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Exhibit 10.19
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of February
__, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California corporation
("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania corporation
("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation ("Brawn"), GUMP'S
BY MAIL, INC., a Delaware Corporation ("GBM"), GUMP'S CORP., a California
corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin corporation
("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI HOLDINGS, INC., a
Delaware Corporation ("LWI"), AEGIS CATALOG CORPORATION, a Delaware corporation
("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware corporation ("HDV"), and
HANOVER REALTY, INC., a Virginia corporation ("Hanover Realty"; and together
with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis and HDV, each
individually referred to herein as an "Existing Borrower" and collectively,
"Existing Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation ("Aegis Holding"), AEGIS VENTURES, INC.,
a Delaware corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin
corporation, BRAWN WHOLESALE CORP., a California corporation, THE COMPANY
FACTORY, INC., a Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin
corporation, COMPANY STORE HOLDINGS, INC., a Delaware corporation ("CSHI"), D.M.
ADVERTISING, INC., a New Jersey corporation, GUMP'S CATALOG, INC., a Delaware
corporation, GUMP'S HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS,
INC., a Delaware corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware
corporation ("Hanover Catalog"), HANOVER DIRECT NEW JERSEY, INC., a Delaware
corporation, HANOVER FINANCE CORPORATION, a Delaware corporation ("Hanover
Finance"), HANOVER HOLDINGS, INC., a Delaware corporation, HANOVER LIST
MANAGEMENT INC., a New Jersey corporation, HANOVER VENTURES, INC., a Delaware
corporation, LEICHTUNG OF MICHIGAN, INC., a Michigan corporation, LWI RETAIL,
INC., an Ohio corporation, SCANDIA DOWN CORPORATION, a Delaware corporation
("Scandia"), SKANDIA DOWNSALES, INC., a Wisconsin corporation, TW ACQUISITIONS
INC., a Delaware corporation, TWEEDS OF VERMONT, INC., a Delaware corporation,
and YORK FULFILLMENT COMPANY, INC., a Pennsylvania corporation (each
individually an "Existing Guarantor" and collectively, "Existing Guarantors"),
THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; as hereinafter further
defined) and AUSTAD HOLDINGS, INC., a Delaware corporation ("Austad Holdings";
as hereinafter further defined). Each Existing Borrower, together with Austad,
shall hereinafter be referred to individually as a "Borrower" and collectively
as "Borrowers", and each Existing Guarantor, together with Austad Holdings,
shall hereinafter be referred to individually as a "Guarantor" and collectively
as "Guarantors."
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W I T N E S S E T H:
WHEREAS, Existing Borrowers, Existing Guarantors and Lender
entered into the Loan and Security Agreement, dated November 14, 1995 (the "Loan
Agreement"), pursuant to which Lender has made loans and advances to Existing
Borrowers; and
WHEREAS, Existing Borrowers, Existing Guarantors and Lender
contemplated, pursuant to Section 2.11 of the Loan Agreement, that Austad may
become a Revolving Loan Borrower under the Loan Agreement and that Austad
Holdings may become a Guarantor under the Loan Agreement; and
WHEREAS, Hanover, Austad, Austad Holdings, David B. Austad,
individually and as custodian for certain members of his immediate family, and
Denise Austad (the "David Austad Group", as hereinafter further defined) have
agreed, among other things, to a plan of corporate separation and restructure of
the mail order and retail businesses of Austad; and
WHEREAS, to provide working capital financing for the mail
order business retained by Austad following such corporate separation and
reorganization, Austad has requested that it become a Revolving Loan Borrower
under the Loan Agreement and Austad Holdings has requested that it become a
Guarantor under the Loan Agreement; and
WHEREAS, Existing Borrowers and Existing Guarantors have also
requested that Austad become a Revolving Loan Borrower pursuant to the terms and
conditions of the Loan Agreement, as amended hereby, and that Austad Holdings
become a Guarantor pursuant to the terms and conditions of the Loan Agreement,
as amended hereby; and
WHEREAS, the parties to the Loan Agreement desire to enter
into a this Amendment to the Loan Agreement to amend and modify certain
provisions thereof in order to: (a) include Austad as a Revolving Loan Borrower
and Austad Holdings as a Guarantor thereunder, subject to the provisions set
forth herein, (b) provide that Lender shall have a security interest in and lien
upon all of the assets and properties of each of Austad and Austad Holdings to
secure their Obligations to Lender, and (c) make certain other amendments to the
Loan Agreement;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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1. Definitions.
(a) Additional Definitions. As used herein or in any
of the other Financing Agreements, the following terms shall have the respective
meanings given to them below, and the Loan Agreement shall be deemed and is
hereby amended to include, in addition and not in limitation, each of the
following definitions:
(i) "AGS" shall mean AGS, Inc., a South
Dakota corporation, and its successors and assigns.
(ii) "Austad Catalog Division" shall mean
all of the assets and properties of Austad related to or used in connection with
the sale of golf equipment, golf supplies, golf apparel and related goods and
services through its "Austad's" mail order catalog.
