EXHIBIT 10.59
AMENDED AND RESTATED
ACCOUNTS FINANCING AGREEMENT
[SECURITY AGREEMENT]
DATED AS OF JUNE 1, 1997
AMONG
CONGRESS FINANCIAL CORPORATION (SOUTHWEST)
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
AND
FARAH U.S.A., INC.
VALUE CLOTHING COMPANY, INC.
FARAH MANUFACTURING (U.K.) LIMITED
0000 XXXXX XXXX
XXXXXXXX X
XXXXX 000
XX XXXX, XXXXX 00000-0000
FARAH U.S.A., INC.
Dated as of June 1, 1997
[Amending and Restating Accounts
Financing Agreement [Security Agreement]
dated August 2, 1990
Congress Financial Corporation (Southwest)
0000 Xxx Xxxx Xxxxx
Xxxxxx, Xxxxx 00000
Gentlemen:
Congress Financial Corporation (Southwest) (sometimes called "Lender"),
Farah U.S.A., Inc. ("Farah USA"), Value Clothing Company, Inc. ("Value
Clothing"), Farah Manufacturing (U.K.) Limited ("Farah UK," and together with
Farah USA and Value Clothing, individually, sometimes called a "Borrower" or
collectively the "Borrowers") have entered into financing arrangements pursuant
to the Accounts Financing Agreement [Security Agreement], dated as of August 2,
1990, between Lender and Farah USA (the "Original Accounts Financing Agreement")
and various Supplements thereto, as amended pursuant to Amendment No. 1 to
Financing Agreements, dated November 5, 1990, Amendment No. 2 to Financing
Agreements, dated February 11, 1991, Amendment No. 3 to Financing Agreements,
dated January 29, 1992, Amendment No. 4 to Financing Agreements, dated June 25,
1992, Amendment No. 5 to Financing Agreements, dated August 31, 1992, Amendment
No. 6 to Financing Agreements, dated September 4, 1992, Amendment No. 7 to
Financing Agreements, dated September 16, 1992, Amendment No. 8 to Financing
Agreements, dated as of June 7, 1993, Amendment No. 9 to Financing Agreements,
dated July 16, 1993, Amendment No. 10 to Financing Agreements, dated November 3,
1993, Amendment No. 11 to Financing Agreements, dated as of February 9, 1994
("Amendment No. 11"), Amendment No. 12 to Financing Agreements, dated as of July
14, 1994, Amendment No. 13 to Financing Agreements, dated as of March 7, 1995,
Amendment No. 14 to Financing Agreements, dated as of April 5, 1995, and as
amended pursuant to the letter agreement dated as of October 28, 1992, Amendment
No. 15 to Financing Agreements, dated as of August 1, 1995 and Consent,
Amendment and Agreement dated as of June 5, 1996 (collectively, as so amended
and as amended hereby, the "Financing Agreement", and together with all
Supplements thereto, including, but not limited to, the Covenant Supplement to
Accounts Financing Agreement [Security Agreement], dated as of August 2, 1990,
the Trade Financing Agreement Supplement to Accounts Financing Agreement
[Security Agreement] dated as of August 2, 1990, (collectively, the "Original
Financing Agreements").
Borrower and Lender desire to amend and restate certain of the Original
Financing Agreements as of June 1, 1997 to clarify their existing agreements by
consolidating the foregoing amendments, to make certain new agreements and to
execute the Farah (UK) Supplement, dated as of June 1, 1997 (the "Farah (UK)
Supplement"), among Borrowers and Lender (amending and restating Amendment No.
11), and all other agreements, documents and instruments at any time executed
and/or delivered in connection with any of the foregoing or related thereto, as
the same exist as of June 1, 1997 and as the same may hereafter be further
amended, modified, supplemented, extended, renewed, restated, confirmed or
replaced, collectively, the "Financing Agreements").
The Original Financing Agreements include guarantees and related
security agreements by companies affiliated with the Borrowers. The Lender and
the Borrowers desire that each of Farah Incorporated, Farah International, Inc.,
Farah Manufacturing Company, Inc., Farah Manufacturing Company of New Mexico,
Inc., Farah Clothing Company, Inc., a Delaware corporation, Value Clothing
Company, Inc., FTX, Inc., Value Slacks, Inc., and Corporacion Farah-Costa Rica
S.A. (collectively the "Guarantors") confirm their respective guarantees and
related security agreements.
This Agreement amends and restates the terms and conditions of the
Original Accounts Financing Agreement (as so amended restated, and as the same
may hereafter be further amended, modified, supplemented, extended, renewed,
restated, confirmed or replaced, this "Agreement" or the "Amended and Restated
Accounts Financing Agreement") and effective as of the date of acceptance by
Lender, Borrowers may continue to obtain loans and the financial accommodations
from Lender for Borrowers' general corporate and business purposes and to
finance certain capital expenditure of Farah USA upon the terms and the security
referred to herein. We shall be jointly and severally bound hereunder.
Section I. DEFINITIONS.
1.1. All terms used herein which are defined in Article 1 or Article 9
of the Uniform Commercial Code ("UCC") shall have the meanings given therein,
unless otherwise defined in this Agreement or in a Supplement, and all
references to the plural herein shall also mean the singular.
1.2. "Accounts" shall mean all of our present and future accounts,
contract rights, general intangibles, chattel paper, documents and instruments,
as such terms are defined in the UCC, including, without limitation, all
obligations for the payment of money arising out of our sale, lease or other
disposition of good or other property or rendition of services.
1.3. "Account Debtor" shall mean each debtor or obligor in any
way obligated on or in connection with any Account.
1.4. "Annual Rate" shall have the meaning set forth in Section 3.1
hereof.
1.5. "Bank" shall mean CoreStates Bank, N.A. (or its successors) in
Philadelphia, Pennsylvania.
1.6. "Borrower(s)" shall mean, collectively, Farah USA, Value
Clothing and Farah UK.
1.7. "Collateral" shall have the meaning set forth in Section 4.1
hereof.
1.8. "Covenant Supplement" shall mean the Amended and Restated Covenant
Supplement, dated as of June 1, 1997, among Borrowers and Lender as amended,
modified, supplemented, extended, renewed, restated, confirmed or replaced from
time to time.
1.9. "Current Assets" shall mean the aggregate net book value of all
assets of any Person and its Subsidiaries, on a consolidated basis, calculating
the book value of inventory for this purpose on a first-in-first-out basis,
which would, in accordance with GAAP, be classified as current assets.
1.10. "Current Liabilities" shall mean all Indebtedness of any Person
and its Subsidiaries, on a consolidated basis, which would in accordance with
GAAP be classified as current liabilities; and in any event including
Indebtedness payable on demand or within one (1) year from the date of
determination without any option of the obligor to extend or renew beyond such
year, all accruals for federal or other taxes based on or measured by income and
payable within such year, and including the current portion of long-term debt
required to be paid within one (1) year.
1.11. "Eligible Accounts" shall mean Accounts created by us in the
ordinary course of business arising out of our sale of goods or rendition of
services, which are and at all times shall continue to be acceptable to you in
all respects. Standards of eligibility may be fixed and revised from time to
time solely by you in your exclusive judgment. In determining eligibility, you
may, but need not, rely on agings, reports and schedules of Accounts furnished
by us, but reliance by you thereon from time to time shall not be deemed to
limit your right to revise standards of eligibility at any time as to both our
present and future Accounts. In general, an Account shall be deemed eligible
unless: (a) the Account Debtor on such Account is and at all time continues to
be acceptable to you, (b) such Account complies in all respects with the
representations, covenants and warranties hereinafter set forth, and (c) no more
than 90 days have elapsed since the invoice date of such Account if the Account
by its terms is payable within 30 days of the invoice date and no more than 120
days have elapsed since the invoice date of such Account if the Account by its
terms is payable within more than 30 days of the invoice date.
