FINANCING AGREEMENT
Dated as of October 30, 1998
by and among
CHIC BY H.I.S., INC.,
and
XXXXX X. XXXXXX COMPANY, INC.,
as Borrowers,
THE DOMESTIC SUBSIDIARIES OF CHIC BY H.I.S., INC.,
as Guarantors,
THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
as Lenders,
and
THE CIT GROUP/COMMERCIAL SERVICES, INC.,
as Agent
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS; CERTAIN TERMS......................................1
SECTION 1.01. Definitions......................................1
SECTION 2.02. Accounting and Other Terms..................... 18
SECTION 2.03. Time References ............................... 19
ARTICLE II THE LOANS......................................................19
SECTION 2.01. Commitments.....................................19
SECTION 2.02. Loans...........................................19
SECTION 2.03. Making the Loans................................20
SECTION 2.04. Notes; Repayment of Loans.......................20
SECTION 2.05. Funding and Settlement Procedures...............21
SECTION 2.06. Interest........................................23
(a) Revolving Credit Loans.....................23
(b) Term Loan..................................23
(c) Default Interest...........................23
(d) Interest Payment...........................23
(e) General....................................24
SECTION 2.07. Reduction of Commitment; Prepayment of Loans....24
(a) Early Termination Fees.....................26
(b) Unused Line Fee............................26
(c) Other Fees.................................26
SECTION 2.08. Fees ...........................................26
SECTION 2.09. Eurodollar Rate Not Determinable; Illegality
or Impropriety..................................26
SECTION 2.10. Indemnity.......................................27
SECTION 2.11. Continuation and Conversion of Loans............28
SECTION 2.12. Taxes...........................................29
ARTICLE III LIABILITY OF BORROWERS........................................ 31
SECTION 3.01 Joint and Several Liability of the Borrowers... 31
(ii)
ARTICLE IV FEES, PAYMENTS AND OTHER COMPENSATION..........................32
SECTION 4.01. Audit Fees......................................32
SECTION 4.02. Payments; Computations and Statements...........32
SECTION 4.03. Sharing of Payments, Etc........................33
SECTION 4.04. Apportionment of Payments.......................34
SECTION 4.05. Increased Costs and Reduced Return..............34
ARTICLE V CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING...........................................36
SECTION 5.01. Conditions Precedent to Effectiveness...........36
(a) Payment of Fees, Etc.......................36
(b) Representations and Warranties; No Event
of Default.................................36
(c) Legality...................................36
(d) Delivery of Documents......................36
(e) Proceedings; Receipt of Documents..........39
(f) Material Adverse Effect....................39
(g) Corporate and Legal Structure..............39
(h) Availability...............................39
SECTION 5.02. Conditions Precedent to Loans...................40
(a) Payment of Fees, Etc.......................40
(b) Representations and Warranties; No Event
of Default.................................40
(c) Legality...................................40
(d) Notices....................................40
(e) Delivery of Documents......................40
(f) Proceedings; Receipt of Documents..........40
ARTICLE VI REPRESENTATIONS AND WARRANTIES.................................41
SECTION 6.01. Representations and Warranties..................41
(a) Organization, Good Standing, Etc...........41
(b) Authorization, Etc.........................41
(c) Governmental Approvals.....................41
(iii)
(d) Enforceability of Loan Documents...........41
(e) Inventory Locations; Places of
Business; Chief Executive Office...........41
(f) Subsidiaries...............................42
(g) Litigation.................................42
(h) Financial Condition........................42
(i) Compliance with Law, Etc...................42
(j) ERISA......................................43
(k) Taxes, Etc.................................43
(l) Regulation U...............................43
(m) Nature of Business.........................44
(n) Adverse Agreements, Etc....................44
(o) Holding Company and Investment
Company Acts...............................44
(p) Permits, Etc...............................44
(q) Title to Properties........................44
(r) Full Disclosure............................44
(s) Operating Lease Obligations................45
(t) Environmental Matters......................45
(u) Schedules..................................45
(v) Insurance..................................45
(w) Use of Proceeds............................45
(x) Security Interests.........................45
(y) Trade Names................................45
(z) Solvency...................................46
(aa) Material Contracts.........................46
(bb) Year 2000 Compliance.......................46
ARTICLE VII COVENANTS OF THE BORROWERS.....................................46
SECTION 7.01. Affirmative Covenants...........................46
(a) Reporting Requirements.....................46
(b) Guaranties, Etc............................50
(c) Compliance with Laws, Etc..................50
(d) Preservation of Existence, Etc.............51
(e) Keeping of Records and Books of Account....51
(f) Inspection Rights..........................51
(g) Maintenance of Properties, Etc.............51
(h) Maintenance of Insurance...................51
(i) Environmental..............................52
(j) Further Assurances.........................52
(k) Real Estate................................52
(iv)
(l) Change in Collateral; Collateral Records...53
(m) Borrowing Base.............................53
(n) Appraisals.................................53
SECTION 7.02. Negative Covenants..............................53
(a) Liens, Etc.................................53
(b) Indebtedness...............................55
(c) Guaranties, Etc............................56
(d) Merger, Consolidation, Sale of
Assets, Etc................ ...............56
(e) Change in Nature of Business...............56
(f) Investments, Etc...........................56
(g) Lease Obligations..........................57
(h) Capital Expenditures.......................57
(i) Dividends, Prepayments, Etc................58
(j) Sale of Notes, Etc.........................58
(k) Compromise of Receivable...................58
(l) Federal Reserve Regulations................58
(m) Transactions with Affiliates...............58
(n) Environmental..............................58
(o) Financial Covenants........................59
(i) Tangible Net Worth................59
(ii) Leverage Ratio....................59
(iii) Fixed Charge Coverage Ratio.......60
(p) Fiscal Periods.............................60
(q) Year 2000 Compatibility....................60
(r) Availability...............................61
ARTICLE VIII MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL.......................61
SECTION 8.01. Collection of Accounts Receivable;
Management of Collateral........................61
SECTION 8.02. Accounts Receivable Documentation...............63
SECTION 8.03. Status of Accounts Receivable and Other
Collateral......................................64
SECTION 8.04. Collateral Custodian............................65
(v)
ARTICLE IX THE AGENT......................................................65
SECTION 9.01. Authorization and Action........................65
SECTION 9.02. Borrower's Default..............................65
SECTION 9.03. Agent's Reliance, Etc...........................66
SECTION 9.04. CIT.............................................66
SECTION 9.05. Lender Credit Decision..........................67
SECTION 9.06. Indemnification.................................67
SECTION 9.07. Successor Agents................................67
SECTION 9.08. Collateral Matters..............................68
ARTICLE X EVENTS OF DEFAULT..............................................69
SECTION 10.01. Events of Default...............................69
ARTICLE XI GUARANTY.......................................................72
SECTION 11.01. Guaranty........................................72
SECTION 11.02. Obligations Unconditional.......................72
SECTION 11.03. Waivers.........................................73
SECTION 11.04. Subrogation.....................................73
SECTION 11.05. No Waiver; Remedies.............................73
SECTION 11.06. Stay of Acceleration............................74
ARTICLE XII MISCELLANEOUS..................................................74
SECTION 12.01. Termination.....................................74
SECTION 12.02. Notices, Etc....................................75
SECTION 12.03. Amendments, Etc.................................76
SECTION 12.04. No Waiver; Remedies, Etc........................76
SECTION 12.05. Expenses; Taxes; Attorneys' Fees................77
SECTION 12.06. Right of Setoff.................................78
SECTION 12.07. Severability....................................78
SECTION 12.08. Assignments and Participations..................78
SECTION 12.09. Counterparts....................................80
SECTION 12.10 Headings........................................80
SECTION 12.11. Governing Law...................................80
SECTION 12.12. WAIVER OF JURY TRIAL, ETC.......................81
SECTION 12.13. Consent by the Agent, Lenders...................81
SECTION 12.14. No Party Deemed Drafter.........................81
SECTION 12.15. Reinstatement; Certain Payments.................82
SECTION 12.16. Indemnification.................................82
SECTION 12.17. Binding Effect..................................83
(vi)
Schedule 1.01A
Lenders and Lenders' Commitments...................................(i)
SCHEDULE A Guarantors
SCHEDULE 1.01A Lenders and Lenders' Commitments
SCHEDULE 1.01B Existing Control Group
SCHEDULE 1.01C Bond Indebtedness
SCHEDULE 1.01D Fiscal Months and Fiscal Quarters
SCHEDULE 6.01(e) Inventory Locations
SCHEDULE 6.01(f) Subsidiaries
SCHEDULE 6.01(g) Litigation
SCHEDULE 6.01(j) ERISA
SCHEDULE 6.01(s) Operating Lease Obligations
SCHEDULE 6.01(y) Tradenames
SCHEDULE 6.01(aa) Material Contracts
SCHEDULE 7.02(a)(ii) Liens
SCHEDULE 7.02(b)(ii) Indebtedness
SCHEDULE 7.02(c)(iii) Guaranties
SCHEDULE 7.02(f)(ii) Investments
SCHEDULE 7.02(g) Capitalized Lease Obligations
SCHEDULE 8.01 Lockboxes and Lockbox Banks
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Term Note
EXHIBIT C Form of Borrower Guaranty
EXHIBIT D-1 Form of Borrower Security Agreement
EXHIBIT D-2 Form of Guarantor Security Agreement
EXHIBIT E-1 Form of Parent Pledge Agreement
EXHIBIT E-2 Form of HIS Pledge Agreement
EXHIBIT E-3 Form of H.I.S. Limited Pledge Agreement
EXHIBIT E-4 Form of German Pledge Agreement
EXHIBIT F Form of Contribution Agreement
EXHIBIT G Form of New York Counsel Opinion
(vii)
EXHIBIT H Form of German Counsel Opinion
EXHIBIT I Form of Tennessee Counsel Opinion
EXHIBIT J Form of Assignment and Acceptance
EXHIBIT K Form of Notice of Borrowing
EXHIBIT L Form of Borrowing Base Certificate
(viii)
FINANCING AGREEMENT
FINANCING AGREEMENT, dated as of October 30, 1998, by and among Chic
by H.I.S., Inc., a Delaware corporation (the "Parent"), Xxxxx X. Xxxxxx Company,
Inc., a Delaware corporation ("HIS", and together with the Parent, each a
"Borrower" and collectively the "Borrowers"), the domestic Subsidiaries of the
Parent listed on Schedule A hereto (each a "Guarantor" and collectively the
"Guarantors"), the financial institutions from time to time party hereto (each a
"Lender" and collectively the "Lenders"), and The CIT Group/Commercial Services,
Inc., as agent for the Lenders (in such capacity, the "Agent").
RECITALS
The Borrowers and the Guarantors have asked the Lenders to extend
credit to the Borrowers consisting of (a) a term loan to the Parent in the
principal amount of $20,000,000 and (b) a revolving credit facility to HIS in an
aggregate principal amount not in excess of $40,000,000 at any time outstanding.
The proceeds of the term loan and the loans under the revolving credit facility
shall be used to refinance existing indebtedness of the Borrowers, for general
working capital purposes of the Borrowers and for other general corporate
purposes of the Borrowers. The Lenders are severally, and not jointly, willing
to extend such credit to the Borrowers subject to the terms and conditions
hereinafter set forth. Accordingly, the Borrowers, the Guarantors, the Lenders
and the Agent hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Account Debtor" means each debtor, customer or obligor in any way
obligated on or in connection with any Account Receivable.
"Accounts Receivable" means any and all rights of a Loan Party to
payment for goods sold, including accounts, contract rights, general intangibles
and any and all such rights evidenced by chattel paper, instruments or
documents, whether due or to become due and whether or not earned by
performance, and whether now or hereafter acquired or arising in the future and
any proceeds arising therefrom or relating thereto.
"Action" has the meaning specified therefor in Section 12.13 hereof.
"Affiliate" means, as to any Person, any other Person that directly or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with,
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such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (i) vote 10% or more of the Capital
Stock having ordinary voting power for the election of directors of such Person
or (ii) direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"Agent" has the meaning specified therefor in the preamble hereto.
"Agent Advances" has the meaning specified therefor in Section 9.08
hereof.
"Assignment and Acceptance" means an assignment and acceptance entered
into by an assigning Lender and an assignee and accepted by the Agent, in
accordance with Section 12.08 hereof and substantially in the form of Exhibit J
hereto.
"Availability" shall mean, the lesser of (i) the difference between
(A) the Borrowing Base and (B) the aggregate outstanding principal amount of all
Revolving Credit Loans and (ii) the difference between (A) the Total Revolving
Credit Commitment and (B) the aggregate outstanding principal amount of all
Revolving Credit Loans.
"Bank" means The Chase Manhattan Bank.
"Base Rate" means, for any day, the Prime Rate for such day.
"Base Rate Loan" means a Loan bearing interest at a rate calculated
based upon the Base Rate.
"Board" means the Board of Governors of the Federal Reserve System of
the United States.
"Bond Indebtedness" means the aggregate principal amount of any
Indebtedness of the Parent or its Subsidiaries under the agreements listed on
Schedule 1.01C hereto.
"Borrower" and "Borrowers" each has the meaning specified therefor in
the preamble hereto.
"Borrowing Base" means with respect to HIS as of any date, the
difference between (i) the sum of (A) 90% of the Net Amount of Eligible Accounts
Receivable of HIS and (B) the lesser of (x) 60% of the value, determined at the
lower of cost or market value in accordance with GAAP, of the Eligible Inventory
of HIS and (y) $27,000,000 and (ii) such reserves as the Agent may deem
appropriate in the exercise of its reasonable business judgment based upon the
lending practices of the Agent, consistent with the practices customary in the
commercial finance industry generally.
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"Borrowing Base Certificate" means the certification of the Borrowing
Base in compliance with Section 7.01(a)(v) hereof, substantially in the form of
Exhibit L hereto, setting forth the calculation of the Borrowing Base.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in New York City are required or authorized to
close, provided, that with respect to the borrowing, payment, conversion to or
continuation of, or determination of interest rate on, Eurodollar Loans,
Business Day shall mean any Business Day on which dealings in Dollars may be
carried on in the interbank eurodollar markets in New York City and London.
"Capital Guideline" means any law, rule, regulation, policy, guideline
or directive (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) (i) regarding capital adequacy,
capital ratios, capital requirements, the calculation of a bank's capital or
similar matters, or (ii) affecting the amount of capital required to be obtained
or maintained by the Lenders or any Person controlling any Lender or the manner
in which the Lenders or any Person controlling any Lender allocate capital to
any of their contingent liabilities (including letters of credit), advances,
acceptances, commitments, assets or liabilities.
"Capital Stock" means any and all shares, interests, participations,
warrants, options or other equivalents (however designated) of capital stock of
a corporation or any and all equivalent ownership interests in a Person (other
than a corporation).
"Capitalized Lease" means any lease which is required under GAAP to be
capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" means obligations for the payment of
rent for any real or personal property under leases or agreements to lease that,
in accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with such principles.
"Change of Control" means (i) any person or group of persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended), excluding the Existing Control Group, shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 30% or more of the voting power of the
then outstanding common stock of the Parent, (ii) during any period of 12
consecutive calendar months, individuals who were directors of the Parent on the
first day of such period shall cease to constitute a majority of the board of
directors of the Parent, provided that a director who has resigned or is
replaced during such time shall not be included in any determination of whether
a Change of Control has occurred pursuant to this clause (ii) to the extent such
director is replaced by a successor director elected by a majority of those
directors who were directors at the commencement of such period, (iii) the
Parent shall cease to directly or indirectly own and control, of record and
beneficially, 100% of the then outstanding Capital
- 3 -
Stock of HIS and each Guarantor free and clear of all Liens, or (iv) Xxxxxx
Xxxxx shall cease to manage and be involved in the day-to-day operations of the
Borrowers and a successor, reasonably acceptable to the Agent, is not appointed
within 90 days of the cessation of such management and involvement.
"CIT" means The CIT Group/Commercial Services, Inc., a New York
corporation.
"Collateral" means all of the property (tangible and intangible)
purported to be subject to the Lien purported to be created by any mortgage,
deed of trust, security agreement, pledge agreement, assignment or other
security document heretofore or hereafter executed by any Person as security for
all or any part of the Obligations.
"Collection Account" has the meaning specified therefor in Section
8.01.
"Commitment" means, with respect to each Lender, such Lender's
Revolving Credit Commitment and Term Loan Commitment.
"Consolidated Domestic Subsidiary" of a Person at any time shall mean
those Subsidiaries of such Person located in the United States, Canada and
Mexico whose accounts are or should in accordance with GAAP be consolidated with
those of such Person.
"Consolidated EBITDA" means for any Person and its Consolidated
Domestic Subsidiaries, for any period, the net income (or net loss) of such
Person and its Consolidated Domestic Subsidiaries for such period, plus (i) the
sum, without duplication, of (A) gross interest expense for such period minus
gross interest income for such period, (B) income tax expense, (C) depreciation
expense, (D) amortization expense net of negative goodwill amortization, and (E)
extraordinary or unusual non-cash losses (provided such extraordinary or unusual
losses do not at any time result in a cash outlay by such Person), less (ii)
extraordinary gains (other than extraordinary cash gains to the extent of
extraordinary cash losses), each determined on a consolidated basis in
accordance with GAAP for such Person and its Consolidated Domestic Subsidiaries.
"Consolidated Fixed Charges" means, for any Person and its
Consolidated Domestic Subsidiaries for any period, the sum of, without
duplication (i) Consolidated Net Interest Expense for such period, (ii) all
principal of Indebtedness for borrowed money of such Person or any of its
Consolidated Domestic Subsidiaries having a scheduled due date during such
period (not including mandatory prepayments pursuant to Section 2.07 hereof),
(iii) cash dividends or distributions paid by such Person or any of its
Consolidated Domestic Subsidiaries (other than dividends and distributions paid
any Loan Party) during such period, (iv) the total income tax liability actually
payable by such Person or any of its Consolidated Domestic Subsidiaries in
respect of such period, and (v) cash capital expenditures of such Person and its
Consolidated Domestic Subsidiaries made during such period.
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"Consolidated Funded Debt" means, at a particular date, the sum of (i)
the principal amount of all Indebtedness of the Parent and its Consolidated
Domestic Subsidiaries outstanding under this Agreement, the Notes and the other
Loan Documents, (ii) all Bond Indebtedness of the Parent and its Consolidated
Domestic Subsidiaries, and (iii) all Capitalized Lease Obligations of the Parent
and its Consolidated Domestic Subsidiaries.
"Consolidated Net Interest Expense" means, for any Person and its
Consolidated Domestic Subsidiaries for any period, gross interest expense of
such Person and its Consolidated Domestic Subsidiaries for such period
determined in conformity with GAAP less the following for such Person and its
Consolidated Domestic Subsidiaries determined in conformity with GAAP (i) the
sum of (a) interest income for such period and (b) gains for such period on
Hedging Agreements (to the extent not included in interest income above and to
the extent not deducted in the calculation of such gross interest expense), plus
the following for such Person and its Consolidated Domestic Subsidiaries
determined in conformity with GAAP (ii) the sum of (a) losses for such period on
Hedging Agreements (to the extent not included in such gross interest expense)
and (b) the expending of upfront costs or fees for such period associated with
Hedging Agreements (to the extent not included in gross interest expense).
"Consolidated Subsidiary" of a Person at any time shall mean those
subsidiaries of such Person (including, in the case of the Parent, Sportswear AG
and its subsidiaries) whose accounts are or should in accordance with GAAP be
consolidated with those of such Person.
"Consolidated Tangible Net Worth" means, with respect to a Person and
its Consolidated Subsidiaries, the excess of (i) the aggregate net book value of
the assets (other than goodwill, unamortized non-compete agreements,
organization costs, capitalized financing costs and other intangible assets
classified as such in accordance with GAAP) of such Person and its Consolidated
Subsidiaries on a consolidated basis after adjustments in accordance with GAAP
(including, without limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization and any valuation allowance against tax assets and
excluding the amount of any write-up or revaluation of any asset) over (ii) the
Consolidated Total Liabilities of such Person and its Consolidated Subsidiaries
on a consolidated basis, in each case computed and consolidated in accordance
with GAAP.
"Consolidated Total Liabilities" means, for a Person and its
Consolidated Subsidiaries, at any date, without duplication, all obligations
which in conformity with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet of such Person and its
Consolidated Subsidiaries including, without limitation, in any event, all
Indebtedness of such Person and its Consolidated Subsidiaries at such date
whether or not the same would be shown.
"Contribution Agreement" means the Contribution Agreement among each
of the Guarantors in the form of Exhibit F attached hereto, as the same may be
amended or otherwise modified from time to time.
- 5 -
"Default" means an event which, with the giving of notice or the lapse
of time or both, would constitute an Event of Default.
"Dollar", "Dollars" and the symbol "$" means lawful money of the
United States of America.
"Early Termination Fee" means a fee equal to (i) the sum of (A) the
aggregate unpaid principal amount of the Term Loans and (B) the Total Revolving
Credit Commitment, in each case outstanding at the time of the termination of
the Total Revolving Credit Commitment, multiplied by (ii) (A) 3%, if the Total
Revolving Credit Commitment is terminated before October 29, 1999, (B) 2%, if
the Total Revolving Credit Commitment is terminated after October 29, 1999 and
before October 30, 2000, and (C) 1%, if the Total Revolving Credit Commitment is
terminated after October 30, 2000 and before October 30, 2001.
"Effective Date" has the meaning specified therefor in Section 5.01
hereof.
"Eligible Accounts Receivable" means the Accounts Receivable of HIS
which are and at all times continue to be, reasonably acceptable to the Agent in
all respects based upon the lending practices of the Agent consistent with those
criteria customary in the commercial finance industry generally. Criteria for
eligibility may be established and revised from time to time solely by the Agent
in the exercise of its reasonable business judgment based upon the lending
practices of the Agent consistent with those criteria customary in the
commercial finance industry generally. In general, Accounts Receivable of HIS
shall in no event be deemed to be eligible unless: (i) delivery of the
merchandise has been completed; (ii) no return, rejection or repossession has
occurred; (iii) the merchandise has been accepted by the Account Debtor without
dispute, setoff, defense or counterclaim; (iv) such Account Receivable is owned
by HIS free and clear of any Lien (other than that of the Agent under the Loan
Documents) and continues to be in full conformity with any and all
representations and warranties made by HIS to the Agent and the Lenders with
respect thereto in the Loan Documents; (v) such Account Receivable is
unconditionally payable in Dollars within 90 days from the invoice date and is
not evidenced by a promissory note, chattel paper or any other instrument or
document; (vi) no more than 90 days have elapsed from the invoice due date and
no more than 120 days have elapsed from the invoice date; (vii) the Account
Debtor with respect thereto is not an Affiliate of any Borrower or any
Guarantor; (viii) such Account Receivable does not constitute an obligation of
the United States or any other Governmental Authority other than a post exchange
or any other Governmental Authority with respect to which HIS has provided to
the Agent evidence, reasonably satisfactory to the Agent, that the Account
Receivable of such Governmental Authority is not subject to the Federal
Assignment of Claims Act or any similar state or local assignment of claims act;
(ix) the Account Debtor (or the applicable office of the Account Debtor) with
respect thereto is located in the continental United States or Canada, unless
the Account Receivable is supported by a letter of credit or other similar
obligation satisfactory to the Agent; (x) the Account Debtor with respect
thereto is not also a supplier to or creditor of a Borrower or Guarantor, unless
such supplier or creditor has executed a no-offset letter
- 6 -
satisfactory to the Agent; (xi) not more than 50% of the aggregate amount of all
Accounts Receivable of the Account Debtor with respect to such Account
Receivable have remained unpaid 90 days past the invoice due date or 120 days
past the invoice date; (xii) the Account Debtor is not the subject of a
"Bankruptcy Proceeding"; for purposes hereof an Account Debtor is subject to a
"Bankruptcy Proceeding" if such Account Debtor has filed a petition for
bankruptcy or any other relief under the United States Bankruptcy Code or any
other law relating to bankruptcy, insolvency, reorganization or relief of
debtors, made an assignment for the benefit of creditors, had filed against it
any petition or other application for relief under the United States Bankruptcy
Code or any such other law, has failed, suspended business operations, become
insolvent, called a meeting of its creditors for the purpose of obtaining any
financial concession or accommodation, or had or suffered to be appointed a
receiver or a trustee for all or a significant portion of its assets or affairs;
and (xiii) the Agent is, and continues to be, reasonably satisfied with the
credit standing of the Account Debtor in relation to the amount of credit
extended based upon the lending practices of the Agent consistent with those
criteria customary in the commercial finance industry generally.