(iii) "Austad Eligible Inventory" shall mean
all Inventory of Austad in the merchandise categories of golf equipment, golf
supplies, golf apparel and related finished goods offered for sale by Austad in
its "Austad's" catalog, or such other catalogs created or acquired by Austad
covering substantially similar merchandise which Austad has requested Lender to
include in this Inventory category.
(iv) "Austad Escrow Agreement" shall mean
the Escrow Agreement, dated February 16, 1996, by and among The First National
Bank in Sioux Falls, Austad and David Austad in his individual capacity and on
behalf of the other members of the David Austad Group, as the same now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(v) "Austad Holdings" shall mean Austad
Holdings, a Delaware corporation, and its successors and assigns.
(vi) "Austad Reorganization Agreements"
shall mean, collectively, the Agreement and Plan of Corporate Separation and
Reorganization, dated as of February 16, 1996, by and among Hanover, Austad
Holdings, Austad and the David Austad Group, the Escrow Agreement and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Person in connection therewith or related thereto, as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(vii) "Austad Retail Division" shall mean
all assets and properties of Austad related to or used in connection with the
retail sale of golf equipment, golf supplies, apparel and related goods and
services through one retail store located in Sioux Falls, South Dakota, two
retail stores located in Blaine and Edina, Minnesota and one retail store
located in
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Oak Brook, Illinois, but only to the extent such assets and properties are
transferred to AGS pursuant to the Austad Reorganization Agreements, and, in the
case of Inventory of Austad, limited to only such Inventory that is located on
the premises of the foregoing retail stores and such Inventory that is located
on the premises of the Sioux Falls, South Dakota fulfillment center of Austad
that was specifically purchased for the retail division of Austad.
(viii) "Austad Subordinated Notes" shall
mean, collectively, (A) the Promissory Note, dated May 25, 1995, by Austad
payable to Hanover Finance in the original principal amount of $400,000, the
payment of which is guaranteed by Austad Holdings, and (B) the Subordinated
Promissory Note, dated May 25, 1995, by Austad payable to Hanover Finance in the
original principal amount of $2,200,000, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.
(ix) "David Austad" shall mean David B.
Austad, and his heirs, executors, administrators, successors and assigns.
(x) "David Austad Group" shall mean,
individually and collectively, (A) David B. Austad, individually and as
custodian for certain members of his immediate family under the South Dakota
Uniform Transfer to Minors Act, (B) Denise Austad, individually and (C) each of
their respective heirs, executors, administrators, successors and assigns.
(xi) "FNBO" shall mean First National Bank
of Omaha, a national banking association, successor in interest to First Bank of
South Dakota, N.A., and its successors and assigns.
(xii) "HDV" shall mean Hanover Direct
Virginia Inc., a Delaware corporation, and its successors and assigns.
(b) Amendments of Certain Definitions.
(i) Section 1.117 of the Loan Agreement is
hereby amended to include Austad within the definition of "Revolving Loan
Borrowers" as set forth therein.
(ii) Section 1.100 of the Loan Agreement is
hereby amended such that neither Austad nor Austad Holdings shall be considered
Non-Guarantor Subsidiaries.
(iii) Austad and Austad Holdings shall each
be deemed included in the definition of "Guarantors" set forth in Section 1.51
of the Loan Agreement, and the parties hereto agree
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that Austad and Austad Holdings are each hereby included as a Guarantor under
the Loan Agreement.
(iv) Section 1.34 of the Loan Agreement is
hereby amended to include Austad Eligible Inventory within the definition of
"Eligible Inventory" as set forth therein.
(v) Section 1.13 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"1.13 "Austad" shall mean The Austad
Company, a South Dakota corporation, and its
successors and assigns."
(c) Interpretation. For purposes of this
Amendment, unless otherwise defined herein, all capitalized terms used herein
which are defined in the Loan Agreement shall have the meaning given to such
terms in the Loan Agreement.
2. Assumption of Obligations; Amendments to
Guarantees and Financing Agreements.
(a) Austad hereby expressly (i) assumes and
agrees to be directly liable to Lender, jointly and severally with the other
Borrowers, for all Obligations under, contained in, or arising out of the Loan
Agreement and the other Financing Agreements applicable to all Borrowers and as
applied to Austad as a Borrower and Guarantor, (ii) agrees to perform, comply
with and be bound by all terms, conditions and covenants of the Loan Agreement
and the other Financing Agreements applicable to all Borrowers and as applied to
Austad as a Borrower and Guarantor, with the same force and effect as if Austad
had originally executed and been an original Borrower and Guarantor party
signatory to the Loan Agreement and the other Financing Agreements, and (iii)
agrees that Lender shall have all rights, remedies and interests, including
security interests in and to the Collateral granted pursuant to Section 3(a)
hereof, the Loan Agreement and the other Financing Agreements, with respect to
Austad and its properties and assets with the same force and effect as Lender
has with respect to the other Borrowers and their assets and properties as if
Austad had originally executed and had been an original Borrower and Guarantor
party signatory to the Loan Agreement and the other Financing Agreements.
