EXHIBIT 10.4
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (SOUTHWEST)
as Lender
and
ALLIED FASHION, INC.
as Borrower
Dated: April 2, 1999
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS............................................................... 1
SECTION 2. CREDIT FACILITIES ........................................................ 7
2.1 Revolving Loans ......................................................... 7
2.2 Letter of Credit Accommodations.......................................... 8
SECTION 3. INTEREST AND FEES......................................................... 11
3.1 Interest................................................................. 11
3.2 Closing Fee ............................................................. 11
3.3 Loan Servicing Fee ...................................................... 12
3.4 Compensation Adjustment.................................................. 12
SECTION 4. CONDITIONS PRECEDENT ..................................................... 13
4.1 Conditions Precedent to Initial Loans and the Letter of Credit
Accommodations .......................................................... 13
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.... 16
SECTION 5. GRANT OF SECURITY INTEREST ............................................... 17
SECTION 6. COLLECTION AND ADMINISTRATION............................................. 17
6.1 Borrower's Loan Account.................................................. 17
6.2 Statements .............................................................. 18
6.3 Collection of Accounts................................................... 18
6.4 Payments................................................................. 19
6.5 Authorization to Make Loans.............................................. 20
6.6 Use of Proceeds.......................................................... 20
SECTION 7. COLLATERAL REPORTING AND COVENANTS........................................ 21
7.1 Collateral Reporting .................................................... 21
7.2 Accounts Covenants ...................................................... 23
7.3 Inventory Covenants ..................................................... 24
7.4 Equipment Covenants...................................................... 25
7.5 Power of Attorney........................................................ 26
7.6 Right to Cure............................................................ 27
7.7 Access to Premises ...................................................... 28
SECTION 8. REPRESENTATIONS AND WARRANTIES ........................................... 28
8.1 Corporate Existence, Power and Authority; Subsidiaries................... 28
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TABLE OF CONTENTS
(continued)
Page
8.2 Financial Statements; No Material Adverse Change........................ 28
8.3 Chief Executive Office; Collateral Locations............................ 29
8.4 Priority of Liens; Title to Properties ................................. 29
8.5 Tax Returns ............................................................ 29
8.6 Litigation ............................................................. 29
8.7 Compliance with Other Agreements and Applicable Laws.................... 29
8.8 Acquisition of Purchased Assets......................................... 30
8.9 Capitalization ......................................................... 30
8.10 Employee Benefits ...................................................... 31
8.11 Accuracy and Completeness of Information ............................... 31
8.12 Survival of Warranties; Cumulative ..................................... 32
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS...................................... 32
9.1 Maintenance of Existence ............................................... 32
9.2 New Collateral Locations................................................ 32
9.3 Compliance with Laws, Regulations, Etc.................................. 32
9.4 Payment of Taxes and Claims ............................................ 32
9.5 Insurance .............................................................. 33
9.6 Financial Statements and Other Information.............................. 33
9.8 Encumbrances ........................................................... 35
9.9 Indebtedness ........................................................... 35
9.10 Loans, Investments, Guarantees, Etc .................................... 36
9.11 Dividends and Redemptions............................................... 37
9.12 Transactions with Affiliates ........................................... 37
9.13 Compliance with ERISA .................................................. 37
9.14 Year 2000 Matter ....................................................... 38
9.15 Adjusted Tangible Net Worth ............................................ 38
9.16 Costs and Expenses ..................................................... 38
9.17 Further Assurances ..................................................... 39
SECTION 10. EVENTS OF DEFAULT AND REMEDIES........................................... 39
10.1 Events of Default ....................................................... 39
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TABLE OF CONTENTS
(continued)
Page
10.2 Remedies ....................................................................... 41
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND
CONSENTS; GOVERNING LAW ........................................................ 43
11.1 Governing Law, Choice of Forum; Service of Process; Jury Trial Waiver .......... 43
11.2 Waiver of Notices .............................................................. 44
11.3 Amendments and Waivers ......................................................... 44
11.4 Indemnification ................................................................ 44
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS ............................................... 45
12.1 Term ........................................................................... 45
12.2 Notices ........................................................................ 46
12.3 Partial Invalidity ............................................................. 46
12.4 Successors ..................................................................... 46
12.5 Entire Agreement ............................................................... 47
12.6 Confidentiality ................................................................ 47
12.7 Publicity ...................................................................... 47
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Exhibit A Information Certificate
Schedule 6.3 Deposit Accounts
Schedule 7.3(i) Consignment Inventory
Schedule 8.3 Chief Executive Office; Collateral Locations
Schedule 8.4 Other Liens
Schedule 8.7 Exceptions to Compliance with Laws, Regulations, etc.
Schedule 8.8 Exceptions to Title to Purchased Assets
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated April 2,1999 is entered into by and
between CONGRESS FINANCIAL CORPORATION (SOUTHWEST), a Texas corporation
("Lender"), and ALLIED FASHION, INC., a Delaware corporation ("Borrower").
WITNESSETH:
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower, and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
All terms used herein which are defined in Article 1 or Article 9 of the
New York Uniform Commercial Code shall have the respective meanings given
therein unless otherwise defined in this Agreement. All references to the plural
herein shall also mean the singular and to the singular shall also mean the
plural. All references to Borrower and Lender pursuant to the definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns. The words "hereof", "herein", "hereunder",
"this Agreement" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not any particular provision of this
Agreement and as this Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. An Event of
Default shall exist or continue or be continuing until such Event of Default is
waived in accordance with Section 11.3. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meaning customarily given to
such term in accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Tangible Net Worth" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its subsidiaries (if any),
the amount equal to: (a) the difference between: (i) the aggregate net book
value of all assets of such Person and its subsidiaries, calculating the book
value of inventory for this purpose, as the lower of (A) cost as determined by
the retail method of accounting (which method of accounting includes the netting
of
markdowns from the Retail Sales Price or ticketed sales price under the
first-in-first-out method in accordance with GAAP) or (B) market value, and
after deducting from such book values all appropriate reserves in accordance
with GAAP (including all reserves for doubtful receivables, obsolescence,
depreciation and amortization) and (ii) the aggregate amount of the indebtedness
and other liabilities of such Person and its subsidiaries (including tax and
other proper accruals and accounts payable), plus (b) indebtedness of such
Person and its subsidiaries which is subordinated in right of payment to the
full and final payment of all of the Obligations on terms and conditions
acceptable to Lender, and redeemable preferred stock and junior notes permitted
hereunder, minus (c) goodwill, patents, trademarks, copyrights, franchises,
formulas, leasehold interests, leasehold improvements, non-compete agreements,
engineering plans, organization costs, and any other assets of Borrower that
would be treated as intangible assets on Borrower's balance sheet prepared in
accordance with GAAP.
1.3 "Appraised Inventory Value" shall mean, with respect to Eligible
Inventory, the appraised value of such Eligible Inventory, expressed as a
percentage of either the Value or the Retail Sales Price, as required by Lender,
determined as of any date on a "going out of business sale" basis, net of all
estimated liquidation expenses, shrinkage and markdowns, pursuant to an
appraisal conducted, at Borrower's expense, by an independent appraisal firm
acceptable to Lender in its sole and absolute discretion exercised in good faith
or such value as otherwise determined by Lender in its reasonable discretion; it
being understood by the parties hereto that such percentage shall be
seventy-three and one-half percent (73.5%) until such time that such percentage
shall be adjusted in accordance with this Section 1.3 hereof.
1.4 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time reasonably establish and revise
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrower under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii)
the assets or business of Borrower or any Obligor or (iii) the security
interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) to reflect any state of
facts which Lender determines in good faith constitutes an Event of Default or
may, with notice or passage of time or both, constitute an Event of Default.
Without limiting the generality of the foregoing, Lender (i) shall establish on
the date hereof and maintain throughout the term of this Agreement and
throughout any renewal term an Availability Reserve for an amount equal to two
(2) months of Borrower's gross rent as lessee for each leased premises of
Borrower which is either a distribution center or warehouse location or is
located in a state where a landlord may be entitled to a priority lien on
Collateral to secure unpaid rent and with respect to each such property the
landlord has not executed a form of waiver and consent reasonably acceptable to
Lender, (ii) may establish an additional Availability Reserve on the date
hereof, and from time to time hereafter, and maintain such reserve throughout
the term of this Agreement and throughout any renewal term in an amount
determined by Lender in its reasonable discretion to be sufficient to cover the
anticipated moving expenses and other costs associated with the transfer of
Inventory from each of Borrower's retail locations to another location for which
the landlord thereof has not executed a
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form of waiver and consent reasonably acceptable to Lender, (iii) upon an Event
of Default or an event that, with notice or passage of time or both, would be an
Event of Default, may establish and maintain an additional Availability Reserve
from time to time in an amount equal to the Dollar value of cash-on-hand in
registers maintained by Borrower, and (iv) may establish and maintain an
additional Availability Reserve from time to time in an amount equal to any
increase in shrinking Inventory from the amount reflected in the most recent
appraisal conducted by an outside appraiser satisfactory to Lender.
1.5 "Blocked Account" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New York or the State of North Carolina, and a day on
which First Union National Bank, or such other bank as Lender may from time to
time designate, and Lender are open for the transaction of business.
1.7 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.8 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.9 "Confidential Information" shall have the meaning set forth in
Section 12.6 hereof.
1.10 "Credit Card Agreements" shall mean all agreements now or hereafter
entered into by Borrower with any Credit Card Issuer or Credit Card Processor as
the same may now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.11 "Credit Card Issuer" shall mean any person who issues or whose
members issue credit cards used by customers of the Borrower to purchase goods,
including, without limitation, MasterCard or VISA bank credit or debit cards or
other bank credit or debit cards, and American Express, Discover, Diners Club,
Carte Blanche, and other non-bank credit or debit cards.
1.12 "Credit Card Processor" shall mean any servicing or processing agent
or any factor or financial intermediary who facilities, services, processes or
manages the credit authorization, billing transfer and/or payment from a Credit
Card Issuer or Credit Card Processor and other procedures with respect to any
sales transactions of the Borrower involving credit card or debit card purchases
by customers using credit cards or debit cards issued by any Credit Card Issuer.
1.13 "Credit Card Receivables" shall mean all Accounts consisting of the
present and future rights of Borrower to payment by Credit Card Issuers or
Credit Card Processors for merchandise sold and delivered to customers of
Borrower who have purchased such goods using a credit card or a debit card
issued by a Credit Card Issuer.
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1.14 "Eligible Inventory" shall mean Inventory consisting of finished
merchandise held for sale in the ordinary course of the business of Borrower
which are located either at one of Borrower's retail stores, its distribution
center or are in transit from one store location or distribution center to
another store location and which are acceptable to Lender based on the criteria
set forth below except, that, any and all Inventory located at a distribution
center or retail store within the State of Florida shall not be deemed Eligible
Inventory unless Lender has received a waiver or consent reasonably acceptable
to Lender with respect to such distribution center or retail store and executed
by the lessor thereof. In general, Eligible Inventory shall not include (a) raw
materials, (b) work-in-process; (c) components which are not part of finished
goods; (d) spare parts for equipment; (e) packaging and shipping materials; (f)
supplies used or consumed in Borrower's business; (g)Inventory at premises not
owned or controlled by Borrower except Inventory at retail locations of Borrower
which are leased or sub-leased by Borrower and are not sub-leased to another
Person, (h) Inventory in transit other than Inventory in transit described in
the immediately preceding sentence; (i) Inventory subject to a security interest
or lien in favor of any person other than Lender except those permitted in this
Agreement; (j) Inventory which has been sold and not delivered to a customer,
provided, that, Layaway Inventory shall be deemed Eligible Inventory to the
extent that it meets all other criteria set forth in this Section 1.14; (k)
Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (l) damaged and/or defective Inventory; (m)
Inventory held for return to vendors; (n) Inventory returned by customers and
not held for resale or otherwise used by a customer; (o) Inventory consisting of
samples and not held for resale; (p) display Inventory; (q) that portion of the
Value of Inventory attributable to markdowns not posted to the Inventory retail
system due to month-end cut-off, or to unearned discounts; and (r) Inventory
purchased or sold on consignment. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in its reasonable credit
judgment. Any Inventory which is not Eligible Inventory shall nevertheless be
part of the Collateral.
1.15 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.16 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.17 "ERISA Affiliate" shall mean any person required to be aggregated
with Borrower or any of its affiliates under Section 414(b) or 414(c) of the
Code or, for purposes of Section 412 of the Code, Sections 414(m) or 414(o) of
the Code.
1.18 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.19 "Excess Availability" shall mean the amount, as determined by
Lender, calculated at any time, equal to:
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(a) the lesser of (i) the amount of the Revolving Loans available
to Borrower as of such time (based on the applicable advance rate set forth in
Section 2.1 (a)(i) hereof multiplied by the Retail Sales Price or Appraised
Inventory Value of Eligible Inventory, as applicable, as determined by Lender),
subject to the sublimits and Availability Reserves from time to time
established by Lender hereunder and (ii) the Maximum Credit, minus
(b) the sum of: (i) the amount of all then outstanding and unpaid
Obligations, (ii) the aggregate amount of all trade payables of Borrower which
are more than sixty (60) days past due as of such time, (iii) the aggregate
amount of Borrower's book overdrafts, and (iv) the aggregate amount of
Borrower's past due lease and notes payable.
1.20 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.21 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.15 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender prior to
the date hereof.
1.22 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.23 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.24 "Inventory Advance Rate" shall mean the advance rate applicable to
Eligible Inventory as determined in accordance with Section 2.1(a)(i).
1.25 "Layaway Inventory" shall mean Inventory of Borrower for which a
customer of Borrower has made a cash deposit towards the purchase of such
Inventory and Borrower has retained title and possession of such Inventory.
1.26 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued, opened or provided by Lender for the account of Borrower or any Obligor
or (b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by Borrower of its obligations to such
issuer.
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1.27 "Loans" shall mean the Revolving Loans.
1.28 "Maximum Credit" shall mean, with reference to the Revolving Loans,
and the Letter of Credit Accommodations, the amount of Eight Million Dollars
($8,000,000).
1.29 "Obligations" shall mean any and all Revolving Loans, the Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.30 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.31 "Participant" shall mean any person which at any time participates
with Lender in respect of the Loans, the Letter of Credit Accommodations or
other Obligations or any portion thereof.
1.32 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.33 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including, without limitation, any corporation which
elects subchapter S status under the Internal Revenue Code of 1986, as amended),
business trust, limited liability company, unincorporated association, joint
stock corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.34 "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
1.35 "Purchase Agreements" shall mean, individually and collectively, the
Asset Purchase Agreement of even date herewith between Borrower and Seller,
together with bills of sale, quitclaim deeds, assignment and assumption
agreements and such other instruments of transfer as are referred to therein and
all side letters with respect thereto, and all agreements, documents and
instruments executed and/or delivered in connection therewith, as all of the
foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced; provided, that, the term "Purchase
Agreements" as used herein shall not include any of the "Financing Agreements"
as such term is defined herein.
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1.36 "Purchased Assets" shall mean all of the assets and properties
acquired by Borrower from Seller pursuant to the Purchase Agreements.
1.37 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.38 "Retail Sales Price" shall mean the retail sales price as reflected
in the Borrower's MIS System, net of markdowns from the original retail sales
price with respect thereto, for the types, categories and styles of inventory
included in the Eligible Inventory of Borrower.
1.39 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.40 "Seller" shall mean Variety Wholesalers, Inc., a North Carolina
corporation, and its successors and assigns.
1.41 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost as determined by the retail method
of accounting (which method of accounting includes the netting of markdowns from
the Retail Sales Price or ticketed sales price under the first-in-first-out
method, in accordance with GAAP) or (b) market value.
1.42 "Year 2000 Problem" shall have the meaning set forth in Section 9.14
hereof.
SECTION 2. CREDIT FACILITIES.
2.1 Revolving Loans.
(a) Subject to, and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the sum of:
(i) the least of:
(A) sixty-five percent (65%) of the Value of the
Eligible Inventory;
(B) thirty-five percent (35%) of the Retail Sales
Price of the Eligible Inventory;or
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(C) eighty-five percent (85%) of the Appraised
Inventory Value of Eligible Inventory; minus
(ii) the then undrawn amounts of outstanding Letter of Credit
Accommodations; multiplied by the applicable percentages as provided for in
Section 2.2(c)(i)(A) hereof; minus
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not
less than five (5) days prior notice to Borrower, reduce the lending formula(s)
with respect to Eligible Inventory to the extent that Lender determines in good
faith that: (A) the mix of such Inventory for any period has changed in any
materially adverse respect or (B) the Appraised Inventory Value of the Eligible
Inventory, or any category thereof, has decreased in any material respect;
provided, however, in the event that Lender reduces such lending formula(s)
based on a material decrease in the Appraised Inventory Value, pursuant to
clause (B) of this Section 2.1(b), Lender shall not further reduce such lending
formula(s) pursuant to clause (A) of this Section 2.1(b) based on the same
event, condition, contingency or risk that caused such material decrease in the
Appraised Inventory Value. In determining whether to reduce the lending
formula(s), Lender may consider events, conditions, contingencies or risks which
are also considered in determining Eligible Inventory or in establishing
Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans, the Letter of Credit Accommodations and other Obligations outstanding at
any time shall not exceed the Maximum Credit. In the event that the outstanding
amount of any component of the Loans and Letter of Credit Accommodations or the
aggregate amount of the outstanding Loans and Letter of Credit Accommodations
and other Obligations exceeds the amounts available under the lending formulas
set forth in Section 2.1 (a) hereof, the sublimits for Letter of Credit
Accommodations set forth in Section 2.2(d), or the Maximum Credit, as
applicable, such event shall not limit, waive or otherwise affect any rights of
Lender in that circumstance or on any future occasions and Borrower shall, upon
demand by Lender, which may be made at any time or from time to time,
immediately repay to Lender the entire amount of any such excess(es) for which
payment is demanded.
(d) To the extent Lender may revise the lending formula set forth
in Section 2.1 (a) hereof or establish new criteria or revise existing criteria
for Eligible Inventory so as to address any circumstance, condition, event or
contingency in a manner satisfactory to Lender, Lender shall not establish an
Availability Reserve for the same purpose. The amount of any Availability
Reserve established by Lender shall have a reasonable relationship to the event,
condition or other matter which is the basis for such reserve as reasonably
determined by Lender.
2.2 Letter of Credit Accommodations.
(a) Subject to, and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection
8
with the Letter of Credit Accommodations shall constitute additional Revolving
Loans to Borrower pursuant to this Section 2.