1.12. "Eligible Inventory" shall mean Eligible Inventory of Farah USA
consisting of Finished Goods, Work-in-Process and Raw Materials acceptable to
Lender in all respects. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in its exclusive reasonable
judgment. In determining such acceptability, Lender may, but need not, rely on
report and schedules of Eligible Inventory furnished to Lender by Farah USA, but
reliance thereon by Lender from time to time shall not be deemed to limit its
right to revise standards of eligibility at any time. In general, except in
Lender's sole discretion, Eligible Inventory shall not include (A) components
which are not to be incorporated into Finished Goods, (B) spare parts, (C)
packaging and shipping materials, (D) supplies used or consumed in the business
of Farah USA, (E) Eligible Inventory subject to a security interest or lien in
favor of any third party, (F) xxxx and hold goods, (G) Eligible Inventory which
is not subject to the perfected security interest of Lender (other than
Work-in-Process located outside the United
States of America), (H) defective goods, (I) obsolete, slow-moving and/or
discontinued goods, (J) "seconds" and (K) Eligible Inventory purchased on
consignment.
1.13. "Events of Default" shall have the meaning set forth in
Section 8.1 hereof.
1.14. "Excess" shall have the meaning set forth in Section 3.4
hereof.
1.15. "Farah USA" shall mean Farah U.S.A., Inc., a Texas corporation
and its successors and assigns.
1.16. "Farah Clothing" shall mean Farah Clothing Company, Inc., a
Delaware corporation, and its successors and assigns.
1.17. "Farah UK" shall mean Farah Manufacturing (U.K.) Limited, an
England corporation, and its successors and assigns.
1.18. "Finished Goods" shall mean Eligible Inventory of Borrowers
consisting of first quality finished goods held for resale to customers of Farah
USA in the ordinary course of our business.
1.19. "Governmental Agency" shall mean the government of any country,
or any province or state thereof or a local municipality or other political
subdivision thereof or any body, department, authority, agency, public
corporation or instrumentality of any of the foregoing.
1.20. "Interest Period" means, with respect to any Libor Rate loan,
each period commencing on the date such loan is established or converted from a
Prime Rate loan or the last day of the next preceding Interest Period with
respect to such Libor Rate loans, and ending on the numerically corresponding
day in the first, second, third or sixth calendar month thereafter, as we may
select, 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: (a) 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 succeeding business day falls in the next succeeding
calendar month, on the next preceding business day); (b) any Interest Period
which would otherwise extend beyond the termination date of this Agreement as
set forth in Section 9.1 below applicable to a given loan shall end on such
termination date; (c) no more than five (5) Interest Periods shall be in effect
at the same time; (d) no Interest Period for any Libor Rate loan shall have a
duration of less than one (1) month and, if the Interest Period would otherwise
be a shorter period, the related Libor Rate loan shall not be available
hereunder; and (e) no Interest Period in respect of any term loan may extend
beyond a principal repayment date thereof unless, after giving effect thereto,
the aggregate principal amount of such loan subject to Libor Rate having
Interest Periods
that end after such principal payment date shall be equal to or less than the
aggregate principal amount of such loan to be outstanding hereunder after such
principal payment date.
1.21. "Libor Rate" means, for any Libor Rate loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) offered to Bank at approximately 11:00 a.m. Eastern Standard
time (or as soon thereafter as practicable) two business days prior to the first
day of such Interest Period by leading banks in the London interbank market of
U.S. dollar deposits in immediately available funds having a term comparable to
such Interest Period and in an amount comparable to the principal amount of the
Libor loan applicable to such bank to which such Interest Period relates.
1.22. "Maximum Credit" shall mean, with respect to all Borrowers, the
aggregate amount of $75,000,000; provided, however, that such "Maximum Credit"
shall, except in Lender's sole discretion, have the following sublimits: (i)
with respect to Farah UK only, (A) the aggregate principal amount of loans at
any one time outstanding shall not exceed $5,000,000 in U.S. Dollars or U.S.
Dollar Equivalents; and (B) the aggregate principal amount of the loans
outstanding at any time based on the Eligible Inventory of Farah UK, regardless
of the amount of such inventory, shall not exceed $1,750,000 in U.S. Dollars or
U.S. Dollar Equivalents; (ii) with respect to Farah USA, Farah UK and Value
Clothing, the aggregate unpaid principal amount of the loans outstanding at any
time based on the Eligible Inventory of Farah USA and the Value Slacks Eligible
Inventory, regardless of the amounts of such Eligible Inventory or Value Slacks
Eligible Inventory, shall not exceed $35,000,000; (iii) with respect to Value
Clothing only, the aggregate unpaid principal amount of the loans outstanding at
any time based on the Value of the Value Slacks Eligible Inventory, regardless
of the amounts of the Value Slacks Eligible Inventory, shall notwithstanding
clause (ii) not exceed $3,000,000; and (iv) with respect to Farah USA only, the
aggregate amount of the term loan permitted under Section 2.1.1(e) shall not
exceed the principal sum of $10,000,000 and shall reduce the Maximum Credit by
the principal amount thereof which is outstanding from time to time.
1.23. "Maximum Legal Rate" shall have the meaning set forth in
Section 3.4 hereof.
1.24. "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less sales, excise or similar taxes, and less returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed.
1.25. "Obligations" shall mean any and all loans, indebtedness,
liabilities and obligations of any kind owing by us to you, however evidenced,
whether as principal, guarantor or otherwise, whether arising under this
Agreement, any other Financing Agreement, any Supplement, or otherwise, whether
now existing or hereafter arising, whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary liquidated or
unliquidated, secured or unsecured, original, renewed or extended, and whether
arising directly or acquired from others (including, without limitation, your
participations or interests in our obligations to others) and including, without
limitation, your charges, commissions, interest, expenses, costs and attorneys'
fees chargeable to us in connection with all of the foregoing.
1.26. "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including a business trust),
unincorporated association, joint stock corporation, trust, joint venture or
other entity or government or any agency or instrumentality or political
subdivision thereof.
1.27. "Prime Rate" shall mean the prime commercial interest rate
(presently 8.5% per annum) from time to time publicly announced by CoreStates
Bank, N.A. (or its successors) at its offices in Philadelphia, Pennsylvania
whether or not such announced rate is the best rate available at such bank.
1.28. "Raw Materials" shall mean Eligible Inventory of Farah USA
consisting of raw materials used by Farah USA to produce Work-in-Process and/or
Finished Goods (and including piece goods, major trim and minor trim).
1.29. "Records" shall have the meaning set forth in Section 4.1(f)
hereof.
1.30. "Renewal Date" shall mean July 1, 2001, subject to Section 9.1
hereof.
1.31. "Revolving Loans" shall mean all loans hereunder other than
the Term Loan.
1.32. "Subsidiary" shall mean any corporation, association or
organization, active or inactive, as to which more than fifty (50%) percent of
the outstanding voting stock or shares or interests shall now or hereafter be
owned or controlled, directly or indirectly by any Person, any Subsidiary of
such Person, or any Subsidiary of such Subsidiary.
1.33. "Supplements" shall mean, collectively, the Covenants Supplement,
the Trade Financing Supplement, the Farah UK Supplement, the Amended and
Restated Inventory and Equipment Security Agreement Supplement, dated as of June
1, 1997, by Farah USA and other Supplements to any Financing Agreements that may
exist from time to time, as any of the same may be amended, modified,
supplemented, extended, renewed, restated, confirmed or replaced from time to
time.
1.35. "Term Loan" or "term loan" shall mean the loan described in
Section 2.1.1(e) hereof.
1.36. "Trade Financing Supplement" shall mean the Amended and Restated
Trade Financing Supplement dated as of June 1, 1997, among Borrowers and Lenders
amended, modified, supplemented, extended, renewed, restated, confirmed and
replaced from time to time.
1.37. "Value" shall mean cost computed on a first-in-first-out basis
or market price, as determined by Lender, whichever is lower.
1.38. "Value Clothing" shall mean Value Clothing Company, Inc., a
Texas corporation and wholly owned subsidiary of Value Slacks, and its
successors and assigns.
