EXHIBIT 10.1.16
Second Amended and Restated
Loan and Security Agreement
by and between
CONGRESS FINANCIAL CORPORATION
as Lender
and
CHARMING SHOPPES, INC.
CHARMING SHOPPES OF DELAWARE, INC.
CSI INDUSTRIES, INC.
and
FB APPAREL, INC.
as Borrowers
and
CHARMING SHOPPES OF DELAWARE, INC.
as Borrowers' Agent
Dated: February 28, 199
TABLE OF CONTENTS
SECTION 1. DEFINITIONS 2
SECTION 2. CREDIT FACILITIES 16
2.1 Revolving Loans 16
2.2 Letter of Credit Accommodations 17
2.3 Availability Reserves 20
2.4 Acknowledgement of Existing Obligations 20
SECTION 3. INTEREST AND FEES 21
3.1 Interest 21
3.2 Closing Fee 23
3.3 Servicing Fee 23
3.4 Unused Line Fee 23
3.5 Changes in Laws and Increased Costs of Loans 23
3.6 Compensation Adjustment 24
SECTION 4. CONDITIONS PRECEDENT 26
4.1 Conditions Precedent to Initial Loans and Letter
of Credit Accommodations 26
4.2 Conditions Precedent to All Loans and Letter of
Credit Accommodations 28
SECTION 5. GRANT OF SECURITY INTEREST 29
5.1 Collateral 29
5.2 Excluded Collateral 30
SECTION 6. COLLECTION AND ADMINISTRATION 30
6.1 Borrowers' Loan Accounts 30
6.2 Statements 31
6.3 Collection of Accounts and Proceeds of Sales of
Inventory 31
6.4 Payments 34
6.5 Authorization to Make Loans 35
6.6 Use of Proceeds 35
SECTION 7. COLLATERAL REPORTING AND COVENANTS 36
7.1 Collateral Reporting 36
7.2 Accounts Covenants 37
7.3 Inventory Covenants 39
7.4 Equipment Covenants 41
7.5 Equipment, Real Property and Intellectual Property
License. 41
7.6 Power of Attorney 42
7.7 Right to Cure 43
7.8 Access to Premises 44
SECTION 8. REPRESENTATIONS AND WARRANTIES 44
8.1 Corporate Existence, Power and Authority;
Subsidiaries 44
8.2 Financial Statements; No Material Adverse Change.
45
8.3 Chief Executive Office; Collateral Locations.
45
8.4 Priority of Liens; Title to Properties 45
8.5 Tax Returns 46
8.6 Litigation 46
8.7 Compliance with Other Agreements and Applicable
Laws 47
8.8 Environmental Compliance 47
8.9 Employee Benefits 48
8.10 Accuracy and Completeness of Information. 49
8.11 Interrelated Businesses 49
8.12 Subordinated Notes. 50
8.13 Bank Group and Noteholders. 51
8.14 Credit Card Agreements; Credit Card Receivables.
51
8.15 Inactive/Dissolved Subsidiaries 51
8.16 Survival of Warranties; Cumulative 51
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS 52
9.1 Maintenance of Existence; Subsidiaries 52
9.2 New Collateral Locations 52
9.3 Compliance with Laws, Regulations, Etc 53
9.4 Payment of Taxes and Claims 54
9.5 Insurance 55
9.6 Financial Statements and Other Information 56
9.7 Sale of Assets, Consolidation, Merger,
Dissolution, Etc 57
9.8 Encumbrances 58
9.9 Indebtedness 60
9.10 Loans, Investments, Guarantees, Etc 63
9.11 Dividends and Redemptions 64
9.12 Transactions with Affiliates 65
9.13 Adjusted Net Worth 65
9.14 Compliance with ERISA 65
9.15 Use of Fashion Bug Card 66
9.16 Costs and Expenses 66
9.17 Further Assurances 67
SECTION 10. EVENTS OF DEFAULT AND REMEDIES 67
10.1 Events of Default 67
10.2 Remedies 70
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW 72
11.1 Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver 72
11.2 Waiver of Notices 74
11.3 Amendments and Waivers 74
11.4 Waiver of Counterclaims; Punitive Damages and
Consequential Damages 74
11.5 Indemnification 74
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS 75
12.1 Term 75
12.2 Appointment of Borrowers' Agent 76
12.3 Notices 77
12.4 Partial Invalidity 77
12.5 Successors 77
12.6 Confidentiality 78
12.7 Entire Agreement 79
INDEX TO
EXHIBITS AND SCHEDULES
Omnibus Schedule 2 Eligible
Inventory Locations (Section 1.25)
Omnibus Schedule 1 Subsidiaries (Section 8.1)
Omnibus Schedule 2 Collateral
Locations (Sections 7.3 and 8.3)
Omnibus Schedule 13 Existing
Liens (Sections 8.4 and 9.8)
Omnibus Schedule 16 Tax Returns (Section 8.5)
Omnibus Schedule 8 Litigation (Section 8.6)
Omnibus Schedule 11 Environmental Matters (Section 8.8)
Omnibus Schedule 13 Existing
Liens and Security Interests (Section 9.8)
Omnibus Schedule 12 Existing Indebtedness (Section 9.9)
Omnibus Schedule 14 Existing
Investments and Guarantees
(Sections 9.9 and 9.10)
Omnibus Schedule 1, Excluded Subsidiaries
Subpart 7 (Section 1.34)
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Amended and Restated Loan and Security Agreement
dated February 28, 1997 is entered into by and among
Congress Financial Corporation, a California corporation
("Lender"), (b) Charming Shoppes, Inc., a Pennsylvania
corporation ("Parent"), Charming Shoppes of Delaware, Inc.,
a Pennsylvania corporation ("CS Delaware"), CSI Industries,
Inc., a Delaware corporation ("CSI") and FB Apparel, Inc.,
an Indiana corporation ("FB Apparel"; and, together with
Parent, CS Delaware, CSI and FB Apparel, hereinafter
referred to individually as a "Borrower" and collectively as
"Borrowers") and (c) CS Delaware in its capacity as agent
for itself as a Borrower and for the other Borrowers
("Borrowers' Agent").
W I T N E S E T H:
WHEREAS, Borrowers, together with the other members of the
Apparel Group (as hereinafter defined), operate a chain of retail
stores which sell apparel and certain related businesses; and
WHEREAS, Borrowers, Borrowers' Agent and Lender are parties
to that certain Loan and Security Agreement, dated October 24,
1995, which has been amended and restated in its entirety by the
Amended and Restated Loan and Security Agreement among Lender,
Borrowers and Borrowers' Agent, dated November 30, 1995 (the
"First Restated Loan Agreement"), as amended by Amendment No. 1
to the First Restated Loan Agreement among Lender, Borrowers and
Borrowers' Agent, dated July 23, 1996 (collectively, the
"Existing Loan Agreement", as hereinafter further defined)
pursuant to which Lender has made loans and provided other
financial accommodations to CS Delaware, CSI and FB Apparel,
which have been fully guaranteed by Parent; and
WHEREAS, Lender has entered into the Trade Financing
Agreement (as hereinafter defined) with the Additional L/C
Debtors (as hereinafter defined) pursuant to which Lender will,
upon certain terms and conditions, provide Additional L/C
Accommodations (as hereinafter defined) to each of the Additional
L/C Debtors, with the Additional L/C Debt (as hereinafter
defined) relating thereto being guaranteed by the Borrowers, the
Obligors (as hereinafter defined) and each of the other
Additional L/C Debtors and secured by the Collateral (as
hereinafter defined), the other property which is security for
the Obligations (as hereinafter defined) and the Additional L/C
Collateral (as hereinafter defined); and
WHEREAS, Borrowers have requested that Lender continue to
make loans and provide other financial accommodations to CS
Delaware, CSI and FB Apparel, and to provide the Additional L/C
Accommodations to the Additional L/C Debtors and, upon and after
the date hereof, (a) amend and restate the Existing Loan
Agreement in its entirety as provided in this Agreement, and (b)
amend certain of the other Financing Agreements (as defined in
the First Restated Loan Ageement) as hereinafter provided in
connection therewith; and
WHEREAS, Lender is willing to (a) continue to make such
loans and provide such other financial accommodations, (b) amend
and restate the Existing Loan Agreement and (c) amend the other
Financing Agreements, subject to the terms and conditions set
forth herein and in the other Financing Agreements (as
hereinafter defined); and
NOW, THEREFORE, in consideration of the foregoing, the
mutual conditions and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree, effective
as of the date hereof, that the Existing Loan Agreement is hereby
amended and restated in its entirety as provided below and
further agree, effective as of the date hereof, as follows (the
covenants, warranties and agreements of Borrowers, except as
otherwise expressly set forth herein, being joint and several):
SECTION 1 DEFINITIONS
All terms used herein which are defined in Article 1 or
Article 9 of the Uniform Commercial Code shall have the meanings
given therein unless otherwise defined in this Agreement. All
references to the plural herein shall also mean the singular and
to the singular shall also mean the plural. All references to
Borrowers shall, unless the context otherwise expressly provides,
mean any one Borrower and all Borrowers, individually and
collectively, jointly and severally. All references to
Borrowers, Borrowers' Agent, Parent, Additional L/C Debtors,
Obligors and Lender pursuant to the definitions set forth in the
recitals hereto, or to any other person herein, shall include
their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar
import when used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision of this Agreement
and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
The words "this Agreement" and words of similar import when used
in this Agreement shall mean, unless the context otherwise
requires, the Existing Loan Agreement as amended and restated
hereby. An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance
with Section 11.3. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meanings
customarily given to such term in accordance with GAAP. For
purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all of each Borrower's existing
and hereafter acquired accounts and other rights to payment
Arising from the sale, lease or other disposition of Inventory
or other Collateral or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not
earned by performance.
1.2 Additional L/C Accommodations" shall mean the letters
of credit, guarantees and other financial accommodations provided
by Lender to the Additional L/C Debtors pursuant to the Trade
Financing Agreement.
1.3 "Additional L/C Collateral" shall mean the "Collateral"
as defined on the date hereof in the Trade Financing Agreement.
1.4 "Additional L/C Debt" shall mean, collectively, the
reimbursement obligations with respect to the Additional L/C
Accommodations and other indebtedness owed by the Additional L/C
Debtors to Lender pursuant to the Trade Financing Agreement.
1.5 "Additional L/C Debtors" shall mean, individually and
collectively, Sentani Trading Limited, Trimoland Limited, Huambo
Limited, Loyal Paradise Limited and CS Insurance Ltd.
1.5.0.1 "Adjusted Cash Flow" shall mean as to any
applicable period, the consolidated net income of Parent and
its consolidated Subsidiaries for such period, after all expenses
and other proper charges, but before any deduction for income
tax expense and extraordinary losses or any addition for
income tax benefits and extraordinary gains during such
period, determined in accordance with GAAP, plus the sum of
all depreciation, amortization and other noncash charges (to
the extent deducted in determining net income) for such
period, minus the sum of all cash payments of income taxes
by Parent and its consolidated Subsidiaries during such
period, the aggregate amount of all capital expenditures by
Parent or its consolidated Subsidiaries during such period, to
the extent not financed by the incurrence of indebtedness by
Parent or any consolidated Subsidiary and all earnings during
such period attributable to equity interests in any Person
that is not a consolidated Subsidiary unless actually received
by Parent or any consolidated Subsidiary.
1.5.0.1.0.1 "Adjusted Eurodollar Rate" shall mean, with
respect to each Interest Period for any Eurodollar Rate Loan, the
rate per annum (rounded upwards, if necessary, to the next
one-sixteenth (1/16) of one (1%) percent) determined by
dividing the Eurodollar Rate for such Interest Period by a
percentage equal to: (i) one (1) minus (ii) the Reserve
Percentage. For purposes hereof, "Reserve Percentage" shall
mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority
for determining the reserve requirement which is or would be
applicable to deposits of United States dollars in a non-
United States or an international banking office of
Reference Bank used to fund a Eurodollar Rate Loan or any
Eurodollar Rate Loan made with the proceeds of such deposit,
whether or not the Reference Bank actually holds or has made
any such deposits or loans. The Adjusted Eurodollar Rate
shall be adjusted on and as of the effective day of any
change in the Reserve Percentage.
1.5.1 "Adjusted Net Worth" shall mean as to any Person,
at any time, in accordance with GAAP (except as otherwise
specifically set forth below), on a consolidated basis for such
Person and its subsidiaries (if any), the amount equal to: the
difference between: the aggregate net book value of all assets
of such Person and its subsidiaries, calculating the book value
of inventory for this purpose on a first-in-first-out basis at
the lower of cost or market as determined by the retail method
(average cost basis), after deducting from such book values all
appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and
amortization) and the aggregate amount of the indebtedness and
other liabilities of such Person and its subsidiaries (including
tax and other proper accruals) plus indebtedness of such Person
and its subsidiaries which is subordinated in right of payment to
the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.6 "Apparel Group" shall mean, collectively, Borrowers and
US Subsidiaries which are Obligors.
1.6.1 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time
establish and revise in good faith reducing the amount of
Revolving Loans and Letter of Credit Accommodations which would
otherwise be available to Borrowers or (with respect to
Additional L/C Accommodations) to Additional L/C Debtors under
the lending formula(s) provided for herein: to reflect events,
conditions, contingencies or risks which, as determined by Lender
in good faith, do or may affect either the Collateral, the
Additional L/C Collateral or any other property which is security
for the Obligations or its value, the assets, business or
prospects of any Borrower, or any other Obligor or the security
interests and other rights of Lender in the Collateral or any
other property which is security for the Obligations (including
the enforceability, perfection and priority thereof) or to
reflect Lender's good faith belief that any collateral report or
financial information furnished by or on behalf of any Borrower
or any Obligor or any additional L/C Debtor to Lender is or may
have been incomplete, inaccurate or misleading in any material
respect or in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of
Default.
1.6.1.1 "Blocked Account Conditions" shall mean the
occurrence of any of the following events: an Event of Default
or a condition or event which, with notice or the passage of time
or both, would constitute an Event of Default exists and is
continuing, or Borrowers have an average of
$5,000,000 or more of Loans outstanding for five (5) consecutive
days, or the aggregate amount of Excess Availability plus any of
Borrower's and any Subsidiary's unrestricted Cash Equivalents
(including, without limitation, cash on deposit) and long term
publicly traded investments is less than the higher of
$25,000,000 or an amount equal to one hundred and fifty
(150%) percent of all outstanding Letter of Credit
Accommodations.
1.7 "Blocked Accounts" shall have the meaning set forth in
Section 6.3(a) hereof.
1.8 "Business Day" shall mean (a) for the Prime Rate Loans,
any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the
laws of the State of New York or the Commonwealth of
Pennsylvania, and a day on which the Reference Bank and Lender
are open for the transaction of business, and (b) for all
Eurodollar Rate Loans, any such day as described in (a) above in
this definition of Business Day, excluding any day on which banks
are closed for dealings in dollar deposits in the London
interbank market or other applicable Eurodollar Rate market.
1.8.1 "Cash Equivalents" shall mean, individually and
collectively, cash, securities with maturities of one year or
less from the date of acquisition thereof issued or fully
guaranteed or insured by the United States Government or any
agency thereof, certificates of deposit and eurodollar time
deposits with maturities of one year or less from the date of
acquisition thereof and overnight bank deposits with any
commercial bank having capital and surplus in excess of
$500,000,000, repurchase obligations of any commercial bank
satisfying the requirements of clause (b) of this definition,
having a term of not more than 30 days with respect to securities
issued or fully guaranteed or insured by the United States
Government, commercial paper of a domestic issuer rated at least
A-2 by Standard and Poor's Rating Group ("S&P") or P-2 by Xxxxx'x
Investors Service, Inc. ("Moody's""), securities with maturities
of one year or less from the date of acquisition thereof issued
or fully guaranteed by any state, commonwealth or territory of
the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any
foreign government, the securities of which state, commonwealth,
territory, political subdivision, taxing authority or foreign
government (as the case may be) are rated at least A by S&P or A
by Moody's, securities with maturities of one year or less from
the date of acquisition thereof backed by standby letters of
credit issued by any commercial bank
satisfying the requirements of clause (b) of this definition or
shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a)
through (f) of this definition.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as
the same now exists or may from time to time hereafter be
amended, modified, recodified or supplemented, together with all
rules, regulations and interpretations thereunder or related
thereto.
1.10 "Collateral" shall have the meaning set forth in
Section 5 hereof.
1.11 "Concentration Accounts" shall mean, individually and
collectively, the concentration and cash management deposit
account maintained by CS Delaware at CoreStates Bank, N.A., which
presently bears account number 1415304342, or at a bank used by
Borrowers for such purpose(s) after compliance with the next-to-
the-last sentence of Section 6.3(a).
1.12 "Credit Card Agreements" shall mean all agreements now
or hereafter entered into by Parent or a Subsidiary with any
Credit Card Issuer or Credit Card Processor, relating to Credit
Card Receivables, as the same may now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or
replaced.
1.13 "Credit Card Issuer" shall mean any person (including,
without limitation, the Financing Subsidiaries) who issues or
whose members issue credit cards used by customers of the Retail
Store Subsidiaries to purchase goods, including, without
limitation, MasterCard or VISA bank credit or debit cards or
other bank credit or debit cards, and American Express, Discover,
Diners Club, Xxxxx Xxxxxxx, the Fashion Bug Card and other non-
bank credit or debit cards.
1.14 "Credit Card Processor" shall mean any servicing or
processing agent or any factor or financial intermediary who
facilitates, services, processes or manages the credit
authorization, billing transfer and/or payment from a Credit Card
Issuer or Credit Card Processor and other procedures with respect
to any sales transactions of the Retail Stores involving credit
card or debit card purchases by customers using credit cards or
debit cards issued by any Credit Card Issuer.
1.15 "Credit Card Receivables" shall mean all existing and
hereafter arising accounts consisting of the present and future
rights of Parent or any Subsidiary of Parent (including, without
limitation, Borrowers and the Retail Store Subsidiaries, but
excluding the Financing Subsidiaries) to payment by Credit Card
Issuers or Credit Card Processors (which may include the
Financing Subsidiaries) for merchandise sold and delivered to
customers of the Retail Stores who have purchased such goods
using a credit card or a debit card issued by a Credit Card
Issuer.
1.15.1 "Eligible Inventory" shall mean Inventory of each
Borrower and of each Retail Store Subsidiary, consisting of
finished goods held for resale in the ordinary course of the
business of such Borrower or such Retail Store Subsidiary, which
are acceptable to Lender based on the criteria set forth below
and are located only at the premises set forth on Part A to
Omnibus Schedule 2 hereto; provided, that, with respect to any
such premises of any of Borrowers not owned by such Borrower,
Lender shall have received an agreement in writing from the
person in possession of such Inventory and/or the owner or
operator of such premises (including, without limitation, any
other Borrower) in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the
Inventory, waiving security interests and claims by such person
against the Inventory and permitting Lender access to, and the
right to remain on, the premises so as to exercise Lender's
rights and remedies and otherwise deal with the Collateral. In
general, Eligible Inventory shall not include raw materials for
such finished goods, work-in-process; components which are not
part of finished goods; spare parts for equipment; packaging
and shipping materials; supplies used or consumed in such
Borrower's or such Retail Store Subsidiary's business; Inventory
in transit to Borrowers or any Retail Store Subsidiary or at
premises other than those set forth on Omnibus Schedule 1 hereto
(except Inventory in transit (i) to a warehouse location of
Borrowers listed on Omnibus Schedule 2 hereto, which Inventory is
located in the United States, has cleared United States customs
and with respect to which all United States import duties and
foreign and domestic freight charges has been paid, (ii) to the
United States for which the foreign vendor thereof has been paid
the entire purchase price therefor and which is the subject of an
ocean xxxx of
lading in the possession of a customs broker, as to
which there has been compliance with Section 4.1(g) hereof, and
(iii) to any Retail Store Subsidiary from a warehouse location of
Borrowers); Inventory subject to a security interest or lien in
favor of any person other than Lender except those specifically
permitted in this Agreement; xxxx and hold goods;
unserviceable, obsolete or slow moving Inventory; Inventory
which is not subject to the first priority, valid and perfected
security interest of Lender; returned, damaged and/or defective
Inventory; Inventory held for return to vendors; Inventory
returned by customers and not held for resale; Inventory
purchased or sold on consignment; and Inventory consisting of
samples. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good
faith. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral and security for the
Obligations.
1.16 "Environmental Laws" shall mean all federal, state,
district, local and foreign laws, rules, regulations, ordinances,
and consent decrees relating to health, safety, hazardous
substances, pollution and environmental matters, as now or at any
time hereafter in effect, applicable to any Borrower's business
and facilities (whether or not owned by it), including laws
relating to emissions, discharges, releases or threatened
releases of pollutants, contamination, chemicals, or hazardous,
toxic or dangerous substances, materials or wastes into the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata) or
otherwise relating to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, or hazardous,
toxic or dangerous substances, materials or wastes.
1.17 "Equipment" shall mean all of each Borrower's and
Retail Store Subsidiary's now owned and hereafter acquired
equipment, machinery, computers and computer hardware and
software (whether owned or licensed), vehicles, tools, furniture,
fixtures, all attachments, accessions and property now or
hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
1.18 "Equipment, Real Property and Intellectual Property
License" shall have the meaning ascribed thereto in Section 7.5
hereof.