"Eligible Inventory" means all finished goods Inventory of HIS which
is located in the continental United States and meets all of the following
specifications: (i) the Inventory is owned by HIS free and clear of any existing
Lien, other than that of the Agent under the Loan Documents, it is not held on
consignment and may be lawfully sold and it continues to be in full conformity
with any representations and warranties made in this Agreement by HIS to the
Agent and the Lenders with respect thereto; (ii) HIS has the right to assignment
thereof and the power to grant Liens thereon and security interests therein;
(iii) the Inventory arose or was acquired in the ordinary course of HIS's
business and does not represent damaged goods; (iv) no Account Receivable or
document of title has been created or issued with respect to such Inventory; (v)
the Inventory is readily marketable for sale by HIS; (vi) the Inventory is (A)
located in one of the locations in the United States listed on Part B of
Schedule 6.01(e) hereto which is designated with an asterisk or such other
locations in the continental United States which is approved in writing by the
Agent or (B) "in transit" Inventory being shipped within the United States to a
location in the United States described in clause (vi)(A) above, provided,
however, that the aggregate value of such "in transit" Inventory included in
this clause (vi)(B) shall not at any time exceed $2,000,000; (vii) the Inventory
does not represent raw materials, trim, work in process, supplies or samples;
(viii) if the Inventory is sold under a licensed trademark, the Agent shall have
entered into a licensor waiver letter, in form and substance satisfactory to the
Agent, with the licensor with respect to the rights of the Agent to use the
trademark to sell or otherwise dispose of such Inventory; and (ix) the Inventory
is and at all times shall continue to be reasonably acceptable to the Agent in
all respects in the exercise of its reasonable business judgment based upon the
lending practices of the Agent, consistent with the criteria customary in the
commercial finance industry generally.
"Employee Plan" means an employee benefit plan (other than a
Multiemployer Plan) covered by Title IV of ERISA and maintained (or was
maintained at any time during the
- 7 -
six (6) calendar years preceding the date of any borrowing hereunder) for
employees of a Borrower or any of their ERISA Affiliates.
"Environmental Actions" refers to any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other written communication from
any governmental agency, department, bureau, office or other authority, or any
third party involving violations of Environmental Laws or Releases of Hazardous
Materials (i) from any assets, properties or businesses of any Loan Party or any
predecessor in interest; or (ii) from or onto any adjoining properties or
businesses; or (iii) from or onto any facilities which received Hazardous
Materials generated by any Loan Party or any predecessor in interest.
"Environmental Law" means the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601, et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801, et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251, et seq.), the Clean Air Act (42
U.S.C. ss. 7401, et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601,
et seq.) and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et,
seq.), as such laws may be amended or supplemented from time to time, and any
other present or future federal, state, local or foreign statute, ordinance,
rule, regulation, order, judgment, decree, permit, license or other binding
determination of any Governmental Authority imposing liability or establishing
standards of conduct for protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and, unless the context otherwise requires, the rules
and regulations promulgated thereunder from time to time.
"ERISA Affiliate" means, with respect to any Person, any trade or
business (whether or not incorporated) which is a member of a group of which
such Person is a member and which would be deemed to be a "controlled group"
within the meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue
Code.
"Eurodollar Base Rate" means, with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate of interest published
in The Wall Street Journal, Eastern Edition, two Business Days prior to such
Interest Period as the "London Interbank Offered Rate" applicable to one, two,
three or six months, as selected by a Borrower. In the event that The Wall
Street Journal, Eastern Edition is not published or such rate does not appear in
The Wall Street Journal, Eastern Edition, the Eurodollar Base Rate shall be the
rate determined by the Agent to be the rate at which deposits in Dollars are
offered by the Bank to first class banks in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in respect of
its eurodollar loans are then being conducted at approximately 11:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest
Period, in an amount approximately equal to the principal amount of the
Eurodollar
- 8 -
Loan to which such Interest Period is to apply and for a period of time
comparable to such Interest Period.
"Eurodollar Loan" means a Loan bearing interest based on the
Eurodollar Rate.
"Eurodollar Rate" means with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100 of
1%):
Eurodollar Base Rate
--------------------
1.00 - Reserve Requirements
"Event of Default" means any of the events set forth in Section 10.01
hereof.
"Excess Cash Flow" means, for any fiscal period of the Parent (i) net
income (or net loss) of the Parent and its Consolidated Subsidiaries for such
period, plus (ii) all non-cash charges of the Parent and its Consolidated
Subsidiaries deducted in arriving at such net income (or net loss) for such
period, less (iii) all non-cash credits of the Parent and its Consolidated
Subsidiaries included in arriving at such net income (or net loss) for such
period, less (iv) all scheduled and mandatory cash principal payments on the
Loans and optional cash principal payments on the Loans made during such period
(but, in the case of the Revolving Credit Loans only to the extent that the
Total Revolving Credit Commitment is permanently reduced by the amount of such
payments) during such period, less (v) the cash portion of capital expenditures
made by the Parent and its Consolidated Subsidiaries during such period to the
extent permitted to be made under this Agreement.
"Existing Control Group" means the Persons identified on Schedule
1.01B hereto.
"Existing Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of March 17, 1997, among the Parent, certain of its
Subsidiaries, NationsBank, N.A., as agent, and certain lenders, as amended.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by it.
"Fee Letter" means the letter agreement, dated as of the date hereof,
among the Borrowers and the Agent obligating the Borrowers to jointly and
severally pay certain fees to the
- 9 -
Agent for their account in connection with this Agreement, as such letter
agreement may be modified, supplemented or amended from time to time.
"Final Maturity Date" means the date this Agreement is terminated
pursuant to Section 12.01 hereof.
"Financial Statements" means (i) the audited consolidated financial
statements of the Parent and its Consolidated Subsidiaries for the fiscal year
ended November 1, 1997 and (ii) the unaudited consolidated financial statements
of the Parent and its Consolidated Subsidiaries for the nine-month period ended
August 1, 1998.
"Fiscal Month" means each fiscal month listed on Schedule 1.01D.
"Fiscal Quarter" means each fiscal quarter listed on Schedule 1.01D.
"Fiscal Year" means the fiscal year of the Parent ending on the first
Saturday of November of each year.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States, applied on a consistent basis, provided that
for the purposes of Section 7.02(o) and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any department, commission, board,
bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranties" means (i) the guaranty made by the Guarantors contained
in Article XI hereof and (ii) each guaranty, substantially in the form of
Exhibit C hereto, made by the Parent and HIS in favor of the Lenders
guaranteeing the Obligations, as the same may be amended, modified or
supplemented from time to time.
"Guarantors" means Chic by H.I.S. Licensing Corporation, H.I.S.
Kentucky, Inc., Chic Holdings Corp., H.I.S. Limited and all Persons which
hereafter guarantee, pursuant to Section 7.01(b) hereof or otherwise, all or any
part of the Obligations.
"Hazardous Materials" shall include (i) any element, compound, or
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substance, extremely hazardous
substance or chemical, hazardous waste, special waste, or solid waste under
Environmental Laws; (ii) petroleum and its refined products; (iii)
polychlorinated biphenyls; (iv) any substance exhibiting a hazardous waste
characteristic
- 10 -
including but not limited to corrosivity, ignitability, toxicity or reactivity
as well as any radioactive or explosive materials; and (v) any raw materials,
building components, including but not limited to asbestos-containing materials,
and manufactured products containing Hazardous Materials.
"Hedging Agreement" means any interest rate swap, collar, cap, floor
or a forward rate agreement or other agreement regarding the hedging of interest
rate risk exposure executed in connection with hedging the interest rate
exposure of the Borrowers, and any confirming letter executed pursuant to such
agreement, all as amended or supplemented from time to time.
"Indebtedness" means as to any Person, without duplication, (i)
indebtedness for borrowed money; (ii) indebtedness for the deferred purchase
price of property or services (other than current trade payables incurred in the
ordinary course of business and payable in accordance with customary practices);
(iii) indebtedness evidenced by bonds, debentures, notes or other similar
instruments (other than performance, surety and appeal or other similar bonds
arising in the ordinary course of business); (iv) obligations and liabilities
secured by a Lien upon property owned by such Person, whether or not owing by
such Person and even though such Person has not assumed or become liable for the
payment thereof; (v) obligations and liabilities directly or indirectly
guaranteed by such Person; (vi) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights
and remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property; (vii) Capitalized Lease Obligations; (viii) all
liabilities in respect of letters of credit, acceptances and similar obligations
created for the account of such Person; and (ix) net liabilities of such Person
under: (A) Hedging Agreements and (B) foreign currency exchange agreements, each
calculated on a basis reasonably satisfactory to the Agent and in accordance
with accepted practice.
"Indemnitees" has the meaning specified therefor in Section 12.16
hereof.
"Interest Period" means the period commencing on the borrowing date or
the date of any continuation or conversion into a Eurodollar Loan, as the case
may be, and ending one, two, three or six months thereafter, in each case as
selected by the relevant Borrower in the applicable notice given to the Agent
pursuant to Sections 2.03 or 2.11 hereof; provided that (i) each Interest Period
shall begin on the first Business Day of a month, (ii) any Interest Period that
would otherwise end on a day that is not a Business Day shall be extended to the
succeeding Business Day, unless such Business Day fails in another calendar
month, in which case such Interest Period shall end on the next preceding
Business Day, (iii) no Interest Period for any Eurodollar Loan shall end after
the Final Maturity Date in the case of the Revolving Credit Loans or October 30,
2001 in the case of the Term Loan, and (iv) no more than three (3) Interest
Periods may exist at any one time.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time.
- 11 -
"Inventory" means all goods and merchandise of a Loan Party including,
but not limited to, all raw materials, work in process, piece goods, trim,
finished goods, materials and supplies of every nature used or usable in
connection with the manufacture, shipping, storing, advertising or sale of such
goods and merchandise, whether now owned or hereafter acquired and all such
property the sale or other disposition of which would give rise to Accounts
Receivable.
"Lender" has the meaning specified therefor in the preamble hereto.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
"Loan" means any Revolving Credit Loan or Term Loan made by a Lender
or the Agent to a Borrower pursuant to Article II hereof.
"Loan Account" means the Borrowers' joint account maintained at the
Payment Office of the Agent in the name of the Borrowers in which the Borrowers
will be charged with all Loans made to, and all other Obligations incurred by,
the Borrowers or such other accounts as the Agent shall designate from time to
time.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
Security Agreements, the Pledge Agreements, the Fee Letter, the Contribution
Agreement, all lockbox agreements and all other instruments, agreements and
other documents executed and delivered pursuant hereto or thereto.
"Loan Parties" means each of the Borrowers and the Guarantors.
"Lockboxes" has the meaning specified therefor in Section 8.01 hereof.
"Lockbox Bank" has the meaning specified therefor in Section 8.01
hereof.
"Material Adverse Effect" means a material adverse effect upon (i) the
business, properties, operations, or condition (financial or otherwise) of a
Borrower or of the Loan Parties taken as a whole, (ii) the ability of a Borrower
or of the Loan Parties taken as a whole to perform the obligations for such
Person(s) hereunder or under any other Loan Document to which any such Person(s)
is a party, (iii) the Lien arising under the Loan Documents on any Collateral,
(iv) the rights, powers and remedies of the Agent and the Lenders under this
Agreement or any other Loan Document or the legality, validity or enforceability
of this Agreement or any other Loan Document or (v) the aggregate value of the
property included in the calculation of the Borrowing Base.
- 12 -
"Material Contract" means, with respect to any Person, each contract
to which such Person is a party involving aggregate consideration payable to or
by such Person of $100,000 or more (other than purchase orders and contracts
that by their terms may be terminated by any party thereto in the ordinary
course of its business upon less than 60 days' notice) or otherwise material to
the business, condition (financial or otherwise), operations, performance,
properties or prospects of such Person.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA for which a Borrower or any ERISA Affiliate has
contributed to, or has been obligated to contribute to, at any time during the
six (6) years preceding the date hereof.
"Net Amount of Eligible Accounts Receivable" means the aggregate
unpaid invoice amount of Eligible Accounts Receivable less, without duplication
sales, excise or similar taxes, returns, discounts, chargebacks, claims, advance
payments, credits and allowances of any nature at any time issued, owing,
granted, outstanding, available or claimed.
"Net Proceeds" means (a) with respect to the sale or other disposition
of any asset by the Parent or any of its domestic Subsidiaries (including in
connection with any sale-leaseback), the excess, if any, of (i) the aggregate
amount received in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such sale or other
disposition, over (ii) the sum of (A) the principal amount of any Indebtedness
which is secured by any such asset (other than Indebtedness assumed by the
purchaser of such asset) or which is required to be, and is, repaid in
connection with the sale or other disposition thereof (other than Indebtedness
hereunder), (B) the reasonable out-of-pocket expenses and fees incurred by the
Parent or its domestic Subsidiaries in connection with such sale or other
disposition (but only to the extent that such out-of-pocket expenses and fees,
if paid to an Affiliate of the Parent are approved by the Agent in its sole
discretion exercised reasonably), and provided that all such expenses and fees
are set forth on a certificate provided to the Agent, and (C) federal and state
taxes incurred in connection with such sale or other disposition, whether
payable at such time or thereafter and (b) with respect to the sale or other
disposition of any Capital Stock or debt security by the Parent or any of its
domestic Subsidiaries, excluding any sale or disposition of Capital Stock of the
Parent pursuant to employee stock option plans of the Parent, the excess of (i)
the aggregate amount received in cash (including any cash received by way of
deferred payment pursuant to a note receivable, other non-cash consideration or
otherwise, but only as and when such cash is so received, in connection with
such sale or other disposition, over (ii) the sum of (A) the reasonable fees,
commissions and other out-of-pocket expenses incurred by the Parent or its
domestic Subsidiaries in connection with such sale or other disposition (but
only to the extent such fees, commissions and expenses, if paid to an Affiliate
of the Parent are approved by the Agent in its sole discretion exercised
reasonably and provided that all such fees, commissions, discounts and expenses
are set forth on a certificate provided to the Agent) and (B) federal and state
taxes incurred in connection with such sale or other disposition, whether
payable at such time or thereafter.
- 13 -
"Notes" means the Revolving Credit Notes and the Term Notes.
"Notice of Borrowing" has the meaning specified therefor in Section
2.03 hereof.
"Obligations" means (i) the obligations of each Borrower to pay, as
and when due and payable (by scheduled maturity or otherwise), all amounts from
time to time owing by it in respect of any Loan Document to which it is a party,
whether for principal, interest (including, without limitation, all interest
that accrues after the commencement of any case, proceeding or other action
relating to bankruptcy, insolvency or reorganization of any Borrower, whether or
not a claim for post-filing interest is allowed in such proceeding), fees,
commissions, expense reimbursements, indemnifications or otherwise, and (ii) the
obligations of each Borrower to perform or observe all of its other obligations
from time to time existing under any Loan Document to which it is a party.
"Operating Lease Obligations" means all obligations for the payment of
rent for any real or personal property under leases or agreements to lease,
other than Capitalized Lease Obligations.
"Other Taxes" shall have the meaning specified therefor in Section
2.12 hereof.
"Parent" has the meaning specified therefor in the preamble hereto.
"Payment Office" means the Agent's offices located at 0000 Xxxxxx xx
xxx Xxxxxxxx, Xxx Xxxx, XX 00000, or such other offices as the Agent may
designate and, when used in connection with any payments made to the Agent,
shall mean an account in the name of the Agent designated to the Borrowers and
the Lenders from time to time into which the Borrowers and the Lenders shall
make all payments to the Agent under this Agreement.
"Permitted Investments" means (i) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six months from the date of acquisition thereof; (ii)
commercial paper, maturing not more than 270 days after the date of issue rated
P-1 by Xxxxx'x Investors Service, Inc. or A-1 by Standard & Poor's Ratings
Group, (iii) overnight bank deposits, certificates of deposit and bankers'
acceptances in each case maturing not more than 270 days after the date of
issue, issued by any Lender or issued by commercial banking institutions and
money market or demand deposit accounts maintained at any Lender or commercial
banking institutions, each commercial banking institution (other than any
Lender) of which is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than $500,000,000, (iv)
overnight bank deposits and certificates of deposit in each case maturing not
more than 270 days after the date of issue, issued by commercial banking
institutions and money market or demand deposit accounts in an aggregate amount
not to exceed $1,000,000 at any time maintained at commercial banking
institutions that are insured by the Federal Deposit Insurance
- 14 -
Corporation, and (v) repurchase agreements having maturities of not more than 90
days from the date of acquisition which are entered into with the commercial
banking institutions described in clause (iii) above and which are secured by
readily marketable direct obligations of the Government of the United States of
America or any agency thereof.
"Permitted Liens" shall have the meaning specified therefor in Section
7.02(a) --------------- hereof.
"Person" means an individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or Governmental Authority.
"Pledge Agreements" means the Pledge and Security Agreement(s) made by
each of the Borrowers and H.I.S. Limited in favor of the Agent, each
substantially in the form of Exhibits E-1, E-2, E-3 or E-4 hereto, as
applicable, as the same may be amended or otherwise modified from time to time.
"Post-Default Rate" means a rate of interest per annum equal to the
rate of interest otherwise in effect plus 2% or, if no other rate of interest is
in effect, the Base Rate plus 2%.
"Prime Rate" means the rate of interest publicly announced by the Bank
in New York, New York from time to time as its prime rate. The prime rate is
determined from time to time by the Bank as a means of pricing some loans to its
borrowers and neither is tied to any external rate of interest or index, nor
necessarily reflects the lowest rate of interest actually charged by the Bank,
to any particular class or category of customers. Each change in the Prime Rate
shall be effective on the first day of the month following the date such change
is announced.
"Pro Rata Share" means, with respect to any Lender, a fraction
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the Total Commitment,
provided that, if the Commitments have been reduced to zero, the numerator shall
be the aggregate unpaid principal amount of such Lender's Loans and the
denominator shall be the aggregate unpaid principal amount of all of the Loans.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping, or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers, and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including ambient
air, soil, surface or ground water.
"Remedial Action" shall mean all actions taken to (i) monitor, assess,
evaluate, investigate, clean up, remove, treat, remediate or contain or in any
way address Hazardous Materials in the indoor or outdoor environment, (ii)
prevent, mitigate or minimize any Release or
- 15 -
threatened Release so that the Release or threatened Release does not migrate or
endanger or threaten to endanger public health or welfare or the environment or
(iii) perform pre-remedial investigations and studies, and post remedial
operation and maintenance activities or any other actions authorized by 42
U.S.C. ss. 9601.
"Reportable Event" means an event described in Section 4043 of ERISA
(other than an event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation under the regulations promulgated under
such Section).
"Required Lenders" means, at any time, Lenders whose Pro Rata Shares
aggregate at least 66 2/3%.
"Reserve Requirements" means, for any day as applied to a Eurodollar
Loan, the aggregate (without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities
and to be subject to such reserve requirements without benefit of or credit for
proration, exceptions or offsets which may be available from time to time to any
Lender or the Affiliate of any Lender under Regulation D.
"Revolving Credit Commitment" means, with respect to each Lender the
revolving credit commitment of such Lender as set forth in Schedule 1.01A
hereto, as the same may be adjusted from time to time pursuant to the terms of
this Agreement.
"Revolving Credit Loan" means a Loan made by a Lender or the Agent to
HIS pursuant to Section 2.01(a)(i) hereof.
"Revolving Credit Note" means a promissory note of HIS, substantially
in the form of Exhibit A hereto, made payable to the order of a Lender and
evidencing the Indebtedness resulting from the making by such Lender of
Revolving Credit Loans and delivered to the Agent pursuant to Article V hereof,
as such promissory note may be modified or extended from time to time, and any
promissory note or notes issued in exchange or replacement therefor.
"Security Agreements" means the Security Agreements made by each of
the Loan Parties in favor of the Agent, each in the form of Exhibit D-1 or D-2
hereto, as the same may be amended or otherwise modified from time to time.
"Security Documents" means collectively, each Security Agreement, each
Pledge Agreement and each blocked account, lockbox or similar agreement executed
and delivered by a Loan Party, and all Uniform Commercial Code financing
statements required by this Agreement,
- 16 -
the Security Agreements and the Pledge Agreements to be filed with respect to
the security interests in personal property and fixtures created pursuant to
such agreements, and all other documents and agreements executed and delivered
by the Loan Parties in connection with any of the foregoing documents.
"Settlement Period" has the meaning specified therefor in Section
2.05(b)(i) ----------------- hereof.
"Solvent" means, with respect to any Person on a particular date, that
on such date (a) the fair value of the property of such Person is not less than
the total amount of its liabilities (including, without limitation, liabilities
on all claims, whether or not reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured) of such Person, (b) the present fair salable value of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its existing debts as they become
absolute and matured, (c) such Person is able to realize upon its assets and pay
its debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (d) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (e) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital.
"Sportswear AG" means H.I.S. Sportswear AG, a company incorporated
under German law.
"Subsidiary" means, as to any Person, any corporation of which more
than 50% of the outstanding Capital Stock having (in the absence of
contingencies) ordinary voting power to elect directors (or Persons performing
similar functions) of such corporation is, at the time of determination, owned
directly, or indirectly through one or more intermediaries, by such Person,
provided that the term Subsidiary shall exclude Sportswear AG and all
subsidiaries of Sportswear AG.
"Taxes" shall have the meaning given to that term in Section 2.12
hereof.
"Term Loan" means a Loan made by a Lender to the Parent pursuant to
Section 2.01(a)(ii) hereof.
"Term Loan Commitment" means, with respect to each Lender, the term
commitment of such Lender as set forth in Schedule 1.01A hereto, as the same may
be adjusted from time to time pursuant to the terms of this Agreement.
"Term Note" means a promissory note of the Parent, substantially in
the form of Exhibit B hereto, made payable to the order of a Lender and
evidencing the Indebtedness
- 17 -
resulting from the making by such Lender of such Lender's Term Loan and
delivered to the Agent pursuant to Article V hereof, as such promissory note may
be modified or extended from time to time, and any promissory note or notes
issued in exchange or replacement therefor.
"Termination Agreement" means the termination agreement, in form and
substance satisfactory to the Agent, dated as of the date hereof between
NationsBank, N.A. and the Borrowers and Guarantors confirming the payment in
full of all of the obligations of the Borrowers and Guarantors owing to the
lenders party to the Existing Credit Agreement and the termination or release of
all Liens existing in favor of such lenders in and to the properties or assets
of the Borrowers and the Guarantors.
"Termination Anniversary Date" means October 30, 2001 and thereafter
October 30 of each succeeding calendar year.
"Termination Event" means (i) a Reportable Event with respect to any
Employee Plan, (ii) any event that causes a Borrower or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
Internal Revenue Code, (iii) the filing of a notice of intent to terminate an
Employee Plan under Section 4041(c) of ERISA, (iv) the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate an Employee
Plan, (v) any other event or condition that would constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Employee Plan or (vi) failure to make any installment payment
under Section 412 of the Code to any Employee Plan by its due date.
"Title Company" shall have the meaning specified therefor in Section
7.01(k) hereof.
"Total Commitment" means the sum of the amounts of the Lenders'
Commitments.
"Total Revolving Credit Commitment" means the sum of the Lenders'
Revolving Credit Commitments.
"Total Term Loan Commitment" means the sum of the Lenders' Term Loan
Commitments.
"Unused Line Fee" has the meaning specified therefor in Section
2.08(b) hereof.
"WARN" has the meaning specified therefor in Section 6.01(j) hereof.
SECTION 1.02. Accounting and Other Terms. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under GAAP applied on a basis consistent with those used in preparing the
Financial Statements. All terms
- 18 -
used in this Agreement which are defined in Article 9 of the Uniform Commercial
Code in effect in the State of New York on the date hereof and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein.
SECTION 1.03. Time References. Unless otherwise indicated herein, all
references to time of day refer to Eastern standard time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding", provided, however, that with respect to a computation
of fees or interest payable to the Agent or the Lenders, such period shall in
any event consist of at least one full day.
