SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported) - June 30, 1994
UNITED MERCHANTS AND MANUFACTURERS, INC.
(Exact name of registrant as specified in its charter)
Delaware 1-3185 13-1426280
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1650 Palisade Avenue, Teaneck, N.J. 07666
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 837-1700
Exhibit index on page 4.
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Item 5. Other Events.
On June 30, 1994, the Registrant reduced its indebtedness (including that
of its consolidated, 79%-owned subsidiary, Victoria Creations, Inc.) to
its senior secured lender to the target amount established in its
previously announced agreement (copy filed with Registrant's Report on
Form 10-Q for the quarter ended September 30, 1993, incorporated herein by
reference) with that lender. At that time, in accordance with the
agreement, the lender accepted, in full satisfaction of the balance
(approximately $63.4 million) of the Registrant and its subsidiary's
indebtedness to the lender, a 5% subordinated income note due June 30,
2019 in the principal amount of $30 million.
The satisfaction of this indebtedness by the Registrant resulted in an
extraordinary, non-cash gain from retirement of debt in excess of $30
million, which will be included in the Registrant's statement of
operations for its fiscal year ended June 30, 1994.
The Registrant reduced its indebtedness to the targeted amount through the
previously announced sales of two of the Registrant's operating divisions,
sales of certain other assets, and a borrowing of approximately $29
million, directly and through its subsidiary, from another lender. The
borrowings from the other lender were under secured promissory notes
totaling $12 million, with the balance borrowed under revolving loan and
security agreements. These borrowings are secured by substantially all of
the Registrant and its subsidiary's assets. The notes and agreements are
for a period of two years from June 30, 1994, may be prepaid without
premium or penalty and bear interest at the rate of 24% a year.
The foregoing is qualified in its entirety by reference to the Exhibits
listed below in Item 7 which are herein incorporated by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
4.1 5% Subordinated Note due June 30, 2019 from Registrant to The CIT
Group/Commercial Services, Inc.
4.2 Secured Promissory Note from Registrant to Foothill Capital
Corporation dated as of June 28, 1994.
4.3 Loan and Security Agreement between Registrant and Foothill
Capital Corporation dated as of June 28, 1994.
4.4 Secured Promissory Note from Registrant's subsidiary, Victoria
Creations, Inc. to Foothill Capital Corporation dated as of June
28, 1994.
4.5 Loan and Security Agreement between Registrant's subsidiary,
Victoria Creations, Inc. and Foothill Capital Corporation dated
as of June 28, 1994.
99.9 Press release issued by Registrant on July 5, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UNITED MERCHANTS AND
MANUFACTURERS, INC.
Date July 14, 1994 by /s/ Norman R. Forson
Norman R. Forson,
Senior Vice President and
Controller
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EXHIBIT INDEX
Exhibit Page
No. Description No.
4.1 5% Subordinated Note due June 30, 2019 from Registrant
to The CIT Group/Commercial Services, Inc. 5
4.2 Secured Promissory Note from Registrant to Foothill Capital
Corporation dated as of June 28, 1994.
4.3 Loan and Security Agreement between Registrant and Foothill
Capital Corporation dated as of June 28, 1994
4.4 Secured Promissory Note from Registrant's subsidiary,
Victoria Creations, Inc. to Foothill Capital Corporation
dated as of June 28, 1994.
4.5 Loan and Security Agreement between Registrant's subsidiary,
Victoria Creations, Inc. and Foothill Capital Corporation
dated as of June 28, 1994.
99.1 Press release issued by Registrant on July 5, 1994
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Exhibit 4.1
UNITED MERCHANTS AND MANUFACTURERS, INC.
5% Subordinated Note due June 30, 2019
No. 1 June 30, 1994
$30,000,000
UNITED MERCHANTS AND MANUFACTURERS, INC., a Delaware corporation
(the "Company", which term includes any successor corporation), for value
received, promises to pay to The CIT Group/Commercial Services, Inc., a New
York corporation (the "Holder"), the principal sum of THIRTY MILLION
DOLLARS ($30,000,000), together with accrued and unpaid interest thereon,
if any, on June 30, 2019 in accordance with the provisions set forth below.
See Article 8 for certain definitions.
1. Interest.
1.1 Payment of Interest. (i) Subject to Section 1.2 hereof,
the Company promises to pay interest on the unpaid principal amount hereof
(computed on the basis of a 365-day year for the actual number of days
elapsed) at the interest rate per annum of five percent (5%). The Company
shall pay interest, if applicable, annually for the fiscal year ended June
30, on October 15 of each year or on the 105th day after the end of the
fiscal year if the fiscal year of the Company changes (the "Interest Pay-
ment Date"), commencing October 15, 1995. Interest on this Note shall
accrue from July 1, 1994 until this Note is paid in full; provided,
however, that, except as set forth in Section 2.2, no interest shall accrue
during any fiscal year in which Net Earnings (excluding interest expense,
net of any applicable income tax benefits accrued with respect thereto, on
indebtedness other than Senior Indebtedness) does not exceed the Minimum
Amount. The Company shall cause its accountants to provide to the Holder
certification of the calculation of interest and principal at the time of
the determination thereof.
(ii) The Company shall pay interest on any overdue principal
and, to the extent permitted by law, on any installment of interest from
and after the date when due hereunder at two percent (2%) per annum in
excess of the rate equal to the rate of interest from time to time an-
nounced by Chemical Bank at its principal office as the prime rate.
1.2 Interest Contingent. In the event Net Earnings (excluding
interest expense, net of any applicable income tax benefits accrued with
respect thereto, on indebtedness other than Senior Indebtedness) for any
fiscal year exceed the Minimum Amount, the amount of interest which shall
accrue, and which shall be payable on the next Interest Payment Date, shall
be the lesser of (i) the amount which would be due pursuant to Section
1.1(i) hereof and (ii) the excess of Net Earnings (excluding interest
expense, net of any applicable income tax benefits accrued with respect
thereto, on indebtedness other than Senior Indebtedness) over the Minimum
Amount.
2. Payments.
2.1 Method of Payment. The Holder must, as a requirement to
collect any payment of principal hereunder, endorse on the schedule
attached hereto an appropriate notation evidencing the date and amount of
each payment of principal; provided that the Holder must surrender this
Note to the Company to collect any final amounts due to the Holder on June
30, 2019. Payments of principal shall be made by wire transfer in immedi-
ately available funds to the Holder's account at a bank in the United
States specified by the Holder, or at the option of the Holder at the time
of surrender by such Holder of this Note, by certified check. Payments of
interest shall be made by wire transfer as set forth above. The Company
shall pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts.
If a payment date is a Legal Holiday at a place of payment, payment shall
be made at that place on the next succeeding day that is not a Legal
Holiday.
2.2 Additional Payments. Notwithstanding anything herein to the
contrary, (a) at the end of each fiscal year, interest and principal shall
accrue in an amount equal to the Blocked Amount for such fiscal year, and
(b) such amount shall be payable five days after the date that the restric-
tions preventing such Blocked Amount from being distributed by a subsidiary
to the Company no longer exist.
3. No Transfer. This Note may not be transferred by sale,
pledge, hypothecation or otherwise; provided, however, that the Holder may,
upon at least 10 days prior notice to the Company, assign or sell its
interest hereunder so long as no more than five (5) total Persons (not
including affiliates of the Holder) are Holders hereunder at any given
time. The Holder hereby represents and warrants that it is purchasing this
Note for its own account for investment and not with a view to the distri-
bution hereof or with any present intention of distributing or selling this
Note. The Holder understands that this Note has not been registered under
the United States Securities Act of 1933 and may be resold (which resale is
not now contemplated) only if registered pursuant to the provisions thereof
or if an exemption from registration is available, and that the Company is
not required to so register the Note.
4. Redemption.
4.1 Optional Redemption. This Note shall be redeemable at the
option of the Company at any time and from time to time, in whole or in
part, by giving a written notice of the portion to be redeemed to the
Holder of the Note, such notice to be given on not less than 30 days nor
more than 60 days prior to the date fixed for redemption (the "Redemption
Date"). Any portion of this Note to be redeemed pursuant to this Article 4
shall be redeemed at a redemption price equal to 100% of the principal
amount thereof. On and after the Redemption Date, interest will cease to
accrue on the portion of this Note so redeemed, unless the Company defaults
in the payment of the redemption price. To the extent there has been a
partial redemption in any fiscal year pursuant to this Section 4.1 and such
partial redemption occurs on a day (the "Partial Redemption Date") other
than June 30, interest for such fiscal year shall be computed on the
principal amount outstanding for the period from the prior June 30 through
such Partial Redemption Date, and on the remaining principal balance for
the period from the Partial Redemption Date through June 30 of such fiscal
year.
4.2 Additional Redemptions. On each Interest Payment Date, the
Company shall pay to the Holder of the Note an amount equal to 20% of the
excess, if any, of Net Earnings over the Minimum Amount. Such payment will
be applied to reduce the principal amount of the Note as of the date such
payment is made.
5. Successor Corporation.
5.1 When Company May Merge, etc. The Company, in a single
transaction or through a series of related transactions, shall not (a)
consolidate with or merge with or into any other Person, or transfer (by
lease, assignment, sale or otherwise) all or substantially all of its
properties and assets as an entirety or substantially as an entirety to
another Person or group of affiliated Persons, or (b) adopt a Plan of
Liquidation, unless, in either case,
(i) either the Company shall be the continuing Person, or
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or to which all or substantially all of the
properties and assets of the Company as an entirety or substantially as an
entirety (or, in the case of a Plan of Liquidation, one Person to which
assets are transferred) (the Company or such other person, the "Surviving
Person") shall be a corporation organized and validly existing under the
laws of the United States, any state thereof or the District of Columbia
and shall expressly assume all the obligations of the Company under this
Note; and
(ii) immediately preceding and immediately after giving
effect to such transaction and the assumption of the obligations as set
forth in clause (i) above and the incurrence or anticipated incurrence of
any indebtedness to be incurred in connection therewith, no Default or
Event of Default shall have occurred and be continuing. For purposes of
the foregoing, the transfer (by lease, assignment, sale or otherwise) of
all or substantially all of the properties and assets of one or more
subsidiaries, the Capital Stock of which constitutes all or substantially
all of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
5.2 Surviving Person Substituted. Upon any consolidation or
merger or any transfer of all or substantially all of the assets of the
Company or any adoption of a Plan of Liquidation in accordance with Section
5.1, the Surviving Person formed by such consolidation or into which the
Company is merged or to which such transfer is made (or, in the case of a
Plan of Liquidation, to which assets are transferred) shall succeed to, and
be substituted for, and may exercise every right and power of, the Company
under this Note with the same effect as if such Surviving Person had been
named as the Company herein.
6. Default and Remedies.
6.1 Event of Default. An "Event of Default" occurs if:
(i) the Company defaults in the payment of interest on this
Note when the same becomes due and payable and the Default continues for a
period of 30 days;
(ii) the Company defaults in the payment of the principal
of this Note when the same becomes due and payable, whether at maturity,
upon redemption, acceleration or otherwise and the Default continues for a
period of 10 days;
(iii) the Company pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or proceeding;
(B) consents to the entry of an order for relief against it in
an involuntary case or proceeding;
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property; or
(D) makes a general assignment for the benefit of its creditors;
(iv) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case or
proceeding;
(B) appoints a Custodian of the Company or for all or any
substantial part of its property;
(C) orders the liquidation of the Company;
and in each case the order or decree remains unstayed and in effect for 30
days; or
(v) the Company fails to perform or observe Section 5.1 of
this Note.
6.2 Acceleration. If an Event of Default (other than an Event
of Default specified in Sections 6.1(iii) or 6.1(iv)) occurs and is
continuing, the Holder by notice to the Company may declare the principal
of and accrued and unpaid interest on this Note to be due and payable. If
an Event of Default specified in Sections 6.1(iii) or 6.1(iv) occurs, then
the principal of, and accrued but unpaid interest (if any) on, this Note
shall become and be immediately due and payable without any declaration or
other act on the part of the Holder.
6.3 Other Remedies. If an Event of Default occurs and is
continuing, the Holder may pursue any available remedy by proceeding at law
or in equity to collect the payment of principal of or interest on this
Note or to enforce the performance of any provision of this Note. A delay
or omission by the Holder in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive
of any other remedy. All available remedies are cumulative to the extent
permitted by law.
7. Subordination.
7.1 Notes Subordinate to Senior Indebtedness. The Company
covenants and agrees, and the Holder, by its acceptance of this Note,
likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article, the indebtedness represented by this
Note and the payment of the principal of and interest on this Note is
hereby expressly made subordinate and subject in right of payment to the
prior payment in full, in cash, of all Senior Indebtedness (including any
interest accruing on Senior Indebtedness For Borrowed Money subsequent to
an event specified in Sections 6.1(iii) or 6.1(iv) whether or not such
interest is an allowed claim enforceable against the Company in a bank-
ruptcy case under Bankruptcy Law).
7.2 Payment Over of Proceeds Upon Dissolution, Etc. In the
event of (a) any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or proceed-
ing in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other
winding up of the Company, whether voluntary or involuntary and whether or
not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of
the Company, then the holders of Senior Indebtedness shall be entitled to
receive payment in full, in cash, of all amounts due or to become due on or
in respect of all Senior Indebtedness (including any interest accruing on
Senior Indebtedness For Borrowed Money subsequent to an event specified in
Sections 6.1(iii) or 6.1(iv) whether or not such interest is an allowed
claim enforceable against the Company in a bankruptcy case under Bankruptcy
Law), before the Holder is entitled to receive any payment or distribution
on account of principal of or interest on this Note, and to that end the
holders of Senior Indebtedness shall be entitled to receive, for applica-
tion to the payment thereof, any payment or distribution of any kind or
character, whether in cash, property or securities, including any such
payment or distribution which may be payable or deliverable by reason of
the payment of any other indebtedness of the Company being subordinated to
the payment of this Note, which may be payable or deliverable in respect of
this Note in any such case, proceeding, dissolution, liquidation or other
winding up or event.
In the event that, notwithstanding the foregoing provisions of
this Section, the Holder shall have received any payment or distribution of
assets of the Company of any kind or character, whether in cash, property
or securities, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other indebtedness
of the Company being subordinated to the payment of this Note, before all
Senior Indebtedness is paid in full, in cash (including any interest
accruing on Senior Indebtedness For Borrowed Money subsequent to an event
specified in Sections 6.1(iii) or 6.1(iv) whether or not such interest is
an allowed claim enforceable against the Company in a bankruptcy case under
Bankruptcy Law), or payment thereof provided for, then such payment or dis-
tribution shall be held in trust for the holders of Senior Indebtedness
and, upon written notice to the Holder from any holder of Senior Indebted-
ness and pursuant to the directions of any such holder, paid over or deliv-
ered forthwith to the holders of Senior Indebtedness as their interests may
appear, to the extent necessary to pay all Senior Indebtedness in full, in
cash (including any interest accruing on Senior Indebtedness For Borrowed
Money subsequent to an event specified in Sections 6.1(iii) or 6.1(iv)
whether or not such interest is an allowed claim enforceable against the
Company in a bankruptcy case under Bankruptcy Law), after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness.
7.3 [Intentionally Deleted]
7.4 No Payment When Senior Indebtedness in Default.
(a) In the event and during the continuation of any default in
the payment of any Senior Indebtedness For Borrowed Money when due, (b) in
the event that any event of default with respect to any Senior Indebtedness
For Borrowed Money shall have occurred and be continuing and shall have
resulted in such Senior Indebtedness For Borrowed Money becoming or being
declared due and payable prior to the date on which it would otherwise have
become due and payable, (c) in the event that any default (other than a
default described in clause (a) or clause (b)) with respect to any Senior
Indebtedness For Borrowed Money) shall have occurred and be continuing per-
mitting the holders of such Senior Indebtedness For Borrowed Money (or a
trustee or agent on behalf of the holders thereof) to declare such Senior
Indebtedness For Borrowed Money due and payable prior to the date on which
it would otherwise have become due and payable or (d) in the event any
judicial proceeding shall be pending with respect to any such default in
payment described in clause (a) or other default described in clause (b) or
(c), then no payment (including any payment which may be payable by reason
of the payment of any other indebtedness of the Company being subordinated
to the payment of this Note) shall be made by the Company on account of the
principal of or interest on this Note or on account of the purchase or
other acquisition of this Note; provided, however, that, notwithstanding
anything to the contrary contained in this Note, any payment which is so
blocked from being made under this Section 7.4 shall accrue and shall be
paid five days after the date that none of the conditions described in
clauses (a) through (d) above shall be continuing.
In the event that, notwithstanding the foregoing, the Company
shall make any payment to the Holder prohibited by the foregoing provisions
of this Section, then and in such event such payment shall be held in trust
for the holders of Senior Indebtedness For Borrowed Money and, upon written
notice to the Holder from any holder of Senior Indebtedness For Borrowed
Money received by the Holder within 180 days of the making of such payment,
and pursuant to the directions of any such holder, paid over and delivered
forthwith to the holders of Senior Indebtedness For Borrowed Money as their
interests may appear.
7.5 Payment Permitted if No Default. Nothing contained in this
Note shall prevent the Company, at any time except during the pendency of
any case, proceeding, dissolution, liquidation or other winding up, as-
signment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 7.2 or under the condi-
tions described in Section 7.4, from making payments at any time of
principal of or interest on this Note.
7.6 Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full, in cash, of all Senior Indebtedness, the
Holder shall be subrogated (equally and ratably with the holders of all
indebtedness of the Company, if any, which by its express terms is subordi-
nated to indebtedness of the Company to substantially the same extent as
this Note is subordinated and is entitled to like rights of subrogation) to
the rights of the holders of such Senior Indebtedness to receive payments
and distributions of cash, property and securities applicable to the Senior
Indebtedness until the principal of and interest on this Note shall be paid
in full. For purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of any cash, property or securities
to which the Holder would be entitled except for the provisions of this
Article, and no payments pursuant to the provisions of this Article to the
holders of Senior Indebtedness by the Holder shall, as among the Company,
its creditors other than holders of Senior Indebtedness and the Holder, be
deemed to be a payment or distribution by the Company to or on account of
the Senior Indebtedness.
If any payment or distribution to which the Holder would other-
wise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of
all amounts payable under the Senior Indebtedness of the Company, then and
in such case, the Holder shall be entitled to receive from the holders of
such Senior Indebtedness at the time outstanding any payments or distribu-
tions received by such holders of Senior Indebtedness in excess of the
amount sufficient to pay all obligations payable under or in respect of the
Senior Indebtedness of the Company in full, in cash (including any interest
accruing on Senior Indebtedness For Borrowed Money subsequent to an event
specified in Sections 6.1(iii) or 6.1(iv) whether or not such interest is
an allowed claim enforceable against the Company in a bankruptcy case under
Bankruptcy Law).
7.7 Provisions Solely to Define Relative Rights. The provisions
of this Article are and are intended solely for the purpose of defining the
relative rights of the Holder on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Note is intended
to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness, if any, and the Holder, the obligation of
the Company, which is absolute and unconditional, to pay to the Holder the
principal of and interest on this Note as and when the same shall become
due and payable in accordance with its terms; or (b) affect the relative
rights against the Company of the Holder and creditors of the Company other
than the holders of Senior Indebtedness; or (c) prevent the Holder from
exercising all remedies otherwise permitted by applicable law upon default
under this Note, subject to the rights, if any, under this Article of the
holders of Senior Indebtedness to receive cash, property and securities
otherwise payable or deliverable to the Holder.
7.8 No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Indebtedness to enforce subordina-
tion as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any
act or failure to act, in good faith, by any such holder, or by any non-
compliance by the Company with the terms, provisions and covenants of this
Note, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Holder, without
incurring responsibility to the Holder and without impairing or releasing
the subordination provided in this Article or the obligations hereunder of
the Holder to the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, Senior Indebtedness, or otherwise
amend or supplement in any manner Senior Indebtedness or any instrument
evidencing the same or any agreement under which Senior Indebtedness is
outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Indebtedness;
(iii) release any Person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
7.9 Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred
to in this Article, the Holder shall be entitled to rely upon (a) any order
or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolu-
tion, winding up or similar case or proceeding is pending, or (b) a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, or (c) a certificate or certificates
of any trustee, fiduciary or agent for any holders of Senior Indebtedness,
in each case delivered to the Holder for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the
holders of the Senior Indebtedness and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this
Article.
7.10 Reliance by Holders of Senior Indebtedness on Subordination
Provisions. The Holder by accepting this Note acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after
the issuance of this Note, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness and such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provi-
sions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
7.11 Proof of Claims. In the event that the Company is subject
to any case or proceeding described in Section 7.2 and the Holder fails to
file any proof of claim permitted to be filed in such proceeding with
respect to this Note, then any holder of Senior Indebtedness may file such
proof of claim by the earlier of (i) the expiration of 60 days after any
such holder notifies the Holder in writing of its intention to do so and
(ii) the last day permitted to file such claim.
8. Certain Definitions.
The following terms shall have the respective meanings specified
below.
"Bankruptcy Law" means Title 11, United States Code or any
similar federal, state or foreign law for the relief of debtors, as
amended.
"Blocked Amount" means, for any fiscal year, the difference
between (a) the aggregate amount of interest and principal that would be
payable for such fiscal year under Section 1.2 and Section 4.2, respective-
ly, assuming for purposes of calculating such amounts that clause (ii) in
the definition of Net Earnings is not given effect, and (b) the aggregate
amount of interest and principal that is actually payable for such fiscal
year under Section 1.2 and Section 4.2, respectively assuming for purposes
of calculating such amounts that clause (ii) in the definition of Net
Earnings is given effect.
"Capitalized Lease Obligation" means obligations under a lease
that is required to be capitalized for financial reporting purposes in
accordance with generally accepted accounting principles, and the amount of
indebtedness represented by such obligations will be the capitalized amount
of such obligations determined in accordance with generally accepted
accounting principles.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated)
or corporate stock, including each class of common stock and preferred
stock of such Person.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event that is, or after notice or passage of
time, or both, would be, an Event of Default.
"Event of Default" shall have the meaning provided in Section
6.1.
"Interest Payment Date" shall have the meaning provided in
Section 1.1.
"Interest Swap Obligations" means, with respect to any Person,
the obligations of such Person pursuant to any arrangement with any other
Person whereby, directly or indirectly, such Person is entitled to receive
from time to time periodic payments calculated by applying either a
floating or a fixed rate of interest on a stated notional amount in
exchange for periodic payments made by such Person calculated by applying a
fixed or a floating rate of interest on the same notional amount.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in New York, New York are not required to open.
"Minimum Amount" shall be Seven Million Five Hundred Thousand
Dollars ($7,500,000), provided however, that if the Company's fiscal year
is changed and as a result the first fiscal year after such change is less
than 365 days, then for such fiscal year the Minimum Amount shall be
$7,500,000 multiplied by a fraction the numerator of which shall be the
number of days in such fiscal year and the denominator of which shall be
365.
"Net Earnings" shall mean, for any period for which such amount
is being determined, the net earnings of the Company and its consolidated
subsidiaries during such period determined on a consolidated basis for such
period in accordance with generally accepted accounting principles, as set
forth in the consolidated financial statements of the Company audited by
one of the "Big Six" accounting firms or other reputable accounting firm
reasonably acceptable to the Holder and which are included in the Company's
Form 10-Q Quarterly Reports, Form 10-K Annual Reports and Form 8-K Current
Reports which are filed with the Securities and Exchange Commission (or, in
the event that the Company is no longer legally required to file such re-
ports, financial statements reflecting the same information and deliverable
on the same dates as the above-referenced filings), provided that there
shall be excluded (i) income of any Person (other than a consolidated
subsidiary of the Company) in which the Company or any of its consolidated
subsidiaries has an equity investment or comparable interest, except to the
extent of the amount of dividends or other distributions actually paid to
the Company or any of its consolidated subsidiaries by such Person during
such period, (ii) the income of any subsidiary of the Company to the extent
that the declaration or payment of dividends or similar distributions by
that subsidiary of the income is not at the time permitted by any judgment,
decree, order, statute, rule or governmental regulation applicable to that
subsidiary, and (iii) any non-recurring, non-cash gains and losses, net of
any applicable income taxes.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organiza-
tion or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan of Liquidation" means, with respect to any Person, a plan
that provides for, contemplates or the effectuation of which is preceded or
accompanied by (whether or not substantially contemporaneously, in phases
or otherwise) (i) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of such Person otherwise than as an
entirety or substantially as an entirety and (ii) the distribution of all
or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of
such Person to holders of Capital Stock of such Person.
"Redemption Date" shall have the meaning provided in Section 4.1.
"Senior Indebtedness" means (i) any liability of the Company (A)
for borrowed money, (B) evidenced by a note, debenture or similar instru-
ment whether issued in connection with the acquisition of any property,
assets (including inventory or similar property acquired in the ordinary
course of business) or securities, or otherwise, (C) arising in the
ordinary course of business (including trade payables), (D) evidenced by
the Company's 3-1/2% Senior Subordinated Secured Debentures due 2009, (E)
any indebtedness which by its terms is superior in right of payment to this
Note, and (F) obligations under factoring agreements, accounts receivables
purchase agreements and accounts receivable securitization agreements, (ii)
Capitalized Lease Obligations and other purchase money obligations of the
Company, (iii) Interest Swap Obligations of the Company, (iv) any liability
of others described in the preceding clauses (i), (ii) or (iii) which the
Company has guaranteed or is otherwise its legal liability and (v) any
amendment, renewal, extension or refunding of any liability of the types
referred to in clauses (i), (ii), (iii) or (iv) above. Notwithstanding the
foregoing, Senior Indebtedness will not include this Note or the Subordi-
nated Note made by the Company in favor of the ILGWU National Retirement
Fund.
"Senior Indebtedness For Borrowed Money" means Senior Indebted-
ness other than as described in clause (i)(C) of the definition thereof.
"Surviving Person" shall have the meaning provided in Section
5.1.
9. Miscellaneous.
9.1 Notices. Except as otherwise expressly provided for herein,
all notices, requests and other communications to any party hereunder shall
be in writing (including telex, facsimile or similar writing) and shall be
given to such party at its address, telex or facsimile number set forth
below, or such other address, telex or facsimile number as such party may
hereinafter specify for the purpose (in the case of the Company, by notice
in accordance herewith to the Holder or, in the case of the Holder, by
notice in accordance herewith to the Company). Each such notice, request
or other communication shall be effective (i) if given by telex or facsimi-
le, when such telex or facsimile is transmitted to the telex or facsimile
number specified in this Section and the appropriate answerback is received
or, (ii) if given by mail, when received or if sent by certified mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or, (iii) if given by any other
means, when delivered at the address specified in this Section. Notices
shall be addressed as follows:
if to the Company:
United Merchants and Manufacturers, Inc.
1650 Palisade Avenue
Teaneck, New Jersey 07666
Attention: Treasurer
if to the Holder:
The CIT Group
Commercial Services, Inc.
1211 Avenue of the Americas
New York, NY 10036
Attention: President
If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
9.2 Successors and Assigns. All agreements of the Company and
of the Holder in this Note shall bind their respective successors and
assigns.
9.3 New York Law. This Note shall be construed in accordance
with and governed by the laws of the State of New York, without regard to
the conflict of laws principles thereof.
9.4 Separability. In case any provision in this Note shall be
invalid, illegal or unenforceable, the validity, legality and enforceabili-
ty of the remaining provisions thereof shall not in any way be affected or
impaired thereby.
