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):
July 9, 1999
KASPER A.S.L., LTD.
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(Exact Name of Registrant as Specified in its Charter)
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<S> <C> <C>
DELAWARE 0-24179 22-3497645
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(State of other Jurisdiction of (Commission File Number) (I.R.S. Employer
Incorporation) Identification Number)
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77 METRO WAY
SECAUCUS, NEW JERSEY 07094
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(Address of Principal Executive Offices) (Zip Code)
(201) 864-0328
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(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
#764330 v5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 9, 1999, Kasper A.S.L., Ltd. ("Kasper") completed the
previously announced purchase of certain trademarks, including ANNE KLEIN(R),
ANNE KLEIN II(R) and A LINE ANNE KLEIN(TM) and the "Lion Head Design" from Anne
Klein Company LLC ("Anne Klein"). The aggregate purchase price for these assets
was $60,000,000. On July 12, 1999, Kasper issued a press release (the "July 12th
Press Release") announcing the completion of the purchase. The purchase was
funded by the Company's Revolving Credit Facility referred to below.
ITEM 5. OTHER EVENTS
Kasper also announced in the July 12th Press Release that it
had entered into a Revolving Credit Facility, dated as of July 9, 1999 (the
"Revolving Credit Facility"), led by The Chase Manhattan Bank in order to fund
Kasper's working capital requirements and to finance the purchase of the Anne
Klein trademarks. The Revolving Credit Facility provides Kasper with two
revolving credit lines aggregating up to $125 million and will increase to $160
million upon the satisfaction of certain conditions.
In addition, Kasper announced that, as a result of the closing
of the Revolving Credit Facility, the Second Supplemental Indenture (the "Second
Supplemental Indenture"), dated as of June 16, 1999, to the Indenture governing
Kasper's 12.75% Senior Notes due 2004 (the "Senior Notes"), has become
effective.
The press release, which is incorporated by reference herein and made a
part hereof, is filed with this Current Report on Form 8-K as Exhibit 99.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
It is impracticable for Kasper to file the financial statements for the
acquired business at this time. The required financial statements will be filed
in an amendment to this Report as soon as practicable, but not later than
September 22, 1999.
(b) Pro Forma Financial Information
It is impracticable for Kasper to file the pro forma financial
information for the acquired business at this time. The required pro forma
financial information will be filed in an amendment to this Report as soon as
practicable, but not later than September 22, 1999.
(c) Exhibits
Exhibit No. Description
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2 Asset Purchase Agreement, dated as of March
15, 1999, among Kasper A.S.L., Ltd., Anne
Klein Company LLC and Takihyo Inc.
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10.1 Amended and Restated Credit Agreement, dated
as of July 9, 1999, among Kasper A.S.L.,
Ltd., as Borrower, the guarantors named
therein, the lenders named therein, The
Chase Manhattan Bank, as administrative and
collateral agent, and The CIT Group /
Commercial Services, Inc., as collateral
monitor
10.2 Second Supplemental Indenture, dated as of
June 16, 1999, to the Indenture, dated as of
June 1, 1997 and effective as of June 4,
1997, as amended, between Kasper A.S.L.,
Ltd. (f/k/a Sassco Fashions, Ltd.) and IBJ
Whitehall Bank & Trust Company (f/k/a IBJ
Schroder Bank & Trust Company), as Trustee.
99 Press Release dated July 12, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf of the
undersigned, thereunto duly authorized.
Dated: July 13, 1999
KASPER A.S.L., LTD.
By: /s/ Dennis P. Kelly
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Dennis P. Kelly
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
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2 Asset Purchase Agreement, dated as of March
15, 1999, among Kasper A.S.L., Ltd., Anne
Klein Company LLC and Takihyo Inc.
10.1 Amended and Restated Credit Agreement, dated
as of July 9, 1999, among Kasper A.S.L.,
Ltd., as Borrower, the guarantors named
therein, the lenders named therein, The
Chase Manhattan Bank, as administrative and
collateral agent, and The CIT Group /
Commercial Services, Inc., as collateral
monitor
10.2 Second Supplemental Indenture, dated as of
June 16, 1999, to the Indenture, dated as of
June 1, 1997 and effective as of June 4,
1997, as amended, between Kasper A.S.L.,
Ltd. (f/k/a Sassco Fashions, Ltd.) and IBJ
Whitehall Bank & Trust Company (f/k/a IBJ
Schroder Bank & Trust Company), as Trustee.
99 Press Release dated July 12, 1999.
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Exhibit 2
ASSET PURCHASE AGREEMENT
BY AND AMONG
KASPER A.S.L., LTD.
ANNE KLEIN COMPANY LLC
AND
TAKIHYO INC.
DATED AS OF MARCH 15, 1999
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of March 15, 1999 by and among
KASPER A.S.L., LTD., a corporation having its principal office at 77 Metro Way,
Secaucus, New Jersey 07094 ("Purchaser"), ANNE KLEIN COMPANY LLC, a limited
liability company having its principal office at 11 West 42nd Street, New York,
New York 10036 ("Seller") and TAKIHYO INC., ("Takihyo") a corporation having its
principal office at 11 West 42nd Street, New York, New York 10036.
W I T N E S S E T H:
WHEREAS, Seller owns all right, title and interest to the trademarks "Anne
Klein," "Anne Klein II" and "A Line Anne Klein," and any and all other
trademarks, trade names, logos and intellectual property rights, as set forth on
Schedule 6.07 hereto, as well as certain other assets relating thereto;
WHEREAS, Seller desires to sell, and Purchaser wishes to purchase, the
Assets (as hereinafter defined) subject to the terms and conditions of this
Agreement;
WHEREAS, in connection with the execution and delivery of this Agreement,
on the date hereof, (i) Purchaser and Seller are entering into a license
agreement (the "License Agreement") pursuant to which Seller is licensing to
Purchaser certain of Seller's trademarks; (ii) Purchaser and Seller are entering
into an agreement (the "Omnibus Agreement") pursuant to which, among other
things, Purchaser is agreeing to purchase certain of Seller's inventory, (iii)
Purchaser and Seller are entering into a management consulting and services
agreement (the "Management Consulting Agreement") pursuant to which Purchaser is
providing certain services to Seller relating to the wind down of certain
aspects of Seller's business and (iv) Purchaser and Seller are
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entering into a services agreement (the "Services Agreement") pursuant to which
Seller is providing certain services to Purchaser in connection with Purchaser's
operations pursuant to the License Agreement (collectively, the "Transaction
Documents" and the transactions contemplated by the Transaction Documents, the
"Anne Klein Transactions");
WHEREAS, the consummation of certain transactions contemplated by this
Agreement and certain of the Transaction Documents, and the effectiveness of
certain provisions of the License Agreement, are subject to, among other things,
receipt of FTC Approval (as defined in Section 11.06 of this Agreement).
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
Condition of FTC Approval; Early Termination of this Agreement
1.01 FTC Approval; Early Termination. The purchase of the Assets, the
payment of the Purchase Price (as hereinafter defined), the assumption of the
obligations of Seller under the Trademark License Agreements, the Other
Trademark Agreements and the Other Assumed Agreements (all as hereinafter
defined) and the consummation of the other transactions contemplated hereby,
except for the provisions of Section 11.06, are expressly and absolutely subject
to obtaining FTC Approval. In the event that FTC Approval is not obtained prior
to May 31, 1999, or on such other date upon which Purchaser and Seller shall
mutually agree in writing, then (a) this Agreement (other than the provisions of
Article X to the extent such Article related to the indemnification obligations
of Seller and Takihyo of the Purchaser Indemnified Parties (as hereinafter
defined) in respect of Excluded Liabilities (as hereinafter
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defined) and any other provision hereunder that by its terms expressly shall
survive the termination of this Agreement) shall terminate in its entirety as of
such date and (b) except for the foregoing, none of the parties hereto shall
have any further rights or obligations of any nature pursuant hereto or thereto.
ARTICLE II
Definitions
2.01 Defined Terms. As used in this Agreement, the following defined terms
shall have the meanings assigned to them below, which meanings shall be
applicable equally to the singular and plural forms of the terms so defined:
"Actual Knowledge" of, or "Actually Known" to, or "knowledge" of, Seller or
Takihyo, or Seller or Takihyo becoming "aware" or similar expressions shall mean
the actual knowledge of Frank Mori, Tomio Taki, Beverly Katz, Lawrence Stern, or
Barbara Friedman as long as they are employed and (if they are not so employed)
their respective replacements or substitutes.
"Agreement" shall mean this Asset Purchase Agreement, together with all
schedules and exhibits hereto, as the same may be supplemented, modified,
amended or restated from time to time in the manner provided herein.
"Apparel Business" shall mean the development, design, production,
marketing, distribution and sale by Seller of women's and girl's apparel under
the Trademarks.
"Asset" and "Assets" shall mean all right, title and interest of Seller in
and to any or all of the following:
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(a) all state (including common law), federal and foreign trademarks,
service marks and trade names, corporate names, certification marks, collective
marks, company names, business names, fictitious business names, d/b/a's, domain
names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, as well as any and all patents,
ideas, inventions, services, know-how, programs, procedures, strategies,
customer lists and other trade secrets and works of authorship, including any
copyrights thereof, in each case relating to or derivative of the trademarks
"Anne Klein," "Anne Klein II," "A Line Anne Klein" and the "Lion Head Design",
whether now existing or hereafter acquired by Seller, and all developments,
refinements, documentation, registrations and recordings thereof, and all
applications filed or to be filed in connection therewith, including
registrations and applications in the United States Patent and Trademark Office
and U.S. Copyright Office, any State of the United States or any other country
or any political subdivision thereof, and all extensions or renewals thereof,
including the trademarks identified on Schedule 6.07 of the Seller Disclosure
Schedules (as hereinafter defined) attached hereto (as the same may be amended,
modified or supplemented from time to time), and the right (but not the
obligation) to register claims under any state or federal trademark, copyright
or patent law or regulation or any trademark, copyright or patent law or
regulation of any foreign country and to apply for, renew and extend any of the
same, to bring opposition or cancellation proceedings and all rights arising
therefrom throughout the world (collectively, the "Trademarks");
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(b) all claims, causes of action and rights to sue for past, present or
future infringement or unconsented use of any Trademarks and all rights arising
therefrom and pertaining thereto;
(c) the goodwill of the Business symbolized by the Trademarks or otherwise
appurtenant thereto;
(d) Subject to obtaining required consents or approvals from the other
parties thereto, all right, title and interest of Seller in and to, and all of
Seller's obligations from and after the Closing and which arise after the
Closing under (A) any and all license, distribution, trademark, trade name or
other agreements to which Seller is a party relating to the use of any of the
Trademarks and any amendments, modifications, waivers or supplements thereto as
set forth on Schedule 6.05 (collectively, the "Trademark License Agreements"),
and the New Trademark Agreements (as hereinafter defined) and License Amendments
(as hereinafter defined) entered into pursuant to Section 11.02, in each case
which are in effect on the Closing Date; (B) any and all concurrent use
agreements, registered user agreements, settlement agreements or consents to
which Seller is a party relating to the Trademarks as set forth on Schedule 6.05
and such of the foregoing types of agreements as are entered into between the
date hereof and the Closing pursuant to Section 11.02 (collectively, the "Other
Trademark Agreements"), in each case which are in effect on the Closing Date,
(C) all other agreements to which Seller is a party related to the use of the
Assets, including, without limitation, advertising agreements, as set forth on
Schedule 6.05 without giving effect to any Updates other than with respect to
agreements Seller shall enter into in the ordinary course of business during the
period from and after the date hereof to the Closing of the following types:
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(1) advertising agreements and freelance design services agreements in
accordance with Trademark License Agreements, New Trademark Agreements and
License Amendments and (2) agreements for the design and production of
promotional, packaging and similar materials in connection with Trademark
License Agreements, New Trademark Agreements and License Amendments
(collectively, the "Other Assumed Agreements"), in each case which are in effect
on the Closing Date;
(e) except as otherwise provided in the Transaction Documents, all proceeds
of any and all the foregoing to the extent arising from or relating to the
Trademark License Agreements, the Other Trademark Agreements, the Other Assumed
Agreements or the operation of the Business after Closing; and
(f) all books and records of Seller relating to the foregoing, including
Seller's style books, any trademark usage manuals or any other documents
relating to the use of the Trademarks.
"Bank Pledge" shall mean the security interests (now existing or hereafter
granted) of The Chase Manhattan Bank, First Union National Bank and Chase
Equipment Leasing, Inc., and all of their respective assignees and participating
lenders, in all Seller's existing and future domestic and foreign inventory,
accounts, equipment under certain equipment leases, Trademarks and Existing
Trademark Agreements (as hereinafter defined) or other assets as may be
requested by such lenders and the proceeds of the foregoing.
"Business" shall mean the business of Seller directly or indirectly
relating to or arising from the ownership and/or use of the Assets other than
the Apparel Business.
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"Business Day" shall mean any day other than any Saturday, Sunday or other
applicable U.S. federal or New York State holiday. "Confidentiality Agreement"
shall mean that certain letter agreement between Takihyo and the Purchaser dated
November 23, 1998 (executed by Purchaser on November 24, 1998).
"Loss" shall mean any loss, damage, liability, claim, demand, action, suit,
investigation, proceeding, settlement, judgment, award, arbitration, fine,
penalty, tax, fee, charge, cost or expense (including reasonable attorneys' and
professional advisor's fees, disbursements and other expenses and any costs of
investigation); provided, that any Loss shall be deemed reduced by the amount of
any insurance proceeds received in connection therewith and any offsetting tax
benefit accruing to the claiming party or its affiliates.
"Material Adverse Event" shall mean (a) the termination or expiration (but
not the expiration of the term of any Trademark License Agreement for which a
new term commences upon such expiration) of Trademark License Agreements after
the date hereof pursuant to which the aggregate royalties (including percentage
and minimum royalties) paid or payable thereunder during calendar year 1998
exceeded $2,000,000 (excluding additional royalties that may have been or may
become payable as the result of an audit by Seller or any of its Representatives
pursuant to the terms of any such agreement) or (b) a default in the payment of
royalties (whether percentage or minimum royalties) under the Trademark License
Agreements (excluding additional royalties that may have been or may become
payable as the result of an audit by Seller or any of its Representatives
pursuant to the terms of any such agreement) in an amount as of the date
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of determination equal to $2,000,000 or more after the respective cure periods
set forth in such agreements (but without giving effect to any requirement of
notice by any party).
"Organizational Documents" shall include (without limitation) each and any
of the following with respect to any entity: (a) the articles of incorporation,
certificate of incorporation, by-laws, partnership certificate, partnership
agreement, limited liability company certificate of formation, limited liability
company operating agreement and/or any and all other constituent documents of
such entity, if any; (b) any resolution with continuing effect adopted by the
board of directors, stockholders, members, managing partners or managers of such
entity and/or any committee thereof; or (c) any term or provision of any written
agreement or trust to which such entity is a party respecting the securities or
other ownership interests issued by such entity or any related rights; in each
case, whether now or hereafter existing, and as each has been and hereafter may
be supplemented, modified, amended or restated from time to time.
"Person" shall mean any individual, firm, company, corporation,
partnership, trust, body of persons, joint venture, governmental authority,
labor organization, or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Purchase Price" shall mean the price to be paid by Purchaser for the
purchase of the Assets as provided in Section 4.01.
"Representative" and "Representatives" shall mean, with respect to
Purchaser, its directors, officers, financial advisors, counsel, independent
public accountants, bankers, financiers and other representatives, and, with
respect to Seller and Takihyo, their respective members, stockholders,
directors, officers, financial advisors,
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counsel, independent public accountants, bankers, financiers, controlling
persons and other representatives.
"Transfer Documents" shall mean such assignments, instruments and other
documents evidencing (i) the sale, assignment or other transfer or delivery of
any Asset to Purchaser, all as reasonably requested by Purchaser and reasonably
acceptable to Seller (including, without limitation, the bill of sale in
substantially the form attached hereto as Exhibit A) and (ii) the assignment to
and assumption by the Purchaser of the Trademark License Agreements, the Other
Trademark Agreements and the Other Assumed Agreements, all as reasonably
requested by Seller and reasonably acceptable to Purchaser (including, without
limitation, an assignment and assumption agreement in substantially the form
attached hereto as Exhibit B).
ARTICLE III
Purchase and Sale of Assets; Assumption of Liabilities
3.01 Sale and Purchase of Assets; Assumption of Liabilities. Subject to the
terms and conditions set forth herein:
(a) Assets. At Closing (as hereinafter defined), Seller will sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser hereby agrees
to accept and purchase from Seller, in exchange for the Purchase Price specified
in Section 4.01 hereof, all Seller's right, title and interest in and to the
Assets, free and clear of all liens, claims, pledges, security interests and any
and all other encumbrances, including, without limitation, the Bank Pledge, (the
"Encumbrances") other than (a) the Trademark License Agreements, Other Trademark
Agreements and Other Assumed Agreements which are in effect on the Closing Date,
(b) Seller's right to continue using the Trademarks as
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described in Section 11.11 of this Agreement and Section 2.01(a)(ii) of the
License Agreement and (c) Encumbrances created by or imposed upon Purchaser.
(b) Assumption of Liabilities. At Closing, Seller will assign to Purchaser,
and Purchaser will assume and agree to pay, perform and discharge when due and
payable, in accordance with their respective terms, all liabilities and
obligations of Seller from and after the Closing which arise after the Closing
Date, pursuant to the Trademark License Agreements, the Other Trademark
Agreements, the Other Assumed Agreements, and the New Trademark Agreements and
the License Amendments entered into pursuant to Section 11.02 and, in each case,
which have not terminated or expired prior to the Closing Date, subject to
obtaining any required consent for such assignment and assumption (the "Assumed
Agreements"); provided, that in no event shall Purchaser be deemed to have
assumed the Excluded Liabilities.