1.39. "Value Slacks" shall mean Value Slacks, Inc., a Texas
corporation, and its successors and assigns.
1.40. "Value Slack Companies" shall mean, individually and
collectively, Value Slacks and Value Clothing.
1.41. "Value Slacks Eligible Inventory" shall mean inventory of the
Value Slacks Companies consisting of finished goods which are located at the
premises of the Value Slacks Companies and acceptable to Lender in all respects.
General criteria for Value Slacks Eligible Inventory may be established and
revised from time to time by Lender in its exclusive reasonable judgment. In
determining such acceptability, Lender may, but need not, rely on reports and
schedules of such Eligible Inventory furnished to Lender by either or both of
the Value Slacks Companies or Farah USA, but reliance thereon by Lender from
time to time shall not be deemed to limit its right to revise standards of
eligibility at any time. In general, except in Lender's sole discretion, Value
Slacks Eligible Inventory shall not include (A) raw materials, (B)
work-in-process, (C) components which are not to be incorporated into finished
goods, (D) spare parts, (E) packaging and shipping materials, (F) supplies used
or consumed in the business of the Value Slacks Companies, (G) Eligible
Inventory subject to a security interest or lien in favor of any third party,
(H) xxxx and hold goods, (I) Eligible Inventory which is not subject to the
perfected security interest of Lender and (J) Eligible Inventory purchased on
consignment.
1.42. "We," "our," "us," or "Borrowers" shall collectively refer to
Farah USA, Value Clothing and Farah UK.
1.43. "Work-in-Process" shall mean Eligible Inventory of Farah USA
which is in the process of being converted from Raw Materials to Finished Goods.
1.44. "You," "you," "Your(s)," "your(s)" or "Lender" shall refer to
Congress Financial Corporation (Southwest).
Section 2. LOANS.
2.1. You shall, make loans to us from time to time, at our request,
up to the Maximum Credit, on the terms set forth below:
2.1.1. Lender shall make the Term Loan described in clause (e)
below and, in its discretion, make Revolving Loans to Farah USA from time to
time, at the request of Farah USA, described in clauses (a) to (e) below, as
follows:
(a) Revolving Loans of up to eighty-five (85%)
percent of the Net Amount of Eligible Accounts (or such greater or lesser
percentage thereof as Lender may determine from time to time); plus
(b) Revolving Loans of up to sixty (60%) percent
of the Farah USA Eligible Inventory consisting of Finished Goods (or such
greater or lesser percentage thereof as Lender may determine from time to time);
plus
(c) Revolving Loans of up to ten (10%) percent
of the Farah USA Eligible Inventory consisting of Work-in-Process (or such
greater or lesser percentage thereof as Lender may determine from time to time);
plus
(d) Revolving Loans of up to fifty (50%) percent
of the Farah USA Eligible Inventory consisting of Raw Materials (or such
greater or lesser percentage thereof as Lender may determine from time to time);
plus
(e) The Term Loan of $10,000,000 in the
aggregate, with principal payments commencing as of August 1, 1997, payable:
(i) over a term of four (4) years, (ii) in installments of $208,333.33 per
month and (iii) at the Annual Rate or the Libor Rate selected and determined
as set forth in Section 3 below. Such term loans shall (A) be evidenced by
a term promissory note in form and substance satisfactory to Lender, (B) be
issued as of June 1, 1997, bearing that date, in the original principal amount
of $10,000,000, (C) have a maturity date of June 30, 2001, and (D) be secured
by all of the Collateral. Such term loan may not be reborrowed.
2.1.2 Value Clothing Loans.
(a) Lender shall, in its discretion, make loans to Value Clothing from time
to time, at the request of Value Clothing an amount equal to fifty (50%) percent
of the Value Slacks Eligible Inventory consisting of Finished Goods (or such
greater or lesser percentage thereof as Lender may determine from time to time)
up to aggregate loans of $3,000,000.
(b) All loans shall be charged to a loan account in the name of Value
Clothing on Lender's books. Lender shall render to Farah USA, as agent for the
Value Slacks Companies, each month a statement of its loan account which shall
be considered correct and deemed accepted by, and binding upon, the Value Slacks
Companies as an account stated, except to the extent that Lender receives a
written notice of any specific exceptions by Value Clothing thereto within
thirty (30) days after the date of such statement.
(c) At Lender's option, all principal, interest, fees, commissions, costs,
expenses or other charges payable by Value Clothing to Lender and any and all
loans and advances by Lender to Value Clothing may be charged directly to the
account of Value Clothing maintained by Lender.
(d) Until the authority of the Value Slacks Companies to do so is curtailed
or terminated at any time by Lender, the Value Slacks Companies shall, at their
expense and on behalf of Lender, collect, as the property of Lender and in trust
for Lender, all proceeds from the sale of the inventory of the Value Slacks
Companies, in whatever form, including, without limitation, all cash, checks,
credit or debt card transaction records, and all forms of daily retail store
receipts, as well as all proceeds of Collateral or any other cash proceeds. At
such time hereafter as Lender may request, the Value Slacks Companies shall not
commingle such collections with the Value Slacks Companies' own funds. Upon
Lender's request, the Value Slacks Companies shall on the day received deposit
all such proceeds into deposit accounts subject to the provisions set forth
below for the collection and transfer of sales proceeds. At such time as
proceeds of Collateral of the Value Slacks Companies are deposited into deposit
accounts subject to the provisions set forth below, such proceeds when received
by Lender at such place as Lender may designate from time to time shall be
credited to the loan account of Value Clothing after adding two (2) business
days for remittances by federal funds wire transfers and after adding two (2)
business days for collection, clearance and transfer of all other remittance, in
each instance conditional upon final payment to Lender.
(e) At such time as Lender may request, the Value Slacks Companies shall,
in a manner satisfactory to Lender from time to time, enter into deposit account
arrangements and merchant payment arrangements with respect to credit and debit
card sales, such that all proceeds of the sale of the inventory of the Value
Slacks Companies of every form, including, without limitation, cash, checks,
credit or debit card receipts and charge slips and other forms of daily store
receipts, or amounts payable upon letters of credits, bankers' acceptances and
other proceeds of such Collateral shall be deposited into a blocked account
under Lender's control or deposited into one of the deposit accounts that is
approved by Lender with respect to which irrevocable instructions from the Value
Slacks Companies have been accepted by the depository bank to transfer all
collected funds to a blocked account under the control of Lender. In connection
therewith, the Value Slacks Companies shall execute such instructions, blocked
account and other agreements as Lender, in its discretion, shall specify.
(f) The Value Slacks Companies shall immediately upon obtaining knowledge
thereof report to Lender all reclaimed, repossessed or returned goods (other
than returns in the ordinary course of business of the Value Slacks Companies
which shall only be reported to Lender with such frequency and in such manner as
Lender may reasonably require).
2.1.3 Lender shall, in its discretion, make Revolving Loans to
Farah UK from time to time, at the request of Farah UK, in accordance with the
Farah (UK) Supplement.
2.2. All loans shall be charged to a loan account in our name on your
books. You shall render to us each month a statement of our loan account which
shall be considered correct and deemed accepted by, and conclusively binding
upon, us as an account stated, except to the extent that you receive a written
notice of any specific exceptions by us thereto within thirty (30) days after
the date of such statement.
2.3. (a) Except in your sole discretion, the outstanding aggregate
principal amount of all loans by you to us hereunder or under any Supplement,
shall not exceed the Maximum Credit at any time. Without limiting your right to
demand payment of the Obligations, or any portion thereof, in accordance with
any other terms of this Agreement, or any Supplement, in the event that the
outstanding aggregate principal amount of loans by you to us exceeds the Maximum
Credit or the formulas set forth in Section 2.1 hereof or as contemplated in
Section 2.3(b), we shall remain liable therefor and the entire amount of such
excess(es) shall, at your option, become immediately due and payable, upon your
demand.