1.19 "ERISA" shall mean the United States Employee
Retirement Income Security Act of 1974, as the same now exists or
may hereafter from time to time
be amended, modified, recodified or supplemented, together with
all rules, regulations and interpretations thereunder or related
thereto.
1.20 "ERISA Affiliate" shall mean any person required to be
aggregated with Parent or any of its Subsidiaries under Sections
414(b) or 414(c) of the Code.
1.21 "Eurodollar Rate" shall mean with respect to the
Interest Period for a Eurodollar Rate Loan, the interest rate per
annum equal to the arithmetic average of the rates of interest
per annum (rounded upwards, if necessary, to the next one-
sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank
market (or other Eurodollar Rate market selected by Borrowers'
Agent and approved by Lender) on or about 9:00 a.m. (New York
time) two (2) Business Days prior to the commencement of such
Interest Period in amounts substantially equal to the principal
amount of the Eurodollar Rate Loans requested by and available to
Borrowers in accordance with this Agreement, with a maturity of
comparable duration to the Interest Period selected by Borrowers'
Agent.
1.22 "Eurodollar Rate Loans" shall mean any Loans or portion
thereof on which interest is payable based on the Adjusted
Eurodollar Rate in accordance with the terms hereof.
1.23 "Event of Default" shall mean the occurrence or
existence of any event or condition described in Section 10.1
hereof.
1.23.1 "Excess Availability" shall mean the amount, as
determined by Lender, calculated at any time, equal to: the
amount of the Revolving Loans available to Borrowers as of such
time based on the applicable lending formulas described in
Section 2.1(a)(i) hereof, as determined by Lender, and subject to
the Availability Reserves from time to time established by Lender
hereunder, minus the sum of: (i) the amount of all then
outstanding and unpaid Obligations, plus (ii) the aggregate
amount of all then outstanding and unpaid trade payables for
merchandise owed to the United States and Canadian vendors
thereof by Borrowers and/or any other US Subsidiary which are
sixty (60) days or more past due as of such time and which are
not disputed in good faith.
1.24 Excluded Collateral" shall have the meaning set forth
in Section 5.2 hereof.
1.25 "Excluded Collections" shall have the meaning set forth
in Section 5.2(b)(ii) hereof.
1.26 "Excluded Subsidiaries shall mean each of the Financing
Subsidiaries, the Inactive/Dissolved Subsidiaries and each of the
other Subsidiaries described on Omnibus Schedule 1, Subpart (7)
hereto.
1.27 "Existing Loan Agreement" shall mean, collectively,
the Loan and Security Agreement, dated October 24, 1995, among
(a) Lender, (b) CS Delaware, CSI and FB Apparel, (c) CS Delaware,
as agent, and (d) Parent, as amended and restated in its entirety
by the Amended and Restated Loan and Security Agreement among
Lender, Borrowers and Borrowers' Agent, dated November 30, 1995,
(the "First Restated Loan Agreement"), as amended by Amendment
No. 1 to the First Restated Loan Agreement among Lender,
Borrowers and Borrowers' Agent, dated July 23, 1996.
1.28 "Fashion Bug Card" shall mean the private label credit
card or private label credit cards issued by the Financing
Subsidiaries (or any subsequent Credit Card Issuer replacing the
Financing Subsidiaries with respect to such private label credit
card or private label credit cards as to which there has been
compliance with Sections 4.1(h) and 9.15 hereof) to customers or
prospective customers of the Retail Store Subsidiaries.
1.29 "FB Distro" shall mean FB Distro, Inc., an Indiana
corporation.
1.30 "Financing Agreements" shall mean, collectively, this
Agreement and all notes, guarantees, security agreements and
other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by any Borrower or any
Obligor or the Additional L/C Debtors in connection with this
Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.31 "Financing Subsidiaries" shall mean, individually and
collectively, Fashion Service Corp., Fashion SPC, Inc. and Spirit
of America National Bank and any other Subsidiary of any of them
engaged in financing receivables owed to any of them by customers
of the Retail Store Subsidiaries who have purchased merchandise
using the Fashion Bug Card.
1.32 "First Restated Loan Agreement" shall have the meaning
ascribed thereto in Section 1.36 above.
1.33 "GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from time
to time as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Boards which
are applicable to the circumstances as of the date of
determination consistently applied, except that, for purposes of
Sections 1.6 and 9.13 hereof, GAAP shall be determined on the
basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited
financial statements of Parent delivered to Lender prior to the
date hereof.
1.34 "Xxxxxx Xxxxxxxx Valuation Review" shall mean the
Inventory Valuation and Limited Review, dated September 1995,
prepared by Xxxxxx Xxxxxxxx Partners, Inc. with respect to and
appraising the Eligible Inventory of CSI, CS Delaware, FB Apparel
and the Retail Store Subsidiaries.
1.35 "Hazardous Materials" shall mean any hazardous, toxic
or dangerous substances, materials and wastes, including, without
limitation, hydrocarbons (including naturally occurring or man-
made petroleum and hydrocarbons), flammable explosives, asbestos,
urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and
any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or
any other similar substances, materials, or wastes and including
any other substances, materials or wastes that are or become
regulated under any Environmental Law (including, without
limitation any that are or become classified as hazardous or
toxic under any Environmental Law).
1.36 "Inactive/Dissolved Subsidiaries" shall mean,
individually and collectively, the Retail Store Subsidiaries that
are not presently operating a Retail Store and which have no
material assets, all as more particularly described on Omnibus
Schedule 1, Subpart (3) hereto, Sentani Trading (Macau) Limited,
Charming F.S. Company, Inc., CSBC, Inc., CSI-Honduras, Inc.,
Diversified Fashions, Inc., Executive Flights, Inc., Fashion
Acceptance Corp., Fashion Bug of Pelham, Inc., Fashion Bug Plus
Promotions, Inc., X.X. Xxxxxx Co., J.P.A. Clothing & Company,
J.P.A. Service Company, SourceNet, Inc., Specialty Fixtures,
Inc., a Delaware corporation, Specialty Fixtures, Inc., a
Pennsylvania corporation and X.X. Distributors, Inc.
1.36.1 "Intellectual Property" shall mean all of any
Person's now owned and hereafter acquired common law and
statutory trademarks, service marks, trade names, trademark and
service xxxx registrations, applications for trademark or service
xxxx registrations, corporate names, company names, business
names, fictitious business names, trade styles, logos, other
source or business identifiers, copyrights, designs and all
registrations and recordings thereof, including, without
limitation, registrations, recordings and applications in the
United States Patent and Trademark Office, United States Register
of Copyrights, or in any similar office or agency of the United
States, any state thereof, or any county or any political
subdivision thereof, together with all goodwill associated
therewith, United States and foreign patents and patent
applications, utility models, industrial models, designs, know-
how, blue prints, drawings and all other forms of industrial
intellectual property, all grants issued by or applications
pending in the United States Patent and Trademark Office or in
any other country or political subdivision thereof, all
extensions, reissues, continuations, continuations-in-part, and
divisions thereof, and all proceeds of the foregoing (including,
without limitation, license royalties and proceeds of
infringement suits).
1.37 "Interest Period" shall mean for any Eurodollar Rate
Loan, a period of approximately one (1), two (2), or three (3)
months duration as Borrowers' Agent may elect, the exact duration
to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; provided, that, Borrowers'
Agent may not elect an Interest Period which will end after the
last day of the then-current term of this Agreement.
1.38 "Interest Rate" shall mean, as to Prime Rate Loans, a
rate of three-quarters of one percent (3/4%) percent per annum in
excess of the Prime Rate and, as to Eurodollar Rate Loans, a rate
of three and three-eighths (3-3/8%)
percent per annum in excess of the Adjusted Eurodollar Rate
(based on the Eurodollar Rate applicable for the Interest Period
selected by Borrowers' Agent as in effect three (3) Business Days
after the date of receipt by Lender of the request of Borrowers'
Agent for such Eurodollar Rate Loans in accordance with the terms
hereof, whether such rate is higher or lower than any rate
previously quoted to Borrowers); provided, that, the Interest
Rate shall mean the rate of two and three-quarters (2-3/4%)
percent per annum in excess of the Prime Rate as to Prime Rate
Loans and the rate of five and three-eighths (5-3/8%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar
Rate Loans, at Lender's option, without notice, (a) for the
period on and after the date of termination or non-renewal
hereof, or the date of the occurrence of any Event of Default,
and for so long as such Event of Default or period on or after
the date of termination or non-renewal hereof is continuing as
determined by Lender and until such time as all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment
against Borrowers) and (b) on the Revolving Loans at any time
outstanding in excess of the amounts available to Borrowers under
Section 2 (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before
or after an Event of Default). Each rate referred to in this
Section 1.46 is subject to a one time reduction as set forth in
Section 3.1(e) hereof.
1.39 "Inventory" shall mean all of each Borrower's and each
Retail Store Subsidiary's now owned and hereafter existing or
acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.39.1 "Letter of Credit Accommodations" shall mean the
letters of credit, merchandise purchase or other guaranties,
including, without limitation, the Additional L/C Accommodations,
which are from time to time issued or opened by Lender for the
account of any of Borrowers or any Obligor or any Additional L/C
Debtor or with respect to which Lender has agreed to indemnify
the issuer or guaranteed to the issuer the performance by any of
Borrowers or any Obligor or any Additional L/C Debtor of its
obligations to such issuer.
1.40 "Loans" shall mean the Revolving Loans.
1.41 "Material Adverse Retail Store Event" means a condition
or occurrence or event as to any number of the Retail Store
Subsidiaries which in
Lender's reasonable judgment adversely affects the Collateral or
other property which is security for the Obligations or the
consolidated assets, business or operations of the Retail Store
Subsidiaries or the Apparel Group, taken as a whole, in any
material respect.
1.42 "Maximum Credit" shall mean the amount of $150,000,000.
1.43 "Obligations" shall mean any and all Revolving Loans,
all Letter of Credit Accommodations and all other obligations,
liabilities and indebtedness of every kind, nature and
description owing by any or all of Borrowers, Retail Store
Subsidiaries, other Obligors or Additional L/C Debtors to Lender
(but not owed solely to any affiliate of the original Lender),
including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under this Agreement or
otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term
of this Agreement or after the commencement of any case with
respect to any or all of Borrowers, any Retail Store Subsidiary
or other Obligor or Additional L/C Debtor under the United States
Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would
accrue and become due but for the commencement of such case),
whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by
Lender.
1.44 "Obligor" shall mean any guarantor, endorser, acceptor,
surety or other person liable on or with respect to the
Obligations or who is the owner of any property which is security
for the Obligations, including, without limitation, each of the
Retail Store Subsidiaries, C.S.A.C., Inc., C.S.F., Inc.,
C.S.I.C., Inc., FB Clothing, Inc., Charm-Fin Stores, Inc.,
Fashion Bug of California, Inc. and International Apparel, Inc.,
but not including any of Borrowers, the Additional L/C Debtors or
the Excluded Subsidiaries.
1.45 "Obligor Collateral" shall mean, as to each Obligor,
all of its property pledged to Lender and further described in
the general security agreement executed and delivered by each
Obligor in favor of Lender.
1.46 "Participant" shall mean any person which at any time
participates with Lender in respect of the Loans, the Letter of
Credit Accommodations or other Obligations or any portion
thereof.
1.47 "Payment Account" shall have the meaning set forth in
Section 6.3 hereof.
1.48 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without
limitation, any corporation which elects subchapter S status
under the Internal Revenue Code of 1986, as amended), business
trust, unincorporated association, joint stock corporation,
limited liability company, trust, joint venture or other entity
or any government or any agency or instrumentality or political
subdivision thereof.
1.49 "Prime Rate" shall mean the rate from time to time
publicly announced by CoreStates Bank, N.A., or its successors,
at its office in Philadelphia, Pennsylvania, as its prime rate,
whether or not such announced rate is the best rate available at
such bank.
1.50 "Prime Rate Loans" shall mean any Loans or portion
thereof on which interest is payable based on the Prime Rate in
accordance with the terms thereof.
1.51 "Records" shall mean all of each Borrower's and each
Obligor's present and future books of account of every kind or
nature, purchase and sale agreements, invoices, ledger cards,
bills of lading and other shipping evidence or documents of
title, statements, correspondence, memoranda, credit files and
other data relating to the Collateral or other property which is
security for the Obligations or any account debtor, together with
the tapes, disks, diskettes and other data and software storage
media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of such Borrower or
Obligor with respect to the foregoing maintained with or by any
other person).
1.52 "Reference Bank" shall mean CoreStates Bank, N.A., or
such other bank as Lender may from time to time designate.
1.53 "Retail Sales Price" shall mean the current ticketed
sales price in the Retail Stores, net of markdowns from the
original retail sales price with respect thereto, for the types,
categories and styles of inventory included in the Eligible
Inventory of Borrowers and the Retail Store Subsidiaries.
1.53.1 "Retail Store Equipment" shall mean Equipment owned
by a Retail Store Subsidiary and Equipment located in or used in
Retail Stores or acquired for purposes of location in or use in
any Retail Store; but "Retail Store Equipment" shall not include
Equipment leased to Borrowers or an Obligor and owned by a third
party, which is not a Subsidiary, for use by or located in the
premises of a Retail Store Subsidiary.
1.54 "Retail Stores" shall mean the retail stores which are
now or hereafter operated by US Subsidiaries of Parent and which
sell Inventory purchased from Borrowers.
1.55 "Retail Store Subsidiary" shall mean a US Subsidiary of
Parent which now or hereafter owns a Retail Store or which has
owned a Retail Store in the past or which is now or hereafter
organized to operate a Retail Store in the future other than such
a US Subsidiary described on Omnibus Schedule 1, Subpart (3)
hereto.
1.56 "Revolving Loans" shall mean the loans now or hereafter
made by Lender to or for the benefit of Borrowers on a revolving
basis (involving advances, repayments and readvances) as set
forth in Section 2.1 hereof and payments made by Lender to any
issuer of Letter of Credit Accommodations or to the beneficiary
of any Letter of Credit Accommodations opened by Lender pursuant
to Section 2.2.
1.57 "Subordinated Note Indenture" shall mean the Indenture,
dated as of the date of issuance of the Subordinated Notes,
between Parent and Trustee with respect to the Subordinated
Notes, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.58 "Subordinated Note Agreements" shall mean,
individually and collectively, the Subordinated Notes, the
Subordinated Note Indenture and all other agreements, documents
and instruments now or at any time hereafter executed and/or
delivered by Parent or any other Borrower or any other person in
connection with the issuance of the Subordinated Notes, as the
same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.59 "Subordinated Notes" shall mean the unsecured 7.5%
Convertible Subordinated Notes due 2006 issued by Parent pursuant
to the Subordinated Note Indenture in the aggregate principal
amount of up to $138,000,000, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.60 "Subsidiary" shall mean any corporation of which more
than fifty (50%) percent of the outstanding securities of any
class or classes thereof, as to which the holders thereof are
ordinarily, in the absence of contingencies, entitled to elect a
majority of the directors (or Persons performing similar
functions), of such corporation, is now or hereafter directly or
indirectly (through one or more intermediaries), owned by Parent
or any of Borrowers and/or one or more of their Subsidiaries.
1.61 "Trade Financing Agreement" shall mean, individually
and collectively, (a) the Amended and Restated Trade Financing
Agreement [Security Agreement] between the Additional L/C Debtors
(other than CS Insurance Limited) and Lender, dated as of the
date hereof, (b) the Amended and Restated Letter of Credit
Reimbursement Agreement between CS Insurance Ltd. and Lender,
dated of even date, and (c) all other agreements, documents and
instruments executed in connection with the foregoing as all of
the foregoing now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.62 "Trustee" shall mean First Union National Bank and its
successors and assigns, and any replacement trustee permitted
pursuant to the terms and conditions of the Subordinated Note
Indenture.
1.63 "US Subsidiary" means a Subsidiary which is a
corporation organized under the laws of the United States of
America or of any state within the United States of America,
except that such term shall not include the Excluded
Subsidiaries.
1.64 "Value" shall mean, with respect to Inventory, the
lower of (a) cost as determined by the retail method (average
cost basis) in accordance with GAAP or (b) market value.
SECTION 2 CREDIT FACILITIES
2.1 Revolving Loans.
2.1.1 Subject to, and upon the terms and conditions
contained herein, Lender agrees to make Revolving Loans to
Borrowers from time to time in amounts requested by Borrowers'
Agent of up to the amount equal to the sum of:
2.1.1.0.1. the lesser of: fifty (50%) percent multiplied
by the Value of the Eligible Inventory, or twenty-five
(25%) percent of the Retail Sales Price of the Eligible
Inventory, less
2.1.1.1 any Availability Reserves.
2.1.2 For purposes of determining the "cost" of Inventory
hereunder, with respect to any Inventory sold by a Borrower to
any other Borrower or a Retail Store Subsidiary, such term shall
mean the original cost thereof to the Borrower or Subsidiary
which originally purchased such Inventory and shall not include
any xxxx up or profit on such intercompany sale.
2.1.3 Lender may, in its reasonable discretion, from time
to time, upon not less than two (2) days prior notice to
Borrowers' Agent, reduce the lending formula(s) with respect to
Eligible Inventory to the extent that Lender determines that: (A)
the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the liquidation
value of the Eligible Inventory has decreased in any material
respect, or (C) the nature and quality of the Inventory has
deteriorated in any material respect. In determining whether to
reduce the lending formula(s), Lender may consider events,
conditions, contingencies or risks which are also considered in
determining Eligible Inventory or in establishing Availability
Reserves.
2.1.4 Except in Lender's discretion, the aggregate amount
of the Loans and Letter of Credit Accommodations outstanding at
any time shall not exceed the Maximum Credit. In the event that
the outstanding amount of any component of the Loans, or the
aggregate amount of the outstanding Loans and Letter of Credit
Accommodations exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set
forth in Section 2.2(c) or the Maximum Credit, as applicable,
such event shall not limit, waive or otherwise affect any rights
of Lender in that circumstance or on any future occasions and
Borrowers shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire
amount of any such excess(es) for which payment is demanded.
2.2 Letter of Credit Accommodations.
2.2.1 Subject to, and upon the terms and conditions
contained herein, at the request of Borrowers' Agent, Lender
agrees to provide or arrange for Letter of Credit Accommodations
for the account of Borrowers or any Additional L/C Debtor
containing terms and conditions acceptable to Lender and the
issuer thereof. Any payments made by Lender to any issuer
thereof and/or related parties in connection with the Letter of
Credit Accommodations shall constitute additional Revolving Loans
to Borrowers pursuant to this Section 2.
2.2.2 In addition to any charges, fees or expenses charged
by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrowers shall pay to Lender a letter of credit
fee at a rate equal to one and three eighths (1 3/8%) percent per
annum prior to October 1, 1996 and one and one quarter (1 1/4%)
percent per annum on and after October 1, 1996 on the daily
outstanding balance of the Letter of Credit Accommodations for
the immediately preceding
month (or part thereof), payable in arrears as of the first day
of each succeeding month; provided, however, that such letter of
credit fee shall be increased, at Lender's option without notice,
to three and one quarter (3 1/4%) percent per annum for the
period on or after the date of termination or non-renewal of this
Agreement, or the date of occurrence of an Event of Default and
during the continuation thereof. Such letter of credit fee shall
be calculated on the basis of a three hundred sixty (360) day
year and actual days elapsed and the obligation of Borrowers to
pay such fee shall survive the termination or non-renewal of this
Agreement.
2.2.2.1. No Letter of Credit Accommodations shall be
available unless on the date of the proposed issuance of any
Letter of Credit Accommodations, the Revolving Loans available to
Borrowers based on the applicable lending formulas described
in Section 2.1(a) hereof (subject to the Maximum Credit and
any Availability Reserves) are equal to or greater than: if
the proposed Letter of Credit Accommodation is for the purpose
of purchasing Eligible Inventory, the sum of one hundred
(100%) percent of the face amount thereof, minus the lending
formula for Eligible Inventory set forth in Section 2.1(a)(i)
hereof, multiplied by the cost of the Eligible Inventory which
is the subject of such Letter of Credit, plus freight, taxes,
duties and other amounts which Lender estimates must be paid
in connection with such Eligible Inventory upon arrival and
for delivery to one of Borrowers' locations for Eligible
Inventory within the United States of America and if the
proposed Letter of Credit Accommodation is for any other
purpose (including, without limitation, the acquisition of raw
materials) or does not require the presentation thereunder of
a copy of a cargo receipt, xxxx of lading or other transport
document with respect to Eligible Inventory, an amount equal
to one hundred (100%) percent of the face amount thereof and
all other commitments and obligations made or incurred by
Lender with respect thereto. Effective on the issuance of
each Letter of Credit Accommodation, the amount of Revolving
Loans which might otherwise be available to Borrowers shall be
reduced by the applicable amount set forth in Section
2.2(c)(i) or Section 2.2(c)(ii).
2.2.2.1.1. Except in Lender's discretion, the amount of all
outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Lender in
connection therewith, shall not at any time exceed the
Maximum Credit, minus the aggregate amount of the then
outstanding Revolving Loans. At any time an Event of
Default exists or has occurred and is continuing, upon
Lender's request, Borrowers will either furnish cash
collateral to secure the reimbursement obligations to the
issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Lender for the
Letter of
Credit Accommodations, and in either case, the
Revolving Loans otherwise available to Borrowers shall not
be reduced as provided in Section 2.2(c) to the extent of
such cash collateral.