(b) Austad Holdings hereby expressly (i) assumes
and agrees to be directly liable for all Obligations under, contained in, or
arising out of the Loan Agreement, the General Security Agreement, dated
November 14, 1995, by the Existing Guarantors, other than Hanover and Borrowers,
in favor of Lender (the "Subsidiary General Security Agreement") and the other
Financing Agreements applicable to all Guarantors and as applied to Austad
Holdings as a Guarantor, (ii) agrees to perform, comply with and be bound by all
terms, conditions and covenants of the
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Loan Agreement, the Subsidiary General Security Agreement and the other
Financing Agreements applicable to all Guarantors and as applied to Austad
Holdings as a Guarantor with the same force and effect as if Austad Holdings had
originally executed and been an original Guarantor or Debtor, as the case may
be, party signatory to the Loan Agreement, the Subsidiary General Security
Agreement and the other Financing Agreements, and (iii) agrees that Lender shall
have all rights, remedies and interests, including security interests in the
Collateral granted pursuant to Section 3(b) hereof, the Loan Agreement, the
Subsidiary General Security Agreement, and the other Financing Agreements, with
respect to Austad Holdings and its properties and assets with the same force and
effect as if Austad Holdings had originally executed and had been an original
Guarantor or Debtor, as the case may be, party signatory to the Loan Agreement,
the Subsidiary General Security Agreement and the other Financing Agreements.
(c) Each of the Existing Borrowers, in their
capacities as Guarantors, hereby agrees that each of their respective Guarantee
and Waivers, dated November 14, 1995 (collectively, the "Borrower Guarantees")
is hereby amended to include Austad as an additional Guarantor party signatory
thereto. Austad hereby expressly (i) assumes and agrees to be directly liable to
Lender, jointly and severally with the other Borrowers signatories thereto and
the Guarantors, for all Obligations (as defined in the Borrower Guarantees),
(ii) agrees to perform, comply with and be bound by all terms, conditions and
covenants of the Borrower Guarantees with the same force and effect as if Austad
had originally executed and been an original party signatory to each of the
Borrower Guarantees, and (iii) agrees that Lender shall have all rights,
remedies and interests with respect to Austad and its property under the
Borrower Guarantees with the same force and effect as if Austad had originally
executed and been an original party signatory to each of the Borrower
Guarantees.
(d) Each of the Existing Guarantors which is a
party to the Guarantee and Waiver, dated November 14, 1995, executed by the
Existing Guarantors, other than Hanover and the Existing Borrowers, in favor of
Lender (the "Subsidiary Guarantee"), hereby agrees that such Guarantee is hereby
amended to include Austad Holdings as an additional Guarantor party signatory
thereto. Austad Holdings hereby expressly (i) assumes and agrees to be directly
liable to Lender, jointly and severally with the other Guarantors signatories
thereto and the Borrowers, for all Obligations (as defined in the Subsidiary
Guarantee), (ii) agrees to perform, comply with and be bound by all terms,
conditions and covenants of the Subsidiary Guarantee with the same force and
effect as if Austad Holdings had originally executed and been an original party
signatory to the Subsidiary Guarantee, and (iii) agrees that Lender shall have
all rights, remedies and interests with respect to Austad Holdings and its
property with the same force and effect as if Austad Holdings had
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originally executed and been an original party signatory to the
Subsidiary Guarantee.
(e) Each Guarantor, including without limitation,
Austad, in its capacity as Guarantor, and Austad Holdings, hereby expressly and
specifically ratifies, restates and confirms the terms and conditions of its
respective Guarantees in favor of Lender and its liability for all of the
Obligations (as defined in its Guarantees), and other obligations, liabilities,
agreements and covenants thereunder.
(f) Each Borrower, including, without limitation,
Austad, and each Guarantor, including, without limitation, Austad Holdings,
hereby agrees that all references to Borrower or Borrowers contained in any of
the Financing Agreements are hereby amended to include Austad as an additional
Borrower. Each Borrower, including, without limitation, Austad, and each
Guarantor, including, without limitation, Austad Holdings, hereby agrees that
all references to Guarantor or Guarantors or Debtor or Debtors contained in any
of the Financing Agreements are hereby amended to include Austad Holdings as an
additional Guarantor or Debtor, as the case may be.
