EXHIBIT 10.62
[FARAH LETTERHEAD]
FARAH (UK) SUPPLEMENT TO
ACCOUNTS FINANCING AGREEMENT
[SECURITY AGREEMENT]
As of June 1, 1997
Congress Financial Corporation (Southwest)
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Gentlemen:
This Farah (UK) Supplement ("Supplement"), dated as of June 1, 1997, is
a supplement to the Amended and Restated Accounts Financing Agreement [Security
Agreement], dated as of June 1, 1997, among Farah U.S.A., Inc., a Texas
corporation, Value Clothing Company, Inc. and Farah Manufacturing (U.K.) Limited
("Farah UK") (together with each of their respective successors and assigns,
collectively, "Borrowers") and Congress Financial Corporation (Southwest), a
Texas corporation (together with its successors and assigns, "Congress" or
"Lender"), amending and restating the Accounts Financing Agreement [Security
Agreement], dated as of August 2, 1990 (together with this Supplement, any and
all other supplements thereto, and all other agreements, documents and
instruments between Borrowers and Congress related thereto, as the same now
exist or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced, the "Amended and Restated Accounts Financing Agreement").
This Supplement is (a) hereby incorporated into the Amended and Restated
Accounts Financing Agreement, (b) made a part thereof and (c) subject to the
terms, conditions, covenants and warranties thereof, including the other
Supplements (as defined therein). All terms (including capitalized terms) used
herein shall have the meanings ascribed to them respectively in the Amended and
Restated Accounts Financing Agreement, unless otherwise defined in this
Supplement.
1.(a) Additional Definitions. As used herein, the following
terms shall have the respective meanings given to them below:
(i) "Eligible Farah UK Accounts" shall mean Farah UK Accounts in the
ordinary course of business arising out of Farah UK's sale of goods or rendition
of services, which are and at all times shall continue to be acceptable to
Lender in all respects. Standards of eligibility may be fixed and revised from
time to time solely by Lender in its exclusive reasonable judgment. In
determining eligibility, Lender may, but need not, rely on agings, reports and
schedules of Farah UK Accounts furnished to Lender by Farah USA or Farah UK, but
reliance by Lender thereon from time to time shall not be deemed to limit
Lender's right to revise standards of eligibility at any time as to both present
and future Farah UK Accounts. In general, a Farah UK Account shall not be deemed
eligible unless:
(A) the Farah UK Account Debtor on such Farah UK Account is and at all times
continues to be reasonably acceptable to Lender, (B) such Farah UK Account
complies in all respects with the representations, covenants and warranties set
forth herein and in the other Amended and Restated Accounts Financing Agreements
(as if such Farah UK Account was an Eligible Account of Farah USA under the
terms of the Financing Agreements, including, but not limited to, Sections 6.5
and 6.6 of the Amended and Restated Accounts Financing Agreement) and (C) no
more than sixty (60) days have elapsed since the due date of such Farah UK
Account but in no event more than one hundred twenty (120) days from the invoice
date thereof.
(ii) "Eligible Farah UK Inventory" shall mean Inventory of Farah UK
consisting of finished goods acceptable to Lender in all respects. General
criteria for Eligible Farah UK Inventory may be established and revised from
time to time by Lender in its exclusive reasonable judgment. In determining such
acceptability Lender may, but need not, rely on reports and schedules of
Inventory furnished to Lender by either Farah UK or Farah USA on behalf of Farah
UK, but reliance thereon by Lender from time to time shall not be deemed to
limit its right to revise standards of eligibility at any time. In general,
except in Lender's sole discretion, Eligible Farah UK Inventory shall not
include (A) raw materials, (B) work-in-process (C) spare parts, (D) packaging
and shipping materials, (E) supplies used or consumed in the business of Farah
UK, (F) Inventory subject to a security interest or lien in favor of any third
party or subject to a retention of title by any third party, (G) Inventory which
is not subject to the first priority perfected security interest of Lender, (H)
Inventory at premises which are not owned and operated by Farah UK; provided,
that, any Inventory of Farah UK which would otherwise be deemed Eligible Farah
UK Inventory at locations which are not owned and operated by Farah UK may
nevertheless be considered Eligible Farah UK Inventory if Lender shall have
received an agreement in writing, in form and substance satisfactory to Lender,
from the holder of such Inventory or the owner and/or operator of such location,
as the case may be, pursuant to which such holder, owner and/or operator, if
required by Lender, acknowledges the first priority lien on such Inventory of
Lender, agrees to waive any and all claims such holder, owner and/or operator
may, at any time, have against such Inventory, and permits Lender access to and
the right to remain on the premises so as to exercise Lender's rights and
remedies and otherwise deal with the Inventory of Farah UK, (I) xxxx and hold
goods, (J) defective goods, (K) obsolete, slow-moving and/or discontinued goods,
(L) "seconds" and (M) Inventory purchased on consignment.
(iii) "Farah UK" shall mean Farah Manufacturing (U.K.) Limited, a
corporation incorporated in England, and its successors and assigns.
(iv) "Farah UK Account Debtor" shall mean each debtor or obligor in any way
obligated on or in connection with any Farah UK Accounts.
(v) "Farah UK Accounts" shall mean all of Farah UK's present and future
accounts, contract rights, general intangibles, chattel paper, documents and
instruments, as such terms are defined in the UCC, including, without
limitation, all obligations for the payment of money arising out of Farah UK's
sale, lease or other disposition of goods or other property or rendition of
services.
(vi) "Farah UK Agreements" shall mean individually and collectively, the
Debenture, dated January 21, 1994, between Lender and Farah UK and all
agreements, documents and instruments at any time executed and/or delivered by
Farah UK to Lender in connection herewith or therewith, as the same now exist or
may hereafter be further amended, modified, supplemented, extended, renewed,
restated or replaced.