2.2.3 Borrowers shall indemnify and hold Lender harmless
from and against any and all losses, claims, damages,
liabilities, costs and expenses which Lender may suffer or incur
in connection with any Letter of Credit Accommodations and any
documents, drafts or acceptances relating thereto, including, but
not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or
correspondent with respect to any Letter of Credit Accommodation,
except as a result of an intentional breach of contract by Lender
or Lender's own acts or omissions constituting gross negligence
or willful misconduct, as determined pursuant to a final and non-
appealable judgment or order of a court of competent
jurisdiction. Borrowers assume all risks with respect to the
acts or omissions of the drawer under or beneficiary of any
Letter of Credit Accommodation and for such purposes the drawer
or beneficiary shall be deemed the agent of Borrowers. Borrowers
assume all risks for, and agrees to pay, all foreign, Federal,
State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents,
drafts or acceptances thereunder. Borrowers hereby release and
hold Lender harmless from and against any acts, waivers, errors,
delays or omissions, whether caused by Borrowers, by any issuer
or correspondent or otherwise with respect to or relating to any
Letter of Credit Accommodation, except as a result of an
intentional breach of contract by Lender or Lender's own acts or
omissions constituting gross negligence or willful misconduct, as
determined pursuant to a final and non-appealable judgment or
order of a court of competent jurisdiction. The provisions of
this Section 2.2(e) shall survive the payment of Obligations and
the termination or non-renewal of this Agreement.
2.2.3.0.1. Nothing contained herein shall be deemed or
construed to grant Borrowers, any Additional L/C Debtor or
Borrowers' Agent any right or authority to pledge the credit
of Lender in any manner. Lender shall have no liability of
any kind with respect to any Letter of Credit Accommodation
provided by an issuer other than Lender unless Lender has
duly executed and delivered to such issuer the application
or a guarantee or indemnification in writing with respect to
such Letter of Credit Accommodation. Borrowers and
Additional L/C Debtors shall be bound by any interpretation
made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of Borrowers. In
connection with any Letter of Credit
Accommodations, Lender shall have the sole and exclusive right
and authority to, and Borrowers, Additional L/C Debtors and
Borrowers' Agent shall not: at any time an Event of Default
exists or has occurred and is continuing, approve or resolve any
questions of non-compliance of documents, give any
instructions as to acceptance or rejection of any documents
or goods or execute any and all applications for steamship
or airway guaranties, indemnities or delivery orders, and
at any time without the prior written approval of Lender,
grant any extensions of the maturity of, expiration date of,
any drafts, acceptances, letters of credit or documents, and
agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms
or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances
thereunder or any letters of credit included in the
Collateral, except (unless an Event of Default or a
condition or event which, with notice or the passage of time
or both, would constitute an Event of Default has occurred),
Borrowers and Additional L/C Debtors may waive discrepancies
in the presentation of documents required for payment under
any Letter of Credit Accommodations other than for the
required presentation or delivery of a xxxx of lading or
cargo receipt or other transport document with respect to
Eligible Inventory thereunder. Lender may take such actions
either in its own name or in the name of any of Borrowers.
2.2.4 Any rights, remedies, duties or obligations granted
or undertaken by Borrowers to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other
agreement in favor of any issuer or correspondent relating to any
Letter of Credit Accommodation, shall be deemed to have been
granted or undertaken by Borrowers and Additional L/C Debtors to
Lender. Any duties or obligations undertaken by Lender to any
issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement by Lender in favor
of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by
Borrowers to Lender and to apply in all respects to Borrowers.
2.3 Availability Reserves. All Revolving Loans otherwise
available to Borrowers pursuant to the lending formulas and
subject to the Maximum Credit and other applicable limits
hereunder shall be subject to Lender's continuing right to
establish and revise Availability Reserves, including, without
limitation, Availability Reserves for unpaid foreign and domestic
freight charges and unpaid United States customs fees and duties
with respect to imported Inventory.
2.4 Acknowledgement of Existing Obligations. Borrowers
hereby acknowledge, confirm and agree that (a) each of them are
directly obligated to Lender for all Obligations (as such term is
defined in the Existing Loan Agreement), all of which Obligations
are unconditionally owing by Borrowers to Lender without offset,
defense or counterclaim of any kind, nature or description
whatsoever, (b) all of such Obligations are secured by a valid,
enforceable and (unless otherwise specifically consented to in
writing by Lender) perfected security interests in all
"Collateral" (as defined in the Existing Loan Agreement) and all
other property securing such Obligations, (c) the outstanding
amount of the Revolving Loans, Letter of Credit Accommodations
and Obligations (as each of such terms is defined in the Existing
Loan Agreement) shall be and are included in and shall be part
of, respectively, the Revolving Loans, Letter of Credit
Accommodations and Obligations pursuant to this Agreement, and
(d) nothing contained in this Agreement, the transactions in
connection herewith or otherwise shall in any manner be construed
to constitute payment or satisfaction or impair, cancel,
extinguish, terminate or constitute a novation of any Borrower's
or any Obligor's indebtedness, obligations or liabilities to
Lender arising under or evidenced by the existing Loan Agreement
or otherwise or (except as excluded from the description of the
Collateral in Section 5.1 hereof or to the extent included in
Excluded Collateral as described in Section 5.2 hereof), with
respect to the security interests and liens securing such
indebtedness, obligations and liabilities.
SECTION 3 INTEREST AND FEES
3.1 Interest.
3.1.1. Borrowers shall pay to Lender interest on the
outstanding principal amount of the non-contingent Obligations at
the Interest Rate. All interest accruing hereunder on and after
the date of any Event of Default or termination or non-renewal
hereof shall be payable on demand.
3.1.1.1 Borrowers' Agent may from time to time request
that Prime Rate Loans be converted to Eurodollar Rate Loans or
that any existing Eurodollar Rate Loans continue for an
additional Interest Period. Such request from Borrowers' Agent
shall specify the amount of the Prime Rate Loans which will
constitute Eurodollar Rate Loans (subject to the limits set
forth below) and the Interest Period to be applicable to such
Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by
Lender of such a request from Borrowers' Agent, such Prime
Rate Loans shall be converted to Eurodollar Rate Loans or such
Eurodollar Rate Loans shall continue, as the case may be,
provided, that, no Event of Default, or event which with
notice or passage of time or both would constitute an Event of
Default exists or has occurred and is continuing, no party
hereto shall have sent any notice of termination or non-
renewal of this Agreement, Borrowers and Borrowers' Agent
shall have complied with such customary procedures as are
established by Lender and specified by Lender to Borrowers'
Agent from time to time for requests by Borrowers' Agent for
Eurodollar Rate Loans, no more than five (5) Interest Periods
may be in effect at any one time, the aggregate amount of the
Eurodollar Rate Loans must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess
thereof, the maximum amount of the Eurodollar Rate Loans at
any time requested by Borrowers' Agent shall not exceed the
amount equal to eighty (80%) percent of the daily average of
the principal amount of the Revolving Loans and Letter of
Credit Accommodations which it is anticipated will be
outstanding during the applicable Interest Period, in each
case as determined by Lender (but with no obligation of Lender
to make such Revolving Loans and Letter of Credit
Accommodations) and (vii) Lender shall have determined that
the Interest Period or Adjusted Eurodollar Rate is available
to Lender through the Reference Bank and can be readily
determined as of the date of the request for such Eurodollar
Rate Loan by Borrowers' Agent. Any request by Borrowers'
Agent to convert Prime Rate Loans to Eurodollar Rate Loans or
to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary
contained herein, Lender and Reference Bank shall not be
required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions
hereof shall be deemed to apply as if Lender and Reference
Bank had purchased such deposits to fund the Eurodollar Rate
Loans.
3.1.1.1.1. Any Eurodollar Rate Loans shall automatically
convert to Prime Rate Loans upon the last day of the
applicable Interest Period, unless Lender has received and
approved a request to continue such Eurodollar Rate Loan at
least three (3) Business Days prior to such last day in
accordance with the terms hereof. Any Eurodollar Rate Loans
shall, at Lender's option, upon notice by Lender to
Borrowers' Agent, convert to Prime Rate Loans in the event
that an Event of Default or event which with the notice or
passage of time or both would constitute an Event of
Default, shall exist, this Agreement shall terminate or not
be renewed, or the aggregate principal amount of the Prime
Rate Loans which have previously been converted to
Eurodollar Rate Loans or existing Eurodollar Rate Loans
continued, as the case may be, at the beginning of an
Interest Period shall at any time during such Interest
Period
exceed either the aggregate principal amount of the
Loans then outstanding, or the then outstanding principal
amount of the Revolving Loans then available to Borrowers
under Section 2 hereof. Borrowers shall pay to Lender, upon
demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to
compensate Lender, the Reference Bank or any participant
with Lender for any loss (including loss of anticipated
profits), cost or expense incurred by such person, as a
result of the conversion of Eurodollar Rate Loans to Prime
Rate Loans pursuant to any of the foregoing.
3.1.2 Interest shall be payable by Borrowers to Lender
monthly in arrears not later than the first day of each calendar
month and shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed. The interest rate
on non-contingent Obligations (other than Eurodollar Rate Loans)
shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the
month after any change in such Prime Rate is announced based on
the Prime Rate in effect on the last day of the month in which
any such change occurs. In no event shall charges constituting
interest payable by Borrowers to Lender exceed the maximum amount
or the rate permitted under any applicable law or regulation, and
if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or
provision shall be deemed amended to conform thereto.
3.1.3 The Interest Rate shall be automatically reduced, but
not more than once, by one eighth of one (1/8%) percent if (i)
the Adjusted Cash Flow of Parent, for its immediately prior
fiscal year commencing after November 30, 1995, based upon its
annual audited financial statements on a consolidated basis for
such fiscal year received by Lender, is greater than $5,000,000
and (ii) as of the effective date of such reduction, the Excess
Availability is greater than $50,000,000. Such reduction in the
Interest Rate shall become effective upon acceptance of such
financial statements by Lender which shall be deemed to have
occurred automatically on the tenth (10th) Business Day after
receipt of such financial statements by Lender, unless Lender
shall have notified Borrowers' Agent otherwise.
3.2 Closing Fee. Borrowers have paid to Lender as a
closing fee the amount of $1,962,500 which fee has been fully
earned by Lender on the date of the First Restated Loan
Agreement.
3.3 Servicing Fee. Borrowers shall pay to Lender an annual
servicing fee in an amount equal to $100,000 in respect of
Lender's services for each year or part thereof while this
Agreement remains in effect (including the period in which the
First Restated Loan Agreement was in effect) and for so long
thereafter as any of the Obligations are outstanding, which fee
shall be payable in advance on November 30 of each year during
the term of this Agreement, such servicing fee having already
been paid in advance for the period November 30, 1996 through and
including November 29, 1997.
3.4 Unused Line Fee. Borrower shall pay to Lender monthly
an unused line fee equal to a rate equal to three-eighths of one
(3/8%) percent per annum calculated upon the amount by which
$105,000,000 exceeds the average daily principal balance of the
outstanding Revolving Loans and Letter of Credit Accommodations
during the immediately preceding month while this Agreement (or
the First Restated Loan Agreement) is in effect and for so long
thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
3.5 Changes in Laws and Increased Costs of Loans.
3.5.0.1 Notwithstanding anything to the contrary contained
herein, all Eurodollar Rate Loans shall, upon notice by Lender
to Borrowers' Agent, convert to Prime Rate Loans in the event
that any change in applicable law or regulation (or the
interpretation or administration thereof) shall either make
it unlawful for Lender, Reference Bank or any participant to
make or maintain Eurodollar Rate Loans or to comply with the
terms hereof in connection with the Eurodollar Rate Loans, by
an amount deemed by Lender to be material, or shall result in
the increase in the costs to Lender, Reference Bank or any
participant of making or maintaining any Eurodollar Rate Loans
or reduce the amounts received or receivable by Lender in
respect thereof, by an amount deemed by Lender to be material
or the cost to Lender, Reference Bank or any participant of
making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be
material. Borrowers shall pay to Lender, upon demand by
Lender (or Lender may, at its option, charge any loan account
of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss
(including loss of anticipated profits), cost or expense
incurred by such person as a result of the foregoing,
including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or
maintain the Eurodollar Rate Loans or any portion thereof. A
certificate of
Lender setting forth the basis for the determination of such
amount necessary to compensate Lender as aforesaid shall be
delivered to Borrowers' Agent and shall be conclusive, absent
manifest error.
3.5.1 If any payments or prepayments in respect of the
Eurodollar Rate Loans are received by Lender other than on the
last day of the applicable Interest Period (whether pursuant to
acceleration, upon maturity or otherwise), including any payments
pursuant to the application of collections under Section 6.3 or
any other payments made with the proceeds of Collateral,
Borrowers shall pay to Lender upon demand by Lender (or Lender
may, at its option, charge any loan account of Borrowers) any
amounts required to compensate Lender, the Reference Bank or any
participant with Lender for any additional loss, cost or expense
incurred by such person as a result of such prepayment or
payment, including, without limitation, any loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof.
3.6 Compensation Adjustment.
3.6.1 If after the date of this Agreement the introduction
of, or any change in, any law or any governmental rule,
regulation, policy, guideline or directive (whether or not having
the force of law), or any interpretation thereof, or compliance
by Lender or any Participant therewith:
3.6.1.1. subjects Lender to any tax, duty, charge or
withholding on or from payments due from Borrowers (excluding
franchise taxes, imposed upon, and taxation of the overall net
income of, Lender or any Participant), or changes the basis of
taxation of payments, in either case in respect of amounts due
it hereunder, or
3.6.1.2. imposes or increases or deems applicable any
reserve requirement or other reserve, assessment, insurance
charge, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by
Lender or any Participant, or
3.6.1.3. imposes any other condition the result of which
is to increase the cost to Lender or any Participant of
making, funding or maintaining the Revolving Loans or Letter
of Credit Accommodations or reduces any amount receivable by
Lender or any Participant in connection with the Revolving
Loans or Letter of Credit Accommodations, or requires Lender
or any
Participant to make payment calculated by references to
the amount of loans held or interest received by it, by an
amount deemed material by Lender or any Participant, or
3.6.1.4. imposes or increases any capital requirement or
affects the amount of capital required or expected to be
maintained by Lender or any Participant or any corporation
controlling Lender or any Participant, and Lender or any
Participant determines that such imposition or increase in
capital requirements or increase in the amount of capital
expected to be maintained is based upon the existence of this
Agreement or the Revolving Loans or Letter of Credit
Accommodations hereunder, all of which may be determined by
Lender's reasonable allocation of the aggregate of its
impositions or increases in capital required or expected to be
maintained,
and the result of any of the foregoing is to increase the cost to
Lender of making, renewing or maintaining the Revolving Loans or
Letter of Credit Accommodations, or to reduce the rate of return
to Lender or any Participant on the Revolving Loans or Letter of
Credit Accommodations, then upon demand by Lender, Borrowers
shall pay to Lender, and continue to make periodic payments to
Lender or any Participant, such additional amounts as may be
necessary to compensate Lender or any Participant for any such
additional cost incurred or reduced rate of return realized.
3.6.2 A certificate of Lender claiming entitlement to
compensation as set forth above will be conclusive in the absence
of manifest error. Such certificate will set forth the nature of
the occurrence giving rise to such compensation, the additional
amount or amounts to be paid and the compensation, and the method
by which such amounts were determined. In determining any
additional amounts due from Borrowers under this Section 3.6,
Lender shall act reasonably and in good faith and will, to the
extent that the increased costs, reductions, or amounts received
or receivable relate to the Lender's loans or commitments
generally and are not specifically attributable to the Revolving
Loans and commitments hereunder, use averaging and attribution
methods which are reasonable and equitable and which cover all
loans and commitments under this Agreement by such Lender, as the
case may be, whether or not the loan documentation for such other
loans and commitments permits such Lender to receive compensation
costs of the type described in this Section 3.6.
SECTION 4 CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of
Credit Accommodations. Each of the following is a condition
precedent to Lender making the initial Loans hereunder and
providing the Letter of Credit Accommodations pursuant to this
Agreement:
4.1.1 Lender shall have received evidence, in form and
substance satisfactory to Lender, that Lender has valid perfected
and (except to the extent otherwise consented to in writing by
Lender) first priority security interests in and liens upon the
Collateral and any other property which is intended to be
security for the Obligations or the liability of any Obligor in
respect thereof, except for any senior or subordinate security
interests and liens permitted herein or in the other Financing
Agreements;
4.1.2. all requisite corporate actions and proceedings in
connection with this Agreement and the other Financing Agreements
shall be satisfactory in form and substance to Lender, and Lender
shall have received all information and copies of all documents,
including, without limitation, records of requisite corporate
action and proceedings which Lender may have requested in
connection therewith, such documents where requested by Lender or
its counsel to be certified by appropriate corporate officers or
governmental authorities;
4.1.3 no material adverse change shall have occurred in the
consolidated assets, business or prospects of the Apparel Group
since the date of Lender's latest field examination and no change
or event shall have occurred which would impair the ability of
any Borrower or any Obligor to perform its obligations hereunder
or under any of the other Financing Agreements to which it is a
party or of Lender to enforce the Obligations or realize upon the
Collateral, except, with respect to only the Retail Store
Subsidiaries, any such change or event which is not a Material
Adverse Retail Store Event;
4.1.3.1. Lender shall have received, in form and substance
satisfactory to Lender, a guarantee of payment by each
Borrower of the Obligations owed by each of the other
Borrowers, the Obligors and the Additional L/C Debtors, and a
guarantee of payment by all Obligors of all Obligations,
secured by a first and only security interest in favor of
Lender granted by all Obligors, except as otherwise agreed in
writing by Lender, in all of their existing and future assets
constituting Obligor Collateral;
4.1.4. Lender shall have received the original executed
copy of each promissory note and security agreement executed in
favor of any Borrower or any Obligor by a Retail Store Subsidiary
and photocopies of all UCC Financing Statements filed with
respect thereto and, at the request of Lender, any other
documents executed or delivered in connection therewith;
4.1.5 except as otherwise agreed by Lender, Lender shall
have received, in form and substance satisfactory to Lender, all
consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in
and liens upon the Collateral and the other property securing the
Obligations or to effectuate the provisions or purposes of this
Agreement and the other Financing Agreements, including, without
limitation, acknowledgements by lessors, mortgagees,
warehousemen, customs brokers, freight forwarders and cargo
consolidators (including, without limitation, American
Consolidation Services, Ltd.) of Lender's security interests in
the Collateral and the other property securing the Obligations,
waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the
premises (except with respect to locations of the Retail Stores)
in which Collateral is located to exercise its rights and
remedies and otherwise deal with the Collateral;
4.1.6 Lender shall have received, in form and substance
satisfactory to Lender, an intercompany subordination agreement
among Lender and each of the Subsidiaries, as acknowledged and
agreed to by Borrowers, providing for the subordination of
certain indebtedness of Borrowers and the Subsidiaries to one
another (but which shall not include Credit Card Receivables owed
by the Financing Subsidiaries and accounts owed by the Retail
Store Subsidiaries or any of the other Subsidiaries to the
Borrowers or to any other Retail Store Subsidiary) to the prior
payment in full of all Obligations;
4.1.7 Each of the depository banks used by the Retail Store
Subsidiaries for the deposit of Retail Store receipts from the
sale of merchandise and by any of the Borrowers or other Obligors
for the deposit of other proceeds of Collateral and other
property which is security for the Obligations shall have been
notified of Lender's security interest therein and shall have
been irrevocably authorized and directed to send all funds on
deposit with such banks only to the Concentration Accounts or as
Lender otherwise directs;
4.1.8 Lender shall have received, in form and substance,
satisfactory to Lender, the executed Trade Financing Agreement;
4.1.9 Lender shall have received evidence of insurance and
loss payee endorsements required hereunder and under the other
Financing Agreements, in form and substance satisfactory to
Lender, and certificates of insurance policies and/or endorse-
ments naming Lender as loss payee;
4.1.10 Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to
Borrowers, Obligors and the Additional L/C Debtors with respect
to the Financing Agreements and such other matters as Lender may
request; and
4.1.11 the other Financing Agreements and all instruments
and documents hereunder and thereunder shall have been duly
executed and delivered to Lender, in form and substance
satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition
precedent to Lender making Loans and providing Letter of Credit
Accommodations to Borrowers, including the initial Loans and
Letter of Credit Accommodations and any future Loans and Letter
of Credit Accommodations:
4.2.1 all representations and warranties contained herein
and in the other Financing Agreements shall be true and correct
in all material respects with the same effect as though such
representations and warranties had been made on and as of the
date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto;
and
4.2.2 no Event of Default and no event or condition which,
with notice or passage of time or both, would constitute an Event
of Default, shall exist or have occurred and be continuing on and
as of the date of the making of such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto.