(b) In addition to any charges, fees or expenses charged by any
bank or issuer in connection with the Letter of Credit Accommodations, Borrower
shall pay to Lender a letter of credit fee at a rate equal to one and one
quarter percent (1.25%) per annum on the daily outstanding balance of the Letter
of Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month; provided,
however, that such letter of credit fee shall be increased, at Lender's option
without notice, to three and one quarter percent (3.25%) per annum for the
period on or after the date of termination or non-renewal of this Agreement, or
the date of the occurrence of an Event of Default. Such letter of credit fee
shall be calculated on the basis of a three hundred sixty (360) day year and
actual days elapsed and the obligation of Borrower to pay such fee shall survive
the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than:
(i) if the proposed Letter of Credit Accommodation is for
the purpose of purchasing Eligible Inventory, the sum of:
(A) the product of the Value of such Eligible
Inventory multiplied by one minus the Inventory Advance Rate under Sections 2.1
(a)(i)(A), (B) or (C) hereof, as applicable; plus
(B) freight, taxes, duty and other amounts which
Lender estimates must be paid in connection with such Inventory upon arrival and
for delivery to one of Borrower's locations for Eligible Inventory within the
United States of America; and
(ii) if the proposed Letter of Credit Accommodation is for
standby letters of credit guaranteeing the purchase of Eligible Inventory or for
any other purpose, an amount equal to one hundred percent (100%) of the face
amount thereof and all other commitments and obligations made or incurred by
Lender with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, the amount of
Revolving Loans which might otherwise be available to Borrower shall be reduced
by the applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed Five
Hundred Thousand Dollars ($500,000). At any time an Event of Default exists or
has occurred and is continuing, upon Lender's request, Borrower will either
furnish cash collateral to secure the reimbursement obligations to the issuer in
connection with any Letter of Credit Accommodations or furnish cash collateral
to Lender for the Letter of Credit Accommodations, and in either case, the
Revolving Loans otherwise
9
available to Borrower shall not be reduced as provided in Section 2.2(c) to the
extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including, but not limited to, any losses, claims, damages, liabilities, costs
and expenses due to any action taken by any issuer or correspondent with respect
to any Letter of Credit Accommodation. Borrower assumes all risks with respect
to the acts or omissions of the drawer under or beneficiary of any Letter of
Credit Accommodation and for such purposes the drawer or beneficiary shall be
deemed Borrower's agent. Borrower assumes all risks for, and agrees to pay, all
foreign, Federal, State and local taxes, duties and levies relating to any goods
subject to any Letter of Credit Accommodations or any documents, drafts or
acceptances thereunder. Borrower hereby releases and holds Lender harmless from
and against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise, unless caused by the
gross negligence or willful misconduct of Lender, with respect to or relating to
any Letter of Credit Accommodation. The provisions of this Section 2.2(e) shall
survive the payment of Obligations and the termination or non-renewal of this
Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation reasonably made by Lender, or any
other issuer or correspondent under or in connection with any Letter of Credit
Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not at any time an Event of Default exists or
has occurred and is continuing, (i) approve or resolve any questions of
non-compliance of documents, (ii) give any instructions as to acceptance or
rejection of any documents or goods, (iii) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, (iv) grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents, or (v) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit included in
the Collateral. Lender may take such actions either in its own name or in
Borrower's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit
10
Accommodation, shall be deemed to have been undertaken by Borrower to Lender and
to apply in all respects to Borrower.
SECTION 3. INTEREST AND FEES.
3.1. Interest.
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the rate of three-quarters
of one percent (.75%) per annum in excess of the Prime Rate, except that
Borrower shall pay to Lender interest, at Lender's option, without notice, at
the rate of two and three quarters percent (2.75%) per annum in excess of the
Prime Rate:
(i) on the non-contingent Obligations for the period from
and after the date of termination or non-renewal hereof, or the date of the
occurrence of an Event of Default, and for so long as such Event of Default is
continuing as determined by Lender and until such time as Lender has received
full and final payment of all such Obligations (notwithstanding entry of any
judgment against Borrower) and
(ii) on the Revolving Loans at any time outstanding in excess
of the amounts available to Borrower under Section 2 (whether or not such
excess(es) arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default). All interest accruing
hereunder on and after the occurrence of any of the events referred to in
Sections 3.1(a)(i) or 3.1(a)(ii) above shall be payable on demand.
(b) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate shall increase or decrease by an amount equal to each
increase or decrease in the Prime Rate effective on the first day of the month
after any change in such Prime Rate is announced based on the Prime Rate in
effect on the last day of the month in which any such change occurs. In no event
shall charges constituting interest payable by Borrower to Lender exceed the
maximum amount or the rate permitted under any applicable law or regulation, and
if any part or provision of this Agreement is in contravention of any such law
or regulation, such part or provision shall be deemed amended to conform
thereto.
3.2 Closing Fee. Borrower shall pay to Lender as a closing fee Eighty
Thousand Dollars ($80,000), which fee shall be fully earned as of and payable on
the date hereof. Lender and Borrower hereby acknowledge that Borrower has paid
to Lender Twenty-Five Thousand Dollars ($25,000) as a deposit against expenses
incurred by Lender. Such deposit shall be: (a) retained by Lender and credited
to the loan account of Borrower, less the cost of Lender's field examinations,
legal fees and other expenses directly related to the loan application and
credit review if the loans contemplated hereunder are funded or (b) retained by
Lender as a fee in addition to expenses payable by Borrower as set forth in
clause (a) hereof if the initial loans contemplated hereunder are not funded
prior to April 20,1999, whether as a result of Borrower's election not to do
business with Lender or a failure to fulfill any of the conditions of the
proposed financing as approved by Lender.
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3.3 Loan Servicing Fee. In addition to any fees or expenses payable by
Borrower under Section 9.16 hereof, Borrower shall pay to Lender an annual loan
servicing fee in an amount equal to Ten Thousand Dollars ($10,000), in respect
of Lender's services for each year (or part thereof) while this Agreement
remains in effect and for so long thereafter as any of the Obligations are
outstanding, which fee shall be fully earned as of the date hereof and on each
annual anniversary hereafter, such annual loan servicing fee to be payable on a
quarterly basis, in advance, with the first such quarterly payment payable on
the date hereof and on the first day of each quarter hereafter.
3.4 Compensation Adjustment.
(a) If after the date of this Agreement the introduction of, or
any change in, any law or any governmental rule, regulation, policy, guideline
or directive (whether or not having the force of law), or any interpretation
thereof, or compliance by Lender or any Participant therewith:
(i) subjects Lender to any tax, duty, charge or withholding
on or from payments due from Borrower (excluding franchise taxes imposed upon,
and taxation of the overall net income of, Lender or any Participant), or
changes the basis of taxation of payments, in either case in respect of amounts
due it hereunder, or
(ii) imposes or increases or deems applicable any reserve
requirement or other reserve, assessment, insurance charge, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by Lender or any Participant, or
(iii) imposes any other condition the result of which is to
increase the cost to Lender or any Participant of making, funding or maintaining
the Loans or Letter of Credit Accommodations or reduces any amount receivable by
Lender or any Participant in connection with the Loans or Letter of Credit
Accommodations, or requires Lender or any Participant to make payment calculated
by references to the amount of loans held or interest received by it, by an
amount deemed material by Lender or any Participant, or
(iv) imposes or increases any capital requirement or affects
the amount of capital required or expected to be maintained by Lender or any
Participant or any corporation controlling Lender or any Participant, and Lender
or any Participant reasonably determines that such imposition or increase in
capital requirements or increase in the amount of capital expected to be
maintained is based upon the existence of this Agreement or the Loans or Letter
of Credit Accommodations hereunder, all of which may be determined by Lender's
reasonable allocation of the aggregate of its impositions or increases in
capital required or expected to be maintained, and the result of any of the
foregoing is to increase the cost to Lender or any Participant of making,
renewing or maintaining the Loans or Letter of Credit Accommodations, or to
reduce the rate of return to Lender or any Participant on the Loans or Letter of
Credit Accommodations, then upon demand by Lender, Borrower shall pay to Lender,
and continue to make periodic payments to Lender or any Participant, such
additional amounts as may be necessary to compensate Lender or any Participant
for any such additional cost incurred or reduced rate of return realized.
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(b) A certificate of Lender claiming entitlement to compensation
as set forth above will create a rebuttable presumption that it is conclusive in
the absence of manifest error. Such certificate will set forth the nature of the
occurrence giving rise to such compensation, the additional amount or amounts to
be paid and the compensation and the method by which such amounts were
determined. In determining any additional amounts due from Borrower under this
Section 3.4, Lender shall act reasonably and in good faith and will, to the
extent that the increased costs, reductions, or amounts received or receivable
relate to the Lender's or a Participant's loans or commitments generally and are
not specifically attributable to the Loans and commitments hereunder, use
averaging and attribution methods which are reasonable and equitable and which
cover all loans and commitments under this Agreement by the Lender or such
Participant, as the case may be, whether or not the loan documentation for such
other loans and commitments permits the Lender or such Participant to receive
compensation costs of the type described in this Section 3.4.
SECTION 4. CONDITIONS PRECEDENT.
4.1 Conditions Precedent to Initial Loans and the Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory
to Lender, evidence that the Purchase Agreements have been duly executed and
delivered by and to the appropriate parties thereto and the transactions
contemplated under the terms of the Purchase Agreements have been consummated
prior to or contemporaneously with the making of the initial Loans to Borrower
hereunder; it being understood by the parties hereto that if the transactions
contemplated under the terms of the Purchase Agreements are not consummated on
or before April 20, 1999, notwithstanding any provision to the contrary
contained in this Agreement or the other Financing Agreements (including, but
not limited to Section 12.1(b) hereof), neither Lender nor Borrower shall have
any obligations to the other party hereunder or under the other Financing
Agreements; provided, however, that in such event, Borrower hereby agrees to pay
and satisfy in full the obligations of ING Equity Partners II, L.P. and its
successors or assigns to pay Lender's costs and expenses under that certain
Proposal Letter Agreement dated as of February 25,1999 addressed to George
Bellino of The Bellino Group, and that this Agreement and the other Financing
Agreements shall terminate as of the date of such event;
(b) Lender shall have received, in form and substance satisfactory
to Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination of any interest in and to any
assets and properties of Borrower, duly authorized, executed and delivered by it
or each of them, including, but not limited to, UCC termination statements for
all UCC financing statements and Lender shall have satisfied itself that it has
valid, perfected and first priority security interests in and liens upon the
Collateral and any other property which is intended as security for the
Obligations or the liability of any Obligor in respect thereto, subject only to
the security interests and liens permitted herein or in the other Financing
Agreements;
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(c) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including, without limitation, records of requisite
corporate action and proceedings which Lender may have requested in connection
therewith, such documents where requested by Lender or its counsel to be
certified by appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the assets
or business prospects of Borrower or the Allied Fashion for Less division of
Seller since the date of Lender's latest field examination and no change or
event shall have occurred which would materially impair the ability of Borrower
or any Obligor to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce the
Obligations or realize upon the Collateral;
(e) Lender shall have completed a field review of the Records and
of such other financial information, projections, budgets, business plans, cash
flows as Lender shall reasonably request from time to time, including, but not
limited to, current agings of receivables, current perpetual inventory records
and/or rollforwards of Accounts and Inventory through the date of closing
(including a physical count of the Inventory by a third party acceptable to
Lender), together with supporting documentation, including documentation with
respect to Inventory in-transit, goods in bonded warehouses or at other
third-party locations, that will enable Lender to accurately identify and verify
the Eligible Inventory at or before the date hereof in a manner reasonably
satisfactory to Lender, the results of which shall be reasonably satisfactory to
Lender;
(f) Borrower shall have used its best efforts to obtain, in form
and substance satisfactory to Lender, all consents, waivers, acknowledgments and
other agreements from lessors of all premises leased by Borrower, acknowledging
Lender's security interests in the Collateral, waivers by such persons of any
security interests, liens or other claims by such persons to the Collateral and
agreements permitting Lender access to, and the right to remain on, the premises
to exercise its rights and remedies and otherwise deal with the Collateral;
(g) all Credit Card Processors shall have been irrevocably
directed by the parties to Credit Card Agreements, and such Credit Card
Processors shall agree, that all proceeds of Credit Card Receivables shall be
remitted to the Blocked Account;
(h) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(i) Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrower with respect to the
Purchase Agreements, the Financing Agreements and the security interests and
liens of Lender with respect to the Collateral and such other matters as Lender
may reasonably request;
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(j) the Borrower shall have Excess Availability, as determined by
Lender as of the date hereof, in an amount not less than One Million Five
Hundred Thousand Dollars ($1,500,000) after giving effect to the initial Loans
made or to be made hereunder and the payment of all fees and expenses payable
upon the consummation of the initial transactions contemplated by this
Agreement, and provided that Borrower's accounts payable, notes and leases
payable and book overdrafts (including those acquired or to be acquired by
Borrower from Allied Fashion for Less) are acceptable to Lender in all respects;
(k) Crestar Bank, Lender and Borrower shall have entered into an
agreement, pursuant to which Crestar Bank has acknowledged Lender's security
interests in the funds deposited into Borrower's collection account with Crestar
Bank and has agreed to direct all such funds to the Blocked Account or as Lender
otherwise directs;
(l) Lender shall have received, in form and substance satisfactory
to Lender, an executed copy of a Blocked Account agreement, pursuant to Section
6.3(a)(ii) hereof, among Lender, Borrower and First Union National Bank;
(m) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender;
(n) Lender shall have received, in form and substance satisfactory
to Lender, an estimated pro-forma balance sheet of Borrower reflecting the
initial transactions contemplated hereunder, including, but not limited to, (i)
the consummation of the acquisition of the Purchased Assets by Borrower from
Seller and the other transactions contemplated by the Purchase Agreements and
(ii) the Loans and Letter of Credit Accommodations provided by Lender to
Borrower on the date hereof and the use of the proceeds of the initial Loans as
provided herein, accompanied by a certificate, dated of even date herewith, of
the chief financial officer of Borrower stating that such pro-forma balance
sheet represents the reasonable, good faith opinion of such officer as to the
subject matter thereof as of the date of such certificate;
(o) Lender shall have received, in form and substance satisfactory
to Lender, evidence that Borrower has received net cash proceeds from a cash
equity capital contribution to Borrower of not less than Six Million Eight
Hundred Ninety-Five Thousand Dollars ($6,895,000) and such proceeds have been
applied to the purchase price of the Purchased Assets payable pursuant to the
Purchase Agreements;
(p) the conditions precedent set forth in this Section 4.1 shall
have been satisfied and the initial funding of the Loans contemplated hereunder
shall have occurred on or prior to April 20,1999;
(q) Lender shall have received the Information Certificate
executed by Borrower and a certificate, in form and substance satisfactory to
Lender, certifying that all representations and warranties contained herein and
in the other Financing Agreements, including, without limitation, the
information set forth in the Information Certificate and the Schedules hereto,
are true and correct in all material respects and any exceptions to such
certificate or changes to the Information Certificate or Schedules hereto (other
than changes to
15
Schedule 8.7 deleting therefrom Borrower's violation of certain regulations of
the Occupational Safety and Hazard Act of 1970, as amended) shall be acceptable
to Lender in its sole discretion;
(r) receipt of physical inventory count results as conducted by an
independent third party reasonably acceptable to Lender;
(s) Lender shall have received evidence, in form and substance
reasonably satisfactory to Lender, that any funds released by the Escrow Agent
under the Purchase Price Escrow Agreement (as defined in the Purchase
Agreements) to Borrower shall be paid directly into the Payment Account; and
(t) if Borrower acquires any federally registered trademarks or
the rights to any applications therefor pending with the United States Patent
and Trademark Office from Seller pursuant to the Purchase Agreements, Borrower
shall have executed a Collateral Assignment of Trademarks, in form and substance
satisfactory to Lender, in favor of Lender with respect to such existing or
future trademarks.
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter of Credit Accommodations to
Borrower, including the initial Loans and Letter of Credit Accommodations and
any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
4.3 Condition Subsequent to Initial Loans and Letter of Credit
Accommodations.
Within sixty (60) days of the date that the initial Loans
contemplated hereunder are made, each of the depository banks used by Borrower's
retail store locations for the deposit of receipts from the sale of merchandise
or for the deposit of other proceeds of Collateral and other property which is
security for the Obligations shall have been notified of Lender's security
interests therein and shall have been irrevocably authorized and directed to
send all funds on deposit with such banks only to the Blocked Account or as
Lender otherwise directs, and the failure to complete this condition to Lender's
satisfaction within the time frame set forth herein shall constitute an Event of
Default.
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SECTION 5. GRANT OF SECURITY INTEREST.
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the "Collateral"):
5.1 Accounts, Credit Card Receivables and other indebtedness owed to the
Borrower;
5.2 all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, chooses
in action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
investment property, letters of credit, proceeds of letters of credit, bankers'
acceptances and guaranties;
5.3 all present and future monies, securities, credit balances,
deposits, deposit accounts and other property of Borrower now or hereafter held
or received by or in transit to Lender or its affiliates or at any other
depository or other institution from or for the account of Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts, Credit Card Receivables, and other
Collateral, including, without limitation, (a) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (b) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (c) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Accounts, Credit Card Receivables, or other Collateral,
including, without limitation, returned, repossessed and reclaimed goods, and
(d) deposits by and property of account debtors or other persons securing the
obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Records; and
5.7 all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION.
6.1 Borrower's Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, all Letter of
Credit Accommodations and all other Obligations and the Collateral, (b) all
payments made by or on behalf of Borrower and
17
(c) all other appropriate debits and credits as provided in this Agreement,
including, without limitation, fees, charges, costs, expenses and interest. All
entries in the loan account(s) shall be made in accordance with Lender's
customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrower shall establish and maintain, at its expense, deposit
account arrangements and merchant payment arrangements with the banks set forth
on Schedule 6.3 and after prior written notice to Lender, such other banks as
Borrower may hereafter select as are acceptable to Lender. The banks set forth
on Schedule 6.3 constitute all of the banks with whom Borrower has deposit
account arrangements and merchant payment arrangements as of the date hereof and
identifies each of the deposit accounts at such banks to a retail store location
of Borrower or otherwise describes the nature of the use of such deposit account
by Borrower.
