AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT
AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT, dated May 12, 1997,
made by SPRINGDALE FASHIONS, INC., a Delaware corporation, TORTONI MANUFACTURING
CORP., a Delaware corporation, STONEHENGE FINANCIAL CORP., a New York
corporation (individually and collectively, the "Grantor"), in favor of THE CIT
GROUP/COMMERCIAL SERVICES, INC., as agent (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, Andover Togs, Inc. (the "Borrower") and each Grantor filed a
voluntary petition for relief under chapter 11, title 11, of the United States
Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the
Southern District of New York (the "Court").
WHEREAS, the Grantors have heretofore executed and delivered to Lender
that certain Subsidiary Security Agreement ("Original Security Agreement") (each
such Grantor is hereafter referred to as an "Original Grantor"), under which
each such Original Grantor has granted, to CIT, liens on and security interests
in the properties, rights, interests, and privileges therein described, for the
benefit and security of the Obligations (as such term is defined in the Original
Security Agreement) to CIT.
WHEREAS, each Grantor entered into a Guaranty dated as of September 19,
1996 (the "Original Guaranty") and secured the obligations thereunder pursuant
to the Original Security Agreement.
WHEREAS, the Borrower and CIT have heretofore entered into that certain
Replacement DIP Financing and Security Agreement dated as of September 19, 1996
(as amended, the "Original Financing Agreement").
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs, Inc.
("Plan of Reorganization") and under chapter 11 of the Bankruptcy Code, the
Original Grantors will reorganize
their businesses and operations, which Plan of Reorganization was confirmed by
order of the Court entered on April 10, 1997.
WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Borrower and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement and
the Grantors have entered into that certain amended and Restated Guaranty (the
"Guaranty") of the date hereof, amending and restating, in its entirety, the
Original Guaranty.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to renew,
modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that each Original Grantor
confirm and assure by its execution and delivery of this Amended and Restated
Security Agreement that the Collateral (as hereinafter defined) is and remains
collateral security for the Guaranteed Obligations (as such term is defined in
the Guaranty Agreement), for all other credit from time to time extended by CIT
to the Borrower under the Financing Agreement and for all other Obligations (as
hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Lender to make and maintain the Loans and assist the
Borrower in opening Letters of Credit pursuant to the Financing Agreement, the
Grantor hereby agrees with the Agent as follows:
1. Definitions. Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement which are
defined in the Financing Agreement or in Article 9 of the Uniform Commercial
Code currently in effect in the State of New York (the "Code") and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein. In the event of any
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inconsistencies in such definitions, the provisions of the Financing Agreement
shall control.
2. Grant of Security Interest. As collateral security for all of the
Obligations (as defined in Section 3 hereof), the Grantor hereby pledges and
assigns to the Agent and grants to the Agent, for the benefit of itself and the
Lender, a continuing general lien upon and first priority, perfected security
interest in, all of the following, wherever located and whether presently in
existence or hereafter acquired or created, however acquired or created and
which is owned by the Grantor or in which the Grantor has any interest, wherever
held by the Grantor or others for its account (collectively, the "Collateral").