(b) You may, from time to time, permit the outstanding amount
of any components of the loans by you to us, or the aggregate amounts of such
outstanding loans to exceed the amounts available under the lending formulas or
sublimits provided for herein or otherwise applicable as to each of the
Borrowers or $75,000,000, as applicable; provided, that, should you so permit in
any one instance such event shall not operate to limit, waive or otherwise
affect any rights of yours on any future occasions. In such event, and without
limiting the right of yours to demand payment of the Obligations, or any portion
thereof, in accordance with any other terms of the Financing Agreements, we
shall remain liable therefor and we shall, upon demand by you, which may be made
at any time and from time to time, repay to you the entire amount of any such
excess(es) or in accordance with such other terms as you may agree to in writing
at the time, except, that, notwithstanding anything contained herein or in the
other Financing Agreement to the contrary, Farah UK shall not be required to
repay any such amounts arising as a result of loans by you to the other
Borrowers.
2.4. At your option, all principal, interest, fees, commissions, costs,
expenses or other charges with respect to this Agreement or any Supplement (all
of which shall be cumulative and not exclusive) and any and all loans and
advances by you to us may be charged directly to our account maintained by you.
2.5. All loans shall be payable at your office specified above or at
such other place as you may hereafter designate from time to time and at your
option and upon your request, we shall execute and deliver to you one or more
promissory notes in form and substance satisfactory to you to further evidence
such loans.
Section 3. INTEREST AND FEES.
3.1. (a) With respect to Prime Rate loans, interest shall be payable by
us to you on the first day of each month upon the closing daily balances in our
loan account for each day during the immediately preceding month, at a rate
equal to one-half percent (1/2%) per annum in excess of the Prime Rate (the
"Annual Rate"). With respect to Libor Rate loans, interest shall be payable on
the first day of each month on the principal amounts thereof at a rate equal to
two and three-quarters of one percent (2.75%) applicable thereto per annum in
excess of the Libor Rate. The Annual Rate shall increase or decrease by an
amount equal to each increase or decrease, respectively, in the Prime Rate,
effective on the first day of the month after any change in the
Prime Rate based on the Prime Rate in effect on the last day of the month in
which any such change occurs. The Annual Rate in effect hereunder on the date
hereof, expressed in terms of simple interest, is eight and one-half of one
percent (8.5%) per annum.
(b) You shall have the right from time to time to convert all
or part of a loan based on the Prime Rate into a loan based on the Libor Rate or
to continue in effect any loan based on the Libor Rate; provided, that: (i) you
give us notice of such conversion or continuation, substantially in the form of
Exhibit B hereto (which may be given by facsimile with electronic confirmation
of receipt) (a "Libor Borrowing Notice"), within two (2) business days before
the end of an existing or new Interest Period, as the case may be, specifying
the term, amount and other information that we may request with respect to such
Libor Rate loan, (ii) a Libor Rate loan may not be converted to a Prime Rate
loan except on the last day of the applicable Interest Period, and (iii) the
requirements of Section 3.1(c), (d), (e) and (f) hereof shall have been met.
(c) Subject to the terms and conditions contained herein, two
(2) business days after receipt by Lender of a Libor Borrowing Notice, such
Prime Rate Loans shall be converted to Libor Rate loans or such Libor Rate loans
shall continue, as the case may be; provided, that, (i) no Event of Default, or
event which with notice of passage of time or both would constitute an Event of
Default exists or has occurred and is continuing, (ii) no party hereto shall
have sent any notice of termination or non-renewal of this Agreement or the
other Financing Agreements, (iii) Borrowers shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrower from time to time for requests by Borrower for Libor Rate loans, (iv)
no more than five (5) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Libor Rate loans outstanding must be in an amount not
less than Five Million Dollars ($5,000,000) or an integral multiple of One
Million Dollars ($1,000,000) in excess thereof, (vi) the maximum amount of the
Libor Rate loans at any time requested by Borrowers shall not exceed the amount
equal to (A) the principal amount of the Term Loan which it is anticipated will
be outstanding as of the last day of the applicable Interest Period plus (B)
ninety percent (90.0%) of the daily average of the principal amount of the
Revolving Loans which it is anticipated will be outstanding during the
applicable Interest Period, in each case as determined by Lender (but with no
obligation of Lender to make such Revolving Loans) and (vii) Lender shall have
determined that the Interest Period or Libor Rate is available to Lender through
the Bank and can be readily determined as of the date of the request for such
Libor Rate loan by Borrower. Any Libor Borrowing Notice delivered by Borrower to
convert Prime Rate loans to Libor Rate loans or to continue any existing Libor
Rate loans shall be irrevocable. Notwithstanding anything to the contrary
contained herein, Lender and Bank shall not be required to purchase United
States dollar deposits in the London interbank market or other applicable Libor
Rate market to fund any Libor Rate loans, but the provisions hereof shall be
deemed to apply as if Lender and Bank had purchased such deposits to fund the
Libor Rate loans.
(d) Any Libor Rate loans shall automatically convert to Prime
Rate loans described in Section 2.1 hereof upon the last day of the applicable
Interest Period, unless Lender has received and approved a Libor Borrowing
Notice to continue such Libor Rate loan at least
two (2) Business Days prior to such last day in accordance with the terms
hereof. Any Libor Rate loan shall, at Lender's option, upon notice by Lender to
Borrower, convert to Prime Rate loans in the event that (i) an Event of Default
shall exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the
aggregate principal amount of the Prime Rate loans which have previously been
converted to Libor Rate loans or existing Libor Rate loans continued, as the
case may be, at the beginning of an Interest Period shall at any time during
such Interest Period exceed either (A) the aggregate principal amount of the
loans then outstanding, or (B) the sum of the then outstanding principal amount
of the Term Loan plus the Revolving Loans then available to Borrower under
Section 2 hereof with respect to the Libor Rate loans which, in any case, result
in such excess. Borrower shall pay to Lender, upon demand by Lender (or Lender
may, at its option, charge any loan account of Borrower) any amounts required to
compensate Lender, the Bank or any participant with Lender for any loss
(including loss of anticipated profits), cost or expense incurred by such
person, as a result of the conversion of Libor Rate loans to Prime Rate loans
pursuant to any of the events set forth in the previous sentence.
(e) Notwithstanding anything to the contrary contained herein,
all Libor Rate loans shall, upon notice by Lender to Borrower, convert to Prime
Rate loans in the event that (i) any change in applicable law or regulation (or
the interpretation or administration thereof) shall either (A) make it unlawful
for Lender, Bank or any participant to make or maintain Libor Rate loans or to
comply with the terms hereof in connection with the Libor Rate loans, by an
amount deemed by Lender to be material, or (B) shall result in the increase in
the costs to Lender, the Bank or any participant of making or maintaining any
Libor Rate loans or (C) reduce the amounts received or receivable by Lender in
respect thereof, by an amount deemed by Lender to be material or (ii) the cost
to Lender, the Bank or any participant of making or maintaining any Libor Rate
loans affecting the Libor Rate on the London Interbank Market shall otherwise
increase by an amount deemed by Lender to be material. Borrower shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) any amounts required to compensate Lender, the Bank or any
participant for any loss (including loss of anticipated profits), cost or
expense incurred by such person as a result of the foregoing, including, without
limitation, any such loss, cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such person to make or
maintain the Libor Rate loans or any portion thereof. A certificate of Lender
setting forth the basis for the determination of such amount necessary to
compensate Lender as aforesaid shall be delivered to Borrower and shall be
conclusive, absent manifest error.
(f) If any payments or prepayments in respect of the Libor
Rate loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
8 hereof or any other payments made with the proceeds of Collateral, Borrower
shall pay to Lender upon demand by Lender (or Lender may, at its option, charge
any loan account of Borrower) any amounts required to compensate Lender, the
Bank or any Participant for any additional loss (including loss of anticipated
profits), cost or expense incurred by such person as a result of such prepayment
or payment, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such person to make or maintain such Libor Rate loans or any portion thereof.
