BNY FINANCIAL CORPORATION
SECOND RESTATED AND AMENDED FINANCING AGREEMENT
XXXXXXX CHAUS, INC.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Gentlemen/Ladies:
Second Restated and Amended Financing Agreement ("Agreement") dated as of
October 10, 1997 (the "Closing Date") between Xxxxxxx Chaus, Inc., a corporation
organized under the laws of the State of New York ("Borrower") and BNY
Financial Corporation, a corporation organized under the laws of the State of
New York ("Lender").
BACKGROUND
Borrower and Lender are parties to a Restated and Amended Financing
Agreement dated as of February 21, 1995 (as the same has been amended,
restated, supplemented or otherwise modified from time to time, the "Existing
Agreement") pursuant to which Lender provides Borrower with certain financial
accommodations.
By execution of this Agreement, Borrower and Lender intend to amend and
restate the Existing Agreement in its entirety and, as so amended and restated,
the Existing Agreement shall read in full as set forth herein from and after
the date hereof.
IN CONSIDERATION of the mutual covenants and undertakings herein
contained, Borrower and Lender hereto hereby agree as follows:
AMENDMENT AND RESTATEMENT
As of the date of this Agreement, the terms, conditions, covenants,
agreements, representations and warranties contained in the Existing Agreement
shall be deemed amended and restated in their entirety as follows; provided,
however, nothing contained in this Agreement shall impair, limit or affect the
liens heretofore granted, pledged and/or assigned to Lender with respect to the
Collateral as security for the Obligations to Lender under the Existing
Agreement. Borrower acknowledges that the outstanding balance of Obligations
under the Existing Agreement is $77,252,000 as of the date hereof ("Existing
Obligations") the payment of which is not subject to any defense, offset or
counterclaim on the part of the Borrower. Borrower reaffirms all of the Other
Documents executed in connection with the Existing Agreement, and all
references to the Existing Agreement in the Other Documents shall mean and
include this Agreement.
1. COVERED SALES; SECURITY INTEREST
Borrower hereby acknowledges, confirms and agrees that Lender has and
shall continue to have a lien upon and security interest in all Collateral
heretofore granted to Lender pursuant to the Existing Agreement to secure the
Obligations, and to the extent not otherwise granted thereunder or under the
Other Documents or otherwise granted to or held by Lender, Borrower hereby
grants to Lender a continuing lien and security interest in all presently
existing and hereafter arising Collateral which Borrower now or hereafter owns
or has an interest in, wherever located, to secure prompt repayment of any and
all Obligations owed and to be owed by Borrower to Lender and to secure prompt
performance by Borrower of each and all of its covenants and obligations under
this Agreement and the Other Documents. Lender's lien and security interest in
the Collateral shall attach to all Collateral without further act on the part
of Lender or Borrower.
2. TERM LOAN; REVOLVING ADVANCES; L/CS; INTEREST; COMMISSIONS; LATE
PAYMENT CHARGES
2.1. If Borrower so requests, Lender shall, subject to the other
provisions of this Agreement including but not limited to Lender's rights to
withhold Reserves, make Revolving Advances and issue sight, trade Letters of
Credit ("L/Cs") (Revolving Advances and the Term Loan, collectively, the
"Loans"). All outstanding Loans and payments related to L/C's which have been
drawn upon shall be Obligations and shall be charged to Borrower's account when
made. The outstanding amount of all L/Cs shall not exceed $20,000,000 in the
aggregate at any time and shall be chargeable to Borrower's account. In no
event, however, shall the aggregate amount of all then outstanding Obligations
(including but not limited to, Loans, L/Cs and all other amounts then charged
or chargeable to Borrower's account) exceed at any time the Maximum Loan
Amount. At no time will Borrower request or incur or permit there to be
outstanding Obligations which, or request Loans or the issuance of L/Cs which
would cause the then outstanding Obligations to, exceed the Maximum Loan
Amount, or request Revolving Advances which, if made, would cause the aggregate
amount of Revolving Advances then outstanding to exceed the lesser of (i) the
Maximum Loan Amount (less outstanding L/Cs) or (ii) the Formula Amount.
Furthermore, and without limiting Borrower's Obligations or Lender's other
rights, Borrower shall forthwith pay Lender (A) the amount, if any, by which
the then outstanding Obligations at any time and from time to time exceed the
then Maximum Loan Amount, and (B) the amount by which the then aggregate amount
of outstanding Revolving Advances exceeds the lesser of (x) Maximum Revolving
Amount (less outstanding L/Cs) or (y) the Formula Amount (each, an
"Overadvance").
2.2. Fifteen Million Dollars ($15,000,000) of the Existing Obligations is
hereby recast as a Term Loan (the "Term Loan"). The Term Loan shall, with
respect to principal, amortize annually as follows, in nineteen (19) quarterly
installments, commencing as of March 31, 1998 and on the last day of each
fiscal quarter thereafter and one final installment on December 31, 2002 in
the amount of the then outstanding principal balance, subject to acceleration
upon the occurrence and continuance of an Event of Default under this Agreement
or termination of this Agreement pursuant to Section 7 hereof:
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PERIOD ANNUAL AMORTIZATION QUARTERLY INSTALLMENT
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Fiscal year ending June 30, 1998 $ 500,000 $250,000
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Fiscal year ending June 30, 1999 $1,000,000 $250,000
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Fiscal year ending June 30, 2000 $1,000,000 $250,000
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Fiscal year ending June 30, 2001 $1,000,000 $250,000
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Fiscal year ending June 30, 2002 $1,000,000 $250,000
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September 30, 2002 $ 250,000 $250,000
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December 31, 2002 The outstanding balance
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The Term Loan shall be evidenced by and subject to the terms and conditions set
forth in the secured promissory note attached hereto as Exhibit 2.2.
2.3. Subject to the terms and conditions set forth in this Agreement,
Lender will make Revolving Advances to Borrower in aggregate amounts
outstanding at any time equal to the lesser of (a) the Maximum Revolving Amount
less the aggregate amount of outstanding L/Cs or (b) an amount equal to the sum
of:
(i) 85% of the net face amount of Eligible Receivables (as hereinafter
defined); provided, that with respect to Eligible Receivables
generated by sales to Dillards Department Store, such advance
percentage shall be 80%) plus ----
(ii) (A) 60% of the value of the Eligible Inventory consisting of Domestic
Finished Goods Inventory and (B) 50% of the value of the Eligible
Inventory consisting of Foreign Finished Goods Inventory; provided,
that the maximum amount of availability hereunder with respect to
Inventory located at Guarantor's retail store locations shall not
exceed (I) $2,500,000 during the period from October 1, 1997 through
and including October 31, 1997, (II) $1,500,000 during the period
from November 1, 1997 through and including November 30, 1997, (III)
$1,200,000 during
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the period from December 1, 1997 through and including January 31,
1998 and (IV) $0 at all times thereafter, plus
(iii) 100% of the Cash Collateral Deposit, plus
(iv) Permitted Overadvances, plus
(v) the Put Amount minus
(vi) Reserves.
The amount derived from the sum of (x) Sections 2.3(i), (ii), (iii), (iv)
and (v) minus (y) Section 2.3(vi) at any time and from time to time shall be
referred to as the "Formula Amount." However, Lender may at any time and from
time to time, in Lender's sole ----- discretion, increase or decrease any of
the percentages referred to in the preceding sentence.
2.4. For Lender's services, Lender shall charge to Borrower's account:
(a) monthly, as of the last day of each month, interest on the average
daily balance of all Obligations which are outstanding during such month (but
in the case of L/Cs, only those which have been charged to Borrower's account)
at a rate per annum which exceeds the average Alternate Base Rate in effect
during such month by the then "Applicable Margin" (as hereinafter defined);
provided, however, that said interest rate shall not be less than six percent
(6%) per annum and shall in no event be higher than the highest rate permitted
by New York law. (b) all bank charges for wire transfers.
(c) an unused line fee at the rate of three eighths of one percent (3/8%)
per annum (based on a 360-day year), calculated and payable monthly, on the
difference between (i) the Maximum Loan Amount and (ii) the average amount of
outstanding Obligations during such month.
(d) a fee at the rate of 1/8% of 1% per month (the "L/C Fee") on the
average daily balance of L/Cs outstanding during such month, but in no event
less than $25,000 per month, provided however, that if there shall exist an
Overadvance including, but not limited to a Permitted Overadvance outstanding
on each of five or more days in any month, the L/C Fee shall be increased by
1/12 of one percent for such month. Additional amounts, at Lender's standard
rates for letters of credit and those of the issuing banks, shall be charged
for letters of credit issued on Borrower's behalf which are not negotiated by
the beneficiaries at (i) an overseas branch of the Bank or (ii) another bank,
if any, chosen by Lender.
(e) monthly, as of the 15th day of each month, a commission at the rate of
twenty five one hundredths of one percent (.25%) of the gross face amount of
each invoice evidencing a Receivable assigned to Lender under this Agreement
during such month, which commission is in consideration of the accounts
receivable management and bookkeeping services to be provided by Lender
hereunder. However, for all purposes hereof, the minimum
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commission that Borrower shall pay with respect to each "Contract Quarter"
(the three month period beginning on February 1, May 1, August 1, and
November 1, of each year) shall not be less than $125,000 ("Minimum
Commission"). If the actual commission paid in any Contract Quarter or part
thereof is less than the Minimum Commission, Lender shall charge to Borrower's
account the difference ("Minimum Commission Charge") between the Minimum
Commission and the commission actually paid for the Contract Quarter or portion
thereof during which this Agreement is in effect. For each Contract Quarter
Lender shall compute the Minimum Commission Charge, if any, and charge
Borrower's account therefor for each such quarter in the month following the
end of such quarter or in the month following the Restructure Date of
termination of this Agreement in the case of the last Contract Quarter or
partial Contract Quarter.
3. MATURED FUNDS
On the last day of each month, Lender shall credit Borrower's account with
interest at a rate per annum equal to three percent (3%) less than the average
Alternate Base Rate in effect during such month on the average daily balance of
any amounts payable by Lender to Borrower hereunder with respect to Receivables
(as confirmed by Lender by appropriate credit to Borrower's account with
Lender) which are not drawn by Borrower on the Maturity Date, while held by
Lender after the Maturity Date.
4. CHARGES; BALANCES; RESERVES
Lender may charge to Borrower's account all Obligations. Recourse to
security will not be required at any time. All credit balances or other sums at
any time standing to Borrower's credit and all Reserves on Lender's books, and
all of Borrower's property in Lender's possession at any time or in the
possession of any parent, affiliate or subsidiary of Lender or on or in which
Lender or any parent, affiliate or subsidiary has a lien or security interest,
may be held and reserved by Lender as security for all Obligations. Lender will
account to Borrower monthly and each monthly accounting statement will be fully
binding on Borrower and will constitute an account stated, unless, within
thirty (30) days after such statement is mailed to Borrower or within thirty
(30) days after the mailing of any adjustment thereof Lender may make, Borrower
gives Lender specific written notice of exceptions.