(a) all of the Grantor's right, title and interest in and to all
equipment, vehicles, furniture, fixtures and machinery wherever located and
whether now or hereafter existing and whether now owned or hereafter acquired,
together with all substitutes, replacements, accessions and additions thereto,
and all tools, parts, accessories and attachments used in connection therewith
(hereinafter collectively referred to as the "Equipment");
(b) all of the Grantor's right, title and interest in and to all inventory
of any kind wherever located and whether now or hereafter existing and whether
now owned or hereafter acquired (including, without limitation, all types of
inventory, merchandise, goods, tangible personal property and other assets that
are held by the Grantor for sale, lease or other disposition in the ordinary
course of the Grantor's business or to be furnished under a contract for
services, whether such inventory, merchandise, goods, tangible personal property
and other assets are raw, in process and finished, and materials used or
consumed in the business of the Grantor, and goods returned to or repossessed by
the Grantor and goods in which the Grantor has an interest in mass or in joint
or other interest or right of any kind including consigned goods and goods being
possessed), and all accessions thereto and products thereof and all packing and
shipping materials (hereinafter collectively referred to as the "Inventory");
(c) all of the Grantor's right, title and interest in and to, whether now
or hereafter existing, (i) all present and future accounts, contract rights,
chattel paper, documents and
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instruments (as such terms are defined in the Code); (ii) all moneys, securities
and other property and the proceeds thereof, now or hereafter held or received
by, or in transit to, the Agent from or for the Grantor, whether for
safekeeping, pledge, custody, transmission, collection or otherwise; (iii) all
of the Grantor's right, title and interest, and all of the Grantor's rights,
remedies, security and liens, in, to and in respect of any credit, insurance
(the right of the Agent to insurance proceeds is subject to the terms of the
Financing Agreement), accounts (including, without limitation, rights of
stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party), guaranties or other
contracts of suretyship with respect to accounts, and deposits or other security
for the obligation of any account debtor; (iv) all rights relating to the sale
or other transfer of property to, or the construction, renovation or other
improvement of property by or for the Grantor; (v) all rights now or hereafter
existing in and to all security agreements, leases and other contracts now or
hereafter existing and securing or otherwise relating to any accounts, contract
rights, chattel paper, instruments, documents, or other rights or obligations;
and (vi) all of the Grantor's 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 or other documents or
instruments with respect to, or otherwise representing or evidencing, any
accounts, and all returned, reclaimed or repossessed goods (any and all such
accounts, contract rights, chattel paper, instruments, documents, and rights and
obligations being hereinafter referred to as the "Accounts" and any and all such
security agreements, leases and other contracts being hereinafter referred to as
the "Related Contracts");
(d) (i) all of the Grantor's right, title and interest in and to all
general intangibles; (ii) all rights, interest, choses in action, causes of
action, claims and all other intangible property of every kind and nature, in
each instance whether now owned or hereafter acquired by the Grantor, including,
without limitation, all corporate and other business records, all loans,
royalties, and all other forms of obligations receivable whatsoever (other than
Accounts); (iii) all trademarks, trademark applications, trademark licenses,
patents, patent applications, patent licenses, trade secrets, licenses,
copyrights, goodwill, inventions, designs, registrations,
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permits, franchises and licenses; (iv) all computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence, and advertising materials; (v) all customer and supplier
contracts, sale orders, rights under license and franchise agreements, and other
contracts and contract rights; (vi) all interests in partnership and joint
ventures, including all moneys due from time to time in respect thereof; (vii)
all federal, state and local tax refunds and federal, state and local tax refund
claims; (viii) all right, title and interest under leases, subleases, licenses
and concessions and other agreements relating to personal property, including
all moneys due from time to time in respect thereof; (ix) all payments due or
made to the Grantor in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property by any Person or
Governmental Authority; (x) all deposit accounts (general or special) with any
bank or other financial institution, including, without limitation, any
depositary or other accounts maintained by the Grantor at the Agent or any other
Lender and all funds on deposit thereon; (xi) all credits with and other claims
against third parties (including carriers and shippers) (other than Accounts);
(xii) all rights to indemnification; (xiii) all reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts; (xiv) all proceeds of insurance (except Excess Key Man Life
Insurance Proceeds (as defined in the Financing Agreement)), including credit
insurance, of which such Grantor is the beneficiary; (xv) all letters of credit
guaranties, liens, security interests and other security held by or granted to
such Grantor; and (xvi) all other intangible property, whether or not similar to
the foregoing, in each instance, however and wherever and whenever arising and
whether now owned or hereafter acquired (hereinafter collectively referred to as
"General Intangibles");
(e) the books and records of the Grantor relating to any of the foregoing
Collateral, including, without limitation, all customer contracts, sale orders,
minute books, ledgers, records, computer programs, software, printouts and other
computer materials, customer lists, credit files, correspondence and advertising
materials, in each case indicating, summarizing or evidencing any of the
Collateral; and
(f) all cash and non-cash proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise
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included, all payments under insurance (whether or not the Agent is the loss
payee thereof) (except Excess Key Man Life Insurance Proceeds (as defined in the
Financing Agreement)), and any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral;
in each case, howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
3. Security for Obligations. The security interest created hereby in the
Collateral constitutes continuing collateral security for all of the Obligations
(as defined in the Financing Agreement) and the due performance and observance
by the Borrower, the Grantor or any other Guarantor of all of their other
obligations from time to time existing in respect of the Financing Agreement and
all other Loan Documents, whether now existing or hereafter incurred (the
"Obligations"). The Grantors hereby confirm and assure that the terms of the
Original Security Agreement are hereby superseded and restated in their entirety
by this Agreement without thereby cancelling, releasing or discharging the
security interests created thereby.