3.02 Liabilities Not Assumed. Except as expressly set forth in Section
3.01(b) or in any of the other Transaction Documents, Purchaser shall not assume
or be liable or responsible for, any liability or obligation of, or with respect
to, any of Seller, Takihyo, or any of their respective affiliates (the "Excluded
Liabilities"), including, without limitation, any liability or obligation of
Seller, Takihyo or any such affiliates arising out of or relating to: (a) any
violation of any applicable law by Seller, Takihyo, or their respective
affiliates; (b) any pending or threatened action, suit, investigation or
proceeding at law, in equity, in arbitration or by or before any authority
involving or affecting Seller, Takihyo, or their respective affiliates; (c) any
foreign, federal, state, county or local taxes, assessments, fees or other
governmental charges of any kind or nature, or any interest or penalties
thereon, accrued for, applicable to or arising from any period, whether prior to
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or after the date hereof; (d) the ownership or use of the Assets or the
operation of the Business prior to Closing; (e) the employment by Seller,
Takihyo or their respective affiliates of any employee; (f) salary, wages,
commissions, benefits, severance, accrued vacation, or pension, health, welfare,
hospitalization, medical and other funds (such pension, health, welfare,
hospitalization, medical and other funds being hereinafter collectively referred
to as the "Funds") to which Seller, Takihyo or their respective affiliates
contribute or contributed for their respective employees, as well as any other
amounts, whether required under any collective bargaining agreement, any of the
Funds, other agreements, applicable law or otherwise; (g) any labor organization
representing employees of Seller, Takihyo or their respective affiliates with
respect to such employees; or (h) any collective bargaining agreement covering
any employees, or any bargaining unit, of Seller, Takihyo or their respective
affiliates. Notwithstanding the foregoing, Seller shall not assume or be liable
or responsible for, and Excluded Liabilities expressly shall not include, any
liability or obligation of, or with respect to, Purchaser or any of its
affiliates arising out of or relating to (i) any collective bargaining agreement
covering any employees, or any bargaining unit, of Purchaser or its affiliates,
including without limitation any Funds to which Purchaser or its affiliates
contribute for their respective employees, (ii) any labor organization
representing employees of Purchaser or its affiliates with respect to such
employees, or (iii) any Losses incurred by Purchaser or its affiliates arising
out of or relating to any claim or assertion against Purchaser or its affiliates
under any collective bargaining agreement covering any employees of Seller,
Takihyo or their respective affiliates (the "Purchaser's Liabilities").
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3.03 Third Party Offers. Seller and Takihyo hereby agree on their behalf
and on behalf of their Representatives that, except as otherwise provided
herein, during the period from the date hereof to and including the Closing Date
(or if earlier, the dates on which this Agreement terminates pursuant to Section
1.01 or Article XII), none of Seller or Takihyo, or any of their respective
Representatives will, directly or indirectly, (a) solicit, initiate or otherwise
engage in any discussions with any person, corporation or other entity (each, a
"Person") other than Purchaser concerning, (b) afford access to the properties,
books and records, or other information of or concerning Seller, Takihyo or any
of their respective affiliates, to any Person other than Purchaser and its
Representatives with respect to, or (c) enter into any agreement, arrangement or
understanding with any Person other than Purchaser with respect to, (i) the
license, distribution, sale or other disposition of any or all of the Assets
other than dealings with licensees in the ordinary course of business and other
than New Trademark Agreements (as hereinafter defined) and License Amendments
(as hereinafter defined) contemplated by Section 11.02, (ii) any sale of Seller
prior to the Closing Date to one or more Persons, however structured, (iii) any
merger or consolidation of Seller prior to the Closing Date with or into another
Person, or (iv) any transaction substantially similar to the foregoing.
Notwithstanding the foregoing, clauses (a) and (b) above shall not prevent or
restrict internal discussions among Seller, Takihyo and their respective
Representatives, or the review by such Representatives of the properties, books
and records or other information concerning Seller, Takihyo or their respective
Representatives for internal discussion and decision making purposes and conduct
of their respective businesses. If Seller or Takihyo receives any written
proposal from any Person other than Purchaser or its
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Representatives with respect to any such matters, then Seller or Takihyo, as the
case may be, shall notify Purchaser thereof immediately.
3.04 Confidentiality; Disclosure.
(a) In connection with the transactions contemplated by this Agreement and
the other Transaction Documents, each of Takihyo and Seller, on the one hand,
and Purchaser, on the other hand or, in either case, their Representatives have
been or will be furnished with or have access to certain Proprietary Information
(as hereinafter defined) relating to the other parties. Except as expressly
provided herein, each party hereby agrees with regard to the Proprietary
Information of the other party, unless otherwise expressly consented to in each
case in advance in writing by Mr. Frank Mori, with regard to Takihyo and Seller,
and the Chairman of the Board, Chief Operating Officer, President, Executive
Vice President-Finance and Administration, or Chief Financial Officer of
Purchaser, with regard to Purchaser, (i) to keep, and cause its Representatives
to keep, all information concerning the other parties hereto to the extent
furnished by the other parties or their respective Representatives, whether
furnished before or after the date hereof, whether oral or written and
regardless of the manner in which it is furnished ("Proprietary Information"),
confidential and not disclose or reveal any Proprietary Information to any
Person other than its Representatives who are involved in the Anne Klein
Transactions, and (ii) not use the Proprietary Information for any purpose other
than in connection with the transactions contemplated by this Agreement or any
of the other Transaction Documents. For purposes hereof, Proprietary Information
includes all analyses, compilations, studies, summaries or extracts of any
information or materials which contain, are derived from or otherwise reflect
Proprietary
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Information, whether prepared by any party hereto or its Representatives. Each
party shall be responsible for any breach of this Section 3.04 by any of its
Representatives. For purposes hereof, the term "Proprietary Information" shall
not include information which (i) is presently available to the public, or
hereafter shall become available to the public other than as a result of a
disclosure by a party or its Representatives in breach of this Agreement, or
(ii) becomes available to Seller and Takihyo, on the one hand, or Purchaser, on
the other hand, from a source other than the other parties or their respective
Representatives; provided; that such source does not provide such information in
violation of a confidentiality obligation with respect to such information,
which confidentiality obligation is known to the party receiving the information
after making reasonable inquiry as to the existence of such confidentiality
obligation at the time such information is disclosed.
(b) During the period from the date hereof until the Closing, Purchaser, on
the one hand, and Seller and Takihyo, on the other hand, will not, and will
cause their respective Representatives not to, without the prior written consent
of the other party, (i) make any release to the press or other public
disclosure, or (ii) make any statement with regard to this Agreement, the
Transaction Documents or the Anne Klein Transactions, to any competitor,
customer, client, licensee or supplier of Seller or any of its affiliates, or
any other Person, other than (A) the parties' respective Representatives and (B)
subject to Section 3.04(c) below, any Persons to which any party has a
contractual obligation to disclose or provide notice in connection with
obtaining third party consents and approvals contemplated hereby; provided, that
none of the parties shall hold any other party responsible hereunder for any
statement with respect to any of
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the foregoing made prior to November 23, 1998 to Paul Guez, Herbert Guez, PG
Capital LLC, Schottenstein Stores Corporation or any of their affiliates or
representatives. Each party shall be responsible for any breach of the foregoing
by any of its Representatives.
(c) The restrictions in Section 3.04(b) shall not prohibit the disclosure
of any information by Purchaser, on the one hand, and Seller and Takihyo, on the
other hand, (i) in connection with obtaining the consents and approvals to be
obtained by them pursuant to the Transaction Documents (including, without
limitation, obtaining consents and approvals of the holders of Purchaser's
Senior Notes as contemplated herein), or (ii) the disclosure of information
required by law, rule or regulation (including, without limitation, the rules
and regulations of the Securities and Exchange Commission and any stock exchange
(including The NASDAQ National Market) upon which any of the securities of
Purchaser or Seller are listed) subject to compliance with the following
provisions: (A) the disclosing party shall give the other parties hereto written
notice of such requirement as soon as possible after becoming aware of such
requirement; (B) the disclosing party shall provide the other parties hereto
with a copy of any proposed disclosure a reasonable period of time in advance of
actual disclosure to any third party for review and comment on such proposed
disclosure, and the disclosing party will use its commercially reasonable
efforts to address any concerns raised by a non-disclosing party consistent with
the disclosing party's legal obligations (including, without limitation,
reporting and filing requirements under Federal and State securities laws); (C)
in case of disclosures being compelled by legal process, prior to making such
disclosure the disclosing party shall afford the non-disclosing parties an
opportunity to seek an appropriate protective order with respect to such
information, and the disclosing party
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shall provide the non-disclosing parties with reasonable cooperation and
assistance in connection therewith; and (D) with respect to any information
which is disclosed to a third party in accordance with these provisions, the
disclosing party, consistent with its legal obligations, shall use its best
efforts to obtain assurances from such third party that such information will be
treated as confidential by such third party. The parties shall issue a joint
press release upon the signing of this Agreement and the Transaction Documents,
upon the consummation of the closing of the transactions contemplated by this
Agreement (or, if applicable, upon termination of this Agreement) and as they
shall thereafter otherwise mutually agree.
(d) Purchaser may use any information, including Proprietary Information,
in Purchaser's Financial Statements, including its pro forma financial
statements, required pursuant to its legal obligations, including, without
limitation, under applicable Federal and State securities laws.
(e) Purchaser, on the one hand, and Seller and Takihyo, on the other hand,
will not, and will cause their respective Representatives not to, without the
prior written consent of the other party, make any release to the press or other
public disclosure or make any statement to any other Person with regard to the
negotiation process with respect to this Agreement, the Transaction Documents
and the transactions contemplated hereby and thereby. In addition, Purchaser
will not, and will cause its Representatives not to, without the prior written
consent of Mr. Frank Mori, make any disparaging or derogatory settlement to any
other Person with regard to the conduct by Seller or Takihyo of their respective
businesses prior to Closing. Each party shall be responsible for any breach of
the foregoing by any of its Representatives. The restrictions in this Section
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3.04(e) shall not prohibit the disclosure of any information by Purchaser, on
the one hand, and Seller and Takihyo, on the other hand, required by law, rule
or regulation (including, without limitation, the rules and regulations of the
Securities and Exchange Commission and any stock exchange (including The NASDAQ
National Market) upon which any of the securities of Purchaser or Seller are
listed) subject to compliance with the following provisions: (A) the disclosing
party shall give the other parties hereto written notice of such requirement as
soon as possible after becoming aware of such requirement; (B) the disclosing
party shall provide the other parties hereto with a copy of any proposed
disclosure a reasonable period of time in advance of actual disclosure to any
third party for review and comment on such proposed disclosure, and the
disclosing party will use its commercially reasonable efforts to address any
concerns raised by a non-disclosing party consistent with the disclosing party's
legal obligations (including, without limitation, reporting and filing
requirements under Federal and State securities laws); (C) in case of
disclosures being compelled by legal process, prior to making such disclosure
the disclosing party shall afford the non-disclosing parties an opportunity to
seek an appropriate protective order with respect to such information, and the
disclosing party shall provide the non-disclosing parties with reasonable
cooperation and assistance in connection therewith; and (D) with respect to any
information which is disclosed to a third party in accordance with these
provisions, the disclosing party, consistent with its legal obligations, shall
use its best efforts to obtain assurances from such third party that such
information will be treated as confidential by such third party.
(f) The provisions of clause (iii) of the second paragraph and the fourth
paragraph of the Confidentiality Agreement shall terminate at Closing and be of
no
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further force or effect. In addition, to the extent of an inconsistency between
the terms and conditions of Section 3.04 of this Agreement and the
Confidentiality Agreement, the terms and provisions of Section 3.04 shall
govern.
3.05 Net Tangible Assets. Seller and/or Takihyo shall maintain net tangible
assets (as hereinafter defined) during the following periods and in the amounts
set forth below: (a) during the period from and after the date hereof to and
including the first anniversary of the Closing, in an amount not less than
$5,000,000; and (b) during the period from and after the first anniversary of
the Closing to and including the second anniversary of the Closing, in an amount
not less than $2,500,000. The term "net tangible assets" shall mean the excess
of all tangible assets of Seller and/or Takihyo over all liabilities of Seller
and/or Takihyo, determined in accordance with generally accepted accounting
principles as in effect from time to time ("GAAP"); provided, that the portion
of the excess required to be maintained pursuant to clauses (a) and (b) above
shall at all times be comprised of cash, marketable securities, or such other
assets as are reasonably acceptable to Purchaser (and Purchaser acknowledges and
agrees that shares of the Common Stock, $0.01 par value per share, of Donna
Karan International Inc. ("DK Shares") held by Seller or Takihyo shall be assets
of a type that are reasonably acceptable to Purchaser), further provided that to
the extent that the DK Shares would not be considered "tangible assets" under
GAAP, such shares shall be considered "tangible assets" for the purposes of this
Section 3.05. Seller and/or Takihyo shall from time to time at the request of
Purchaser furnish to Purchaser such information as Purchaser shall reasonably
request in order to confirm the maintenance of the foregoing. All such
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information shall be deemed Proprietary Information and shall be subject to the
provisions of Section 3.04.
ARTICLE IV
Purchase Price
4.01 Purchase Price. The aggregate purchase price for the Assets and the
assignment and assumption of the Assumed Agreements shall be Sixty Million
Dollars ($60,000,000.00) less the aggregate amount of any licensing fee actually
paid by Purchaser to Seller prior to Closing pursuant to Section 8.04 of the
License Agreement (the "Purchase Price"). The Purchase Price shall be payable at
Closing in consideration for the transfer of the Assets and the assignment and
assumption of the Assumed Agreements in accordance with the terms and conditions
of this Agreement, in immediately available funds by wire transfer to an account
specified by Seller to Purchaser in writing at least two (2) Business Days prior
to Closing.
4.02 Allocation of Purchase Consideration. An amount equal to the sum of
the Purchase Price and the liabilities to be assumed by Purchaser under the
Assumed Agreements (the "Purchase Consideration") shall be allocated among the
Assets in accordance with an allocation schedule to be mutually agreed upon by
Seller and Purchaser within fourteen (14) days of the date hereof, which
allocation schedule shall be prepared in accordance with the rules under Section
1060 of the Internal Revenue Code of 1986, as amended (the "Tax Code") and the
Treasury Regulations promulgated thereunder. Unless otherwise required by
applicable law, Purchaser and Seller agree to report the allocation of the
Purchase Consideration in accordance with such schedule for all purposes and
neither Purchaser nor Seller will take any position inconsistent therewith with
respect to any tax return, audit or examination by any taxing authority,
litigation,
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proceeding or otherwise. In this regard, and without limiting the foregoing,
Purchaser and Seller agree to act, and cause their respective affiliates to act,
in accordance with the computations and allocations contained in such schedule
in any forms or reports required to be filed pursuant to Section 1060 of the Tax
Code or the Treasury Regulations promulgated thereunder ("1060 Forms"), to
cooperate in the preparation of any 1060 Forms and to file such 1060 Forms in
the manner required by applicable law.
ARTICLE V
Closing
5.01 Closing. The closing of the purchase and sale of the Assets
("Closing") shall take place at the offices of Parker Chapin Flattau & Klimpl,
LLP, 1211 Avenue of the Americas, New York, New York 10036 at 10:00 A.M. local
time on the earlier of, July 10, 1999 or that date that is thirty (30) Business
Days after the later of receipt of all consents and approvals listed on
Schedules 8.01 and 8.02 hereof, the satisfaction of the conditions set forth in
Section 8.01(i) and the receipt by Purchaser of the requisite consents or
approvals contemplated by Section 11.15, or at such other place, time or date as
the parties may mutually agree in writing (the date of Closing being referred to
herein as the "Closing Date").
ARTICLE VI
Representations and Warranties of Seller and Takihyo
To induce Purchaser to enter into this Agreement and the Transaction
Documents to which it is or will be a party and to purchase the Assets, each of
Seller and Takihyo hereby, jointly and severally, represents and warrants to
Purchaser, as of the date hereof, that:
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6.01 Organization, Powers, Etc. Anne Klein is a limited liability company
validly existing and in good standing under the laws of New York and has all
requisite power and authority to enter into this Agreement, the Transfer
Documents and the other Transaction Documents to which it is or will be a party
and to carry out the transactions contemplated hereby and thereby. Takihyo is a
corporation, validly existing and in good standing under the laws of Delaware.
Takihyo has all requisite power and authority to enter into this Agreement, the
Transfer Documents and the other Transaction Documents to which it is or will be
a party and to carry out the transactions contemplated hereby and thereby.
6.02 Equity Owners. Takihyo, Tolara Triangle Inc. ("TT") and First
Resources Marketing, Inc. ("FRM") are the legal and beneficial owners of all of
the outstanding equity interests of Seller. Frank R. Mori and Tomio Taki are the
legal and beneficial owners of all of the outstanding equity interests of
Takihyo. Mr. Taki is the legal and beneficial owner of all of the outstanding
equity interests of TT. Mr. Mori is the legal and beneficial owner of all of the
outstanding equity interests of FRM, except that Christopher Mori and Heather
Mori each own 10% of the outstanding capital stock of FRM.