9.5 No Recourse Against Others. No past, present or future
stockholder, director, officer, or incorporator, as such, of the Company or
of any successor corporation shall have any liability for any obligations
of the Company under this Note or for any claim based on, in respect of, or
by reason of, such obligations or their creation. By accepting this Note,
the Holder waives and releases all such liability.
9.6 Loss, Theft, Destruction or Mutilation of this Note. Upon
receipt by the Company of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Note, and of an
indemnity agreement or other security reasonably satisfactory to the
Company, and upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Note, if
mutilated, the Company will make and deliver a new Note of like tenor, in
lieu of this Note. Any Note made and delivered in accordance with the
provisions of this Section shall be dated as of the date to which interest
has been paid on this Note, or if no interest has therefore been paid on
this Note, then dated the date hereof.
IN WITNESS WHEREOF, the Company has caused this Note to be duly
executed.
UNITED MERCHANTS AND
MANUFACTURERS, INC.
By:/s/ Judith A. Nadzick
Name: Judith A. Nadzick
Title: Executive Vice President
Dated: June 30, 1994
<PAGE>
Schedule to
5% Subordinated Note
Date Principal Payment Balance Notation Made By
Exhibit 4.2
SECURED PROMISSORY NOTE
$10,000,000 Los Angeles, California
June 28, 1994
FOR VALUE RECEIVED, the undersigned ("Maker") hereby promises
to pay to FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), or order, at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, or at such other address as the holder hereof
("Holder") may specify in writing, the principal sum of Ten Million Dollars
($10,000,000) plus interest in the manner and upon the terms and conditions
set forth below.
1. Rate of Interest
The unpaid principal balance of this Secured Promissory
Note ("Note") shall bear interest at a rate equal to two (2) percent per month.
Interest charged on this Note shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2. Schedule of Payments
Principal and interest under this Note shall be due and
payable in arrears according to the following schedule: (a) interest shall be
due and payable on the first day of each month commencing August 1, 1994
and continuing thereafter until this Note has been paid in full; (b) the
outstanding principal balance, together with all accrued and unpaid interest
thereon, shall be due and payable in full on June 30, 1996.
3. Prepayment
This Note may be prepaid at any time, in whole or in part,
without any premium or penalty whatsoever.
4. Holder's Right of Acceleration
Upon the occurrence of an Event of Default under that
certain Loan and Security Agreement between the Maker and Foothill of even
date herewith, as amended, supplemented or otherwise modified from time to
time (the "Agreement") including, but not limited to, the failure to pay any
installment of principal or interest hereunder when due, the Holder may, at
its election and upon notice to the Maker, declare the entire balance hereof
immediately due and payable.
5. Additional Rights of Holder
If any installment of principal or interest hereunder is not
paid when due, the Holder shall have, in addition to the rights set forth
herein, in the Agreement, and under law the right to compound interest by
adding the unpaid interest to principal, with such amount thereafter bearing
interest at the rate provided in this Note.
6. General Provisions
(a) If this Note is not paid when due, the Maker further
promises to pay all costs of collection, foreclosure fees, and reasonable
attorneys' fees incurred by the Holder, whether or not suit is filed hereon.
(b) The Maker hereby consents to any and all renewals,
replacements, and/or extensions of time for payment of this Note before, at,
or after maturity.
(c) The Maker hereby consents to the acceptance, release,
or substitution of security for this Note.
(d) Presentment for payment, notice of dishonor, protest,
and notice of protest are hereby expressly waived.
(e) Any waiver of any rights under this Note, the
Agreement, or under any other agreement, instrument, or paper signed by the
Maker is neither valid nor effective unless made in writing and signed by the
Holder.
(f) No delay or omission on the part of the Holder in
exercising any right shall operate as a waiver thereof or of any other right.
(g) A waiver by the Holder upon any one occasion shall
not be construed as a bar or waiver of any right or remedy on any future
occasion.
(h) Should any one or more of the provisions of this Note
be determined illegal or unenforceable, all other provisions shall nevertheless
remain effective.
(i) This Note cannot be changed, modified, amended, or
terminated orally.
7. Security for the Note
This Note is secured by the Agreement and by the Loan
Documents (as that term is defined in the Agreement), and is subject to all
of the terms and conditions thereof including, but not limited to, the remedies
specified therein.
8. Choice of Law and Venue. THE VALIDITY OF THIS NOTE, ITS
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE
MAKER AND THE HOLDER, SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. TO THE
MAXIMUM EXTENT PERMITTED BY LAW, THE MAKER HEREBY AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS NOTE SHALL BE
TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL COURTS LOCATED
IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, OR, AT THE SOLE
OPTION OF THE HOLDER, IN ANY OTHER COURT WHERE IT IS NECESSARY TO
ENFORCE OR PROTECT FOOTHILL'S SECURITY INTERESTS IN THE COLLATERAL
IN WHICH THE HOLDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE MAKER
HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
9. Waiver of Jury Trial. THE MAKER, TO THE EXTENT IT MAY
LEGALLY DO SO, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING
UNDER OR WITH RESPECT TO THIS NOTE, OR IN ANY WAY CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE DEALINGS OF THE HOLDER AND THE
MAKER WITH RESPECT TO THIS NOTE, OR THE TRANSACTIONS RELATED HERETO,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE.
THE MAKER, TO THE EXTENT IT MAY LEGALLY DO SO, HEREBY AGREES THAT
ANY SUCH CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING SHALL
BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT THE HOLDER MAY
FILE AN ORIGINAL COUNTERPART OF THIS SECTION 9 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF MAKER TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY.
IN WITNESS WHEREOF, this Note has been executed and delivered
on the date first set forth above.
UNITED MERCHANTS AND
MANUFACTURERS, INC., a Delaware
corporation
/s/ Judith A. Nadzick
By Judith A. Nadzick
Title: Executive Vice President
Exhibit 4.3
LOAN AND SECURITY AGREEMENT
by and between
UNITED MERCHANTS AND MANUFACTURERS, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of June 28, 1994
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 11
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.5 Schedules and Exhibits.. . . . . . . . . . . . . . . . . . . . 11
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . 12
2.1 Revolving Advances.. . . . . . . . . . . . . . . . . . . . . . 12
2.2 Letters of Credit and Letter of Credit Guarantees. . . . . . . 13
2.3 Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.4 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.5 Interest: Rates, Payments, and Calculations . . . . . . . . . 15
2.6 Crediting Payments; Application of Collections . . . . . . . . 16
2.7 Statements of Obligations. . . . . . . . . . . . . . . . . . . 16
2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . 17
3.1 Conditions Precedent to Initial Advance, L/C, or L/C
Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 Conditions Precedent to All Advances, L/Cs, or L/C
Guarantees.. . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 19
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . 19
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . 19
4.2 Negotiable Collateral. . . . . . . . . . . . . . . . . . . . . 19
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.4 Delivery of Additional Documentation Required. . . . . . . . . 20
4.5 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . 20
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 21
5.1 No Prior Encumbrances. . . . . . . . . . . . . . . . . . . . . 21
5.2 Eligible Accounts. . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Eligible Inventory . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Location of Inventory and Equipment. . . . . . . . . . . . . . 21
5.5 Inventory Records. . . . . . . . . . . . . . . . . . . . . . . 21
5.6 Location of Chief Executive Office; FEIN . . . . . . . . . . . 21
5.7 Due Organization and Qualification . . . . . . . . . . . . . . 21
5.8 Due Authorization; No Conflict . . . . . . . . . . . . . . . . 22
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.10 No Material Adverse Change in Financial Condition. . . . . . . 22
5.11 No Transfer. . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.12 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 22
5.13 Environmental Condition. . . . . . . . . . . . . . . . . . . . 23
5.14 Compliance With The ADA. . . . . . . . . . . . . . . . . . . . 23
5.15 Reliance by Foothill; Cumulative . . . . . . . . . . . . . . . 24
6. AFFIRMATIVE COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Accounting System. . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Collateral Reports . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Schedules of Accounts. . . . . . . . . . . . . . . . . . . . . 24
6.4 Financial Statements, Reports, Certificates. . . . . . . . . . 25
6.5 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Designation of Inventory . . . . . . . . . . . . . . . . . . . 26
6.7 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.8 Title to Equipment . . . . . . . . . . . . . . . . . . . . . . 26
6.9 Maintenance of Equipment . . . . . . . . . . . . . . . . . . . 26
6.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.11 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.12 Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . 28
6.13 No Setoffs or Counterclaims. . . . . . . . . . . . . . . . . . 28
6.14 Location of Inventory and Equipment. . . . . . . . . . . . . . 28
6.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 29
6.16 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 29
6.17 Environmental Condition. . . . . . . . . . . . . . . . . . . . 29
6.18 Compliance With The ADA. . . . . . . . . . . . . . . . . . . . 31
6.19 Store Openings and Closings. . . . . . . . . . . . . . . . . . 31
6.20 Inventory Audits . . . . . . . . . . . . . . . . . . . . . . . 31
6.21 Real Property Leases; Consignments . . . . . . . . . . . . . . 31
6.22 Landlord Waivers.. . . . . . . . . . . . . . . . . . . . . . . 31
6.23 Consigned Inventory. . . . . . . . . . . . . . . . . . . . . . 31
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.3 Restrictions on Fundamental Changes. . . . . . . . . . . . . . 33
7.4 Extraordinary Transactions and Disposal of Assets. . . . . . . 33
7.5 Change Name. . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.7 Restructure. . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.9 Change of Control. . . . . . . . . . . . . . . . . . . . . . . 33
7.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . 33
7.11 Consignments . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.12 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 33
7.13 Accounting Methods . . . . . . . . . . . . . . . . . . . . . . 34
7.14 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . 34
7.16 Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.17 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 34
7.19 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees.. . . . . . . . . . . . . . . . . . . . 34
8. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . . . . 35
9. FOOTHILL'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . 37
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . 37
9.2 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . 39
9.3 Foreclosure Not A Discharge. . . . . . . . . . . . . . . . . . 39
10. TAXES AND EXPENSES REGARDING THE COLLATERAL . . . . . . . . . . . . 39
11. WAIVERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 40
11.1 Demand; Protest; etc.. . . . . . . . . . . . . . . . . . . . . 40
11.2 Foothill's Liability for Collateral. . . . . . . . . . . . . . 40
11.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 40
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . . 41
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . . . . . . 42
15. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 42
15.1 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . 42
15.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 42
15.3 Section Headings . . . . . . . . . . . . . . . . . . . . . . . 42
15.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 42
15.5 Severability of Provisions . . . . . . . . . . . . . . . . . . 43
15.6 Amendments in Writing. . . . . . . . . . . . . . . . . . . . . 43
15.7 Counterparts; Telefacsimile Execution. . . . . . . . . . . . . 43
15.8 Revival and Reinstatement of Obligations . . . . . . . . . . . 43
15.9 Lending Relationship . . . . . . . . . . . . . . . . . . . . . 43
15.10 Integration . . . . . . . . . . . . . . . . . . . . . . . 43
15.11 Confidentiality.. . . . . . . . . . . . . . . . . . . . . 44
15.12 Limitation of Liability . . . . . . . . . . . . . . . . . 44
15.13 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 44
SCHEDULES
Schedule E-1 Eligible Inventory
Schedule P-1 Permitted Liens
Schedule R-1 Real Property
Schedule 5.9 Litigation
Schedule 5.12 Employee Benefits
Schedule 6.14 Location of Inventory and Equipment
Schedule 7.4 Repayment of Obligations from Sale Proceeds
<PAGE>
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT, is entered into as of June 28, 1994,
between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with a place of business located at 11111 Santa Monica Boulevard, Suite 1500,
Los Angeles, California 90025-3333, and UNITED MERCHANTS AND MANUFACTURERS,
INC., a Delaware corporation ("Borrower"), with its chief executive office
located at 1650 Palisade Avenue, Teaneck, New Jersey 07666.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of
services by Borrower, irrespective of whether earned by performance, and any
and all credit insurance, guaranties, or security therefor.
"Act" means all applicable laws, regulations, and ordinances, where
a property is located, of any federal, state, or local government,
instrumentality, or body, and that are related to Hazardous Materials, as the
same may be amended, modified, or supplemented from time to time.
"ADA" means the Americans with Disabilities Act, 42 U.S.C. S 12101,
et. seq., and all applicable rules and regulations promulgated thereunder.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control" as applied to
any Person means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Loan and Security Agreement and any
extensions, riders supplements, notes, amendments, or modifications to or in
connection with this Loan and Security Agreement.
"Authorized Officer" means any officer of Borrower.
"Average Unused Portion of Maximum Amount" means (a) the Maximum
Amount; less (b) the sum of: (i) the average Daily Balance of advances made
by Foothill under Section 2.1 that were outstanding during the immediately
preceding month; plus (ii) the average Daily Balance of the undrawn L/Cs and
L/C Guarantees issued by Foothill under Section 2.2 that were outstanding
during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code (11
U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing
Borrower's properties or assets (including the Collateral) or liabilities;
all information relating to Borrower's business operations or financial
condition; and all computer programs, disc or tape files, printouts, runs, or
other computer prepared information, and the equipment containing such
information.
"Buffalo" means Borrower's Buffalo Mill division.
"Buffalo Borrowing Base" has the meaning set forth in Section
2.1.1.
"Business Day" means any day which is not a Saturday, Sunday, or
other day on which national banks are authorized or required to close.
"Change of Control" shall be deemed to have occurred at such time
as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than thirty percent (30%) of the total voting power of
all classes of stock then outstanding of Borrower normally entitled to vote
in the election of directors.
"Closing Date" means the date of the initial advance or the date of
the initial issuance of an L/C or an L/C Guaranty, whichever occurs first.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts; Borrower's
Books; the Equipment; the General Intangibles; the Inventory; the Negotiable
Collateral; the Real Property; any money, or other assets of Borrower which
now or hereafter come into the possession, custody, or control of Foothill;
and the proceeds and products, whether tangible or intangible, of any of the
foregoing including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, the Real Property, money,
deposit accounts, or other tangible or intangible property resulting from the
sale, exchange, collection, or other disposition of any of the foregoing, or
any portion thereof or interest therein, and the proceeds thereof.
"Combined Revolving Obligations" means, at the time of
determination thereof, the sum of all then outstanding amounts advanced under
Sections 2.1, plus the aggregate face amount of all then outstanding L/Cs and
L/C Guarantees plus all then outstanding amounts advanced to Victoria under
Section 2.1 of the Victoria Loan Agreement.
"Combined Term Note" has the meaning set forth in Section 2.3
hereof.
"Daily Balance" means the amount of an Obligation owed at the end
of a given day.
"Debentures" means those certain 3.5% Senior Subordinated Secured
Debentures due July 1, 2009, issued by Borrower pursuant to the Indenture.
"Eligible Accounts" means those Accounts created by Buffalo in the
ordinary course of business that arise out of Buffalo's sale of goods or
rendition of services, that strictly comply with all of Borrower's
representations and warranties to Foothill, and that are and at all times
shall continue to be acceptable to Foothill in all respects; provided,
however, that standards of eligibility may be fixed and revised from time to
time by Foothill in Foothill's reasonable credit judgment. Eligible Accounts
shall not include the following:
(a) (i) Accounts that the Account Debtor has failed to pay
within sixty (60) days of due date (for Accounts with selling terms of sixty
(60) days or less); (ii) Accounts that the Account Debtor has failed to pay
within thirty (30) days of due date (for Accounts with selling terms of
between sixty one (61) days and one hundred twenty (120) days);
(iii) Accounts with selling terms of more than one hundred twenty (120) days;
(iv) all Accounts owed by an Account Debtor that has failed to pay fifty
percent (50%) or more of its Accounts owed to Borrower within the terms of
clauses (a)(i), (ii), or (iii);
(b) Accounts with respect to which the Account Debtor is an
officer, employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold
(provided, however that Accounts of Buffalo respecting bill and hold goods
may constitute Eligible Accounts if documentation satisfactory to Foothill,
evidences the terms of such bill and hold relationship), or other terms by
reason of which the payment by the Account Debtor may be conditional;
(d) Accounts with respect to which the Account Debtor is not
a resident of the United States, and which are not either (i) covered by
credit insurance in form and amount, and by an insurer, satisfactory to
Foothill, or (ii) supported by one or more letters of credit that are
assignable by their terms and have been delivered to Foothill in an amount,
of a tenor, and issued by a financial institution, reasonably acceptable to
Foothill;
(e) Accounts with respect to which the Account Debtor is the
United States or any department, agency, or instrumentality of the United
States;
(f) Accounts with respect to which Borrower is or may become
liable to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower;
(g) Accounts with respect to an Account Debtor whose total
obligations owing to Borrower exceed twenty five percent (25%) of all
Eligible Accounts, to the extent of the obligations owing by such Account
Debtor in excess of such percentage;
(h) Accounts with respect to which the Account Debtor
disputes liability or makes any claim with respect thereto (to the extent of
such dispute or claim), or is subject to any Insolvency Proceeding, or
becomes insolvent, or goes out of business;
(i) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the Account
Debtor's financial condition;
(j) Accounts that are payable in other than United States
Dollars; and
(k) Accounts that represent progress payments or other
advance billings that are due prior to the completion of performance by
Borrower of the subject contract for goods or services.
"Eligible Inventory" means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Jonathan Logan's and
Buffalo's business, Buffalo's work in process inventory, and Buffalo's raw
materials for such finished goods, provided that such Inventory is, in each
case, located at the premises identified on Schedule E-1, in strict
compliance with all of Borrower's representations and warranties to Foothill,
and acceptable to Foothill in all respects; provided, however, that standards
of eligibility may be fixed and revised from time to time by Foothill in
Foothill's reasonable credit judgment. Eligible Inventory shall not include
the following: (a) slow moving or obsolete items, (b) Buffalo Mills styles
1, 2 and 3 (over production/odd sized fabrics), style 9999 (samples), style
99 (unmerchantable inventory), (c) restrictive or custom items (except those
manufactured by Buffalo in the ordinary course of its business), (d) spare
parts, packaging, and shipping materials, (e) supplies used or consumed in
Borrower's business, (f) Inventory at any location other than those set forth
on Schedule E-1, (g) Inventory subject to a security interest or lien in
favor of any third Person except for a junior Permitted Lien, (h) bill and
hold goods, (i) Inventory that is not subject to Foothill's perfected
security interests, (j) defective goods, (k) "seconds," and (l) Inventory
acquired by Borrower on consignment (including Inventory acquired on
consignment from Victoria). Eligible Inventory shall be valued at the lower
of Borrower's cost or market value.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, machine tools, motors, equipment, furniture, furnishings,
fixtures, vehicles (including motor vehicles and trailers), tools, parts,
dies, jigs, goods (other than consumer goods, farm products, or Inventory),
wherever located, and any interest of Borrower in any of the foregoing, and
all attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever located.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, or any predecessor, successor, or superseding
laws of the United States of America, together with all regulations
promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which, within the meaning of Section 414 of the IRC, is:
(i) under common control with Borrower; (ii) treated, together with Borrower,
as a single employer; (iii) treated as a member of an affiliated service
group of which Borrower is also treated as a member; or (iv) is otherwise
aggregated with the Borrower for purposes of the employee benefits
requirements listed in IRC Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan;
(ii) a Prohibited Transaction with respect to any Plan; (iii) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer
Plan; (iv) the complete or partial withdrawal of Borrower or an ERISA
Affiliate from a Qualified Plan during a plan year in which it was, or was
treated as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts which,
under the provisions of any Plan or applicable law, Borrower or any ERISA
Affiliate is required to make; (vi) the filing of a notice of intent to
terminate, or the treatment of a plan amendment as a termination, under
Sections 4041 or 4041A of ERISA; (vii) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any
Qualified Plan or Multiemployer Plan; (viii) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate; and (ix) a
violation of the applicable requirements of Sections 404 or 405 of ERISA, or
the exclusive benefit rule under Section 403(c) of ERISA, by any fiduciary or
disqualified person with respect to any Plan for which Borrower or any ERISA
Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in Section 8.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Expenses" means all: costs or expenses (including taxes,
photocopying, notarization, telecommunication and insurance premiums)
required to be paid by Borrower under any of the Loan Documents that are paid
or advanced by Foothill; documentation, filing, recording, publication,
appraisal (including periodic Collateral appraisals), real estate survey,
real property taxes on any of the Real Property (should Foothill elect to pay
them), environmental audit, and search fees assessed, paid, or incurred by
Foothill in connection with Foothill's transactions with Borrower; costs and
expenses incurred by Foothill in preserving the value of the Collateral;
costs and expenses incurred by Foothill in the disbursement of funds to
Borrower (by wire transfer or otherwise); charges paid or incurred by
Foothill resulting from the dishonor of checks; costs and expenses paid or
incurred by Foothill to correct any default or enforce any provision of the
Loan Documents, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, or advertising to
sell the Collateral, or any portion thereof, irrespective of whether a sale
is consummated; costs and expenses paid or incurred by Foothill in examining
Borrower's Books; costs and expenses of third party claims or any other suit
paid or incurred by Foothill in enforcing or defending the Loan Documents;
and Foothill's reasonable attorneys fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys fees and expenses incurred in connection with
a "workout," a "restructuring," or an Insolvency Proceeding concerning
Borrower or any guarantor of the Obligations), defending, or concerning the
Loan Documents, irrespective of whether suit is brought.
"Fund" means the ILGWU National Retirement Fund.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and future
general intangibles and other personal property (including contract rights,
rights arising under common law, statutes, or regulations, choses or things
in action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists, monies due
or recoverable from pension funds, route lists, rights to payment and other
rights under any royalty or licensing agreements, infringements, claims,
computer programs, computer discs, computer tapes, literature, reports,
catalogs, deposit accounts, insurance premium rebates, tax refunds, and tax
refund claims), other than goods and Accounts.
"Hazardous Materials" means:
(a) those substances as defined as "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in the
Comprehensive Environmental Response, Compensation and Liability Act,
Resource Conservation and Recovery Act, 42 U.S.C. S 6901 et seq. ("RCRA"), or
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq.,
and in the regulations promulgated pursuant thereto;
(b) those substances designated as a "hazardous substance" under
or pursuant to the Federal Water Pollution Control Act, 33 U.S.C. S 1257 et
seq., or defined as a "hazardous waste" under or pursuant to RCRA and in the
regulations promulgated pursuant thereto;
(c) those substances listed in the United States Department of
Transportation Table (40 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and
(d) such other substances, materials and wastes which are
regulated or classified as hazardous or toxic under any Act in the state in
which the particular Real Property is located.
"Indebtedness" means: (a) all obligations of Borrower for borrowed
money; (b) all obligations of Borrower evidenced by bonds, debentures, notes,
or other similar instruments and all reimbursement or other obligations of
Borrower in respect of letters of credit, letter of credit guaranties,
bankers acceptances, interest rate swaps, controlled disbursement accounts,
or other financial products; (c) all obligations under capitalized leases;
(d) all obligations or liabilities of others secured by a lien or security
interest on any property or asset of Borrower, irrespective of whether such
obligation or liability is assumed; and (e) any obligation of Borrower
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co-made,
discounted, or sold with recourse to Borrower) any indebtedness, lease,
dividend, letter of credit, or other obligation of any other Person.
"Indemnified Persons" means Foothill and its parents, subsidiaries
and affiliates, attorneys, and each of their officers, directors, agents,
employees, trustees, receivers, executors, and administrators, and the heirs,
successors, and assigns of all of the foregoing.
"Indenture" means that certain Indenture, dated as of July 1, 1990,
between Borrower and First Trust National Association as trustee, concerning
the Debentures, as supplemented from time to time.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any
other bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally
with its creditors, or proceedings seeking reorganization, arrangement, or
other similar relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and
future raw materials, work in process, finished goods, and packing and
shipping materials, wherever located, and any documents of title representing
any of the above.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Jonathan Logan" means Borrower's Jonathan Logan division.
"Jonathan Logan Borrowing Base" has the meaning set forth in
Section 2.1.1.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Loan Documents" means this Agreement, the Lock Box Agreements, the
Mortgages, the Term Note, the Combined Term Note, any other note or notes
executed by Borrower and payable to Foothill, and any other agreement entered
into in connection with this Agreement, including the Patent and Trademark
Security Agreement and the Security Agreement--Stock Pledge.
"Lock Box" has the meaning provided in the respective Lock Box
Agreements.
"Lock Box Agreements" means those certain Lockbox Operating
Procedural Agreements and Depository Account Agreements, in form and
substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and one of the Lock Box Banks.
"Lock Box Banks" means Chemical Bank and The Boatmen's National
Bank of St. Louis.
"Losses" shall mean any and all losses, liabilities, contingent
liabilities, damages, obligations, claims, contingent claims, actions, suits,
proceedings, disbursements, penalties, costs and expenses incurred after the
incurrence of and during the continuation of an Event of Default (including,
without limitation, actual attorneys' fees and costs of counsel retained by
Foothill to monitor the proceedings and actions of Borrower in satisfying its
obligations hereunder, and to advise and represent Foothill with respect to
matters related hereto, including, without limitation, fees incurred pursuant
to 11 U.S.C., and all other professional or consultants' fees and expenses),
whether or not an action or proceeding is commenced or threatened.
"Maturity Date" has the meaning set forth in Section 3.3.
"Maximum Amount" has the meaning set forth in Section 2.1.3.
"Mortgages" means one or more mortgages, deeds of trust, or deeds
to secure debt, executed by Borrower in favor of Foothill, the form and
substance of which shall be satisfactory to Foothill, that encumber the Real
Property and the related improvements thereto.
"Multiemployer Plan" means a multiemployer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which
employees of Borrower or an ERISA Affiliate participate or to which Borrower
or any ERISA Affiliate contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit, notes, drafts, instruments, certificated and
uncertificated securities (including the shares of stock of Victoria and any
other subsidiaries of Borrower), documents, personal property leases (wherein
Borrower is the lessor), chattel paper, and Borrower's Books relating to any
of the foregoing.
"Obligations" means all loans, advances, debts, principal, interest
(including any interest that, but for the provisions of the Bankruptcy Code,
would have accrued), contingent reimbursement obligations owing to Foothill
under any outstanding L/Cs or L/C Guarantees, premiums, liabilities
(including all amounts charged to Borrower's loan account pursuant to any
agreement authorizing Foothill to charge Borrower's loan account),
obligations, fees, lease payments, guaranties, covenants, and duties owing by
Borrower to Foothill of any kind and description (whether pursuant to or
evidenced by the Loan Documents, or any agreement executed in connection
therewith), and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and further including all interest not paid
when due and all Foothill Expenses that Borrower is required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"Old Lender" means The CIT Group/Commercial Services, Inc.
"Old Lender Documents" means various documents between Borrower and
Old Lender, including the Subordinated CIT Note, relating to the partial
repayment and restructuring of Borrower's obligations to Old Lender.
"Overadvance" has the meaning set forth in Section 2.4.
"PBGC" means the Pension Benefit Guaranty Corporation as defined in
Title IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security interests held by
Foothill; (b) liens for unpaid taxes that are not yet due and payable; (c)
liens and security interests set forth on Schedule P-1 attached hereto; (d)
purchase money security interests and liens of lessors under capitalized
leases to the extent that the acquisition or lease of the underlying asset
was permitted under Section 7.10, and so long as the security interest or
lien only secures the purchase price of the asset; (e) easements, rights of
way, reservations, covenants, conditions, restrictions, zoning variances, and
other similar encumbrances that do not materially interfere with the use or
value of the property subject thereto; (f) obligations and duties as lessee
under any lease existing on the date of this Agreement; (g) exceptions listed
in the title insurance or commitment therefor to be delivered by Borrower
hereunder in respect of the Real Property; (h) carriers', warehousemen's,
mechanics', materialmen's, repairmen's or other like liens arising in the
ordinary course of business which are not overdue for a period of more than
thirty (30) days or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Borrower in accordance with GAAP or for which
a bond in the full amount thereof has been posted; (i) pledges or deposits
under worker's compensation, unemployment insurance and other social security
legislation; and (j) deposits to secure the performance of bids, trade
contracts (other than for borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, or other organizations, irrespective of whether they are
legal entities, and governments and agencies and political subdivisions
thereof.
