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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
June 15, 1998
DESIGNS, INC.
(Exact Name of registrant as specified in its charter)
Delaware 0-15898 04-2623104
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
66 B Street, Needham, Massachusetts 02194
(Address of principal executive offices) (Zip Code)
(781) 444-7222
(Registrant's telephone number, including area code)
Item 5. Other Events
On June 4, 1998, Designs, Inc. (the "Company") entered into an Amended
and Restated Loan and Security Agreement (the "Credit Agreement") with
BankBoston Retail Finance Inc. (the "Agent"), a subsidiary of BankBoston, N.A.,
as agent for the lender(s) identified in the Credit Agreement. The full text of
the Credit Agreement, the Revolving Credit Note dated June 4, 1998 made by the
Company pursuant to the terms and conditions of the Credit Agreement, and a
letter concerning certain fees paid and to be paid by the Company pursuant to
the terms and conditions of the Credit Agreement, are attached as Exhibit 10.1,
Exhibit 10.2 and Exhibit 10.3 hereto, respectively.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Exhibit 10.1 Amended and Restated Loan and Security Agreement, dated
June 4, 1998, among Designs, Inc., BankBoston Retail
Finance Inc. as Agent for the Lender(s) identified therein
Exhibit 10.2 Revolving Credit Note, dated June 4, 1998, in favor of
BankBoston Retail Finance Inc.
Exhibit 10.3 Fee Letter, dated June 4, 1998, concerning certain fees
paid and to be paid by the Company to BankBoston Retail
Finance Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DESIGNS, INC.
Date: June 15, 1998 By: /s/ Joel H. Reichman
-------------------------------
Joel H. Reichman, President and
Chief Executive Officer
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BANKBOSTON RETAIL FINANCE INC.
AGENT FOR
THE LENDERS REFERENCED HEREIN
DESIGNS, INC.
THE BORROWER
June 4, 1998
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS 1
ARTICLE 2 - THE REVOLVING CREDIT 21
2-1. Establishment of Revolving Credit 21
2-2. Advances in Excess of Borrowing Base 23
2-3. Risks of Value of Collateral 23
2-4. Loan Requests 23
2-5. Making of Loans Under Revolving Credit 25
2-6. The Loan Account 25
2-7. The Revolving Credit Notes 26
2-8. Payment of The Loan Account 27
2-9. Interest 27
2-10. Commitment Fee; Agent's Fee 28
2-11. Line Fee 28
2-12. Early Termination Fee 28
2-13. Regarding Fees 29
2-14. Agent's and Lenders' Discretion 29
2-15. Procedures For Issuance of L/C's 30
2-16. Fees For L/C's 30
2-17. Concerning L/C's 31
2-18. Changed Circumstances 33
2-19. Increased Costs 34
2-20 Lenders' Commitments 34
ARTICLE 3 - CONDITIONS PRECEDENT 36
3-1. Corporate Due Diligence 36
3-2. Opinion 36
3-3. [Intentionally Omitted] 36
3-4 Guarantors 37
3-5. Additional Documents 37
3-6. Officers' Certificates 37
3-7. Representations and Warranties 37
3-8. Minimum Excess Availability 37
3-9. All Fees and Expenses Paid 37
3-10. No Suspension Event 38
3-11. No Adverse Change 38
ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS 38
4-1. Payment and Performance of Liabilities. 38
4-2. Due Organization - Corporate Authorization
- No Conflicts 38
4-3. Trade Names 39
4-4. Infrastructure 40
4-5. Locations 40
4-6. Title to Assets 41
4-7. Indebtedness 43
4-8. Insurance Policies 43
4-9. Licenses 44
4-10. Leases 44
4-11. Requirements of Law 44
4-12. Maintain Properties 44
4-13. Pay Taxes 45
4-14. No Margin Stock 46
4-15. ERISA 46
4-16. Hazardous Materials 47
4-17. Litigation 48
4-18. Dividends or Investments 48
4-19. Permitted Acquisitions 49
4-20. Loans 50
4-21. Joint Venture 50
4-22. Restrictions on Sale of Collateral; License Agreements 51
4-23. Protection of Assets 51
4-24. Line of Business 51
4-25. Affiliate Transactions 51
4-26. Additional Assurances 52
4-27. Adequacy of Disclosure 52
4-28. Other Covenants 53
ARTICLE 5 - REPORTING REQUIREMENTS/FINANCIAL COVENANTS 53
5-1. Maintain Records 53
5-2. Access to Records 53
5-3. Notice to Agent 54
5-4. Borrowing Base Certificate 55
5-5. Weekly Reports 56
5-6. Monthly Reports 56
5-7. Quarterly Reports 57
5-8. Annual Reports 57
5-9. Applicable to Monthly, Quarterly and Annual Reports 58
5-10. Officers' Certificates 58
5-11. Inventories, Appraisals, and Audits 59
5-12. Additional Financial Information 60
5-13. Financial Performance Covenants 61
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL 61
6-1. Use of Inventory Collateral 61
6-2. Inventory Quality 61
6-3. Adjustments and Allowances 61
6-4. Validity of Accounts 62
6-5. Notification to Account Debtors 62
ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES 62
7-1 Depository Accounts 62
7-2. Credit Card Receipts 63
7-3. The Concentration and the Funding Accounts 63
7-4. Proceeds and Collection of Accounts 63
7-5. Payment of Liabilities 64
7-6. The Funding Account 65
ARTICLE 8 - GRANT OF SECURITY INTEREST 65
8-1. Grant of Security Interest 65
8-2. Extent and Duration of Security Interest 66
ARTICLE 9 - AGENT AS BORROWER'S ATTORNEY-IN-FACT 66
9-1. Appointment as Attorney-In-Fact 66
9-2. No Obligation to Act 67
ARTICLE 10 - EVENTS OF DEFAULT 68
10-1. Failure to Pay Revolving Credit 68
10-2. Failure To Make Other Payments 68
10-3. Failure to Perform Covenant or Liability
(No Grace Period) 68
10-4. Financial Reporting Requirements 68
10-5. Failure to Perform Covenant or Liability (Grace Period) 69
10-6. Misrepresentation 69
10-7. Acceleration of Other Debt. Breach of Lease 69
10-8. Default Under Other Agreements 69
10-9. Uninsured Casualty Loss. 69
10-10. Judgment. Restraint of Business 70
10-11. Business Failure 70
10-12. Bankruptcy 70
10-13. Indictment - Forfeiture 71
10-14. Default by Guarantor or Related Entity 71
10-15. Termination of Guaranty 71
10-16. Challenge to Loan Documents 71
10-17. Lease Default 71
10-18. Change in Control 71
10-19. Termination or Non-renewal of Joint Venture
or License Agreement 72
ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT 72
11-1. Rights of Enforcement 72
11-2. Sale of Collateral 72
11-3. Occupation of Business Location 73
11-4. Grant of Nonexclusive License 74
11-5. Assembly of Collateral 74
11-6. Rights and Remedies 74
ARTICLE 12 - NOTICES 74
12-1. Notice Addresses 74
12-2. Notice Given 75
ARTICLE 13 - TERM 76
13-1. Termination of Revolving Credit 76
13-2. Effect of Termination 76
ARTICLE 14 - GENERAL 76
14-1. Protection of Collateral 76
14-2. Successors and Assigns 77
14-3. Severability 77
14-4. Amendments. Course of Dealing 77
14-5. Power of Attorney 78
14-6. Application of Proceeds 78
14-7. Costs and Expenses of Agent and Of Lenders 78
14-8. Copies and Facsimiles 79
14-9. Massachusetts Law 79
14-10. Consent to Jurisdiction 79
14-11. Indemnification 80
14-12. Rules of Construction 80
14-13. Intent 81
14-14. Right of Set-Off 82
14-15. Maximum Interest Rate 82
14-16. Waivers 82
14-17. Confidentiality 83
14-18. Amendment and Restatement 83
EXHIBITS
2-4 : Loan Request
2-7 : Revolving Credit Note
2-20 : Voting Rights
4-2 : Related Entities
4-3 : Trade Names
4-4(b) : Exceptions to Property Rights
4-5 : Locations, Leases, and Landlords
4-5(c) : Form of Landlord's Waiver
4-6 : Encumbrances
4-7 : Indebtedness
4-8 : Insurance Policies
4-10 : Capital Leases
4-13 : Taxes
4-17 : Litigation
5-4 : Borrowing Base Certificate
5-13(a) : Financial Performance Covenants
7-1 : DDA's.
7-2 : Credit Card Arrangements
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT BankBoston Retail Finance Inc.
Agent
June 4, 1998
THIS AGREEMENT is made between
BankBoston Retail Finance Inc. (in such capacity, herein the
"Agent"), a Delaware corporation with offices at 40 Broad Street,
Boston, Massachusetts 02109, as agent for the ratable benefit of the
"Lenders", who are, at present, those financial institutions
identified on the signature pages of this Agreement and who in the
future are those Persons (if any) who become "Lenders" in accordance
with the provisions of Section 2-20, below,
and
Designs, Inc. (hereinafter, the "Borrower"), a Delaware
corporation with its principal executive offices at 66 B
Street, Needham, Massachusetts 02194
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
ARTICLE 1 - DEFINITIONS.
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"Acceptable Inventory": All Inventory of the Borrower (excluding any
supplies, goods returned or rejected by customers, goods to be
returned to suppliers, and goods in transit to third persons
(other than the Borrower's agents or warehouses)), consisting
of casual apparel, footwear, and related accessories, less any
Reserves, as to which inventory the Lender has a perfected
security interest which is prior and superior to all security
interests, claims, and encumbrances other than Permitted
Encumbrances.
"Accounts" and "Accounts Receivable" "Accounts" as defined in the UCC,
and also all: accounts, accounts receivable, credit card
receivables, notes, drafts, acceptances, and other forms of
obligations and receivables and rights to payment for credit
extended and for goods sold or leased, or services rendered,
whether or not yet earned by performance; all "contract
rights" as formerly defined in the UCC; all Inventory which
gave rise thereto, and all rights associated with such
Inventory, including the right of stoppage in transit; all
reclaimed, returned, rejected or repossessed Inventory (if
any) the sale of which gave rise to any Account.
"Account Debtor": Has the meaning given that term in the UCC.
"ACH": Automated clearing house.
"Acquisition": The purchase or other acquisition, by the Borrower or by
any Subsidiary (no matter how structured in one transaction or
in a series of transactions) , of: (a) equity interests in any
other Person which would constitute or which results in a
Change in Control of such other Person, or (b) such of the
assets of any Person as would permit the Borrower or such
Subsidiary to operate one or more retail locations of such
Person or to conduct other business operations with such
assets (provided, however, none of the following shall
constitute an "Acquisition": purchases of inventory in the
ordinary course of the Borrower's business; purchases, leases
or other acquisitions of Equipment in the ordinary course of
the Borrower's business; and capital expenditures permitted
hereunder).
"Administrative Costs": All attorneys' reasonable fees and reasonable
out-of-pocket expenses incurred by the Agent's and any
Lender's attorneys, and all reasonable costs incurred by the
Agent or any Lender (but excluding the Agent's or any Lender's
overhead expense), in the administration of the Liabilities
and/or the Loan Documents, including, without limitation,
reasonable costs and expenses associated with travel on behalf
of the Agent or any Lender, which costs and expenses are
directly or indirectly related to or in respect of the Agent's
and any Lender's: administration and management of the
Liabilities; negotiation, documentation, and amendment of any
Loan Document; or efforts to preserve, protect, collect, or
enforce the Collateral, the Liabilities, and/or the Agent's
Rights and Remedies and/or any of the Agent's rights and
remedies against or in respect of any guarantor or other
person liable in respect of the Liabilities (whether or not
suit is instituted in connection with such efforts). The
Administrative Costs are Liabilities, and at the Agent's
option may bear interest at the rate which the Agent may then
charge the Borrower hereunder as if such had been lent,
advanced, and credited by the Agent to, or for the benefit of,
the Borrower.
"Affiliate": With respect to any two Persons, a relationship in which
(a) one holds, directly or indirectly, not less than Fifty-One
Percent (51%) of the capital stock, beneficial interests,
partnership interests, or other equity interests of the other;
or (b) one has, directly or indirectly, the right, under
ordinary circumstances, to vote for the election of a majority
of the directors (or other body or Person who has those powers
customarily vested in a board of directors of a corporation);
or (c) not less than Fifty-One Percent (51%) of their
respective ownership is directly or indirectly held by the
same third Person; provided that, for purposes of this
Agreement, the Joint Venture shall not be deemed an Affiliate
of the Borrower.
"Agent": Is defined in the Preamble.
"Agent's Fee": Is defined in Section 2-10.
"Agent's Rights and Remedies": Is defined in Section 11-6.
"Availability": Is defined in Section 2-1(b).
"Availability Reserves": Such reserves as the Agent from time
to time reasonably determines in the Agent's discretion as
being appropriate to reflect the impediments to the Agent's
ability to realize upon the Collateral. Without limiting the
generality of the foregoing, Availability Reserves may include
(but are not limited to) reserves based on the following
(notwithstanding that certain of the following may constitute
Permitted Encumbrances):
(i) Rent (based upon past due rent
and/or whether or not Landlord's
Waiver, acceptable to the Agent ,
has been received by the Agent for
those states in which the Agent
reasonably believes the landlord(s)
may have a statutory lien). Without
limiting the Agent's rights, at the
execution of this Agreement, the
Availability Reserve for rent shall
be in the sum of $300,000.00.
(ii) In store customer credits and Gift
Certificates: Without limiting the
Agent's rights, at the execution of
this Agreement, the Availability
Reserve for such items shall be in
the sum of $250,000.00.
(iii) Frequent Shopper Programs.
(iv) Layaways and Customer Deposits
(v) Taxes and other governmental
charges, including, ad valorem,
personal property, and other taxes
which might have priority over the
security interests of the Agent in
the Collateral.
"Bankruptcy Code": Title 11, U.S.C., as amended from time to time.
"Base": The Base Rate announced from time to time by BankBoston, N.A.
(or any successor in interest to BankBoston, N.A.). In the
event that said bank (or any such successor) ceases to
announce such a rate, "Base" shall refer to that rate or index
announced or published from time to time as the Agent, in good
faith, designates as the functional equivalent to said Base
Rate. Any change in "Base" shall be effective, for purposes of
the calculation of interest due hereunder, when such change is
made effective generally by the bank on whose rate or index
"Base" is being set. In all events, interest which is
determined by reference to Base (or any successor to Base)
shall be calculated on a 360 day year and actual days elapsed.
"Base Margin Loan": Each Revolving Credit Loan while bearing interest
at the Base Margin Rate.
"Base Margin Rate": Base.
"Borrower": Is defined in the Preamble.
"Borrowing Base": The lesser, on any day, of
(a) the amount determined in accordance with Section
2-1(b)(1); or
(b) the amount determined in accordance with Section
2-1(b)(ii) hereof, in each instance ((a) or (b)) determined
without deduction from said amount of the unpaid principal
balance of the Loan Account on that day.
"Business Day": Any day other than (a) a Saturday or Sunday; (b) any
day on which banks in Boston, Massachusetts or Needham,
Massachusetts, generally are not open to the general public
for the purpose of conducting commercial banking business; or
(c) a day on which the Agent is not open to the general public
to conduct business.
"Business Plan": The Borrower's annual business plan dated March 28,
1998, which has been furnished to the Agent, and any annual
business plan hereafter furnished the Agent in accordance with
the provisions of Section 5-12(c) hereof.
"Capital Expenditures": The expenditure of funds or the incurrence
of liabilities which are capitalized in accordance with
GAAP, consistent with the Borrower's prior practices.
"Capital Lease": Any lease which is capitalized in accordance with
GAAP, consistent with the Borrower's prior practices.
"Change in Control": The occurrence of any of the following:
(a) The acquisition, by any group of persons (within
the meaning of the Securities Exchange Act of 1934, as
amended) or by any Person, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange
Commission) of 50% or more of the issued and outstanding
capital stock of the Borrower having the right, under ordinary
circumstances, to vote for the election of directors of the
Borrower.
(b) More than half of the persons who were directors
of the Borrower on the first day of any period consisting of
Twelve (12) consecutive calendar months (the first of which
Twelve (12) month periods commencing with the first day of the
month during which this Agreement was executed), cease, for
any reason other than death or disability, to be directors of
the Borrower.
"Chattel Paper": Has the meaning given that term in the UCC.
"Collateral": Is defined in Section 8-1.
"Commitment Fee": Is defined in Section 2-10.
"Commitment": Subject to Section 2-20, as follows:
------------------ -------------------------- ----------------
Lender Dollar Commitment Commitment
Percentage
------------------ -------------------------- ----------------
BankBoston $50,000,000.00 100%
Retail Finance
Inc.
------------------ ------------------------- ----------------
"Commitment Percentage": Subject to Section 2-20, as set forth in the
definition of "Commitment".
"Concentration Account": Is defined in Section 7-3.
"Cost": The lower of
(a) the calculated cost of purchases, as
determined from invoices received by the Borrower,
the Borrower's purchase journal or stock ledger,
based upon the Borrower's accounting practices, known
to the Lender, which practices are in effect on the
date on which this Agreement was executed; or
(b) the lowest ticketed or promoted price at
which the subject inventory is offered to the public,
after all mark-downs (whether or not such price is
then reflected on the Borrower's accounting system).
"Cost" does not include inventory capitalization
costs or other non-purchase price charges used in the
Borrower's calculation of cost of goods sold (other
than freight, which may be capitalized consistent
with GAAP and the Borrower's prior practices).
"DDA": Any checking or other demand daily depository account
maintained by any Obligor.
"Deposit Account": Has the meaning given that term in the UCC.
"Documents": Has the meaning given that term in the UCC.
"Documents of Title": Has the meaning given that term in the UCC.
"Dollar Commitment": As provided in the Definition of "Commitment",
above.
"Early Termination Fee": Is defined in Section 2-12.
"Eligible Investments": Any or all of the following:
(a) marketable direct full faith and credit obligations of, or
marketable obligations guaranteed by, the United States of America;
provided that such securities, as a group, may not, on the date of
determination, have a remaining weighted average maturity of more than
five years;
(b) marketable direct full faith and credit obligations of
States of the United States or of political subdivisions or agencies;
provided that such securities, as a group, may not, on the date of
determination, have a remaining weighted average maturity of more than
five years; and provided, further, that such obligations carry a rating
of "A" or better by a Rating Service;
(c) publicly issued bonds or debentures which have a remaining
maturity at the time of purchase of no more than five years issued by a
corporation (other than the Company or an Affiliate thereof), organized
under the laws of a State of the United States or the District of
Columbia; provided, that such obligations carry a rating of "A" or
better by a Rating Service;
(d) open market commercial paper of any corporation (other
than the Company or an Affiliate thereof) incorporated under the laws
of the United States of America or any State thereof or the District of
Columbia rated not less than "P-2" or "A-2" or its equivalent by a
Rating Service and maturing within 270 days after the date on which
such commercial paper is purchased;
(e) certificates of deposit and bankers acceptances maturing
within one year after the acquisition thereof issued by (i) BankBoston,
N.A. or (ii) any commercial bank organized under the laws of the United
States of America or of any political subdivision thereof the long term
obligations of which are rated "A" or better by a Rating Service;
(f) Eurodollar certificates of deposit maturing within one
year after the acquisition thereof issued by any commercial bank having
combined capital, surplus and undivided profits of at least $1 billion;
(g) repurchase agreements, having terms of less than one year,
for government obligations of the type described in (a) or (b) above,
with a commercial bank or trust company meeting the requirements of
clause (e) above;
(h) publicly issued collateralized mortgage obligations which
have a remaining maturity at the time of purchase of no more than five
years; provided, that such obligations carry a rating of "A" or better
by a Rating Service;
(i) tax-exempt bonds or notes which have a remaining maturity
at the time of purchase of no more than five years issued by any State
of the United States or the District of Columbia, or any political
subdivision thereof; provided, that such obligations carry a rating of
"A" or better by a Rating Service;
(j) publicly issued shares of common or preferred stock issued
by a corporation (other than the Borrower or an Affiliate thereof,
unless otherwise permitted pursuant to Section 4-18 hereof), organized
under the laws of any State of the United States or the District of
Columbia, and bonds or debentures convertible into shares of such
common or preferred stock, so long as (A) such securities have been
registered under the Securities Exchange Act of 1934, as amended, and
are traded on the New York Stock Exchange, the American Stock Exchange
or NASDAQ, and (B) the senior debt securities of the issuer thereof (if
any) are rated "A" or better by a Rating Service; provided, however,
that the securities under this clause (j) may not at any time comprise
more than 10% of the total assets of the Borrower; and
(k) interests in any fund or other pooled "open-end"
investment vehicle which (i) is a registered investment company under
the Investment Company Act of 1940, as amended and (ii) invests
principally in obligations of any of the types described in clauses (a)
through (j) above.
