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EXHIBIT 10.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND THIS NOTE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS IT HAS BEEN SO REGISTERED OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
THIS NOTE IS SUBJECT AND SUBORDINATE TO THE LIABILITIES OF DESIGNS, INC. DUE OR
TO BECOME DUE TO FLEET RETAIL FINANCE INC., AGENT PURSUANT TO A SUBORDINATION
AGREEMENT DATED MAY 14, 2002, AS AMENDED AND IN EFFECT.
DESIGNS, INC.
FORM OF 5% SUBORDINATED NOTE DUE April 26, 2007
__________, 2002 $__________
Designs, Inc., a Delaware corporation (the "Company"), for value
received, hereby promises to pay to ____________________, a __________
corporation (the "PAYEE"), on April 26, 2007, the principal sum of __________
dollars ($__________), together with interest (computed on the basis of a
360-day year of twelve 30-day months) on the unpaid principal amount hereof at
the rate of five percent (5%) per annum from the date hereof.
1. MANDATORY PRINCIPAL PAYMENTS. On the last day of each fiscal quarter
of the Company starting with the fiscal quarter ending July 31, 2003, the
Company shall pay towards the then-outstanding principal amount of this Note the
amount of $__________.
2. PAYMENT OF INTEREST. Interest accrued on this Note is payable on
July 31, October 31, January 31, and April 30 of each year.
3. METHOD OF PAYMENT. The Company shall make all payments of amounts
due under this Note by wire transfer of immediately available funds to an
account designated by the Payee in a written notice to the Company.
4. OPTIONAL PREPAYMENT. The Company may prepay this Note in whole or in
part at any time without premium or penalty. Any such prepayment will be applied
first against all accrued and unpaid interest and then in reduction of the
then-outstanding principal balance.
5. EVENTS OF DEFAULT. The occurrence of one or more of the following
events (an "EVENT OF DEFAULT") will cause the Company to be in default under
this Note:
(1) the Company fails to make any payment of principal or interest when due
hereunder and that failure is not cured within 10 days after written
notice thereof from the Payee to the Company;
(2) there occurs a Bankruptcy Event with respect to the Company;
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(3) the final stated maturity of any senior debt or senior subordinated
debt obligation of the Company is accelerated, which acceleration is
not rescinded, annulled or otherwise cured within 10 days of receipt by
the Company of notice of such acceleration; or
(4) any material agreement between the Company and the Payee has been
terminated by the Payee in accordance with its terms by reason of a
material breach by the Company of any of its obligations thereunder.
As used herein, "Bankruptcy Event" means any of the following:
(1) the institution by the Company of bankruptcy or insolvency proceedings;
(2) the consent of the Company to the institution of bankruptcy or
insolvency proceedings against the Company;
(3) the filing by the Company of a petition seeking reorganization or
release under applicable law, or the consent by the Company to the
filing of any such petition or to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official)
of the Company or of any substantial part of the property of the
Company;
(4) the making by the Company of an assignment for the benefit of
creditors; and
(5) the entry of an order by a court having jurisdiction adjudging the
Company bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization, arrangement, adjustment, or
composition of or in respect of the Company under applicable law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company, or of any substantial part of
the property of the Company, or ordering the winding up or liquidation
of the affairs of the Company, and (A) the Company consents to that
decree or order or (B) that decree or order remains unstayed and in
effect for more than 60 consecutive days.
6. ACCELERATION. The entire unpaid principal balance of this Note,
together with interest accrued thereon, will become immediately due and payable
(x) immediately upon written notice from the Payee to the Company upon the
occurrence of an Event of Default under clause (1) or (4) of Section 5 or (y)
automatically upon the occurrence of an Event of Default under clause (2) or (3)
of Section 5.
7. SUBORDINATION. (a) This Note shall be pari-passu with the Company's
12% Senior Subordinated Notes Due 2007 (the "12% Notes") (as well as with any
other 5% Subordinated Notes Due April 26, 2007 of the Company payable to the
Payee) and shall be, to the same extent as such 12% Notes, subordinated and
junior in right of payment to the prior payment in full in cash of all amounts
payable under Senior Debt, as defined for the purposes of such 12% Notes,
whether outstanding on the issue date hereof or thereafter incurred.
(b) No direct or indirect payment by or on behalf of the Company of
principal of or interest on this Note, whether pursuant to the terms hereof,
upon acceleration, or otherwise, shall be made if (i) a default in the payment
of the principal of or premium, if any, or interest on Designated Senior Debt,
as defined for purposes of the 12% Notes, occurs and is continuing
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beyond any applicable period of grace or (ii) any other default occurs and is
continuing with respect to Designated Senior Debt that permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity and the Payee receives a written notice of such other default (a
"PAYMENT BLOCKAGE NOTICE") from the Company or the holders of any Designated
Senior Debt (with a copy to the Company) until all Obligations with respect to
such Designated Senior Debt are paid in full; payments on this Note shall be
resumed (x) in the case of a payment default, upon the date on which such
default is cured or waived and (y) in case of a nonpayment default, the earlier
of the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received by
the Holder (such period being referred to herein as the "PAYMENT BLOCKAGE
PERIOD"), unless the maturity of any Designated Senior Debt has been accelerated
(and written notice of such acceleration has been received by the Company).