(vii) "Farah UK Collateral" shall mean all assets and properties of Farah
UK at any time subject to a mortgage, charge, assignment, pledge, lien, right of
set-off, encumbrance or other security interest (whether fixed or floating) in
favor of Lender and including, without limitation, all assets and properties of
Farah UK subject to a charge in favor of Lender pursuant to the Farah UK
Agreements.
(viii) "Farah UK Events of Default" shall have the meaning set forth in
Section 7 of this Supplement.
(ix) "Governmental Agency" shall mean the government of any country, or any
province or state thereof or a local municipality or other political subdivision
thereof or any body, department, authority, agency, public corporation or
instrumentality of any of the foregoing.
(x) "Net Amount of Eligible Farah UK Accounts" shall mean the gross amount
of Eligible Farah UK Accounts less sales, excise or similar taxes and less
returns, discounts, claims, credits and allowances of any nature at any time
issued, owing, granted, outstanding, available or claimed.
(xi) "Pounds Sterling" shall mean legal tender according to the laws of
England.
(xii) "U.S. Dollars" shall mean legal tender according to the laws of the
United States of America.
(xiii) "U.S. Dollar Equivalent" shall mean the number of U.S. Dollars which
Lender can purchase with the amount of the available currency, including,
without limitation, Pounds Sterling, at any time or from time to time in order
to perform any provision of this Supplement or the other Amended and Restated
Accounts Financing Agreements, provided that such determination shall be at the
buying rate of exchange available to Lender on such date, at such time, at any
branch in New York, New York or of any bank, chartered, incorporated or
qualified to do banking business under the laws of the United States of America,
the State of New York or as may be selected by Lender, in its discretion.
(b) Interpretation. All capitalized terms used herein shall
have the meaning assigned thereto in the other Amended and Restated Accounts
Financing Agreement, unless otherwise defined herein.
2. Farah UK Loans.
(a) Lender shall, in its discretion, make loans to Farah UK
from time to time, at the request of Farah UK or Farah USA on behalf of Farah
UK, of up to:
(i) seventy-five (75%) percent of the U.S. Dollar Equivalent of the Net
Amount of Eligible Farah UK Accounts (or such greater or lesser percentage
thereof as Lender may determine from time to time); plus
(ii) thirty-five (35%) percent of the Value (based on the U.S. Dollar
Equivalent) of Eligible Farah UK Inventory (or such greater or lesser percentage
thereof as Lender may determine from time to time) up to $1,750,000 in U.S.
Dollars or the U.S. Dollar Equivalent.
(b) All loans shall be charged to a loan account in the name
of Farah UK on Lender's books. Lender shall render to Farah USA, as agent for
Farah UK, each month a statement of its loan account which shall be considered
correct and deemed accepted by, and binding upon, Farah UK as an account stated,
except to the extent that Lender receives a written notice of any specific
exceptions by Farah UK thereto within thirty (30) days after the date of such
statement.
(c) At Lender's option, all principal, interest, fees,
commissions, costs, expenses or other charges payable by Farah UK to Lender and
any and all loans and advances by Lender to Farah UK may be charged directly to
the account of Farah UK maintained by Lender.
(d) All loans by Lender to Farah UK shall be payable at the
offices of Lender specified above or at such other place as Lender may hereafter
designate from time to time and at Lender's option and upon the request of
Lender, Farah UK shall execute and deliver to Lender one or more promissory
notes in form and substance satisfactory to Lender to further evidence such
loans.
(e) With respect to loans based on the Prime Rate, interest
shall be payable by Farah UK to Lender on the last day of each month upon the
closing daily balances in its account for each day during such month at a rate
equal to the Annual Rate. With respect to Libor Rate loans, interest shall be
payable on the last day of each month at a rate equal to 2.75% in excess of the
Libor Rate. The Annual Rate shall increase or decrease by an amount equal to
each increase or decrease, respectively, in the Prime Rate, effective on the
first day of the month after any change in the Prime Rate based on the Prime
Rate in effect on the last day of the month in which any such change occurs.
Interest based on the Libor Rate shall be selected, determined and charged in
accordance with Section 3.1 of the Amended and Restated Accounts Financing
Agreement. The Annual Rate in effect hereunder on the date hereof, expressed in
terms of simple interest is eight and one-half of one percent (8.5%) per annum.
Interest shall be calculated on the basis of a three hundred sixty (360) day
year and shall be included in each monthly statement of the loan account of
Farah UK. Lender shall have the right, at its option, to charge all interest to
the loan account of Farah UK on the first day of each month, and such interest
shall be deemed to be paid by the first amounts subsequently credited thereto.