ARTICLE II
THE LOANS
SECTION 2.01. Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties set forth herein, each Lender
severally agrees to make the following Loans to the Borrowers:
(i) Revolving Credit Loans to HIS at any time and from time
to time from the Effective Date to the Final Maturity Date, or until the
earlier reduction of its Revolving Credit Commitment to zero in accordance
with the terms hereof, in an aggregate principal amount of Revolving Credit
Loans at any time outstanding not to exceed the amount of such Lender's
Revolving Credit Commitment; and
(ii) a Term Loan to the Parent on the Effective Date in a
principal amount not to exceed such Lender's Term Loan Commitment.
(b) Notwithstanding the foregoing, the aggregate principal amount
of Revolving Credit Loans outstanding at any time to HIS shall not exceed the
lower of (i) the Total Revolving Credit Commitment and (ii) the then current
Borrowing Base.
(c) Within the foregoing limits, HIS may borrow, repay and
reborrow Revolving Credit Loans, on or after the Effective Date and prior to the
Final Maturity Date, subject to the terms, provisions and limitations set forth
herein. Any principal amount of a Term Loan which is repaid or prepaid may not
be reborrowed.
SECTION 2.02. Loans. Except as otherwise provided in Section 2.05,
Loans shall be made ratably by the Lenders in accordance with their respective
Revolving Credit Commitments and Term Loan Commitments, as the case may be. The
Term Loan shall be made on the Effective Date by the Lenders against delivery
hereunder of the Term Notes, and the
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initial Revolving Credit Loans shall be made on or after the Effective Date
against delivery hereunder of the Revolving Credit Notes.
SECTION 2.03. Making the Loans. A Borrower shall give the Agent prior
telephone notice (which notice, if requested by the Agent, must be promptly
confirmed in writing in substantially the form of Exhibit K hereto (a "Notice of
Borrowing")) (i) not later than 11:00 a.m. (New York City time) on the date of
the proposed borrowing, in the case of a borrowing consisting of Base Rate
Loans, or (ii) not later than 12:00 noon (New York City time) three Business
Days prior to such proposed borrowing in the case of a borrowing consisting of
Eurodollar Loans, provided that Eurodollar Loans will only be made on the first
Business Day of a month. Such Notice of Borrowing shall be irrevocable and shall
specify the Borrower that is requesting such Loan, the principal amount of the
proposed borrowing (which, in the case of a Eurodollar Loan, must be in a
minimum amount of $3,000,000 and in multiples of $1,000,000 in excess thereof),
whether such Loan is requested to be a Base Rate Loan or a Eurodollar Loan and,
in the case of a Eurodollar Loan, the Initial Interest Period for such
Eurodollar Loan, the use of the proceeds of such proposed Loan, and the proposed
borrowing date, which must be a Business Day and, in the case of a Eurodollar
Loan, the first Business Day of a month, and such Borrower shall be bound to
make a borrowing in accordance therewith. At no time shall the Borrowers
collectively have more than three (3) Eurodollar Loans outstanding at any one
time. The Agent may act without liability upon the basis of written, telecopy or
telephone notice believed by the Agent in good faith to be from a Borrower (or
from any officer thereof designated in writing to the Agent), and the Borrowers
hereby waive the right to dispute the Agent's record of the terms of any such
telephonic Notice of Borrowing.
SECTION 2.04. Notes; Repayment of Loans. (a) The Term Loan made by a
Lender shall be evidenced by a Term Note, each duly executed by the Parent,
dated the Effective Date and delivered to and made payable to the order of such
Lender in a principal amount equal to such Lender's Term Loan Commitment. All
Revolving Credit Loans made by a Lender shall be evidenced by a single Revolving
Credit Note, duly executed by HIS, dated the Effective Date, and delivered to
and made payable to the order of such Lender in a principal amount equal to its
Revolving Credit Commitment on such date.
(b) The outstanding principal balance of each Revolving Credit
Loan shall be due and payable on the Final Maturity Date.
(c) The Term Loan shall be payable as to principal as follows:
(i) $1,000,000 on October 30, 2000, (ii) $1,500,000 on April 30, 2001, and (iii)
$17,500,000 on October 30, 2001; provided, however that the last such
installment shall be in the amount sufficient to repay in full the principal
amount of the Term Loan outstanding on October 30, 2001.
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SECTION 2.05. Funding and Settlement Procedures.
(a) (i) Except as otherwise provided in this subsection 2.05(a),
all Loans under this Agreement shall be made by the Lenders simultaneously and
proportionately according to their Pro Rata Shares of the Total Term Loan
Commitment or the Total Revolving Credit Commitment, as the case may be, it
being understood that no Lender shall be responsible for any default by any
other Lender in such other Lender's obligation to make a Loan requested
hereunder nor shall the relevant Commitment of any Lender to make the Loan
requested be increased or decreased as a result of the default by any other
Lender in such other Lender's obligation to make a Loan requested hereunder.
(ii) Notwithstanding any other provision of this Agreement,
in order to reduce the number of fund transfers among the Borrowers, the
Lenders and the Agent, the Borrowers, the Lenders and the Agent agree that
the Agent may, but shall not be obligated to, and the Borrowers and the
Lenders hereby irrevocably authorize the Agent to, fund, on behalf of the
Lenders, Revolving Credit Loans pursuant to Sections 2.02 and 2.03, subject
to the procedures for settlement set forth in subsection 2.05(b); provided,
however, that (A) the Agent shall in no event fund such Revolving Credit
Loan if the Agent shall have received written notice from the Required
Lenders on the Business Day prior to the date of the proposed Revolving
Credit Loan that one or more of the conditions precedent contained in
Section 5.02 hereof will not be satisfied on the date of the proposed
Revolving Credit Loan and (B) the Agent shall not otherwise be required to
determine that, or take notice whether, the conditions precedent in Section
5.02 have been satisfied. If the Agent elects not to fund a requested
Revolving Credit Loan on behalf of the Lenders, promptly after receipt of a
Notice of Borrowing, the Agent shall so notify each Lender. If the Agent
notifies the Lenders that it will not fund a requested Revolving Credit
Loan on behalf of the Lenders, each Lender shall make its Pro Rata Share of
the Loan available to the Agent, in immediately available funds, at the
Payment Office no later than 2:00 p.m. (New York City time) on the date of
the proposed Loan. The Agent will make the proceeds of such Loans available
to HIS on the day of the proposed Loan by causing an amount, in immediately
available funds, equal to the proceeds of all such Loans received by the
Agent at the Payment Office or the amount funded by the Agent on behalf of
the Lenders to be deposited in an account designated by the HIS.
(iii) If the Agent has notified the Lenders that the Agent
will not fund a particular Loan pursuant to subsection 2.05(a)(ii) on
behalf of the Lenders, the Agent may assume that such Lender has made such
amount available to the Agent on such day and the Agent, in its sole and
absolute discretion, may, but shall not be obligated to, cause a
corresponding amount to be made available to HIS on such day. If, in such
case, the Agent makes such corresponding amount available to HIS and such
corresponding amount is not in fact made available to the Agent by such
Lender, such Lender and HIS, severally agree to repay to the Agent
forthwith on demand such
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corresponding amount together with interest thereon for each day from the
date such amount is made available to HIS until the date such amount is
repaid to the Agent, at (A) in the case of HIS, a rate per annum equal to
the higher of the Federal Funds Rate and the interest rate applicable
thereto pursuant to Section 2.06 and (B) in the case of such Lender, at the
Federal Funds Rate for three Business Days and thereafter at the Prime
Rate. If such Lender shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Lender's Pro Rata Share of such
Revolving Credit Loan.
(iv) Nothing in this subsection 2.05(a) shall be deemed to
relieve any Lender from its obligation to fulfill its Revolving Credit
Commitment hereunder or to prejudice any rights that the Agent or a
Borrower may have against any Lender as a result of any default by such
Lender hereunder.
(b) (i) With respect to all periods for which the Agent, on
behalf of the Lenders, has funded Revolving Credit Loans pursuant to subsection
2.05(a), on the first Business Day after the last day of each week, or such
shorter period as the Agent may from time to time select (any such week or
shorter period being herein called a "Settlement Period"), the Agent shall
notify each Lender of the unpaid principal amount of the Revolving Credit Loans
outstanding as of the last day of the Settlement Period. In the event that such
amount is greater than the unpaid principal amount of the Revolving Credit Loans
outstanding as of the last day of the immediately preceding Settlement Period
(or, if there has been no preceding Settlement Period, the amount of the
Revolving Credit Loans made on the date of such Lender's initial funding), each
Lender shall promptly make available to the Agent such Lender's Pro Rata Share
of the difference in immediately available funds. In the event that such amount
is less than such unpaid principal amount, the Agent shall promptly pay over to
each other Lender such Lender's Pro Rata Share of the difference in immediately
available funds. In addition, if the Agent shall so request at any time when a
Default or an Event of Default shall have occurred and be continuing, or any
other event shall have occurred as a result of which the Agent shall determine
that it is desirable to present claims against the Borrowers for repayment, each
Lender shall promptly remit to the Agent or, as the case may be, the Agent shall
promptly remit to each Lender, sufficient funds to adjust the interests of the
Lenders in the then outstanding Revolving Credit Loans to such an extent that,
after giving effect to such adjustment, each Lender's interest in the then
outstanding Revolving Credit Loans will be equal to its Pro Rata Share thereof.
The obligations of the Agent and each Lender under this subsection 2.05(b) shall
be absolute and unconditional. Each Lender shall only be entitled to receive
interest on its Pro Rata Share of the Revolving Credit Loans which have been
funded by such Lender.
(ii) In the event that any Lender fails to make any payment
required to be made by it pursuant to subsection 2.05(b)(i), the Agent
shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from the date such
payment was due until the date such amount is paid to the Agent, at the
Federal Funds Rate for three Business Days and thereafter at the Prime
Rate. During the period in which such Lender has not paid such
corresponding
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amount to the Agent, notwithstanding anything to the contrary contained in
this Agreement or any other Loan Document, the amount so advanced by the
Agent to HIS shall, for all purposes hereof, be a Loan made by the Agent
for its own account. Upon any such failure by a Lender to pay the Agent,
the Agent shall promptly thereafter notify HIS of such failure and HIS
shall immediately pay such corresponding amount to the Agent for its own
account.
SECTION 2.06. Interest.
(a) Revolving Credit Loans. Each Revolving Credit Loan which is a
Eurodollar Loan shall bear interest on the principal amount thereof from time to
time outstanding from the date of such Loan until such principal amount becomes
due, at a rate per annum equal to the Eurodollar Rate for the Interest Period in
effect for such Loan plus 1.75%. Interest shall accrue from and include the
first date of an Interest Period, but exclude the last day of such Interest
Period. Each Revolving Credit Loan which is a Base Rate Loan shall bear interest
on the principal amount thereof from time to time outstanding from the date of
such Loan, until such principal amount becomes due, at a rate per annum equal to
the Base Rate.
(b) Term Loan. The portion of the Term Loan that is a Eurodollar
Loan shall bear interest on the principal amount thereof from time to time
outstanding from the date of such Term Loan until such principal amount becomes
due at a rate per annum equal to the Eurodollar Rate for the Interest Period in
effect for such Loan plus 2%. Interest shall accrue from and include the first
date of an Interest Period, but exclude the last day of such Interest Period.
Each Term Loan which is a Base Rate Loan shall bear interest on the principal
amount thereof from time to time outstanding from the date of such Loan until
such principal amount becomes due, at a rate per annum equal to the Base Rate.
(c) Default Interest. Upon the occurrence and during the
continuance of an Event of Default, all outstanding principal of the Loans and
(to the extent permitted by law) interest which is not paid when due, shall bear
interest until such amount is paid in full at a fluctuating interest rate per
annum equal at all times to the Post-Default Rate.
(d) Interest Payment. Interest on each Eurodollar Loan shall be
payable, in arrears, on the last day of each Interest Period of such Eurodollar
Loan and, in the case of any Eurodollar Loan of six month duration, the day that
interest would have been payable if such Eurodollar Loan had an Interest Period
of three months. Interest on each Base Rate Loan shall be payable monthly, in
arrears, on the first day of each month, commencing on the first day of the
month following the month in which such Loan is made, and at maturity (whether
upon demand, by acceleration or otherwise). Interest at the Post-Default Rate
shall be payable on demand. The Borrowers hereby authorize the Agent to, and the
Agent may, from time to time, charge the Loan Account pursuant to Section 4.02
hereof with the amount of any interest payment due hereunder.
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(e) General. All interest shall be computed on the basis of a
year of 360 days for the actual number of days, including the first day but
excluding the last day, elapsed.
SECTION 2.07. Reduction of Commitment; Prepayment of Loans.
(a) The Total Term Loan Commitment shall automatically terminate
in full at 5:00 p.m. on the Effective Date. Subject to Section 2.08, HIS may at
any time or from time to time and without penalty or premium reduce the Total
Revolving Credit Commitment to an amount (which may be zero) not less than the
sum of the unpaid principal amount of all Revolving Credit Loans then
outstanding plus the principal amount of all Revolving Credit Loans not yet made
as to which notice has been given by HIS under Section 2.03 hereof. Any
reduction shall be in an amount which is an integral multiple of $5,000,000.
Reduction of the Total Revolving Credit Commitment shall be made by providing
not less than three Business Days' written notice (which notice shall be
irrevocable) to such effect to the Agent (which notice the Agent shall promptly
transmit to each Lender). Reductions of the Total Revolving Credit Commitment
are irrevocable and may not be reinstated. Each such reduction shall reduce the
Revolving Credit Commitment of each Lender proportionately in accordance with
its Pro Rata Share.
(b) Subject to the terms and conditions contained in this Section
2.07, Section 2.10 and elsewhere in this Agreement, the Borrowers shall have the
right to prepay, in whole or in part, the Revolving Credit Loans and the Term
Loan, provided that (i) subject to the terms of Section 2.08, the Borrowers
shall be obligated to pay the Early Termination Fee with respect to any Loans
prepaid in connection with a termination of the Total Revolving Credit
Commitment prior to October 30, 2001, and (ii) all partial prepayments of the
Term Loan shall be applied to the principal installments of the Term Loan in the
inverse order of maturity.
(c) If at any time the Borrowing Base is less than the sum of the
outstanding principal on all Revolving Credit Loans outstanding (i) HIS will
immediately give notice of such occurrence to the Agent and (ii) HIS will prepay
the Revolving Credit Loans in an amount which will reduce the sum of the
outstanding principal on all Revolving Credit Loans to an amount less than or
equal to the then current Borrowing Base.
(d) Within ten (10) Business Days of delivery to the Agent of
audited annual financial statements pursuant to Section 7.01(a)(ii) hereof or,
if such financial statements are not delivered to the Agent on the date such
statements are required to be delivered pursuant to such Section 7.01(a)(ii),
ten (10) Business Days after the date such statements are required to be
delivered to the Agent pursuant to Section 7.01(a)(ii), the Parent shall pay to
the Agent an amount equal to 50% of the Excess Cash Flow for the Fiscal Year
covered by such financial statements. Each prepayment pursuant to this paragraph
(d) shall be applied to principal payments of the Term Loan in the inverse order
of maturity.
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(e) The Borrowers shall immediately prepay the outstanding
principal amount of the Term Loan in full in the event the Total Revolving
Credit Commitment is terminated for any reason.
(f) Immediately upon the receipt by any Loan Party of any Net
Proceeds from the issuance, sale, assignment, transfer or other disposition by
any Loan Party of any Capital Stock, debt securities or assets of the Parent or
any of its Subsidiaries, the Borrowers shall make a prepayment of the Term Loan
in an amount equal to the amount of such Net Proceeds, provided that the
Borrowers shall not be required to prepay the Term Loan pursuant to this Section
2.07(f) in the case of (i) intercompany indebtedness between the Loan Parties
permitted by Sections 7.02(b) and 7.02(f) hereof, (ii) sales of Inventory by HIS
in the ordinary course of business, and (iii) sales of machinery, equipment,
fixtures or real property by the Parent or any of its Consolidated Domestic
Subsidiaries in the ordinary course of business with an aggregate fair market
value not exceeding $3,000,000 in any Fiscal Year. The aggregate amount of Net
Proceeds shall be applied first to the principal installments of the Term Loan
in the inverse order of maturity and, if any Net Proceeds remain after such
application, second, to the Revolving Credit Loans.
(g) Subject to paragraph (b) of Section 2.10 of this Agreement,
the Agent shall on each Business Day apply all funds transferred to or deposited
in the Payment Office, to the payment, in whole or in part, of the outstanding
Revolving Credit Loans.
(h) Immediately upon the receipt by any Loan Party of any
insurance proceeds, HIS shall prepay the Revolving Credit Loans in an amount
equal to the insurance proceeds received by such Loan Party, provided that (i)
except during the continuance of an Event of Default, proceeds from insurance
covering damage to property not in excess of $250,000 for any one occurrence
shall not be required to be so prepaid on such date to the extent such insurance
proceeds are used to replace or restore the properties or assets in respect of
which such proceeds were paid if the Borrowers deliver a certificate to the
Agent on or prior to such date stating that such proceeds shall be used to
replace or restore any such properties or assets within a period specified in
such certificate not to exceed 60 days after the date of receipt of such
proceeds (which certificate shall set forth estimates of the proceeds to be so
expended) and (ii) if all or any portion of such proceeds not so applied to the
repayment of the Revolving Credit Loans are not so used within the period
specified in the relevant certificate furnished pursuant to clause (i) above,
such remaining portion shall be prepaid on the last day of such specified
period. Such insurance proceeds shall be applied to the outstanding Revolving
Credit Loans.
(i) Any prepayment made pursuant to this Section 2.07 shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of prepayment.
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(j) Except as otherwise expressly provided in this Section 2.07,
payments with respect to any paragraph of this Section 2.07 are in addition to
payments made or required to be made under any other paragraph of this Section
2.07.
SECTION 2.08. Fees.
(a) Early Termination Fees. If the Total Revolving Credit
Commitment is terminated by HIS prior to October 30, 2001, the Borrowers shall
pay to the Agent for the Pro Rata Share of the Lenders, on the date of such
termination, the Early Termination Fee, provided, that if the termination occurs
upon the occurrence of a Change of Control, no Early Termination Fee shall be
payable, except that if the Total Revolving Credit Commitment is terminated by
HIS prior to October 29, 1999 as a result of or in connection with a Change of
Control, the Borrowers shall pay to the Lenders a fee in the amount of $500,000.
(b) Unused Line Fee. From and after the Effective Date until the
Termination Date, HIS shall pay to the Agent, for the account of each Lender in
accordance with such Lender's Pro Rata Share, an unused line fee (the "Unused
Line Fee") accruing at the rate of one-quarter of one percent (0.25%) per annum,
on the excess, if any, of the total Revolving Credit Commitment over the
Revolving Credit Loans outstanding from time to time. All Unused Line Fees shall
be payable monthly in arrears on the first day of each month commencing December
1, 1998.
(c) Other Fees. The Borrowers shall jointly and severally pay to
the Agent the fees set forth in the Fee Letter at the times set forth in the Fee
Letter. All fees required to be paid to the Agent pursuant to the Fee Letter and
this Agreement shall be paid to the Agent for its own account or for the Pro
Rata Share of the Lenders, as the case may be. All fees under this Agreement and
the Fee Letter are non-refundable under all circumstances.
SECTION 2.09. Eurodollar Rate Not Determinable; Illegality or
Impropriety.
(a) In the event, and on each occasion, that on or before the day
on which the Eurodollar Rate is to be determined for a borrowing that is to
include Eurodollar Loans, the Agent has determined in good faith that, or has
been advised by the Required Lenders that, (i) the Eurodollar Rate cannot be
determined for any reason, (ii) the Eurodollar Rate will not adequately and
fairly reflect the cost of maintaining Eurodollar Loans or (iii) Dollar deposits
in the principal amount of the applicable Eurodollar Loans are not available in
the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of the Lenders' Eurodollar Loans are then being
conducted, the Agent shall, as soon as practicable thereafter, give written
notice of such determination to the Borrowers and the other Lenders. In the
event of any such determination, any request by the Borrowers for a Eurodollar
Loan pursuant to Section 2.03 shall, until, in the case of such a determination
by the Required Lenders, the Agent has been advised by the Required Lenders and
the Agent has so advised such
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Borrower that, or in the case of a determination by the Agent, the Agent has
advised such Borrower and the other Lenders that, the circumstances giving rise
to such notice no longer exist, be deemed to be a request for a Base Rate Loan.
Each determination by the Agent and/or the Required Lenders hereunder shall be
conclusive and binding absent manifest error.
(b) In the event that it shall be unlawful or improper for any
Lender to make, maintain or fund any Eurodollar Loan as contemplated by this
Agreement, then such Lender shall forthwith give notice thereof to the Agent and
the Borrowers describing such illegality or impropriety in reasonable detail.
Effective immediately upon the giving of such notice, the obligation of such
Lender to make Eurodollar Loans shall be suspended for the duration of such
illegality or impropriety and, if and when such illegality or impropriety ceases
to exist, such suspension shall cease, and such Lender shall notify the Agent
and the Borrowers. If any such change shall make it unlawful or improper for any
Lender to maintain any outstanding Eurodollar Loan as a Eurodollar Loan, such
Lender shall, upon the happening of such event, notify the Agent and the
Borrowers, and the Borrowers shall immediately, or if permitted by applicable
law, rule, regulation, order, decree, interpretation, request or directive, at
the end of the then current Interest Period for such Eurodollar Loan, convert
each such Eurodollar Loan into a Base Rate Loan.
SECTION 2.10. Indemnity.
(a) The Borrowers hereby jointly and severally indemnify each
Lender against any loss or expense that such Lender actually sustains or incurs
(including, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund or maintain any Eurodollar Loan, any loss or expense incurred in
connection with any interest rate swap or other derivative product, and
including loss of anticipated profits) as a consequence of (i) any failure by
the Borrowers to fulfill on the date of any borrowing hereunder the applicable
conditions set forth in Article V, (ii) any failure by the Borrowers to borrow
any Eurodollar Loan hereunder, to convert any Base Rate Loan into a Eurodollar
Loan or to continue a Eurodollar Loan as such after notice of such borrowing,
conversion or continuation has been given pursuant to Section 2.03 or Section
2.11 hereof, (iii) any payment, prepayment (mandatory or optional) or conversion
of a Eurodollar Loan required by any provision of this Agreement or otherwise
made on a date other than the last day of the Interest Period applicable
thereto, (iv) any default in payment or prepayment of the principal amount of
any Eurodollar Loan or any part thereof or interest accrued thereon, as and when
due and payable (at the due date thereof, by notice of prepayment or otherwise),
or (v) the occurrence of any Event of Default, including, in each such case, any
loss (including, without limitation, loss of margin) or reasonable expense
sustained or incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Loan or any part thereof as a Eurodollar
Loan. Such loss or reasonable expense shall include but not be limited to an
amount equal to the excess, if any, as reasonably determined by such Lender, of
(i) its cost of obtaining the funds for the Loan being paid or prepaid or
converted or continued or not borrowed or converted or continued (based on the
Eurodollar Rate applicable thereto) for the period from
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the date of such payment, prepayment, conversion, continuation or failure to
borrow, convert or continue on the last day of the Interest Period for such Loan
(or, in the case of a failure to borrow, convert or continue, the last day of
the Interest Period for such Loan that would have commenced on the date of such
failure to borrow, convert or continue) over (ii) the amount of interest (as
reasonably determined by such Lender) that would be realized by such Lender in
reemploying the funds so paid, prepaid, converted or continued or not borrowed,
converted or continued for such Interest Period. A certificate of any Lender
setting forth in reasonable detail any amount or amounts that such Lender is
entitled to receive pursuant to this Section 2.10 and the basis for the
determination of such amount or amounts shall be delivered to the Borrowers and
shall be conclusive and binding absent manifest error.
(b) Notwithstanding paragraph (a) of this Section 2.10, the Agent
will use reasonable efforts to minimize or reduce any such loss or expense
resulting from the mandatory prepayments required by Section 2.07 (other than
paragraph (e) thereof) of this Agreement by (i) applying all payments and
prepayments to Revolving Credit Loans or the portion of the Term Loan, as
appropriate, bearing interest at the Base Rate prior to any application of
payments to Revolving Credit Loans or the portion of the Term Loan, as
appropriate, bearing interest at the Eurodollar Rate and (ii) after all Base
Rate Loans have been paid in full, calculating any such loss or expense based
upon the net decrease in Revolving Credit Loans, or the portion of the Term
Loan, as appropriate, bearing interest at the Eurodollar Rate on a day after
giving effect to all prepayments and all Loans made on such day.
