EXHIBIT 10.1
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AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
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FLEET RETAIL FINANCE INC.
AS LENDER
AND
AEROPOSTALE, INC. F/K/A MSS-DELAWARE, INC.
THE BORROWER
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OCTOBER 7, 2003
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS: ................................................... 1
ARTICLE 2 - THE REVOLVING CREDIT: .......................................... 21
2-1. Establishment of Revolving Credit ................................... 21
2-2. Intentionally Omitted ............................................... 22
2-3. Intentionally Omitted ............................................... 22
2-4. Risks of Value of Collateral ........................................ 22
2-5. Loan Requests ....................................................... 22
2-6. Making of Loans Under Revolving Credit .............................. 24
2-7. The Loan Account .................................................... 24
2-8. The Revolving Credit Notes .......................................... 25
2-9. Payment of The Loan Account ......................................... 25
2-10. Interest Rates ..................................................... 26
2-11. Commitment Fee ..................................................... 27
2-12. Intentionally Omitted .............................................. 27
2-13. Line (Unused) Fee .................................................. 27
2-14. Early Termination Fee .............................................. 28
2-15. Concerning Fees .................................................... 28
2-16. Lenders' Discretion ................................................ 28
2-17. Procedures For Issuance of L/C's ................................... 28
2-18. Fees For L/C's ..................................................... 29
2-19. Cash Collateralization of L/Cs ..................................... 29
2-20. Concerning L/C's ................................................... 30
2-21. Changed Circumstances .............................................. 32
2-22. Increased Costs .................................................... 33
2-23. Lender's Commitments ............................................... 34
2-24. Intentionally Omitted .............................................. 35
ARTICLE 3 - CONDITIONS PRECEDENT: .......................................... 35
3-1. Corporate Due Diligence ............................................. 35
3-2. Opinion ............................................................. 35
3-3. Additional Documents ................................................ 35
3-4. Officers' Certificates .............................................. 35
3-5. Representations and Warranties ...................................... 36
3-6. Minimum Excess Availability at Time of Initial Advance .............. 36
3-7. All Fees and Expenses Paid .......................................... 36
3-8. Intentionally Omitted ............................................... 36
3-9. Borrower's Assets ................................................... 36
3-10. Lien Search ........................................................ 36
3-11. Perfection of Collateral ........................................... 36
3-12. Insurance .......................................................... 37
3-13. Sourcing Agreement ................................................. 37
3-14. No Suspension Event ................................................ 37
3-15. No Adverse Change .................................................. 37
ARTICLE 4 - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
4-1. Payment and Performance of Liabilities .............................. 38
4-2. Due Organization - Corporate Authorization - No Conflicts ........... 38
4-3. Trade Names ......................................................... 39
4-4. Intellectual Property ............................................... 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 ................................................ 45
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. Loans .............................................................. 48
4-20. Protection of Assets ............................................... 49
4-21. Line of Business ................................................... 49
4-22. Affiliate Transactions ............................................. 49
4-23. Additional Assurances .............................................. 49
4-24. Adequacy of Disclosure ............................................. 50
4-25. Investments ........................................................ 51
4-26. Other covenants .................................................... 51
ARTICLE 5 - FINANCIAL REPORTING AND PERFORMANCE COVENANTS: ................. 51
5-1. Maintain Records .................................................... 51
5-2. Access to Records ................................................... 52
5-3. Prompt Notice to Lender ............................................. 52
5-4. Intentionally Omitted ............................................... 53
5-5. Weekly Reports ...................................................... 53
5-6. Monthly Reports ..................................................... 54
5-7. Quarterly Reports ................................................... 55
5-8. Annual Reports ...................................................... 55
5-9. Officers' Certificates .............................................. 55
5-10. Inventories, Appraisals, and Audits ................................ 56
5-11. Additional Financial Information ................................... 57
5-12. Financial Performance Covenants .................................... 57
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL: .............................. 58
6-1. Use of Inventory Collateral ......................................... 58
6-2. Adjustments and Allowances .......................................... 58
6-3. Validity of Accounts ................................................ 58
6-4. Notification to Account Debtors ..................................... 59
ARTICLE 7 - CASH MANAGEMENT, PAYMENT OF LIABILITIES: ....................... 59
7-1. Depository Accounts ................................................. 59
7-2. Credit Card Receipts ................................................ 59
7-3. The Concentration, Blocked, and Operating Accounts .................. 60
7-4. Proceeds and Collection of Accounts ................................. 61
7-5. Payment of Liabilities .............................................. 61
7-6. The Operating Account ............................................... 62
ARTICLE 8 - GRANT OF SECURITY INTEREST: .................................... 63
8-1. Grant of Security Interest .......................................... 63
8-2. Extent and Duration of Security Interest ............................ 64
ARTICLE 9 - LENDER AS BORROWER'S ATTORNEY-IN-FACT: ......................... 64
9-1. Appointment as Attorney-In-Fact ..................................... 64
9-2. No Obligation to Act ................................................ 65
ARTICLE 10 - EVENTS OF DEFAULT: ............................................ 65
10-1. Failure to Pay Revolving Credit .................................... 65
10-2. Failure To Make Other Payments ..................................... 65
10-3. Failure to Perform Covenant or Liability (No Grace Period) ......... 65
10-4. Failure to Perform Covenant or Liability (Limited Grace Period) .... 66
10-5. Failure to Perform Covenant or Liability (Grace Period) ............ 66
10-6. Misrepresentation .................................................. 66
10-7. Default of Other Debt .............................................. 66
10-8. Default of Leases .................................................. 66
10-9. Uninsured Casualty Loss ............................................ 66
10-10. Judgment, Restraint of Business ................................... 66
10-11. Business Failure .................................................. 67
10-12. Bankruptcy ........................................................ 67
10-13. Indictment- Forfeiture ............................................ 67
10-14. Default by Guarantor or Subsidiary ................................ 67
10-15. Termination of Guaranty ........................................... 68
10-16. Challenge to Loan Documents ....................................... 68
10-17. Intentionally Omitted ............................................. 68
10-18. Change in Control ................................................. 68
ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT: ............................. 68
11-1. Rights of Enforcement .............................................. 68
11-2. Sale of Collateral ................................................. 69
11-3. Occupation of Business Location .................................... 70
11-4. Grant of Nonexclusive License ...................................... 70
11-5. Assembly of Collateral ............................................. 70
11-6. Rights and Remedies ................................................ 70
ARTICLE 12 - NOTICES: ...................................................... 71
12-1. Notice Addresses ................................................... 71
12-2. Notice Given ....................................................... 73
ARTICLE 13 - TERM: ......................................................... 73
13-1. Termination of Revolving Credit .................................... 73
13-2. Effect of Termination .............................................. 73
ARTICLE 14 - GENERAL: ...................................................... 74
14-1. Protection of Collateral ........................................... 74
14-2. Successors and Assigns ............................................. 74
14-3. Severability ....................................................... 74
14-4. Amendments, Course of Dealing ...................................... 74
14-5. Power of Attorney ................................................. 75
14-6. Application of Proceeds ............................................ 75
14-7. Costs and Expenses of Lender ....................................... 75
14-8. Copies and Facsimiles .............................................. 75
14-9. Massachusetts Law .................................................. 76
14-10. Consent to Jurisdiction ........................................... 76
14-11. Indemnification ................................................... 76
14-12. Rules of Construction ............................................. 77
14-13. Intent ............................................................ 79
14-14. Right of Set-Off .................................................. 70
14-15. Maximum Interest Rate ............................................. 79
14-16. Waivers ........................................................... 79
14-17. Confidentiality ................................................... 80
EXHIBITS
2-8 : Revolving Credit Note
4-2 : Related Entities
4-3 : Trade Names
4-5 : Locations, Leases, and Landlords
4-6 : Encumbrances
4-7 : Indebtedness
4-8 : Insurance Policies
4-10 : Capital Leases
4-13 : Taxes
4-17 : Litigation
4-22 : Permitted Management Fees and Other Affiliated Transactions
4-23 : Excluded Assets
6-3 : Bonds and Deposits
7-1 : DDA's.
7-2 : Credit Card Arrangements
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
October 7, 2003
THIS AGREEMENT is made between
Fleet Retail Finance Inc. (the "LENDER"), a Delaware corporation
with offices at 40 Broad Street, Boston, Massachusetts 02109
and
Aeropostale, Inc., f/k/a MSS-Delaware, Inc. (hereinafter, the
"BORROWER"), a Delaware corporation with its principal executive offices
at 1372 Broadway, New York, New York 10020
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
WHEREAS, the Borrower has entered into a Loan and Security Agreement dated
as of July 31,1998 with BankBoston Retail Finance Inc. (now known as Fleet
Retail Finance Inc.), as agent for the lenders party thereto and such lenders
(as amended and in effect, the "EXISTING LOAN AGREEMENT"); and
WHEREAS, the Borrower desires to amend and restate the Existing Loan
Agreement in order (a) to decrease the amount of the Loan Ceiling (as
hereinafter defined) to $25,000,000, (b) to terminate the Commitments of all
lenders other than Fleet Retail Finance Inc., and (c) to make certain other
amendments to the terms and conditions of the Existing Loan Agreement.
NOW, THEREFORE, the parties hereto agree that the Existing Loan Agreement
shall be amended and restated in its entirety to read as follows:
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 BLANK STOCK INVENTORY": Inventory of the Borrower and AWI
which consists of blank t-shirts and other items of apparel which
are in the possession of third Persons for processing, which
Inventory otherwise would be deemed Acceptable Inventory and as to
which the Lender has received an agreement from such processor in
form and substance reasonably acceptable to the Lender.
"ACCEPTABLE L/C INVENTORY": Inventory which is the subject of a
Documentary L/C in favor of a foreign manufacturer or vendor of such
Inventory, which Inventory is to be manufactured for, or delivered
to, the Borrower or AWI and will become Acceptable In-Transit
Inventory within seventy-five (75) days after the date of issuance
of the Documentary L/C.
"ACCEPTABLE IN-TRANSIT INVENTORY": Inventory-in-transit to the Borrower or
AWI, title to which has passed to the Borrower or AWI, which
Inventory has been placed with a carrier (f.o.b.) for shipment to
the Borrower or AWI, and which Inventory is scheduled to be received
within fifty (50) days at the Borrower's or AWI's distribution
center, as to which Inventory the Lender has a perfected security
interest which is prior and superior to all security interests,
claims, and all Encumbrances other than Permitted Encumbrances (it
being understood, however, that the Lender will not require
possession of the Documents of Title or any foreign filings to be
deemed "perfected"); provided that such Inventory shall be deemed to
be Acceptable In-Transit Inventory only if the Lender has received
an agreement (to the extent relevant to such Inventory) with (i)
Federated Department Stores, Inc. and each other sourcing agent
under other sourcing agreements, and (ii) each of the Borrower's and
AWI's custom brokers, each satisfactory in form and substance to the
Lender. Notwithstanding the foregoing, the Lender, periodically (but
in no event in months other than July through October of any year),
may, in its reasonable discretion, include Inventory which otherwise
satisfies the requirements of this definition but for the fact that
title has not yet passed to the Borrower or AWI as Acceptable
In-Transit Inventory, but only if the Lender has received written
confirmation from the applicable sourcing agent that title to such
Inventory will pass to the Borrower or AWI upon receipt of payment
of a sum certain and the Borrower has requested the Lender to make,
and has Availability for, a Revolving Credit Loan to pay such
sourcing agent in such amount.
"ACCEPTABLE INVENTORY": Such of the Borrower's and AWI's Inventory, at
such locations, and of such types, character, qualities and
quantities, as the Lender in its sole discretion from time to time
determines to be acceptable for borrowing, including, without
limitation, Acceptable In-Transit Inventory and Acceptable L/C
Inventory (but excluding Acceptable Blank Stock Inventory), as to
which Inventory, the Lender has a perfected security interest which
is prior and superior to all security interests, claims, and all
Encumbrances other than Permitted Encumbrances. Without limiting the
generality of the foregoing, Acceptable Inventory shall in no event
include Inventory that is not salable, non-merchandise categories
(such as labels, bags and packaging), Inventory not located in the
United States (other than Acceptable In-Transit Inventory and
Acceptable L/C Inventory), samples, damaged goods, return-to-vendor
merchandise, and packaway Inventory.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
"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; and all reclaimed, returned, rejected or
repossessed Inventory (if any) the sale of which gave rise to any
Account.
"ACH": Automated clearing house.
"ACCOUNT DEBTOR": has the meaning given that term in the UCC and includes
all credit card processors of the Borrower.
2
"AFFILIATE": With respect to any two Persons, a relationship in which (a)
one holds, directly or indirectly, not less than twenty-five percent
(25%) 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 twenty-five
percent (25%) of their respective ownership is directly or
indirectly held by the same third Person.
"ALTERNATE BASE RATE": The higher of (i) Base or (ii) one-half of one
percent (0.50%) plus the Federal Funds Effective Rate (rounded
upwards, if necessary, to the next 1/16 of 1%).
"AVAILABILITY": Is defined in Section 2-1(b)(i).
"AWI": Aeropostale West, Inc., a Delaware corporation with an address of
201 Willowbrook Blvd., Wayne, New Jersey 07470, a wholly owned
Subsidiary of the Borrower.
"BANKRUPTCY CODE": Title 11, U.S.C., as amended from time to time.
"BASE": The Prime Rate announced from time to time by Fleet National Bank
(or any successor in interest to Fleet National Bank). 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 Lender, in good faith, designates
as the functional equivalent to said Prime Rate. Any change in
"Base" should 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 365 or 366 day year (as
applicable) and actual days elapsed.
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest at
the Alternate Base Rate.
"BLOCKED ACCOUNT": Is defined in Section 7-3.
"BORROWER": Is defined in the Preamble.
"BUSINESS DAY": Any day other than (a) a Saturday or Sunday; (b) any day
on which banks in Boston, Massachusetts or New York, New York,
generally are not open to the general public for the purpose of
conducting commercial banking business; or (c) a day on which the
Lender is not open to the general public to conduct business.
"BUSINESS PLAN": The Borrower's then current business plan and any
revision, amendment, or update of such business plan to which the
Lender has provided its written sign-off.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
liabilities which are capitalized in accordance with GAAP, provided
that for purposes of this Agreement, capital expenditures funded by
the proceeds from the incurrence of Indebtedness permitted
hereunder, by the proceeds received from the sale of assets
permitted pursuant to Section 4-12(d) hereof, by casualty insurance
proceeds or
3
condemnation proceeds shall, to the extent of such proceeds, not be
deemed Capital Expenditures.
"CAPITAL LEASE": Any lease which is capitalized in accordance with GAAP.
"CASH EQUIVALENTS" shall mean, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof) having
maturities of not more than twelve (12) months from the date of
acquisition by such Person, (ii) time deposits and certificates of
deposit of any commercial bank incorporated in the United States of
recognized standing having capital and surplus in excess of
$100,000,000 with maturities of not more than twelve (12) months
from the date of acquisition by such Person, (iii) repurchase
obligations with a term of not more than seven (7) days for
underlying securities of the types described in clause (i) above,
provided that there shall be no restriction on the maturities of
such underlying securities pursuant to this clause (iii) entered
into with a bank meeting the qualifications specified in clause (ii)
above, (iv) commercial paper issued by the parent corporation of any
commercial bank (provided that the parent corporation and the bank
are both incorporated in the United States) of recognized standing
having capital and surplus in excess of $500,000,000 and commercial
paper issued by any Person incorporated in the United States rated
at least A-1 or the equivalent thereof by Standard & Poor's Ratings
Group or at least P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing not more than twelve (12)
months after the date of acquisition by such Person, and (v)
investments in money market funds substantially all of whose assets
are comprised of securities of the types described in clauses (i)
through (v) above.
"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 30% or more of
the issued and outstanding capital stock of the Borrower (on a fully
diluted basis (i.e. after taking into account options for the
purchase of such capital stock held by Management)) having the
right, under ordinary circumstances, to vote for the election of
directors of the Borrower.