3.2. Upon the occurrence and during the continuance of an Event of
Default or termination or non-renewal the interest rate on all outstanding
unpaid Obligations shall, at Lender's option, accrue at a rate equal to two
percent (2%) per annum in excess of the Annual Rate or four and three-quarters
of one percent (4.75%) in excess of the Libor Rate for Libor Rate loans, as the
case may be, from the date of such Event of Default or termination or
non-renewal, and all interest accruing hereunder shall thereafter be payable on
demand.
3.3. Interest shall be calculated on the basis of a 360-day year and
shall be included in each monthly statement of our loan account. You shall have
the right, at your option, to charge all interest to our loan account on the
first day of each month, in the case of loans based on the Annual Rate, and on
the last day of the applicable Interest Period, in the case of loans based on
the Libor Rate, and such interest shall be deemed to be paid by the first
amounts subsequently credited thereto.
3.4. No agreements, conditions, provisions or stipulations contained in
this Agreement or in any other agreement between you and us, or the occurrence
of an Event of Default hereunder, or the exercise by you of the right to
accelerate the payment of the maturity of principal and interest, or to exercise
any option whatsoever contained in this Agreement or any other agreement between
you and us, or the arising of any contingency whatsoever shall entitle you to
collect, in any event, interest exceeding the maximum rate of nonusurious
interest allowed from time to time by applicable state or federal laws as now or
as may hereafter be in effect (the "Maximum Legal Rate"), and in no event shall
we be obligated to pay interest exceeding such Maximum Legal Rate, and all
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel us to pay a rate of
interest exceeding the Maximum Legal Rate shall be without binding force or
effect at law or in equity, to the extent only of the excess of interest over
such maximum interest allowed by law. In the event any interest is charged in
excess of the Maximum Legal Rate (herein referred to as the "Excess"), we
acknowledge and stipulate that any such charge shall be the result of an
accidental and bona fide error, and such Excess shall be, first, applied to
reduce the principal of any Obligations due, and, second, returned to us, it
being the intention of the parties hereto not to enter at any time into an
usurious or otherwise illegal relationship. The parties hereto recognize that
with fluctuations in the Prime Rate and the Libor Rate such an unintentional
result could inadvertently occur. By the execution of this Agreement, we
covenant that (a) the credit or return of any Excess shall constitute the
acceptance by us of any such Excess, and (b) we shall not seek or pursue any
other remedy, legal or equitable, against you based, in whole or in part, upon
the charging or receiving or any interest in excess of the Maximum Legal Rate.
For the purpose of determining whether or not any Excess has been contracted
for, charged or received by you, all interest at any time contracted for,
charged or received by you in connection with our Obligations shall be
amortized, prorated, allocated and spread in equal parts during the entire term
of this Agreement.
3.5. Notwithstanding the provisions of Sections 3.1 or 3.2 hereof to
the contrary, (a) if at any time the amount of interest computed on the basis of
the Annual Rate or the Libor Rate, as the case may be, would exceed the amount
of such interest computed upon the basis of the Maximum Legal Rate, the interest
payable under this Agreement shall be computed upon the basis of the Maximum
Legal Rate, but any subsequent reduction in the Annual Rate or the Libor Rate,
as the case may be, shall not reduce such interest thereafter payable below the
amount computed on the basis of the Maximum Legal Rate until the aggregate
amount of such interest accrued and payable under this Agreement equals the
total amount of interest which would have accrued if such interest had been at
all time computed solely on the basis of the Annual Rate or the Libor Rate, as
the case may be; and (b) unless preempted by federal law, the Annual Rate or the
Libor Rate, as the case may be, from time to time in effect hereunder may not
exceed the "Indicated Ceiling Rate" from time to time in effect under Chapter 15
of the Texas Credit Code (Vernon's Texas Civil Statutes), Section (c), Article
5069-1.04, as amended.
3.6. The provisions of Sections 3.4 and 3.5 hereof shall be deemed to
be incorporated into every document or communication relating to the Obligations
which sets forth or preserves any account, right or claim or alleged account,
right or claim of you with respect to us (or any other obligor in respect of the
Obligations), whether or not any provision of Sections 3.4 or 3.5 is referred to
therein. All such documents and communications and all figures set forth therein
shall, for the sole purpose of computing the extent of the Obligations asserted
by you thereunder, be automatically recomputed by us or any other obligor, and
by any court considering the same, to give effect to the adjustments or credits
required by Sections 3.4 and 3.5 hereof.
3.7. If the applicable state or federal law is amended in the future to
allow greater rate of interest to be charged under this Agreement than in
presently allowed by applicable state or federal law, then the limitation of
interest hereunder shall be increased to the maximum rate of interest allowed by
applicable state or federal law as amended, which increase shall be effective
hereunder on the effective date of such amendment, and all interest charges
owing to you by reason thereof shall be payable upon demand.
3.8. The fees described in this Section 3.8 shall be payable if the
average outstanding daily principal balance of all loans and Credits by you to
us under the Financing Agreements is less than $17,500,000. With respect to each
month (or part thereof) that this Agreement is in effect or so long as any of
the Obligations are outstanding, Borrowers shall pay to Lender a fee at a rate
equal to one-half of one (1/2%) percent per annum calculated for such month and
payable monthly, in arrears, upon the excess, if any, of: (i) $17,500,000 over
(ii) the average of the daily principal balances of the loans outstanding to
Borrowers and the Credits outstanding for such month (or part thereof).
3.9. We shall pay to you a facility fee in an amount equal to
$125,000, payable simultaneously with the execution hereof.
Section 4. SECURITY INTEREST
4.1. As security for the prompt performance, observance and payment in
full of all Obligations, we hereby grant to you a continuing security interest
in, a lien upon and a right of setoff against, and we hereby assign, transfer,
pledge and set over to you the following (which together with any of our other
property in which you may at any time have a security interest or lien, whether
pursuant to any Supplement, or otherwise, are herein collectively referred to as
the "Collateral"): All present and future (a) Accounts; (b) moneys, securities
and other property and the proceeds thereof, now or hereafter held or received
by, or in transit to, you from or for us, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of our deposits (general
or special), balances, sums and credits with you at any time existing; (c) all
of our right, title and interest, and all of our rights, remedies, security and
liens, in, to and in respect of the Accounts and other Collateral, including,
without limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lien or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any Account Debtor, and credit
and other insurance; (d) all of our right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in, Accounts
including, without limitation, all goods described in invoices, documents,
contracts or instruments with respect to, or otherwise representing or
evidencing, any Accounts or other Collateral, including, without limitation, all
returned, reclaimed or repossessed goods; (e) all deposit accounts; (f) all
books, records, ledger cards, computer programs, and other property and general
intangibles evidencing or relating to the Accounts and any other Collateral or
any Account Debtor, together with the file cabinets or containers in which the
foregoing are stored ("Records"); (g) all other general intangibles of every
kind and description, including, without limitation, trade names and trademarks,
and the goodwill of the business symbolized thereby, patents, copyrights,
licenses and Federal, State and local tax refund claims of all kinds and (h) all
proceeds of the foregoing, in any form, including, without limitation, any
claims against third parties for loss or damage to or destruction of any or all
of the foregoing.
4.2. We shall keep and maintain, at our cost and expense, satisfactory
and complete books and records of all Accounts, all payments received or credits
granted thereon, and all other dealings therewith. At any time on or after the
occurrence of an Event of Default, and at such times as you may request, we
shall deliver to you all original documents evidencing the sale and delivery of
goods or the performance of services which created any Accounts, including but
not limited to, all original contracts, orders, invoices, bills of lading,
warehouse receipts, delivery tickets and shipping receipts. Any such time as you
may request, we shall deliver to you schedules describing the Accounts and/or
written confirmatory assignments to you of each Account, in form and substance
satisfactory to you and duly executed by us, together with such other
information as you may request. You will return to us, at our expense, any
original documents evidencing the sale and delivery of goods which created any
Accounts delivered to you pursuant to this Section 4.2 and in your possession
when your actual or anticipated need therefor has ceased. In no event shall the
making or the failure to make or the content of any schedule or assignment or
our failure to comply with the provisions hereof be deemed or construed as a
waiver, limitation or modification of your security interest in, lien upon and
assignment of the Collateral or our representations, warranties or covenants
under this Agreement or any Supplement hereto.