3. Collateral.
(a) Austad Collateral. Without limiting the
provisions of Section 2(a) hereof, the Loan agreement and the other Financing
Agreements, as collateral security for the prompt performance, payment and
performance when due of all of the Obligations of Austad to Lender, Austad
hereby grants to Lender, a continuing security interest in, and liens upon, and
rights of setoff against, and Austad hereby pledges and assigns to Lender, all
now owned and hereafter acquired and arising assets and properties of Austad,
all of which shall be included in the definition of Collateral as set forth in
the Loan Agreement (which definition is hereby amended accordingly), including,
without limitation, the following:
(i) all of the following, whether now owned
or hereafter acquired or arising: (A) all Accounts, including, without
limitation, all MasterCard/VISA Receivables and all other Third Party Credit
Card Receivables, and all monies, credit balances and other amounts due from or
through or held by Third Party Credit Card Issuers, or other parties to the
Third Party Credit Card Agreements, all monies paid by or through the Private
Credit Card Purchaser, all rentals or license fees receivable in respect of
sale, lease, or license of Customer Lists, all monies, securities and other
property and the proceeds thereof, now or hereafter held or received by, or in
transit to, Lender from or for Austad, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Austad's deposits (general or
special), balances, sums and credits with Lender at any time existing; (B) all
right, title
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and interest, and all rights, remedies, security and liens, in, to and in
respect of the Accounts and other Collateral, including, without limitation,
rights of stoppage in transit, replevin, repossession and reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, guarantees or
other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligations of any Account Debtor, all credit and other
insurance; (C) all right, title and interest in, to and in respect of all goods
relating to, or which by sale have resulted in, Accounts, including, without
limitation, all goods described in invoices, documents, contracts or instruments
with respect to, or otherwise representing or evidencing, any Account or other
Collateral, including, without limitation, all returned, reclaimed or
repossessed goods; (D) all deposit accounts; and (E) all other general
intangibles of every kind and description, including, without limitation, (1)
tradenames and trademarks, and the goodwill of the business symbolized thereby,
(2) patents, (3) copyrights, (4) licenses, (5) Federal, State and local tax and
duty refund claims of all kinds, (6) catalogs and promotional materials, (7) all
Customer Lists, and (8) all right, title and interest of Austad in and to Mail
Order Joint Ventures, and other joint ventures, partnerships and other Persons;
(ii) Inventory;
(iii) Equipment;
(iv) Real Property, other than the real
property located at 4500 East 10th Street, Sioux Falls, South Dakota;
(v) all present and future books, records,
ledger cards, computer software (including all manuals, upgrades, modifications,
enhancements and additions thereto), computer tapes, disks, other electronic
data storage media, documentation of file and record formats and source code,
documents, other property and general intangibles evidencing or relating to any
of the above, any other Collateral or any Account Debtor, together with the file
cabinets or containers in which the foregoing are stored; and
(vi) all present and future products and
proceeds of the foregoing, in any form whatsoever, including, without
limitation, any insurance proceeds and any claims against third persons for loss
or damage to or destruction of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any leasehold
interests of Austad.
(b) Austad Holdings Collateral. Without limiting the
provisions of Section 2(b) hereof, the Loan Agreement, the
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Subsidiary General Security Agreement and the other Financing Agreements, as
collateral security for the prompt payment and performance when due of all of
the Obligations of Austad Holdings, Austad Holdings hereby grants to Lender, a
continuing security interest in, and liens upon, and rights of setoff against,
and Austad Holdings hereby pledges and assigns to Lender, all now owned and
hereafter acquired and arising assets and properties of Austad Holdings, all of
which shall be included in the definition of Collateral as set forth in the
Subsidiary General Security Agreement (which definition is hereby amended
accordingly), including, without limitation, the following:
(i) all present and future: (A) accounts,
credit card receivables (including credit card charge records and other
evidences of credit card transactions), contract rights, general intangibles,
chattel paper, documents and instruments (collectively, "Accounts"), including,
without limitation, all obligations for the payment of money arising out of the
sale, lease or other disposition of goods or other property or rendition of
services, all monies, all credit balances, reserve balances and other monies due
from or held by factors or credit card issuers or servicing agents or financial
intermediaries; (B) all monies, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, Lender or any
participant from or for Austad Holdings, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of Austad Holding's
deposits (general or special), balances, sums and credits with Lender or any
participant at any time existing; (C) all of Austad Holding's right, title and
interest, and all of Austad Holding's rights, remedies, security and liens, in,
to and in respect of the Accounts and other collateral, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any account debtor, credit and
other insurance; (D) all of Austad Holding's right, title and interest in, to
and in respect of all goods relating to, or which by sale have resulted in
Accounts, including, without limitation, all goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, any Account or other collateral, including, without limitation,
all returned, reclaimed or repossessed goods; (E) all deposit accounts; and (F)
all other general intangibles of every kind and description, including, without
limitation, (1) trade names and trademarks, and the goodwill of the business
symbolized thereby, (2) patents, (3) copyrights, (4) licenses, (5) claims and
other choses in action, (6) Federal, State, local and foreign tax refund claims
of all kinds, (7) catalogs and promotional materials, customer and mailing
lists, and (8) all right, title and interest in and to joint ventures and
partnerships;
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(ii) all Inventory;
(iii) all Equipment;
(iv) all Real Property;
(v) all present and future books, records,
ledger cards, computer programs and other property and general intangibles
evidencing or relating to any of the above, any other collateral or any account
debtor, together with the file cabinets or containers in which the foregoing are
stored; and
(vi) all present and future products and
proceeds of the foregoing, in any form, including, without limitation, any
insurance proceeds and any claims against third persons for loss or damage to or
destruction of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any leasehold
interests of Austad Holdings.