(b) Persons ("Continuing Directors") who (i) 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), or (ii) subsequently became
directors of the Borrower and whose initial election or initial
nomination for election subsequent to that date was approved by a
majority of the Continuing Directors then on the board of directors
of the Borrower cease, for any reason other than death or disability
or replacement (in the ordinary course of business and not as a
result of any change in the equity ownership of the Borrower), to
constitute a majority of the directors of the Borrower.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"COLLATERAL": Is defined in Section 8-1.
4
"COMMERCIAL TORT CLAIM": Has the meaning given that term in the UCC.
"COMMITMENT FEE": Is defined in Section 2-11.
"COMMITMENT": Subject to the provisions of Section 2-23, as of the
Effective Date, as follows:
LENDER DOLLAR COMMITMENT COMMITMENT PERCENTAGE
- ------ ----------------- ---------------------
Fleet Retail $25,000,000.00 100%
Finance Inc.
"COMMITMENT PERCENTAGE": As provided in the Definition of "Commitment",
above.
"CONCENTRATION ACCOUNT": Is defined in Section 7-3.
"CONSOLIDATED": With reference to any term defined herein, shall mean that
term as applied to the accounts of the Borrower and its
Subsidiaries, consolidated in accordance with GAAP.
"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 cost equivalent of 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), which
cost equivalent is determined in accordance with the retail
method of accounting, reflecting the Borrower's historic
business practices.
"Cost" does not include inventory capitalization costs or other
non-purchase price charges (such as freight) used in the Borrower's
calculation of cost of goods sold.
"COST FACTOR": The result of 1 minus the Borrower's then cumulative markup
percent derived from the Borrower's purchase journal on a rolling
12-month basis.
"COSTS OF COLLECTION": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by
the Lender's attorneys, and all reasonable costs incurred by the
Lender 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 Lender, which costs
and expenses are directly or indirectly related to or in respect of
the Lender's: administration and management of the Liabilities
(other than customary overhead expenses); negotiation,
documentation, and amendment of any Loan Document; or efforts to
preserve, protect, collect, or enforce the Collateral, the
Liabilities, and/or the Lender's Rights and Remedies and/or any of
the Lender's rights and remedies
5
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 Costs of Collection are
Liabilities, and at the Lender's option may bear interest at the
highest post-default rate which the Lender may charge the Borrower
hereunder as if such had been lent, advanced, and credited by the
Lender to, or for the benefit of, the Borrower. Notwithstanding the
foregoing, the entitlement of any Lender to "Costs of Collection''
is limited to the extent provided in Section 14-7 hereof.
"COVERAGE RATIO": At any time of calculation, the ratio of (a)(i) the net
appraised liquidation value of the Borrower's and AWI's Acceptable
Inventory as determined from time to time by an independent
appraiser reasonably satisfactory to the Lender, multiplied by (ii)
the Cost of the Borrower's and AWI's Acceptable Inventory, to (b)
the sum of (i) the then outstanding Revolving Credit Loans, plus
(ii) the then Stated Amount of all L/Cs, plus (iii) the then
outstanding Unreimbursed L/C Obligations.
"DDA": Any checking or other demand daily depository account maintained
by the Borrower or AWI.
"DEFAULT INTEREST EVENT": The occurrence of any of the following:
(a) The acceleration of the time for payment of the Liabilities upon
the occurrence of an Event of Default.
(b) The occurrence of any Event of Default under Sections 10-1,lO-2,
10-11, or 10-12 hereof.
(c) The failure of the Borrower to comply with the provisions of
Section 5-4 (which failure continues for two Business Days),
Sections 5-6 or 5-7 (which failures continue for fifteen (15)
Business Days), Section 5-12, or Article 7.
"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 2-14.
"EBITDA": With respect to any fiscal period of the Borrower and its
Subsidiaries on a Consolidated basis, the earnings before interest,
income taxes, depreciation, and amortization, each as determined in
accordance with GAAP.
"EFFECTIVE DATE": The date upon which the conditions precedent set forth
in Article 3 hereof have been satisfied or waived and this Agreement
has become effective.
"EMPLOYEE BENEFIT PLAN": As defined in Section 3(2) of ERISA.
"ENCUMBRANCE": Each of the following:
6
(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 (to
the extent of recourse) 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 (other than
indemnities, not then due and payable, which survive repayment of
the Revolving Credit Loans and L/Cs and termination of the
Commitments) 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": Includes, without limitation, "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 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.
"EURODOLLAR BUSINESS DAY": Any day which is both a Business Day and a day
on which the principal Eurodollar market in which Fleet National
Bank participates is open for dealings in United States Dollar
deposits.
"EURODOLLAR LOAN": Any Revolving Credit Loan which bears interest at a
Eurodollar Rate.
7
"EURODOLLAR MARGIN": Shall mean the following percentages based upon the
following performance criteria:
TRAILING TWELVE MONTH
LEVEL EBITDA EURODOLLAR MARGIN
- ----- ------ -----------------
I Greater than $90,000,000 1.25%
IT Greater than $60,000,000 and 1.50%
less than or equal to
$90.000.000
III Less than $60,000,000 1.75%
The Eurodollar Margin shall initially be established at Level II.
Thereafter, the Eurodollar Margin shall be adjusted quarterly after
the Lender's receipt and review of the financial statements required
pursuant to Section 5-7 and 5-8 hereof, such adjustment to take
retroactive effect as of the first day of each February, May,
August, and November, commencing February 1,2004, based upon the
Borrower's trailing twelve month EBITDA calculated as of the most
recent quarter then ended. Upon the occurrence of an Event of
Default, at the option of the Lender, interest shall be determined
in the manner set forth in Section 2.10(f).
"EURODOLLAR OFFER RATE": That rate of interest (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by the Lender to be
the highest prevailing rate per annum at which deposits on U.S.
Dollars are offered to Fleet National Bank (or if Fleet National
Bank is not offered such deposits or does not participate in a
Eurodollar market, to such banking institution as the Lender may
reasonably select upon two (2) Business Days prior notice to the
Borrower), by first-class banks in the Eurodollar market in which
Fleet National Bank participates at or about 10:00 AM (Boston Time)
two (2) Eurodollar Business Days before the first day of the
Interest Period for the subject Eurodollar Loan, for a deposit
approximately in the amount of the subject loan for a period of time
approximately equal to such Interest Period.
"EURODOLLAR RATE": That per annum rate determined as the aggregate of the
Eurodollar Offer Rate plus the Eurodollar Margin except that, in the
event that it is determined by the Lender that it may be subject to
the Reserve Percentage, the "Eurodollar Rate" shall mean, with
respect to any Eurodollar Loans then outstanding (from the date on
which that Reserve Percentage first became applicable to such
loans), and with respect to all Eurodollar Loans thereafter made, an
interest rate per annum equal the sum of (a) plus (b), where:
(a) is the decimal equivalent of the following fraction:
Eurodollar Offer Rate
--------------------------
1 minus Reserve Percentage
(b) is the applicable Eurodollar Margin.
8
The Eurodollar Rate shall be calculated on a 360 day year and for actual days
elapsed.
"EVENTS OF DEFAULT": Is defined in Article 10.
"EXISTING LOAN AGREEMENT": Has the meaning set forth in the Recitals hereto.
"FEDERAL FUNDS EFFECTIVE RATE": For any day, a fluctuating per annum interest
rate equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on that date (or on the then next
succeeding Business Day, if not one) by the Federal Reserve Bank of New
York, provided that if such a rate is not so published for a day which is
a Business Day, the Federal Funds Effective Rate shall be the average of
quotations for such day on such transactions received by the Lender from
three federal funds brokers of recognized standing selected by the Lender.
"FIXTURES": Has the meaning given that term in the UCC.
"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 Lender, (a) the Borrower's compliance with the financial
performance covenants imposed pursuant to Section 5-12 shall be determined
as if such Material Accounting Change had not taken place 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": Includes, without limitation, "general intangibles" as
defined in the UCC; and also all: rights to payment for credit extended;
deposits; amounts due to the Borrower and/or AWI; credit memoranda in
favor of the Borrower and/or AWI; 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
and/or AWI 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,
9
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 and/or AWI 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 and/or AWI or credit extended or services
performed, by the Borrower and/or AWI, whether intended for an
individual customer or the general business of the Borrower and/or AWI,
or used or useful in connection with research by the Borrower and/or
AWI.
"GOODS": Has the meaning given that term in the UCC.
"GROSS MARGIN": With respect to the subject accounting period for which being
calculated, the decimal equivalent of the following (determined in
accordance with GAAP):
Sales (Minus) Cost of Goods Sold
--------------------------------
Sales
"HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous waste, hazardous
or toxic substances, petroleum products, which (as to 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 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 other than the sale of retail
Accounts to credit card processors.
(d) On account of deposits or advances.
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(e) As lessee under Capital Leases.
"Indebtedness" also includes:
(x) Indebtedness of others secured by an Encumbrance on any
asset of such Person, whether or not such Indebtedness is assumed by
such Person.
(y) Any guaranty, endorsement, suretyship or other undertaking
pursuant to which that Person may be liable on account of any
Indebtedness of any third party, other than endorsements of
negotiable instruments for collection in the ordinary course of
business.
(z) The Indebtedness of a partnership or joint venture in
which such Person is a general partner or joint venturer to the
extent that the holder of such Indebtedness has recourse to such
Person.
"INDEMNIFIED CLAIM": Is defined in Section 14-11.
"INDEMNIFIED PERSON": Is defined in Section 14-11.
"INITIAL CLOSING DATE": July 31, 1998.
"INSTRUMENTS": Has the meaning given that term in the UCC.
"INTEREST EXPENSE": For any period, the interest expense of the Borrower and AWI
for such period, including the fees payable in accordance with the
incurrence of Indebtedness and the portion of any payments made under
Capital Leases allocable to interest expense, all as determined in
accordance with GAAP.
"INTEREST PAYMENT DATE": With reference to:
Each Eurodollar Loan: The last day of the Interest Period relating
thereto; the Termination Date; and the End Date.
Each Base Margin Loan: the first day of each month; the Termination
Date; and the End Date.
"INTEREST PERIOD": (a) With respect to each Eurodollar Loan: Subject to
Subsection (c), below, the period commencing on the date of the making or
continuation of, or conversion to, the subject Eurodollar Loan and ending
one, two, three or six months thereafter, as the Borrower may elect by
notice (pursuant to Section 2-5(a)) to the Lender.
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(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 Eurodollar Loan, as the Borrower may elect by notice (pursuant to
Section 2-5(a)) to the Lender, 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 Eurodollar 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) Subject to Subsection (iv), below, any Interest Period
applicable to a Eurodollar 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) The number of Interest Periods in effect at any one time
is subject to Section 2-10(d) hereof.
"INVENTORY": Includes, without limitation, "inventory" as defined in the UCC
and also all: packaging, advertising, and shipping materials related to
any of the foregoing, and all names or marks affixed or to be affixed
thereto for identifying or selling the same; 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.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"ISSUER": Fleet National Bank.
"L/C": Any letter of credit, the issuance of which is procured by the Lender for
the account of the Borrower and any acceptance made on account of such
letter of
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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.
"LENDER": Defined in the Preamble to this Agreement.
"LENDER'S RIGHTS AND REMEDIES": Is defined in Section 11-6.
"LETTER OF CREDIT RIGHTS": Has the meaning given that term in the UCC and also
shall refer to any right to payment or performance under a letter of
credit, whether or not the beneficiary has demanded or at the time is
entitled to demand payment or performance.
"LIABILITIES" (in the singular, "LIABILITY"): Includes, without limitation, all
and each of the following, whether now existing or hereafter arising:
(a) Any and all direct and indirect liabilities, debts, and
obligations of the Borrower to the Lender, each of every kind, nature, and
description under the Loan Documents.
(b) Each obligation to repay any loan, advance, indebtedness, note,
obligation, overdraft, or amount now or hereafter owing by the Borrower to
the Lender under the Loan Documents (including all future advances whether
or not made pursuant to a commitment by the 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 Lender may hold
against the Borrower under the Loan Documents.
(c) All notes and other obligations of the Borrower now or hereafter
assigned to or held by the Lender with respect to the Loan Documents, each
of every kind, nature, and description.
(d) All interest, fees, and charges and other amounts which may be
charged by the Lender to the Borrower under the Loan Documents and/or
which may be due from the Borrower to the Lender under the Loan Documents
from time to time.
(e) All costs and expenses incurred or paid by the Lender in respect
of any of the Loan Documents (including, without limitation, Costs of
Collection, attorneys' reasonable fees, and all court and litigation costs
and expenses).
(f) Any and all covenants of the Borrower to or with the Lender and
any and all obligations of the Borrower to act or to refrain from acting
in accordance with under Loan Documents.
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(g) Each of the foregoing as if each reference to the "Lender"
therein were to each Affiliate of the Lender.
"LINE (UNUSED) FEE": Is defined in Section 2-13.
"LOAN ACCOUNT": Is defined in Section 2-7.
"LOAN CEILING": $25,000,000.00.
"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 or in connection with any transaction
which arises out of any depository, letter of credit, interest rate
protection, foreign exchange or other hedging agreement, or equipment
leasing services provided by the Lender or any Affiliate of the Lender, as
each may be amended from time to time. For the avoidance of doubt, Loan
Documents does not include the Sourcing Agreement.
"MANAGEMENT": Julian Geiger, John Mills and all other Persons who, from time to
time, acquire capital stock of the Borrower (or rights or options to
acquire capital stock of the Borrower) in connection with services
rendered to, or for the benefit of, the Borrower or its Subsidiaries.
"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 5-12 where such
a breach would not have occurred if such change had not taken place or
visa versa.
"MATERIAL ADVERSE EFFECT": A material adverse effect upon (i) the Borrower's and
AWI's business, properties, operations or financial affairs, taken as a
whole, or (ii) the Collateral, taken as a whole, or (iii) the ability of
the Borrower or AWI to perform its respective obligations under this
Agreement and the other Loan Documents, taken as a whole, or (iv) the
validity, enforceability, perfection or priority of this Agreement or the
other Loan Documents or of the rights and remedies of the Lender under any
Loan Document, taken as a whole.
"MATURITY DATE": September 30,2005.
"OPERATING ACCOUNT": Is defined in Section 7-3.
14
"PARTICIPANT": Is defined in Section 14-14, hereof.
"PAYMENT INTANGIBLES": Has the meaning given that term in the UCC and shall also
refer to any General Intangible under which the Account Debtor's primary
obligation is a monetary obligation.
"PERMITTED ACQUISITION": The investment in, the purchase of stock of, or the
purchase of all or a substantial part of the assets or properties of any
Person, or the entering into of any transaction, merger (with the Borrower
as the surviving entity), consolidation or exchange of securities with any
Person, in which each of the following conditions are satisfied:
(a) The type of business of such Person is generally the same type
of business (or is included in the types of business) in which the
Borrower is engaged or a business reasonably related thereto.
(b) Immediately after giving effect to the transaction, the Coverage
Ratio is satisfied.
(c) Prior to and immediately after giving effect to the transaction,
no Suspension Event exists or will arise.
(d) The aggregate consideration (exclusive of the value of any
common equity of the Borrower issued or delivered in connection with such
transaction) however classified, whether cash, property or assumption of
Indebtedness, in connection with all such transactions shall not exceed
$50,000,000.00 in any fiscal year.
(e) All action required to be undertaken pursuant to Section 4-18(f)
by any Subsidiary created in connection with such transaction has been
completed to the reasonable satisfaction of the Lender.
(f) The Borrower and the Person being so acquired, on a consolidated
basis, shall be in compliance on a pro forma basis, after giving effect to
such transaction, with the financial performance covenants contained in
Section 5-12 hereof.
"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": Includes, without limitation, "Proceeds" as defined in the UCC
(defined below), and each type of property described in Section 8-1
hereof.
15
"RECEIPTS": All cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.
"RECEIVABLES COLLATERAL": That portion of the Collateral which consists of the
Borrower's and/or AWI's Accounts, Accounts Receivable, General Intangibles
for the payment of money, Chattel Paper, Instruments, Investment Property,
letters of credit for the benefit of the Borrower and/or AWI, and bankers'
acceptances held by the Borrower and/or AWI, 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, Subsidiary, or Affiliate, 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)(l), (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.