(f) No agreements, conditions, provisions or stipulations
contained in this Supplement or in any of the other Amended and Restated
Accounts Financing Agreements or the occurrence of an Event of Default or the
exercise by Lender of the right to accelerate the payment of the maturity of
principal and interest, or to exercise any option whatsoever contained in this
Supplement or in any of the other Amended and Restated Accounts Financing
Agreements or the arising of any contingency whatsoever shall entitle Lender to
collect, in any event, interest exceeding the Maximum Legal Rate, and in no
event shall Farah UK be obligated to pay interest exceeding such Maximum Legal
Rate, and all agreements, conditions or stipulations, if any, which may in any
event or contingency whatsoever operate to bind, obligate or compel Farah UK to
pay a rate of interest exceeding such Maximum Legal Rate shall be without
binding force or effect at law or in equity, to the extent only of the excess of
interest over such maximum interest allowed by law. In the event any interest is
charged in excess of the Maximum Legal Rate (herein referred to as the
"Excess"), Farah UK and Lender acknowledge and stipulate that any such charge
shall be the result of an accidental and bona fide error, and such Excess shall
be, first, applied to reduce the principal of any Obligations due, and, second,
returned to Farah UK, it being the intention of the parties hereto not to enter
at any time into an usurious or otherwise illegal relationship. The parties
hereto recognize that with fluctuations in the Prime Rate and Libor Rate such an
unintentional result could inadvertently occur. By the execution of this
Supplement, Farah UK covenants that (i) the credit or return of any Excess shall
constitute the acceptance by Farah UK of any such Excess, and (ii) Farah UK
shall not seek or pursue any other remedy, legal or equitable, against Lender
based, in whole or in part, upon the charging or receiving of any interest in
excess of the Maximum Legal Rate. For the purpose of determining whether or not
any Excess has been contracted for, charged or received by Lender, all interest
at any time contracted for, charged or received by Lender in connection with the
Obligations of Farah UK shall be amortized, prorated, allocated and spread in
equal parts during the entire term of the financing arrangements of Lender with
Farah UK.
(g) If the applicable law is amended in the future to allow a
greater rate of interest to be charged to Farah UK under this Supplement than is
presently allowed by applicable state or federal law, then the limitation of
interest hereunder and under the Amended and Restated Accounts Financing
Agreement shall be increased to the maximum rate of interest allowed by
applicable law as amended, which increase shall be effective hereunder on the
effective date of such amendment, and all interest charges owing to Lender by
reason thereof shall be payable upon demand.
(h) Until the authority of Farah UK to do so is curtailed or
terminated at any time by Lender, Farah UK shall, at its expense and on behalf
of Lender, collect, as the property of Lender and in trust for Lender, all
proceeds from the Farah UK Accounts and the sale of the Inventory of Farah UK,
in whatever form, including, without limitation, all cash, checks, drafts or
other instruments and all other proceeds of Collateral. At such time hereafter
as Lender may request, Farah UK shall not commingle such collections with Farah
UK's own funds. Upon Lender's request, Farah UK shall on the day received
deposit all such proceeds into deposit accounts subject to the provisions set
forth below for the collection and transfer of sales proceeds. At such time as
proceeds of Collateral of Farah UK are deposited into deposit accounts subject
to the provisions set forth below, such proceeds when received by Lender at such
place as Lender may designate from time to time shall be credited to the loan
account of Farah UK after adding two (2) business days for remittances by
federal funds wire transfers and after adding two (2) business days for
collection, clearance and transfer of all other remittances, in each instance
conditional upon final payment to Lender.
(i) At such time as Lender may request, Farah UK shall, in a
manner satisfactory to Lender from time to time, enter into deposit account
arrangements such that all proceeds of the sale of the inventory of Farah UK of
every form, or amounts payable upon letters of credit, bankers' acceptances and
other proceeds of such Collateral shall be deposited into a blocked account
under Lender's control or deposited into one of the deposit accounts that is
approved by Lender with respect to which irrevocable instructions from Farah UK
have been accepted by the depository bank to transfer all collected funds to a
blocked account under the control of Lender. In connection therewith, Farah UK
shall execute such instructions, blocked account and other agreements as Lender,
in its discretion, shall specify.
3. Farah UK Representations, Warranties and Covenants. Farah UK hereby
represents, warrants and covenants to Lender the following (which shall survive
the execution and delivery of this Supplement), the truth and accuracy of which,
or compliance with, being a continuing condition of the making of loans by
Lender to Farah UK hereunder:
(a) Farah UK shall at all times preserve, renew and keep in
full force and effect its existence as a corporation and the rights and
franchises with respect thereto and continue to engage in business of the same
type as it is engaged as of the date hereof. Farah UK shall give Lender thirty
(30) days prior written notice of any proposed change in its corporate name
which notice shall set forth the new name.
(b) The books and records and chief executive office of Farah
UK are maintained at Xxxxxxxx Xxxx, Xxxxxx, Xxxxx XX0 0XX Xxxxxxx. Farah UK
shall not change such location without Lender's prior written consent and prior
to making any such change, Farah UK agrees to execute any additional documents
or notices which Lender may require. The only locations of any assets of Farah
UK are those addresses listed on Exhibit A hereto and made a part hereof.
Exhibit A sets forth the owner and/or operator of the premises at such addresses
for all locations which Farah UK does not own and operate and all mortgages, if
any, with respect to the premises. Farah UK shall not remove any Farah UK
Collateral from such locations, without Lender's prior written consent, except
for sales of Farah UK Inventory in the ordinary course of business of Farah UK.
(c) Farah UK shall maintain its shipping forms, invoices and
other related documents in a form satisfactory to Lender and shall maintain its
books, records and accounts in accordance with applicable accounting principles
consistently applied. Farah agrees to furnish Lender monthly with accounts
receivable agings, inventory reports (if requested by Lender) and interim
financial statements (including balance sheets, statements of income and
retained earnings and cash flow statements), and to furnish Lender, at any time
or from time to time with such other information regarding its business affairs
and financial condition as Lender may reasonably request, including, without
limitation, balance sheets, statements of income, statements of cash flows
projections, forecasts, schedules, agings and reports. Farah UK hereby
irrevocably authorizes and directs all accountants, auditors or other third
parties to deliver to Lender, at Farah UK's expense, copies of its financial
statements, papers related thereto, and other accounting records of any nature
in their possession and to disclose to Lender any information they may have
regarding its business affairs and financial conditions. All such statements and
information will fairly present Farah UK's financial condition as of the dates
and the results of Farah UK's operations for the periods, for which the same are
furnished. Any documents, schedules or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, unless Farah UK makes written request therefor and pays all
expenses attendant to their return, in which event Lender shall return same when
Lender's actual or anticipated need therefor has ceased.