"Employee Benefit Plan": As defined in ERISA.
"Encumbrance": Each of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale
or other title retention agreement; sale of accounts
receivable or chattel paper; or other arrangement pursuant to
which any Person is entitled to any preference or priority
with respect to the property or assets of another Person or
the income or profits of such other Person or which
constitutes an interest in property to secure an obligation;
each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) The filing of any financing statement under the
UCC or comparable law of any jurisdiction.
"End Date": The date upon which both (a) all Liabilities have been
paid in full and (b) all obligations of any Lender to make
loans and advances and to provide other financial
accommodations to the Borrower hereunder shall have been
irrevocably terminated.
"Environmental Laws": All of the following:
(a) Any and all federal, state, local or
municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees or requirements which
regulate or relate to, or impose any standard of conduct or
liability on account of or in respect to environmental
protection matters, including, without limitation, Hazardous
Materials, as are now or hereafter in effect.
(b) The common law relating to damage to Persons
or property from Hazardous Materials.
"Equipment": Means "equipment" as defined in the UCC, and also all
motor vehicles, rolling stock, machinery, office equipment,
plant equipment, tools, dies, molds, store fixtures,
furniture, and other goods, property, and assets which are
used and/or were purchased for use in the operation or
furtherance of the Borrower's business, and any and all
accessions or additions thereto, and substitutions therefor.
"ERISA": The Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate": Any Person (other than the Joint Venture) which is
under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the
Borrower and which would be treated as a single employer under
Section 414 of the Internal Revenue Code of 1986, as amended.
"Events of Default": Is defined in Article 10.
"Fee Letter": That letter, styled the "Fee Letter" between the
Borrower and the Agent, as such letter may from time to
time be amended.
"Fixed Charge Coverage Ratio": The ratio of the following, determined
monthly on a trailing twelve (12) month basis with respect to
the Obligors only (excluding from the following calculation
all results from the operation of the Joint Venture):
(a) net income after taxes plus income taxes plus
interest plus depreciation plus amortization minus
capital expenditures paid in cash to
(b) cash payments of principal of all Indebtedness
(other than payments of principal of the Revolving
Credit), plus without duplication of the foregoing,
cash payments on account of: Capital Leases plus
interest plus income taxes, plus cash payments made
in connection with Permitted Acquisitions, plus cash
payments made in connection with the redemption,
retirement, purchase or acquisition of any of the
Borrower's capital stock, plus cash payments made in
connection with any permitted investments in the
Joint Venture.
"Fixtures": Has the meaning given that term in the UCC.
"Funding Account": Is defined in Section 7-3.
"GAAP": Principles which are consistent with those promulgated or
adopted by the Financial Accounting Standards Board and
its predecessors (or successors) in effect and applicable to
that accounting period in respect of which reference to
GAAP is being made, provided, however, in the event of a
Material Accounting Change, then unless otherwise
specifically agreed to by the Agent, (a) the Borrower's
compliance with the financial performance covenants imposed
pursuant to Section shall be determined as if such Material
Accounting Change had not taken place (except for
changes resulting from the conversion from the LIFO method of
accounting to a method in which assets are reported at
the lower of cost or market value), and (b) the Borrower
shall include, with its monthly, quarterly, and annual
financial statements a schedule, certified by the Borrower's
chief financial officer, on which the effect of such
Material Accounting Change to the statement with which
provided shall be described.
"General Intangibles": Means "general intangibles" as defined in the
UCC; and also all: rights to payment for credit extended;
deposits; amounts due to the Borrower; credit memoranda in
favor of the Borrower; warranty claims; tax refunds and
abatements; insurance refunds and premium rebates; all means
and vehicles of investment or hedging, including, without
limitation, options, warrants, and futures contracts; records;
customer lists; telephone numbers; goodwill; causes of action;
judgments; payments under any settlement or other agreement;
literary rights; rights to performance; royalties; license
and/or franchise fees; rights of admission; licenses;
franchises; license agreements, including all rights of the
Borrower to enforce same; permits, certificates of convenience
and necessity, and similar rights granted by any governmental
authority; patents, patent applications, patents pending, and
other intellectual property; internet addresses and domain
names; developmental ideas and concepts; proprietary
processes; blueprints, drawings, designs, diagrams, plans,
reports, and charts; catalogs; manuals; technical data;
computer software programs (including the source and object
codes therefor), computer records, computer software, rights
of access to computer record service bureaus, service bureau
computer contracts, and computer data; tapes, disks,
semi-conductors chips and printouts; trade secrets rights,
copyrights, mask work rights and interests, and derivative
works and interests; user, technical reference, and other
manuals and materials; trade names, trademarks, service marks,
and all goodwill relating thereto; applications for
registration of the foregoing; and all other general
intangible property of the Borrower in the nature of
intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts
or ideas, and any matter related to, or connected with, the
design, development, manufacture, sale, marketing, leasing, or
use of any or all property produced, sold, or leased, by the
Borrower or credit extended or services performed, by the
Borrower, whether intended for an individual customer or the
general business of the Borrower, or used or useful in
connection with research by the Borrower.
"Goods": Has the meaning given that term in the UCC.
"Guarantors": All Subsidiaries of the Borrower (other than the Joint
Venture and Designs Securities Corporation), which
now or hereafter own any assets, rights and interests in
property, whether tangible or intangible.
"Hazardous Materials": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as
any of the foregoing) are defined or regulated as a hazardous
material in or under any Environmental Law and (b) oil in any
physical state.
"Indebtedness": All indebtedness and obligations of or assumed by any
Person (other than the Joint Venture) on account of or in
respect to any of the following:
(a) In respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
(b) In connection with any letter of credit or
acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued
for the account of such Person or reimbursement on account of
which such Person would be obligated).
(c) In connection with the sale or discount of
accounts receivable or chattel paper of such Person.
(d) On account of deposits or advances.
(e) As lessee under Capital Leases.
(f) Indebtedness of others secured by an Encumbrance
on any asset of such Person, whether or not such Indebtedness
is assumed by such Person.
(g) Any guaranty, endorsement, suretyship or other
undertaking pursuant to which that Person may be liable on
account of any obligation of any third party (other than (i)
contingent and unliquidated indemnities delivered in the
ordinary course of business and (ii) guarantees and
endorsements resulting from the endorsement of negotiable
instruments for collection in the ordinary course of
business).
(h) The Indebtedness of a partnership or joint
venture in which such Person is a general partner or joint
venturer.
"Indemnified Person": Is defined in Section 14-11.
"Instruments": Has the meaning given that term in the UCC.
"Interest Payment Date": With reference to:
(a) Each LIBOR Loan: (i) Having an Interest Period of
one, two or three months, the last day of the Interest Period
relating thereto; the Termination Date, and the End Date; (ii)
Having an Interest Period of six months, the last day of the
third month of such Interest Period, the last day of the
Interest Period, the Termination Date and the End Date.
(b) Each Base Margin Loan: the first day of each
month; the Termination Date; and the End Date.
"Interest Period": (a) With respect to each LIBOR Loan: Subject to
Subsection (c), below, the period commencing on the date of
making or continuation of, or conversion to, such LIBOR Loan
and ending on (but excluding) the day which corresponds
numerically to such date, one, two, three or six months
thereafter, as the Borrower may elect by notice to the Agent.
(b) With respect to each Base Margin Loan:
Subject to Subsection (c), below, the period commencing on the
date of the making or continuation of or conversion to such
Base Margin Loan and ending on that date (i) as of which the
subject Base Margin Loan is converted to a LIBOR Loan, as the
Borrower may elect by notice to the Agent, or (ii) on which
the subject Base Margin Loan is paid by the Borrower.
(c) The setting of Interest Periods is in all
instances subject to the following:
(i) Any Interest Period for a Base Margin Loan
which would otherwise end on a day which is not a
Business Day shall be extended to the next
succeeding Business Day.
(ii) Any Interest Period for a LIBOR Loan
which would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding
Business Day, unless that succeeding Business Day is
in the next calendar month, in which event such
Interest Period shall end on the last Business Day of
the month during which the Interest Period ends.
(iii) Any Interest Period applicable to a
LIBOR Loan, which Interest Period begins on a day for
which there is no numerically corresponding day in
the calendar month during which such Interest Period
ends, shall end on the last Business Day of the month
during which that Interest Period ends.
(iv) Any Interest Period which would
otherwise end after the Termination Date shall end on
the Termination Date.
(v) Subject to Section (iii), above, no
Interest Period applicable to a LIBOR Loan may be
less than one (1) month.
(vi) The number of Interest Periods
applicable to LIBOR Loans in effect at any one time
is subject to Section 2-9 hereof.
"Investment Property": Has the meaning given that term in the UCC.
"Inventory": Means "inventory" as defined in the UCC and also all:
packaging and shipping materials related to any of the
foregoing; Goods held for sale or lease or furnished or to be
furnished under a contract or contracts of sale or service by
the Borrower, or used or consumed or to be used or consumed
in the Borrower's business; Goods of said description in
transit: returned, repossessed and rejected Goods of said
description; and all documents (whether or not negotiable)
which represent any of the foregoing.
"Inventory Advance Rate": The following percentage during the period
indicated:
--------------------------------------------- ------------------------
Period Inventory Advance Rate
--------------------------------------------- ------------------------
December 1 through July 14 of each year 60%
--------------------------------------------- ------------------------
July 15 through November 30 of each year 65%
--------------------------------------------- ------------------------
"Inventory Reserves": Such Reserves as may be reasonably established
from time to time by the Agent in the Agent's discretion with
respect to the determination of the saleability, at retail, of
the Acceptable Inventory or which reflect such other factors
as affect the market value of the Acceptable Inventory.
Without limiting the generality of the foregoing, Inventory
Reserves may include (but are not limited to) reserves based
on the following:
(i) Seasonality.
(ii) Shrinkage.
(iii) Imbalance.
(iv) Change in Inventory character that
could have an adverse impact on the
appraised value of the Inventory as
determined by the Agent in its
reasonable discretion.
(v) Change in Inventory composition that
could have an adverse impact on the
appraised value of the Inventory as
determined by the Agent in its
reasonable discretion.
(vi) Change in Inventory mix that could
have an adverse impact on the
appraised value of the Inventory as
determined by the Agent in its
reasonable discretion.
(vii) Markdowns (both permanent and point
of sale) not in the ordinary course
of business and inconsistent with
the Borrower's prior practices.
(viii) Retail markons and markups
inconsistent with the Borrower's
prior practices.
"Issuer": The issuer of any L/C.
"Joint Venture": Collectively, (a) the joint venture among Affiliates
of the Borrower and Levi Strauss & Co., and (b) Designs JV
Corp., being the wholly-owned Subsidiary of the Borrower
formed to hold the partnership interest in such joint venture.
"L/C": Any letter of credit, the issuance of which is procured by
the Agent for the account of the Borrower and any acceptance
made on account of such letter of credit.
"Lease": Any lease or other agreement, no matter how styled or
structured, pursuant to which the Borrower is entitled to
the use or occupancy of any space.
"Leasehold Interest": Any interest of the Borrower as lessee under
any Lease.
"Lenders": Defined in the Preamble to this Agreement
"Liabilities" (in the singular, "Liability"): Means all and each of
the following, whether now existing or hereafter arising
under this Agreement or any other Loan Document:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrower to the Agent or any
Lender, each of every kind, nature, and description.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrower to the Agent or any Lender
(including all future advances whether or not made pursuant to
a commitment by the Agent or any Lender), whether or not any
of such are liquidated, unliquidated, primary, secondary,
secured, unsecured, direct, indirect, absolute, contingent, or
of any other type, nature, or description, or by reason of any
cause of action which the Agent or any Lender may hold against
the Borrower.
(c) All notes and other obligations of the Borrower
now or hereafter assigned to or held by the Agent or any
Lender, each of every kind, nature, and description.
(d) All interest, reasonable fees, and charges and
other amounts which may be charged by the Agent or any Lender
to the Borrower and/or which may be due from the Borrower to
the Agent or any Lender from time to time.
(e) All reasonable costs and expenses incurred or
paid by the Agent or any Lender in respect of any agreement
between the Borrower and Agent or any Lender or instrument
furnished by the Borrower to the Agent or any Lender
(including, without limitation, Administrative Costs,
attorneys' reasonable fees, and all court and litigation costs
and expenses).
(f) Each of the foregoing as if each reference to the
"Agent and each Lender" therein were to each Affiliate of the
Agent or any Lender.
"LIBOR Business Day": Any day which is both a Business Day and a day
on which the principal interbank market for LIBOR deposits
in London in which BankBoston, N.A. participates is open for
dealings in United States Dollar deposits.
"LIBOR Loan": Any Revolving Credit Loan which bears interest at a
Eurodollar Rate.
"LIBOR Offer Rate": That rate of interest (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by the Agent to
be the prevailing rate per annum at which deposits on U.S.
Dollars are offered to BankBoston, N.A., by first-class banks
in the London interbank market in which BankBoston, N.A.
participates at or about 10:00 AM (Boston Time) Two (2) LIBOR
Business Days before the first day of the Interest Period for
the subject LIBOR Loan, for a deposit approximately in the
amount of the subject loan for a period of time approximately
equal to such Interest Period.
"LIBOR Margin": 225 basis points.
"LIBOR Rate": That per annum rate determined as the aggregate of the
LIBOR Offer Rate plus the LIBOR Margin except that, in the
event that it is determined by the Agent that any Lender may
be subject to the Reserve Percentage, the "LIBOR Rate" shall
mean, with respect to any LIBOR Loans then outstanding (from
the date on which that Reserve Percentage first became
applicable to such loans), and with respect to all LIBOR Loans
thereafter made, an interest rate per annum equal to the sum
of (a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
LIBOR Offer Rate
__________________________
1 minus Reserve Percentage
(b) the applicable LIBOR Margin.
"Line (Unused) Fee": Is defined in Section 2-11.
"Loan Account": Is defined in Section 2-6.
"Loan Ceiling": $50,000,000.00.
"Loan Documents": This Agreement, each instrument and document
executed and/or delivered as contemplated by Article 3, below,
and each other instrument or document from time to time
executed and/or delivered in connection with the arrangements
contemplated hereby, the Master Lease Agreement between the
Borrower and Winthrop Resources Corporation (which has been
assigned to an Affiliate of the Agent), and any other
instruments, documents, agreements and facilities heretofore
or hereafter entered into in connection with or relating to
any transaction which arises out of any cash management,
depository, investment, letter of credit, or interest rate
protection services provided by the Agent or any Lender or any
Affiliate of the Agent or any Lender, as each may be amended
from time to time.
"Material Accounting Change": Any change in GAAP applicable to
accounting periods subsequent to the Borrower's fiscal year
most recently completed prior to the execution of this
Agreement, which change has a material effect on the
Borrower's financial condition or operating results, as
reflected on financial statements and reports prepared by or
for the Borrower, when compared with such condition or results
as if such change had not taken place or where preparation of
the Borrower's statements and reports in compliance with such
change results in the breach of a financial performance
covenant imposed pursuant to Section where such a breach would
not have occurred if such change had not taken place or vice
versa.
"Maturity Date": June 4, 2001.
"Obligors": Collectively, the Borrower and the Guarantors.
"Participant": Is defined in Section , hereof.
"Permitted Acquisition": An Acquisition complying with the following:
(A) Such acquisition shall be of assets
ancillary, incidental or necessary to the retail sale
of apparel and related activities, or of 100% of the
stock of a corporation whose assets consist
substantially of such assets, or through the merger
of such a corporation with the Borrower (with the
Borrower as the surviving corporation), or with a
Subsidiary of the Borrower (other than the Joint
Venture), where, giving effect to such merger, such
corporation becomes a wholly-owned Subsidiary of the
Borrower; and
(B) If such acquisition includes the
acquisition of assets by, or the merger of, the
Borrower, there shall have been no change in the
identity of the president, chief financial officer or
any executive vice president of the Borrower as a
consequence of such acquisition, or if there has been
such a change, the Lender shall have consented in
writing to such change in identity within thirty (30)
days thereafter (which consent shall not be
unreasonably withheld or delayed); and
(C) If a new Subsidiary is formed or
acquired as a result of such Acquisition, such
Subsidiary shall execute documentation, reasonably
satisfactory in form and substance to the Agent,
guarantying payment and performance of the
Liabilities and granting a first lien, subject only
to Permitted Encumbrances, in its assets in favor of
the Agent, for the ratable benefit of the Lenders,
"Permitted Encumbrances": Those Encumbrances permitted as provided in
Section 4-6(a) hereof.
"Person": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other
enterprise or entity.
"Proceeds": Means "Proceeds" as defined in the UCC (defined below),
and each type of property described in Section 8-1 hereof.
"Rating Service": Either or both of Moody's Investors Services, Inc.
or Standard & Poor's Corporation.
"Receipts": All cash, cash equivalents, checks, and credit card slips
and receipts as arise out of the sale of the Collateral
or any collateral granted by the Guarantors to the Agent.
"Receivables Collateral": That portion of the Collateral which consists
of the Borrower's Accounts, Accounts Receivable, contract
rights, General Intangibles, Chattel Paper, Instruments,
Documents of Title, Documents, Investment Property, letters of
credit for the benefit of the Borrower, and bankers'
acceptances held by the Borrower, and any rights to payment.
"Related Entity": (a) Any corporation, limited liability company,
trust, partnership, joint venture, or other enterprise which:
is a parent, brother-sister, or Subsidiary, of the Borrower;
could have such enterprise's tax returns or financial
statements consolidated with the Borrower's; could be a member
of the same controlled group of corporations (within the
meaning of Section 1563(a)(1), (2) and (3) of the Internal
Revenue Code of 1986, as amended from time to time) of which
the Borrower is a member; controls or is controlled by the
Borrower or by any Affiliate of the Borrower, but excluding,
in any event, the Joint Venture.
(b) Any Affiliate.
"Requirement of Law": As to any Person:
(a)(i) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims
jurisdiction over such Person, or any property of such Person,
or of any other Person for whose conduct such Person would be
responsible.
(b) That Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and (c) that Person's
by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"Reserves": All (if any) Availability Reserves and Inventory Reserves.
"Reserve Percentage": The decimal equivalent of that rate applicable to
a Lender under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Lender
with respect to "Eurocurrency liabilities" as defined in such
regulations. The Reserve Percentage applicable to a particular
LIBOR Loan shall be based upon that in effect during the
subject Interest Period, with changes in the Reserve
Percentage which take effect during such Interest Period to
take effect (and to consequently change any interest rate
determined with reference to the Reserve Percentage) if and
when such change is applicable to such loans. As of the date
hereof, the Agent acknowledges that the Reserve Percentage is
zero.
"Revolving Credit": Is defined in Section 2-1.
"Revolving Credit Note": Is defined in Section 2-7.
"SEC": The Securities and Exchange Commission.
"Stated Amount": The maximum amount for which an L/C may be honored.
"Subsidiary": With respect to any Person, any corporation, partnership
or other entity of which securities or other ownership
interests having ordinary voting power to elect a majority of
the board of directors or other Persons performing similar
functions are at the time directly or indirectly owned by such
Person.
"Suspension Event": Any occurrence, circumstance, or state of facts
which (a) is an Event of Default; or (b) would become an Event
of Default if any requisite notice were given and/or any
requisite period of time were to run and such occurrence,
circumstance, or state of facts were not cured within any
applicable grace period.
"Tangible Net Worth": The result, on the day on which compliance with
any financial performance covenant applicable to Tangible Net
Worth is being determined, of (a) the difference between (i)
the Obligors' assets and (ii) the Obligors' liabilities,
respectively, minus (b) the aggregate of those of the
Obligors' assets as may be deemed intangible in accordance
with GAAP, minus (c) without duplication, the equity in the
Joint Venture (meaning thereby the difference between (i) the
Joint Venture's assets and (ii) the Joint Venture's
liabilities), minus (d) the balance, if any, of all notes
receivable due from the Joint Venture, all of the foregoing as
would be reflected on a balance sheet prepared in accordance
with the requirements of Section 5-1 hereof.
"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 10-12 hereof; or
(c) date set by notice by the Agent to the Borrower, which
notice sets the Termination Date on account of the occurrence
of any Event of Default other than as described in Section
hereof.
"UCC": The Uniform Commercial Code as presently in effect in
Massachusetts (Mass. Gen. Laws, Ch. 106).