"Plan" means an employee benefit plan (as defined in Section 3(3)
of ERISA) which Borrower or any ERISA Affiliate sponsors or maintains or to
which Borrower or any ERISA Affiliate makes, is making, or is obligated to
make contributions, including any Multiemployer Plan or Qualified Plan.
"Prohibited Transaction" means any transaction described in Section
406 of ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in Section 3(2)
of ERISA) intended to be tax-qualified under Section 401(a) of the IRC which
Borrower or any ERISA Affiliate sponsors, maintains, or to which any such
person makes, is making, or is obligated to make, contributions, or, in the
case of a multiple-employer plan (as described in Section 4064(a) of ERISA),
has made contributions at any time during the immediately preceding period
covering at least five (5) plan years, but excluding any Multiemployer Plan.
"Real Property" means the parcel or parcels of real property and
the related improvements thereto identified on Schedule R-1, and any parcels
of real property hereafter acquired by Borrower.
"Remediate" and "Remediation" shall include, but not be limited to,
the investigation of the environmental condition of the Real Property, the
preparation of any feasibility studies, reports or remedial plans, and the
performance of any cleanup, abatement, removal, remediation, containment,
operation, maintenance, monitoring or restoration work, whether on or off of
the Real Property.
"Reportable Event" means any event described in Section 4043 (other
than Subsections (b)(7) and (b)(9)) of ERISA.
"Subordinated CIT Note" means that certain Subordinated Note, of
even date herewith, in the original principal amount of Thirty Million
Dollars ($30,000,000), issued by Borrower to the order of Old Lender, and any
amendments, restatements, substitutions, or replacements thereof.
"Subordinated Fund Note" means that certain Subordinated Note in
the original principal amount of Twenty Two Million Dollars ($22,000,000), to
be issued by Borrower to the order of the Fund, and any amendments,
restatements, substitutions, or replacements thereof.
"Subordinated Notes" means, collectively, the Subordinated CIT Note
and the Subordinated Fund Note.
"Tangible Net Worth" means, as of the date any determination
thereof is to be made, the difference of: (a) Borrower's total stockholder's
equity; minus (b) the sum of: (i) all intangible assets of Borrower; (ii) all
of Borrower's prepaid expenses; and (iii) all amounts due to Borrower from
Affiliates, calculated on a consolidated basis.
"Term Note" has the meaning set forth in Section 2.3 hereof.
"Unfunded Benefit Liability" means the excess of a Plan's benefit
liabilities (as defined in Section 4001(a)(16) of ERISA) over the current
value of such Plan's assets, determined in accordance with the assumptions
used by the Plan's actuaries for funding the Plan pursuant to Section 412 of
the IRC for the applicable plan year.
"Victoria" means Victoria Creations, Inc., a Rhode Island
corporation.
"Victoria Agreement" means the Loan and Security Agreement, of even
date herewith, between Foothill and Victoria, and any amendments,
replacements, renewals, and substitutions thereto.
"Victoria Guaranty" means that certain Continuing Guaranty of even
date herewith, by Victoria in favor of Foothill, respecting the Obligations.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used herein,
the term "financial statements" shall include the notes and schedules
thereto. Whenever the term "Borrower" is used in respect of a financial
covenant or a related definition, it shall be understood to mean Borrower on
a consolidated basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement which are defined in
the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4 Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, the term "including" is not limiting, and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as
a whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule, and exhibit references are to this Agreement
unless otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements, thereto and thereof, as
applicable.
1.5 Schedules and Exhibits. All of the schedules and exhibits
attached to this Agreement shall be deemed incorporated herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
2.1.1 Subject to the terms and conditions of this Agreement,
Foothill agrees to make revolving advances to Borrower in an amount not to
exceed the Combined Borrowing Base. For purposes of this Agreement,
"Combined Borrowing Base" shall mean the sum of:
(a) an amount (the "Buffalo Borrowing Base") equal to
the sum of: (i) an amount equal to the lesser of: (y) seventy-five
percent (75%) of the amount of Eligible Accounts, and (z) an amount
equal to Buffalo's cash collections for the immediately preceding one
hundred twenty (120) day period; plus (ii) an amount equal to the lesser
of: (x) fifty percent (50%) of the amount of Eligible Inventory of
Buffalo, net of reserves not otherwise excluded in the definition of
Eligible Inventory, and (y) the amount of credit availability created by
Section 2.1.1(a)(i) above; plus
(b) an amount (the "Jonathan Logan Borrowing Base")
equal to fifty percent (50%) of the amount of Eligible Inventory of
Jonathan Logan, net of reserves not otherwise excluded in the definition
of Eligible Inventory.
Foothill shall establish reasonable reserves against Eligible Inventory
for obsolescence, shrinkage, damaged goods, markdowns, and for
Inventory, if any, that is subject to landlord liens that are not
subordinate to Foothill's security interests in such Inventory.
2.1.2 Anything to the contrary in Section 2.1.1 above
notwithstanding, Foothill may reduce its advance rates based upon Eligible
Accounts or Eligible Inventory without declaring an Event of Default if it
determines, in its reasonable discretion, that there is a material impairment
of the prospect of repayment of all or any portion of the Obligations or a
material impairment of the value or priority of Foothill's security interests
in the Collateral.
2.1.3 Foothill shall have no obligation to make advances
hereunder to the extent they would cause:
(a) the aggregate outstanding advances pursuant to this
Section 2.1 and the outstanding face amount of L/Cs and L/C Guarantees
issued pursuant to Section 2.2, to exceed Eleven Million Dollars
($11,000,000) (the "Maximum Amount");
(b) the aggregate outstanding advances pursuant to
Section 2.1.1(a) to exceed Eight Million Five Hundred Thousand Dollars
($8,500,000);
(c) the aggregate outstanding advances pursuant to
Section 2.1.1(b) to exceed Two and One-Half Million Dollars
($2,500,000); or
(d) the aggregate outstanding Combined Revolving
Obligations to exceed Eighteen Million Dollars ($18,000,000) or during
the period of July 1, through November 30 of each year, Twenty Two
Million Dollars ($22,000,000).
2.1.4 Foothill is authorized to make advances under this
Agreement based upon telephonic or other instructions received from anyone
purporting to be an Authorized Officer of Borrower, or without instructions
if pursuant to Section 2.5(c). Borrower agrees to establish and maintain a
single designated deposit account for the purpose of receiving the proceeds
of the advances requested by Borrower and made by Foothill hereunder. Unless
otherwise agreed by Foothill and Borrower, any advance requested by Borrower
and made by Foothill hereunder shall be made to such designated deposit
account. Amounts borrowed pursuant to this Section 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.
2.2 Letters of Credit and Letter of Credit Guarantees.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue commercial or standby letters of credit for the
account of Borrower (each, an "L/C") or to issue standby letters of credit or
guarantees of payment (each such letter of credit or guaranty, an "L/C
Guaranty") with respect to commercial or standby letters of credit issued by
another Person for the account of Borrower in an aggregate face amount not to
exceed the lesser of: (i) the Borrowing Base less the amount of advances
outstanding pursuant to Section 2.1, and (ii) One Million Five Hundred
Thousand Dollars ($1,500,000). Borrower expressly understands and agrees
that Foothill shall have no obligation to arrange for the issuance by other
financial institutions of letters of credit that are to be the subject of L/C
Guarantees. Borrower and Foothill acknowledge and agree that certain of the
letters of credit that are to be the subject of L/C Guarantees may be
outstanding on the Closing Date. Each such L/C (including those that are the
subject of L/C Guarantees) shall have an expiry date no later than sixty (60)
days prior to the date on which this Agreement is scheduled to terminate
under Section 3.3 (without regard to any potential renewal term) and all such
L/Cs and L/C Guarantees shall be in form and substance acceptable to Foothill
in its sole discretion. Foothill shall not have any obligation to issue L/Cs
or L/C Guarantees to the extent that the face amount of all outstanding L/Cs
and L/C Guarantees, plus the amount of advances outstanding pursuant to
Section 2.1, would exceed the Maximum Amount. The L/Cs and the L/C
Guarantees issued under this Section 2.2 shall be used by Borrower,
consistent with this Agreement, for its general working capital purposes or
to support its obligations with respect to workers' compensation premiums or
other similar obligations. If Foothill is obligated to advance funds under
an L/C or L/C Guaranty, the amount so advanced immediately shall be deemed to
be an advance made by Foothill to Borrower pursuant to Section 2.1 and,
thereafter, shall bear interest at the rates then applicable under Section
2.5.
(b) Borrower hereby agrees to indemnify, save, defend, and
hold Foothill harmless from any loss, cost, expense, or liability, including
payments made by Foothill, expenses, and reasonable attorneys fees incurred
by Foothill arising out of or in connection with any L/Cs or L/C Guarantees.
Borrower agrees to be bound by the issuing bank's regulations and
interpretations of any letters of credit guarantied by Foothill and opened to
or for Borrower's account or by Foothill's interpretations of any L/C issued
by Foothill to or for Borrower's account, even though this interpretation may
be different from Borrower's own, and Borrower understands and agrees that
Foothill shall not be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Borrower's instructions or those
contained in the L/Cs or any modifications, amendments, or supplements
thereto. Borrower understands that the L/C Guarantees may require Foothill
to indemnify the issuing bank for certain costs or liabilities arising out of
claims by Borrower against such issuing bank. Borrower hereby agrees to
indemnify, save, defend, and hold Foothill harmless with respect to any loss,
cost, expense (including attorneys fees), or liability incurred by Foothill
under any L/C Guaranty as a result of Foothill's indemnification of any such
issuing bank.
(c) Borrower hereby authorizes and directs any bank that
issues a letter of credit guaranteed by Foothill to deliver to Foothill all
instruments, documents, and other writings and property received by the
issuing bank pursuant to the letter of credit, and to accept and rely upon
Foothill's instructions and agreements with respect to all matters arising in
connection with the letter of credit and the related application. Borrower
may or may not be the "applicant" or "account party" with respect to such
letter of credit.
(d) Any and all service charges, commissions, fees, and costs
incurred by Foothill relating to the L/Cs guaranteed by Foothill shall be
considered Foothill Expenses for purposes of this Agreement and immediately
shall be reimbursable by Borrower to Foothill. On the first day of each
month, Borrower will pay Foothill a fee equal to two percent (2%) per annum
times the average Daily Balance of the undrawn L/Cs and L/C Guarantees that
were outstanding during the immediately preceding month. Service charges,
commissions, fees, and costs may be charged to Borrower's loan account at the
time the service is rendered or the cost is incurred.
(e) Immediately upon the termination of this Agreement,
Borrower agrees to either: (i) provide cash collateral to be held by
Foothill in an amount equal to the maximum amount of Foothill's obligations
under L/Cs plus the maximum amount of Foothill's obligations to any Person
under outstanding L/C Guarantees, or (ii) cause to be delivered to Foothill
releases of all of Foothill's obligations under its outstanding L/Cs and L/C
Guarantees. At Foothill's discretion, any proceeds of Collateral received by
Foothill after the occurrence and during the continuation of an Event of
Default may be held as the cash collateral required by this Section 2.2(e).
2.3 Term Loans. Foothill has agreed to make a term loan to
Borrower in the original principal amount of Ten Million Dollars
($10,000,000), to be evidenced by and repayable in accordance with the terms
and conditions of a promissory note (the "Term Note"), of even date herewith,
executed by Borrower in favor of Foothill. Foothill has also agreed to make
a term loan jointly to Borrower and Victoria in the original principal amount
of Two Million Dollars ($2,000,000), to be evidenced by and repayable in
accordance with the terms of a promissory note (the "Combined Term Note"), of
even date herewith, executed by Borrower and Victoria in favor of Foothill.
All amounts evidenced by the Term Note and the Combined Term Note shall
constitute Obligations.
2.4 Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Foothill pursuant to Sections 2.1 and 2.2
is greater than either the dollar or percentage limitations set forth in
Sections 2.1 or 2.2 (an "Overadvance"), Borrower immediately shall pay to
Foothill, in cash, the amount of such excess to be used by Foothill first, to
repay non-contingent Obligations and, thereafter, to be held by Foothill as
cash collateral to secure Borrower's obligation to repay Foothill for all
amounts paid pursuant to L/Cs or L/C Guarantees.
2.5 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations, except for undrawn L/Cs
and L/C Guarantees shall bear interest, on the average Daily Balance, at the
rate of two percent (2%) per month.
(b) Intentionally omitted.
(c) Payments. Interest hereunder shall be due and payable in
arrears on the first day of each month during the term hereof. Borrower
hereby authorizes Foothill, at its option, without prior notice to Borrower,
to charge such interest, Foothill Expenses arising after the occurrence and
during the continuance of an Event of Default (as and when incurred), and all
installments or other payments due under the Term Note and the Combined Term
Note or other Loan Document to Borrower's loan account, which amounts shall
thereafter accrue interest at the rate then applicable hereunder. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate
then applicable hereunder.
(d) Computation. All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
(e) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement, the Term
Note, or the Combined Term Note, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.
Borrower and Foothill, in executing this Agreement, the Term Note and the
Combined Term Note, intend to legally agree upon the rate or rates of
interest and manner of payment stated within it; provided, however, that,
anything contained herein in the Term Note or in the Combined Term Note to
the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, ipso facto
as of the date of this Agreement and the Term Note and the Combined Term
Note, Borrower is and shall be liable only for the payment of such maximum as
allowed by law, and payment received from Borrower in excess of such legal
maximum, whenever received, shall be applied to reduce the principal balance
of the Obligations to the extent of such excess.
2.6 Crediting Payments; Application of Collections. The receipt
of any wire transfer of funds, check, or other item of payment by Foothill
(whether from transfers to Foothill by the Lock Box Banks pursuant to the
Lock Box Agreements or otherwise) immediately shall be applied to
provisionally reduce the Obligations, but shall not be considered a payment
on account unless such wire transfer is of immediately available federal
funds and is made to the appropriate deposit account of Foothill or unless
and until such check or other item of payment is honored when presented for
payment. From and after the Closing Date, Foothill shall be entitled to
charge Borrower for five (5) Business Days of `clearance' at the rate set
forth in Sections 2.5(a) (applicable to advances under Section 2.1) on all
checks or other items of payment that are not in immediately available funds
that are received by Foothill (except for wire transfers of federal funds).
This five (5) Business Day clearance charge on certain receipts is
acknowledged by the parties to constitute an integral aspect of the pricing
of Foothill's facility to Borrower, and shall apply irrespective of the
characterization of whether receipts are owned by Borrower or Foothill, and
irrespective of the level of Borrower's Obligations to Foothill. Should any
check or item of payment not be honored when presented for payment, then
Borrower shall be deemed not to have made such payment, and interest shall be
recalculated accordingly. Anything to the contrary contained herein
notwithstanding, any wire transfer, check, or other item of payment shall be
deemed received by Foothill only if it is received into Foothill's Operating
Account (as such account is identified in the Lock Box Agreements) on or
before 11:00 a.m. Los Angeles time. If any wire transfer, check, or other
item of payment is received into Foothill's Operating Account (as such
account is identified in the Lock Box Agreements) after 11:00 a.m. Los
Angeles time it shall be deemed to have been received by Foothill as of the
opening of business on the immediately following Business Day.
2.7 Statements of Obligations. Foothill shall render statements
to Borrower of the Obligations, including principal, interest, fees, and
including an itemization of all charges and expenses constituting Foothill
Expenses owing, and such statements shall be conclusively presumed to be
correct and accurate and constitute an account stated between Borrower and
Foothill unless, within thirty (30) days after receipt thereof by Borrower,
Borrower shall deliver to Foothill by registered or certified mail at its
address specified in Section 12, written objection thereto describing the
error or errors contained in any such statements.
2.8 Fees. After the occurrence and during the continuation of an
Event of Default, Borrower shall pay to Foothill the following fees:
Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination of Borrower performed by Foothill or its agents; Foothill's
customary appraisal fee of One Thousand Dollars ($1,000) per day per
appraiser, plus out-of-pocket expenses for each appraisal of the Collateral
performed by Foothill or its agents.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance, L/C, or L/C Guaranty.
The obligation of Foothill to make the initial advance or to provide the
initial L/C or L/C Guaranty is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
on or before the Closing Date:
(a) the Closing Date shall occur on or before June 30, 1994.
(b) Old Lender shall have executed and delivered the Pay-Off
Letter, together with UCC termination statements and other documentation
evidencing the termination of its liens and security interests in and to the
properties and assets of Borrower or a subordination agreement in form and
substance satisfactory to Foothill in its sole discretion;
(c) Foothill shall have received stamped filed copies of its
financing statements and fixture filings;
(d) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force and
effect:
i) the Lock Box Agreements;
ii) the Term Note and the Combined Term Note;
iii) the Mortgages;
iv) an Intercreditor Agreement among the Trustee of the
Indenture and Foothill;
v) the Victoria Guaranty;
vi) a Patent and Trademark Security Agreement of even
date herewith, between Borrower and Foothill;
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution and delivery of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing specific
officers of Borrower to execute same;
(f) Foothill shall have received copies of Borrower's By-laws
and Certificate of Incorporation, as amended, modified, or supplemented to
the Closing Date, certified by the Secretary of Borrower;
(g) Foothill shall have received a certificate of corporate
status with respect to Borrower, dated within ten (10) days of the Closing
Date, by the Secretary of State of the state of incorporation of Borrower,
which certificate shall indicate that Borrower is in good standing in such
state;
(h) Foothill shall have received certificates of corporate
status with respect to Borrower, each dated within fifteen (15) days of the
Closing Date, such certificates to be issued by the Secretary of State of the
states in which its failure to be duly qualified or licensed would have a
material adverse effect on the financial condition or properties and assets
of Borrower, which certificates shall indicate that Borrower is in good
standing;
(i) Foothill shall have received the certified copies of the
policies of insurance, together with the endorsements thereto, as are
required by Section 6.11 hereof, the form and substance of which shall be
satisfactory to Foothill and its counsel;
(j) In the event that Borrower's motor vehicles have an
aggregate book value of Fifty Thousand Dollars ($50,000), or more, Foothill
shall have received duly executed certificates of title with respect to that
portion of the Collateral that is subject to certificates of title;
(k) Foothill shall have received each of the Mortgages, duly
executed, and each shall have been recorded in the appropriate county
recording office;
(l) Foothill shall have received ALTA 1970 Form Lenders
Policies of Title Insurance in form and content acceptable to Foothill, in
its sole and absolute discretion on all of the Real Property except for the
undeveloped Real Property located in Aiken County, South Carolina;
(m) Foothill shall have received opinions of Borrower's
counsel in form and substance satisfactory to Foothill in its sole
discretion; and
(n) all other documents and legal matters in connection with
the transactions contemplated by this Agreement (including all conditions
precedent set forth in Sections 3.1 and 3.2 of the Victoria Loan Agreement)
shall have been delivered or executed or recorded and shall be in form and
substance satisfactory to Foothill and its counsel.
3.2 Conditions Precedent to All Advances, L/Cs, or L/C Guarantees.
The following shall be conditions precedent to all advances, L/Cs, or L/C
Guarantees hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all
respects on and as of the date of such advance, L/C, or L/C Guaranty, as
though made on and as of such date (except to the extent that such represen-
tations and warranties relate solely to an earlier date);
(b) no Event of Default or event which with the giving of
notice or passage of time would constitute an Event of Default shall have
occurred and be continuing on the date of such advance, L/C, or L/C Guaranty,
nor shall either result from the making of the advance; and
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the making of such advance or
the issuance of such L/C or L/C Guaranty shall have been issued and remain in
force by any governmental authority against Borrower, Foothill, or any of
their Affiliates.
3.3 Term. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill and shall continue in
full force and effect for a term ending on the date (the "Maturity Date")
that is two (2) years from the Closing Date, unless sooner terminated
pursuant to the terms hereof. Borrower may terminate this Agreement at any
time, without premium or penalty, by giving Foothill at least ten (10) days
prior written notice. The foregoing notwithstanding, Foothill shall have the
right to terminate its obligations under this Agreement immediately and upon
notice upon the occurrence and during the continuation of an Event of
Default.
3.4 Effect of Termination. On the date of termination, all
Obligations (including contingent reimbursement obligations under any
outstanding L/Cs or L/C Guarantees) immediately shall become due and payable
without notice or demand. No termination of this Agreement, however, shall
relieve or discharge Borrower of Borrower's duties, Obligations, or covenants
hereunder, and Foothill's continuing security interests in the Collateral
shall remain in effect until all Obligations have been fully and finally
discharged and Foothill's obligation to provide advances hereunder is
terminated.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and
hereafter acquired or arising Collateral in order to secure prompt repayment
of any and all Obligations and in order to secure prompt performance by
Borrower of each of its covenants and duties under the Loan Documents.
Foothill's security interests in the Collateral shall attach to all
Collateral without further act on the part of Foothill or Borrower. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, and other than sales of Inventory to buyers in the ordinary
course of business and those actions contemplated by Section 7.4 and
Schedule 7.4, Borrower has no authority, express or implied, to dispose of
any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and assign
such Negotiable Collateral to Foothill and deliver physical possession of
such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral. Foothill, Borrower, and the Lock Box Banks shall enter into the
Lock Box Agreements, in form and substance satisfactory to Foothill in its
sole discretion, pursuant to which all of Borrower's cash receipts, checks,
and other items of payment (including, insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds) will be forwarded to Foothill on a
daily basis. At any time after the occurrence and during the continuance of
an Event of Default or after Foothill, in its reasonable judgment, deems
itself insecure, Foothill or Foothill's designee may: (a) notify customers or
Account Debtors of Borrower that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Foothill or that Foothill has a
security interest therein; and (b) collect the Accounts, General Intangibles,
and Negotiable Collateral directly and charge the collection costs and
expenses to Borrower's loan account. Borrower agrees that it will hold in
trust for Foothill, as Foothill's trustee, any cash receipts, checks, and
other items of payment (including, insurance proceeds, proceeds of cash
sales, rental proceeds, and tax refunds) that it receives and immediately
will deliver said cash receipts, checks, and other items of payment to
Foothill in their original form as received by Borrower except that Jonathan
Logan sales proceeds will be transferred to the Lock Box weekly.
4.4 Delivery of Additional Documentation Required. At any time
upon the request of Foothill, Borrower shall execute and deliver to Foothill
all financing statements, continuation financing statements, fixture filings,
security agreements, chattel mortgages, pledges, assignments, endorsements of
certificates of title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents that
Foothill may reasonably request, in form satisfactory to Foothill, to perfect
and continue perfected Foothill's security interests in the Collateral and in
order to fully consummate all of the transactions contemplated hereby and
under the other the Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers,
employees, or agents designated by Foothill) as Borrower's true and lawful
attorney, with power to: (a) send requests for verification of Accounts; (b)
endorse Borrower's name on any checks, notices, acceptances, money orders,
drafts, or other item of payment or security that may come into Foothill's
possession; (c) at any time that an Event of Default has occurred and is
continuing, settle and adjust disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms which Foothill
determines to be reasonable, and Foothill may cause to be executed and
delivered any documents and releases which Foothill determines to be
necessary. The appointment of Foothill as Borrower's attorney, and each and
every one of Foothill's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully and finally repaid
and performed and Foothill's obligation to extend credit hereunder is
terminated.
4.6 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter,
during normal business hours, to inspect Borrower's Books and to check, test,
and appraise the Collateral in order to verify Borrower's financial condition
or the amount, quality, value, condition of, or any other matter relating to,
the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as follows:
5.1 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of liens, claims, security interests,
or encumbrances, except for Permitted Liens.
5.2 Eligible Accounts. All of Borrower's representations and
warranties in this Section are based upon Borrower's knowledge after
reasonable review in accordance with normal and prudent business practices.
The Eligible Accounts are, at the time of the creation thereof and as of each
date on which Borrower includes them in a Borrowing Base calculation or
certification, bona fide existing obligations created by the sale and
delivery of Inventory or the rendition of services to Account Debtors in the
ordinary course of Borrower's business, unconditionally owed to Borrower
without defenses, disputes, offsets, counterclaims, or rights of return or
cancellation. Except for Accounts arising from bill and hold sales, the
property giving rise to such Eligible Accounts has been delivered to the
Account Debtor, or to the Account Debtor's agent for immediate shipment to
and unconditional acceptance by the Account Debtor. At the time of the
creation of an Eligible Account and as of each date on which Borrower
includes an Eligible Account in a Borrowing Base calculation or
certification, Borrower has not received notice of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of
any applicable Account Debtor regarding such Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is now and at all
times hereafter shall be of good and merchantable quality, free from defects.
5.4 Location of Inventory and Equipment. The Inventory and
Equipment are not stored with a bailee, warehouseman, or similar party
(without Foothill's prior written consent) and are located only at the
locations identified on Schedule 6.14 or otherwise permitted by Section 6.14.
5.5 Inventory Records. Borrower now keeps, and hereafter at all
times shall keep, correct and accurate records itemizing and describing the
kind, type, quality, and quantity of the Inventory, and Borrower's cost
therefor.
5.6 Location of Chief Executive Office; FEIN. The chief executive
office of Borrower is located at the address indicated in the preamble to
this Agreement and Borrower's FEIN is 13-1426280.
5.7 Due Organization and Qualification. Borrower is duly
organized and existing and in good standing under the laws of the state of
its incorporation and qualified and licensed to do business in, and in good
standing in, any state where the failure to be so licensed or qualified could
reasonably be expected to have a material adverse effect on the business,
operations, condition (financial or otherwise), finances, or prospects of
Borrower or on the value of the Collateral to Foothill.
5.8 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's corporate powers,
have been duly authorized, and are not in conflict with nor constitute a
breach of any provision contained in Borrower's Articles or Certificate of
Incorporation, or By-laws, nor will they constitute an event of default under
any material agreement to which Borrower is a party or by which its
properties or assets may be bound.
5.9 Litigation. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency and Borrower does
not have knowledge or belief of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower or any guarantor of the Obligations, except
for: (a) ongoing collection matters in which Borrower is the plaintiff; (b)
matters disclosed on Schedule 5.9; and (c) matters arising after the date
hereof that, if decided adversely to Borrower, would not materially impair
the prospect of repayment of the Obligations or materially impair the value
or priority of Foothill's security interests in the Collateral.
5.10 No Material Adverse Change in Financial Condition. All
financial statements relating to Borrower or any guarantor of the Obligations
that have been delivered by Borrower to Foothill have been prepared in
accordance with GAAP and fairly present Borrower's (or such guarantor's, as
applicable) financial condition as of the date thereof and Borrower's results
of operations for the period then ended. There has not been a material
adverse change in the financial condition of Borrower (or such guarantor, as
applicable) since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.11 No Transfer. No transfer of property is being made by
Borrower and no obligation is being incurred by Borrower in connection with
the transactions contemplated by this Agreement or the other Loan Documents
with the intent to hinder, delay, or defraud either present or future
creditors of Borrower.