(d) Farah UK shall keep and maintain, at its own cost and
expense, satisfactory and complete books and records of all Farah UK Accounts,
all payments received or credits granted thereon and all other dealings
therewith. At any time on or after the occurrence of an Event of Default, at
such times as Lender may request, Farah UK shall deliver to Lender all original
documents evidencing the sale and delivery of goods or the performance of
services which created any Accounts, including but not limited to all original
contracts, orders, invoices, bills of lading, warehouse receipts, delivery
tickets and shipping receipts. At any such time as Lender may request, Farah UK
shall deliver to Lender schedules describing the Accounts and/or written
confirmatory assignments to Lender of each Account, in form and substance
satisfactory to Lender and duly executed by Farah UK, together with such other
information as Lender may request. Lender will return to Farah UK, at Farah UK's
expense, any original documents evidencing the sale and delivery of goods which
created any Accounts delivered to Lender pursuant to this Section 3(d) and in
Lender's possession when Lender's actual or anticipated need therefor has
ceased. In no event shall the making or the failure to make or the content of
any schedule or assignment or Farah UK's failure to comply with the provisions
hereof be deemed or construed as a waiver, limitation or modification of
Lender's security interest therein, lien upon and assignment of the Farah UK
Collateral or Farah UK's representations, warranties or covenants under this
Supplement or any of the other Amended and Restated Accounts Financing
Agreements.
(e) Farah UK shall immediately upon obtaining knowledge
thereof report to Lender all reclaimed, repossessed or returned goods (other
than returns in the ordinary course of business of Farah UK which shall only be
reported to Lender with such frequency and in such manner as Lender may
reasonably require).
(f) Farah UK shall duly pay and discharge all taxes,
assessments, contributions and governmental charges upon or against Farah UK or
its properties or assets prior to the date on which penalties attach thereto.
Farah UK will be liable for any tax or penalty imposed upon any transaction
under this Supplement or any of the other Amended and Restated Accounts
Financing Agreements or giving rise to the Farah UK Accounts or any other assets
of Farah UK or which Lender may be required to withhold or pay for any reason
and Farah UK agrees to indemnify and hold Lender harmless with respect thereto,
and to repay to Lender on demand the amount thereof, and until paid by Farah UK
such amount shall be added to and deemed part of the Obligations.
(g) Except as otherwise disclosed to Lender in writing, there
is no present investigation by any Governmental Agency pending or threatened
against Farah UK and there is no action, suit, proceeding or claim pending or
threatened against Farah UK or its assets or goodwill, or affecting any
transactions contemplated by this Supplement or the other Amended and Restated
Accounts Financing Agreements, or any instruments or documents delivered in
connection herewith or therewith before any court, arbitrator or Governmental
Agency which if adversely determined with respect to Farah UK would result in
any material adverse change in Farah UK's business, properties, assets,
goodwill, or condition, financial or otherwise.
(h) Farah UK does not have any Subsidiaries as of the date
hereof except as set forth on Exhibit B hereto. Farah International, Inc., a
Texas corporation, is the direct and beneficial owner and holder of 9,999 shares
of the issued and outstanding shares of capital stock of Farah UK and Farah USA
is the direct and beneficial owner and holder of 1 share of the issued and
outstanding shares of capital stock of Farah UK, which 10,000 shares constitute
all of the issued and outstanding shares of capital stock of Farah UK. Farah UK
will not form or acquire any Subsidiary without the prior written consent of
Lender.
(i) Farah UK will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist, contingently or otherwise, any
Indebtedness, except:
(i) Indebtedness to Lender;
(ii) Indebtedness consisting of unsecured current liabilities incurred in
the ordinary course of its business which are not past due;
(iii) unsecured Indebtedness of Farah UK to Farah Exports (Ireland)
incurred by Farah UK in the ordinary course of business of Farah UK pursuant to
the purchase of Inventory by Farah UK from Farah Exports (Ireland), which
Indebtedness is, in all respects, subject and subordinate in right of payment to
the right of Lender to receive the prior indefeasible payment in full of all of
the Obligations; provided, that: (A) Farah UK shall not, directly or indirectly,
make any payments in respect of such Indebtedness, including, but not limited
to, any prepayments or other non-mandatory payments or any payments pursuant to
the purported acceleration thereof except, that, Farah UK may make payments from
time to time to Farah Exports (Ireland) in respect of such indebtedness
outstanding as of the date hereof, provided, that, each of the following
conditions is satisfied: (1) as of the date of each such payment and after
giving effect thereto, no Event of Default shall exist or have occurred and (2)
the aggregate amount of all such payments in any fiscal year of Farah UK shall
not exceed $500,000, and (B) Farah UK shall not, directly or indirectly, (1)
amend, modify, alter or change the terms of such Indebtedness or (2) redeem,
retire, defease, purchase or otherwise acquire such Indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose;
(iv) Indebtedness incurred in the ordinary course of its business secured
only by liens permitted under Sections 3(j)(ii) and 3(j)(iii) hereof;
(v) Indebtedness owing to any one person existing on the date hereof in an
amount of less than $100,000 (or the foreign currency equivalent thereof as
determined by Lender) and any other Indebtedness existing on the date hereof
equal to or in excess of such amount which is described on Exhibit C hereto,
provided, that: (A) Farah UK and its subsidiaries may only make regularly
scheduled payments of principal and interest in respect of such Indebtedness as
set forth on Exhibit C, (B) Farah UK will not, directly or indirectly, (1) make
any prepayments or other non-mandatory payments in respect of any such
Indebtedness or (2) redeem, retire, defense, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose or (3) amend, modify, alter or change the terms of the arrangements
relating thereto or any agreement or instrument evidencing such Indebtedness,
and (C) Farah UK and its subsidiaries will furnish to Lender all notices,
demands or other materials concerning such Indebtedness, promptly after receipt
thereof or concurrently with the sending thereof, as the case may be;
(vi) unsecured Indebtedness owing to a Borrower evidencing loans made by
such Borrower to Farah UK, provided that such Borrower collaterally assigns to
Lender the note and/or other agreements evidencing such Indebtedness in form and
substance satisfactory to Lender;
(vii) Indebtedness evidencing letter of credits issued by third parties on
behalf of Farah UK in an aggregate amount not to exceed 500,000 in British
Pounds Sterling at any time outstanding;
(viii) unsecured Indebtedness of Farah UK under custom guarantees in
respect of the payment of import duties in an aggregate amount not to exceed
250,000 in British Pounds Sterling; and
(ix) Indebtedness to third party lenders of Farah UK arising after Farah UK
terminates its obligations under the Amended and Restated Accounts Financing
Agreement, this Supplement, the Farah UK Agreements, and the other Financing
Agreements in accordance with the terms and conditions of Section 8 of this
Supplement.