"Year 2000 Risk": The risk that a computer application may not be
able to recognize certain dates or properly perform date
sensitive functions involving dates prior to and after
December 31, 1999.
ARTICLE 2 - THE REVOLVING CREDIT.
2-1. Establishment of Revolving Credit.
(a) The Lenders hereby establish a revolving line of
credit (the "Revolving Credit") in the Borrower's favor
pursuant to which each Lender, subject to, and in accordance with, this
Agreement, acting through the Agent, shall make loans and advances and otherwise
provide financial accommodations to and for the account of the Borrower as
provided herein, in each instance equal to that Lender's Commitment Percentage
of Availability, up to the maximum amount of that Lender's Dollar Commitment.
The amount of the Revolving Credit shall be reasonably determined by the Agent
by reference to Availability, as determined by the Agent from time to time
hereafter. All loans made under this Agreement, and all of the Borrower's other
Liabilities, are payable as provided herein.
(b) As used herein, the term "Availability" refers
at any time to the lesser of (i) or (ii), below, where:
(i) Is the result of:
(A) The Loan Ceiling.
Minus
(B) The then unpaid principal balance of the
Loan Account.
Minus
(C) The then aggregate of such Availability
Reserves as may have been established by the
Agent as provided herein.
Minus
(D) The then outstanding Stated Amount of
all L/C's.
(ii) Is the result of:
(A) Up to the then applicable Inventory Advance
Rate of the Cost of Acceptable Inventory.
Minus
(B) The then unpaid principal balance of
the Loan Account.
Minus
(C) The then aggregate of such Availability
Reserves as may have been established by the
Agent as provided herein.
Minus
(D) The then outstanding Stated Amount
of all L/C's.
(c) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 5-4 hereof.
(d) The proceeds of borrowings under the Revolving Credit
shall be used solely for working capital purposes of the Borrower, for
Permitted Acquisitions, for redemption, retirement, purchase or acquisition
of any of the Borrower's Capital Stock, and for Capital Expenditures, all
solely to the extent permitted by this Agreement.
2-2. Advances in Excess of Borrowing Base. No Lender has any
obligation to make any loan or advance, or otherwise to provide any credit
for the benefit of the Borrower such that the balance of the Loan Account
exceeds the Borrowing Base. The making of loans, advances, and credits and
he providing of financial accommodations in excess of the Borrowing Base
is for the benefit of the Borrower and does not affect the obligations of
the Borrower hereunder; such loans, advances, credits, and financial
accommodations constitute Liabilities. The making of any such loans, advances,
and credits and the providing of financial accommodations, on any one occasion
such that the Borrowing Base is exceeded shall not obligate any Lender to make
any such loans, credits, or advances or to provide any financial accommodation
on any other occasion nor to permit such loans, credits, or advances to remain
outstanding.
2-3. Risks of Value of Collateral. The Agent's reference to a given
asset in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit and/or
the monitoring of compliance with the provisions hereof shall not be
deemed a determination by the Agent or any Lender relative to the actual
value of the asset in question. All risks concerning the saleability of
the Borrower's Inventory are and remain upon the Borrower. All Collateral
secures the prompt, punctual, and faithful performance of the Liabilities
whether or not relied upon by the Agent or by any Lender in connection with the
making of loans, credits, and advances and the providing of financial
accommodations under the Revolving Credit.
2-4. Loan Requests.
(a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Borrower
shall be made by the Lenders pursuant hereto, provided that:
(i) Borrowing Base will not be exceeded; and
(ii) The Revolving Credit has not been suspended as
provided in Section 2-4(i).
(b) Subject to the provisions of this Agreement, the
Borrower may request a Revolving Credit Loan and elect an interest rate
and Interest Period to be applicable to that Revolving Credit Loan by giving
the Agent written notice or telephonic notice confirmed in writing (in the
form of EXHIBIT 2-4 hereof) no later than the following:
(i) If such Loan is or is to be converted to a Base
Margin Loan: By 11:30 AM on the Business Day on which the subject
Revolving Credit Loan is to be made or is to be so converted.
(ii) If such Loan is or is to be continued as a LIBOR
Loan: By 1:00 PM Three (3) Business Days before the end of the then
applicable Interest Period or before the day on which such Loan is to
be made.
(iii) If such Loan is to be converted to a LIBOR Loan:
By 1:00 PM Three (3) Business Days before the day on which such
conversion is to take place.
(c) (i) Base Margin Loans and conversions to Base Margin
Loans shall be in a minimum amount of $10,000.00 each.
(ii) LIBOR Loans and conversions to LIBOR Loans shall
each be not less than $500,000.00 and in $500,000.00 increments in
excess of such minimum.
(d) Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is made after the applicable
deadline therefor, as set forth above, shall be deemed to have been made
at the opening of business on the next Business Day or LIBOR Business
Day, as applicable. Each request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan shall be made in such manner as may from
time to time be acceptable to the Agent
(e) If, during the Sixty (60) days immediately preceding
the day on which a loan request is made there has been no unpaid principal
balance in the Loan Account on account of loans and advances under the
Revolving Credit, the loan so requested shall be made (subject to all other
provisions of this Agreement) no later than the Second Business Day after
(and not counting) the day on which the loan otherwise would have been made as
provided above.
(f) The Borrower may request that the Agent cause the
issuance of L/C's for the account of the Borrower as provided in Section 2-15.
(g) The Agent may rely on any request for a loan or advance,
or other financial accommodation under the Revolving Credit which the Agent,
in good faith, believes to have been made by a person duly authorized to
act on behalf of the Borrower and may decline to make any such requested
loan or advance, or issuance, or to provide any such financial accommodation
pending the Agent's being furnished with such documentation concerning
that person's authority to act as may be reasonably satisfactory to the Agent.
(h) A request by the Borrower for loan or advance, or
other financial accommodation under the Revolving Credit shall be irrevocable
and shall constitute certification by the Borrower that as of the date of such
request, each of the following is true and correct:
(i) There has been no material adverse change in the
Borrower's financial condition from the most recent financial
information furnished Agent or any Lender pursuant to this Agreement.
(ii) The Borrower is in compliance with, and has not
breached any of, its covenants contained in this Agreement.
(iii) Each representation which is made herein or in
any of the Loan Documents (defined below) is then true and complete
as of and as if made on the date of such request.
(iv) Suspension Event is then extant.
(i) Upon the occurrence from time to time of any
Suspension Event:
(i) The Agent may suspend the Revolving Credit
immediately.
(ii) Neither the Agent nor any Lender shall be
obligated, during such suspension, to make any loans or advance,
or to provide any financial accommodation hereunder or to seek the
issuance of any L/C.
2-5. Making of Loans Under Revolving Credit.
(a) A loan or advance under the Revolving Credit shall be
made by the transfer of the proceeds of such loan or advance to the
Funding Account or as otherwise instructed by the Borrower.
(b) A loan or advance shall be deemed to have been made
under the Revolving Credit (and the Borrower shall be indebted to the Agent
for the amount thereof immediately) at the following:
(i) The Agent's initiation of the transfer of the proceeds
of such loan or advance in accordance with the Borrower's instructions
(if such loan or advance is of funds requested by the Borrower).
(ii) The charging of the amount of such loan to the Loan
Account (in all other circumstances).
(c) There shall not be any recourse to or liability of the
Agent or any Lender, on account of any delay in the receipt, and/or any loss,
of funds which constitute a loan or advance under the Revolving Credit, the
wire transfer of which was properly initiated by the Agent in accordance
with wire instructions provided to the Agent by the Borrower.
2-6. The Loan Account.
(a) An account ("Loan Account") shall be opened on the books of
the Agent. A record shall be kept in the Loan Account of all loans made under
or pursuant to this Agreement and of all payments thereon.
(b) The Agent shall also keep a record (either in the
Loan Account or elsewhere, as the Agent may from time to
time elect) of all interest, fees, service charges, costs, expenses, and other
debits owed the Lender on account of the Liabilities and of all credits against
such amounts so owed.
(c) All credits against the Liabilities shall be conditional
upon final payment to the Agent for the Account of each Lender of the
items giving rise to such credits. The amount of any item credited against
the Liabilities which is charged back against Agent or any Lender for any
reason or is not so paid shall be a Liability and shall be added to the Loan
Account, whether or not the item so charged back or not so paid is returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrower is obligated hereunder
are payable on demand. In the determination of Availability, the Agent may
deem fees, service charges, accrued interest, and other payments as having
been advanced under the Revolving Credit whether or not such amounts
are then due and payable.
(e) The Agent, without the request of the Borrower, may advance
under the Revolving Credit any interest, fee, service charge, or other
payment to which the Agent or any Lender is entitled from the Borrower
pursuant hereto and may charge the same to the Loan Account notwithstanding
that such amount so advanced may result in Borrowing Base's being exceeded.
Such action on the part of the Agent shall not constitute a waiver of
the Agent's rights and Borrower's obligations under Section 2-8(b). Any amount
which is added to the principal balance of the Loan Account as provided
in this Section 2-6(e) shall bear interest.
(f) Any statement rendered by the Agent or any Lender to
the Borrower concerning the Liabilities shall be considered correct
and accepted by the Borrower and shall be conclusively binding upon the
Borrower unless the Borrower provides the Agent with written objection thereto
within thirty (30) days from the mailing of such statement, which written
objection shall indicate, with particularity, the reason for such
objection. The Loan Account and the Agent's books and records concerning the
loan arrangement contemplated herein and the Liabilities shall be prima facie
evidence and proof of the items described therein, absent manifest error.
2-7. The Revolving Credit Notes. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein,
shall be evidenced by Notes (each, a "Revolving Credit Note") in the form
of EXHIBIT 2-7, annexed hereto, executed by the Borrower, one payable
to each Lender. Neither the original nor a copy of any Revolving Credit Note
shall be required, however, to establish or prove any Liability. In the event
that any Revolving Credit Note is ever lost, mutilated, or destroyed, the
Borrower shall execute a replacement thereof and deliver such replacement to
the Agent.
2-8. Payment of The Loan Account.
(a) The Borrower may repay all or any portion of the principal
balance of the Loan Account from time to time until the Termination Date.
(b) The Borrower, without notice or demand from the Agent
or any Lender, shall pay the Agent that amount, from time to time, which is
necessary so that the unpaid balance of the Loan Account does not exceed the
Borrowing Base.
(c) The Borrower shall repay the then entire unpaid balance of
the Loan Account and all other Liabilities on the Termination Date.
2-9. Interest.
(a) Each Revolving Credit Loan shall bear interest (determined
based on a 360 day year and actual days elapsed) at the Base Margin Rate unless
timely notice is given (as provided in Section ) that the subject Revolving
Credit Loan (or a portion thereof) is, or is to be converted to, a LIBOR Loan.
(b) Each Revolving Credit Loan which consists of a LIBOR
Loan shall bear interest at the applicable LIBOR Rate.
(c) Subject to the provisions hereof, the Borrower, by notice to
the Agent, may cause all or a part of the unpaid principal balance of the Loan
Account to bear interest at the Base Margin Rate or the LIBOR Rate as specified
from time to time by the Borrower. For ease of reference and administration,
each part of the Loan Account which bears interest at the same interest and for
the same Interest Period is referred to herein as if it were a separate
"Revolving Credit Loan".
(d) The Borrower shall not select, renew, or convert any
interest rate for a Revolving Credit Loan such that
there are more than seven (7) Interest Periods applicable to the LIBOR Loans at
any one time.
(e) The Borrower shall pay accrued and unpaid interest on each
Revolving Credit Loan in arrears
(i) On the applicable Interest Payment Date for that
Revolving Credit Loan.
(ii) On the Termination Date and on the End Date.
(iii) Following the occurrence, and during the continuance,
of any Event of Default, with such frequency as may be determined by
the Agent.
(f) Following the occurrence, and during the continuance, of any
Event of Default (whether or not the Agent exercises the Agent's rights on
account thereof), all Revolving Credit Loans shall bear interest, at the option
of the Agent, at the aggregate of the Base Margin Rate plus Two Percent (2%)
per annum. The Agent shall furnish the Borrower with prompt written notice of
the Agent's election to institute the default rate of interest hereunder.
(g) In addition, in the event of the occurrence of any of the
circumstances described in Section 2-18 hereof, and during the continuance
thereof, each Revolving Credit Loan shall bear interest (determined based on a
360 day year and actual days elapsed) at the Base Margin Rate.
2-10. Commitment Fee; Agent's Fee.
(a) As compensation for the commitment of BankBoston Retail
Finance Inc. to make loans and advances to the Borrower and as compensation for
its maintenance of sufficient funds available for such purpose, BankBoston
Retail Finance Inc. has earned a Commitment Fee (so referred to herein) at the
times and in the amounts as set forth in the Fee Letter.
(b) As compensation for BankBoston Retail Finance Inc.'s
serving as Agent hereunder, BankBoston Retail Finance Inc. will earn an Agent's
Fee (so referred to herein) payable by the Borrower at the times and in the
amounts as set forth in the Fee Letter.
2-11. Line Fee. In addition to any other fee by the Borrower on
account of the Revolving Credit, the Borrower shall pay the Agent a Line
(Unused) Fee (so referred to herein) in arrears, on the first day of each month
(and on the Termination Date). The Line Fee shall be equal to 0.30% per annum
of the average daily difference, during the month just ended (or relevant
period with respect to the payment being made on the Termination Date), between
the Loan Ceiling and the unpaid principal balance of the Loan Account.
2-12. Early Termination Fee.
In the event that the Termination Date occurs, for any reason, prior to
June 4, 2000, the Borrower shall pay the Agent, for the benefit of the Lenders,
the Early Termination Fee (so referred to herein) in an amount equal to (a) one
percent (1%) of the Loan Ceiling if the Termination Date occurs prior to June 4,
1999, or (b) one-half of one percent (0.50%) of the Loan Ceiling if the
Termination Date occurs on or after June 4, 1999 and prior to June 4, 2000,
provided that, the Early Termination Fee shall be waived if the Liabilities are
refinanced by a facility furnished by BankBoston Retail Finance Inc. or any of
its Affiliates (nothing herein being deemed the commitment or agreement of
BankBoston Retail Finance Inc. or any of its Affiliates to so refinance the
Liabilities).
2-13. Regarding Fees. The Borrower shall not be entitled to any
credit, rebate or repayment of the Commitment Fee, Line (Unused) Fee, Early
Termination Fee, Agent's Fee or other fee previously earned by the Agent or any
Lender pursuant to this Agreement notwithstanding any termination of this
Agreement or suspension or termination of the Agent's and any Lender's
respective obligation to make loans and advances hereunder.
2-14. Agent's and Lenders' Discretion.
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by the Agent or any Lender shall be to that Person's
exercise of its reasonable judgement, in good faith, based upon that Person's
consideration of any such factor as the Agent or that Lender, taking into
account information of which that Person then has actual knowledge, believes:
(i) Will or reasonably could be expected to affect the
value of the Collateral, the enforceability of the Agent's security
and collateral interests therein, or the amount which the Agent would
likely realize therefrom (taking into account delays which may
possibly be encountered in the Lender's realizing upon the Collateral
and likely Administrative Costs).
(ii) Indicates that any report or financial information
delivered to the Agent or any Lender by or on behalf of the Borrower
is incomplete, inaccurate, or misleading in any material manner or was
not prepared in accordance with the requirements of this Agreement.
(iii) Would likely result in the Borrower's becoming the
subject of a bankruptcy or insolvency proceeding.
(iv) Constitutes a Suspension Event.
(b) In the exercise of such judgement, the Agent and each Lender
also may take into account any of the following factors:
(i) Those included in, or tested by, the definitions of
"Acceptable Inventory," "Retail," and "Cost".
(ii) Material changes in or to the mix of the Borrower's
Inventory.
(iii) Seasonality with respect to the Borrower's Inventory
and patterns of retail sales.
(iv) Such other factors as the Agent and each Lender
determines as having a material bearing on credit risks associated
with the providing of loans and financial accommodations to the
Borrower.
(c) The burden of establishing the failure of the Agent or any
Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrower's.
2-15. Procedures For Issuance of L/C's.
(a) The Borrower may request that the Agent cause the issuance
of L/C's for the account of the Borrower. Each such request shall be in such
manner as may from time to time be acceptable to the Agent.
(b) The Agent will cause the issuance of any L/C so requested by
the Borrower, provided that, at the time that the request is made, the
Revolving Credit has not been suspended as provided in Section 2-4(i) and if
so issued:
(i) The aggregate Stated Amount of all L/C's
then outstanding, does not exceed Five Million Dollars ($5,000,000.00).
(ii) The expiry of the L/C is not later than the earlier
of Thirty (30) days prior to the Maturity Date (unless the Borrower
provides cash collateral reasonably acceptable to the Agent in an
amount equal to 103% of the Stated Amount of any L/C having an expiry
after that date) or the following:
(A) Standby's: One (1) year from initial issuance.
(B) Documentary's: One Hundred (100) days from issuance.
(iii) Borrowing Base would not be exceeded.
(c) The Borrower shall execute such documentation to apply for
and support the issuance of an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability
of, the Agent or any Lender on account of
(i) Any delay or refusal by an Issuer to issue an L/C;
(ii) Any action or inaction of an Issuer on account of or
in respect to, any L/C.
(e) The Agent, without the request of the Borrower, may advance
under the Revolving Credit (and charge to the Loan Account) the amount of any
honoring of any L/C and other amount for which the Borrower, the Issuer, or
the Lenders become obligated on account of, or in respect to, any L/C. Such
advance shall be made whether or not a Suspension Event is then extant or
such advance would result in Borrowing Base's being exceeded. Such action
shall not constitute a waiver of the Agent's rights under Section 2-8(b) hereof.
2-16. Fees For L/C's.
(a) The Borrower shall pay to the Agent a fee, on account of
L/C's, the issuance of which had been procured by the Agent, monthly in
arrears, and on the Termination Date and on the End Date, equal to 2 % per
annum of the weighted average Stated Amount of all L/C's outstanding during
the period in respect of which such fee is being paid.
(b) In addition to the fee to be paid as provided in Subsection
2-16(a), above, the Borrower shall pay to the Agent (or to the Issuer, if so
requested by Agent), on demand, all issuance, processing, negotiation,
amendment, and administrative fees and other amounts charged by the Issuer on
account of, or in respect to, any L/C.
2-17. Concerning L/C's.
(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any
L/C of that beneficiary's obligations to the Borrower.
(ii) The form, sufficiency, correctness, genuineness,
authority of any person signing; falsification; or the legal
effect of; any documents called for under any L/C if (with
respect to the foregoing) such documents on their face appear to be in
order.
(b) The Issuer may honor, as complying with the terms of any L/C
and of any drawing thereunder, any drafts or other documents otherwise in
order, but signed or issued by an administrator, executor, conservator,
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, liquidator, receiver, or other legal representative of the party
authorized under such L/C to draw or issue such drafts or other documents.
(c) Unless otherwise agreed to, in the particular instance, the
Borrower hereby authorizes any Issuer to:
(i) Select an advising bank, if any.
(ii) Select a paying bank, if any.
(iii) Select a negotiating bank.
(d) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrower. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of
payment called for in, and in accordance with, such instructions (or by any
other commercially reasonable and comparable method). None of the Agent, any
Lender, nor the Issuer shall have any responsibility for any inaccuracy,
interruption, error, or delay in transmission or delivery by post, telegraph or
cable, or for any inaccuracy of translation.
(e) The Agent's, each Lender's, and the Issuer's rights, powers,
privileges and immunities specified in or arising under this Agreement are in
addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract.
(f) Except to the extent otherwise expressly provided hereunder
or agreed to in writing by the Issuer and the Borrower, each L/C will be
governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or regulation, or
any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirements against letters of credit heretofore
or hereafter issued by any Issuer or with respect to which the Agent,
any Lender or any Issuer has an obligation to lend to fund drawings
under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit;
and the result of any event referred to in Section or , above, shall be to
increase the cost to any Issuer of issuing or maintaining any L/C (which
increase in cost shall be the result of such Issuer's reasonable allocation
among that Issuer's letter of credit customers of the aggregate of such cost
increases resulting from such events), then, upon demand by the Agent and
delivery by the Agent to the Borrower of a certificate of an officer of the
subject Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Issuer, and the basis
for determining such increased costs and their allocation, the Borrower shall
immediately pay to the Agent, from time to time as reasonably specified by the
Agent, such amounts as shall be sufficient to compensate such Issuer for such
increased cost. Any Issuer's determination of costs incurred under Section or ,
above, and the allocation, if any, of such costs among the Borrower and other
letter of credit customers of such Issuer, if done in good faith and made on an
equitable basis and in accordance with such officer's certificate, shall be
conclusive and binding on the Borrower.