SECTION 2.11. Continuation and Conversion of Loans.
(a) Subject to Section 2.09 hereof, the Borrowers shall have the
right, at any time, on three (3) Business Days' prior irrevocable written or
telecopy notice to the Agent, to continue any Eurodollar Loan, or any portion
thereof, into a subsequent Interest Period or, to convert any Base Rate Loan or
portion thereof into a Eurodollar Loan, or on one (1) Business Day's prior
irrevocable written or telecopy notice to the Agent, to convert any Eurodollar
Loan or portion thereof into a Base Rate Loan, subject to the following:
(i) no Eurodollar Loan may be continued as such and no Base
Rate Loan may be converted into a Eurodollar Loan, when any Event of
Default or Default shall have occurred and be continuing at such time;
(ii) in the case of a continuation of a Eurodollar Loan as
such or a conversion of a Base Rate Loan into a Eurodollar Loan, the
aggregate principal amount of such Eurodollar Loan shall not be less than
$3,000,000 and in multiples of $1,000,000 if in excess thereof;
(iii) accrued interest on the Loan (or portion thereof)
being converted shall be paid by the applicable Borrower at the time of
conversion;
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(iv) a Base Rate Loan may be converted into a Eurodollar
Loan only on the first Business Day of a month;
(v) any portion of a Loan maturing or required to be repaid
in less than one month may not be converted into or continued as a
Eurodollar Loan; and
(vi) if any conversion of a Eurodollar Loan shall be
effected on a day other than the last day of an Interest Period, the
Borrowers shall jointly and severally reimburse each Lender on demand for
any loss incurred or to be incurred by it in the reemployment of the funds
released by such conversion as provided in Section 2.10 hereof.
In the event that a Borrower shall not give notice to continue any Eurodollar
Loan into a subsequent Interest Period, such Loan shall automatically become a
Base Rate Loan at the expiration of the then current Interest Period.
SECTION 2.12. Taxes. (a) All payments made by the Borrowers hereunder,
under the Notes or under any other Loan Document shall be made without set-off,
counterclaim, deduction or other defense. All such payments shall be made free
and clear of and without deduction for any present or future income, franchise,
sales, use, excise, stamp or other taxes, levies, imposts, deductions, charges,
fees, withholdings, restrictions or conditions of any nature now or hereafter
imposed, levied, collected, withheld or assessed by any jurisdiction (whether
pursuant to United States Federal, state, local or foreign law) or by any
political subdivision or taxing authority thereof or therein, and all interest,
penalties or similar liabilities, excluding taxes on the net income of, and
branch profit taxes of, any Lender or the Agent imposed by the jurisdiction in
which such Lender or the Agent is organized or any political subdivision thereof
or taxing authority thereof or any jurisdiction in which such Person's principal
office or relevant lending office is located or any political subdivision
thereof or taxing authority thereof (such nonexcluded taxes being hereinafter
collectively referred to as "Taxes"). If the Borrowers shall be required by law
to deduct or to withhold any Taxes from or in respect of any amount payable
hereunder, (i) the amount so payable shall be increased to the extent necessary
so that after making all required deductions and withholdings (including Taxes
on amounts payable to the Lenders pursuant to this sentence) the Lenders receive
an amount equal to the sum they would have received had no such deductions or
withholdings been made, (ii) the Borrowers shall make such deductions or
withholdings, and (iii) the Borrowers shall pay the full amount deducted or
withheld to the relevant taxation authority in accordance with applicable law.
Whenever any Taxes are payable by the Borrowers, as promptly as possible
thereafter, the Borrowers shall send the Lenders and the Agent an official
receipt (or, if an official receipt is not available, such other documentation
as shall be satisfactory to the Lenders or the Agent, as the case may be)
showing payment. In addition, the Borrowers agree to pay any present or future
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery, performance, recordation or filing of, or
otherwise with respect to, this Agreement, the Notes or any other Loan Document
(hereinafter referred to as "Other Taxes").
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(b) The Borrowers will jointly and severally indemnify the
Lenders for the amount of Taxes or Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 2.12) paid by any Lender and any liability (including penalties,
interest and expenses for nonpayment, late payment or otherwise) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be paid within 30 days
from the date on which such Lender makes written demand which demand shall
identify the nature and amount of Taxes or Other Taxes for which indemnification
is being sought and the basis of the claim.
(c) Each Lender that is organized in a jurisdiction other than
the United States, a State thereof or the District of Columbia hereby agrees
that:
(i) it shall, no later than the Effective Date (or, in the
case of a Lender which becomes a party hereto pursuant to Section 12.08
hereof after the Effective Date, the date upon which such Lender becomes a
party hereto) deliver to the Borrowers and the Agent:
(A) two accurate, complete and signed originals of U.S.
Internal Revenue Service Form 4224 or successor form, or
(B) two accurate, complete and signed originals of U.S.
Internal Revenue Service Form 1001 or successor form,
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of its lending office under this Agreement free from
withholding of United States Federal income tax;
(ii) if at any time such Lender changes its lending office
or offices or selects an additional lending office it shall, at the same
time or reasonably promptly thereafter, deliver to the Borrowers through
the Agent in replacement for, or in addition to, the forms previously
delivered by it hereunder:
(A) if such changed or additional lending office is
located in the United States, two accurate, complete and signed
originals of such Form 4224 or successor form, or
(B) two accurate, complete and signed originals of such
Form 1001 or successor form,
in each case indicating that such Lender is on the date of delivery
thereof entitled to receive payments of principal, interest and fees
for the account of such changed
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or additional lending office under this Agreement free from
withholding of United States Federal income tax; and
(iii) it shall, promptly upon the Borrowers' reasonable
request to that effect, deliver to the Borrowers such other forms or
similar documentation as may be required from time to time by any
applicable law, treaty, rule or regulation in order to establish such
Lender's tax status for withholding purposes.
(d) If either of the Borrowers fails to perform its obligations
under this Section 2.12, the Borrowers shall jointly and severally indemnify the
Lenders for any taxes, interest or penalties that may become payable as a result
of any such failure.
ARTICLE III
LIABILITY OF BORROWERS
SECTION 3.01 Joint and Several Liability of the Borrowers.
(a) Notwithstanding anything in this Agreement or any other Loan
Document to the contrary, each of the Borrowers hereby accepts joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Agent and the Lenders under this
Agreement and the other Loan Documents, for the mutual benefit, directly and
indirectly, of each of the Borrowers and in consideration of the undertakings of
the other Borrower to accept joint and several liability for the Obligations.
Each of the Borrowers, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrower, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 3.01), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each of the Borrowers without preferences or distinction among
them. If and to the extent that any of the Borrowers shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Borrower will make such payment with respect to, or perform, such
Obligation. Subject to the terms and conditions hereof, the Obligations of each
of the Borrowers under the provisions of this Section 3.01 constitute the
absolute and unconditional, full recourse Obligations of each of the Borrowers
enforceable against each such Person to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement, the other Loan Documents or any other circumstances whatsoever.
(b) The provisions of this Section 3.01 are made for the benefit
of the Agent, the Lenders and their successors and assigns, and may be enforced
by them from time to time against any or all of the Borrowers as often as
occasion therefor may arise and without requirement on the part of the Agent,
the Lenders or such successors or assigns first to xxxxxxxx
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any of its or their claims or to exercise any of its or their rights against any
of the other Borrowers or to exhaust any remedies available to it or them
against any of the other Borrowers or to resort to any other source or means of
obtaining payment of any of the Obligations hereunder or to elect any other
remedy. The provisions of this Section 3.01 shall remain in effect until all of
the Obligations shall have been paid in full or otherwise fully satisfied.
(c) Each of the Borrowers hereby agrees that it will not enforce
any of its rights of contribution or subrogation against the other Borrower with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to the Agent or the Lenders with respect to
any of the Obligations or any Collateral until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against the other Borrower with respect to any payments to the Agent or the
Lenders hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to such Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to such
Borrower therefor.
ARTICLE IV
FEES, PAYMENTS AND OTHER COMPENSATION
SECTION 4.01. Audit Fees. The Borrowers acknowledge that the Agent may
upon reasonable notice to the Parent conduct audits and/or field examinations of
the Borrowers and the Guarantors at any time and from time to time in a manner
so as to not unduly disrupt the business of the Borrowers and the Guarantors,
provided that such notice shall not be required if an Event of Default has
occurred and is continuing. The Borrowers jointly and severally agree to pay,
for the account of the Agent, $750 per day per examiner plus the examiner's
out-of-pocket costs and reasonable expenses incurred in connection with all such
visits, inspections, audits and examinations not to exceed $30,000 per calendar
year, provided that, during the continuance of an Event of Default, there shall
be no limitation on such amount.
SECTION 4.02. Payments; Computations and Statements. (a) The Borrowers
will make each payment under the Notes not later than 11:00 a.m. (New York City
time) on the day when due, in lawful money of the United States of America and
in immediately available funds, to the Agent at the Payment Office. All payments
received by the Agent after 11:00 a.m. (New York City time) on any Business Day
will be credited to the Loan Account on the next succeeding Business Day. All
payments shall be made by the Borrowers without defense, set-off or counterclaim
to the Agent and the Lenders. Except as provided in Section 2.05, after receipt,
the Agent will promptly thereafter cause to be distributed like funds relating
to
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the payment of principal ratably to the Lenders and like funds relating to the
payment of any other amount payable to any Lender to such Lender in each case to
be applied in accordance with the terms of this Agreement, provided that the
Agent will cause to be distributed all interest and fees received from or for
the account of each Borrower not less than once each month. The Lenders and the
Borrowers hereby authorize the Agent to, and the Agent may, from time to time,
charge the Loan Account with any amount due and payable by any Borrower under
any Loan Document. Each of the Lenders and the Borrowers agree that the Agent
shall have the right to make such charges whether or not any Event of Default or
Default shall have occurred and be continuing or whether any of the conditions
precedent in Section 5.02 have been satisfied. Any amount charged to the Loan
Account shall be deemed a Revolving Credit Loan hereunder made by the Lenders to
HIS, funded by the Agent on behalf of the Lenders and subject to Section 2.05 of
this Agreement. The Lenders and the Borrowers confirm that any charges which the
Agent may so make to the Loan Account of the Borrower as herein provided will be
made as an accommodation to the Borrowers and solely at the Agent's discretion.
It is expressly understood and agreed by the Borrowers that the Agent and the
Lenders shall have no responsibility to inquire into the correctness of the
apportionment, allocation or disposition of Loans made to the Borrowers or any
fees, costs or expenses for which the Borrowers are jointly and severally
obligated under this Agreement. Whenever any payment to be made under any such
Loan Document shall be stated to be due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be. All computations of fees shall be made by the Agent on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such fees are
payable. Each determination by the Agent of an interest rate or fees hereunder
shall be conclusive and binding for all purposes in the absence of manifest
error.
(b) The Agent shall provide the Borrowers, promptly after the end
of each calendar month, a summary statement (in the form from time to time used
by the Agent) of the opening and closing daily balances in the Loan Account
during such month, the amounts and dates on all Loans made to the Borrowers
during such month, the amounts and dates of all payments on account of the Loans
to the Borrowers during such month and the Loans to which such payments were
applied, the amount of interest accrued on the Loans to the Borrowers during
such month and the amount and nature of any charges to such Loan Account made
during such month on account of fees, commissions, expenses and other
Obligations. All entries on any such statement shall, 30 days after the same is
sent, be presumed to be correct and shall constitute presumptive evidence of the
information contained in such statement and shall be final and conclusive absent
manifest error.
SECTION 4.03. Sharing of Payments, Etc. Except as provided in Section
2.05 hereof, if any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of any Obligation in excess of its ratable share of payments on account
of similar obligations obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in such similar
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obligations held by them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them; provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender of
any interest or other amount paid by the purchasing Lender in respect of the
total amount so recovered). The Borrowers agree that any Lender so purchasing a
participation from another Lender pursuant to this Section 4.03 may, to the
fullest extent permitted by law, exercise all its rights (including the Lender's
right of set-off) with respect to such participation as fully as if such Lender
were the direct creditor of the Borrowers in the amount of such participation.
SECTION 4.04. Apportionment of Payments. (a) Subject to Sections 2.05
and 12.01 hereof, all payments of principal and interest in respect of
outstanding Loans, all payments of fees (other than the fees set forth in the
Fee Letter, and the audit fee provided for in Section 4.01) and all other
payments in respect of any other Obligations, shall be allocated by the Agent
among such of the Lenders as are entitled thereto, in proportion to their
respective Pro Rata Shares or otherwise as provided herein or, in respect of
payments not made on account of Loans, as designated by the Person making
payment when the payment is made.
(b) After the occurrence and during the continuance of an Event
of Default, the Agent may, and upon the direction of the Required Lenders shall,
apply all payments in respect of any Obligations and all proceeds of the
Collateral, subject to the provisions of this Agreement (i) first, to pay the
Obligations in respect of any fees, expense reimbursements or indemnities then
due to the Agent; (ii) second, to pay the Obligations in respect of any fees and
indemnities then due to the Lenders; (iii) third, ratably to pay interest due in
respect of the Loans; (iv) fourth, ratably to pay or prepay principal of the
Loans; and (v) fifth, to the ratable payment of all other Obligations then due
and payable.
SECTION 4.05. Increased Costs and Reduced Return.
(a) If any Lender shall have determined that the adoption or
implementation of, or any change in, any law, rule, treaty or regulation, or any
policy, guideline or directive of, or any change in the interpretation or
administration thereof by, any court, central bank or other administrative or
Governmental Authority, or compliance by any Lender or any Person controlling
any such Lender with any directive of or guideline from any central bank or
other Governmental Authority or the introduction of or change in any accounting
principles applicable to any Lender or any Person controlling any such Lender
(in each case, whether or not having the force of law), shall (i) change the
basis of taxation of payments to any Lender or any Person controlling any such
Lender of any amounts payable hereunder (except for taxes on the overall net
income of any Lender or any Person controlling any such Lender), (ii) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against any Loan
- 34 -
or against assets of or held by, or deposits with or for the account of, or
credit extended by any Lender, or any Person controlling any such Lender or
(iii) impose on any Lender or any Person controlling any such Lender any other
condition regarding this Agreement or any Loan, and the result of any event
referred to in clauses (i), (ii) or (iii) above shall be to increase the cost to
any Lender of making any Loan or agreeing to make any Loan or to reduce any
amount received or receivable by any Lender hereunder, then, upon demand by such
Lender, the Borrowers shall pay to such Lender such additional amounts as will
compensate such Lender for such increased costs or reductions in amount,
together with interest on such additional amounts.
(b) If any Lender shall have determined that any Capital
Guideline or adoption or implementation of, or any change in, any Capital
Guideline by the Governmental Authority charged with the interpretation or
administration thereof, or compliance by any Lender or any Person controlling
any Lender with any Capital Guideline or with any request or directive of any
such Governmental Authority with respect to any Capital Guideline, or the
implementation of, or any change in, any applicable accounting principles (in
each case, whether or not having the force of law), either (i) affects or would
affect the amount of capital required or expected to be maintained by any Lender
or any Person controlling any Lender, and any Lender determines that the amount
of such capital is increased as a direct or indirect consequence of any Loans
made or maintained or any Lender's or any such other controlling Person's other
obligations hereunder, or (ii) has or would have the effect of reducing the rate
of return on any Lender's or any such other controlling Person's capital to a
level below that which such Lender or such controlling Person could have
achieved but for such circumstances as a consequence of any Loans made or
maintained, or any agreement to make Loans or such Lender's or such other
controlling Person's other obligations hereunder (in each case, taking into
consideration such Lender's or such other controlling Person's policies with
respect to capital adequacy), then, upon demand by any Lender, the Borrowers
shall pay to such Lender from time to time such additional amounts as will
compensate such Lender for such cost of maintaining such increased capital or
such reduction in the rate of return such Lender's or such other controlling
Person's capital.
(c) All amounts payable under this Section 4.05 shall bear
interest from the date that is three Business Days after the date of demand by a
Lender until payment in full to such Lender at the Post-Default Rate. A
certificate of any Lender claiming compensation under this Section 4.05
specifying the event herein above described and the nature of such event shall
be promptly submitted by such Lender to a Borrower, setting forth the additional
amount due and an explanation of the calculation thereof, or such Lender's
reasons for invoking the provisions of this Section 4.05, and shall be final and
conclusive absent manifest error.
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ARTICLE V
CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING
SECTION 5.01. Conditions Precedent to Effectiveness. This Agreement
shall become effective as of the Business Day (the "Effective Date") when each
of the following conditions precedent shall have been satisfied:
(a) Payment of Fees, Etc. The Borrowers shall have paid on or
before the date of this Agreement, all fees, costs, expenses and taxes then
payable by the Borrowers pursuant to Sections 2.08(c) and 12.05 hereof.
(b) Representations and Warranties; No Event of Default. The
representations and warranties contained in Section 6.01 of this Agreement and
in each other Loan Document and certificate or other writing delivered to the
Agent or the Lenders pursuant hereto on or prior to the Effective Date shall be
correct on and as of the Effective Date as though made on and as of such date;
and no Default or Event of Default shall have occurred and be continuing on the
Effective Date or would result from this Agreement becoming effective in
accordance with its terms.
(c) Legality. The making of the initial Loans shall not
contravene any law, rule or regulation applicable to the Lenders.
(d) Delivery of Documents. The Agent shall have received on or
before the Effective Date the following, each in form and substance satisfactory
to the Agent and, unless indicated otherwise, dated the Effective Date:
(i) a Term Note payable to the order of each Lender, duly
executed by the Parent;
(ii) a Revolving Credit Note payable to the order of each
Lender, duly executed by HIS;
(iii) a Guaranty, duly executed by each Borrower;
(iv) a Security Agreement, duly executed by each Borrower
and each Guarantor;
(v) a Pledge Agreement, duly executed by each Borrower and
H.I.S. Limited, together with the original stock certificates (or other
documents, agreements or instruments establishing the perfection of the
Lien of the Agent on any uncertificated securities) representing all of the
Capital Stock of the Subsidiaries of the
- 36 -
Parent, all of the Parent's Capital Stock in Sportswear AG and all
inter-company promissory notes payable to the Borrowers, accompanied by
undated stock powers executed in blank or other instruments of transfer;
(vi) appropriate financing statements on Form UCC-1, duly
executed by each Borrower and Guarantor and duly filed in such office or
offices as may be necessary or, in the reasonable opinion of the Agent,
desirable to perfect the security interests purported to be created by the
Security Agreements;
(vii) certified copies of requests for copies of information
on Form UCC-11, listing all effective financing statements which name as
debtor any Borrower or Guarantor and which are filed in the offices
referred to in paragraph (vi) above, together with copies of such financing
statements, none of which, except as otherwise agreed to in writing by the
Agent, shall cover any of the Collateral;
(viii) a copy of the resolutions adopted by the Board of
Directors of each Borrower and Guarantor, certified as of the Effective
Date by authorized officers thereof, authorizing (A) the borrowings
hereunder and the transactions contemplated by the Loan Documents to which
such Borrower or Guarantor is or will be a party, and (B) the execution,
delivery and performance by each Borrower and Guarantor of each Loan
Document and the execution and delivery of the other documents to be
delivered by each Borrower and Guarantor in connection herewith;
(ix) a certificate of an authorized officer of each Borrower
and Guarantor, certifying the names and true signatures of the officers of
such Borrower or Guarantor authorized to sign each Loan Document to which
such Borrower or Guarantor is or will be a party and the other documents to
be executed and delivered by such Borrower or Guarantor in connection
herewith, together with evidence of the incumbency of such authorized
officers;
(x) a certificate dated as of a recent date of the
appropriate official(s) of the states of incorporation and each state of
foreign qualification of each Borrower and Guarantor, certifying as to the
subsistence in good standing of, and the payment of taxes by, such Borrower
or Guarantor in such states and listing all charter documents of such
Borrower and Guarantor on file with such official(s);
(xi) a copy of the charter of each Borrower and each
Guarantor certified by the appropriate official(s) of the state of
organization of such Borrower or Guarantor and as of the Effective Date by
an authorized officer of the Borrower or Guarantor;
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(xii) a copy of the by-laws of each Borrower and each
Guarantor, certified as of the Effective Date by an authorized officer of
such Borrower or Guarantor;
(xiii) an opinion of Proskauer Rose LLP, New York counsel to
the Borrowers and Guarantors, substantially in the form of Exhibit G
hereto, and as to such other matters as the Agent may reasonably request;
(xiv) an opinion of Xxxx, Xxxxxxxxxxxx & Xxxx, German
counsel to the Parent, substantially in the form of Exhibit H hereto, and
as to such other matters as the Agent may reasonably request;
(xv) a certificate of the chief executive officer or the
chief financial officer of each Borrower, certifying as to the matters set
forth in subsection (b) of this Section 5.01;
(xvi) a copy of the Financial Statements together with a
certificate of the chief executive officer or chief financial officer of
each Borrower setting forth (i) all existing Indebtedness, including
guarantees, pending or, to the best of each Borrower's knowledge,
threatened litigation or claims and other contingent liabilities of the
Borrowers and Guarantors, and (ii) all dividends declared or paid since the
date of such financial statements and all inter-company payments made or
obligations incurred to Affiliates outside the ordinary course of the
Borrowers' businesses since the date of such Financial Statements;
(xvii) a breakdown of Inventory by location in the form
specified in Section 7.01(a)(v)(A) hereof certified by the chief financial
officer of HIS;
(xviii) copies of the insurance policies and certificates of
insurance evidencing such insurance on the property of the Borrowers and
the Guarantors as is required by Section 7.01(h) hereof naming the Agent as
additional insured and loss payee, using a long form loss payee
endorsement, for all insurance maintained by the Borrowers and the
Guarantors;
(xix) an opinion of Bass, Xxxxx & Xxxx, Tennessee counsel to
the Borrowers and the Guarantors, substantially in the form of Exhibit I
hereto, and as to such other matters as the Agent may reasonably request;
(xx) a certificate of an authorized officer of each Borrower
certifying the names and true signatures of those officers of each Borrower
and Guarantor that are authorized to provide Notices of Borrowings and all
other notices under this Agreement and the Loan Documents;
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(xxi) a Borrowing Base Certificate current as of October 23,
1998;
(xxii) a copy of the most recent annual report (Form 5500
Series) for each Employee Plan;
(xxiii) the Termination Agreement duly executed by
NationsBank, N.A., the other lenders party to the Existing Credit Agent and
the Borrowers and Guarantors, together with UCC termination statements and
other documentation evidencing the termination by NationsBank, N.A. and
such other lenders of their Liens in and to the properties and assets of
the Borrowers and Guarantors;
(xxiv) such depositary account, blocked account, lockbox
account and similar agreements and other documents as the Lenders may
reasonably request with respect to the cash management system of the
Borrowers and the Guarantors;
(xxv) a Contribution Agreement, duly executed by each
Borrower and Guarantor; and
(xxvi) such other agreements, instruments, approvals,
opinions and other documents as the Agent may reasonably request including,
without limitation, all inter-company management services agreements among
the Borrowers and the Guarantors.
(e) Proceedings; Receipt of Documents. All proceedings in
connection with the transactions contemplated by this Agreement, and all
documents incidental thereto, shall be satisfactory to the Agent and its special
counsel, and the Agent and such special counsel shall have received all such
information and such counterpart originals or certified or other copies of such
documents as the Agent or such special counsel may reasonably request.
(f) Material Adverse Effect. The Lenders shall have determined,
in their sole judgment, that no Material Adverse Effect shall have occurred
after August 1, 1998.
(g) Corporate and Legal Structure. The Agent shall be satisfied
with the corporate and legal structure of each Loan Party, both before and after
giving effect to the transactions contemplated by this Agreement, including the
terms and conditions of the charter, bylaws and each class of Capital Stock of
each such Loan Party and of each agreement or instrument relating to such
structure or capitalization.
(h) Availability. After giving effect to all Loans made on the
Effective Date (i) Availability shall not be less than $14,000,000 and (ii) all
liabilities of the Borrowers and the Guarantors shall be current. The Parent
shall deliver to the Agent a certificate of the
- 39 -
chief financial officer of the Parent certifying as to the matters set forth in
clauses (i) and (ii) above and containing the calculations thereof.