(j) Farah UK will not, and will not permit any Subsidiary to,
create or suffer to exist any mortgage, pledge, security interest, lien,
encumbrance, defect in title or restriction upon the use of its real or personal
properties, whether now owned or hereafter acquired, except:
(i) the liens or security interests in favor of Lender;
(ii) tax, mechanics or other like statutory liens arising in the ordinary
course of Farah UK's business to the extent (A) such liens secure Indebtedness
which is not overdue or (B) until foreclosure or similar proceedings shall have
been commenced, such liens secure Indebtedness relating to claims or liabilities
which are being contested in good faith by appropriate proceedings available to
Farah UK prior to the commencement of foreclosure or other similar proceedings
and are adequately escrowed for or reserved against in Lender's judgment;
(iii) purchase money mortgages or other purchase money liens or security
interests upon any specific fixed assets now existing or hereafter acquired, or
mortgages, liens or security interests existing on any such fixed assets at the
time of acquisition thereof (including, without limitation, capitalized or
finance leases) or in connection with the refinancing of the existing
capitalized leases with respect to specific assets, provided, that, (A) no such
purchase money or other mortgages, liens or security interests (or capitalized
or finance lease, as the case may be) with respect to specific future fixed
assets or as refinanced shall extend to or cover any other property, other than
the specific fixed assets so acquired, or acquired or refinanced subject to such
mortgage, lien or security interest (or lease) and the proceeds thereof, (B)
such mortgage, lien or security interest secures the obligation to pay the
purchase price of such specific fixed assets only (or the obligations under the
capitalized or finance lease), and (C) the principal amount secured thereby
shall not exceed one hundred (100%) percent of the cost of the fixed assets so
acquired;
(iv) the existing liens, encumbrances or security interests described on
Exhibit D hereto; and
(v) Liens, security interests and charges against the assets of Farah UK
securing the Indebtedness described in Section 3(i)(ix) above.
(k) Farah UK will not, and will not permit any Subsidiary to,
directly or indirectly, make any loans or advance money or property to any
Person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or Indebtedness or all or a substantial part of
the assets or property of any Person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends or any Person or agree to do any of the
foregoing, except:
(i) guarantees in favor of Lender;
(ii) loans by Farah UK or any of its subsidiaries to any of the other
Borrowers or Farah Incorporated, provided that Farah UK collaterally assigns the
note and/or agreements evidencing such loan in form and substance satisfactory
to Lender;
(iii) the endorsement of instruments for collection or deposit in the
ordinary course of business;
(iv) investments by Farah UK and its subsidiaries in the stock of any
Subsidiary existing as of the date hereof or hereafter approved by Lender; and
(v) after written notice thereof to Lender, investments in the following
instruments, which shall be pledged and delivered to Lender upon Lender's
request, (A) marketable obligations issued or guaranteed by the United States of
America or an instrumentality or agency thereof, maturing not more than one (1)
year after the date of acquisition thereof, (B) certificates of deposit or other
obligations maturing not more than one (1) year after the date of acquisition
thereof issued by any bank or trust company organized under the laws of and
located in the United States of America or any State thereof or any bank, trust
company, building society or other financial institution organized under the
laws of and located in England or Wales and having capital, surplus and
undivided profits of at least $100,000,000 or the foreign currency equivalent
thereof as determined by Lender (provided, that, upon Lender's request, Farah UK
or such Subsidiary, as the case may be, shall execute and deliver to Lender a
pledge agreement or memorandum of deposit with respect thereto, in form and
substance satisfactory to Lender) and (C) open market commercial paper with a
maturity date not in excess of two hundred seventy (270) days from the date of
acquisition thereof which have the highest credit rating by either Standard &
Poor's Corporation or Xxxxx'x Investors Service, Inc.
(l) Farah UK will not, and will not permit any Subsidiary to,
directly or indirectly, purchase, acquire or lease any property or receive any
services from, or sell, transfer or lease any property or services to any
Affiliate of Farah UK except on prices and terms no less favorable than would
have been obtained in an arm's length transaction with a non-affiliated person.
(m) Farah UK will permit representatives of Lender at any time
to inspect its inventory, equipment and other tangible Farah UK Collateral and
to have free access to and right of inspection of any papers, instruments an
records pertaining to any of the Farah UK Collateral and make abstracts or
photocopies from Farah UK's books and records, at the expense of Farah UK,
pertaining to inventory, accounts, contract rights, chattel paper, instruments,
documents and other collateral. The foregoing rights shall be in addition to and
shall not limit Lender's rights and remedies with respect to the Farah UK
Collateral upon or at any time after the occurrence of an Event of Default (as
provided hereunder).