(h) The obligations of the Borrower under this Agreement with
respect to L/C's are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all circumstances,
whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or restriction,
restraint, or stay in the enforcement of this Agreement, any L/C, or
any other agreement or instrument relating thereto.
(ii) Any amendment or waiver of, or consent to the
departure from, any L/C.
(iii) The existence of any claim, set-off, defense, or other
right which the Borrower may have at any time against the beneficiary
of any L/C.
(iv) Any good faith honoring of a drawing under
any L/C, which drawing possibly could have been dishonored based upon
a strict construction of the terms of the L/C.
2-18. Changed Circumstances.
(a) The Agent may give the Borrower notice of the occurrence of
the following:
(i) The Agent shall have determined in good faith on any
day on which the rate for a LIBOR Loan would otherwise be set, that,
by reason of changes affecting the London interbank market, adequate
and fair means do not exist for ascertaining such rate on the basis
provided for in the definition of LIBOR Offer Rate.
(ii) The Agent shall have determined in good
faith that:
(A) The continuation of or conversion of any Revolving
Credit Loan to a LIBOR Loan has been made impracticable or
unlawful by the occurrence of a change in law occurring after
the date of this Agreement that materially and adversely
affects the applicable market or compliance by the Agent or
any Lender in good faith with any applicable law or
governmental regulation, guideline or order or interpretation
or change thereof by any governmental authority charged with
the interpretation or administration thereof or with any
request or directive of any such governmental authority
(whether or not having the force of law).
(B) The indices on which the interest rates for LIBOR
Loans are determined shall no longer represent the effective
cost to the Agent or any Lender for U.S. dollar deposits in
the interbank market for deposits in which it regularly
participates.
(b) In the event that the Agent gives the Borrower notice
of an occurrence described in Section 2-18(a), then, until the Agent notifies
the Borrower that the circumstances giving rise to such notice no longer apply:
(i) The obligation of the Agent and of each Lender to make
LIBOR Loans of the type affected by such changed circumstances or to
permit the Borrower to select the affected interest rate as otherwise
applicable to any Revolving Credit Loans shall be suspended.
(ii) Any notice which the Borrower had given the Agent with
respect to any LIBOR Loan, the time for action with respect to which
has not occurred prior to the Agent's having given notice pursuant to
Section 2-18(a), shall be deemed at the option of the Agent to not
having been given and such loan shall be made or continued as, or
converted into, as appropriate, a Base Margin Loan.
(iii) Subject to the provisions of Section 2-11, the
Borrower may (and shall, with respect to the occurrence of any event
described in Section ), cancel the relevant borrowing or conversion
notice on the same date the Borrower was notified of such event, or
if the LIBOR Loan is then outstanding, prepay the affected LIBOR Loan.
2-19. Increased Costs. If, as a result of any requirement of law, or
of the interpretation or application thereof by any court or by any
governmental or other authority or entity charged with the administration
thereof, whether or not having the force of law, which:
(a) subjects any Lender to any taxes or changes the basis
of taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by the Borrower to the Agent or any
Lender under this Agreement (except for taxes on the Agent or any
Lender's overall net income or capital imposed by the jurisdiction in
which the Agent or that Lender's principal or lending offices are
located);
(b) imposes, modifies or deems applicable any reserve,
cash margin, special deposit or similar requirements against assets
held by, or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Lender;
(c) imposes on any Lender any other condition with respect to
any Loan Document; or
(d) imposes on any Lender a requirement to maintain or allocate
capital in relation to the Liabilities;
and the result of any of the foregoing, in such Lender's reasonable opinion, is
to increase the cost to that Lender of making or maintaining any loan, advance
or financial accommodation or to reduce the income receivable by such Lender in
respect of any loan, advance or financial accommodation by an amount which the
such Lender deems to be material, then the Agent shall furnish the Borrower with
written notice of any event entitling any Lender to compensation hereunder (a
"Change Notice"). Thereafter, upon ten (10) days written notice from the Agent,
from time to time, to the Borrower (such notice to set out in reasonable detail
the facts giving rise to and a summary calculation of such increased cost or
reduced income), the Borrower shall pay to the Agent, for the benefit of the
subject Lender, that amount which shall compensate the subject Lender for such
additional cost or reduction in income accruing after the date of the Change
Notice.
2-20. Lenders' Commitments.
(a) The obligations of each Lender are several and not joint.
No Lender shall have any obligation to make any loan or advance under the
Revolving Credit in excess of the lesser of
(i) that Lender's Commitment Percentage of the subject loan
or advance or of Availability; or
(ii) that Lender's Dollar Commitment,
(b) No Lender shall have any liability to the Borrower on
account of the failure of any other Lender to provide any loan or advance under
the Revolving Credit nor any obligation to make up any shortfall which may be
created by such failure.
(c) The Dollar Commitments, Commitment Percentages, and
identities of the Lenders (but not the overall Commitment) may be changed, from
time to time by the reallocation or assignment of Dollar Commitments and
Commitment Percentages amongst the Lenders or with other Persons who determine
to become "Lenders", provided, however,
(i) Unless an Event of Default has occurred and is
continuing (in which event, no consent of the Borrower is required)
any assignment to a Person not then a Lender shall be subject to the
prior consent of the Borrower (not to be unreasonably withheld), which
consent will be deemed given unless the Borrower provides the Agent
with written objection, not more than Five (5) Business Days after the
Agent shall have given the Borrower written notice of a proposed
assignment.
(ii) Any such assignment or reallocation shall be on a
pro-rata basis such that each reallocated or assigned Dollar
Commitment to any Person remains the same percentage of the overall
Commitment (in terms of dollars) as the reallocated Commitment
Percentage is to such Person.
(iii) Unless an Event of Default has occurred and is
continuing (in which event, no consent of the Borrower is required),
any appointment of an agent for the Lenders to replace the Agent shall
be subject to the prior consent of the Borrower (not to be
unreasonably withheld), which consent will be deemed given unless the
Borrower provides the Agent with written objection, not more than five
(5) Business Days after the Agent shall have given the Borrower
written notice of such proposed replacement.
(d) Upon written notice given the Borrower from time to time by
the Agent, of any assignment or allocation referenced in Section 2-20(c):
(i) The Borrower shall execute replacements for one or more
Revolving Credit Notes to reflect such changed Dollar Commitments,
Commitment Percentages, and identities and shall deliver such
replacement Revolving Credit Notes to the Agent (which promptly
thereafter shall deliver to the Borrower the Revolving Credit Notes so
replaced) provided however, in the event that a Revolving Credit Note
is to be exchanged following its acceleration or the entry of an order
for relief under the Bankruptcy Code with respect to the Borrower, the
Agent, in lieu of causing the Borrower to execute one or more new
Revolving Credit Notes, may issue the Agent's Certificate confirming
the resulting Commitments and Commitment Percentages.
(ii) Such change shall be effective from the effective date
specified in such written notice and any Person added as a Lender
shall have all rights and privileges of a Lender hereunder thereafter
as if such Person had been a signatory to this Agreement and any other
Loan Document to which a Lender is a signatory and any person removed
as a Lender shall be relieved of any obligations or responsibilities
of a Lender hereunder thereafter.
(e) The Borrower recognizes that the Agent's exercise of any
discretion accorded to the Agent herein and of its rights, remedies, powers,
privileges, and discretions with respect to the Borrower is subject to a
certain Agency Agreement amongst the Agent and the Lenders. The provisions of
the Agency Agreement relating to voting rights of the Lenders shall be subject
to the approval of the Borrower, which approval shall not be unreasonably
delayed or withheld. The Borrower acknowledges that the Borrower's approval of
the voting rights shall be deemed furnished if the voting rights provisions
described in EXHIBIT 2-20 hereto are incorporated in the Agency Agreement.
ARTICLE 3 - CONDITIONS PRECEDENT.
As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit, and the making of the first loan under
the Revolving Credit, each of the documents respectively described in Sections
through and including 3-6, (each in form and substance reasonably satisfactory
to the Agent) shall have been delivered to the Agent, and the conditions
respectively described in Sections 3-7 through and including 3-11, shall have
been satisfied:
3-1. Corporate Due Diligence.
A Certificate of each Obligor's Secretary of the due adoption,
continued effectiveness, and setting forth the texts of, each corporate
resolution adopted in connection with the establishment of the loan arrangement
contemplated by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents.
3-2. Opinion. An opinion of counsel to the Obligors in form and
substance reasonably satisfactory to the Agent .
3-3. [Intentionally Omitted]
3-4. Guarantors. Each Guarantor shall have (a) executed and delivered
to the Agent and the Lenders its guaranty of the Liabilities, and (b) granted
the Agent for the ratable benefit of the Lenders, a first lien on all of its
assets, and (c) shall have executed such other documents and undertaken such
other action as the Agent may have reasonably requested.
3-5. Additional Documents. Such additional instruments and documents
as the Agent or its counsel reasonably may require or request, including,
without limitation an Intercreditor and Subordination Agreement with Winthrop
Resources, Inc.
3-6. Officers' Certificates. Certificates executed on behalf of the
Borrower by the President and the Chief Financial Officer of the Borrower and
stating that the representations and warranties made by the Borrower to the
Agent and the Lenders in the Loan Documents are true and complete in all
material respects as of the date of such Certificate, and that no event has
occurred which is or which, solely with the giving of notice or passage of
time (or both) would be an Event of Default.
3-7. Representations and Warranties. Each of the representations made
by or on behalf of the Obligors in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of the Obligors shall be true and complete in all material respects
as of the date as of which such representation or warranty was made.
3-8. Minimum Excess Availability. The aggregate of the Borrowing
Base, together with any cash balances of the Obligors on deposit at BankBoston,
N.A., and investments reasonably acceptable to the Agent, after giving effect
to (i) the first funding under the Revolving Credit; (ii) all then held checks
(if any); (iii) accounts payable which are beyond credit terms then accorded
the Obligors; (iv) overdrafts; (v) any charges to the Loan Account made in
connection with the establishment of the credit facility contemplated hereby;
and (vi) L/C's to be issued at, or immediately subsequent to, the closing date,
is not less than $25,000,000.00.
3-9. All Fees and Expenses Paid. All fees due at or immediately after
the first funding under the Revolving Credit and all costs and expenses
incurred by the Agent in connection with the establishment of the credit
facility contemplated hereby (including the fees and expenses of counsel to
the Agent) shall have been paid.
3-10. No Suspension Event. No Suspension Event shall then exist.
3-11. No Adverse Change. No event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon the Borrower's financial condition when compared with such financial
condition at the fiscal month ended February 28, 1998.
No document shall be deemed delivered to the Agent or any Lender until received
and accepted by the Agent at its head offices in Boston, Massachusetts. Under no
circumstances will this Agreement take effect until executed and accepted by the
Agent at said head office.
ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) the Borrower, in addition to all other
representations, warranties, and covenants made by the Obligors in any other
Loan Document, makes those representations, warranties, and covenants included
in this Agreement.
4-1. Payment and Performance of Liabilities. The Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.
4-2. Due Organization - Corporate Authorization - No Conflicts.
(a) The Borrower presently is and shall hereafter remain in good
standing as a Delaware corporation and is and shall hereafter remain duly
qualified and in good standing in every other State in which, by reason of the
nature or location of the Borrower's assets or operation of the Borrower's
business, such qualification may be necessary, except where the failure to so
qualify would not have a material adverse effect on the Borrower's business,
assets or financial condition.
(b) Each Related Entity is listed on EXHIBIT 4-2, annexed hereto.
Each Related Entity is and shall hereafter remain in good standing in the State
in which incorporated and is and shall hereafter remain duly qualified in which
other State in which, by reason of that entity's assets or the operation of
such entity's business, such qualification may be necessary, except where the
failure to so qualify would not have a material adverse effect on the Related
Entity's business, assets or financial condition. provided that, the Borrower
may dissolve any Related Entity if (i) upon such dissolution, all of such
Related Entity's assets are transferred to the Borrower and (ii) as a result of
such dissolution, the Borrower does not, expressly or by operation of law,
assume any liabilities of such Related Entity that would, in accordance with
GAAP, be classified as liabilities, whether absolute or contingent, and whether
or not they would be reflected on a balance sheet and the notes thereto of the
Borrower, unless the Agent shall have consented to the assumption of such
liabilities. The Borrower shall provide the Agent with prior written notice of
any entity's becoming or ceasing to be a Related Entity.
(c) Each Obligor has all requisite corporate power and authority
to execute and deliver all Loan Documents to which such Obligor is a party and
has and will hereafter retain all requisite corporate power to perform all
Liabilities.
(d) The execution and delivery by each Obligor of each Loan
Document to which it is a party; the Obligor's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the
creation of security interests by the Obligors as contemplated hereby); each
Obligor's performance under those of the Loan Documents to which it is a party;
the borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary
corporate action.
(ii) Do not, and will not, contravene in any material
respect any provision of any Requirement of Law or obligation of
the Obligors.
(iii) Will not result in the creation or imposition of, or
the obligation to create or impose, any Encumbrance upon any assets
of the Obligors pursuant to any Requirement of Law or obligation,
except pursuant to the Loan Documents.
(e) The Loan Documents have been duly executed and delivered by
Obligors and are the legal, valid and binding obligations of the Obligors,
enforceable against the Obligors in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency, or other
laws relating to or affecting generally the enforcement of creditors' rights
and except to the extent that the availability of the remedy of specific
performance or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
4-3. Trade Names.
(a) EXHIBIT4-3, annexed hereto, is a listing of:
(i) All names under which the Borrower conducted its
business within the past five (5) years.
(ii) All entities and/or persons with whom within the past
five (5) years the Borrower consolidated or merged, or from whom
within the past five (5) years the Borrower acquired in a single
transaction or in a series of related transactions substantially all
of such entity's or person's assets.
(b) Except (i) upon not less than fifteen (15) days prior
written notice given the Agent , and (ii) in compliance with all other
provisions of this Agreement, the Borrower will not undertake or commit to
undertake any action such that the results of that action, if undertaken prior
to the date of this Agreement, would have been reflected on EXHIBIT 4-3.
4-4. Infrastructure.
(a) Based upon a diligent inquiry undertaken by the Borrower, it
appears that the computer applications which the Obligors presently employ do
have a Year 2000 Risk. On or before August 1, 1999, the Obligors shall remedy
all Year 2000 Risk deficiencies they may have with existing computer
applications that could have a material adverse effect on the Borrower's
business operations, to the Agent's reasonable satisfaction. The Obligors will
not employ any additional computer application hereafter unless the Obligors
shall have first made a diligent inquiry to assure that no Year 2000 Risk will
arise on account of the use of such application.
(b) To the Obligors' knowledge, except as set forth in
EXHIBIT 4-4(b), the Obligors own and possess, or have the right to use (and
will hereafter own, possess, or have such right to use) all patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, and other
intellectual or proprietary property of any third Person necessary for each
Obligor's conduct of its business.
(c) To the Obligors' knowledge, the conduct by the Obligors of
the Obligors' business does not presently infringe (nor will the Obligors
conduct their business in the future so as to infringe) the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person.
4-5. Locations.
(a) The Collateral, and the books, records, and papers of
Borrower pertaining thereto, are kept and maintained solely at the Borrower's
chief executive offices at
(i) 66 B Street, Needham, Massachusetts 02194; and
(ii) those locations which are listed on EXHIBIT 4-5,
annexed hereto, which EXHIBIT includes, with respect to each such
location, the name and address of the landlord on the Lease which
covers such location (or an indication that the Borrower owns the
subject location) and of all service bureaus with which any such
records are maintained.
(b) The Borrower shall not remove any of the Collateral from
said chief executive office or those locations listed on EXHIBIT 4-5 except to
(i) accomplish sales of Inventory in the ordinary course
of business;
(ii) move Inventory from one such location to another such
location;
(iii) utilize such of the Collateral as is removed from such
locations in the ordinary course of business (such as motor vehicles).
(iv) return Inventory to the Borrower's suppliers in the
ordinary course of business, consistent with the Borrower's
past practices;
(v) move Inventory to third parties to complete
alterations thereon; or
(vi) move Inventory and other Collateral to a new
store or warehouse, provided the Borrower furnishes the Agent with at
least ten (10) days prior notice thereof.
(c) The Obligors will not execute, alter, modify, or amend any
Lease other than in the ordinary course of business and not otherwise in
violation of this Agreement; provided that
(i) no such amendment shall result in any Obligor's
granting a landlord an Encumbrance on any of the Obligors' assets; and
(ii) the Borrower shall not execute, alter, modify or amend
any Lease, whether or not in the ordinary course of business, without
first furnishing the Agent with ten (10) days prior notice thereof
(provided that no such notice need be furnished if the sole purpose of
the amendment is to extend the term of the Lease) and using its best
efforts to obtain a landlord's waiver in favor of the Agent, in form
reasonably satisfactory to the Agent.
(d) None of the Obligors shall cease the conduct of business
from any of their present or future locations without first furnishing the
Agent with at least ten (10) days prior notice thereof.
(e) Except as otherwise disclosed pursuant to, or permitted by,
this Section , no tangible personal property of any Obligor of more than de
minimis value is in the care or custody of any third party or stored or
entrusted with a bailee or other third party and no property of more than de
minimis value shall hereafter be placed under such care, custody, storage, or
entrustment.
4-6. Title to Assets.
(a) The Borrower is, and shall hereafter remain, the owner of
the Collateral free and clear of all Encumbrances with the exceptions of the
following (the "Permitted Encumbrances"):
(i) Encumbrances in favor of the Agent.
(ii) Those Encumbrances (if any) listed on EXHIBIT 4-6,
annexed hereto.
(iii) Encumbrances for taxes, assessments or other
governmental charges which are being contested in good faith by
appropriate proceedings, and for which adequate reserves are being
maintained, as to which no Encumbrance which may have priority over
the Agent's Encumbrance shall have arisen.
(iv) Statutory liens of carriers, warehousemen, mechanics,
materialmen, repairmen, landlords, and others arising in the ordinary
course of business for sums not overdue, or which are being contested
in good faith by appropriate proceedings.
(v) Liens incurred or deposits or pledges made in
connection with worker's compensation, health or unemployment
insurance, social security laws, or similar legislation or in
connection with or to secure the payment or performance of bids,
tenders, sale agreements, leases, trade agreements, statutory
obligations or surety bonds, or other liens incidental to the ordinary
conduct of its business or the ownership of its property and assets,
which are not incurred in connection with the borrowings of money; or
judgment liens in proceedings which are being appealed and with respect
to which there has been a stay of execution; provided that all of the
foregoing do not in the aggregate materially adversely affect the value
of its property or assets or impair the use thereof in the operation of
the Borrower's business.
(vi) Encumbrances on property hereafter acquired (either in
connection with purchase money mortgages, rental purchase agreements,
including capital leases, or conditional sale or other title retention
agreements), which are restricted to the property so acquired and do
not secure Indebtedness exceeding the fair value (at the time of
acquisition) thereof.
(vii) Easements, rights of way, restrictions, minor defects,
encroachments or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the ordinary
conduct of the business of the Borrower or any of its Related Entities.
(viii) License agreements pursuant to which the Borrower
licenses any of its trademarks, trade names, service marks, trade
dress, or other intellectual property.
(b) The Borrower does not and shall not have possession of any
property on consignment to the Borrower.
(c) The Borrower shall not acquire or obtain the right to use
any Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement, in which Equipment any third party has an
interest, except for:
(i) Equipment which is used in the conduct of the
Borrower's business.
(ii) Equipment, the acquisition or right to use of which
has been consented to by the Agent, which consent may be conditioned
upon the Agent's receipt of such agreement with the third party which
has an interest in such Equipment as is satisfactory to the Agent.
4-7. Indebtedness. The Obligors do not and shall not hereafter have
any Indebtedness with the exceptions of:
(a) Any Indebtedness to the Lenders.
(b) The Indebtedness (if any) listed on EXHIBIT 4-7,
annexed hereto.
(c) Any Indebtedness secured by Permitted Encumbrances.
4-8. Insurance Policies.
(a) EXHIBIT 4-8, annexed hereto, is a schedule of all insurance
policies owned by the Obligors or under which any of the Obligors is the named
insured. To the Obligors' knowledge, each of such policies is in full force and
effect. To the Obligors' knowledge, neither the issuer of any such policy nor
any Obligor is in default or violation of any such policy.