SECTION 5.02. Conditions Precedent to Loans. As a condition precedent
to any Agent or any Lender making any Loan (including the initial Loans on the
Effective Date), each of the following conditions precedent shall be fulfilled
in a manner satisfactory to the Agent;
(a) Payment of Fees, Etc. The Borrowers shall have paid all fees,
costs, expenses and taxes then payable by the Borrowers pursuant to Sections
2.08 and 12.05 hereof.
(b) Representations and Warranties; No Event of Default. The
following statements shall be true, and the submission by a Borrower to the
Agent of a Notice of Borrowing with respect to a Loan and such Borrower's
acceptance of the proceeds of such Loan shall be deemed to be a representation
and warranty by such Borrower on the date of such Loan that (i) the
representations and warranties contained in Section 6.01 of this Agreement and
in each other Loan Document and certificate or other writing delivered to the
Lenders pursuant hereto on or prior to the date of such Loan are correct on and
as of such date as though made on and as of such date (other than those
representations and warranties which expressly speak only as of a different
date); and (ii) no Event of Default or Default has occurred and is continuing or
would result from the making of the Loan to be made on such date.
(c) Legality. The making of such Loan shall not contravene any
law, rule or regulation applicable to the Agent or the Lenders, as the case may
be.
(d) Notices. The Agent shall have received a Notice of Borrowing
pursuant to Section 2.03 hereof no later than 11:00 a.m. (New York City time)
(A) on the date of the proposed borrowing with respect to a Base Rate Loan and
(B) three Business Days prior to the date of the proposed borrowing in the case
of a Eurodollar Loan.
(e) Delivery of Documents. The Agent shall have received any
other agreements, instruments, approvals and other documents, each in form and
substance satisfactory to the Agent, as the Agent may reasonably request.
(f) Proceedings; Receipt of Documents. All proceedings in
connection with the making of such Loan and the other transactions contemplated
by this Agreement, and all documents incidental thereto, shall be reasonably
satisfactory to the Agent and their special counsel, and the Agent and such
special counsel shall have received all such information and such counterpart
originals or certified or other copies of such documents as the Agent or such
special counsel may reasonably request.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties. Each Borrower and each
Guarantor represents and warrants as follows:
(a) Organization, Good Standing, Etc. Each Loan Party (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization, (ii) has all requisite power and authority to
conduct its business as now conducted and as presently contemplated and to make
the borrowings hereunder (in the case of the Borrowers) and to consummate the
transactions contemplated by the Documents to which it is a party, and (iii) is
duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, except where all
such failures by any Guarantors to be in good standing and all such Loan Parties
to be qualified to do business in each jurisdiction will not have a Material
Adverse Effect.
(b) Authorization, Etc. The execution, delivery and performance
by each Loan Party of each Document to which it is a party, (i) have been duly
authorized by all necessary corporate action, (ii) do not and will not
contravene the charter, by-laws or any applicable law or any contractual
restriction binding on or otherwise affecting it or any of its properties, (iii)
do not and will not result in or require the creation of any Lien, (other than
pursuant to any such Loan Document) upon or with respect to any of its
properties, and (iv) do not and will not result in any suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to its operations or any of its properties.
(c) Governmental Approvals. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or other
regulatory body is required in connection with the due execution, delivery and
performance by each Loan Party of any Document to which it is or will be a
party.
(d) Enforceability of Loan Documents. This Agreement is, and each
other Document to which each Loan Party is or will be a party, when delivered
hereunder, will be, a legal, valid and binding obligation of such Loan Party,
enforceable against such Loan Party in accordance with its terms except to the
extent the enforceability thereof may be limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws from time to time in
effect affecting generally, the enforcement of creditors' rights and remedies
and by general principles of equity.
(e) Inventory Locations; Places of Business; Chief Executive
Office. There is no location at which HIS has any Inventory (except for
Inventory in transit) other than (i) those locations listed on Part A and Part B
of Schedule 6.01(e) hereto and (ii) any other
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locations approved in writing by the Agent pursuant to the definition of
"Eligible Inventory". Part B of Schedule 6.01(e) hereto contains a true, correct
and complete list, as of the Effective Date, of the legal names and addresses of
each warehouse at which Inventory of HIS is stored. None of the receipts
received by HIS from any warehouse states that the goods covered thereby are to
be delivered to bearer or to the order of a named Person or to a named Person
and such named Person's assigns. Part C of Schedule 6.01(e) sets forth a
complete and accurate list as of the date hereof of (x) each place of business
of each Loan Party; and (y) the chief executive office of each Loan Party. Part
D of Schedule 6.01(e) sets forth a complete and accurate description and list as
of the date hereof of the location, by state and street address, of all real
property owned and leased by the Parent and its Subsidiaries.
(f) Subsidiaries. Schedule 6.01(f) hereto is a complete and
correct description of the name, jurisdiction of incorporation and ownership of
the outstanding Capital Stock of each Subsidiary of the Parent in existence on
the date hereof. All shares of such stock owned by the Parent or one or more of
its Subsidiaries, as indicated in such Schedule, are owned free and clear of all
Liens other than Liens created by the Loan Documents.
(g) Litigation. Except as set forth on Schedule 6.01(g) hereto,
on the Effective Date there is no pending or, to the best of the Loan Parties'
knowledge, threatened action, suit or proceeding affecting the Parent or any of
its Subsidiaries or any of their properties before any court or other
Governmental Authority or any arbitrator. There is no pending or, to the best of
the Loan Parties' knowledge, threatened action, suit or proceeding affecting the
Parent or any of its Subsidiaries before any court or other Governmental
Authority or any arbitrator which may have a Material Adverse Effect.
(h) Financial Condition. (i) The Financial Statements, copies of
which have been delivered to the Lenders, fairly present, in all material
respects, the financial condition of the Parent and its Consolidated
Subsidiaries as at the respective dates thereof and the results of operations of
the Parent and its Consolidated Subsidiaries for the fiscal periods ended on
such respective dates, all in accordance with GAAP, and since August 1, 1998
there has been no Material Adverse Effect.
(ii) The Parent has heretofore furnished to the Agent and
the Lenders projected balance sheets, income statements and statements of
cash flow prepared on a quarterly basis for the period from November 8,
1998 to November 6, 1999 and such projections were believed at the time
furnished to be reasonable, have been prepared on a reasonable basis and in
good faith by the Parent, and have been based on assumptions believed by
the Parent to be reasonable at the time made and upon the best information
then reasonably available to the Parent.
(i) Compliance with Law, Etc. Neither the Parent nor any
other Loan Party is in violation (i) of its charter or by-laws, or (ii) in
any material respect of any law or any term of any agreement or instrument
binding on or otherwise affecting it or any of its properties.
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(j) ERISA. Schedule 6.01(j) hereto sets forth each Employee Plan
and Multiemployer Plan. Except as set forth on Schedule 6.01(j) hereto, (i) each
Employee Plan is in compliance in all material respects with the applicable
provisions of ERISA and the Internal Revenue Code, (ii) no Termination Event has
occurred nor is reasonably expected to occur with respect to any Employee Plan,
(iii) the most recent annual report (Form 5500 Series) with respect to each
Employee Plan, including Schedule B (Actuarial Information) thereto, copies of
which have been filed with the Internal Revenue Service and delivered to the
Agent, is complete and correct and fairly presents the funding status of such
Employee Plan, and since the date of such report there has been no material
adverse change in such funding status, (iv) no Employee Plan had an accumulated
or waived funding deficiency or permitted decreases or has applied for an
extension of any amortization period within the meaning of Section 412 of the
Internal Revenue Code at any time during the previous 60 months, and (v) no Lien
imposed under the Internal Revenue Code or ERISA exists or is likely to arise on
account of any Employee Plan within the meaning of Section 412 of the Internal
Revenue Code at any time during the previous 60 months. Except as set forth on
Schedule 6.01(j) hereto, neither the Parent nor any other Loan Party nor any of
their respective ERISA Affiliates have incurred any withdrawal liability under
ERISA with respect to any Multiemployer Plan, and neither the Parent nor any
other Loan Party is aware of any facts indicating that the Parent or any other
Loan Party or any of their respective ERISA Affiliates may in the future incur
any such withdrawal liability. Except as required by Section 4980B of the
Internal Revenue Code and except as set forth on Schedule 6.01(j), neither the
Parent nor any other Loan Party nor any of their respective ERISA Affiliates
maintains an employee welfare benefit plan (as defined in Section 3(1) of ERISA)
which provides health or welfare benefits (through the purchase of insurance or
otherwise) for any retired or former employee of the Parent or any other Loan
Party or any of their respective ERISA Affiliates or coverage after a
participant's termination of employment. Neither the Parent nor any other Loan
Party nor any of their respective ERISA Affiliates has incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act ("WARN")
or similar state law, which remains unpaid or unsatisfied.
(k) Taxes, Etc. All Federal, state and local tax returns and
other reports required by applicable law to be filed by the Parent and each Loan
Party have been filed, and all taxes, assessments and other governmental charges
imposed upon the Parent or any other Loan Party or any property of the Parent or
such other Loan Party and which have become due and payable on or prior to the
date hereof have been paid, except to the extent 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.
(l) Regulation U. Neither the Parent nor any other Loan Party is
or will be engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System), and no proceeds of any
Loan will be used to purchase or carry any
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margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock.
(m) Nature of Business. Neither the Parent nor any other Loan
Party is engaged in any business other than designing, manufacturing and selling
of moderately priced casual sportswear and licensing of their trademarks. None
of H.I.S. Kentucky, Chic Holdings Corp. or H.I.S. Limited (i) are engaged in any
business, or (ii) own any assets other than (a) the Capital Stock of Chic by
H.I.S. Licensing Corporation (in the case of H.I.S. Limited), and (b) assets
with an aggregate fair market value exceeding $100,000 (excluding intercompany
Indebtedness).
(n) Adverse Agreements, Etc. Neither the Parent nor any other
Loan Party is a party to any agreement or instrument, or subject to any charter
or other corporate restriction or any judgment, order, regulation, ruling or
other requirement of a court or other Governmental Authority or regulatory body,
which has or, to the best knowledge of the Parent and the other Loan Parties, in
the future is reasonably likely to result in, a Material Adverse Effect.
(o) Holding Company and Investment Company Acts. Neither the
Parent nor any other Loan Party is (i) a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, or (ii) an "investment company" or an "affiliated person" or "promoter"
of, or "principal underwriter" of or for, an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended.
(p) Permits, Etc. Each Loan Party has all permits, licenses,
authorizations and approvals required for them lawfully to own and operate their
business except where all such failures to have such permits, licenses,
authorizations and approvals may have a Material Adverse Effect.
(q) Title to Properties. Each Loan Party has good and marketable
title to all of their properties and assets, free and clear of all Liens, and
other types of preferential arrangements except for Permitted Liens.
(r) Full Disclosure. No Loan Document or schedule or exhibit
thereto and no certificate, report, statement or other document or information
furnished in writing by or on behalf of the Loan Parties to any Lender in
connection herewith or with the consummation of the transactions contemplated
hereby, contains any material misstatement of fact or omits to state a material
fact or any fact necessary to make the statements contained herein or therein
not misleading in any material respect. There is no fact reasonably likely to
result in a Material Adverse Effect which has not been set forth in a footnote
included in the Financial Statements or a Schedule hereto.
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(s) Operating Lease Obligations. The Parent and the other Loan
Parties do not have any obligations as lessee for the payment of rent for any
real or personal property other than the Operating Lease Obligations set forth
in Schedule 6.01(s) hereto.
(t) Environmental Matters. (i) The operations of the Loan Parties
are in material compliance with all Environmental Laws; (ii) there has been no
Release at any of the properties owned or operated by any Loan Party or a
predecessor in interest, or at any disposal or treatment facility which received
Hazardous Materials generated by any Loan Party or any predecessor in interest
except, in each case, where the Release would not reasonably be expected to have
a Material Adverse Effect; (iii) no Environmental Actions have been asserted
against any Loan Party or any predecessor in interest nor does any Loan Party
have knowledge or notice of any threatened or pending Environmental Action
against any Loan Party or any predecessor in interest which is reasonably likely
to have a Material Adverse Effect; and (iv) no Environmental Actions have been
asserted against any facilities that may have received Hazardous Materials
generated by any Loan Party or any predecessor in interest which are reasonably
likely to result in a Material Adverse Effect.
(u) Schedules. All of the information which is required to be
scheduled to this Agreement is set forth on the Schedules attached hereto, is
correct and accurate and does not omit to state any information material
thereto.
(v) Insurance. The Loan Parties keep their properties adequately
insured and maintain (i) insurance to such extent and against such risks,
including fire, as is customary with companies in the same or similar
businesses, (ii) workmen's compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include product
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death on properties
owned, occupied or controlled by them, and (iv) such other insurance as may be
required by law or as may be reasonably required in writing by the Agent.
(w) Use of Proceeds. The proceeds of the Loans shall be used to
refinance existing indebtedness of the Borrowers, for general working capital
purposes of the Borrowers and for other general corporate purposes of the
Borrowers, provided that proceeds of Loans in an amount of not more than
$2,000,000 in the aggregate may be used by the Parent to repurchase its Capital
Stock and purchase Capital Stock of Sportswear AG.
(x) Security Interests. The Security Documents create in favor of
the Agent, for the benefit of the Lenders, a legal, valid and perfected first
priority (except as permitted by Section 7.02(a) hereof) security interest in
the Collateral.
(y) Trade Names. Schedule 6.01(y) hereto sets forth a complete
and accurate list as of the Effective Date of all trade names used by the Parent
and its Subsidiaries.
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(z) Solvency. After giving effect to the transactions
contemplated or required to occur by the terms of this Agreement, each Loan
Party is, individually and together with its Subsidiaries, Solvent.
(aa) Material Contracts. Set forth on Schedule 6.01(aa) hereto is
a complete and accurate list as of the Effective Date of all Material Contracts
of the Parent and its Subsidiaries, showing the parties and subject matter
thereof and amendments and modifications thereto. Each such Material Contract
(i) is in full force and effect and is binding upon and enforceable against each
Loan Party that is a party thereto and, to the best of such Loan Party's
knowledge, all other parties thereto in accordance with its terms, (ii) has not
been otherwise amended or modified, and (iii) there exists no default under any
Material Contract by any Loan Party thereto or, to the Loan Parties' knowledge,
any other party thereto which default may have a Material Adverse Effect.
(bb) Year 2000 Compliance. Any reprogramming required to permit
the proper functioning, in and following the year 2000, of (A) the Borrowers'
and the Guarantors' computer systems and (B) equipment containing embedded
microchips (including, to the knowledge of Borrowers and Guarantors, systems and
equipment supplied by others or with which Borrowers' and the Guarantors'
systems interface) and the testing of all such systems and equipment, as so
reprogrammed, will be completed by October 1, 1999. The cost to the Borrowers
and the Guarantors of such reprogramming and testing and of the reasonably
foreseeable consequences of year 2000 to the Borrowers and the Guarantors
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) will not result in an Event of Default or have a Material
Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentences of this Section 6.01(bb) as may be necessary, the computer
and management information systems of the Borrowers and the Guarantors are and,
with ordinary course upgrading and maintenance, will continue to be, sufficient
to permit the Borrowers and the Guarantors to conduct their business without a
Material Adverse Effect.
ARTICLE VII
COVENANTS OF THE BORROWERS
SECTION 7.01. Affirmative Covenants. So long as any principal of or
interest on the Loans (whether or not due) shall remain unpaid or any Lender
shall have any Commitment hereunder, the Borrowers will unless the Required
Lenders shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event within 60 days
after the end of each Fiscal Quarter of the Parent, (A) consolidated
balance sheets, consolidated statements of income and retained earnings and
consolidated statements of
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cash flow of the Parent and its Consolidated Subsidiaries as at the end of
such Fiscal Quarter, (B) consolidated balance sheets, consolidated
statements of income and retained earnings and consolidated statements of
cash flow of the Parent and its Consolidated Domestic Subsidiaries as at
the end of such Fiscal Quarter, and (C) consolidated balance sheets,
consolidated statements of income and retained earnings and consolidated
statements of cash flow of Sportswear AG and its Consolidated Subsidiaries
as at the end of such Fiscal Quarter; and for the period commencing at the
end of the immediately preceding Fiscal Year and ending with the end of
such Fiscal Quarter, setting forth in each case in comparative form the
figures for the corresponding date or period of the immediately preceding
Fiscal Year, all in reasonable detail and certified by the chief financial
officer of the Parent as fairly presenting, in all material respects, the
financial position of the Parent and its Consolidated Subsidiaries, the
Parent and its Consolidated Domestic Subsidiaries and Sportswear AG and its
Consolidated Subsidiaries, as the case may be, as of the end of such Fiscal
Quarter and the results of operations and changes in financial position of
the Parent and its Consolidated Subsidiaries, the Parent and its
Consolidated Domestic Subsidiaries and Sportswear AG and its Consolidated
Subsidiaries, as the case may be, for such Fiscal Quarter, in accordance
with GAAP applied in a manner consistent with that of the most recent
audited financial statements furnished to the Lender, subject to year end
adjustments;
(ii) as soon as available, and in any event within 90 days
after the end of each Fiscal Year of the Parent, consolidated and
consolidating balance sheets consolidated and consolidating statements of
income and retained earnings and consolidated and consolidating statements
of cash flow of the Parent and its Consolidated Subsidiaries as at the end
of such Fiscal Year, setting forth in comparative form the corresponding
figures for the immediately preceding Fiscal Year, all in reasonable detail
and prepared in accordance with GAAP, and, in the case of such consolidated
financial statements, accompanied by a report and an unqualified opinion,
prepared in accordance with generally accepted auditing standards, of BDO
Xxxxxxx LLP or other independent certified public accountants of recognized
standing selected by the Parent and satisfactory to the Agent, together
with a written statement of such accountants (1) to the effect that, in
making the examination necessary for their certification of such financial
statements, they have not obtained any knowledge of the existence of an
Event of Default or a Default and (2) if such accountants shall have
obtained any knowledge of the existence of an Event of Default or such
Default, describing the nature thereof;
(iii) as soon as available and in any event within 45 days
of the end of each Fiscal Month, internally prepared consolidated
statements of income and retained earnings of the Parent and its
Consolidated Domestic Subsidiaries for such Fiscal Month and for the period
from the beginning of such Fiscal Year to the end of such Fiscal Month all
in reasonable detail and certified by the chief financial officer of the
Parent as fairly presenting, in all material respects, the financial
position of the Parent and its Consolidated Domestic Subsidiaries as of the
end of such Fiscal Month and the results of
- 47 -
operations and changes in financial position of the Parent and its
Consolidated Domestic Subsidiaries for such Fiscal Month, in accordance
with GAAP applied in a manner consistent with that of the most recent
audited financial statements furnished to the Lender, subject to year end
adjustments;
(iv) simultaneously with the delivery of the financial
statements required by clauses (i), (ii) and (iii) of this Section 7.01(a),
a certificate of the chief financial officer of the Parent, stating (a)
that such officer has reviewed the provisions of this Agreement and the
other Loan Documents and has made or caused to be made under his
supervision a review of the condition and operations of the Parent and its
Subsidiaries during the period covered by such financial statements with a
view to determining whether the Parent and its Subsidiaries were in
compliance with all of the provisions of such Loan Documents at the times
such compliance is required by the Loan Documents, and that such review has
not disclosed, and such officer has no knowledge of, the existence during
such period of an Event of Default or Default or, if an Event of Default or
such Default existed, describing the nature and period of existence thereof
and the action which the Parent and its Subsidiaries propose to take or
took with respect thereto and (b) a schedule showing the calculations
specified in Section 7.02(o) of this Agreement;
(v) (A) within 15 days after the end of each Fiscal Month, a
schedule, in form and substance satisfactory to the Agent, certified by the
chief financial officer of HIS, containing a breakdown of HIS's Inventory
by amount and valued at cost (which shall include dollar valuation by
location) and warehouse and production facility location, appropriately
completed with information satisfactory to the Agent, incorporating all
appropriate month-end adjustments and current as of the close of business
on the last day of such Fiscal Month immediately prior to such date, and
(B) on Monday of each week, a Borrowing Base Certificate current as of the
close of business on the Friday of the immediately preceding week setting
forth the calculation of the Borrowing Base;
(vi) on or before August 31 of each Fiscal Year, financial
projections, including monthly balance sheets, income statements and
statements of cash flow, in form and substance satisfactory to the Agent,
for the succeeding Fiscal Year for the Parent and its Subsidiaries and all
such financial projections to be reasonable, to be prepared on a reasonable
basis and in good faith, and to be based on assumptions believed by the
Parent to be reasonable at the time made and from the best information then
available to the Parent;
(vii) promptly upon their becoming available, a copy of (A)
all consultants' reports, investment bankers' reports, accountants'
management letters, business plans and similar documents, (B) all reports,
financial statements or other information delivered by the Parent or any
other Loan Party to its shareholders, (C) all
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reports, proxy statements, financial statements and other information
generally distributed by the Parent or any other Loan Party to its
creditors or the financial community in general, including, without
limitation, all filings by the Parent with the Securities and Exchange
Commission, and (D) any audit or other reports submitted to the Parent or
any other Loan Party by independent accountants in connection with any
annual, interim or special audit;
(viii) promptly after submission to any Government Authority
all documents and information furnished to such Government Authority in
connection with any investigation of any Loan Party other than routine
inquiries by such Governmental Authority;
(ix) as soon as possible, and in any event within five days
after the occurrence of an Event of Default or Default, or a Material
Adverse Effect, the written statement of the chief executive officer or the
chief financial officer of each Borrower, setting forth the details of such
Event of Default, Default or Material Adverse Effect and the action which
the Parent and its Subsidiaries propose to take with respect thereto;
(x) (A) as soon as possible and in any event (1) within 30
days after the Borrowers, the Guarantors or any of their respective ERISA
Affiliates knows or has reason to know that any Termination Event described
in clause (i) of the definition of Termination Event with respect to any
Employee Plan has occurred, (2) within 10 days after the Borrowers, the
Guarantors or any of their respective ERISA Affiliates knows or has reason
to know that any other Termination Event with respect to any Employee Plan
has occurred, or (3) within 10 days after any of the Borrowers, any of the
Guarantors or any of their respective ERISA Affiliates knows or has reason
to know that an accumulated funding deficiency has been incurred or an
application has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including installment
payments) or an extension of any amortization period under Section 412 of
the Internal Revenue Code with respect to an Employee Plan, a statement of
the chief financial officer of the Parent setting forth the details of such
occurrence and the action, if any, which the Borrowers, the Guarantors or
any of their respective ERISA Affiliates proposes to take with respect
thereto, (B) promptly and in any event within two Business Days after
receipt thereof by the Borrowers, the Guarantors or any of their respective
ERISA Affiliates from the Pension Benefit Guaranty Corporation, copies of
the notice received by the Borrowers, the Guarantors or any of their
respective ERISA Affiliates of the Pension Benefit Guaranty Corporation's
intention to terminate any Plan or to have a trustee appointed to
administer any Plan, (C) promptly and in any event within 30 days after the
filing thereof with the Internal Revenue Service, copies of each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) with
respect to each Employee Plan and Multiemployer Plan, (D) promptly and in
any event within ten days after receipt thereof by the Borrowers, the
Guarantors or any of their respective
- 49 -
ERISA Affiliates from a sponsor of a Multiemployer Plan or from the Pension
Benefit Guaranty Corporation, a copy of the notice received by the
Borrowers, the Guarantors or any of their respective ERISA Affiliates
concerning the imposition or amount of withdrawal liability under Section
4202 of ERISA or indicating that such Multiemployer Plan may enter
reorganization status under Section 4241 of ERISA, and (E) promptly and in
any event within 10 Business Days after any of the Borrowers, any of the
Guarantors or any of their respective ERISA Affiliates sends notice of a
plant closing or mass layoff (as defined in WARN) to employees, copies of
each such notice sent by the Borrowers, the Guarantors or any of their
respective ERISA Affiliates;
(xi) promptly after the commencement thereof but in any
event not later than five days after service of process with respect
thereto on, or the obtaining of knowledge thereof by, the Parent or any
other Loan Party, notice of each action, suit or proceeding before any
court or other Governmental Authority or other regulatory body or any
arbitrator which may have a Material Adverse Effect;
(xii) on or before December 30, 1998, financial projections,
including monthly balance sheets, income statements and statements of cash
flow of the Parent and its Consolidated Domestic Subsidiaries, in form and
substance satisfactory to the Agent, for the 1999 Fiscal Year of the Parent
and all such financial projections to be reasonable, to be prepared on a
reasonable basis and in good faith, and to be based on assumptions believed
by the Parent to be reasonable at the time made and from the best
information then available to the Parent; and
(xiii) promptly upon request, such other information
concerning the condition or operations, financial or otherwise, of the
Parent or any other Loan Party that the Agent from time to time may
reasonably request.