(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, governmental panel, or other
governmental body which has jurisdiction over such Person, or any property
of such Person.
(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.
"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
Eurodollar 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.
"REVOLVING CREDIT": Is defined in Section 2-1.
16
"REVOLVING CREDIT NOTE": Is defined in Section 2-8.
"REVOLVING CREDIT LOAN": A term of convenience which refers to so much of
the unpaid principal balance of the Loan Account as bears the same
rate of interest for the same Interest Period.
"SECURED L/Cs": L/Cs which have been secured in the manner provided
pursuant to Section 2-19 hereof.
"SELLER": Federated Specialty Stores, Inc., an Ohio corporation.
"SOURCING AGREEMENT": The Sourcing Agreement dated July 31,1998 by and
among Federated Department Stores, Inc., Specialty Acquisition Corp.
and the Borrower, as amended and in effect from time to time.
"STATED AMOUNT": The maximum amount for which an L/C may be honored.
"SUBORDINATED INDEBTEDNESS": Indebtedness the payment of principal and
interest of which is expressly subordinated in right of payment to
the Liabilities, in such form and on such terms (which may include
the payment of current interest until the occurrence, and during the
continuance, of a Suspension Event) as are reasonably acceptable to
the Lender.
"SUBSIDIARY": As to any Person, any corporation, association, partnership,
limited liability company, joint venture or other business entity of
which at least fifty percent (50%) or more of the ordinary voting
power (or equivalent interests) for the election of a majority of
the board of directors (or other equivalent governing body) of such
entity is held or controlled by such Person, or by one or more
Subsidiaries of such Person, or by such Person and one or more
Subsidiaries of such Person; or which is otherwise controlled by
such Person, or by one or more Subsidiaries of such Person, or by
such Person and one or more Subsidiaries of such Person through the
exercise of voting power or otherwise.
"SUPPORTING OBLIGATION": Has the meaning given that term in the UCC and
shall also refer to a Letter of Credit Right or secondary obligation
that supports the payment or performance of an Account, Chattel
Paper, a Document, a General Intangible, an Instrument or Investment
Property.
"SUSPENSION EVENT": Any occurrence, circumstance, or state of facts which
(a) is an Event of Default, which is continuing; 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 absolutely cured within any
applicable grace period.
"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 Lender to the Borrower, which notice sets
the Termination Date on account of the
17
occurrence of any Event of Default other than as described in
Section 10-12 hereof.
"TRANSACTION COSTS": Reasonable, non-recurring costs and expenses incurred
by the Borrower in connection with the consummation of a Permitted
Acquisition, including, without limitation, brokerage fees,
attorneys' fees, and investment banking fees.
"TRUST DEPOSIT ACCOUNTS": Depository accounts established by the Borrower
and/or AWI, the proceeds of which are to be utilized solely for the
payment of sales taxes, ad valorem taxes, withholding taxes and
other similar taxes, and other depository accounts established by
the Borrower and/or AWI for which the Borrower and/or AWI is a
trustee or other fiduciary for any other Persons.
"UCC": The Uniform Commercial Code as presently in effect in Massachusetts
(Mass. Gen. Laws, Ch. 106).
"UNREIMBURSED L/C OBLIGATIONS": Is defined in Section 2-1(b)(i)(D).
ARTICLE 2 - THE REVOLVING CREDIT:
2-1. Establishment of Revolving. Credit.
(a) The Lender hereby establishes a revolving line of credit (the
"REVOLVING CREDIT") in the Borrower's favor pursuant to which the Lender,
subject to, and in accordance with, this Agreement, shall make loans and
advances and otherwise provide financial accommodations to and for the account
of the Borrower as provided herein, up to the maximum amount of the Lender's
Dollar Commitment.
(b) As used herein, "AVAILABILITY" refers at any time to the
result of the following:
(I) The Loan Ceiling.
Minus
(II) The then unpaid principal balance of the Loan
Account.
Minus
(III) The then Stated Amount of all L/C's.
Minus
18
(IV) The then unpaid reimbursement obligations in
respect of L/Cs which have been drawn, but which
have not been repaid either by an advance under
the Revolving Credit in accordance with the
provisions of Section 2-17(e) hereof or otherwise
(the "Unreimbursed L/C Obligations").
(c) Intentionally Omitted.
(d) The proceeds of borrowings under the Revolving Credit shall be
used solely for working capital and general corporate purposes
of the Borrower and for its Capital Expenditures, all solely
to the extent permitted by this Agreement.
2-2. Intentionally Omitted.
2-3. Intentionally Omitted.
2-4. Risks of Value of Collateral. The Lender'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 Lender relative to the actual value of the asset in
question. All risks concerning the collectability of the Borrower's Accounts and
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 Lender in connection with the
making of loans, credits, and advances and the providing of financial
accommodations under the Revolving Credit.
2-5. 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 pursuant hereto, provided that:
(i) Availability will not be exceeded; and
(ii) The Revolving Credit has not been suspended as provided
in Section 2-(h).
(b) Requests for loans and advances under the Revolving Credit may
be requested by the Borrower in such manner as may from time to time be
reasonably acceptable to the Lender.
(c) 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 Lender notice no
later than the following:
19
(i) If such Revolving Credit Loan is or is to be converted
to a Base Margin Loan: By 1:00 PM on the Business Day on which the subject
Revolving Credit Loan is to be made or is to be so converted. Base Margin
Loans requested by the Borrower, other than those resulting from the
conversion of a Eurodollar Loan, shall not be less than $10,000.00 (or the
then Availability if less than $10,000.00).
(ii) If such Revolving Credit Loan is, or is to be continued
as, or converted to, a Eurodollar Loan: By 1:00 PM Two (2) Eurodollar
Business Days before the end of the then applicable Interest Period.
Eurodollar Loans and conversions to Eurodollar Loans shall each be not
less than $1,000,000.00 and in increments of $1,000,000.00 in excess of
such minimum.
(iii) Any Eurodollar Loan which matures while a Suspension
Event is extant shall be converted, at the option of the Lender to a Base
Margin Loan notwithstanding any notice from the Borrower that such Loan is
to be continued as a Eurodollar Loan.
(d) Any request for a Revolving Credit Loan or for the conversion
of a Revolving Credit Loan which is made after the applicable deadline there-
for, as set forth above, shall be deemed to have been made at the opening of
business on the then next Business Day or Eurodollar 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
reasonably acceptable to the Lender
(e) The Borrower may request that the Lender cause the issuance of
L/C's for the account of the Borrower as provided in Section 2-17.
(f) The Lender may rely on any request for a loan or advance, or
other financial accommodation under the Revolving Credit which the Lender, in
good faith, reasonably 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
Lender's being furnished with such documentation concerning that Person's
authority to act as may be reasonably satisfactory to the Lender.
(g) 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 to the Lender pursuant to this Agreement.
(ii) All or a portion of any loan or advance so requested
will be set aside by the Borrower to cover all of the Borrower's
obligations for sales tax on account of sales since the then most recent
borrowing pursuant to the Revolving Credit.
(iii) Each representation which is made herein or in any of
the Loan Documents (defined below) is then true and complete in all
material respects as of and as
20
if made on the date of such request (other than those which are as of a specific
date, in which case such representation was true and complete in all material
respects as of such date).
(iv) No Suspension Event is then extant.
(h) Upon the occurrence, and during the continuance, from time to
time of any Suspension Event:
(i) The Lender may suspend the Revolving Credit immediately.
(ii) The Lender shall not 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.
(iii) The Lender may suspend the right of the Borrower to
request any Eurodollar Loan or to convert any Base Margin Loan to a
Eurodollar Loan.
2-6. 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 Operating 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 Lender for the
amount thereof immediately) at the following:
(i) The Lender'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 Lender,
on account of:
(i) Any delay in the making of any loan or advance requested
under the Revolving Credit unless due to the Lender's gross negligence or
willful misconduct.
(ii) Any delay in the proceeds of any such loan or advance
constituting collected funds.
(iii) Any delay in the receipt, and/or any loss, of funds
which constitute
21
a loan or advance under the Revolving Credit, the wire transfer of which
was properly initiated by the Lender in accordance with wire instructions
provided to the Lender by the Borrower.
2-7. The Loan Account.
(a) An account ("LOAN ACCOUNT") shall be opened on the books of
the Lender. A record may be kept in the Loan Account of all loans made under or
pursuant to this Agreement and of all payments thereon.
(b) The Lender may also keep a record (either in the Loan Account
or elsewhere, as the Lender 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 Lender of the items giving rise to such credits. The amount
of any item credited against the Liabilities which is charged back against the
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.
(e) The Lender, without the request of the Borrower, may advance
under the Revolving Credit any interest, fee, service charge, or other payment
to which the 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 Availability's being exceeded. Such action on the part of the Lender
shall not constitute a waiver of the Lender's rights and Borrower's obligations
under Section 2-9(b). Any amount which is added to the principal balance of the
Loan Account as provided in this Section 2-7(e) shall bear interest, subject to
Section 2-10(f), at the Alternate Base Rate.
(f) Absent manifest error, any statement rendered by the 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 Lender with written objection thereto within sixty (60)
days from the receipt of such statement, which written objection shall indicate,
with particularity, the reason for such objection. The Loan Account and the
Lender'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.
2-8. 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 2-8,
annexed hereto, executed by the Borrower. 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, upon receipt of an indemnification with respect to the lost
Revolving Credit Note from the Lender in form and substance reasonably
satisfactory to the
22
Borrower and the Lender, the Borrower shall execute a replacement thereof and
deliver such replacement to the Lender.
2-9. 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. Such
payments shall be applied first to Base Margin Loans and only then to Eurodollar
Loans.
(b) The Borrower, without notice or demand from the Lender, shall
pay the Lender that amount, from time to time, which is necessary so that the
unpaid balance of the Loan Account does not exceed Availability. Such payments
shall be applied first to Base Margin Loans and only then to Eurodollar Loans.
(c) Subject to the provisions of Section 7-5(b)(v) hereof, the
Lender shall endeavor to cause those applications of payments (if any), pursuant
to Sections 2-9(a) and 2-9(b) against Eurodollar Loans then outstanding in such
manner as results in the least cost to the Borrower, but shall not have any
affirmative obligation to do so nor liability on account of the Lender's failure
to have done so. In no event shall action or inaction taken by the Lender excuse
the Borrower from any indemnification obligation under Section 2-9(e).
(d) The Borrower shall repay the then entire unpaid balance of the
Loan Account and all other Liabilities on the Termination Date.
(e) The Borrower shall indemnify the Lender and hold the Lender
harmless from and against any loss, cost or expense (excluding loss of
anticipated profits) which the Lender may sustain or incur (including, without
limitation, by virtue of acceleration after the occurrence of any Event of
Default) as a consequence of the following:
(i) Default by the Borrower in payment of the principal
amount of or any interest on any Eurodollar Loan as and when due and
payable, including any such loss or expense arising from interest or fees
payable by the Lender to lenders of funds obtained by it in order to
maintain its Eurodollar Loans.
(ii) Default by the Borrower in making a borrowing or
conversion after the Borrower has given (or is deemed to have given) a
request for a Revolving Credit Loan or a request to convert a Revolving
Credit Loan from one applicable interest rate to another.
(iii) The making of any payment on a Eurodollar Loan or the
making of any conversion of any such Loan to a Base Margin Loan on a day
that is not the last day of the applicable Interest Period with respect
thereto, including interest or fees payable by the Lender to lenders of
funds obtained by it in order to maintain any such Loans as "breakage
fees" (so-called).
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2-10. Interest Rates.
(a) Each Revolving Credit Loan shall bear interest at the Alternate Base
Rate unless timely notice is given (as provided in Section 2-5(a)) that the
subject Revolving Credit Loan (or a portion thereof) is, or is to be converted
to, a Eurodollar Loan.
(b) Each Revolving Credit Loan which consists of a Eurodollar Loan
shall bear interest at the applicable Eurodollar Rate.
(c) Subject to the provisions hereof, the Borrower, by notice to
the Lender, may cause all or a part of the unpaid principal balance of the Loan
Account to bear interest at the Alternate Base Rate or the Eurodollar Rate as
specified from time to time by the Borrower.
(d) The Borrower shall not select, renew, or convert any interest
rate for a Revolving Credit Loan such that, in addition to interest at the
Alternate Base Rate, there are more than Six (6) Eurodollar Rates applicable to
the Revolving Credit Loans at any one time.
(e) The Borrower shall pay accrued and unpaid interest on each
Revolving Credit Loan in arrears as follows:
(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
Lender.
(f) Following the occurrence, and during the continuance, of any
Default Interest Event (and whether or not the Lender exercises the Lender's
rights on account thereof), all Revolving Credit Loans shall bear interest, at
the option of the Lender, at a rate which is the aggregate of the interest rate
then in effect plus two percent (2%) per annum.
2-11. Commitment Fee. As compensation for the commitment of the Lender to
make loans and advances to the Borrower and as compensation for the Lender's
maintenance of sufficient funds available for such purpose, the Lender has
earned a COMMITMENT FEE (so referred to herein) in the sum of $62,500, which
Commitment Fee shall be fully earned and paid on the Effective Date.
2-12. Intentionally Omitted.
2-13. Line (Unused) Fee. In addition to any other fee paid by the Borrower
on account of the Revolving Credit, the Borrower shall pay the Lender a LINE
(UNUSED) FEE (so referred to herein) in arrears, on the first day of each month
(and on the Termination Date). The Line (Unused) Fee shall be equal to 0.375%
per annum of the difference during the month just ended (or relevant period with
respect to the payment being made on the Termination Date)
24
between the Loan Ceiling and the average unused portion of the Revolving Credit
(including, for purposes hereof, the average Stated Amount of Outstanding L/Cs
during such period) during such period.
2-14. Early Termination Fee.
In the event that the Termination Date occurs, for any reason prior
to the Maturity Date, the Borrower shall pay the Lender, the EARLY TERMINATION
FEE (so referred to herein) determined and payable as follows:
TERMINATION DATE FEE
- ---------------- ---
SEPTEMBER 30, 2003 THROUGH SEPTEMBER 30, 2004 1.0% OF THE COMMITMENT
OCTOBER 1, 2004 THROUGH MARCH 30, 2005 0.50% OF THE COMMITMENT
FROM AND AFTER MARCH 31, 2005 0
2-15. Concerning Fees.
The Borrower shall not be entitled to any credit, rebate or
repayment of the Commitment Fee, Line (Unused) Fee, Early Termination Fee, or
other fee previously earned by the Lender pursuant to this Agreement
notwithstanding any termination of this Agreement or suspension or termination
of the Lender's obligation to make loans and advances hereunder.
2-16. Lender's Discretion.
Each reference in the Loan Documents to the exercise of discretion
or the like by the Lender shall be to its exercise of its reasonable judgement,
in good faith, based upon the Lender's consideration of any such factor as the
Lender reasonably deems appropriate.
2-17. Procedures For Issuance of L/C's.
(a) The Borrower may request that the Lender 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 Lender.
(b) The Lender will endeavor to 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 2-5(h) and if
so issued:
(i) The aggregate Stated Amount of all L/C's then
outstanding, does not exceed Fifteen Million Dollars and No Cents
($15,000,000.00).
25
(ii) The expiry of the L/C is not later than the
Maturity Date.
(iii) Availability would not be exceeded.
(iv) Intentionally Omitted.
(c) The Borrower shall execute such documentation to apply for
and support the issuance of an L/C as may be reasonably required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Lender on account of
(i) Any delay 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 Borrower shall reimburse the Issuer for the amount of
any drawing under an L/C on the same Business Day of such drawing. The Lender,
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 Availability's
being exceeded. Such action shall not constitute a waiver of the Lender's rights
under Section 2-9(b) hereof.
2-18. Fees For L/C's.
(a) The Borrower shall pay to the Lender a fee, on account of L/C's,
the issuance of which had been procured by the Lender, monthly in arrears, and
on the Termination Date and on the End Date, equal to 1.50% 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 2-18(a), above, the Borrower shall pay to the Lender (or to the
Issuer, if so requested by Lender), 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.