4. Representations and Warranties. The Grantor represents and warrants as
follows:
(a) The Grantor (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation as set forth
on the first page hereof, and (ii) has all requisite power and authority to
execute, deliver and perform this Agreement.
(b) The execution, delivery and performance by the Grantor of this
Agreement (i) have been duly authorized by all necessary corporate action, (ii)
do not and will not contravene its charter or by-laws, any other applicable law
or any contractual restriction binding on or affecting the Grantor or any of its
properties, and (iii) do not and will not result in or require the creation of
any lien, security interest or other charge or encumbrance upon or with respect
to any of its properties other than as set forth in this Agreement.
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(c) This Agreement is a legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its terms.
(d) All Equipment and Inventory now existing is, and all Equipment and
Inventory hereafter existing will be, unless consented to in writing by the
Agent, located at the address(es) specified therefor in Schedule I hereto. The
Grantor's chief place of business and chief executive office, the place where
the Grantor keeps its records concerning Accounts and General Intangibles and
all originals of all chattel paper which constitutes Accounts are located at the
address specified therefor in such Schedule I. None of the Accounts or General
Intangibles is evidenced by a promissory note or other instrument. Set forth as
Schedule II hereto is a complete and correct list of each trade name used by the
Grantor.
(e) The Grantor has delivered to the Agent complete and correct copies of
each Related Contract, including all schedules and exhibits thereto. Each
Related Contract sets forth the entire agreement and understanding of the
parties thereto relating to the subject matter thereof, and there are no other
agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby or the rights of the Grantor in respect thereof. Each
Related Contract now existing is, and each other prospective Related Contract
will be, the legal, valid and binding obligation of the parties thereto,
enforceable against such parties in accordance with its terms. No material
default thereunder by any such party has occurred, nor does any defense, offset,
deduction or counterclaim exist thereunder in favor of any such party.
(f) The Grantor is and will be at all times the owner of the Collateral
free and clear of any lien, security interest or other charge or encumbrance,
except for (i) the security interest created by this Agreement, and (ii) the
security interests and other encumbrances described in Schedule III hereto. No
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording or filing office,
except (i) such as may have been filed in favor of the Agent relating to this
Agreement, and (ii) such as may have been filed to perfect or protect any
security interest or encumbrance described in Schedule III hereto.
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(g) The exercise by the Agent of any of its rights and remedies hereunder
will not contravene any law or any contractual restrictions binding on or
affecting the Grantor or any of its properties and will not result in or require
the creation of any lien, security interest or other charge or encumbrance upon
or with respect to any of the Grantor's properties other than as set forth in
this Agreement.
(h) Except with respect to any authorization or approval required under
the laws of another country as to Tortoni, no authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or other
regulatory body is required for (i) the due execution, delivery and performance
by the Grantor of this Agreement, (ii) the grant by the Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or (iii) the exercise by the Agent of any of its rights and remedies
hereunder, except for the filing of the financing statements required to be
filed to perfect the security interest created by this Agreement, all of which
financing statements have been duly filed and are in full force and effect.
(i) There is no pending or, to the best of Grantor's knowledge, threatened
action, suit, proceeding or claim before any court or other Governmental
Authority or any arbitrator, or any order, judgment or award by any court or
other Governmental Authority or arbitrator, that may adversely affect the grant
by the Grantor, or the perfection, of the security interest purported to be
created hereby in the Collateral, or the exercise by the Agent of any of its
rights and remedies hereunder.