(b) The Obligors shall have and maintain at all times insurance
covering such risks, in such amounts, containing such terms, in such form, for
such periods, and written by such companies as may be reasonably satisfactory
to the Agent . The coverage reflected on EXHIBIT 4-8 presently satisfies the
foregoing requirements, it being recognized by the Borrower, however, that such
requirements may change hereafter to reflect changing circumstances. All
insurance carried by the Obligors shall provide for a minimum of Ten (10) days'
written notice of cancellation to the Agent due to non-payment of premiums, and
Thirty (30) days' written notice of cancellation to the Agent in all other
circumstances, and all such insurance which covers the Collateral shall include
an endorsement in favor of the Agent, which endorsement shall provide that the
insurance, to the extent of the Agent's interest therein, shall not be impaired
or invalidated, in whole or in part, by reason of any act or neglect of any
Obligor or by the failure of any Obligor to comply with any warranty or
condition of the policy. In the event of the failure by the Obligors to
maintain insurance as required herein, the Agent , at its option, may obtain
such insurance, provided, however, the Agent's obtaining of such insurance
shall not constitute a cure or waiver of any Event of Default occasioned by the
Obligors' failure to have maintained such insurance. The Borrower shall furnish
to the Agent certificates or other evidence satisfactory to the Agent regarding
compliance by the Obligors with the foregoing insurance provisions.
(c) The Borrower shall advise the Agent of each claim in excess
of $500,000.00 made by the Borrower under any policy of insurance which covers
the Collateral. Following the acceleration of the time for payment of the
Liabilities, the Borrower will permit the Agent, at the Agent's option in each
instance, to the exclusion of the Borrower, to conduct the adjustment of all
claims regardless of the amount thereof. The Borrower hereby appoints the Agent
as the Borrower's attorney in fact to obtain, adjust, settle, and cancel any
insurance described in this section and to endorse in favor of the Agent any
and all drafts and other instruments with respect to such insurance. This
appointment, being coupled with an interest, is irrevocable until this
Agreement is terminated by a written instrument executed by a duly authorized
officer of the Agent . The Agent shall not be liable on account of any exercise
pursuant to said power except for any exercise with gross negligence or in
actual willful misconduct and bad faith. The Agent may apply any proceeds of
such insurance against the Liabilities, whether or not such have matured, in
such order of application as the Agent may determine.
4-9. Licenses. Each license, distributorship, franchise, and similar
agreement issued to, or to which any Obligor is a party is in full force and
effect. To the Obligors' knowledge, no party to any such license or agreement
is in default or violation thereof. The Obligors have not received any notice
of cancellation of any such license or agreement.
4-10. Leases. EXHIBIT 4-10, annexed hereto, is a schedule of all
presently effective Capital Leases. EXHIBIT 4-5 includes a list of the
locations of properties that are the subject of all other presently effective
Leases. To the Obligors' knowledge, each of such Leases and Capital Leases is
in full force and effect. To the Obligors' knowledge, no party to any such
Lease or Capital Lease is in default or violation of any such Lease or Capital
Lease, and the Obligors have not received any notice of cancellation of any
such Lease or Capital Lease. The Obligors hereby authorize the Agent at any
time and from time to time after the occurrence, and during the continuance,
of an Event of Default to contact any of the Obligor's landlords in order to
confirm the Obligor's continued compliance with the terms and conditions of the
Lease(s) between such Obligor and that landlord and to discuss such issues,
concerning the Obligor's occupancy under such Lease(s), as the Agent may
determine.
4-11. Requirements of Law. The Obligors are in compliance with, and
shall hereafter comply with and use their assets in compliance with, all
Requirements of Law, except where such non-compliance would not have a material
adverse effect on the Borrower, its business or assets. The Obligors have not
received any notice of any violation of any Requirement of Law (whether or not
such violation is material), which violation has not been cured or otherwise
remedied.
4-12. Maintain Properties. The Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral.
(c) Not use any of the Collateral in violation of any policy of
insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the
Collateral, other than the following:
(i) The sale of Inventory in compliance with this
Agreement.
(ii) The disposal of Equipment which is obsolete, worn out,
or damaged beyond repair, which Equipment is replaced to the extent
necessary to preserve or improve the operating efficiency of
the Borrower.
(iii) The turning over to the Agent of all Receipts as
provided herein.
(iv) The sale, liquidation or other disposition of
Inventory at any locations from which the Borrower determines to cease
the conduct of its business, provided that such sales, liquidations, or
other dispositions shall be on terms reasonably satisfactory to the
Agent (whose consent shall not be unreasonably delayed or withheld),
and further provided that notwithstanding the Agent's furnishing of any
such consent, the Agent may, in the exercise of its reasonable
discretion, impose Inventory Reserves, as a result of the occurrence of
any such sale, liquidation, or disposition.
4-13. Pay Taxes.
(a) Except as described EXHIBIT 4-13, the Borrower has filed all
material tax returns and reports (federal, state and local) required to be
filed by it, and paid all material taxes, assessments and other governmental
charges imposed upon it and its property and assets, other than (i) such as
are presently payable without interest or penalty, (ii) such as are being
contested in good faith by appropriate proceedings, and for which adequate
reserves are being maintained in accordance with GAAP, or (iii) with respect to
local taxes, such local taxes payable by the Borrower which (A) the chief
financial officer of the Borrower has no knowledge of the Borrower's obligation
to pay and (B) the failure to pay does not have a material adverse effect on
the business, property, assets or condition, financial or otherwise, of the
Borrower. Except as described on EXHIBIT , the federal income tax returns
of the Borrower have not been audited by the Internal Revenue Service within the
last three years, all prior audits have been closed, and there are no unpaid
assessments, penalties or other charges arising from such prior audits. Except
as described on EXHIBIT 4-13, no agreement is extant which waives or extends any
statute of limitations applicable to the right of the Internal Revenue Service
or any state taxing authority to assert a deficiency or make any other claim for
or in respect to federal or state taxes. No issue has been raised in any
examination which, by application of similar principles, reasonably could be
expected to result in the assertion of a deficiency for any fiscal year open for
examination, assessment, or claim by the Internal Revenue Service or any state
taxing authority.
(b) Except as set forth in Section 4-6(a)(iii) hereof, the
Borrower hereafter shall: pay, as they become due and payable, all taxes and
unemployment contributions and other charges of any kind or nature levied,
assessed or claimed against the Obligors or the Collateral by any person or
entity whose claim could result in an Encumbrance upon any asset of any Obligor
or by any governmental authority; properly exercise any trust responsibilities
imposed upon the Obligors by reason of withholding from employees' pay or by
reason of any Obligor's receipt of sales tax or other funds for the account of
any third party; timely make all contributions and other payments as may be
required pursuant to any Employee Benefit Plan now or hereafter established by
any Obligor; and timely file all tax and other returns and other reports with
each governmental authority to whom any Obligor is obligated to so file.
(c) At its option, after the occurrence, and during the
continuance, of an Event of Default, the Agent may, but shall not be obligated
to, pay any taxes, unemployment contributions, and any and all other charges
levied or assessed upon any Obligor or the Collateral by any person or entity
or governmental authority, and make any contributions or other payments on
account of any Obligor's Employee Benefit Plan as the Agent, in the Agent's
discretion, may deem necessary or desirable, to protect, maintain, preserve,
collect, or realize upon any or all of the Collateral or the value thereof or
any right or remedy pertaining thereto, provided, however, the Agent's making
of any such payment shall not constitute a cure or waiver of any Event of
Default occasioned by the Borrower's failure to have made such payment.
4-14. No Margin Stock. The Obligors are not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations G,U,T, and X of the Board of Governors of
the Federal Reserve System of the United States). Except as permitted elsewhere
in this Agreement, no part of the proceeds of any borrowing hereunder will be
used at any time to purchase or carry any such margin stock or to extend credit
to others for the purpose of purchasing or carrying any such margin stock.
4-15. ERISA. Neither the Borrower nor any ERISA Affiliate:
(a) Is in violation of or hereafter shall violate, or has failed
or hereafter shall fail to be in material compliance with, the Borrower's
Employee Benefit Plan.
(b) Has failed or hereafter shall fail timely to file all
reports and filings required by ERISA to be filed by the Borrower.
(c) Has engaged or hereafter shall engage in any "prohibited
transactions" or "reportable events" (respectively as described in ERISA).
(d) Has engaged or hereafter shall engage in, or commit, any act
such that a tax or penalty could be imposed upon the Borrower on account
thereof pursuant to ERISA.
(e) Has accumulated or hereafter shall accumulate any material
funding deficiency within the meaning of ERISA.
(f) Has terminated or hereafter shall terminate any Employee
Benefit Plan such that a lien could be asserted against any assets of the
Borrower on account thereof pursuant to ERISA.
(g) Is or hereafter shall be a member of, contribute to, or have
any obligation under any Employee Benefit Plan which is a multiemployer plan
within the meaning of Section 4001(a) of ERISA.
4-16. Hazardous Materials.
(a) The Obligors have never:
(i) been legally responsible for any release or threat of
release of any Hazardous Material;
(ii) or received notification of any release or threat of
release of any Hazardous Material from any site or vessel occupied or
operated by any Obligor and/or of the incurrence of any expense or
loss in connection with the assessment, containment, or removal of any
release or threat of release of any Hazardous Material from any such
site or vessel.
(b) The Obligors shall:
(i) dispose of any Hazardous Material only in compliance
with all Environmental Laws in all material respects; and
(ii) not store on any site or vessel occupied or operated by
any Obligor and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the
ordinary course of such Obligor's business and is in compliance with
all Environmental Laws in all material respects.
(c) The Borrower shall provide the Agent with written notice
upon the Borrower's obtaining knowledge of any incurrence of any expense or
loss by any governmental authority or other Person in connection with the
assessment, containment, or removal of any Hazardous Material, for which
expense or loss any Obligor may be liable.
4-17. Litigation. Except as described in EXHIBIT 4-17, annexed hereto,
there is not presently pending or threatened by or against any Obligor or the
Joint Venture any suit, action, proceeding, or investigation which, if
determined adversely to such Obligor or the Joint Venture, would have a
material adverse effect upon the Obligors' financial condition or ability to
conduct their business as such business is presently conducted or is
contemplated to be conducted in the foreseeable future.
4-18. Dividends or Investments. The Obligors shall not:
(a) Pay any cash dividend or make any other distribution in
respect of any class of the Borrower's capital stock.
(b) Own, redeem, retire, purchase, or acquire any of the
Borrower's capital stock involving the expenditure of cash after the date of
this Agreement in the aggregate in excess of the difference between
(i) $10,000,000.00 and (ii) the amount of cash expended by the Borrower after
the date of this Agreement in connection with Permitted Acquisitions; provided
that no such redemption, retirement, purchase or acquisition shall be
undertaken after the occurrence and during the continuance of any Suspension
Event and provided further that no such redemption, retirement, purchase or
acquisition shall be undertaken in any twelve month period after the date of
this Agreement involving the expenditure of cash during such twelve month
period in excess of the difference between (i) $5,000,000.00 and (ii) the
amount of cash expended by the Borrower during such twelve month period in
connection with Permitted Acquisitions.
(c) Invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity,
ther than (i) existing investments in the Joint Venture and future investments
in the Joint Venture only if (A) the Borrower provides the Agent with at least
twenty (20) days notice prior to making such additional investment, (B) the
Agent in good faith (which shall be presumed) believes that the financial
performance covenants set forth in EXHIBIT 5-13 hereto will not be breached as
of the end of the quarter immediately following the making of such investment,
(C) the Borrower provides the Agent with such information as the Agent may
reasonably request in connection with the investment and with the Agent's
determination pursuant to clause (B), above, and (D) no Suspension Event then
exists or would arise therefrom (ii) Permitted Acquisitions, and (iii) other
Eligible Investments provided that no Revolving Credit Loans are then
outstanding and each such Eligible Investment is pledged to the Agent to secure
the Liabilities).
(d) Except as permitted pursuant to Section hereof, merge or
consolidate or be merged or consolidated with or into any other corporation or
other entity.
(e) Except as permitted pursuant to Section hereof, consolidate
any of the Borrower's operations with those of any other corporation or
other entity.
(f) Organize or create any Related Entity, other than in
connection with a Permitted Acquisition and in compliance with the provisions
of Section 4-19(e) hereof.
(g) Subordinate any debts or obligations owed to the Borrower by
any third party to any other debts owed by such third party to any other Person
other than subordination, attornment, and non-disturbance agreements required
pursuant to any Leases.
(h) Except as permitted pursuant to Section hereof, acquire any
assets other than in the ordinary course and conduct of the Borrower's business
as conducted at the execution of this Agreement.
4-19. Permitted Acquisitions. The Borrower may make Permitted
Acquisitions without the consent of the Agent or the Lenders; provided that:
(a) Not less than Fifteen (15) days prior written notice (with
reasonable particularity as to the facts and circumstancesin respect of which
such notice is being given) of such Permitted Acquisition is given to the Agent.
(b) The aggregate purchase price (exclusive of the portion of the
purchase price paid for with capital stock of the Borrower) of all such
Permitted Acquisitions is not greater than Fifteen Million Dollars
($15,000,000.00).
(c) The aggregate consideration paid in cash for all such
Permitted Acquisitions does not exceed the difference between Ten Million
Dollars ($10,000,000.00) and the amount of cash expended by the Borrower after
the date of this Agreement pursuant to Section hereof (provided that the
aggregate consideration paid in cash for Permitted Acquisitions in any twelve
month period after the date of this Agreement shall not exceed the difference
between (i) $5,000,000.00 and (ii) the amount of cash expended by the Borrower
during such twelve month period pursuant to Section 4-18(b)), unless the target
of such Permitted Acquisition, treated together with the Borrower as an
economic unit and reflecting those economies which would be realized if the
Acquisition were consummated, which economies, the Agent in its reasonable
judgment agrees are supported by the specific facts and circumstances of the
transaction, would have satisfied the Fixed Charge Coverage Ratio for the
12 month period prior to such Permitted Acquisition (with appropriate
adjustments to which the Agent, in the Agent's reasonable judgment agrees are
supported by the specific facts and circumstances of the transaction to the
calculation of such Fixed Charge Coverage Ratio to reflect the circumstances).
The Agent shall be deemed to have furnished its agreement to the foregoing
unless the Agent furnishes written objection to the Borrower within Ten (10)
days after the Agent's receipt of all information reasonably requested by the
Agent in connection with the proposed Acquisition.
(d) No Event of Default then exists or would result from any
such Acquisition.
(e) With respect, to and in the event of any Permitted
Acquisition which consists of, or results in the creation of, a Subsidiary,
Agent shall be provided with such Subsidiary's Unlimited Guaranty (in form and
substance satisfactory to the Agent), which Unlimited Guaranty shall be secured
by first perfected security interests and liens on substantially all of the
assets of such Subsidiary, subject to the same limitations set forth in
Section 8-1 hereof and subject to Permitted Encumbrances.
(f) The Agent and the Lenders shall have no obligation to
include any Inventory acquired in such Permitted Acquisition (or Inventory of
a similar type and nature acquired after the Permitted Acquisition) as
"Acceptable Inventory".
4-20. Loans. The Obligors shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:
(a) Advance payments made to the Borrower's suppliers in the
ordinary course.
(b) Advances to the Borrower's officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrower, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrower.
(c) Loans to the Borrower's officers and employees not exceeding
$400,000 in the aggregate at any one time outstanding, provided that each such
loan is for a term of not more than 90 days from the date on which it is made
and is paid within such 90-day period; and (B) loans to the Joint Venture not
exceeding $7,500,000 in the aggregate at any one time outstanding, provided
that (i) no such loans to the Joint Venture are outstanding on the last day of
each fiscal year of the Borrower or during any so-called "clean-up period" set
forth in an agreement to which the Borrower and the Joint Venture are parties
relating to any such loans, and (ii) no loans may be made to the Joint Venture
at any time a Suspension Event exists; and further provided that, all amounts
due on account of loans permitted under this clause (c) shall constitute
Collateral and shall be pledged to the Agent for the ratable benefit of the
Lenders; and
(d) Advances to contractors for the construction or renovation
of stores, buildings or improvements for use in the business of the Borrower.
4-21. Joint Venture. (a) The Borrower shall cause Designs JV Corp. to
make periodic distributions of available cash to the Borrower in the ordinary
course of business. All such distributions shall be delivered to the Agent for
application toward the Liabilities in accordance with the provisions of
Article 7 hereof.
(b) The Borrower shall not, and shall not permit, any material
change or amendment to the terms of documents and agreements establishing the
Joint Venture.
4-22. Restrictions on Sale of Collateral; License Agreements.
To the Obligors' knowledge, the Obligors are not, and shall not become, party
to any agreement or understanding which limits, impairs, or otherwise restricts
the ability of the Agent to freely sell and dispose of any of the Collateral
(including, without limitation, any repurchase agreements, rights of first
refusal or other agreements which limit or condition the time, manner, place or
price for the sale or disposition of the Collateral), other than certain
Trademark License Agreements with Levi Strauss & Co. dated November 1, 1991 and
November 15, 1996. The Borrower shall not effect or permit any material change
or amendment to the terms of such License Agreements which would impose further
restrictions to the Agent's disposition of the Collateral or would shorten the
term of such License Agreements.
4-23. Protection of Assets.
The Agent, in the Agent's discretion, and from time to time, may discharge any
tax or Encumbrance on any of the Collateral (other than Permitted Encumbrances
unless an Event of Default has occurred and is continuing), or take any other
action that the Lender may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The Agent
shall not have any obligation to undertake any of the foregoing and shall have
no liability on account of any action so undertaken except where there is a
specific finding in a judicial proceeding (in which the Agent has had an
opportunity to be heard), from which finding no further appeal is available,
that the Agent had acted in actual bad faith or in a grossly negligent manner.
The Borrower shall pay to the Agent, on demand, or the Agent, in its discretion,
may add to the Loan Account, all amounts paid or incurred by the Lender pursuant
to this section. The obligation of the Borrower to pay such amounts is a
Liability.
4-24. Line of Business.
The Obligors shall not engage in any business other than the business in which
they are currently engaged or a business reasonably related thereto provided
that the foregoing shall not prohibit the expansion or contraction of the
Borrower's business so long as the Borrower is still engaged solely in the
retail sale of apparel, footwear and related accessories and other activities,
ancillary, incidental or necessary thereto.
4-25. Affiliate Transactions.
The Obligors shall not make any payment, nor give any value to any Related
Entity except for goods and services actually purchased by the Obligors from, or
sold by the Obligors to, such Related Entity for a price and on terms which
shall
(a) be competitive and fully deductible as an "ordinary and
necessary business expense" and/or fully depreciable under the Internal Revenue
Code of 1986 and the Treasury Regulations, each as amended; and
(b) not be less favorable than those which would have been
charged in an arms length transaction.
4-26. Additional Assurances.
(a) The Borrower shall execute and deliver to the Agent such
instruments, documents, and papers, and shall do all such things from time to
time hereafter as the Agent may reasonably request to carry into effect the
provisions and intent of this Agreement; to protect and perfect the Agent's
security interests in the Collateral; and to comply with all applicable
statutes and laws, and facilitate the collection of the Receivables Collateral.
The Borrower shall execute all such instruments as may be required by the Agent
with respect to the recordation and/or perfection of the security interests
created herein.
(b) The Borrower hereby designates the Agent as and for the
Borrower's true and lawful attorney, with full power of substitution, to sign
and file any financing statements in order to perfect or protect the Agent's
security and other collateral interests in the Collateral.
(c) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant
to this Section shall be sufficient for filing to perfect the security
interests granted herein.
4-27. Adequacy of Disclosure.
(a) All financial statements furnished to the Agent and each
Lender by the Borrower have been prepared in accordance with GAAP consistently
applied and present fairly the condition of the Borrower at the date(s) thereof
and the results of operations and cash flows for the period(s) covered. There
has been no change in the financial condition, results of operations, or cash
flows of the Borrower since the date(s) of such financial statements, other
than changes in the ordinary course of business, which changes have not been
materially adverse, either singularly or in the aggregate.
(b) The Borrower does not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the
Borrower's annual certified financial statements and Form 10K and 10Q reports
furnished to the Agent and each Lender prior to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given the Agent by or on behalf of the Borrower or any guarantor of
the Liabilities in connection with the execution of this Agreement by the
Agent, taken as a whole, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements therein not misleading.
4-28. Other Covenants.
The Borrower shall not indirectly do or cause to be done any act which, if
done directly by the Borrower, would breach any covenant contained in this
Agreement.
ARTICLE 5 - REPORTING REQUIREMENTS/FINANCIAL COVENANTS.
5-1. Maintain Records. The Borrower shall:
(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Borrower's transactions,
all in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its
results of operations for, the periods in question.
(b) Timely provide the Agent with those financial reports,
statements, and schedules required by this Article or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its
results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public
accountants who are reasonably satisfactory to the Agent and instruct such
accountants to fully cooperate with, and be available to, the Agent to discuss
the Borrower's financial performance, financial condition, operating results,
controls, and such other matters, within the scope of the retention of such
accountants, as may be raised by the Agent.
