the subject DDA; and
(ii) the proceeds of all credit card charges not otherwise
provided for pursuant hereto.
provided that the Company shall not be responsible for any delays in any ACH
or wire transfer beyond the control of the Company.
7.5 Payment of Obligations.
(a) On each Business Day, the Bank shall apply, towards the
Obligations, the then collected balance of the Concentration Account
(subject to one Business Day's clearance and collection).
(b) The Bank shall transfer to the Funding Account any
surplus in the Concentration Account remaining after the application
towards the Obligations referred to in Section 7.5(a), above.
7.6 The Funding Account. Except as otherwise specifically provided in,
or permitted by, the within Agreement, all checks shall be drawn by the
Company upon, and other disbursements made by the Company solely from, the
Funding Account.
7.7 Inapplicability of Provisions. The provisions of this Article 7
shall not apply to (a) the Joint Venture, any of its DDAs, cash or credit
card collections; or (b) to the Company's payroll and SEC DDAs, provided that
such DDAs shall be utilized only for the specific purposes for which
established and shall not be used as a general depository of the funds of the
Company and its Subsidiaries.
ARTICLE 8
DEFAULTS
8.1 Events of Default. The occurrence of any one of the following
events, where applicable, of, by or against the Company, shall constitute an
Event of Default under this Agreement:
(a) Failure to make any payment of principal of or interest on any
Loan, or any other amount payable hereunder within five (5) Business Days
after the same is due (whether by demand or on the Termination Date).
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(b) Any representation, warranty or statement made by the Company
herein or in connection with this Agreement, any Credit Advance or any
other Obligation shall prove to have been incorrect or false in any
material respect when made or furnished.
(c) Failure to perform or observe any covenant contained in Section
6.1(b), Section 6.2 or Section 6.3 or in Article 7 hereof.
(d) Failure to perform or observe any material covenant or condition
(other than as provided in paragraphs (a), (b) or (c) above) contained in
this Agreement, the Loan Documents or any other agreement with the Bank,
which failure shall continue for more than 30 days after the Company knew
or should have known of such default.
(e) Failure of the Company or any Subsidiary thereof to make any
payment in respect of Indebtedness (other than Credit Advances) in the
aggregate principal amount of more than $500,000 when due or within any
applicable grace period.
(f) Except as provided in clause (p) below or with respect to the
Atlantic Excluded Claim (until the Company's contest of such claim is
resolved), any event or condition occurs that results in the acceleration
of the maturity of any Indebtedness (other than Credit Advances) of the
Company or any of its Subsidiaries in the aggregate principal amount of
more than $500,000 or that enables (or, with the giving of notice or
passage of time would enable) a holder of such Indebtedness, or any Person
acting on behalf of such holder, to accelerate the maturity thereof.
(g) Termination of the Company's existence or, except as permitted
in Section 6.1(c) or Section 6.2(d), any of its Subsidiaries' existence,
suspension or discontinuance of its respective business; or insolvency or
inability of the Company or any of its Subsidiaries to pay its respective
debts as they mature.
(h) Making of a general assignment for the benefit of creditors or
of a composition or similar arrangement with creditors; conveyance of all
or a substantial part of its property or assets to a trust mortgagee or
liquidating agent; or appointment, in a voluntary proceeding, of a
receiver, trustee or similar judicial officer or agent, to take charge of
or liquidate all or a substantial part of the respective property or
assets of the Company or any of its Subsidiaries.
(i) Appointment of such a receiver, trustee or similar judicial
officer or agent, in any involuntary proceeding, or action by any court to
take jurisdiction of all or a substantial part of the Company's or any of
its Subsidiaries respective property, unless the Company or such
Subsidiary is diligently contesting such appointment or the taking of such
jurisdiction by appropriate action, or if, despite such contest, such
officer or agent is not discharged or such jurisdiction is not
relinquished within a period of 90 days.
(j) Commencement of any voluntary proceeding under any provision of
Title 11 of the United States Code, as now or hereafter amended, or any
other proceeding, under any state or federal law, now or hereafter in
force, relating to bankruptcy, insolvency, reorganization, or otherwise to
the relief of debtors or the readjustment of indebtedness; or commencement
of any such proceeding against the Company or any of its Subsidiaries,
unless the Company or such Subsidiary is diligently contesting the same by
appropriate action, or if, despite such contest, such proceeding is not
dismissed within a period of 90 days.
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(k) Attachment, levy or seizure of or on any material asset or
assets of the Company or of any of its Subsidiaries, which is not released
within 30 days.
(l) Entry of a final uninsured judgment which, singly or with any
other outstanding final uninsured judgments, against the Company or any of
its Subsidiaries, exceeds an aggregate amount of $500,000 if such judgment
is not discharged or execution thereof stayed pending appeal within 60
days, or if, within 60 days after the expiration of any such stay, it is
not discharged or satisfied.