SECTION 5 GRANT OF SECURITY INTEREST
5.1 Collateral. To secure payment and performance of all
Obligations, each Borrower hereby grants to Lender and confirms
its prior grant to Lender of a continuing security interest in, a
lien upon, and a right of set off against, and hereby assigns to
Lender as security, the following property and interests in
property of such Borrower, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the
"Collateral"):
5.1.1 all of such Borrower's Accounts, Credit Card
Receivables and indebtedness owed to such Borrower, including,
without limitation, by the other Borrowers, or by any of the
other Subsidiaries, together with any collateral therefor;
5.1.2 all of such Borrower's present and future (i)
contract rights relating to the sale, lease or other disposition
of Inventory and other Collateral, (ii) general intangibles
relating to Inventory and other Collateral (including, but not
limited to, income tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists,
licenses, whether as licensor or licensee and choses in action
and other claims), (iii) chattel paper relating to Inventory and
other Collateral, (iv) documents relating to Inventory and other
Collateral (including, without limitation, bills of lading,
warehouse receipts and cargo receipts), (v) instruments relating
to Inventory and other Collateral, (vi) capital stock of each of
the other Borrowers and the Obligors, (vii) letters of credit,
bankers' acceptances and guaranties relating to Accounts and
other Collateral and (viii) indebtedness and obligations owed to
such Borrower by any other Borrower, or any Obligor or any other
Subsidiary;
5.1.2.1 all present and future monies, securities, credit
balances, deposits, deposit accounts and other property of
such Borrower now or hereafter held or received by or in
transit to Lender or (except to the extent not constituting
Collateral or Obligor Collateral) its affiliates or (except to
the extent not constituting Collateral or Obligor Collateral)
at any other depository or other institution from or for the
account of such Borrower, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights,
remedies, title and interest in, to and in respect of such
Borrower's Accounts, Inventory and the other Collateral,
including, without limitation, rights and remedies under or
relating to guaranties, contracts of suretyship, letters of
credit and credit and other insurance related to the
Collateral, rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, goods described in
invoices, documents, contracts, cargo receipts or instruments
with respect to, or otherwise representing or evidencing, such
Borrower's Accounts, Inventory or other Collateral, including,
without limitation, returned, repossessed and reclaimed goods,
and deposits by and property of account debtors or other
persons securing the obligations of account debtors;
5.1.3 Inventory of such Borrower;
5.1.4 Retail Store Equipment of such Borrower;
5.1.5 Records of such Borrower; and
5.1.6 all products and proceeds of the foregoing, in any
form, including, without limitation, insurance proceeds and all
claims against third parties for loss or damage to or destruction
of any or all of the foregoing.
5.1.7 Excluded Collateral. Notwithstanding subsection 5.1
of this Section 5, the Collateral shall not include
(collectively, "Excluded Collateral") the stock and assets of
the Excluded Subsidiaries or any Retail Store Subsidiary that
does not currently and does not intend in the future to own or
operate a Retail Store, all (i) receivables owed to the
Financing Subsidiaries as a Credit Card Issuer by customers of
the Retail Store Subsidiaries who have purchased merchandise
using the Fashion Bug Card and (ii) collections from such
customers for such receivables ("Excluded Collections"),
Equipment other than Retail Store Equipment (except to the extent
included in the definition of "Records"), real property or
rentals from the use or occupancy of real property, cash
surrender value of life insurance policies, capital stock other
than the stock of Borrowers (other than Parent) and any Obligor,
the net proceeds from the sale of the Subordinated Notes plus all
proceeds with respect thereto, and (i) Cash Equivalents, (ii)
other securities and (iii) Cash Equivalents and other securities
purchased by any Borrower or any Obligor as a result of
investments permitted under Section 9.10(b)(ix) hereof plus all
proceeds thereof, provided, that, such Cash Equivalents and other
securities described in (i) and (ii) of this subsection (h) do
not constitute proceeds of Collateral or Obligor Collateral.
SECTION 6 COLLECTION AND ADMINISTRATION
6.0.1 Borrowers' Loan Accounts. Lender shall maintain one
or more loan account(s) on its books in which shall be recorded
all Loans, Letter of Credit Accommodations, other Obligations and
the Collateral and property of the Retail Store Subsidiaries
securing the Obligations, all payments made by or on behalf of
Borrowers and all other appropriate debits and credits as
provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan
account(s) shall be made in accordance with Lender's customary
practices as in effect from time to time. Effective as of
September 1, 1996, Borrower shall be entitled to receive interest
monthly from Lender on the monthly average of any net credit
balance in Borrowers' loan accounts at the rate of three and one
quarter (3 1/4%) percent per annum below the Prime Rate (the
"Credit Balance Rate"); provided, however, upon written notice by
Lender to Borrowers' Agent (a "Reduction Notice"), if Lender's
average per annum interest rate on funds employed by Lender in
making loans generally in the ordinary course of Lender's
business in any month (the
"Average Cost of Funds Rate") is lower than the average Credit
Balance Rate for such month, then the interest payable on such
net credit balances for such month shall be at the rate of three
(3%) percent per annum below the Average Cost of Funds Rate for
such month. In determining the Average Cost of Funds Rate,
Lender shall act reasonably and in good faith. The interest
accruing on Borrowers' net credit balances in any month shall, on
or before the tenth (10th) Business Day of the immediately
following month, (a) first be credited against any outstanding
Loans or, if an Event of Default exists and is continuing and
there are no outstanding Loans, be held as cash collateral for
any other outstanding Obligations and (b) if there are no
outstanding Loans and no Event of Default exists and is
continuing, be paid to Borrowers' Agent for the account of
Borrowers.
6.1 Statements. Lender shall render to Borrowers' Agent
each month a statement setting forth the balance in the loan
account(s) maintained by Lender for Borrowers pursuant to the
provisions of this Agreement, including principal, credit
balances, interest, fees, costs and expenses. Each such
statement shall be subject to subsequent adjustment by Lender but
shall, absent manifest errors or omissions, be considered correct
and deemed accepted by Borrowers, Parent and Borrowers' Agent and
conclusively binding upon Borrowers, Parent and Borrowers' Agent
as an account stated except to the extent that Lender receives a
written notice from Borrowers' Agent of any specific exceptions
thereto within thirty (30) days after the date such statement has
been mailed by Lender. Until such time as Lender shall have
rendered to Borrowers' Agent a written statement as provided
above, the balance in Borrowers' loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by
Borrower.
6.2 Collection of Accounts and Proceeds of Sales of
Inventory.
6.2.1 If any of the Blocked Account Conditions occur and
are continuing, not later than ten (10) days after a written
request by Lender, Borrowers shall establish and maintain, at
their expense, blocked accounts or lock boxes and related blocked
accounts (in either case "Blocked Accounts"), as Lender may
specify, with such banks as are acceptable to Lender and
Borrowers shall promptly deposit in such Blocked Accounts and
direct, and Parent shall cause each of the other Obligors to
deposit in such Blocked Accounts and direct, their respective
account debtors, Credit Card Issuers and Credit Card Processors
to directly remit to such Blocked Accounts payments on its
Accounts, Credit Card Receivables and all other payments
constituting proceeds of Inventory, except for Excluded
Collections, other Collateral or other property which is security
for the Obligations in the identical form in which such payments
are made, whether by cash, check or other manner; provided,
however, if at any time thereafter none of the Blocked Account
Conditions exist for a period of thirty (30) consecutive days,
after ten (10) days written notice by Borrowers' Agent to Lender,
Borrowers may direct Lender to, and Lender hereby agrees to,
terminate the Blocked Accounts and such deposits and remittance
directions shall not be applicable (except if any of the Blocked
Account Conditions occur at any subsequent time).
Notwithstanding the preceding sentence, (a) Borrowers may direct
each of the Retail Store Subsidiaries to first deposit all
collections from customers of their Retail Stores into a
depository account maintained by them with a local bank, provided
that (i) such Retail Store Subsidiary shall irrevocably direct
(except as Lender otherwise directs after occurrence of an Event
of Default) its local depository bank to remit no less frequently
than once each week, and more frequently upon Lender's reasonable
request, all collected funds in such depository account to one of
the Concentration Accounts and (ii) on and after the date of
occurrence of any of the Blocked Account Conditions and during
the continuance thereof, on each Business Day CS Delaware shall
remit or cause the applicable depository bank to remit all
collected funds in such Concentration Accounts (except for
Excluded Collections) to the Blocked Accounts or, if a Blocked
Account has not yet been established as provided herein, to the
Payment Account or as Lender otherwise directs in writing, and
(b) all Credit Card Issuers and Credit Card Processors
(including, without limitation, the Financing Subsidiaries) shall
be irrevocably directed (except as Lender otherwise directs after
occurrence and during the continuance of any of the Blocked
Account Conditions) by the Borrowers and Obligors which are
parties to Credit Card Agreements, and such Credit Card Issuers
and Credit Card Processors shall all agree, that all proceeds of
Credit Card Receivables shall be remitted to the Concentration
Accounts. The banks at which the Blocked Accounts are
established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items received or
deposited in the Blocked Accounts are the property of Lender,
that the depository bank has no lien upon, or right to setoff
against, the Blocked Accounts, the items received for deposit
therein or the funds from time to time on deposit
therein and that the depository bank will wire, or otherwise
transfer, in immediately available funds, on a daily basis, all
funds received or deposited into the Blocked Accounts to such
bank account of Lender as Lender may from time to time designate
for such purpose or for the purpose of receiving other payments
on account of the Obligations ("Payment Account"). Borrowers
agree that all deposits and payments made to such Blocked
Accounts or other funds received and collected by Lender, whether
on the Accounts or as proceeds of Inventory or other Collateral
or property securing the Obligations or otherwise (except with
respect to Excluded Collections and deposits in the Blocked
Accounts remitted to the Concentration Accounts pursuant to an
unrevoked direction of Lender as hereafter provided) shall be the
property of Lender. None of Borrowers nor any of the other
Obligors shall open or use any concentration or cash management
accounts at any bank or other financial institution, other than
the Concentration Accounts as presently in effect, without the
prior written consent of Lender, except if (i) Lender receives
not less than ten (10) days prior written notice thereof and (ii)
such accounts are maintained at a commercial bank having a
capital and surplus of not less than $500,000,000.
Notwithstanding anything to the contrary in this Section 6.3,
Lender does not have any interest in the Excluded Collections.
6.21.2 Borrowers, and the other Subsidiaries and all of
their respective affiliates, Subsidiaries, shareholders,
employees or agents shall, acting as trustee for Lender, receive,
as the property of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or
other Collateral or property which is security for the
Obligations (but excluding any Excluded Collections) which come
into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited,
if any of the Blocked Account Conditions exist, in the Blocked
Accounts or, at Lender's written direction, to be remitted
directly to the Payment Account or in kind to Lender, except in
each case as expressly provided in Section 6.3(a) hereof. In no
event shall the same be commingled with any Borrower's or
Subsidiary's own funds except as specifically permitted in
Section 6.3(a) hereof. Borrowers agree to reimburse Lender on
demand for any amounts owed or paid to any bank at which a
Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts
arising out of Lender's payments to or indemnification of such
bank or person in connection herewith. The obligation of
Borrowers to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this
Agreement. Notwithstanding the foregoing or any other provision
of this Agreement or otherwise, Lender does not waive or release
its security interest in any proceeds of Collateral or other
property which is security for the Obligations.
6.2.3 For purposes of calculating interest on the
Obligations, such payments or other funds received and collected
by Lender on account of the Obligations will be applied
(conditional upon final collection) to the Obligations one (1)
Business Day following the date of receipt of immediately
available funds by Lender in the Payment Account. In addition,
with respect to all proceeds of Accounts, Credit Card Receivables
and Inventory deposited in the Blocked Accounts or otherwise
received by Borrowers, which are not remitted to the Payment
Account (which shall only be in accordance with Section 6.3(a)
and (b) hereof or as hereafter specifically permitted in writing
by Lender), Borrowers shall pay to Lender a collection fee on the
first day of each month equal to the amount of the Interest Rate
on Prime Rate Loans with respect to such proceeds (a) from the
earlier of the date of receipt of such proceeds by Borrowers or
the date of deposit of such proceeds in the Blocked Accounts and
(b) until the next Business Day. Notwithstanding the immediately
preceding sentence, effective as of September 1, 1996, such
collection fee shall not be charged by or payable to Lender
unless and until the Blocked Account Condition described in
Section 1.11(b) has occurred and is continuing from time to time.
For purposes of calculating the amount of the Revolving Loans
available to Borrowers, such payments will be applied
(conditional upon final collection) to the Obligations on the
business day of receipt by Lender in the Payment Account, if such
payments are received within sufficient time (in accordance with
Lender's usual and customary practices as in effect from time to
time) to credit Borrower's loan account on such day, and if not,
then on the next business day.
6.3 Payments. All Obligations shall be payable to the
Payment Account as provided in Section 6.3 or such other place as
Lender may designate from time to time. Lender may apply
payments received or collected from Borrowers or for the account
of Borrowers (including, without limitation, the monetary
proceeds of collections or of realization upon any Collateral or
other property which is security for the Obligations) to such of
the Obligations, whether or not then due, in such order and
manner as Lender determines. Lender agrees to apply such
payments to the Prime Rate Loans prior to applying such payments
against the Eurodollar Rate Loans, unless otherwise directed by
Borrowers' Agent. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this
Agreement or the other Financing Agreements may be charged
directly to the loan account(s) of Borrowers. Borrowers shall
make all payments to Lender on the Obligations free and clear of,
and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any
kind. If after receipt of any payment of, or proceeds of
Collateral or other property which is security for the
Obligations applied to the payment of, any of the Obligations,
Lender is required to surrender or return such payment or
proceeds to any Person for any
reason, then the Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by Lender. Borrowers
shall be liable to pay to Lender, and each of Borrowers does
hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.4
shall remain effective notwithstanding any contrary action which
may be taken by Lender in reliance upon such payment or proceeds.
This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
6.4 Authorization to Make Loans. Lender is authorized to
make the Loans and provide the Letter of Credit Accommodations
based upon telephonic or other instructions received from anyone
purporting to be an officer of a Borrower or of Borrowers' Agent
or other authorized person or, at the discretion of Lender, if
such Loans are necessary to satisfy any Obligations. All
requests for Loans or Letter of Credit Accommodations hereunder
shall specify the date on which the requested advance is to be
made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan.
Requests received after 11:00 a.m. New York City time on any day
shall be deemed to have been made as of the opening of business
on the immediately following Business Day. All Loans and Letter
of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to a Borrower or, with
respect to Additional L/C Accommodations, to an Additional L/C
Debtor, and at the request of and for the benefit of all
Borrowers, when deposited to the credit of any Borrower or
otherwise disbursed or issued in accordance with the instructions
of any Borrower or Borrower's Agent or in accordance with the
terms and conditions of this Agreement.
6.5 Use of Proceeds. All Loans made or Letter of Credit
Accommodations provided by Lender to Borrowers and Additional L/C
Debtors pursuant to the provisions hereof shall be used by
Borrowers only for general operating, working capital and other
proper corporate purposes of Borrowers not otherwise prohibited
by the terms hereof and in Lender's discretion to satisfy any of
the Obligations. Without limitation, none of the proceeds will
be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to
purchase or carry any margin security or for any other purpose
which might cause any of the Loans to be considered a "purpose
credit" within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System, as amended.
SECTION 7 COLLATERAL REPORTING AND COVENANTS
7.0.1 Collateral Reporting. Borrowers or Borrowers' Agent
shall provide Lender with the following documents in a form
satisfactory to Lender: on Tuesday of each week, and, at the
written request of Lender, Thursday of each week, as of the
immediately preceding business day, a schedule of Eligible
Inventory of Borrowers, setting forth the location thereof,
aggregate cost and Retail Sales Price of such Eligible Inventory
at each owned and leased warehouse location (including markdowns
from the original retail sales price or ticketed sales price with
respect thereto); on Tuesday of each week for the immediately
preceding week ending on the close of business on Saturday of
that week or more frequently as Lender may request, reports of
deposits in each of the Concentration Accounts, together with the
separate amounts thereof arising from cash sales, Excluded
Collections, Credit Card Receivables by each Credit Card Issuer
(other than the Financing Subsidiaries) and miscellaneous
collections, a schedule of the Eligible Inventory at the Retail
Stores setting forth the aggregate cost and Retail Sales Price of
such Eligible Inventory (including markdowns from the original
sales price or ticketed sales price with respect thereto),
except as otherwise agreed in writing by Lender, reports of the
cost and other information as required by Lender of or with
respect to inventory and other goods at each of the premises of
American Consolidation Services, Ltd. and any other cargo
consolidator used by Borrowers and approved by Lender as provided
herein, except as otherwise agreed in writing by Lender, reports
of the cost and other information as required by Lender of
inventory and other goods acquired by Borrowers or Additional L/C
Debtors with Letter of Credit Accommodations or Additional L/C
Accommodations which are the subject of bills of lading and which
have not been delivered to Borrowers at the permitted locations
of Eligible Inventory in the United States, and reports of
Eligible Inventory to be sold by each department of the Retail
Store Subsidiaries; once each month, on or before the tenth
(10th) business day of such month for the immediately preceding
month or more frequently as Lender may request, at the written
request of Lender, agings of merchandise accounts payable, lease
payables and other payables, at the written request of Lender, a
schedule of Credit Card Receivables, the aggregate amount of all
sales of Inventory for all Retail Stores and all sales of
Inventory by Borrowers to Persons other than Retail Store
Subsidiaries, and a certificate from an authorized officer of
Borrowers representing that Borrowers have made payment of sales
and use taxes during such month or, at Lender's request, other
evidence of such payment, at the written request of Lender once
each month, on or before the twentieth (20th) day of such month,
for the immediately preceding month or more frequently as Lender
may request, a Schedule of Accounts, Credit Card Receivables owed
by the Financing Subsidiaries and intercompany payables
(including, those owed to or by the Financing Subsidiaries), and
upon Lender's reasonable request, perpetual inventory reports,
copies of customer statements and credit memos, remittance
advices and reports, and copies of deposit slips and bank
statements, copies of shipping and delivery documents, and
copies of purchase orders, invoices and delivery documents for
Inventory and Equipment acquired by Borrower; and such other
reports as to the Collateral and other property which is security
for the Obligations as Lender shall reasonably request from time
to time. If any of Borrowers' or any other Obligor's records or
reports of the Collateral or other property which is security for
the Obligations are prepared or maintained by an accounting
service, contractor, shipper or other agent, each of Borrowers
hereby irrevocably authorizes, and Parent shall cause each of the
Obligors to irrevocably authorize, such service, contractor,
shipper or agent to deliver such records, reports, and related
documents to Lender and to follow Lender's instructions with
respect to further services at any time that an Event of Default
exists or has occurred and is continuing.
7.1 Accounts Covenants.
7.1.0.1 Each Borrower or Borrowers' Agent shall notify
Lender promptly of: any material delay in performance by such
Borrower of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims in
excess of $100,000 by any account debtor, or any disputes in
excess of such sum with account debtors, or any settlement,
adjustment or compromise thereof and all material adverse
information relating to the financial condition of any account
debtor if such information would have a material adverse
effect on the consolidated assets, liabilities, properties or
condition, financial or otherwise, of the Apparel Group, taken
as a whole. No credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any
account debtor without Lender's consent, except in the
ordinary course of such Borrower's business in accordance with
practices and policies previously disclosed in writing to
Lender. So long as no Event of Default exists or has occurred
and is continuing, each Borrower shall settle, adjust or
compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists
or has occurred and is continuing, Lender shall, at its
option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with
account debtors or grant any credits, discounts or allowances.
7.1.0.2 Each Borrower or Borrower's Agent shall promptly
report to Lender any return of Inventory by an account debtor
to any of Borrowers' warehouse locations having a sales price
in excess of $1,000,000 for reasons relating to the quality of
such Inventory. In the event any account debtor of any
Borrower returns Inventory when an Event of Default exists or
has occurred and is continuing, such Borrower shall, upon
Lender's request, hold the returned Inventory in trust for
Lender, segregate all returned Inventory from all of its
other property, dispose of the
returned Inventory solely according to Lender's instructions, and
not issue any credits, discounts or allowances with respect
thereto without Lender's prior written consent.
7.1.0.3 With respect to each Account and Credit Card
Receivable: the amounts shown on any invoice delivered to
Lender or schedule thereof delivered to Lender shall be true
and complete, no payments shall be made thereon except
payments made pursuant to the terms of this Agreement, there
shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect
thereto except as reported to Lender in accordance with the
terms of this Agreement or as provided herein, none of the
transactions giving rise thereto will violate any applicable
State or Federal laws or regulations, all documentation
relating thereto will be legally sufficient under such laws
and regulations and all such documentation will be legally
enforceable in accordance with its terms, and there shall be
compliance with the provisions of Section 6.3(a) hereof (if
any of the Blocked Account Conditions exist) as to each Credit
Card Issuer obligated on any Credit Card Receivables.
7.1.1 Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify
the validity, amount or any other matter relating to any Account,
Credit Card Receivable or other Collateral or property which is
security for the Obligations, by mail, telephone, facsimile
transmission or otherwise.
7.1.2 Borrowers shall deliver or cause to be delivered to
Lender, with appropriate endorsement and assignment, with full
recourse to Borrowers, all chattel paper and instruments arising
from sales of Borrowers' Inventory or other Collateral which any
Borrower now owns or may at any time acquire immediately upon any
Borrower's receipt thereof, except as Lender may otherwise agree.
7.1.2.1 Lender may, at any time or times that an Event of
Default exists or has occurred and is continuing, notify any
or all account debtors that the Accounts, Credit Card
Receivables and other obligations included in the Collateral
have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all account
debtors to make payment thereof directly to Lender, extend
the time of payment of, compromise, settle or adjust for cash,
credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Accounts, Credit Card Receivables
or other obligations included in the Collateral and thereby
discharge or release the account debtor or any other party or
parties in any way liable for
payment thereof without affecting any of the Obligations,
demand, collect or enforce payment of any Accounts, Credit Card
Receivables or such other obligations, but without any duty to do
so, and Lender shall not be liable for its failure to collect or
enforce the payment thereof nor for the negligence of its agents
or attorneys with respect thereto and take whatever other action
Lender may deem necessary or desirable for the protection of
its interests. At any time that an Event of Default exists or
has occurred and is continuing, at Lender's request, all
invoices and statements sent to any account debtor shall state
that the Accounts, Credit Card Receivables and such other
obligations have been assigned to Lender and are payable
directly and only to Lender and each Borrower shall deliver to
Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise
to any Accounts as Lender may require. This subsection (f)
shall not be applicable to any Excluded Collections.