(c) Additional Collateral. Without limiting the
foregoing, or the other grants of Collateral pursuant to the Loan Agreement or
any of the other Financing Agreements, in order to induce Lender to extend
loans, advances and other financial accommodations to Borrowers under the Loan
Agreement, and as additional collateral for the payment and performance when due
of all Obligations of Austad, Austad Holdings and Hanover Finance, as the case
may be, (i) each of Austad and Austad Holdings by its execution below, hereby
pledges and assigns to Lender and grants to Lender a security interest in, all
of its now existing and hereafter arising (A) rights, remedies, claims for
monies, indemnification claims and claims for damages or other relief pursuant
to or in respect of the Austad Escrow Agreement and the other Austad
Reorganization Agreements, (B) rights, remedies, claims for monies,
indemnification claims and claims for damages or other relief under or in
respect of the documents and instruments referred to in the Austad Escrow
Agreement and the other Austad Reorganization Agreements, and (C) all proceeds,
collections, recoveries and rights with respect to the foregoing and (ii)
Hanover Finance by its signature below hereby pledges and assigns to Lender all
of its right, title and interest in and to, and agrees to indorse to Lender,
each of the Austad Subordinated Notes. Nothing set forth herein, and no act
taken by Lender pursuant to the pledges, assignments and grants of security
interests set forth herein shall constitute an assumption by Lender of any
obligation or liability of Austad or Austad Holdings pursuant to or in
connection with the Escrow Agreement and the other Austad Reorganization
Agreements or otherwise, or of Hanover Finance pursuant to or in connection with
the Austad Subordinated Notes or otherwise.
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4. Austad Inventory Advance Rate. Section 2.1(b) of
the Loan Agreement is hereby deleted in its entirety and replaced
with the following:
"(b) Revolving Inventory Loans. Subject to, and upon
the terms and conditions contained herein and in the other
Financing Agreements, Lender shall, from time to time, make
Revolving Inventory Loans (i) to each Revolving Loan Borrower,
other than Gump's and Austad's, at such Revolving Loan
Borrower's request, of up to the lesser of (A) sixty percent
(60%) of the Value of the Eligible Inventory of such Revolving
Loan Borrower or (B) the Net OLV Percentage of the Value of
such Eligible Inventory, and (ii) to Gump's, at its request,
of up to the lesser of (A) sixty percent (60%) of the Value of
Eligible Inventory of Gump's or (B) the Net GOB Percentage of
the Value of Eligible Inventory of Gump's, and (iii) to
Austad, at its request, of up to the lesser of (A) forty
percent (40%) of the Value of Eligible Inventory of Austad or
(B) the Net OLV Percentage of the Value of such Eligible
Inventory, or, in each of clauses (b)(i), (b)(ii) or (b)(iii),
such greater or lesser percentages thereof as Lender shall, in
its sole discretion, determine from time to time (the
"Inventory Loan Formulas"). Without limiting the foregoing,
the sixty percent (60%) lending formula component referred to
in clauses (b)(i)(A) and (b)(ii)(A) and the forty percent
(40%) lending formula component referred to in clause
(b)(iii)(A) may be adjusted downward by Lender based upon any
adverse change, individually or in the aggregate, in the
turnover of Eligible Inventory or deterioration in mix, nature
or quality of Eligible Inventory in the respective categories
of Eligible Inventory, and any such downward adjustment made
for such reason(s) (or on the basis of the lending formula
component set forth in clauses (b)(i)(B), (b)(ii)(B) or
(b)(iii)(B) above) shall not be considered solely
discretionary for purposes of the provision contained in the
definition of Interest Rate and Section 2.7(c) hereof."
5. Inventory Sublimits. Section 2.2(j) of the Loan Agreement
is hereby redesignated Section 2.2(k) and a new Section 2.2(j) of the Loan
Agreement is added as follows:
"(j) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving
Loans and Letter of Credit Accommodations made available to
Austad shall not exceed Three Million Dollars ($3,000,000) at
any one time outstanding."
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6. Letter of Credit Accommodations. Without limiting the
rights of Lender to establish a greater percentage in connection with Letter of
Credit Accommodations established for the purchase of goods pursuant to Sections
2.3(b) and 2.3(d) of the Loan Agreement, Austad and the Existing Borrowers agree
for purposes of clarity that the reference to forty percent (40%) set forth in
Sections 2.3(b)(i)(A)(1) and 2.3(d)(i)(A) of the Loan Agreement shall apply only
to Existing Borrowers and that it is hereby agreed that such percentage as
applied to Austad shall be sixty percent (60%) in such Sections .
7. Guarantees. Section 4.2 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following, effective November 14,
1995:
"4.2 Guarantees
Concurrently herewith, in order to induce Lender to
enter into this Agreement and the other Financing Agreements
to be entered into on the date hereof, each Borrower shall
execute and deliver to Lender the Guarantee by Borrowers, and
Borrowers shall cause Guarantors to execute and deliver to
Lender the Guarantees by the Guarantors, each in form and
substance satisfactory to Lender, as provided therein (as all
of such Guarantees, now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or
replaced, individually a "Guarantee" and collectively the
"Guarantees"). In its capacity as a party signatory to such
Guarantees, each Borrower shall be considered a Guarantor
hereunder."