(e) Not change the Borrower's fiscal year.
(f) Not change the Borrower's taxpayer identification number.
5-2. Access to Records.
(a) Upon reasonable prior notice from the Agent to the Borrower,
the Borrower shall accord the Agent and the Agent's representatives with access
from time to time as the Agent and such representatives may require to all
properties owned by or over which the Borrower has control. The Agent and the
Agent's representatives shall have the right, and the Borrower will permit the
Agent and such representatives from time to time as the Agent and such
representatives may request, to examine, inspect, copy, and make extracts from
any and all of the Borrower's books, records, electronically stored data,
papers, and files. The Borrower shall make all of the Borrower's copying
facilities available to the Agent.
(b) The Borrower hereby authorizes the Agent and the Agent's
representatives to:
(i) Except to the extent prohibited by the Borrower's
contractual obligations, inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates
to the Borrower, or any service bureau, contractor, accountant, or
other person, and directs any such service bureau, contractor,
accountant, or other person fully to cooperate with the Agent and the
Agent's representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrower's computer billing companies, collection agencies, and
accountants and to sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Collateral.
5-3. Notice to Agent.
(a) The Borrower shall provide the Agent with written notice
promptly upon the occurrence of any of the following events, which written
notice shall be with reasonable particularity as to the facts and circumstances
in respect of which such notice is being given:
(i) Any change in the Borrower's officers.
(ii) The completion of any physical count of the Borrower's
Inventory (together with a copy of the results thereof certified by
the Borrower's chief financial officer).
(iii) Any ceasing of the Borrower's making of payment, in
the ordinary course, to any of its creditors, on account of
obligations aggregating in excess of $180,000.00 (including the
ceasing of the making of such payments on account of a dispute with
the subject creditor).
(iv) Any failure by the Borrower to pay rent at any of the
Borrower's locations which rent in the aggregate exceeds $180,000.00,
which failure continues for more than Ten (10) days following the day
on which such rent first came due.
(v) Any material change in the business, operations, or
financial affairs of the Borrower.
(vi) The Borrower's obtaining knowledge of any fact which
has, or in the foreseeable future, is likely to have, a material
adverse effect on the financial condition of the Borrower or
any Guarantor.
(vii) The occurrence of any Suspension Event.
(viii) Any intention on the part of the Borrower to
discharge the Borrower's present independent accountants or any
withdrawal or resignation by such independent accountants from their
acting in such capacity (as to which, see Subsection 5-1(d)).
(ix) Any litigation which, if determined adversely to the
Borrower, is likely to have a material adverse effect on the financial
condition of the Borrower.
(b) The Borrower shall:
(i) Provide the Agent, when so distributed, with copies of
any materials distributed to the shareholders of the Borrower (qua
such shareholders).
(ii) Provide the Agent:
(A) When filed, copies of all filings with the SEC.
(B) When received, copies of all correspondence from
the SEC, asserting that the Borrower is in violation of any
Requirement of Law.
(iii) Add the Agent as an addressee on all mailing lists
maintained by or for the Borrower.
(iv) At the request of the Agent, from time to time,
provide the Agent with copies of all advertising (including copies of
all print advertising and duplicate tapes of all video and radio
advertising).
(v) Provide the Agent, when received by the Borrower, with
a copy of any management letter or similar communications from any
accountant of the Borrower.
5-4. Borrowing Base Certificate.
The Borrower shall provide the Agent by 5:00 PM, daily, (unless no Revolving
Credit Loans are outstanding, in which event weekly, by the close of business on
Monday of each week) with a Borrowing Base Certificate (in the form of EXHIBIT
5-4 annexed hereto, as such form may be revised from time to time by the Agent).
Such Certificate may be sent to the Agent by facsimile transmission, provided
that the original thereof is forwarded to the Agent on the date of such
transmission. It is understood that in furnishing the Borrowing Base Certificate
to the Agent, the Borrower will update Inventory values on a weekly basis (at a
minimum).
5-5. Weekly Reports.
If any Revolving Credit Loans are outstanding, or if the Stated Amount of
outstanding L/Cs exceed $3,000,000.00, weekly, on Wednesday of each week (as of
the then immediately preceding Saturday), the Borrower shall provide the Agent
with a sales audit report (in such form as may be reasonably specified from time
to time by the Agent). Such report may be sent to the Agent by facsimile
transmission, provided that the original thereof is forwarded to the Agent on
the date of such transmission.
5-6. Monthly Reports.
(a) Monthly, the Borrower shall provide the Agent with the
following (each in such form as the Agent from time to time may specify):
(i) Within Fifteen (15) days of the end of the previous
month:
(A) A "Stock Ledger Inventory Report" by department
for each division and a Certificate by department for each
division (signed on behalf of the Borrower by the Borrower's
President or Chief Financial Officer) concerning the Borrower's
Inventory.
(B) An aging of the Borrower's Inventory.
(ii) Within Thirty (30) days of the end of the previous
month:
(A) Reconciliations of the above described Report and
inventory Certificate (Section 5-6(a)(i)(A)) to Availability and
to the general ledger as of the end of the subject month.
(B) A gross margin reconciliation.
(C) A schedule of purchases from the Borrower's ten
largest vendors (in terms of year to date purchases), which
schedule shall be in such form as may be satisfactory to the
Agent and shall include year to date cumulative purchases and an
aging of payables to each such vendor.
(D) An aging of the Borrower's accounts payable.
(E) A store activity report.
(F) An internally prepared consolidated and
consolidating financial statement of the Obligors' financial
condition the results of its operations for, the period ending
with the end of the subject month, which financial statement
shall include, at a minimum, a balance sheet, income statement
(on a store specific and on a "consolidated" basis), cash flow
and comparison of same store sales for the corresponding month of
the then immediately previous year, as well as to the Business
Plan.
(G) The following portions of the Borrower's monthly
financial closing package:
(i) Executive Summary/Press releases.
(ii) Monthly and year to date sales reporting
package.
(iii) A comparison of actual sales to the prior
year's sales and to the Borrower's projections for the
subject month and for the year to date.
(iv) A Gross Margin analysis by segment for the
subject month and fiscal quarter to date.
(v) An Inventory Reconciliation of the
Borrower's retail stock ledger to the Borrower's general
ledger.
(vi) A Shrink analysis and accruals by division.
(b) For purposes of Section 5-6(a)(i), above, the first
"previous month" in respect of which the items required by that Section shall
be provided shall be the fiscal month ended April, 1998 and for purposes of
Section 5-6(a)(ii), above, the first "previous month" in respect of which the
items required by that Section shall be provided shall be the fiscal month ended
April, 1998.
5-7. Quarterly Reports.
Quarterly, within Fifty (50) days following the end of each of
the Borrower's fiscal quarters (except for the last fiscal quarter of each
fiscal year), the Borrower shall provide the Agent with an original counterpart
of a management prepared consolidated and consolidating financial statement of
the Borrower and its Subsidiaries for the period from the beginning of the
Borrower's then current fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous fiscal year, which
statement shall include, at a minimum, a balance sheet, income statement (on a
store specific and on a "consolidated" basis), statement of changes in
shareholders' equity, and cash flows and comparisons for the corresponding
quarter of the then immediately previous year, as well as to the Business Plan,
(ii) the Borrower's Form 10-Q report filed with the SEC.
5-8. Annual Reports.
(a) Annually, within ninety-five (95) days following the end of
the Borrower's fiscal year, the Borrower shall furnish the Agent with (i) an
original signed counterpart of the Borrower's annual consolidated financial
statement, which statement shall bear the unqualified opinion of, the
Borrower's independent certified public accountants (i.e. said statement shall
be "certified" by such accountants). Such annual statement shall include, at a
minimum (with comparative information for the then prior fiscal year) a balance
sheet, income statement, statement of changes in shareholders' equity, and cash
flows, (ii) the Borrower's Form 10-K report filed with the SEC, and (iii) the
annual financial statement prepared in accordance with Section 5-8(a)(i) with
respect to the Joint Venture.
(b) No later than the earlier of Fifteen (15) days prior
to the end of each of the Borrower's fiscal years or the date on which such
accountants commence their work on the audit of the Borrower's annual financial
statement, the Borrower shall give written notice to such accountants (with a
copy of such notice, when sent, to the Agent) that:
(i) Such annual financial statement will be delivered
by the Borrower to the Agent (for subsequent distribution to each
Lender).
(ii) It is the intention of the Borrower, in its engagement
of such accountants, to satisfy the financial reporting requirements
set forth in this Article 5.
(iii) The Agent (and each Lender) will rely thereon with
respect to the administration of, and transactions under, the credit
facility contemplated by this Agreement.
(c) Each annual statement shall be accompanied by such
accountant's certificate indicating that, in the preparation of such annual
statement, such accountants did not conclude that any Suspension Event had
occurred during the subject fiscal year as a result of the Borrower's breach of
the financial performance covenants set forth on EXHIBIT 5-13(a) (a) hereto
(or if one or more had occurred, the facts and circumstances thereof).
5-9. Applicable to Monthly, Quarterly and Annual Reports.
All financial reports furnished by the Borrower under Sections 5-6, 5-7, and
5-8 hereof shall be prepared on the following basis:
(a) The Borrower and its Subsidiaries on a consolidated
basis; and
(b) The Borrower and its Subsidiaries (exclusive of the Joint
Venture) on a consolidated basis; and
(c) The Joint Venture only (without consolidation with the
Borrower and its other Subsidiaries).
5-10. Officers' Certificates.
The Borrower shall cause the Borrower's President and Chief Financial
Officer respectively to provide such Person's Certificate on behalf of the
Borrower with those monthly, quarterly, and annual statements to be furnished
pursuant to this Agreement, which Certificate shall:
(a) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied and presents fairly the financial
condition of the Obligors and the Joint Venture at the close of, and the
results of their respective operations and cash flows for, the period(s)
covered, subject, however to the following:
(i) usual year end adjustments and footnotes (this
exception shall not be included in the Certificate which accompanies
such annual statement).
(ii) Material Accounting Changes (in which event, such
Certificate shall include a schedule (in reasonable detail) of the
effect of each such Material Accounting Change) not previously
specifically taken into account in the determination of the financial
performance covenant imposed pursuant to Section 5-13.
(b) Indicate either that during the relevant period (i) no
Suspension Event has occurred or (ii) if such an event has occurred, its nature
(in reasonable detail) and the steps (if any) being taken or contemplated by
the Borrower to be taken on account thereof.
(c) Include calculations concerning the Borrower's compliance
(or failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 5-13 hereof.
5-11. Inventories, Appraisals, and Audits.
(a) The Agent and each Lender, at the expense of the Borrower,
may participate in and/or observe each physical count and/or inventory of so
much of the Collateral as consists of Inventory which is undertaken on behalf
of the Borrower.
(b) Upon the Agent's request from time to time, the Borrower
shall obtain (in all events, at the Borrower's expense) physical counts and/or
inventories of the Collateral, conducted by such inventory takers as are
satisfactory to the Agent and following such methodology as may be required by
the Agent, each of which physical counts and/or inventories shall be observed
by the Borrower's accountants. The Agent contemplates requiring the Borrower to
conduct one such count and/or inventory for each of the Borrower's locations
during each Twelve (12) month period during which this Agreement is in effect.
The Borrower shall promptly furnish the Agent with copies of the results and
adjusting entries for each such count or inventory. In the Agent's discretion,
after the occurrence of an Event of Default, the Agent may undertake or cause
the Borrower to undertake additional such counts or inventories during any such
period.
(c) Upon the Agent's request from time to time, the Borrower
shall permit the Agent to obtain appraisals (in all events, at the Borrower's
expense) conducted by such appraisers as are satisfactory to the Agent.
(d) The Agent contemplates conducting up to Four (4) commercial
finance audits (in each event, at the Borrower's expense) of the Borrower's
books and records during any Twelve (12) month period during which this
Agreement is in effect, but in its discretion, may undertake additional such
audits during such period.
(e) The Agent from time to time (in all events, at the
Borrower's expense) may undertake "mystery shopping" (so-called) visits to all
or any of the Borrower's business premises. The Agent shall provide the
Borrower with a copy of any non-company confidential results of such mystery
shopping.
(f) The maximum aggregate cost for the following which the Agent
conducts or causes to be conducted in any Twelve (12) month period for which
the Borrower shall reimburse the Agent shall not exceed the aggregate of
following, it being understood, however, that (x) the maxima are subject to
Borrower's having made available, as appropriate, upon reasonable prior notice
and during normal business hours, its facilities, financial information, and
personnel to facilitate completion in the ordinary course of the following and
(y) no Event of Default having occurred and continuing (and that if either (x)
or (y) is not fulfilled, there shall not be any such limitation on the
aggregate of such costs):
(i) Appraisals pursuant to Section 5-11(c): $50,000.00.
(ii) Commercial finance audits pursuant to Section 5-11(d):
$20,000.00, plus travel expenses.
(iii) Mystery Shopping pursuant to Section 5-11(e):
$1,000.00
5-12. Additional Financial Information.
(a) In addition to all other information required to be provided
pursuant to this Article , the Borrower promptly shall provide the Agent, with
such other and additional information concerning the Obligors, the Joint
Venture, the Collateral, the operation of the Obligors' and the Joint Venture's
business, and the Obligors' and the Joint Venture's financial condition,
including original counterparts of financial reports and statements, as the
Agent may from time to time reasonably request from the Borrower.
(b) The Borrower may provide the Agent, from time to time
hereafter, with updated projections of the Obligors' anticipated performance
and operating results.
(c) In all events, the Borrower, no sooner than Ninety (90) nor
later than Sixty (60) days prior to the end of each of the Borrower's fiscal
years, shall furnish the Agent with an updated and extended projection for the
Obligors which shall go out at least through the end of the next fiscal year.
(d) The Obligors recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Agent or any
Lender may obtain, develop, or receive with respect to the Obligors or the
Joint Venture is confidential to the Agent and the Lenders and that, except as
otherwise provided herein, the Obligors are not entitled to receipt of any of
such appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.
5-13. Financial Performance Covenants.
The Borrower shall observe and comply with those financial performance
covenants set forth on EXHIBIT 5-13(a), annexed hereto. Compliance with such
financial performance covenants shall be made as if no Material Accounting
Changes had been made. The Agent may determine the Borrower's compliance with
such covenants based upon financial reports and statements provided by the
Borrower to the Agent (whether or not such financial reports and statements are
required to be furnished pursuant to this Agreement) as well as by reference to
interim financial information provided to, or developed by, the Agent. If the
Agent determines, based upon information developed by the Agent, that an Event
of Default exists as a result of the Borrower's failure to comply with such
covenants, the Agent shall furnish such information which the Agent has
developed to the Borrower upon the Borrower's request therefor.
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL.
6-1. Use of Inventory Collateral.
(a) The Borrower shall not engage in any sale of the Inventory
other than for fair consideration in the conduct of the Borrower's business in
the ordinary course and shall not engage in sales or other dispositions to
creditors; sales or other dispositions in bulk; and any use of any of the
Inventory in breach of any provision of this Agreement.
(b) No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, with the exception of the Borrower's
customary return policy applicable to the return of inventory purchased by the
Borrower's retail customers in the ordinary course, such Inventory may be
returned to the Borrower without the consent of the Agent.
6-2. Inventory Quality.
All Inventory now owned or hereafter acquired by the Borrower is and will
be of good and merchantable quality and free from defects (other than defects
within customary trade tolerances), other than Inventory owned or acquired for
the Levi's Outlet By Designs Stores, which in the ordinary course sells
manufacturer's overruns, discontinued lines, and irregulars purchased directly
from Levi Strauss & Company or purchased for Boston Traders and Buffalo outlet
stores.
6-3. Adjustments and Allowances.
The Borrower may grant such allowances or other adjustments to the
Borrower's Account Debtors (exclusive of extending the time for payment of any
Account or Account Receivable, which shall not be done without first obtaining
the Agent's prior written consent in each instance) as the Borrower may
reasonably deem to accord with sound business practice, provided, however, the
authority granted the Borrower pursuant to this Section may be limited or
terminated by the Lender at any time in the Agent's discretion.
6-4. Validity of Accounts.
(a) The amount of each Account shown on the books, records, and
invoices of the Borrower represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrower.
(b) The Borrower has no knowledge of any impairment of the
validity or collectibility of any of the Accounts and shall notify the Agent of
any such fact immediately after Borrower becomes aware of any such impairment.
(c) The Borrower shall not post any bond to secure the
Borrower's performance under any agreement to which the Borrower is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of the Borrower (other than to the Agent ) in the event
of the Borrower's failure so to perform.
6-5. Notification to Account Debtors.
The Agent shall have the right at any time after the occurrence, and
during the continuance, of an Event of Default to notify any of the Borrower's
Account Debtors to make payment directly to the Agent and to collect all
amounts due on account of the Collateral.
ARTICLE 7 - CASH MANAGEMENT. PAYMENT OF LIABILITIES.
7-1. Depository Accounts.
(a) Annexed hereto as EXHIBIT 7-1 is a Schedule of all present
DDA's, which Schedule includes, with respect to each depository (i) the name
and address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such depository.
(b) The Borrower shall deliver to the Agent, as a condition to
the effectiveness of this Agreement a notification, executed on behalf of the
Obligors, to each depository institution (other than BankBoston, N.A.) with
which any DDA is maintained, in form satisfactory to the Agent, of the Agent's
interest in such DDA.
(c) The Obligors will not establish any DDA hereafter, unless
the Borrower shall have furnished at least ten (10) days prior written notice
to the Agent and unless the Borrower shall deliver to the Agent a notification
to the depository institution with which such DDA is to be maintained, in form
satisfactory to the Agent, of the Agent's interest in such DDA.
7-2. Credit Card Receipts.
(a) Annexed hereto as EXHIBIT 7-2, is a Schedule which describes
all arrangements to which any Obligor is a party with respect to the payment to
such Obligor of the proceeds of all credit card charges for sales by the
Obligors.
(b) The Borrower shall deliver to the Agent, as a condition to
the effectiveness of the Agreement, notification, executed on behalf of the
Obligors, to each of the Obligors' credit card clearinghouses and processors of
notice (in form satisfactory to the Agent), which notice provides that payment
of all credit card charges submitted by the Obligors to that clearinghouse or
other processor and any other amount payable to the Obligors by such
clearinghouse or other processor shall be directed to the Concentration Account
or as may be otherwise directed by the Agent. The Obligors shall not change
such direction or designation except upon and with the prior written consent of
the Agent.
7-3. The Concentration and the Funding Accounts.
(a) The following checking accounts have been or will be
established (and are so referred to herein):
(i) The Concentration Account: Established by the Agent
with BankBoston, N.A.
(ii) The Funding Account: Established by the Borrower with
BankBoston, N.A. (Account No. 4701682 and Account No. 80-048-046).
(b) The contents of each DDA (other than the Funding Account)
constitutes Collateral and Proceeds of Collateral. The contents of the
Concentration Account constitutes the Agent's property.
(c) The Borrower shall pay all fees and charges of, and maintain
such balances as may be required by the Lender or by any bank in which any
account is opened as required hereby (even if such account is opened by and/or
is the property of the Agent).
7-4. Proceeds and Collection of Accounts.
(a) All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Obligors for the Agent; and shall
be deposited and/or transferred only to the Concentration Account.
(b) The Borrower shall cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily (and whether or not there
is then an outstanding balance in the Loan Account) of the then contents of
each DDA (other than the Funding Account), each such transfer to be net of any
minimum balance, not to exceed $750.00, as may be required to be maintained in
the subject DDA by the bank at which such DDA is maintained).
(c) In the event that, notwithstanding the provisions of this
Section 7-4, any Obligor receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by such Obligor for the Agent
and shall not be commingled with any of the Obligors' other funds or deposited
in any account of the Obligors other than as instructed by the Agent.
7-5. Payment of Liabilities.
(a) On each Business Day, the Agent shall apply, towards the
Liabilities, the then collected balance of the Concentration Account (net of
fees charged, and of such impressed balances as may be required by the bank at
which the Concentration Account is maintained), provided, however, for purposes
of the calculation of interest on the unpaid principal balance of the Loan
Account, such payment shall be deemed to have been made One (1) Business Day
after such transfer, and further provided that until the occurrence, and during
the continuance, of an Event of Default, unless the Borrower otherwise
instructs the Agent, the balance of the Concentration Account shall not be
applied to any LIBOR Loans until the end of the applicable Interest Period
therefor.