7.1.3 Inventory Covenants. With respect to the Inventory:
each Borrower shall, and Parent shall cause each Obligor and L/C
Debtor to, at all times maintain inventory records reasonably
satisfactory to Lender, keeping correct and accurate records
itemizing and describing the kind, type, quality, location and
quantity of Inventory, such Borrower's or Obligor's or L/C
Debtor's cost therefor, the Retail Sales Price thereof (including
markdowns with respect thereto) and daily withdrawals therefrom
and additions thereto in accordance with such Borrower's or
Obligor's or L/C Debtor's existing business practices; each
Borrower, Obligor and L/C Debtor shall conduct a physical count
of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and
promptly following such physical inventory shall supply Lender
with a report in the form and with such specificity as may be
reasonably satisfactory to Lender concerning such physical count;
each Borrower shall not remove, and Parent shall cause each
Retail Store Subsidiary and each other Obligor and L/C Debtor to
not remove, any Inventory from the locations set forth on Omnibus
Schedule 2 hereto, without the prior written consent of Lender,
except for sales of Inventory as permitted hereby and except to
move Inventory directly from one location set forth or permitted
herein to any other such location; upon Lender's request,
Borrowers' Agent shall, at its expense, no more than three times
in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as
to the Inventory in form, scope and methodology acceptable to
Lender by Xxxxxx Xxxxxxxx Partners, Inc. or by any other
appraiser acceptable to Lender, addressed to Lender or upon which
Lender is expressly permitted to rely; each Borrower shall
produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with
applicable laws (including, but not limited to, the requirements
of the Federal Fair Labor Standards Act of 1938, as amended and
all rules, regulations and orders related thereto); each
Borrower assumes all responsibility and liability arising from or
relating to the production, use, sale or other disposition of the
Inventory; each Borrower shall not sell Inventory to any customer
on approval, or any other basis which entitles the customer to
return or may obligate Borrower to repurchase such Inventory
except with respect to a customer which is a Retail Store
Subsidiary; each Borrower shall keep the Inventory in good and
marketable condition; and each Borrower shall not, without prior
written notice to Lender, acquire or accept any Inventory on
consignment or approval except with respect to sales of Inventory
to Retail Store Subsidiaries. Borrowers shall not sell any
Inventory to any Person other than to any other Borrower or to
any Retail Store Subsidiaries or other Obligor without Lender's
written consent, except, that, Borrowers may sell Inventory to a
Person which is not a US Subsidiary (i) in an aggregate amount in
any single transaction or related series of transactions of up to
$10,000,000, provided, that, such Inventory is not sold for a
sales price below fifty (50%) percent (but such percentage shall
be increased to seventy-five (75%) percent if any of the Blocked
Account Conditions exist and are continuing) of the cost for such
Inventory, the purchase price therefor is due and payable on or
before delivery to the buyer thereof, written notice thereof is
given to Lender pursuant to Section 7.1(c)(iii) hereof, and, if
any of the Blocked Account Conditions exist, all proceeds of such
sales of Inventory are immediately paid to Lender, and (ii) where
Inventory has been acquired by Borrowers for the specific purpose
of resale thereof to such Person, provided that, such Inventory
is not sold for a sales price below one hundred (100%) percent of
the cost for such Inventory, the entire purchase price therefor
is due and payable on or before delivery to the buyer thereof,
written notice thereof is given to Lender pursuant to
Section 7.1(c)(iii) hereof and the entire proceeds of such sale
are immediately paid to Lender. Upon delivery to or for the
account of any Borrower, Parent or other Subsidiary of documents
of title with respect to Inventory accompanying drafts under a
letter of credit opened for the account of any of Borrowers or
otherwise relating to Inventory, such documents of title shall be
immediately delivered to and held by a customs broker or freight
forwarder who has executed a bailment letter with respect thereto
in favor of Lender, in form and substance satisfactory to Lender,
or, if an Event of Default has occurred, as Lender otherwise
directs. All inventory acquired pursuant to the Additional L/C
Accommodations shall be owned by and title thereof shall only be
in the name of Borrowers, until resold to a Retail Store
Subsidiary and all bills of lading with respect to the
importation of such inventory into the United States shall be
delivered by an overnight courier service only to a customs
broker who has executed a bailment letter with respect thereto in
favor of Lender, in form and substance satisfactory to Lender.
Borrowers shall not use any customs broker or freight forwarder
for the importation of Inventory into the United States or any
cargo consolidator or store any of their Eligible Inventory nor
permit the Additional L/C Debtors to store any of their finished
goods inventory outside the United States (other than such
inventory which is in transit and covered by a xxxx of lading
issued by a third party and finished goods inventory for which
the purchase price has not been paid to the manufacturer thereof
located at the premises of such manufacturer) with any Person,
except, with respect to each of the foregoing, for any such
Person who has executed a bailment letter with respect thereto in
favor of Lender, in form and substance satisfactory to Lender.
7.2 Equipment Covenants. With respect to the Equipment:
(a) upon Lender's request, Borrowers shall, at their expense, at
any time or times as Lender may request on or after an Event of
Default, deliver or cause to be delivered to Lender written
reports or appraisals as to the Retail Store Equipment in form,
scope and methodology acceptable to Lender and by an appraiser
acceptable to Lender, addressed to Lender upon which Lender is
expressly permitted to rely; (b) each Borrower shall keep its
Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (c) each Borrower shall use
its Equipment with all reasonable care and caution and in
accordance with applicable standards of any insurance and in
conformity with all applicable laws; (d) the Equipment is and
shall be used in Borrower's business and not for personal,
family, household or farming use; (e) Retail Store Equipment
shall not be removed from the locations set forth or permitted
herein, except to the extent necessary to have any Retail Store
Equipment repaired or maintained in the ordinary course of the
business or to move Retail Store Equipment directly from one
location set forth or permitted herein to another such location;
(f) the Retail Store Equipment is now and shall remain personal
property and each Borrower shall not permit any of the Retail
Store Equipment to be or become a part of or affixed to real
property other than Retail Store Equipment located on the real
property which is of the type that has previously become affixed
to real property; and (g) each Borrower assumes all
responsibility and liability arising from the use of the
Equipment.
7.3 Equipment, Real Property and Intellectual Property
License.
7.3.0.1 Each Borrower hereby grants Lender, and shall
cause each Subsidiary to grant to Lender, an irrevocable non-
exclusive license, without charge to use, after the
occurrence and during the continuance of an Event of Default,
any of its Equipment consisting of computers or other data
processing equipment relating to the storage or processing of
records, documents or files pertaining to the Collateral and
use any of its other Equipment and real property (provided,
however, except for any period in which Lender is stayed or
enjoined from enforcing its rights, such
use period shall not be for more than six (6) months after the
commencement of the use thereof by Lender) to handle, deal with
or dispose of any Collateral pursuant to the rights and remedies
of Lender as set forth in this Agreement and the other Financing
Agreements, the Uniform Commercial Code of any applicable
jurisdiction and other applicable law, provided that Lender
shall be responsible for the reasonable cost of repair of any
physical injury to such Equipment and real property caused by
Lender or its agents in connection with such use, and to use
after the occurrence and during the continuance of an Event of
Default, any of the Intellectual Property marked or stamped on
any Collateral or otherwise required to collect or realize on
any Collateral (collectively, the "Equipment, Real Property
and Intellectual Property License"). Such license shall be
irrevocable and shall continue until the Obligations have been
indefeasibly paid and satisfied and this Agreement and all
other Financing Agreements have been terminated.
7.3.1 If, to the extent permitted or not otherwise
restricted hereunder, any Borrower or Subsidiary sells or grants
liens upon any of its equipment or real property in favor of any
other Person, then such Borrower or Subsidiary hereby agrees to
cause such other Person to grant Lender in writing (to the extent
applicable to such property) the Equipment, Real Property and
Intellectual Property License; provided, that, such equipment or
real property is owned or used by a Borrower or an Obligor.
Notwithstanding anything to the contrary contained in Section
7.5(a) above, Lender will agree to pay such other Person for each
day that Lender uses such property, unless such other Person has
otherwise been paid the rent or charge in respect of any such
period, the regularly scheduled rent or charge or indebtedness
owed by such Borrower or Subsidiary to such other Person,
prorated on a per diem basis to be determined on a thirty (30)
day month.
7.3.1.1 Power of Attorney. Each Borrower hereby
irrevocably designates and appoints Lender (and all persons
designated by Lender) as such Borrower's true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or
Lender's name, to: at any time an Event of Default or event
which with notice or passage of time or both would constitute an
Event of Default exists or has occurred and is continuing demand
payment on Accounts or other proceeds of Inventory or other
Collateral, enforce payment of Accounts, Credit Card Receivables
or other obligations included in the Collateral by legal
proceedings or otherwise, exercise all of such Borrower's rights
and remedies to collect any Account, Credit Card Receivables or
other Collateral, sell or assign any Accounts, Credit Card
Receivables or other Collateral upon such terms, for such
amounts and at such time or times as the Lender deems
advisable, settle, adjust, compromise, extend or
renew an Account or Credit Card Receivable, discharge and
release any Account, Credit Card Receivables or other obligation
included in the Collateral, prepare, file and sign such
Borrower's name on any proof of claim in bankruptcy or other
similar document against an account debtor, notify the post
office authorities to change the address for delivery of such
Borrower's mail to an address designated by Lender, and open
and dispose of all mail addressed to such Borrower, and do
all acts and things which are necessary, in Lender's
determination, to fulfill such Borrower's obligations under
this Agreement and the other Financing Agreements and at any
time to take control in any manner of any item of payment or
proceeds thereof with respect to Collateral, except Excluded
Collections, have access to any lockbox or postal box into
which such Borrower's mail is deposited, endorse such
Borrower's name upon any items of payment or proceeds thereof
with respect to Collateral, (except Excluded Collections) and
deposit the same in the Lender's account for application to
the Obligations, endorse such Borrower's name upon any
chattel paper, document, instrument, invoice, or similar
document or agreement received or otherwise held by Lender
relating to any Account or any goods pertaining thereto or any
other Collateral, sign such Borrower's name on any
verification of Accounts or Credit Card Receivables and
notices thereof to account debtors and execute in such
Borrower's name and file any UCC financing statements or
amendments thereto with respect to the Collateral. The
foregoing power of attorney shall not be applicable to any
Excluded Collections or Excluded Collateral. Each Borrower
hereby releases Lender and its officers, employees and
designees from any liabilities arising from any act or acts
under this power of attorney and in furtherance thereof,
whether of omission or commission, except as a result of
Lender's own gross negligence or wilful misconduct as
determined pursuant to a final non-appealable judgment or
order of a court of competent jurisdiction.
7.3.2 Right to Cure. Lender may, at its option, cure any
default by any Borrower under any agreement with a third party or
pay or bond on appeal any judgment entered against any Borrower
or any Obligor, discharge taxes, liens, security interests or
other encumbrances at any time levied on or existing with respect
to the Collateral or other property which is security for the
Obligations and pay any amount, incur any expense or perform any
act which, in Lender's judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral or other
property which is security for the Obligations and the rights of
Lender with respect thereto. Lender may add any amounts so
expended to the Obligations and charge such Borrower's account
therefor, such amounts to be repayable by such Borrower on
demand. Lender shall be under no obligation to effect such cure,
payment or bonding and shall not,
by doing so, be deemed to have assumed any obligation or
liability of any Borrower or any Obligor. Any payment made or
other action taken by Lender under this Section shall be without
prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.3.3 Access to Premises. From time to time as requested by
Lender, at the cost and expense of Borrowers, Lender or its
designee shall have complete access to all of Borrowers'
premises, and Parent shall cause each Obligor to permit Lender to
have complete access to all of such Obligor's premises, during
normal business hours and after notice to Borrowers' Agent, or at
any time and without notice to Borrowers or Borrowers' Agent or
Parent if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and
auditing the Collateral and other property which is security for
the Obligations and all of Borrowers' and such Obligor's books
and records, including, without limitation, the Records, and
Borrowers shall promptly furnish or cause to be furnished to
Lender such copies of such books and records or extracts
therefrom as Lender may request, and Lender may use during
normal business hours such of Borrowers', and Parent shall cause
each other Obligor to permit Lender to use such of such other
Obligor's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default
exists or has occurred and is continuing for the collection of
Accounts and realization of other Collateral and property which
is security for the Obligations.
SECTION 8 REPRESENTATIONS AND WARRANTIES
Borrowers hereby, jointly and severally, represent and
warrant to Lender the following (which shall survive the
execution and delivery of this Agreement), the truth and accuracy
of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries.
Except as set forth on Omnibus Schedule 7, each Borrower and each
Obligor is a corporation duly organized and in good standing
under the laws of its state of incorporation and is duly
qualified as a foreign corporation and in good standing in all
states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which
the failure to so qualify would not have a material adverse
effect on the Apparel Group's consolidated financial condition,
results of operations or business or the rights of Lender in or
to any of the Collateral or other
property which is security for the Obligations. The execution,
delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and
thereunder are all within each Borrower's and each other
Obligor's corporate powers, have been duly authorized and are not
in contravention of law or the terms of each Borrower's or any
other Obligor's certificate of incorporation, by-laws, or other
organizational documentation, or any indenture, agreement or
undertaking to which any Borrower or any other Obligor is a party
or by which any Borrower or any other Obligor or any of their
respective property is bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding
obligations of Borrowers, Parent, the other Obligors and
Borrower's Agent enforceable in accordance with their respective
terms. Borrowers do not have any Subsidiaries except as set
forth on Omnibus Schedule 1 hereto or, after the date hereof, as
disclosed in writing to Lender and as to which there has been
compliance with Sections 9.1 and 9.2 hereof.
8.2 Financial Statements; No Material Adverse Change. All
financial statements relating to Borrowers or any other
Subsidiary which have been or may hereafter be delivered by
Borrowers to Lender have been prepared in accordance with GAAP
and fairly present the financial condition and the results of
operation of Borrowers or such other Subsidiary at the dates and
for the periods set forth therein. Except as disclosed in any
interim financial statements furnished or as otherwise disclosed
in writing by Borrowers to Lender prior to the date of this
Agreement, there has been no material adverse change in the
consolidated assets, liabilities, properties and condition,
financial or otherwise, of the Apparel Group, since the date of
the most recent audited financial statements furnished by
Borrowers to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief
executive office of each Borrower and each Borrower's Records
concerning Accounts are located only at its respective address
set forth below and its only other places of business and the
only other locations of Collateral or other property which is
security for the Obligations, if any, are the addresses set forth
for such Borrower on Omnibus Schedule 2 hereto, subject to the
right of any Borrower or other Obligor to establish new locations
in accordance with Section 9.2 below. Omnibus Schedule 2 hereto
correctly identifies as of the date hereof any of such locations
of Borrowers which are not owned by Borrowers and sets forth the
owners and/or operators thereof.
8.4 Priority of Liens; Title to Properties. The security
interests and liens granted to Lender under this Agreement and
the other Financing Agreements constitute valid and, except as
otherwise specifically consented to in writing by Lender,
perfected first priority liens and security interests in and upon
the Collateral and other property which is security for the
Obligations subject only to the subordinate liens indicated on
Omnibus Schedule 13 hereto. Each Borrower and the other Obligors
has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests,
encumbrances or charges of any kind, except those granted to
Lender and such others as are specifically listed on Omnibus
Schedule 13 hereto or permitted under Section 9.8 hereto.
8.4.1 Tax Returns. Each of Borrowers and the other US
Subsidiaries has filed, or caused to be filed, in a timely manner
all tax returns, reports and declarations which are required to
be filed by it (without requests for extension except as
previously disclosed in writing to Lender), except as set forth
in Omnibus Schedule 16 hereto or unless any such failure to
timely file any such tax returns, reports or declarations would
not adversely affect the Collateral or Obligor Collateral in any
material respect, impair the ability of any Borrower or other
Obligor to otherwise perform its Obligations hereunder or under
any of the other Financing Agreements to which it is a party or
of Lender to enforce any Obligations or realize upon any
Collateral or other property which is security for the
Obligations or result in a material adverse change in the
consolidated assets, business or prospects of the Apparel Group.
All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Each of
Borrowers and the other US Subsidiaries has paid or caused to be
paid all taxes due and payable or claimed due and payable in any
assessment received by it, as to which non-payment thereof would
result in a material adverse change in the consolidated assets,
business or prospects of the Apparel Group or would impair the
ability of any Borrower or any other Obligor to perform its
Obligations hereunder or under any of the Financing Agreements to
which it is a party or of Lender to enforce any obligations or
realize upon any Collateral or other property which is security
for the Obligations, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently
pursued and available to, as applicable, Borrowers or the other
US Subsidiaries and with respect to which adequate reserves have
been set aside on its books. Adequate provision has been made
for the payment of all accrued and unpaid Federal, State, county,
local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.
8.4.2 Litigation. Except as set forth on Omnibus Schedule 8
hereto, there is no present investigation by any governmental
agency pending, or to the best of any Borrower's knowledge
threatened, against or affecting any Borrower or any other
Subsidiary, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of any
Borrower's knowledge threatened, against any Borrower or other
Subsidiary or its assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely
determined against any Borrower or such other Subsidiary would
result in any material adverse change in the consolidated assets,
business or prospects of the Apparel Group or would impair the
ability of any Borrower or any other Obligor to perform its
obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral or other property
which is security for the Obligations.
8.4.3 Compliance with Other Agreements and Applicable Laws.
None of Borrowers or Obligors is in default in any material
respect under, or in violation in any material respect of any of
the terms of, any agreement, contract, instrument, lease or other
commitment to which it is a party or by which it or any of its
assets are bound and each of Borrower and the other US
Subsidiaries is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, Federal, State or
local governmental authority, as to which any such default,
violation or non-compliance would result in a material adverse
change in the consolidated assets, business or prospects of the
Apparel Group or would impair the ability of any Borrower or any
other Obligor to perform its obligations hereunder or under any
of the Financing Agreements to which it is a party or of Lender
to enforce any obligations or realize upon any Collateral or
other property which is security for the Obligations.
8.5 Environmental Compliance.
8.5.1 Except as set forth on Omnibus Schedule 11 hereto and
as provided in subsection (e) of this Section 8.8, Borrowers have
not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which
at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization
thereunder and the operations of Borrowers comply in all material
respects with all Environmental
Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
8.5.2 Except as set forth on Omnibus Schedule 11 hereto and
as provided in subsection (e) of this Section 8.8, there has been
no investigation, proceeding, complaint, order, directive, claim,
citation or notice by any governmental authority or any other
person nor is any pending or to the best of any Borrower's
knowledge threatened, with respect to any non-compliance with or
violation of the requirements of any Environmental Law by
Borrowers or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use,
storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any other
environmental, health or safety matter, which affects Borrowers
or its business, operations or assets or any properties at which
Borrowers have transported, stored or disposed of any Hazardous
Materials.
8.5.3 Except as provided in subsection (e) of this Section
8.8, Borrowers have no material liability (contingent or
otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the
generation, use, storage, treatment, transportation, manufacture,
handling, production or disposal of any Hazardous Materials.
8.5.4 Except as provided in subsection (e) of this Section
8.8, Borrowers have all licenses, permits, certificates,
approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrowers under any
Environmental Law and all of such licenses, permits, certif-
icates, approvals or similar authorizations are valid and in full
force and effect.
8.5.5 Each of subsections (a), (b), (c) and (d) of this
Section 8.8 are subject to an additional exception for
conditions, events or circumstances that are not, individually or
in the aggregate, reasonably likely to give rise to a Material
Adverse Retail Store Event.
8.6 Employee Benefits.
8.6.1 Borrowers and Obligors have not engaged in any
transaction in connection with which Borrowers or any of its
ERISA Affiliates could be subject to either a material civil
penalty assessed pursuant to Section 502(i) of ERISA or a
material tax imposed by Section 4975 of the Code, including any
accumulated funding deficiency described in Section 8.9(c) hereof
and any deficiency with respect to vested accrued benefits
described in Section 8.9(d) hereof.
8.6.2 No liability to the Pension Benefit Guaranty
Corporation has been or is expected by Borrowers to be incurred
with respect to any employee pension benefit plan of Borrowers or
any of its ERISA Affiliates. There has been no reportable event
(within the meaning of Section 4043(b) of ERISA) or any other
event or condition with respect to any employee pension benefit
plan of Borrowers or any of its ERISA Affiliates which presents a
risk of termination of any such plan by the Pension Benefit
Guaranty Corporation.
8.6.3 Full payment has been made of all amounts which
Borrowers or any of its ERISA Affiliates is required under
Section 302 of ERISA and Section 412 of the Code to have paid
under the terms of each employee pension benefit plan as
contributions to such plan as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, and no
accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, exists
with respect to any employee pension benefit plan, including any
penalty or tax described in Section 8.9(a) hereof and any
deficiency with respect to vested accrued benefits described in
Section 8.9(d) hereof.