(n) Upon Lender's request, on or after the occurrence of an
Event of Default at any time and from time to time, but in no event prior to the
occurrence of an Event of Default more than once in any twelve (12) consecutive
month period, Farah UK will, at its sole cost and expense, execute and deliver
to Lender written reports or appraisals of the Farah UK Collateral consisting of
inventory and equipment listing all items and categories thereof, describing the
condition of same and setting forth the value thereof (the lower if cost or
market value of the inventory and the lower of net cost less depreciation, fair
market value and/or liquidation value of the equipment), in such form as is
satisfactory to Lender.
(o) Farah UK will (i) use, store and maintain the Farah UK
Collateral consisting of inventory and equipment with all reasonable care and
caution, and (ii) use such Farah UK Collateral for lawful purposes only and in
conformity with applicable laws, ordinances and regulations.
(p) At its option, Lender may discharge taxes, liens or
security interests or other encumbrances at any time levied or placed on the
Farah UK Collateral and may pay for the maintenance and preservation of the
Farah UK Collateral and Farah UK agrees to reimburse Lender on demand, together
with interest therein at the rate specified herein, for any payment made or
expense incurred by Lender in connection with the foregoing and any such payment
or expense shall constitute a part of the Obligations.
4. Farah UK Inventory Loan Sublimits. Notwithstanding anything to the
contrary contained herein or in any of the other Amended and Restated Accounts
Financing Agreements, except in Lender's discretion, the aggregate unpaid
principal amount of the loans outstanding at any time based on the Eligible
Farah UK Inventory, regardless of the amounts of such Eligible Farah UK
Inventory, shall not exceed $1,750,000 in U.S. Dollars or U.S. Dollar
Equivalents.
5. Maximum Credit for Farah UK Loans. Except in Lender's discretion, the
aggregate unpaid principal amount of the loans or other financial accommodations
by Lender to Farah UK shall be made in U.S. Dollars and not exceed U.S.
$5,000,000 in U.S. Dollars or U.S. Dollar Equivalents.
6. Farah UK Financial Covenants.
(a) Net Worth. Farah UK will, at all times, maintain a Consolidated
Tangible Net Worth of not less than $750,000.
(b) Working Capital. Farah UK will, at all times, maintain a ratio of
Current Assets to Current Liabilities of not less than l.0:l.0.
7. Farah UK Events of Default. All Obligations shall be, at Lender's
option, immediately due and payable without notice or demand (notwithstanding
any deferred or installment payments allowed, if any, by any instrument
evidencing or relating to the Obligations) and any provision of this Supplement
or any of the other Amended and Restated Accounts Financing Agreements as to
future loans and advances by Lender to Borrowers shall, at Lender's option,
terminate forthwith, upon the occurrence of any one or more of the following
("Farah UK Events of Default"):
(a) Farah UK shall be in default in the payment of any of the
Obligations of Farah UK when due, which default shall continue for three (3)
days; or
(b) Farah UK shall fail to observe or perform any covenant or
agreement contained herein or in any of the other Amended and Restated Accounts
Financing Agreements other than as described in subsection (a) above and such
failure shall continue for seven (7) business days, provided, that, such seven
(7) business day period shall not apply in the case of: (i) any failure to
observe any such covenant or agreement which is not capable of being cured at
all or within such seven (7) business day period or which has been the subject
of a prior failure within a six (6) month period or (ii) an intentional breach
by Farah UK or its management of any such covenant or agreement; or
(c) any other guarantor, endorser or person liable on the
Obligations shall terminate or breach any of the terms, covenants, conditions or
provisions of any guarantee, endorsement or other agreement of such person with,
or in favor of, Lender; or
(d) any representation, warranty or statement of fact when made to Lender
at any time by or on behalf of Farah UK is false or misleading in any material
respect; or
(e) Farah UK or any other guarantor, endorser or person liable
on the Obligations shall become insolvent, generally unable to pay its debts as
they mature, call a meeting of creditors or have a creditors' committee
appointed, make a voluntary arrangement, make a general assignment for the
benefit of creditors, suspend or discontinue doing business for any reason, or
shall commence or have commenced against it any action or proceeding for the
winding up or dissolution or the appointment of any trustee, manager, receiver,
custodian, administrator or administrative receiver or liquidator of it or all
or any part of its properties or assets; or
(f) a judgment (including, without limitation, any attachment,
sequestration or distress) is rendered against Farah UK or any other guarantor,
endorser or person liable on the Obligations in excess of $250,000 or the
foreign currency equivalent thereof as determined by Lender in any one case or
in excess of $500,000 or the foreign currency equivalent thereof as determined
by Lender in the aggregate and the same shall remain undischarged for a period
in excess of thirty (30) days or execution shall at any time not be effectively
stayed; or
(g) Farah UK or any other guarantor, endorser or person liable
on the Obligations shall commence any action or proceeding for relief under the
U.S. Bankruptcy Code or any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the U.S.