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to the
Concentration Account on the Business Day on which deposited, provided
that notice of such deposit is available to the Agent by 2:00 PM on
that Business Day.
(ii) Funds paid to the Agent, other than by deposit to the
Concentration Account, shall be deemed to have been received on the
Business Day when they are good and collected funds, provided that
notice of such payment is available to the Agent by 2:00 PM on that
Business Day.
(iii) If notice of a deposit to the Concentration Account
(Section 7-5(b)(i)) or payment (Section 7-5(b)(ii)) is not available
to the Agent until after 2:00 PM on a Business Day, unless caused
by the Agent's bank's error, such deposit or payment shall be
deemed to have been made at 9:00 AM on the next Business Day.
(iv) All deposits to the Concentration Account and other
payments to the Agent are subject to clearance and collection.
(c) The Agent shall transfer to the Funding Account any surplus
in the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7-5(a), above (less those amount which are
to be netted out, as provided therein) provided, however, in the event that
both (i) an Event of Default has occurred and is continuing, and (ii) one or
more L/C's are then outstanding, the Agent may establish a funded reserve of
up to 103% of the aggregate Stated Amounts of such L/C's.
7-6. The Funding Account.
Except as otherwise specifically provided in, or permitted by, this
Agreement, all checks shall be drawn by the Borrower upon, and other
disbursements made by the Borrower solely from, the Funding Account.
ARTICLE 8 - GRANT OF SECURITY INTEREST.
To secure the Borrower's prompt, punctual, and faithful performance of all
and each of the Liabilities, the Borrower hereby grants to the Agent, for the
ratable benefit of the Lenders and their respective Affiliates, a continuing
security interest in and to, and assigns to the Agent, for the ratable benefit
of the Lenders and their respective Affiliates, the following, and each item
thereof, whether now owned or now due, or in which the Borrower has an interest,
or hereafter acquired, arising, or to become due, or in which the Borrower
obtains an interest, and all products, Proceeds, substitutions, and accessions
of or to any of the following (all of which, together with any other property in
which the Agent may in the future be granted a security interest, is referred to
herein as the "Collateral"):
(a) All Accounts and accounts receivable.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the
Collateral and/or to the operation of the Borrower's
business, and all rights of access to such books,
records, and information, and all property in which
such books, records, and information are stored,
recorded, and maintained.
(i) All Investment Property (including, without limitation,
stock in the Guarantors but excluding the stock in the
Borrower's other Subsidiaries and the Joint Venture),
Instruments, Documents, Deposit Accounts, policies
and certificates of insurance, deposits, impressed
accounts, compensating balances, money, cash, or
other property.
(j) All insurance proceeds, refunds, and premium rebates,
including, without limitation, proceeds of fire and credit
insurance, whether any of such proceeds, refunds, and
premium rebates arise out of any of the foregoing.
(8-1(a) through 8-1(i)) or otherwise.
(k) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8-1(a) through 8-1(i)),
including the right of stoppage in transit.
(l) All Leasehold Interests.
Notwithstanding anything in this Agreement to the contrary, with
respect to each item of Collateral constituting equipment subject to a Capital
Lease, or constituting an agreement, license, permit or other instrument of the
Borrower, such item shall be subject to the security interest created hereby
only to the extent that the granting of such security interest, under the terms
of such Capital Lease, agreement, license, permit or other instrument, or as
provided by law, does not cause any default under or termination of such Capital
Lease, agreement, license, permit or other instrument or the loss of any
material right of the Borrower thereunder; provided, however, that in no event
shall the foregoing be construed to exclude from the security interest created
by this agreement, proceeds or products of any such Capital Lease, agreement,
license, permit or other instrument of the Borrower or any accounts receivable
or the right to payments due or to become due the Borrower under any such
agreement or other instrument.
8-2. Extent and Duration of Security Interest.
The grant of a security interest herein is in addition to, and supplemental
of, any security interest previously granted by the Borrower to the Agent and
shall continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full and the security interest
granted herein is specifically terminated in writing by a duly authorized
officer of the Agent.
ARTICLE 9 - AGENT AS BORROWER'S ATTORNEY-IN-FACT.
9-1. Appointment as Attorney-In-Fact.
The Borrower hereby irrevocably constitutes and appoints the Agent as the
Borrower's true and lawful attorney, with full power of substitution,
exercisable after the occurrence, and during the continuance, of an Event of
Default, to convert the Collateral into cash at the sole risk, cost, and expense
of the Borrower, but for the sole benefit of the Agent. The rights and powers
granted the Agent by such appointment include but are not limited to the right
and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) Sign change of address forms to change the address to which
the Borrower's mail is to be sent to such address as the Agent shall designate;
receive and open the Borrower's mail; remove any Receivables Collateral and
Proceeds of Collateral therefrom and turn over the balance of such mail either
to the Borrower or to any trustee in bankruptcy, receiver, assignee for the
benefit of creditors of the Borrower, or other legal representative of the
Borrower whom the Agent determines to be the appropriate person to whom to so
turn over such mail.
(c) Endorse the name of the Borrower in favor of the Agent upon
any and all checks, drafts, notes, acceptances, or other items or instruments;
sign and endorse the name of the Borrower on, and receive as secured party,
any of the Collateral, any invoices, schedules of Collateral, freight or
express receipts, or bills of lading, storage receipts, warehouse receipts, or
other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Receivables Collateral; sign
the Borrower's name on any Proof of Claim in Bankruptcy against Account
Debtors, and on notices of lien, claims of mechanic's liens, or assignments or
releases of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the
Borrower is a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrower.
(g) Use, license or transfer any or all General Intangibles of
the Borrower.
9-2. No Obligation to Act.
The Agent shall not be obligated to do any of the acts or to exercise any
of the powers authorized by Section herein, but if the Agent elects to do any
such act or to exercise any of such powers, it shall not be accountable for
more than it actually receives as a result of such exercise of power, and shall
not be responsible to the Borrower for any act or omission to act except for
any act or omission to act as to which there is a final determination made in
a judicial proceeding (in which proceeding the Agent has had an opportunity to
be heard) which determination includes a specific finding that the subject act
or omission to act had been grossly negligent or in actual bad faith.
ARTICLE 10 - EVENTS OF DEFAULT.
The occurrence of any event described in this Article respectively
shall constitute an "Event of Default" herein. Upon the occurrence of any Event
of Default described in Section , any and all Liabilities shall become due and
payable without any further act on the part of the Agent or any Lender. Upon the
occurrence of any other Event of Default, any and all Liabilities shall become
immediately due and payable, at the option of the Agent and without notice or
demand. The occurrence of any Event of Default shall also constitute, without
notice or demand, a default under all other agreements between the Agent or any
Lender and the Borrower and instruments and papers given the Agent or any Lender
by the Borrower, whether such agreements, instruments, or papers now exist or
hereafter arise.
10-1. Failure to Pay Revolving Credit Fees.
The failure by the Borrower to pay when due any principal or interest
hereunder, or fees payable under Sections 2-10, 2-11, 2-12, or 2-16 of this
Agreement.
10-2. Failure to Make Other Payments.
The failure by the Borrower to pay within Five (5) Business Days after the
date when due (or upon demand, if payable on demand) any payment Liability other
than those set forth in Section 10-1 hereof.
10-3. Failure to Perform Covenant or Liability (No Grace Period).
The failure by the Borrower to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability not otherwise
described in Section or Section hereof, and included in any of the following
provisions hereof:
Section Relates to:
___________________________________________
4-5 Location of Collateral
4-6 Title to Assets
4-7 Indebtedness
4-8(b) Insurance Policies
4-13 Pay taxes
4-25 Affiliate Transactions
4-26 Additional Assurances
5-13 Financial Covenants
6-1 Use of Collateral
Article 7 Cash Management
10-4. Financial Reporting Requirements.
The failure by the Borrower to promptly, punctually, faithfully and timely
perform, discharge, or comply with the financial reporting requirements
included in Article , subject, however, to the following limited number of
grace periods applicable to certain of those requirements:
- ------------------- ------------- -------------------- ------------------------
REPORT/STATEMENT REQUIRED BY GRACE PERIOD NUMBER OF GRACE PERIODS
SECTION
- ------------------- ------------- -------------------- ------------------------
Borrowing Base 5-4 One Business Day Three per fiscal Quarter
Certificates
- ------------------- ------------- -------------------- ------------------------
Weekly Report 5-5 Two Business Days Six in any 12 months
- ------------------- ------------- -------------------- ------------------------
Monthly Report 5-6(a)(i) Three Business Days Three in any 12 months
(15 Days)
- ------------------- ------------- -------------------- ------------------------
Monthly Reports 5-6(a)(ii) Three Business Days Three in any 12 months
(30 Days)
- -------------------- ------------- -------------------- -----------------------
10-5. Failure to Perform Covenant or Liability (Grace Period).
The failure by the Borrower, upon Thirty (30) days written notice by the
Agent, to cure the Borrower's failure to promptly, punctually and faithfully
perform, discharge, or comply with any covenant or Liability not described in
any of Sections 10-1, 10-2, 10-3 or 10-4 hereof.
10-6. Misrepresentation.
The determination by the Agent that any representation or warranty at any
time made by the Borrower to the Agent or any Lender, was not true or complete
in all material respects when given.
10-7. Acceleration of Other Debt. Breach of Lease.
The occurrence of any event such that any Indebtedness of the Borrower to
any creditor in excess of $500,000.00 other than the Agent or any Lender could
be accelerated or, without the consent of the Borrower, Leases with aggregate
monthly rents of at least $180,000.00 could be terminated prior to the stated
termination date thereof (whether or not the subject creditor or lessor takes
any action on account of such occurrence).
10-8. Default Under Other Agreements.
The occurrence of any breach or default under any agreement between the
Agent or any Lender and the Borrower or instrument or paper given the Agent or
any Lender by the Borrower not constituting a Loan Document, whether such
agreement, instrument, or paper now exists or hereafter arises, with respect to
Indebtedness in excess of $500,000.00 (notwithstanding that the Agent or the
subject Lender may not have exercised its rights upon default under any such
other agreement, instrument or paper).
10-9. Uninsured Casualty Loss.
The occurrence of any uninsured loss, theft, damage, or destruction of or
to any substantial portion of the Collateral.
10-10. Judgment. Restraint of Business.
(a) The attachment by trustee or other process, of any of the
Borrower's funds on deposit with, or assets of the Borrower in the possession
of, the Agent or any Lender or such Participant.
(b) The entry of any judgment against the Borrower in excess of
$500,000.00, which judgment is not satisfied (if a money judgment) or appealed
from (with execution or similar process stayed) within thirty (30) days of
its entry.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by the Borrower of its business in the ordinary course.
10-11. Business Failure.
Any act by, against, or relating to the Borrower, or its property or
assets, which act constitutes the application for, consent to, or sufferance of
the appointment of a receiver, trustee, or other person, pursuant to court
action or otherwise, over all, or any part of the Borrower's property; the
granting of any trust mortgage or execution of an assignment for the benefit of
the creditors of the Borrower, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for the Borrower; the
offering by or entering into by the Borrower of any composition, extension, or
any other arrangement seeking relief from or extension of the debts of the
Borrower; or the initiation of any judicial or non-judicial proceeding or
agreement by, against, or including the Borrower which seeks or intends to
accomplish a reorganization or arrangement with creditors; and/or the
initiation by or on behalf of the Borrower of the liquidation or winding up of
all or any part of the Borrower's business or operations.
10-12. Bankruptcy.
The failure by the Borrower to generally pay the debts of the Borrower as
they mature; adjudication of bankruptcy or insolvency relative to the Borrower;
the entry of an order for relief or similar order with respect to the Borrower
in any proceeding pursuant to the Bankruptcy Code or any other federal
bankruptcy law; the filing of any complaint, application, or petition by the
Borrower initiating any matter in which the Borrower is or may be granted any
relief from the debts of the Borrower pursuant to the Bankruptcy Code or any
other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower initiating any matter in which
the Borrower is or may be granted any relief from the debts of the Borrower
pursuant to the Bankruptcy Code or any other insolvency statute or procedure,
which complaint, application, or petition is not timely contested in good faith
by the Borrower by appropriate proceedings or, if so contested, is not
dismissed within ninety (90) days of when filed.
10-13. Indictment - Forfeiture.
The indictment of, or institution of any legal process or proceeding
against, the Borrower, under any federal, state, municipal, and other civil or
criminal statute, rule, regulation, order, or other requirement having the
force of law where the relief, penalties, or remedies sought or available
include the forfeiture of any property of the Borrower and/or the imposition of
any stay or other order, the effect of which could be to restrain in any
material way the conduct by the Borrower of its business in the ordinary course.
10-14. Default by Guarantor or Related Entity.
The occurrence of any of the foregoing Events of Default with respect to
any Guarantor of the Liabilities, or the occurrence of any of the foregoing
Events of Default with respect to any parent (if the Borrower is a corporation),
subsidiary, or Related Entity, as if such Guarantor, parent, or Related Entity
were the "Borrower" described therein.
10-15. Termination of Guaranty.
The termination or attempted termination of any guaranty by any Guarantor
of the Liabilities.
10-16. Challenge to Loan Documents.
(a) Any challenge by or on behalf of the Borrower or any
Guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document in accordance with the
subject Loan Document's material terms or which seeks to void, avoid, limit, or
otherwise materially adversely affect the security interest created by or in the
Loan Documents or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable in accordance
with the subject Loan Document's material terms or which voids, avoids, limits,
or otherwise materially adversely affects the security interest created by the
Loan Documents or any payment made pursuant thereto.
10-17. Lease Default.
The occurrence of any default, after any applicable grace or cure
period, pursuant to that certain Master Lease Agreement (i) of the Borrower
with Winthrop Resources Corporation and all Schedules thereto, or (ii) of the
Joint Venture with Winthrop Resources Corporation and all Schedules thereto,
as each may be amended and in effect from time to time.
10-18. Change in Control. Any Change in Control.
10-19. Termination or Non-renewal of Joint Venture or License Agreement.
Unless the Agent shall have consented thereto,
(a) the termination of, or the receipt by the Borrower of notice
of termination of, the Joint Venture or the Trademark License Agreement with
Levi Strauss & Co. dated November 15, 1996, for whatever reason, with or
without cause; or
(b) The failure of the Borrower to have obtained an extension or
renewal of the Joint Venture or the Trademark License Agreement, described
above, on substantially the same terms as are presently in effect, at least 120
days prior to the expiration of the term thereof.
ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT.
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the following rights and remedies upon the
occurrence of any Event of Default and at any time thereafter. No stay which
otherwise might be imposed pursuant to Section 362 of the Bankruptcy Code or
otherwise shall stay, limit, prevent, hinder, delay, restrict, or otherwise
prevent the Agent's exercise of any of such rights and remedies.
11-1. Rights of Enforcement.
The Agent shall have all of the rights and remedies of a secured party
upon default under the UCC, in addition to which the Agent shall have all and
each of the following rights and remedies:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(b) To take possession of all or any portion of the Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing
as the Agent deems advisable and with or without the taking of possession of
any of the Collateral.
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
11-2. Sale of Collateral.
(a) Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Agent deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Agent's disposition of the Collateral.
(b) The Agent, in the exercise of the Agent's rights and
remedies upon default, may conduct one or more going out of business sales, in
the Agent's own right or by one or more agents and contractors. Such sale(s)
may be conducted upon any premises owned, leased, or occupied by the Borrower.
The Agent and any such agent or contractor, in conjunction with any such sale,
may augment the Inventory with other goods (all of which other goods shall
remain the sole property of the Agent or such agent or contractor). Any amounts
realized from the sale of such goods which constitute augmentations to the
Inventory (net of an allocable share of the costs and expenses incurred in
their disposition) shall be the sole property of the Agent or such agent or
contractor and neither the Borrower nor any Person claiming under or in right
of the Borrower shall have any interest therein.
(c) Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market (in
which event the Agent shall provide the Borrower with such notice as may be
practicable under the circumstances), the Agent shall give the Borrower at
least seven (7) days prior written notice of the date, time, and place of any
proposed public sale, and of the date after which any private sale or other
disposition of the Collateral may be made. The Borrower agrees that such
written notice shall satisfy all requirements for notice to the Borrower which
are imposed under the UCC or other applicable law with respect to the exercise
of the Agent's rights and remedies upon default.
(d) The Agent and any Lender may purchase the Collateral, or any
portion of it at any sale held under this Article.
(e) The Agent shall apply the proceeds of any exercise of the
Agent's Rights and Remedies under this Article towards the Liabilities in such
manner, and with such frequency, as the Agent determines.
11-3. Occupation of Business Location.
In connection with the Agent's exercise of the Agent's rights under this
Article , the Agent may enter upon, occupy, and use any premises owned or
occupied by the Borrower, and may exclude the Borrower from such premises or
portion thereof as may have been so entered upon, occupied, or used by the
Agent. The Agent shall not be required to remove any of the Collateral from any
such premises upon the Agent's taking possession thereof, and may render any
Collateral unusable to the Borrower. In no event shall the Agent be liable to
the Borrower for use or occupancy by the Agent of any premises pursuant to this
Article , nor for any charge (such as wages for the Borrower's employees and
utilities) incurred in connection with the Agent's exercise of the Agent's
Rights and Remedies.
11-4. Grant of Nonexclusive License.
Except to the extent prohibited by the Borrower's contractual obligations,
the Borrower hereby grants to the Agent a royalty free nonexclusive irrevocable
license to use, apply, and affix any trademark, trade name, logo, or the like
in which the Borrower now or hereafter has rights, such license being with
respect to the Agent's exercise of the rights hereunder including, without
limitation, in connection with any completion of the manufacture of Inventory or
sale or other disposition of Inventory.
11-5. Assembly of Collateral.
The Agent may require the Borrower to assemble the Collateral and make it
available to the Agent at the Borrower's sole risk and expense at a place or
places which are reasonably convenient to both the Agent and Borrower.
11-6. Rights and Remedies.
The rights, remedies, powers, privileges, and discretions of the Agent
hereunder (herein, the " Agent's Rights and Remedies") shall be cumulative and
not exclusive of any rights or remedies which it would otherwise have. No delay
or omission by the Agent in exercising or enforcing any of the Agent's Rights
and Remedies shall operate as, or constitute, a waiver thereof. No waiver by the
Agent of any Event of Default or of any default under any other agreement shall
operate as a waiver of any other default hereunder or under any other agreement.
No single or partial exercise of any of the Agent's Rights or Remedies, and no
express or implied agreement or transaction of whatever nature entered into
between the Agent and any person, at any time, shall preclude the other or
further exercise of the Agent's Rights and Remedies. No waiver by the Agent of
any of the Agent's Rights and Remedies on any one occasion shall be deemed a
waiver on any subsequent occasion, nor shall it be deemed a continuing waiver.
All of the Agent's Rights and Remedies and all of the Agent's rights, remedies,
powers, privileges, and discretions under any other agreement or transaction are
cumulative, and not alternative or exclusive, and may be exercised by the Agent
at such time or times and in such order of preference as the Agent in its sole
discretion may determine. The Agent's Rights and Remedies may be exercised
without resort or regard to any other source of satisfaction of the Liabilities.
ARTICLE 12 - NOTICES.
12-1. Notice Addresses.
All notices, demands, and other communications made in respect of this
Agreement (other than a request for a loan or advance or other financial
accommodation under the Revolving Credit) shall be made to the following
addresses, each of which may be changed upon seven (7) days written notice to
all others given by certified mail, return receipt requested:
If to the Agent:
BankBoston Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
Attention : Mr. Michael Pizette
Director
Fax : 617 434-4339
With a copy to:
Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Attention : David S. Berman, Esquire
Fax : 617 723-6831
If to the Borrower:
Designs, Inc.
66 B Street
Needham, Massachusetts 02194
Attention : Carolyn R. Faulkner,
Chief Financial Officer
Fax : (781) 444-8999
With a copy to:
Foley, Hoag & Eliot, LLP
One Post Office Square
Boston, Massachusetts 02109
Attention : Peter Rosenblum, Esquire
Fax: : (617) 832-7000
12-2. Notice Given.
(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or Three
(3) days following deposit in the United States mail, postage prepaid.
(ii) By recognized overnight express delivery: the Business
Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after 9:00 AM
and no later than Three (3) hours prior to the close of customary
business hours of the recipient, when delivered. Otherwise, at the
opening of the next Business Day.
(iv) By Facsimile transmission (which must include a header
on which the party sending such transmission is indicated): If sent
on a Business Day after 9:00 AM and no later than Three (3) hours
prior to the close of customary business hours of the recipient, one
(1) hour after being sent. Otherwise, at the opening of the next
Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or Facsimile Number for which no due
notice was given shall each be deemed receipt of the notice sent.