(i) Borrower shall deposit all proceeds from sales of
Inventory in every form (including, without limitation, cash, checks, credit
card sales drafts, credit card sales or charge slip or receipts and other forms
of daily store receipts) from each retail store location of Borrower, and all
other proceeds of Collateral, on each Business Day into the deposit accounts of
Borrower used solely for such purpose and identified to each retail store
location as set forth on Schedule 6.3. Borrower shall irrevocably authorize and
direct in writing, in form and substance satisfactory to Lender, each of the
banks into which proceeds from sales of Inventory from each retail store
location of Borrower and any and all other proceeds of Collateral are at any
time deposited as provided above to send by wire transfer on a daily basis all
funds deposited in such account, and shall irrevocably authorize and direct in
writing its account debtors, Credit Card Issuers and Credit Card Processors to
directly remit payments on its Accounts, Credit Card Receivables and all other
payments constituting proceeds of Inventory to the Blocked Accounts described in
Section 6.3(a)(ii) below. Such authorizations and directions shall not be
rescinded, revoked or modified without the prior written consent of Lender.
(ii) Borrower shall establish and maintain, at its expense,
pursuant to an agreement described in the following sentence, a blocked account
with such bank or banks as are acceptable to Lender (each a "Blocked Account"
and collectively the "Blocked Accounts"). Each bank at which a Blocked Account
is established shall enter into an agreement, in form and substance satisfactory
to Lender, providing (unless otherwise agreed to by Lender) that all items
received or deposited in such Blocked Account are the Collateral of Lender, that
the depository bank has no lien upon, or right to setoff against, the Blocked
Accounts, the items received for
18
deposit therein, or the funds from time to time on deposit therein, and that the
depository bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into such Blocked
Account to such bank account of Lender as Lender may from time to time designate
for such purpose (the "Payment Account"). Borrower agrees that all amounts
deposited in the Blocked Account[s] or other funds received and collected by
Lender, whether as proceeds of Inventory, the collection of Accounts or other
Collateral or otherwise shall be the Collateral of Lender.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon final
collection) to the Obligations on the Business Day following the date of receipt
of immediately available funds by Lender in the Payment Account, or on the
Business Day following the date of receipt of funds that are not immediately
available to Lender in the Payment Account, as applicable. For purposes of
calculating the amount of the Revolving Loans available to Borrower such
payments will be applied (conditional upon final collection) to the Obligations
on the Business Day of receipt by Lender in the Payment Account, if such
payments are received within sufficient time (in accordance with Lender's usual
and customary practices as in effect from time to time) to credit Borrower's
loan account on such day, and if not, then on the next Business Day. If no
monetary obligations by Borrower are outstanding on any day, Borrower shall pay
interest at the applicable rate set forth in Section 3.1(a) on the amount of
any payments or other funds that are received by Lender (irrespective of the
characterization whether receipts are owned by Lender or Borrower) for such day.
(c) Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, cash, checks, credit
card sales drafts, credit card sales or charge slips or receipts, notes, drafts
and all forms of daily store receipts or any other payment relating to and/or
proceeds from sales of Inventory or other Collateral which come into their
possession or under their control and immediately upon receipt thereof, shall
deposit or cause the same to be deposited in the Blocked Accounts, or remit the
same or cause the same to be remitted, in kind, to Lender. In no event shall any
such monies, checks, credit card sales drafts, credit card sales or charge slips
or receipts, notes, drafts or other payments be commingled with Borrower's own
funds. Borrower agrees to reimburse Lender on demand for any amounts owed or
paid to any bank at which a Blocked Account is established or any other bank or
person involved in the transfer of funds to or from the Blocked Accounts arising
out of Lender's payments to or indemnification of such bank or person, unless
such payment or indemnification obligation of Lender was a result of Lender's
gross negligence or willful misconduct. The obligation of Borrower to reimburse
Lender for such amounts pursuant to this Section 6.3 shall survive the
termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrower or for the
account of Borrower (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
whether or not then due, in such order and manner as Lender determines. At
Lender's option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing Agreements may be
charged
19
directly to the loan accounts of Borrower. Borrower shall make all payments to
Lender on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Lender is required
to surrender or return such payment or proceeds to any Person for any reason,
then the Obligations intended to be satisfied by such payment or proceeds shall
be reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Lender. Borrower
shall be liable to pay to Lender, and docs hereby indemnify and hold Lender
harmless for the amount of any payments or proceeds surrendered or returned.
This Section 6.4 shall remain effective notwithstanding any contrary action
which may be taken by Lender in reliance upon such payment or proceeds. This
Section 6.4 shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested Loan. Requests received after
1:45 p.m. (New York time) on any day shall be deemed to have been made as of the
opening of business on the immediately following Business Day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrower when deposited to the credit of Borrower or otherwise disbursed or
established in accordance with the instructions of Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each of
the persons listed in the disbursement direction letter furnished by Borrower to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrower pursuant to the provisions
hereof shall be used by Borrower only for the acquisition under the Purchase
Agreements and for general operating, working capital and other proper corporate
purposes of Borrower not otherwise prohibited by the terms hereof. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Loans to be
considered a "purpose credit" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended.
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SECTION 7. COLLATERAL REPORTING AND COVENANTS.
7.1 Collateral Reporting. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender:
(a) on a monthly basis, on or before the tenth (10th) Business Day
after the closing date for the immediately preceding monthly period for such
period or more frequently Lender may reasonably request:
(i) perpetual inventory reports;
(ii) inventory reports by category;
(iii) summary agings of accounts payable, lease payables and
other payables;
(iv) summary reports of sales for each category of Inventory;
(v) summary reports on sales and use tax collections,
deposits and payments, including monthly sales and use tax accruals;
(vi) reports on Accounts, Credit Card Receivables, and other
indebtedness owed to Borrower, including aggregate outstanding amounts by
category, payments, accruals and returns and other credits;
(vii) a certificate from an authorized officer of Borrower
representing that Borrower has made payment of sales and use taxes during such
month or, at Lender's request, other evidence of such payment; and
(viii) a schedule of the Inventory of Borrower by retail store
and warehouse location of Borrower, setting forth the aggregate cost and Retail
Sales Price of such Inventory located at each such retail store or warehouse
location;
(b) on the Monday of each week, as of the immediately preceding
Business Day, or more frequently as Lender may reasonably request, a schedule of
the Inventory of Borrower, setting forth the aggregate cost and Retail Sales
Price of such Inventory;
(c) on the Monday of each week for the immediately preceding week
ending on the close of business on the Friday of that week or more frequently as
Lender may reasonable request:
(i) reports of deposits in each of Borrower's depository
accounts and in the Blocked Account and amounts retained by Borrower, together
with the separate amounts thereof arising from cash sales, Credit Card
Receivables;
(ii) except as otherwise agreed in writing by Lender, reports
of the costs and other information as required by Lender of Inventory and
other goods which are either
21
acquired by Borrower with Letter of Credit Accommodations which are the subject
of bills of lading and which have not been delivered to Borrower at the
permitted locations of Eligible Inventory in the United States;
(iii) summary reports of sales of Inventory, indicating gross
sales, returns, allowances and net sales; and
(iv) summary reports of all Inventory purchases (including
all costs related thereto, such as freight, duty and taxes) and identifying
items of Inventory in transit to Borrower related to the applicable documentary
letter of credit and/or bill of lading number,
(d) on a quarterly basis, on or before the tenth (10th) Business
Day after the end of each of Borrower's fiscal quarters for the immediately
preceding fiscal quarter period, or more frequently as Lender may reasonably
request:
(i) reports by retail store location of sales and operating
profits for each such retail store location; and
(ii) agings of accounts receivable;
(e) upon Lender's reasonable request:
(i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank statements;
(ii) copies of shipping and delivery documents;
(iii) copies of purchase orders, invoices and delivery
documents for Inventory and Equipment acquired by Borrower; and
(iv) the results of periodic counts of Inventory performed by
an independent firm satisfactory to Lender,
(f) as soon as available, but in any event not later than ten (10)
days after receipt by Borrower, the monthly statements received by Borrower from
any Credit Card Issuers or Credit Card Processors, together with such additional
information with respect thereto as shall be sufficient to enable Lender to
monitor the transactions pursuant to the Credit Card Agreements; and
(g) such other reports as to the Collateral or other property
which is security for the Obligations, projections, budgets, business plans,
statements of cash flow and other information as Lender shall reasonably request
from time to time.
If any of Borrower's records or reports of the Collateral or other property
which is security for the Obligations are prepared or maintained by an
accounting service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports, and related documents to Lender and to follow Lender's
22
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7-2 Accounts Covenants.
(a) No credit, discount, allowance or extension or agreement for
any of the foregoing shall be granted to any Credit Card Issuer or Credit Card
Processor except in the ordinary course of Borrower's business in accordance
with its most recent past practices and policies. So long as no Event of Default
exists or has occurred and is continuing, Borrower may settle, adjust or
compromise any claim, offset, counterclaim or dispute with any Credit Card
Issuer or Credit Card Processor in the ordinary course of Borrower's business in
accordance with its most recent past practices and policies. At any time that an
Event of Default exists or has occurred and is continuing, Lender shall, at its
option, have the exclusive right to settle, adjust or compromise any claim,
offset, counterclaim or dispute with account debtors, Credit Card Issuers or
Credit Card Processors or grant any credits, discounts or allowances.
(b) Borrower shall notify Lender promptly of:
(i) any notice of a material default by Borrower under any
of the Credit Card Agreements or of any default which might result in the Credit
Card Issuer or Credit Card Processor ceasing to make payments or suspending
payments to Borrower,
(ii) any notice from any Credit Card Issuer or Credit Card
Processor that such person is ceasing or suspending, or will cease or suspend,
any present or future payments due or to become due to Borrower from such
person, or that such person is terminating or will terminate any of the Credit
Card Agreements; and
(iii) the failure of Borrower to comply with any material
terms of the Credit Card Agreements or any terms thereof which might result in
the Credit Card Issuer or Credit Card Processor ceasing or suspending payments
to Borrower.
(c) With respect to each Account:
(i) the amounts shown on any invoice delivered to Lender or
schedule thereof delivered to Lender shall be true and complete;
(ii) no payments shall be made thereon except payments
delivered to Lender pursuant to the terms of this Agreement;
(iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any Credit Card Issuer or Credit
Card Processor, except as reported to Lender in accordance with this Agreement
and except for credits, discounts, allowances or extensions made or given in the
ordinary course of Borrower's business in accordance with practices and policies
previously disclosed to Lender; and
(iv) none of the transactions giving rise thereto will
violate any applicable State or Federal Laws or regulations, all documentation
relating thereto will be legally
23
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.
(d) Lender may, at any time or times that an Event of Default
exists or has occurred:
(i) notify any or all account debtors, Credit Card Issuers
and Credit Card Processors that the Accounts have been assigned to Lender and
that Lender has a security interest therein and Lender may direct any or all
account debtors, Credit Card Issuers and Credit Card Processors to make payments
of Accounts directly to Lender,
(ii) extend the time of payment of, compromise, settle or
adjust for cash, credit, return of merchandise or otherwise, and upon any terms
or conditions, any and all Accounts or other obligations included in the
Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations;
(iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its failure to collect or enforce the payment thereof or for the
negligence of its agents or attorneys with respect thereto except, for, Lender's
failure to collect or enforce the foregoing due to Lender's gross negligence or
intentional misconduct; and
(iv) take whatever other action Lender may deem reasonably
necessary or desirable for the protection of its interests.
At any time that an Event of Default exists or has occurred and is continuing,
at Lender's request, all invoices and statements sent to any account debtor,
Credit Card Issuer or Credit Card Processor shall state that the Accounts due
from such account debtor, Credit Card Issuer or Credit Card Processor and such
other obligations have been assigned to Lender and are payable directly and only
to Lender and Borrower shall deliver to Lender such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory:
(a) Borrower shall at all times maintain inventory records
reasonably satisfactory to Lender, keeping correct and accurate records
itemizing and describing the kind, type, quality and quantity of Inventory,
Borrower's cost therefor, the Retail Sales Price thereof and daily withdrawals
therefrom and additions thereto;
(b) Borrower shall cause a third party firm reasonably acceptable
to Lender to conduct a complete physical count of the Inventory at a minimum of
once over every twelve (12) month period (whether by cycle count or otherwise),
except, that, (i) upon the occurrence of an Event of Default which results in an
acceleration of payment of all Obligations pursuant to Section 10.2(b) hereof,
such physical count shall be conducted at any time Lender may request and (ii)
upon the occurrence of an Event of Default which does not result in such
acceleration of payment of all Obligations, such physical count shall be
conducted at any time as Lender may
24
request but no more than once in any three (3) month period, and promptly
following any such physical count, such firm shall supply Lender with a report
in the form and with such specificity as may be reasonably satisfactory to
Lender concerning such physical count;
(c) Borrower shall not remove any Inventory from the locations set
forth or permitted herein, without the prior written consent of Lender, except
for sales of Inventory in the ordinary course of Borrower's business and except
to move Inventory directly from one location set forth or permitted herein to
another such location;
(d) upon Lender's request, Borrower shall, at its expense, no more
than one time in any twelve (12) month period, but at any time or times as
Lender may request upon the occurrence of an Event of Default, deliver or cause
to be delivered to Lender written reports or appraisals as to the Inventory in
form, scope and methodology acceptable to Lender by an appraiser acceptable to
Lender, addressed to Lender or upon which Lender is expressly permitted to rely
(with the understanding that Lender may establish Availability Reserves as
Lender may deem advisable in its reasonable discretion based upon the results of
such updated appraisals in accordance with Section 1.4 and 2.1 hereof);
(e) Borrower shall produce, use, store and maintain the Inventory,
with all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with applicable laws (including, but not
limited to, the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto);
(f) Borrower assumes all responsibility and liability arising from
or relating to the production, use, sale or other disposition of the Inventory;
(g) Borrower shall not sell Inventory to any customer on approval,
or any other basis which entitles the customer to return or may obligate
Borrower to repurchase such Inventory with the exception of Inventory sold in
the ordinary course of Borrower's business subject to Borrower's normal and
customary return policy;
(h) Borrower shall keep the Inventory in good and marketable
condition;
(i) Borrower shall not, without prior written notice to Lender,
acquire or accept any Inventory on consignment or approval except as set forth
on Schedule 7.3(1) hereto; and
(j) upon the occurrence of an Event of Default, Borrower shall not
return any Inventory to its vendors without the prior consent of Lender.
7.4 Equipment Covenants. With respect to the Equipment:
(a) upon Lender's request, Borrower shall, at its expense, at any
time or times as Lender may request on or after an Event of Default, deliver or
cause to be delivered to Lender written reports or appraisals as to the
Equipment in form, scope and methodology acceptable to Lender and by an
appraiser acceptable to Lender;
25
(b) Borrower shall keep the Equipment in good order, repair,
running and marketable condition (ordinary wear and tear excepted);
(c) Borrower shall use the Equipment with all reasonable care and
caution and in accordance with applicable standards of any insurance and in
conformity with all applicable laws;
(d) the Equipment is and shall be used in Borrower's business and
not for personal, family, household or farming use;
(e) Borrower shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or to
move Equipment directly from one such location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrower in the ordinary course of business;
(f) the Equipment is now and shall remain personal property and
Borrower shall not permit any of the Equipment to be or become a part of or
affixed to real property; and
(g) Borrower assumes all responsibility and liability arising from
the use of the Equipment
7.5 Power of Attorney. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to:
(a) at any time an Event of Default or event with notice or
passage of time or both would constitute an Event of Default exists or has
occurred and is continuing;
(i) demand payment on Accounts or other proceeds of
Inventory or other Collateral;
(ii) enforce payment of Accounts, Credit Card,Receivables or
other obligations included in the Collateral by legal proceedings or otherwise;
(iii) exercise all of Borrower's rights and remedies to
collect any Account, Credit Card Receivables or other proceeds of Inventory or
other Collateral;
(iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Lender deems advisable;
(v) settle, adjust, compromise, extend or renew an Account;
(vi) discharge and release any Account, Credit Card
Receivables or other obligations included in the Collateral;
(vii) prepare, file and sign Borrower's name on any proof of
claim in bankruptcy or other similar document against an account debtor;
26
(viii) notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Lender, and
open and dispose of all mail addressed to Borrower; and
(ix) do all acts and things which are necessary, in Lender's
determination, to fulfill Borrower's obligations under this Agreement and the
other Financing Agreements; and
(b) at any time, subject to the terms of the agreement(s) relating
to the Blocked Account(s) to:
(i) take control in any manner of any item of payment or
proceeds thereof;
(ii) have access to any lockbox or postal box into which
Borrower's mail is deposited;
(iii) endorse Borrower's name upon any items of payment or
proceeds thereof and deposit the same in the Lender's account for application to
the Obligations;
(iv) endorse Borrower's name upon any chattel paper,
document, instrument, invoice, or similar document or agreement relating to any
Account or Credit Card Receivables or any goods pertaining thereto or any other
Collateral;
(v) sign Borrower's name on any verification of Accounts or
Credit Card Receivables and notices thereof to account debtors; and
(vi) execute in Borrower's name and file any UCC financing
statements or amendments thereto.
Borrower hereby releases Lender and its officers, employees and designees from
any liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Lender's own gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option: (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower; (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral; and (c) pay any amount, incur any expense or perform any act
which, in Lender's judgment, is necessary or appropriate to preserve, protect,
insure or maintain the Collateral and the rights of Lender with respect thereto.
Lender may add any amounts so expended to the Obligations and charge Borrower's
account therefor, such amounts to be repayable by Borrower on demand. Lender
shall be under no obligation to effect such cure, payment or bonding and shall
not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
7.6 shall be without prejudice to any right to assert an Event of Default
hereunder and to proceed accordingly.
27
7.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrower:
(a) Lender or its designee shall have complete access to all of
Borrower's premises during normal business hours and after reasonable notice to
Borrower, or at any time and without notice to Borrower if an Event of Default
exists or has occurred and is continuing, for the purposes of inspecting,
verifying and auditing the Collateral and all of Borrower's books and records,
including, without limitation, the Records;
(b) Borrower shall promptly furnish to Lender such copies of such
books and records or extracts therefrom as Lender may request; and
(c) use during normal business hours such of Borrower's personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Accounts and Credit Card Receivables and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES.