(j) This Agreement creates a valid security interest in favor of the Agent
in the Collateral, as security for the Obligations. The Agent's having
possession of all Collateral that are instruments and cash and the filing of the
financing statements required to perfect the security interest created by this
Agreement result in the perfection of such security interests. Such security
interests are, or in the case of Collateral in which the Grantor obtains rights
after the date hereof, will be, perfected, first priority security interests,
subject only to the security interests and other encumbrances described in
Schedule III hereto. Such filings and all other action necessary or desirable to
perfect and protect such security interests have been duly taken, except for the
Agent's
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having possession of Collateral constituting instruments or cash after the date
hereof.
5. Covenants as to the Collateral. So long as any of the Obligations shall
remain outstanding, unless the Agent shall otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Agent may reasonably request in order (i) to perfect and protect the
security interest created hereby; (ii) after the occurrence and during the
continuance of an Event of Default, to enable the Agent to exercise and enforce
its rights and remedies hereunder in respect of the Collateral; or (iii) to
otherwise effect the purposes of this Agreement, including, without limitation,
(A) marking conspicuously each chattel paper included in the Accounts and
General Intangibles and, at the request of the Agent, each of its records
pertaining to the Collateral with a legend, in form and substance reasonably
satisfactory to the Agent, indicating that such chattel paper or Collateral is
subject to the security interest created hereby, (B) if any Account or General
Intangible shall be evidenced by a promissory note or other instrument or
chattel paper, delivering and pledging to the Agent hereunder such note,
instrument or chattel paper duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Agent, (C) executing and filing such financing or continuation statements,
or amendments thereto, as may be necessary or desirable or that the Agent may
reasonably request in order to perfect and preserve the security interest
purported to be created hereby, and (D) furnishing to the Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail.
(b) Location of Equipment and Inventory. The Grantor will keep the
Equipment and Inventory (other than Inventory sold in the ordinary course of
business) at the location(s) specified therefor in Schedule I hereto, or, upon
not less than 30 Business Days' prior written notice to the Agent accompanied by
a new Schedule I hereto indicating each new location of the Equipment and
Inventory, at such other locations as the Grantor may elect,
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provided that the Agent's rights in such Equipment and Inventory, including,
without limitation, the existence, perfection and priority of the security
interest created hereby in such Equipment and Inventory, are not adversely
affected thereby.
(c) Condition of Equipment. The Grantor will cause Equipment necessary for
the operation of its business to be maintained and preserved in good repair and
working order, ordinary wear and tear excepted, and will forthwith, or in the
case of any loss or damage to any Equipment as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs, replacements, and
other improvements in connection therewith which are necessary or desirable or
that the Agent may reasonably request to such end. The Grantor will promptly
furnish to the Agent a statement regarding any loss or damage in excess of
$100,000 to any Equipment.
(d) Taxes. The Grantor will pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against any
Collateral, except to the extent the validity thereof is being contested in good
faith by proper proceedings which stay the imposition of any penalty, fine or
lien resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof.
(e) Insurance.
(i) The Grantor will, at its own expense, maintain insurance
(including, without limitation, comprehensive general liability insurance
and all risk insurance insuring against loss by fire, explosion, theft and
such other casualties as may be satisfactory to the Agent) with respect to
the Equipment and Inventory in such amounts, against such risks, in such
form and with such insurers, as is currently in effect. Each policy for
liability insurance shall provide for all losses to be paid on behalf of
the Agent and the Grantor as their respective interests may appear, and
each policy for property damage shall provide for all losses to be paid
directly to the Agent upon the occurrence and during the continuance of an
Event of Default. In addition, each such policy for property
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damage insurance shall provide for all losses to be paid directly to the
Agent and shall (A) include the Agent as an insured party thereunder
(without any representation or warranty by or obligation upon the Agent)
as its interest may appear, (B) contain the agreement by the insurer that
any loss pursuant to clause (iii) of this Section 5(e) shall be payable to
the Agent on its own account, notwithstanding any action, inaction or
breach of representation or warranty by the Grantor, (C) provide that
there shall be no recourse against the Agent for payment of premiums or
other amounts with respect thereto, and (D) provide that at least 30 days'
prior written notice of cancellation or of lapse shall be given to the
Agent by the insurer. The Grantor will, if so requested by the Agent,
deliver to the Agent original or duplicate policies of all liability and
property damage insurance and, as often as the Agent may reasonably
request, a report of a reputable insurance broker with respect to such
insurance. The Grantor will also, after the occurrence and during the
continuance of an Event of Default, at the request of the Agent, duly
exercise and deliver instruments of assignment of such insurance policies
and cause the respective insurers to acknowledge notice of such
assignment.