2-19. Cash Collateralization of L/Cs. (a) With respect to L/Cs with a
scheduled expiry after the Maturity Date, thirty (30) days prior to the Maturity
Date, and
(b) with respect to all L/Cs, upon the Lender's request after the occurrence,
and during the continuance, of any Event of Default hereunder,
the Borrower shall deposit in an account with the Lender, an amount in cash
equal to 103% of the
26
then Stated Amount of all outstanding L/Cs. Such deposit shall be held by the
Lender as collateral for the payment and performance of the Liabilities. The
Lender shall have the exclusive dominion and control over such account. Such
deposits shall not bear interest. Monies in such account shall be automatically
applied by the Lender to reimburse the Issuer for any honoring of any L/Cs,
together with any other amounts owed to the Issuer, and after all L/Cs have been
so reimbursed or otherwise expired, any remaining balance shall be applied in
reduction of the Liabilities. In lieu of depositing such cash with the Lender
the Borrower may furnish the Lender, with a so-called "back-to-back" letter of
credit in form and substance and issued by a bank reasonably satisfactory to the
Lender in its sole and absolute discretion, in an amount equal to 103 percent of
the then Stated Amount of all outstanding L/Cs. Drawings under such "back-
to-back" letters of credit shall be applied by the Lender to the Liabilities in
the manner set forth above with respect to the cash collateral account. If no
Event of Default then exists, the cash collateral deposited with the Lender and
or the amount of the "back-to-back" letters of credit may be reduced by an
amount equal to any reduction from time to time in the Stated Amount of all
outstanding L/Cs (other than on account of drawings thereunder).
2-20. 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, except
to the extent that such Issuer, Issuer's correspondents, or advising,
negotiating, or paying bank has actual knowledge of any of the
foregoing.
(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
27
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).
Neither the 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, except for their gross
negligence or willful misconduct.
(e) The 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, the 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 Lender, any 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 2-20(g)(i) or 2-20(g)(ii),
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 Lender
and delivery by the Lender 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 Lender, from time to time as specified by the Lender,
such amounts as shall be sufficient to compensate such Issuer for such increased
cost; provided that the Borrower shall not be obligated to make payment of such
amounts which arise from transactions which occurred more than ninety (90)
Business Days prior to the Lender's furnishing notice hereunder. Any Issuer's
determination of costs incurred under Section 2-20(g)(i) or 2-20(g)(ii), 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, absent manifest error.
(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
28
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.
2-21. Changed Circumstances.
(a) The Lender may give the Borrower notice of the occurrence
of the following:
(i) The Lender shall have determined in good faith
(which determination shall be final and conclusive) on any day on which
the rate for a Eurodollar Loan would otherwise be set, that adequate
and fair means do not exist for ascertaining such rate.
(ii) The Lender shall have determined in good faith
(which determination shall be final and conclusive) that:
(A) The continuation of or conversion of any
Revolving Credit Loan to a Eurodollar Loan has been made
impracticable or unlawful by the occurrence of a contingency
that materially and adversely affects the applicable market or
compliance by the 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
Eurodollar Loans are based shall no longer represent the
effective cost to the Lender for U.S.dollar deposits in the
interbank market for deposits in which it regularly
participates.
(b) In the event that the Lender gives the Borrower notice of
an occurrence described in Section 2-21(a), then, until the Lender notifies the
Borrower that the circumstances giving rise to such notice no longer apply:
(i) The obligation of the Lender to make Eurodollar
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.
29
(ii) Any notice which the Borrower had given the Lender with
respect to any Eurodollar Loan, the time for action with respect to which
has not occurred prior to the Lender's having given notice pursuant to
Section 2-21(a), shall be deemed to be a request for a Base Margin Loan.
(c) Notwithstanding the foregoing, the Lender agrees to use its
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic or regulatory manner) to
designate a different lending office if the making of such designation would
allow the Lender or its lending office to continue to make Eurodollar Loans.
2-22. Increased Costs. If there is adopted after the date hereof any
requirement of law, or if there is any new interpretation or application of any
law after the date hereof 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 the 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 Lender under this
Agreement (except for taxes on the Lender's overall net income or capital
imposed by the jurisdiction in which the Lender's principal or lending
offices are located or in which the Lender is organized);
(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 the Lender;
(c) imposes on the Lender any other condition with respect to any
Loan Document; or
(d) imposes on the Lender a requirement to maintain or allocate
capital in relation to the Liabilities;
and the result of any of the foregoing, in the Lender's reasonable opinion, is
to increase the cost to the Lender of making or maintaining any loan, advance or
financial accommodation or to reduce the income receivable by the Lender in
respect of any loan, advance or financial accommodation by an amount which the
Lender deems to be material, then upon the Lender's giving written notice
thereof 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 forthwith pay to the Lender, upon receipt of such
notice, that amount which shall compensate the Lender for such additional cost
or reduction in income, provided that the Borrower shall not be obligated to
make payment of such amounts which arise from transactions which occurred more
than ninety (90) Business Days prior to the Lender's furnishing notice
hereunder.
Notwithstanding the foregoing, the Lender agrees to use its reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic or regulatory manner) to
designate a different lending office if the making of such designation would
allow the
30
Lender or its lending office to avoid the imposition of such increased costs.
2-23. Lender's Commitments.
(a) The Dollar Commitments, Commitment Percentages, and identities
of the Lenders (but not the overall Commitment) may be changed, from time to
time by the assignment of Dollar Commitments and Commitment Percentages with
other Persons who determine to become "Lenders", provided, however, that
(i) Unless an Event of Default has occurred and is
continuing (in which event, no consent of the Borrower is required) any
assignment (other than an assignment to a then 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 Lender with
written objection, not more than five (5) Business Days after the Lender
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) No such assignment shall be in an amount less than Ten
Million Dollars ($10,000,000.00), or, if less, the total Dollar Commitment
of such assigning Lender.
(b) Upon written notice given the Borrower from time to time by
the Lender, of any assignment or allocation referenced in Section 2-23(c):
(i) The Borrower shall execute replacement 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 Lender (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 Lender, in lieu of
causing the Borrower to execute one or more new Revolving Credit Notes,
may issue the Lender'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.
(iii) The Borrower shall maintain a register identifying the
Lenders from time to time.
31
(c) Intentionally Omitted.
2-24. Intentionally Omitted.
ARTICLE 3 - CONDITIONS PRECEDENT:
(a) 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 on the Initial Closing Date, each of the documents respectively described
in Sections 3-1 through and including 3-4, (each in form and substance
reasonably satisfactory to the Lender) shall have been delivered to the Lender,
and the conditions respectively described in Sections 3-5 through and including
3-15, shall have been satisfied:
3-1. Corporate Due Diligence.
(a) A Certificate of corporate good standing issued by the
Secretary of State of Delaware.
(b) Certificates of due qualification, in good standing, issued by
the Secretary(ies) of State of each State in which the nature of the Borrower's
business conducted or assets owned would reasonably be expected to require such
qualification.
(c) A Certificate of the Borrower'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 Borrower in form and substance
reasonably satisfactory to the Lender.
3-3. Additional Documents. Such additional instruments and documents as
the Lender or its counsel reasonably may require or request.
3-4. Officers' Certificates. Certificates executed by the President and
the Chief Financial Officer of the Borrower and stating that the representations
and warranties made by the Borrower to the Lender 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.
3-5. Representations and Warranties. Each of the representations made by
or on behalf of the Borrower 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 Borrower shall be true and complete in all material respects as
of the date as of which such representation or warranty was made.
3-6. Intentionally Omitted.
32
3-7. All Fees and Expenses Paid. All fees due at or immediately after the
first funding under the Revolving Credit and all costs and expenses reasonably
incurred by the Lender in connection with the establishment of the credit
facility contemplated hereby (including the reasonable fees and expenses of
counsel to the Lender) shall have been paid (to the extent then invoiced).
3-8 Intentionally Omitted.
3-9. Borrower's Assets. The Lender shall have received a copy of the
results of the Borrower's most recent physical inventory and such results shall
be reasonably satisfactory to the Lender. In addition, the Lender shall be
reasonably satisfied that the inventory of the Borrower is located at such
places or is in transit to the Borrower and is in the amounts and of the quality
and value previously represented by the Borrower to the Lender and the Lender
shall have received such reports, material and other information concerning the
inventory and the Borrower's suppliers as shall reasonably satisfy the Lender in
its sole discretion.
3-10. Lien Search. The Lender shall have received results of searches or
other evidence satisfactory to the Lender (in each case dated as of a date
reasonably satisfactory to the Lender) indicating the absence of liens on the
assets of the Borrower, except for Permitted Encumbrances and liens for which
termination statements and releases reasonably satisfactory to the Lender are
being tendered concurrently with the establishment of the Revolving Credit.
3-11. Perfection of Collateral. The Lender shall have filed all such
financing statements and given all such notices as may be necessary for the
Lender to perfect its security interest in such of the Collateral as to which
the Lender determines to perfect its security interests and to assure its first
priority status (subject only to Permitted Encumbrances).
3-12. Insurance. The Lender shall be reasonably satisfied with the
Borrower's insurance arrangements and shall have received all documentation
requested in connection with such insurance including, documentation naming the
Lender as "loss payee" under each policy (except with respect to the key man
life insurance policies, the proceeds of which shall be utilized solely for
funding stock repurchases from deceased Management.
3-13. Sourcing Agreement. The Sourcing Agreement with Federated Department
Stores, Inc. shall be in full force and effect, and said Federated Department
Stores, Inc. and each of the Borrower's customs brokers shall have entered into
such agreements with the Lender as the Lender may reasonably require.
3-14. No Suspension Event. No Suspension Event shall then exist.
3-15. No Adverse Change. No event shall have occurred or failed to occur,
which occurrence or failure reasonably would be expected to have a Material
Adverse Effect.
(b) This Agreement shall not be effective until each of the following
conditions precedent have been fulfilled to the satisfaction of the Lender:
3-16. Execution and Delivery of Agreement. This Agreement shall have been
duly
33
executed and delivered by the parties hereto, and shall be in full force and
effect and shall be in form and substance satisfactory to the Lender.
3-17. Corporate Action. All action on the part of the Borrower and AWI
necessary for the valid execution, delivery and performance by the Borrower and
AWI of this Agreement and all other documentation, instruments, and agreements
to be executed in connection herewith shall have been duly and effectively taken
and evidence thereof satisfactory to the Lender shall have been provided to the
Lender.
3-18. All Fees and Expenses Paid. All fees due under this Agreement,
including, without limitation, the Commitment Fee, and all costs and expenses
incurred by the Lender in connection with the establishment of the credit
facility contemplated hereby (including the fees and expenses of counsel to the
Lender) shall have been paid in full.
3-19. No Suspension Event. No Suspension Event shall be then occurring.
3-20. Termination of Commitments of Existing Lenders. The Commitments of
all lenders under the Existing Loan Agreement (other than the Lender) shall have
been terminated and such lenders shall have executed and delivered such
documents in connection therewith to the Lender as the Lender may reasonably
request.
3-21. Further Assurances. The Borrower and AWI shall have executed and
delivered to the Lender such other documents, instruments, and agreements as may
be required by the Lender.
3-22. Continued Satisfaction of Conditions Precedent. All conditions
precedent to the Initial Closing Date shall continue to have been satisfied.
No document shall be deemed delivered to the Lender until received and accepted
by the Lender at its head offices in Boston, Massachusetts. Under no
circumstances will this Agreement take effect until executed and accepted by the
Lender at said head office.
ARTICLE 4 - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
To induce the 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 Borrower 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.
34
4-2. Due Organization - Corporate Authorization - No Conflicts.
(a) The Borrower and AWI each presently is and shall hereafter
remain in good standing as a Delaware corporation and each 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 or AWI's assets or
operation of the Borrower's or AWI's business, such qualification is necessary,
except where the failure to so qualify would not have a Material Adverse Effect.
(b) Each Related Entity as of the date hereof is listed on EXHIBIT
4-2, annexed hereto. Each Subsidiary 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 reasonably be expected to have
a Material Adverse Effect. The Borrower shall provide the Lender with prior
written notice of any entity's becoming or ceasing to be a Related Entity.
(c) Neither the Borrower nor AWI shall change its State of
incorporation nor its taxpayer identification number.
(d) Each of the Borrower and AWI has all requisite corporate power
and authority to execute and deliver all Loan Documents to which the Borrower or
AWI is a party and has and will hereafter retain all requisite corporate power
to perform all Liabilities.
(e) The execution and delivery by the Borrower and AWI of each
Loan Document to which it is a party; the Borrower's and AWI's consummation of
the transactions contemplated by such Loan Documents (including, without
limitation, the creation of security interests by the Borrower and AWI as
contemplated hereby); the Borrower's and AWI'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 Borrower or
AWI.
(iii) Will not result in the creation or imposition of, or the
obligation to create or impose, any Encumbrance upon any assets of the
Borrower or AWI pursuant to any Requirement of Law or obligation, except
pursuant to the Loan Documents.
(f) The Loan Documents have been duly executed and delivered by
Borrower and AWI and are the legal, valid and binding obligations of the
Borrower and AWI, enforceable against the Borrower and AWI in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
application relating to or affecting the rights and remedies of creditors
generally and except as the remedy of specific performance or injunctive relief
is subject to the discretion of the court before which any proceeding therefor
may be brought.
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4-3. Trade Names.
(a) EXHIBIT 4-3, annexed hereto, is a listing of:
(i) All names under which the Borrower and AWI conducted its
business within the past five (5) years.
(ii) All entities and/or persons with whom the Borrower and AWI
consolidated or merged within the past five (5) years, or from whom the
Borrower and AWI, within the past five (5) years, acquired in a single
transaction or in a series of related transactions substantially all of
such entity's or person's assets.
(b) Neither the Borrower nor AWI will change its name or conduct
its business under any name not listed on EXHIBIT 4-3 except (i) upon not less
than twenty-one (21) days prior written notice (with reasonable particularity)
to the Lender and (ii) in compliance with all other provisions of this
Agreement.
4-4. Intellectual Property.
(a) The Borrower and AWI each owns and possesses, or has 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 the
Borrower's and AWI's conduct of their respective business.
(b) The conduct by the Borrower and AWI of their respective
business does not presently infringe in any manner which could reasonably be
expected to have a Material Adverse Effect (nor will the Borrower or AWI conduct
its business in the future so as to infringe in any manner which could
reasonably be expected to have a Material Adverse Effect) 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
and AWI pertaining thereto, are kept and maintained solely at, or in transit to
and from, the Borrower's or AWI's chief executive offices at
(i) 1372 Broadway, New York, New York 10020
(i) 201 Willowbrook Blvd., Wayne, New Jersey 07470
(i) those locations which are listed on EXHIBIT 4-5 annexed
hereto, as such EXHIBIT may be amended from time to time, which EXHIBIT
includes, with respect to each such location, the name and address of the
landlord on the Lease which
36
covers such location (or an indication that the Borrower or AWI owns
the subject location) and of all service bureaus with which any such
records are maintained.
(b) Neither the Borrower nor AWI shall remove any of the
Collateral from said chief executive office or those locations listed on
EXHIBIT 4-5 except:
(i) to accomplish sales of Inventory in the ordinary course
of business; or
(ii) to move Inventory, Equipment and other assets from one
such location to another such location; or
(iii) to utilize such of the Collateral as is removed from
such locations in the ordinary course of business (such as motor
vehicles).
(iv) to accomplish other dispositions permitted pursuant
to Section 4-12(d) hereof.
(v) otherwise upon thirty (30) days prior written notice to
the Lender.
(c) Except (i) with respect to Inventory delivered to a processor
for finishing, (ii) with respect to Inventory in transit, and (iii) as otherwise
disclosed pursuant to, or permitted by, this Section 4-5, no tangible personal
property of the Borrower or AWI is in the care or custody of any third party or
stored or entrusted with a bailee or other third party and none shall hereafter
be placed under such care, custody, storage, or entrustment.
4-6. Title to Assets.