6.03 Execution, Delivery and Performance. Except as set forth on Schedule
6.03, the authorization, execution, delivery and performance of this Agreement,
the Transfer Documents and the other Transaction Documents to which each of
Seller and Takihyo is or will be a party, and the consummation by each of Seller
and Takihyo of the transactions contemplated hereby and thereby, will not (i)
conflict with or result in a breach of the Organizational Documents of Seller or
Takihyo, (ii) violate any U.S. or
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foreign laws, statutes or regulations to which Seller or Takihyo is subject or
by which Seller, Takihyo or their respective assets are bound, (iii) violate any
order, writ, injunction, judgment, award, arbitration or decree of any court,
governmental body, administrative agency, arbitrator or other competent
authority (collectively, "Orders") to which Seller, Takihyo or their respective
assets are subject, (iv) violate, conflict with, result in or constitute (with
the giving of notice, the lapse of time, or both) a breach or default under, or
result in the termination or acceleration of any obligation to any third party
under any material agreement, mortgage, indenture, note, lease, license,
insurance policy, or other material commitment, obligation or instrument to
which Seller or Takihyo is a party or by which any of their respective
properties or assets are bound, including, without limitation, the Existing
Trademark Agreements (collectively, "Seller's or Takihyo's Contracts"), or (v)
create or impose any lien on any Asset pursuant to Seller's or Takihyo's
Contracts or any other agreement to which Seller is a party. Except for FTC
Approval and as set forth on Schedule 6.03, no consent, approval or
authorization of, notice to, or filing or registration with, any court,
governmental body, administrative agency, arbitrator or other competent
authority, or any other Person, is required, pursuant to the terms of any of
Seller's or Takihyo's Contracts, applicable law, or any Orders to which Seller
or Takihyo is subject or by which Seller, Takihyo or their respective assets are
bound to be made or obtained by Seller or Takihyo in connection with the
execution, delivery and performance by Seller or Takihyo of this Agreement, the
Transfer Documents or the other Transaction Documents to which it is or will be
a party, and the consummation of the transactions contemplated hereby and
thereby.
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6.04 Authority. All proceedings required to be taken by each of Seller and
Takihyo to authorize the execution, delivery and performance by it of this
Agreement, the Transfer Documents and the other Transaction Documents to which
it is or will be a party have been duly and properly taken. This Agreement
constitutes, and the Transfer Documents and the other Transaction Documents to
which Seller or Takihyo will be a party, when duly executed and delivered by the
parties thereto, will constitute, the valid and binding obligations of Seller
and Takihyo, as the case may be, enforceable against it in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy and
other laws affecting the enforceability of creditors' rights generally or laws
governing the availability of specific performance or other equitable remedies.
6.05 Existing Trademark Agreements. Schedule 6.05 sets forth a complete and
correct list of the Trademark License Agreements, the Other Trademark
Agreements, and the Other Assumed Agreements in each case as in effect on the
date hereof (collectively, the "Existing Trademark Agreements"), complete and
correct copies of which (including all amendments thereto) have been delivered
to Purchaser. Except as set forth on Schedule 6.05, the Existing Trademark
Agreements are valid, binding, enforceable and in full force and effect subject
to bankruptcy and other laws affecting the enforceability of creditors' rights
generally or laws governing the availability of specific performance or other
equitable remedies. Except as set forth on Schedule 6.05, to Seller's and
Takihyo's Actual Knowledge, (i) Seller is not in material default, (ii) no
written notice has been received by Seller or Takihyo and (iii) there exists no
condition or event which, with notice or lapse of time or both, would constitute
a material default by Seller, under or with respect to any of the Existing
Trademark Agreements. To the Actual Knowledge of
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Seller, except as set forth on Schedule 6.05, (a) no other party to any of the
Existing Trademark Agreements is in material default under any of the Existing
Trademark Agreements, and (b) there exists no condition or event which, with
notice or lapse of time or both, would constitute a material default by any
other party to any such Existing Trademark Agreements. Except as set forth on
Schedule 6.05, each of the Existing Trademark Agreements may be assigned to
Purchaser without the consent of any person in connection with the transactions
contemplated by this Agreement and the Transaction Documents.
6.06 No Material Adverse Event. Since January 1, 1999, there has been no
Material Adverse Event.
6.07 Trademarks and Other Assets. Schedule 6.07 sets forth a true and
correct list of all of the registered or issued Trademarks subject to the
Updates provided pursuant to Section 11.12 relating to the maturity to
registration of applications previously filed, the filing of new applications
for registrations and the conversion of intent to use applications to use based
applications. Each of the Trademarks listed in Schedule 6.07 is subsisting and,
except as disclosed in Schedule 6.07, has not been adjudged invalid or
unenforceable, in whole or in part, and, to the Actual Knowledge of Seller, each
of the registered or issued Trademarks is valid and enforceable in the
countries, as set forth and qualified on Schedule 6.07. Seller has rights in and
good and defensible title to the Trademarks. Except as set forth on Schedule
6.07, Seller is the sole and exclusive owner of (i) the Trademarks in the
countries where the Trademarks are registered or issued (and to the Actual
Knowledge of Seller or Takihyo, no other person is claiming ownership of the
Trademarks in any other country), and (ii) the other Assets, in each case which
are
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free and clear of any liens, claims, pledges, security interests or any other
encumbrances and rights of others, except for those rights granted by Seller to
licensees in the Trademarks pursuant to the Existing Trademark Agreements, those
rights granted by Seller pursuant to the Bank Pledge and Seller's rights to
continue to use the Trademarks solely in accordance with the provisions of
Section 11.11 of this Agreement and Section 2.0l(a)(ii) of the License
Agreement. The Trademarks listed on Schedule 6.07 are the only assets of the
type described in clause (a) of the definition of Assets owned or used by Seller
on the date hereof and material to the business of Seller as presently
conducted. To the Actual Knowledge of Seller, the past and present use of the
Trademarks and the other Assets by Seller has not, does not and will not
infringe upon or violate any right, privilege or license agreement of or with
any other Person, except as set forth on Schedule 6.07. To the Actual Knowledge
of Seller, except as otherwise set forth on Schedule 6.07, no material
infringement or unauthorized use presently is being made of any of the
Trademarks by any Person.
6.08 Litigation. Except as set forth on Schedule 6.08, there are no
actions, suits, arbitrations or proceedings pending against Seller or Takihyo,
and neither Seller nor Takihyo has Actual Knowledge, or has received written
notice, of any threatened action, suit, or proceeding, at law, in equity, in
arbitration or by or before any other authority, involving or affecting the
Business or any of the Assets, or any of the transactions contemplated by this
Agreement, the Transfer Documents or the other Transaction Documents. Except as
set forth on Schedule 6.08, none of Seller or Takihyo is in default with respect
to any judgment, order, writ, injunction, award, arbitration, decree or consent
of any court, governmental body, administrative agency, arbitrator or other
competent
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authority applicable to any of them and which involves or affects the Business,
any of the Assets, or any of the transactions contemplated by this Agreement,
the Transfer Documents or the other Transaction Documents.
6.09 Compliance with Law. Except as set forth on Schedule 6.09, Seller is
in material compliance with all laws, rules, regulations, orders and decrees
applicable to Seller in connection with ownership and/or use of the Assets or
the operation of the Business.
ARTICLE VII
Representations and Warranties of Purchaser
To induce Seller and Takihyo to enter into this Agreement and the
Transaction Documents to which they are or will be a party and to sell the
Assets, Purchaser hereby represents and warrants to Seller and Takihyo as of the
date hereof that:
7.01 Organization, Powers, Etc. Purchaser is a corporation, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to enter into this Agreement, the Transfer
Documents and the other Transaction Documents to which it is or will be a party,
and to carry out the transactions contemplated hereby and thereby.
7.02 Execution, Delivery and Performance. Except as set forth on Schedule
7.02, the authorization, execution, delivery and performance of this Agreement,
the Transfer Documents and the other Transaction Documents to which Purchaser is
or will be a party, and the consummation by Purchaser of the transactions
contemplated hereby and thereby will not (i) conflict with or result in a breach
of the Organizational Documents of Purchaser, (ii) violate any U.S. or foreign
laws, statutes or regulations to which Purchaser is subject or by which
Purchaser or its assets are bound, (iii) violate any
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Order to which Purchaser or its assets are subject, or (iv) violate, conflict
with, result in or constitute (with the giving of notice, the lapse of time, or
both) a breach or default under, or result in the termination or acceleration of
any obligations to any third party under, or the creation or imposition of a
lien on any of its assets pursuant to, any material agreement, mortgage,
indenture, note, lease, license, insurance policy, or other material commitment,
obligation or instrument to which Purchaser is a party or by which any of its
properties or assets are bound (collectively, the "Purchaser Contracts"). Except
for the FTC Approval and as set forth on Schedule 7.02, no consent, approval or
authorization of, notice to, or filing or registration with, any governmental,
administrative or regulatory authority, or any other Person, is required,
pursuant to the terms of any of the Purchaser Contracts, applicable law, or any
Orders to which Purchaser is subject or by which its assets are bound, to be
made or obtained by Purchaser in connection with the execution, delivery and
performance by Purchaser of this Agreement, the Transfer Documents and the other
Transaction Documents to which it is or will be a party and the consummation of
the transactions contemplated hereby and thereby.
7.03 Authority. All proceedings required to be taken by Purchaser to
authorize the execution, delivery and performance by it of this Agreement, the
Transfer Documents and the other Transaction Documents to which it is or will be
a party have been duly and properly taken. This Agreement constitutes, and the
Transfer Documents and the other Transaction Documents, when duly executed and
delivered by the parties thereto, will constitute, the valid and binding
obligations of Purchaser, enforceable against it in accordance with their
respective terms, except as such enforcement may be limited by
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bankruptcy and other laws affecting the enforceability of creditors' rights
generally or laws governing the availability of specific performance or other
equitable remedies.
ARTICLE VIII
Conditions Precedent to Closing
8.01 Conditions Precedent to Purchaser's Obligations to Close. The
obligation of Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby is subject to the satisfaction (or waiver by
Purchaser) prior to or on the Closing Date of each of the following conditions:
(a) (i) Subject to Section 11.12, the representations and warranties of
Seller and Takihyo contained in this Agreement shall have been true and correct
when made, (ii) the representations and warranties of Seller and Takihyo
contained in Sections 6.01 through 6.04 shall be true and correct in all
material respects on the Closing Date as if made on the Closing Date (without
giving effect to any Updates), (iii) the representations and warranties of
Seller or Takihyo contained in Section 6.07 with regard to trademarks "Anne
Klein," "Anne Klein II," "A Line Anne Klein" and the "Lion Head Design" shall be
true and correct in all material respects on the Closing Date as if made on the
Closing Date (qualified to the extent any Update relates to the maturity to
registration of applications previously filed, the filing of new applications
for registrations and conversion of intent to use applications to use based
applications) and (iv) subject to Section 11.12, all other representations and
warranties of Seller and Takihyo shall be true and correct in all material
respects on the Closing Date as if made on the Closing Date; provided, however,
that if any representation or warranty is already qualified by materiality, for
purposes of determining whether this condition has been
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satisfied, such representation or warranty as so qualified shall be true and
correct in all respects.
(b) The covenants and agreements of Seller and Takihyo contained in this
Agreement and required to be complied with or performed on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
(c) Purchaser shall have received a certificate dated the Closing Date and
executed by the Managing Member of Seller and the President of Takihyo or, in
each case, such other duly authorized representatives reasonably acceptable to
Purchaser, certifying the satisfaction of the conditions referred to in Sections
8.01(a) and (b).
(d) All consents of, and releases from, any governmental entity or other
Person listed in Schedule 8.01 attached hereto, each in form and substance
reasonably satisfactory to Purchaser, shall have been received.
(e) Purchaser shall have received a certificate of the Member Manager of
Seller (the "Seller's Certificate") and a certificate from the Secretary of
Takihyo ("Takihyo's Certificate") or, in each case, such other duly authorized
representatives of Seller and Takihyo reasonably acceptable to Purchaser,
certifying the resolutions duly and validly adopted by Seller and Takihyo
evidencing, in each case, their respective authorization of the execution and
delivery of this Agreement, the Transfer Documents and the other Transaction
Documents to which each of Seller and Takihyo is or will be a party and the
consummation of the transactions contemplated hereby and thereby, and the names
and signatures of the members of Seller and officers of Takihyo authorized to
sign this Agreement, the Transfer Documents and the other Transaction Documents.
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(f) On the Closing Date: (i) there shall be no effective injunction, writ
or preliminary restraining order or any order of any kind whatsoever issued by a
court, governmental body, administrative agency, arbitrator or other competent
authority, which restrains or prohibits the consummation of the transactions
contemplated hereby; (ii) there shall be no law, rule or regulation in effect
which restrains or prohibits the consummation of the transactions contemplated
hereby; and (iii) there shall be no proceeding, lawsuit or arbitration pending
or, to the knowledge of Purchaser or Seller, threatened in writing, which seeks
to restrain or prohibit the consummation of the transactions contemplated
hereby.
(g) Since January 1, 1999, no Material Adverse Event shall have occurred
(without giving effect to any Updates).
(h) The form and substance of all certificates, consents, instruments, and
other documents delivered to Purchaser under this Agreement shall be reasonably
satisfactory in all respects to Purchaser and its counsel.
(i) Purchaser shall have obtained financing from banks or financial
institutions, in amounts and on terms and conditions reasonably satisfactory to
it and necessary, in Purchaser's good faith judgment, for Purchaser to
consummate the transactions contemplated by this Agreement (the "Purchaser's
Financing").
(j) Purchaser shall have received such termination statements (which
statements shall be delivered to Purchaser at the Closing for filing), lien
releases and satisfactions of liens, in form and substance reasonably
satisfactory to Purchaser, evidencing the termination, release and satisfaction
of all Encumbrances on the Assets, except for those rights granted by Seller to
licensees in the Trademarks pursuant to the
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Existing Trademark Agreements, Seller's rights to continue to use the Trademarks
solely in accordance with the provisions of Section 11.11 of this Agreement and
Section 2.01(a)(ii) of the License Agreement and Encumbrances created by or
imposed upon Purchaser.
(k) Purchaser shall have received the Transfer Documents dated the Closing
Date and executed by the Member Manager of Seller.
8.02 Conditions Precedent to Seller's and Takihyo's Obligations to Close.
The obligation of Seller and Takihyo to consummate the transactions contemplated
hereby is subject to the satisfaction (or waiver by Seller and Takihyo) prior to
or on the Closing Date of each of the following conditions:
(a) The representations and warranties of Purchaser contained in this
Agreement shall have been true and correct when made and shall be true and
correct in all material respects as of the Closing Date as if made on the
Closing Date, provided, however, that if any representation or warranty is
already qualified by materiality, for purposes of determining whether this
condition has been satisfied, such representation or warranty as so qualified
shall be true and correct in all respects.
(b) The covenants and agreements of Purchaser contained in this Agreement
and required to be complied with or performed on or prior to the Closing Date
shall have been complied with or performed in all material respects.
(c) Seller and Takihyo shall have received a certificate dated the Closing
Date and executed by an executive officer of Purchaser, certifying to the
satisfaction of the conditions referred to in Sections 8.02(a) and (b).
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(d) All consents of, and releases from, any governmental entity or other
Person listed in Schedule 8.02 attached hereto, each in form and substance
reasonably satisfactory to Seller, shall have been received.
(e) Seller and Takihyo shall have received a certificate of the Secretary
of Purchaser (the "Purchaser's Certificate") or such other duly authorized
representative reasonably acceptable to Seller, certifying the resolutions duly
and validly adopted by Purchaser evidencing its authorization of the execution
and delivery of this Agreement, the Transfer Documents and the other Transaction
Documents to which Purchaser is a party and the consummation of the transactions
contemplated hereby and thereby, and the names and signatures of the officers of
Purchaser authorized to sign this Agreement, the Transfer Documents and the
other Transaction Documents.
(f) On the Closing Date: (i) there shall be no effective injunction, writ
or preliminary restraining order or any order of any kind whatsoever issued by a
court, governmental body, administrative agency, arbitrator or other competent
authority, which restrains or prohibits the consummation of the transactions
contemplated hereby; (ii) there shall be no law, rule or regulation in effect
which restrains or prohibits the consummation of the transactions contemplated
hereby; and (iii) there shall be no proceeding, lawsuit or arbitration pending
or, to the knowledge of Seller or Purchaser, threatened in writing which seeks
to restrain or prohibit the consummation of the transactions contemplated
hereby.
(g) The form and substance of all certificates, consents, instruments and
other documents delivered to Seller and Takihyo under this Agreement shall be
reasonably satisfactory in all respects to Seller and Takihyo and their counsel.
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(h) Seller shall have received the Transfer Documents dated the Closing
Date and executed by an executive officer of Purchaser.
ARTICLE IX
Closing Deliveries
9.01 Deliveries of Seller and Takihyo. At Closing, Seller and Takihyo shall
deliver or cause to be delivered the following items to Purchaser:
(a) the certificate referred to in Section 8.01(c), duly executed by Seller
and Takihyo;
(b) the Seller's Certificate referred to in Section 8.01(e); and Takihyo's
Certificate referred to in Section 8.01(e);
(c) the Transfer Documents referred to in Section 8.01(k), each duly
executed by Seller and/or Takihyo, as applicable; and
(d) the termination statements, lien releases and satisfaction of liens
referred to in Section 8.01(j).
9.02 Deliveries of Purchaser. At Closing, Purchaser shall deliver or cause
to be delivered the following items to Seller:
(a) the certificate referred to in Section 8.02(c), duly executed by an
executive officer of Purchaser;
(b) the Purchaser's Certificate referred to in Section 8.02(e);
(c) the Transfer Documents referred to in Section 8.02(h), each duly
executed by Purchaser; and
(d) the Purchase Price.
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ARTICLE X
Indemnification
10.01 Indemnification by Seller and Takihyo. Seller and Takihyo shall,
jointly and severally, indemnify, defend and hold the Purchaser, and its
officers, directors, employees, affiliates and agents (the "Purchaser
Indemnified Parties") harmless from and against any and all Losses to which any
of the Purchaser Indemnified Parties becomes subject based upon, arising out of,
or otherwise in respect of (a) the Assets or the Business with regard to all
periods prior to Closing and with regard to all periods, whether prior to or
subsequent to Closing, to the extent based upon, arising out of or otherwise in
respect of any event occurring prior to Closing, (b) the Excluded Liabilities
and (c) any breach of any representation, warranty, covenant or agreement of
Seller or Takihyo contained in this Agreement or the Transfer Documents to which
they are a party.