(ii) Reimbursement under any liability insurance maintained by the
Grantor pursuant to this Section 5(e) may be paid directly to the Person
who shall have incurred liability covered by such insurance. In the case
of any loss involving damage to Equipment or Inventory as to which clause
(iii) of this Section 5(e) is not applicable, the Grantor will make or
cause to be made the necessary repairs to or replacements of such
Equipment and Inventory, and any proceeds of insurance maintained by the
Grantor pursuant to this Section 5(e) shall be paid to the Grantor as
reimbursement for the costs of such repairs or replacements.
(iii) Upon the occurrence and during the continuance of an Event of
Default, or the actual or constructive total loss (in excess of $100,000
per occurrence) of any Equipment or Inventory, all insurance payments in
respect of such Equipment and
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Inventory and all other Collateral shall be paid to the Agent and applied
as specified in Section 7(b) hereof.
(f) Provisions Concerning the Accounts, General Intangibles and the
Related Contracts.
(i) The Grantor will (A) give the Agent at least 30 days' prior
written notice of any change in the Grantor's name, identity or corporate
structure, (B) keep its chief place of business and chief executive office
and all originals of all chattel paper which constitutes Accounts or
General Intangibles at the locations specified therefor in Schedule I
hereof, and (C) keep adequate records concerning the Accounts and General
Intangibles and such chattel paper and permit representatives of the Agent
to inspect and make abstracts from such records and chattel paper at any
time during normal business hours.
(ii) The Grantor will duly perform and observe all of its
obligations under each Related Contract and, except as otherwise provided
in this subsection (f), continue to collect, at its own expense, all
amounts due or to become due under the Accounts and General Intangibles.
In connection with such collections, the Grantor may (and, at the Agent's
direction, will) take such action as the Grantor or the Agent may deem
necessary or advisable to enforce collection or performance of the
Accounts and General Intangibles; provided, however, the Agent shall have
the right at any time, upon the occurrence and during the continuance of
an Event of Default, to notify the account debtors or obligors under any
Account or General Intangible of the assignment of such Account or General
Intangible to the Agent and to direct such account debtors or obligors to
make payment of all amounts due or to become due to the Grantor thereunder
directly to the Agent and, upon such notification and at the expense of
the Grantor and to the extent permitted by law, to enforce collection of
any such Accounts or General Intangibles and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the
same extent as the Grantor might have done. In addition, upon the
occurrence and during
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the continuance of an Event of Default, the Agent shall have the right to
notify the United States Postal Service authorities to change the address
for delivery of mail addressed to the Grantor at such address as the Agent
may designate and to do all other acts and things necessary to carry out
this Agreement. After an Event of Default, (A) all amounts and proceeds
(including instruments) received by the Grantor in respect of the Accounts
and General Intangibles shall be received in trust for the benefit of the
Agent hereunder, shall be segregated from other funds of the Grantor and
shall be forthwith paid over to the Agent in the same form as so received
(with any necessary indorsement) to be held as cash collateral and either
(1) released to the Grantor so long as no Event of Default or an event
which, with the giving of notice or lapse of time or both, would
constitute an Event of Default under the Financing Agreement shall be
continuing or (2) if any Event of Default shall be continuing, applied as
specified in Section 7(b) hereof, and (B) the Grantor will not adjust,
settle or compromise the amount or payment of any Account or General
Intangible or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon.
(iii) Upon the occurrence and during the continuance of any material
breach or default under the Related Contracts by any party thereto other
than the Grantor, the Grantor will (A) promptly after obtaining knowledge
thereof, give the Agent written notice of the nature and duration thereof,
specifying what action, if any, it has taken and proposes to take with
respect thereto, (B) not, without the prior written consent of the Agent,
declare or waive any such breach or default or affirmatively consent to
the cure thereof, and (C) upon written instructions from the Agent and at
the Grantor's expense, take such action as the Agent may reasonably deem
necessary or advisable in respect thereof.