8. Additional Amendments.
(a) Section 2.11(c), (d) and (e) of the Loan
Agreement are hereby redesignated Sections 2.11(a), (b) and (c), respectively.
(b) The name of the signatory party identified on
signature page 123 to the Loan Agreement as Skandia Down Sales, Inc. is hereby
corrected to be Skandia Downsales, Inc.
9. Exhibits.
(a) Exhibits A, B-1, B-4, C, D, F, G, H-1 and H-3, to
the Loan Agreement are hereby amended to include, in addition and not in
limitation, the information set forth on the First Supplements to each of such
Exhibits attached hereto.
(b) Exhibit A to the Subsidiary General Security
Agreement is hereby amended to include, in addition and not in limitation, the
information set forth on the First Supplement to Exhibit A attached hereto.
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13
10. Representations and Warranties. Borrowers represent,
warrant and covenant with and to Lender as follows, which representations,
warranties and covenants are continuing and shall survive the execution and
delivery hereof, the truth and accuracy of, or compliance with each, together
with the representations, warranties and covenants in the other Financing
Agreements, being a continuing condition of the making of any Revolving Loans or
Letter of Credit Accommodations by Lender to Borrowers:
(a) As of the date hereof, Austad does not have a
Deferred Billing Option Program.
(b) This Amendment and each other agreement or
instrument to be executed and delivered by each of Austad, Austad Holdings, the
other Borrowers and/or the other Guarantors hereunder have been duly authorized,
executed and delivered by all necessary action on the part of each of Austad,
Austad Holdings, the other Borrowers and the other Guarantors which is a party
hereto and thereto and, if necessary, their respective stockholders, and is in
full force and effect as of the date hereof, as the case may be, and the
agreements and obligations of each of Austad, Austad Holdings, the other
Borrowers and/or the other Guarantors, as the case may be, contained herein and
therein constitute legal, valid and binding obligations of each of Austad,
Austad Holdings, the other Borrowers and/or the other Guarantors, as the case
may be, enforceable against them in accordance with their terms.
(c) Neither the execution and delivery of the Austad
Reorganization Agreements, nor the consummation of the transactions contemplated
by the Austad Reorganization Agreements, nor compliance with the provisions of
the Austad Reorganization Agreements, shall result in the creation or imposition
of any lien, claim, charge or encumbrance upon any assets of the Austad Catalog
Division or any other Collateral, except in favor of Lender pursuant to this
Amendment.
(d) Neither the execution and delivery of the Austad
Reorganization Agreements, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof, (i) has violated or
shall violate any Bulk Sales Act, Bulk Transfer Act or Article 6 of the UCC, if
applicable, or any Federal or State securities laws or any other law or
regulation or any order or decree of any court or governmental instrumentality
in any respect or (ii) does, or shall conflict with or result in the breach of,
or constitute a default in any respect under any mortgage, deed of trust,
security agreement, agreement or instrument to which Austad or Austad Holdings
or any other Borrower or other Guarantor is a party or may be bound, or (iii)
shall violate any provision of the Certificates of Incorporation or By-Laws of
Austad, Austad Holdings, or any other Borrower or other Guarantor.
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14
(e) All of the outstanding shares of capital stock of
each of Austad and Austad Holdings have been duly authorized, validly issued and
are fully paid and non-assessable, free and clear of all claims, liens, pledges
and encumbrances of any kind. Hanover is the beneficial and direct owner of
record of one hundred (100%) percent of the issued and outstanding capital stock
of Austad Holdings. Austad Holdings is the beneficial and direct owner of record
of one hundred (100%) percent of the issued and outstanding capital stock of
Austad. After giving effect to the consummation of the Austad Reorganization
Agreements, there is no debt outstanding that is convertible into capital stock
of Austad or Austad Holdings, and there are no outstanding rights, options or
warrants to acquire any capital stock or debt convertible into capital stock of
Austad or Austad Holdings.
(f) No action of, or filing with, or consent of any
governmental or public body or authority, other than the filing of UCC financing
statements, and no approval or consent of any other party, is required to
authorize, or is otherwise required in connection with, the execution, delivery
and performance of this Amendment.
(g) All of the representations and warranties set
forth in the Loan Agreement and the other Financing Agreements, each as amended
hereby, are true and correct in all material respects on and as of the date
hereof as if made on the date hereof, except as affected by transactions
expressly contemplated or permitted by this Amendment and except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
(h) As of the date hereof, and after giving effect to
the provisions of this Amendment, no Event of Default, and no condition or event
which, with the giving of notice or lapse of time, or both, would constitute an
Event of Default, exists or has occurred and is continuing.
(i) Austad Holdings is a Delaware corporation, duly
organized and validly existing in good standing under the laws of the State of
Delaware. Austad is a South Dakota corporation, duly organized and validly
existing in good standing under the laws of the State of South Dakota. Each of
Austad and Austad Holdings (i) is duly licensed or qualified to do business as a
foreign corporation and is in good standing in each of the jurisdictions set
forth in the First Supplement to Exhibit A to the Loan Agreement annexed hereto,
which are the only jurisdictions wherein the character of the properties owned
or licensed or the nature of the business of Austad and/or Austad Holdings,
makes such licensing or qualification to do business necessary; and (ii) has all
requisite power and authority to own,
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lease and operate its properties and to carry on its business as it is now being
conducted and will be conducted in the future.