10.02 Indemnification by Purchaser. Purchaser shall indemnify, defend and
hold Seller and its officers, directors, members, employees, affiliates and
agents (the "Seller Indemnified Parties") harmless from and against any and all
Losses to which any of the Seller Indemnified Parties becomes subject based
upon, arising out of or otherwise in respect of (a) the Assets, the liabilities
and obligations assumed by Purchaser under the Assumed Agreements and the
operation of Purchaser's business relating to the Assets and the Assumed
Agreements with regard to all periods from and after the Closing to the extent
based upon, arising out of, or otherwise in respect of any event occurring after
the Closing, but in no event based upon, arising out of, or otherwise in respect
of the Excluded Liabilities, (b) any breach of any representation, warranty,
covenant
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or agreement of Purchaser contained in this Agreement or the Transfer Documents
to which it is a party and (c) the Purchaser's Liabilities.
10.03 Notice and Opportunity to Defend. Promptly after receipt by either
party hereto of notice of the assertion of any Losses or discovery of any facts
upon which such party expects to make a claim for indemnification hereunder,
such party (the "Indemnified Party") shall give the other party who may become
obligated to provide indemnification hereunder (the "Indemnifying Party")
written notice describing such Losses or facts in reasonable detail; provided,
however, that any delay or failure by an Indemnified Party to provide such
notice shall not impair or affect its rights hereunder or the obligation of the
Indemnifying Party with respect to such Losses, except to the extent the
Indemnifying Party can demonstrate that it was materially prejudiced by the
Indemnified Party's delay in giving or failure to give such notice. Such
Indemnifying Party shall have the right, at its option, to compromise or defend,
at its own expense and by its own counsel, any such matter involving the
asserted liability of the Indemnified Party; provided, however, that no
Indemnifying Party shall compromise or settle any asserted liability (except a
liability settled or compromised for monetary consideration or damages only
payable solely by other than the Indemnified Party and such compromise or
settlement provides for a full and unconditional release of the claims asserted
against the Indemnified Party and its affiliates) without the prior written
consent of the Indemnified Party (such consent not to be unreasonably withheld).
If any Indemnifying Party shall undertake to compromise or defend any such
asserted liability, it shall promptly notify the Indemnified Party of its
intention to do so, and shall diligently defend against such claims with counsel
reasonably acceptable to the Indemnified Party. The
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Indemnified Party agrees to cooperate fully with the Indemnifying Party and its
counsel in the compromise of, or defense against, any such asserted liability.
No Indemnified Party shall compromise or settle any asserted liability (except a
liability settled or compromised for monetary consideration or damages only
payable solely by other than the Indemnifying Party and such compromise or
settlement provides for a full and unconditional release of the claims asserted
against the Indemnifying Party and its affiliates) without the prior written
consent of the Indemnifying Party. All costs and expenses incurred in connection
with such cooperation shall be borne by the Indemnifying Party up until the date
that the Indemnifying Party actually assumes the defense with respect thereto
pursuant to this Section. In any event, the Indemnified Party shall have the
right at its own expense and by its own counsel to participate in the defense of
such asserted liability; provided, however, that if after having notified the
Indemnified Party of its intention to assume the defense of a claim or asserted
liability as aforesaid, the Indemnifying Party fails to do so in a reasonably
prompt and diligent manner or the Indemnified Party is advised in writing by
counsel reasonably satisfactory to the Indemnifying Party that there is a
conflict between the interests of the Indemnified Party and the Indemnifying
Party with respect to such defense under the applicable code or rules of
professional responsibility, then the Indemnifying Party shall be responsible
for the reasonable fees and expenses of one firm of separate counsel for the
Indemnified Party. Except as may otherwise be agreed in writing between an
Indemnifying Party and an Indemnified Party, an Indemnifying Party shall not be
deemed liable under this Article X with respect to third party claims unless and
until (i) a final judgment or award shall have been rendered by a court,
arbitration board or administrative agency of competent
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jurisdiction with respect to such claim and the time in which to appeal
therefrom shall have expired or (ii) a settlement of such claim shall have been
agreed to with the third party in compliance with this Article X which requires
the payment of monetary damages by the Indemnifying Party provided, that clauses
(i) and (ii) above shall not be applicable to third party claims based upon, or
arising out of, or otherwise in respect of Excluded Liabilities or Purchaser's
Liabilities.
10.04 Limitations on Seller's and Takihyo's Liability
(a) "Basket" Limitation. Neither Seller nor Takihyo shall be liable to all
or any of the Purchaser Indemnified Parties under this Article X unless the
aggregate amount of any Claims which are covered by Seller's and/or Takihyo's
obligations under Section
10.01 ("Seller's Covered Claims") exceed $500,000 (the "Seller's Basket")
and in such event Seller and Takihyo shall only be liable for Seller's Covered
Claims in excess of the Seller's Basket.
(b) "Cap" Limitation. The amount that the Purchaser Indemnified Parties may
recover under this Article X in the aggregate for all Seller's Covered Claims
shall not exceed an amount equal to $20,000,000.
(c) Survival. The representations and warranties of Seller and Takihyo
contained in this Agreement and Seller's and Takihyo's obligation to indemnify
and hold the Purchaser Indemnified Parties harmless relating thereto under this
Article X shall survive for a period of two (2) years after the Closing Date;
provided, that if Purchaser shall have given, on or prior to the second
anniversary of the Closing Date, to Seller and Takihyo any notice of assertion
of any claim or discovery of any facts upon which Purchaser expects in good
faith to make a claim for indemnification under this
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Agreement as contemplated by the first sentence of Section 10.03, the
limitations set forth in this Section 10.04(c) shall not be applicable in
respect of the matters set forth in such notice.
(d) Excluded Liabilities. Notwithstanding anything contained in this
Agreement to the contrary, the provisions of this Section 10.04 shall not be
applicable to, and shall not limit, the obligations of Seller and Takihyo to
indemnify, defend and hold harmless the Purchaser Indemnified Parties in respect
of Losses based upon, arising out of or otherwise in respect of, the Excluded
Liabilities.
(e) Termination Reimbursement. Subject to Section 10.06, if Seller shall
terminate this Agreement pursuant to Section 12.01(b) and there shall exist a
material breach by Purchaser of any representation, warranty, covenant or
agreement contained herein which breach is the cause of such termination and
with respect to which Seller has provided written notice to Purchaser, then the
indemnification obligations of Purchaser set forth above in this Article X shall
not be applicable and, in lieu thereof, Purchaser shall pay or cause to be paid,
by wire transfer in immediately available funds in accordance with wire transfer
instructions provided to Purchaser by Seller, an amount, not to exceed
$2,000,000, equal to all of Seller's and Takihyo's out-of-pocket fees and
expenses, including, without limitation, the fees and expenses of attorneys,
consultants, accountants, banks and financial institutions and other
professional advisors, but excluding internal overhead and similar expense
allocations, incurred by Seller or Takihyo from and after November 23, 1998 in
respect of the transactions contemplated by the Confidentiality Agreement, this
Agreement and the other Transaction Documents.
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10.05 Limitations on Purchaser's Liability
(a) "Basket" Limitation. Purchaser shall not be liable to all or any of the
Seller Indemnified Parties under this Article X unless the aggregate amount of
any Claims which are covered by Purchaser's obligations under Section 10.02
("Purchaser's Covered Claims") exceed $500,000 (the "Purchaser's Basket") and
Purchaser shall be liable for Purchaser's Covered Claims in excess of the
Purchaser's Basket.
(b) "Cap" Limitation. The amount that the Seller Indemnified Parties may
recover under this Article X in the aggregate for all Purchaser's Covered Claims
shall not exceed an amount equal to $20,000,000.
(c) Survival. The representations and warranties of Purchaser contained in
this Agreement and Purchaser's obligation to indemnify and hold the Seller
Indemnified Parties harmless relating thereto under this Article X shall survive
for a period of two (2) years after the Closing Date; provided, that if Seller
or Takihyo shall have given, on or prior to the second anniversary of the
Closing Date, to Purchaser any notice of assertion of any claim or discovery of
any facts upon which Seller or Takihyo expect in good faith to make a claim for
indemnification under this Agreement as contemplated by the first sentence of
Section 10.03, the limitations set forth in this Section 10.05(c) shall not be
applicable in respect of the matters set forth in such notice.
(d) Purchaser's Liabilities. Notwithstanding anything contained in this
Agreement to the contrary, the provisions of this Section 10.05 shall not be
applicable to, and shall not limit, the obligations of Purchaser to indemnify,
defend and hold harmless the Seller Indemnified Parties in respect of Losses
based upon, arising out of or otherwise in respect of, the Purchaser's
Liabilities.
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(e) Termination Reimbursement. Subject to Section 10.06, if Purchaser shall
terminate this Agreement pursuant to Section 12.01(b) and there shall exist a
material breach by Seller or Takihyo of any representation, warranty, covenant
or agreement contained herein which breach is the cause of such termination,
with respect to which Purchaser has provided written notice to Seller and
Takihyo, then the indemnification obligations of Seller and Takihyo set forth
above in this Article X shall not be applicable and, in lieu thereof, Seller and
Takihyo shall pay or cause to be paid, by wire transfer in immediately available
funds in accordance with wire transfer instructions provided to Seller by
Purchaser, an amount, not to exceed $2,000,000, equal to all of Purchaser's
out-of-pocket fees and expenses, including, without limitation, the fees and
expenses of attorneys, consultants, accountants, bank and financial institutions
and other professional advisors, but excluding internal overhead and similar
expense allocations, incurred by Purchaser from and after November 23, 1998 in
respect of the transactions contemplated by the Confidentiality Agreement, this
Agreement and the other Transaction Documents.
10.06 Exclusive Remedy. The provisions of Article X of this Agreement
contain the exclusive remedies of the parties hereto and the Purchaser
Indemnified Parties and Seller Indemnified Parties with respect to any breach or
alleged breach of any representation, warranty or covenant contained herein and
with respect to any claim otherwise arising from or relating to the transactions
contemplated by this Agreement; provided, that (i) the provisions of Article X
of this Agreement shall not be the exclusive remedies of (x) Purchaser for
Losses or claims based upon, arising out of or relating to, the Excluded
Liabilities, or (y) Seller for Losses or claims based upon, arising out of or
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relating to, the Purchaser's Liabilities, (ii) nothing herein, including,
without limitation, Sections 10.04(e) and 10.05(e), shall be deemed to limit or
restrict any party's rights or remedies in respect of any willful breach of this
Agreement or any representation, warranty, covenant or agreement contained
herein prior to Closing or termination pursuant to Article XII, including rights
or remedies based upon equitable principles (including specific performance and
injunctive relief), and (iii) nothing herein, including, without limitation,
Sections 10.04(e) and 10.05(e), shall be deemed to limit or restrict any party's
rights or remedies in respect of any breach, alleged breach of, or claim under,
this Agreement based upon, or arising out of or otherwise in respect of, fraud.
Each party agrees that money damages would not be a sufficient remedy for any
such breach of this Agreement (including, without limitation, Section 3.03
hereof) prior to the Closing and that the other party will be entitled, without
the necessity of actual monetary loss being proved or the posting of a bond, to
the foregoing equitable remedies.
ARTICLE XI
Certain Additional Covenants and Agreements
11.01 Additional Equity Interests. From the date hereof until Closing (or,
if earlier, the date on which this Agreement terminates pursuant to Section 1.01
or Article XII), no existing equity interest in Seller shall be sold, pledged,
encumbered, transferred, assigned or otherwise disposed of (each, a "Transfer")
by any legal or beneficial owner thereof (the "Equity Owners") and no new equity
interest shall be issued by Seller and none of Mr. Frank Mori, Mr. Christopher
Mori, Ms. Heather Mori or Mr. Tomio Taki (each, an "Ultimate Owner") will
Transfer any equity interest in any Equity Owner; provided that any of the
Equity Owners or Ultimate Owners may Transfer any existing equity interest in
Seller or in any Equity Owner to another Equity Owner or Ultimate
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Owner or to a corporation or other entity in which they, or any of them, are the
sole legal and beneficial owner of all equity interests therein. Seller or the
Equity Owner thereof in which such equity interest is to be transferred shall
give Purchaser prior written notice pursuant to Section 14.01 of each proposed
transfer.
11.02 Ordinary Course. Commencing as of the date hereof, Seller and
Takihyo, jointly and severally, agree that, except as otherwise set forth in or
as contemplated by the Transaction Documents, Seller shall conduct the Business
only in the ordinary course and in conformity with past practice. Without
limiting the generality of the foregoing, Seller and Takihyo, jointly and
severally, covenant that from the date hereof until Closing (or, if earlier, the
date on which this Agreement terminates pursuant to Section 1.01 or Article
XII), Seller shall provide notice to Purchaser with respect to the following
matters and shall provide Purchaser with such information with respect thereto
as Purchaser shall reasonably request, but Seller shall not be required to
obtain Purchaser's consent thereto: (i) entering into or granting any new
license, distribution, trademark, trade name, concurrent use, registered user,
settlement or similar agreement (each a "New Trademark Agreement"), or (ii)
amending, modifying, waiving, terminating or supplementing any Existing
Trademark Agreement (each, a "License Amendment"); provided, that
notwithstanding the foregoing, nothing in this Section 11.02 shall be deemed to
prohibit Seller's dealings with Fashions of Seventh Avenue in the ordinary
course of business pursuant to the existing oral license with Fashions of
Seventh Avenue. Purchaser acknowledges and agrees that the delivery by Seller of
such notice and information shall constitute full compliance with the provisions
of the preceding sentence of this Section 11.02. Except as otherwise provided
above with regard to Fashions of Seventh Avenue,
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from the date hereof until Closing (or, if earlier, the date on which this
Agreement terminates pursuant to Section 1.01 or Article XII), without the prior
written consent of Purchaser, Seller shall not enter into any New Trademark
Agreement or License Amendment with any officer, director, member, stockholder,
employee, affiliate, or other Person related in any way to Seller, Takihyo or
any of the foregoing Persons.
11.03 Trademark Infringement and Other Events. From the date hereof until
Closing (or, if earlier, the date on which this Agreement terminates pursuant to
Section 1.01 or Article XII), Seller and/or Taikihyo shall promptly notify
Purchaser of any infringement, counterfeiting or passing-off of a Trademark of
which Seller becomes aware, whether by the use of the Trademark, a similar
trademark or trademarks or by the imitation of packaging, label designs or
otherwise. Seller shall take such legal action to protect the Trademarks against
an infringement, counterfeiting or passing-off as is consistent with Seller's
past practices. Seller will promptly, but in any event within five (5) Business
Days, give Purchaser written notice of the occurrence of any event of which
Seller becomes aware that could reasonably be expected to result in a Material
Adverse Event, including the following: (a) any petition under the Bankruptcy
Code filed by or against any licensee of any of the Trademarks as to which
Seller is licensor, the filing of which is Actually Known to Seller and Takihyo,
(b) any notice of opposition or petition for cancellation filed against any of
the Trademarks of which Seller actually becomes aware, (c) any other claim
asserted in a judicial, administrative or other proceeding concerning the
Trademarks, the filing of which is Actually Known to Seller and Takihyo, (d)
receipt by Seller or Takihyo of any written notice or other written
communication from any third Person alleging that the consent of such third
Person is or may be required
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in connection with the transactions contemplated by this Agreement or the
Transfer Documents, (e) any notice of any pending claim, suit, proceeding,
arbitration or governmental body investigation relating to the Business or the
Assets, or which is threatened against Seller, and in each case of which Seller
or Takihyo receives written notice or has Actual Knowledge, and (f) the receipt
by Seller of any written notice or any other notice Actually Known to Seller
from any licensee of Seller alleging a material default by Seller under any of
the Existing Trademark Agreements or any written notice sent by Seller to any
licensee alleging a material default by such licensee under any of the Existing
Trademark Agreements. Seller shall, from the date hereof until either the
Closing or the termination of this Agreement pursuant to Article XII, as the
case may be, consistent with its past practice, (i) maintain all registrations
for the Trademarks and, in that connection, not abandon any Trademark or use
thereunder, (ii) prosecute any trademark applications for the Trademarks pending
as of the date of this Agreement, file and prosecute opposition and cancellation
proceedings and (iii) otherwise preserve and maintain all rights in the
Trademarks and preserve intact the Business, consistent with Seller's past
practice. All legal and other expenses incurred in connection with the foregoing
shall be borne by Seller.
11.04 Rights Acquired Prior to Closing. If and when Seller shall obtain
rights to any new Trademarks, or any reissue, renewal or extension of any
Trademarks, such Trademarks shall be covered by, and deemed to be incorporated
into, this Agreement.
11.05 Access Prior to Closing. Subject to the last two sentences in this
Section 11.05 and subject to the prior approval of Mr. Frank Mori (which
approval shall be granted or denied in the commercially reasonable judgment of
Mr. Mori), (i) upon
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reasonable notice, Seller shall afford Purchaser and its Representatives
reasonable access during regular business hours during the period from the date
hereof up to and including the Closing to any and all of the premises,
properties, contracts, books, records, data and personnel of Seller relating to
the Business and the Assets and (ii) Seller shall, and shall use reasonable
efforts to cause each of its directors, officers, members, managers, agents
and/or employees to cooperate in a reasonable manner in connection with the
foregoing. All information disclosed in the course of such due diligence shall
be subject to the provisions of Section 3.04 hereof. In the event that Purchaser
or its Representatives shall desire such access or any such information or
documents concerning the Business or the Assets, Purchaser, through its Chairman
of the Board, Chief Operating Officer or Executive Vice President-Finance and
Administration shall provide the aforementioned reasonable notice in accordance
with Section 14.01. Within a reasonable time thereafter, Seller shall afford
Purchaser and its Representatives such access or such information or documents,
as the case may be, in each case to the extent consistent with the foregoing
provisions of this Section 11.05.