(a) Each of the Borrower and AWI is, and shall hereafter remain,
the owner of, or holder of subsisting license or leasehold rights in and to, the
Collateral free and clear of all Encumbrances with the exceptions of the
following (the "PERMITTED ENCUMBRANCES"):
(i) Encumbrances in favor of the Lender.
(ii) Those Encumbrances (if any) listed on EXHIBIT 4-6,
annexed hereto.
(iii) Purchase money security interests in Equipment to secure
Indebtedness otherwise permitted hereby.
(iv) Encumbrances for taxes, governmental assessments or
charges in the nature of taxes not yet due or which are being contested in
good faith by appropriate proceedings as to which adequate reserves are
maintained on the books of the Borrower or AWI in accordance with GAAP.
37
(v) Encumbrances in respect of property or assets of the
Borrower or AWI imposed by law, which were incurred in the ordinary course
of business, such as carriers', warehousemen's, customs broker's,
materialmen's, repairmen's, and mechanics' liens and other similar
Encumbrances, in each case in respect of obligations not overdue for a
period of more than thirty (30) days or which are being contested in good
faith by appropriate proceedings.
(vi) Utility deposits and pledges or deposits in connection
with worker's compensation, unemployment insurance and other social
security legislation.
(vii) Encumbrances arising under Capital Leases.
(viii) Encumbrances resulting from the sale, transfer and
assignment of retail Accounts to credit card processors.
(ix) Deposits to secure the performance of bids, tenders,
trade contracts (other than for borrowed money), leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business,
all to the extent such obligations are otherwise permitted hereunder.
(x) Encumbrances on Equipment of a Person which becomes a
Subsidiary after the date hereof pursuant to, and Equipment acquired in
connection with, a Permitted Acquisition, provided that (A) such
Encumbrances existed at the time such Person became a Subsidiary or such
Equipment was acquired and were not created in anticipation of the
acquisition, and (B) any such Encumbrance does not cover any other assets
of such Person after it became a Subsidiary or any other assets of the
Borrower or AWI after such Equipment was acquired, and (C) such
Encumbrance does not secure any Indebtedness other than Indebtedness
existing immediately prior to the time such Person became a Subsidiary or
the time of such acquisition.
(xi) Encumbrances consisting of the right of setoff of a
customary nature or bankers' liens on amounts on deposit incurred in the
ordinary course of business.
(xii) Encumbrances on goods in favor of customs and revenue
authorities which secure the payment of customs duties in connection with
the importation of such goods, which obligations are not overdue.
(xiii) Encumbrances constituting precautionary filings by
lessors and bailees with respect to assets which are leased or entrusted
to the Borrower or AWI but in which assets the Borrower or AWI has mere
possessory rights.
(xiv) Encumbrances arising from judgments which do not result
in an Event of Default under Section 10-10 hereof.
(b) Neither the Borrower nor AWI has or shall have possession of
any property on consignment to the Borrower or AWI.
38
(c) Neither the Borrower nor AWI shall 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 merely incidental to the conduct of
the Borrower's or AWI's business.
(ii) Equipment, the acquisition or right to use of which has
been consented to by the Lender, which consent may be conditioned upon the
Lender's receipt of such agreement with the third party which has an
interest in such Equipment as is satisfactory to the Lender.
(iii) Equipment, the acquisition of which is permitted
pursuant to Section 4-7(c) hereof or which is the subject of an operating
lease (but not Capital Leases).
4-7. Indebtedness. Neither the Borrower nor AWI has or shall 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) Capital Lease obligations and purchase money Indebtedness not
to exceed the aggregate principal amount outstanding in excess of
$15,000,000.00, and extensions, renewals and refinancings thereof on terms
no less favorable in any material respect to the Borrower and AWI than the
Indebtedness or Capital Lease being refinanced.
(d) Subordinated Indebtedness.
(e) Other Indebtedness not to exceed $15,000,000.00 outstanding at
any time.
4-8. Insurance Policies.
(a) EXHIBIT 4-8, annexed hereto, is a schedule of all material
insurance policies owned by the Borrower and AWI or under which the Borrower or
AWI is the named insured as of the date hereof (excluding key man life insurance
policies, the proceeds of which shall be utilized to fund Management stock
repurchases as permitted hereunder). Each of such policies is in full force and
effect. None of the issuer (to the Borrower's knowledge) of any such policy, the
Borrower or AWI is in default or violation of any such policy.
(b) The Borrower and AWI 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 Lender. The coverage reflected on EXHIBIT 4-8 presently
satisfies the foregoing requirements, it being recognized by the Borrower and
AWI, however, that such requirements may change hereafter to reflect changing
circumstances. All insurance carried by the Borrower and AWI shall provide for a
39
minimum of sixty (60) days' written notice of cancellation to the Lender and all
such insurance which covers the Collateral shall include an endorsement in favor
of the Lender, as loss payee and additional insured, which endorsement shall
provide that the insurance, to the extent of the Lender's interest therein,
shall not be impaired or invalidated, in whole or in part, by reason of any act
or neglect of the Borrower or AWI or by the failure of the Borrower or AWI to
comply with any warranty or condition of the policy. In the event of the failure
by the Borrower or AWI to maintain insurance as required herein, the Lender, at
its option, may obtain such insurance, provided, however, the Lender's obtaining
of such insurance shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrower's or AWI's failure to have maintained such insurance.
The Borrower and AWI shall furnish to the Lender certificates or other evidence
satisfactory to the Lender regarding compliance by the Borrower and AWI with the
foregoing insurance provisions.
(c) After the occurrence, and during the continuance, of an Event
of Default, the Borrower and AWI shall each advise the Lender of each claim made
by the Borrower or AWI, as applicable, under any policy of insurance which
covers the Collateral and will permit the Lender, at the Lender's option in each
instance, to the exclusion of the Borrower and AWI, to conduct the adjustment of
each such claim. The Borrower and AWI each hereby appoints the Lender as the
Borrower's and AWI's attorney in fact, exercisable after the occurrence, and
during the continuance, of an Event of Default, to obtain, adjust, settle, and
cancel any insurance described in this section and to endorse in favor of the
Lender 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 Lender. The Lender shall not be liable on account of any exercise
pursuant to said power except for any exercise in actual willful misconduct and
bad faith. The Lender may apply any proceeds of such insurance against the
Liabilities, whether or not such have matured, in such order of application as
the Lender may determine.
4-9. Licenses. Each material license, distributorship, franchise, and
similar agreement issued to, or to which the Borrower or AWI is a party is in
full force and effect. To the Borrower's knowledge, no party to any such license
or agreement is in default or violation thereof. Neither the Borrower nor AWI
has received any notice or threat 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 (other than Capital Leases the total obligations under
which do not aggregate more than $100,000). EXHIBIT 4-5 includes a list of all
other presently effective Leases. Each of such Leases and Capital Leases
presently is in full force and effect. As of the date hereof, no party to any
such Lease or Capital Lease is in default or violation in any material respect
of any such Lease or Capital Lease (for which the Borrower has not received an
indemnification from the Seller) and neither the Borrower nor AWI has received
any notice or threat of cancellation of any such Lease or Capital Lease. The
Borrower and AWI each hereby authorizes the Lender 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 Borrower's or AWI's landlords in order to confirm the
Borrower's and AWI's continued compliance with the terms and conditions of the
Lease(s) between the Borrower or AWI, as applicable, and that landlord and to
discuss such issues, concerning the Borrower's or AWI's occupancy under such
Lease(s), as the Lender may determine.
4-11. Requirements of Law. The Borrower and AWI each is in compliance
with, and shall hereafter comply with and use its respective assets in
compliance with, all Requirements of Law, except to the extent that such
non-compliance would not reasonably be expected to have a
40
Material Adverse Effect. Neither the Borrower nor AWI has received any notice of
any material violation of any Requirement of Law, which violation has not been
cured or otherwise remedied.
4-12. Maintain Properties. The Borrower and AWI each 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) as long as no Event of Default exists or would arise as
a result thereof, 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
and AWI.
(iii) The surrender, disposition, or expiration of Collateral
(such as trademarks and copyrights) no longer used or useful for the
conduct of the Borrower's or AWI's business in the ordinary course.
(iv) The turning over to the Lender of all Receipts as
provided herein.
(v) The transfer, sale and assignment of retail Accounts to
credit card processors.
4-13. Pay Taxes/Tax Shelter Regulations.
(a) Except as disclosed on EXHIBIT 4-13, (i) all tax returns
(federal, state, local or foreign) that relate to or include the Borrower or AWI
and that are due on or before the date hereof, taking into account any
extensions for the filing thereof, have been or will be prepared and timely
filed in accordance in all material respects with applicable Requirements of
Law, (ii) all such tax returns are or will be correct and complete insofar as
they relate to the Borrower, and (iii) all taxes (federal, state, local or
foreign) for which the Borrower or AWI may be liable that are due (whether or
not shown on any tax return) have been or will be paid in full.
(b) The Borrower and AWI each has, and hereafter shall: pay, as
they become due and payable, all taxes and unemployment contributions and other
charges of any kind or
41
nature levied, assessed or claimed against the Borrower, AWI, or the Collateral
by any person or entity whose claim could result in an Encumbrance upon any
asset of the Borrower or AWI or by any governmental authority, except to the
extent such taxes are being contested by the Borrower or AWI in good faith, and
adequate reserves are being maintained therefor on the Borrower's or AWI's books
in accordance with GAAP; properly exercise any trust responsibilities imposed
upon the Borrower or AWI by reason of withholding from employees' pay or by
reason of the Borrower's or AWI'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 the Borrower or AWI, and timely file all tax and other returns
and other reports with each governmental authority to whom the Borrower or AWI
is obligated to so file, in each case, taking into account any applicable
extension periods.
(c) At its option, after the occurrence, and during the
continuance, of a Suspension Event, the Lender may, but shall not be obligated
to, pay any taxes, unemployment contributions, and any and all other charges
levied or assessed upon the Borrower, AWI, or the Collateral by any person or
entity or governmental authority, and make any contributions or other payments
on account of the Borrower's or AWI's Employee Benefit Plan as the Lender, in
the Lender'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
Lender's making of any such payment shall not constitute a cure or waiver of any
Event of Default occasioned by the Borrower's or AWI's failure to have made such
payment.
(d) The Borrower does not intend to treat the Revolving Credit and
the L/Cs and the transactions related thereto as being "reportable
transactions" (within the meaning of Treasury Regulation Section 1.6011-4). In
the event the Borrower determines to take any action inconsistent with such
intention, it will promptly notify the Lender thereof. If the Borrower so
notifies the the Lender, the Borrower acknowledges that the Lender may treat the
Revolving Credit and/or its interest in the L/Cs as part of a transaction that
is subject to Treasury Regulation Section 301.6112-1, and the Lender, will
maintain the lists and other records required by such Treasury Regulation.
4-14. No Margin Stock. Neither the Borrower nor AWI is engaged in the
business of extending credit for the purpose of purchasing or carrying any
margin stock (within the meaning of Regulations U,T, and X of the Board of
Governors of the Federal Reserve System of the United States). 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. From and after the date hereof, none of the Borrower, AWI nor
any ERISA Affiliate shall, in any manner which could reasonably be expected to
have a Material Adverse Effect:
(a) Fail to comply in all material respects with any Employee
Benefit Plan.
(b) Fail timely to file all reports and filings required by ERISA
to be filed by the Borrower or AWI.
(c) Engage in any non-exempt "prohibited transactions" (as
described in
42
ERISA).
(d) Engage in, or commit, any act such that a tax or penalty could
be imposed upon the Borrower or AWI on account thereof pursuant to ERISA.
(e) Accumulate any material funding deficiency within the meaning
of Section 302 of ERISA.
(f) Terminate any Employee Benefit Plan such that a lien could be
asserted against any assets of the Borrower or AWI on account thereof pursuant
to ERISA.
(g) 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)(3) of ERISA.
4-16. Hazardous Materials.
(a) Other than matters that could not reasonably be expected to
have a Material Adverse Effect, neither the Borrower nor AWI has ever:
(i) Been legally responsible for any release or threat of
release of any Hazardous Material.
(ii) Received notification of any release or threat of
release of any Hazardous Material from any site or vessel occupied or
operated by the Borrower or AWI 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 Borrower and AWI each shall:
(i) Dispose of any Hazardous Material only in compliance
with all Environmental Laws, except for dispositions which could not
reasonably be expected to have a Material Adverse Effect.
(ii) Not store on any site or vessel occupied or operated by
the Borrower or AWI and not transport or arrange for the transport of any
Hazardous Material, except if such storage or transport is in the ordinary
course of the Borrower's or AWI's business and is in compliance with all
Environmental Laws or could not reasonably be expected to have a Material
Adverse Effect.
(c) The Borrower or AWI shall provide the Lender with written
notice upon the Borrower's or AWI'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 the Borrower or AWI may be liable, other than expense or loss
that could not reasonably be expected to have a Material Adverse Effect.
43
4-17. Litigation. Except as described in EXHIBIT 4-17, annexed hereto,
there is not presently pending or threatened by or against the Borrower or AWI
any suit, action, proceeding, or investigation which, if determined adversely to
the Borrower or AWI, would have a material adverse effect upon the Borrower's or
AWI's financial condition or ability to conduct its business as such business is
presently conducted or is contemplated to be conducted in the foreseeable
future.
4-18. Dividends or Investments. Neither the Borrower nor AWI shall:
(a) Intentionally Omitted.
(b) Intentionally Omitted.
(c) Except as provided in Section 4-25 or with respect to Permitted
Acquisitions, invest in or purchase any stock or securities or rights to
purchase any such stock or securities, of any corporation or other entity.
(d) Merge or consolidate or be merged or consolidated with or into
any other corporation or other entity, other than (i) the merger of any of the
Borrower's Subsidiaries with and into the Borrower, and (ii) in connection with
any Permitted Acquisitions.
(e) Consolidate any of the Borrower's or AWL'S operations with those
of any other corporation or other entity, except in connection with any
Permitted Acquisition.
(f) Organize or create any Subsidiary, other than in connection with
a Permitted Acquisition and only if (i) such Subsidiary guarantees the repayment
of the Liabilities and (ii) such Subsidiary grants the Lender a first priority
Encumbrance (subject to Permitted Encumbrances) on all of its assets, all of the
foregoing satisfactory in form and substance to the Lender.
(g) Subordinate any debts or obligations owed to the Borrower or AWI
by any third party to any other debts owed by such third party to any other
Person.
(h) Acquire any assets other than Permitted Acquisitions, by the
making of Capital Expenditures to the extent permitted hereunder, and other than
in the ordinary course and conduct of the Borrower's and AWI's business
permitted under Section 4-21 hereof.
4-19. Loans. Neither the Borrower nor AWI shall 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 or AWI's suppliers in
the ordinary course.
(b) Advances to the Borrower's and AWI's officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and
44
salespersons for the benefit of the Borrower or AWI in the ordinary course of
business, which expenses are properly substantiated by the person seeking such
advance and properly reimbursable by the Borrower or AWI.
(c) Loans to non-Management employees in the ordinary course of
business, not to exceed $500,000.00 in the aggregate outstanding at any time.
(d) Advances on account of sales of Inventory in the ordinary course
of business made on credit and all Accounts arising therefrom.
4-20. Protection of Assets. The Lender, in the Lender's reasonable
discretion, and from time to time, may discharge any tax or Encumbrance on any
of the Collateral, or take any other action that the Lender may deem necessary
to repair, insure, maintain, preserve, collect, or realize upon any of the
Collateral. The Lender 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
Lender has had an opportunity to be heard), from which finding no further appeal
is available, that the Lender had acted in actual bad faith or in a grossly
negligent manner. The Borrower shall pay to the Lender, on demand, or the
Lender, in its reasonable 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.
4-21. Line of Business. Neither the Borrower nor AWI shall engage in any
business other than the business in which it is currently engaged (which is
agreed to be the marketing, distribution and sale of apparel products and
accessories and the licensing of trade names, trademarks and intellectual
property to third Persons in connection with the foregoing) or a business
reasonably related thereto.