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5. CERTAIN REPRESENTATIONS AND WARRANTIES; DISPUTES; RETURNS; CHARGEBACKS
5.1. Borrower warrants and represents that Borrower has good title to the
Receivables free of any encumbrance except in Lender's favor; each Receivable
purchased hereunder is a bona fide, enforceable obligation created by the
absolute sale and delivery of goods or the rendition of services in the
ordinary course of business; when Borrower assigns each Receivable to Lender,
Borrower's customer is unconditionally obligated to pay at maturity the full
amount of each Receivable purchased hereunder without defense, counterclaim or
offset, real or alleged; all documents in connection therewith are genuine; and
when Borrower assigns each Receivable to Lender the customer will accept the
goods or services without alleging any defense, counterclaim, offset, dispute
or other claim whether arising from or relating to the sale of such goods or
services or arising from or relating to any other transaction or occurrence (a
"Dispute").
5.2. Borrower further represents and warrants that (a) Borrower's address
set forth above is that of Borrower's chief place of business and chief
executive office and the location of all Collateral and of Borrower's books and
records relating to the Receivables; (b) Borrower has disclosed to Lender the
locations of all of Borrower's and Guarantor's other places of business as well
as all trade names or styles, trademarks, divisions or other names under which
Borrower and Guarantor conduct business (hereinafter collectively defined as
the "Trade Names") and that Borrower and Guarantor in the ordinary course of
its business and Lender in the exercise of its rights with respect to the
Collateral have and will have the right to use the Trade Names; and (c) except
after thirty (30) days prior written notice to Lender of Borrower's intention
to do so, neither Borrower nor Guarantor will make any change in its name or
corporate structure (whether by merger, reorganization or otherwise) or sell or
acquire any assets except in the ordinary course of its business, nor make any
change which would have the effect of rendering inaccurate or incomplete the
representations contained in this subparagraph 5.2. If Borrower or Guarantor
takes or proposes to take any action referred to in the immediately preceding
subdivision (c), Lender may, at any time before or after such action is taken,
terminate this Agreement effective immediately by giving Borrower written
notice of such termination.
Upon an "Event of Default" (as hereafter defined) Lender may at any time in
Lender's discretion (i) withdraw Borrower's authority to issue credits to its
customers without Lender's prior written consent; (ii) litigate Disputes or
settle them directly with the customers on terms acceptable to Lender; or (iii)
direct Borrower to set aside, identify as Lender's property and procure
insurance satisfactory to Lender on any returned or repossessed merchandise or
other goods which by sale resulted in Receivables theretofore assigned to
Lender ("Retained Goods"). All Retained Goods (and the proceeds thereof) shall
be (A) held by Borrower in trust for Lender as Lender's property; (B) subject
to a security interest in Lender's favor as security for the Obligations; and
(C) disposed of only in accordance with Lender's express written instructions.
5.3. BORROWER WARRANTS THAT IT WILL NOT GRANT A SECURITY INTEREST, LIEN OR
OTHER ENCUMBRANCES IN, TO OR ON ANY OF BORROWER'S RECEIVABLES OR INVENTORY TO
ANYONE EXCEPT LENDER WITHOUT LENDER'S PRIOR WRITTEN CONSENT EXCEPT FOR THE
FOLLOWING "PERMITTED LIENS":
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(a) Liens for taxes or assessments or other government charges or levies
if not yet due and payable or if due and payable if they are being contested in
good faith by appropriate proceedings and for which appropriate reserves are
maintained;
(b) Liens imposed by law, such as mechanic's, materialmen's, landlord's,
warehouseman's and carrier's liens, and other similar liens, securing
obligations incurred in the ordinary course of business which are not past due
for more than thirty (30) days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(c) Liens under workmen's compensation, unemployment insurance, social
security or similar legislation (other than ERISA);
(d) other liens incidental to the conduct of Borrower's business or the
ownership of Borrower's property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit,
and which do not in the aggregate materially detract from Lender's rights in
and to Borrower's property which is subject to Lender's security interest or
which do not materially impair the use thereof in the operation of Borrower's
business;
(e) judgment and other similar liens arising in connection with court
proceedings; provided that the execution or other enforcement of such liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings and for which appropriate reserves
are maintained;
(f) purchase money liens on any equipment hereafter acquired or the
assumption of any lien on equipment existing at the time of such acquisition;
provided that:
(i) any property subject to any of the foregoing is acquired by the
Borrower in the ordinary course of its business and the lien on any
such property is created contemporaneously with such acquisition;
(ii) the obligation secured by any lien so created, assumed or existing
shall not exceed one hundred percent (100%) of the lesser of cost or
fair market value as of the time of acquisition of the property
covered thereby;
(iii) each such lien shall attach only to the property so acquired and
fixed improvements thereon;
(g) Liens securing obligations arising out of the extension or refinancing
of an obligation permitted to be secured by a lien pursuant to the provisions
of paragraph 5(f) hereof; and
(h) Liens existing on the date hereof and listed on Exhibit 5.3(h) hereto
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5.4. Borrower warrants and represents that except with respect to
infractions, the consequences of which would not have a material adverse effect
on Borrower's business, Borrower is now, and Borrower hereby covenants and
agrees that Borrower will at all times hereafter be and remain in compliance
with all laws, rules, regulations and orders of all federal, state and local
governmental agencies having jurisdiction, including but not limited to those
relating to environmental protection (including CERCLA, RCRA and EPA) and
employees (including OSHA, ERISA and PBGC). Borrower will promptly advise
Lender of any action, threatened action or claim against Borrower relating to
its failure or alleged failure to comply with such laws, rules regulations, or
orders and give Lender copies of all documents received or sent by Borrower
relating thereto. Borrower will at its sole cost and expense take appropriate
steps to defend against any such actions and claims and Borrower will keep
Lender apprised of the status thereof. If, in Lender's opinion, Borrower fails
to take such steps, or fails to comply with such laws, rules, regulations or
orders, Lender may, but shall not be obligated to, take such steps, at
Borrower's cost and expense (for which Borrower will promptly reimburse
Lender), as Lender deems appropriate for such defense and/or to ensure such
compliance. Borrower will, at its sole cost and expense, furnish Lender with
such audits, assessments and evaluations (including but not limited to those
related to environmental protection) concerning its compliance or failure to
comply with such laws, rules, regulations and orders, as Lender requests.
Borrower will indemnify, defend and hold Lender harmless from and against all
losses, damages, liabilities, costs and expenses arising out of Borrower's
failure or alleged failure to comply with such laws, rules, regulations or
orders. Without limiting any of the foregoing, Borrower warrants and represents
that there are no visible signs of releases, spills, discharges, leaks or
disposal of hazardous substances at, upon, under or within any of Borrower's
realty or any premises leased by Borrower; there are no underground storage
tanks or polychlorinated biphenyls on Borrower's realty or any premises leased
by Borrower; neither Borrower's realty nor any premises leased by Borrower has
ever been used as a treatment, storage or disposal facility of hazardous waste;
and no hazardous substances are present on the realty or any premises leased by
Borrower, excepting such quantities as are handled in accordance with all
applicable manufacturer's instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of its
business.
5.5. Borrower represents and warrants that (a) Borrower is not a party to
any litigation or administrative or other proceeding the adverse outcome of
which could have a material adverse effect on Borrower's business and (b) the
only material pending litigation and administrative and other proceedings to
which Borrower is a party are set forth on Exhibit 5.5 hereto.
6. INVOICING; PAYMENTS; RETURNS; L/C's
6.1. Borrower recognizes that the amount evidenced by checks, notes,
drafts or any other forms of payment relating to and/or proceeds of Receivables
may not be collectible by Lender on the date received. Accordingly, all items
of payment of Receivables shall be credited to Borrower's account two (2)
business days after confirmation to Lender that such items of payment have been
collected in good funds and finally credited to Lender's account. Lender is
not, however, required to credit Borrower's account for the amount of any item
of payment which is unsatisfactory to Lender and may charge Borrower's account
for the amount of any item of payment which is returned unpaid.
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6.2. Borrower shall pay principal, interest, fees, commissions and
expenses and all other amounts payable hereunder, or under any related
agreement, without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
6.3. In connection with each L/C, Borrower shall execute and deliver to
Lender such applications, agreements, certificates and other documents as
Lender may reasonably request.
6.4. Each L/C shall, among other things, call for sight drafts and have an
expiry date not later than six (6) months from date of issuance.
6.5. Borrower shall hold in trust for Lender and deliver to Lender in
original form and on the date of receipt thereof, all checks, drafts, notes,
money orders, acceptances, cash and other payments received by Borrower, if
any, in payment of the Receivables.
6.6. Lender shall have the right at any time to send notice of the
assignment of, and Lender's security interest in, the Receivables to any and
all of Borrower's customers or any third party. Thereafter, Lender shall have
the sole right to collect the Receivables. Lender's actual collection expenses,
including, but not limited to stationery and postage, telephone and telegraph,
secretarial and clerical expenses and the salaries of any collection personnel
used for collection, may be charged to Borrower's account.
6.7. Lender shall have the right to receive, endorse, assign and/or
deliver in Lender's name or Borrower's any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and Borrower
hereby waives notice of presentment, protest and non-payment of any instrument
so endorsed. Borrower hereby constitutes Lender or Lender's designee as
Borrower's attorney with power (a) to endorse Borrower's name upon any notes,
acceptances, checks, drafts, money orders or other evidences of payment; (b) to
sign Borrower's name on any invoice or xxxx of lading relating to any of the
Receivables, drafts against Borrower's customers, assignments and verifications
of Receivables; (c) to send verification of Receivables to any customer; (d) to
sign Borrower's name on all financing statements or any other documents or
instruments deemed necessary or appropriate by Lender to preserve, protect, or
perfect Lender's interest in the Collateral and to file same; (e) upon an Event
of Default to demand payment of the Receivables; (f) upon an Event of Default
to enforce payment of the Receivables by legal proceedings or otherwise; (g)
upon the occurrence and during the continuance of an Event of Default to
exercise all of Borrower's rights and remedies with respect to the collection
of the Receivables and any other Collateral; (h) upon the occurrence and
during the continuance of an Event of Default to settle, adjust, compromise,
extend or renew the Receivables; (i) upon the occurrence and during the
continuance of an Event of Default to settle, adjust or compromise any legal
proceedings brought to collect Receivables; (j) to prepare, file and sign
Borrower's name on a proof of claim in bankruptcy or similar document against
any customer; (k) to prepare, file and sign Borrower's name on any notice of
lien, assignment or satisfaction of lien or similar document in connection
with the Receivables; and (l) to do all other acts and things reasonably
necessary to carry out this Agreement. All acts of said attorney or designee
are hereby ratified and approved, and said attorney or designee shall
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not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done willfully, maliciously or
with gross negligence; this power being coupled with an interest is
irrevocable while any of the Obligations remain unpaid. Lender shall have
the right at any time to change the address for delivery of mail addressed to
Borrower to such address as Lender may designate.