(b) Guaranties, Etc. Cause each of their respective Subsidiaries
not existing on the Effective Date to execute and deliver to the Agent promptly,
and in any event within 15 days after the formation or acquisition thereof (i) a
guaranty, substantially in the form of Exhibit C hereto, guaranteeing the
Obligations, and (ii) a security agreement, substantially in the form of Exhibit
D-2 hereto, securing such guaranty, and, in connection with each such delivery,
cause to be delivered to the Agent, in form and substance satisfactory to the
Agent, a favorable written opinion of counsel as to such matters relating
thereto as the Agent may reasonably request, together with such other
agreements, instruments, approvals or other documents as the Agent may
reasonably request. In addition, within 15 days after the formation or
acquisition of any Subsidiary not existing on the Effective Date, the parent of
such Subsidiary shall pledge all of the Capital Stock of such Subsidiary to the
Agent pursuant to the terms of the Pledge Agreement substantially in the form of
Exhibit E-1, E-2 or E-3.
(c) Compliance with Laws, Etc. Comply, and cause each of their
respective Subsidiaries to comply, in all material respects with all applicable
laws, rules,
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regulations and orders (including, without limitation, ERISA and Environmental
Laws), such compliance to include, without limitation, (i) paying before the
same become delinquent all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any of its properties, and
(ii) paying all lawful claims which if unpaid might become a Lien upon any of
its properties, except to the extent 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.
(d) Preservation of Existence, Etc. Maintain and preserve, and
cause each of their Subsidiaries to maintain and preserve, its existence, rights
and privileges, and become or remain duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by them or
in which the transaction of their business makes such qualification necessary,
provided, however, that nothing contained in this subsection (d) shall be
construed so as to prohibit any merger or consolidation permitted by Section
7.02(d)(i).
(e) Keeping of Records and Books of Account. Keep, and cause each
of their Subsidiaries to keep, adequate records and books of account, with
complete entries made in accordance with GAAP.
(f) Inspection Rights. Permit, and cause each of their
Subsidiaries to permit, the Agent, or any agents or representatives thereof at
any time and from time to time upon reasonable notice to the Parent, during
normal business hours, to examine and make copies of and abstracts from their
records and books of account, to visit and inspect their properties, to conduct
audits, physical counts, valuations or examinations and to discuss their
affairs, finances and accounts with any of the directors, officers, managerial
employees, independent accountants or other representatives thereof, provided
that (i) the foregoing shall be in a manner so as to not unduly disrupt the
business of the Borrowers and (ii) such notice shall not be required if an Event
of Default has occurred and is continuing.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of their Subsidiaries to maintain and preserve, all of their
properties which are necessary or useful in the proper conduct of their business
in good working order and condition, ordinary wear and tear excepted, and
comply, in all material respects, and cause each of their Subsidiaries to
comply, in all material respects, at all times with the provisions of all leases
to which each of them is a party as lessee or under which each of them occupies
property, so as to prevent any loss or forfeiture thereof or thereunder.
(h) Maintenance of Insurance. Maintain for the Parent and its
Subsidiaries, with responsible and reputable insurance companies or associations
insurance (including, without limitation, comprehensive general liability and
property and casualty insurance) with respect to their properties and business,
in such amounts and covering such risks, as is required by any Governmental
Authority or other regulatory body having jurisdiction with
- 51 -
respect thereto and as is carried generally in accordance with sound business
practice by companies in similar businesses similarly situated.
(i) Environmental. Cause each Loan Party to (i) keep any property
either owned or operated by it free of any Liens arising under any Environmental
Laws; (ii) comply in all material respects with Environmental Laws and shall
provide to the Agent documentation of such compliance which the Agent reasonably
request; (iii) immediately notify the Agent of any Release of a Hazardous
Material in excess of any reportable quantity and take any Remedial Actions
required to xxxxx said Release; and (iv) promptly provide the Agent with written
notice within ten (10) days of the receipt of any Environmental Action or notice
that an Environmental Action will be filed against either of the Borrowers.
(j) Further Assurances. Shall, and shall cause each Subsidiary
to, do, execute, acknowledge and deliver, at the sole cost and expense of the
Borrowers, all such further acts, deeds, conveyances, mortgages, assignments,
estoppel certificates, financing statements, notices of assignment, transfers
and assurances as the Agent may require from time to time in order to (i) carry
out more effectively the purposes of this Agreement and the other Loan
Documents, (ii) subject all the Collateral to valid and perfected first priority
Liens, (iii) perfect and maintain the validity, effectiveness and priority of
any of the Loan Documents and the Liens intended to be created thereby, and (iv)
better assure, convey, grant, assign, transfer and confirm unto the Agent and
the Lenders the rights now or hereafter intended to be granted to the Agent and
the Lenders under this Agreement, any Loan Document or any other instrument
under which the Borrowers, the Guarantors or any of their respective
Subsidiaries may be or may hereafter become bound for carrying out the intention
or facilitating the performance of the terms of the Agreement. In addition, any
Loan Party acquiring any Capital Stock of Sportswear AG shall promptly and, in
any event within 20 days of any acquisition of Capital Stock in Sportswear AG,
pledge to the Agent all such Capital Stock of Sportswear AG.
(k) Real Estate. Upon the request of the Agent at any time that
the Agent deems itself to be insecure in its sole discretion, each Loan Party
having any fee interest in real property shall promptly, and in any event within
60 days after such request, execute, deliver and record a first priority
mortgage and/or deed of trust in favor of the Agent covering such real property
interest, in form and substance reasonably satisfactory to the Agent, and
provide the Agent with a title insurance policy covering such real property
interest in an amount reasonably acceptable to the Agent, a current ALTA survey
thereof, a surveyor's certificate, a satisfactory legal description of such
property and an opinion from special counsel to such Loan Party, each in form
and substance reasonably satisfactory to the Agent and as to such matters as the
Agent may reasonably request together with a report of title on forms of and
issued by a title company reasonably satisfactory to the Agent ("Title
Company"), subject to such exceptions as are reasonably satisfactory to the
Agent, and, to the extent necessary under applicable law, Uniform Commercial
Code financing statements covering fixtures, in each case appropriately
completed and duly executed, for filing in the appropriate county land office
and evidence that such Loan Party shall have paid to the Title Companies all
expenses of the Title Companies in connection
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with the issuance of such reports and in addition shall have paid to the Title
Companies an amount equal to the recording and stamp taxes (including mortgage
recording taxes), if any, payable in connection with recording such mortgages in
the appropriate county land offices, each in form and substance reasonably
satisfactory to the Agent. In addition, each such Loan Party delivering a
mortgage and/or deed of trust pursuant to this paragraph (k) shall, within 30
days after a request by the Agent, cause to be performed, at the Borrowers' cost
and expense, a Phase I environmental audit (and, if reasonably requested by the
Agent based upon the results of such Phase I Audit, a Phase II Audit), in form
and substance and by an independent firm reasonably satisfactory to the Agent.
(l) Change in Collateral; Collateral Records. Give the Agent not
less than thirty days' prior written notice of any change in the location of any
Collateral (except for in-transit Inventory), other than to locations that as of
the date hereof are known to the Agent and at which the Agent has filed
financing statements and otherwise fully perfected its Liens thereon. The
Borrowers shall also advise the Agent promptly, in sufficient detail, of any
material adverse change relating to the type, quantity or quality of the
Collateral or the Lien granted thereon. The Borrowers agree to execute and
deliver to the Agent for the benefit of the Lenders from time to time, solely
for the Agent's convenience in maintaining a record of Collateral, such written
statements and schedules as the Agent may reasonably require, designating,
identifying or describing the Collateral. The Borrowers' failure, however, to
promptly give the Agent such statements or schedules shall not effect, diminish
or modify or otherwise limit the Agent's security interest in the Collateral.
(m) Borrowing Base. Maintain all Revolving Credit Loans in
compliance with the then current Borrowing Base.
(n) Appraisals. Furnish to the Lenders on or before April 30,
1999, appraisals, at the sole cost and expense of the Borrowers, in form and
substance satisfactory to the Agent and performed by an appraiser acceptable to
the Agent, of all trademarks of the Parent and its Subsidiaries. Upon the
request of the Agent at any time that the Agent deems itself to be insecure in
its sole discretion, furnish to the Lenders within 60 days after such request,
appraisals, at the sole cost and expense of the Borrowers, in form and substance
reasonably satisfactory to the Agent and performed by an appraiser acceptable to
the Agent, of (i) all real property of the Parent and its Subsidiaries, and (ii)
all fixed assets of the Parent and its Subsidiaries, such appraisals to be on an
"orderly liquidation value" basis.
SECTION 7.02. Negative Covenants. So long as any principal of or
interest on the Loans (whether or not due) shall remain unpaid or any Lender
shall have any Commitment hereunder, the Borrowers will not without the prior
written consent of the Required Lenders:
(a) Liens, Etc. Create or suffer to exist, or permit any of their
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of their properties,
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rights or other assets, whether now owned or hereafter acquired, or assign or
otherwise transfer, or permit any of their Subsidiaries to assign or otherwise
transfer, any right to receive income, other than the following ("Permitted
Liens"):
(i) Liens created pursuant to the Loan Documents;
(ii) Liens existing on the date hereof, as set forth in
Schedule 7.02(a)(ii) hereto, and the renewal and replacement of such Liens,
provided that any such renewal or replacement Lien shall be limited to the
property or assets covered by the Lien renewed or replaced and the
Indebtedness secured by any such renewal or replacement Lien shall be in an
amount not greater than the amount of Indebtedness secured by the Lien
renewed or replaced;
(iii) Liens for taxes, assessments or governmental charges
or levies to the extent that the payment thereof shall not be required by
Section 7.01(c) hereof;
(iv) Liens created by operation of law or leases (other than
Liens created under Environmental Laws), such as landlords' liens,
materialmen's liens, mechanics' liens and other similar Liens, arising in
the ordinary course of business and securing claims the payment of which
shall not be required by Section 7.01(c) hereof;
(v) deposits, pledges or Liens (other than Liens arising
under ERISA or the Internal Revenue Code) securing (A) obligations incurred
in respect of workers' compensation, unemployment insurance or other forms
of governmental insurance or benefits, (B) the performance of bids,
tenders, leases, contracts (other than for the payment of money) and
statutory obligations, or (C) obligations on surety or appeal bonds, but
only to the extent such deposits, pledges or Liens are incurred or
otherwise arise in the ordinary course of business and secure obligations
which are not past due;
(vi) easements, rights-of-way, zoning and similar
restrictions and other similar charges and encumbrances on the use of real
property and minor irregularities in the title thereto which do not (A)
secure obligations for the payment of money, or (B) materially impair the
value of such property or materially impair the use thereof by the Parent
or any of its Subsidiaries in the normal conduct of such Person's business;
(vii) purchase money liens on or purchase money security
interests in equipment acquired or held in the ordinary course of business
of the Parent and its Subsidiaries; and
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(viii) Liens securing Capitalized Leases permitted by
Section 7.02(g).
(b) Indebtedness. Create, incur or suffer to exist, or permit any
of their Subsidiaries to create, incur or suffer to exist, any Indebtedness,
other than:
(i) Indebtedness created hereunder or under the Notes;
(ii) Indebtedness existing on the date hereof, as set forth
in Schedule 7.02(b)(ii) hereto and any extension of maturity, refinancing
or other modification of the terms thereof, provided, however, that such
extension, refinancing or modification (A) is pursuant to terms that are
not less favorable to the Parent and its Subsidiaries than the terms of the
Indebtedness being extended, refinanced or modified, and (B) after giving
effect to the extension, refinancing or modification of such Indebtedness,
the amount of such Indebtedness outstanding is not greater than the amount
of such Indebtedness outstanding immediately prior to such extension,
refinancing or modification;
(iii) (A) intercompany Indebtedness permitted by Section
7.02(f)(iii) owing to any Borrower by any Loan Party, provided that (x) the
repayment of such Indebtedness shall be subordinated to the payment of the
Obligations on terms approved in writing by the Agent and (y) such
Indebtedness shall be evidenced by one or more promissory notes and such
notes or other instruments evidencing such Indebtedness shall be pledged to
the Agent for the benefit of the Lenders and (B) intercompany Indebtedness
permitted by Section 7.02(f)(iii) owing to any Borrower by Chic By H.I.S.
de Mexico, S.A. de CV or Quebec Inc., provided that, such Indebtedness
shall be evidenced by one or more promissory notes and such notes or other
instruments evidencing such Indebtedness shall be pledged to the Agent for
the benefit of the Lenders;
(iv) Indebtedness permitted by subsection (c) of this
Section 7.02;
(v) Indebtedness secured by Liens permitted by clause (vii)
of subsection (a) of this Section 7.02;
(vi) Indebtedness under the Hedging Agreements;
(vii) Indebtedness under Capitalized Leases permitted by
Section 7.02(g); and
(viii) Indebtedness subordinated in writing to the
Obligations in form and substance satisfactory to the Agent.
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(c) Guaranties, Etc. Assume, guarantee, endorse or otherwise
become directly or contingently liable (including, without limitation, liable by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss), in connection with any Indebtedness of any
other Person, other than:
(i) guaranties in favor of the Agent and the Lenders;
(ii) guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business; and
(iii) guaranties existing on the date hereof, as set forth
in Schedule 7.02(c)(iii) hereto, and any renewal or modification thereof.
(d) Merger, Consolidation, Sale of Assets, Etc.
(i) Merge or consolidate with any Person, or permit any of
their Subsidiaries to merge or consolidate with, any Person; provided,
however, that any Loan Party (other than the Borrowers) may be merged into
a Borrower or another such Subsidiary, or may consolidate with another such
Subsidiary, so long as (A) the Parent gives the Agent at least 60 days'
prior written notice of such merger or consolidation and (B) no Default or
Event of Default shall have occurred and be continuing either before or
after giving effect to such transactions.
(ii) Sell, assign, lease or otherwise transfer or dispose
of, or permit any of its Subsidiaries to sell, assign, lease or otherwise
transfer or dispose of, whether in one transaction or in a series of
related transactions, any of its properties, rights or other assets whether
now owned or hereafter acquired to any Person, provided that (A) HIS may
sell Inventory in the ordinary course of business, (B) the Parent and its
Subsidiaries may dispose of obsolete or worn-out property in the ordinary
course of business, and (C) the Parent and its Consolidated Domestic
Subsidiaries may sell machinery, equipment, fixtures or real property in
the ordinary course of business with an aggregate fair market value not
exceeding $3,000,000 in any Fiscal Year.
(e) Change in Nature of Business. Make, or permit any of their
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(f) Investments, Etc. Make, or permit any of its Subsidiaries to
make, any loan or advance to any Person or purchase, hold or otherwise acquire,
or permit any of its Subsidiaries to purchase, hold or otherwise acquire, any
Capital Stock, other securities, properties, assets or obligations of, or any
interest in, any Person, other than:
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(i) Permitted Investments;
(ii) investments existing on the date hereof, as set forth
in Schedule 7.02(f)(ii) hereto;
(iii) (A) loans or advances made by any Borrower to any Loan
Party, provided that (x) the repayment of all such loans and advances is
subordinated to the payment of the Obligations on terms approved in writing
by the Agent and (y) all such Indebtedness shall be evidenced by one or
more promissory notes and such notes or other instruments evidencing such
Indebtedness shall be pledged to the Agent for the benefit of the Lenders,
and (B) loans or advances made by any Borrower to Chic By H.I.S. de Mexico,
S.A. de CV or Quebec Inc., provided that (x) all such Indebtedness shall be
evidenced by one or more promissory notes and such notes or other
instruments evidencing such Indebtedness shall be pledged to the Agent for
the benefit of the Lenders and (y) the proceeds of any such loans or
advances are used by such Subsidiaries to make expenditures for fixed or
capital assets (to the extent permitted by Section 7.02(h)) or to pay the
expenses incurred by such Subsidiaries in the ordinary course of operating
their sales offices and their cutting, manufacturing and laundry
facilities;
(iv) loans or advances to employees in the ordinary course
in an aggregate amount not to exceed $500,000; and
(v) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, repurchases by the
Parent of its Capital Stock and purchases by any Loan Party of any Capital
Stock of Sportswear AG for aggregate consideration paid for all such
purchases not in excess of $2,000,000.
(g) Lease Obligations. Create, incur or suffer to exist, or
permit any of their Subsidiaries to create, incur or suffer to exist, any
obligations as lessee (i) for the payment of rent for any real or personal
property in connection with any sale and leaseback transaction, or (ii) for the
payment of rent for any real or personal property under leases or agreements to
lease other than (A) obligations under Capitalized Leases (other than the
existing Capitalized Leases set forth on Schedule 7.02(g) hereto) which would
not cause the aggregate amount of all obligations under Capitalized Leases
entered into after the Effective Date owing by the Loan Parties in any Fiscal
Year to exceed the amounts set forth in subsection (h) of this Section 7.02, and
(B) Operating Lease Obligations which would not cause the aggregate amount of
all Operating Lease Obligations owing by the Loan Parties in any Fiscal Year to
exceed $4,500,000 or such greater amount as shall be approved by the Required
Lenders.
(h) Capital Expenditures. Make or be committed to make, or permit
any of its Subsidiaries to make or be committed to make, any expenditure (by
purchase or Capitalized Lease) for fixed or capital assets other than
expenditures (including obligations under Capitalized Leases) which would not
cause the aggregate amount of all such expenditures to
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exceed $11,000,000 for the Fiscal Year ended November 6, 1999 and $7,500,000 for
each Fiscal Year thereafter.
(i) Dividends, Prepayments, Etc. Declare or pay any dividends,
purchase or otherwise acquire for value any of its Capital Stock now or
hereafter outstanding, return any capital to its stockholders as such, or make
any other payment or distribution of assets to its stockholders as such, or
permit any of its Subsidiaries to do any of the foregoing or to purchase or
otherwise acquire for value any stock of any Loan Party or make any payment or
prepayment of principal of, premium, if any, or interest on, or redeem, defease
or otherwise retire, any Indebtedness of any Loan Party (other than Indebtedness
under the Loan Documents) before its scheduled due date, provided that, so long
as no Default or Event of Default shall have occurred and be continuing or would
result therefrom (i) any Loan Party (other than the Parent) may declare and pay
dividends to any other Loan Party and (ii) the Parent may repurchase shares of
its Capital Stock and, subject to the last sentence of Section 7.01(j) hereof,
purchase Capital Stock of Sportswear AG, if the aggregate consideration paid for
all such purchases does not exceed $2,000,000.
(j) Sale of Notes, Etc. Sell, discount or otherwise dispose of
notes, Accounts Receivable or other obligations owing to a Loan Party or permit
any of their Subsidiaries to do so.
(k) Compromise of Receivable. Compromise or adjust any of the
Accounts Receivable (or extend the time for payment thereof) or grant any
discounts, allowance or credits thereon or permit any of their Subsidiaries to
do so, except in the ordinary course of business consistent with past practice,
provided that during the continuance of an Event of Default, no such compromise,
adjustment, discounts, allowance or credits shall be permitted without the prior
written consent of the Agent.
(l) Federal Reserve Regulations. Permit any Loan or the proceeds
of any Loan under this Agreement to be used for any purpose which violates or is
inconsistent with the provisions of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
(m) Transactions with Affiliates. Enter into or be a party to, or
permit any Subsidiary to enter into or be a party to any transaction with any
Affiliate of the Parent except (i) as otherwise expressly provided in this
Agreement and (ii) in the ordinary course of business in a manner and to an
extent consistent with past practice and necessary or desirable for the prudent
operation of its business for fair consideration and on terms no less favorable
to the Parent or such Subsidiary as are available from unaffiliated third
parties.
(n) Environmental. Allow, or permit any of their Subsidiaries to
allow, the use, handling, generation, storage, treatment, release or disposal of
Hazardous Materials at any property owned or leased by the Loan Parties except
and where such use, handling,
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generation, storage, treatment, release or disposal of Hazardous Materials does
not result in a Material Adverse Effect.
(o) Financial Covenants.
(i) Tangible Net Worth. Permit Consolidated Tangible Net
Worth of the Parent and its Consolidated Subsidiaries at the end of each
Fiscal Quarter to be less than the amount set forth below opposite each
such Fiscal Quarter:
Fiscal Quarter Tangible Net Worth
-------------- ------------------
First Quarter 1999 $51,500,000
Second Quarter 1999 $53,000,000
Third Quarter 1999 $54,500,000
Fourth Quarter 1999 $57,000,000
First Quarter 2000 $57,500,000
Second Quarter 2000 $58,500,000
Third Quarter 2000 $60,000,000
Fourth Quarter 2000 $61,000,000
and thereafter
(ii) Leverage Ratio. Permit the ratio of Consolidated Funded
Debt to Consolidated EBITDA of the Parent and its Consolidated Domestic
Subsidiaries as of the end of each period of four Fiscal Quarters ending at
the end of each Fiscal Quarter set forth below to be greater than the ratio
set forth below opposite each such Fiscal Quarter:
Fiscal Quarter Leverage Ratio
-------------- --------------
Fourth Quarter 1999 .80 to 1
First Quarter 2000 1.0 to 1
Third Quarter 1999 1.0 to 1
Fourth Quarter 1999 1.25 to 1
and thereafter
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(iii) Fixed Charge Coverage Ratio. Permit the ratio of
Consolidated EBITDA of the Parent and its Consolidated Domestic
Subsidiaries to Consolidated Fixed Charges of the Parent and its
Consolidated Domestic Subsidiaries (A) for the first Fiscal Quarter of the
1999 Fiscal Year of the Parent to be less than .50 to 1, (B) for the first
and second Fiscal Quarters of 1999 Fiscal Year of the Parent (on a
cumulative basis) to be less than .60 to 1, (C) for the first, second and
third Fiscal Quarters of the 1999 Fiscal Year of the Parent (on a
cumulative basis) to be less than .60 to 1, and (D) for each Fiscal Quarter
commencing with the fourth Fiscal Quarter of the 1999 Fiscal Year of the
Parent, for each period of four consecutive Fiscal Quarters ending at the
end of each Fiscal Quarter set forth below to be less than the ratio set
forth below opposite each such Fiscal Quarter:
Fiscal Quarter Leverage Ratio
-------------- --------------
Fourth Quarter 1999 .80 to 1
First Quarter 2000 1.0 to 1
Third Quarter 1999 1.0 to 1
Fourth Quarter 1999 1.25 to 1
and thereafter
(p) Fiscal Periods. Change the Fiscal Months, Fiscal Years and
Fiscal Quarters, except as otherwise agreed to in writing by the Agent.
(q) Year 2000 Compatibility. Each of the Borrowers and the
Guarantors shall take all action necessary to assure that the Borrowers' and the
Guarantors' computer-based systems are to operate and effectively process data
including datafields requiring references to dates on and after January 1, 2000.
At the request of the Agent, the Borrowers and the Guarantors shall provide to
the Agent written assurances and other evidence acceptable to the Agent and the
Lenders of the Borrowers' and the Guarantors' compliance with this Section
7.02(q).
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(r) Availability. Permit Availability (assuming for purposes of
this paragraph (r) that clause (i) in the definition of the term Availability is
less than clause (ii) therein) to be less than $10 million on the last day of
each of the first eleven Fiscal Months in the 1999 Fiscal Year of the Parent.
ARTICLE VIII
MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
SECTION 8.01. Collection of Accounts Receivable; Management of
Collateral. (a) On or prior to the Effective Date, the Borrowers shall assist
the Agent, on behalf of the Lenders, in (i) establishing, and, during the term
of this Agreement, maintaining one or more lockboxes in the name of the Agent
and identified on Schedule 8.01 hereto (collectively, the "Lockboxes") with the
financial institutions set forth in Schedule 8.01 or such other financial
institutions selected by the Borrowers and acceptable to the Agent in its sole
discretion (each being referred to as a "Lockbox Bank"), and (ii) establishing,
and during the term of this Agreement, maintaining an account (a "Collection
Account" and, collectively, the "Collection Accounts") in the name of the Agent
with each Lockbox Bank. HIS shall irrevocably instruct its Account Debtors, with
respect to Accounts Receivable of HIS, to remit all payments to be made by
checks or other drafts to the Lockboxes and to remit all payments to be made by
wire transfer or by Automated Clearing House, Inc. payments to be made directly
to the Collection Accounts and shall instruct each Lockbox Bank to deposit all
amounts received in its Lockbox to the Collection Account at such Lockbox Bank.