11.06 FTC Approval. As promptly as practicable after the execution and
delivery of this Agreement and the other Transaction Documents, Seller and
Purchaser shall each file or cause to be filed a notification and report form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), with the Federal Trade Commission and the Department of Justice. The
purchase of the Assets, the payment of the Purchase Price, the assumption of the
obligations of Seller under the Trademark License Agreements, the Other
Trademark Agreements and the Other Assumed Agreements and the consummation of
the transactions contemplated hereby are
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expressly and absolutely subject, in each case, to the expiration or termination
of all applicable waiting periods under the HSR Act, without any party hereto
(or, if different, any "person" in which such party is included for purposes of
the HSR Act) having been formally or informally advised by the Federal Trade
Commission or the Department of Justice that either of them will or may seek to
enjoin the consummation of, or otherwise will or may challenge, the transactions
contemplated by this Agreement or the other Transaction Documents and without
either Seller or Purchaser (or their respective "persons") being obligated to
divest itself of any assets or reorganize its existing corporate structures
("FTC Approval"). Each of Seller and Purchaser shall use its best efforts to
prosecute all such applications, as soon as possible after the filing thereof,
and will cooperate with the other and take all steps reasonably necessary,
proper or desirable to expedite the prosecution of such applications (provided
that there is no obligation to agree to any divestiture or reorganization).
11.07 Preserve Accuracy of Representations and Warranties. Between the date
hereof and the Closing Date, except as otherwise provided herein, including,
without limitation, Section 11.02, each of the parties hereto shall refrain from
knowingly taking any action which would render any of its respective
representations or warranties contained in Articles VI or VII of this Agreement
inaccurate as of the Closing Date, provided, that in no event shall Seller or
Takihyo be deemed in breach of this provision by virtue of the conduct by Seller
of its business in compliance with this Agreement and the other Transaction
Documents.
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11.08 Employees of Seller.
(a) Purchaser shall have the right, but shall not be obligated, to hire or
otherwise establish an independent contractor, consultant or other business
relationship with (collectively "Hire") any employees of Seller, but shall have
no right to Hire any employees of Seller's licensing operations unless and until
the closing of the transactions contemplated under this Agreement are
consummated, although Purchaser shall not be restricted from making offers to
Hire such employees provided such offers are conditioned on the consummation of
such closing. Purchaser shall provide to Seller reasonable advance written
notice of any employee of Seller to whom Purchaser intends to extend an offer to
Hire and shall keep Seller informed of the status of any such offer and the
acceptance thereof.
(b) In the event that Seller shall notify Purchaser in writing that any
employees of Seller who are not represented by a labor organization to whom
Purchaser intends to extend or shall have extended an offer to Hire shall be, in
the commercially reasonable judgment of Mr. Frank Mori, necessary to the
wind-down of Seller's business as contemplated by this Agreement, the Omnibus
Agreement and the License Agreement, Seller and Purchaser shall in good faith
attempt to agree upon a sharing arrangement with respect to such employees on
terms and conditions reasonably acceptable to both Seller and Purchaser;
provided, that any such sharing arrangement shall contain, among other things,
the following terms: (i) within thirty (30) days of receipt by Purchaser from
Seller of vouchers and/or receipts or other documentation reasonably requested
by Purchaser, Purchaser shall reimburse Seller with respect to the services of
any employee of Seller who shall perform services for Purchaser pursuant to any
such sharing arrangement in an
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amount equal to the pro rata portion of such employee's salary based upon the
portion of such employee's working time spent in performing such services, and
(ii) if Purchaser shall fail to reimburse Seller for such pro rata portion of
the salary of any shared employee as provided above in this Section 11.08(b),
and such failure shall continue for a period of three (3) Business Days after
Seller shall have notified Purchaser, in accordance with Section 14.01 hereof,
of such failure, Seller shall have the right to terminate the sharing
arrangement with respect to such employee. In such event, except for the pro
rata portion of the salary of such employee that Purchaser shall not have paid,
neither Seller nor Purchaser shall have any further rights or obligations with
respect to such sharing arrangement.
(c) Purchaser shall reimburse Seller, in an amount not to exceed $180,000,
for any liability actually incurred by Seller as a result of Seller's inability
to fully comply with the provisions of the Worker Adjustment and Retraining
Notification Act, as amended, 29 U.S.C. Sections 2101 et seq. ("Warn Act") in
connection with the transactions contemplated by this Agreement, upon written
notice to Purchaser by Seller of such liability and upon receipt by Purchaser of
documentation reasonably satisfactory to it in respect thereof.
11.09 Continuing Advertising Obligations. During the period from the date
hereof until Closing, Seller shall continue to advertise and promote the
Trademarks and the Business as required under the Existing Trademark Agreements.
11.10 Post-Closing Reconciliations. Prior to the Closing, Seller shall use
its commercially reasonable efforts to collect promptly all royalties (including
minimum royalties) ("Royalties"), distribution fees and other payments
(collectively, with
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Royalties, "Fees") due under each Trademark License Agreement, Other Trademark
Agreement and Other Assumed Agreement and from and after the Closing, Purchaser
shall use its commercially reasonable efforts to promptly collect all such Fees.
The parties agree that, upon consummation of the Closing, Seller and Purchaser
allocate the economic benefit of the Trademark License Agreements, Other
Trademark Agreements and the Other Assumed Agreements listed below among Seller
and Purchaser as follows:
(a) Accrual Basis of Sharing of Royalties under Trademark License
Agreements. Except as provided in subsections (b) and (c) below, Seller and
Purchaser shall share Royalties under each Trademark License Agreement for the
calendar quarter in which the closing occurs (the "Closing Quarter") on an
accrual basis based upon net sales or other applicable transactions for which
Royalties are payable thereunder. Seller shall be entitled to retain or receive,
as the case may be, Royalties in respect of such net sales or other applicable
transactions occurring prior to the Closing Date, including, without limitation,
Royalties that become due and payable in respect thereof as the result of an
audit under any Trademark License Agreement, and Purchaser shall be entitled to
retain or receive, as the case may be, Royalties in respect of such net sales or
other applicable transactions occurring from and after the Closing Date,
including, without limitation, Royalties that become due and payable in respect
thereof as the result of an audit under any Trademark License Agreement. Seller
and Purchaser shall provide to each other, promptly upon receipt, all reports
from the other party or parties to such Trademark License Agreement received by
them, including, without limitation, monthly reports thereunder. To the extent
that monthly or other more frequent reports are not required under any Trademark
License Agreement, Seller and Purchaser shall each use its
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commercially reasonable efforts to obtain from the other party or parties to
each such Trademark License Agreement monthly or other more frequent reports of
net sales and other transactions in such detail as shall be reasonably necessary
to effect the sharing of Royalties under such Trademark License Agreement on an
accrual basis as contemplated by Section 11.10(a). At Closing, subject to such
information being reasonably available to Seller, Seller shall deliver to
Purchaser a schedule (a "Pre-Closing Royalty Schedule") identifying by Trademark
License Agreement and licensee the amount of royalties (including minimum
royalties) paid to Seller under each Trademark License Agreement in the Closing
Quarter through the end of the month preceding the month in which the Closing
occurs, along with copies of all reports and statements, including monthly and
other more frequent reports, from the other parties to the Trademark License
Agreements theretofore received by Seller, and within ten (10) Business Days
after the Closing Date, Seller shall deliver to Purchaser a revised Pre-Closing
Royalty Schedule (a "Final Pre-Closing Royalty Schedule") setting forth the
amount of Royalties paid to Seller under each Trademark License Agreement in the
Closing Quarter through the Closing Date, along with copies of any further
reports and statements from the other parties to the Trademark License
Agreement. Promptly upon Purchaser's receipt of a monthly, quarterly or other
report from any licensee of Royalties payable in the Closing Quarter, Purchaser
shall deliver to Seller a detailed schedule (a "Reconciliation Schedule"),
identifying by Trademark License Agreement and licensee the aggregate amount of
Royalties payable pursuant to each Trademark License Agreement for the Closing
Quarter and indicating, based on the Final Pre-Closing Royalty Schedule, and the
monthly, quarterly or other reports from the other parties to the Trademark
License Agreement received by Seller or Purchaser from and after the Closing for
the Closing Quarter, the portion of such royalties to which each of Seller and
Purchaser is entitled pursuant to the sharing arrangement set forth in the first
sentence of this Section 11.10(a). At such time, Purchaser shall also provide to
Seller a copy of all monthly, quarterly or other reports that Purchaser shall
have received pursuant to the Trademark License
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Agreements. Within ten (10) Business Days following Seller's receipt of the
Reconciliation Schedule, each party shall notify the other whether the notifying
party is in agreement with the Final Pre-Closing Schedule or the Reconciliation
Schedule, as the case may be. In the event of any dispute among Seller and
Purchaser as to the sharing of such Royalties and, in that connection, the Final
Pre-Closing Schedule or the Reconciliation Schedule, Seller and Purchaser shall
in good faith attempt to resolve their differences. In the event, however, that
any dispute shall not be so resolved, the parties shall submit their differences
for resolution to Ernst & Young, or other independent certified public
accountants who shall be mutually chosen by Seller and Purchaser (the
"Accountants"). The Accountants shall be instructed to, and shall determine and
report to Seller and Purchaser upon, such differences no later than twenty (20)
days after submission of the applicable Reconciliation Schedule to it. Such
report shall be final, binding and conclusive on the parties hereto. The fees
and disbursements of the Accountants shall be borne equally by Seller and
Purchaser. Within three (3) days following the resolution of all differences by
Seller and Purchaser or the Accountants, as applicable, Seller shall pay to
Purchaser, or Purchaser shall pay to Seller, as the case may be, the amount due
to the other by wire transfer in immediately available funds.
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(b) (i) Inability to Effect Accrual Basis of Sharing of Royalties. In the
event that Seller and Purchaser shall determine that they have been unable to
obtain sufficiently detailed information to effect the sharing of the Royalties
on a reasonably accurate basis in accordance with Section 11.10(a) with respect
to any Trademark License Agreement, then Royalties under such Trademark License
Agreement shall be shared for the Closing Quarter on a pro rata basis, based
upon (i) the number of days in the Closing Quarter up to and including the
Closing Date, for the benefit of Seller, and (ii) the number of days in the
Closing Quarter after the Closing Date, for the benefit of Purchaser. In such
event, at Closing, subject to such information being reasonably available to
Seller, Seller shall deliver to Purchaser a Pre-Closing Royalty Schedule
identifying by Trademark License Agreement and licensee the amount of Royalties
paid to Seller under each Trademark License Agreement in the Closing Quarter
through the end of the month preceding the month in which the Closing occurs,
and within ten (10) Business Days after the Closing Date, Seller shall deliver
to Purchaser a Final Pre-Closing Royalty Schedule setting forth the amount of
Royalties paid to Seller under each Trademark License Agreement in the Closing
Quarter through the Closing Date. Promptly upon Purchaser's receipt of a report
from any licensee of royalties payable in the Closing Quarter, Purchaser shall
deliver to Seller a Reconciliation Schedule, identifying by Trademark License
Agreement and licensee the aggregate amount of Royalties payable pursuant to
each Trademark License Agreement for the Closing Quarter and indicating, based
on the Final Pre-Closing Royalty Schedule, the pro rata portion of such
royalties to which each of Seller and Purchaser is entitled pursuant to the
sharing arrangement set forth in this Section 11.l0(b)(i). At such time,
Purchaser
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shall also provide to Seller a copy of all monthly, quarterly or other reports
that Purchaser shall have received pursuant to the Trademark License Agreements.
Royalties payable as a result of an audit of any Trademark License Agreement
shall be payable to the party that would have been entitled to such Royalties
(e.g., Seller with respect to Royalties payable for periods up to and including
the Closing Date and Purchaser with respect to Royalties payable for periods
after the Closing Date). The payment and dispute resolution procedures set forth
in Section 11.10(a) shall also be applicable to this Section 11.10(b)(i).
(ii) Notwithstanding Section 11.10(a) and Section 11.l0(b)(i) above, Seller
and Purchaser agree that, because the royalties payable by Vogue Pattern Service
division of Butterick Company, Inc. ("Vogue") are computed and paid only twice
per year (in July and January for the immediately preceding six-month period),
the Vogue royalties payable for sales in 1999 shall be pro rated based upon (i)
the number of days in the six-month period ending June 30, 1999 or December 31,
1999, as applicable, in which the Closing occurs or any shorter period in the
event of termination of such Trademark License Agreement prior to June 30, 1999
or December 31, 1999, as applicable (the "Vogue Half Year") up to and including
the Closing Date, for the benefit of Seller and (ii) the number of days in the
Vogue Half Year after the Closing Date, for the benefit of Purchaser. Seller and
Purchaser also agree that, because the royalties in excess of the minimum
royalties payable by Takihyo Company Ltd. ("TCL") are paid only twice yearly (in
October and April for the immediately preceding six-month period), the TCL
royalties payable for sales in 1999 shall be pro rated based upon (i) the number
of days in the six-month period ending August 31, 1999 or February 29, 2000, as
applicable, in
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which the Closing occurs or any shorter period in the event of termination of
such Trademark License Agreement prior to August 31, 1999 or February 29, 2000,
as applicable (the "TCL Half Year") up to and including the Closing Date, for
the benefit of Seller and (ii) the number of days in the TCL Half Year after the
Closing Date, for the benefit of Purchaser. Promptly upon Purchaser's receipt of
a report from Vogue or TCL, as applicable, of royalties payable in the Vogue
Half Year or TCL Half Year, as applicable, and in any event, on or prior to the
45th day after the last day of the Vogue Half Year or the 60th day after the
last day of the TCL Half Year, as applicable, Purchaser shall deliver to Seller
a Reconciliation Schedule identifying the aggregate amount of royalties
(including minimum royalties) payable pursuant to the Vogue Trademark License
Agreement for the Vogue Half Year or the TCL Trademark License Agreement for the
TCL Half Year, as applicable, and indicating, based on the Final Pre-Closing
Royalty Schedule, the pro rata portion of such royalties to which each of Seller
and Purchaser is entitled pursuant to the sharing arrangement set forth in this
Section 11.10(b)(ii). At such time, Purchaser shall also provide to Seller a
copy of all monthly, quarterly or other reports that Purchaser shall have
received pursuant to the Vogue or TCL Trademark License Agreements, as
applicable. The payment and dispute resolution procedures set forth in Section
11.10(a) shall also be applicable to this Section 11.10(b)(ii).
(c) Distribution Fees. The parties acknowledge and agree that, with respect
to the Other Trademark Agreement between Seller and Simms Sigal & Co. Ltd.
("Simms"), all distribution fees payable with respect to (A) all merchandise
purchased by Simms for all seasons through and including the Fall 1999 season
and (B) all "Initials"
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merchandise purchased by Simms from Seller shall be for the benefit of Seller.
In the event that Purchaser shall receive any such fees at any time after the
Closing, Purchaser shall promptly remit them to Seller in immediately available
funds within two (2) Business Days after Purchaser's receipt thereof. The
payment and dispute resolution procedures set forth in Section 11.10(a) shall
also be applicable to this Section 11.10(c).
(d) Image Fund Payments. As of the date hereof, Seller has (i) produced
advertising and promotion materials and incurred media placement commitments for
the Spring 1999 advertising campaign and (ii) initiated planning of the
advertising and promotion materials for the Fall 1999 advertising campaign for
which production-related expenses will be incurred during the period prior to
June 1999 and media commitments will be made during the period prior to August
1999, and with respect to which payment will be due in the period from September
1, 1999 through December 31, 1999 (collectively, "1999 Advertising Expenses").
All image fund payments made pursuant to the Trademark License Agreements (the
"Image Fund Payments") received by Seller on or prior to the Closing Date shall
be applied by Seller to recoup Seller's 1999 Advertising Expenses. At Closing,
subject to such information being reasonably available to Seller, Seller shall
deliver to Purchaser a schedule (the "Pre-Closing 1999 Advertising Expense
Schedule") identifying the amount of 1999 Advertising Expenses actually incurred
by Seller and the amount of such expenses that has been recouped by Seller, in
each case through the end of the month preceding the month in which the Closing
occurs, and within ten (10) Business Days after the Closing Date Seller shall
deliver to Purchaser a revised Pre-Closing 1999 Advertising Expense Schedule
(the "Final Pre-Closing 1999 Advertising Expense Schedule") setting forth the
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amount of 1999 Advertising Expenses actually incurred by Seller and the amount
of such expenses that has been recouped by Seller, in each case through the
Closing Date. From and after the Closing, Purchaser shall remit to Seller,
within two (2) Business Days of their receipt by Purchaser, all Image Fund
Payments received by Purchaser pursuant to the Trademark License Agreements,
together with a report identifying the amount and source of all such Image Fund
Payments received by Purchaser since the Closing Date, until such time as Seller
shall have recouped all 1999 Advertising Expenses actually incurred by Seller as
set forth on the Final Pre-Closing 1999 Advertising Expense Schedule. If the
aggregate Image Fund Payments received by Purchaser that are attributable to the
year ending December 31, 1999 (including Image Fund Payments attributable to the
fourth calendar quarter of 1999 and received by Purchaser after December 31,
1999) (collectively, the "1999 Image Fund Payments") are less than the aggregate
amount of 1999 Advertising Expenses actually incurred by Seller, then Purchaser
shall have no obligation to pay to Seller any amount in excess of the 1999 Image
Fund Payments actually received by Purchaser. To the extent that the aggregate
1999 Image Fund Payments received by Purchaser exceed the aggregate amount of
1999 Advertising Expenses actually incurred by Seller, Purchaser shall be
entitled to retain such excess for use in accordance with the applicable
Trademark License Agreements.
(e) Audit Rights. Seller and Purchaser shall from time to time promptly
provide to each other such documentation as reasonably requested by them to
enable them to confirm the matters contemplated by this Section 11.10. In
addition, upon reasonable notice during normal business hours, Seller and
Purchaser shall be entitled to audit each others' books and records for purposes
of confirming such accounting.