6.8. Lender shall not, under any circumstances or in any event whatsoever,
have any liability for any error or omission or delay of any kind occurring in
the settlement, collection or payment of any of the Receivables or any
instrument received in payment thereof, or for any damage resulting therefrom,
except to the extent that any of the foregoing arises out of the gross
negligence, bad faith, unlawful conduct or willful misconduct of Lender.
6.9. Until Lender instructs otherwise, all proceeds of all Receivables
shall be deposited by Borrower's customers into a lockbox account. Arrangements
relating to the lockbox account shall be pursuant to agreements among Borrower,
Lender and banks acceptable to Lender, in form and substance acceptable to
Lender, and must include, inter alia, a provision prohibiting the bank from
exercising any set off or similar right and must give Lender sole and exclusive
dominion and control. All funds deposited in such lockbox account shall
immediately become Lender's property. Lender assumes no responsibility for such
lockbox account arrangement, including, without limitation, any claim of accord
and satisfaction or release with respect to deposits accepted by any bank
thereunder. Until Lender instructs otherwise, Borrower shall legend all
invoices in such manner as Lender directs in order to instruct Borrower's
customers to remit payment through the lockbox account. Borrower has previously
delivered each lockbox agreement with respect to the accounts described on
Exhibit 6.9 hereof executed by the applicable bank.
7. TERMINATION
7.1. This agreement shall remain in full force and effect until terminated
as follows:
(a) Subject to the terms of Paragraph 7(c) below, Borrower may terminate
this agreement at any time by giving Lender written notice of termination at
least ninety (90) days prior to the Restructure Date of termination. Lender may
terminate this Agreement effective as of December 31, 2002 or at any time
thereafter by giving Borrower written notice of termination at least sixty (60)
days prior to the Restructure Date of termination. Borrower and Lender each
acknowledges and agrees that Borrower or Lender may exercise the right to
terminate under this subdivision (a) even if the other party is not in breach
of or in default under this Agreement and no matter what the financial
condition or prospects of the other party may be.
(b) If Borrower shall suspend business, sell all or a significant portion
of its assets, becomes insolvent or unable to pay debts as they mature after
giving effect to the Transactions, make an assignment for the benefit of
creditors, or apply for an extension from creditors; or if a Receiver or
Trustee shall be appointed for Borrower or its property; or if Borrower's
property shall become subject to any material lien or attachment other than
Permitted
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Liens; or if a petition under the Federal Bankruptcy Code shall be filed
by or against Borrower; or if Borrower shall seek relief under any insolvency
statute, federal, state or other; or if a custodian shall be appointed for
all or substantially all of Borrower's property; or if Borrower shall breach
this agreement or any other agreement with Lender except if such breach
is unintentional and immaterial; or if an Event of Default occurs and is
continuing under this Agreement; or if any warranty, or representation
hereunder or any portion of the contents of any document heretofore or
hereafter furnished in connection with this Agreement is or becomes untrue or
misleading except if such false or misleading warranty or representation is
immaterial and has been made unintentionally; or if Borrower shall fail to pay
any Obligation when due; or if any guaranty of the Obligations shall be
terminated, provided that the guaranty of X. Xxxxx shall be amended as of the
date hereof to limit X. Xxxxx'x obligation thereunder to $10,000,000 and shall
thereafter be released upon application of the Cash Collateral Deposit as
provided in Section 12.3 hereof and provided, further that upon the dissolution
of Guarantor, the guaranty of Guarantor shall be released; or if there is a
default by X. Xxxxx under the Restructure Put which is not cured within any
applicable grace period; or if there occurs any change in Borrower's condition
or prospects which in Lender's reasonable opinion impairs the Collateral or
Lender's rights or Borrower's ability to perform the Obligations; or if
Lender's security interest in the Collateral ceases to be a perfected first
security interest; or if Borrower fails to deliver its business plan to Lender,
as required pursuant to Section 9.1(e) hereof, at least thirty (30) days prior
to June 30th of each year; or if all of the retail store operations conducted
by Borrower or Borrower's subsidiary shall not have been closed by January 31,
1998, except for the retail operation at the Secaucus, New Jersey location;
then in any of such events, an "Event of Default" shall be deemed to have
occurred under this Agreement, and Lender may terminate this Agreement at any
time without notice. In addition, this Agreement shall automatically terminate
in the event of a filing of a petition under the Federal Bankruptcy Code by or
against Borrower.
(c) Termination pursuant to paragraph 5.2 above.
7.2. On the Restructure Date of termination all Obligations shall become
immediately due and payable in full without further notice or demand and Lender
shall have no further obligation to provide any Loans or issue any L/Cs.
Lender's rights with respect to Obligations owing to it, or chargeable to
Borrower's account, arising out of transactions having their inception prior to
the Restructure Date of termination, will not be affected by termination.
Without limiting the foregoing, all of Lender's security interests and other
rights in and to all Collateral shall continue to be operative until such
Obligations have been fully and finally satisfied or Borrower has furnished
Lender an indemnity and from an indemnitor satisfactory to Lender.
7.3. If Borrower terminates this Agreement pursuant to paragraph 7.1(a),
or if Lender terminates the Agreement pursuant to paragraph 7.1(b) or 7.1(c),
in any such case, in addition to Borrower's other Obligations, Borrower will
pay Lender on or before the Restructure Date of termination an early
termination fee as follows:
(a) If termination occurs prior to October 8, 2000, Borrower shall pay
Lender $2,750,000;
11
(b) If termination occurs at any time from October 9, 2000 through and
including December 30, 2002, Borrower shall pay Lender $2,200,000.
Lender's rights under this paragraph 7.3 are in addition to Lender's other
rights under this agreement.
7.4. Upon the occurrence and during the continuance of an Event of
Default, Lender may, if Lender so elects, at any time thereafter, in addition
to Lender's other rights, suspend indefinitely the making of any additional
Loans and/or the issuance of additional L/Cs and/or reduce the Formula Amount
in a manner and in amounts in Lender's sole discretion, without at the same
time terminating this Agreement. However, such suspension shall not be a waiver
of or otherwise deprive Lender of any of its other rights, including but not
limited to the right at any time to terminate this Agreement because of the
occurrence of such event or any other event, or the right to terminate this
Agreement pursuant to paragraph 7.1(a) or 7.1(c) hereof, all of which rights
are now hereby, and then shall be automatically, reserved without any other
action on Lender's part.
8. DEFINITIONS
As used herein
"Alternate Base Rate" shall mean, for any day, a rate per annum equal to
the higher of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2 of 1%. Interest shall be calculated
on the basis of the actual number of days elapsed over a year of 360 days.
"Applicable Margin" shall mean (A) one percent for any month in which the
Interest bearing Obligations outstanding on each of five or more days in any
month exceed the Formula Amount or (B) one half of one percent (1/2%) at any
other time; provided, however, that the Applicable Margin shall mean two and
one half percent (2 1/2%) with respect to all Obligations not paid when due
hereunder so long as they remain unpaid.
"Availability Projections" shall have the meaning given to such term in
that certain Letter Agreement dated as of the Closing Date between Borrower and
Lender.
"Bank" shall mean The Bank of New York, New York, New York.
"Cash Collateral Deposit" shall mean an aggregate of $22,500,000 in which
Lender has been granted a security interest by X. Xxxxx pursuant to the Cash
Collateral Deposit Letters.
"Cash Collateral Deposit Letters" shall mean the (i) Cash Collateral
Deposit Letter dated July 23, 1997 by X. Xxxxx in favor of Lender and (ii) Cash
Collateral Deposit Letter dated as of the Closing Date by X. Xxxxx in favor of
Lender.
"Closing Date" shall have the meaning set forth in the introductory
paragraph hereof.
12
"Collateral" shall mean and include:
(A) all Inventory;
(B) all Equipment;
(C) all General Intangibles;
(D) all Receivables;
(E) all books, records, ledgercards, files, correspondence, computer
programs, tapes, disks and related data processing software (owned by Borrower
or in which it has an interest) which at any time evidence or contain
information relating to (A), (B), (C) and (D) above or are otherwise necessary
or helpful in the collection thereof or realization thereupon;
(F) documents of title, policies and certificates of insurance,
securities, chattel paper, other documents or instruments evidencing or
pertaining to (A), (B), (C), (D) and (E) above;
(G) all guaranties, liens on real or personal property, leases, and other
agreements and property which in any way secure or relate to (A), (B), (C),
(D), (E) and (F) above, or are acquired for the purpose of securing and
enforcing any item thereof;
(H) (i) all cash held as cash collateral to the extent not otherwise
constituting Collateral, all other cash or property at any time on deposit with
or held by Lender for the account of Borrower (whether for safekeeping,
custody, pledge, transmission or otherwise), (ii) all present or future deposit
accounts (whether time or demand or interest or non-interest bearing) of
Borrower with Lender or any other Person including those to which any such cash
may at any time and from time to time be credited, (iii) all investments and
reinvestments (however evidenced) of amounts from time to time credited to such
accounts, and (iv) all interest, dividends, distributions and other proceeds
payable on or with respect to (x) such investments and reinvestments and (y)
such accounts; and
(I) all products and proceeds of (A), (B), (C), (D), (E), (F), (G) and (H)
above (including, but not limited to, all claims to items referred to in (A),
(B), (C), (D), (E), (F), (G) and (H) above) and all claims of Borrower against
third parties (x) for (i) loss of, damage to, or destruction of, and (ii)
payments due or to become due under leases, rentals and hires of, any or all of
(A), (B), (C), (D), (E), (F), (G) and (H) above and (y) proceeds payable under,
or unearned premiums with respect to policies of insurance in whatever form.
"Contract Quarter" shall have the meaning set forth in Section 2.4(e)
hereof.
"Contract Rate" shall mean the applicable non-default rate of interest
charged under this Agreement or the X. Xxxxx Subordinated Note, as applicable.
13
"Dispute" shall have the meaning set forth in Section 5.1 hereof.
"Domestic Finished Goods Inventory" shall mean finished goods Inventory
(including inventory in Guarantor's retail outlets) located in the U.S.A.