5.12 Employee Benefits. Except as set forth in Schedule 5.12, each
of the following provisions of this Section 5.12 is true. Each Plan is in
compliance in all material respects with the applicable provisions of ERISA
and the IRC. Each Qualified Plan and Multiemployer Plan has been determined
by the Internal Revenue Service to qualify under Section 401 of the IRC, and
the trusts created thereunder have been determined to be exempt from tax
under Section 501 of the IRC, and, to the best knowledge of Borrower, nothing
has occurred that would cause the loss of such qualification or tax-exempt
status. There are no outstanding liabilities under Title IV of ERISA with
respect to any Plan maintained or sponsored by Borrower or any ERISA
Affiliate, nor with respect to any Plan to which Borrower or any ERISA
Affiliate contributes or is obligated to contribute which could reasonably be
expected to have a material adverse effect on the financial condition of
Borrower. No Plan subject to Title IV of ERISA has any Unfunded Benefit
Liability which could reasonably be expected to have a material adverse
effect on the financial condition of Borrower. Neither Borrower nor any
ERISA Affiliate has transferred any Unfunded Benefit Liability to a person
other than Borrower or an ERISA Affiliate or has otherwise engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA which
could reasonably be expected to have a material adverse effect on the
financial condition of Borrower. Neither Borrower nor any ERISA Affiliate
has incurred nor reasonably expects to incur (x) any liability (and no event
has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Sections 4201 or 4243 of ERISA with
respect to a Multiemployer Plan, or (y) any liability under Title IV of ERISA
(other than premiums due but not delinquent under Section 4007 of ERISA) with
respect to a Plan, which could, in either event, reasonably be expected to
have a material adverse effect on the financial condition of Borrower.
Within the past six (6) years, no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the IRC has
been made with respect to any Plan. No ERISA Event has occurred or is
reasonably expected to occur with respect to any Plan which could reasonably
be expected to have a material adverse effect on the financial condition of
Borrower. Borrower and each ERISA Affiliate have complied in all material
respects with the notice and continuation coverage requirements of Section
4980B of the IRC.
5.13 Environmental Condition.
(a) To the Borrower's knowledge, Borrower has not used
Hazardous Materials at or affecting the Real Property in any manner which
violates any Act governing the use, storage, treatment, transportation,
manufacturing, refinement, handling, production, or disposal of Hazardous
Materials where such violation would reasonably be expected to result in a
loss that would have a material adverse effect on Borrower.
2. To the Borrower's knowledge, no prior or current owner,
occupant or operator of the Real Property has used Hazardous Materials at or
affecting the Real Property in any manner which violates any Act governing
the use, storage, treatment, transportation, manufacturing, refinement,
handling, production, or disposal of Hazardous Materials where such violation
would reasonably be expected to result in a loss that would have a material
adverse effect on Borrower.
5.14 Compliance With The ADA.
(a) All of the Real Property is presently used as an
administrative, office, manufacturing, or distribution facility and for other
commercial purposes, and no portions of the Real Property are used as or for
a "public accommodation," within the meaning of the ADA.
(b) To the best of Borrower's knowledge, Borrower has made
all modifications or provided all accommodations which may be required to be
made or provided by Borrower to the Real Property pursuant to the ADA in
order to accommodate the needs and requirements of any disabled persons.
(c) Borrower has received no notice or complaint regarding
any noncompliance with the ADA of any of the Real Property or of Borrower's
employment practices and, to the best of Borrower's knowledge, there has been
no threatened litigation alleging any such noncompliance by Borrower or the
Real Property.
5.15 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement automatically shall be deemed
repeated with each advance or issuance of an L/C or L/C Guaranty and shall be
conclusively presumed to have been relied on by Foothill regardless of any
investigation made or information possessed by Foothill except to the extent
that Foothill has previously waived any breach hereof as to such warranty.
The warranties and representations set forth herein shall be cumulative and
in addition to any and all other warranties and representations that Borrower
now or hereafter shall give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations, and
unless Foothill shall otherwise consent in writing, Borrower shall do all of
the following:
6.1 Accounting System. Borrower shall maintain a standard and
modern system of accounting in accordance with GAAP with ledger and account
cards or computer tapes, discs, printouts, and records pertaining to the
Collateral which contain information as from time to time may be requested by
Foothill. Borrower also shall keep proper books of account showing all
sales, claims, and allowances on its Inventory.
6.2 Collateral Reports. Borrower shall deliver to Foothill, no
later than the tenth (10th) day of each month during the term of this
Agreement, a detailed aging, by total, of the Accounts, a reconciliation
statement, and a summary, by vendor, of all accounts payable, including due
dates of invoices, and any book overdraft. Original sales invoices
evidencing daily sales shall be mailed by Borrower to each Account Debtor
with, at Foothill's request, a copy to Foothill, and, after the occurrence
and during the continuance of an Event of Default, at Foothill's direction,
the invoices shall indicate on their face that the Account has been assigned
to Foothill and that all payments are to be made directly to Foothill.
Borrower shall deliver to Foothill, as Foothill may from time to time
require, collection reports, sales journals, invoices, original delivery
receipts, customer's purchase orders, shipping instructions, bills of lading,
and other documentation respecting shipment arrangements. Absent such a
request by Foothill, copies of all such documentation shall be held by
Borrower as custodian for Foothill.
6.3 Schedules of Accounts. With such regularity as Foothill shall
require, Borrower shall provide Foothill with schedules describing all
Accounts. Foothill's failure to request such schedules or Borrower's failure
to execute and deliver such schedules shall not affect or limit Foothill's
security interests or other rights in and to the Accounts.
6.4 Financial Statements, Reports, Certificates. Borrower agrees
to deliver to Foothill: (a) as soon as available, but in any event within
forty-five (45) days after the end of each month during each of Borrower's
fiscal years, a company prepared income statement and cash flow statement
covering Borrower's operations during such period; and (b) as soon as
available, but in any event within ninety (90) days after the end of each of
Borrower's fiscal years, financial statements of Borrower for each such
fiscal year, audited by KPMG Peat Marwick or by other independent certified
public accountants reasonably acceptable to Foothill and certified, without
any qualifications (other than going concern or consistency with prior year
in the case of a change of accounting principle), by such accountants to have
been prepared in accordance with GAAP, together with a certificate of such
accountants addressed to Foothill stating that such accountants do not have
knowledge of the existence of any event or condition constituting an Event of
Default, or that would, with the passage of time or the giving of notice,
constitute an Event of Default. Such audited financial statements shall
include a balance sheet, profit and loss statement, and cash flow statement,
and, if prepared, such accountants' letter to management. If Borrower is a
parent company of one or more subsidiaries, or Affiliates, or is a subsidiary
or Affiliate of another company, then, in addition to the financial
statements referred to above, Borrower agrees to deliver financial statements
prepared on a consolidating basis so as to present Borrower and each such
related entity separately, and on a consolidated basis.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports,
and Form 8-K Current Reports, and any other filings made by Borrower with the
Securities and Exchange Commission, if any, as soon as the same are filed, or
any other information that is provided by Borrower to its shareholders, and
any other report reasonably requested by Foothill relating to the Collateral
and financial condition of Borrower.
Each month, together with the financial statements provided
pursuant to Section 6.4(a), Borrower shall deliver to Foothill a certificate
signed by its chief financial officer to the effect that: (i) all reports,
statements, or computer prepared information of any kind or nature delivered
or caused to be delivered to Foothill hereunder have been prepared in
accordance with GAAP (except for footnotes for monthly statements) and fairly
present the financial condition of Borrower; (ii) Borrower is in timely
compliance with all of its covenants and agreements hereunder; (iii) the
representations and warranties of Borrower contained in this Agreement and
the other Loan Documents are true and correct in all material respects on and
as of the date of such certificate, as though made on and as of such date
(except to the extent that such representations and warranties relate solely
to an earlier date); and (iv) on the date of delivery of such certificate to
Foothill there does not exist any condition or event that constitutes an
Event of Default (or, in each case, to the extent of any non-compliance,
describing such non-compliance as to which he or she may have knowledge and
what action Borrower has taken, is taking, or proposes to take with respect
thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them after the
occurrence and during the continuance of an Event of Default or with
Borrower's cooperation prior thereto, to communicate with Foothill and to
release to Foothill whatever financial information concerning Borrower that
Foothill may request. After the occurrence and during the continuance of an
Event of Default, Borrower hereby irrevocably authorizes and directs all
auditors, accountants, or other third parties to deliver to Foothill, at
Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and
to disclose to Foothill any information they may have regarding Borrower's
business affairs and financial conditions.
6.5 Tax Returns. Borrower agrees to deliver to Foothill copies of
each of Borrower's future federal income tax returns, and any amendments
thereto, within thirty (30) days of the filing thereof with the Internal
Revenue Service.
6.6 Designation of Inventory. Borrower shall now and from time to
time hereafter, but not less frequently than monthly, execute and deliver to
Foothill a designation of Inventory specifying the lower of Borrower's cost
or market value of Borrower's raw materials, work in process, and finished
goods, and further specifying such other information as Foothill may
reasonably request.
6.7 Returns. Returns and allowances, if any, as between Borrower
and its Account Debtors shall be on the same basis and in accordance with the
usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. If, at a time when no Event of
Default has occurred and is continuing, any Account Debtor returns any
Inventory of Buffalo, Borrower promptly shall determine the reason for such
return and, if Borrower accepts such return, issue a credit memorandum in the
appropriate amount to such Account Debtor. If, at a time when an Event of
Default has occurred and is continuing, any Account Debtor returns any
Inventory of Buffalo to Borrower, Borrower promptly shall determine the
reason for such return and, if Foothill consents (which consent shall not be
unreasonably withheld), issue a credit memorandum (with a copy to be sent to
Foothill) in the appropriate amount to such Account Debtor. On a daily
basis, Borrower shall notify Foothill of all returns and recoveries and of
all disputes and claims of which it is aware.
6.8 Title to Equipment. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title
to any items of Equipment.
6.9 Maintenance of Equipment. Borrower shall keep and maintain
the Equipment in good operating condition and repair (ordinary wear and tear
excepted) in accordance with past practices, and make all necessary
replacements thereto so that the value and operating efficiency thereof shall
at all times be maintained and preserved. Borrower shall not permit any item
of Equipment to become a fixture (other than a trade fixture) to real estate
or an accession to other property, and the Equipment is now and shall at all
times remain personal property.
6.10 Taxes. All assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property have been paid, and shall hereafter be paid
in full, before delinquency or before the expiration of any extension period.
Borrower shall make due and timely payment or deposit of all federal, state,
and local taxes, assessments, or contributions required of it by law, and
will execute and deliver to Foothill, on demand, appropriate certificates
attesting to the payment thereof or deposit with respect thereto. Borrower
will make timely payment or deposit of all tax payments and withholding taxes
required of it by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Foothill with proof satisfactory to Foothill
indicating that Borrower has made such payments or deposits.
6.11 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
(exclusive of the Real Property) insured against loss or damage by fire,
theft, explosion, sprinklers, and all other hazards and risks, and in such
amounts, as are ordinarily insured against by other owners in similar
businesses. Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance, as well as
insurance against larceny, embezzlement, and criminal misappropriation.
(b) Borrower will obtain and maintain (i) insurance of the
type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the full replacement cost thereof, against any
loss by fire, lightning, windstorm, hail, explosion, aircraft, smoke damage,
vehicle damage, earthquakes, elevator collision, and other risks from time to
time included under "extended coverage" policies, in such amounts as Foothill
may require, but in any event in amounts sufficient to prevent Borrower from
becoming a co-insurer under such polices, (ii) combined single limit bodily
injury and property damages insurance against any loss, liability, or damages
on, about, or relating to each parcel of Real Property, in an amount of not
less than Thirty Million Dollars ($30,000,000); and (iii) such other risk as
Foothill may require. Replacement costs, at Foothill's option, may be
redetermined by an insurance appraiser, satisfactory to Foothill, not more
frequently than once every twelve (12) months at Borrower's cost.
(c) All insurance required herein shall be written by
companies of recognized financial standing, satisfactory to Foothill, which
are authorized to do insurance business in the State of California. Such
insurance shall be in form satisfactory to Foothill, shall with respect to
hazard insurance and such other insurance as Foothill shall specify, name as
the loss payee thereunder Borrower and Foothill, as their interests may
appear, and shall contain a California Form 438BFU (NS) mortgagee
endorsement, or its local equivalent. Every policy of insurance referred to
in this Section shall contain an agreement by the insurer that it will not
cancel such policy except after thirty (30) days' prior written notice to
Foothill and that any loss payable thereunder shall be payable notwith-
standing any act or negligence of Borrower or Foothill which might, absent
such agreement, result in a forfeiture of all or a part of such insurance
payment and notwithstanding (i) occupancy or use of the Real Property for
purposes more hazardous than permitted by the terms of such policy, (ii) any
foreclosure or other action or proceeding taken by Foothill pursuant to the
Mortgages upon the happening of an Event of Default, or (iii) any change in
title or ownership of the Real Property.
(d) Original policies or certificates thereof satisfactory to
Foothill evidencing such insurance shall be delivered to Foothill at least
thirty (30) days prior to the expiration of the existing or preceding
policies. Borrower shall give Foothill prompt notice of any loss covered by
such insurance and Foothill shall have the right to adjust any loss.
Foothill shall have the exclusive right to adjust all losses in excess of One
Hundred Fifty Thousand Dollars ($150,000) payable under any such insurance
policies without any liability to Borrower whatsoever in respect of such
adjustments; provided, however that Foothill will consult with Borrower with
respect of such adjustments and will act in a commercially reasonable manner
in respect thereto. Any monies received as payment for any loss in excess of
One Hundred Fifty Thousand Dollars ($150,000) under any insurance policy
including, but not limited to, the insurance policies mentioned above, shall
be paid over to Foothill to be applied at the option of Foothill either to
the prepayment of the Obligations without premium, in such order or manner as
Foothill may elect, or shall be disbursed to Borrower under stage payment
terms satisfactory to Foothill for application to the cost of repairs,
replacements or restorations. All restorations shall be effected with
reasonable promptness and shall be of a value at least equal to the value of
the items or property to destroyed prior to such damage or destruction. Upon
the occurrence of an Event of Default, all prepaid premiums shall be the sole
and absolute property of Foothill to be applied by Foothill to the payment of
the Obligations in such order or form as Foothill shall determine.
(e) Borrower shall not take out separate insurance concurrent
in form or contributing in the event of loss with that required to be
maintained under this Section 6.11, unless Foothill is included thereon as
named insured with the loss payable to Foothill under a standard California
438BFU (NS) Mortgagee endorsement, or its local equivalent. Borrower shall
immediately notify Foothill whenever such separate insurance is taken out,
specifying the insurer thereunder and full particulars as to the policies
evidencing the same, and originals of such policies shall immediately
thereafter be provided to Foothill.
6.12 Tangible Net Worth. Tangible Net Worth shall not decrease by
more than Seventeen Million Dollars ($17,000,000) from March 31, 1994 without
giving effect to the sale of Borrower's Seneca/Clarkesville division,
measured on a fiscal quarter-end basis. In calculating the decrease in
Tangible Net Worth the following shall not be included: (a) conversions of
Indebtedness into equity, (b) forgiveness of Indebtedness, and (c) the
issuance of new equity securities by Borrower.
6.13 No Setoffs or Counterclaims. All payments hereunder and under
the other Loan Documents made by or on behalf of Borrower shall be made
without setoff or counterclaim and free and clear of, and without deduction
or withholding for or on account of, any federal, state, or local taxes.
6.14 Location of Inventory and Equipment. Borrower shall keep the
Inventory and Equipment only at the locations identified on Schedule 6.14;
provided, however, that Borrower may amend Schedule 6.14 so long as such
amendment occurs by written notice to Foothill not less than thirty (30) days
prior to the date on which the Inventory or Equipment is moved to such new
location, so long as such new location is within the continental United
States, and so long as, at the time of such written notification, Borrower
provides any financing statements or fixture filings necessary to perfect and
continue perfected Foothill's security interests in such assets and also
provides to Foothill a landlord's waiver in form and substance satisfactory
to Foothill.
6.15 Compliance with Laws. Borrower shall comply with the
requirements of all applicable laws, rules, regulations, and orders of any
governmental authority, including the Fair Labor Standards Act and the ADA.
6.16 Employee Benefits.
(a) Borrower shall deliver to Foothill a written statement by
the chief financial officer of Borrower specifying the nature of any of the
following events and the actions which Borrower proposes to take with respect
thereto promptly, and in any event within ten (10) days of becoming aware of
any of them, and when known, any action taken or threatened by the Internal
Revenue Service, PBGC, Department of Labor, or other party with respect
thereto: (i) an ERISA Event with respect to any Plan; (ii) the incurrence of
an obligation to pay additional premium to the PBGC under Section
4006(a)(3)(E) of ERISA with respect to any Plan; and (iii) any lien on the
assets of Borrower arising in connection with any Plan.
(b) Borrower shall also promptly furnish to Foothill copies
prepared or received by Borrower or an ERISA Affiliate of: (i) at the
request of Foothill, each annual report (Internal Revenue Service Form 5500
series) and all accompanying schedules, actuarial reports, financial
information concerning the financial status of each Plan, and schedules
showing the amounts contributed to each Plan by or on behalf of Borrower or
its ERISA Affiliates for the most recent three (3) plan years; (ii) all
notices of intent to terminate or to have a trustee appointed to administer
any Plan; (iii) all written demands by the PBGC under Subtitle D of Title IV
of ERISA; (iv) all notices required to be sent to employees or to the PBGC
under Section 302 of ERISA or Section 412 of the IRC; (v) all written notices
received with respect to a Multiemployer Plan concerning (x) the imposition
or amount of withdrawal liability pursuant to Section 4202 of ERISA, (y) a
termination described in Section 4041A of ERISA, or (z) a reorganization or
insolvency described in Subtitle E of Title IV of ERISA; (vi) the adoption of
any new Plan that is subject to Title IV of ERISA or Section 412 of the IRC
by Borrower or any ERISA Affiliate; (vii) the adoption of any amendment to
any Plan that is subject to Title IV of ERISA or Section 412 of the IRC, if
such amendment results in a material increase in benefits or Unfunded Benefit
Liability; or (viii) the commencement of contributions by Borrower or any
ERISA Affiliate to any Plan that is subject to Title IV of ERISA or Section
412 of the IRC.
6.17 Environmental Condition.
(a) Borrower shall not cause or permit the Real Property to
be used to generate, manufacture, refine, transport, treat, store, handle,
dispose, produce, or process Hazardous Materials except in compliance with
all applicable Acts.
(b) Borrower shall ensure compliance by all owners,
operators, and occupants of the Real Property with all applicable Acts and
will ensure that all such owners, operators and occupants obtain and comply
with any and all required approvals, registrations, or permits.
(c) In the event Foothill reasonably believes that Borrower
has not complied with its obligations in Section 6.17(a) or (b) and that such
suspected noncompliance is reasonably likely to adversely affect the
Collateral or result in a material liability to Borrower, Foothill may
request in writing an explanation of such noncompliance from Borrower.
Borrower shall provide a detailed written response to Foothill within ten
(10) business days of receiving the request. If such response is not
reasonably satisfactory to Foothill, Foothill may require Borrower to retain
an environmental consultant, who shall be approved in advance and in writing
by Foothill, which approval shall not be unreasonably withheld, to
investigate the suspected noncompliance. Borrower shall provide Foothill
with a copy of any report by such consultant, and, if the report confirms
Borrower's noncompliance, Borrower shall promptly correct such noncompliance.
Borrower shall promptly take all actions to Remediate the Real Property which
are required by federal, state, or local governmental agency or political
subdivision or which are reasonably necessary to mitigate a spill or a
violation of any Act, except that Borrower may, in good faith, contest any
requirements before any governmental body or court with jurisdiction. All
such work shall be performed by one or more contractors selected by Borrower
and approved in advance and in writing by Foothill, which approval shall not
be unreasonably withheld. Any such actions shall be performed in a good,
safe, and workmanlike manner and in such manner as to minimize any impact on
the business or occupation at the Real Property. Borrower shall pay all
costs in connection with such investigatory and remedial activities,
including but not limited to, all power and utility costs, any and all taxes
or fees that may be applicable to such activities. Borrower shall promptly
provide to Foothill copies of testing results and reports that are generated
in compliance with the above activities. At the conclusion of such actions,
Borrower shall remove all associated equipment, and restore the Real Property
to substantially the same the condition existing prior to the commencement of
Remediation, which shall include, without limitation, the repair of any
surface damage, including paving caused by such investigation or Remediation
hereunder.
(d) The obligations of Borrower and the rights of Foothill
with respect to Hazardous Materials are in addition to and not in
substitution of the obligations of Borrower and the rights of Foothill under
all applicable, federal, state, and local laws, regulations, and ordinances
relating to health and safety, and protection of the environment. The
obligations of Borrower and the rights of Foothill, notwithstanding anything
contained herein or in any other document or agreement which may be construed
to the contrary, (i) shall not be subject to any antideficiency laws or
protections, if any, (ii) shall survive (y) a non-judicial sale, judicial
sale or deed or other transaction in lieu of such sale hereunder, and (z) the
repayment of the Obligations. In the event Borrower does not timely perform
any of its obligations with respect to Hazardous Materials, Foothill may
perform such obligations, but is not obligated to, at the expense of Borrower
and such expense shall be added to the Obligations and shall not cure
Borrower's breach under this Agreement.
6.18 Compliance With The ADA.
(a) Borrower shall promptly provide Foothill with copies of
all notices or claims which may be received by Borrower and involving claims
made by any individual, entity or governmental agency as to any alleged
noncompliance of the Real Property with the requirements of the ADA.
(b) Borrower shall observe and comply in all material
respects with all obligations and requirements of the ADA as it applies to
the Real Property, which shall include, without limitation, installing or
constructing all improvements or alterations which may be necessary to cause
the Real Property to be accessible to all persons if the use of any of the
Real Property or any part thereof becomes a "public accommodation," as
defined in the ADA, or in the event additional building improvements are
added or incorporated into the existing improvements, and making any
reasonable accommodations which may be necessary to accommodate the needs or
requirements of any existing or future employee of Borrower.
6.19 Store Openings and Closings. Borrower shall give Foothill
reasonable prior notice of new store openings and closing of its stores.
6.20 Inventory Audits. Borrower shall continue to take physical
counts of its Inventory at least once in each fiscal year. Such physical
inventory taking will be observed by Borrower's independent certified public
accountants to the extent deemed necessary by such accountants.
6.21 Real Property Leases; Consignments. Borrower shall make
timely payment of all rents and other monies payable on real property leases
where Borrower is lessee except for Jonathan Logan stores, or unless such
payments are contested in good faith by Borrower and the failure to pay such
monies could not reasonably be expected to materially and adversely affect
Borrower or the Collateral. Borrower shall also make timely payments to
consignors of Inventory, if any. In the event that Borrower does not make
any such payments to lessors or consignors, Foothill may, in its discretion,
establish reasonable reserves for delinquent payments.
6.22 Landlord Waivers. Borrower shall use its best efforts to
obtain landlord waivers from the lessors of its Jonathan Logan stores and
other leased locations on or before August 31, 1994.
6.23 Consigned Inventory. Borrower agrees that each Inventory
designation provided under Section 6.6 shall also separately identify and
value all Inventory consigned to Borrower by third Persons. Borrower further
agrees not to include any such consigned Inventory as Eligible Inventory in
any certificate or report provided to Foothill.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until full and final payment of the Obligations,
Borrower will not do any of the following without Foothill's prior written
consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to
any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, the Term Note
or the Combined Term Note;
(b) Indebtedness set forth in the latest financial statements
of Borrower submitted to Foothill on or prior to the Closing Date;
(c) Indebtedness secured by Permitted Liens;
(d) Indebtedness evidenced by the Subordinated Notes and the
Debentures;
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b), (c) and (d) of this Section 7.1 (and continuance
or renewal of any Permitted Liens associated therewith) so long as: (i) the
terms and conditions of such refinancings, renewals, or extensions do not
materially impair the prospects of repayment of the Obligations by Borrower,
(ii) the net cash proceeds of such refinancings, renewals, or extensions do
not result in an increase in the aggregate principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the
average weighted maturity of the Indebtedness so refinanced, renewed, or
extended, and (iv) to the extent that Indebtedness that is refinanced was
subordinated in right of payment to the Obligations, then the subordination
terms and conditions of the refinancing Indebtedness must be at least as
favorable to Foothill as those applicable to the refinanced Indebtedness; and
(f) as previously disclosed to Foothill.
7.2 Liens. Create, incur, assume, or permit to exist, directly or
indirectly, any lien on or with respect to any of its property or assets, of
any kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including liens that are replacements
of Permitted Liens to the extent that the original Indebtedness is refinanced
under Section 7.1(d) and so long as the replacement liens secure only those
assets or property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Except as provided in
Schedule 7.4 or as previously disclosed to Foothill, enter into any
acquisition, merger, consolidation, reorganization, or recapitalization, or
reclassify its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign, lease,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business, property, or
assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all of the properties, assets, stock, or other
evidence of beneficial ownership of any Person.
7.4 Extraordinary Transactions and Disposal of Assets. Except as
provided in Schedule 7.4 or as previously disclosed to Foothill, enter into
any transaction not in the ordinary and usual course of Borrower's business,
including the sale, lease, or other disposition of, moving, relocation, or
transfer, whether by sale or otherwise, of any of Borrower's properties or
assets (other than sales of Inventory to buyers in the ordinary course of
Borrower's business as currently conducted and sales of obsolete Equipment in
the ordinary course of Borrower's business for prices at or above Borrower's
book value for such Equipment).
7.5 Change Name. Change Borrower's name, FEIN, business
structure, or identity, or add any new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way liable
with respect to the obligations of any third Person except by endorsement or
instruments or items of payment for deposit to the account of Borrower or
which are transmitted or turned over to Foothill and except for the
Continuing Guaranty in favor of Foothill, respecting Victoria's obligations.
7.7 Restructure. Except as provided in Schedule 7.4 or as
previously disclosed to Foothill, make any change in Borrower's financial
structure, the principal nature of Borrower's business operations, or the
date of its fiscal year.
7.8 Prepayments. Except in connection with a refinancing
permitted by Section 7.1(e), prepay any Indebtedness owing to any third
Person.
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Capital Expenditures. Make any capital expenditure, in any
fiscal year in excess of Borrower's depreciation for such fiscal year.
7.11 Consignments. Consign any Inventory or sell any Inventory on
sale or return, sale on approval, or other conditional terms of sale.
7.12 Distributions. Make any distribution or declare or pay any
dividends (in cash or in stock) on, or purchase, acquire, redeem, or retire
any of Borrower's capital stock, of any class, whether now or hereafter
outstanding.
7.13 Accounting Methods. Modify or change its method of accounting
or enter into, modify, or terminate any agreement currently existing, or at
any time hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of Borrower's accounting
records without said accounting firm or service bureau agreeing to provide
Foothill information regarding the Collateral or Borrower's financial
condition.
7.14 Investments. Except for employee loans not to exceed One
Hundred Thousand Dollars ($100,000) in the aggregate outstanding at any time
combined with Victoria, advances to Victoria or as previously disclosed to
Foothill, directly or indirectly make or acquire any beneficial interest in
(including stock, partnership interest, or other securities of), or make any
loan, advance, or capital contribution to, any Person.
7.15 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of
Borrower's business, upon fair and reasonable terms, that are fully disclosed
to Foothill, and that are no less favorable to Borrower than would be
obtained in arm's length transaction with a non-Affiliate.
7.16 Suspension. Except as provided in Schedule 7.4, suspend or go
out of a substantial portion of its business.