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(f) Payment. From and after the Closing (i) in the event that Seller
receives any Fees to which Purchaser is entitled pursuant to this Section 11.10,
Seller shall promptly pay such amount to Purchaser and (ii) in the event that
Purchaser receives any Fees to which Seller is entitled pursuant to this Section
11.10, Purchaser shall promptly pay such amount to Seller.
11.11 Rights to Use Trademarks After Closing. Until the earlier of March 1,
2000 or upon receipt by Purchaser of written notice from Seller as to its
completion of the wind down of the Apparel Business of Seller contemplated by
the Management Consulting Agreement and the License Agreement (the "Trademark
Use Period"), Seller shall be entitled to use the Trademarks in accordance with
the following:
(a) Within forty-five (45) Business Days after the Closing Date (and, with
respect to the "Initials" inventory, within 45 Business Days after the date of
purchase thereof by Purchaser under the Omnibus Agreement (the "Initials Closing
Date")), Seller shall provide to Purchaser a complete and accurate list of
Seller's inventory of (i) finished goods of apparel items for the Fall 1999
season, (ii) "Initials" inventory not purchased by Purchaser pursuant to the
Omnibus Agreement, (iii) piece goods relating to the Fall 1999 season and prior
seasons, (iv) work-in-progress related to any of the foregoing and (v) raw
materials then on hand (collectively, the "Existing Inventory"). The list shall
be prepared as of the close of business on the day immediately preceding the
Closing Date (or the Initials Closing Date, as applicable).
(b) During the Trademark Use Period, Seller may manufacture apparel items
using the Trademarks. During the Trademark Use Period, Seller (but no other
Person, including, without limitation, any Person having a security interest,
lien or other
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Encumbrance in or on any Existing Inventory) shall be entitled, on a
non-exclusive basis, to use the Trademarks in connection with the sale or other
disposal of the Existing Inventory and cut-ups (the Existing Inventory, and
cut-ups, wherever produced, are collectively referred to as "Inventory"). All
such sales and disposals shall be through Normal Retail Channels (as defined in
the License Agreement) or to those retail outlets identified on Schedule 2.03 to
the License Agreement on the date hereof (without regard to any amendment or
modification thereof unless otherwise agreed to by Purchaser) (the "Outlets").
Without limiting the generality of the foregoing, during the Trademark Use
Period, Seller may accept and fulfill orders for Inventory and such Inventory
may bear any of the Trademarks in a form consistent with such use by Seller
prior to Closing, including, without limitation, the Trademark "ANNE KLEIN
CLASSICS". At the end of the Trademark Use Period, if Seller has additional
remaining Inventory (the "Remaining Inventory"), Seller shall notify Purchaser
and Purchaser shall, in such event, have a right of first refusal to purchase
all of the Remaining Inventory, at a price and on the terms, including, without
limitation, the timing of payment for and taking delivery of the Remaining
Inventory as may be mutually agreed, which right shall be exercisable only by
notice in writing delivered to Seller within five (5) Business Days after Seller
gives written notice to Purchaser in accordance with Section 14.01 setting forth
the pertinent details of the proposed sale, including, without limitation, a
description of the Remaining Inventory and the proposed purchase price and
terms. If Purchaser does not exercise its rights to purchase hereunder, Seller
may proceed to sell such Remaining Inventory after the Trademark Use Period in
accordance with the other terms and conditions of this Section 11.11 or, with
Purchaser's prior written consent, which consent shall not be
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unreasonably withheld, in such other manner as Seller may reasonably request,
for a period not to exceed thirty (30) days after the end of the Trademark Use
Period.
(c) Except as otherwise specifically provided in this Section 11.11, from
and after the Closing Seller shall have no right to use the Trademarks or any
variation or simulation thereof and shall, promptly upon Purchaser's written
request, free of charge, execute any and all documents Purchaser may deem
necessary or desirable to the effect that Seller no longer has the right to use
the Trademarks (and if Seller fails to do so promptly, Purchaser shall have the
right to sign such documents as it deems reasonably necessary on Purchaser's
behalf). In addition, at the end of the Trademark Use Period, except as
otherwise provided in Section 11.11(b) with respect to the Remaining Inventory,
Seller shall destroy, or, if requested by Purchaser, shall deliver to Purchaser
all Inventory and all other materials of all kinds in its possession with the
Trademarks thereon for which Purchaser shall pay Seller's actual cost.
(d) If, during the Trademark Use Period, Seller wishes to sell any of the
Inventory other than in Normal Retail Channels or those Retail Outlets
identified on Schedule 2.03 to the License Agreement, or if Seller wishes to
sell all or substantially all of the Inventory to a single purchaser or group of
related purchasers, Purchaser shall, in such event, have a right of first
refusal with respect to any such sale at a price equal to the price to be paid
to Seller by the proposed purchaser, which right shall be exercisable only by
notice in writing delivered to Seller within five (5) Business Days after
Purchaser receives written notice from Seller setting forth the proposed
purchase price of the Inventory covered by the proposed sale and all of the
other pertinent details thereof, including without limitation, the name of the
proposed purchaser and the proposed
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purchase price. If Purchaser does not exercise its rights to purchase hereunder,
Seller may proceed with the proposed sale with the purchaser and at the price
offered to Seller.
(e) Seller's right to use the Trademarks shall terminate immediately, if
Seller commences or becomes the subject of any case or proceeding under any
applicable federal, state or other bankruptcy laws or if, during the Trademark
Use Period, a court appoints a receiver liquidator, assignee, trustee,
custodian, sequestrator or similar official for Seller and any such involuntary
proceeding or appointment is not discharged within sixty (60) days. In addition,
Seller's right to use the Trademarks shall terminate upon notice to Seller by
Purchaser in the event that Seller fails to perform any of the other terms,
conditions, agreements or covenants it is obligated to perform under this
Section 11.11 and (i) such breach is curable but continues uncured for a period
of forty-five (45) days after Purchaser gives Seller written notice thereof; or
(ii) if said breach is curable but not within forty-five (45) days and all
reasonable steps necessary to cure have not been taken within forty-five (45)
days after Purchaser gives Seller written notice of breach. Purchaser may
terminate the Trademark Use Period immediately upon giving notice at any time
after said forty-fifth day, without prejudice to any other rights of Purchaser.
However, if any such breach is not curable, Purchaser may terminate such rights
to use the Trademark immediately upon giving notice at any time, without
prejudice to any other rights of Purchaser.
(f) Unless otherwise provided by law, no receiver, liquidator, assignee,
trustee or custodian appointed to administer the affairs of Seller, sheriff or
any other officer of the court or official charged with taking custody of
Seller's assets or business shall have the right to use the Trademarks in any
way.
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(g) Notwithstanding the foregoing, if the United States Bankruptcy Code or
any amendment, supplement or successor thereto (the "Code") permits a trustee in
bankruptcy of Seller (or Seller as Debtor-in-Possession) to assume this Section
11.11 or this Agreement and either does so and, thereafter, desires to assign
this Section 11.11 or this Agreement to a third person in compliance with the
requirements of the Code, the trustee or Seller, as the case may be, shall
notify Purchaser of the same in writing. Said notice shall set forth the name
and address of the proposed assignee, the proposed consideration for the
assignment and all other relevant details thereof. The giving of such notice
shall be deemed to constitute the grant to Purchaser of an option to have this
Agreement or Section assigned to it or to its designee for such consideration,
or its equivalent in money, and upon such terms as are specified in the notice.
Said option may be exercised only by written notice given to the trustee or
Seller, as the case may be, by Purchaser within fifteen (15) days after Seller's
receipt of the aforesaid notice from such party, or within such shorter period
as may be deemed appropriate by the court in the bankruptcy proceeding. If
Purchaser fails to exercise its said option within the aforestated exercise
period, the trustee or Seller, as the case may be, may complete the assignment
referred to in its notice, but only if such assignment is to the entity named in
said notice and for consideration and upon the terms specified therein. Nothing
contained herein shall be deemed to preclude or impair any rights or remedies
which Purchaser may have.
(h) Not later than five (5) Business Days after the end of the Trademark
Use Period, Seller shall have, or arranged to have, amended its Organizational
Documents, in form and substance reasonably satisfactory to Purchaser, to change
its
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name so as to remove any reference to "Anne Klein" or any other Trademark and to
cease otherwise doing business under any name referencing "Anne Klein" or any
other Trademark, including, without limitation under assumed name filings. At
such time, Seller shall provide Purchaser with such official documents and such
other documents reasonably requested by Purchaser to indicate that the name
change and the cessation of the use of such name has been duly recorded with the
appropriate authorities or that such steps have been taken by Seller which are
reasonably satisfactory to Purchaser to effect such change and cessation.
11.12 Schedule Updates.
(a) Upon execution and delivery of this Agreement, Seller and Takihyo shall
prepare and deliver to Purchaser the Seller Disclosure Schedules and Purchaser
shall also prepare and deliver to Seller the Purchaser Disclosure Schedules.
Seller or Takihyo shall have the right to update the Seller Disclosure Schedules
on a monthly basis (the "Updates"), which Updates, if any, shall be delivered to
Purchaser within five (5) Business Days following the end of each calendar month
until Closing. Final Updates, if any, shall be delivered three (3) Business Days
prior to Closing. Updates shall contain any information, condition or
circumstance of which Seller or Takihyo shall become aware including, without
limitation, any change in or omission from the Seller Disclosure Schedules that
would cause the representations and warranties of Seller and Takihyo to be
incomplete or incorrect in any respect.
(b) The representations and warranties contained in Section 6.01 through
6.04 of this Agreement shall not be qualified by information contained in any
Updates. The representations and warranties contained in Section 6.07 of this
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Agreement, as such section relates to the Trademarks "Anne Klein," "Anne Klein
II," "A Line Anne Klein" and the "Lion Head Design" automatically shall be
qualified as of the date such representations and warranties were made by
information, conditions and circumstances of which Seller becomes aware and
which occur from and after the date hereof to and including the Closing as
reflected in Updates of such section with regard to the following matters: the
maturity to registration of applications previously filed, the filing of new
applications for registrations and the conversion of intent to use applications
to use based applications (except to the extent that any such information,
condition or circumstance results from a breach of any of the covenants
contained herein). The representations and warranties contained in Sections
6.05, 6.06, 6.07 (other than as provided in the immediately preceding sentence),
6.08 and 6.09 automatically shall be qualified as of the date such
representations and warranties were made by information, conditions and
circumstances of which Seller becomes aware and which occur from and after the
date hereof to and including the Closing as reflected in Updates of such
sections (except to the extent that any such information, condition or
circumstance results from a breach of any of the covenants contained herein).
(c) In the event that any Update shall reflect a breach of, change to or
omission from any representation and warranty of Seller when made, without
giving effect to any prior Updates, Purchaser shall have a period of ten (10)
Business Days during which it may object to such Update and terminate this
Agreement. Any such objection and termination shall be in writing and shall be
sent to the other parties hereto pursuant to Section 14.01. Failure of Purchaser
to object to any such Updates within ten (10) Business Days of receipt of such
Updates shall constitute a waiver of Purchaser's
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rights or remedies for breach of any of the representations and warranties of
the other parties to the extent such representations and warranties shall have
been updated by such Updates and such representations and warranties shall be
deemed modified as of the date such representations and warranties were made to
the extent of the information set forth in such Updates. The provisions of
Article XII shall be applicable in the event of any termination under this
Section 11.12(c).
(d) Purchaser hereby agrees that the consummation of the Closing shall
constitute a waiver by it of any rights or remedies for breach of any of the
representations and warranties of Seller and Takihyo to the extent such
representations and warranties shall have been updated by the Updates; provided,
that the delivery of the Updates shall not, absent consummation of the Closing,
constitute a waiver of any breach of any such representations and warranties or
any rights or remedies with respect thereto, except as otherwise expressly
provided in this Agreement.
11.13 Post-Closing Cooperation. From and after Closing, the parties agree
to cooperate with each other from time to time as may be reasonably required in
connection with any claim, action or suit asserted or filed against, or any
proceeding, arbitration or investigation involving, any of the parties or their
respective Representatives and arising out of or relating to the operation of
the Business or the ownership or use of the Assets prior to or after Closing, as
the case may be.
11.14 Bank Financing. From and after the date hereof, Purchaser shall in
good faith use all commercially reasonable efforts to obtain in an expeditious
manner, but in any event at or prior to July 10, 1999, the Purchaser's
Financing. In addition, Purchaser shall from time to time after the date hereof,
at Seller's request, discuss the status of
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Purchaser's efforts and Purchaser shall promptly give Seller written notice of
having received a commitment for the Purchaser's Financing.
11.15 Noteholders' Consent. From and after the date hereof, Purchaser shall
in good faith use its commercially reasonable efforts to obtain in an
expeditious manner, but in any event at or prior to July 10, 1999, in compliance
with applicable law and the terms and conditions of the Indenture dated as of
June 4, 1997 by and between Purchaser and IBJ Schroder Bank & Trust Company, as
Trustee (as amended and supplemented, the "Indenture"), any requisite consent or
approval under the Indenture or otherwise of the holders of Purchaser's Senior
Notes in connection with the Purchaser's Financing and the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents.
Purchaser shall from time to time after the date hereof, at Seller's request,
discuss the status of the foregoing matters and shall give Seller prompt written
notice of having received the requisite consent or approval of such holders. The
provisions of Section 3.04 shall apply to the actions contemplated by this
Section 11.15 to the extent applicable.
11.16 Further Assurances. Consistent with the terms and conditions hereof,
each party hereto wilt cooperate with each other and execute and deliver any and
all instruments and take any and all other actions, either before or after the
Closing, which may be necessary, proper or advisable to effect or evidence the
provisions of this Agreement and the other Transfer Documents and to consummate
the transactions contemplated hereby and thereby as promptly as practicable.
Except as otherwise expressly provided herein, (a) the parties hereto shall use
their respective commercially reasonable efforts to obtain in an expeditious
manner, but in any event on or prior to
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July 10, 1999, all approvals, authorizations and consents of all third Persons
which are necessary for the consummation of the transactions contemplated
hereby, (b) shall keep each other informed on a regular and timely basis with
respect to all such matters and (c) except as otherwise provided in Sections
11.14 or 11.15, shall provide written notice to the other party within five (5)
Business Days of receipt of any consent listed on Schedules 8.01 or 8.02.
Nothing in this Section 11.16 shall be construed as requiring Purchaser to
assume any of the Excluded Liabilities.
11.17 Transfer Tax Filings. Each tax return (and any exemption, clearance
or similar filing or certificate) with respect to any sales, use, transfer,
stamp, value-added, motor vehicle transfer or registration, documentary,
registration, recording, excise, real estate transfer or similar taxes or fees
("Transfer Taxes") required to be paid to any relevant taxing authority (or for
which an exemption is being sought) in connection with the transactions
contemplated by this Agreement shall be timely filed by the party legally
obligated to file such tax return (or exemption, clearance or similar fling or
certificate) with respect thereto. In this regard, Seller and Purchaser agree to
cooperate, and to cause their respective affiliates to cooperate, with each
other in the making of all such filings required in connection with any such
Transfer Taxes. Purchaser shall deliver to Seller prior to the Closing Date all
exemption, clearance, resale or similar certificates which would under
applicable law enable the transactions contemplated by this Agreement to be
exempt from any Transfer Taxes.
11.18 Trademark Documentation. Without limiting the generality of Section
11.16, promptly, but in no event later than thirty (30) days after receipt of
Purchaser's request from time to time, Seller shall furnish to Purchaser, at
Seller's cost and expense
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(including the reimbursement of applicable filing and recording fees as provided
below), all documents and instruments in Seller's possession or otherwise
publicly available, necessary, or reasonably requested by Purchaser to reflect
all corporate and other mergers and reorganizations of Seller, its predecessors
and affiliates and the ownership of the Trademarks, the other Assets and correct
parties to the Assumed Agreements as a result thereof and to enable Purchaser,
at Seller's cost and expense, to file and/or record with all governmental and
other agencies and authorities (collectively, the "Trademark Authorities") such
documents and instruments necessary or reasonably requested by Purchaser to
reflect that as the result of such corporate and other reorganizations, the
Trademarks and the other Assets were owned by Seller and that Seller is the
correct party to the Assumed Agreements. In addition, Seller shall furnish to
Purchaser (at Purchaser's cost and expense), promptly, but in no event later
than thirty (30) days after receipt of Purchaser's request from time to time,
all documents and instruments necessary or reasonably requested by Purchaser to
reflect that the Trademarks and the other Assets have been sold to and purchased
by Purchaser and that the Assumed Agreements have been assigned to and assumed
by Purchaser and to enable Purchaser to file and/or record with all Trademark
Authorities to reflect such sale, purchase, assignment and assumption. Each of
Seller and Purchaser shall cooperate with the other as reasonably required to
effect the foregoing. Purchaser shall bear the cost and expense of each such
filing and recordation; provided, that Seller shall reimburse Purchaser for
Purchaser's costs and expenses of the filing and recording fees (including the
expense of legalization, if required) related to the filing and/or recordation
of the documents set forth in the first
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sentence of this Section 11.18 within three (3) Business Days of Purchaser's
written request therefor.
11.19 Bulk Transfer Laws. Subject to Article X, the parties hereto hereby
waive compliance with all applicable bulk sales and similar laws with respect to
the Anne Klein Transactions.
ARTICLE XII
Termination
12.01 Termination. Anything contained in this Agreement to the contrary
notwithstanding, this Agreement may also be terminated at any time prior to the
Closing Date:
(a) By the mutual consent of Purchaser and Seller;
(b) By Purchaser or Seller, upon written notice to the other party, if
Closing shall not have occurred on or before July 10, 1999 (or such later date
as shall be mutually agreed to in writing by Purchaser, Seller and Takihyo);
provided that the party seeking termination is not in default or breach of this
Agreement; or
(c) By Purchaser, upon written notice to Seller, as provided in Section
11.12.