"Eligible Inventory" means (A) Domestic Finished Goods Inventory, and (B)
Foreign Finished Goods Inventory, all valued at the lower of cost or market
value, determined on a first-in first-out basis, which is not, in Lender's
reasonable opinion, obsolete, slow moving in unacceptable condition or
unmerchantable or merchantable only at a price less than cost and which Lender,
in its sole discretion, shall not deem ineligible inventory, based on such
considerations as Lender may from time to time deem appropriate including,
without limitation, whether the inventory is subject to a perfected, first
priority security interest in favor of Lender (other than inventory in transit
from suppliers in the ordinary course of Borrower's business) and whether the
inventory conforms to all standards imposed by any governmental agency,
division or department thereof which has regulatory authority over such goods
or the use or sale thereof.
Without limiting the foregoing, so long as Borrower is in default under
any licensing agreement relating to any inventory, or so long as the licensor
thereunder shall not have entered into an agreement in form and substance
acceptable to Lender relating to such inventory and Lender's rights therein,
the respective inventory shall be ineligible. Lender's making loans to Borrower
related to the value of such inventory despite its ineligibility shall not be
deemed a waiver of any of Lender's rights to deem such inventory ineligible at
any time or times, or Borrower's obligation hereunder to pay Lender forthwith
the amount by which then outstanding Obligations shall exceed the then
Borrowing Base as a result of such ineligibility.
"Eligible Receivables" means each Receivable arising in the ordinary
course of Borrower's business and which Lender, in its sole reasonable credit
judgment, shall deem to be an Eligible Receivable, based on such considerations
as Lender may from time to time deem appropriate. In general, a Receivable
shall not be deemed eligible unless such Receivable is subject to Lender's
perfected security interest and no other lien and is evidenced by an invoice
or other documentary evidence satisfactory to Lender. In addition, no
Receivable shall be an Eligible Receivable if:
(A) it arises out of a sale made by Borrower to an affiliate of
Borrower's or to an entity controlled by an affiliate of Borrower's;
(B) it is unpaid more than 60 days (30 days in the case of "Dated
Invoices") after the original due date, or due more than 150 days after
the invoice date; (a Dated Invoice is any invoice issued on terms
exceeding net 45 days);
(C) twenty-five percent (25%) or more of the Receivables from the
account debtor are not deemed Eligible Receivables hereunder. Such
percentage may, in Lender's sole discretion, be increased or decreased
from time to time;
(D) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
14
(E) the account debtor is also Borrower's creditor or supplier, or
the account debtor has disputed liability, or the account debtor has made
any claim with respect to any other Receivable due from such account
debtor to Borrower, or the Receivable otherwise is or may become subject
to any right of setoff by the account debtor;
(F) the account debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made
an assignment for the benefit of creditors, or if a decree or order for
relief has been entered by a court having jurisdiction in the premises in
respect of the account debtor in an involuntary case under any state or
federal bankruptcy laws, as now constituted or hereafter amended, or if
any other petition or other application for relief under any state or
federal bankruptcy law has been filed against the account debtor, or if
the account debtor has failed, suspended business, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for
it or for all or a significant portion of its assets or affairs; except
with respect to Receivables arising from sales to account debtors for
which Borrower have obtained Lender's prior written consent.
(G) the sale to the account debtor is on a xxxx-and-hold, guaranteed
sale, sale-and return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper;
(H) Lender believes, in its sole judgment, that collection of such
Receivable is insecure or that such Receivable may not be paid by reason
of the account debtor's financial inability to pay;
(I) the account debtor is the United States of America, any state or
any department, agency or instrumentality or any of them, unless Borrower
assigns its rights to payment of such Receivable to Lender pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. sub-Section 203 et
seq.) or have otherwise complied with other applicable statutes or
ordinances;
(J) the goods giving rise to such Receivable have not been shipped
and delivered to and accepted by the account debtor or the services giving
rise to such receivable have not been performed by Borrower and accepted
by the account debtor or the Receivable otherwise does not represent a
final sale;
(K) the Receivables of the account debtor exceed a credit limit
determined by Lender in its sole discretion, to the extent such Receivable
exceeds such limit;
(L) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim or if the Receivable is contingent in any respect
or for any reason;
(M) Borrower has made any agreement with any account debtor for any
deduction therefrom, except for discounts or allowances made in the
ordinary
15
course of business for prompt payment, all of which discounts or
allowances are reflected in the calculation of the face value of each
respective invoice related thereto;
(N) shipment of the merchandise or the rendition of services has not
been completed;
(O) any return, rejection or repossession of the merchandise has
occurred;
(P) such Receivable is not payable to Borrower; or
(Q) such Receivable is not otherwise satisfactory to Lender as
determined in good faith by Lender in the exercise of its discretion in a
reasonable manner.
"Equipment" shall mean and include all of Borrower's now owned or
hereafter acquired equipment, machinery and goods (other than Inventory),
whether or not constituting fixtures, including, without limitation: plant and
office equipment, tools, dies, parts, data processing equipment, furniture and
trade fixtures, trucks, trailers, loaders and other vehicles and all
replacements and substitutions therefore and all accessions thereto.
"Event of Default" shall mean any of the events set forth in Section
7.1(b) hereof.
"Federal Funds Rate" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day (or
if such day is not a business day, for the next preceding business day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a business day, the average of quotations for such day on such
transactions received by the Bank from three Federal funds brokers of
recognized standing selected by the Bank.
"Foreign Finished Goods Inventory" shall mean finished goods inventory
located outside of the U.S.A. and destined for the U.S.A. to be imported by
Borrower under outstanding L/C's for which payment has not yet been made.
"Formula Amount" shall have the meaning set forth in Section 2.3 hereof.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"General Intangibles" shall mean and include all of Borrower's now owned
or hereafter acquired general intangibles as said term is defined in the
Uniform Commercial Code in effect in the State of New York including, without
limitation, trademarks, tradenames, tradestyles, trade secrets, equipment
formulation, manufacturing procedures, quality control procedures, product
specifications, patents, patent applications, copyrights, registrations,
contract rights, choses in action, causes of action, corporate or other
business records, inventions, designs,
16
goodwill, claims under guarantees, licenses, franchises, tax refunds, tax
refund claims, computer programs, computer data bases, computer program flow
diagrams, source codes, object codes and all other intangible property of
every kind and nature.
"Guarantor" shall mean Chaus Retail, Inc.
"Infusion Event" shall mean a cash infusion of either equity or
subordinated debt in form reasonably satisfactory to Lender.
"Inventory" shall mean all of Borrower's [and
Guarantor 's] now owned or hereafter acquired goods, merchandise and other
personal property, wherever located, to be furnished under any contract of
service or held for sale or lease, all raw materials, work in process,
finished goods and materials and supplies of any kind, nature or description
which are or might be used or consumed in Borrower's business or used in
selling or furnishing such goods, merchandise and other personal property, and
all documents of title or other documents representing them and all proceeds of
the foregoing.
"X. Xxxxx" shall mean Xxxxxxxxx Xxxxx.
"X. Xxxxx Subordinated Note" shall mean collectively those certain Notes
issued by Borrower to X. Xxxxx in the aggregate principal amount of
approximately $26,500,000, as amended, restated, consolidated or modified, from
time to time.
"L/C's" shall have the meaning set forth in Section 2.1 hereof.
"L/C Fee" shall have the meaning set forth in Section 2.4(d) hereof.
"Loans" shall have the meaning set forth in Section 2.1 hereof.
"Loss" shall mean for any period, "loss" as such term is defined under
GAAP.
"Maturity Date" shall mean December 31, 2002.
"Maximum Loan Amount" shall mean $81,000,000 as reduced dollar for dollar
by application of the Cash Collateral Deposit.
"Maximum Revolving Amount" shall mean $66,000,000 as reduced dollar for
dollar by application of the Cash Collateral Deposit.
"Minimum Commission" shall have the meaning set forth in Section 2.4(e)
hereof.
"Minimum Commission Charge" shall have the meaning set forth in Section
2.4(e) hereof.
"Obligations" means all amounts of any nature whatsoever, direct or
indirect, absolute or contingent, due or to become due, arising or incurred
heretofore or hereafter,
17
arising under this or any other agreement or by operation of law, now or
hereafter owing by Borrower to Lender or to any parent, subsidiary or affiliate
of Lender. Said amounts include, but are not limited to, loans, debts and
liabilities heretofore or hereafter acquired by purchase or assignment from
other present or future clients of ours, or through participation. Without
limiting the foregoing, Obligations shall include Revolving Advances, Term
Loan, L/Cs, interest, commissions, bank (including those of L/C issuing
confirming and negotiating banks) related charges, costs, fees, expenses,
taxes and all Receivables and other amounts charged or chargeable to Borrower's
account hereunder.
"Other Documents" shall have the meaning set forth in Section 11.17(a)
hereof.
"Overadvance" shall have the meaning set forth in Section 2.1 hereof.
"Permitted Liens" shall have the meaning set forth in Section 5.3 hereof.
"Permitted Overadvances" shall mean the amount set forth below opposite
the applicable period:
Period Permitted Overadvances
------ ----------------------
Closing Date through October 31, 1997 $ 3,445,000
November 1, 1997 through November 10, 1997 -0-
November 11, 1997 through November 30, 1997 $ 625,000
December 1, 1997 through December 10, 1997 -0-
December 11, 1997 through December 31, 1997 $ 162,000
January 1, 1998 through January 10, 1998 $ 8,475,000
January 11, 1998 through January 31, 1998 $12,475,000
February 1, 1998 through February 10, 1998 $ 8,840,000
February 11, 1998 through February 28, 1998 $12,840,000
March 1, 1998 through March 10, 1998 $ 4,333,000
March 11, 1998 through March 31, 1998 $ 8,333,000
April 1, 1998 through April 10, 1998 $ 2,197,000
April 11, 1998 through April 30, 1998 $ 6,196,000
May 1, 1998 through May 10, 1998 -0-
May 11, 1998 through May 31, 1998 $ 2,788,000
June 1, 1998 through June 10, 1998 -0-
June 11, 1998 through June 30, 1998 $ 2,742,000
July1, 1998 through July 10, 1998 $ 2,357,000
July 11, 1998 and at all times thereafter -0-
In the event that Borrower shall receive any proceeds in excess of $12,500,000
(the "Excess Proceeds" pursuant to the Restructure Transaction, the Permitted
Overadvances shall be reduced dollar for dollar in an amount equal to the
Excess Proceeds.
"Prime Rate" shall mean the prime commercial lending rate of the Bank as
publicly announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the Restructure Date of any change in such
rate.
18
"Profit" shall mean for any period "profit" as defined under GAAP.
"Put Amount" shall mean $2,500,000 for the period commencing on the
Closing Date through the Restructure Date.