7.17 Compensation. Increase the annual fee or per-meeting fees paid
to directors during any year by more than fifteen percent (15%) over the
prior year; pay or accrue total cash compensation, during any year, to
officers and senior management employees in an aggregate amount in excess of
one hundred fifteen percent (115%) of that paid or accrued in the prior year.
7.18 Use of Proceeds. Use the proceeds of the advances made
hereunder for any purpose other than: (a) on the Closing Date, to repay
outstanding principal, accrued interest, and accrued fees and expenses owing
to the Old Lender; (b) to pay transactional fees, costs and expenses incurred
in connection with this Agreement; and (c) thereafter, consistent with the
terms and conditions hereof, for its lawful and permitted corporate purposes.
7.19 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees. Borrower covenants and agrees that it will not,
without thirty (30) days prior written notification to Foothill, relocate its
chief executive office to a new location and so long as, at the time of such
written notification, Borrower provides any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's security
interests and also provides to Foothill a landlord's waiver in form and
substance satisfactory to Foothill. The Inventory and Equipment shall not at
any time now or hereafter be stored with a bailee, warehouseman, or similar
party without Foothill's prior written consent.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an event
of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when declared
due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the
Bankruptcy Code, would have accrued on such amounts), fees and charges due
Foothill, reimbursement of Foothill Expenses, or other amounts constituting
Obligations), and if such failure results or would result in an Overadvance
by virtue of payment of interest and such amount is not fully paid within
five (5) days;
8.2 If Borrower fails or neglects to perform, keep, or observe any
material term, provision, condition, covenant, or agreement contained in this
Agreement, in any of the Loan Documents (including the Mortgages), or in any
other present or future agreement between Borrower and Foothill;
8.3 If there is a material impairment of the value or priority of
Foothill's security interests in the Collateral;
8.4 If any material portion of Borrower's properties or assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against Borrower and
any of the following events occur: (a) Borrower consents to the institution
of the Insolvency Proceeding against it; (b) the petition commencing the
Insolvency Proceeding is not timely controverted; (c) the petition commencing
the Insolvency Proceeding is not dismissed within forty-five (45) calendar
days of the date of the filing thereof; provided, however, that, during the
pendency of such period, Foothill shall be relieved of its obligation to make
additional advances or issue additional L/Cs or L/C Guarantees hereunder;
(d) an interim trustee is appointed to take possession of all or a
substantial portion of the properties or assets of, or to operate all or any
substantial portion of the business of, Borrower; or (e) an order for relief
shall have been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs for three (3) Business Days or more;
8.8 If a notice of lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets (and the same cannot
be adequately reserved against by Foothill and is not discharged within ten
(10) days of its filing) by the United States Government, or any department,
agency, or instrumentality thereof, or by any state, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter to
any one or more of such entities becomes a lien, whether choate or otherwise,
upon any of Borrower's properties or assets and the same is not paid on the
payment date thereof;
8.9 If a judgment or other claim becomes a lien or encumbrance
upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons where such third Persons
have accelerated the maturity of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of Indebtedness that
has been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of
the subordination provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation exists now
or hereafter in any warranty, representation, statement, or report made to
Foothill by Borrower or any officer, employee, agent, or director of
Borrower, or if any such warranty or representation is withdrawn;
8.13 If the obligation of any guarantor or other third Person under
any Loan Document is limited or terminated by operation of law or terminated
or purported to be terminated by the guarantor or other third Person
thereunder, or any such guarantor or other third Person becomes the subject
of an Insolvency Proceeding; or
8.14 If (a) with respect to any Plan, there shall occur any of the
following which could reasonably be expected to have a material adverse
effect on the financial condition of Borrower: (i) the violation of any of
the provisions of ERISA; (ii) the loss by a Plan intended to be a Qualified
Plan of its qualification under Section 401(a) of the IRC; (iii) the
incurrence of liability under Title IV of ERISA; (iv) a failure to make full
payment when due of all amounts which, under the provisions of any Plan or
applicable law, Borrower or any ERISA Affiliate is required to make; (v) the
filing of a notice of intent to terminate a Plan under Sections 4041 or 4041A
of ERISA; (vi) a complete or partial withdrawal of Borrower or an ERISA
Affiliate from any Plan; or (vii) the receipt of a notice by the plan
administrator of a Plan that the PBGC has instituted proceedings to terminate
such Plan or appoint a trustee to administer such Plan; (viii) a commencement
or increase of contributions to, or the adoption of or the amendment of, a
Plan; and (ix) the assessment against Borrower or any ERISA Affiliate of a
tax under Section 4980B of the IRC.
8.15 If: (a) there shall occur during any consecutive twelve month
period, one or more uninsured losses, thefts, damage or destruction of the
Real Property, or any part thereof, having an aggregate value in excess of
One Hundred Thousand Dollars ($100,000); or (b) an event of default shall
occur under any prior Permitted Lien, if any;
8.16 If there shall occur an "Event of Default" as defined in the
Victoria Loan Agreement; or
8.17 If Borrower shall fail to promptly pay to Foothill any
proceeds (net of direct costs of sale) received by Borrower upon the exercise
by the purchaser of any option to purchase Real Property.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence of an Event of
Default Foothill may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due
and payable;
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but without
affecting Foothill's rights and security interests in the Collateral and
without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers
advisable, and in such cases, Foothill will credit Borrower's loan account
with only the net amounts received by Foothill in payment of such disputed
Accounts after deducting all Foothill Expenses incurred or expended in
connection therewith;
(e) Cause Borrower to hold all returned Inventory in trust
for Foothill, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its security interests in the Collateral.
Borrower agrees to assemble the Collateral if Foothill so requires, and to
make the Collateral available to Foothill as Foothill may designate.
Borrower authorizes Foothill to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest, or compromise any encumbrance, charge, or
lien that in Foothill's determination appears to conflict with its security
interests and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned premises, Borrower hereby grants Foothill
a license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise
any of Foothill's rights or remedies provided herein, at law, in equity, or
otherwise;
(g) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Foothill (including any amounts received in the
Lock Boxes), or (ii) indebtedness at any time owing to or for the credit or
the account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the Lock
Boxes, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein or in the Mortgages) the Collateral. Foothill is hereby granted a
license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production
of, advertising for sale, and selling any Collateral and Borrower's rights
under all licenses and all franchise agreements shall inure to Foothill's
benefit;
(j) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Foothill determines is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder of a
security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Collateral, then the time on or after which
the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in Section 12, at least five (5)
days before the date fixed for the sale, or at least five (5) days before the
date on or after which the private sale or other disposition is to be made;
no notice needs to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in value or
that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in the Collateral shall be sent to
such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at
least five (5) days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public sale;
and
(m) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies under
this Agreement, the Loan Documents, and all other agreements shall be
cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an election, and
no waiver by Foothill of any Event of Default shall be deemed a continuing
waiver. No delay by Foothill shall constitute a waiver, election, or
acquiescence by it.
9.3 Foreclosure Not A Discharge. Foreclosure shall not operate as
a discharge to Borrower's Obligations to Foothill as to Hazardous Materials
and the indemnity provisions in Section 11; and in the event Borrower tenders
a deed in lieu of foreclosure for all or part of the Real Property, Borrower
shall deliver such property to Foothill (or its designee) free of any and all
Hazardous Materials. The indemnity provisions in Section 11 shall not be
discharged or affected in any way by foreclosure or by Foothill's acceptance
of a deed in lieu thereof, and the same shall continue for a period equal to
the longest living child born in Los Angeles County on January 1, 1994, plus
twenty-one (21) years.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Borrower fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all
as required under the terms of this Agreement or the Mortgages, then, to the
extent that Foothill reasonably determines that such failure by Borrower
could have a material adverse effect on Foothill's interests in the
Collateral, in its discretion and upon five (5) days prior notice to
Borrower, Foothill may do any or all of the following: (a) make payment of
the same or any part thereof; (b) set up such reserves in Borrower's loan
account as Foothill deems necessary to protect Foothill from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type described in Section 6.12, and take any action with respect to such
policies as Foothill deems prudent. Any such amounts paid by Foothill shall
constitute Foothill Expenses. Any such payments made by Foothill shall not
constitute an agreement by Foothill to make similar payments in the future or
a waiver by Foothill of any Event of Default under this Agreement. Foothill
need not inquire as to, or contest the validity of, any such expense, tax,
security interest, encumbrance, or lien and the receipt of the usual official
notice for the payment thereof shall be conclusive evidence that the same was
validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest, notice
of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise,
settlement, extension, or renewal of accounts, documents, instruments,
chattel paper, and guarantees at any time held by Foothill on which Borrower
may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code,
Foothill shall not in any way or manner be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in the
value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other Person. All risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to defend, indemnify, save,
and hold all Indemnified Persons harmless against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other Person
arising out of or relating to the transactions contemplated by this Agreement
or any other Loan Document including, but not limited to, those claimed by
any broker or finder unless such obligations, demands, claims or liabilities
resulted from the gross negligence or willful misconduct of such Indemnified
Person; (b) all Losses, in any way suffered, incurred, or paid as a result of
or in any way, arising out of, following, or consequential to the
transactions contemplated by this Agreement or any other Loan Document unless
such Losses resulted from the gross negligence or willful misconduct of such
Indemnified Person; and (c) all Losses suffered or incurred, regardless of
negligence, whether as a holder of security interests in Real Property, as
mortgagee in possession, or as successor in interest to Borrower as owner of
the Real Property by virtue of foreclosure or acceptance of a deed or other
transaction in lieu of foreclosure, or after partial or total reconveyance of
the mortgage, arising from, in respect of, as a consequence of (whether
foreseeable or unforeseeable) or in connection with the use, storage,
disposal, generation, transportation, spill, or treatment of any Hazardous
Materials at or related to the Real Property whether or not originating or
emanating from the Real Property. This provision shall survive the
termination of this Agreement.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other Loan Document shall be
in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail, postage
prepaid, return receipt requested, or by prepaid telex, TWX, telefacsimile,
or telegram (with messenger delivery specified) to Borrower or to Foothill,
as the case may be, at its address set forth below:
If to Borrower: UNITED MERCHANTS AND MANUFACTURERS, INC.
1650 Palisade Avenue
Teaneck, New Jersey 07666
Attn.: Treasurer
Telefacsimile No. (201) 837-8689
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division Manager
Telefacsimile No. (310) 479-2690
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given
to the other. All notices or demands sent in accordance with this Section
12, other than notices by Foothill in connection with Sections 9504 or 9505
of the Code, shall be deemed received on the earlier of the date of actual
receipt or three (3) days after the deposit thereof in the mail. Borrower
acknowledges and agrees that notices sent by Foothill in connection with
Sections 9504 or 9505 of the Code shall be deemed sent when deposited in the
mail or transmitted by telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL
MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE
PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE
OPTION OF FOOTHILL, IN ANY OTHER COURT WHERE IT IS NECESSARY TO ENFORCE OR
PROTECT FOOTHILL'S SECURITY INTERESTS IN THE COLLATERAL IN WHICH FOOTHILL
SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER AND FOOTHILL
WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE
TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
BORROWER AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. BORROWER AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill
four (4) months after they are delivered to or received by Foothill, unless
Borrower requests, in writing, the return of said documents, schedules, or
other papers and makes arrangements, at Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and deemed
effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and assigns of each of the
parties; provided, however, that Borrower may not assign this Agreement or
any rights or duties hereunder without Foothill's prior written consent and
any prohibited assignment shall be absolutely void. No consent to an
assignment by Foothill shall release Borrower from its Obligations. Foothill
may assign this Agreement and its rights and duties hereunder and no consent
or approval by Borrower is required in connection with any such assignment.
Foothill reserves the right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in Foothill's rights
and benefits hereunder. In connection with any such assignment or
participation, Foothill may disclose all documents and information which
Foothill now or hereafter may have relating to Borrower or Borrower's
business. To the extent that Foothill assigns its rights and obligations
hereunder to a third Person, Foothill shall thereafter be released from such
assigned obligations to Borrower and such assignment shall effect a novation
between Borrower and such third Person.
15.3 Section Headings. Headings and numbers have been set forth
herein for convenience only. Unless the contrary is compelled by the
context, everything contained in each section applies equally to this entire
Agreement.
15.4 Interpretation. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Foothill or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by all parties and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
fairly accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the
purpose of determining the legal enforceability of any specific provision.
15.6 Amendments in Writing. This Agreement can only be amended by
a writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which, when executed and delivered, shall be deemed to
be an original, and all of which, when taken together, shall constitute but
one and the same Agreement. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of a
manually executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver a
manually executed counterpart of this Agreement but the failure to deliver a
manually executed counterpart shall not affect the validity, enforceability,
and binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the incurrence
or payment of the Obligations by Borrower or any guarantor of the Obligations
or the transfer by either or both of such parties to Foothill of any property
of either or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law relating to
creditors' rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or recoverable
payments of money or transfers of property (collectively, a "Voidable
Transfer"), and if Foothill is required to repay or restore, in whole or in
part, any such Voidable Transfer, or elects to do so upon the reasonable
advice of its counsel, then, as to any such Voidable Transfer, or the amount
thereof that Foothill is required or elects to repay or restore, and as to
all reasonable costs, expenses, and attorneys fees of Foothill related
thereto, the liability of Borrower or such guarantor automatically shall be
revived, reinstated, and restored and shall exist as though such Voidable
Transfer had never been made.
15.9 Lending Relationship. Nothing contained in the this Agreement
or any of the other Loan Documents shall be deemed or construed by the
parties hereto or by any third party to create the relationship of principal
and agent, partnership, joint venture, or any association between Borrower
and Foothill, it being expressly understood and agreed that nothing contained
in this Agreement or the other Loan Documents shall be deemed to create any
relationship between Borrower and Foothill other that the relationship of
borrower and lender.
15.10 Integration. This Agreement, together with the other
Loan Documents, reflect the entire understanding of the parties with respect
to the transactions contemplated hereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date hereof.
15.11 Confidentiality. Foothill agrees (on behalf of itself
and each of its Affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential in
accordance with its customary business practices, any non-public information
supplied to it by the Borrower, provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute,
rule, regulation or judicial process, (ii) to counsel to Foothill, (iii) to
regulators, auditors or accountants, (iv) in connection with any litigation
to which Foothill is a party or (v) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant
(or prospective assignee or participant) first agrees to this confidentiality
provision in writing. In connection with any potential disclosure under (i)
or (iii) above, Foothill agrees that it will promptly advise the Borrower of
any request for disclosure and use reasonable efforts to provide the Borrower
with as much time as possible prior to complying with such request in order
to allow the Borrower to obtain an injunction or stay to the release of such
information or an order providing for the handling of such information in a
confidential matter.
15.12 Limitation of Liability. Except for a Person's willful
misconduct, none of Borrower's officers, directors, agents, employees, nor
any heir, successor or assign of the foregoing shall be personally liable
(whether by operation or law or otherwise) for payments due hereunder or
under any other Loan Document or for the performance of any Obligations. The
sole recourse of Foothill for satisfaction of the Obligations shall be
against the Borrower and guarantor of Borrower's Obligations and the assets
of Borrower and any guarantor and not against any other Person.
15.13 Expenses. Borrower and Victoria have previously paid
Foothill the combined sum of Fifty Thousand Dollars ($50,000) in partial
payment of Foothill Expenses, and Foothill hereby acknowledges receipt of
such payment. Borrower shall not be obligated to pay any other Foothill
Expenses except for: (a) service charges, commissions, fees and costs
incurred by Foothill relating to L/Cs guaranteed by Foothill, and (b) other
Foothill Expenses arising after the occurrence and during the continuance of
an Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
/s/ Scott Diehl
By Scott Diehl
Title: Senior Vice President
UNITED MERCHANTS AND MANUFACTURERS, INC.,
a Delaware corporation
/s/ Judith A. Nadzick
By Judith A. Nadzick
Title: Executive Vice President
<PAGE>
SCHEDULE 7.4
REPAYMENT OF OBLIGATIONS FROM SALE PROCEEDS
(a) Borrower may sell all or substantially all of the assets of Buffalo so
long as the proceeds of such sale are used to repay in full outstanding
Obligations based upon the Buffalo Borrowing Base and to further reduce
Obligations in the order provided below by not less than Eight Million
Five Hundred Thousand Dollars ($8,500,000). After payment in full of
the Obligations based upon the Buffalo Borrowing Base, all of the
remaining proceeds shall first be used to repay the Term Note in full,
next to repay the Combined Term Note to the extent of the remaining
proceeds, and after repayment of the Combined Term Note, any additional
proceeds shall be used to repay and permanently reduce the outstanding
balance of the Obligations under the Jonathan Logan Borrowing Base or
Victoria Borrowing Base (as such term is defined in the Victoria
Agreement) in such manner as Foothill may elect.
(b) Borrower may sell all or substantially all of the assets of Jonathan
Logan so long as the proceeds of such sale are used to repay in full
outstanding Obligations based upon the Jonathan Logan Borrowing Base and
to further reduce Obligations in the order provided below by not less
than Five Hundred Thousand Dollars ($500,000). After payment in full of
the Obligations based upon the Jonathan Logan Borrowing Base, all of the
remaining proceeds shall first be used to repay the Term Note in full,
next to repay the Combined Term Note to the extent of the remaining
proceeds, and after repayment of the Combined Term Note, any additional
proceeds shall be used to repay and permanently reduce the outstanding
balance of the Obligations under the Buffalo Borrowing Base or Victoria
Borrowing Base in such manner as Foothill may elect.
(c) Borrower may sell the property in Philadelphia, Pennsylvania commonly
known as all the "Villager Property" so long as the proceeds of such
sale are used to reduce Obligations in the order provided below by not
less than Two Million Dollars ($2,000,000). The proceeds shall first be
used to repay the Term Note in full, next to repay the Combined Term
Note to the extent of the remaining proceeds, and after repayment of the
Combined Term Note, any additional proceeds shall be used to repay and
permanently reduce the outstanding balance of the Obligations under any
of the Jonathan Logan Borrowing Base, Buffalo Borrowing Base or Victoria
Borrowing Base in such manner as Foothill may elect.
(d) Sales of other assets by Borrower may only be made so long as such sales
are at fair market value to Persons who are not Affiliates of Borrower
and Borrower has consulted in advance of such sales with Foothill.
(e) All of the foregoing repayments may be made without premium or penalty.
Exhibit 4.4
SECURED PROMISSORY NOTE
(Combined Term Note)
$2,000,000 Los Angeles, California
June 28, 1994
FOR VALUE RECEIVED, the undersigned (individually, a "Maker"
and collectively, "Makers") hereby jointly and severally promise to pay to
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), or
order, at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California
90025-3333, or at such other address as the holder hereof ("Holder") may
specify in writing, the principal sum of Two Million Dollars ($2,000,000) plus
interest in the manner and upon the terms and conditions set forth below.
1. Rate of Interest
The unpaid principal balance of this Secured Promissory
Note ("Note") shall bear interest at a rate equal to two (2) percent per
month. Interest charged on this Note shall be computed on the basis of
a three hundred sixty (360) day year for the actual number of days
elapsed.
2. Schedule of Payments
Principal and interest under this Note shall be due and
payable in arrears according to the following schedule: (a) interest shall
be due and payable on the first day of each month commencing August 1,
1994 and continuing thereafter until this Note has been paid in full; (b)
the outstanding principal balance, together with all accrued and unpaid
interest thereon, shall be due and payable in full on June 30, 1996.
3. Prepayment
This Note may be prepaid at any time, in whole or in
part, without any premium or penalty whatsoever.
4. Holder's Right of Acceleration
Upon the occurrence of an Event of Default under (i)
that certain Loan and Security Agreement between United Merchants and
Manufacturers, Inc. and Foothill of even date herewith, as amended,
supplemented or otherwise modified from time to time (the "United
Agreement") or (ii) that certain Loan and Security Agreement between
Victoria Creations, Inc. and Foothill of even date herewith, as amended,
supplemented or otherwise modified from time to time (the "Victoria
Agreement") (the United Agreement and the Victoria Agreement are
collectively referred to in this Note as, the "Agreements"), including, but
not limited to, the failure to pay any installment of principal or interest
hereunder when due, the Holder may, at its election and upon notice to the
Makers, declare the entire balance hereof immediately due and payable.
5. Additional Rights of Holder
If any installment of principal or interest hereunder is
not paid when due, the Holder shall have, in addition to the rights set
forth herein, in the Agreements, and under law, the right to compound
interest by adding the unpaid interest to principal, with such amount
thereafter bearing interest at the rate provided in this Note.
6. General Provisions
(a) If this Note is not paid when due, the Makers
further promise to pay all costs of collection, foreclosure fees, and
reasonable attorneys' fees incurred by the Holder, whether or not suit is
filed hereon.
(b) The Makers hereby consent to any and all
renewals, replacements, and/or extensions of time for payment of this Note
before, at, or after maturity.
(c) The Makers hereby consent to the acceptance,
release, or substitution of security for this Note.
(d) Presentment for payment, notice of dishonor,
protest, and notice of protest are hereby expressly waived.
(e) Any waiver of any rights under this Note, the
Agreements, or under any other agreement, instrument, or paper signed by
the Makers is neither valid nor effective unless made in writing and signed
by the Holder.
(f) No delay or omission on the part of the Holder in
exercising any right shall operate as a waiver thereof or of any other
right.
(g) A waiver by the Holder upon any one occasion
shall not be construed as a bar or waiver of any right or remedy on any
future occasion.
(h) Should any one or more of the provisions of this
Note be determined illegal or unenforceable, all other provisions shall
nevertheless remain effective.
(i) This Note cannot be changed, modified, amended,
or terminated orally.
7. Security for the Note
This Note is secured by the Agreements and by the Loan
Documents (as that term is defined in each of the Agreements), and is
subject to all of the terms and conditions thereof including, but not limited
to, the remedies specified therein.
8. Choice of Law and Venue. THE VALIDITY OF THIS NOTE,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS
OF THE MAKERS AND THE HOLDER, SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE
MAKERS HEREBY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS NOTE SHALL BE TRIED AND DETERMINED ONLY IN
THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, OR, AT THE SOLE OPTION OF THE HOLDER,
IN ANY OTHER COURT WHERE IT IS NECESSARY TO ENFORCE OR PROTECT
FOOTHILL'S SECURITY INTERESTS IN THE COLLATERAL IN WHICH THE
HOLDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.
TO THE MAXIMUM EXTENT PERMITTED BY LAW, THE MAKERS HEREBY
EXPRESSLY WAIVE ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
9. Waiver of Jury Trial. THE MAKERS, TO THE EXTENT
EACH MAY LEGALLY DO SO, HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR
PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS NOTE, OR IN ANY
WAY CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE DEALINGS OF
THE HOLDER AND THE MAKERS WITH RESPECT TO THIS NOTE, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND IRRESPECTIVE OF WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE. THE MAKERS, TO THE EXTENT EACH MAY
LEGALLY DO SO, HEREBY AGREE THAT ANY SUCH CLAIM, DEMAND, ACTION,
CAUSE OF ACTION, OR PROCEEDING SHALL BE DECIDED BY A COURT TRIAL
WITHOUT A JURY AND THAT THE HOLDER MAY FILE AN ORIGINAL
COUNTERPART OF THIS SECTION 9 WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF MAKER TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
10. Joint and Several Liability.
(a) Each Maker agrees that it is jointly and severally,
directly and primarily liable to the Holder for payment in full of this Note
and that such liability is independent of the duties, obligations, and
liabilities of the other Maker. The Holder may bring a separate action or
actions on each, any, or all of the Obligations against either Maker,
whether action is brought against the other Maker.
(b) Each Maker agrees that any release which may be
given by the Holder to the other Maker or any guarantor or endorser of
this Note shall not release the other Maker from its obligations hereunder.
(c) Each Maker hereby waives any right to assert
against the Holder any defense (legal or equitable), set off, counterclaim,
or claims which such Maker individually may now or any time hereafter
have against the other Maker or any other party liable to the Holder in
any manner or way whatsoever.
(d) Each Maker is presently informed as to the
financial condition of the other Maker and of all other circumstances which
a diligent inquiry would reveal and which bear upon the risk of
nonpayment of this Note. Each Maker hereby covenants that it will
continue to keep itself informed as to the financial condition of the other
Maker, the status of the other Maker and of all circumstances which bear
upon the risk of nonpayment. Absent a written request from either Maker
to the Holder for information, each Maker hereby waives any and all rights
it may have to require the Holder to disclose to such Maker any
information which the Holder may now or hereafter acquire concerning the
condition or circumstances of the other Maker.
(e) Each Maker waives all rights to notices of default,
existence, creation, or incurring of new or additional indebtedness, and all
other notices or formalities to which such Maker may, as a joint and
several Maker hereunder, be entitled.
(f) At the request of Makers to facilitate and expedite
the administration and accounting processes hereunder, Foothill has agreed,
in lieu of maintaining separate loan accounts, Foothill may maintain a single
loan account under the name of the Makers (the "Loan Account"). The loan
evidenced by this Note shall be made jointly and severally to the Makers
and shall be charged to the Loan Account, together with all interest and
other charges as permitted under and pursuant to this Agreement. The
Loan Account shall be credited with all repayments of this Note received
by the Holder from either Maker.
(g) The Holder shall render to United Merchants and
Manufacturers, Inc., on behalf of Makers, one statement of the Loan
Account, which shall be deemed to be an account stated as to each Maker
and which will be deemed correct and accepted by each Maker unless the
Holder receives a written statement of exceptions from either Maker within
thirty (30) days after such statement has been rendered by the Holder.
Each Maker hereby expressly agrees and acknowledges that the Holder
shall have no obligation to account separately to such Maker.
(h) Each Maker expressly agrees and acknowledges
that the Holder shall have no responsibility to inquire into the correctness
of the apportionment or allocation of or any disposition by either of the
Makers of (i) the loan evidenced by this Note, or (b) any of the interest,
expenses and other items charged to the Loan Account pursuant to this
Agreement. Such loan, all interest and expenses and other items shall be
made for the collective, joint, and several account of the Makers and shall
be charged to the Loan Account.
(i) Each Maker agrees and acknowledges that the
administration of this Note on a combined basis, as set forth herein, is
being done as an accommodation to Makers and at their request, and that
the Holder shall incur no liability to either of the Makers as a result
thereof. To induce Foothill to do so, and in consideration thereof, each of
the Makers hereby agrees to indemnify and hold the Holder harmless from
and against any and all liability, expense, loss, damage, claim of damage,
or injury, made against the Holder by either of the Makers or by any
other person or entity, arising from or incurred by reason of such
administration of this Note.
IN WITNESS WHEREOF, this Note has been executed and
delivered on the date first set forth above.