Borrower hereby represents and warrants to Lender as of the date of the
initial funding of the Loans, the following (which shall survive the execution
and delivery of this Agreement), the truth and accuracy of which are a
continuing condition of the making of Loans and the providing of Letter of
Credit Accommodations by Lender to Borrower:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Borrower is
a corporation duly organized and in good standing under the laws of its state of
incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on Borrower's financial condition,
results of operation or business or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions contemplated hereunder and thereunder
are all within Borrower's corporate powers, have been duly authorized and are
not in contravention of law or the terms of Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which Borrower is a party or by which Borrower or
its property are bound. This Agreement and the other Financing Agreements
constitute legal, valid and binding obligations of Borrower enforceable in
accordance with their respective terms. Borrower does not have any subsidiaries
except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrower which have been delivered by Borrower to Lender
have been prepared consistent with previous accounting policies and practices
(which were established to enable the inclusion of the financial statements of
the Allied Fashion for Less division with and into the consolidated financial
statements of Seller, which were prepared in accordance with GAAP) and fairly
present the financial condition and the results of operations of Borrower as of
the dates and for the periods set forth therein; it being understood by Lender
that the working capital of
28
Borrower as set forth in such financial statements have been calculated by the
accounting firm of Deloitte and Touche. Except as disclosed in any interim
financial statements furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent financial statements furnished by Borrower to Lender prior to
the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in
Schedule 8.3 hereto, subject to the right of Borrower to establish new locations
in accordance with Section 9.2 below. Schedule 8.3 correctly identifies any of
such locations which are not owned by Borrower and sets forth the owners and/or
operators thereof.
8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has good
and marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Lender and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timely
manner all tax returns, reports and declarations which are required to be filed
by it (without requests for extension except as previously disclosed in writing
to Lender). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets or business of
Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Except as
otherwise set forth on Schedule 8.7 hereto, Borrower is not in default in any
material respect under, or in violation in any material respect of any of the
terms of, any agreement, contract, instrument,
29
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority.
8.8 Acquisition of Purchased Assets.
(a) The Purchase Agreements and the transactions contemplated
thereunder have been duly executed, delivered and performed in accordance with
their terms by the respective parties thereto in all respects, including the
fulfillment (not merely the waiver, except as may be disclosed to Lender and
consented to in writing by Lender) of all conditions precedent set forth therein
and giving effect to the terms of the Purchase Agreements and the assignments to
be executed and delivered by Seller (or any of its affiliates or subsidiaries)
thereunder, and, except as set forth on Schedule 8.8 hereto, Borrower acquired
and has good and marketable title to the Purchased Assets, free and clear of all
claims, liens, pledges and encumbrances of any kind, except as permitted
hereunder.
(b) All actions and proceedings, required by the Purchase
Agreements, applicable law or regulation (including, but not limited to,
compliance with the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as
amended) have been taken and the transactions required thereunder have been duly
and validly taken and consummated.
(c) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of the
transactions described in the Purchase Agreements and no governmental or other
action or proceeding has been threatened or commenced, seeking any injunction,
restraining order or other order which seeks to void or otherwise modify the
transactions described in the Purchase Agreements.
(d) Borrower has delivered, or caused to be delivered, to Lender,
true, correct and complete copies of the Purchase Agreements.
8.9 Capitalization.
(a) Ninety-seven percent (97%) of the primary issued and
outstanding shares of capital stock of Borrower are directly and beneficially
owned and held by Hampshire Equity Partners II, L.P. (as successor in interest
to ING Equity Partners II, L.P.). All issued and outstanding shares of capital
stock of Borrower have been duly authorized and are fully paid and
non-assessable, free and clear of all claims, liens, pledges and encumbrances of
any kind, except as disclosed in writing to Lender.
(b) Borrower is solvent and will continue to be solvent after the
creation of the Obligations, the security interests of Lender and the other
transaction contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business and all businesses in
which it is about to engage. The assets and properties of Borrower at a fair
valuation and at their present fair salable value are, and will be, greater than
the Indebtedness of Borrower, and including subordinated and contingent
liabilities computed at the amount which,
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to the best of Borrower's knowledge, represents an amount which can reasonably
be expected to become an actual or matured liability.
(c) Hampshire Equity Partners II, L.P. (as successor in interest
to ING Equity Partners II, L.P.) has on or before the date that the initial
Loans are funded hereunder, made a cash equity capital contribution to Borrower
in an aggregate amount not less than Six Million Eight Hundred Ninety-Five
Thousand Dollars ($6,895,000) as consideration for shares of capital stock of
Borrower consisting of common stock and the proceeds of such cash equity capital
contribution have been applied, contemporaneously herewith, to the purchase
price for the Purchased Assets.
8.10 Employee Benefits.
(a) Borrower has not engaged in any transaction in connection with
which Borrower or any of its ERISA Affiliates is subject to either a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section
4975 of the Code.
(b) No liability to the Pension Benefit Guaranty Corporation
(other than liability for premiums) has been or is expected by Borrower to be
incurred with respect to any employee pension benefit plan of Borrower or any of
its ERISA Affiliates. There has been no reportable event (within the meaning of
Section 4043(c) of ERISA) or any other event or condition with respect to any
employee pension benefit plan of Borrower or any of its ERISA Affiliates which
presents a material risk of termination of any such plan by the Pension Benefit
Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower or
any of its ERISA Affiliates is required under Section 302 of ERISA and Section
412 of the Code to have paid under the terms of each employee pension benefit
plan as contributions to such plan as of the last day of the most recent fiscal
year of such plan ended prior to the date hereof, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, exists with respect to any such employee pension benefit
plan.
(d) The current value of all vested accrued benefits under all
employee pension benefit plans maintained by Borrower that are subject to Title
IV of ERISA does not exceed the current value of the assets of such plans
allocable to such vested accrued benefits. The terms "current value" and
"accrued benefit" have the meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has
ever been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.11 Accuracy and Completeness of Information. All information furnished
by or on behalf of Borrower in writing to Lender in connection with this
Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material
31
adverse affect on the business, assets or prospects of Borrower, which has not
been fully and accurately disclosed to Lender in writing.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS.
9.1 Maintenance of Existence. Borrower shall at all times preserve,
renew and keep in full force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, trade names, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender forty-five (45) days prior written notice
of any proposed change in its corporate name, which notice shall set forth the
new name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 New Collateral Locations. Borrower may open any new location within
the continental United States provided Borrower (a) gives Lender forty-five (45)
days prior written notice of the intended opening of any such new location, and
(b) executes and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem reasonably
necessary or desirable to protect its interests in the Collateral at such
location, including, without limitation, UCC financing statements and, if
Borrower leases such new location, uses its best efforts to provide a landlord
waiver or subordination in form and substance reasonably satisfactory to Lender,
or, in the alternative, Lender may apply an Availability Reserve, all in a
manner consistent with the Availability Reserve established to cover rent as
defined in Section 1.4 hereof.
9.3 Compliance with Laws, Regulations, Etc. Except as provided on
Schedule 8.7 hereto, Borrower shall, at all times, comply in all material
respects with all laws, rules, regulations, licenses, permits, approvals and
orders applicable to it and duly observe all requirements of any Federal, State
or local governmental authority, including, without limitation, the Employee
Retirement Security Act of 1974, as amended, the Occupational Safety and Hazard
Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and
all statutes, rules, regulations, orders, permits and stipulations relating to
environmental pollution and employee health and safety, including, without
limitation, all of the Environmental Laws.
9.4 Payment of Taxes and Claims. Borrower shall duly pay and discharge all
taxes, assessments, contributions and governmental charges upon or against it or
its properties or
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assets, except for taxes the validity of which are being contested in good faith
by appropriate proceedings diligently pursued and available to Borrower and with
respect to which adequate reserves have been set aside on its books. If, at any
time, Lender assigns, or sells participations in, all or any part of the Loans,
the Letter of Credit Accommodations or any other interest herein to a foreign
financial institution or other foreign Person, Borrower shall be liable for any
tax or penalties imposed on Lender as a result of the financing arrangements
provided for herein and Borrower agrees to indemnify and hold Lender harmless
with respect to the foregoing, and to repay to Lender on demand the amount
thereof, and until paid by Borrower such amount shall be added and deemed part
of the Loans, provided, that, nothing contained herein shall be construed to
require Borrower to pay any income or franchise taxes attributable to the income
of Lender from any amounts charged or paid hereunder to Lender. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
9.5 Insurance. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrower shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrower fails to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrower. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance; provided, that, so long as no Event of
Default exists or has occurred and is continuing, Lender shall not amend such
insurance so as to reduce the amounts of coverage without the consent of
Borrower. Borrower shall cause Lender to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and Borrower shall obtain non-contributory lender's loss
payable endorsements to all insurance policies in form and substance
satisfactory to Lender. Such lender's loss payable endorsements shall specify
that the proceeds of such insurance shall be payable to Lender as its interests
may appear and further specify that Lender shall be paid regardless of any act
or omission by Borrower or any of its affiliates. At its option, Lender may
apply any insurance proceeds received by Lender at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as Lender may determine
or hold such proceeds as cash collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrower and its subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender: (i) within thirty (30) days after the end of each fiscal month, monthly
unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of
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Borrower and its subsidiaries as of the end of and through such fiscal month;
(ii) within thirty (30) days after the end of each calendar month, a
store-by-store profitability report for each of Borrower's retail locations; and
(iii) within one hundred twenty (120) days after the end of each fiscal year,
audited consolidated financial statements and, if Borrower has any subsidiaries,
audited consolidating financial statements of Borrower and its subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrower and its subsidiaries as of the end of and for the fiscal year then
ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any loss, damage, investigation, action, suit, proceeding or
claim relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in Borrower's
business, properties, assets, goodwill or condition, financial or otherwise and
(ii) the occurrence of any Event of Default or event which, with the passage of
time or giving of notice or both, would constitute an Event of Default.
(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all financial reports which
Borrower sends to its stockholders generally and copies of all reports and
registration statements which Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information in respect of the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower. Any documents, schedules, invoices or other
papers delivered to Lender may be destroyed or otherwise disposed of by Lender
one (1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
(e) Borrower shall deliver, or cause to be delivered, to Lender,
within ninety (90) days from the date hereof, an opening balance sheet of
Borrower after giving effect to the transactions contemplated by this Agreement
and the Purchase Agreements, together with the unqualified opinion of
independent certified public accountants, which accountants shall be an
independent accounting firm selected by Borrower and reasonably acceptable to
Lender, to the effect that such opening balance sheet has been prepared in
accordance with GAAP and presents fairly the financial condition of Borrower as
of such date.
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9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or consolidate
with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
any stock or indebtedness to any other Person or any of its assets to any other
Person (except for (i) sales of Inventory in the ordinary course of business,
(ii) the sale or other disposition of Equipment in the event of a store closure,
and (iii) the disposition of Equipment so long as (A) if an Event of Default
exists or has occurred and is continuing, any proceeds are paid to Lender (B)
such sales do not involve Equipment having an aggregate fair market value in
excess of One Hundred Thousand Dollars ($ 100,000) for all such Equipment
disposed of in any fiscal year of Borrower and (C) Borrower reinvests the
proceeds from the sale of such Equipment (other than worn-out or obsolete
Equipment or Equipment no longer used in the business of Borrower) to benefit
the ordinary business purpose of Borrower), or (c) form or acquire any
subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of
the foregoing.
9.8 Encumbrances. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral, except: (a) the liens and security interests of
Lender, (b) liens securing the payment of taxes, either not yet overdue or the
validity of which are being contested in good faith by appropriate proceedings
diligently pursued and available to Borrower and with respect to which adequate
reserves have been set aside on its books; (c) security deposits in the ordinary
course of business; (d) non-consensual statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower's
business to the extent: (i) such liens secure indebtedness which is not overdue
or (ii) such liens secure indebtedness relating to claims or liabilities which
arc fully insured and being defended at the sole cost and expense and at the
sole risk of the insurer (subject to applicable deductibles) or being contested
in good faith by appropriate proceedings diligently pursued and available to
Borrower, in each case prior to the commencement of foreclosure or other similar
proceedings and with respect to which adequate reserves have been set aside on
its books; (e) liens in favor of credit card processors with respect to Credit
Card Receivables processed by them; (f) zoning restrictions, easements,
licenses, covenants and other restrictions affecting the use of real property
which do not interfere in any material respect with the use of such real
property or ordinary conduct of the business of Borrower as presently conducted
thereon or materially impair the value of the real property which may be subject
thereto; (g) purchase money security interests in Equipment (including capital
leases) and purchase money mortgages on real estate or other security interests
in equipment or fixtures so long as such security interests and mortgages do not
apply to any property of Borrower other than the Equipment or real estate so
acquired, and the indebtedness secured thereby does not exceed the cost of the
Equipment or real estate so acquired, as the case may be; (h) deposits of cash
with the owner or lessor of premises leased by Borrower, and (i) the security
interests and liens set forth on Schedule 8.4 hereto.
9.9 Indebtedness. Borrower shall not incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except:
(a) the Obligations;
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(b) trade obligations and normal accruals in the ordinary course
of business not yet due and payable, or with respect to which Borrower is
contesting in good faith the amount or validity thereof by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the
extent not incurred or secured by liens (including capital leases) in violation
of any other provision of this Agreement;
(d) unsecured indebtedness to former employees of Borrower in an
aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000) at any
time, provided, that, (i) such indebtedness shall at all times be evidenced by a
promissory note, containing terms and conditions satisfactory to Lender,
including, without limitation, a provision subordinating the right of payment of
such indebtedness to the right of Lender to receive the prior final payment and
satisfaction in full of all of the Obligations, (ii) Borrower shall not,
directly or indirectly, make any payments in respect of such indebtedness,
including, but not limited to, any prepayments or other non-mandatory payments,
except that until an Event of Default, or event which with notice or passage of
time or both would constitute an Event of Default, shall exist or have occurred
and be continuing, Borrower may make regularly scheduled payments of principal
and interest in accordance with the terms of such agreement or instrument as in
effect on the date hereof, (ii) Borrower shall not, directly or indirectly, (A)
amend, modify, alter or change any terms of such indebtedness or any agreement,
document or instrument related thereto, or (B) redeem, retire, defease, purchase
or otherwise acquire such indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (iii) Borrower shall furnish to Lender all
notices, demands or other materials concerning such indebtedness either received
by Borrower or on its behalf, promptly after receipt thereof, or sent by
Borrower or on its behalf, concurrently with the sending thereof, as the case
may be; and
(e) obligations or indebtedness set forth on the Information
Certificate; provided, that, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof, or (B) except as otherwise permitted under this Agreement, redeem,
retire, defease, purchase or otherwise acquire such indebtedness, or set aside
or otherwise deposit or invest any sums for such purpose, and (iii) Borrower
shall furnish to Lender all notices or demands in connection with such
indebtedness either received by Borrower or on its behalf, promptly after the
receipt thereof, or sent by Borrower or on its behalf, concurrently with the
sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
36
endorsement of instruments for collection or deposit in the ordinary course of
usiness; (b) investments in: (i) short-term direct obligations of the United
States Government, (ii) negotiable certificates of deposit issued by any bank
satisfactory to Lender, payable to the order of the Borrower or to bearer and
delivered to Lender, and (iii) commercial paper rated Al or P1; provided, that,
as to any of the foregoing, unless waived in writing by Lender, Borrower shall
take such actions as are deemed necessary by Lender to perfect the security
interest of Lender in such investments; (c) the loan to Ted Boswell and George
Bellino in an amount not to exceed Thirty-Five Thousand Dollars ($35,000) in the
aggregate as evidenced by a promissory note; and (d) the guarantees set forth in
the Information Certificate.
9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of any class
of capital stock of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing, except Borrower may redeem shares of
capital stock owned by the management employees of Borrower, provided, that, (a)
no Event of Default exists, or has occurred and is continuing (b) no more than
Five Hundred Thousand Dollars ($500,000) is paid by Borrower to its employees in
any twelve (12) month period to redeem such stock and (c) Excess Availability is
not less than One Million Dollars ($1,000,000) after giving effect to such
redemption.
9.12 Transactions with Affiliates. Borrower shall not enter into any
transaction for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than Borrower would obtain in
a comparable arm's length transaction with an unaffiliated person, except so
long as an Event of Default does not exist or has occurred and is continuing,
Borrower may pay Hampshire Equity Partners II, L.P. a management fee not to
exceed One Hundred Twenty Thousand Dollars ($120,000) in any fiscal year of
Borrower.
9.13 Compliance with ERISA. Borrower shall not with respect to any
"employee pension benefit plans" maintained by Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit plans so as
to incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA; (ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust created
thereunder which would subject Borrower or such ERISA Affiliate to a material
tax or penalty or other liability on prohibited transactions imposed under
Section 4975 of the Code or ERISA; (iii) fail to pay to any such employee
pension benefit plan any contribution which it is obligated to pay under Section
302 of ERISA, Section 412 of the Code the terms of such plan; (iv) allow or
suffer to exist any accumulated funding deficiency, whether or not waived, with
respect to any such employee pension benefit plan; (v) allow or suffer to exist
any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee pension benefit plan that is a single employer
plan, which termination could result in any
37
material liability to the Pension Benefit Guaranty Corporation; or (vi) incur
any withdrawal liability with respect to any multiemployer pension plan.
(b) As used in this Section 9.13, the term "employee pension
benefit plans," "employee benefit plans," "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.14 Year 2000 Matter. The Borrower has reviewed the areas within its
business and operations which could be adversely affected by, and have developed
or are developing a program to address on a timely basis, the "Year 2000
Problem" (that is, the risk that computer applications used by the Borrower may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date on or after December 31, 1999). Based on
such review and program, the Borrower believes that the "Year 2000 Problem", to
the extent resulting from a deficiency in the hardware or software operated by
the Borrower, will not have a material adverse effect on the Borrower, and that
such program to address the "Year 2000 Problem" shall have been resolved in all
material respects by June 30, 1999. From time to time, at the request of the
Lender, the Borrower shall provide to the Lender such updated information of
documentation as is requested regarding the status of their efforts to address
the "Year 2000 Problem".
9.15 Adjusted Tangible Net Worth. Borrower shall, at the end of each
fiscal quarter of Borrower, maintain Adjusted Tangible Net Worth of not less
than (i) Adjusted Tangible Net Worth as calculated by Deloitte & Touche in their
opening audited balance sheet, minus (ii) One Million Two Hundred Fifty Thousand
Dollars ($1,250,000). In no event shall Adjusted Tangible Net Worth be less than
One Million Dollars ($1,000,000).