4-22. Affiliate Transactions. Neither the Borrower nor AWI shall make any
payment, nor give any value to any Related Entity except for goods and services
actually purchased by the Borrower or AWI from, or sold by the Borrower or AWI
to, such Related Entity for a price and on terms which shall not be less
favorable to the Borrower or AWI from those which would have been charged in an
arms length transaction, provided that, notwithstanding the foregoing, until the
occurrence, and during the continuance, of an Event of Default, the Borrower and
AWI may (a) pay management fees at the times and in the amounts, and (b) may
maintain and make payments with respect to those transactions, in each case as
set forth in EXHIBIT 4-22 hereof.
4-23. Additional Assurances.
(a) Except as set forth on EXHIBIT 4-23, neither the Borrower nor
AWI is the owner of, nor has it any interest in, any property or asset which,
immediately upon the satisfaction of the conditions precedent to the
effectiveness of the credit facility contemplated hereby (Article 3) will not be
subject to a perfected security or other collateral interest in favor of the
Lender (subject only to Permitted Encumbrances) to secure the Liabilities.
(b) Except as set forth on EXHIBIT 4-23, neither the Borrower nor
AWI will hereafter acquire any asset or any interest in property which is not,
immediately upon such acquisition, subject to such a perfected security or other
collateral interest in favor of the Lender
45
to secure the Liabilities (subject only to Permitted Encumbrances).
(c) The Borrower and AWI shall each execute and deliver to the
Lender such instruments, documents, and papers, and shall do all such things
from time to time hereafter as the Lender may reasonably request to carry into
effect the provisions and intent of this Agreement; to protect and perfect the
Lender's security interests in the Collateral; and to comply in all material
respects with all applicable statutes and laws, and facilitate the collection of
the Receivables Collateral. The Borrower and AWI shall each execute all such
instruments as may be reasonably required by the Lender with respect to the
recordation and/or perfection of the security interests created herein.
(d) The Borrower and AWI each hereby designates the Lender as and
for the Borrower's and AWI's true and lawful attorney, with full power of
substitution, to sign and file any financing statements in order to perfect or
protect the Lender's security and other collateral interests in the Collateral.
(e) To the full extent permitted by applicable law, a carbon,
photographic, or other reproduction of this Agreement or of any financing
statement or other instrument executed pursuant to this Section 4-23 shall be
sufficient for filing to perfect the security interests granted herein.
4-24. Adequacy of Disclosure.
(a) All financial statements for periods after the date hereof which
are furnished to the Lender by the Borrower or AWI shall be prepared in
accordance with GAAP consistently applied and present fairly, in all material
respects, the condition of the Borrower and AWI at the date(s) thereof and the
results of operations and cash flows for the period(s) covered.
(b) To the knowledge of the Borrower's executive officers, as of the
date hereof, there has been no change in the financial condition, results of
operations, or cash flows of the Borrower's business from the financial
statements which the Seller has furnished the Borrower and the Borrower has, in
turn, furnished the Lender, other than changes in the ordinary course of
business, which changes have not been materially adverse, either singularly or
in the aggregate.
(c) As of the effective date of this Agreement, neither the Borrower
nor AWI has any contingent obligations or obligation under any Lease or Capital
Lease which is not noted in the Borrower's and AWI's financial statements
furnished to the Lender prior to the execution of this Agreement.
(d) No document, instrument, agreement, or paper now or hereafter
given the Lender by or on behalf of the Borrower or AWI in connection with the
execution of this Agreement by the Lender 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. There is no
fact known to the Borrower or AWI which has, or which, in the foreseeable future
would reasonably be expected to have, a material adverse effect on the financial
condition of the Borrower or AWI which has not been disclosed in writing to the
Lender.
46
4-25. Investments. As long as no Revolving Credit Loans are then
outstanding, the Borrower and AWI may make investments consisting of Cash
Equivalents maintained at such bank(s) as the Borrower may select.
4-26. Other Covenants. Neither the Borrower nor AWI shall indirectly do or
cause to be done any act which, if done directly by the Borrower or AWI, would
breach any covenant contained in this Agreement.
ARTICLE 5 - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:
5-1. Maintain Records. The Borrower shall, and shall cause AWI to:
(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 and AWI's
transactions, all in accordance with GAAP, applied consistently with all prior
periods, to fairly reflect, in all material respects, the financial condition of
the Borrower and AWI at the close of, and its results of operations for, the
periods in question.
(b) Timely provide the Lender with those financial reports,
statements, and schedules required by this Article 5 or otherwise, each of which
reports, statements and schedules shall be prepared, to the extent applicable,
in accordance with GAAP (but for the absence of footnotes and year end
adjustments), applied consistently with all prior periods, to fairly reflect, in
all material respects, the financial condition of the Borrower and AWI at the
close of, and their results of operations for, the period(s) covered therein.
(c) At all times, keep accurate (in all material respects) and
current records of the Collateral including, without limitation, accurate
current stock, cost, and sales records of its respective 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 Lender and instruct such accountants to
fully cooperate with, and be available to, the Lender to discuss the Borrower's
and AWI'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 Lender.
(e) Not change the Borrower's or AWI's fiscal year for book
accounting purposes, except in connection with an initial public offering of the
Borrower's capital stock.
5-2. Access to Records.
(a) The Borrower shall, and shall cause AWI to, afford the Lender
and the Lender's representatives with access from time to time, during normal
business hours and, unless an Event of Default exists, upon reasonable notice,
as the Lender and such representatives may require to all properties owned by or
over which the Borrower and/or AWI has control. The Lender and the Lender's
representatives shall have the right, and the Borrower will, and will cause AWI
to, permit the Lender and such representatives from time to time as the Lender
and
47
such representatives may request, during normal business hours and, unless an
Event of Default exists, upon reasonable notice, to examine, inspect, copy, and
make extracts from any and all of the Borrower's and AWI's books, records,
electronically stored data, papers, and files pertaining to its business
operations, financial information or the Collateral. The Borrower shall, and
shall cause AWI to, make copying facilities reasonably available to the Lender.
(b) The Borrower for itself, and as the sole shareholder of AWI,
hereby authorizes the Lender and the Lender's representatives to:
(i) 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
AWI, whether in the possession of the Borrower or AWI or in the possession
of any service bureau, contractor, accountant, or other person, (and the
Borrower and AWI each directs any such service bureau, contractor,
accountant, or other person fully to cooperate with the Lender and the
Lender's representatives with respect thereto), provided that, except as
set forth in Section 5-10 hereof, such inspections and reviews shall not
be undertaken by the Lender as long as no Event of Default then exists and
is continuing.
(ii) Verify at any time the Collateral or any portion thereof,
including verification with Account Debtors, and/or with the Borrower's
and/or AWI's computer billing companies, collection agencies, and
accountants and to sign the name of the Borrower or AWI on any notice to
the Borrower's or AWI's Account Debtors or verification of the Collateral,
provided that, as long as no Event of Default exists and is continuing,
the form and content of any such verification letters shall be subject to
the prior approval of the Borrower (whose consent shall not be
unreasonably withheld or delayed).
5-3. Prompt Notice to Lender.
(a) The Borrower shall, and shall cause AWI to, provide the Lender
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 or AWI's executive officers.
(ii) The completion of any physical count of the Borrower's or
AWI's Inventory (together with a copy of the certified results thereof).
(iii) Any ceasing of the Borrower's or AWI's making of
payment, in the ordinary course, to a material portion (in amount or
number) of its creditors.
(iv) Any failure by the Borrower or AWI to pay rent at any of
the Borrower's or AWI's locations, which failure continues for more than
twenty (20) Business Days following the day on which such rent first came
due, except for Leases for such locations which have been terminated or
abandoned by the Borrower or AWI.
48
(v) Any material change in the business, operations, or
financial affairs of the Borrower or AWI.
(vi) The occurrence of any Suspension Event, that has not been
cured by the Borrower or AWI or waived by the Lender.
(vii) Any decision on the part of the Borrower or AWI to
discharge the Borrower's or AWI'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)).
(viii) Any litigation which, if determined adversely to the
Borrower or AWI, would reasonably be expected to have a material adverse
effect on the financial condition of the Borrower or AWI.
(ix) The acquisition by the Borrower or AWI of any Commercial
Tort Claim.
(x) The intention by Borrower to treat the Revolving Credit
and/or the L/Cs and related transactions as being a "reportable
transaction" (within the meaning of Treasury Regulation Section 1.6011-4),
by delivering a duly completed copy of IRS Form 8886 or any successor
form.
(b) The Borrower shall, and shall cause AWI to, provide the Lender,
when received by the Borrower or AWI, with a copy of any management letter or
similar communications from any accountant of the Borrower or AWI.
5-4. Intentionally Omitted.
5-5. Intentionally Omitted.
5-6. Monthly Reports. Monthly, within thirty (30) days of the end of the
previous month, the Borrower shall provide the Lender with original counterparts
of the following (each in such form as the Lender from time to time may
reasonably specify):
(a) An internally prepared financial statement of the Borrower's and
AWI's financial condition and 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 "consolidated"
basis), cash flow and comparison of same to the Business Plan; and
(b) Those reports required under Section 5-7 hereof, to the extent
the Borrower is required to provide such reports pursuant to the last sentence
of Section 5-7.
5-7. Quarterly Reports. Quarterly, the Borrower shall provide the Lender
with original
49
counterparts of the following:
(a) within forty-five (45) days following the end of each of the
Borrower's fiscal quarters, the Borrower shall furnish the Lender with an
internally prepared financial statement of the Borrower's and AWI's financial
condition and the results of their respective operations for, the period ending
with the end of the subject quarter, which financial statement shall include, at
a minimum, a balance sheet, income statement (on a "consolidated" basis), cash
flow and comparison of same store sales for the corresponding quarter of the
then immediately previous year, as well as to the Business Plan, and
Management's analysis and discussion of the operating results reflected therein.
The delivery to the Lender of the Borrower's Form 10Q which is filed with the
Securities and Exchange Commission shall satisfy the Borrower's obligations
under this Section 5-7(a);
(b) within thirty (30) days of the end of each fiscal quarter:
(i) A "Stock Ledger Inventory Report" for the Borrower and AWI
and a Certificate (signed by the Borrower's Controller or Chief Financial
Officer) concerning the Borrower's and AWI's Inventory.
(ii) An aging of the Borrower's and AWI's Inventory, to the
extent available.
(iii) A Rolling Operating Forecast.
(iv) Reconciliations of the above described Report and
Inventory Certificate (Section 5-7(b)(i)) to Availability and to the
general ledger as of the end of the subject quarter.
(v) A Gross Margin Reconciliation.
(vi) An aging of the Borrower's and AWI's accounts payable.
Notwithstanding the foregoing, for any month in which the Borrower at any time
has or had any Revolving Credit Loans outstanding, the Borrower shall furnish
the reports described in Sections 5-7(b) within thirty days, after the end of
such month.
5-8. Annual Reports.
(a) Annually, within ninety (90) days following the end of the
Borrower's fiscal year, the Borrower shall furnish the Lender with an original
signed counterpart of the Borrower's consolidated annual financial statement,
which statement shall have been prepared by, and 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. The delivery to the Lender of the Borrower's Form 10K which is
filed with the Securities and
50
Exchange Commission shall satisfy the Borrower's obligations under this Section
5-8(a).
(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 preparation 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 Lender) that:
(i) Such annual financial statement will be delivered by the
Borrower to the Lender.
(ii) It is an intention of the Borrower and AWI, in their
engagement of such accountants, to satisfy the financial reporting
requirements set forth in this Article 5.
(iii) The Borrower and AWI have been advised that the 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 (or if one or more had occurred, the facts and circumstances
thereof).
5-9. Officers' Certificates. The Borrower shall cause the Borrower's
Controller or Treasurer and Chief Financial Officer or President respectively to
provide such Person's Certificate (prepared in their corporate and not
individual capacities) with those 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 in all material respects the
financial condition of the Borrower and AWI at the close of, and the results of
the Borrower's and AWI's operations and cash flows for, the period(s) covered,
subject, however to the following:
(i) year end adjustments (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 5-12.
(b) Indicate either that (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 or AWI to be taken on
account thereof.
(c) Include calculations concerning the Borrower's compliance (or
failure to
51
comply) at the date of the subject statement with each of the financial
performance covenants included in Section 5-12 hereof.
Notwithstanding the foregoing, for any month in which the Borrower at any time
has or had any Revolving Credit Loans outstanding, the Borrower shall furnish
the certificate described in this Section 5-9 within thirty (30) days after the
end of such month.
5-10. Inventories, Appraisals, and Audits.
(a) The 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, and at the request
of, the Borrower or AWI.
(b) The Borrower and AWI, at their own expense, shall cause not less
than one (1) physical inventory to be undertaken in each twelve (12) month
period during which this Agreement is in effect conducted by such inventory
takers as are reasonably satisfactory to the Lender and following such
methodology as may be reasonably satisfactory to the Lender.
(i) The Borrower shall provide the Lender with a copy of the
preliminary results of each such inventory (as well as of any other
physical inventory undertaken by the Borrower or AWI) within fourteen (14)
days following the completion of such inventory.
(ii) The Borrower shall provide the Lender with a
reconciliation of the results of each such inventory (as well as of any
other physical inventory undertaken by the Borrower or AWI) to the
Borrower's and AWI's books and records within forty-five (45) days
following completion of such inventory.
(iii) The Lender, in its discretion, following the occurrence,
and during the continuance, of a Suspension Event, may cause such
additional inventories to be taken as the Lender determines (each, at the
expense of the Borrower).
(c) Upon the Lender's request from time to time, the Borrower shall,
and shall cause AWI to, permit the Lender to obtain appraisals (except as set
forth in the last sentence of this subsection (c), at the Lender's expense)
conducted by such appraisers as are satisfactory to the Lender and using a
methodology similar in scope and nature as was undertaken on behalf of the
Lender prior to the effectiveness of this Agreement. Without limiting the
foregoing, the Lender may obtain periodic Inventory liquidation analyses
performed by Hilco/Great American Group or another liquidation analysis firm
selected by the Lender. After the occurrence and during the continuance of an
Event of Default, all such appraisals shall be undertaken at the Borrower's and
AWI's expense.
(d) Upon the Lender's request from time to time, the Borrower shall,
and shall cause AWI to, permit the Lender to conduct commercial finance audits
of the Borrower's and AWI's books and records (except as set forth in the last
sentence of this subsection (d), at the Lender's expense) using a methodology
similar in scope and nature as was undertaken on behalf of the Lender prior to
the effectiveness of this Agreement. After the occurrence and during the
continuance of an Event of Default, all such audits shall be undertaken at the
Borrower's and
52
AWI's expense.
(e) Intentionally Omitted.
5-11. Additional Financial Information.
(a) In addition to all other information required to be provided
pursuant to this Article 5, the Borrower promptly shall provide the Lender (and
shall cause AWI and any other guarantor of the Liabilities to also provide the
Lender), with such other and additional information concerning the Borrower (AWI
or such other guarantor), the Collateral, the operation of the Borrower's (AWI's
or such other guarantor's) business, and the Borrower's (AWI's or such other
guarantor's) financial condition, including original counterparts of financial
reports and statements, as the Lender may from time to time reasonably request
from the Borrower.
(b) The Borrower may provide the Lender, from time to time
hereafter, with updated projections of the Borrower's and AWI's anticipated
performance and operating results.
(c) In all events, the Borrower, no sooner than ninety (90) nor
later than thirty (30) days prior to the end of each of the Borrower's fiscal
years, shall furnish the Lender with an updated and extended projection which
shall go out at least through the end of the then next fiscal year. Together
with such updated and extended projections, the Borrower shall deliver to the
Lender a description of the methodology and assumptions upon which the
projections were prepared.
(d) The Borrower and AWI each recognizes that all appraisals,
inventories, analysis, financial information, and other materials which the
Lender may obtain, develop, or receive with respect to the Borrower or AWI is
confidential to the Lender and that, except as otherwise provided herein,
neither the Borrower nor AWI is entitled to receipt of any of such appraisals,
inventories, analysis, financial information, and other materials, nor copies or
extracts thereof or therefrom.
5-12. Financial Performance Covenants. The Borrower shall not at any time
permit the Coverage Ratio to be less than 2:l.
ARTICLE 6 - USE AND COLLECTION OF COLLATERAL:
6-1. Use of Inventory Collateral.