UNITED MERCHANTS AND MANUFACTURERS, INC., a
Delaware corporation
/s/ Judith A. Nadzick
By Judith A. Nadzick
Title: Executive Vice President
VICTORIA CREATIONS, INC., a Rhode Island
corporation
/s/ Judith A. Nadzick
By Judith A. Nadzick
Title: Assistant Secretary
Exhibit 4.5
LOAN AND SECURITY AGREEMENT
by and between
VICTORIA CREATIONS, INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of June 28, 1994
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . 10
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4 Construction . . . . . . . . . . . . . . . . . . . . 10
1.5 Schedules and Exhibits.. . . . . . . . . . . . . . . 10
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . 11
2.2 [INTENTIONALLY DELETED]. . . . . . . . . . . . . . . 12
2.3 Combined Term Loan.. . . . . . . . . . . . . . . . . 12
2.4 Overadvances . . . . . . . . . . . . . . . . . . . . 12
2.5 Interest: Rates, Payments, and Calculations . . . . 12
2.6 Crediting Payments; Application of Collections . . . 13
2.7 Statements of Obligations. . . . . . . . . . . . . . 13
2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . 13
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . 14
3.1 Conditions Precedent to Initial Advance. . . . . . . 14
3.2 Conditions Precedent to All Advances.. . . . . . . . 15
3.3 Term . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Effect of Termination. . . . . . . . . . . . . . . . 16
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . 16
4.1 Grant of Security Interest . . . . . . . . . . . . . 16
4.2 Negotiable Collateral. . . . . . . . . . . . . . . . 16
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral . . . . . . . . . . . . . . . . . . . . . 16
4.4 Delivery of Additional Documentation Required. . . . 17
4.5 Power of Attorney. . . . . . . . . . . . . . . . . . 17
4.6 Right to Inspect . . . . . . . . . . . . . . . . . . 17
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 17
5.1 No Prior Encumbrances. . . . . . . . . . . . . . . . 17
5.2 Eligible Accounts. . . . . . . . . . . . . . . . . . 17
5.3 Eligible Inventory . . . . . . . . . . . . . . . . . 18
5.4 Location of Inventory and Equipment. . . . . . . . . 18
5.5 Inventory Records. . . . . . . . . . . . . . . . . . 18
5.6 Location of Chief Executive Office; FEIN . . . . . . 18
5.7 Due Organization and Qualification . . . . . . . . . 18
5.8 Due Authorization; No Conflict . . . . . . . . . . . 18
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . 18
5.10 No Material Adverse Change in Financial Condition. . 19
5.11 No Transfer. . . . . . . . . . . . . . . . . . . . . 19
5.12 Employee Benefits. . . . . . . . . . . . . . . . . . 19
5.13 Reliance by Foothill; Cumulative . . . . . . . . . . 20
6. AFFIRMATIVE COVENANTS.. . . . . . . . . . . . . . . . . . 20
6.1 Accounting System. . . . . . . . . . . . . . . . . . 20
6.2 Collateral Reports . . . . . . . . . . . . . . . . . 20
6.3 Schedules of Accounts. . . . . . . . . . . . . . . . 20
6.4 Financial Statements, Reports, Certificates. . . . . 20
6.5 Tax Returns. . . . . . . . . . . . . . . . . . . . . 22
6.6 Guarantor Reports. . . . . . . . . . . . . . . . . . 22
6.7 Designation of Inventory . . . . . . . . . . . . . . 22
6.8 Returns. . . . . . . . . . . . . . . . . . . . . . . 22
6.9 Title to Equipment . . . . . . . . . . . . . . . . . 22
6.10 Maintenance of Equipment . . . . . . . . . . . . . . 22
6.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 23
6.12 Insurance. . . . . . . . . . . . . . . . . . . . . . 23
6.13 Tangible Net Worth . . . . . . . . . . . . . . . . . 24
6.14 No Setoffs or Counterclaims. . . . . . . . . . . . . 24
6.15 Location of Inventory and Equipment. . . . . . . . . 24
6.16 Compliance with Laws . . . . . . . . . . . . . . . . 24
6.17 Employee Benefits. . . . . . . . . . . . . . . . . . 25
6.18 Consigned Inventory. . . . . . . . . . . . . . . . . 25
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . 25
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . 25
7.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . 26
7.3 Restrictions on Fundamental Changes. . . . . . . . . 26
7.4 Extraordinary Transactions and Disposal of Assets. . 26
7.5 Change Name. . . . . . . . . . . . . . . . . . . . . 26
7.6 Guarantee. . . . . . . . . . . . . . . . . . . . . . 27
7.7 Restructure. . . . . . . . . . . . . . . . . . . . . 27
7.8 Prepayments. . . . . . . . . . . . . . . . . . . . . 27
7.9 Change of Control. . . . . . . . . . . . . . . . . . 27
7.10 Capital Expenditures . . . . . . . . . . . . . . . . 27
7.11 Consignments . . . . . . . . . . . . . . . . . . . . 27
7.12 Distributions. . . . . . . . . . . . . . . . . . . . 27
7.13 Accounting Methods . . . . . . . . . . . . . . . . . 27
7.14 Investments. . . . . . . . . . . . . . . . . . . . . 27
7.15 Transactions with Affiliates . . . . . . . . . . . . 27
7.16 Suspension . . . . . . . . . . . . . . . . . . . . . 28
7.17 Compensation . . . . . . . . . . . . . . . . . . . . 28
7.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . 28
7.19 Change in Location of Chief Executive Office; Inventory and
Equipment with Bailees.. . . . . . . . . . . . . . . 28
8. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . 28
9. FOOTHILL'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . 30
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . 30
9.2 Remedies Cumulative. . . . . . . . . . . . . . . . . 32
10. TAXES AND EXPENSES REGARDING THE COLLATERAL . . . . . . . 32
11. WAIVERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . 33
11.1 Demand; Protest; etc.. . . . . . . . . . . . . . . . 33
11.2 Foothill's Liability for Collateral. . . . . . . . . 33
11.3 Indemnification. . . . . . . . . . . . . . . . . . . 33
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 33
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . 34
14. DESTRUCTION OF BORROWER'S DOCUMENTS . . . . . . . . . . . 35
15. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . 35
15.1 Effectiveness. . . . . . . . . . . . . . . . . . . . 35
15.2 Successors and Assigns . . . . . . . . . . . . . . . 35
15.3 Section Headings . . . . . . . . . . . . . . . . . . 36
15.4 Interpretation . . . . . . . . . . . . . . . . . . . 36
15.5 Severability of Provisions . . . . . . . . . . . . . 36
15.6 Amendments in Writing. . . . . . . . . . . . . . . . 36
15.7 Counterparts; Telefacsimile Execution. . . . . . . . 36
15.8 Revival and Reinstatement of Obligations . . . . . . 36
15.9 Lending Relationship . . . . . . . . . . . . . . . . 37
15.10Integration. . . . . . . . . . . . . . . . . . . . . 37
15.11Confidentiality. . . . . . . . . . . . . . . . . . . 37
15.12Limitation of Liability. . . . . . . . . . . . . . . 37
15.13Expenses . . . . . . . . . . . . . . . . . . . . . . 37
SCHEDULES
Schedule E-1 Eligible Inventory
Schedule P-1 Permitted Liens
Schedule 5.9 Litigation
Schedule 5.12 Employee Benefits
Schedule 6.15 Location of Inventory and Equipment
Schedule 7.4 Repayment of Obligations from Sale or Refinancing
Proceeds
<PAGE>
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT, is entered into as of June 28,
1994, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, and VICTORIA
CREATIONS, INC., a Rhode Island corporation ("Borrower"), with its chief
executive office located at 30 Jefferson Park Road, Warwick, Rhode
Island 02888.
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the following
terms shall have the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of an Account.
"Accounts" means all currently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to
Borrower arising out of the sale or lease of goods or the rendition of
services by Borrower, irrespective of whether earned by performance, and
any and all credit insurance, guaranties, or security therefor.
"Act" means all applicable laws, regulations, and ordinances,
where a property is located, of any federal, state, or local government,
instrumentality, or body, and that are related to Hazardous Materials, as
the same may be amended, modified, or supplemented from time to time.
"ADA" means the Americans with Disabilities Act, 42 U.S.C.
Section 12101, et. seq., and all applicable rules and regulations promulgated
thereunder.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with, that Person. For purposes of this definition, "control" as applied to
any Person means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract,
or otherwise.
"Agreement" means this Loan and Security Agreement and any
extensions, riders supplements, notes, amendments, or modifications to or
in connection with this Loan and Security Agreement.
"Authorized Officer" means any officer of Borrower.
"Average Unused Portion of Maximum Amount" means (a) the
Maximum Amount; less (b) the average Daily Balance of advances made by
Foothill under Section 2.1 that were outstanding during the immediately
preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code
(11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Borrower" has the meaning set forth in the preamble to this
Agreement.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records indicating, summarizing, or evidencing
Borrower's properties or assets (including the Collateral) or liabilities; all
information relating to Borrower's business operations or financial
condition; and all computer programs, disc or tape files, printouts, runs,
or other computer prepared information, and the equipment containing such
information.
"Borrowing Base" has the meaning set forth in Section 2.1.
"Business Day" means any day which is not a Saturday,
Sunday, or other day on which national banks are authorized or required
to close.
"Change of Control" shall be deemed to have occurred at such
time as UM&M ceases to own, directly or indirectly, a minimum of fifty one
percent (51%) of the total voting power of all classes of stock then
outstanding of Borrower normally entitled to vote in the election of
directors.
"Closing Date" means the date of the initial advance.
"Code" means the California Uniform Commercial Code.
"Collateral" means each of the following: the Accounts;
Borrower's Books; the Equipment; the General Intangibles; the Inventory;
the Negotiable Collateral; any money, or other assets of Borrower which
now or hereafter come into the possession, custody, or control of Foothill;
and the proceeds and products, whether tangible or intangible, of any of
the foregoing including proceeds of insurance covering any or all of the
Collateral, and any and all Accounts, Borrower's Books, Equipment, General
Intangibles, Inventory, Negotiable Collateral, money, deposit accounts, or
other tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any portion
thereof or interest therein, and the proceeds thereof.
"Combined Revolving Obligations" means, at the time of
determination thereof, the sum of the then outstanding amounts advanced
under Section 2.1 plus the aggregate face amount of all then outstanding
L/Cs and L/C Guarantees issues under the UM&M Loan Agreement plus the
aggregate amount of all then outstanding amounts advanced under Section
2.1 of UM&M Loan Agreement.
"Combined Term Note" has the meaning set forth in Section 2.3
hereof.
"Daily Balance" means the amount of an Obligation owed at the
end of a given day.
"Eligible Accounts" means those Accounts created by Borrower
in the ordinary course of business that arise out of Borrower's sale of
goods or rendition of services, that strictly comply with all of Borrower's
representations and warranties to Foothill, and that are and at all times
shall continue to be acceptable to Foothill in all respects; provided,
however, that standards of eligibility may be fixed and revised from time
to time by Foothill in Foothill's reasonable credit judgment. Eligible
Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to pay
within sixty (60) days of due date or Accounts with selling terms of more
than sixty (60) days and all Accounts owed by an Account Debtor that has
failed to pay fifty percent (50%) or more of its Accounts owed to Borrower
within sixty (60) days of due date;
(b) Accounts with respect to which the Account Debtor
is an officer, employee, Affiliate, or agent of Borrower;
(c) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return, sale on approval, bill and
hold (provided, however, that Accounts in respect of bill and hold goods
may constitute Eligible Accounts if documentation satisfactory to Foothill
evidences the terms of such bill and hold relationship), or other terms by
reason of which the payment by the Account Debtor may be conditional;
(d) Accounts with respect to which the Account Debtor
is not a resident of the United States, and which are not either (i) covered
by credit insurance in form and amount, and by an insurer, satisfactory
to Foothill, or (ii) supported by one or more letters of credit that are
assignable by their terms and have been delivered to Foothill in an
amount, of a tenor, and issued by a financial institution, reasonably
acceptable to Foothill;
(e) Accounts with respect to which the Account Debtor
is the United States or any department, agency, or instrumentality of the
United States other than the Army and Navy Exchanges;
(f) Accounts with respect to which Borrower is or may
become liable to the Account Debtor for goods sold or services rendered
by the Account Debtor to Borrower;
(g) Accounts with respect to an Account Debtor whose
total obligations owing to Borrower exceed ten percent (10%) of all Eligible
Accounts (or, in the case of J.C. Penney Company, Inc., thirty-five percent
(35%), or in the case of Dillard's Department Stores and Whitman
Laboratories Ltd. fifteen percent (15%) each), to the extent of the
obligations owing by such Account Debtor in excess of such percentage;
(h) Accounts with respect to which the Account Debtor
disputes liability or makes any claim with respect thereto (to the extent of
such dispute or claim), or is subject to any Insolvency Proceeding, or
becomes insolvent, or goes out of business;
(i) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the
Account Debtor's financial condition;
(j) Accounts that are payable in other than United
States Dollars; and
(k) Accounts that represent progress payments or
other advance billings that are due prior to the completion of performance
by Borrower of the subject contract for goods or services.
"Eligible Inventory" means Inventory consisting of first quality
finished goods held for sale in the ordinary course of Borrower's business
and raw materials for such finished goods, that are located at Borrower's
premises identified on Schedule E-1 or at UM&M's Jonathan Logan retail
outlet stores, that strictly comply with all of Borrower's representations
and warranties to Foothill, and that are acceptable to Foothill in all
respects; provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill in Foothill's reasonable credit
judgment. Eligible Inventory shall not include the following: (a) slow
moving or obsolete items, (b) restrictive items, (c) work-in-process, (d)
spare parts, packaging, and shipping materials, (e) supplies used or
consumed in Borrower's business, (f) Inventory at any location other than
those set forth on Schedule E-1, (g) Inventory subject to a security
interest or lien in favor of any third Person except for a junior Permitted
Lien, (h) bill and hold goods, (i) Inventory that is not subject to Foothill's
perfected security interests, (j) defective goods, (k) "seconds," and (l)
Inventory acquired by Borrower on consignment. Inventory placed on
consignment at UM&M's Jonathan Logan retail outlet locations shall become
ineligible upon the sale of any of such retail outlets or the Jonathan Logan
division. Eligible Inventory shall be valued at the lower of Borrower's cost
or market value.
"Equipment" means all of Borrower's present and hereafter
acquired machinery, machine tools, motors, equipment, furniture,
furnishings, fixtures, vehicles (including motor vehicles and trailers), tools,
parts, dies, jigs, goods (other than consumer goods, farm products, or
Inventory), wherever located, and any interest of Borrower in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing,
wherever located.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any predecessor, successor, or
superseding laws of the United States of America, together with all
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which, within the meaning of Section 414 of the IRC, is:
(i) under common control with Borrower; (ii) treated, together with
Borrower, as a single employer; (iii) treated as a member of an affiliated
service group of which Borrower is also treated as a member; or (iv) is
otherwise aggregated with the Borrower for purposes of the employee
benefits requirements listed in IRC Section 414(m)(4).
"ERISA Event" means any one or more of the following: (i) a
Reportable Event with respect to a Qualified Plan or a Multiemployer Plan;
(ii) a Prohibited Transaction with respect to any Plan; (iii) a complete or
partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer
Plan; (iv) the complete or partial withdrawal of Borrower or an ERISA
Affiliate from a Qualified Plan during a plan year in which it was, or was
treated as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts which,
under the provisions of any Plan or applicable law, Borrower or any ERISA
Affiliate is required to make; (vi) the filing of a notice of intent to
terminate, or the treatment of a plan amendment as a termination, under
Sections 4041 or 4041A of ERISA; (vii) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Qualified Plan or Multiemployer Plan; (viii) the imposition of any liability
under Title IV of ERISA, other than PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate; and
(ix) a violation of the applicable requirements of Sections 404 or 405 of
ERISA, or the exclusive benefit rule under Section 403(c) of ERISA, by any
fiduciary or disqualified person with respect to any Plan for which
Borrower or any ERISA Affiliate may be directly or indirectly liable.
"Event of Default" has the meaning set forth in Section 8.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to this
Agreement.
"Foothill Expenses" means all: costs or expenses (including
taxes, photocopying, notarization, telecommunication and insurance
premiums) required to be paid by Borrower under any of the Loan
Documents that are paid or advanced by Foothill; documentation, filing,
recording, publication, appraisal (including periodic Collateral appraisals),
and search fees assessed, paid, or incurred by Foothill in connection with
Foothill's transactions with Borrower; costs and expenses incurred by
Foothill in preserving the value of the Collateral; costs and expenses
incurred by Foothill in the disbursement of funds to Borrower (by wire
transfer or otherwise); charges paid or incurred by Foothill resulting from
the dishonor of checks; costs and expenses paid or incurred by Foothill
to correct any default or enforce any provision of the Loan Documents, or
in gaining possession of, maintaining, handling, preserving, storing,
shipping, selling, preparing for sale, or advertising to sell the Collateral,
or any portion thereof, irrespective of whether a sale is consummated;
costs and expenses paid or incurred by Foothill in examining Borrower's
Books; costs and expenses of third party claims or any other suit paid or
incurred by Foothill in enforcing or defending the Loan Documents; and
Foothill's reasonable attorneys fees and expenses incurred in advising,
structuring, drafting, reviewing, administering, amending, terminating,
enforcing (including attorneys fees and expenses incurred in connection
with a "workout," a "restructuring," or an Insolvency Proceeding
concerning Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, irrespective of whether suit is brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"General Intangibles" means all of Borrower's present and
future general intangibles and other personal property (including contract
rights, rights arising under common law, statutes, or regulations, choses
or things in action, goodwill, patents, trade names, trademarks,
servicemarks, copyrights, blueprints, drawings, purchase orders, customer
lists, monies due or recoverable from pension funds, route lists, rights to
payment and other rights under any royalty or licensing agreements,
infringements, claims, computer programs, computer discs, computer tapes,
literature, reports, catalogs, deposit accounts, insurance premium rebates,
tax refunds, and tax refund claims), other than goods and Accounts.
"Hazardous Materials" means:
(a) those substances as defined as "hazardous substances,"
"hazardous materials," "toxic substances," or "solid waste" in the
Comprehensive Environmental Response, Compensation and Liability Act,
Resource Conservation and Recovery Act, 42 U.S.C. S 6901 et seq. ("RCRA"),
or the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and in the regulations promulgated pursuant thereto;
(b) those substances designated as a "hazardous substance"
under or pursuant to the Federal Water Pollution Control Act, 33 U.S.C.
Section 1257 et seq., or defined as a "hazardous waste" under or pursuant to
RCRA and in the regulations promulgated pursuant thereto;
(c) those substances listed in the United States Department
of Transportation Table (40 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto); and
(d) such other substances, materials and wastes which are
regulated under any act, or which are classified as hazardous or toxic
under any Act.
"Indebtedness" means: (a) all obligations of Borrower for
borrowed money; (b) all obligations of Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or
other obligations of Borrower in respect of letters of credit, letter of
credit guaranties, bankers acceptances, interest rate swaps, controlled
disbursement accounts, or other financial products; (c) all obligations
under capitalized leases; (d) all obligations or liabilities of others secured
by a lien or security interest on any property or asset of Borrower,
irrespective of whether such obligation or liability is assumed; and (e) any
obligation of Borrower guaranteeing or intended to guarantee (whether
guaranteed, endorsed, co-made, discounted, or sold with recourse to
Borrower) any indebtedness, lease, dividend, letter of credit, or other
obligation of any other Person.
"Indemnified Persons" means Foothill and its parents,
subsidiaries and affiliates, attorneys, and each of their officers, directors,
agents, employees, trustees, receivers, executors, and administrators, and
the heirs, successors, and assigns of all of the foregoing.
"Insolvency Proceeding" means any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code or
under any other bankruptcy or insolvency law, including assignments for
the benefit of creditors, formal or informal moratoria, compositions,
extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including goods held for sale or lease or to be
furnished under a contract of service and all of Borrower's present and
future raw materials, work in process, finished goods, and packing and
shipping materials, wherever located, and any documents of title
representing any of the above.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Loan Documents" means this Agreement, the Combined Term
Note, the Lock Box Agreements, any note or notes executed by Borrower
and payable to Foothill, and any other agreement entered into in
connection with this Agreement, including the Patent and Trademark
Security Agreement.
"Lock Box" has the meaning provided in the respective Lock
Box Agreements.
"Lock Box Agreements" means those certain Lockbox Operating
Procedural Agreements and Depository Account Agreements, in form and
substance satisfactory to Foothill, each of which is among Borrower,
Foothill, and the Lock Box Bank.
"Lock Box Bank" means Harris Trust and Savings Bank.
"Losses" shall mean any and all losses, liabilities, contingent
liabilities, damages, obligations, claims, contingent claims, actions, suits,
proceedings, disbursements, penalties, costs, and expenses (including,
without limitation, actual attorneys' fees and costs of counsel retained by
Foothill to monitor the proceedings and actions of Borrower in satisfying
its obligations hereunder, and to advise and represent Foothill with respect
to matters related hereto, including, without limitation, fees incurred
pursuant to 11 U.S.C.) and all other professional or consultants' fees and
expenses), whether or not an action or proceeding is commenced or
threatened.
"Maturity Date" has the meaning set forth in Section 3.3.
"Maximum Amount" has the meaning set forth in Section 2.1.
"Multiemployer Plan" means a multiemployer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the IRC in which
employees of Borrower or an ERISA Affiliate participate or to which
Borrower or any ERISA Affiliate contribute or are required to contribute.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit, notes, drafts, instruments, certificated and
uncertificated securities (including the shares of stock of subsidiaries of
Borrower), documents, personal property leases (wherein Borrower is the
lessor), chattel paper, and Borrower's Books relating to any of the
foregoing.
"Obligations" means all loans, advances, debts, principal,
interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), premiums, liabilities (including all
amounts charged to Borrower's loan account pursuant to any agreement
authorizing Foothill to charge Borrower's loan account), obligations, fees,
lease payments, guaranties, covenants, and duties owing by Borrower to
Foothill of any kind and description (whether pursuant to or evidenced by
the Loan Documents, by any note or other instrument (including the
Combined Term Note), or pursuant to any other agreement between Foothill
and Borrower, and irrespective of whether for the payment of money),
whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and further including all interest not
paid when due and all Foothill Expenses that Borrower is required to pay
or reimburse by the Loan Documents, by law, or otherwise.
"Old Lender" means The CIT Group/Commercial Services, Inc.
"Old Lender Documents" means various documents between
Borrower and Old Lender relating to the partial repayment of Borrower's
obligations to Old Lender.
"Overadvance" has the meaning set forth in Section 2.4.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Liens" means: (a) liens and security interests held
by Foothill; (b) liens for unpaid taxes that are not yet due and payable;
(c) liens and security interests set forth on Schedule P-1 attached hereto;
(d) purchase money security interests and liens of lessors under
capitalized leases to the extent that the acquisition or lease of the
underlying asset was permitted under Section 7.10, and so long as the
security interest or lien only secures the purchase price of the asset; (e)
easements, rights of way, reservations, covenants, conditions, restrictions,
zoning variances, and other similar encumbrances that do not materially
interfere with the use or value of the property subject thereto; (f)
obligations and duties as lessee under any lease existing on the date of
this Agreement; (h) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like liens arising in the ordinary course of business
which are not overdue for a period of more than thirty (30) days or which
are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP or for which a bond in the full amount
thereof has been posted; (i) pledges or deposits under worker's
compensation, unemployment insurance and other social security legislation;
and (j) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business.
"Person" means and includes natural persons, corporations,
limited
partnerships, general partnerships, joint ventures, trusts, land trusts,
business trusts, or other organizations, irrespective of whether they are
legal entities, and governments and agencies and political subdivisions
thereof.
"Plan" means an employee benefit plan (as defined in Section
3(3) of ERISA) which Borrower or any ERISA Affiliate sponsors or maintains
or to which Borrower or any ERISA Affiliate makes, is making, or is
obligated to make contributions, including any Multiemployer Plan or
Qualified Plan.
"Prohibited Transaction" means any transaction described in
Section 406 of ERISA which is not exempt by reason of Section 408 of
ERISA, and any transaction described in Section 4975(c) of the IRC which
is not exempt by reason of Section 4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in Section
3(2) of ERISA) intended to be tax-qualified under Section 401(a) of the IRC
which Borrower or any ERISA Affiliate sponsors, maintains, or to which any
such person makes, is making, or is obligated to make, contributions, or,
in the case of a multiple-employer plan (as described in Section 4064(a) of
ERISA), has made contributions at any time during the immediately
preceding period covering at least five (5) plan years, but excluding any
Multiemployer Plan.
"Reportable Event" means any event described in Section 4043
(other than Subsections (b)(7) and (b)(9)) of ERISA.
"Tangible Net Worth" means, as of the date any determination
thereof is to be made, the difference of: (a) Borrower's total stockholder's
equity; minus (b) the sum of: (i) all intangible assets of Borrower; (ii) all
of Borrower's prepaid expenses; and (iii) all amounts due to Borrower from
Affiliates, calculated on a consolidated basis.
"UM&M" means United Merchants and Manufacturers, Inc., a
Delaware corporation.
"UM&M Guaranty" means that certain Continuing Guaranty, of
even date herewith, by UM&M in favor of Foothill, respecting the
Obligations.
"UM&M Loan Agreement" means that certain Loan and Security
Agreement, of even date herewith, between Foothill and UM&M, and any
amendments, replacements, renewals, and substitutions thereto.
"Unfunded Benefit Liability" means the excess of a Plan's
benefit liabilities (as defined in Section 4001(a)(16) of ERISA) over the
current value of such Plan's assets, determined in accordance with the
assumptions used by the Plan's actuaries for funding the Plan pursuant
to Section 412 of the IRC for the applicable plan year.
"Voidable Transfer" has the meaning set forth in Section 15.8.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP. When used
herein, the term "financial statements" shall include the notes and
schedules thereto. Whenever the term "Borrower" is used in respect of a
financial covenant or a related definition, it shall be understood to mean
Borrower on a consolidated basis unless the context clearly requires
otherwise.
1.3 Code. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth in the
Code unless otherwise defined herein.
1.4 Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. Section, subsection, clause, schedule, and
exhibit references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement
or any of the Loan Documents shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
and supplements, thereto and thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated herein by
reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to make revolving advances to Borrower in an
amount not to exceed the Borrowing Base. For purposes of this Agreement,
"Borrowing Base" shall mean the sum of: (i) an amount equal to the lesser
of: (y) seventy-five percent (75%) of the amount of Eligible Accounts, and
(z) an amount equal to Borrower's cash collections for the immediately
preceding ninety (90) day period; plus (ii) an amount equal to the lesser
of: (y) fifty percent (50%) of the amount of Eligible Inventory, net of
reserves not otherwise excluded in the definition of Eligible Inventory, and
(z) two (2) times the amount of credit availability created by
Section 2.1(a)(i) above. Foothill shall establish reasonable reserves against
Eligible Inventory for obsolescence, shrinkage, and damaged goods not
otherwise excluded in the definition of Eligible Inventory, and for
Inventory, if any, that is subject to landlord liens that are not subordinate
to Foothill's security interests in such Inventory.
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill may reduce its advance rates based upon Eligible
Accounts or Eligible Inventory without declaring an Event of Default if it
determines, in its reasonable discretion, that there is a material impairment
of the prospect of repayment of all or any portion of the Obligations or a
material impairment of the value or priority of Foothill's security interests
in the Collateral.
(c) Foothill shall have no obligation to make advances
hereunder to the extent they would cause:
(i) the outstanding advances under this
Section 2.1 to exceed Thirteen Million Dollars ($13,000,000) or Sixteen
Million Dollars ($16,000,000) for the period of July 1 through
November 30 of each year ("Maximum Amount"); or
(ii) the aggregate outstanding Combined
Revolving Obligations to exceed Eighteen Million Dollars ($18,000,000)
or Twenty Two Million Dollars ($22,000,000) for the period of July 1
through November 30 of each year.
(d) Foothill is authorized to make advances under this
Agreement based upon telephonic or other instructions received from
anyone purporting to be an Authorized Officer of Borrower, or without
instructions if pursuant to Section 2.5(c). Borrower agrees to establish
and maintain a single designated deposit account for the purpose of
receiving the proceeds of the advances requested by Borrower and made
by Foothill hereunder. Unless otherwise agreed by Foothill and Borrower,
any advance requested by Borrower and made by Foothill hereunder shall
be made to such designated deposit account. Amounts borrowed pursuant
to this Section 2.1 may be repaid and, subject to the terms and conditions
of this Agreement, reborrowed at any time during the term of this
Agreement.