"Receivables" means all amounts and all forms of obligations now or
hereafter owing to Borrower (including but not limited to accounts,
instruments, contract rights, documents and chattel paper) and general
intangibles; all security therefor and guaranties thereof; all of Borrower's
rights as an unpaid seller of goods and Borrower's rights to goods sold which
may be represented thereby (including but not limited to Borrower's rights of
replevin and stoppage in transit); all of Borrower's books of account, records,
files, and documents relating thereto and the equipment containing said books,
records, files and documents; all of Borrower's rights under insurance policies
relating to the foregoing; the right to use the Trade Names in connection with
Lender's rights with respect to the goods; and all proceeds of the foregoing.
"Reserves" means reserves for all Obligations chargeable to Borrower's
account and Obligations which, in Lender's sole judgment, may be chargeable to
Borrower's account in the future, including but not limited to (A) all
ineligible inventory and Receivables, disputed items, deductions, allowances,
credits, xxxx and hold and consignment sales, steamship guarantees, airway
releases, (B) an amount equal to the sum of (i) 50% of the outstanding face
amount of Documentary Letters of Credit relating to finished goods destined for
U.S. ports and Bills of Lading assigned to Lender at Lender's sole discretion,
and (ii) 100% of the outstanding face amount of all other Letters of Credit,
(C) the Term Loan Reserve and (D) such additional amounts as Lender in its sole
discretion deems appropriate.
"Restructure Date" shall mean the earlier of (a) May 15, 1998 or (b) the
date upon which the Restructure Transaction has been completed.
"Restructure Transaction" shall mean the transactions described in Exhibit
8(b) attached hereto and made a part hereof.
"Restructuring Charges" shall have the meaning given to such term in that
certain letter agreement dated as of the Closing Date between Borrower and
Lender.
"Restructure Put" shall mean the Agreement attached hereto as Exhibit
8(c).
"Retained Goods" shall have the meaning set forth in Section 5.2 hereof.
"Revolving Advances" shall mean Loans made other than L/Cs or the Term
Loan.
"Subordinated Debt" shall have the meaning set forth in Section 9.1(b)
hereof.
"Tangible Net Worth" shall have the meaning set forth in Section 9.1(d)
hereof.
19
"Term Loan" shall have the meaning set forth in Section 2.2 hereof.
"Term Loan Reserve" shall mean $10,000,000
"Term Note" shall mean the promissory note described in Section 2.2
hereof.
"Trade Names" shall have the meaning set forth in Section 5.2 hereof.
"Transactions" shall have the meaning set forth in Section 11.17(o)(vi)
hereof.
9. COVENANTS
Borrower covenants and agrees that, until the later of the termination of
this Agreement or the satisfaction in full of all of the Obligations
9.1. Borrower will not:
(a) permit any of its property (including but not limited to
Receivables, inventory, machinery, equipment, furniture, fixtures, plant,
and real estate) to be encumbered by any security interest, lien,
mortgage, or other encumbrance of any nature whatsoever except in favor of
Lender or with respect to Permitted Liens.
(b) incur any indebtedness, or guaranty the obligations of any other
entity, except that Borrower may incur (i) unsecured debt to Borrower's
trade suppliers in the ordinary course of its business, (ii) debt to
Borrower's subsidiaries, as permitted hereunder, (iii) indebtedness in
connection with purchase money liens in accordance with Section 5.3(f)
hereof and (iv) debt subordinated to the Obligations in amounts and on
terms reasonably acceptable to Lender ("Subordinated Debt").
(c) Intentionally Omitted.
(d) permit Borrower's Tangible Net Worth (equity plus subordinated
debt minus goodwill and intangible assets) to be less than the following
amounts as of the following dates:
As of December 31, 1997 ($ 25,880,000)
As of March 31, 1998 $ 1,600,000
As of June 30, 1998 $ 2,010,000
For the period commencing September 30, 1997 through and including June
30, 1998, the calculation of Tangible Net Worth shall exclude Restructuring
Charges.
20
Intangible assets include write ups, unamortized debt discount and
expense, unamortized deferred charges, patents, licenses, R&D expenses, and
other intangible items.
(e) permit Borrower's Working Capital (the amount by which Borrower's
current assets exceed Borrower's current liabilities) to be less than the
following amounts on the following dates:
As of December 31, 1997 ($17,050,000)
As of March 31, 1998 $10,870,000
As of June 30, 1998 $10,960,000
]
The calculation of Working Capital, shall exclude accrued but unpaid
Restructuring Charges at the end of each measurement period through June
30, 1998.
(f) To the extent the Restructure Transaction takes place on a day
other than on January 15, 1998 the Tangible Net Worth and Working Capital
covenants shall be amended to give effect to the components of the
Restructure Transaction for each of the measurement periods affected
thereby, such components including but not limited to (i) the conversion
of the X. Xxxxx Subordinated Note plus accrued interest thereon at the
Contract Rate through the date of occurrence of the Restructure
Transaction, and (ii) the reduction of the Revolving Advances by
$25,000,000 plus the interest which would have accrued or had accrued
thereon at the Contract Rate for the period between January 15, 1998 and
the date of the Restructure Transaction. In addition, to the extent
Borrower (a) receives any proceeds pursuant to the Restructure
Transaction, the amounts set forth in the Tangible Net Worth and Working
Capital covenants shall be increased by an amount equal to the product of
(A) the difference between the net proceeds received by Borrower and
$12,500,000 and (B) 100% or (b) receives any proceeds from equity (other
than pursuant to the Restructure Transaction) or subordinated debt (except
proceeds in connection with the Restructure Put) the amount set forth in
the Tangible Net Worth and Working Capital covenants shall be increased by
an amount equal to the product of (A) the net proceeds received by
Borrower and (B) 75%.
(g) Borrower's (i) Loss (after taxes) will not exceed and (ii) Profit
(after taxes) will not be less than the amounts specified below as
applicable to the indicated Period under the applicable column:
21
Maximum Minimum
Period Permitted Loss Permitted Profit
------ -------------- ----------------
Fiscal Quarter ended September 30, 1997 $1,600,000
Month of October 1997 $ 950,000
Month of November 1997 $ 510,000
Month of December 1997 $2,430,000
Fiscal quarter ended December 31, 1997 $1,750,000
Month of January 1998 $ 270,000
Month of February 1998 $ 920,000
Month of March 1998 $1,230,000
Fiscal quarter ended March 31, 1998 $2,450,000
Month of April 1998 $ 600,000
Month of May 1998 $ 720,000
Month of June 1998 $ 140,000
Fiscal year ended June 30, 1998 $2,625,000
The amounts set forth in the above subsections 9.1(d), 9.1(e) and 9.1(g) shall
be amended for each subsequent fiscal year in the term of this Agreement once
Lender has received Borrower's business plan for the next succeeding fiscal
year; such business plan to be received by Lender no later than June 1st for
the fiscal year beginning July 1st immediately thereafter. In the event that
Borrower does not deliver its business plan for fiscal years beginning July 1,
1999, July 1, 2000, July 1, 2001 or if after delivering such plans Borrower and
Lender cannot agree on revised financial covenants, Borrower agrees that the
Maximum Permitted Loss for any month and that the Maximum Permitted Loss for
each fiscal year, in the aggregate, shall not exceed $0.
In addition, for purposes of calculating Borrower's compliance with clauses
9.1(g) above through June 30, 1998, Lender shall exclude up to $4,250,000 of
Restructuring Charges.
(h) purchase or acquire obligations or stock of, or any other
interest in, any entity, except (i) obligations issued or guaranteed by
the United States of America of any agency thereof, (ii) commercial paper
with maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating), (iii) certificates of
time deposit and bankers' acceptances having maturities of not more than
180 days and repurchase agreements backed by United States government
securities of a commercial bank if (A) such bank has a combined capital
and surplus of at least $500,000,000, or (B) its debt obligations, or
those of a holding company of which it is a subsidiary, are rated not less
than A (or the equivalent rating) by a nationally recognized investment
rating agency and (iv) U.S. money market funds that invest solely in
obligations issued or guaranteed by the United States of America or an
agency thereof, and (v) Eurodollar time deposits with financial
institutions with a published rating of not less than A-1 or P-1 (or the
equivalent rating).
22
(i) make advances, loans or extensions of credit to any entity,
including, without limitation, any parent, subsidiary or affiliate except
for loans to Borrower's subsidiaries not to exceed $4,000,000 in the
aggregate at any time.
(j) declare, pay or make any dividend or distribution on any shares
of common stock or preferred stock (other than dividends or distributions
payable in Borrower's stock, or split-ups or reclassifications of
Borrower's stock) or apply any of its funds, property or assets to the
purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of Borrower's
common or preferred stock, except for purchases of Borrower's common stock
made on behalf of its employees pursuant to Borrower's 401(K) plan and
except that if an Infusion Event occurs, so long as (i) no Event of
Default has occurred or is continuing and (ii) the Obligations hereunder
do not exceed the Formula Amount less the applicable Permitted
Overadvances, then Borrower may make a dividend or distribution not to
exceed 20% of the net proceeds of such infusion.
(k) substantially change the nature of the business in which Borrower
is presently engaged (except for its retail store business), nor, except
as specifically permitted hereby, purchase or invest, directly or
indirectly, in any assets or property other than in the ordinary course of
business for assets or property which are useful in, necessary for and are
to be used in Borrower's business as presently conducted.
(l) directly or indirectly, purchase, acquire or lease any property
from, or sell, transfer or lease any property to, or otherwise deal with,
any affiliate, except disclosed transactions in the ordinary course of
business, on an arm's-length basis on terms no less favorable than terms
which would have been obtainable from a person other than an affiliate.
(m) enter as lessee into any lease arrangement (i) for real or
personal property in connection with Guarantor's retail operations to the
extent such lease arrangement does not terminate by January 31, 1998 or
(ii) any other real or personal property, other than a renewal or
extension of existing real property leases listed on Exhibit 9.1(m) or
replacements thereof (unless capitalized and otherwise permitted
hereunder) except for leases entered into with respect to equipment so
long as rentals under such leases do not exceed the aggregate amount of
$2,500,000.00 per year.
(n) enter into any partnership, joint venture or similar arrangement
without Lender's prior written consent, which consent will not be
unreasonably withheld.
(o) change Borrower's fiscal year for financial reporting purposes
from June 30 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment
except as required by law without Lender's prior written consent, which
shall not be unreasonably withheld.
9.2. Borrower will
(a) pay to Lender on demand all usual and customary fees and
reasonable out-of-pocket expenses which Lender incurs in connection with
(i) the forwarding of
23
Loan proceeds and (ii) the establishment and maintenance of any lockbox
account as provided for in paragraph 6.9. Lender may, without making
demand, charge Borrower's account for all such fees and expenses.