12.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 12.01, all further obligations of the parties
under this Agreement (other than the provisions of Section 3.04) shall be
terminated without further liability of any party or its shareholders, members,
directors, or officers to the other parties, provided that (a) if either
Purchaser or Seller terminates this Agreement pursuant to Section 12.01(b),
then, to the extent applicable, the provisions of Section 10.04(e), with respect
to Seller, and Section 10.05(e), with respect to Purchaser, shall be applicable
and shall survive any such termination, (b) the provisions of Article X to the
extent such Article relates to the indemnification obligations of (i) Seller and
Takihyo with respect to the Purchaser Indemnified Parties in respect of Excluded
Liabilities and (ii) Purchaser with respect to the Seller Indemnified Parties in
respect of Purchaser's Liabilities, shall
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survive the termination of this Agreement, and (c) the provisions of Article X
to the extent such Article relates to the indemnification obligations of any
party in respect of fraud and willful breaches of this Agreement shall survive
the termination hereof. In no event shall the termination of this Agreement
affect in any way the terms and conditions of, or the rights or obligations of
the parties pursuant to, the License Agreement.
ARTICLE XIII
Governing Law, Etc.
13.01 New York Governing Law. This Agreement and each of the other Purchase
Documents shall be governed by and construed in accordance with the applicable
laws pertaining in the State of New York, without regard to principles of
conflicts of law or choice of law that defer to the substantive laws of another
jurisdiction, other than Section 5-1401 of the New York General Obligations Law.
13.02 No Fiduciary Relationship, Etc. The parties hereto acknowledge and
agree that the sole relationship between Seller and Takihyo, on the one hand,
and Purchaser, on the other, is that of arm's-length seller and purchaser,
respectively, and that no term or provision of this Agreement or any other
Transaction Document is intended to create, nor shall any such term or provision
be deemed or construed to have created, any joint venture, partnership, trust,
agency, employee, employer or other fiduciary or other relationship among the
parties hereto. The parties acknowledge and agree that they have independently
and fully reviewed and evaluated this Agreement, the transactions
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contemplated hereunder and the potential effects of such transactions on the
Assets, Business, operations, properties and condition (financial or otherwise)
of Seller and Takihyo, which review and evaluation was made (a) together with
counsel and (to the extent deemed prudent by the parties) financial and other
advisors, and (b) without any reliance upon any oral or written advice, analysis
or assurance of any kind whatsoever from any other party. Sections 13.01 and
13.02 shall survive the termination of this Agreement, the other Transaction
Documents, the rights and obligations of the parties hereunder or thereunder,
and the transactions contemplated hereby and thereby.
ARTICLE XIV
Miscellaneous
14.01 Notice. Any and all notices or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if given by personal delivery, by certified or
registered mail, postage prepaid, return receipt requested, or by telecopier
with verified answer back or by a recognized major overnight delivery service.
Any such notice shall be deemed given when personally delivered against written
receipt therefor, five (5) Business Days after posting, postage prepaid, in the
mails of the United States of America, upon receipt of verified answer back with
respect to transmission by telecopier (with the original sent postage prepaid by
first class mail) or, with respect to delivery by major overnight delivery
service, upon its receipt against written receipt therefor, at the following
addresses or to such other address or to such other addressee as any party may
from time to time specify by notice to the other party given as aforesaid:
71
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If to Purchaser:
Kasper A.S.L., Ltd.
77 Metro Way
Secaucus, NJ 07094
Attention: Chief Financial Officer
Facsimile No.: (201) 864-7768
With a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: Mark Abramowitz, Esq.
Facsimile No.: (212) 704-6288
If to Seller and Takihyo:
Anne Klein Company LLC
11 West 42nd Street
New York, New York 10036
Attention: Frank Mori
Facsimile No.: (212) 869-9535
and:
Takihyo Inc.
11 West 42nd Street
New York, New York 10036
Attention: Frank Mori
Facsimile No.: (212) 869-9535
With a copy to:
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue
New York, New York 10022-4697
Attention: Leigh Ryan, Esq.
Facsimile No.: (212) 319-4090
14.02 Entire Agreement. This Agreement, the Schedules and Exhibits hereto,
together with the agreements, certificates and other documents referred to
herein, and together with the Confidentiality Agreement, constitute the entire
agreement and set forth the entire understanding of the parties with respect to
the subject matter hereof, supersede
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all prior agreements, covenants, arrangements, letters, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of either party, relating to the subject matter hereof, and
may not be modified or amended, except by a written agreement specifically
referring to this Agreement signed by the parties hereto and any other party to
be charged.
14.03 No Waiver. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature. No failure on the part of any party to exercise,
and no delay in exercising any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
14.04 Assignment. Neither party may transfer or assign this Agreement or
its rights hereunder or delegate its performance hereunder without the prior
written consent of the other party, and any purported assignment without such
consent shall be void and of no effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
14.05 Headings. The section and paragraph headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of any Section or paragraph.
14.06 Transaction Expenses. Whether or not the transactions contemplated
hereby are consummated, all legal and other costs and expenses incurred in
connection
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with this Agreement, the Transfer Documents and the Transaction Documents and
the transactions contemplated hereby or thereby shall be paid by the party
incurring such expenses, except as otherwise specifically provided herein or
therein.
14.07 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
14.08 No Third Party Beneficiaries. Nothing herein, express or implied, is
intended to or shall confer upon any person or entity including, without
limitation, any employee, contractor, vendor or distributor of the Business or
labor organization, other than the parties hereto, the Purchaser Indemnified
Parties and Seller Indemnified Parties pursuant to Article X hereof, any legal
or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
[PAGE INTENTIONALLY ENDS HERE]
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
KASPER A.S.L., LTD.
By: /s/ Lester E. Schreiber
-------------------------------
Name: Lester E. Schreiber
Title: Chief Operating Officer
ANNE KLEIN COMPANY LLC,
a New York limited liability company,
by its Member Manager
TAKIHYO INC.
By: /s/ Frank R. Mori
--------------------------------
Name: Frank R. Mori
Title: President
TAKIHYO INC.
By: /s/ Frank R. Mori
-------------------------------
Name: Frank R. Mori
Title: President
73
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EXHIBIT A
FORM OF BILL OF SALE
This Bill of Sale ("Bill of Sale") dated the ____ day of ______, 1999, is
made by Anne Klein Company LLC ("Seller"), a New York limited liability company
with its principal office at 11 West 42nd Street, New York, NY 10036.
WHEREAS, in connection with that certain Asset Purchase Agreement (the
"Purchase Agreement") dated as of ____, 1999, between Kasper A.S.L., Ltd.
("Purchaser"), a Delaware corporation with its principal office at 77 Metro Way,
Secaucus, NJ 07094 and Seller, which is incorporated herein by reference, Seller
desires to transfer to, and Purchaser desires to acquire, all Seller's right,
title and interest in and to the Assets (all capitalized terms used but not
otherwise defined herein shall have the meaning assigned thereto in the Purchase
Agreement);
NOW, THEREFORE, Seller, in exchange for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, hereby grants and
assigns, transfers and conveys to Purchaser, its successors and assigns, all
Seller's right, title and interest in and to the Assets free and clear of all
liens, claims, pledges, security interests and other encumbrances other than (a)
the Trademark License Agreements, Other Trademark Agreements and Other Assumed
Agreements which are in effect on the Closing Date and (b) Seller's rights to
continue using the Trademarks as described in Section 11.11 of the Purchase
Agreement and Section 2.01(a)(ii) of the License Agreement;
TO HAVE AND TO HOLD, all the Assets, hereby granted and assigned unto
Purchaser, its successors, assigns and legal representatives, to and for its and
their own use and benefit forever.
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE PURCHASE AGREEMENT, THE
ASSETS ARE BEING DELIVERED TO THE TRANSFEREE BY THE TRANSFEROR IN "AS IS" "WHERE
IS" CONDITION AND THE TRANSFEROR MAKES NO REPRESENTATIONS, WARRANTIES,
GUARANTEES OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
REGARDING THE ASSETS. THE TRANSFEREE WAIVES, RELEASES AND RENOUNCES ALL
WARRANTIES, OBLIGATIONS AND LIABILITIES OF SELLER, EXPRESS OR IMPLIED, ARISING
BY LAW OR OTHERWISE, WITH RESPECT TO ANY NONCONFORMITY OR DEFECT IN THE ASSETS.
Setter will from time to time, at Purchaser's request and without further
cost or expense to Purchaser, execute and deliver to Purchaser such other
instruments of transfer and take such other action as Purchaser may reasonably
request so as to more effectively transfer the Assets to Purchaser.
A-1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
KASPER A.S.L., LTD.
By: ____________________________________
Name:
Title:
ANNE KLEIN COMPANY LLC,
a New York limited liability company,
by its Member Manager
TAKIHYO INC.
By: ___________________________________
Name:
Title:
TAKIHYO INC.
By: ____________________________________
Name:
Title:
A-2
<PAGE>
EXHIBIT B
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is entered into
as of ___________, 1999, by and between Kasper A.S.L., Ltd., a Delaware
corporation ("Purchaser") and Anne Klein Company LLC, a New York limited
liability company ("Seller").
WHEREAS, in connection with that certain Asset Purchase Agreement (the
"Purchase Agreement") dated as of ___________, 1999, Purchaser and Seller which
is incorporated herein by reference, Seller has agreed to assign to Purchase,
and Purchaser has agreed to assume the Assumed Agreements (as hereinafter
defined) and Assumed Liabilities (all capitalized terms used but not otherwise
defined herein shall have the meaning assigned thereto in the Purchase
Agreement);
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties to this Agreement hereby agree as follows:
1. Assignment by Seller. Seller hereby transfers and assigns to Purchaser
all of its rights, title and interest in and to, and all of its obligations
under (a) the Assumed Agreements listed on Schedule I (the "Assumed Agreements")
and (b) the Assumed Liabilities.
2. Assumption by Purchaser. Purchaser hereby consents to the transfer and
assignment of the Assumed Agreements and Assumed Liabilities to Purchaser and
assumes and agrees to pay, perform and discharge, all of the liabilities and
obligations of Seller from and after the Closing and which arise after the
Closing, when due and payable in accordance with their respective terms of
Seller pursuant to the Assumed Agreements and the Assumed Liabilities.
3. Further Assurances. The parties shall, upon request of each other from
time to time, do and execute and deliver, or cause to be done, executed or
delivered, all such further acts, deeds, assignments, transfers and conveyances
as each of them may reasonably request to more completely consummate and make
effective the transactions contemplated hereby.
4. Entire Agreement. This Agreement, together with the Purchase Agreement
and other agreements referenced therein, constitute the entire and sole
agreement and understanding between the parties hereto with respect to the
subject matter hereof and thereof supersede any prior or contemporaneous
understanding, agreement, representation or warranty, whether oral or written,
with respect to the subject matter hereof and thereof.
5. Amendment and Waiver. No modifications or amendment of any provision of
this Agreement shall be effective unless approved in writing by the parties to
this Agreement. No party shall be deemed to have waived compliance by any other
party
B-1
<PAGE>
with any provision of this Agreement unless such waiver is in writing, and the
failure of any party at any time to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the rights of any party thereafter to enforce such provisions in
accordance with their terms. No waiver of any provision of this Agreement shall
be deemed to be a waiver of any other provision of this Agreement. No waiver of
any breach of any provision of this Agreement shall be deemed the waiver of any
subsequent breach thereof or of any other provision of this Agreement.
6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK WITHOUT
CONSIDERATION OF PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS.
7. Severability. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unenforceability in such jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
8. Counterparts. This Agreement may be executed in one or more counterparts
and in separate counterparts, each of which shall be deemed to be an original
copy of this Agreement, and all of which, when taken together, shall be deemed
to constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
B-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ANNE KLEIN COMPANY LLC,
a New York limited liability company,
by its Member Manager
TAKIHYO INC.
By:_______________________________
Name:_____________________________
Title:____________________________
KASPER A.S.L., LTD.
By:_______________________________
Name:_____________________________
Title:____________________________
B-3
Exhibit 10.1
=====================================
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of July 9, 1999
Among
KASPER A.S.L., LTD.,
THE GUARANTORS NAMED HEREIN
THE LENDERS NAMED HEREIN,
THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AND COLLATERAL AGENT
and
THE CIT GROUP/COMMERCIAL SERVICES, INC.,
AS COLLATERAL MONITOR
=====================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I. DEFINITIONS...................................................................2
SECTION 1.01 Certain Defined Terms....................................2
SECTION 1.02 Accounting Terms........................................25
II. THE LOANS....................................................................25
SECTION 2.01 Revolving Credit Commitments and Reducing
Revolving Credit Commitments...........................25
SECTION 2.02 Loans...................................................26
SECTION 2.03 Notice of Loans.........................................28
SECTION 2.04 Notes; Repayment of Loans...............................29
SECTION 2.05 Interest on Loans.......................................30
SECTION 2.06 Fees....................................................30
SECTION 2.07 Termination and Reduction of Revolving Credit
Commitments............................................30
SECTION 2.08 Interest on Overdue Amounts; Alternate Rate of
Interest...............................................31
SECTION 2.09 Prepayment of Loans.....................................32
SECTION 2.10 Reserve Requirements; Change in
Circumstances..........................................35
SECTION 2.11 Change in Legality......................................37
SECTION 2.12 Indemnity...............................................38
SECTION 2.13 Pro Rata Treatment; Assumption by and
Delegation of Authority to the Agent...................39
SECTION 2.14 Sharing of Setoffs......................................41
SECTION 2.15 Payments and Computations...............................42
SECTION 2.16 Taxes...................................................43
SECTION 2.17 Issuance of Letters of Credit...........................46
SECTION 2.18 Payment of Letters of Credit; Reimbursement.............47
SECTION 2.19 Agent's Actions with respect to Letters of Credit.......49
SECTION 2.20 Letter of Credit Fees...................................49
SECTION 2.21 Change of Lending Office................................50
III. COLLATERAL SECURITY..........................................................50
SECTION 3.01 Security Documents......................................50
SECTION 3.02 Filing and Recording....................................50
IV. REPRESENTATIONS AND WARRANTIES...............................................51
SECTION 4.01 Organization, Legal Existence...........................51
SECTION 4.02 Authorization...........................................51
SECTION 4.03 Governmental Approvals..................................52
</TABLE>
i
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<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 4.04 Binding Effect..........................................52
SECTION 4.05 Material Adverse Change.................................52
SECTION 4.06 Litigation; Compliance with Laws; etc...................52
SECTION 4.07 Financial Statements....................................53
SECTION 4.08 Federal Reserve Regulations.............................53
SECTION 4.09 Taxes...................................................54
SECTION 4.10 Employee Benefit Plans..................................54
SECTION 4.11 No Material Misstatements...............................55
SECTION 4.12 Investment Company Act; Public Utility Holding
Company Act............................................56
SECTION 4.13 Security Interest.......................................56
SECTION 4.14 Use of Proceeds.........................................56
SECTION 4.15 Subsidiaries............................................56
SECTION 4.16 Title to Properties; Possession Under Leases;
Trademarks.............................................56
SECTION 4.17 Solvency................................................57
SECTION 4.18 Permits, etc............................................58
SECTION 4.19 Compliance with Environmental Laws......................58
SECTION 4.20 No Change in Credit Criteria or Collection Policies.....59
SECTION 4.21 Employee Matters........................................59
SECTION 4.22 Acquisition.............................................59
SECTION 4.23 Year 2000...............................................60
V. CONDITIONS OF CREDIT EVENTS..................................................60
SECTION 5.01 All Credit Events.......................................60
SECTION 5.02 First Borrowing.........................................61
VI. AFFIRMATIVE COVENANTS........................................................66
SECTION 6.01 Legal Existence.........................................66
SECTION 6.02 Businesses and Properties...............................66
SECTION 6.03 Insurance...............................................67
SECTION 6.04 Taxes...................................................67
SECTION 6.05 Financial Statements, Reports, etc......................68
SECTION 6.06 Litigation and Other Notices............................71
SECTION 6.07 ERISA...................................................72
SECTION 6.08 Maintaining Records; Access to Properties and
Inspections; Right to Audit............................73
SECTION 6.09 Use of Proceeds.........................................73
SECTION 6.10 Fiscal Year-End.........................................73
SECTION 6.11 Further Assurances......................................73
SECTION 6.12 Additional Grantors and Guarantors......................73
SECTION 6.13 Environmental Laws......................................74
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
SECTION 6.14 Pay Obligations to Lenders and Perform Other
Covenants..............................................76
SECTION 6.15 Year 2000...............................................76
SECTION 6.16 Special Charter Amendment...............................76
SECTION 6.17 Rate Agreement..........................................76
VII. NEGATIVE COVENANTS...........................................................77
SECTION 7.01 Liens...................................................77
SECTION 7.02 Sale and Lease-Back Transactions........................79
SECTION 7.03 Indebtedness............................................79
SECTION 7.04 Dividends, Distributions and Payments...................79
SECTION 7.05 Consolidations, Mergers and Sales of Assets.............80
SECTION 7.06 Investments.............................................80
SECTION 7.07 Capital Expenditures....................................82
SECTION 7.08 Capitalization Ratio....................................83
SECTION 7.09 Interest Coverage Ratio.................................84
SECTION 7.10 Net Worth...............................................85
SECTION 7.11 Business................................................85
SECTION 7.12 Sales of Receivables....................................85
SECTION 7.13 Use of Proceeds.........................................86
SECTION 7.14 ERISA...................................................86
SECTION 7.15 Accounting Changes......................................86
SECTION 7.16 Prepayment or Modification of Indebtedness;
Modification of Charter Documents......................86
SECTION 7.17 Transactions with Affiliates............................87
SECTION 7.18 Consulting Fees.........................................87
SECTION 7.19 Negative Pledges, etc...................................87
VIII. EVENTS OF DEFAULT...........................................................87
IX. AGENT AND COLLATERAL MONITOR.................................................91
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL........96
SECTION 10.01 Collection of Receivables; Management of Collateral....96
SECTION 10.02 Receivables Documentation..............................98
SECTION 10.03 Status of Receivables and Other Collateral.............98
SECTION 10.04 Monthly Statement of Account..........................100
SECTION 10.05 Collateral Custodian..................................100
</TABLE>
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<TABLE>
<CAPTION>
Page
<S> <C>
XI. MISCELLANEOUS...............................................................100
SECTION 11.01 Notices...............................................100
SECTION 11.02 Survival of Agreement.................................101
SECTION 11.03 Successors and Assigns; Participations................101
SECTION 11.04 Expenses; Indemnity...................................105
SECTION 11.05 Applicable Law........................................106
SECTION 11.06 Right of Setoff.......................................106
SECTION 11.07 Payments on Business Days.............................106
SECTION 11.08 Waivers; Amendments...................................107
SECTION 11.09 Severability..........................................108
SECTION 11.10 Entire Agreement; Waiver of Jury Trial, etc...........108
SECTION 11.11 Confidentiality.......................................109
SECTION 11.12 Submission to Jurisdiction............................110
SECTION 11.13 Counterparts; Facsimile Signature.....................110
SECTION 11.14 Headings..............................................110
XII. GUARANTEES..................................................................110
</TABLE>
iv
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Page
EXHIBITS
EXHIBIT A Trademark Amounts
EXHIBIT B-1 Form of Revolving Credit Note
EXHIBIT B-2 Form of Reducing Revolving Credit Note
EXHIBIT C Intentionally Omitted
EXHIBIT D Form of Amended and Restated Pledge Agreement
EXHIBIT E Form of Amended and Restated Security Agreement
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Amended and Restated Security Agreement and
Mortgage - Trademarks, Patents and Copyrights
SCHEDULES
SCHEDULE 2.01(a) Revolving Credit Commitments
SCHEDULE 2.01(b) Reducing Revolving Credit Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.03 Eurodollar Lending Offices
SCHEDULE 2.17 Existing Letters of Credit
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.06(a) Litigation
SCHEDULE 4.06(b) Compliance with Laws
SCHEDULE 4.10 Employee Benefit Plans
SCHEDULE 4.15 Subsidiaries
SCHEDULE 4.19 Environmental Law Compliance
SCHEDULE 4.21 Employee Matters
SCHEDULE 6.05(k) Borrowing Base Certificate
SCHEDULE 6.05(m) Inventory Designation
SCHEDULE 6.13 Hazardous Materials
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.06 Existing Investments
v
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AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 9, 1999, among
KASPER A.S.L., LTD., a Delaware corporation (the "Borrower"), the
Guarantors named herein and signatories hereto, the financial institutions
from time to time party hereto, initially consisting of those financial
institutions listed on Schedule 2.01 annexed hereto (collectively, the
"Lenders"), THE CHASE MANHATTAN BANK ("Chase"), as administrative and
collateral agent for the Lenders (in such capacity, the "Agent") and THE
CIT GROUP/COMMERCIAL SERVICES, INC. ("CIT"), as collateral monitor (in such
capacity, the "Collateral Monitor").