2.2 [INTENTIONALLY DELETED]
2.3 Combined Term Loan. Foothill has agreed to make a term
loan jointly to Borrower and UM&M in the original principal amount of Two
Million Dollars ($2,000,000), to be evidenced by and repayable in accordance
with the terms of a promissory note (the "Combined Term Note"), of even
date herewith, executed by Borrower and UM&M in favor of Foothill. All
amounts evidenced by the Combined Term Note shall constitute Obligations.
2.4 Overadvances. If, at any time or for any reason, the
amount of Obligations owed by Borrower to Foothill pursuant to Section 2.1
is greater than either the dollar or percentage limitations set forth in
Section 2.1 (an "Overadvance"), Borrower immediately shall pay to Foothill,
in cash, the amount of such excess to be used by Foothill to repay
Obligations.
2.5 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations shall bear interest,
on the average Daily Balance, at the rate of two percent (2%) per month.
(b) Intentionally omitted.
(c) Payments. Interest hereunder shall be due and
payable, in arrears, on the first day of each month during the term hereof.
Borrower hereby authorizes Foothill, at its option, without prior notice to
Borrower, to charge such interest, Foothill Expenses arising after the
occurrence and during the continuance of an Event of Default (as and
when incurred), and all installments or other payments due under the
Combined Term Note, any note or other Loan Document to Borrower's loan
account, which amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. All interest and fees chargeable
under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
(e) Intent to Limit Charges to Maximum Lawful Rate.
In no event shall the interest rate or rates payable under this Agreement
or the Combined Term Note, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court
of competent jurisdiction shall, in a final determination, deem applicable.
Borrower and Foothill, in executing this Agreement and the Combined Term
Note, intend to legally agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything contained
herein or in the Combined Term Note to the contrary notwithstanding, if
said rate or rates of interest or manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the date of this
Agreement and the Combined Term Note, Borrower is and shall be liable
only for the payment of such maximum as allowed by law, and payment
received from Borrower in excess of such legal maximum, whenever
received, shall be applied to reduce the principal balance of the Obligations
to the extent of such excess.
2.6 Crediting Payments; Application of Collections. The
receipt of any wire transfer of funds, check, or other item of payment by
Foothill (whether from transfers to Foothill by the Lock Box Bank pursuant
to the Lock Box Agreements or otherwise) immediately shall be applied to
provisionally reduce the Obligations, but shall not be considered a payment
on account unless such wire transfer is of immediately available federal
funds and is made to the appropriate deposit account of Foothill or unless
and until such check or other item of payment is honored when presented
for payment. From and after the Closing Date, Foothill shall be entitled to
charge Borrower for five (5) Business Days of `clearance' at the rate set
forth in Sections 2.5(a) (applicable to advances under Section 2.1) on all
checks or other items of payment that are not in immediately available
funds that are received by Foothill (except for wire transfers of federal
funds). This five (5) Business Day clearance charge on certain receipts
is acknowledged by the parties to constitute an integral aspect of the
pricing of Foothill's facility to Borrower, and shall apply irrespective of
the characterization of whether receipts are owned by Borrower or Foothill,
and irrespective of the level of Borrower's Obligations to Foothill. Should
any check or item of payment not be honored when presented for payment,
then Borrower shall be deemed not to have made such payment, and
interest shall be recalculated accordingly. Anything to the contrary
contained herein notwithstanding, any wire transfer, check, or other item
of payment shall be deemed received by Foothill only if it is received into
Foothill's Operating Account (as such account is identified in the Lock Box
Agreements) on or before 11:00 a.m. Los Angeles time. If any wire
transfer, check, or other item of payment is received into Foothill's
Operating Account (as such account is identified in the Lock Box
Agreements) after 11:00 a.m. Los Angeles time it shall be deemed to have
been received by Foothill as of the opening of business on the immediately
following Business Day.
2.7 Statements of Obligations. Foothill shall render
statements to Borrower of the Obligations, including principal, interest,
fees, and including an itemization of all charges and expenses constituting
Foothill Expenses owing, and such statements shall be conclusively
presumed to be correct and accurate and constitute an account stated
between Borrower and Foothill unless, within thirty (30) days after receipt
thereof by Borrower, Borrower shall deliver to Foothill by registered or
certified mail at its address specified in Section 12, written objection
thereto describing the error or errors contained in any such statements.
2.8 Fees. After the occurrence and during the continuation
of an Event of Default, Borrower shall pay to Foothill the following fees:
Foothill's customary fee of Six Hundred Fifty Dollars ($650) per day per
examiner, plus out-of-pocket expenses for each financial analysis and
examination of Borrower performed by Foothill or its agents; Foothill's
customary appraisal fee of One Thousand Dollars ($1,000) per day per
appraiser, plus out-of-pocket expenses for each appraisal of the Collateral
performed by Foothill or its agents.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance. The obligation
of Foothill to make the initial advance is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions
on or before the Closing Date:
(a) the Closing Date shall occur on or before June 30,
1994;
(b) Old Lender and Borrower shall have executed and
delivered the Old Lender Documents including UCC termination statements
and other documentation evidencing the termination of its liens and
security interests in and to the properties and assets of Borrower or a
subordination agreement in form and substance satisfactory to Foothill in
its sole discretion;
(c) Foothill shall have received stamped filed copies
of its financing statements and fixture filings;
(d) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full force
and effect:
i) the Lock Box Agreements;
ii) the UM&M Guaranty;
iii) the Patent and Trademark Security
Agreement between Borrower and Foothill; and
iv) the Combined Term Note.
(e) Foothill shall have received a certificate from the
Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing its execution and delivery of this Agreement and the
other Loan Documents to which Borrower is a party and authorizing
specific officers of Borrower to execute same;
(f) Foothill shall have received copies of Borrower's
By-laws and Articles or Certificate of Incorporation, as amended, modified,
or supplemented to the Closing Date, certified by the Secretary of
Borrower;
(g) Foothill shall have received a certificate of
corporate status with respect to Borrower, dated within ten (10) days of
the Closing Date, by the Secretary of State of the state of incorporation
of Borrower, which certificate shall indicate that Borrower is in good
standing in such state;
(h) Foothill shall have received certificates of
corporate status with respect to Borrower, each dated within fifteen (15)
days of the Closing Date, such certificates to be issued by the Secretary
of State of the states in which its failure to be duly qualified or licensed
would have a material adverse effect on the financial condition or
properties and assets of Borrower, which certificates shall indicate that
Borrower is in good standing;
(i) Foothill shall have received the certified copies of
the policies of insurance, together with the endorsements thereto, as are
required by Section 6.12 hereof, the form and substance of which shall be
satisfactory to Foothill and its counsel;
(j) In the event that Borrower's motor vehicles have
an aggregate book value of Fifty Thousand Dollars ($50,000), or more,
Foothill shall have received duly executed certificates of title with respect
to that portion of the Collateral that is subject to certificates of title;
(k) Foothill shall have received an opinion of
Borrower's counsel in form and substance satisfactory to Foothill in its sole
discretion; and
(l) all other documents and legal matters in connection
with the transactions contemplated by this Agreement (including all
conditions precedent set forth in Sections 3.1 and 3.2 of the UM&M Loan
Agreement) shall have been delivered or executed or recorded and shall be
in form and substance satisfactory to Foothill and its counsel.
3.2 Conditions Precedent to All Advances. The following
shall be conditions precedent to all advances hereunder:
(a) the representations and warranties contained in
this Agreement and the other Loan Documents shall be true and correct in
all respects on and as of the date of such advance as though made on and
as of such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) no Event of Default or event which with the giving
of notice or passage of time would constitute an Event of Default shall
have occurred and be continuing on the date of such advance nor shall
either result from the making of the advance; and
(c) no injunction, writ, restraining order, or other
order of any nature prohibiting, directly or indirectly, the making of such
advance shall have been issued and remain in force by any governmental
authority against Borrower, Foothill, or any of their Affiliates.
3.3 Term. This Agreement shall become effective upon the
execution and delivery hereof by Borrower and Foothill and shall continue
in full force and effect for a term ending on the date (the "Maturity Date")
that is two (2) years from the Closing Date, unless sooner terminated
pursuant to the terms hereof. Borrower may terminate this Agreement at
any time, without premium or penalty, by giving Foothill at least ten (10)
days prior written notice. The foregoing notwithstanding, Foothill shall
have the right to terminate its obligations under this Agreement
immediately and upon notice upon the occurrence and during the
continuation of an Event of Default.
3.4 Effect of Termination. On the date of termination, all
Obligations immediately shall become due and payable without notice or
demand. No termination of this Agreement, however, shall relieve or
discharge Borrower of Borrower's duties, Obligations, or covenants
hereunder, and Foothill's continuing security interests in the Collateral
shall remain in effect until all Obligations have been fully and finally
discharged and Foothill's obligation to provide advances hereunder is
terminated.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Borrower hereby grants to
Foothill a continuing security interest in all currently existing and
hereafter acquired or arising Collateral in order to secure prompt
repayment of any and all Obligations and in order to secure prompt
performance by Borrower of each of its covenants and duties under the
Loan Documents. Foothill's security interests in the Collateral shall attach
to all Collateral without further act on the part of Foothill or Borrower.
Anything contained in this Agreement or any other Loan Document to the
contrary notwithstanding, and other than sales of Inventory to buyers in
the ordinary course of business and those actions contemplated by
Section 7.4 and Schedule 7.4, Borrower has no authority, express or
implied, to dispose of any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Borrower shall, immediately upon the request of Foothill, endorse and
assign such Negotiable Collateral to Foothill and deliver physical possession
of such Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles, Negotiable
Collateral. Foothill, Borrower, and the Lock Box Bank shall enter into the
Lock Box Agreements, in form and substance satisfactory to Foothill in its
sole discretion, pursuant to which all of Borrower's cash receipts, checks,
and other items of payment (including, insurance proceeds, proceeds of
cash sales, rental proceeds, and tax refunds) will be forwarded to Foothill
on a daily basis. At any time after the occurrence and during the
continuance of an Event of Default or after Foothill, in its reasonable
judgment, deems itself insecure, Foothill or Foothill's designee may: (a)
notify customers or Account Debtors of Borrower that the Accounts, General
Intangibles, or Negotiable Collateral have been assigned to Foothill or that
Foothill has a security interest therein; and (b) collect the Accounts,
General Intangibles, and Negotiable Collateral directly and charge the
collection costs and expenses to Borrower's loan account. Borrower agrees
that it will hold in trust for Foothill, as Foothill's trustee, any cash
receipts, checks, and other items of payment (including, insurance
proceeds, proceeds of cash sales, rental proceeds, and tax refunds) that
it receives and immediately will deliver said cash receipts, checks, and
other items of payment to Foothill in their original form as received by
Borrower except that Jonathan Logan sales proceeds will be transferred to
the Lock Box weekly.
4.4 Delivery of Additional Documentation Required. At any
time upon the request of Foothill, Borrower shall execute and deliver to
Foothill all financing statements, continuation financing statements, fixture
filings, security agreements, chattel mortgages, pledges, assignments,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Foothill may reasonably request, in form satisfactory to
Foothill, to perfect and continue perfected Foothill's security interests in
the Collateral and in order to fully consummate all of the transactions
contemplated hereby and under the other the Loan Documents.
4.5 Power of Attorney. Borrower hereby irrevocably makes,
constitutes, and appoints Foothill (and any of Foothill's officers, employees,
or agents designated by Foothill) as Borrower's true and lawful attorney,
with power to: (a) send requests for verification of Accounts; (b) endorse
Borrower's name on any checks, notices, acceptances, money orders, drafts,
or other item of payment or security that may come into Foothill's
possession; (c) at any time that an Event of Default has occurred and is
continuing, settle and adjust disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms which Foothill
determines to be reasonable, and Foothill may cause to be executed and
delivered any documents and releases which Foothill determines to be
necessary. The appointment of Foothill as Borrower's attorney, and each
and every one of Foothill's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully and
finally repaid and performed and Foothill's obligation to extend credit
hereunder is terminated.
4.6 Right to Inspect. Foothill (through any of its officers,
employees, or agents) shall have the right, from time to time hereafter,
during normal business hours, to inspect Borrower's Books and to check,
test, and appraise the Collateral in order to verify Borrower's financial
condition or the amount, quality, value, condition of, or any other matter
relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Foothill as follows:
5.1 No Prior Encumbrances. Borrower has good and
indefeasible title to the Collateral, free and clear of liens, claims, security
interests, or encumbrances, except for Permitted Liens.
5.2 Eligible Accounts. All of Borrower's representations and
warranties in this Section are based upon Borrower's knowledge after
reasonable review in accordance with normal and prudent business
practices. The Eligible Accounts are, at the time of the creation thereof
and as of each date on which Borrower includes them in a Borrowing Base
calculation or certification, bona fide existing obligations created by the
sale and delivery of Inventory or the rendition of services to Account
Debtors in the ordinary course of Borrower's business, unconditionally
owed to Borrower without defenses, disputes, offsets, counterclaims, or
rights of return or cancellation. Except for Accounts arising from bill and
hold sales, the property giving rise to such Eligible Accounts has been
delivered to the Account Debtor, or to the Account Debtor's agent for
immediate shipment to and unconditional acceptance by the Account Debtor.
At the time of the creation of an Eligible Account and as of each date on
which Borrower includes an Eligible Account in a Borrowing Base
calculation or certification, Borrower has not received notice of actual or
imminent bankruptcy, insolvency, or material impairment of the financial
condition of any applicable Account Debtor regarding such Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is now and at
all times hereafter shall be of good and merchantable quality, free from
defects.
5.4 Location of Inventory and Equipment. The Inventory
and Equipment are not stored with a bailee, warehouseman, or similar party
(without Foothill's prior written consent) and are located only at the
locations identified on Schedule 6.15 or otherwise permitted by Section 6.15.
5.5 Inventory Records. Borrower now keeps, and hereafter
at all times shall keep, correct and accurate records itemizing and
describing the kind, type, quality, and quantity of the Inventory, and
Borrower's cost therefor.
5.6 Location of Chief Executive Office; FEIN. The chief
executive office of Borrower is located at the address indicated in the
preamble to this Agreement and Borrower's FEIN is 05-0301429.
5.7 Due Organization and Qualification. Borrower is duly
organized and existing and in good standing under the laws of the state
of its incorporation and qualified and licensed to do business in, and in
good standing in, any state where the failure to be so licensed or qualified
could reasonably be expected to have a material adverse effect on the
business, operations, condition (financial or otherwise), finances, or
prospects of Borrower or on the value of the Collateral to Foothill.
5.8 Due Authorization; No Conflict. The execution, delivery,
and performance of the Loan Documents are within Borrower's corporate
powers, have been duly authorized, and are not in conflict with nor
constitute a breach of any provision contained in Borrower's Articles or
Certificate of Incorporation, or By-laws, nor will they constitute an event
of default under any material agreement to which Borrower is a party or
by which its properties or assets may be bound.
5.9 Litigation. There are no actions or proceedings pending
by or against Borrower before any court or administrative agency and
Borrower does not have knowledge or belief of any pending, threatened,
or imminent litigation, governmental investigations, or claims, complaints,
actions, or prosecutions involving Borrower or any guarantor of the
Obligations, except for: (a) ongoing collection matters in which Borrower is
the plaintiff; (b) matters disclosed on Schedule 5.9; and (c) matters arising
after the date hereof that, if decided adversely to Borrower, would not
materially impair the prospect of repayment of the Obligations or materially
impair the value or priority of Foothill's security interests in the
Collateral.
5.10 No Material Adverse Change in Financial Condition. All
financial statements relating to Borrower or any guarantor of the
Obligations that have been delivered by Borrower to Foothill have been
prepared in accordance with GAAP and fairly present Borrower's (or such
guarantor's, as applicable) financial condition as of the date thereof and
Borrower's results of operations for the period then ended. There has not
been a material adverse change in the financial condition of Borrower (or
such guarantor, as applicable) since the date of the latest financial
statements submitted to Foothill on or before the Closing Date.
5.11 No Transfer. No transfer of property is being made by
Borrower and no obligation is being incurred by Borrower in connection
with the transactions contemplated by this Agreement or the other Loan
Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrower.
5.12 Employee Benefits. Except as set forth in Schedule 5.12,
each of the following provisions of this Section 5.12 is true. Each Plan is
in compliance in all material respects with the applicable provisions of
ERISA and the IRC. Each Qualified Plan and Multiemployer Plan has been
determined by the Internal Revenue Service to qualify under Section 401
of the IRC, and the trusts created thereunder have been determined to be
exempt from tax under Section 501 of the IRC, and, to the best knowledge
of Borrower, nothing has occurred that would cause the loss of such
qualification or tax-exempt status. There are no outstanding liabilities
under Title IV of ERISA with respect to any Plan maintained or sponsored
by Borrower or any ERISA Affiliate, nor with respect to any Plan to which
Borrower or any ERISA Affiliate contributes or is obligated to contribute
which could reasonably be expected to have a material adverse effect on
the financial condition of Borrower. No Plan subject to Title IV of ERISA
has any Unfunded Benefit Liability which could reasonably be expected to
have a material adverse effect on the financial condition of Borrower.
Neither Borrower nor any ERISA Affiliate has transferred any Unfunded
Benefit Liability to a person other than Borrower or an ERISA Affiliate or
has otherwise engaged in a transaction that could be subject to Sections
4069 or 4212(c) of ERISA which could reasonably be expected to have a
material adverse effect on the financial condition of Borrower. Neither
Borrower nor any ERISA Affiliate has incurred nor reasonably expects to
incur (x) any liability (and no event has occurred which, with the giving
of notice under Section 4219 of ERISA, would result in such liability) under
Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan, or
(y) any liability under Title IV of ERISA (other than premiums due but not
delinquent under Section 4007 of ERISA) with respect to a Plan, which
could, in either event, reasonably be expected to have a material adverse
effect on the financial condition of Borrower. Within the past six (6)
years, no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the IRC has been made with
respect to any Plan. No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan which could reasonably be
expected to have a material adverse effect on the financial condition of
Borrower. Borrower and each ERISA Affiliate have complied in all material
respects with the notice and continuation coverage requirements of Section
4980B of the IRC.
5.13 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement automatically shall be deemed
repeated with each advance and shall be conclusively presumed to have
been relied on by Foothill regardless of any investigation made or
information possessed by Foothill. The warranties and representations set
forth herein shall be cumulative and in addition to any and all other
warranties and representations that Borrower now or hereafter shall give,
or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Foothill shall otherwise consent in writing, Borrower
shall do all of the following:
6.1 Accounting System. Borrower shall maintain a standard
and modern system of accounting in accordance with GAAP with ledger and
account cards or computer tapes, discs, printouts, and records pertaining
to the Collateral which contain information as from time to time may be
requested by Foothill. Borrower also shall keep proper books of account
showing all sales, claims, and allowances on its Inventory.
6.2 Collateral Reports. Borrower shall deliver to Foothill, no
later than the tenth (10th) day of each month during the term of this
Agreement, a detailed aging, by total, of the Accounts, a reconciliation
statement, and a summary, by vendor, of all accounts payable, including
due dates of invoices, and any book overdraft. Original sales invoices
evidencing daily sales shall be mailed by Borrower to each Account Debtor
with, at Foothill's request, a copy to Foothill, and, after the occurrence
and during the continuance of an Event of Default, at Foothill's direction,
the invoices shall indicate on their face that the Account has been
assigned to Foothill and that all payments are to be made directly to
Foothill. Borrower shall deliver to Foothill, as Foothill may from time to
time require, collection reports, sales journals, invoices, original delivery
receipts, customer's purchase orders, shipping instructions, bills of lading,
and other documentation respecting shipment arrangements. Absent such
a request by Foothill, copies of all such documentation shall be held by
Borrower as custodian for Foothill.
6.3 Schedules of Accounts. With such regularity as Foothill
shall require, Borrower shall provide Foothill with schedules describing all
Accounts. Foothill's failure to request such schedules or Borrower's failure
to execute and deliver such schedules shall not affect or limit Foothill's
security interests or other rights in and to the Accounts.
6.4 Financial Statements, Reports, Certificates. Borrower
agrees to deliver to Foothill: (a) as soon as available, but in any event
within forty-five (45) days after the end of each month during each of
Borrower's fiscal years, a company prepared income statement and cash
flow statement covering Borrower's operations during such period; and (b)
as soon as available, but in any event within ninety (90) days after the
end of each of Borrower's fiscal years, financial statements of Borrower for
each such fiscal year, audited by KPMG Peat Marwick or by other
independent certified public accountants reasonably acceptable to Foothill
and certified, without any qualifications (other than going concern or
consistency with prior year in the case of a change of accounting
principle), by such accountants to have been prepared in accordance with
GAAP, together with a certificate of such accountants addressed to Foothill
stating that such accountants do not have knowledge of the existence of
any event or condition constituting an Event of Default, or that would,
with the passage of time or the giving of notice, constitute an Event of
Default. Such audited financial statements shall include a balance sheet,
profit and loss statement, and cash flow statement, and, if prepared, such
accountants' letter to management. If Borrower is a parent company of one
or more subsidiaries, or Affiliates, or is a subsidiary or Affiliate of another
company, then, in addition to the financial statements referred to above,
Borrower agrees to deliver financial statements prepared on a consolidating
basis so as to present Borrower and each such related entity separately,
and on a consolidated basis.
Together with the above, Borrower also shall deliver to
Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports,
and Form 8-K Current Reports, and any other filings made by Borrower
with the Securities and Exchange Commission, if any, as soon as the same
are filed, or any other information that is provided by Borrower to its
shareholders, and any other report reasonably requested by Foothill
relating to the Collateral and financial condition of Borrower.
Each month, together with the financial statements
provided pursuant to Section 6.4(a), Borrower shall deliver to Foothill a
certificate signed by its chief financial officer to the effect that: (i) all
reports, statements, or computer prepared information of any kind or
nature delivered or caused to be delivered to Foothill hereunder have been
prepared in accordance with GAAP (except for footnotes for monthly
statements) and fairly present the financial condition of Borrower;
(ii) Borrower is in timely compliance with all of its covenants and
agreements hereunder; (iii) the representations and warranties of Borrower
contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such certificate,
as though made on and as of such date (except to the extent that such
representations and warranties relate solely to an earlier date); and (iv)
on the date of delivery of such certificate to Foothill there does not exist
any condition or event that constitutes an Event of Default (or, in each
case, to the extent of any non-compliance, describing such non-compliance
as to which he or she may have knowledge and what action Borrower has
taken, is taking, or proposes to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them after the
occurrence and during the continuance of an Event of Default or with
Borrower's cooperation prior thereto, to communicate with Foothill and to
release to Foothill whatever financial information concerning Borrower that
Foothill may request. After the occurrence of an Event of Default,
Borrower hereby irrevocably authorizes and directs all auditors,
accountants, or other third parties to deliver to Foothill, at Borrower's
expense, copies of Borrower's financial statements, papers related thereto,
and other accounting records of any nature in their possession, and to
disclose to Foothill any information they may have regarding Borrower's
business affairs and financial conditions.
6.5 Tax Returns. Borrower agrees to deliver to Foothill
copies of each of Borrower's future federal income tax returns, and any
amendments thereto, within thirty (30) days of the filing thereof with the
Internal Revenue Service.
6.6 Guarantor Reports. Borrower agrees to cause UM&M to
deliver its annual financial statements at the time when Borrower provides
its audited financial statements to Foothill and copies of all federal income
tax returns as soon as the same are available and in any event no later
than thirty (30) days after the same are required to be filed by law.
6.7 Designation of Inventory. Borrower shall now and from
time to time hereafter, but not less frequently than monthly, execute and
deliver to Foothill a designation of Inventory specifying the lower of
Borrower's cost or market value of Borrower's raw materials, work in
process, and finished goods, and further specifying such other information
as Foothill may reasonably request.
6.8 Returns. Returns and allowances, if any, as between
Borrower and its Account Debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. If, at a time
when no Event of Default has occurred and is continuing, any Account
Debtor returns any Inventory to Borrower, Borrower promptly shall
determine the reason for such return and, if Borrower accepts such
return, issue a credit memorandum in the appropriate amount to such
Account Debtor. If, at a time when an Event of Default has occurred and
is continuing, any Account Debtor returns any Inventory to Borrower,
Borrower promptly shall determine the reason for such return and, if
Foothill consents (which consent shall not be unreasonably withheld), issue
a credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor. On a daily basis, Borrower
shall notify Foothill of all returns and recoveries and of all disputes and
claims of which it is aware.
6.9 Title to Equipment. Upon Foothill's request, Borrower
immediately shall deliver to Foothill, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment.
6.10 Maintenance of Equipment. Borrower shall keep and
maintain the Equipment in good operating condition and repair (ordinary
wear and tear excepted) in accordance with past practices, and make all
necessary replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Borrower shall not
permit any item of Equipment to become a fixture (other than a trade
fixture) to real estate or an accession to other property, and the
Equipment is now and shall at all times remain personal property.
6.11 Taxes. All assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against
Borrower or any of its property have been paid, and shall hereafter be
paid in full, before delinquency or before the expiration of any extension
period. Borrower shall make due and timely payment or deposit of all
federal, state, and local taxes, assessments, or contributions required of it
by law, and will execute and deliver to Foothill, on demand, appropriate
certificates attesting to the payment thereof or deposit with respect
thereto. Borrower will make timely payment or deposit of all tax payments
and withholding taxes required of it by applicable laws, including those
laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and
federal income taxes, and will, upon request, furnish Foothill with proof
satisfactory to Foothill indicating that Borrower has made such payments
or deposits.
6.12 Insurance.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as are ordinarily insured
against by other owners in similar businesses. Borrower also shall
maintain business interruption, public liability, product liability, and
property damage insurance, as well as insurance against larceny,
embezzlement, and criminal misappropriation.
(b) All insurance required herein shall be written by
companies of recognized financial standing, satisfactory to Foothill, which
are authorized to do insurance business in the State of California. Such
insurance shall be in form satisfactory to Foothill, shall with respect to
hazard insurance and such other insurance as Foothill shall specify, name
as the loss payee thereunder Borrower and Foothill, as their interests may
appear, and shall contain a California Form 438BFU (NS) mortgagee
endorsement, or its local equivalent. Every policy of insurance referred
to in this Section shall contain an agreement by the insurer that it will not
cancel such policy except after thirty (30) days' prior written notice to
Foothill and that any loss payable thereunder shall be payable notwith-
standing any act or negligence of Borrower or Foothill which might, absent
such agreement, result in a forfeiture of all or a part of such insurance
payment.
(c) Original policies or certificates thereof satisfactory
to Foothill evidencing such insurance shall be delivered to Foothill at least
thirty (30) days prior to the expiration of the existing or preceding
policies. Borrower shall give Foothill prompt notice of any loss covered by
such insurance and Foothill shall have the right to adjust any loss.