8.6.4 The current value of all vested accrued benefits
under all employee pension benefit plans maintained by Borrowers
that are subject to Title IV of ERISA does not exceed the current
value of the assets of such plans allocable to such vested
accrued benefits, including any penalty or tax described in
Section 8.9(a) hereof and any accumulated funding deficiency
described in Section 8.9(c) hereof. The terms "current value"
and "accrued benefit" have the meanings specified in ERISA.
8.6.5 Neither Borrowers nor any of their respective ERISA
Affiliates is or has (except to the extent that any applicable
statute of limitation bars any remedy, proceedings, or actions
with respect thereto) ever been obligated to
contribute to any "multiemployer plan" (as such term is defined
in Section 4001(a)(3) of ERISA) that is subject to Title IV of
ERISA.
8.7 Accuracy and Completeness of Information. The
information furnished by or on behalf of any Borrower or any
other Subsidiary in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, taken as a whole, is
true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any
material fact necessary in order to make such information not
misleading. No event or circumstance has occurred which has had
or could reasonably be expected to have a material adverse affect
on the consolidated business, assets or prospects of the Apparel
Group, which has not been fully and accurately disclosed to
Lender in writing.
8.7.1 Interrelated Businesses. Parent is the direct and
beneficial owner and holder of all of the issued and outstanding
shares of capital stock of the Borrowers other than FB Apparel.
FB Clothing, Inc., which is a US Subsidiary, is the beneficial
owner and holder of all of the issued and outstanding shares of
capital stock of FB Apparel. Each of the Additional L/C Debtors
is a Subsidiary and the Additional L/C Accommodations are opened
solely for the purpose of (a) with respect to the Additional L/C
Debtors other than CS Insurance Ltd., acquiring Inventory by
Borrowers for ultimate resale in the Retail Stores and (b) with
respect to CS Insurance Limited, providing insurance services for
the Apparel Group. Borrowers and the other US Subsidiaries share
an identity of interests such that any benefit received by each
of Borrowers benefits the others (except the Financing
Subsidiaries). Each Borrower and the other Subsidiaries render
services to or for the benefit of the other Borrowers and other
Subsidiaries (other than the Financing Subsidiaries), make loans
and advances and provide other financial accommodations to or for
the benefit of the other Borrowers and the other Subsidiaries
(other than the Financing Subsidiaries) (including, inter alia,
the payment and/or guaranties by Borrowers and the other
Subsidiaries of indebtedness of the other Borrowers and the other
Subsidiaries), and provide administrative, marketing, payroll
and management services to or for the benefit of the other
Borrowers and the other Subsidiaries (other than the Financing
Subsidiaries). Borrowers and the other Subsidiaries (other than
the Financing Subsidiaries) have centralized accounting and legal
services.
8.8 Subordinated Notes.
8.8.1 Neither the execution and delivery of the
Subordinated Notes or any of the other Subordinated Note
Agreements, nor the consummation of the transactions contemplated
by the Subordinated Note Agreements or compliance with the
provisions thereof, have resulted or shall result in the creation
or imposition of any lien, charge or incumbrance upon any of the
Collateral.
8.8.2 The Subordinated Notes have been duly authorized,
issued and delivered by Parent and all agreements, documents and
instruments related thereto, including, but not limited to, the
Subordinated Note Indenture, have been duly authorized, executed
and delivered and the transactions contemplated thereunder have
been performed in accordance with their terms by the respective
parties thereto in all respects, including the fulfillment (not
merely the waiver) of all conditions precedent set forth therein.
8.8.3 All actions and proceedings required by the
Subordinated Notes and the other Subordinated Note Agreements,
applicable law or regulation have been taken and the transactions
required thereunder have been duly and validly taken and
consummated.
8.8.4 No consent, approval, authorization, order,
registration, filing or qualification of or with any court or
governmental authority or agency is required for the execution
and delivery of the Subordinated Note Agreements and the
consummation of the transactions contemplated therein, except
such as may be required and have been obtained under the
Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder, in
connection with the registration of the Subordinated Notes and
except such as may be required under state securities or Blue Sky
laws in connection with the purchase and distribution of the
Subordinated Notes by the underwriters; and neither the execution
and delivery of the Subordinated Notes or any of the other
Subordinated Note Agreements nor the consummation of the
transactions therein contemplated, nor compliance with the
provisions thereof, does or shall conflict with or result in the
breach of, or constitute a default in any respect under, any
indenture, mortgage, deed of trust, security agreement, agreement
or instrument to which any Borrower is a party or may be bound,
or violate any provision of the Certificate of Incorporation or
By-Laws of any Borrower.
8.8.5 Parent has delivered, or caused to be delivered, to
Lender, a true, correct and complete specimen of the Subordinated
Notes and copies of all other Subordinated Note Agreements.
8.8.6 Parent has received from or on behalf of the initial
holders of the Subordinated Notes cash or other immediately
available funds in the aggregate amount of not less than
$138,000,000, less underwriting commissions, transaction fees and
other expenses incurred in connection with the issuance of the
Subordinated Notes; and the proceeds received by Parent from or
on behalf of the initial holders of the Subordinated Notes have
been applied as set forth in the Form S-3 Registration Statement
filed by Parent with the Securities and Exchange Commission on
May 21, 1996, as amended.
8.9 Bank Group and Noteholders. All obligations and
indebtedness owed by Borrowers or any Subsidiary to the Bank
Group (as defined in the Existing Loan Agreement) or the
Noteholders (as defined in the Existing Loan Agreement) have been
satisfied and paid in full. The Bank Group Agreements (as
defined in the Existing Loan Agreement) and the Noteholders
Agreements (as defined in the Existing Loan Agreement) have each
been terminated and are of no further force and effect. All
security interests in and liens upon the assets of Borrowers or
any Subsidiary previously held by the Bank Group or the
Noteholders have been terminated and discharged.
8.10 Credit Card Agreements; Credit Card Receivables. No
member of the Apparel Group is a party to any Credit Card
Agreements except for Borrowers and, as a Credit Card Issuer or
Credit Card Processor, the Financing Subsidiaries. All Credit
Card Receivables are the property of and payable to Borrowers.
8.10.1 Inactive/Dissolved Subsidiaries. Each of the
Inactive/Dissolved Subsidiaries either has no material business
operations and assets or has been dissolved or liquidated.
8.11 Survival of Warranties; Cumulative. All
representations and warranties contained in this Agreement or any
of the other Financing Agreements shall survive the execution and
delivery of this Agreement and shall be deemed to have been made
again to Lender on the date of each additional borrowing or other
credit accommodation hereunder and shall be conclusively presumed
to have been relied on by Lender regardless of any investigation
made or information possessed
by Lender. The representations and warranties set forth herein
shall be cumulative and in addition to any other representations
or warranties which any Borrower or any other Obligor shall now
or hereafter give, or cause to be given, to Lender.
SECTION 9 AFFIRMATIVE AND NEGATIVE COVENANTS
9.0.1 Maintenance of Existence; Subsidiaries. Each
Borrower shall, and Parent shall cause each Obligor and the
Additional L/C Debtors to, at all times preserve, renew and keep
in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and
effect all permits, licenses, trademarks, tradenames, approvals,
authorizations, leases and contracts necessary to carry on the
business as presently or proposed to be conducted, except as to
only Retail Store Subsidiaries, which have no material assets or
as to which, individually or cumulatively, the failure to do any
of the foregoing, does not constitute a Material Adverse Retail
Store Event and the dissolution of any other Subsidiary (other
than Borrowers or Obligors) that does not conduct any business
activities, has no material assets and has no material business
operations for a period of at least six (6) months, with respect
to which Lender has received a certificate of an authorized
officer of Parent to such effect. Each Borrower shall, and
Parent shall cause each other Obligor to, give Lender fifteen
(15) days prior written notice of any proposed change in its
corporate name, which notice shall set forth the new name and, as
applicable, such Borrower or other Obligor shall deliver to
Lender a copy of the amendment to the Certificate of
Incorporation of such Borrower or other Obligor providing for the
name change certified by the Secretary of State of the
jurisdiction of incorporation of, as applicable, such Borrower or
Obligor as soon as it is available. None of Borrowers shall
organize or cause to be organized any new US Subsidiary except
for a new Retail Store Subsidiary which within ten (10) days
after the organization thereof, executes and delivers to Lender
(in form and substance satisfactory to Lender) a guarantee of
payment of the Obligations, a security agreement granting to
Lender a first and prior security interest in all of its assets
as security for such guarantee, UCC financing statements and such
other documents as Lender deems necessary to implement the
foregoing.
9.0.2 New Collateral Locations. Any Borrower or Obligor may
only open any new location within the continental United States
provided Borrowers' Agent gives Lender ten (10) days prior
written notice of the intended opening of any such new location
and Lender receives such agreements, guaranties, documents, and
instruments as Lender may deem reasonably necessary or
desirable to protect its interests in the Collateral and other
property which is security for the Obligations at such location,
including, without limitation, UCC financing statements, executed
(i) with respect to any new location of Borrowers, by Borrower's
Agent and Borrowers, (ii) with respect to any new location of a
Retail Store operated by a Retail Store Subsidiary, by such
Retail Store Subsidiary, and (iii) with respect to a new location
of any Obligor, by such Obligor.
9.1 Compliance with Laws, Regulations, Etc.
9.1.1 Each Borrower shall, and Parent shall cause each
Obligor to, at all times, comply in all material respects with
all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any
Federal, State or local governmental authority, including,
without limitation, the Employee Retirement Security Act of 1974,
as amended, the Occupational Safety and Hazard Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and
stipulations relating to environmental pollution and employee
health and safety, including, without limitation, all of the
Environmental Laws.
9.1.2 Each Borrower shall establish and maintain, at its
expense, a system to assure and monitor its continued compliance
with all Environmental Laws in all of its operations, which
system shall include annual reviews of such compliance by
employees or agents of such Borrower who are familiar with the
requirements of the Environmental Laws. Copies of all
environmental surveys, audits, assessments, feasibility studies
and results of remedial investigations shall be promptly
furnished, or caused to be furnished, by Borrowers to Lender at
Lender's request. Borrowers shall take prompt and appropriate
action to respond to any non-compliance with any of the
Environmental Laws and shall regularly report to Lender on such
response at Lender's request, provided that Borrowers shall give
written notice of such non-compliance to Lender by Borrowers.
9.1.2.0.1 Each Borrower shall give both oral and written
notice to Lender immediately upon such Borrower's receipt of
any notice of, or such Borrower's otherwise obtaining
knowledge of, the occurrence of any event involving the
release, spill or
discharge, threatened or actual, of any hazardous Material, which
shall reasonably be expected to result in a Material Adverse
Retail Store Event, or any investigation, proceeding, complaint,
order, directive, claims, citation or notice with respect to:
any non-compliance with or violation of any Environmental Law by
Borrower or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use,
storage, treatment, transportation, manufacture, handling,
production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects
Borrower or its business, operations or assets or any
properties at which Borrower transported, stored or disposed
of any Hazardous Materials, which shall reasonably be
expected to result in a Material Adverse Retail Store Event.
9.1.2.1 Without limiting the generality of the foregoing,
whenever Lender reasonably determines that there is non-
compliance, or any condition which requires any action by or
on behalf of any Borrower in order to avoid any material
non-compliance, with any Environmental Law, such Borrower
shall, at Lender's request and such Borrower's expense: cause
an independent environmental engineer acceptable to Lender to
conduct such tests of the site where such Borrower's non-
compliance or alleged non-compliance with such Environmental
Laws has occurred as to such non-compliance and prepare and
deliver to Lender a report as to such non-compliance setting
forth the results of such tests, a proposed plan for
responding to any environmental problems described therein,
and an estimate of the costs thereof and provide to Lender a
supplemental report of such engineer whenever the scope of
such non-compliance, or such Borrower's response thereto or
the estimated costs thereof, shall change in any material
respect.
9.1.3 Borrowers shall indemnify and hold harmless Lender,
its directors, officers, employees, agents, representatives,
successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including
attorneys' fees and legal expenses) directly or indirectly
arising out of or attributable to the use, generation,
manufacture, reproduction, storage, release, threatened release,
spill, discharge, disposal or presence of a Hazardous Material,
including, without limitation, the costs of any required or
necessary repair, cleanup or other remedial work with respect to
any property of Borrowers or Obligors and the preparation and
implementation of any closure, remedial or other required plans,
provided that such indemnification shall not be available to
Lender to the extent such losses are determined by a final and
non-appealable order of a court of competent jurisdiction to have
resulted solely from the gross negligence or wilful misconduct of
Lender. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of
the Obligations and the termination or non-renewal of this
Agreement.
9.1.4 Payment of Taxes and Claims. Each Borrower shall, and
Parent shall cause each Obligor to, duly pay and discharge all
taxes, assessments,
contributions and governmental charges upon or against it or its
properties or assets, as to which non-payment thereof would
result in a material adverse change in the consolidated assets,
business or prospects of the Apparel Group or would impede the
ability of any Borrower or Obligor to perform its obligations
hereunder or under any of the other Financing Agreements or
Lender to enforce any Obligations or realize upon any Collateral
or other property which is collateral for the Obligations, except
for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to
any Borrower or any of their Subsidiaries and with respect to
which adequate reserves have been set aside on its books. Each
Borrower shall be liable for any tax or penalties imposed on
Lender as a result of the financing arrangements provided for
herein and each Borrower agrees to indemnify and hold Lender
harmless with respect to the foregoing, and to repay to Lender on
demand the amount thereof, and, until paid by Borrowers, such
amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require
Borrowers or Parent to pay any income or franchise taxes
attributable to the income of Lender from any amounts charged or
paid hereunder to Lender. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal
of this Agreement.
9.2 Insurance. Each Borrower shall, at all times, maintain
with financially sound and reputable insurers insurance with
respect to the Collateral and other property which is security
for the Obligations against loss or damage and all other
insurance of the kinds and in the amounts customarily insured
against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated.
Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Each Borrower shall furnish
certificates, policies or endorsements to Lender as Lender shall
require as proof of such insurance, and, if any Borrower fails to
do so, Lender is authorized, but not required, to obtain such
insurance at the expense of Borrowers. All policies shall
provide for at least thirty (30) days prior written notice to
Lender of any cancellation or reduction of coverage and that
Lender may act as attorney for Borrowers in obtaining, and at any
time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such
insurance. Each Borrower shall cause Lender to be named as a
loss payee and an additional insured (but without any liability
for any premiums) under such insurance policies and each Borrower
shall obtain non-contributory lender's loss payable endorsements
to all insurance policies in form and substance satisfactory to
Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as
its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by any Borrower or any of
its affiliates. At its option, Lender may apply any casualty
insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such
manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations.
9.3 Financial Statements and Other Information.
9.3.0.1 Each Borrower shall, and Parent shall cause each
Obligor to, keep proper books and records in which true and
complete entries shall be made of all dealings or transactions
of or in relation to the Collateral, other property which is
security for the Obligations and the business of such Borrower
and Obligor (if any) in accordance with GAAP and Borrowers'
Agent shall furnish or cause to be furnished to Lender:
within thirty (30) days after the end of each fiscal month
(except that such period shall be within ninety (90) days for
the fiscal month of January and within sixty (60) days for the
fiscal month of February), monthly unaudited consolidated
financial statements for Parent, and its consolidated
Subsidiaries including, without limitation, consolidated
financial statements for all of the Retail Store Subsidiaries
as a whole, (including in each case balance sheets, statements
of income and loss, statements of cash flow and statements of
shareholders' equity), all in reasonable detail, fairly
presenting the consolidated financial position and the results
of the consolidated operations of Parent and its consolidated
Subsidiaries as of the end of and through such fiscal month
and within ninety (90) days after the end of each fiscal
year, audited consolidated financial statements of Parent
(including in each case balance sheets, statements of income
and loss, statements of cash flow and statements of
shareholders' equity), and the accompanying notes thereto, all
in reasonable detail, fairly presenting the consolidated
financial position and the results of the consolidated
operations of Parent and its consolidated Subsidiaries,
including the other Borrowers, as of the end of and for such
fiscal year, together with the opinion of independent
certified public accountants, which accountants shall be an
independent accounting firm selected by Parent and reasonably
acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Parent and
its consolidated Subsidiaries, as of the end of and for the
fiscal year then ended.
9.3.0.2 Borrowers' Agent shall promptly notify Lender in
writing of the details of any loss, damage, investigation,
action, suit, proceeding or claim relating to Inventory having
a cost of $2,000,000 or more or which would otherwise
adversely affect the Collateral or any other property which is
security for the Obligations in any material respect or which
would result in any
material adverse change in the consolidated business, properties,
assets, goodwill or condition, financial or otherwise of the
Apparel Group and the occurrence of any Event of Default or event
which, with the passage of time or giving of notice or both,
would constitute an Event of Default.
9.3.1 Borrowers' Agent shall promptly after the sending or
filing thereof furnish or cause to be furnished to Lender copies
of all reports which Parent or any other Borrower sends to its
stockholders generally and copies of all reports and registration
statements which Parent or any other Borrower files with the
Securities and Exchange Commission, any national securities
exchange or the National Association of Securities Dealers, Inc.
933.2 Borrowers' Agent shall furnish or cause to be
furnished to Lender such budgets, forecasts, projections and
other information respecting the Collateral and any other
property which is security for the Obligations and the
consolidated business of the Apparel Group, as Lender may, from
time to time, reasonably request. Lender is hereby authorized to
deliver a copy of any financial statement or any other
information relating to the business of Borrowers or any other
Obligor to any court or other government agency or to any
participant or assignee or prospective participant or assignee,
subject to the confidentiality provisions of Section 12.6 hereof.
Each Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrowers'
expense, copies of the financial statements of Parent or any of
the other Borrowers or any other Obligor and any reports or
management letters prepared by such accountants or auditors on
behalf of Parent or any of Borrowers and to disclose to Lender
such information as they may have regarding the business of
Parent or any of the other Borrowers or any other Obligor. Any
documents, schedules, invoices or other papers delivered to
Lender may be destroyed or otherwise disposed of by Lender one
(1) year after the same are delivered to Lender, except for any
longer period as otherwise designated by Borrowers' Agent to
Lender in writing.
9.3.3 Sale of Assets, Consolidation, Merger, Dissolution,
Etc. Neither any Borrower nor any Obligor shall merge into or
with or consolidate with any other Person (other than a Borrower
or Obligor, including, without limitation, a Retail Store
Subsidiary) or permit any other Person (other than a Borrower or
Obligor) to merge into or with or consolidate with it, except for
the merger or consolidation of any other Person into a Borrower
or Obligor, with such Borrower or Obligor being the surviving
entity of such merger or consolidation as to which Lender has
given its prior written consent thereto, which consent will not
be unreasonably withheld, or sell, assign, lease, transfer,
abandon or otherwise
dispose of any of its assets to any other Person, except for
sales of Inventory in the ordinary course of business or as
otherwise permitted by Section 7.3 hereof, the disposition of
(x) Retail Store Equipment to a Retail Store Subsidiary or (y)
worn-out or obsolete Equipment or Equipment no longer used in the
business of such Borrower or such Obligor, provided that, if an
Event of Default exists or has occurred and is continuing, any
proceeds of Retail Store Equipment are paid to Lender,
dispositions by any Borrower or any Obligor of any property to
any other Borrower or any other Obligor, the sale, lease or
other disposition of Equipment (other than Retail Store
Equipment) or real property to any other Person at arm's length
and for fair value, provided that, no Event of Default or
condition or event which, with notice or passage of time or both,
would constitute an Event of Default then exists, and Lender
receives twenty (20) days prior written notice of the sale, lease
or other disposition of such Equipment and real property which
will continue to be used by Borrowers, or any Retail Store
Subsidiary or any other Obligor and, with respect thereto, such
Person consents and agrees in writing to be bound (to the extent
applicable to such property) by the Equipment, Real Property and
Intellectual Property License, dispositions of assets owned by
any Retail Store Subsidiaries in connection with the closing of
any Retail Stores, so long as such Retail Store Subsidiary
receives aggregate proceeds from sales of inventory included in
such assets of an amount at least equal to fifty (50%) percent of
the aggregate cost of such inventory (but such percentage shall
be increased to seventy-five (75%) percent if any of the Blocked
Account Conditions have occurred and are continuing) and, upon
the occurrence of any such Blocked Account Conditions and during
the continuance thereof, the net sale proceeds thereof shall be
immediately remitted to Lender, and dispositions of the Cash
Equivalents and other investments permitted under Section 9.10(b)
hereof or form or acquire any US Subsidiaries after the date
hereof, except after ten (10) days written notice thereof to
Lender, for the organization or acquisition of a new and
additional Retail Store Subsidiary which becomes an Obligor and
grants Lender a first and prior security interest in all of its
existing and future assets and property, or wind up, liquidate
or dissolve, except (i) any Retail Store Subsidiary may be wound
up, liquidated or dissolved by Parent if the Retail Store
operated by such Retail Store Subsidiary shall have been closed
and (ii) any Subsidiary that does not or no longer does conduct
business activities and has no assets, or agree to do any of the
foregoing.