(iv) The Grantor will, at its expense, promptly deliver to the Agent
a copy of each notice or other communication received by it by which any
other party to the Related Contracts purports to exercise any of
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its rights or affect any of its obligations thereunder, together with a
copy of any reply by the Grantor thereto.
(v) The Grantor will not, without the prior written consent of the
Agent which shall not be unreasonably withheld, cancel, terminate, amend,
modify or waive any provision of any Related Contract.
(g) Transfers and Other Liens. The Grantor will not (i) sell, transfer or
assign (by operation of law or otherwise), lease, exchange or otherwise dispose
of any of the Collateral (except for (A) sales or disposals of Inventory in the
ordinary course of business and (B) sales and dispositions of obsolete equipment
in the ordinary course of business so long as the amount thereof sold in any
fiscal year by the Grantor shall not have a fair market value in excess of
$100,000), or (ii) create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the Collateral,
except for (A) the security interest created hereby, (B) the security interests
and other encumbrances described in Schedule III hereto, and (C) the security
interests and other encumbrances permitted under the Financing Agreement.
6. Additional Provisions Concerning the Collateral.
(a) So long as any Obligations remain outstanding and so long as the
Financing Agreement has not been terminated, the Grantor hereby authorizes the
Agent to file, without the signature of the Grantor where permitted by law, one
or more financing or continuation statements, and amendments thereto, relating
to the Collateral.
(b) The Grantor hereby irrevocably appoints the Agent the Grantor's
attorney-in-fact and proxy, with full authority in the place and stead of the
Grantor and in the name of the Grantor or otherwise, from time to time in the
Agent's discretion, to take any action and to execute any instrument which the
Agent may reasonably deem necessary or advisable to accomplish the purposes of
this Agreement (subject to the rights of the Grantor under Section 5(f) hereof),
including, without limitation: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of the Agent or the Grantor, any and all checks, notes,
drafts, and other documents or instruments relating to the Collateral
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(but in all instances before an Event of Default in the name of the Grantor and
not the Agent); (B) to obtain and adjust insurance required to be paid to the
Agent pursuant to Section 5(e) hereof, and to receive, indorse and collect any
drafts or other instruments, documents and chattel paper in connection
therewith; and (C) in addition to the foregoing and without limitation, upon the
occurrence of an Event of Default, (i) to receive, indorse and collect any
notes, drafts or other instruments, documents and chattel paper relating to the
Collateral; (ii) to ask, demand, collect, xxx for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral; (iii) to receive, indorse, and collect any drafts or
other instruments, documents and chattel paper in connection with clause (B),
(C)(i) or (C)(ii) of this subsection (b); and (iv) to file any claims or take
any action or institute any proceedings which the Agent may deem necessary or
desirable for the collection of any Collateral or otherwise to enforce the
rights of the Agent with respect to any Collateral, including, without
limitation, the sole right, in the name of the Agent for the benefit of the
Lender or the Grantor, to file claims under any insurance policies, to receive,
receipt and give acquittance for any payments that may be payable thereunder,
and to execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any claims under any such insurance policies.
(c) If the Grantor fails to perform any agreement contained herein, the
Agent may itself perform, or cause performance of, such agreement or obligation,
and the expenses of the Agent incurred in connection therewith shall be payable
by the Grantor pursuant to Section 8 hereof.
(d) The powers conferred on the Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Agent shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
15
(e) Anything herein to the contrary notwithstanding, (i) the Grantor shall
remain liable under the Related Contracts to the extent set forth therein to
perform all of its obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Agent of any of its
rights hereunder shall not release the Grantor from any of its obligations under
the Related Contracts, and (iii) the Agent shall not have any obligation or
liability by reason of this Agreement under the Related Contracts, nor shall the
Agent be obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
7. Remedies Upon Default. If any Event of Default under the Financing
Agreement shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to it, all
of the rights and remedies of a secured party on default under the Code (whether
or not the Code applies to the affected Collateral), and may also (i) require
the Grantor to, and the Grantor hereby agrees that it will at its expense and
upon request of the Agent forthwith, assemble all or part of the Collateral as
directed by the Agent and make it available to the Agent at a place to be
designated by the Agent which is reasonably convenient to both parties, and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at a public or private sale, at any of the
Agent's offices or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as the Agent may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least 10 days' notice to the Grantor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Agent and the Lender arising by
reason of the fact that the price at which the Collateral may
16
have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree.