(b) (i) conduct continuously and operate actively Borrower's business
according to good business practices and maintain all of Borrower's
properties useful or necessary in Borrower's business in good working
order and condition (reasonable wear and tear excepted) including, without
limitation, all licenses, patents, copyrights, Trade Names, trade secrets
and trademarks; (ii) keep in full force and effect its existence and
comply in all material respects with the laws and regulations governing
the conduct of its business and (iii) make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts
and things as may be lawfully required to maintain Borrower's rights,
licenses, leases, powers and franchises under the laws of the United
States or any political subdivision thereof.
(c) promptly discharge all of Borrower's obligations of any nature
whatsoever, whether now existing or hereafter arising, owing to any
person, firm, corporation or governmental agency.
9.3. Borrower will give Lender
(a) once in each calendar year (but not more than twelve months shall
elapse between the first and second report in each calendar year) a
physical count of Borrower's inventory observed by an independent public
accountant acceptable to Lender in a manner consistent with procedures
followed in connection with the certification of Borrower's annual
financial statements unless waived in writing by Lender.
(b) not later than fifteen days after the end of each month,
inventory designations certified by Borrower's Treasurer to be reasonably
accurate, all in form and substance satisfactory to Lender.
(c) from time to time at Lender's request financial projections in
form and substance satisfactory to Lender;
(d) prompt written notice of any breach or default, or the occurrence
of an event which with notice or lapse of time would constitute a breach
or default, under this Agreement or Borrower's Obligations to Lender, or
any other agreement material to Borrower's business (including but not
limited to all license agreements relating to inventory), Borrower's
material violation of any law, rule, order or regulation of any
governmental agency applicable to Borrower or the Collateral, and the
commencement or assertion by or against Borrower of any claim, suit,
action or proceeding of a civil, criminal or an administrative nature or
the occurrence of any events adversely affecting the value of the
Collateral or Lender's rights or Borrower's condition. Lender may, but
shall not be obligated to, cure any such breach, default or violation and,
if Lender elects to do so, Borrower will on demand reimburse Lender for
the cost and expenses incurred by it in connection therewith.
(e) within 45 days after the close of each of the first three
quarters in each of Borrower's fiscal years (i) consolidated balance
sheets of Borrower and its
24
subsidiaries as at the end of such quarter, and the related consolidated
statements of income, retained earnings and changes in financial position
of Borrower and its subsidiaries for the elapsed portion of the fiscal
year ended with the last day of such quarter setting forth in each case
in comparative form the figures for the corresponding periods of the
previous fiscal year, each of which shall be accompanied by a certificate
of Borrower's chief financial officer in form and substance satisfactory
to Lender or (ii) a copy of the Borrower's Form 10-Q filed with the
Securities and Exchange Commission for such period.
(f) within 90 days after the end of each of Borrower's fiscal years
(i) consolidated balance sheets of Borrower and its subsidiaries as at the
end of such fiscal year and the related consolidated statements of income,
retained earnings and changes in financial position of Borrower and its
subsidiaries for such fiscal year, setting forth in comparative form the
figures as at the end of and for the previous fiscal year, in each case
certified by independent certified public accountants of recognized
standing satisfactory to Lender, whose certificates shall be in scope and
substance satisfactory to Lender or (ii) a copy of the Borrower's Form
10-K filed with the Securities and Exchange Commission for such period.
Together with such financial statements Borrower shall deliver a
certificate of Borrower's chief financial officer in form and substance
satisfactory to Lender and a certificate of such accountants addressed to
Lender (i) stating that Borrower is authorized to deliver such financial
statements and their certifications thereof to Lender pursuant to this
Agreement and that they have caused this Agreement to be reviewed and
that, in making the examination necessary for the certification of such
financial statements, as a result of the output of the audit work, nothing
has come to their attention to lead them to believe that any default
hereunder or breach hereof exists, or, if such is not the case, specifying
such default or breach and its nature, when it occurred and whether it is
continuing and (ii) having attached the calculations required to establish
whether or not Borrower and Borrower's subsidiaries on a consolidated
basis were in compliance with the covenants contained in paragraph 9.1(d)
through 9.1(f).
(g) within thirty (30) days after the end of each month, an unaudited
balance sheet of Borrower and its subsidiaries and related unaudited
statements of income, retained earnings and changes in financial position
of Borrower and its subsidiaries for such period reflecting results of
operations from the beginning of the fiscal year to the end of such month
and for such month, prepared on a basis consistent with prior practices
and complete and correct in all material respects, subject to normal year
end adjustments. The reports shall be accompanied by a certificate of
Borrower's President and/or Chief Financial Officer which shall state
that, based on an examination sufficient to permit him to make an informed
statement, no Event of Default exists, or, if such is not the case,
specifying such Event of Default, its nature, when it occurred, whether it
is continuing and the steps being taken by Borrower with respect to such
default, and such certificate shall have appended thereto calculations
which set forth Borrower's compliance with the requirements or
restrictions imposed by Sections 9.1(d), 9.1(e), 9.1(k), 9.1(n) and 9.1(o)
hereof.
(h) such other reports and documents as and when Lender reasonably
request including but not limited to Borrower's reports to stockholders
and any documents filed with any governmental agency or stock exchange.
(i) With respect to Receivables, on or before the fifteenth (15th)
day of each month as and for the prior month accounts receivable ageings.
In addition,
25
Borrower will deliver to Lender with respect to Receivables at such
intervals as Lender may require: (i) confirmatory assignment schedules,
(ii) copies of customer's invoices, (iii) evidence of shipment or
delivery and (iv) such further schedules, documents and/or information
regarding the Receivables as Lender may reasonably request, including,
without limitation, trial balances and test verifications. Lender shall
have the right to confirm and verify all Receivables by any manner and
through any medium it considers advisable and do whatever it may deem
reasonably necessary to protect Lender's interests hereunder. The items to
be provided under this subdivision are to be in form satisfactory to
Lender and executed by Borrower and delivered to Lender from time to time
solely for Lender's convenience in maintaining records of the Collateral,
and Borrower's failure to deliver any of such items shall not affect,
terminate, modify or otherwise limit Lender's lien on or security interest
in the Collateral.
(j) quarterly, Borrower's certificate signed by Borrower's Chief
Financial Officer stating, to the best of his/her knowledge, that Borrower
is in compliance in all material respects with all federal, state and
local laws including but not limited those relating to environmental
protection and control and employees.
(k) take all action that may be necessary or desirable, or that
Lender may request, so as at all time to maintain the validity,
perfection, enforceability and priority of Lender's security interest in
the Collateral or to enable Lender to protect, exercise or enforce its
rights hereunder and in the Collateral, including, but not limited to (i)
discharging all liens other than Permitted Liens, (ii) obtaining
landlords' or mortgagees' lien waivers, (iii) delivering to Lender,
endorsed or accompanied by such instruments of assignment as Lender may
specify, and stamping or marking, in such manner as Lender may specify,
any and all chattel paper, instruments, letters of credits and advices
thereof and documents evidencing or forming a part of the Collateral, (iv)
entering into warehousing, lockbox and other custodial arrangements
satisfactory to Lender, and (v) executing and delivering financing
statements, instruments of pledge, mortgages, notices and assignments, in
each case in form and substance satisfactory to Lender, relating to the
creation, validity, perfection, maintenance or continuation of Lender's
security interest under the Uniform Commercial Code or other applicable
law. All charges, expenses and fees the Lender may incur in doing any of
the foregoing, and any local taxes relating thereto, shall be charged to
the Borrower's account and added to the Obligations, or at the Lender's
option, shall be paid to the Lender immediately upon demand.
10. PLACE OF PAYMENT; NEW YORK LAW AND COURT
10.1. All Obligations shall be paid at Lender's office in New York, New
York.
10.2. This agreement shall be governed by and construed according to the
laws of the State of New York. All terms used herein, unless otherwise defined
herein, shall have the meanings given in the New York Uniform Commercial Code.
10.3. Borrower and Lender expressly submit and consent to the exclusive
jurisdiction of the Supreme Court of the State of New York, and the United
States District Court for the Southern District of New York, with respect to
any controversy arising out of or relating to this agreement or any supplement
hereto or to any transactions in connection therewith and hereby waives
personal service of the summons, complaint or other process or
26
papers to be issued therein and hereby agrees that service of such summons,
complaint, process or papers may be made by registered or certified mail
addressed to the other party at the address appearing herein, but nothing
herein shall bar Lender from commencing any action against Borrower in any
court in any jurisdiction in addition to those specified above.
11. REPORTS; RECORDS; ASSURANCES; WAIVERS; REMEDIES; ADDITIONAL
WARRANTIES, REPRESENTATIONS AND COVENANTS; CONDITIONS; MISCELLANEOUS
11.1. Lender may at all times during Borrower's normal business hours have
reasonable access to, and inspect, audit, and make extracts from, all of
Borrower's records, files and books of account, and Lender may charge
Borrower's account with the costs, fees or expenses incurred in connection
therewith and Lender's then standard charges for each examiner or auditor.
11.2. Borrower shall perform all acts and execute all documents under this
agreement requested by Lender to perfect and maintain Lender's security
interest and other rights in the Collateral and under this Agreement.
11.3. Failure by Lender to exercise any right, remedy or option under this
Agreement or delay by Lender in exercising the same will not operate as a
waiver; no waiver by Lender will be effective unless Lender confirms it in
writing and then only to the extent specifically stated.
11.4. Lender may charge to Borrower's account, when incurred by Lender,
the amount of legal fees (including reasonable fees, expenses and costs payable
or allocable to attorneys retained or employed by Lender) and other costs, fees
and expenses incurred by Lender in negotiating or preparing this agreement and
any legal documentation required by Lender or requested by Borrower in
connection with this agreement or any amendments, waivers or supplements
thereof, or in enforcing, evaluating, or analyzing Lender's rights hereunder or
in connection with litigation arbitration or administrative proceedings
relating to any controversy arising out of this agreement, or in enforcing,
protecting, preserving or perfecting Lender's interest in, any Collateral,
including without limitation all taxes assessed or payable with respect to any
Collateral, and the out-of-pocket costs of all public record filings,
appraisals, reports and searches relating to Borrower or any Collateral. Lender
may file Financing Statements under the Uniform Commercial Code without
Borrower's signature or, if Lender so elects, sign and file them as Borrower's
agent.
11.5. Lender's rights and remedies under this agreement will be cumulative
and not exclusive of any other right or remedy Lender may have hereunder or
under the Uniform Commercial Code or otherwise. Without limiting the foregoing,
if Lender exercises its rights as a secured party Lender may, at any time or
times, without demand, advertisement or notice, all of which Borrower hereby
waives, sells the Collateral, or any part of it, at public or private sale, for
cash, upon credit, or otherwise, at Lender's sole option and discretion, and
Lender may bid or become purchaser at any such sale, free of any right of
redemption which Borrower hereby waive. After application of all Collateral to
Borrower's Obligations (in such
27
order and manner as Lender in its sole discretion shall determine), Borrower
shall remain liable to Lender for any deficiency.