(j) The assets and properties of Austad and Austad
Holdings are owned by them, free and clear of all security interests, liens and
encumbrances of any kind, nature or description, as of the date hereof, except
those security interests granted pursuant hereto in favor of Lender and except
for Liens (if any) permitted under Section 6.4 of the Loan Agreement or the
other Financing Agreements.
11. Conditions Precedent. Concurrently with the execution
hereof (except to the extent otherwise indicated below), and as a further
condition to the effectiveness of this Amendment and the agreement of Lender to
the modifications and amendments set forth in this Amendment:
(a) Lender shall have received, in form and substance
satisfactory to Lender, evidence that (i) the Austad Reorganization Agreements
have been duly executed and delivered by and to the appropriate parties thereto
and (ii) the transactions contemplated under the terms of the Austad
Reorganization Agreements have been consummated prior to, or contemporaneously
with, the execution of this Amendment, including, without limitation, the
receipt by FNBO of the amount, to be paid by or on behalf of the David Austad
Group and/or AGS, representing a portion of the outstanding obligations owed by
Austad to FNBO under the financing arrangements between FNBO and Austad,
referred to as the "Balance Due Amount" in the Austad Reorganization Agreements;
(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 by FNBO of its
financing arrangements with Austad and Austad Holdings, and the termination and
release by FNBO of any interest in and to any assets and properties of Austad
and Austad Holdings, duly authorized, executed and delivered by FNBO, including,
but not limited to (i) UCC-3 Termination Statements for all UCC-1 Financing
Statements previously filed by FNBO for its predecessors, as secured party, and
Austad or Austad Holdings, as debtor, and (ii) satisfactions and discharges of
any mortgages, deeds of trust or deeds to secure debt by Austad or Austad
Holdings in favor of FNBO, in form acceptable for recording in the appropriate
governmental office;
(c) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions of this Amendment and
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the other Financing Agreements, including, without limitation, a Mortgagee
Waiver by Valley Bank as mortgagee of Austad's Sioux Falls, South Dakota
distribution center real property;
(d) Each of Austad, Austad Holdings, Borrowers and
Guarantors shall have delivered to Lender, in form and substance satisfactory to
Lender, each of the following agreements duly authorized, executed and
delivered:
(i) First Amendment to Trademark Collateral
Assignment and Security Agreement, dated November 14, 1995, by and among
Hanover, Hanover Catalog, Scandia, Aegis Holdings, CSHI and Lender, providing
for the addition of Austad Holdings as a Debtor thereunder and the grant by
Austad Holdings of a security interest in any trademarks, and any such
documents, instruments or filings with respect thereto with the U.S. Patent and
Trademark Office to protect such Collateral;
(ii) five (5) Special Powers of Attorney
(Trademark) by Austad Holdings in favor of Lender;
(iii) amendments to the Third Party Credit
Card Acknowledgments setting forth such acknowledging parties' agreement to
transfer to the Blocked Accounts all monies due and other funds payable to or
for the account of Austad and/or Austad Holdings under any applicable Third
Party Credit Card Agreements;
(iv) evidence that all existing Customer
Lists, including the Customer Lists of Austad and/or Austad Holdings, have been
delivered by HDI to the Customer List Escrow Agent and are being held by the
Customer List Escrow Agent pursuant to the Customer List Escrow Agreement;
(v) Amended and Restated Intercompany
Subordination Agreement between Hanover and Lender;
(vi) Amended and Restated Agency Agreement
by and among Hanover, Austad and certain Borrowers;
(vii) Guarantee and Waiver by Borrowers,
other than Austad, in favor of Lender with respect to the Obligations of Austad
to Lender;
(viii) Guarantee and Waiver by Guarantors,
other than Borrowers, Hanover and Austad, in favor of Lender with respect to the
Obligations of Austad to Lender;
(ix) Guarantee and Waiver by Hanover in
favor of Lender with respect to the Obligations of Austad to Lender;
(x) Amended and Restated Blocked Account
Agreement by and among The First National Bank of Maryland,
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17
Borrowers, certain Guarantors and Lender providing for the establishment of a
Blocked Account for Austad; and
(xi) the delivery by Hanover Finance to
Lender of each of the Austad Subordinated Notes with an Allonge Indorsement
affixed to each such note providing for the payment of any amounts due under
each Austad Subordinated Note to the order of Lender;
(e) Austad and Austad Holdings and all other
Borrowers and Guarantors shall have duly executed and delivered to Lender such
UCC financing statements and other documents and instruments which Lender in its
sole discretion has determined are necessary to perfect the security interests
of Lender in all assets now or hereafter owned by Austad and Austad Holdings;
(f) Lender shall have received a current Appraisal
with respect to the Inventory of Austad, prepared at Revolving Loan Borrowers'
expense by the Appraiser in form, scope and methodology acceptable to Lender and
addressed to Lender, or upon which Lender is expressly permitted to rely, that
is satisfactory to Lender and will enable Lender to calculate the Net Orderly
Liquidation Value of such Inventory and the Net OLV Percentage with respect
thereto;
(g) Each of Austad and Austad Holdings shall have
delivered to Lender (i) a copy of its Certificate of Incorporation, and all
amendments thereto, certified by the Secretary of State of its jurisdiction of