Until the Agent has advised HIS to the contrary after the occurrence and during
the continuance of an Event of Default, HIS may and will enforce, collect and
receive all amounts owing on the Accounts Receivable of HIS for the Agent's
benefit and on the Agent's behalf, but at HIS's expense; such privilege shall
terminate, at the election of the Agent, upon the occurrence and during the
continuance of any Event of Default. All checks, drafts, notes, money orders,
acceptances, cash and other evidences of Indebtedness received directly by HIS
from any Account Debtor, as proceeds from Accounts Receivable of HIS, or as
proceeds of any other Collateral, shall be held by HIS in trust for the Agent
and upon receipt be deposited by HIS in original form and no later than the next
Business Day after receipt thereof into a Collection Account. HIS shall not
commingle such collections with HIS's own funds or with the proceeds of any
assets not included in the Collateral. The Agent shall charge the Loan Account
on the last day of each month with two (2) collection days for all such
collections, except wire transfers or other transfers of good funds. All funds
received in the Collection Account shall be credited to the Loan Account for
application at the end of each Business Day to reduce the then principal balance
of the Loans, conditional upon final payment to the Agent. No checks, drafts or
other instrument received by the Agent shall constitute final payment to the
Agent unless and until such instruments have actually been collected.
(b) After the occurrence and during the continuance of an Event
of Default, the Agent may send a notice of assignment and/or notice of the
Lenders' security interest
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to any and all Account Debtors or any third party holding or otherwise concerned
with any of the Collateral, and thereafter the Agent shall have the sole right
to collect the Accounts Receivable and/or take possession of the Collateral and
the books and records relating thereto. The Parent shall not and shall not
permit its Subsidiaries to, without prior written consent of the Agent, grant
any extension of time of payment of any Account Receivable, compromise or settle
any Account Receivable for less than the full amount thereof, release, in whole
or in part, any Person or property liable for the payment thereof, or allow any
credit or discount whatsoever thereon, except, in absence of a continuing Event
of Default, as permitted by Section 7.02(k) hereof.
(c) (i) HIS hereby appoints the Agent or its designee on behalf
of the Agent as HIS's attorney-in-fact with power exercisable during the
continuance of an Event of Default to endorse HIS's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment relating
to the Accounts Receivable, to sign HIS's name on any invoice or xxxx of lading
relating to any of the Accounts Receivable of HIS, drafts against Account
Debtors with respect to Accounts Receivable of HIS, assignments and
verifications of Accounts Receivable of HIS and notices to Account Debtors with
respect to Accounts Receivables of HIS, to send verification of Accounts
Receivable of HIS, and, to notify the Postal Service authorities to change the
address for delivery of mail addressed to HIS to such address as the Agent may
designate and to do all other acts and things necessary to carry out this
Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designate shall not be liable for any acts of
omission or commission (other than acts or omissions constituting gross
negligence or willful misconduct), nor for any error of judgment or mistake of
fact or law; this power being coupled with an interest is irrevocable until all
of the Loans and other Obligations under the Loan Documents are paid in full and
all of the Loan Documents are terminated. HIS hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed, all in a
commercially reasonable manner and without discharging or in any way affecting
liability hereunder.
(ii) The Agent, without notice to or consent of the
Borrowers or Guarantors upon the occurrence and during the continuance of
an Event of Default (A) may xxx upon or otherwise collect, extend the time
of payment of, or compromise or settle for cash, credit or otherwise upon
any terms, any of the Accounts Receivable or any securities, instruments or
insurance applicable thereto and/or release the Account Debtor thereon; (B)
is authorized and empowered to accept the return of the goods represented
by any of the Accounts Receivable, and (C) shall have the right to receive,
endorse, assign and/or deliver in its name or the name of the Borrowers or
any Guarantors any and all checks, drafts, and other instruments for the
payment of money relating to the Accounts Receivable. The Borrowers and
Guarantors hereby waive notice of presentment, protest and non-payment of
any instrument so endorsed, all in a commercially reasonable manner and
without discharging or in any way affecting liability hereunder.
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(d) Nothing herein contained shall be construed to constitute the
Agent as agent of HIS for any purpose whatsoever, and the Agent shall not be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof (other than from acts or omissions of the Agent constituting
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction). The Agent shall not, under any circumstances
or in any event whatsoever, have any liability for any error or omission or
delay of any kind occurring in the settlement, collection or payment of any of
the Accounts Receivable or any instrument received in payment thereof or for any
damage resulting therefrom (other than acts or omissions of the Agent
constituting gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction). The Agent, by anything herein or
in any assignment or otherwise, does not assume any of HIS's obligations under
any contract or agreement assigned to the Agent and shall not be responsible in
any way for the performance by HIS of any of the terms and conditions thereof.
(e) If any of the Accounts Receivable includes a charge for any
tax payable to any Governmental Authority, the Lender is hereby authorized (but
in no event obligated) in its discretion to pay the amount thereof to the proper
taxing authority for the relevant Borrower's account and to charge such Borrower
therefor. Each Borrower shall notify the Lender if any Accounts Receivable owing
to such Borrower include any taxes due to any such authority and, in the absence
of such notice, the Agent shall have the right to retain the full proceeds of
such Accounts Receivable and shall not be liable for any taxes that may be due
from such Borrower by reason of the sale and delivery creating such Accounts
Receivable.
SECTION 8.02. Accounts Receivable Documentation. Each Borrower will at
such intervals as the Agent may reasonably require, execute and deliver
confirmatory written collateral assignments of the Accounts Receivable to the
Agent and furnish such further schedules and/or information as the Agent may
reasonably require relating to the Accounts Receivable, including, without
limitation, sales invoices or the equivalent, credit memos issued, remittance
advises, reports and copies of deposit slips and copies of original shipping or
delivery receipts for all merchandise sold. In addition, each Borrower shall
notify the Agent of any non-compliance in respect of the representations,
warranties and covenants contained in Section 8.03 below. The items to be
provided under this Section 8.02 are to be in form satisfactory to the Agent and
are to be executed and delivered to the Agent from time to time solely for its
convenience in maintaining records of the Collateral. Any Borrower's failure to
give any of such items to the Agent shall not affect, terminate, modify or
otherwise limit the Agent's Lien in the Collateral. Each Borrower shall not
re-date any invoice or sale or make sales on extended dating beyond that
customary in such Borrower's industry, and shall not re-xxxx any Accounts
Receivable without promptly disclosing the same to the Agent and providing the
Agent with a copy of such re-billing, identifying the same as such. If any
Borrower becomes aware of anything materially detrimental to any of the
Borrowers' customers' credit, such Borrower will promptly advise the Agent
thereof.
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SECTION 8.03. Status of Accounts Receivable and Other Collateral. With
respect to Collateral of the Borrowers and the Guarantors at the time the
Collateral becomes subject to the Agent's security interests, each Borrower
covenants, represents and warrants: (a) such Borrower or Guarantor shall be the
sole owner of the Collateral owned by it, free and clear of all Liens except the
Lien in favor of the Agent for the benefit of the Lenders or except as otherwise
permitted hereunder, and shall be fully authorized to sell, transfer, pledge
and/or grant a security interest in each and every item of said Collateral; (b)
each Account Receivable shall be a good and valid account representing an
undisputed bona fide indebtedness incurred or an amount indisputably owed by the
Account Debtor therein named, for a fixed sum as set forth in the invoice
relating thereto with respect to absolute sale and delivery upon the specified
terms of goods sold by such Borrower or Guarantor or work, labor and/or services
theretofore rendered by such Borrower or Guarantor; (c) no Account Receivable is
subject to any defense, offset, counterclaim, discount or allowance except as
may be stated in the invoice relating thereto or discounts and allowances as may
be customary in such Borrower's or Guarantor business, and, to the best
knowledge of the Borrowers, each of such Account Receivable will be paid when
due; (d) none of the transactions underlying or giving rise to any Accounts
Receivable shall violate any applicable state or federal laws or regulations,
and all documents relating thereto shall be legally sufficient under such laws
or regulations and shall be legally enforceable in accordance with their terms;
(e) no agreement under which any deduction or offset of any kind, other than
normal trade discounts, may be granted or shall have been made by such Borrower
at or before the time such Accounts Receivable is created; (f) all documents and
agreements relating to Accounts Receivable shall be true and correct and in all
respects what they purport to be; (g) all signatures and endorsements that
appear on all documents and agreements relating to Accounts Receivable shall be
genuine and all signatories and endorsers shall have full capacity to contract;
(h) the Borrowers and the Guarantors shall maintain books and records pertaining
to said Collateral in such detail, form and scope as the Agent shall reasonably
require; (i) such Borrower or Guarantor will immediately notify the Agent if any
of its accounts arise out of contracts with the United States or any department,
agency, or instrumentality thereof and will execute any instruments and take any
steps required by the Agent in order that all monies due or to become due under
any such contract shall be assigned to the Agent and notice thereof given to the
United States Government under the Federal Assignment of Claims Act; (j) such
Borrower or Guarantor will, immediately upon learning thereof, report to the
Agent any material loss or destruction of, or substantial damage to, any of the
Collateral, and any other matters adversely affecting in any material respect
the value, enforceability or collectibility of any of the Collateral; (k) if any
amount payable under or in connection with any Account Receivable is evidenced
by a promissory note or other instrument, as such term is defined in the Uniform
Commercial Code, such promissory note or instrument shall be immediately
pledged, endorsed, assigned and delivered to the Agent as additional Collateral;
(l) such Borrower or Guarantor shall not redate any invoice or sale or make
sales on extended dating beyond that which is customary in the ordinary course
of their business and in the industry; (m) such Borrower or Guarantor shall
conduct a physical count of its Inventory at such intervals as the Agent may
reasonably request and the Borrowers and the Guarantors shall promptly supply
the Agent with a copy of each such count accompanied by a report of the value
(based on the lower of cost (on a FIFO basis) or
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market value) of such Inventory; and (n) such Borrower or Guarantor is not and
shall not be entitled to pledge the Agent's or the Lenders' credit on any
purchases for or any purpose whatsoever.
SECTION 8.04. Collateral Custodian. Upon the occurrence and during the
continuance of an Event of Default, the Agent may at any time and from time to
time employ and maintain in the premises of the Borrowers a custodian selected
by the Agent who shall have full authority to do all acts necessary to protect
the Agent's interests. The Borrowers hereby agree to cooperate with any such
custodian and to do whatever the Agent may reasonably request to preserve the
Collateral. All costs and expenses incurred by the Agent, by reason of the
employment of the custodian, shall be charged to the Loan Account.
ARTICLE IX
THE AGENT
SECTION 9.01. Authorization and Action. Each Lender (and each
subsequent holder of any Note by its acceptance thereof) hereby irrevocably
appoints and authorizes CIT, in its capacity as the Agent, as set forth in this
Agreement (i) to receive on behalf of each Lender any payment of principal of or
interest on the Notes outstanding hereunder and all other amounts accrued
hereunder paid to the Agent, and, subject to Section 2.05 of this Agreement and
the other provisions of this Agreement, to distribute promptly to each Lender
its Pro Rata Share of all payments so received, (ii) to distribute to each
Lender copies of all material notices and agreements received by the Agent and
not required to be delivered to each Lender pursuant to the terms of this
Agreement, provided that the Agent shall not have any liability to the Lenders
for the Agent's inadvertent failure to distribute any such notice or agreements
to the Lenders, and (iii) subject to Section 12.03 of this Agreement, to take
such action as the Agent deem appropriate on its behalf to administer the Loans
and the Loan Documents and to exercise such other powers delegated to the Agent
by the terms hereof or the Loan Documents (including, without limitation, the
power to give or to refuse to give notices, waivers, consents, approvals and
instructions and the power to make or to refuse to make determinations and
calculations), together with such powers as are reasonably incidental thereto to
carry out the purposes hereof and thereof. As to any matters not expressly
provided for by this Agreement and the other Loan Documents (including, without
limitation, enforcement or collection of the Notes), the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions of the Required Lenders shall be binding upon all Lenders and all
holders of Notes; provided, however, that the Agent shall not be required to
take any action which, in the reasonable opinion of the Agent, exposes the Agent
to liability or which is contrary to this Agreement or any Loan Document or
applicable law.
SECTION 9.02. Borrower's Default. In the event that (i) a Borrower
fails to pay when due the principal of or interest on any Note or any fee
payable hereunder, or (ii) the
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Agent receive written notice of the occurrence of an Event of Default, the Agent
shall promptly give written notice thereof to the Lenders, and shall take such
action with respect to such Event of Default as it shall be directed to take by
the Required Lenders; provided, however, that, unless and until the Agent shall
have received such directions and except as otherwise expressly provided in this
Agreement, the Agent may take such action or refrain from taking such action
hereunder or under the other Loan Documents with respect to an Event of Default
or Default, as it shall deem advisable in the best interest of the Lenders.
SECTION 9.03. Agent's Reliance, Etc. The Agent or any of its
directors, officers, agents or employees shall not be liable for any action
taken or omitted to be taken by them under or in connection with this Agreement
or the other Loan Documents, except for their own gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. Without limiting the generality of the foregoing, the Agent (i)
may treat the payee of any Note as the holder thereof until the Agent receives
written notice of the assignment or transfer thereof, pursuant to Section 12.08
hereof, signed by such payee and in form satisfactory to the Agent; (ii) may
consult with legal counsel (including, without limitation, counsel to the Agent
or counsel to the Borrowers), independent public accountants, and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, certificates,
warranties or representations made in or in connection with this Agreement or
the other Loan Documents; (iv) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms, covenants or
conditions of this Agreement or the other Loan Documents on the part of any
Person or to inspect the Collateral or other property (including, without
limitation, the books and records) of any Person; (v) shall not be responsible
to any Lender for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or the other Loan Documents
or any other instrument or document furnished pursuant hereto or thereto; (vi)
shall not be deemed to have made any representation or warranty regarding the
existence, value or collectibility of the Collateral, the existence, priority or
perfection of the Lenders' Lien thereon, or the Borrowing Base or any
certificate prepared by a Borrower in connection therewith, nor shall the Agent
be responsible or liable to the Lenders for any failure to monitor or maintain
the Borrowing Base or any portion of the Collateral; and (vii) shall incur no
liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telegram, telecopy, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 9.04. CIT. With respect to the Loans made by it and the Notes
issued to it, CIT and each of its Affiliates shall have the same rights and
powers under this Agreement as any other Lender and may exercise the same as
though it were not an Agent; and the term "Lender" or "any Lenders" shall,
unless otherwise expressly indicated, include CIT in its individual capacity.
CIT and each of its respective Affiliates may accept deposits from, lend money
to, act as trustee or paying agent under indentures of, and generally engage in
any kind of
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business with, any Borrower or any Guarantor, any of their Affiliates, or any
Person who may do business with or own securities of any Borrower or Guarantor,
or any of their Affiliates, all as if CIT was not the Agent and without any duty
to account therefor to any Lenders.
SECTION 9.05. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender, made
its own credit analysis and decision to enter into this Agreement. Each Lender
also acknowledges that it will, independently and without reliance upon the
Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan Documents.
SECTION 9.06. Indemnification. Each Lender agrees to indemnify and
hold harmless the Agent (to the extent not reimbursed by any Borrower or any
Guarantor), ratably according to the Pro Rata Shares of each Lender, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Agent in any way relating to or arising out of this Agreement or the other Loan
Documents or any action taken or omitted by the Agent under this Agreement or
the other Loan Documents; provided, however, that no Lender shall be liable to
the Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements for which
there has been a final judicial determination that such resulted from the
Agent's gross negligence or willful misconduct. Without limiting the foregoing,
each Lender agrees to reimburse the Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including reasonable counsel fees,
disbursements and other charges) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiation, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this Agreement or
the other Loan Documents, to the extent that the Agent is not reimbursed in full
for such expenses by the Borrowers. The obligations of each Lender under this
Section 9.06 shall survive the termination of this Agreement and the other Loan
Documents and the payment of all other obligations of the Agent and the Lenders
under this Agreement and the other Loan Documents.
SECTION 9.07. Successor Agents. The Agent may resign at any time by
giving written notice thereof to the Lenders and the Parent. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent, reasonably acceptable to the Parent, with such rights and obligations
hereunder as those previously held by the retiring Agent, provided, the
successor Agent may be appointed by the Required Lenders without any
consultation with or consent of the Parent or any other Loan Party if an Event
of Default or Default has occurred and is continuing. If no successor Agent
shall have been so appointed by the Required Lenders, been accepted by the
Parent, and have accepted such appointment, within 30 days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on
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behalf of the Lenders, appoint a successor Agent, which shall be a Lender or a
commercial bank or other financial institution organized under the laws of the
United States of America or any State thereof and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement and the other Loan Documents. After
any retiring Agent's resignation hereunder as an Agent, the provisions of this
Article IX shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was an Agent under this Agreement and the other Loan
Documents.
SECTION 9.08. Collateral Matters.
(a) The Agent may from time to time, make such disbursements and
advances ("Agent Advances") which the Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the Collateral or any portion
thereof, to enhance the likelihood or maximize the amount of repayment by any
Borrower, any Guarantor or other Person of the Loans and other Obligations or to
pay any other amount chargeable to such Borrower or Guarantor pursuant to the
terms of this Agreement, including, without limitation, costs, fees and expenses
as described in Section 12.05. The Agent Advances shall be repayable on demand
and be secured by the Collateral. The Agent Advances shall not constitute Loans
but shall otherwise constitute Obligations hereunder. Without limitation to its
obligations pursuant to Section 9.06, each Lender agrees that it shall make
available to the Agent, upon the Agent's demand, in Dollars in immediately
available funds, the amount equal to such Lender's Pro Rata Share of each such
Agent Advance. If such funds are not made available to the Agent by such Lender
the Agent shall be entitled to recover such funds, on demand from such Lender
together with interest thereon, for each day from the date such payment was due
until the date such amount is paid to the Agent, at the Federal Funds Rate for
three Business Days and thereafter at the Base Rate.
(b) The Agent shall have no obligation whatsoever to any Lenders
to assure that the Collateral exists or is owned by any Borrower or any
Guarantor or is cared for, protected or insured or has been encumbered or that
the Liens granted to the Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
the Agent in this Section 9.08 or in any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act, omission or
event related thereto, the Agent may act in any manner it may deem appropriate,
in its sole discretion, given the Agent's own interest in the Collateral as one
of the Lenders and that the Agent shall have no duty or liability whatsoever to
any other Lender other than for acts or omissions constituting gross negligence
or willful misconduct as determined by a final judgment of a court of competent
jurisdiction.
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(c) The Lenders hereby irrevocably authorize the Agent, at its
option and in its discretion, to release any Lien granted to or held by the
Agent upon any Collateral upon termination of the Revolving Credit Commitments
and payment and satisfaction of all Loans, (whether or not due) and all other
Obligations which have matured and which the Agent has been notified in writing
are then due and payable; or constituting property being sold or disposed of if
a Loan Party certifies to the Agent that the sale or disposition is made in
compliance with Section 7.02(d)(ii) hereof (and the Agent may rely conclusively
on any such certificate, without further inquiry); or constituting property in
which the Loan Parties owned no interest at the time the Lien was granted or at
any time thereafter; or (except as otherwise provided in Section 12.03 of this
Agreement) if approved, authorized or ratified in writing by the Required
Lenders. Without in any manner limiting the Agent's authority to act without any
specific or further authorization or consent by the Required Lenders, upon
request by the Agent at any time, the Lenders shall confirm in writing the
Agent's authority to release particular types or items of Collateral pursuant to
this Section 9.08(c).
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.01. Events of Default. If any of the following Events of
Default shall occur and be continuing:
(a) Any Loan Party shall fail to pay (i) any principal of or
interest on any Loan or any Agent Advance when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise) or (ii) any
fee or other amount (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) when due and, in the case of this clause
(ii), such failure shall remain unremedied for 3 Business Days;
(b) Any representation or warranty made by any Loan Party or any
officer of such Loan Party under or in connection with any Loan Document shall
have been incorrect in any material respect when made;
(c) Any Loan Party shall fail to perform or observe any covenant
contained in (i) paragraphs (b), (c) (d), (f), (j) (last sentence), (l), (m), or
(n) of Section 7.01, Section 7.02 or Article VIII of this Agreement, (ii)
paragraphs (b), (d), (e), (f) (i), (g), (h) or (j) of Section 5 of the Security
Agreements, or (iii) Section 4(a) or paragraphs (e), (f), (g) or (h) of Section
6 of the Pledge Agreements;
(d) Any Loan Party shall default in the performance or observance
of (i) the covenants contained in Section 7.01(a) of this Agreement (other than
subparagraphs (v), (ix) and (xi) thereof) and such default shall continue
unremedied for a period of 10 days, (ii) the covenants contained in
subparagraphs (v), (ix) and (xi) of Section 7.01(a) of this Agreement and such
default shall continue unremedied for a period of 3 days, or (iii) any other
covenant
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contained in Section 7.01 of this Agreement (to the extent not otherwise
provided for in paragraphs (a), (b) or (c) of this Section 10.01) and such
default shall continue unremedied for a period of 20 days;
(e) Any Loan Party shall fail to pay any principal or interest on
any of its Indebtedness (excluding Indebtedness evidenced by the Notes) in
excess of $250,000, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness, or any other
default under any agreement or instrument relating to any such Indebtedness, or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or any such Indebtedness in excess of such amount
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof;
(f) Any Loan Party (i) shall institute any proceeding or
voluntary case seeking to adjudicate it bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such Loan Party or for any substantial
part of its property, (ii) shall be generally not paying its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
(iii) shall make a general assignment for the benefit of creditors, or (iv)
shall take any action to authorize or effect any of the actions set forth above
in this subsection (f);
(g) Any proceeding shall be instituted against any Loan Party
seeking to adjudicate it bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for such
Loan Party or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 45 days or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property) shall occur;
(h) Any material provision of any Loan Document shall at any time
for any reason be declared to be null and void, or the validity or
enforceability thereof shall be contested by any Loan Party, or a proceeding
shall be commenced by any Loan Party or any Governmental Authority or other
regulatory body having jurisdiction over such Loan Party, seeking to establish
the invalidity or unenforceability thereof, or any Loan Party shall deny in
writing that such Loan Party has any liability or obligation purported to be
created under any Loan Document;
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(i) Any Security Agreement, Pledge Agreement, any mortgage or any
other security document, after delivery thereof pursuant hereto, shall for any
reason fail or cease to create a valid and perfected and, except to the extent
permitted by the terms hereof or thereof, first priority Lien on or security
interest in any Collateral purported to be covered thereby;
(j) One or more judgments or orders (other than a judgment or
award described in subsections (f) or (g) of this Section 10.01) for the payment
of money exceeding any applicable insurance or bond coverage by more than
$500,000 in the aggregate for the Loan Parties shall be rendered against any
Loan Party and either (i) enforcement proceedings shall have been commenced by
any creditor upon any such judgment or order, or (ii) there shall be any period
of 30 consecutive days during which a stay of enforcement of any such judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect;
(k) Any Loan Party or any of its ERISA Affiliates shall have made
a complete or partial withdrawal from a Multiemployer Plan, and, as a result of
such complete or partial withdrawal, such Loan Party or such ERISA Affiliate
incurs a withdrawal liability in an annual amount exceeding $500,000; or a
Multiemployer Plan enters reorganization status under Section 4241 of ERISA,
and, as a result thereof, such Loan Party's or such ERISA Affiliate's annual
contribution requirement with respect to such Multiemployer Plan increases in an
annual amount exceeding $500,000;
(l) Any Termination Event with respect to any Employee Plan shall
have occurred, and, 30 days after notice thereof shall have been given to any
Loan Party by the Agent, (i) such Termination Event (if correctable) shall not
have been corrected, and (ii) the then current value of such Employee Plan's
vested benefits exceeds the then current value of assets allocable to such
benefits in such Employee Plan by more than $500,000 (or, in the case of a
Termination Event involving liability under Section 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069 of ERISA or Section 4971 or 4975 of the Internal Revenue
Code, the liability is in excess of such amount), provided that this paragraph
(l) shall not apply to any Reportable Event if such Reportable Event does not
result in an obligation (by contract or otherwise) to make contributions to any
Employee Plan in any plan year in excess of the minimum funding obligations set
forth in Section 412 of the Code by an amount in excess of $1,000,000;
(m) A Change of Control shall have occurred;
then, and in any such event, the Agent may and, upon the direction of the
Required Lenders, shall by notice to the Parent, (i) declare the Total
Commitment to be reduced to zero, whereupon the Total Commitment shall forthwith
be reduced to zero, (ii) declare all Loans, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Loans, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by each Loan Party; provided,
however, that upon the occurrence of any Event of Default described in
subsections (f) or (g) of this Section 10.01, the Loans all such
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interest and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of which
are expressly waived by each Loan Party, and (iii) exercise any and all of its
other rights under applicable law, hereunder and under the other Loan Documents.