ARTICLE 13 - TERM.
13-1. Termination of Revolving Credit.
The Revolving Credit shall remain in effect (subject to suspension as
provided in Section 2-4(i) hereof) until the Termination Date.
13-2. Effect of Termination.
Upon the termination of the Revolving Credit, the Borrower shall pay the
Agent (whether or not then due), in immediately available funds, all then
Liabilities including, without limitation: the entire balance of the Loan
Account; any accrued and unpaid Line Fee; and all unreimbursed costs and
expenses of the Agent and of each Lender for which the Borrower is responsible;
and shall make such arrangements concerning any L/C's then outstanding are
reasonably satisfactory to the Agent . Until such payment, all provisions of
this Agreement, other than those contained in Article which place an obligation
on the Agent and any Lender to make any loans or advances or to provide
financial accommodations under the Revolving Credit or otherwise, shall remain
in full force and effect until all Liabilities shall have been paid in full.
The release by the Agent of the security and other collateral interests granted
the Agent by the Borrower hereunder may be upon such conditions and
indemnifications as the Agent may require.
ARTICLE 14 - GENERAL.
14-1. Protection of Collateral.
The Agent has no duty as to the collection or protection of the Collateral
beyond the safe custody of such of the Collateral as may come into the
possession of the Agent and shall have no duty as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Agent may
include reference to the Borrower (and may utilize any logo or other distinctive
symbol associated with the Borrower) in connection with any advertising,
promotion, or marketing undertaken by the Agent.
14-2. Successors and Assigns.
This Agreement shall be binding upon the Borrower and the Borrower's
representatives, successors, and assigns and shall enure to the benefit of the
Agent and each Lender and the respective successors and assigns of each
provided, however, no trustee or other fiduciary appointed with respect to the
Borrower shall have any rights hereunder. In the event that the Agent or any
Lender assigns or transfers its rights under this Agreement, the assignee shall
thereupon succeed to and become vested with all rights, powers, privileges, and
duties of such assignor hereunder and such assignor shall thereupon be
discharged and relieved from its duties and obligations hereunder.
14-3. Severability.
Any determination that any provision of this Agreement or any application
thereof is invalid, illegal, or unenforceable in any respect in any instance
shall not affect the validity, legality, or enforceability of such provision in
any other instance, or the validity, legality, or enforceability of any other
provision of this Agreement.
14-4. Amendments. Course of Dealing.
(a) This Agreement and the other Loan Documents incorporate all
discussions and negotiations between the Borrower and the Agent and each
Lender, either express or implied, concerning the matters included herein and
in such other instruments, any custom, usage, or course of dealings to the
contrary notwithstanding. No such discussions, negotiations, custom, usage, or
course of dealings shall limit, modify, or otherwise affect the provisions
thereof. No failure by the Agent or any Lender to give notice to the Borrower
of the Borrower's having failed to observe and comply with any warranty or
covenant included in any Loan Document shall constitute a waiver of such
warranty or covenant or the amendment of the subject Loan Document. No change
made by the Agent in the manner by which Availability is determined shall
obligate the Agent to continue to determine Availability in that manner.
(b) The Borrower may undertake any action otherwise prohibited
hereby, and may omit to take any action otherwise required hereby, upon and
with the express prior written consent of the Agent. No consent, modification,
amendment, or waiver of any provision of any Loan Document shall be effective
unless executed in writing by or on behalf of the party to be charged with such
modification, amendment, or waiver (and if such party is the Agent, then by a
duly authorized officer thereof). Any modification, amendment, or waiver
provided by the Agent shall be in reliance upon all representations and
warranties theretofore made to the Agent by or on behalf of the Borrower (and
any guarantor, endorser, or surety of the Liabilities) and consequently may be
rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.
14-5. Power of Attorney.
In connection with all powers of attorney included in this Agreement, the
Borrower hereby grants unto the Agent full power to do any and all things
necessary or appropriate in connection with the exercise of such powers as fully
and effectually as the Borrower might or could do, hereby ratifying all that
said attorney shall do or cause to be done by virtue of this Agreement. No power
of attorney set forth in this Agreement shall be affected by any disability or
incapacity suffered by the Borrower and each shall survive the same. All powers
conferred upon the Agent by this Agreement, being coupled with an interest,
shall be irrevocable until this Agreement is terminated by a written instrument
executed by a duly authorized officer of the Agent.
14-6. Application of Proceeds.
The proceeds of any collection, sale, or disposition of the Collateral, or
of any other payments received hereunder, shall be applied towards the
Liabilities in such order and manner as the Agent determines in its sole
discretion. The Borrower shall remain liable for any deficiency remaining
following such application.
14-6. Costs and Expenses of Agent and Of Lenders.
(a) The Borrower shall pay on demand all Administrative Costs
and all reasonable expenses of the Agent in connection with the preparation,
execution, and delivery of this Agreement and of any other Loan Documents,
whether now existing or hereafter arising, and all other reasonable expenses
which may be incurred by the Agent in preparing or amending this Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
incurred with respect to the Liabilities, and all costs and expenses of the
Agent which relate to the credit facility contemplated hereby.
(b) The Borrower shall pay on demand all costs and expenses
(including attorneys' reasonable fees) incurred, following the occurrence of
any Event of Default, by each Lender in connection with the enforcement,
attempted enforcement, or preservation of any rights and remedies under this,
or any other Loan Document, as well as any such costs and expenses in
connection with any "workout", forbearance, or restructuring of the credit
facility contemplated hereby.
(c) The Borrower authorizes the Agent to pay all such fees and
expenses and in the Agent's discretion, to add such fees and expenses to the
Loan Account.
(d) The undertaking on the part of the Borrower in this Section
14-7 shall survive payment of the Liabilities and/or any termination, release,
or discharge executed by the Agent in favor of the Borrower, other than a
termination, release, or discharge which makes specific reference to this
Section 14-7.
14-8. Copies and Facsimiles.
This Agreement and all documents which relate thereto, which have been or
may be hereinafter furnished the Agent or any Lender may be reproduced by that
Person or by the Agent by any photographic, microfilm, xerographic, digital
imaging, or other process, and that Person may destroy any document so
reproduced. Any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made in the
regular course of business). Any facsimile which bears proof of transmission
shall be binding on the party which or on whose behalf such transmission was
initiated and likewise shall be so admissible in evidence as if the original of
such facsimile had been delivered to the party which or on whose behalf such
transmission was received.
14-9. Massachusetts Law.
This Agreement and all rights and obligations hereunder, including matters
of construction, validity, and performance, shall be governed by the laws of
The Commonwealth of Massachusetts.
14-10. Consent to Jurisdiction.
(a) The Borrower agrees that any legal action, proceeding, case,
or controversy against the Borrower with respect to any Loan Document may be
brought in the Superior Court of Suffolk County Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Agent may elect in the Agent's sole discretion. By
execution and delivery of this Agreement, the Borrower, for itself and in
respect of its property, accepts, submits, and consents generally and
unconditionally, to the jurisdiction of the aforesaid courts.
(b) The Borrower WAIVES personal service of any and all process
upon it, and irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by certified mail, postage prepaid, to the Borrower at the Borrower's
address for notices as specified herein, such service to become effective five
(5) Business Days after such mailing.
(c) The Borrower WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of the Agent to bring
legal actions or proceedings in any other competent jurisdiction.
(e) The Borrower agrees that any action commenced by the
Borrower asserting any claim or counterclaim arising under or in connection
with this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.
14-11. Indemnification.
The Borrower shall indemnify, defend, and hold the Agent and each Lender
and any employee, officer, or agent of any of the foregoing (each, an
"Indemnified Person") harmless of and from any claim brought or threatened
against any Indemnified Person by the Borrower, any guarantor or endorser of
the Liabilities, or any other Person (as well as from attorneys' reasonable
fees and expenses in connection therewith) on account of the relationship of
the Borrower or of any other guarantor or endorser of the Liabilities with the
Agent, the Funding Agent, or any Lender (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with counsel of the
Lender's selection, but at the expense of the Borrower) other than any claim as
to which a final determination is made in a judicial proceeding (in which the
Agent and any other Indemnified Person has had an opportunity to be heard),
which determination includes a specific finding that the Indemnified Person
seeking indemnification had acted in a grossly negligent manner or in actual
bad faith. This indemnification shall survive payment of the Liabilities and/or
any termination, release, or discharge executed by the Agent in favor of the
Borrower, other than a termination, release, or discharge which makes specific
reference to this Section 14-11.
14-12. Rules of Construction.
The following rules of construction shall be applied in the
interpretation, construction, and enforcement of this Agreement and of the
other Loan Documents:
(a) Words in the singular include the plural and words in the
plural include the singular.
(b) Headings (indicated by being underlined) and the Table of
Contents are solely for convenience of reference and do not constitute a part
of the instrument in which included and do not affect such instrument's meaning,
construction, or effect.
(c) The words "includes" and "including" are not limiting.
(d) Text which follows the words "including, without limitation"
(or similar words) is illustrative and not limitational.
(e) Text which is underlined, shown in italics, shown in bold,
shown IN ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be
deemed to be conspicuous.
(f) The words "may not" are prohibitive and not permissive.
(g) The word "or" is not exclusive.
(h) Terms which are defined in one section of an instrument are
used with such definition throughout the instrument in which so defined.
(i) The symbol "$" refers to United States Dollars.
(j) References to "herein", "hereof", and "within" are to this
entire Loan Agreement and not merely to the provision in which such reference
is included.
(k) References to "this Agreement" or to any other Loan Document
is to the subject instrument as amended to the date on which application of
such reference is being made.
(l) Except as otherwise specifically provided, all references
to time are to Boston time.
(m) In the determination of any notice, grace, or other period
of time prescribed or allowed hereunder:
(i) Unless otherwise provided (l) the day of the act,
event, or default from which the designated period of time begins to
run shall not be included and the last day of the period so computed
shall be included unless such last day is not a Business Day, in which
event the last day of the relevant period shall be the next Business
Day and (II) the period so computed shall end at 5:00 PM on the
relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The work "through" means "to and including".
(n) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section
hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of
this Agreement shall govern and control.
(o) The words "during the continuance of an Event of Default"
shall mean the occurrence of an Event of Default which has not been waived by
the Agent.
14-13. Intent.
It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Agent.
(c) The security interests created by this Agreement secure all
Liabilities, whether now existing or hereafter arising.
(d) Unless otherwise explicitly provided herein, the Agent's
consent to any action of the Borrower which is prohibited unless such consent
is given may be given or refused by the Agent in its sole discretion and
without reference to Section 2-14 hereof.
14-14. Right of Set-Off.
Any and all deposits or other sums at any time credited by or due to the
Borrower from the Agent or any Lender or from any Affiliate of the Agent or any
Lender and any cash, securities, instruments or other property of the Borrower
in the possession of the Agent or any Lender or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same) shall at all times constitute security for all Liabilities and for any
and all obligations of the Borrower to the Agent and each Lender and any such
Affiliate and may be applied or set off against the Liabilities and against such
obligations at any time, after the occurrence, and during the continuance, of
an Event of Default, whether or not such are then due and whether or not other
collateral is then available to the Agent, any Lender or any such Affiliate.
14-15. Maximum Interest Rate.
Regardless of any provision of any Loan Document, none of the Agent or
any Lender shall be entitled to contract for, charge, receive, collect, or
apply as interest on any Liability, any amount in excess of the maximum rate
imposed by applicable law. Any payment which is made which, if treated as
interest on a Liability would result in such interest's exceeding such maximum
rate shall be held, to the extent of such excess, as additional collateral for
the Liabilities as if such excess were "Collateral."
14-16. Waivers.
(a) The Borrower (and all guarantors, endorsers, and sureties of
the Liabilities) make each of the waivers included in Section 14-16(b), below,
knowingly, voluntarily, and intentionally, and understands that the Agent and
each Lender, in entering into the financial arrangements contemplated hereby
and in providing loans and other financial accommodations to or for the account
of the Borrower as provided herein, whether not or in the future, is relying on
such waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) Except as otherwise specifically required hereby, the
right to notice and/or hearing prior to the Agent's exercising of the
Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT
OR ANY LENDER OR IN WHICH THE AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT
OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER
PERSON AND THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER
LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH
CASE OR CONTROVERSY).
(iv) The benefits or availability of any stay, limitation,
hindrance, delay, or restriction (including, without limitation, any
automatic stay which otherwise might be imposed pursuant to Section
362 of the Bankruptcy Code) with respect to any action which the Agent
may or may become entitled to take hereunder.
(v) Any defense, counterclaim, set-off, recoupment, or
other basis on which the amount of any Liability, as stated on the
books and records of the Agent or any Lender, could be reduced or
claimed to be paid otherwise than in accordance with the tenor of and
written terms of such Liability.
(vi) Any claim to consequential, special, or punitive
damages.
14-17. Confidentiality.
The Agent and each of the Lenders agrees that it will not disclose without
the prior consent of the Borrower (other than to its employees, Affiliates,
advisors or counsel, each of whom shall be directed to observe this
confidentiality obligation) any information with respect to the Borrower or any
of its Subsidiaries which is now or in the future furnished pursuant to this
Agreement or any other Loan Document and which is designated by the Borrower in
writing as confidential, provided, however, that the Agent may disclose any such
information (i) as has become generally available to the public, (ii) as may be
required in any report, statement or testimony submitted to any municipal,
state, or federal regulatory body having or claiming to have jurisdiction over
the Agent or any Lender, (iii) as may be required in respect to any summons or
subpoena or in connection with any litigation, (iv) in order to comply with any
law, order, regulation or ruling applicable to the Agent or any Lender, (v) to
any prospective or actual transferee or participant in connection with any
contemplated transfer or participation of this Agreement, the Liabilities, or
any interest therein by the Agent, provided, however, that such prospective
transferee or participant executes a confidentiality agreement with the Agent
for the benefit of the Borrower and its Subsidiaries containing similar
provisions to those set forth in this Section , and (vi) as may be reasonably
required in connection with the Agent's enforcement of this Agreement or the
other Loan Documents against the Borrower and/or its Subsidiaries.
14-18. Amendment and Restatement.
This Agreement amends and restates the December 10, 1997 Credit Agreement
between BankBoston, N.A. and the Borrower (which has been assigned by
BankBoston, N.A. to the Agent) in its entirety. All of the other documents
executed in connection with the existing Credit Agreement (other than the
Promissory Note dated December 10, 1997) remain in full force and effect,
provided that In the event of any inconsistency between the terms thereof and
the terms of the Loan Documents, the Loan Documents shall control.
DESIGNS, INC.
("Borrower")
By: /s/ Joel H.Reichman
____________________
Print Name: Joel H. Reichman
Title: President
BANKBOSTON RETAIL FINANCE INC.
("Agent")
By: /s/ Michael L. Pizette
_______________________
Print Name: Michael L. Pizette
Title: Director
The "Lenders"
BANKBOSTON RETAIL FINANCE INC.
("Agent")
By: /s/ Michael L. Pizette
_______________________
Print Name: Michael L. Pizette
Title: Director
REVOLVING CREDIT NOTE
Boston, Massachusetts June 4, 1998
FOR VALUE RECEIVED, the undersigned, Designs, Inc., a Delaware
corporation with its principal executive offices at 66 B Street, Needham,
Massachusetts 02194 (the "Borrower") promises to pay to the order of BankBoston
Retail Finance Inc., a Delaware corporation with offices at 40 Broad Street,
Boston, Massachusetts 02109 (hereinafter, with any subsequent holder, a
"Lender") the Lender's Commitment Percentage of the aggregate unpaid principal
balance of loans and advances made to the Borrower pursuant to the Revolving
Credit established pursuant to the Amended and Restated Loan and Security
Agreement of even date (as such may be amended hereafter, the "Loan Agreement")
between BankBoston Retail Finance Inc., a Delaware corporation with its offices
at 40 Broad Street Boston, Massachusetts 02109 (in such capacity, the "Agent"),
as agent for the ratable benefit of the "Lenders" named therein and those
Lenders on the one hand, and the Borrower, on the other, with interest at the
rate and payable in the manner stated therein.
This is a "Revolving Credit Note" to which reference is made in the
Loan Agreement and is subject to all terms and provisions thereof. The principal
of, and interest on, this Note shall be payable as provided in the Loan
Agreement and shall be subject to acceleration as provided therein.
The Agent's books and records concerning loans and advances pursuant to
the Revolving Credit, the accrual of interest thereon, and the repayment of such
loans and advances, shall be prima facie evidence of the indebtedness to the
Lender hereunder.
No delay or omission by the Agent or any Lender in exercising or
enforcing any of the Agent's or such Lender's powers, rights, privileges,
remedies, or discretions hereunder shall operate as a waiver thereof on that
occasion nor on any other occasion. No waiver of any default hereunder shall
operate as a waiver of any other default hereunder, nor as a continuing waiver.
The Borrower, and each endorser and guarantor of this Note,
respectively waives presentment, demand, notice, and protest, and also waives
any delay on the part of the holder hereof. Each assents to any extension or
other indulgence (including, without limitation, the release or substitution of
collateral) permitted by the Agent with respect to this Note and/or any
collateral given to secure this Note or any extension or other indulgence with
respect to any other Liability or any collateral given to secure any other
Liability of the Borrower or any other person obligated on account of this Note.
This Note shall be binding upon the Borrower, and each endorser and
guarantor hereof, and upon their respective heirs, successors, assigns, and
representatives, and shall inure to the benefit of the Lender and its
successors, endorsees, and assigns.
The liabilities of the Borrower, and of any endorser or guarantor of
this Note, are joint and several, provided, however, the release by the Lender
or by the Agent of any one or more such person, endorser or guarantor shall not
release any other person obligated on account of this Note. Each reference in
this Note to the Borrower, any endorser, and any guarantor, is to such person
individually and also to all such persons jointly. No person obligated on
account of this Note may seek contribution from any other person also obligated
unless and until all liabilities, obligations and indebtedness to the Lender of
the person from whom contribution is sought have been satisfied in full.
This Note is delivered to the Lender at the offices of the Agent in
Boston, Massachusetts, shall be governed by the laws of The Commonwealth of
Massachusetts, and shall take effect as a sealed instrument.
The Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Lender and the Agent in the
establishment and maintenance of their respective relationship with the Borrower
contemplated by the within Note, is relying thereon. THE BORROWER, TO THE EXTENT
ENTITLED THERETO, WAIVES ANY PRESENT OR FUTURE RIGHT OF THE BORROWER, OR OF ANY
GUARANTOR OR ENDORSER OF THE BORROWER OR OF ANY OTHER PERSON LIABLE TO THE
LENDER ON ACCOUNT OF OR IN RESPECT TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY
CASE OR CONTROVERSY IN WHICH THE LENDER AND/OR THE AGENT IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER AND/OR
THE AGENT OR IN WHICH THE LENDER AND/OR THE AGENT IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY
RELATIONSHIP AMONGST OR BETWEEN THE BORROWER, ANY SUCH PERSON, AND THE LENDER
AND/OR THE AGENT.
DESIGNS, INC.
The ("Borrower")
By: /s/ Joel H. Reichman
_____________________
Joel H. Reichman
President
June 4, 1998
BankBoston Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
Attention: Mr. Michael Pizette
Director
Re: Revolving Credit Facility
Gentlemen:
Designs, Inc. (the "Borrower") has this day entered into a Loan and
Security Agreement (the "Loan Agreement") with BankBoston Retail Finance Inc.
(in such capacity, the "Agent"), as Agent for the Lenders party thereto and such
Lenders. This letter is the Fee Letter so referred to in the Loan Agreement. All
capitalized terms used herein and not otherwise defined shall have the same
meaning herein as in the Loan Agreement.
The Borrower hereby agrees as follows:
The Commitment Fee referred to in Section 2-10(a) of the Loan Agreement
shall be in the amount of $375,000.00, which will be fully earned as of
the date hereof and paid in full upon the execution of this Fee Letter
(less any amounts previously paid by the Borrower on account thereof).
The Agent's Fee referred to in Section 2-10(b) of the Loan Agreement
shall be in the amount of $50,000.00 per annum, which shall be payable
in three installments of $50,000.00 each: upon the execution of this
Fee Letter and on June 4, 1999 and June 4, 2000.
Please indicate your agreement with the terms of this Fee Letter by
signing below. This letter is intended to take effect as a sealed instrument.
Very truly yours,
DESIGNS, INC.
By /s/ Joel H. Reichman
Title: President
BankBoston Retail Finance Inc.
June 4, 1998
Page 2
The foregoing is agreed to:
BANKBOSTON RETAIL FINANCE INC.
By /s/ Michael Pizette
Title: Director
Dated: June 4, 1998