9.16 Costs and Expenses. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable);(b) costs and expenses and
fees for title insurance and other insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections, appraisal fees and
search fees; (c) costs and expenses of remitting loan proceeds, collecting
checks and other items of payment, and establishing and maintaining the Blocked
Accounts, together with Lender's customary charges and fees with respect
thereto; (d) charges, fees or expenses charged by any bank or issuer in
connection with the Letter of Credit Accommodations; (e) costs and expenses of
preserving and protecting the Collateral; (f) costs and expenses paid or
incurred in connection with obtaining payment of the Obligations, enforcing the
security interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Financing Agreements or defending any claims made or threatened against
Lender arising out of the transactions contemplated hereby and thereby
(including,
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without limitation, preparations for and consultations concerning any such
matters); (g) all out-of-pocket expenses and costs incurred by Lender's
examiners in the conduct of their periodic field examinations of the Collateral
and Borrower's operations, plus a per diem charge at the rate of $650 per person
per day for Lender's examiners in the field and office; and (h) the reasonable
fees and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.17 Further Assurances. At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing on behalf of Borrower that all conditions precedent to the
making of Loans and providing Letter of Credit Accommodations contained herein
are satisfied. In the event of such request by Lender, Lender may, at its
option, cease to make any further Loans or provide any further Letter of Credit
Accommodations until Lender has received such certificate and, in addition,
Lender has determined that such conditions are satisfied. Where permitted by
law, Borrower hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES.
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default," and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations;
(b) Borrower fails to perform any of the covenants contained in
Sections 9.1, 9.2, 9.3, 9.4, 9.6, 9.13, 9.14, 9.15 and 9.16 of this Agreement
and such failure shall continue for fifteen (15) days; provided, that, such
fifteen (15) day period shall not apply in the case of: (i) any failure to
observe any such covenant which is not capable of being cured at all or within
such fifteen (15) day period or which has previously been the subject of a
prior failure within the prior twelve (12) months period or (ii) an intentional
breach by Borrower of any such covenant;
(c) Borrower fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements (other than the covenants set forth in Section 10.1(b)
above) and such failure shall continue for five (5) Business Days; provided;
that, such five (5) Business Day period shall not apply in the case of: (i) any
failure to observe any such term, covenant, condition or provision which is not
capable of being cured at all or within such five (5) Business Day period or
which has previously been the subject of a prior failure within the prior twelve
(12) month period or (ii) an intentional breach by Borrower of such term,
covenant, condition or provision;
39
(d) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or otherwise shall when made
or deemed made be false or misleading in any material respect;
(e) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(f) any judgment for the payment of money is rendered against
Borrower in excess of Fifty Thousand Dollars ($50,000) in any one case or in
excess of Two Hundred Thousand Dollars ($200,000) in the aggregate and shall
remain undischarged or unvacated for a period in excess of thirty (30) days or
execution shall at any time not be effectively stayed, or any material judgment
other than for the payment of money, or injunction, attachment, garnishment or
execution is rendered against Borrower or any Obligor or any of their assets;
(g) Borrower or any Obligor, which is a partnership, limited
liability company, or corporation, dissolves or suspends or discontinues doing
business;
(h) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(i) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against Borrower or any Obligor or all or any part of its
properties and such petition or application is not dismissed within thirty (30)
days after the date of its filing or Borrower or any Obligor shall file any
answer admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;
(j) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by Borrower or for all or any Obligor or any part of its
property;
(k) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of One Hundred Fifty Thousand Dollars ($150,000) which
default continues for more than the applicable cure period, if any, with respect
thereto, or any default by Borrower or any Obligor under any material contract,
lease, license or other obligation to any person other than Lender, which
default continues for more than the applicable cure period, if any, with respect
thereto;
40
(l) Hampshire Equity Partners II, L.P. shall own or otherwise
control less than 50.1% of all issued and outstanding voting stock of Borrower;
(m) the indictment or threatened indictment of Borrower or any
Obligor under any criminal statute, or the commencement or threatened
commencement of criminal or civil proceedings against Borrower or any Obligor,
pursuant to which statute or proceedings the penalties or remedies sought or
available include forfeiture of any of the property of Borrower or such
Obligor;
(n) there shall be a material adverse change in the business or
assets of Borrower or any Obligor after the date hereof; or
(o) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation:
(i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(i) and 10.1(j), all Obligations
shall automatically become immediately due and payable);
(ii) with or without judicial process or the aid or
assistance of others, enter upon any premises on or in which any of the
Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral;
(iii) require Borrower, at Borrower's expense, to assemble and
make available to Lender any part or ail of the Collateral at any place and time
designated by Lender;
41
(iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral;
(v) remove any or all of the Collateral from any premises on
or in which the same may be located for the purpose of effecting the sale,
foreclosure or other disposition thereof or for any other purpose;
(vi) sell, lease, transfer, assign, deliver or otherwise
dispose of any and all Collateral (including, without limitation, entering into
contracts with respect thereto,public or private sales at any exchange, broker's
board, at any office of Lender or elsewhere) at such prices or terms as Lender
may deem reasonable, for cash, upon credit or for future delivery, with the
Lender having the right to purchase the whole or any part of the Collateral at
any such public sale, all of the foregoing being free from any right or equity
of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower, and/or
(vii) terminate this Agreement.
If any of the Collateral is sold or leased by Lender upon credit terms or for
future delivery, the Obligations shall not be reduced as a result thereof until
payment therefor is finally collected by Lender. If notice of disposition of
Collateral is required by law, five (5) days prior notice by Lender to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other notice. In
the event Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of prejudgment remedy, Borrower waives the
posting of any bond which might otherwise be required.
(c) Lender shall apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in such order as Lender may elect,
whether or not then due. Borrower shall remain liable to Lender for the payment
of any deficiency with interest at the highest rate provided for herein and all
costs and expenses of collection or enforcement, including reasonable attorneys'
fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an
Event of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice: (i)
cease making Loans or arranging Letter of Credit Accommodations or reduce the
lending formulas or amounts of Loans and Letter of Credit Accommodations
available to Borrower, and/or (ii) terminate any provision of this Agreement
providing for any future Loans or Letter of Credit Accommodations to be made by
Lender to Borrower.
42
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW.
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the State of New York
(without giving effect to principles of conflicts of law); provided, however,
with respect to perfecting Lender's security interest and lien on the deposit
accounts of Borrower, such acts shall be governed by the Uniform Commercial Code
of the State of California (without giving effect to principles of conflicts of
law.
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the state courts of the County of New York, State
of New York and of the United States District Court for the Southern District of
New York and waive any objection based on venue or forum non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Lender shall have the right to bring any action or proceeding against Borrower
or its property in the courts of any other jurisdiction which Lender deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against Borrower or its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited hi the U.S. mails, or, at
Lender's option, by service upon Borrower in any other manner provided under the
rules of any such courts.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR
LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS
43
AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
11.2 Waiver of Notices. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Indemnification. Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses imposed on, incurred by
or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
reasonable fees and expenses of counsel. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section 11.4 may be
unenforceable because it violates any law or public policy, Borrower shall pay
the maximum portion which it is permitted to pay under applicable law to Lender
in satisfaction of indemnified matters under this Section. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.
44
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS.
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof. Regardless of the timing of termination, this Agreement and all
other Financing Agreements must be terminated simultaneously. Upon me effective
date of termination of the Financing Agreements, Borrower shall pay to Lender,
in full, all outstanding and unpaid Obligations and shall furnish cash
collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender from loss, cost, damage or expense, including
reasonable attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment Such cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
Business Day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 3:00 p.m., New York time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the
end of the then current term or any agreed upon renewal term of this Agreement,
in view of the impracticality and extreme difficulty of ascertaining actual
damages and by mutual agreement of the parties as to a reasonable calculation of
Lender's lost profits as a result thereof, Borrower agrees to pay to Lender,
upon the effective date of such termination, an early termination fee in the
amount set forth below if such termination is effective in the period indicated:
Amount Period
------------------------ ---------------------------------------------
(i) 1% of the Maximum Credit from the date of this Agreement to and
including the first anniversary of this
Agreement
(ii) 1% of the Maximum Credit from the day after the first anniversary
of this Agreement to and including the second
anniversary of this Agreement
45
Amount Period
------------------------ ---------------------------------------
(iii) 0.5% of the Maximum Credit from the day after the second
anniversary of this Agreement to and
including the end of the term of this
Agreement.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. Lender shall
be entitled to such early termination fee upon the occurrence of any Event of
Default described in Sections 10.1(i) and 10.1(j) hereof, even if Lender does
not exercise its right to terminate this Agreement, but elects, at its option,
to provide financing to Borrower or permit the use of cash collateral under the
United States Bankruptcy Code; provided, however, if Lender waives such Event of
Default, does not exercise its rights to terminate this Agreement and continues
financing Borrower, such early termination fee shall not be due and payable by
Borrower at such time. The early termination fee provided for in this Section
12.1 shall be deemed included in the Obligations.
Notwithstanding the foregoing, the early termination fee shall be waived
(a) after the first anniversary of this Agreement, if the termination is due to
the refinancing of the Obligations by First Union National Bank and if there is
no Event of Default or event or circumstance which, with notice or passage of
time or both, would become an Event of Default under this Agreement or (b) if
Borrower chooses to exercise the right to terminate this Agreement and the other
Financing Agreements upon any assignment by Lender of its rights or obligations
under or related to this Agreement or the other Financing Agreements to a
non-U.S. Lender, defined as any Lender that is not a "United States person,"
within the meaning of Section 7701(a)(30) of the Code.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and: (a) made to Lender at its address set forth below and to Borrower
at its chief executive office set forth below, or to such other address as
either party may designate by written notice to the other in accordance with
this provision; and (b) deemed to have been given or made: if delivered in
person, immediately upon delivery; if by telex, telegram or facsimile
transmission, immediately upon sending and upon confirmation of receipt; if by
nationally recognized overnight courier service with instructions to deliver the
next Business Day, one (1) Business Day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and
46
any other document referred to herein or therein without the prior written
consent of Lender. Lender may, after notice to Borrower, assign its rights and
delegate its obligations under this Agreement and the other Financing Agreements
(a) to any of its present and future domestic subsidiaries or affiliates that
are in the business of making loans or otherwise have arrangements for the
making of loans or (b) to the extent of the interests of Participants as
provided herein, or (c) upon the merger, consolidation, sale, transfer, or other
disposition of all or any substantial portion of its business, loan portfolio or
other assets or (d) at any time an Event of Default shall exist or have occurred
and be continuing or (e) with the consent of Borrower, which shall not be
unreasonably withheld, delayed or conditioned. In addition, Lender may sell
participations in any part of the Loans, the Letter of Credit Accommodations or
any other interest herein to another financial institution or other Person.
12.5 Entire Agreement. This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
12.6 Confidentiality. Lender hereby agrees that all written or oral
information disseminated by Borrower to Lender concerning Borrower, now or
hereafter is confidential (the "Confidential Information"). The Confidential
Information: (i) shall be kept confidential by Lender and will not be disclosed,
divulged or provided to any Person without Borrower's prior written consent;
provided, however, that the Confidential Information may be disclosed: (A) to
Lender's officers and employees or any of Lender's affiliated companies'
officers and employees, independent attorneys, accountants, loan participants
and appraisers who need to know such Confidential Information for the purpose of
evaluating the financing of Borrower hereunder; or (B) if such disclosure is
required by operation of law, and (ii) shall not be deemed to include
information which: (A) is public knowledge or becomes generally available to the
public; (B) becomes available to Lender, on a non-confidential basis, from
Borrower or its agents; or (c) is in Lender's possession prior to disclosure by
Borrower.
12.7 Publicity. Lender may publish a tombstone or similar advertising
material relating to the financing transaction contemplated by this Agreement
with Borrower's consent, which shall not be unreasonably withheld.
47
IN WITNESS WHEREOF, Lender and Borrower have caused these presents
to be duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION ALLIED FASHION, INC.
(SOUTHWEST)
By:/s/ Frederick P. Kiehne By: /s/ Olivier C. Trouveroy
----------------------- ------------------------
Name:Frederick P. Kiehne Name:Olivier C. Trouveroy
-------------------- -----------------------
Title:Vice President Title:Executive Vice President
------------------- ------------------------
Address: Chief Executive Office:
1201 Main Street, Suite 1625 102 Fahm Street
Dallas, Texas 75202 Savannah, Georgia 31401
48
INFORMATION CERTIFICATE
OF
ALLIED FASHION, INC.
Dated:_______199__
Congress Financial Corporation (Western)
225 South Lake Avenue Suite 1000
Pasadena, CA 91101
In order to assist you in the continuing evaluation of the financing you are
considering for Allied Fashion Inc. ("the Corporation"), and to expedite the
preparation of any documentation which may be required, and to induce you to
provide such financing to the Corporation, we represent and warrant to you the
following information about the Corporation, its organizational structure and
other manners of interest to you:
1. The full and exact name of the Corporation as set forth in its Certificate
of Incorporation is: Allied Fashion, Inc.
2. The Corporation uses and owns the following trade name(s) in the operation
of its business (i.e. billing, advertising, etc.): (Note, do not include
names which are product names only):
Allied Fashion for kids, Allied Department Store, Allied Kidswear,
Kidswear, Sugar Grove, ALady fashions, APlus Fashions, Mad Mervin's
3. The date of incorporation of the Corporation was March 3, 1999, under the
laws of the State of Delaware, and the Corporation is in good standing
under those laws.
Check one: Correct [X] Incorrect[ ]. If incorrect, explain:
__________________________________________________________________________
__________________________________________________________________________
4. The Corporation has never been involved in a bankruptcy or reorganization.
Check one: Correct[X] Incorrect[ ]. If incorrect, explain:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
5. The Corporation is duly qualified and authorized to transact business as a
foreign corporation in the following states and is in good standing in
such states:
Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South
Carolina
1
6. Since the date of incorporation, the corporate name of the Corporation has
been changed as follows: Check, if appropriate: Not Applicable [X]
7. Since the date of incorporation, the Corporation has made or entered into
the following mergers or acquisitions: Check. if appropriate: None,
Acquisition of the Allied Division of Variety Wholesalers, Inc., as of
the date hereof.
8. The chief executive office of the Corporation is located at:
102 Fahm Street, Savannah 6A
9: The books and records of the Corporation pertaining to accounts, contract
rights, inventory, etc. are located at (if other than the chief executive
office referred to in Section 7 above):
102 Fahm Street Savannah 6A
10. The Corporation has other places of business and/or maintains inventory or
other assets at the following addresses (indicate whether locations are:
owned, leased or operated by third parties and if leased or operated by
third parties, their names and addresses): See Exhibit A attached here to.
2
11. Listed below is a complete list of real property owned by the Corporation
with all respective trust deeds or mortgages against the properties.
Check if appropriate: No real property owned [X].
12. The places of business or other locations of any assets utilized by the
Corporation during the last four (4) months other than those listed
above are as follows: None
Street Address City State County
Street Address City State County
Street Address City State County
13. The Corporation is affiliated with, or has ownership in, the following
corporations (including subsidiaries): None
Chief Jurisdiction Ownership Fed Tax
Exact Executive of Percentage or ID
Name Office Incorporation Relationship Number
- ------ --------- ------------- ------------- -------
______ _________ _____________ _____________ _______
______ _________ _____________ _____________ _______
______ _________ _____________ _____________ _______
14. The Federal Employer Identification Number of the Corporation is as
follows 52-2150697
15. There is no provision in the Certificate of Incorporation or By-laws of
the Corporation, or in the laws of the State of its incorporation,
requiring any vote or consent of shareholders to borrow or to authorize
the mortgage or pledge of or creation of a security interest in any assets
of the Corporation or any subsidiary. Such power is vested exclusively in
its Board of Directors. Check one: Correct [X] Incorrect[ ]. If incorrect,
explain:__________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
3
16. The primary officers of the Corporation and their respective titles are as
follows:
Title Name
----- ----
President & CEO George Bellino
Assistant Secretary, Executive VP Olivier Trouveroy
CFO, Secretary Ted Boswell
The following will have signatory powers as to all of your transaction
with the Corporation:
Olivier Trouveroy, George Bellino, Ted Boswell
17. With respect to the officers noted above, such officers are affiliated
with or have ownership in the following corporations: If none, check here
See Exhibit B attached here to.
Officer's Name Corporate Name Type of Business %
Ownership
______________ ______________ _______________ ______
______________ ______________ _______________ ______
______________ ______________ _______________ ______
18. The members of the Board of Directors of the Corporation are:
Olivier Trouveroy
_________________
_________________
_________________
_________________
_________________
_________________
19. The name of the stockholders of the Corporation and their stock holdings
are as follows (if stock is widely held indicate only stockholders owning
10% or more of the voting stock):
Name No. of Shares % Ownership
- ------------------ ------------- -----------
Hampshire Equity
Partners II,.L.P. 339,500 97.3%
_____________ ___________
George Bellino 7,500 1.93%
_____________ ___________
Ted Boswell 3,000 0.77%
4
20. There are no pending or threatened judgments and there is no pending or
threatened litigation by or against the Corporation, its subsidiaries
and/or affiliates or any of its officers/principals.
Check one : Correct [X] Incorrect [ ]. If incorrect, explain
exceptions :______________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
21. At the present time, there are no delinquent taxes due (including, but not
limited to, all payroll taxes, personal property taxes).
Check one: Correct [X] Incorrect [ ]. If incorrect, explain
exceptions :______________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
22. The Corporation's assets are owned and held free and clear of any security
interests, liens or attachments.
Check one: Correct [ ] Incorrect [X]. If incorrect, list below:
Lienholder Assets Amount of Debt Secured
- ---------------- ------------------ ------------------------
Statutory Landlords Liens in the State where qualified to do business
________________ __________________ ________________________
________________ __________________ ________________________
________________ __________________ ________________________
23. The Corporation has not guaranteed and is not otherwise liable for the
obligations of others.
Check one: Correct [X] Incorrect [ ]. If incorrect, explain:
__________________________________________________________________________
__________________________________________________________________________
__________________________________________________________________________
24. The Corporation does not own or license any trademarks, patents, copyright
or other intellectual property.
Check one: Correct [ ] Incorrect [X]. If incorrect, indicate the type of
intellectual property and whether owned or licensed, registration number,
date of registration, and if licensed, the name and address of the
licensor:
Trademark Applications for Allied Fashion for Less (751,512,682) and
Allied Department Stores (751,512,681)
25. The Corporation's fiscal year end is: December 31
5
26. With regard to any pension or profit sharing plan; N/A
(a.) A determination as to qualification has been issued: Yes [ ] No [ ].
(b.) Funding is on a current basis and in compliance with established
requirements:Yes [ ] No [ ].
27. The Certified Public Accounting firm for the Corporation is:
Name of firm Deloitte & Touche LLP
Address 191 Peachtree Street, St. 1500, Atlanta, GA 30303
Patrner handling relationship Roger Herndon
Phone Number 404-220-1864
Were financial statements uncertified for any fiscal year Yes [ ] No [X].