11.6. Lender shall have no liability hereunder (a) for any losses or
damages (including indirect, special or consequential damages) resulting from
Lender's refusal to assume, or delay in assuming, the Credit Risk, or any
malfunction, failure or interruption of communication facilities, or labor
difficulties, or other causes beyond Lender's control; or (b) for indirect,
special or consequential damages arising from accounting errors with respect to
Borrower's account with Lender. Lender's liability for any default by Lender
hereunder shall not exceed a refund to Borrower of any commission paid by
Borrower during the period starting on the occurrence of the default and ending
when it is cured or waived, or when this agreement is terminated, whichever is
earlier.
11.7. This agreement cannot be changed or terminated orally and is for the
benefit of and binding upon the parties and their respective successors and
assigns. Lender may assign or sell participations in this Agreement to others.
However, Borrower may not assign any of Borrower's rights or delegate any of
Borrower's duties hereunder without Lender's prior written consent. This
agreement, and any concurrent or subsequent written supplements thereto or
amendments thereof signed by both parties, represents Lender's entire
understanding and supersedes all inconsistent agreements and communications,
written or oral, between Borrower's and Lender's officers, employees, agents
and other representatives.
11.8. This agreement shall not be effective unless signed by Borrower
below, and signed by Lender at the place for its acceptance.
11.9. TO THE EXTENT LEGALLY PERMISSIBLE, BOTH BORROWER AND LENDER WAIVE
ALL RIGHT TO TRIAL BY JURY IN ANY LITIGATION RELATING TO TRANSACTIONS UNDER
THIS AGREEMENT OR THE OTHER DOCUMENTS, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE.
11.10. Borrower shall keep proper books of record and account in which
full, true, correct and appropriate entries will be made of all dealings or
transactions of or in relation to Borrower's business and affairs, including,
but not limited to, appropriate accruals and allowances. All determinations
pursuant to this subsection shall be made in accordance with, or as required
by, GAAP (except, however, that the Restructuring Charges shall include up to
$800,000 of fees, expenses and other charges incurred by Borrower in connection
with the liquidation of Inventory at the Borrower's, shall store locations
regardless of their characterization as restructuring or unusual under GAAP)
consistently applied in the opinion of such independent public accountant
acceptable to Lender as shall then be regularly engaged by Borrower.
11.11. Confidentiality. Lender shall hold all non-public information
obtained by Lender pursuant to the requirements of this Agreement in accordance
with its customary procedures for handling confidential information of this
nature; provided, however, Lender may disclose such confidential information
(a) to its examiners, affiliates, outside auditors, counsel and other
professional advisors, (b) to any participant or assignee or prospective
participant or assignee, and (c) as required or requested by any governmental
authority or representative thereof or pursuant to legal process; provided,
further that (i) unless
28
specifically prohibited by applicable law or court order, Lender shall use its
best efforts prior to disclosure thereof, to notify Borrower of the applicable
request for disclosure of such non-public information (A) by a governmental
authority or representative thereof (other than any such request in connection
with an examination of the financial condition of Lender by such governmental
authority) or (B) pursuant to legal process and (ii) in no event shall Lender
be obligated to return any materials furnished by Borrower other than those
documents and instruments in possession of Lender in order to perfect its lien
on the Collateral once the Obligations have been paid in full and this
Agreement has been terminated.
11.12. Borrower shall comply with all acts, rules, regulations, laws and
orders of any legislative, administrative or judicial body or official
applicable to Borrower, the Collateral or any part thereof, or to the operation
of Borrower's business.
11.13. At Borrower's own cost and expense in amounts and with carriers
acceptable to Lender, Borrower shall (a) keep all properties in which Borrower
has an interest insured against such hazards and for such amounts, as is
customary for companies engaged in businesses similar to Borrower's; (b)
maintain a bond in such amounts as is customary for companies engaged in
businesses similar to Borrower's, insuring against criminal misappropriation of
Borrower's employees; (c) maintain public and product liability insurance
against claims for personal injury, death or property damage suffered by
others; (d) maintain all such workmen's compensation or similar insurance as
may be required under the laws of any jurisdiction in which Borrower is engaged
in business; (e) Intentionally Omitted; (f) furnish Lender with (i) copies of
all policies and evidence of the maintenance of such policies, and (ii)
appropriate loss payable endorsements in form and substance satisfactory to
Lender, naming Lender as loss payee as its interest may appear with respect to
all insurance coverage referred to in clauses (a) with respect to inventory,
(b) with respect to Receivables and proceeds thereof, and (c) above. In the
event of any loss thereunder, the carriers named therein hereby are directed by
Borrower and Lender to make payment for such loss to Lender and not to Borrower
and Lender jointly. If any insurance losses are paid by check, draft or other
instrument payable to Borrower or to Borrower and Lender jointly, Lender may
endorse Borrower's name thereon and do such other things as Lender may deem
advisable to reduce the same to cash. Lender is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (a), (b) and
(c) above. All loss recoveries received by Lender upon such insurance may be
applied to the Obligations, in such order as Lender in its sole discretion
shall determine. In the event that the amount of the loss exceeds the amount of
the recovery, such deficiency shall be paid by Borrower to Lender, on demand.
11.14. If Borrower fails to obtain insurance as hereinabove provided, or
to keep it in force, Lender, if Lender so elects, may obtain such insurance and
pay the premium therefor for Borrower's account, and charge Borrower's account
therefor.
11.15. Borrower will pay, when due, all taxes, assessments and other
charges or claims lawfully levied or assessed upon Borrower or any of the
Collateral. If any tax by any governmental authority is or may be imposed on or
as a result of any transaction between Borrower and Lender which Lender may be
required to withhold or pay or if any taxes, assessments, or other charges
remain unpaid after the date fixed for their payment, or if any claim shall be
made which, in Borrower's opinion, may possibly create a valid lien, charge or
claim on the Collateral, Lender may without notice to Borrower pay the taxes,
assessments, liens,
29
charges or claims and Borrower hereby indemnifies and holds Lender harmless in
respect thereof. The amount of any payment by Lender under this section shall
be charged to Borrower's account.
11.16. Borrower shall at all times pay, when and as due, rental
obligations under all leases, and shall otherwise comply, in all material
respects, with all other terms of such leases and keep them in full force and
effect and, at Lender's request, will provide evidence of having done so.
11.17. The Borrower represents and warrants as follows:
(a) Authority. The Borrower has full power, authority and legal right
to enter into this Agreement and all related documents, supplements and
agreements ("Other Documents") and perform all obligations hereunder and
thereunder. The execution, delivery and performance hereof and of the
Other Documents are within the Borrower's corporate powers, have been duly
authorized, are not in contravention of law or the terms of the Borrower's
by-laws, certificate of incorporation or other applicable documents
relating to the Borrower's formation or to the conduct of the Borrower's
business or of any agreement or undertaking to which the Borrower is a
party or by which the Borrower is bound, and will not conflict with nor
result in any breach of any of the provisions of or constitute a default
thereunder or result in the creation of any lien upon any asset of the
Borrower.
(b) Formation and Qualification. The Borrower is duly incorporated
and in good standing under the laws of the State of New York and is
qualified to do business and is in good standing in all states in which
qualification and good standing are necessary for the Borrower to conduct
its business and own its property. Borrower has delivered to Lender true
and complete copies of its certificate of incorporation and by-laws and
will promptly notify Lender of any amendment or changes thereto.
(c) Survival of Representations and Warranties. All representations
and warranties of Borrower contained in this Agreement and the Other
Documents shall be true at the time of Borrower's execution of this
Agreement and the Other Documents, and shall survive the execution,
delivery and acceptance thereof by Lender and the parties thereto and the
closing of the transactions described therein or related thereto.
(d) Tax Returns. Borrower has filed all federal, state and local tax
returns and other reports it is required by law to file and has paid all
taxes, assessments, fees and other governmental charges shown to be due
and payable on such returns. The provision for taxes on the books of
Borrower is adequate for all years not closed by applicable statutes, and
for its current fiscal year, and Borrower has no knowledge of any
deficiency or additional assessment in connection therewith not provided
for on its books.
(e) Financial Statements. All financial statements furnished by
Borrower to Lender are accurate, complete and correct in all material
respects and fairly reflect the financial condition of Borrower and have
been prepared in accordance with GAAP, consistently applied. The cash flow
projections of the Borrower and its projected balance sheets are based on
underlying assumptions which provide a reasonable basis for the
projections contained therein and reflect Borrower's judgment based on
present circumstances of the most
30
likely set of conditions and course of action for the project period.
Since the end of the period covered by the most recent financial statement
furnished by Borrower, there has been no change in the condition,
financial or otherwise, of the Borrower or any of its subsidiaries and
no change in the aggregate value of the assets of Borrower and its
subsidiaries, except changes in the ordinary course of business, none of
which individually or in the aggregate has been materially adverse to the
Borrower's business.
(f) Solvency. After giving effect to the transactions contemplated by
this Agreement, the Borrower will be solvent, able to pay its debts as
they mature, and will have capital sufficient to carry on its business and
all businesses in which it is about to engage, and (A) as of the Closing
Date, the fair present saleable value of its assets, calculated on a going
concern basis, is in excess of the amount of its liabilities and (B)
subsequent to the Closing Date, the fair saleable value of its assets
(calculated on a going concern basis) will be in excess of the amount of
its liabilities.
(g) Patents, Trademarks, Tradenames, Copyrights and Licenses. All
patents, patent applications, trademarks, trademark applications,
tradenames, copyrights, copyright applications, trade secrets and licenses
owned or utilized by Borrower in the United States of America are set
forth on Exhibit 11.17(g), are valid and have been duly registered or
filed with all appropriate governmental authorities; there is no objection
or pending challenge to the validity of any such patent, trademark,
copyright, Trade Name, trade secret or license and Borrower is not aware
of any grounds for any challenge.
(h) Licenses and Permits. Borrower (i) is in compliance with and (ii)
has procured and is now in possession of, all material licenses or permits
required by any applicable federal, state or local law or regulation for
the operation of its business in each jurisdiction wherein it is now
conducting or proposes to conduct business and where the failure to
procure such licenses or permits would have a material adverse effect on
the business, properties, condition (financial or otherwise) or operations
of the Borrower.
(i) Default of Indebtedness. Borrower is not in default in the
payment of the principal of or interest on any indebtedness due to any one
party, which at any time exceeds an aggregate amount of $500,000 or under
any instrument or agreement under or subject to which any indebtedness has
been issued and no event has occurred under the provisions of any such
instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of
default thereunder.