Section 5. COLLECTION AND ADMINISTRATION.
5.1. Until our authority to do so is curtailed or terminated at any
time by you, we shall, at our expense and on your behalf, collect, as your
property and in trust for you, all remittances and all amounts unpaid on
Accounts, and we shall not commingle such collections with our own funds. We
shall on the day received remit all such collections to you in the form received
duly endorsed by us for deposit with you, unless you shall direct us otherwise.
All amounts collected on Accounts when received by you in your account
designated for such purpose shall be credited to our loan account, after adding
two (2) business days for federal funds, wire transfers and after adding two (2)
business days for collection, clearance and transfer of any other form of
remittances, conditional upon final payment to you.
5.2. You or your representatives shall at all times have free access to
and right of inspection of the Collateral and have full access to and the right
to examine and make copies of our Records, to confirm and verify all Accounts,
to perform general audits and to do whatever else you deem necessary to protect
your interests. You may at any time remove from our premises or require us or
any accountants and auditors employed by us to deliver any Records and you may,
without cost or expense to you, use such of our personnel, supplies, computer
equipment and space at our places of business as may be reasonably necessary for
the handling of collections.
5.3. We shall immediately upon obtaining knowledge thereof report to
you all reclaimed, repossessed or returned goods, Account Debtor claims and any
other matter affecting the value, enforceability or collectibility of Accounts
in excess of $25,000 and as to such matters for any amount, we shall report same
to you monthly prior to the occurrence of an Event of Default and immediately
upon obtaining knowledge thereof at any time on or after the occurrence of an
Event of Default. All claims and disputes relating to Accounts are to be
promptly adjusted within a reasonable time, at our own cost and expense. You
may, at your option, at any time on or after the occurrence and during the
continuance of an Event of Default, settle, adjust or compromise claims and
disputes relating to Accounts which are not adjusted by us within a reasonable
time.
5.4. We shall, in the manner requested by you from time to time, direct
that all proceeds of Accounts, letters of credit, bankers' acceptances and other
proceeds of Collateral shall be payable to a lock box or post office designated
by you and under your control and/or deposited into a blocked account under your
control and/or deposited into an account maintained in your name and under your
control and in connection therewith shall execute such lock box, blocked account
or other agreement as you in your sole discretion shall specify.
Section 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
We jointly and severally hereby represent, warrant and covenant to you
the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy of which, or compliance with, being a
continuing condition of the making of loans hereunder by you or under any
Supplement:
6.1. We will not directly sell, lease, transfer, abandon or otherwise
dispose of all or any substantial portion of our property or assets or
consolidate or merge with or into any other entity to consolidate or merge with
or into us; provided that a wholly-owned Subsidiary of a Borrower may, on at
least ten (10) days prior written notice to you, merge with and into a Borrower;
provided that such Borrower is the surviving corporation and we provide you
copies of all merger documentation on your request. Each of us will at all times
preserve, renew and keep in full force and effect our existence as a corporation
and the rights and franchises with respect thereto and continue to engage in
business of the same type as we are engaged as of the date hereof. Each of us
shall give you thirty (30) days prior written notice of any proposed change in
our corporate name which notice shall set forth the new name.
6.2. Our Records and chief executive office are maintained at the
address referred to below. We shall not change such location without your prior
written consent and prior to making any such change, we agree to execute any
additional financing statements or other documents or notices which you may
require.
6.3. We shall maintain our shipping forms, invoices and other related
documents in a form satisfactory to you and shall maintain our books, records
and accounts in accordance with generally accepted accounting principles
consistently applied. We agree to furnish you monthly with accounts receivable
agings, inventory reports (if requested by you), and interim financial
statements (including balance sheet, statement of income and retained earnings,
and statement of changes in financial position), and to furnish you, at any time
or from time to time with such other information regarding our business affairs
and financial condition as you may reasonably request, including, without
limitation, balance sheets, statements of income, statements of cash flow,
projections, forecasts, schedules, agings and reports. We hereby irrevocably
authorize and direct all accountants, auditors or other third parties to deliver
to you, at our expense, copies of our financial statements, papers related
thereto, and other accounting records of any nature in their possession and to
disclose to you any information they may have regarding our business affairs and
financial conditions. We shall furnish you with audited financial statements on
an annual basis certified by independent public accountants selected by us and
acceptable to you. All such statements and information shall fairly present our
financial condition as of the dates and the results of our operations for the
periods, for which the same are furnished. Any documents, schedules, invoices or
other papers delivered to you may be destroyed or otherwise disposed of by you
one (1) year after the date the same are delivered to you, unless we make
written request therefor and pay all expenses attendant to their return, in
which event you shall return same when your actual or anticipated need therefor
has ceased, except as to certain originals as specified in Section 4.2 hereof.
6.4. Each Eligible Account represents a valid and legally enforceable
indebtedness based upon an actual and bona fide sale and delivery of goods or
rendition of services in the ordinary course of our business which has been
finally accepted by the Account Debtor and for which the Account Debtor is
unconditionally liable to make payment of the amount stated in each invoice,
document and instrument evidencing the Eligible Account in accordance with the
terms thereof, without offset, defense or counterclaim and to the best of our
knowledge will be paid in full at maturity.
6.5. All statements made and all unpaid balances appearing in the
invoices, documents and instruments evidencing each Eligible Account are true
and correct and are in all respects what they purport to be and all signatures
and endorsements that appear thereon are genuine and all signatories and
endorsers have full capacity to contract and at the time the Account arises,
each Account Debtor is solvent and financially able to pay in full the Eligible
Account when it matures. None of the transactions underlying or giving rise to
any Account shall violate any state or federal laws or regulations, and all
documents relating to the Accounts shall be legally sufficient under such laws
or regulations and shall be legally enforceable in accordance with their terms
and all recording, filing and other requirements of giving public notice under
any applicable law have been duly compiled with.
6.6. We shall duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against us or our properties or
assets prior to the date on which penalties attach thereto. We shall be liable
for any tax or penalty imposed upon any transaction under this Agreement or any
Supplement or giving rise to the Accounts or any other Collateral or which you
may be required to withhold or pay for any reason and we agree to indemnify and
hold you harmless with respect thereto, and to repay to you on demand the amount
thereof, and until paid by us such amount shall be added to and deemed part of
your loans to us.
6.7. Except as otherwise disclosed to you in writing and the
investigations of us by the Internal Revenue Service or other Governmental
Agency in accordance with their ordinary customs and past practices with us,
there is no present investigation by any governmental agency pending or
threatened against us and there is no action, suit, proceeding or claim pending
or threatened against us or our assets or goodwill, or affecting any
transactions contemplated by this Agreement, or any Supplement, or any
agreements, instruments or documents delivered in connection herewith or
therewith before any court, arbitrator, or governmental or administrative body
or agency which if adversely determined with respect to us would result in any
material adverse change in our business, properties, assets, goodwill, or
condition, financial or otherwise.
6.8. The execution, delivery and performance of this Agreement, any
Supplement, or any agreements, instruments and documents executed and delivered
in connection herewith, are within our corporate powers, have been duly
authorized, are not in contravention of law or the terms of our Charter, By-Laws
or other incorporation papers, or any material indenture, agreement or
undertaking to which we are a party or by which we are bound.
6.9. We shall, at our expenses duly, execute and deliver, or shall
cause to be duly executed and delivered, such further agreements, instruments
and documents, including, without limitation, additional security agreements,
mortgages, deeds of trust, deeds to secure debt, collateral assignments, Uniform
Commercial Code financing statements or amendments or continuations thereof,
landlord's or mortgagee's waivers of liens except for the landlord's waivers
with respect to the stores of Value Slacks and Value Clothing and consents to
the exercise by you of all your rights and remedies hereunder, under any
Supplement or applicable law with respect to the Collateral, and do or cause to
be done such further acts as may be necessary or proper in your opinion to
evidence, perfect, maintain and enforce your security interest and the priority
thereof in the Collateral and to otherwise effectuate the provisions or purposes
of this Agreement or any Supplement. Where permitted by law, we hereby authorize
you to execute and file one or more Uniform Commercial Code financing statements
signed only by you.