28. The law firm for the Corporation is:
Name of firm Mayer, Brown & Platt
Address 1675 Broadway, New York, NY 10019
Partner handling relationship Kathleen A. Walsh
Phone Number 212-506-2500
29. The name of all insurers, who have issued policies of insurance to the
Corporation, their address, the number of the policy and the nature of the
insurance coverage provided are as follows:
See Exhibit D attached hereto.
Insurer Address Policy No. Nature of Coverage
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
30. The following are all banks or savings institutions at which the
Corporation and its subsidiaries maintain deposit accounts:
See Exhibit C attached hereto.
Corporation or
Institution Account Number Branch Address Subsidiary
- ----------- -------------- -------------- --------------
____________ ______________ ______________ ______________
____________ ______________ ______________ ______________
____________ ______________ ______________ ______________
6
31. Prompt written notice will be given to you of any change or amendment with
respect to any of the foregoing. Until such notice is received by you. you
shall be entitled to rely upon the foregoing in all respects.
CORPORATE SEAL TO BE Very Truly Yours.
AFFIXED HEREIN BELOW
ALLIED FASHION, INC.
By: George Bellino
Title: President
EXHIBIT A
Collateral Locations
STORE NO. LOCATION
- ------------ -------------------------
02/ 203 N PARLER AVE.
501 ST. GEORGE, SC 29477
843 563-3539
07/ 215 S PALMETTO AVE.
505 DENMARK, SC 29042
803 793-3171
11/ 323 COTTON AVE.
508 MILLEN, GA 30442
JENKINS COUNTY
912 982-1534
12/ CARTER SHOPPING PLAZA
509 1922 BURR STREET
BARNWELL, SC 29812
BARNWELL COUNTY
803 259-3946
13/ 201-203 W BROUGHTON ST.
510 SAVANNAH, GA 31401
912 234-3342
16/ 122 N MAIN STREET
513 BAXLEY,GA 31513
912 367-4464
19/ WESTSIDE SHOPPING CTR
649 HIGHWAY 80
GARDEN CITY,GA 31408
912 966-5009
20/ 16 RIGBY STREET
515 MANNING, SC 29102
803 435-8731
21/ 703-707 LIBERTY STREET
516 WAYNESBORO, GA 30830
706 554-2348
22/ 108 W. BROAD STREET
517 LOUISVILLE, GA 30434
912 625-7419
23/ 107 W. BARNARD
518 GLENNVILLE, GA 30427
912 654-2220
25/ 722 SPRING STREET
520 SPARTA, GA 31087
706 444-6941
STORE NO. LOCATION
- ------------ -------------------------
55/ 20 BROAD STREET
542 CAMILLA, GA 31730
912 336-7427
56/ 12 WASHINGTON STREET
543 QUINCY, FL 32351
850 627-3254
57/ 115 E. MAIN STREET
544 KINGSTREE, SC 29556
803 354-9756
58/ 149 S. BROAD STREET
545 CARIO, GA 31728
912 377-8366
63/ 100 W. JACKSON STREET
547 DUBLIN, GA 31021
912 275-2399
65/ 315 MAIN STREET
549 MONCKS CORNER, SC
29461
843 761-8687
67/ 120 S. MAIN STREET
551 BLAKELY,GA 31723
912 723-8715
69/ NAPIER SQ. SHOPPING CTR
552 949 HILLCREST BLVD
MACON, GA 31204
912 742-3018
70/ SOUTH GATE PLAZA
553 1631 GORDON H-WAY
AUGUSTA, GA 30906
706 790-5982
71/ 4121-B W. BELTLINE BLVD
554 EDENS PLAZA
COLUMBIA,SC 29204
803 256-2719
72/ 317-321 N. MAIN STREET
555 MARION, SC 29571
803 423-4036
73/ 3 LEWIS SMITH SHOP/CTR
556 WHITEVILLE, NC 28472
910 642-2191
76/ 112 S. MAIN STREET
557 TUSKEGEE, AL 36083
334 727-9455
STORE NO. LOCATION
- ------------ -------------------------
27/ 115 LEE AVENUE
522 HAMPTON, SC 29924
HAMPTON COUNTY
803 943-2644
30/ 104-108 W. BROAD STREET
525 P.O. BOX 387
HEMINGWAY, SC 29554
803 558-5019
34/ 458 LEE STREET
527 JOHNSTON, SC 29832
803 275-2342
35/ 8-20 OAK STREET
528 JACKSON, GA 30233
770 775-2333
36/ 136 RUSSEL STREET
529 ORANGEBURG, SC 29115
803 534-0670
40/ 135 MAIN STREET
531 FT. VALLEY, GA 31030
912 825-8162
41/ 930 FRONT STREET
532 GEORGETOWN, SC 29440
803 546-5469
42/ 112 W. MAIN STREET
533 DILLON, SC 29536
843 774-6331
44/ 6 S. MAIN STREET
535 MOULTRIE, GA 31768
912 985-3310
45/ 201 E. SCREVEN STREET
536 QUITMAN, GA 31643
912 263-7774
47/ 146 MARKET STREET
537 CHERA W, SC 29520
843 537-2568
49/ 205 WASHINGTON STREET
538 WALTERBORO, SC 29488
803 549-5813
52/ 117 W. 11TH AVENUE
540 CORDELE.GA 31015
912 273-1014
53/ EDISTO VILLAGE H-WAY
648 301
ORANGEBURG.SC 29115
803 536-6548
STORE NO. LOCATION
- ------------ -------------------------
91/ NORTHSIDE SHOPPING
645 CTR
3599 N. PATTERSON
AVE. WINSTON-SALEM, NC
27105
336 767-7688
120/ FIVE POINT SHOPPING CTR
574 3144-A N. ASHLEY
STREET
VALDOSTA,GA 31602
912 244-8551
121/ PERLIS PLAZA SHOPPING
575 CTR
1536 E. FORSYTH STREET
AMERICUS, GA 31709
912 928-3341
123/ TRI-CITIES SHOPPING CTR
577 3206 E. MAIN STREET
EASTPOINT, GA 30344
FULTON COUNTY
404 762-6533
128/ EASTGATE SHOPPING CTR
608 LA HIGHWAY 10
FRANKLINTON, LA 70438
504 839-5527
130/ 810 US HWY 64 EAST
606 PLYMOUTH, NC 27962
252 793-3578
132/ 601 W. MAIN STREET
609 WEST POINT, MS 39773
601 494-5436
133/ 112-114 N. CENTER STREET
610 GOLDSBORO, NC 27530
919 580-1179
-5-
STORE NO. LOCATION
- ------------ -------------------------
77/ NORTHWAY PLAZA
558 5112 FAIRFIELD ROAD
COLUMBIA, SC 29204
803 754-2451
78/ 20 N. MAIN STREET
559 SUMTER, SC 29150
803 775-2986
79/ 344-A NORTHEAST BLVD
636 CLINTON, NC 28328
910 590-3664
81/ 150 N. DARGAN STREET
561 FLORENCE, SC 29501
843 667-4255
83/ GREENVILLE BUYERS
639 MARKET
MEMORIAL DRIVE
GREENVILLE, NC 27834
919 355-0945
84/ 225-227 E. NASH STREET
562 WILSON, NC 27893
252 291-8937
86/ SUMMIT SHOPPING CTR
643 940 SUMMIT AVENUE
GREENSBORO, NC 27405
336 691-9880
87/ 502 13TH STREET
564 PHENIX PLAZA
PHENIX CITY, AL 36867
334 297-2542
88/ 483-485 KING STREET
565 CHARLESTON, SC 29403
843 577-6786
89/ 5451 NORWOOD AVENUE
566 NORWOOD PLAZA
JACKSONVILLE, FL 32208
904 768-6976
90/ SHIPWATCH PLAZA
567 3655 RIVERS AVENUE
N. CHARLESTON, SC 29405
803 554-9055
-4-
STORE NO. LOCATION
- ------------ -------------------------
137/ TRIANGLE MART
583 SHOP/CTR
4547 N. STATE STREET
JACKSON, MS 39206
601 982-2781
139/ GATEWAY SHOPPING CTR
585 201 N. ALABAMA STREET
COLUMBUS, MS 39701
LOWNDES COUNTY
601 328-8259
141/ COPIAH TRADE CENTER
647 664 CALDWELL DRIVE
HAZLEHURST, MS 39083
601 894-2295
142/ MAGNOLIA MALL
588 261 DEVEREAUX DR/SUITE
14
NATCHEZ, MS 39120
601 446-9543
144/ 415 HOWARD STREET
651 GREENWOOD, MS 38930
601 455-5461
145/ 421 COLUMBIA STREET
653 BOGALUSA, LA 70427
(504) 735-8181
147/ 138 NORTH HARVEY ST
655 GOYER SHP CENTER
GREENVILLE, MS 38701
(601)332-4880
148/ PIKE CTR MART SHPNG
591 CTR
MCCOMB, MS 39648
601 684-4142
150/ DEEPSOUTH SHOPPING
592 CTR
1702 DENNY AVENUE
PASCAGOULA, MS 39567
228 762-6825
154/ NICHOLS SHOPPING CTR
595 509 SAINT MARYS STREET
THIBODAUX, LA 70301
504 446-5573
STORE NO. LOCATION
- ------------ -------------------------
156/ BAKER PLAZA SHPNG/CTR
596 2080 MAIN STREET
BAKER, LA 70714
225 778-1920
157/ RIVERVIEW PLAZA
597 25027 HIGHWAY 1 SOUTH
PLAQUEMINE, LA 70764
IBERVILLE PARISH
504 687-6436
158/ 720 MAIN STREET
591 FRANKLIN, LA 70538
318 828-0495
161/ VISTA VILLAGE SHPING
600 CTR
688 E. CRESWELL LANE
OPELOUSAS, LA 70570
ST. LANDRY PARISH
318 942-4904
162/ PARKVIEW PLAZA
601 SQUARE
SHOPPING CENTER
623 W. LINCOLN ROAD
VILLE PLATTE, LA 70586
318 363-3868
164/ N. PARK SHOPPING CTR
602 1504 N. PARKERSON
AVENUE
CROLEY, LA 70526
ACADIA PARISH
318 783-2045
166/ DELMONT VILLAGE
652 SHOPPING
CENTER 5151 PLANK ROAD
SUITE 1 F
BATON ROUGE, LA 70805
225 356-5950
169/ SOUTHGATE SHOPPING
604 CTR
311-A S. SLAPPY BLVD
ALBANY, GA 31707
912 439-0047
172/ 100 MAIN STREET
615 BISHOPVILLE, SC 29010
LEE COUNTY
803 484-4102
STORE
NO. LOCATION
- ------- ----------------------------
176/ 1323 E. MEMORIAL DRIVE
619 USA HWY 13
AHOSKIE, NC 27910
252 332-6557
180/ HWY 15/401 BYPASS
623 BENNETTSVILLE, SC 29512
843 479-3402
184/ 210 SECOND STREET
627 COCHRAN, GA 31014
BECKLEY COUNTY
912 934-2174
185/ 4122 MAIN STREET
628 LORIS, SC 29569
803 756-0256
186/ 125 W. MAIN STREET
629 WILLIAMSTON, NC 27892
252 792-2101
187/ MART 51 SHOPPING CTR
630 1700 TERRY ROAD
JACKSON, MS 39204
601 352-7615
188/ 206 S. MAIN STREET
635 ROCKY MOUNT, NC 27801
252 972-6802
189/ 1221 W. BASE STREET
631 MADISON, FL 32340
850 973-3303
EXHIBIT B
Officer Affiliations
Olivier Trouveroy is a principal of Hampshire Equity Partners, which controls
several investment funds, including the sole shareholder of Allied Fashion, Inc.
Through its investment funds, Hampshire Equity Partners holds investments in
many corporations. In addition, Olivier Trouveroy is a director of two public
companies, Cost Plus, Inc. and E.Spire Communications, Inc.
DEPOSIT ACCOUNTS
Store STORE NAME Account # Routing # Name Phone
30 HEMINGWAY, SC 550121966 053207054 Anderson State Bank 843-558-2511
41 GEORGETOWN, SC 120263819 053200019 Wachovia 843-527-6200
42 DILLION, SC 79002379 053202240 Carolina Community 843 8410444
57 KINGSTREE, SC 620018366 053207685 Williamsburg First Nat 843-354-6101
72 MARION, SC 530216423 053201720 Anchor Bank 843-431-1000
73 WHITEVILLE, NC 5115058888 053101121 Branch Banking & Turst 910-914-9945
79 CLINTON, NC 002412560394 053100300 1st Citizens Bank 910-590-5340
81 FLORENCE, SC 2000006213488 053207766 First Union 843-664-2900
133 GOLDSBORO, NC 1692428545 053100300 1st Citizens Bank 919-705-2260
172 BISHOPVILLE, SC 270002849701 053906041 1st Citizens Bank 803-484-4257
185 LORIS, SC 5121851271 053201607 Branch Banking & Turst 843-756-4091
7 DENMARK. SC 070074695 053200983 First National Bank 803-793-3324
12 BARNWELL, SC 240001187601 053906041 1st Citizens 803-259-356
20 MANNING, SC 020214475301 053200666 NBSC 803-435-5100
36 ORANGEBURG, SC 2000006211891 053207766 First Union 803-533-4400
53 ORANGEBURG, SC 213000768 053201924 Orangeburg National Bank 803-531-5566
65 MONCKS CORNER, S 240063818 053200019 Wachovia 843-761-8030
71 COLUMBIA, SC 3521432401 053200666 NBSC 803-256-6303
77 COLUMBIA, SC 80047634301 053906041 1st Citizens 803-733-2079
78 SUMTER, SC 760203547 053200019 Wachovia 803-778-7718
88 CHARLESTON, SC 079019396501 053906041 1st Citizens 843-722-5835
90 N. CHARLESTON, SC 079019284301 053201487 1st Citizens 843-747-1180
2 ST. GEORGE, SC 710000726401 053906041 1st Citizens 843-563-3011
11 MILLEN, GA 150913 061103975 Ogeechee Valley 912-982-5700
13 SAVANNAH, GA 200002704687 061200030 First Union 1-800-566-3862
16 BAXLEY, GA 9800294648 061200878 Baxley Suntrust 912-367-8972
19 GARDEN CITY, GA 2000006211943 061000227 First Union 1-800-566-3862
21 WAYNESBORO, GA 0524440 061202245 First National 706-554-8100
23 GLENNVILLE, GA 40741 061204683 Glennville Bank Trust 912-654-3471
27 HAMPTON, SC 0069013538 053202596 Palmetto State Bank 803-943-2671
49 WALTERBORO, SC 890025448 0653200983 First National 843-549-1553
63 DUBLIN, GA 127118 061205938 Dublin Bank of Dudley 912-275-4980
-1-
184 COCHRAN, GA 0201582 061210237 Cochran Sale Bank 912-934-4501
22 LOUISVILLE, GA 136882 061103975 1st National Bank 912-625-2000
25 SPARTA, GA 0019144 061107146 Bank of Hancock 706-444-5781
34 JOHNSTON, SC 470001234901 053201487 1st Citizens 803-275-2354
35 JACKSON, GA 003251604320 061000052 National Bank 770-775-7178
40 FT. VALLEY, GA 00000088641726 0261170070 1st Liberty Bank 912-825-7721
69 MACON, GA 0003601134004 061100473 Suntrust Bank 912-751-5731
70 AUGUSTA, GA 501138580 061100334 Suntrust Bank 706-821-2005
76 TUSKEGEE , AL 5024374 062205665 Alabama Exchange 334-727-1730
87 PHENIX CITY, AL 061100606 142298 CB&T Bank 334-291-3368
123 EASTPOINT, GA 003261259305 061000052 National Bank 404-765-1958
44 MOULTRIE, GA 0170293901 061202025 Southwest Bank 912-985-1120
45 QUITMAN, GA 0119115 061201851 Heritage Bank 912-263-7525
52 CORDELE, GA 0183301 0621210965 Cordele Banking 912-276-2470
55 CAMILLA, GA 045640 061202957 Planters Bank 912-336-5271
56 QUINCY, FL 176318501 063100882 Qunicy State Bank 850-875-1000
58 CARIO, GA 1626961301 061203338 Citizens Bank
67 BLAKLEY, GA 45640 061212002 Bank of Early 912-723-3101
120 VALDOSTA, GA 003251835718 0610052 Nations Bank 912-249-5041
121 AMERICUS, GA 0049229 061202410 Sumter Bank & Trust
169 ALBANY, GA 6967021879 061101375 Regents Bank 912-432-8417
189 MADISON, FL 003063631439 063000047 Nations Bank 850-973-4126
142 NATCHEZ, MS 5200377240 065305436 Deposit Guaranty
150 PASCAGOULA, MS 1092855 065301362 Merchants Marine 228-762-3311
154 THIBODAUX, LA 9500008355 065404913 Union Planters Bank 504-446-8161
156 BAKER, LA 882105237 065000090 Hibernia Bank 225-381-2041
157 PLAQUEMINE, LA 618520 065403150 Citizens Bank & Trust 225-687-6897
158 FRANKLIN, LA 001135546 065400713 St Marys Bank 318-828-0560
161 OPELOUSAS, LA 0169811 065205031 American Bank 318-948-3056
162 VILLE PLATTE, LA 011875159 065204977 American Security Bank 318-363-5602
164 CROWLEY, LA 50905315 065200528 Bank Of Commerce 318-7884805
-2-
166 BATON ROUGE, LA 882105334 065000090 Hibernia Bank
128 FRANKLINTON, LA 011622129 0065400153 Hancock Bank 504-839-9821
132 WEST POINT, MS 60350436 084201278 Bank Of Mississippi 601-495-1000
137 JACKSON, NS 1007177678 065300279 Trustmark 601-354-5040
139 COLUMBUS, MS 8808306920 065300279 Trust mark 601-354-5040
141 HAZLEHURST, MS 6331656 065301744 Copiah Bank 601-894-3930
144 GREENWOOD, MS 394056-01 00842-00981 Bank of Commerce 601-453-4142
145 BOGALUSA, LA 8520005227 06500090 Hibernia Bank
147 GREENVILLE, MS 7006698484 065300279 Trustmark 601-334-8433
148 MCCOMB, MS 4502220481 065300279 Trust mark 601-249-1116
187 JACKSON, MS 5200396933 064000017 Deposit Guaranty 601-960-6462
47 CHERAW, SC 700073547 053200019 Wachovia 843-921-6500
*83 GREENVILLE, NC 3602010281 053101529 Wachovia 252-758-8369
84 WILSON, NC 5212711421 053101121 BB& T Bank
86 GREENSBORO, NC 5112951190 053101121 BB&T 336-733-0105
91 WINSTON SALEM, NC 5112951204 053101121 BB&T 336-733-0105
130 PLYMOUTH, NC 7210024084 053111852 Triangle Bank 252-793-9031
176 AHOSKIE, NC 0126001983 053100494 Wachovia Carolina 252-332-7250
I80 BENNETTSVILLE, SC 0701125819 053207216 Bank 843-479-4141
186 WILLIAMSTON, NC 8540002886 053101529 Wachovia 252-809-4002
188 ROCKY MOUNT, NC 0450004754 053100850 Centura Bank 888-738-2455
-3-
DATE (MM/DD/YY)
ACORD CERTIFICATE OF LIABILITY INSURANCE 4/13/99
PRODUCER THIS CERTIFICATE IS ISSUED AS MATTER OF
Aon Risk Services Inc of NY INFORMATION ONLY AND CONFERS NO RIGHTS
Two World Trade Center UPON THE CERTIFIED HOLDER. THIS
New York, NY 10048 CERTIFICATE DOES NOT AMEND, EXTEND OF
ALTER THE COVERAGE AFFORDED BY THE
POLICIES BELOW
COMPANIES AFFORDING COVERAGE
COMPANY
212-441-1000 A American Home Assurance Co.