incorporation as of the most recent practicable date certifying that each of the
foregoing documents remains in full force and effect and has not been modified
or amended, except as described therein, (ii) a copy of its By-Laws, certified
by the secretary of each of Austad and Austad Holdings, and (iii) a certificate
from the secretary of each of Austad and Austad Holdings dated the date hereof
certifying that each of the foregoing documents remains in full force and effect
and has not been modified or amended, except as described therein;
(h) Each of Austad and Austad Holdings shall have
delivered to Lender evidence, as of the most recent practicable date, that it is
duly qualified and in good standing in each jurisdiction set forth on the First
Supplement to Exhibit A to the Loan Agreement annexed hereto;
(i) Lender shall have received Secretary's
Certificates of Directors' Resolutions with Shareholders' Consent evidencing the
adoption and subsistence of corporate resolutions approving the execution,
delivery and performance by Austad, Austad Holdings and the other Borrowers and
other Guarantors of this Amendment and the agreements, documents and instruments
to be delivered pursuant to this Amendment, together with such opinions of
counsel to Austad, Austad Holdings, the other
-17-
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Borrowers and other Guarantors with respect thereto, addressed to Lender as
Lender shall reasonably require, all in form and substance and satisfactory to
Lender;
(j) Each of Borrowers and Guarantors shall deliver,
or cause to be delivered, to Lender a true and correct copy of any consent,
waiver or approval to or of this Amendment, which any Borrower or Guarantor is
required to obtain from any other Person, and such consent, approval or waiver
shall be in a form reasonably acceptable to Lender; and
(k) Hanover shall have delivered to Lender, in form
and substance satisfactory to Lender, consolidating pro forma opening balance
sheets as of February 16, 1996 for Austad and Austad Holdings reflecting the
separation of the Austad Catalog Division and the Austad Retail Division.
12. Effect of this Amendment. This Amendment and the
instruments and agreements delivered pursuant hereto constitute the entire
agreement of the parties with respect to the subject matter hereof and thereof,
and supersede all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof and thereof. Except as expressly amended pursuant hereto,
and except for the acknowledgements expressly set forth herein, no other changes
or modifications to the Financing Agreements or waivers of or consents under any
provisions thereof are intended or implied, and in all other respects the
Financing Agreements are hereby specifically ratified, restated and confirmed by
all parties hereto as of the effective date hereof. To the extent that any
provision of the Loan Agreement or any of the other Financing Agreements are
inconsistent with the provisions of this Amendment, such other provision shall
be deemed to be amended so that it is made consistent with the provisions of
this Amendment.
13. Further Assurances.
(a) Borrower shall execute and deliver such
additional documents and take such additional action as may be reasonably
requested by Lender to effectuate the provisions and purposes of this Amendment.
(b) Without limiting the provisions of Section 13(a)
hereof, Austad shall, or Borrowers and Hanover shall cause Austad to, (i) obtain
and deliver to Lender, within thirty (30) days from the date hereof, (A)
evidence that Austad has qualified to do business as a foreign corporation in
each of the State of Pennsylvania and the State of California and (B) the Final
Closing Balance Sheet (as defined in the Austad Reorganization Agreements) and
(ii) cause FNBO to remit to an account designated by Lender the balance of any
collections or other amounts received by FNBO in respect of the financing
arrangements between
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FNBO and Austad being terminated pursuant to Section 11(b) hereof, after FNBO
first applies any such amounts to any checks made by Austad that are presented
to FNBO for payment.
14. Governing Law. The rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of laws).
15. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
16. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ Janet S. Last
-------------------------
Title: Vice President
----------------------
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S CORP.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
TWEEDS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this Amendment:
HANOVER DIRECT, INC.,
a Delaware corporation
By: /s/ Edward J. O'Brien
----------------------------
Title: Senior Vice President
-------------------------
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER DIRECT NEW JERSEY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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24
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
SKANDIA DOWNSALES, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
TW ACQUISITIONS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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25
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
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26
FIRST SUPPLEMENT
TO
EXHIBIT __
TO
LOAN AND SECURITY AGREEMENT
The following additional information is hereby added to Exhibit __ to Loan and
Security Agreement:
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27
FIRST SUPPLEMENT
TO
EXHIBIT A
TO
GENERAL SECURITY AGREEMENT,
DATED NOVEMBER 14, 1995, BY
EXISTING GUARANTORS, OTHER THAN
HANOVER, IN FAVOR OF LENDER
The following information is hereby added to Exhibit A to General Security
Agreement, dated November 14, 1995, by Existing Guarantors, other than Hanover,
in favor of Lender:
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