9.3.4 Encumbrances. None of Borrowers or any Obligor shall
create, incur, assume or suffer to exist any security interest,
mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including, without
limitation, the Collateral or other property which is security
for the Obligations, except: liens and security interests of
Lender; liens securing the payment of taxes which are not a lien
upon the Collateral
or other property which is security for the Obligations or are
subordinate to the security interest of Lender in the Collateral
or other property which is security for the Obligations and as to
which non-payment thereof would not result in a material adverse
change in the consolidated assets, business or prospects of the
Apparel Group and would not impede the ability of any Borrower
to perform its obligations hereunder or under any of the other
Financing Agreements or Lender to enforce any Obligations or
realize upon any Collateral or other property which is collateral
for the Obligations, which taxes are either not yet overdue or
the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to any
Borrower or such other Obligor and with respect to which adequate
reserves have been set aside on its books; non-consensual
statutory liens (other than liens securing the payment of taxes)
arising in the ordinary course of any Borrower's or Obligor's
business to the extent: such liens secure indebtedness which is
not overdue, such liens secure indebtedness relating to claims
or liabilities which are fully insured and being defended at the
sole cost and expense and at the sole risk of the insurer and are
being contested in good faith by appropriate proceedings
diligently pursued and available to such Borrower or such
Obligor, in each case prior to the commencement of foreclosure or
other similar proceedings and with respect to which adequate
reserves have been set aside on its books, non-payment thereof
would not result in a material adverse change in the consolidated
assets, business or properties of the Apparel Group, or non-
payment thereof would not impede the ability of any Borrower or
Obligor to perform its obligations hereunder or under any of the
other Financing Agreements or Lender to enforce any Obligations
or realize upon any Collateral or other property which is
collateral for the Obligations; zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of
real property or other similar encumbrances which, in the
aggregate, are not material in amount and do not interfere in any
material respect with the use of such real property or ordinary
conduct of the business of any Borrower or Obligor as presently
conducted thereon or materially detract from the value of the
real property which may be subject thereto; purchase money
security interests in Equipment (including capital leases) and
purchase money mortgages on real estate so long as such security
interests and mortgages do not apply to any property of any
Borrower or Obligor other than the Equipment or real estate so
acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or real estate so acquired, as the case
may be; pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security
legislation; deposits to secure the performance of bids, trade
contracts (other than for borrowed money), freight and customs
duties, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred
in the ordinary course of business; liens and security interests
created by a Retail Store Subsidiary in favor of C.S.A.C., Inc.
to secure advances or financial
accommodations made by C.S.A.C., Inc. for purposes of opening and
operating Retail Stores operated by such Retail Store Subsidiary
and which liens are subordinated in favor of and assigned to
Lender pursuant to the Financing Agreements; liens arising by
operation of law pursuant to Section 107(1) of the federal
Comprehensive Environmental Response, Compensation and Liability
Act or a similar state law which secure obligations that,
individually or in the aggregate, are reasonably expected to
involve less than $1,000,000 and (i) are not due and payable by
virtue of a written demand for payment, or (ii) if due and
payable, are being contested in good faith by appropriate
proceedings; liens created by, and/or setoff rights, in favor of
the bank at which the Concentration Account is maintained to the
extent approved by Lender, other liens upon and security
interests in other property granted by any Borrower or any
Obligor in favor of any other Person, which property is not
included in the Collateral or otherwise securing Obligations,
provided that Lender is given twenty (20) days prior written
notice thereof, no Event of Default or condition or event,
which, with notice or passage of time or both, would constitute
an Event of Default then exists and to the extent such property
is owned or used by a Borrower or Obligor, such Person agrees in
writing to be bound by (to the extent applicable to such
property) the Equipment, Real Property and Intellectual Property
License; liens and security interests (not otherwise permitted
hereunder) which secure obligations not exceeding (as to
Borrowers and all Obligors) $10,000,000 in aggregate amount at
any time and which are not secured by Accounts, Inventory, Credit
Card Receivables or the proceeds thereof of any of Borrowers or
similar assets of any of the Obligors or Additional L/C Debtors
and as to which there is compliance with the conditions contained
in the proviso set forth in clause (k) of this Section 9.8; the
security interests and liens set forth on Omnibus Schedule 12
hereto; and liens and security interests arising out of the
refinancing, extension, renewal or refunding of any indebtedness
secured by any lien or security interest permitted by any of the
foregoing clauses of this Section 9.8, provided, that (i) such
indebtedness is not secured by any additional assets, (ii) the
maturity or due date(s) of such indebtedness is not shortened,
(iii) the amount of such indebtedness secured by any such lien or
security
interest is not increased and (iv) the holder of such
indebtedness complies with the conditions of the applicable
clause of this Section 9.8.
9.3.5 Indebtedness. None of Borrowers shall incur, create,
assume, become or be liable in any manner with respect to, or
permit to exist, any indebtedness except the Obligations;
unsecured obligations and indebtedness owed by any of Borrowers
to any of the other Borrowers or any other Subsidiary; trade
obligations and normal accruals in the ordinary course of
business not yet due and payable, or with respect to which any
Borrower is contesting in good faith the amount or validity
thereof by appropriate
proceedings diligently pursued and available to any such Borrower
and with respect to which adequate reserves have been set aside
on its books; purchase money indebtedness (including capital
leases) to the extent not incurred or secured by liens (including
capital leases) in violation of any other provision of this
Agreement; unsecured indebtedness incurred in connection with an
overdraft line of credit in connection with the Concentration
Accounts and which are due and payable on the next Business Day
after the occurrence of any overdraft; unsecured obligations or
indebtedness set forth on Omnibus Schedule 12 hereto and
indebtedness (including guaranties permitted hereunder) secured
by the liens and security interests permitted under Section 9.8
hereof; provided, that, except pursuant to and only to the extent
of any refinancing thereof permitted pursuant to this Agreement,
Borrower may only make regularly scheduled payments of principal
and interest in respect of such indebtedness in accordance with
the terms of the agreement or instrument evidencing or giving
rise to such indebtedness as in effect on the later of the date
hereof or the date of such agreement or instrument, such
indebted Borrower shall not, directly or indirectly, amend,
modify, alter or change the terms of such indebtedness or any
agreement, document or instrument related thereto as in effect on
the later of the date hereof or the date of such agreement or
instrument in a manner that is materially adverse to the Apparel
Group, or except pursuant to and only to the extent of any
refinancing thereof permitted pursuant to this Agreement, redeem,
retire, defease, purchase or otherwise acquire such indebtedness,
or set aside or otherwise deposit or invest any sums for such
purpose, and Borrowers' Agent shall furnish to Lender all
notices or demands in connection with such indebtedness as to
which non-payment thereof (A) would result in a material adverse
change in the consolidated assets, business or prospects of the
Apparel Group or (B) would impede the ability of any Borrower to
perform its obligations hereunder or under any of the other
Financing Agreements or Lender to enforce any Obligations or
realize upon any Collateral or Obligor Collateral, either
received by any Borrower or on its behalf, promptly after the
receipt thereof, or sent by any Borrower or on its behalf,
concurrently with the sending thereof, as the case may be;
unsecured indebtedness of Parent (but only pursuant to Section
9.10(b) hereof) or any of the other Borrowers or Obligors to any
of the other Borrowers or Obligors and unsecured indebtedness of
any of the other US Subsidiaries to Parent; loans against life
insurance policies owned by Borrowers; unsecured guaranties
permitted under Omnibus Schedule 14 hereto; indebtedness of
Parent of up to the maximum principal amount of $138,000,000 less
the aggregate amount of all repayments or repurchases or
redemptions, optional or mandatory, of principal in respect
thereof, evidenced by the Subordinated Notes, plus interest
thereon at the rate provided for in the Subordinated Notes (as in
effect on the date of issuance); provided, that: (i) Parent shall
only make regularly scheduled payments of principal and interest
and premium, if any, or other mandatory payments in respect of
such indebtedness in
accordance with the terms of the Subordinated Notes or the
Subordinated Note Indenture (as in effect on the date of
issuance); (ii) Parent shall not, directly or indirectly, (A)
amend, modify, alter or change the terms of the Subordinated
Notes or any of the other Subordinated Note Agreements (as in
effect on the date of issuance) in a manner that is materially
adverse to the Apparel Group, or (B) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose in any
sinking fund, or otherwise, except, for mandatory redemptions of
the Subordinated Notes (as in effect on the date of issuance)
required by the Subordinated Note Indenture (as in effect on the
date of issuance) in the event of a Change of Control (as defined
in the Subordinated Note Indenture as in effect on the date of
issuance); and (iii) Borrowers shall furnish to Lender all
notices or demands in connection with such indebtedness as to
which non-payment thereof (A) would result in a material adverse
change in the consolidated assets, or business or prospects of
the Apparel Group or (B) would impede the ability of any Borrower
to perform its obligations hereunder or under any of the other
Financing Agreements or Lender to enforce any Obligations or
realize upon any Collateral, which such notices or demands are
either received by Parent or any other Borrower from any of the
holders of the Subordinated Notes or the Trustee, or on their
behalf, promptly after receipt thereof, or sent by Parent or any
other Borrower, or on their behalf, to any of the holders of the
Subordinated Notes or the Trustee, concurrently with the sending
thereof, as the case may be; unsecured guaranties of unsecured
indebtedness permitted under this Section 9.9 and unsecured
guaranties of indebtedness (up to the fair market value of the
collateral therefor) secured by the security interests,
mortgages, pledges and liens permitted pursuant to Section 9.8
hereof; unsecured guaranties (and secured guaranties, provided,
that, the collateral therefore does not constitute Collateral) by
Parent or CS Delaware of indebtedness or obligations incurred by
Subsidiaries that are not Obligors or Borrowers; unsecured
indebtedness of a type not otherwise described in the foregoing
clauses in an aggregate amount outstanding at any time not to
exceed $10,000,000; and any indebtedness under any amendments,
restatements, renewals, refinancing, extensions or modifications
of any of the foregoing unless such amendment, restatement,
renewal, extension, refinancing or modification (A) is materially
adverse to the Apparel Group or (B) would impede the ability of
any Borrower to perform its obligations hereunder or under any
other Financing Agreements or the ability of Lender to enforce
any of the Obligations or realize upon any Collateral or Obligor
Collateral, (C) would increase the amount or shorten the due
dates or maturity dates of any indebtedness permitted hereunder
or (D) would result in any of the foregoing being secured by
assets which are not collateral therefor prior to the date
thereof.
9.3.6 Loans, Investments, Guarantees, Etc. None of
Borrowers or any Obligor shall, directly or indirectly, make any
loans or advance money or property to any person, or invest in
(by capital contribution, loan, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a
substantial part of the assets or property of any person, or
guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance,
obligations or dividends of any Person or agree to do any of the
foregoing, except: the endorsement of instruments for collection
or deposit in the ordinary course of business; investments
(which may be by capital contributions, loans, dividends or
purchases, including, without limitation, loans and dividends by
any of the other Borrowers to Parent for the purpose of such
permitted investments to be made by Parent): in C.S.I.C., Inc.
for the purpose of acquiring Cash Equivalents, in long term
publicly traded investments (those greater than twelve (12)
months in duration), provided, that, none of the Blocked Account
Conditions have then occurred and are continuing or would result
therefrom, in long term investments (not publicly traded) in an
aggregate amount (for all of Borrowers and Obligors) not greater
than the aggregate amount of $10,000,000 at any time, provided,
that, none of the Blocked Account Conditions have then occurred
and are continuing or would result therefrom, in C.S.A.C., Inc.
for the purpose of opening and operating new Retail Stores for
new Retail Store Subsidiaries and in Retail Store Subsidiaries
for the purpose of opening and operating new Retail Stores,
provided that, in each case, the conditions of Section 9.1 hereof
are satisfied, in joint ventures after the date hereof that do
not constitute Subsidiaries of Parent in an amount (for all of
Borrowers and other Obligors) equal to or less than the noncash
investment of the costs previously capitalized as "other assets"
or "prepaid expenses" attributable to the creation or development
of joint venture concepts as set forth on Parent's balance sheet
immediately after making such investment and delivered to Lender
pursuant to Section 9.6(a) hereof, and cash investments by
Borrowers and Obligors in such joint ventures in an aggregate
amount not to exceed $5,000,000 at any time (for all of Borrowers
and Obligors) plus an amount not to exceed an additional
$5,000,000 in the aggregate (for all of Borrowers and Obligors)
existing at any time, provided that, with respect to the
additional $5,000,000 investments, none of the Blocked Account
Conditions have then occurred and are continuing or would result
therefrom, in any other Borrower or any Obligor (other than a
Borrower or Obligor which does not conduct business in any
material respect or have any material assets), in the securities
described on Omnibus Schedule 14 hereto, made directly from the
net proceeds received by Parent from the issuance of the
Subordinated Notes or from the proceeds received from the sales
of assets of any Borrower or Obligor which are permitted under
this Agreement and in which Lender does not have a security
interest or lien, and in any fiscal year of up to the amount of
the Adjusted Cash Flow of Parent in excess of $10,000,000, for
Parent's immediately
prior fiscal year, based upon Parent's annual audited financial
statements prepared on a consolidated basis for such prior fiscal
year and received by Lender pursuant to the terms of Section
9.6(a) hereof, provided that none of the Blocked Account
Conditions have then occurred and are continuing or would
result therefrom, and of a type not described in the
foregoing clauses (b)(i) through (b)(viii) hereof in an aggregate
amount (for all of Borrowers and other Obligors) existing at any
time not to exceed $5,000,000, provided that none of the Blocked
Account Conditions have then occurred and are continuing or would
result therefrom, provided that, with respect to the investments
described in the foregoing clauses (b)(i) through (b)(ix) hereof
there does not exist any Event of Default or condition or event
which would, with notice or the passage of time or both,
constitute an Event of Default at the time such investment is
made or acquired, consistent with past business practices, the
unsecured guaranties by Parent of Borrowers and the other
Subsidiaries and by each Borrower of Parent, the other Borrowers
and the other Subsidiaries, and the unsecured guaranties set
forth on Omnibus Schedule 14 hereto and any renewals or
extensions thereof which do not increase the then outstanding
amount thereof and of the unsecured and secured guaranties
permitted under Section 9.9 hereof.
9.3.6.0.0.1 Dividends and Redemptions. Except for dividends
paid by a Borrower (other than Parent) or other Obligor to
Parent or to any other Borrower or Obligor of which it is a
Subsidiary, for the purpose of (a) paying corporate overhead
of Parent and the US Subsidiaries consistent with past
business practices, or (b) paying the interest and principal
payments of Parent, the other Borrowers or the Obligors with
respect to the indebtedness permitted under Section 9.9
hereof, subject to the terms and conditions set forth
therein, including, but not limited to, the payments
permitted to be paid by Parent to the holders of the
Subordinated Notes as set forth in Section 9.9(j) hereof and
any Trustee's fees or other expenses incurred in connection
therewith, or funding investments by Parent or any other
Borrower or Obligor permitted under Section 9.10(b) hereof;
none of Borrowers or any Obligor shall, directly or
indirectly, declare or pay any dividends in cash or other of
its assets on account of any shares of any class of capital
stock of such Borrower or any Obligor now or hereafter
outstanding, or set aside or otherwise deposit or invest any
sums for such purpose, or redeem, retire, defease, purchase
or otherwise acquire any shares of any class of capital
stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration other than common
stock or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in
respect of any such shares or agree to do any of the
foregoing.
9.3.7 Transactions with Affiliates. None of Borrowers or
any Obligor shall enter into any transaction for the purchase,
sale or exchange of property to or by any affiliate except in
the ordinary course consistent with past business practices of
and pursuant to the reasonable requirements of such Borrower's or
Obligor's business or upon fair and reasonable terms no less
favorable to such Borrower or Parent than such Borrower or
Obligor would obtain in a comparable arm's length transaction
with an unaffiliated person, except with respect to sales of
Inventory to or purchases of Inventory by a Borrower or Obligor,
as to which the sales or purchase price is not less than the cost
thereof to the seller thereof.
9.4 Adjusted Net Worth. Parent shall, at all times,
maintain Adjusted Net Worth of not less than $350,000,000.
9.5 Compliance with ERISA. Borrowers shall not with
respect to any "employee pension benefit plans" maintained by
Borrower or any of its ERISA Affiliates:
9.5.1 to the extent any of the following would constitute a
Material Adverse Retail Store Event or create a lien on any of
the Collateral or other assets securing the Obligation, (i)
terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation
established pursuant to ERISA, (ii) allow or suffer to exist any
prohibited transaction involving any of such employee pension
benefit plans or any trust created thereunder which would subject
Borrowers or such ERISA Affiliate to a tax or penalty or other
liability on prohibited transactions imposed under Section 4975
of the Code or ERISA, (iii) fail to pay to any such employee
pension benefit plan any contribution which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the
terms of such plan, (iv) allow or suffer to exist any accumulated
funding deficiency, whether or not waived, with respect to any
such employee pension benefit plan, (v) allow or suffer to exist
any occurrence of a reportable event or any other event or
condition which presents a material risk of termination by the
Pension Benefit Guaranty Corporation of any such employee pension
benefit plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect
to any multiemployer pension plan.
9.5.2 As used in this Section 9.14, the term "employee
pension benefit plans," "employee benefit plans", "accumulated
funding
deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term
"prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.6 Use of Fashion Bug Card. Parent shall cause, at the
request of Lender, each of the Retail Store Subsidiaries to cease
making any sales of merchandise to customers of the Retail Store
Subsidiaries that purchase such merchandise with the Fashion Bug
Card (a) upon the occurrence of an Event of Default that is
continuing or (b) at any time that Excess Availability is less
than $40,000,000 if the percentage against the Credit Card
Receivables owed by the Financing Subsidiaries which is advanced
or paid to Borrowers or any Obligor with respect to such Credit
Card Receivables by the Financing Subsidiaries with respect
thereto is at any time less than seventy-five (75%) percent
(before financing discounts, if any). The Financing Subsidiaries
shall not be replaced by any other Credit Card Issuer with
respect to the Fashion Bug Card except for any arrangement with
such replacement Credit Card Issuer which is not materially
adverse from the existing financing arrangements with the
Financing Subsidiaries with respect to the Fashion Bug Card and
as to which there has been compliance with the provisions of
Section 4.1(h) hereof.
9.6.1 Costs and Expenses. Borrowers shall pay to Lender on
demand all costs, expenses, filing fees and taxes paid or payable
in connection with the preparation, negotiation, execution,
delivery, recording, administration, collection, liquidation,
enforcement and defense of the Obligations, Lender's rights in
the Collateral, the other property which is security for the
Obligations, this Agreement, the other Financing Agreements and
all other documents related hereto or thereto, including any
amendments, supplements or consents which may hereafter be
contemplated (whether or not executed) or entered into in respect
hereof and thereof, including, but not limited to: all costs
and expenses of filing or recording (including Uniform Commercial
Code financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees,
if applicable); costs and expenses and premiums for title
insurance and other insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections,
appraisal fees and search fees; costs and expenses of remitting
loan proceeds, collecting checks and other items of payment, and
establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto;
charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; costs and
expenses of preserving and protecting the Collateral and other
property which is security for the Obligations; costs and
expenses paid or incurred in connection with obtaining payment of
the
Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral or
other property which is security for the Obligations, and
otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or
threatened against Lender arising out of the transactions
contemplated hereby and thereby (including, without limitation,
preparations for and consultations concerning any such matters);
all out-of-pocket expenses and costs heretofore and from time to
time hereafter incurred by Lender during the course of periodic
field examinations of the Collateral and other property which is
security for all the Obligations and Borrowers' and any other
Obligor's operations, plus a per diem charge at the rate of $600
per person per day for Lender's examiners in the field and
office; costs and expenses incurred by Lender or arising with
respect to the refinancing or proposed refinancing by Lender of
the Obligations arising under this Agreement and the other
Financing Agreements; and the reasonable fees and disbursements
of counsel (including legal assistants) to Lender in connection
with any of the foregoing.
9.7 Further Assurances. At the request of Lender at any time
and from time to time, Borrowers shall, and Parent shall cause
each of the Obligors and Additional L/C Debtors to, at Borrowers'
expense, duly execute and deliver, or cause to be duly executed
and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may
be necessary or proper to evidence, perfect, maintain and enforce
the security interests and the priority thereof in the Collateral
and other property which is security for the Obligations and to
otherwise effectuate the provisions or purposes of this Agreement
or any of the other Financing Agreements. Lender may at any time
and from time to time request a certificate from an officer of
any of Borrowers or Borrowers' Agent representing that all
conditions precedent to the making of Loans and providing Letter
of Credit Accommodations contained herein are satisfied. In the
event of such request by Lender, Lender may, at its option, cease
to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in
addition, Lender has determined that such conditions are
satisfied. Where permitted by law, each of Borrowers hereby
authorize Lender to execute and file one or more UCC financing
statements with respect to Collateral signed only by Lender.