INSURED COMPANY
Allied Fashion, Inc. B CIGNA
102 Fahm Street COMPANY
Savannah, GA 31401 C
COMPANY
D
COVERAGE
THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN
ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED.
NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER
DOCUMENT WITH RESPECT TO WHICH THE CERTIFICATE MAY BE ISSUED OR MAY PERTAIN,
THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL
THE TERM EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE
BEEN REDUCED BY PAID CLAIMS.
CO POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
- ------------------------------------------------------------------------------------------------------------------------------
GENERAL LIABILITY GENERAL AGGREGATE $ 2,000,000
A [X] COMMERCIAL GENERAL LIABILITY 6122694 4/15/99 4/15/00 PRODUCTS-COMP/OP AGG $ 1,000,000
[ ] [ ] CLAIMS MADE [X] OCCUR PERSONAL & ADV INJURY $ 1,000,000
[ ] OWNER'S & CONTRACTOR'S FROT EACH OCCURRENCE $ 1,000,000
[ ] ___________________________ FIRE DAMAGE (Any one
fire) $ 100,000
[ ] MED EXP (Any one
person) $ 10,000
AUTOMOBILE LIABILITY
A [X] ANY AUTO 3209890 4/15/99 4/15/00 COMBINED SINGLE LIMIT $ 1,000,000
[ ] ALL OWNED AUTOS BODILY INJURY
(Per Person) $
[ ] SCHEDULED AUTOS BODILY INJURY
(Per Accident) $
[ ] HIRED AUTOS
[ ] NON-OWNED AUTOS
[ ] ___________________________
[ ] PROPERTY DAMAGE $
GARAGE LIABILITY AUTO ONLY -EA
ACCIDENT $
[ ] ANY AUTO OTHER THAN AUTO ONLY
[ ] _____________________ EACH ACCIDENT $
[ ] AGGREGATE $
EXCESS LIABILITY EACH OCCURRENCE $10,000,000
B [X] UMBRELLA FORM AGGREGATE $10,000,000
[ ] OTHER THAN UMBRELLA FORM TBD 4/15/99 4/15/00 $
WORKERS COMPENSATION AND [X] WC STATUTORY OTHER
EMPLOYER'S LIABILITY 3479346 4/15/99 4/15/00 LIMITS
A THE PROPRIETOR [ ] INCL EL EACH ACCIDENT $ 1,000,000
PARTNERS/EXECUTIVE [ ] EXCL EL DISEASE - POLICY
LIMIT $ 1,000,000
OFFICERS ARE: EL DISEASE - EA
EMPLOYEE $ 1,000,000
OTHER
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/SPECIAL ITEMS
Congress Financial Corporation (Southwest), as lender is named as an
additional insured.
CERTIFICATE HOLDER CANCELLATION
Congress Financial SHOULD ANY OF THE ABOVE DESCRIBED POLICIES
Corporation (Southwest) BE CANCELLED BEFORE THE EXPIRATION DATE
1201 Main Street, Suite 1625 THEREOF, THE ISSUING COMPANY WILL ENDEAVOR TO
Dallas, TX 75202 MAIL 30 DAYS WRITTEN NOTICE TO THE
CERTIFICATE HOLDER NAMED TO THE LEFT. BUT
FAILURE TO MAIL SUCH NOTICE SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND UPON THE
COMPANY, ITS AGENTS OR REPRESENTATIVES.
AUTHORIZED REPRESENTATIVE 337725000
/s/ Deirdre Linky
ACORD 25,9
DATE (MM/DD/YY)
ACORD. EVIDENCE OF PROPERTY INSURANCE 4/02/99
THIS IS EVIDENCE THAT INSURANCE AS IDENTIFIED BELOW HAS BEEN ISSUED, IS IN
FORCE, AND CONVEYS ALL THE RIGHTS AND PRIVILEGES AFFORDED UNDER THE POLICY.
PRODUCER PHONE COMPANY
(A/C NO. Ext.)
Aon Risk Services Inc of NY Security Insurance Company
Two World Trade Center of Hartford
New York, NY 10048 TIG Insurance Company
Zurich Insurance Company
CODE: SUB CODE:
AGENCY
CUSTOMER ID:
INSURED Allied Fashion, Inc. LOAN NUMBER POLICY NUMBER
102 Fahm Street COPG13583
Savannah, GA 31401 EFFECTIVE DATE EXPIRATION DATE CONTINUED UNTIL
4/13/99/ 4/13/00 [ ] TERMINATED IF CHECKED
THIS REPLACES PRIOR EVIDENCE DATED:
PROPERTY INFORMATION
LOCATION/DESCRIPTION
COVERAGE INFORMATION
COVERAGE/PERILS/FORMS AMOUNT OF INSURANCE DEDUCTABLE
- ---------------------------------------------------------------------------------
All Risk Property 10,000,000
subject to policy terms,
conditions & exclusions
Contingent Business
Interruption 100,000
REMARKS (Including Special Conditions)
Congress Financial Corporation (Southwest), as lender, is hereby named as a
loss payee and/or additional insured as its interests may appear.
CANCELLATION
THE POLICY IS SUBJECT TO THE PREMIUMS, FORMS, AND RULES IN EFFECT FOR EACH
POLICY PERIOD. SHOULD THE POLICY BE TERMINATED, THE COMPANY WILL GIVE THE
ADDITIONAL INTEREST IDENTIFIED BELOW 30 DAYS WRITTEN NOTICE, AND WILL SEND
NOTIFICATION OF ANY CHANGES TO THE POLICY THAT WOULD AFFECT THAT INTEREST, IN
ACCORDANCE WITH THE POLICY PROVISIONS OR AS REQUIRED BY LAW.
ADDITIONAL INTEREST
NAME AND ADDRESS [ ] MORTGAGEE [X] ADDITIONAL INSURED
[X] LOSS PAYEE [ ]
Congress Financial Corporation LOAN'
(Southwest)-Suite 1625 AUTHORIZED REPRESENTATIVE
1201 Main Street /s/
Dallas, TX 75202
Lender's Loss Payable Endorsement- Form 438 BFU
1 Loss or damage, if any, under this policy shall be paid to CONGRESS
FINANCIAL CORPORATION (SOUTHWEST), 1201 MAIN STREET, SUITE 1625, DALLAS,
TX 75202, its assigns, as agent, its successors and assigns, hereinafter
referred to as "the Lender" in whatever form or capacity its interests may
appear and whether said interest be vested in said Lender in its
individual or in its disclosed or undisclosed fiduciary or representative
capacity, or otherwise, or vested in a nominee or trustee of said Lender.
2 The insurance under this policy, or any rider or endorsement attached
thereto, as to the interest only of the Lender, its successors and
assigns, shall not be invalidated nor suspended: (a) by any error,
omission, or change respecting the ownership, description, possession, or
location of the subject of the insurance or interest therein, or the title
thereto; (b) by the commencement of foreclosure proceedings or the giving
of notice of sale of any of the property covered by this policy by virtue
of any mortgage or trust deed; (c) by any breach of warranty, act,
omission, neglect, or non-compliance with any of the provisions of this
policy, including any and all riders now or hereafter attached thereto, by
the named insured, the borrower, mortgagor, trustor, vendee, owner,
tenant, warehouseman, custodian, occupant, or by the agents of either or
any of them or by the happening of any event permitted by them or either
of them, or their agents or which they failed to prevent whether occurring
before or after the attachment of this endorsement, or whether before or
after a loss, which under the provisions of this policy of insurance or of
any rider or endorsement attached thereto would invalidate or suspend the
insurance as to the named insured, excluding herefrom, however, any acts
or omissions of the lender while exercising active control and management
of the property.
3 In the event of failure of the insured to pay any premium or additional
premium which shall be or become due under the terms of this policy or on
account of any change in occupancy or increase in hazard not permitted by
this policy, this Company agrees to give written notice to the Lender of
such non-payment or premium after sixty (60) days from and within one
hundred and twenty (120) days after due date of such premium and it is a
condition of the continuance of the rights of the Lender hereunder that
the Lender when so notified in writing by this Company of the failure of
the insured to pay such premium shall pay or cause to be paid the premium
due within ten (10) days following receipt of the Company's demand in
writing therefor. If the Lender shall decline to pay said premium or
additional premium, the rights of the Lender under this Lender's Loss
Payable Endorsement shall not be terminated before ten (10) days after
receipt of said written notice by the Lender.
4 Whenever this Company shall pay to the Lender any sum for loss or damage
under this policy and shall claim that as to the insured no liability
therefor exists, this Company, at its option, may pay to the Lender the
whole principal sum and interest and other indebtedness due or to become
due from the insured, whether secured or unsecured, (with refund of all
interest not accrued), and this Company, to the extent of such payment,
shall thereupon receive a full assignment and transfer, without recourse,
of the debt and all rights and securities held as collateral thereto.
5 If there be any other insurance upon the within described property, this
Company shall be liable under this policy as to the Lender for the
proportion of such loss or damage that the sum hereby bears to the entire
insurance of similar character on said property under policies held by,
payable to and expressly consented to by the Lender. Any Contribution
Clause included in any Fallen Building Clause Waiver or any Extended
Coverage Endorsement attached to this contract of insurance is hereby
nullified, and also any Contribution Clause in any other endorsement or
rider attached to this contract of insurance is hereby nullified except
Contribution Clauses for the compliance with which the insured has
received reduction in the rate charged or has received extension of the
coverage to include hazards other than fire and compliance with such
Contribution Clause is made a part of the consideration for insuring such
other hazards. The Lender upon the payment to it of the full amount of its
claim, will subrogate this Company (pro rata with all other insurers
contributing to said payment) to all of the Lender's rights of
contribution under said other insurance.
6 This Company reserves the right to cancel this policy at any time, as
provided by its terms, but in such case this policy shall continue in
force for the benefit of the Lender for ten (10) days after written notice
of such cancellation is received by the Lender and shall then cease.
7 This policy shall remain in full force and effect as to the interests of
the Lender for a period of ten (10) days after its expiration unless an
acceptable policy in renewal therefore with loss thereunder payment to the
Lender in accordance with the terms of this Lender's Loss Payable
Endorsement, shall have been issued by some insurance company and accepted
by the Lender.
8 Should legal title to and beneficial ownership of any of the property
covered under this policy become vested in the Lender or its agents,
insurance under this policy shall continue for the term thereof for the
benefit of the Lender but, in such event, any privileges granted by this
Lender's Loss Payable Endorsement which are not also granted the insured
under the terms and conditions of this policy and/or under riders or
endorsements attached thereto shall not apply to the insurance hereunder
as respects such property.
9 All notices herein provided to be given by the Company to the Lender in
connection with this policy and this Lender's Loss Payable Endorsement
shall be mailed to or be delivered to the Lender at its office or branch
at 1201 Main Street, Suite 1625, Dallas, TX 75202.
Insured to: Allied Fashion, Inc.
Agency at: Aon Risk Services Inc. of NY. 2 WTC. New York. NY 10048
Date: April 13, 1999
Schedule 6.3
DEPOSIT ACCOUNTS
See Attached.
DEPOSIT ACCOUNTS
STORE STORE NAME ACCOUNT # ROUTING # NAME PHONE
- ------ ---------------- ------------- ---------- ------------------------ ---------------
30 HEMINGWAY, SC 550121966 053207054 Anderson State Bank 843-558-2511
41 GEORGETOWN, SC 120263819 053200019 Wachovia 843-527-6200
42 DILLION, SC 79002379 053202240 Carolina Community 843-8410444
57 KINGSTREE, SC 620018366 053207685 Williamsburg First Nat 843-354-6101
72 MARION, SC 530216423 053201720 Anchor Bank 843-431-1000
73 WHITEVILLE, NC 5115058888 053101121 Branch Banking & Turst 910-914-9945
79 CLINTON, NC 002412560394 053100300 1st Citizens Bank 910-590-5340
81 FLORENCE, SC 2000006213488 053207766 First Union 843-664-2900
133 GOLDSBORO, NC 1692428545 053100300 1st Citizens Bank 919-705-2260
172 BISHOPVILLE, SC 270002849701 053906041 1st Citizens Bank 803-484-4257
185 LORIS, SC 5121851271 053201607 Branch Banking & Turst 843-756-4091
7 DENMARK, SC 070074695 053200983 First National Bank 803-793-3324
12 BARNWELL, SC 240001187601 053906041 1st Citizens 803-259-356
20 MANNING, SC 020214475301 053200666 NBSC 803-435-5100
36 ORANGEBURG, SC 2000006211891 053207766 First Union 803-533-4400
53 ORANGEBURG, SC 213000768 053201924 Orangeburg National Bank 803-531-5566
65 MONCKS CORNER, S 240063818 053200019 Wachovia 843-761-8030
71 COLUMBIA, SC 3521432401 053200666 NBSC 803-256-6303
77 COLUMBIA, SC 80047634301 053906041 1st Citizens 803-733-2079
78 SUMTER, SC 760203547 053200019 Wachovia 803-778-7718
88 CHARLESTON, SC 079019396501 053906041 1st Citizens 843-722-5835
90 N CHARLESTON, SC 079019284301 053201487 1st Citizens 843-747-1180
2 ST. GEORGE, SC 710000726401 053906041 1st Citizens 843-563-3011
11 MILLEN, GA 150913 061103975 Ogeechee Valley 912-982-5700
13 SAVANNAH, GA 200002704687 061200030 First Union 1-800-566-3862
16 BAXLEY, GA 9800294648 061200878 Baxley Suntrust 912-367-8972
19 GARDEN CITY, GA 2000006211943 061000227 First Union 1-800-566-3862
21 WAYNESBORO, GA 0524440 061202245 First National 706-554 8100
23 GLENNVILLE, GA 40741 061204683 Glennville Bank Trust 912-654-3471
27 HAMPTON, SC 0069013538 053202596 Palmetto State Bank 803-943-2671
49 WALTERBORO, SC 890025448 0653200983 First National 843-549-1553
63 DUBLIN, GA 127118 061205938 Dublin Bank of Dudley 912-275-4980
-1-
89 JACKSONVILLE, FL 3751278573 0111000012 Nations Bank 704-388-6429
184 COCHRAN, GA 0201582 061210237 Cochran Sale Bank 912-934-4501
22 LOUISVILLE, GA 136822 061103975 1st National Bank 912-625-2000
25 SPARTA, GA 0019144 061107146 Bank of Hancock 706-444-5781
34 JOHNSTON, SC 470001234901 053201487 1st Citizens 803-275-2354
35 JACKSON, GA 003251604320 061000052 National Bank 770-775-7178
40 FT. VALLEY, GA 00000088641726 0261170070 1st Liberty Bank 912-825-7721
69 MACON, GA 0003601134004 061100473 Suntrust Bank 912-751-5731
70 AUGUSTA, GA 501138580 061100334 Suntrust Bank 706-821-2005
76 TUSKEGEE , AL 5024374 062205665 Alabama Exchange 334-727-1730
87 PHENIX CITY, AL 061100606 142298 CB&T Bank 334-291-3368
123 EASTPOINT, GA 003261259305 061000052 National Bank 404-765-1958
44 MOULTRIE, GA 0170293901 061202025 Southwest Bank 912-985-1120
45 QUITMAN, GA 0119115 061201851 Hertiage Bank 912-263-7525
52 CORDELE, GA 0183301 0621210965 Cordele Banking 912-276-2470
55 CAMILLA, GA 045640 061202957 Planters Bank 912-336-5271
56 QUINCY, FL 176318501 063100882 Qunicy State Bank 850-875-1000
58 CARIO, GA 1628961301 061203338 Citizens Bank
67 BLAKLEY, GA 45640 061212002 Bank of Early 912-723-3101
120 VALDOSTA, GA 003251835718 0610052 Nations Bank 912-249-5041
121 AMERICUS, GA 0049229 061202410 Sumter Bank & Trust
169 ALBANY, GA 6967021879 061101375 Regents Bank 912-432-8417
189 MADISON, FL 003063631439 063000047 Nations Bank 850-973-4126
142 NATCHEZ, MS 5200377240 065305436 Deposit Guaranty
150 PASCAGOULA, MS 1092855 065301362 Merchants Marine 228-762-3311
154 THIBODAUX, LA 9500008355 065404913 Union Planters Bank 504-446-8161
156 BAKER, LA 882105237 065000090 Hibernia Bank 225-381-2041
157 PLAQUEMINE , LA 618520 065403150 Citizens Bank & Trust 225-687-6897
158 FRANKLIN, LA 001135546 065400713 St Marys Bank 318-828-0560
161 OPELOUSAS, LA 0169811 065205031 American Bank 318-948-3056
162 VILLE PLATTE, LA 011875159 065204977 American Security Bank 318-363-5602
164 CROWLEY, LA 50905315 065200528 Bank Of Commerce 318-7884805
166 BATON ROUGE, LA 882105334 065000090 Hibernia Bank
128 FRANKLINTON, LA 011622129 0065400153 Hancock Bank 504-839-9821
132 WEST POINT, MS 60350436 084201278 Bank Of Mississippi 601-495-1000
137 JACKSON, NS 1007177678 065300279 Trustmark 601-354-5040
139 COLUMBUS, MS 8808306920 065300279 Trust mark 601-354-5040
141 HAZLEHURST, MS 6331656 065301744 Copiah Bank 601-894-3930
144 GREENWOOD, MS 394056-01 00842-00981 Bank of Commerce 601-453-4142
145 BOGALUSA, LA 8520005227 06500090 Hibernia Bank
147 GREENVILLE, MS 7006698484 065300279 Trustmark 601-334-8433
148 MCCOMB, MS 4502220481 065300279 Trust mark 601-249-1116
187 JACKSON, MS 5200396933 064000017 Deposit Guaranty 601-960-6462
47 CHERAW, SC 700073547 053200019 Wachovia 843-921-6500
*83 GREENVILLE, NC 3602010281 053101529 Wachovia 252-758-8369
84 WILSON, NC 5212711421 053101121 BB& T Bank
86 GREENSBORO, NC 5112951190 053101121 BB&T 336-733-0105
91 WINSTON SALEM, NC 5112951204 053101121 BB&T 336-733-0105
130 PLYMOUTH, NC 7210024084 053111852 Triangle Bank 252-793-9031
176 AHOSKIE, NC 0126001983 053100494 Wachovia 252-332-7250
I80 BENNETTSVILLE, SC 0701125819 053207216 Carolina Bank 843-479-4141
186 WILLIAMSTON, NC 8540002886 053101529 Wachovia 252-809-4002
188 ROCKY MOUNT, NC 0450004754 053100850 Centura Bank 888-738-2455
Schedule 7.3(i)
CONSIGNMENT INVENTORY
None
Schedule 8.3
CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS
Chief Executive Office:
102 Fahm Street
Savannah, GA 31401
Collateral Locations:
See Attached.