(m) With respect to any Plan as to which the Company or any of its
Subsidiaries may have any liability, (i) a contribution failure occurs
sufficient to give rise to a lien enforceable by the Pension Benefit
Guaranty Corporation under Section 302(f)(1) of ERISA, or (ii) there
shall exist a deficiency of more than $250,000 in the Plan assets
available to satisfy the benefits guaranteed under ERISA with respect to
such Plan and steps are undertaken to terminate such Plan or such Plan is
terminated or the Company or such Subsidiary withdraws from or institutes
steps to withdraw from such Plan or any Reportable Event with respect to
such Plan shall occur.
(n) Substantial (determined with respect to the Company and its
Subsidiaries taken as a whole) loss, theft, damage or destruction to or of
any substantial portion of the Company's or any of its Subsidiaries'
property (unless covered by insurance); or occurrence of any change in the
Company's or any of its Subsidiaries', condition or affairs, financial or
otherwise, which would have a material adverse effect on the ability of
the Company to perform the requirements of this Agreement or the Note.
(o) The Company or any Subsidiary shall fail to pay aggregate
monthly rent of at least $180,000 when due, or within any applicable
grace period, under leases for any stores that the Company or any
Subsidiary has not intentionally closed, or any other event or condition
occurs that permits (or, with the giving of notice or the passage of time
would permit) leases for stores that the Company or such Subsidiary has
not intentionally closed, with aggregate monthly rents of at least
$180,000, to be terminated prior to the stated termination date thereof.
(p) The occurrence of any default, after any applicable grace or
cure period, pursuant to that certain Master Lease Agreement (i) of the
Company with Winthrop Resources Corporation and all Schedules thereto, or
(ii) the Joint Venture with Winthrop Resources Corporation and all
Schedules thereto, as each may be amended and in effect from time to time.
(q) The occurrence of any Change in Control of the Company or its
Subsidiaries.
(r) The occurrence of any material default by the Company under a
certain Trademark License Agreement with Levi Xxxxxxx & Co. dated November
15, 1996, which default is not cured (if curable) within any applicable
grace period set forth in such Agreement, the existence of which default
would permit Levi Xxxxxxx & Co. to terminate such Agreement; or the
termination of such Agreement whether due to the expiration of its term or
for any other reason.
(s) The occurrence of any material default by the Company under
certain Trademark License Agreement with Levi Xxxxxxx & Co. dated November
1, 1991, which default is not cured (if curable) within any applicable
grace period set forth in such Agreement, the existence of which default
would permit Levi Xxxxxxx & Co. to terminate such Agreement, or the
termination of such Agreement whether due to the expiration of its term or
for any other reason, in each case only if such default or termination
would limit, restrict, impair or prohibit the Company's sale at retail of
L/S Inventory.
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8.2 Rights and Remedies on Default. Upon the occurrence of any Event of
Default specified in Sections 8.1(h), 8.1(i), or 8.1(j), the Commitment shall
forthwith terminate and the Bank shall be relieved of all obligations to make
Credit Advances and to issue L/Cs and the entire unpaid principal amount of all
Loans then outstanding, all interest accrued and unpaid thereon and all other
amounts payable under this Agreement, and all other Obligations of the Company,
shall be forthwith due and payable, without any further notice or action by the
Bank. Upon the occurrence of any other Event of Default and at any time
thereafter, unless the same is previously cured, the Bank may:
(i) declare the unused portion of the Commitment terminated,
whereupon the same and the obligation of the Bank to make Credit Advances
and to issue L/Cs shall be thereupon terminated;
(ii) declare the entire unpaid principal amount of all Loans
then outstanding, all interest accrued and unpaid thereon and all other
amounts payable under this Agreement, and all other Obligations of the
Company, to be forthwith due and payable, whereupon the same shall become
forthwith due and payable and the Commitment shall be terminated, without
presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived by the Company;
(iii) require the Company and its Subsidiaries to furnish the
Bank with cash collateral for all outstanding L/Cs in an amount equal to
one hundred five percent (105%) of the maximum undrawn amount thereof.
Such cash collateral may be immediately applied against any drawing under
any such L/C without further notice to, or consent from, the Company or
its Subsidiaries, and to the extent not utilized for such purpose, shall
secure, and may be applied against, the other Obligations.
(iv) exercise all rights and remedies hereunder, under the Note
and under any other Loan Documents, and under any other agreements with
the Bank; and all other rights and remedies which the Bank may have under
applicable law.