(j) No Default. Borrower is not in default in the payment or
performance of any of its material contractual obligations and no event
has occurred which with the giving of notice or passage of time, would
constitute a default under this Agreement or any Other Document.
(k) No Burdensome Restrictions. Borrower is not party to any contract
or agreement the performance of which would adversely affect the business,
assets, operations or condition (taken as a whole) (financial or
otherwise) of the Borrower. Borrower has not agreed or consented (except
pursuant to this Agreement) to cause or permit in the future (upon the
happening of a contingency or otherwise) any of its property, whether now
owned or hereafter acquired, to be subject to a lien or encumbrance of any
kind.
31
(l) No Labor Disputes. Borrower is not involved in any labor dispute;
there are no strikes or walkouts or union organization of any of
Borrower's employees threatened or in existence and no labor contract is
scheduled to expire July 31, 1999.
(m) Margin Regulations. No part of the proceeds of any Advance or
Loan will be used for "purchasing" or "carrying" "margin stock" as defined
in Regulation U of such Board of Governors.
(n) Disclosure. No representation or warranty made by the Borrower in
this Agreement or in any financial statement, report, certificate or any
other document furnished in connection herewith contains any untrue
statement of a material fact or omits to state any material fact necessary
in order to make the statements herein or therein not misleading.
(o) Conditions to Initial Advances. The agreement of Lender to make
the initial Loans or issue the L/C requested to be made or issued on the
Closing Date is subject to the satisfaction, or waiver by Lender,
immediately prior to or concurrently with the making of such Loans or
issuance of such L/Cs of the following conditions precedent:
(i) Filings Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement)
required by this Agreement, any related agreement or under law or
reasonably requested by the Lender to be filed, registered or
recorded in order to create, in favor of the Lender, a perfected
security interest in or lien upon the Collateral shall have been
properly filed, registered or recorded in each jurisdiction in which
the filing, registration or recordation thereof is so required or
requested, and the Lender shall have received an acknowledgment copy,
or other evidence satisfactory to it, or each such filing,
registration or recordation and satisfactory evidence of the payment
of any necessary fee, tax or expense relating thereto;
(ii) Corporate Proceedings of the Borrower. The Lender shall have received
a copy of the resolutions in form and substance reasonably
satisfactory to Lender, of the Board of Directors of the Borrower
authorizing (A) the execution, delivery and performance of this
Agreement, and the Other Documents, and (B) the granting by Borrower
of the security interests in and liens upon the Collateral in each
case certified by the Secretary or an Assistant Secretary of the
Borrower as of the Closing Date; and, such certificate shall state
that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;
(iii) Incumbency Certificates of the Borrower. The Lender shall have
received a certificate of the Secretary or any Assistant Secretary of
the Borrower, dated the Closing Date, as to the incumbency and
signature of the officers of the Borrower executing this Agreement,
any certificate or other documents to be delivered by it pursuant
hereto, together with evidence of the incumbency of such Secretary or
Assistant Secretary;
(iv) Guaranty. The Lender shall have received a reaffirmation by Chaus
Retail, Inc. with respect to the guaranty of Chaus Retail, Inc.;
32
(v) No Litigation. No litigation, investigation or proceeding before or
by any arbitrator or governmental authority shall be continuing or
threatened against the Borrower or against the officers or directors
of the Borrower (except as set forth in Section 5.5 above and except
for such litigation, investigation or proceeding arising from or in
connection with the Restructure Transaction, including, but not
limited to, litigation by or on behalf of any holder of the
Borrower's common stock) (A) in connection with this Agreement, the
Other Documents, or any of the transactions contemplated thereby
("Transactions") or (B) which if adversely determined, would, in the
reasonable opinion of the Lender, have a material adverse effect on
the business, assets, operations or condition (financial or
otherwise) of the Borrower taken as a whole; and no injunction, writ,
restraining order or other order of any nature materially adverse to
the Borrower or the conduct of its business or inconsistent with the
due consummation of the Transactions shall have been issued by any
governmental authority;
(vi) Intentionally Omitted
(vii) Collateral Examination. The Lender shall have completed Collateral
examinations and received appraisals and reports, the results of
which shall be satisfactory in form and substance to the Lender, of
the assets of the Borrower and all books and records in connection
therewith;
(viii) Fees. The Lender shall have received all fees required by this
Agreement to be paid to the Lender on or prior to the Closing Date;
(ix) Pro Forma Financial Statements. Lender shall have received a copy of
pro forma financial statements which shall be satisfactory in all
respects to Lender;
(x) Subordination Agreement. Lender shall have entered into a
Subordination Agreement with Borrower and holders of the Subordinated
Debt which shall set forth the basis upon which said holders may
receive, and Borrower may make, payments under the Subordinated Debt,
which basis shall be satisfactory in form and substance to Lender in
its sole discretion;
(xi) Other Documents. Lender shall have received the Other Documents
executed in form and substance reasonably satisfactory to Lender;
(xii) Other. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the
Transactions shall be reasonably satisfactory in form and substance
to the Lender and its counsel.
(p) Conditions to Each Advance. Each request for a Loan, or L/C, by
Borrower hereunder shall constitute a representation and warranty by
Borrower as of the date of the making or issuance thereof that the
conditions contained in this subsection shall have been satisfied. The
agreement of Lender to make any Revolving Advance or issue any L/C
requested to be made or issued on any date (including, without limitation,
those first made or
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issued), is subject to the satisfaction of the following conditions
precedent as of the date such Loan is made:
(i) Representations and Warranties. Each of the representations and
warranties made by the Borrower in or pursuant to this Agreement, and
any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document
or financial or other statement furnished at any time under or in
connection with this Agreement or any related agreement shall be true
and correct in all material respects on and as of such day as if made
on and as of such date;
(ii) No Default. No default or event which with the giving of notice or
passage of time would constitute a default herein shall have occurred
and be continuing on such date, or would exist after giving effect to
the Loans requested to be made, or L/Cs requested to be issued on
such date, provided, however, that Lender in its sole discretion, may
continue to make Loans notwithstanding the existence of such default
or event; and
(iii) Maximum Amount. The aggregate amount of Revolving Advances and L/Cs
at any time shall not exceed the Maximum Revolving Amount and the
aggregate Loans at any time shall not exceed the Maximum Loan Amount.
12. APPLICATION OF PAYMENTS; OPTIONAL PREPAYMENT
12.1. Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all proceeds of Collateral to any portion of the
Obligations. To the extent that Borrower makes a payment or Lender receives any
payment or proceeds of the Collateral for Borrower's benefit, which are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, debtor in possession, receiver,
custodian or any other party under any bankruptcy law, common law or equitable
cause, then, to such extent, the Obligations or part thereof intended to be
satisfied shall be revived and continue as if such payment or proceeds had not
been received by Lender.
12.2. Optional Prepayments. Borrower may prepay the Term Loan without
premium or penalty on two (2) business days' prior notice to Lender in minimum
amounts of $100,000 which shall be applied to the outstanding principal
installments on the Term Loan in the inverse maturities thereof.
12.3 Mandatory Prepayments. Upon the Restructure Date, the Maximum Loan
Amount and the Maximum Revolving Amount shall each be reduced in an amount
equal to $22,500,000 and all Revolving Loans which are then outstanding in
excess of the Maximum Revolving Amount as then reduced shall be immediately
repaid by Borrower and Lender shall have the right to apply the proceeds of the
Cash Collateral Deposit to any such payment. Any proceeds of the Cash
Collateral Deposit remaining after any such prepayment shall be applied to the
installments due under the Term Loan in the inverse order of their maturity
provided, however, that any proceeds remaining in connection with the account
established pursuant to the Amended and Restated Cash Collateral Deposit Letter
dated as of the Closing Date (a copy of which is attached hereto as Exhibit
12.3) shall be paid to X. Xxxxx.
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13. INDEMNITY
Borrower shall indemnify Lender from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, reasonable out-of-pocket fees and disbursements of counsel) which
may be imposed on, incurred by, or asserted against Lender in any litigation,
proceeding or investigation instituted or conducted by any governmental agency
or instrumentality or any other entity with respect to any aspect of, or any
transaction contemplated by, or referred to in, or any matter related to, this
Agreement, whether or not the Lender is a party thereto, except to the extent
that any of the foregoing arises out of the gross negligence, bad faith,
unlawful conduct or willful misconduct of Lender.
14. NOTICE
Any notice or request hereunder may be given to Borrower or to Lender at
their respective addresses set forth below or at such other address as may
hereafter be specified in a notice designated as a notice of change of address
under this section. Any notice or request hereunder shall be given by (a) hand
delivery, (b) registered or certified mail, return receipt requested, (c) telex
or telegram, subsequently confirmed by registered or certified mail, or (d)
telefax to the number set out below (or such other number as may hereafter be
specified in a notice designated as a notice of change of address) with
telephone communication to a duly authorized officer of the recipient
confirming its receipt as subsequently confirmed by registered or certified
mail. Notices and requests shall, in the case of those by mail or telegram be
deemed to have been given when deposited in the mail, or delivered to the
telegraph office addressed as provided in this section.
(A) If to Lender, at:
BNY Financial Corporation
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxx, SVP
Telephone: (000) 000-0000
FAX: (000) 000-0000
(B) If to Borrower, at:
Xxxxxxx Chaus, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxxx Xxxxx, Chairwoman of the Board
Telephone: (000) 000-0000
FAX: (000) 000-0000
and
Xxxxxxx Chaus, Inc.
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000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Chief Financial Officer
Telephone: (000) 000-0000
FAX: (000) 000-0000
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
FAX: (000) 000-0000
15. SURVIVABILITY
If any or part of this Agreement is contrary to, prohibited by, or deemed
invalid under applicable laws or regulations, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
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16. INJUNCTIVE RELIEF
Borrower recognizes that, in the event Borrower fails to perform, observe
or discharge any of its obligations or liabilities under this Agreement, any
remedy at law may prove to be inadequate relief to Lender; therefore, Lender if
Lender so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
AGREED TO ON THIS 10TH DAY OF OCTOBER, 1997
ATTEST: XXXXXXX CHAUS, INC.
/s/ Xxxxxx Xxxxxxxx By: /s/ Xxxxxxxxx Xxxxx
--------------------------------- ------------------------------
Secretary C.E.O.
ACCEPTED AT NEW YORK, NEW YORK,
AS OF THE ABOVE DATE
ATTEST: BNY FINANCIAL CORPORATION
/s/ Xxxx Xxxxxxxx By: /s/ Xxxxxx Xxxxx
--------------------------------- ------------------------------
Asst. Secretary
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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