(a) The Borrower shall not, and shall cause AWI not to engage in any
sale of the Inventory other than for fair consideration in the conduct of the
Borrower's or AWI's business in the ordinary course (other than promotions,
markdowns, and discounts in the ordinary course of business) nor shall either
engage in sales or other dispositions to creditors in reduction or satisfaction
of such creditors' claims; sales or other dispositions in bulk; or any use of
any of the Inventory in breach of any provision of this Agreement.
Notwithstanding the foregoing, the Borrower and AWI may "job-out" end of season
and slow-moving Inventory, provided that the Inventory so disposed of does not
exceed five percent (5%) of the Borrower's and AWI's aggregate retail receipts
in any fiscal year.
53
(b) No sale of Inventory shall be on consignment, approval, or under
any other circumstances such that, with the exception of the Borrower's and
AWI's customary return policy applicable to the return of inventory purchased by
the Borrower's and AWI's retail customers in the ordinary course, such Inventory
may be returned to the Borrower or AWI without the consent of the Lender.
6-2. Adjustments and Allowances. The Borrower and AWI may grant such
allowances or other adjustments to the Borrower's or AWI's Account Debtors as
the Borrower and AWI, respectively, may reasonably deem to accord with sound
business practice, provided, however, the authority granted the Borrower and AWI
pursuant to this Section 6-2 may be limited or terminated by the Lender at any
time after the occurrence, and during the continuance, of an Event of Default in
the Lender's discretion.
6-3. Validity of Accounts.
(a) The amount of each Account shown on the books, records, and
invoices of the Borrower and AWI represented as owing by each Account Debtor is
and will be the correct amount actually owing by such Account Debtor (subject to
adjustments for returned Inventory in the ordinary course of business) and shall
have been fully earned by performance by the Borrower and AWI.
(b) The Lender, from time to time (at the expense of the Borrower in
each instance), may verify the validity, amount, and all other matters with
respect to the Receivables Collateral directly with Account Debtors (including
without limitation, by forwarding balance verification requests to the
Borrower's and AWI's Account Debtors), and with the Borrower's and AWI's
accountants, collection agents, and computer service bureaus (each of which is
hereby authorized and directed to cooperate in full with the Lender and to
provide the Lender with such information and materials as the Lender may
request), provided that, as long as no Event of Default exists and is
continuing, the form and content of any such verification letters shall be
subject to the prior approval of the Borrower (whose consent shall not be
unreasonably withheld or delayed).
(c) Neither the Borrower nor AWI has knowledge of any impairment of
the validity or collectibility of any of the Accounts (other than customary
adjustments and chargebacks in the ordinary course of business) and shall notify
the Lender of any such fact immediately after Borrower or AWI becomes aware of
any such impairment.
(d) Except as set forth in EXHIBIT 6-3, neither the Borrower nor AWI
shall post any bond to secure the Borrower's or AWI's performance under any
agreement to which the Borrower or AWI is a party nor cause any surety,
guarantor, or other third party obligee to become liable to perform any
obligation of the Borrower or AWI (other than to the Lender) in the event of the
Borrower's or AWI's failure so to perform.
6-4. Notification to Account Debtors. The Lender 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 and AWI's Account Debtors to make
payment directly to the Lender and to collect all amounts due on account of the
Collateral.
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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, and shall cause AWI to, deliver to the
Lender, as a condition to the effectiveness of this Agreement:
(i) Notification, executed on behalf of the Borrower or AWI, as
applicable, to each depository institution with which any DDA is maintained
(other than the Operating Account), in form reasonably satisfactory to the
Lender, of the Lender's interest in such DDA.
(ii) An agreement (generally referred to as a "Blocked Account
Agreement"), in form reasonably satisfactory to the Lender, with any depository
institution at which a Blocked Account is maintained.
(iii) An agreement, in form reasonably satisfactory to the
Lender, with any depository institution at which the Operating Account is
maintained.
(c) Neither the Borrower nor AWI will establish any DDA hereafter
unless, contemporaneous with such establishment, the Borrower or AWI, as
applicable, delivers to the Lender an agreement (in form satisfactory to the
Lender) executed on behalf of the depository with which such DDA is being
established.
7-2. Credit Card Receipts.
(a) Annexed hereto as EXHIBIT 7-2 is a Schedule which describes all
arrangements to which the Borrower or AWI is a party with respect to the payment
to the Borrower or AWI, as applicable, of the proceeds of all credit card
charges for sales by the Borrower or AWI.
(b) The Borrower shall, and shall cause AWI to, deliver to the
lender, as a condition to the effectiveness of this Agreement, notifications,
executed on behalf of the Borrower or AWI, as applicable, to each of the
Borrower's and AWI's credit card clearinghouses and processors of notice (in
form satisfactory to the Lender), which notice provides that payment of all
credit card charges submitted by the Borrower or AWI to that clearinghouse or
other processor and any other amount payable to the Borrower or AWI by such
clearinghouse or other processor shall be directed to the Concentration Account
or as otherwise designated from time to time by the Lender. Neither the Borrower
nor AWI shall change such direction or designation except upon and with the
prior written consent of the Lender.
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7-3. The Concentration, Blocked, and Operating 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 Lender with
Fleet National Bank.
(ii) The BLOCKED ACCOUNT: Established by the Borrower with Fleet
National Bank.
(iii) The OPERATING ACCOUNT: Established by the Borrower with
Fleet National Bank.
(b) The contents of each DDA, of the Operating Account, and of the
Blocked Account constitutes Collateral and Proceeds of Collateral. The contents
of the Concentration Account constitutes the Lender's property.
(c) The Borrower and AWI:
(i) Contemporaneously with the execution of this Agreement, shall
provide the Lender with such agreement (generally referred to as a "Blocked
Account Agreement") of the depository with which the Blocked Account is
maintained as may be reasonably satisfactory to the Lender;
(ii) Contemporaneously with the execution of this Agreement,
shall provide the Lender with such agreement of the depository with which the
Operating Account is maintained as may be reasonably satisfactory to the Lender;
and
(iii) Shall not establish any Blocked Account or Operating
Account hereafter except upon not less than thirty (30) days prior written
notice to the Lender and the delivery to the Lender of a similar such agreement.
(d) The Borrower and AWI shall pay all fees and charges of, and
maintain such impressed 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 Lender).
7-4. Proceeds and Collection of Accounts.
(a) All Receipts constitute Collateral and proceeds of Collateral
and shall be held in trust by the Borrower and AWI for the Lender; shall not be
commingled with any of the Borrower's or AWI's other funds; and shall be
deposited and/or transferred only to the Blocked Account.
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(b) The Borrower shall cause the, and shall cause AWI to, ACH or
wire transfer to the Blocked Account, no less frequently than daily (and whether
or not there is then an outstanding balance in the Loan Account) of
(i) the then current contents of each DDA (other than the
Operating Account), each such transfer to be net of any minimum balance, not to
exceed $5,000.00, as may be required to be maintained in the subject DDA by the
bank at which such DDA is maintained); and
(ii) the proceeds of all credit card charges not otherwise
provided for pursuant hereto.
Telephone advice (confirmed by written notice) shall be provided to the Lender
on each Business Day on which any such transfer is made.
(c) Whether or not any Liabilities are then outstanding, the
Borrower and AWI shall cause the ACH or wire transfer to the Concentration
Account, no less frequently than daily, of then entire ledger balance of the
Blocked Account, net of such minimum balance, not to exceed $5,000.00, as may be
required to be maintained in the Blocked Account by the bank at which the
Blocked Account is maintained.
(d) In the event that, notwithstanding the provisions of this
Section 7-4, the Borrower or AWI 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 the Borrower or
AWI for the Lender and shall not be commingled with any of the Borrower's or
AWI's other funds or deposited in any account of the Borrower or AWI other than
as instructed by the Lender.
7-5. Payment of Liabilities.
(a) On each Business Day, the Lender 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).
(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 Lender by 2:00 PM on that Business
Day.
(ii) Funds paid to the Lender, 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 Lender by 2:00 PM on that Business Day.
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(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
Lender until after 2:00 PM on a Business Day, such deposit or payment shall be
deemed to have been made at 9:00 AM on the then next Business Day.
(iv) All deposits to the Concentration Account and other payments
to the Lender are subject to clearance and collection.
(c) All payments shall be applied to First pay Liabilities other
than the principal balance of the Loan Account; Second in reduction of Base
Margin Loans until paid in full, and Third in reduction of Eurodollar Loans
until paid in full, together with any amounts which become due as a result of
such payment pursuant to Section 2-8(e) hereof; provided that at the Borrower's
option, as long as no Event of Default then exists, the Borrower shall have the
right, in lieu of making a prepayment on account of the Eurodollar Loans, to
cause any amounts in excess of the sums required to pay the Liabilities
described in clauses First and Second, above, to be deposited with the Lender
and held as collateral for the Liabilities and applied to the payment of the
applicable Eurodollar Loans at the end of the current Interest Periods
applicable thereto, in order of maturity of such Interest Periods (or upon the
occurrence, and during the continuance, of an Event of Default, to the
Liabilities in such order and manner as the Lender, in its discretion, shall
determine).
(d) The Lender shall transfer to the Operating 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) a Suspension Event has occurred and is continuing, and (ii) one or more
L/C's are then outstanding, the Lender may establish a funded reserve of up to
103% of the aggregate Stated Amounts of such L/C's.
7-6. The Operating Account. Except as otherwise specifically provided in,
or permitted by, this Agreement, all checks shall be drawn by the Borrower and
AWI upon, and other disbursements shall be made by the Borrower and AWI solely
from, the Operating Account. Until the occurrence, and during the continuance,
of an Event of Default, as provided in the agreement with the depository with
which the Operating Account has been established, the Lender shall not be
entitled to exercise any dominion or control over the funds in the Operating
Account.
ARTICLE 8 - GRANT OF SECURITY INTEREST:
8-1. 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 Lender a continuing security interest in and to,
and assigns to the Lender, (and ratifies and confirms the Borrower's prior grant
of a security interest to the agent for the ratable benefit of the Lenders
pursuant to the Existing Agreement, in and to) 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 Lender may in the future be granted a security interest, is referred
to herein as the "COLLATERAL"):
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(a) All Accounts and Accounts Receivable.
(b) All Inventory.
(c) All General Intangibles, including, without limitation, all
Payment 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, Instruments, Documents, Deposit
Accounts, policies and certificates of insurance, deposits,
impressed accounts, compensating balances, money, cash, or
other property.
(j) All Letter of Credit Rights and Supporting Obligations.
(k) All Commercial Tort Claims.
(l) 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(k)) or otherwise.
(m) All liens, guaranties, rights, remedies, and privileges
pertaining to any of the foregoing (8-1(a) through 8-1(l)),
including the right of stoppage in transit.
provided that, the Collateral shall not include (i) key man life insurance
policies or proceeds to fund stock repurchases from deceased Management, or (ii)
leases or licenses and rights thereunder to the extent of enforceable
anti-assignment provisions therein contained which have not been waived,
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 leases or licenses or any accounts receivable or the right to payments
due or to become due the Borrower under any such lease or license.
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8-2. Extent and Duration of Security Interest. This grant of a security
interest is in addition to, and supplemental of, any security interest
previously granted by the Borrower to the Lender and shall continue in full
force and effect applicable to all Liabilities, until all Liabilities have been
paid and/or satisfied in full (other than indemnities not then due and payable,
which survive repayment of the Revolving Credit Loans and the L/Cs and
termination of the Commitments) and the security interest granted herein is
specifically terminated in writing by a duly authorized officer of the Lender
(which the Lender agrees to do upon payment and satisfaction of all such
Liabilities).
ARTICLE 9 - LENDER AS BORROWER'S ATTORNEY-IN-FACT:
9-1. Appointment as Attorney-In-Fact. The Borrower hereby irrevocably
constitutes and appoints the Lender 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 Lender. The rights and powers granted the Lender by this 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 Lender 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 Lender 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 Lender 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.
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9-2. No Obligation to Act. The Lender shall not be obligated to do any of
the acts or to exercise any of the powers authorized by Section 9-1 herein, but
if the Lender 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, provided that, if the Lender elects to use or license any
General Intangibles of the Borrower consisting of trademarks, copyrights or
similar property, the Lender shall use reasonable efforts to preserve and
maintain any such trademark, copyright or similar property (but nothing
contained herein shall obligate the Lender to undertake (or refrain from
undertaking) any specific action with respect thereto). The Lender shall not be
responsible to the Borrower for any act or omission to act pursuant to Section
9-1, except to the extent 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 10 shall constitute
an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event of Default
described in Section 10-12, any and all Liabilities shall become due and payable
without any further act on the part of the Lender. Upon the occurrence, and
during the continuance, of any other Event of Default, any and all Liabilities
shall become immediately due and payable, at the option of the Lender and
without notice or demand. The occurrence and continuance of any Event of Default
shall also constitute, without notice or demand, a default under all other Loan
Documents, whether such Loan Documents now exist or hereafter arise.
10-1. Failure to Pay Revolving Credit. The failure by the Borrower to pay
any principal amount when due under the Revolving Credit.
10-2. Failure To Make Other Payments. The failure by the Borrower to pay
when due (or upon demand, if payable on demand) any payment Liability within
three (3) days of the date when due other than the principal amount under the
Revolving Credit.
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 10-1 or Section 10-2 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
6-1 Use of Collateral
5-12 Financial Covenants
Article 7 Cash Management
10-4. Failure to Perform Covenant or Liability (Limited Grace Period). The
failure by the Borrower, upon three (3) days written notice by the Lender, to
cure the Borrower's failure to promptly, punctually and faithfully perform,
discharge, or comply with any covenant under Sections 4-13, 4-22, 4-23, and
Article 5 hereof (other than Section 5-12 hereof).
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10-5. Failure to Perform Covenant or Liability (Grace Period). The failure
by the Borrower, upon fifteen (15) days written notice by the Lender, to cure
the Borrower's failure to promptly, punctually and faithfully perform,
discharge, or comply with any covenant hereunder or under any other Loan
Document or with any Liability not described in any of Sections 10-1, 10-2, 10-3
or 10-4 hereof.
10-6. Misrepresentation. Any representation or warranty at any time made
by the Borrower to the Lender is not true or complete in all material respects
when given.
10-7. Default of Other Debt. The occurrence of any event such that any
Indebtedness of the Borrower to any creditor in excess of $3,000,000.00, other
than the Lender, could then be accelerated (whether or not the subject creditor
takes any action on account of such occurrence), provided that if such event is
waived in writing by the holder of the Indebtedness prior to the Exercise of
remedies by the Lender hereunder, the occurrence of such event shall not
constitute an Event of Default hereunder.
10-8. Default of Leases. The occurrence of any event such that any Lease
or Leases of the Borrower could then be terminated (whether or not any or all of
the subject lessors take any action on account of such occurrence) and such
termination (individually or together with all other such terminations) could
reasonably likely have a Material Adverse Effect, provided that if such event is
waived in writing by the subject lessors prior to the exercise of remedies by
the Lender hereunder, the occurrence of such event shall not constitute an Event
of Default hereunder.
10-9. Uninsured Casualty Loss. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any material portion of the Collateral,
having an aggregate value in excess of $1,500,000.00.
10-10. Judgment. Restraint of Business.
(a) The entry of any uninsured judgment against the Borrower, in
excess of $1,000,000.00, individually or in the aggregate, 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.
(b) The entry of any order or the imposition of any other process
having the force of law, in either case applicable specifically to the Borrower,
the effect of which is to restrain in any material adverse way the conduct by
the Borrower of its business in the ordinary course, which order is not
dissolved within ten (10) days of its imposition.
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 material 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 generally; the
offering by or entering into by the Borrower of any composition, extension, or
any other arrangement seeking relief generally 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
62
intends to accomplish a reorganization or arrangement with creditors, provided
that, if such proceeding is initiated against the Borrower, an Event of Default
shall not arise hereunder unless such proceeding is not timely contested in good
faith by the Borrower by appropriate proceedings or, if so contested, is not
dismissed within sixty (60) days of when initiated; and/or the initiation by or
on behalf of the Borrower of the liquidation or winding up of all or any
material 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 its debts generally pursuant to the Bankruptcy Code
or any other insolvency statute or procedure of general application; 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 its debts
generally pursuant to the Bankruptcy Code or any other insolvency statute or
procedure of general application, 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 sixty (60) 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
would reasonably be expected to restrain in any material way the conduct by the
Borrower of its business in the ordinary course.