8.3 Setoff.
(a) The Bank, and any bank wholly-owned by the Bank, may, upon the
occurrence and during the continuance of an Event of Default hereunder, to the
fullest extent permitted by applicable law, off-set any deposits (general or
special, including, but not limited to indebtedness evidenced by a certificate
of deposit, whether matured or unmatured) and any other indebtedness at any
time held or owing by the Bank or such bank for the account of the Company
against any principal of or interest on any Credit Advance or any other amount
due hereunder (regardless of when such deposits or indebtedness are due to the
Company). The Bank or such bank shall provide such notice of such setoff as
may be provided for in its customary operating procedures as in effect at the
time.
(b) Nothing contained in this Section 8.3 shall be deemed to affect
the authorization set forth in Section 2.10.
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ARTICLE 9
MISCELLANEOUS
9.1 Waivers; Remedies. The Company waives notice of all action by the
Bank in reliance hereon, but not any notice which is expressly required by any
provision of this Agreement to be given to the Company by the Bank. No failure
or delay by the Bank in exercising any right or remedy hereunder or under any
other Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right or remedy preclude any other or further
exercise thereof or the exercise of any other right or remedy hereunder or
thereunder. No amendment, modification, termination, consent or waiver of any
provision of this Agreement or of any other Loan Document shall in any event
be effective unless the same shall be set forth in a writing signed by the Bank
and the Company, and then only to the extent specifically set forth therein.
The rights and remedies of the Bank hereunder and under the other Loan
Documents are cumulative and not exclusive of any other rights and remedies
under other agreements of the Company with the Bank or under applicable law,
and all such rights and remedies may be exercised singly or concurrently.
9.2 Action by Bank. No notice to or demand upon the Company in any
instance, shall entitle the Company to any other or further notice or demand
under similar or other circumstances, unless expressly required by this
Agreement, any other Loan Document or applicable law. The Bank shall be
entitled to rely upon any instrument or communication in any form believed by
it to be genuine and to have been signed or sent by a proper Person. The Bank
shall not be liable for any action taken or omitted to be taken by it hereunder
or under any other Loan Document, except for its own manifest error, gross
negligence or willful misconduct.
9.3 Notices.
(a) All notices, demands and other communications between any of
parties hereunder to the other shall be deemed effective (except for Credit
Requests, which shall be effective when received by the Bank) when made in
writing and delivered by hand or sent by first class mail or by facsimile
transmission, and addressed to the other party as set forth below:
If to the Company:
00 X Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Chief Financial
Officer and Vice President
Telecopy: 000-000-0000
with a copy to Xxxxx X. Xxxxx, Esq., Executive Vice President,
Secretary and General Counsel, at the same address.
or to such other address of which notice is given in the same manner provided
that failure of the Bank to deliver a copy of any notice to the Company's
General Counsel shall not constitute a failure to send notice to the Company.
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If to the Bank:
BankBoston, N.A.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxx, Director
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other address as the Bank may designate in writing to the
Company, in each case with a copy to:
Xxxxx X. Xxxxxx, Esq.
Xxxxxx & Xxxxxxxxxx
Xxxxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
provided that the failure of the Company to deliver a copy of any notice to
Xxxxx X. Xxxxxx shall not constitute a failure to send notice to the Bank.
(b) Credit Requests from the Company to the Bank shall be delivered
in accordance with Section 2.6 and notices to the Bank shall be addressed to
the Bank at:
BankBoston, N.A.
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxx, Director
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other address as the Bank may designate in writing to the other
parties hereto.
9.4 Costs and Expenses. The Company will pay to the Bank, on request, or
the Bank may charge the Company's deposit accounts with the Bank or any other
account of the Company:
(i) all reasonable costs and expenses paid or incurred by the Bank
in connection with the preparation of this Agreement and the other Loan
Documents, and any amendment thereof, including, without limitation, the
reasonable fees and disbursements of Xxxxxx & Xxxxxxxxxx, special counsel
for the Bank, with respect thereto; and
(ii) the reasonable fees and disbursements of such counsel or other
legal counsel, independent public accountants and other experts retained
by the Bank in connection with the collection or enforcement of any Loan
Documents and any collateral or security therefor, and the defense by the
Bank of any claims asserted against it with respect thereto, whether or
not, in any instance, litigation is commenced.
The Bank will give the Company notice of any amount to be charged to any
account of the Company pursuant to this Section prior to charging such
account.