(c) In no event shall a Payment Blockage Period extend beyond 179
days from the date the Payment Blockage Notice in respect thereof was given and
not more than one Payment Blockage Period may be commenced with respect to this
Note during any period of 360 consecutive days.
(d) In the event that, notwithstanding the foregoing, any payment
shall be received by the Payee when such payment is prohibited by this Section
7, such payment shall be held in trust for the benefit of, and shall be paid
over or delivered to, the holders of Designated Senior Debt or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Designated Senior Debt may have been issued, as their
respective interests may appear, but only to the extent that, upon notice to the
holders of Designated Senior Debt that such prohibited payment has been made,
the holders of the Designated Senior Debt (or their representative or
representatives or a trustee) notify the Company and the Payee in writing of the
amounts then due and owing on the Designated Senior Debt, if any, and only the
amounts specified in such notice shall be paid to the holders of Designated
Senior Debt.
(e) Nothing herein shall prohibit the Company from making quarterly
scheduled payments of interest on the Notes, nor the scheduled payments of
principal in the amount of $__________ per quarter beginning July 31, 2003, at
the times and in the amounts originally provided for herein so long as no
default or event of default on Designated Senior Debt has occurred and is
continuing.
8. GOVERNING LAW. This Agreement is governed by the laws of the State
of New York applicable to contracts executed and fully performed within the
State of New York.
9. NOTICES. (a) Every notice or other communication required or
contemplated by this Agreement must be in writing and sent by one of the
following methods: (1) personal delivery, in which case delivery is deemed to
occur the day of delivery; (2) certified or registered mail, postage prepaid,
return receipt requested, in which case delivery is deemed to occur the day it
is officially recorded by the U.S. Postal Service as delivered to the intended
recipient; (3) next-day delivery to a U.S. address by recognized overnight
delivery service such as Federal Express, in which case delivery is deemed to
occur upon receipt; or (4) facsimile transmission, with written confirmation
from the recipient of receipt of the transmission, in which case delivery is
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deemed to occur on the day of transmission (if transmitted by 5:00 p.m. New York
time on a Business Day) or the next Business Day (if transmitted any other
time).
(b) In each case, a notice or other communication sent to a party
must be directed (1) if to the Company, to the Company's address indicated in
the Payee's records as of the date of that notice, or (2) if to the Payee, to
(A) its address shown on the records of the Company as of the date of that
notice or (B) such other address as the Payee designates by written notice to
the Company from time to time.
10. WAIVER OF RIGHTS. No failure or delay on the part of the Payee in
exercising any right, power, privilege or remedy hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any such right,
power, privilege or remedy preclude any other or further exercise thereof or the
exercise of any other right, power, privilege or remedy hereunder. The rights
and remedies provided herein are cumulative and are not exclusive of any other
rights, powers, privileges or remedies, now or hereafter existing, at law or in
equity or otherwise.
11. AMENDMENT. No amendment or waiver of any provision of this Note nor
consent to any departure by the Company therefrom will be effective unless it is
in writing and signed by the Payee, and then that waiver or consent will be
effective only in the specific instance and for the specific purpose for which
it is given.
12. SUCCESSORS AND ASSIGNS. This Note is binding upon the Company and
its legal representatives, successors and assigns and the terms hereof inure to
the benefit of the Payee and the Payee's successors by operation of law. The
Payee may not assign or otherwise transfer this Note without the prior written
consent of the Company.
13. SEVERABILITY. The provisions of this Note are severable, and if any
provision is held invalid or unenforceable in whole or in part in any
jurisdiction, then that invalidity or unenforceability will not in any manner
affect that provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.
14. ENTIRE AGREEMENT. This Note sets forth the entire agreement of the
Company and the Payee with respect to this Note.
15. EXPENSES. The Company shall pay all expenses reasonably incurred by
the Payee in connection with collection of this Note, including without
limitation reasonable attorney's fees and disbursements.
16. WAIVER OF PRESENTMENT. The Company hereby waives presentment,
demand for payment, notice of dishonor, notice of protest, and protest, and all
other notices or demands in connection with the delivery, acceptance,
performance, default or endorsement of this instrument. The obligation to make
payments to the Payee hereunder is absolute and unconditional and the rights of
the Payee are not subject to any defense, set-off, counterclaim or recoupment
that the Company may have against the Payee or by reason of any indebtedness or
liability at any time owing by the Payee to the Company or otherwise. If this
Note is negotiated, endorsed, assigned, transferred, hypothecated or pledged,
the obligations of the Company hereunder will continue in full force and effect.
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17. GUARANTY. The payment of principal and interest on this Note shall
be absolutely and unconditionally guaranteed, on a senior subordinated basis, by
such subsidiary of the Company, if any, as may acquire and hold substantially
all of the assets acquired from Casual Male Corp. and certain direct or indirect
subsidiaries which are debtors in the bankruptcy proceeding pending in the U.S.
Bankruptcy Court of the Southern District of New York.
The Company is executing this Note as of __________, 2002.
DESIGNS, INC.
By:
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Name: Dennis R. Hernreich
Title: Chief Financial Officer
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