ARTICLE XI
GUARANTY
SECTION 11.01. Guaranty. The Guarantors hereby (i) irrevocably,
absolutely and unconditionally jointly and severally guarantee the prompt
payment, as and when due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), of (A) all the Obligations,
including, without limitation, all amounts now or hereafter owing in respect of
the Loan Documents, whether for principal, interest (including interest accruing
on or after the filing of any petition in bankruptcy or for reorganization
relating to any Borrower whether or not any claim for post-filing interest is
allowed in such proceeding), fees, expenses, indemnifications or otherwise, and
(B) all indebtedness, obligations and other liabilities, direct or indirect,
absolute or contingent, now existing or hereafter arising of any Borrower to the
Agent, the Lenders or CIT under the Loan Documents and (ii) agrees to pay any
and all expenses (including reasonable counsel fees and expenses) incurred by
the Agent, the Lenders or CIT in enforcing its rights under this Article XI.
SECTION 11.02. Obligations Unconditional.
(i) The Guarantors hereby jointly and severally guarantee
that the Obligations will be paid strictly in accordance with the terms of
the Loan Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or the Lenders with respect thereto. The Guarantors
agree that their guarantees constitute guarantees of payment when due and
not of collection, and waive any right to require that any resort be had by
the Agent or the Lenders to any security held for payment of the
Obligations or to any balance of any deposit account or credit on the books
of the Lenders in favor of any Borrower or for any other reason. The
liability of the Guarantors hereunder shall be absolute and unconditional,
irrespective of: (i) any lack of validity or enforceability of any Loan
Document or any agreement or instrument relating thereto; (ii) any
extension or change in the time, manner or place of payment of, or in any
other term in respect of, all or any of the Obligations (including, without
limitation, any extension for longer than the original period), or any
other amendment or waiver of or consent to any departure from any provision
of any Loan Document; (iii) any exchange or release of, or non-perfection
of any Lien on, any Collateral, or any release or amendment or waiver of or
consent to any departure from any other guaranty, for all or any of the
Obligations; or (iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of,
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any Borrower or any other Guarantor in respect of the Obligations of the
Borrowers in respect hereof.
(ii) These Guarantees (i) are continuing guarantees and
shall remain in full force and effect until such date on which all of the
Obligations and all other expenses to be paid by the Borrower pursuant
hereto shall have been satisfied in full after the Total Commitment shall
have been terminated, (ii) shall continue to be effective or shall be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the Agent or the
Lenders upon the insolvency, bankruptcy or reorganization of any Borrower
or any Guarantor or otherwise, all as though such payment had not been
made, and (iii) shall be binding upon each Guarantor, its successors and
assigns.
SECTION 11.03. Waivers. The Guarantors hereby waive, to the extent
permitted by applicable law, (i) promptness and diligence, (ii) notice of
acceptance and notice of the incurrence of any Obligation, (iii) notice of any
action taken by the Agent, the Lenders or any Borrower or any other agreement or
instrument relating thereto, (iv) all other notices, demands and protests, and
all other formalities of every kind in connection with the enforcement of the
Obligations or of the obligations of the Guarantors hereunder, the omission of
or delay in which, but for the provisions of this Section 11.03, might
constitute grounds for relieving the Guarantors of their obligations hereunder,
(v) any requirement that the Agent or the Lenders protect, secure, perfect or
insure any Lien or any property subject thereto or exhaust any right or take any
action against any Person or any Collateral, and (vi) any other defenses
available to any of the Guarantors. All such waivers by any of the Guarantors
shall be effective only to the extent permitted by applicable law.
SECTION 11.04. Subrogation. Each of the Guarantors hereby irrevocably
agrees that it will not exercise any rights which it has or may have at any time
or from time to time (whether arising directly or indirectly by operation of law
or contract) to assert any claim against any Borrower or any other Guarantor on
account of any payments made under this Agreement, including, without
limitation, all existing and future rights of subrogation, reimbursement,
exoneration, contribution and/or indemnity. If any amount shall be paid to any
Guarantor on account of such rights at any time when all of such Obligations and
all other Obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Agent or the Lenders, shall be segregated
from the other funds of such Guarantor and shall forthwith be paid over to the
Agent to be applied in whole or in part by the Agent against the Obligations,
whether matured or unmatured, in accordance with the terms of this Agreement.
SECTION 11.05. No Waiver; Remedies. No failure on the part of the
Agent or the Lenders to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedy provided by law.
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SECTION 11.06. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by any Borrower in respect of the Obligations is
stayed upon the insolvency, bankruptcy or reorganization of such Borrower, all
such amounts otherwise subject to acceleration under the terms of this Agreement
shall nonetheless be payable by the Guarantors hereunder forthwith on demand by
the Agent or the Lenders.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Termination. (a) Except as otherwise permitted herein,
the Borrowers may terminate the Total Commitment and this Agreement only by
giving the Agent not less than sixty (60) days prior written notice of
termination. Notwithstanding the foregoing, the Agent may terminate the Total
Commitment and this Agreement immediately by notice to the Parent upon the
occurrence and during the continuance of an Event of Default, provided, however,
that if the Event of Default is an event listed in Sections 10.01(f) or (g) of
this Agreement, the Agent may regard the Total Commitment and the Agreement as
terminated and notice to that effect is not required. The Total Commitment and
this Agreement, unless terminated as herein provided on a Termination
Anniversary Date, shall automatically continue to the next Termination
Anniversary Date. All Obligations shall become due and payable as of the date of
any termination under this Section 12.01 and, pending a final accounting, the
Agent may withhold any balances in the Loan Account (unless supplied with an
indemnity satisfactory to the Agent) to cover all of the Obligations, whether
absolute or contingent. All of the Agent's and the Lenders' rights and Liens and
security interests shall continue after any termination until all Obligations
for the payment of money have been paid in cash and satisfied in full. After
such payment and satisfaction, the Agent and the Lenders will, upon the
reasonable request of the Borrowers, execute all documents necessary to release,
without recourse, representation and warranty and at the expense of the
Borrowers, its Liens granted pursuant to the terms of this Agreement and the
other Loan Documents.
(b) Any Lender may elect not to renew its Commitment by giving
the Agent and the Borrowers written notice of its intention to not renew its
Commitment not less than 60 days prior to a Termination Anniversary Date. If
such Lender does not assign its rights, interests and obligations under this
Agreement pursuant to Section 12.08 hereof, then the Commitment of such Lender
shall be terminated as of such Termination Anniversary Date. The Borrowers
hereby, jointly and severally, agree to pay to the Agent on such Termination
Anniversary Date, for the account of such non-renewing Lender, the principal
amount of, and all accrued interest on, such Lender's Pro Rata Share of all
funded Loans, together with any amounts payable to such Lender pursuant to
Section 12.16 and any fees or other amounts owing to such Lender under this
Agreement and such Lender's Note. If the Agent makes any Loan or Agent Advance
during the period between giving notice of its intention to not renew its
Commitment and such Termination Anniversary Date, the obligations of such
non-renewing Lender pursuant
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to Sections 2.05, 4.02 and 9.08 of this Agreement shall be irrevocable, absolute
and unconditional with respect to such Loan or Agent Advance.
SECTION 12.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed, sent by
overnight courier, telecopied, or delivered, if to any Lender, at its address
specified under its signature on the signature pages hereof; if to the Parent or
its subsidiary, at the following address:
Chic By H.I.S., Inc.
0000 Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxxxxx
Chief Financial Officer
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
if to the Agent, to it at the following address:
The CIT Group/Commercial Services, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
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with a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 12.02. All such notices and other communications shall be
effective (i) if mailed (by certified mail, postage prepaid and return receipt
requested), upon receipt or three Business Days after mailing, whichever occurs
first, (ii) if telecopied, when transmitted and a confirmation is received,
provided the same is on a Business Day and, if not, on the next Business Day,
(iii) if sent by overnight courier, upon receipt or two Business Days after
delivered to such overnight courier, whichever occurs first or (iv) if
delivered, upon delivery, provided the same is on a Business Day and, if not, on
the next Business Day, except that notices to the Agent pursuant to Article II
hereof shall not be effective until received by the Agent, as the case may be.
SECTION 12.03. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the other Loan Documents, and no consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by such Loan Party and the Required
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no amendment, waiver or consent shall (i) increase the Commitment of any Lender,
reduce the principal of, or interest on, the Loans payable to any Lender, reduce
the amount of any fee payable for the account of any Lender, or postpone or
extend any date fixed for any payment of principal of, or interest or fees on,
the Loans, in each case without the written consent of any Lender affected
thereby, (ii) increase the Total Commitment without the written consent of each
Lender, (iii) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes, or amend the definition of "Required
Lenders", release all or a substantial portion of the Collateral (except as
otherwise provided in this Agreement and the other Loan Documents) or the
Guarantors (other than inactive Guarantors), amend, modify or waive Section
12.01 or this Section 12.03 of this Agreement, or amend the definition of
"Eligible Inventory", "Eligible Accounts Receivable", "Net Amount of Eligible
Accounts Receivable" or "Borrowing Base" if the effect of such amendment is to
increase the Availability, in each case without the written consent of each
Lender.
SECTION 12.04. No Waiver; Remedies, Etc. No failure on the part of any
Lender or any 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
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any right under any Loan Document preclude any other or further exercise thereof
or the exercise of any other right. The rights and remedies of the Lenders and
the Agent provided herein and in the other Loan Documents are cumulative and are
in addition to, and not exclusive of, any rights or remedies provided by law.
The rights of the Lenders and the Agent under any Loan Document against any
party thereto are not conditional or contingent on any attempt by the Lenders
and the Agent to exercise any of their rights under any other Loan Document
against such party or against any other Person.
SECTION 12.05. Expenses; Taxes; Attorneys' Fees. The Borrowers agree
to jointly and severally pay or cause to be paid, on demand, and to save the
Agent (and, in the case of clauses (a) and (c) through (m) below, the Lenders)
harmless against liability for the payment of, all reasonable out-of-pocket
expenses, regardless of whether the transactions contemplated hereby are
consummated, including but not limited to reasonable fees and expenses of
counsel for the Agent (and, in the case of clauses (c) through (m) below, the
Lenders), accounting, due diligence, filing fees, periodic field audits,
investigation, monitoring of assets, syndication, miscellaneous disbursements,
examination, travel, lodging and meals, incurred by the Agent (and, in the case
of clauses (a) and (c) through (m) below, the Lenders) from time to time arising
from or relating to: (a) the negotiation, preparation, execution, delivery,
performance and administration of this Agreement and the other Loan Documents
(b) any requested amendments, waivers or consents to this Agreement or the other
Loan Documents whether or not such documents become effective or are given, (c)
the preservation and protection of any of the Agent's and the Lenders' rights
under this Agreement or the other Loan Documents, (d) the defense of any claim
or action asserted or brought against the Agent or the Lenders by any Person
that arises from or relates to this Agreement, any other Loan Document, the
Agent's or the Lenders' claims against the Borrowers or the other Loan Parties,
or any and all matters in connection therewith, (e) the commencement or defense
of, or intervention in, any court proceeding arising from or related to this
Agreement or any other Loan Document, (f) the filing of any petition, complaint,
answer, motion or other pleading by the Agent or the Lenders, or the taking of
any action in respect of the Collateral or other security, in connection with
this Agreement or any other Loan Document, (g) the protection, collection,
lease, sale, taking possession of or liquidation of, any Collateral or other
security in connection with this Agreement or any other Loan Document, (h) any
attempt to enforce any Lien on any Collateral or other security in connection
with this Agreement or any other Loan Document, (i) any attempt to collect from
the Borrowers or any other Loan Party amounts owed hereunder or under any other
Loan Document, (j) the receipt of any advice with respect to any of the
foregoing, (k) all liabilities and costs arising from or in connection with the
past, present or future operations of the Loan Parties involving any damage to
real or personal property or natural resources or harm or injury alleged to have
resulted from any Release of Hazardous Materials on, upon or into such property,
(l) any costs or liabilities incurred in connection with the investigation,
removal, cleanup and/or remediation of any Hazardous Materials present or
arising out of the operations of any facility of the Loan Parties, or (m) any
liabilities or costs incurred in connection with any Lien arising under any
Environmental Law. Without limitation of the foregoing or any other provision of
any Loan Document: (x) the Borrowers jointly and severally agree to pay all
stamp,
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document, transfer, recording or filing taxes or fees (including, without
limitation, mortgage recording taxes) and similar impositions now or hereafter
determined by the Agent or any of the Lenders to be payable in connection with
this Agreement or any other Loan Document, and the Borrowers jointly and
severally agree to save the Agent and the Lenders harmless from and against any
and all present or future claims, liabilities or losses with respect to or
resulting from any omission to pay or delay in paying any such taxes, fees or
impositions, and (y) if the Borrowers or any Loan Party fail to perform any
covenant or agreement contained herein or in any other Loan Document, Agent may
itself perform or cause performance of such covenant or agreement, and the
expenses of the Agent incurred in connection therewith shall be reimbursed on
demand by the Borrowers.
SECTION 12.06. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, each Lender may, and is hereby authorized
to, at any time and from time to time, without notice to any Borrower or
Guarantor (any such notice being expressly waived by the Borrowers and
Guarantors) and to the fullest extent permitted by law, set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender to or for
the credit or the account of any Borrower or Guarantor against any and all joint
and several obligations of the Borrowers now or hereafter existing under any
Loan Document, irrespective of whether or not such Lender shall have made any
demand hereunder or thereunder and although such obligations may be contingent
or unmatured. Such set-off shall be subject to the provisions of Section 4.03.
Such Lender agrees to notify the Borrowers promptly after any such set-off and
application made by such Lender provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Agent under this Section 12.06 are in addition to the other rights and remedies
(including, without limitation, other rights of set-off) which such Lender may
have.
SECTION 12.07. Severability. Any provision of this Agreement, or of
any other Loan Document to which any Borrower or any Guarantor is a party, 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.
SECTION 12.08. Assignments and Participations.
(a) Each Lender may, with the written consent of the Agent and,
unless an Event of Default or Default has occurred and is continuing, the
written consent of the Parent (which consent will not be unreasonably withheld
or delayed), assign to one or more other lenders or other entities all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Loans made by it and the
Notes held by it; provided, however, that (1) such assignment is in an amount
which is at least $5,000,000 or a multiple of $1,000,000 in excess thereof (or
the remainder of such Lender's Commitment), (2) each such assignment shall be of
a constant, and not a varying, percentage of
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all of the assigning Lender's rights and obligations under this Agreement, and
(3) the parties to each such assignment shall execute and deliver to the Agent,
for its acceptance, an Assignment and Acceptance, together with any Note subject
to such assignment and such parties shall deliver to the Agent a processing and
recordation fee of $5,000. Upon such execution, delivery and acceptance, from
and after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least three Business Days after the delivery thereof
to the Agent (or such shorter period as shall be agreed to by the Agent and the
parties to such assignment), (A) the assignee thereunder shall become a "Lender"
hereunder and, in addition to the rights and obligations hereunder held by it
immediately prior to such effective date, have the rights and obligations
hereunder that have been assigned to it pursuant to such Assignment and
Acceptance and (B) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto). Any such assignment shall not adversely affect the Borrowers' rights
under this Agreement except that the assigning Lender shall not be responsible
for the obligations assigned.
(b) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto that: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement of any other instrument or document furnished pursuant
hereto, and (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the value, perfection or priority of
the Collateral or the financial condition of any Borrower or any Guarantor or
any of their Subsidiaries or the performance or observance by such Borrower or
such Guarantor or any of their Subsidiaries of any of their obligations under
this Agreement, any other Loan Document or any other instrument or document
furnished pursuant hereto.
(c) The Agent shall maintain at its address referred to in
Section 12.02 hereof a copy of each Assignment and Acceptance delivered to and
accepted by it. Such copies shall be available for inspection by any Borrower or
any Guarantor or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee Lender, together with the Notes subject to
such assignment and the processing and recordation fee, if the Agent consents,
which consent will not be unreasonably withheld, to the proposed Assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit J hereto, (i) accept such Assignment and
Acceptance, and (ii) give prompt notice thereof to the Borrowers. Within three
Business Days after its receipt of such notice, any Borrower or any Guarantor,
at its own expense, shall
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execute and deliver to the Agent in exchange for the surrendered Note a new Note
to the order of such assignee Lender in an aggregate principal amount equal to
the Loans and Revolving Credit Commitment assumed by it pursuant to such
Assignment and Acceptance, and if the assigning Lender has retained any Loans
and Revolving Credit Commitment hereunder, a new Note to the order of the
assigning Lender in an aggregate principal amount equal to the Loans and
Revolving Credit Commitment retained by it hereunder. Such new Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the date of the Agent's
acceptance of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A and/or Exhibit B hereto. Promptly after each
such Assignment and Acceptance becomes effective, the Agent shall prepare and
distribute to each Lender and the Borrowers a revised Schedule 1.01A hereto
which shall replace the prior Schedule 1.01A and become part of this Agreement.
(e) Each Lender shall not sell participations in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Loans made by it and the
Notes held by it).
(f) Nothing contained in this Section 12.08 shall prohibit any
Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
SECTION 12.09. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
SECTION 12.10 Headings. Section headings herein are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
SECTION 12.11. Governing Law. This Agreement, the Notes and the other
Loan Documents shall be governed by, and construed in accordance with, the law
of the State of New York applicable to contracts made and to be performed in the
State of New York without regard to conflicts of law principles. Any legal
action or proceeding with respect to this Agreement or any other Loan Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, each Borrower and each Guarantor hereby irrevocably accepts in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each Borrower and each Guarantor further irrevocably consents
to the service of process out of any of the aforementioned courts and in any
such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to each Borrower and each Guarantor at its
address for notices contained in Section 12.02, such service to become effective
ten (10) days after such mailing. Each Borrower and each Guarantor hereby
irrevocably appoints the Secretary of State
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of the State of New York as its agent for service of process in respect of any
such action or proceeding. Nothing herein shall affect the right of the Agent to
service of process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Borrowers or the Guarantor in any
other jurisdiction. Each Borrower and each Guarantor hereby expressly and
irrevocably waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of venue of any such litigation
brought in any such court referred to above and any claim that any such
litigation has been brought in an inconvenient forum. To the extent that any
Borrower or any Guarantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise) with respect to itself or its property, such Person hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement and the other Loan Documents.
SECTION 12.12. WAIVER OF JURY TRIAL, ETC. EACH BORROWER, EACH
GUARANTOR, THE LENDERS AND THE AGENT HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT, THE NOTES OR OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH
ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. EACH BORROWER AND EACH GUARANTOR CERTIFIES THAT NO OFFICER,
REPRESENTATIVE, AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF
ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS.
EACH BORROWER AND EACH GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT.
SECTION 12.13. Consent by the Agent, Lenders. Except as otherwise
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an
"Action") of the Agent or the Lenders shall be permitted or required pursuant to
any provision hereof or any provision of any other agreement to which any
Borrower is a party and to which the Agent or the Lenders has succeeded thereto,
such Action shall be required to be in writing and may be withheld or denied by
the Agent or any Lender, as the case may be, with or without any reason, and
without being subject to question or challenge on the grounds that such Action
was not taken in good faith.
SECTION 12.14. No Party Deemed Drafter. Each of the Borrowers, the
Guarantors, the Lenders and the Agent agree that no party hereto shall be deemed
to be the
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drafter of this Agreement, and each of the Borrowers, the Guarantors, the
Lenders and the Agent further agree that, in the event this Agreement is ever
construed by a court of law, such court shall not construe this Agreement or any
provision of this Agreement against any party hereto as the drafter of this
Agreement.
SECTION 12.15. Reinstatement; Certain Payments. If claim is ever made
upon the Agent or the Lenders for repayment or recovery of any amount or amounts
received by the Agent or the Lenders in payment or on account of any of the
Obligations under this Agreement, the Agent or the Lenders shall give prompt
notice of such claim to each other Lender and the Borrowers, and if the Agent or
the Lenders repays all or part of said amount by reason of (i) any judgment,
decree or order of any court or administrative body having jurisdiction over the
Agent or the Lenders or any of their property, or (ii) any good faith settlement
or compromise of any such claim effected by the Agent with any such claimant,
then and in such event each Borrower agrees that (A) any such judgment, decree,
order, settlement or compromise shall be binding upon the Borrowers
notwithstanding the cancellation of any Note or other instrument evidencing the
Obligations under this Agreement or the other Loan Documents or the termination
of this Agreement or the other Loan Documents, and (B) it shall be and remain
liable to the Agent or the Lenders hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by the Agent or the Lenders.
SECTION 12.16. Indemnification. In addition to all of the Borrowers'
other Obligations under this Agreement, each of the Borrowers agree to, jointly
and severally, defend, protect, indemnify and hold harmless the Agent or each
Lender, and all of the respective officers, directors, employees, attorneys,
consultants and agents of the Agent and each Lender (collectively called the
"Indemnitees") from and against any and all losses, damages, liabilities,
obligations, penalties, fees, costs and expenses (including, without limitation,
attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior
to or from and after the Effective Date, whether direct, indirect or
consequential, as a result of or arising from or relating to or in connection
with any of the following: (i) the negotiation, preparation, execution or
performance or enforcement of this Agreement, any Loan Document or of any other
document executed in connection with the transactions contemplated by this
Agreement, (ii) the Lender's furnishing of funds to the Borrowers, including,
without limitation, the management of any such Loans, (iii) any matter relating
to the financing transactions contemplated by this Agreement or by any document
executed in connection with the transactions contemplated by this Agreement, or
(iv) any claim, litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto (collectively, the
"Indemnified Matters"); provided, however, that the Borrowers shall have no
obligation to any Indemnitee hereunder for any Indemnified Matter caused by or
resulting from the gross negligence or willful misconduct of such Indemnitee, as
determined by a final judgment of a court of competent jurisdiction. Such
indemnification for all of the foregoing losses, damages, fees, costs and
expenses of the Indemnitees are chargeable against the Loan Account. To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section 12.16 may be unenforceable because it is violative of any law or
public policy, the Borrowers shall contribute the maximum portion
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which they are permitted to pay and satisfy under applicable law, to the payment
and satisfaction of all Indemnified Matters incurred by the Indemnitees. The
Indemnity shall survive the repayment of the Obligations and the discharge of
the Liens granted under the Loan Documents.
SECTION 12.17. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrowers, the Agent and the Lenders and
when the conditions precedent set forth in Section 5.01 hereof have been
satisfied or waived by the Agent, and thereafter shall be binding upon and inure
to the benefit of each Borrower, the Agent and each Lender, and their respective
successors and assigns, except that the Borrowers shall not have the right to
assign their rights hereunder or any interest herein without the prior written
consent of all of the Lenders, and the assignment by any Lender shall be
governed by Section 12.08 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
CHIC BY H.I.S., INC.
By:
----------------------
Title:
--------------------
XXXXX X. XXXXXX COMPANY, INC.
By:
----------------------
Title:
--------------------
GUARANTORS
----------
CHIC HOLDINGS CORP.
By:
----------------------
Title:
--------------------
CHIC BY H.I.S. LICENSING CORPORATION
By:
----------------------
Title:
--------------------
H.I.S. LIMITED
By:
----------------------
Title:
--------------------
H.I.S. KENTUCKY, INC.
By:
----------------------
Title:
--------------------
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AGENT AND LENDER
THE CIT GROUP/COMMERCIAL SERVICES,
INC.
By:
----------------------
Title:
--------------------
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Schedule 1.01A
Lenders and Lenders' Commitments
Revolving Term Loan
Lender Credit Commitment Commitment Percentage
The CIT Group/Commercial $40,000,000 $20,000,000 100%
Services, Inc.
(i)