10-14. Default by Guarantor or Subsidiary. The occurrence of any of the
foregoing Events of Default with respect to any guarantor of the Liabilities
(including, without limitation, AWI), or the occurrence of any of the foregoing
Events of Default with respect to any Subsidiary of the Borrower, as if such
guarantor or Subsidiary were the "Borrower" described therein.
10-15. Termination of Guaranty. The termination or attempted termination
of any guaranty by any guarantor of the Liabilities (other than in accordance
with its terms or as permitted by the Lenders).
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 strictly in accordance with the subject Loan
Document's terms or which seeks to void, avoid, limit, or otherwise adversely
affect any security interest created by or in any Loan Document or any payment
made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that the Loan Documents, taken as a whole, are not
enforceable strictly in accordance with their terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.
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10-17. Intentionally Omitted.
10-18. Change in Control. Any Change in Control.
ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT:
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Lender is provided prior to the occurrence of an Event of
Default, the Lender shall have the following rights and remedies upon the
occurrence, and during the continuance, of any Event of Default.
11-1. Rights of Enforcement. The Lender shall have all of the rights and
remedies of a secured party upon default under the UCC, in addition to which the
Lender 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 Lender 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 Lender deems
advisable, having due regard to compliance with any statute or regulation which
might affect, limit, or apply to the Lender's disposition of the Collateral.
(b) The Lender, in the exercise of the Lender's rights and remedies
upon default, may conduct one or more going out of business sales, in the
Lender'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
Lender and any such agent or contractor, in conjunction with
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any such sale, may augment the Inventory with other goods (all of which other
goods shall remain the sole property of the Lender 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 Lender 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 Lender shall provide the Borrower with such notice as may be
practicable under the circumstances), the Lender shall give the Borrower at
least ten (10) 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 Lender's rights and remedies upon default.
(d) The Lender may purchase the Collateral, or any portion of it at
any sale held under this Article (to the extent permitted by applicable law).
(e) The Lender shall apply the proceeds of any exercise of the
Lender's Rights and Remedies under this Article 11 towards the Liabilities in
the following order:
First: To all costs and expenses incurred by the Lender under this
Agreement, or any other Loan Document, including all Costs of
Collection.
Second: To accrued and unpaid interest on the Revolving Credit Loans
until all accrued and unpaid interest on the Revolving Credit
Loans has been paid in full.
Third To the principal balance of the Revolving Credit Loans, until
the unpaid principal balance of the Revolving Credit Loans has
been paid in full.
Fourth: To all fees due under this Agreement or any other Loan
Document, until the remaining balance of all fees (including
L/C Fees, Line (Unused Fees), and Early Termination Fees) have
been paid in full.
Fifth: As provided under applicable law, to each Person then entitled
thereto.
11-3. Occupation of Business Location. In connection with the Lender's
exercise of the Lender's rights under this Article 11, the Lender 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 Lender. The Lender shall not be required
to remove any of the Collateral from any such premises upon the Lender's taking
possession thereof, and may render any Collateral unusable to the Borrower. In
no event shall the Lender be liable to the Borrower for use or occupancy by the
Lender of any premises pursuant to this Article 11, nor for any charge (such as
wages for the Borrower's employees and utilities) incurred in connection with
the Lender's exercise of the Lender's Rights and Remedies, except for such
charges which are incurred as a result of the Lender's gross
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negligence or willful misconduct.
11-4. Grant of Nonexclusive License. The Borrower hereby grants to the
Lender a royalty free nonexclusive irrevocable license, exercisable upon the
occurrence, and during the continuance, of an Event of Default, 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 Lender'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. In exercising its rights under such license, the Lender shall use
reasonable efforts to preserve and maintain any such trademark, trade name, or
logo, but nothing contained herein shall obligate the Lender to undertake (or
refrain from undertaking) any specific action and the Lender shall, under no
circumstances, have any liability to the Borrower, except for such which are a
result of the Lender's gross negligence or willful misconduct.
11-5. Assembly of Collateral. The Lender may require the Borrower to
assemble the Collateral and make it available to the Lender at the Borrower's
sole risk and expense at a place or places which are reasonably convenient to
both the Lender and Borrower.
11-6. Rights and Remedies. The rights, remedies, powers, privileges, and
discretions of the Lender hereunder (herein, the "LENDER'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 Lender in exercising or
enforcing any of the Lender's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Lender 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 Lender's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between the Lender and any person,
at any time, shall preclude the other or further exercise of the Lender's Rights
and Remedies. No waiver by the Lender of any of the Lender'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 Lender's Rights and Remedies
and all of the Lender'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 Lender at such time or times and in such
order of preference as the Lender in its sole discretion may determine. The
Lender'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 Lender:
Fleet Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
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Attention: Mark Forti
Managing Director
Fax: (617) 434-4339
With a copy to:
Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attention: David S. Berman, Esquire
Fax: (617) 880-3456
If to the Borrower:
Aeropostale, Inc.
201 Willowbrook Blvd.
Wayne, New Jersey 07470
Attention: Treasurer
Fax:
With a copy to: Gregory and Adams, P.C.
190 Old Ridgefield Road
Wilton, Connecticut 06897
Attention: Derrel Mason, Esquire
Fax: (203) 834-1628
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 then 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
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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 then
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 2-5(h) hereof) until
the Termination Date.
13-2. Effect of Termination. On the Termination Date, the Borrower shall
pay the Lender (whether or not then due), in immediately available funds, all
then Liabilities (other than indemnities, not then due and payable, which
survive repayment of the Revolving Credit Loans and L/Cs and termination of the
Commitments), including, without limitation: the entire balance of the Loan
Account; any accrued and unpaid Line (Unused) Fee; any payments due on account
of the indemnification obligations included in Section 2-9(e); and all
unreimbursed costs and expenses of the Lender for which the Borrower is
responsible; and shall make such arrangements concerning any L/C's then
outstanding are reasonably satisfactory to the Lender. Until such payment, all
provisions of this Agreement, other than those contained in Article 2 which
place an obligation on the 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 (other than indemnities, not then
due and payable, which survive repayment of the Revolving Credit Loans and L/Cs
and termination of the Commitments) shall have been paid in full. The release by
the Lender of the security and other collateral interests granted the Lender by
the Borrower hereunder may be upon such conditions and indemnifications as the
Lender may reasonably require to protect the Lender against and chargebacks,
credits, returned items and any other reversal of payments which had been
received by the Lender and applied toward such Liabilities.
ARTICLE 14 - GENERAL:
14-1. Protection of Collateral. The Lender 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 Lender and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. With the Borrower's prior approval (which shall not be
unreasonably delayed or withheld), the Lender 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 Lender.
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 Lender and its successors and assigns, provided,
however, no trustee or other fiduciary appointed with respect to the Borrower
shall have any rights hereunder. In the event that the Lender, in accordance
with the provisions of Section 2-23 hereof, 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.
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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 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 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.
(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 Lender. 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 Lender, then by a
duly authorized officer thereof). Any modification, amendment, or waiver
provided by the Lender shall be in reliance upon all representations and
warranties theretofore made to the Lender 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 Lender 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 Lender 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
Lender.
14-6. Application of Proceeds. Except as otherwise provided in Section
11-2(e) hereof, 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 Lender determines in its
sole discretion. The Borrower shall remain liable for any deficiency remaining
following such application.
14-7. Costs and Expenses of Lender.
(a) The Borrower shall pay on demand all Costs of Collection and all
reasonable expenses of the Lender 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 Lender in preparing or amending this
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Agreement and all other agreements, instruments, and documents related thereto,
or otherwise incurred with respect to the Liabilities, and all other costs and
expenses of the Lender 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, and
during the continuance, of any Event of Default, by the 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 Lender to pay all such fees and
expenses and in the Lender'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 Lender 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 Lender may be
reproduced by the Lender by any photographic, microfilm, xerographic, digital
imaging, or other process, and the Lender 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 Lender may elect in the Lender'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 non-exclusive 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
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the Borrower at the Borrower's address for notices as specified herein, such
service to become effective ten (10) 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 in the
aforesaid courts under any of the Loan Documents.
(d) Nothing herein shall affect the right of the Lender 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
Lender and any employee, officer, or agent of the Lender (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 Lender (each,
an "Indemnified Claim") other than any claim resulting from the gross negligence
or willful misconduct of such Indemnified Person. Each Indemnified Claim may be
defended, compromised, settled, or pursued by the Indemnified Person with
counsel of the Lender's selection (and if such Indemnified Claim is brought by a
Person other than the Borrower, any guarantor or endorser of the Liabilities or
any Affiliate of the Borrower, after consultation with (but not approval of) the
Borrower regarding the selection of such counsel), but at the expense of the
Borrower, provided that any Indemnified Claim may not be settled without the
consent of the Borrower (which shall not be unreasonably withheld or delayed) if
as the result of any such settlement the Borrower will be obligated to make any
payment (other than reimbursement of the reasonable costs and expenses of the
Indemnified Person). This indemnification shall survive payment of the
Liabilities and or any termination, release, or discharge executed by the Lender
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) Titles, headings (indicated by being underlined or shown in
SMALL CAPITALS) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
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(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) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.
(f) Text which is shown in italics, shown in bold, shown IN ALL
CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to be
conspicuous.
(g) The words "may not" are prohibitive and not permissive.
(h) The word "or" is not exclusive.
(i) Terms which are defined in one section of any Loan Document are
used with such definition throughout the instrument in which so defined.
(j) The symbol "$" refers to United States Dollars.
(k) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof', or "within" is to the entire
Loan Document in which such reference is made.
(l) 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.
(m) Except as otherwise specifically provided, all references to
time are to Boston time.
(n) In the determination of any notice, grace, or other period of
time prescribed or allowed hereunder:
(i) Unless otherwise provided (A) 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 then next Business Day and (B) the period so computed shall
end at 5:00 PM on the relevant Business Day.
(ii) The word "from" means "from and including".
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(iii) The words "to" and "until" each mean "to, but
excluding".
(iv) The word "through" means "to and including".
(o) References to "presently", "currently", "effective date of this
Agreement", and other similar expressions mean the date of this Agreement.
(p) The term "upon the occurrence, and during the continuance, of an
Event of Default", "upon the occurrence, and during the continuance, of Default
Interest Event" and any other similar term means the occurrence of an Event of
Default or a Default Interest Event which has not been (i) waived by the Lender,
or (ii) resolved to the reasonable satisfaction of the Lender. For purposes
hereof, an Event of Default shall be deemed "resolved to the reasonable
satisfaction of the Lender" if (A) the Lender has not theretofore exercised any
of its rights and remedies on account of the existence of such Event of Default,
and (B) the matter giving rise to such Event of Default has been fully
remediated by the Borrower, provided, however, that (1) nothing contained herein
shall furnish the Borrower with any additional cure periods beyond those set
forth in Article 10, if any, prior to an event constituting an "Event of
Default", (2) notwithstanding the foregoing, any Event of Default under Sections
5212, Article 7, or Sections 10-1,l0-2,l0-11,or 10-12 hereof may only be waived
by the Lender and shall not ever be deemed "resolved to the reasonable
satisfaction of the Lender", and (3) the Borrower may not resolve any
occurrences which constitute Events of Default to the reasonable satisfaction of
the Lender on more than four (4) occasions in any fiscal year.
(q) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 14-13
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.
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 Lender.
(c) The security interests created by this Agreement secure all
Liabilities, whether now existing or hereafter arising.
(d) All reasonable costs and expenses (other than overhead costs)
incurred by the Lender in connection with its relationship with the Borrower
shall be borne by the Borrower.
(e) Unless otherwise explicitly provided herein, the Lender's
consent to any action of the Borrower which is prohibited unless such consent is
given may be given or refused by the Lender in its reasonable discretion and
without reference to Section 2-16 hereof.
14-14. Right of Set-Off. Any and all deposits (other than Trust Deposit
Accounts) or
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other sums at any time credited by or due to the Borrower from the Lender, or
any participant (a "PARTICIPANT") in the credit facility contemplated hereby or
any from any Affiliate of the Lender, or any Participant and any cash,
securities, instruments or other property of the Borrower in the possession of
the Lender, any Participant 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 Lender or any Participant or any such
Affiliate and may be applied or set off against the Liabilities and against such
obligations at any time, whether or not such are then due and whether or not
other collateral is then available to the Lender or any Participant or any such
Affiliate.
14-15. Maximum Interest Rate. Regardless of any provision of any Loan
Document, the Lender shall not 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 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, and to
the extent permissible under applicable law, 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, and to
the extent permissible under applicable law, the right to notice and or hearing
prior to the Lender's exercising of the Lender's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR
CONTROVERSY IS INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE 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 LENDER (AND THE LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL
OF ANY SUCH CASE OR CONTROVERSY).
(iv) Except to the extent that such may not be waived under
applicable law, the benefits or availability of any stay, limitation, hindrance,
delay, or restriction with
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respect to any action which the Lender 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 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 against the Lender to consequential, special,
or punitive damages.
14-17. Confidentiality. The Lender shall keep, and shall cause its
officers, directors, employees, affiliates and attorneys to keep, all financial
statements, reports and other proprietary information furnished to it by the
Borrower, the Guarantor or their respective Affiliates (hereinafter
collectively, the "Information") confidential and shall not disclose such
Information, or cause such Information to be disclosed, to any Person, provided.
however, that (i) the Information may be disclosed to the Lender's officers,
directors, employees, affiliates, attorneys and other advisors as need to know
the Information in connection with the Lender's administration of the
Liabilities; (ii) the Information may be disclosed to any regulatory or other
governmental authorities having jurisdiction over the Lender as required in
connection with the exercise of their regulatory activity; (iii) the Information
may be disclosed to any prospective assignee or participant, who has agreed to
be bound by the provisions of this Section 14-17; (iv) the Information may be
disclosed in connection with the enforcement of the Liabilities by the Lender to
the extent required in connection therewith; and (v) the Information may
otherwise be disclosed to the extent required by law. Notwithstanding anything
herein to the contrary, "Information" shall not include, and Lender (and each
employee, representative, or other agent of the Lender) may disclose to any and
all Persons without limitation of any kind, any information with respect to the
"tax treatment" and "tax structure" (in each case, within the meaning of
Treasury Regulation Section 1.6011-4) of the transactions contemplated hereby
and all materials of any kind (including options or other tax analyses) that are
provided to the Lender (and each employee, representative, or other agent of the
Lender) relating to such tax treatment and tax structure; provided, that with
respect to any document or similar item that in either case contains information
concerning the tax treatment or tax structure of the transaction as well as
other information, this sentence shall only apply to such portions of the
document or similar item that relate to the tax treatment or tax structure of
the Revolving Credit, the L/C's and other transactions contemplated hereby.
14-18. Existing Credit Agreement Amended and Restated. This Agreement
shall amend and restate the Existing Credit Agreement in its entirety. On the
Effective Date, the rights and obligations of the parties under the Existing
Credit Agreement shall be subsumed within and be governed by this Agreement;
provided, however, that each of the "Revolving Credit Loans" (as such term is
defined in the Existing Credit Agreement) outstanding under the Existing Credit
Agreement on the Effective Date shall, for purposes of this Agreement, be
included as Revolving Credit Loans hereunder and each of the "L/Cs" (as defined
in the Existing Credit Agreement) outstanding under the Existing Credit
Agreement on the Effective Date shall be L/Cs hereunder.
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AEROPOSTALE, INC.
("BORROWER")
By /s/ John S. Mills
----------------------------------
Print Name: John S. Mills
----------------------------------
Title: President
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FLEET RETAIL FINANCE INC.
("Lender")
By /s/ Mark J. Forti
----------------------------------
Print Name: Mark J. Forti
----------------------------------
Title: Managing Director
----------------------------------
789299.5
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