Foothill shall have the exclusive right to adjust all losses in excess of One
Hundred Fifty Thousand Dollars ($150,000) payable under any such
insurance policies without any liability to Borrower whatsoever in respect
of such adjustments; provided, however that Foothill will consult with
Borrower with respect of such adjustments and will act in a commercially
reasonable manner in respect thereto. Any monies received as payment for
any loss in excess of One Hundred Fifty Thousand Dollars ($150,000) under
any insurance policy including, but not limited to, the insurance policies
mentioned above, shall be paid over to Foothill to be applied at the option
of Foothill either to the prepayment of the Obligations without premium, in
such order or manner as Foothill may elect, or shall be disbursed to
Borrower under stage payment terms satisfactory to Foothill for application
to the cost of repairs, replacements or restorations. All restorations shall
be effected with reasonable promptness and shall be of a value at least
equal to the value of the items or property to destroyed prior to such
damage or destruction. Upon the occurrence of an Event of Default, all
prepaid premiums shall be the sole and absolute property of Foothill to be
applied by Foothill to the payment of the Obligations in such order or form
as Foothill shall determine.
(d) Borrower shall not take out separate insurance
concurrent in form or contributing in the event of loss with that required
to be maintained under this Section 6.12, unless Foothill is included
thereon as named insured with the loss payable to Foothill under a
standard California 438BFU (NS) Mortgagee endorsement, or its local
equivalent. Borrower shall immediately notify Foothill whenever such
separate insurance is taken out, specifying the insurer thereunder and full
particulars as to the policies evidencing the same, and originals of such
policies shall immediately thereafter be provided to Foothill.
6.13 Tangible Net Worth. Tangible Net Worth shall not
decrease by more than Eight Million Dollars ($8,000,000) from March 31,
1994, measured on a fiscal quarter-end basis. In calculating the decrease
in Tangible Net Worth the following shall not be included: (a) conversions
of Indebtedness into equity, (b) forgiveness of Indebtedness, and (c) the
issuance of new equity securities by Borrower.
6.14 No Setoffs or Counterclaims. All payments hereunder and
under the other Loan Documents made by or on behalf of Borrower shall
be made without setoff or counterclaim and free and clear of, and without
deduction or withholding for or on account of, any federal, state, or local
taxes.
6.15 Location of Inventory and Equipment. Borrower shall
keep the Inventory and Equipment only at the locations identified on
Schedule 6.15; provided, however, that Borrower may amend Schedule 6.15
July 12, 1994 so long as such amendment occurs by written notice to
Foothill not less than thirty (30) days prior to the date on which the
Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States, and so long as, at the
time of such written notification, Borrower provides any financing
statements or fixture filings necessary to perfect and continue perfected
Foothill's security interests in such assets and also provides to Foothill a
landlord's waiver in form and substance satisfactory to Foothill.
6.16 Compliance with Laws. Borrower shall comply with the
requirements of all applicable laws, rules, regulations, and orders of any
governmental authority, including the Fair Labor Standards Act and the
ADA.
6.17 Employee Benefits.
(a) Borrower shall deliver to Foothill a written
statement by the chief financial officer of Borrower specifying the nature
of any of the following events and the actions which Borrower proposes to
take with respect thereto promptly, and in any event within ten (10) days
of becoming aware of any of them, and when known, any action taken or
threatened by the Internal Revenue Service, PBGC, Department of Labor,
or other party with respect thereto: (i) an ERISA Event with respect to
any Plan; (ii) the incurrence of an obligation to pay additional premium to
the PBGC under Section 4006(a)(3)(E) of ERISA with respect to any Plan;
and (iii) any lien on the assets of Borrower arising in connection with any
Plan.
(b) Borrower shall also promptly furnish to Foothill
copies prepared or received by Borrower or an ERISA Affiliate of: (i) at
the request of Foothill, each annual report (Internal Revenue Service Form
5500 series) and all accompanying schedules, actuarial reports, financial
information concerning the financial status of each Plan, and schedules
showing the amounts contributed to each Plan by or on behalf of Borrower
or its ERISA Affiliates for the most recent three (3) plan years; (ii) all
notices of intent to terminate or to have a trustee appointed to administer
any Plan; (iii) all written demands by the PBGC under Subtitle D of Title
IV of ERISA; (iv) all notices required to be sent to employees or to the
PBGC under Section 302 of ERISA or Section 412 of the IRC; (v) all written
notices received with respect to a Multiemployer Plan concerning (x) the
imposition or amount of withdrawal liability pursuant to Section 4202 of
ERISA, (y) a termination described in Section 4041A of ERISA, or (z) a
reorganization or insolvency described in Subtitle E of Title IV of ERISA;
(vi) the adoption of any new Plan that is subject to Title IV of ERISA or
Section 412 of the IRC by Borrower or any ERISA Affiliate; (vii) the
adoption of any amendment to any Plan that is subject to Title IV of ERISA
or Section 412 of the IRC, if such amendment results in a material increase
in benefits or Unfunded Benefit Liability; or (viii) the commencement of
contributions by Borrower or any ERISA Affiliate to any Plan that is
subject to Title IV of ERISA or Section 412 of the IRC.
6.18 Consigned Inventory. Borrower agrees that each
Inventory designation provided under Section 6.7 shall also separately
identify and value all Inventory consigned to third Persons.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not do any of the following without Foothill's
prior written consent:
7.1 Indebtedness. Create, incur, assume, permit, guarantee,
or otherwise become or remain, directly or indirectly, liable with respect
to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement or the
Combined Term Note;
(b) Indebtedness set forth in the latest financial
statements of Borrower submitted to Foothill on or prior to the Closing
Date;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith) so
long as: (i) the terms and conditions of such refinancings, renewals, or
extensions do not materially impair the prospects of repayment of the
Obligations by Borrower, (ii) the net cash proceeds of such refinancings,
renewals, or extensions do not result in an increase in the aggregate
principal amount of the Indebtedness so refinanced, renewed, or extended,
(iii) such refinancings, renewals, refundings, or extensions do not result
in a shortening of the average weighted maturity of the Indebtedness so
refinanced, renewed, or extended, and (iv) to the extent that Indebtedness
that is refinanced was subordinated in right of payment to the Obligations,
then the subordination terms and conditions of the refinancing
Indebtedness must be at least as favorable to Foothill as those applicable
to the refinanced Indebtedness.
7.2 Liens. Create, incur, assume, or permit to exist, directly
or indirectly, any lien on or with respect to any of its property or assets,
of any kind, whether now owned or hereafter acquired, or any income or
profits therefrom, except for Permitted Liens (including liens that are
replacements of Permitted Liens to the extent that the original
Indebtedness is refinanced under Section 7.1(e) and so long as the
replacement liens secure only those assets or property that secured the
original Indebtedness).
7.3 Restrictions on Fundamental Changes. Except as
provided in Schedule 7.4, enter into any acquisition, merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock, or
liquidate, wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose
of, in one transaction or a series of transactions, all or any substantial
part of its business, property, or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or substantially all of
the properties, assets, stock, or other evidence of beneficial ownership of
any Person.
7.4 Extraordinary Transactions and Disposal of Assets.
Except as provided in Schedule 7.4, enter into any transaction not in the
ordinary and usual course of Borrower's business, including the sale, lease,
or other disposition of, moving, relocation, or transfer, whether by sale or
otherwise, of any of Borrower's properties or assets (other than sales of
Inventory to buyers in the ordinary course of Borrower's business as
currently conducted and sales of obsolete Equipment in the ordinary
course of Borrower's business for prices at or above Borrower's book value
for such Equipment).
7.5 Change Name. Change Borrower's name, FEIN, business
structure, or identity, or add any new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person except by
endorsement or instruments or items of payment for deposit to the account
of Borrower or which are transmitted or turned over to Foothill and except
for the Continuing Guaranty in favor of Foothill, respecting UM&M's
obligations.
7.7 Restructure. Except as provided in Schedule 7.4 or as
previously disclosed to Foothill, make any change in Borrower's financial
structure, the principal nature of Borrower's business operations, or the
date of its fiscal year.
7.8 Prepayments. Except in connection with a refinancing
permitted by Section 7.1(e), prepay any Indebtedness owing to any third
Person.
7.9 Change of Control. Cause, permit, or suffer, directly or
indirectly, any Change of Control.
7.10 Capital Expenditures. Make any capital expenditure, in
any fiscal year in excess of Borrower's depreciation for such fiscal year.
7.11 Consignments. Consign any Inventory (except to the
Jonathan Logan division of UM&M or Burlington Coat Factory), sale or
return, sale on approval, or other conditional terms of sale.
7.12 Distributions. Make any distribution or declare or pay
any dividends (in cash or in stock) on, or purchase, acquire, redeem, or
retire any of Borrower's capital stock, of any class, whether now or
hereafter outstanding.
7.13 Accounting Methods. Modify or change its method of
accounting or enter into, modify, or terminate any agreement currently
existing, or at any time hereafter entered into with any third party
accounting firm or service bureau for the preparation or storage of
Borrower's accounting records without said accounting firm or service
bureau agreeing to provide Foothill information regarding the Collateral or
Borrower's financial condition.
7.14 Investments. Except for employee loans not to exceed
One Hundred Thousand Dollars ($100,000) in the aggregate with UM&M
outstanding at any one time, directly or indirectly make or acquire any
beneficial interest in (including stock, partnership interest, or other
securities of), or make any loan, advance, or capital contribution to, any
Person.
7.15 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of
Borrower except for transactions that are in the ordinary course of
Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Foothill, and that are no less favorable to Borrower than would
be obtained in arm's length transaction with a non-Affiliate.
7.16 Suspension. Except as provided in Schedule 7.4,
suspend or go out of a substantial portion of its business.
7.17 Compensation. Increase the annual fee or per-meeting
fees paid to directors during any year by more than fifteen percent (15%)
over the prior year; pay or accrue total cash compensation, during any
year, to officers and senior management employees in an aggregate amount
in excess of one hundred fifteen percent (115%) of that paid or accrued in
the prior year.
7.18 Use of Proceeds. Use the proceeds of the advances
made hereunder for any purpose other than: (a) on the Closing Date, to
repay in full the outstanding principal, accrued interest, and accrued fees
and expenses owing to the Old Lender; (b) to pay transactional fees, costs
and expenses incurred in connection with this Agreement; and (c)
thereafter, consistent with the terms and conditions hereof, for its lawful
and permitted corporate purposes.
7.19 Change in Location of Chief Executive Office; Inventory
and Equipment with Bailees. Borrower covenants and agrees that it will
not, without thirty (30) days prior written notification to Foothill, relocate
its chief executive office to a new location and so long as, at the time of
such written notification, Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected Foothill's
security interests and also provides to Foothill a landlord's waiver in form
and substance satisfactory to Foothill. The Inventory and Equipment shall
not at any time now or hereafter be stored with a bailee, warehouseman,
or similar party without Foothill's prior written consent.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of
principal, interest (including any interest which, but for the provisions of
the Bankruptcy Code, would have accrued on such amounts), fees and
charges due Foothill, reimbursement of Foothill Expenses, or other amounts
constituting Obligations), and if such failure results or would result in an
Overadvance by virtue of payment of interest and such amount is not fully
paid within five (5) days;
8.2 If Borrower fails or neglects to perform, keep, or
observe any material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Foothill;
8.3 If there is a material impairment of the value or priority
of Foothill's security interests in the Collateral;
8.4 If any material portion of Borrower's properties or assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by Borrower;
8.6 If an Insolvency Proceeding is commenced against
Borrower and any of the following events occur: (a) Borrower consents to
the institution of the Insolvency Proceeding against it; (b) the petition
commencing the Insolvency Proceeding is not timely controverted; (c) the
petition commencing the Insolvency Proceeding is not dismissed within
forty-five (45) calendar days of the date of the filing thereof; provided,
however, that, during the pendency of such period, Foothill shall be
relieved of its obligation to make additional advances hereunder; (d) an
interim trustee is appointed to take possession of all or a substantial
portion of the properties or assets of, or to operate all or any substantial
portion of the business of, Borrower; or (e) an order for relief shall have
been issued or entered therein;
8.7 If Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material
part of its business affairs for three (3) Business Days or more;
8.8 If a notice of lien, levy, or assessment is filed of record
with respect to any of Borrower's properties or assets (and the same
cannot be adequately reserved against by Foothill or is not discharged
within ten (10) days of its filing) by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, or if any taxes or debts owing at any
time hereafter to any one or more of such entities becomes a lien, whether
choate or otherwise, upon any of Borrower's properties or assets and the
same is not paid on the payment date thereof;
8.9 If a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower's properties or assets;
8.10 If there is a default in any material agreement to which
Borrower is a party with one or more third Persons where such third
Persons have accelerated the maturity of Borrower's obligations thereunder;
8.11 If Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment
to the payment of the Obligations, except to the extent such payment is
permitted by the terms of the subordination provisions applicable to such
Indebtedness;
8.12 If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or report
made to Foothill by Borrower or any officer, employee, agent, or director
of Borrower, or if any such warranty or representation is withdrawn;
8.13 If the obligation of UM&M under the UM&M Guaranty is
limited or terminated by operation of law or terminated or purported to be
terminated by UM&M thereunder, or UM&M becomes the subject of an
Insolvency Proceeding;
8.14 If (a) with respect to any Plan, there shall occur any of
the following which could reasonably be expected to have a material
adverse effect on the financial condition of Borrower: (i) the violation of
any of the provisions of ERISA; (ii) the loss by a Plan intended to be a
Qualified Plan of its qualification under Section 401(a) of the IRC; (iii) the
incurrence of liability under Title IV of ERISA; (iv) a failure to make full
payment when due of all amounts which, under the provisions of any Plan
or applicable law, Borrower or any ERISA Affiliate is required to make; (v)
the filing of a notice of intent to terminate a Plan under Sections 4041 or
4041A of ERISA; (vi) a complete or partial withdrawal of Borrower or an
ERISA Affiliate from any Plan; (vii) the receipt of a notice by the plan
administrator of a Plan that the PBGC has instituted proceedings to
terminate such Plan or appoint a trustee to administer such Plan; (viii) a
commencement or increase of contributions to, or the adoption of or the
amendment of, a Plan; and (ix) the assessment against Borrower or any
ERISA Affiliate of a tax under Section 4980B of the IRC; or (b) if there
shall be any Unfunded Benefit Liability under any of the Plans of Borrower
and its ERISA Affiliates other than an Unfunded Benefit Liability of Plans
of UM&M; or
8.15 If there shall occur an "Event of Default" as defined in
the UM&M Loan Agreement.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Rights and Remedies. Upon the occurrence of an Event
of Default Foothill may, at its election, without notice of its election and
without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrower and Foothill;
(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of Foothill, but
without affecting Foothill's rights and security interests in the Collateral
and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers
advisable, and in such cases, Foothill will credit Borrower's loan account
with only the net amounts received by Foothill in payment of such
disputed Accounts after deducting all Foothill Expenses incurred or
expended in connection therewith;
(e) Cause Borrower to hold all returned Inventory in
trust for Foothill, segregate all returned Inventory from all other property
of Borrower or in Borrower's possession and conspicuously label said
returned Inventory as the property of Foothill;
(f) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Foothill considers
necessary or reasonable to protect its security interests in the Collateral.
Borrower agrees to assemble the Collateral if Foothill so requires, and to
make the Collateral available to Foothill as Foothill may designate.
Borrower authorizes Foothill to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest, or compromise any encumbrance, charge,
or lien that in Foothill's determination appears to conflict with its security
interests and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned premises, Borrower hereby grants
Foothill a license to enter into possession of such premises and to occupy
the same, without charge, for up to one hundred twenty (120) days in
order to exercise any of Foothill's rights or remedies provided herein, at
law, in equity, or otherwise;
(g) Without notice to Borrower (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of Section 9505 of the
Code), set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Foothill (including any amounts received in
the Lock Boxes), or (ii) indebtedness at any time owing to or for the credit
or the account of Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of Borrower held by Foothill, and any amounts received in the
Lock Boxes, to secure the full and final repayment of all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Collateral. Foothill is hereby granted a license
or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a
similar nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to Foothill's benefit;
(j) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions, for cash
or on terms, in such manner and at such places (including Borrower's
premises) as Foothill determines is commercially reasonable. It is not
necessary that the Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Collateral as follows:
(1) Foothill shall give Borrower and each holder
of a security interest in the Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time and place of public sale,
or, if the sale is a private sale or some other disposition other than a
public sale is to be made of the Collateral, then the time on or after which
the private sale or other disposition is to be made;
(2) The notice shall be personally delivered or
mailed, postage prepaid, to Borrower as provided in Section 12, at least
five (5) days before the date fixed for the sale, or at least five (5) days
before the date on or after which the private sale or other disposition is
to be made; no notice needs to be given prior to the disposition of any
portion of the Collateral that is perishable or threatens to decline speedily
in value or that is of a type customarily sold on a recognized market.
Notice to Persons other than Borrower claiming an interest in the Collateral
shall be sent to such addresses as they have furnished to Foothill;
(3) If the sale is to be a public sale, Foothill also
shall give notice of the time and place by publishing a notice one time at
least five (5) days before the date of the sale in a newspaper of general
circulation in the county in which the sale is to be held;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Foothill to Borrower.
9.2 Remedies Cumulative. Foothill's rights and remedies
under this Agreement, the Loan Documents, and all other agreements shall
be cumulative. Foothill shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity.
No exercise by Foothill of one right or remedy shall be deemed an election,
and no waiver by Foothill of any Event of Default shall be deemed a
continuing waiver. No delay by Foothill shall constitute a waiver, election,
or acquiescence by it.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If Borrower fails to pay any monies (whether taxes, rents,
assessments, insurance premiums, or otherwise) due to third Persons, or
fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement or the
Mortgages, then, to the extent that Foothill reasonably determines that
such failure by Borrower could have a material adverse effect on Foothill's
interests in the Collateral, in its discretion and upon five (5) days prior
notice to Borrower, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves in
Borrower's loan account as Foothill deems necessary to protect Foothill
from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type described in Section 6.12, and take any
action with respect to such policies as Foothill deems prudent. Any such
amounts paid by Foothill shall constitute Foothill Expenses. Any such
payments made by Foothill shall not constitute an agreement by Foothill to
make similar payments in the future or a waiver by Foothill of any Event
of Default under this Agreement. Foothill need not inquire as to, or
contest the validity of, any such expense, tax, security interest,
encumbrance, or lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due
and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Borrower waives demand, protest,
notice of protest, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Foothill on
which Borrower may in any way be liable.
11.2 Foothill's Liability for Collateral. So long as Foothill
complies with its obligations, if any, under Section 9207 of the Code,
Foothill shall not in any way or manner be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in
the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other Person. All risk of loss, damage, or
destruction of the Collateral shall be borne by Borrower.
11.3 Indemnification. Borrower agrees to defend, indemnify,
save, and hold all Indemnified Persons harmless against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any
other Person arising out of or relating to the transactions contemplated by
this Agreement or any other Loan Document including, but not limited to,
those claimed by any broker or finder unless such obligations, demands,
claims or liabilities result from the gross negligence or willful misconduct
of such Indemnified Person, and (b) all Losses in any way suffered,
incurred, or paid as a result of or in any way arising out of, following, or
consequential to the transactions contemplated by this Agreement or any
other Loan Document unless such Losses result from the gross negligence
or willful misconduct of such Indemnified Person. This provision shall
survive the termination of this Agreement.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by registered or certified
mail, postage prepaid, return receipt requested, or by prepaid telex, TWX,
telefacsimile, or telegram (with messenger delivery specified) to Borrower
or to Foothill, as the case may be, at its address set forth below:
If to Borrower:VICTORIA CREATIONS, INC.
30 Jefferson Park Road
Warwick, Rhode Island 02888
Attn.: Treasurer
Telefacsimile No. (401) 467-7181
With copy to: UNITED MERCHANTS AND MANUFACTURERS, INC.
1650 Palisade Avenue
Teaneck, New Jersey 07666
Attn.: Treasurer
Telefacsimile No. (201) 837-8689
If to Foothill:FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division Manager
Telefacsimile No. (310) 479-2690
The parties hereto may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing manner
given to the other. All notices or demands sent in accordance with this
Section 12, other than notices by Foothill in connection with Sections 9504
or 9505 of the Code, shall be deemed received on the earlier of the date
of actual receipt or three (3) days after the deposit thereof in the mail.
Borrower acknowledges and agrees that notices sent by Foothill in
connection with Sections 9504 or 9505 of the Code shall be deemed sent
when deposited in the mail or transmitted by telefacsimile or other similar
method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES
AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT
WHERE IT IS NECESSARY TO ENFORCE OR PROTECT FOOTHILL'S SECURITY
INTERESTS IN THE COLLATERAL IN WHICH FOOTHILL SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF BORROWER
AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE
LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND FOOTHILL
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY
AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by Foothill
four (4) months after they are delivered to or received by Foothill, unless
Borrower requests, in writing, the return of said documents, schedules, or
other papers and makes arrangements, at Borrower's expense, for their
return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and
deemed effective when executed by Borrower and Foothill.
15.2 Successors and Assigns. This Agreement shall bind and
inure to the benefit of the respective successors and assigns of each of
the parties; provided, however, that Borrower may not assign this
Agreement or any rights or duties hereunder without Foothill's prior
written consent and any prohibited assignment shall be absolutely void.
No consent to an assignment by Foothill shall release Borrower from its
Obligations. Foothill may assign this Agreement and its rights and duties
hereunder and no consent or approval by Borrower is required in
connection with any such assignment. Foothill reserves the right to sell,
assign, transfer, negotiate, or grant participations in all or any part of,
or any interest in Foothill's rights and benefits hereunder. In connection
with any such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have
relating to Borrower or Borrower's business. To the extent that Foothill
assigns its rights and obligations hereunder to a third Person, Foothill
shall thereafter be released from such assigned obligations to Borrower and
such assignment shall effect a novation between Borrower and such third
Person.
15.3 Section Headings. Headings and numbers have been set
forth herein for convenience only. Unless the contrary is compelled by
the context, everything contained in each section applies equally to this
entire Agreement.
15.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against
Foothill or Borrower, whether under any rule of construction or otherwise.
On the contrary, this Agreement has been reviewed by all parties and shall
be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of all
parties hereto.
15.5 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this Agreement
for the purpose of determining the legal enforceability of any specific
provision.
15.6 Amendments in Writing. This Agreement can only be
amended by a writing signed by both Foothill and Borrower.
15.7 Counterparts; Telefacsimile Execution. This Agreement
may be executed in any number of counterparts and by different parties
on separate counterparts, each of which, when executed and delivered,
shall be deemed to be an original, and all of which, when taken together,
shall constitute but one and the same Agreement. Delivery of an executed
counterpart of this Agreement by telefacsimile shall be equally as effective
as delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile
also shall deliver a manually executed counterpart of this Agreement but
the failure to deliver a manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by Borrower or any guarantor of
the Obligations or the transfer by either or both of such parties to
Foothill of any property of either or both of such parties should for any
reason subsequently be declared to be void or voidable under any state
or federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and
other voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required to repay
or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such
Voidable Transfer, or the amount thereof that Foothill is required or elects
to repay or restore, and as to all reasonable costs, expenses, and attorneys
fees of Foothill related thereto, the liability of Borrower or such guarantor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
15.9 Lending Relationship. Nothing contained in the this
Agreement or any of the other Loan Documents shall be deemed or
construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venture, or any
association between Borrower and Foothill, it being expressly understood
and agreed that nothing contained in this Agreement or the other Loan
Documents shall be deemed to create any relationship between Borrower
and Foothill other that the relationship of borrower and lender.
15.10Integration. This Agreement, together with the other
Loan Documents, reflect the entire understanding of the parties with
respect to the transactions contemplated hereby and shall not be
contradicted or qualified by any other agreement, oral or written, before
the date hereof.
15.11Confidentiality. Foothill agrees (on behalf of itself and
each of its Affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential in accordance with its
customary business practices, any non-public information supplied to it by
the Borrower, provided that nothing herein shall limit the disclosure of any
such information (i) to the extent required by statute, rule, regulation or
judicial process, (ii) to counsel to Foothill, (iii) to regulators, auditors or
accountants, (iv) in connection with any litigation to which Foothill is a
party or (v) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective
assignee or participant) first agrees to this confidentiality provision in
writing. In connection with any potential disclosure under (i) or (iii)
above, Foothill agrees that it will promptly advise the Borrower of any
request for disclosure and use reasonable efforts to provide the Borrower
with as much time as possible prior to complying with such request in
order to allow the Borrower to obtain an injunction or stay to the release
of such information or an order providing for the handling of such
information in a confidential matter.
15.12Limitation of Liability. Except for a Person's willful
misconduct, none of Borrower's officers, directors, agents, employees, nor
any heir, successor or assign of the foregoing shall be personally liable
(whether by operation or law or otherwise) for payments due hereunder
or under any other Loan Document or for the performance of any
Obligations. The sole recourse of Foothill for satisfaction of the Obligations
shall be against the Borrower and guarantor of Borrower's Obligations and
the assets of Borrower and any guarantor and not against any other
Person.
15.13Expenses. Borrower and UM&M have previously paid
Foothill the combined sum of Fifty Thousand Dollars ($50,000) in partial
payment of Foothill Expenses, and Foothill hereby acknowledges receipt of
such payment. Borrower shall not be obligated to pay any other Foothill
Expenses except for: (a) service charges, commissions, fees and costs
incurred by Foothill relating to L/Cs guaranteed by Foothill, and (b) other
Foothill Expenses arising after the occurrence and during the continuance
of an Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
FOOTHILL CAPITAL CORPORATION,
a California corporation
/s/ Scott Diehl
By Scott Diehl
Title: Senior Vice President
VICTORIA CREATIONS, INC.,
a Rhode Island corporation
/s/ Judith A. Nadzick
By Judith A. Nadzick
Title: Assisstant Secretary
<PAGE>
SCHEDULE 7.4 TO LOAN AND SECURITY AGREEMENT
REPAYMENT OF OBLIGATIONS FROM SALE PROCEEDS
Borrower may refinance its Obligations with another Person or sell
all or substantially all of its assets so long as Borrower pays not less than
Fifteen Million Dollars ($15,000,000) to Foothill, and such monies are
sufficient to fully repay its revolving advances pursuant to Section 2.1 of
the Agreement and to pay Foothill an additional Two Million Dollars
($2,000,000) to be applied to the Combined Term Note or against advances
owed by Borrower to UM&M.
Exhibit 99.9
NEWS FROM...
UNITED MERCHANTS AND MANUFACTURERS, INC.
1650 Palisade Avenue Teaneck, NJ 07666 201-837-1700
For Immediate Release July 5, 1994
United Merchants and Manufacturers, Inc. (the "Company")
reported that, in accordance with its previously announced
agreements entered into in November 1993 with its principal
secured lender, it had succeeded in reducing its indebtedness to
the lender to the targeted amount as of June 30, 1994. In
accordance with the agreements, the lender has accepted, in full
satisfaction of the balance (approximately $63.4 million) of the
Company's indebtedness to the lender, a long-term subordinated
income note in the principal amount of $30 million as detailed
in the agreement. The satisfaction of this indebtedness by the
Company will result in an extraordinary, non-cash gain from
retirement of debt in excess of $30 million, which will be
included in the Company's statement of operations for its fiscal
year ended June 30, 1994.
The Company reduced its indebtedness to the targeted amount
through the previously announced sales of two of the Company's
operating divisions, sales of certain other assets, and a
borrowing of approximately $29 million, directly and through a
subsidiary, from another lender under a senior loan and
collateral agreement. The borrowing from the new lender is
secured by substantially all of the Company's assets.
United Merchants and Manufacturers, Inc. is a diversified
company engaged principally in the manufacture and distribution
of textiles and related products and the design, manufacture and
distribution of accessories. The Company operates 54 discount
outlet stores that sell the Company's and other manufacturers
products.
<PAGE>