Section 7. SPECIFIC POWERS.
7.1. We hereby constitute you and your agents and any designee, as our
attorney-in-fact, at our own cost and expense, to exercise at any time all or
any of the following powers which, being coupled with an interest, shall be
irrevocable until all Obligations have been paid in full: (a) to receive, take,
endorse, assign, deliver, accept and deposit, in your or our name, any and all
checks, notes, drafts, remittances and other instruments and documents relating
to the Collateral; (b) on or after the occurrence of an Event of Default to
receive open and dispose of all mail addressed to us and to notify postal
authorities to change the address for delivery thereof to such address as you
may designate; (c) to transmit to Account Debtors notice of your interest
therein and to request from such Account Debtors at any time, in your or our
name or that of your designee, information concerning the Accounts and the
amounts owing thereon; (d) on or after the occurrence of an Event of Default, to
notify Account Debtors to make payment directly to you; (e) on or after the
occurrence of an Event of Default, to take or bring, in your or our name, all
steps, actions, suits or proceedings deemed by you necessary or desirable to
effect collection of the Collateral; and (f) to execute in our name and on our
behalf any UCC financing statements or amendments thereto. We hereby release you
and your officers, employees and designees, from any liability arising from any
act or acts under this Agreement or in furtherance thereof, whether of omission
or commission, and whether based upon any error of judgment or mistake of law or
fact, except for your own willful misconduct or gross negligence.
Section 8. EVENTS OF DEFAULT AND REMEDIES
8.1. All Obligations shall be, at your option, immediately due and
payable without notice or demand (notwithstanding any deferred or installment
payments allowed, if any, by any instrument evidencing or relating to the
Obligations) and any provision of this Agreement or any Supplement, as to future
loans and advances by you shall, at your option, terminate forthwith, upon the
termination or non-renewal of this Agreement or upon the occurrence of any one
or more of the Events of Default as defined in any Supplement (each an "Event of
Default").
8.2. Upon the occurrence of any Event of Default and at any time
thereafter, you shall have the right (in addition to any other rights you may
have under the Agreement, any Supplement or otherwise) without further notice to
us, to appropriate, set off and apply to the payment of any or all of the
Obligations, any or all Collateral, in such manner as you shall in your sole
discretion determine, to enforce payment of any Collateral, to settle,
compromise or release in whole or in part, any amounts owing on the Collateral,
to prosecute any action, suit or proceeding with respect to the Collateral, to
extend the time of payment of any and all Collateral, to make allowances and
adjustments with respect thereto, to issue credits in your or our name, to sell,
assign and deliver the Collateral (or any part thereof), at public or private
sale, at broker's board, for cash, upon credit or otherwise, at your sole option
and discretion, and you may bid or become purchaser any at such sale, if public,
free from any right of redemption which is hereby expressly waived.
8.3. In the event you seek to take possession of all or any portion of
the Collateral by judicial process, we irrevocably waive: (a) the posting of any
bond, surety or security with respect thereto which might otherwise be required,
(b) any demand for possession prior to the commencement of any suit or action to
recover the Collateral, and (c) any requirement that you retain possession and
not dispose of any Collateral until after trial or final judgment.
8.4. We agree that the giving of five (5) days notice by you, to our
address set forth below, designating the place and time of any public sale or of
the time after which any private sale or other intended disposition of the
Collateral is to be made, shall be deemed to be reasonable notice thereof and we
waive any other notice with respect thereto.
8.5. The net cash proceeds resulting from the exercise of any of the
foregoing rights or remedies shall be applied to you to the payment of the
Obligations in such order as you may elect, and we shall remain liable to you
for any deficiency. Without limiting the generality of the foregoing, if you
enter into any credit transaction, directly or indirectly, in connection with
the disposition of any Collateral, you shall have the option, at any time, in
your sole discretion, to reduce the Obligations by the principal amount of such
credit transaction or to defer the reduction thereof until actual receipt by you
of cash or other immediately available funds in connection therewith.
8.6. The enumeration of the foregoing rights and remedies is not
intended to be exclusive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies you may have under the
UCC or other applicable law. You shall have the right, in your sole discretion,
to determine which rights and remedies, and in which order any of the same,
are to be exercised, and to determine which Collateral is to be proceeded
against and in which order, and the exercise of any right or remedy shall not
preclude the exercise of any others, all of which shall be cumulative.
8.7. No act, failure or delay by you shall constitute a waiver of any
of your rights and remedies. No single or partial waiver by you of any provision
of this Agreement or any Supplement hereto, or breach or default thereunder, or
any right or remedy which you may have shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion.
8.8. We waive presentment, notice of dishonor, protest and notice of
all instruments included in or evidencing any of the Obligations or the
Collateral and any and all notices or demands whatsoever (except as expressly
provided herein). You may, at all times, proceed directly against us to enforce
payment of the Obligations and shall not be required to take any action of any
kind to preserve, collect or protect your or our rights in the Collateral.
Section 9. EFFECTIVE DATE; TERMINATION COSTS.
9.1. (a) This Agreement and the other Financing Agreements shall
continue in full force and effect for a term ending on the Renewal Date and from
year to year thereafter, unless sooner terminated pursuant to the terms hereof;
provided, that, (i) Lender or all Borrowers (as one group) (but not any one or
two Borrowers alone) may terminate this Agreement and the other Financing
Agreements effective on the Renewal Date or on the anniversary of the Renewal
Date in any year by giving to the other party at least sixty (60) days prior
written notice and (ii) all Borrowers (but not any one or two Borrowers alone)
may terminate this Agreement and the other Financing Agreements other than on
the Renewal Date in any year by giving to Lender at least sixty (60) days prior
written notice, subject to the terms hereof (including, without limitation,
Section 9.1(c) below and the payment to Lender of the early termination fee
provided for in Section 9.2 below); provided however, that, pursuant to Section
8 of the Farah UK Supplement, Farah UK may terminate its rights and obligations
under this Agreement, the Farah UK Supplement, the Farah UK Agreements and the
other Financing Agreements without penalty and without payment of the early
termination fee provided in Section 9.2 below. This Agreement and all other
Financing Agreements must be terminated simultaneously except as permitted under
Section 8 of the Farah UK Supplement.
(b) In addition, Lender shall have the right to terminate this
Agreement and the other Financing Agreements as to future loans and other
liabilities of Lender immediately at any time upon the occurrence of an Event of
Default or an act, condition or event which with notice or passage of time or
both would constitute an Event of Default.
(c) Upon the effective date of termination or non-renewal
of the Financing Agreements, Borrowers shall pay to Lender in full, all
outstanding and unpaid Obligations (including, but not limited to, the loans
and all interest, fees (including the early termination fee provided herein, if
applicable), charges, expenses and other amounts provided for hereunder,
under the other Financing Agreements or otherwise) and shall furnish cash
collateral to Lender for all undrawn amounts available pursuant to previously
issued and outstanding Credit, by wire transfer in federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing
to Borrowers for such purpose. Interest shall
be due until and including the next business day, if the amounts so paid by
Borrowers to the bank account designated by Lender are received in such bank
account later than 12:00 noon, New York, New York time.
(d) No termination of the Financing Agreements shall relieve
or discharge Borrowers of their duties, obligations and covenants under the
Financing Agreements until all Obligations have been fully indefeasibly
discharged and paid, and Lender's continuing security interests in the
Collateral shall remain in effect until all such Obligations have been fully and
indefeasibly discharged and paid.