STORE
NO. LOCATION
27/ 115 LEE AVENUE
522 HAMPTON, SC 29924
HAMPTON COUNTY
803 943-2644
30/ 104-108 W. BROAD STREET
525 P.O. BOX 387
HEMINGWAY, SC 29554
803 558-5019
34/ 458 LEE STREET
527 JOHNSTON, SC 29832
803 275-2342
35/ 8-20 OAK STREET
528 JACKSON, GA 30233
770 775-2333
36/ 136 RUSSEL STREET
529 ORANGEBURG, SC 29115
803 534-0670
40/ 135 MAIN STREET
531 FT. VALLEY, GA 31030
912 825-8162
4l/ 930 FRONT STREET
532 GEORGETOWN, SC 29440
803 546-5469
42/ 112 W. MAIN STREET
533 DILLON, SC 29536
843 774-6331
44/ 6 S. MAIN STREET
535 MOULTRIE, GA 31768
912 985-3310
45/ 201 E. SCREVEN STREET
536 QUITMAN, GA 31643
912 263-7774
47/ 146 MARKET STREET
537 CHERAW, SC 29520
843 537-2568
49/ 205 WASHINGTON STREET
538 WALTERBORO, SC 29488
803 549-5813
52/ 117 W. 11TH AVENUE
540 CORDELE, GA 31015
912 273-1014
53/ EDISTO VILLAGE H-WAY
648 301
ORANGEBURG, SC 29115
803 536-6548
-2-
Collateral Locations (Schedule 8.3)
STORE
NO. LOCATION
02/ 203 N PARLER AVE.
501 ST. GEORGE, SC 29477
843 563-3539
07/ 215 S PALMETTO AVE.
505 DENMARK, SC 29042
803 793-3171
ll/ 323 COTTON AVE.
508 MILLEN, GA 30442
JENKINS COUNTY
912982-1534
12/ CARTER SHOPPING PLAZA
509 1922 BURR STREET
BARNWELL, SC 29812
BARNWELL COUNTY
803 259-3946
13/ 201-203 W BROUGHTON ST.
510 SAVANNAH, GA 31401
912 234-3342
16/ 122 N MAIN STREET
513 BAXLEY, GA31513
912 367-4464
19/ WESTSIDE SHOPPING CTR
649 HIGHWAY 80
GARDEN CITY, GA 31408
912 966-5009
20/ 16 RIGBY STREET
515 MANNING, SC 29102
803 435-8731
21/ 703-707 LIBERTY STREET
516 WAYNESBORO, GA 30830
706 554-2348
22/ 108 W. BROAD STREET
517 LOUISVILLE, GA 30434
912 625-7419
23/ 107 W. BARNARD
518 GLENNVILLE, GA 30427
912 654-2220
25/ 722 SPRING STREET
520 SPARTA, GA 31087
706 444-6941
STORE LOCATION
NO.
55/ 20 BROAD STREET
542 CAMILLA, GA 31730
912 336-7427
56/ 12 WASHINGTON STREET
543 QUINCY, FL 32351
850 627-3254
57/ 115 E. MAIN STREET
544 KINGSTREE, SC 29556
803 354-9756
58/ 149 S. BROAD STREET
545 CARIO, GA 31728
912 377-8366
63/ 100 W. JACKSON STREET
547 DUBLIN, GA 31021
912 275-2399
65/ 315 MAIN STREET
549 MONCKS CORNER, SC
29461
843 761-8687
67/ 120 S. MAIN STREET
551 BLAKELY, GA 31723
912 723-8715
69/ NAPIER SQ. SHOPPING CTR
552 949 HILLCREST BLVD
MACON, GA 31204
912 742-3018
70/ SOUTH GATE PLAZA
553 1631 GORDON H- WAY
AUGUSTA, GA 30906
706 790-5982
71/ 4121-B W. BELTLINE BLVD
554 EDENS PLAZA
COLUMBIA, SC 29204
803 256-2719
72/ 317-321 N. MAIN STREET
555 MARION, SC 29571
803 423-4036
73/ 3 LEWIS SMITH SHOP/CTR
556 WHITEVILLE NC 28472
910 642-2191
76/ 112 S. MAIN STREET
557 TUSKEGEE, AL 36083
334 727-9455
STORE LOCATION
NO.
77/ NORTHWAY PLAZA
558 5112 FAIRFIELD ROAD
COLUMBIA, SC 29204
803 754-2451
78/ 20 N. MAIN STREET
559 SUMTER, SC 29150
803 775-2986
79/ 344-A NORTHEAST BLVD.
636 CLINTON, NC 28328
910 590-3664
81/ 150 N. DARGAN STREET
561 FLORENCE, SC 29501
843 667-4255
83/ GREENVILLE BUYERS
639 MARKET
MEMORIAL DRIVE
GREENVILLE, NC 27834
919 355-0945
84/ 225-227 E. NASH STREET
562 WILSON, NC 27893
252 291-8937
86/ SUMMIT SHOPPING CTR
643 940 SUMMIT AVENUE
GREENSBORO, NC 27405
336 691-9880
87/ 502 13TH STREET
564 PHENIX PLAZA
PHENIX CITY, AL 36867
334 297-2542
88/ 483-485 KING STREET
565 CHARLESTON, SC 29403
843 577-6786
89/ 5451 NORWOOD AVENUE
566 NORWOOD PLAZA
JACKSONVILLE, FL 32208
904 768-6976
90/ SHIPWATCH PLAZA
567 3655 RIVERS AVENUE
N. CHARLESTON, SC 29405
803 554-9055
-4-
STORE LOCATION
NO.
91/ NORTHSIDE SHOPPING
645 CTR
3599 N. PATTERSON AVE.
WINSTON-SALEM, NC
27105
336 767-7688
120/ FIVE POINT SHOPPING CTR
574 3144-A N. ASHLEY
STREET
VALDOSTA, GA 31602
912 244-8551
121/ PERLIS PLAZA SHOPPING
575 CTR
1536 E. FORSYTH STREET
AMERICUS, GA 31709
912 928-3341
123/ TRI-CITIES SHOPPING CTR
577 3206 E. MAIN STREET
EASTPOINT, GA 30344
FULTON COUNTY
404 762-6533
128/ EASTGATE SHOPPING CTR
608 LA HIGHWAY 10
FRANKLINTON, LA 70438
504 839-5527
130/ 810 US HWY 64 EAST
606 PLYMOUTH, NC 27962
252 793-3578
132/ 601 W. MAIN STREET
609 WEST POINT, MS 39773
601 494-5436
133/ 112-114 N. CENTER STREET
610 GOLDSBORO, NC 27530
919 580-1179
-5-
STORE
NO. LOCATION
--- --------
137/583 TRIANGLE MART
SHOP/CTR
4547 N. STATE STREET
JACKSON, MS 39206
601 982-2781
139/585 GATEWAY SHOPPING CTR
201 N. ALABAMA STREET
COLUMBUS, MS 39701
LOWNDES COUNTY
601 328-8259
141/647 COPIAH TRADE CENTER
664 CALDWELL DRIVE
HAZLEHURST, MS 39083
601 894-2295
142/588 MAGNOLI A MALL
261 DEVEREAUX DR/SUITE
14
NATCHEZ, MS 39120 601
446-9543
144/651 415 HOWARD STREET
GREENWOOD, MS 38930
601 455-5461
145/653 421 COLUMBIA STREET
BOGALUSA, LA 70427
(504)735-8181
147/655 138 NORTH HARVEY ST
GOYER SHP CENTER
GREENVILLE, MS 38701
(601)332-4880
148/591 PIKE CTR MART SHPNG
CTR
MCCOMB,MS 39648
601 684-4142
150/592 DEEPSOUTH SHOPPING
CTR
1702 DENNY AVENUE
PASCAGOULA,MS 39567
228 762-6825
154/595 NICHOLS SHOPPING CTR
509 SAINT MARYS STREET
THIBODAUX, LA 70301
504 446-5573
-6-
STORE
NO. LOCATION
--- --------
156/596 BAKER PLAZA SHPNG/CTR
2080 MAIN STREET
BAKER, LA 70714
225 778-1920
157/597 RIVERVIEW PLAZA
25027 HIGHWAY SOUTH
PLAQUEMINE, LA 70764
IBERVILLE PARISH
504 687-6436
158/598 720 MAIN STREET
FRANKLIN, LA 70538
318 828-0495
161/600 VISTA VILLAGE SHPING
CTR
688 E. CRESWELL LANE
OPELOUSAS, LA 705 70
ST. LANDRY PARISH
318 942-4904
162/601 PARKVIEW PLAZA
SQUARE
SHOPPING CENTER
623 W. LINCOLN ROAD
VILLE PLATTE, LA 70586
318 363-3868
164/602 N. PARK SHOPPING CTR
1504 N. PARKERSON
AVENUE
CROLEY, LA 70526
ACADIA PARISH
318 783-2045
166/652 DELMONT VILLAGE
SHOPPING
CENTER 5151 PLANK ROAD
SUITE 1 F
BATON ROUGE, LA 70805
225 356-5950
169/604 SOUTHGATE SHOPPING
CTR
311-A S. SLAPPY BLVD
ALBANY, GA 3 1707
912 439-0047
172/615 100 MAIN STREET
BISHOP VILLE, SC 29010
LEE COUNTY
803 484-4102
-7-
STORE
NO. LOCATION
--- --------
176/619 1323 E. MEMORIAL DRIVE
USA HWY 13
AHOSKIE,NC 27910
252 332-6557
180/623 HWY 15/401 BYPASS
BENNETTSVILLE, SC 29512
843 479-3402
184/627 210 SECOND STREET
COCHRAN,GA 31014
BECKLEY COUNTY
912 934-2174
185/628 4122 MAIN STREET
LORIS, SC 29569
803 756-0256
186/629 125 W. MAIN STREET
WILLIAMSTON, NC 27892
252 792-2101
187/630 MART 51 SHOPPING CTR
1700 TERRY ROAD
JACKSON, MS 39204
601 352-7615
188/635 206 S. MAIN STREET
ROCKY MOUNT, NC 27801
252 972-6802
189/631 1221 W. BASE STREET
MADISON, FL 32340
850 973-3303
-8-
Schedule 8.7
COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS
See Attached Memo.
Schedule 8.4
OTHER LIENS
Any UCC Financing Statements filed of record with respect to equipment
leased by Borrower. Borrower is not aware of any liens on any owned equipment.
[ENSR LOGO]
MEMORANDUM
To: Laurene Goff/ING Equity Partners Date: March 23,1999
From: Jennifer Ledbetter. P.E. File: 4507-061-100
RE: Allied Fashion for Less CC: Halley Moriyama / ENSR
George Bellino / Allied Fashion
for Less
On Wednesday, March 17, 1999, I conducted a walk-through safety inspection of
Allied Fashion for Less (Allied) located at 102 Fahm Street in Savannah,
Georgia. During the Inspection, I met with Mr. George Bellino, Mr. Ted Boswell
and Ms. Terasa Reckner of Allied. This memo outlines the findings of my
inspection.
Emergency Action Plan (28 CFR 1910.38). The facility should prepare a
site-specific emergency action plan that covers required items such as
evacuation routes, procedures for accounting for employee during an emergency,
assignments of designated personnel during an emergency, and means of reporting
an emergency. Finding: The facility does not have a site-specific emergency
action plan. Estimated cost to mitigate: S2,000.
Means of Egress (29 CFR 1910.37). The facility should conduct a comprehensive
evaluation of exit doors, egress routes, signs, emergency lighting, alarm
systems, etc. Finding: Exit doors were locked; slide locks that could prevent
egress were observed on the exterior of office doors ; egress routes were
blocked with boxes or other items; combustible items were observed in an exit
hallway; exit signs were confusing. Estimated cost to mitigate: $2,000.
Fire Extinguishers (29 CFR 1910.157). The facility should routinely inspect and
maintain fire extinguishers. Finding: Fire Extinguishers had not inspected
within the last year, extinguishers are not being checked monthly: some
extinguishers were not mounted or were missing from designated locations; some
extinguishers were inaccessible due to items in front of extinguishers; some
extinguishers were not charged. Estimated cost to mitigate: $500.
Electrical Safety (29 CFR 1910.303 et al.). Damaged electrical receptacle boxes,
panel boxes, and extension cords should be replaced. Finding: An electrical
panel box cover behind the cardboard bailer had fallen off, outlet box covers
were missing; all outlets in the conference room had broken receptacles and one
showed signs of heat damage; a prong was broken inside of a receptacle located
on the wall with the elevator, wires were observed in the A/C unit drip pans;
extension cords used as permanent wiring were observed throughout the building;
damaged electrical cords on fans and the battery charging station were observed.
Estimated cost to mitigate: $2,000 to $5,000.
Hazard Communication (29 CFR 1910.1200). Most Allied personnel do not come into
contact with chemicals during their normal job function. Those employees (e.g.,
maintenance and janitorial staff) that do come into contact with chemicals
should be trained in hazard communication. Finding: The facility does not have a
written hazard communication plan; MSOSs are not being maintained; unlabelled
chemicals were observed. Estimated cost to mitigate:$1,000.
Bloodborne Pathogens ( 29CFR 1910.1030). The facility should implement a
Bloodborne Pathogen Program and train affected personnel. Finding: Allied
personnel are responsible for janitorial duties, and therefore could be exposed
to bloodborne pathogens. Estimated cost to mitigate: $1,000.
Record keeping of Occupational Injuries and Illnesses (29 CFR 1904). The
facility should maintain OSHA 200 logs and supplementary records. Finding: The
facility has not been maintaining OSHA 200 logs. Some injury reports are being
kept but the reports do not cover injuries for all employees at the facility.
Estimated cost to mitigate: $0.
Lock Out/Tag Out (29 CFR 1910.147). The facility should implement a lock out tag
out program (or ensure that their contractor maintains one) for any work
conducted on equipment (e.g., conveyors, automatic rollers, the
[ENSR LOGO]
cardboard bailer) that could become energized and cause injury. Finding: The
facility does not maintain or require contractors to have a lock out/tag out
program. Estimated cost to mitigate: $1,500.
Asbestos (29 CFR 1910.1001). An asbestos survey should be conducted before
disturbing any building materials. Finding: Suspect materials were observed
in the office areas and on piping on the third floor. No asbestos survey has
been conducted at the facility. Estimated cost to conduct survey; $1,500.
The following is a list of miscellaneous items that were noted during the
inspection:
- - Compressed gas cylinders (Helium in the loading area, Oxygen in the
mezzanine, and welding gases in the maintenance shop) were observed.
According to facility personnel, compressed gases are not needed;
therefore, these cylinders should be removed from the site or maintained
(e.g., secured) properly.
- - A guard covering the belt on the motor located underneath the loading area
conveyor was missing.
- - Chains at the top of the concretes stairs should be replaced w/ permanent
railings. One of the chains was secured to an electrical conduit.
- - The fork lift driver's training should be documented.
- - Due to the addition of the mezzanine level,some space heaters are now
floor level and should be protected so employees are not injured by the
heaters.
- - Kill switches and lines on automatic rollers should be routinely tested.
The pull line on the third floor automatic rollers appeared to be loose.
- - Distance between wheel and resting area of pedestal grinder in maintenance
shop appeared to be greater than 1/8 inch.
- - The cardboard bailer could be construed as a confined space. At a
minimum, a warning sign indicating that employees are not to enter the
bailer should be visible and employees should be instructed to never
enter the bailer.
- - The mezzanine level should be placarded to show that it is rated
properly for loads placed upon it.
- - A 55-gallon drum containing residual dry spot cleaner was
observed on the third floor. According to facility personnel, this
chemical is no longer used at the facility. The drum and residual chemical
should be disposed of properly.
- - Two wooden walkways across the rollers on the third floor should be
replaced with manufactured walkways.
- - The water fountain in reception area should be turned off or repaired so
that water leaking from it does not create a slip hazard.
- - On the mezzanine level, the metal platform (by the concrete stairs) that
passes through the doorway should be moved or extended so there is no gap
between the platform and gate.
Estimated cost to mitigate the above Items: $2,000 to $3,000
In addition. I visited the Allied Fashion retail store (#19-649) located at the
West Side Shopping Mall on Highway 50 in Garden City, Georgia. Items noted
during the walk through Included:
- - The rear fire exit door was locked with a pad lock.
- - The fire extinguisher in the storeroom was not mounted and is not being
routinely inspected. Also, a fire extinguisher should be available in the
store area.
- - The panic bar alarm leading to the store room exit was not activated.
- - Allied employees, who are responsible for janitorial duties and/or
chemical use, should be trained in bloodborne pathogens and hazard
communication.
Page 2
Schedule 8.8
TITLE TO PURCHASED ASSETS
Any UCC Financing Statements filed of record with respect to equipment
leased by Borrower. Borrower is not aware of any liens on any owned equipment.