Bankruptcy Code or any other present or future statute, law or regulation or an
application or petition shall be made by Farah UK or any other guarantor,
endorser or person liable on the Obligations or by any third person to an
English Court for an Administration Order or any other order under the United
Kingdom Insolvency Act 1986 (as amended or substituted from time to time) in
respect of Farah UK or its assets or Farah UK or any other guarantor, endorser
and person liable for the Obligations shall take any corporate action to
authorize any of such actions or proceedings; or
(h) Farah UK or any other guarantor, endorser or person liable
on the Obligations shall have commenced against it any action or proceeding for
relief under the U.S. Bankruptcy Code or any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
U.S. Bankruptcy Code or any other present or future statute, law or regulation
which is not dismissed within thirty (30) days of its commencement, or Farah UK,
any other guarantor, endorser or person shall file any answer admitting or not
contesting the allegations of a petition or application filed against it in any
such proceeding or by any act or omission indicates its consent to, acquiescence
in or approval of, any such action or proceeding or if the relief requested is
granted sooner; or
(i) there shall be a material adverse change in the business, assets or
condition (financial or otherwise) of Farah UK from the date hereof; or
(j) there is any change in the majority control or ownership of Farah UK;
or
(k) at any time, Lender shall, in its reasonable discretion,
consider the Obligations insecure or all or any part of the Collateral unsafe,
insecure or insufficient and Farah UK shall not on Lender's demand furnish other
Farah UK Collateral or make payment on account, reasonable satisfactory to
Lender; or
(l) Farah UK or any other guarantor, endorser or person liable
on the Obligations shall default in the payment of any amounts due on any
indebtedness owed by it or in the performance of any of the other terms or
covenants of any evidence of such indebtedness or of any material mortgage,
security agreement, indenture, debenture, pledge or other agreement relating
thereto or securing such indebtedness or with respect to any material contract,
lease, license or other agreement with any person other than Lender, which
default continues for more than the applicable cure period, if any, with respect
thereto; or
(m) the occurrence of an Event of Default under any of the other Amended
and Restated Accounts Financing Agreements.
8. Alternate Farah UK Financing. Farah UK may, without Lender's prior
consent, but on prior written notice to Lender, seek financing as a partial
or complete replacement of the financing contemplated in this Supplement.
Prior to closing any such financing, Farah UK shall advise Lender of the
terms thereof and the expected termination date of this Supplement and the
other Farah UK Agreements. Lender agrees to execute and deliver to Borrower,
at Borrower's expense (including related attorneys fees and expenses), all
releases and terminations of Lender's liens, security interests and charges
it may have in the assets of Farah UK (including, without limitation, the
Farah UK Agreements) that Borrower may reasonably request, concurrently with
the termination of this Supplement in accordance with this Section 8.
9. Covenants Applicable to U.K. For the purposes of the application and
interpretation of the provisions of the Amended and Restated Accounts Financing
Agreement, this Supplement or the other Amended and Restated Accounts Financing
Agreements to the operations of Farah UK in England and to any of the Collateral
which may at any time or from time to time be located in England:
(a) all payments of principal, interest, fees and other
amounts to be made pursuant to the Amended and Restated Accounts Financing
Agreement, this Supplement or the other Amended and Restated Accounts Financing
Agreements in respect of all or any part of the Obligations shall be made free
and clear and without deduction for any and all present and future taxes,
withholdings, levies, duties, any charges of any Governmental Agency and all
liabilities with respect thereto (except for any taxes, duties or levies charged
on the income of Lender under the laws of the United States of America), and
without set-off, withholding or deduction of any kind whatsoever and, if with
regard to any payment to be made by Farah UK to Lender pursuant to the Amended
and Restated Accounts Financing Agreement, this Supplement, the other Amended
and Restated Accounts Financing Agreements or otherwise, any deduction for any
and all such present and future taxes, withholding, levies, duties, charges of a
Governmental Agency or any liability with respect thereto is required to be made
by Farah UK, Farah UK shall pay such additional amounts to Lender as may be
necessary in order that the net amount received by Lender after such deduction
shall equal such payment which would have been received by Lender in the absence
of such deduction; and
(b) Farah UK shall make all payments in respect of the
Obligations in U.S. Dollars and any payment on account of the Obligations made
in a currency other than U.S. Dollars, whether pursuant to a Judgment or order
of a Court or a Governmental Agency or otherwise, shall constitute a discharge
of the Obligations only to the extent of the U.S. Dollar Equivalent which Lender
is able to purchase and if the number of U.S. Dollars which Lender is so able to
purchase is less than the number of U.S. Dollars originally due to it, Farah UK
shall indemnify and save Lender harmless from and against any loss or damage
arising as a result of such deficiency and this indemnity shall:
(i) constitute an obligation separate and independent from the Obligations,
(ii) give rise to a separate and independent cause of action,
(iii) apply irrespective of any indulgence granted by Lender from time to
time,
(iv) be secured by the assignments, charges and security interests created
in respect of the Collateral by the Amended and Restated Accounts Financing
Agreement, this Supplement or the other Amended and Restated Accounts Financing
Agreements, and
(v) shall continue in full force and effect notwithstanding any judgment or
order for a liquidated sum in respect of an amount due under the Amended and
Restated Accounts Financing Agreement, this Supplement or the other Amended or
Restated Accounts Financing Agreements or any judgment or order or any payment
made under any judgment or order or the termination or non-renewal of the
Amended or Restated Accounts Financing Agreement, this Supplement and the other
Amended and Restated Financing Agreements.