(b) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Agent, be held by the Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Agent pursuant
to Section 8 hereof) in whole or in part by the Agent against, all or any part
of the Obligations in the order determined by the Agent in its discretion. Any
surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all of the Obligations shall be paid over to the Grantor or
to such Person as may be lawfully entitled to receive such surplus.
(c) In event that the proceeds of any such sale, collection or realization
are insufficient to pay all amounts to which the Agent is legally entitled, the
Grantor shall be liable for the deficiency, together with interest thereon at
the highest rate specified in the Financing Agreement for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees and expenses of
any attorneys employed by the Agent to collect such deficiency.
8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Agent and the Lender from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely and directly
from the Agent's or the Lender's gross negligence or willful misconduct.
(b) The Grantor will, upon demand, pay to the Agent the amount of any and
all costs and expenses, including the reasonable fees and disbursements of the
Agent's counsel and of any experts and agents, which the Agent may incur in
connection
17
with (i) the preparation, administration, amendment, waiver or other
modification or termination of this Agreement; (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Collateral; (iii) the exercise or enforcement of any of the rights of the
Agent hereunder; or (iv) the failure by the Grantor to perform or observe any of
the provisions hereof.
9. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Grantor, to each of:
Springdale Fashions, Inc.
c/o Andover Togs, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
Attn: Xxxxxxx Xxxxx, Chairman
Tortoni Manufacturing Corp.
c/o Andover Togs, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
Attn: Xxxxxxx Xxxxx, Chairman
and
Stonehenge Financial Corp.
c/o Andover Togs, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy Number: (000) 000-0000
Attn: Xxxxxxx Xxxxx, Chairman;
with a copy to
Xxxxxx X. Xxxxx, Esq.
Xxxxxxx Breed Xxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
18
if to the Agent, to it at its address specified in the Financing Agreement; or
as to such Person at such other address as shall be designated by such Person in
a written notice to such other Person complying as to delivery with the terms of
this Section 9. All such notices and other communications shall be effective (i)
if mailed, when received or three Business Days after mailing, whichever occurs
first, (ii) if telecopied, when received, or (iii) if delivered, upon delivery.
10. Security Interest Absolute. All rights of the Agent, all security
interests and all obligations of the Grantor hereunder shall be absolute and
unconditional irrespective of (i) any lack of validity or enforceability of the
Financing Agreement or any other agreement or instrument relating thereto; (ii)
any change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations, or any other amendment or waiver of
or consent to any departure from the Financing Agreement or any other agreement
or instrument relating thereto; (iii) any increase in, addition to, exchange or
release of, or non-perfection of any lien on or security interest in, any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or (iv) the absence of any
action on the part of the Agent to obtain payment or performance of the
Obligations from the Grantor or any other party.
11. Miscellaneous.
(a) Amendments. No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is in writing and signed by
the Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) Waivers; Cumulative Rights; Etc. No failure on the part of the Agent
to exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Agent provided
herein and in the Financing
19
Agreement are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agent under this Agreement
and the Financing Agreement are not conditional or contingent on any attempt by
the Agent to exercise any of its rights against any other person.
(c) Captions; Separability. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(d) Continuing Security Interest; Assignments. This Agreement shall create
a continuing security interest in the Collateral and shall (i) remain in full
force and effect until the payment in full of the Obligations after the
Revolving Loans have been reduced to zero and all Letters of Credit have been
canceled, (ii) be binding on the Grantor and its successors and assigns and
shall inure, together with all rights and remedies of the Agent hereunder, to
the benefit of the Agent and its successors, transferees and assigns.