9.2. (a) If Lender terminates any Financing Agreement other than the
Farah UK Supplement upon the occurrence of an Event of Default or, (b) if
Borrowers terminate (i) prior to the Renewal Date, or (ii) prior to any
subsequent anniversary of the Renewal Date, or (c) if any termination of the
Financing Agreements occurs by either Lender or Borrowers resulting from the
sale approved in writing by Lender of the capital stock of any Borrower or of
the assets of any Borrower, in view of the impracticability and extreme
difficulty of ascertaining actual damages and by mutual agreement of the parties
as to a reasonable calculation of Lender's lost profits as a result thereof,
Farah USA, Farah UK and Value Clothing hereby agree jointly and severally to pay
to Lender, upon the effective date of such termination, an early termination
fee, in an amount equal to the amounts set forth below opposite of the
applicable periods:
----------------------------------------------------------- ---------------------------------------------------------
Prepayment as a Percentage of
Prepayment Date/Period Maximum Credit
----------------------------------------------------------- ---------------------------------------------------------
----------------------------------------------------------- ---------------------------------------------------------
From June 1, 1997 through December 31, 2000 1%, except .50% in the case of terminations
under Section 9.2(c)
----------------------------------------------------------- ---------------------------------------------------------
----------------------------------------------------------- ---------------------------------------------------------
January 1, 2001 through
June 30, 2001 0%
----------------------------------------------------------- ---------------------------------------------------------
----------------------------------------------------------- ---------------------------------------------------------
July 1, 2001 and thereafter .50%
----------------------------------------------------------- ---------------------------------------------------------
The early termination fees provided for in this Section 9.2 shall be deemed
included in the Obligations. Notwithstanding the foregoing or anything else
contained herein to the contrary, Farah UK may terminate its obligations under
this Agreement, the Farah UK Supplement, the Farah UK Agreements and the other
Financing Agreement without penalty and without payment of the termination fee
provided in this Section 9.2 in accordance with the terms and conditions of
Section 8 of the Farah UK Supplement.
9.3. This Agreement and the other Financing Agreements, any Supplement,
and any agreements, instruments or documents delivered or to be delivered in
connection herewith or therewith represent our entire agreement and
understanding concerning the subject matter hereof and thereof, and supersede
all other prior and contemporaneous agreements, understandings, negotiations and
discussions, representations, warranties, commitments, offers, contracts,
whether oral or written, including each Original Financing Agreement, which is
amended and restated as of the date hereof; provided, however, that each such
other Original Financing Agreement, executed and delivered as of August 2, 1990
which is not so amended and restated and is in full force and effect as of the
date hereof, is hereby confirmed, ratified and approved as so amended, ratified,
supplemented and confirmed to the date hereof as if each thereof were amended
and restated as of the date of this Agreement in connection with the execution
of the Financing Agreements.
9.4. No provision hereof shall be modified or amended orally or by
course of conduct but only by a written instrument expressly referring hereto
signed by both parties.
9.5. Upon your request we shall pay to you, or reimburse you for, all
sums, costs and expenses which you pay or incur in connection with or related to
the negotiation, preparation, consummation, administration and enforcement of
this Agreement, any Supplement, and all other agreements, instruments and
documents in connection herewith and therewith, and the transactions
contemplated hereunder and thereunder, together with any amendments,
supplements, consents or modifications which may be hereafter made or entered
into in respect hereto for thereof, and all efforts made to defend, protect or
enforce the security interest granted herein or therein or in enforcing payment
of the Obligations, including, without limitation, appraisal fees, filing fees
and taxes, title insurance premiums, recording taxes, expenses for searches,
expenses heretofore incurred by you and from time to time hereafter during the
course of periodic field examinations of the Collateral and our operations, wire
transfer fees, check dishonor fees, the fees and disbursements of counsel to
you, all fees and expenses for the service and filing of papers, premiums on
bonds and undertakings, fees of marshalls, sheriffs, custodians, auctioneers and
others, travel expenses and all court costs and collection charges, all of which
shall be part of the Obligations and shall accrue interest after demand thereof
at a rate equal to the highest rate then payable on any of the Obligations;
provided that the legal fees of Lender's counsel incurred in connection with the
preparation, negotiation and consummation of this Agreement and the other
Financing Agreements shall not exceed $20,000.
Section 10. NOTICES.
10.1. All notices, requests and demands to or upon the respective
parties hereto shall be deemed to have been duly given or made as provided in
the Covenant Supplement.
Section 11. WAIVER OF JURY TRAIL; JURISDICTION; CHOICE OF LAW.
11.1. WE AND YOU EACH HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY SUPPLEMENT, THE OBLIGATIONS, THE COLLATERAL OR ANY SUCH OTHER
TRANSACTION. WE HEREBY WAIVE RIGHTS OF SETOFF AND RIGHTS TO INTERPOSE
COUNTERCLAIMS IN THE EVENT OF ANY LITIGATION WITH RESPECT TO ANY MATTER
CONNECTED WITH THIS AGREEMENT, ANY SUPPLEMENT, THE OBLIGATIONS, THE
COLLATERAL OR ANY OTHER TRANSACTION BETWEEN THE PARTIES EXCEPT COMPULSORY
COUNTERCLAIMS AND WE HEREBY IRREVOCABLY CONSENT AND SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE DISTRICT COURTS OF THE STATE OF TEXAS AND THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS IN CONNECTION WITH
ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY SUPPLEMENT, THE OBLIGATIONS, THE COLLATERAL OR ANY SUCH OTHER
TRANSACTION.
11.2. In any such litigation we waive personal service of any summons,
complaint or other process and agree that service thereof may be made by
certified or registered mail directed to us at our address set forth below.
11.3. This Agreement and all transactions thereunder shall be deemed to
be consummated in the State of Texas and shall be governed by and interpreted in
accordance with the laws of the State of Texas. If any part or provision of this
Agreement is invalid or in contravention of any applicable law or regulation,
such part or provision shall be severable without affecting the validity of any
other party or provision of the Agreement.
11.4. Nonapplicability of Article 5069-15.01 et seq. Borrowers and
Lender hereby agree that, except for Section 15.10(b) thereof, the provisions of
Tex. Rev. Civ. Stat. Xxx. art. 5069-15.01 et seq. (Xxxxxx 1987) (regulating
certain revolving credit loans and revolving tri-party accounts) shall not
apply to this Agreement or any of the other Financing Agreements.
11.5 WAIVER OF CONSUMER RIGHTS. EACH BORROWER HEREBY WAIVES ITS RIGHTS
UNDER THE DECEPTIVE TRADE PRACTICES - CONSUMER PROTECTION ACT, SECTION 17.41 ET.
SEQ. BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND
PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF EACH BORROWER'S OWN
SELECTION, EACH BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. EACH BORROWER
EXPRESSLY WARRANTS AND REPRESENTS THAT SUCH BORROWER (a) IS NOT IN A
SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO LENDER, AND (b) HAS BEEN
REPRESENTED BY LEGAL COUNSEL IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
EACH BORROWER HAS READ AND UNDERSTANDS
SECTION 11.4: /s/ RGG (INITIALS OF
OFFICER OF FARAH USA)
/s/ RGG (INITIALS OF
OFFICER OF VALUE CLOTHING)
/s/ TBP (INITIALS OF
OFFICER OF FARAH UK)
11.6. THIS WRITTEN FINANCING AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Very truly yours,
FARAH U.S.A., INC.
VALUE CLOTHING COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
Address:
0000 Xxxxx Xxxx
Xxxxxxxx X
Xxxxx 000
Xx Xxxx, Xxxxx 00000-0000
FARAH MANUFACTURING (U.K.) LIMITED
By: /s/ Xxxxxxx X. Page
Title: Director
Address:
0000 Xxxxx Xxxx
Xxxxxxxx X
Xxxxx 000
Xx Xxxx, Xxxxx 00000-0000
Accepted as of June 1, 1997 first written above:
CONGRESS FINANCIAL CORPORATION (SOUTHWEST)
By: /s/ Xxxx Xxxxxxx, Xx.
Title: Vice President