-41-
9.5 Indemnification. The Company agrees to indemnify and hold harmless
the Bank from and against any and all claims, actions and suits whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses arising out of this Agreement or any of the other Loan
Documents or the transactions contemplated hereby including, without
limitation, (a) any use by the Company of the proceeds of any of the Loans, or
the relationship of the Company and the Bank under this Agreement or any
transaction contemplated pursuant to this Agreement, (b) the Company's entering
into or performing this Agreement or any of the other Loan Documents or (c) any
administrative or investigative proceeding by any governmental authority
directly or indirectly related to a claim, demand, action or cause of action
described in clause (a) or (b) above, (d) with respect to the Company and its
respective properties and assets, the violation of any environmental law, the
release or threatened release of any hazardous substances or any action, suit,
proceeding or investigation brought or threatened with respect to any hazardous
substances (including, but not limited to claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such claim; provided however that the Bank shall not be
entitled to indemnification if the Bank acted in bad faith, with gross
negligence, or with willful misconduct. If any claim, demand, action or cause
of action is asserted against any indemnitee, such indemnitee shall promptly
notify the Company, but the failure to so promptly notify the Company shall not
affect the Company's obligations under this section. Each indemnitee is
authorized to employ counsel in enforcing its rights hereunder and in defending
against any claim, demand, action or cause of action covered by this section
(the reasonable fees and expenses of which counsel shall promptly be paid by
the Company). The provisions of this Section 9.5 shall survive the repayment
of the Obligations and the termination of the obligations of the Bank
hereunder.
9.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when so executed and delivered, shall be deemed to
be an original and all of which taken together shall constitute but one and the
same Agreement.
9.7 Severability. Any determination that any provision of this Agreement
or any application thereof is invalid, illegal, or unenforceable in any respect
in any instance shall not affect the validity, legality, or enforceability of
such provision in any other instance, or the validity, legality, or
enforceability of any other provision of this Agreement.
9.8 Incorporation of Negotiations.
This Agreement and the other Loan Documents incorporate all discussions
and negotiations between the Company and the Bank, either express or implied,
concerning the matters included herein and in such other Loan Documents, any
custom, usage, or course of dealings to the contrary notwithstanding. No such
discussions, negotiations, custom, usage, or course of dealings shall limit,
modify, or otherwise affect the provisions hereof or thereof.
9.9 Effective Date; Assignment. This Agreement shall become effective
when executed by the Company and the Bank and thereafter shall be binding upon
and inure to the benefit of the Company and the Bank and their respective
successors and assigns, except that (a) the Company may not assign its rights
hereunder or any interest herein without the prior written consent of the Bank,
and (b) the Bank may not assign its rights hereunder or any interest herein
without the prior written consent of the Company (which consent shall not be
unreasonably withheld or delayed), provided that the Bank may grant
participations in any Credit Advance or L/C to any bank wholly-owned by it
without the consent of the Company. No assignee, participant or other
transferee of the Bank's rights (including a transferee by reason of a business
combination involving the Bank) shall be entitled to receive any greater
payment under Section 2.14 or 2.16 than the Bank would have been entitled to
receive with respect to the rights transferred, unless such transfer is made
with Company's prior written consent or at a time when the circumstances
giving rise to such greater payment did not exist.
-42-
9.10 Survival of Covenants. All of the covenants, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and the making of any and all Credit Advances and issuance of any
L/Cs. All covenants, representations and warranties contained in any of the
other Loan Documents, and in any certificate, statement, report or other
document delivered by or on behalf of the Company as provided herein, or
otherwise, in connection with the transactions contemplated hereby, shall be
deemed to have been made in this Agreement as of the date of such certificate,
statement, report or other document.
9.11 GOVERNING LAW. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF
MASSACHUSETTS.
9.12 WAIVER OF JURY TRIAL. EXCEPT TO THE EXTENT PROHIBITED BY LAW WHICH
CANNOT BE WAIVED, THE BANK AND THE COMPANY HEREBY IRREVOCABLY WAIVE TRIAL BY
JURY IN CONNECTION WITH ANY ACTION OR PROCEEDING OF ANY NATURE WHATSOEVER
ARISING UNDER, OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE
LENDER/COMPANY RELATIONSHIP BEING ESTABLISHED HEREBY, WHETHER ARISING UNDER
STATUTE (INCLUDING ANY FEDERAL OR STATE CONSTITUTION) OR UNDER THE LAW OF
CONTRACT, TORT OR OTHERWISE AND INCLUDING, WITHOUT LIMITATION, ANY CHALLENGE TO
THE LEGALITY, VALIDITY, BINDING EFFECT OR ENFORCEABILITY OF THIS SECTION OR
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
9.13 Attachments. All Exhibits and Schedules hereto are hereby
incorporated into and made a part of this Agreement.
9.14 Severability. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid, such invalidity shall
not affect any other provision which can be given effect without the invalid
provision or application, and to this end the provisions hereof shall be
severable.
9.15 Reliance by Company. The Company shall be entitled to rely upon any
certifications, notices or other communications (including any communications
by telephone, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the Bank.
IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to
be executed and delivered as a sealed instrument, at Boston, Massachusetts, by
their duly authorized officers, all as of the date first written above.
DESIGNS, INC.
By: /s/ Xxxx X. Xxxxxxxx
------------------------
Title: President and CEO
BANKBOSTON, N.A.
By: /s/ Xxxxxx X. XxXxxxx
----------------------
Title: Director