SECTION 10 EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any
one or more of the following events (except, with respect to only
the Retail Store Subsidiaries, any such event under clauses (d)
through (k) which does not constitute a Material Adverse Retail
Store Event) are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
10.1.0.1 any Borrower shall fail to pay when due any of the
Obligations within two (2) Business Days of the due date
thereof or to observe or perform any of the other terms,
covenants, conditions or provisions contained in this
Agreement or the other Financing Agreements other than as
described in Section 10.1(a)(i) above and such failure shall
continue for ten (10) consecutive days; provided, that, such
ten (10) day period shall not apply in the case of: (A) any
failure to observe any such term, covenant or condition or
provision which is not capable of being cured at all or within
such ten (10) day period or which has been the subject of a
prior failure within a six (6) month period or (B) an
intentional breach by any Borrower of any such term, covenant,
condition or provision, or (C) the failure to observe or
perform any covenants or provisions with respect to Collateral
under this Agreement or any of the other Financing Agreements;
10.1.1 any representation, warranty or statement of fact
made by any Borrower, any Obligor or any Additional L/C Debtor to
Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise
shall when made or deemed made be false or misleading in any
material respect, provided that such false or misleading
representation, warranty or statement of fact made by a Retail
Store Subsidiary (other than those which are intentional or which
adversely affect Lender's security interest in all such Retail
Store Subsidiaries' inventory in any material respect) shall not
constitute an Event of Default unless the number of Retail Store
Subsidiaries which make such representations, warranties or
statements of fact constitute more than five (5%) percent of the
total number of Retail Store Subsidiaries;
10.1.2 any Obligor or Additional L/C Debtor revokes,
terminates or fails to perform any of the terms, covenants,
conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Lender, provided that such
failure to so perform (other than any such non-performance
which is intentional or which adversely affects Congress'
security interest in all such Retail Store Subsidiaries'
inventory in any material respect) by a Retail Store Subsidiary
shall not constitute an Event of Default unless the number of
Retail Store Subsidiaries which fail to so perform constitutes
more than five (5%) percent of the total number of Retail Store
Subsidiaries which operate Retail Stores.
10.1.2.1 any judgment for the payment of money is rendered
against any Borrower or any Obligor in excess of $1,000,000 in
any one case or in excess of $2,000,000 in the aggregate and
which shall remain undischarged or unvacated for a period in
excess of thirty (30) days or execution shall at any time not
be effectively stayed, or any judgment other than for the
payment of money, or injunction, attachment, garnishment or
execution is rendered against any Borrower or any Obligor or
any of their assets, which judgment (A) would result in a
material adverse change in the consolidated assets, business
or prospects of any Borrower or Parent or (B) would impede the
ability of any Borrower, Parent or any Obligor to perform its
obligations hereunder or under any of the other Financing
Agreements or Lender to enforce any Obligations or realize
upon any Collateral, and, with respect to both (i) and (ii) of
this Section 10.1(d), would have a material adverse effect
upon the consolidated assets, business or prospects of the
Apparel Group;
10.1.2.2 except as otherwise permitted in this Agreement,
any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or any
Obligor, which is a partnership or corporation, dissolves or
suspends or discontinues doing business;
10.1.3 any Borrower or any Obligor becomes insolvent
(however defined or evidenced), makes an assignment for the
benefit of creditors or, makes or sends notice of a bulk transfer
(provided that the making or sending of notice of a bulk transfer
by Retail Store Subsidiaries shall not constitute an Event of
Default unless it constitutes a Material Adverse Retail Store
Event);
10.1.4 a case or proceeding under the bankruptcy laws of
the United States of America now or hereafter in effect or under
any insolvency, reorganization, receivership, readjustment of
debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at law or in
equity) is filed against any Borrower or any Obligor or
Additional L/C Debtor or all or any part of its properties and
such petition or application is not dismissed within thirty (30)
days after the date of its filing or any Borrower or any Obligor
shall file any
answer admitting or not contesting such petition or application
or indicates its consent to, acquiescence in or approval of, any
such action or proceeding or the relief requested is granted
sooner and such action would have a material adverse effect upon
the consolidated assets, business or prospects of the Apparel
Group;
101.5 a case or proceeding under the bankruptcy laws of the
United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now
or hereafter in effect (whether at a law or equity) is filed by
any Borrower or any Obligor or Additional L/C Debtor or for all
or any part of its property and such action would have a material
adverse effect upon the consolidated assets, business or
prospects of the Apparel Group; or
10.1.6 any default by any Borrower, any Obligor or any of
the Financing Subsidiaries under any agreement, document or
instrument relating to any indebtedness for borrowed money owing
to any person other than Lender (including, without limitation,
under any of the Subordinated Note Agreements), or any
capitalized lease obligations, contingent indebtedness in
connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than
Lender, which default continues for more than the applicable cure
period if any, with respect thereto, and would have a material
adverse effect upon the consolidated assets, business or
prospects of the Apparel Group, or any default by any Borrower or
any Obligor or the Financing Subsidiaries under any material
contract, lease, license or other obligation to or with any
person other than Lender, which default continues for more than
the applicable cure period, if any, with respect thereto, and
would have a material adverse effect upon the consolidated
assets, business or prospects of the Apparel Group;
10.1.7 any change in the controlling ownership of any of
Borrowers or any of the other Obligors;
10.1.8 the indictment or threatened indictment of any of
Borrowers, Parent or any other Obligor under any criminal
statute, or commencement or threatened commencement of criminal
or civil proceedings against Borrower or any other Obligor,
pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the
property of Borrower or such Obligor, except as set forth on
Schedule 8.5 hereto and with respect to only the Retail Store
Subsidiaries, any of the foregoing which does not constitute a
Material Adverse Retail Store Event;
10.1.9 any action or inaction by or any of the Borrowers or
Obligors which would result in a breach of any of the terms and
conditions of the Intercreditor Agreement;
10.1.10 there shall be a material adverse change in the
business or assets of the Apparel Group; or
10.1.11 there shall be an event of default under any of the
other Financing Agreements.
10.2 Remedies.
10.2.1 At any time an Event of Default exists or has
occurred and is continuing, Lender shall have all rights and
remedies provided in this Agreement, the other Financing
Agreements, the Uniform Commercial Code and other applicable law,
all of which rights and remedies may be exercised without notice
to or consent by any Borrower or any Obligor, except as such
notice or consent is expressly provided for hereunder or required
by applicable law. All rights, remedies and powers granted to
Lender hereunder, under any of the other Financing Agreements,
the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discr-
etion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right
to apply to a court of equity for an injunction to restrain a
breach or threatened breach by any Borrower or Borrowers' Agent
of this Agreement or any of the other Financing Agreements.
Lender may, at any time or times, proceed directly against any
Borrower or any Obligor to collect the Obligations without prior
recourse to the Collateral or any other property which is
security for the Obligations.
10.2.1.1 Without limiting the foregoing, at any time an
Event of Default exists or has occurred and is continuing, Lender
may, in its discretion and without limitation, accelerate the
payment of all Obligations and demand immediate payment
thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h),
all Obligations shall automatically become immediately due and
payable), with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which
any of the Collateral may be located and take possession of
the Collateral or complete processing, manufacturing and
repair of all or any portion of the Collateral, require any
Borrower, at Borrowers' expense, to assemble and make
available to Lender any part or all of the Collateral at any
place and time designated by Lender, collect, foreclose,
receive, appropriate, setoff and realize upon any and all
Collateral, remove any or all of the Collateral from any
premises on or in which the same may be located for the
purpose of effecting the sale, foreclosure or other
disposition thereof or for any other purpose, sell, lease,
transfer, assign, deliver or otherwise dispose of any and all
Collateral (including, without limitation, entering into
contracts with respect thereto, public or private sales at any
exchange, broker's board, at any office of Lender or
elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with
the Lender having the right to purchase the whole or any part
of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of
any Borrower, which right or equity of redemption is hereby
expressly waived and released by each Borrower and/or (vii)
terminate this Agreement. If any of the Collateral is sold or
leased by Lender upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of
disposition of Collateral is required by law, five (5)
Business Days prior notice by Lender to Borrowers' Agent
designating the time and place of any public sale or the time
after which any private sale or other intended disposition of
Collateral is to be made, shall be deemed to be reasonable
notice thereof to Borrowers and each of Borrowers waives any
other notice. In the event Lender institutes an action to
recover any Collateral or seeks recovery of any Collateral by
way of prejudgment remedy, each of Borrowers waives the
posting of any bond which might otherwise be required.
10.2.2 Lender may apply the cash proceeds of Collateral
actually received by Lender from any sale, lease, foreclosure or
other disposition of the Collateral to payment of the
Obligations, in whole or in part and in such order as Lender may
elect, whether or not then due. Each of Borrowers shall remain
liable to Lender for the payment of any deficiency with interest
at the highest rate
provided for herein and all costs and expenses of collection or
enforcement, including attorneys' fees and legal expenses.
10.2.2.1 Without limiting the foregoing, upon the
occurrence of an Event of Default or an event which with notice
or passage of time or both would constitute an Event of Default,
Lender may, at its option, without notice, cease making Loans
or arranging for Letter of Credit Accommodations or reduce the
lending formulas or amounts of Revolving Loans and Letter of
Credit Accommodations available to Borrowers and Additional
L/C Debtors and/or terminate any provision of this Agreement
or the other Financing Agreements providing for any future
Loans or Letter of Credit Accommodations to be made by Lender
to Borrowers or Additional L/C Debtors.
SECTION 11 JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process;
Jury Trial Waiver.
11.1.1 The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute
arising out of the relationship between the parties hereto,
whether in contract, tort, equity or otherwise, shall be governed
by the internal laws of the State of New York (without giving
effect to principles of conflicts of law).
11.1.2 Each of the parties hereto irrevocably consents and
submits to the non-exclusive jurisdiction of the Supreme Court of
the State of New York, County of New York and the United States
District Court for the Southern District of New York and waives
any objection based on venue or forum non conveniens with respect
to any action instituted therein arising under this Agreement or
any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties
hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions related hereto or thereto, in each
case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute
with respect to any such matters shall be heard only in the
courts described above (except that Lender shall have the right
to bring any action or proceeding against any Borrower or its
property in
the courts of any other jurisdiction which Lender
deems necessary or appropriate in order to realize on the
Collateral or to otherwise enforce its rights against any
Borrower or its property).
11.1.3 Each of Borrowers and Borrowers' Agent hereby waives
personal service of any and all process upon it and consents that
all such service of process may be made by certified mail (return
receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be
completed five (5) days after the same shall have been so
deposited in the U.S. mails, or, at Lender's option, by service
upon any of Borrowers or Borrowers' Agent in any other manner
provided under the rules of any such courts. Within thirty (30)
days after such service, such Borrower or Borrowers' Agent, as
the case may be, shall appear in answer to such process with
respect to each of them, failing which such Borrower or
Borrowers' Agent, as the case may be, shall be deemed in default
and judgment may be entered by Lender against such Borrowers or
Borrowers' Agent, as the case may be, for the amount of the claim
and other relief requested.
11.1.3.1 EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE
TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. EACH OF THE PARTIES HERETO HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT EACH OF THE PARTIES HERETO MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
11.1.4 Lender shall not have any liability to any Borrower
(whether in tort, contract, equity or otherwise) for losses
suffered by any Borrower in connection with, arising out of, or
in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or order of a court of
competent jurisdiction binding on Lender, that the losses were
the result of an intentional breach of contract by Lender or
Lender's own acts or omissions constituting gross negligence or
willful
misconduct. In any such litigation, Lender shall be
entitled to the benefit of the rebuttable presumption that it
acted in good faith and with the exercise of ordinary care in the
performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Each Borrower and Borrowers' Agent
hereby expressly waives demand, presentment, protest and notice
of protest and notice of dishonor with respect to any and all
instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other
demands and notices of any kind or nature whatsoever with respect
to the Obligations, the Collateral and this Agreement, except
such as are expressly provided for herein. No notice to or
demand on any Borrower or Borrowers' Agent which Lender may elect
to give shall entitle such Borrower or any other Borrower or
Borrowers' Agent to any other or further notice or demand in the
same, similar or other circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor
any provision hereof shall be amended, modified, waived or
discharged orally or by course of conduct, but only by a written
agreement signed by an authorized officer of Lender. Lender
shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers
and/or remedies unless such waiver shall be in writing and signed
by an authorized officer of Lender. Any such waiver shall be
enforceable only to the extent specifically set forth therein. A
waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such
right, power and/or remedy which Lender would otherwise have on
any future occasion, whether similar in kind or otherwise.
11.4 Waiver of Counterclaims; Punitive Damages and
Consequential Damages. Each Borrower and Borrowers' Agent waives
all rights to interpose any claims, deductions, setoffs or
counterclaims of any nature (other then compulsory counterclaims)
or claims for punitive or consequential damages of any kind of
nature in any action or proceeding with respect to this
Agreement, the Obligations, the other Financing Agreements, the
Collateral or any matter arising therefrom or relating hereto or
thereto.
11.5 Indemnification. Each Borrower shall indemnify and hold
Lender, and its directors, agents, employees and counsel,
harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or
asserted against any of them (except to the extent resulting
solely from
Lender's own acts or omissions constituting gross
negligence or willful misconduct, as determined pursuant to a
final and non-appealable judgment or order of a court of
competent jurisdiction) in connection with any litigation,
investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery,
enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding
related to any of the transactions contemplated hereby or any
act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court
costs, and the fees and expenses of counsel. To the extent that
the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or
public policy, each Borrower shall pay the maximum portion which
it is permitted to pay under applicable law to Lender in
satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the Obligations
and the termination or non-renewal of this Agreement.
SECTION 12 TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
12.1.1 This Agreement and the other Financing Agreements
shall become effective as of the date set forth on the first page
hereof (except with respect to any of the other Financing
Agreements executed after the date hereof and which shall become
effective on such date of execution) and shall continue in full
force and effect for a term ending on June 1, 1998 unless sooner
terminated by Lender pursuant to the terms hereof. Upon the
effective date of termination of the Financing Agreements,
Borrowers shall pay to Lender, in full, all outstanding and
unpaid Obligations and shall furnish cash collateral to Lender in
such amounts as Lender determines are reasonably necessary to
secure Lender from loss, cost, damage or expense, including
attorneys' fees and legal expenses, in connection with any
contingent Obligations, including checks or other payments
provisionally credited to the Obligations and/or as to which
Lender has not yet received final and indefeasible payment. Such
payment and cash collateral shall be remitted by wire transfer in
Federal funds to such bank account of Lender, as Lender may, in
its discretion, designate in writing to Borrowers' Agent for such
purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrowers to the bank
account designated by Lender are received in such bank account
later than 12:00 noon, New York City time.
12.1.2 No termination of this Agreement or the other
Financing Agreements shall relieve or discharge any Borrower,
Parent or any other Obligor or Additional L/C Debtor of its
respective duties, obligations and covenants under this Agreement
or the other Financing Agreements until all Obligations have been
fully and finally discharged and paid, and Lender's continuing
security interest in the Collateral and other property which is
security for the Obligations and the rights and remedies of
Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations
have been fully and finally discharged and paid.
12.1.3 If for any reason this Agreement is terminated prior
to the end of the then current term of this Agreement, in view of
the impracticality and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable
calculation of Lender's lost profits as a result thereof,
Borrowers agree to pay to Lender, upon the effective date of such
termination, an early termination fee in the amount set forth
below if such termination is effective in the period indicated:
Amount Period
one (1%) percent of Maximum Credit The date hereof to and
including November
30, 1997.
one half of one (l/2%) percent of December 1, 1997 to, but
percent of Maximum Credit not including, June 1, 1998.
Such early termination fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination
and Borrowers agree that it is reasonable under the circumstances
currently existing. The early termination fee provided for in
this Section 12.1 shall be deemed included in the Obligations.
Notwithstanding anything to the contrary contained in this
Section 12.1, the early termination fee provided herein shall be
only one-quarter of one (l/4%) percent of the Maximum Credit if
this Agreement is terminated prior to December 1, 1997 and will
be zero if terminated after November 30, 1997, provided, that,
all of the following conditions are complied with at the time of
such termination, (i) Borrowers elect to terminate the Agreement
and the other Financing Agreements, (ii) Borrowers have entered
into an agreement with a recognized financial
institution to replace the financing arrangements with Lender
pursuant to which such financial institution agrees to make loans
and provide financial accommodations to Borrowers for working
capital on an unsecured basis, (iii) Lender receives payment in
full for all outstanding Obligations (including cash collateral
for all contingent obligations) on the date of termination from
the initial loan proceeds of the replacement loan facility and
(iv) no Event of Default has occurred and is continuing.
12.2 Appointment of Borrowers' Agent.
12.2.1 Each Borrower hereby irrevocably appoints CS
Delaware as Borrowers' Agent hereunder and CS Delaware hereby
irrevocably agrees to act in such capacity as agent for each and
all of Borrowers hereunder. Each Borrower further irrevocably
authorizes Borrowers' Agent to take such action on such
Borrowers' behalf and to exercise such rights and powers
hereunder as are delegated to Borrowers' Agent by the terms
hereof, together with such rights and powers as are reasonably
incidental thereto.
12.2.2.1 Borrowers' Agent is hereby expressly and
irrevocably authorized by each Borrower, without hereby limiting
any other implied or expressed authority, without notice to any
Borrower to give and receive on behalf of such Borrower all
notices and other materials delivered or to be delivered by
Lender to such Borrower or by such Borrower to Lender pursuant to
the Financing Agreements, to request Revolving Loans and Letter
of Credit Accommodations on behalf of such Borrower and to
pay, on behalf of such Borrower, all Obligations at any time
owed to Lender pursuant to the terms of the Financing
Agreements.
12.3 Notices. All notices, requests and demands hereunder
shall be in writing and (a) made to Lender at its address set
forth below and to each Borrower and Borrowers' Agent at the
chief executive office of Borrowers' Agent set forth below, or to
such other address of Lender as Lender may designate by written
notice to Borrowers' Agent or to such other address of Borrowers'
Agent as Borrowers' Agent may designate by written notice to
Lender in accordance with this provision, and (b) deemed to have
been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after
sending; and if by certified mail, return receipt requested, five
(5) days after mailing.
12.4 Partial Invalidity. If any provision of this Agreement
is held to be invalid or unenforceable, such invalidity or
unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not
contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall
be construed and enforced only to such extent as shall be
permitted by applicable law.
12.5 Successors. This Agreement, the other Financing
Agreements and any other document referred to herein or therein
shall be binding upon and inure to the benefit of and be
enforceable in accordance with its terms by the parties hereto
and their respective successors and assigns, except that none of
Borrowers or Borrowers' Agent may assign its rights under this
Agreement, the other Financing Agreements and any other document
referred to herein or therein without the prior written consent
of Lender. Lender may, after notice to Borrowers' Agent, assign
its rights and delegate its obligations under this Agreement and
the other Financing Agreements and further may assign, or sell
participations in, all or any part of the Loans or any other
interest herein to another financial institution or other person
which agrees to comply with Section 12.6 hereof, in which event,
the assignee or participant shall have, to the extent of such
assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise
provided by the terms of such assignment or participation.
12.6 Confidentiality.
12.6.0.1 Lender shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for
handling confidential
information and safe and sound lending practices, any non-public
information supplied to it by Borrowers or Borrowers' Agent
pursuant to this Agreement which is clearly confidential by its
nature or which is clearly and conspicuously marked as
confidential at the time such information is furnished by
Borrowers or Borrowers' Agent to Lender, provided, that, nothing
contained herein shall limit the disclosure of any such
information: to the extent required by statute, rule,
regulation, subpoena or court order, to bank examiners and other
regulators, auditors and/or accountants, in connection with any
litigation to which Lender is a party, to any assignee or
participant (or prospective assignee or participant) so long as
such assignee or participant (or prospective assignee or
participant) shall have first agreed in writing to treat such
information as confidential in accordance with this Section 12.6,
or to counsel for Lender or any participant or assignee (or
prospective participant or assignee).
12.6.0.2 In no event shall this Section 12.6 or any other
provision of this Agreement or applicable law be deemed: to
apply to or restrict disclosure of information that has been
or is made public by Borrowers or Borrowers' Agent or any
third party without breach of this Section 12.6 or otherwise
become generally available to the public other than as a
result of a disclosure in violation hereof, to apply to or
restrict disclosure of information that was or becomes
available to Lender on a non-confidential basis from a person
other than Borrowers or Borrowers' Agent, to require Lender
to return any materials furnished by Borrowers or Borrowers'
Agent to Lender or to prevent Lender from responding to
routine informational requests in accordance with the Code of
Ethics for the Exchange of Credit Information promulgated by
The Xxxxxx Xxxxxx Associates or other applicable industry
standards relating to the exchange of credit information. The
obligations of Lender under this Section 12.6 shall supersede
and replace the obligations of Lender under any
confidentiality letter signed prior to the date hereof.
G. Entire Agreement. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instru-
ments or documents delivered or to be delivered in connection
herewith or therewith represents the entire agreement and
understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior
agreements, understandings, negotiations and discussions,
representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or
written.
IN WITNESS WHEREOF, the parties hereto have caused these
presents to be duly executed as of the day and year first above
written.
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION CHARMING SHOPPES, INC.
By:___________________________ By:_______________________
Title:_______________________ Title:____________________
Address Chief Executive Office:
1133 Avenue of the Americas 000 Xxxxx Xxxx
Xxx Xxxx, Xxx Xxxx 00000 Xxxxxxxx, Xxxxxxxxxxxx 00000
CHARMING SHOPPES OF DELAWARE,
INC.
By:__________________________
Title:_______________________
Chief Executive Xxxxxx
000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
[SIGNATURES CONTINUE ON NEXT PAGE
[SIGNATURES CONTINUED FROM PRECEDING PAGE]
CSI INDUSTRIES, INC.
By:__________________________
Title:_______________________
Chief Executive Office:
0000 Xxxxxxxxxx Xxxx
000 Xxxxxx Xxxxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
FB APPAREL, INC.
By:__________________________
Title:_______________________
Chief Executive Office:
0000 Xxxxx Xxxx 000X
Xxxxxxxxxxx, Xxxxxxx 00000
BORROWERS' AGENT
CHARMING SHOPPES OF DELAWARE,
INC.,
Borrower's Agent
By:__________________________
Title:_______________________
Chief Executive Office:
000 Xxxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxxx 00000