10. Conditions Precedent. The effectiveness of the other terms and
conditions contained herein shall be subject to the satisfaction of each of the
following unless waived by Congress in writing:
(a) receipt by Lender of each of the following, in form and substance
satisfactory to Lender and its counsel:
(i) a confirmation of the absolute and unconditional guarantee of payment
of the Obligations of Borrowers to Lender and the general security agreement
granting to Lender a first and only lien upon its assets, or duly authorized,
executed and delivered by Farah Clothing;
(ii) certified copies of directors' resolutions or unanimous consent of
Farah UK, Farah USA, Value Clothing and the Guarantors evidencing the
authorization and approval of this Supplement, the confirmation of the
guarantees referred to above and as to Farah UK, the amendment and restatement
borrowing arrangements to be provided by Lender to Farah UK hereunder;
(iii) such agreements from participants as may be required to effectuate
the terms and provisions of this Supplement; and
(iv) an original of this Supplement, duly authorized, executed and
delivered by Farah UK, Farah USA, Value Clothing and Guarantors;
(b) all representations and warranties contained herein, in
the Amended and Restated Accounts Financing Agreement and in the other Amended
and Restated Accounts Financing Agreements shall be true and correct in all
respects; and
(c) no Event of Default shall have occurred and no event shall
have occurred or condition be existing which, with notice or passage of time or
both, would constitute an Event of Default.
11. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY ACTION OR PROCEEDING OF ANY KIND WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AMENDED AND RESTATED ACCOUNTS FINANCING AGREEMENT, THE OTHER
AMENDED AND RESTATED ACCOUNTS FINANCING AGREEMENTS, THE OBLIGATIONS, THE
COLLATERAL OR ANY INSTRUMENT, DOCUMENT OR GUARANTY DELIVERED PURSUANT HERETO OR
TO ANY OF THE FOREGOING, OR THE VALIDITY, PROTECTION, INTERPRETATION,
ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR THEREOF OR PURSUANT TO THE
OTHER AMENDED AND RESTATED ACCOUNTS FINANCING AGREEMENTS, OR ANY OTHER CLAIM OR
DISPUTE HOWSOEVER ARISING BETWEEN FARAH UK, FARAH USA, VALUE CLOTHING AND
GUARANTORS AND LENDER.
12. WAIVER OF COUNTERCLAIMS; JURISDICTION; SERVICE OF PROCESS. EACH OF
FARAH UK, FARAH USA, VALUE CLOTHING AND GUARANTORS HEREBY WAIVES ALL RIGHTS OF
SETOFF AND RIGHTS TO IMPOSE COUNTERCLAIMS IN THE EVENT OF ANY LITIGATION WITH
RESPECT TO ANY MATTER CONNECTED WITH THIS AMENDED AND RESTATED ACCOUNTS
FINANCING AGREEMENT, THE OTHER AMENDED AND RESTATED ACCOUNTS FINANCING
AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL, OR ANY TRANSACTION BETWEEN THE
PARTIES HERETO, AND IRREVOCABLY CONSENTS AND SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK IN NEW YORK CITY AND
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND THE
DISTRICT COURT OF THE STATE OF TEXAS AND THE UNITED STATES DISTRICT FOR THE
NORTHERN DISTRICT OF TEXAS AND THE COURTS OF ANY STATE IN WHICH ANY OF THE
COLLATERAL IS LOCATED AND OF ANY FEDERAL COURT LOCATED IN SUCH STATES IN
CONNECTION WITH ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
THIS AMENDED AND RESTATED ACCOUNTS FINANCING AGREEMENT, THE OTHER AMENDED AND
RESTATED ACCOUNTS FINANCING AGREEMENTS, THE OBLIGATIONS, THE COLLATERAL OR ANY
DOCUMENT, INSTRUMENT OR GUARANTY DELIVERED PURSUANT HERETO OR TO ANY OF THE
FOREGOING. IN ANY SUCH LITIGATION, EACH OF FARAH UK, FARAH USA, VALUE CLOTHING
AND GUARANTORS WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER
PROCESS AND AGREES THAT THE SERVICE THEREOF MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED AND BY TELECOPIER, DIRECTED TO IT AT
ITS CHIEF EXECUTIVE OFFICE SET FORTH IN THE AMENDED AND RESTATED ACCOUNTS
FINANCING AGREEMENT OR THE OTHER AMENDED AND RESTATED ACCOUNTS FINANCING
AGREEMENTS, OR DESIGNATED IN WRITING PURSUANT TO THIS AMENDED AND RESTATED
ACCOUNTS FINANCING AGREEMENT, OR IN ANY OTHER MANNER PERMITTED BY THE RULES OF
SAID COURTS. WITHIN THIRTY (30) DAYS AFTER SERVICE, FARAH UK, FARAH USA, VALUE
CLOTHING AND GUARANTORS NAMED IN SUCH SUMMONS, COMPLAINT OR OTHER PROCESS
FAILING WHICH FARAH UK, FARAH USA, VALUE CLOTHING AND GUARANTORS, AS THE CASE
MAY BE, SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY BE ENTERED BY LENDER AGAINST
SUCH BORROWERS OR GUARANTORS FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF
REQUESTED THEREIN.
FARAH U.S.A., INC.
By: /s/ Xxxxxxx X. Xxxxxx
Title: Vice President
FARAH MANUFACTURING (U.K.)
LIMITED
By: /s/ Xxxxxxx X. Page
Title: Director
VALUE CLOTHING COMPANY, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
ACKNOWLEDGED AND AGREED AS OF JUNE 1, 1997:
FARAH INCORPORATED
FARAH INTERNATIONAL, INC.
VALUE CLOTHING COMPANY, INC.
VALUE SLACKS, INC.
FARAH MANUFACTURING COMPANY, INC.
FARAH MANUFACTURING COMPANY
OF NEW MEXICO, INC.
CORPORACION FARAH-COSTA RICA X.X.
XXXXX CLOTHING COMPANY, a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
Title: Chief Financial Officer
ACKNOWLEDGED AND AGREED:
CONGRESS FINANCIAL CORPORATION
(SOUTHWEST)
By: /s/ Xxxx Xxxxxxx, Xx.
Title: Vice President
FTX, INC.
By: Xxxx Xxxxxxx, Xx.
Title: President