(e) GOVERNING LAW. THIS AGREEMENT AND THE SECURED OBLIGATIONS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
(f) WAIVER OF JURY TRIAL AND SETOFF; CONSENT TO JURISDICTION; ETC. (1) In
any litigation in any court with respect to, in connection with, or arising out
of this Agreement, the Collateral, or any other Loan Document or any instrument
or document delivered pursuant to this Agreement, or the validity, protection,
interpretation, collection or enforcement thereof, or any other claim or dispute
howsoever arising, between the Grantor on the one hand and the Agent and the
Lender on the other hand, the Grantor, to the fullest extent it may effectively
do so, (i) waives the right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such
20
litigation, irrespective of the nature of such setoff, recoupment, counterclaim
or cross-claim, unless such setoff, recoupment, counterclaim or cross-claim
could not, by reason of any applicable Federal or State procedural laws, be
interposed, pleaded or alleged in any other action and (ii) WAIVES TRIAL BY JURY
IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
GRANTOR AGREES THAT THIS SECTION 11(f) IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND ACKNOWLEDGES THAT THE LENDER WOULD NOT EXTEND TO THE GRANTOR ANY
FINANCIAL ACCOMMODATIONS UNDER THE FINANCING AGREEMENT IF THIS SECTION 11(f)
WERE NOT PART OF THIS AGREEMENT.
(2) The Grantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Agreement, the Collateral, or any other Loan
Document or any document or instrument delivered pursuant to this Agreement. In
any such litigation, the Grantor waives, to the fullest extent it may
effectively do so, personal service of any summons, complaint or other process
and agrees that the service thereof may be made by certified or registered mail
directed to the Grantor at its address for notice determined in accordance with
Section 9 hereof. The Grantor hereby waives, to the fullest extent it may
effectively do so, the defenses of forum non conveniens and improper venue.
(g) Admissibility of Security Agreement. The Grantor agrees that any copy
of this Agreement signed by the Grantor and transmitted by telecopier for
delivery to the Agent shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence.
(h) Binding Nature. This Agreement shall be binding upon and inure to the
benefit of the successors, assigns or other legal representatives of the
Grantor, and shall, together with the rights and remedies of the Agent and the
Lender hereunder, be binding upon and inure to the benefit of the Agent and the
Lender, each of its successors, assigns or other legal representatives.
21
(i) Counterparts. This Agreement may be executed by the parties hereto
individually or in any combination, in one or more counterparts, each of which
shall be an original and all of which shall together constitute one and the same
agreement.
(j) Schedules. The Agent is authorized to annex hereto any schedules
referred to herein.
(k) Acknowledgment of Receipt. The Grantor acknowledges receipt of a copy
of this Agreement.
(l) Controlling Agreement. The parties hereto further specifically agree
that the Financing Agreement shall be deemed controlling in the event of any
conflict with this Agreement with respect to the Collateral.
22
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed
and delivered by its officer thereunto duly authorized, as of the date first
above written.
SPRINGDALE FASHIONS, INC.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
TORTONI MANUFACTURING CORP.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
STONEHENGE FINANCIAL CORP.
By: /s/ Xxxxxxx X. Xxxxx
------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
23
SCHEDULE I
TO
SUBSIDIARY SECURITY AGREEMENT
1. Location(s) of Equipment and Inventory:
(1) SPRINGDALE FASHIONS, INC.:
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
(2) TORTONI MANUFACTURING CORP.:
Xxxx Xxxxxx XX
La Romana, Dominican Republic
(3) STONEHENGE FINANCIAL CORP.:
c/o Andover Togs, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
2. Grantor's chief place of business, chief executive office and place where
the Grantor keeps its records concerning Accounts and General Intangibles:
(1) SPRINGDALE FASHIONS, INC.:
(a) Location Where Records Kept:
c/o Andover Togs, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) Chief Place of Business:
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxx, X.X. 00000
(c) Chief Executive Office:
Xxxx Xxxxxx
Xxxxxx, Xxxxxxx 00000
(2) TORTONI MANUFACTURING CORP.:
Xxxx Xxxxxx XX
La Romana, Dominican Republic
24
(3) STONEHENGE FINANCIAL CORP.:
c/o Andover Togs, Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
25
SCHEDULE II
TO
SUBSIDIARY SECURITY AGREEMENT
Trade Names, Etc.
Name Corporation
---- -----------
None Stonehenge Financial Corp.
None Springdale Fashions, Inc.
None Tortoni Manufacturing Corp.
26
SCHEDULE III
TO
SUBSIDIARY SECURITY AGREEMENT
Permitted Encumbrances
None
27