The Borrower, the Guarantors, certain lending institutions (the "Existing
Lenders"), BankBoston, N.A., as administrative and collateral agent for the
Existing Lenders (the "Facility Agent"), Citicorp USA, Inc., as documentation
agent (the "Documentation Agent") and Heller Financial, Inc. as co-agent
(together with the Facility Agent and the Documentation Agent, the "Existing
Agents") are parties to the Revolving Credit Agreement, dated as of June 4, 1997
(as heretofore amended and in effect on the date hereof, the "Existing Credit
Agreement") providing for loans to be made to, and letters of credit to be
issued for the account of the Borrower in the aggregate principal and/or face
amount not exceeding $100,000,000 at any one time outstanding. Immediately prior
to the execution and delivery of this Agreement, (i) Chase succeeded to the
position of the Existing Agents (with CIT performing services of the Collateral
Monitor) and in that connection succeeded to the security interests granted by
the Borrowers and Guarantors in the collateral under the Existing Credit
Agreement and (ii) Chase acquired from the Existing Lenders, an assignment of
100% of the commitments of and loans made by the Existing Lenders.
The Borrower, the Guarantors, the Lenders, the Agent and the Collateral
Monitor have agreed to amend and restate the Existing Credit Agreement to
provide for such amendments on the terms set forth in this Agreement, which
Agreement shall become effective upon the satisfaction of certain conditions
precedent set forth herein.
It is the intent of the parties hereto that this Agreement not constitute a
novation of the obligations and liabilities existing under the Existing Credit
Agreement or evidence payment of all or any such obligations and liabilities,
that this Agreement amend and restate in its entirety the Existing Credit
Agreement, and that from and after the Closing Date the Existing Credit
Agreement be of no further force or effect except as to evidence the incurrence
of the obligations thereunder.
Accordingly, in consideration of the mutual covenants contained herein and
subject to the satisfaction of the conditions set forth herein, the Borrower,
the Guarantors, the Lenders, the Agent and the Collateral Monitor hereby agree
as follows:
<PAGE>
The Borrower has applied to the Lenders for Credits (such term and all
other capitalized terms used in this paragraph having the respective meanings
ascribed to such terms above or hereinafter) up to an aggregate principal amount
of $160,000,000 (as provided for in and subject to Schedule 2.01(a) annexed
hereto) in the form of (a) Revolving Credit Loans and Letters of Credit to or
for the benefit of the Borrower in an aggregate principal amount not in excess
of $100,000,000 (as such amount may be increased as provided in Schedule 2.01(a)
annexed hereto) outstanding at any time and from time to time prior to the
Revolving Credit Termination Date, (b) Reducing Revolving Credit Loans to or for
the benefit of the Borrower in an aggregate principal amount not in excess of
$25,000,000 outstanding at any time and from time to time prior to the Reducing
Revolving Credit Termination Date and (c) Revolving Credit Loans and Letters of
Credit to or for the benefit of the Borrower in an aggregate principal amount
not in excess of $160,000,000 after the Agent receives the Special Charter
Amendment Opinion. The proceeds of the Revolving Credit Loans and the Reducing
Revolving Credit Loans made on the Closing Date shall be used to finance
partially the Acquisition pursuant to the Acquisition Agreement (including the
purchase of certain retail stores of the Seller), to capitalize ACK Acquisition
and Lion Licensing, to pay related transaction costs and for working capital
purposes. The proceeds of the Revolving Credit Loans and the Reducing Revolving
Credit Loans subsequent to the Closing Date shall be used for general working
capital and corporate purposes, including the purchase of certain retail stores
of the Seller and in the case of the Revolving Credit Loans to repay outstanding
Reducing Revolving Credit Loans on the date the Agent receives the Special
Charter Amendment Opinion. The Grantors will provide Collateral in accordance
with the provisions of this Agreement and the Security Documents. The Lenders
are severally, and not jointly, willing to extend such Credits to the Borrower
subject to the terms and conditions hereinafter set forth. Accordingly, the
Borrower, the Guarantors, the Lenders and the Agent hereby agree as follows:
I. DEFINITIONS
SECTION 1.01 Certain Defined Terms. For purposes hereof, the following
terms shall have the meanings specified below:
"Account Debtor" shall have the meaning assigned to such term in the
definition of Eligible Receivables hereof.
"Acquisition" shall mean the purchase by the Borrower of certain assets of
the Seller pursuant to the Acquisition Agreement.
"Acquisition Agreement" shall mean the Asset Purchase Agreement dated as of
March 15, 1999 among the Borrower, Seller and Takihyo Inc., as in effect on the
Closing Date.
2
<PAGE>
"Acquisition Documents" shall mean the Acquisition Agreement and all
agreements, documents and instruments executed and delivered pursuant thereto or
in connection therewith, in each case as in effect on the Closing Date.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Loan for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/100 of 1%) equal to the product of (i) the LIBO Rate in effect for
such Interest Period and (ii) Statutory Reserves. For purposes hereof,
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including, without
limitation, any marginal, special, emergency, or supplemental reserves)
expressed as a decimal established by the Board and any other banking authority
to which the Agent is subject for Eurocurrency Liabilities (as defined in
Regulation D). Such reserve percentages shall include, without limitation, those
imposed under Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and as such shall be deemed to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets which may be available from time to time to any Lender under Regulation
D. Statutory Reserves shall be adjusted automatically on and as of the effective
date of any change in any reserve percentage.
"Affiliate" of any person shall mean any other person which, directly or
indirectly, controls or is controlled by or is under common control with such
person and, without limiting the generality of the foregoing, includes (i) any
person which beneficially owns or holds 10% or more of any class of voting
securities of such person or 10% or more of the equity interest in such person,
(ii) any person of which such person benefi cially owns or holds 10% or more of
any class of voting securities or in which such person beneficially owns or
holds 10% or more of the equity interest in such person and (iii) any director,
officer or employee of such person. For the purposes of this definition, the
term "control" (including, with correlative meanings, the terms "controlled by"
and "under common control with"), as used with respect to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such person, whether through the
ownership of voting securities or by contract or otherwise.
"Agent" shall have the meaning assigned to such term in the preamble to
this Agreement.
"ACK Acquisition" shall mean AKC Acquisition, Ltd., a Delaware corporation
and direct wholly-owned subsidiary of the Borrower.
"Alternate Base Loan" shall mean a Loan based on the Alternate Base Rate in
accordance with Article II hereof.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day
plus 1%, and (c) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. "Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by the Agent at its principal office in New York City as its
prime rate in effect at such time.
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"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"Three- Month Secondary CD Rate" shall mean, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate shall not be so reported on such day
or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Agent from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it. "Statutory Reserves"
shall mean a fraction (expressed as a decimal), the numerator of which is the
number one and the denominator of which is the number one minus the maximum
reserve percentage (including any marginal, special, emergency or supplemental
reserves) expressed as a decimal, established by the Board and any other banking
authority to which the Agent is subject, for new negotiable nonpersonal time
deposits in dollars of over $100,000 with maturities approximately equal to
three months. Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage. "Assessment Rate"
shall mean, for any day, the annual assessment rate (net of refunds and rounded
upwards, if necessary, to the next 1/100 of 1%) estimated by the Agent (in good
faith, but in no event in excess of statutory or regulatory maximums) to be
payable by the Agent to the Federal Deposit Insurance Corporation (or any
successor) for insurance by such Corporation (or such successor) of time
deposits made in dollars at the Agent's domestic offices during the current
calendar year. "Federal Funds Effective Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it. If
for any reason the Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base CD
Rate or the Federal Funds Effective Rate, or both, for any reason, including,
the inability or failure of the Agent to obtain sufficient quotations in
accordance with the terms hereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the first sentence of this
definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate, respectively.
"Anne Klein Trademark Value" shall mean forty percent (40%) of the
appraised value of the Anne Klein trademarks as determined by an independent
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appraiser acceptable to the Agent as at the Closing Date and updated at the
joint request of the Collateral Monitor and the Agent but in no event more than
once each Fiscal Year and not before the first anniversary of the Closing Date.
"Applicable Lending Office" shall mean, with respect to each Lender, such
Lender's Domestic Lending Office in the case of an Alternate Base Loan and such
Lender's Eurodollar Lending Office in the case of a Eurodollar Loan.
"Assignment and Acceptance" shall mean an assignment and acceptance entered
into by a Lender and an assignee and accepted by the Agent, in substantially the
form of Exhibit F annexed hereto.
"ASL Retail" shall mean A.S.L. Retail Outlets, Inc.
"ASL Retail Prior Season Inventory" shall mean finished goods inventory
owned by ASL Retail which was manufactured for sale by the Borrower in a
shipping season more than one year prior to the current shipping season of the
Borrower.
"Availability" shall mean at any time (i) the lesser at such time of (x)
the Total Revolving Credit Commitment and (y) the Borrowing Base, minus (ii) the
sum at such time of (x) the unpaid principal balance of, and accrued interest
and fees on the Revolving Credit Loans together with all Availability Reserves
pursuant to this Agreement, and (y) the Letter of Credit Usage.
"Availability Reserves" shall mean, as of any date of determination, such
reserves in amounts as the Collateral Monitor (in consultation with the Agent)
may from time to time establish and revise in good faith in accordance with its
customary credit policies reducing the amount of Revolving Credit Loans and
Letters of Credit which would otherwise be available to the Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by the Collateral Monitor (in
consultation with the Agent) in good faith in accordance with its customary
credit policies, do or may affect either (i) the Collateral or its value, (ii)
the assets or business of the Borrower or any subsidiary of the Borrower or
(iii) the security interests and other rights of the Agent or any Lender in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect the Collateral Monitor's (in consultation with the Agent) good
faith belief that any collateral report or financial information furnished by or
on behalf of the Borrower or any subsidiary of the Borrower to the Collateral
Monitor or to the Agent or to any Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect of any state
of facts which the Collateral Monitor (in consultation with the Agent)
determines in good faith constitutes a Default or an Event of Default.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States.
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"Book Value" shall mean, as to any inventory in respect of which such
amount is to be determined, the lower of (i) the cost (as reflected in the
general ledgers of the Inventory Grantor or any subsidiary of the Inventory
Grantor) or (ii) market value (both cost and market value being determined in
accordance with GAAP calculated on a first in first out basis).
"Borrower" shall have the meaning assigned to such term in the preamble to
this Agreement.
"Borrowing Base" shall mean, at any time an amount equal to the sum of (i)
ninety percent (90%) of the Net Amount of Eligible Receivables, plus (ii) the
lesser of (a) $50,000,000 and (b) sixty percent (60%) of the Net Amount of
Eligible Inventory, plus (iii) the sum of (a) fifty percent (50%) of the
aggregate undrawn amount of all outstanding Eligible Letters of Credit plus (b)
fifty percent (50%) of the amount of In- Transit Letter of Credit Inventory,
plus (iv) the sum of (a) one hundred percent (100%) of the aggregate undrawn
amount of all outstanding Eligible CMT Letters of Credit plus (b) one hundred
percent (100%) of the amount of In-Transit CMT Letter of Credit Inventory, plus
(v) the Trademark Advance (vi) plus fifty percent (50%) of Eligible In- Transit
Finished Goods.
"Business Day" shall mean any day, other than a Saturday, Sunday or legal
holiday in the State of New York, on which banks are open for substantially all
their banking business in New York City except that, if any determination of a
"Business Day" shall relate to a Eurodollar Loan, the term "Business Day" shall
in addition exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.
"Capitalization Ratio" shall mean, with respect to any person for any
period, the ratio of (i) Total Funded Debt to (ii) the sum of Total Funded Debt
plus Net Worth.
"Capital Expenditures" shall mean all expenditures for the acquisition or
leasing (pursuant to a capital lease) of fixed or capital assets or additions to
equipment (including replacements, capitalized repairs and improvements) which
should be capitalized under GAAP.
"Capitalized Lease Obligation" shall mean an obligation to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real and/or personal property which obligation is required to be classified
and accounted for as a capital lease on a balance sheet prepared in accordance
with GAAP, and for purposes hereof the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Closing Date" shall mean the date of the first borrowing under this
Agreement, but in no event later than July 12, 1999.
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"CMT Letter of Credit" shall mean a letter of credit issued primarily to
support labor costs relating to cut, make and trim work.
"Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, as amended from time to time.
"Collateral" shall mean all collateral and security as described in the
Security Documents.
"Collateral Monitor" shall have the meaning assigned to such term in the
preamble hereof.
"Commitment Letter" shall mean the commitment letter dated June 1, 1999
addressed to the Borrower and all attachments thereto and the related fee
letters.
"Consolidated" shall mean, in respect of any person, as applied to any
financial or accounting term, such term determined on a consolidated basis in
accordance with GAAP (except as otherwise required herein) for the person and
all consolidated subsidiaries thereof.
"Contaminant" shall mean all Hazardous Materials and all those substances
which are regulated by or form the basis of liability under Federal, state,
local or other applicable jurisdiction environmental, health and safety statutes
or regulations, or any other material or substance which constitutes a material
health, safety or environmental hazard to any person or property.
"Credit Event" shall mean each borrowing and each issuance, continuance or
renewal of a Letter of Credit hereunder.
"Credits" shall mean the Revolving Credit Loans, the Reducing Revolving
Credit Loans and Letters of Credit.
"Cure Loans" shall have the meaning assigned to such terms in Section
2.13(d) hereof.
"Current Season Inventory" shall mean, with respect to inventory of the
Inventory Grantor, finished goods inventory which was manufactured for sale in
the current shipping season of the Inventory Grantor.
"Customer" shall mean and include the account debtor or obligor with
respect to any Receivable.
"Default" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
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"Documentation Agent" shall have the meaning assigned to such term in the
preamble to this Agreement.
"dollars" or the symbol "$" shall mean lawful currency of the United States
of America.
"Domestic Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite its
name in Schedule 2.02 annexed hereto, or such other office of such Lender as
such Lender may from time to time specify to the Borrower and the Agent.
"EBITDA" shall mean with respect to any person for any period the sum of
(i) Net Income, (ii) Interest Expense, (iii) depreciation and amortization and
other non-cash items properly deductible in determining Net Income and (iv)
federal, state and local income taxes, in each case of such person for such
period, computed and calculated in accordance with GAAP and minus (v) non-cash
items properly added in determining Net Income, in each case for the
corresponding period.
"Eligible ASL Retail Prior Season Inventory" shall mean ASL Retail Prior
Season Inventory which the Collateral Monitor may determine, in its reasonable
business judgment (in consultation with the Agent), to be eligible inventory.
"Eligible CMT Letter of Credit" shall mean a commercial letter of credit
issued by the Agent covering finished goods inventory (i) which has been or will
be consigned to the Agent, (ii) which has been or will be shipped to a location
in the United States set forth on Schedule I to the Security Agreement, and
(iii) for which the amount of such letter of credit shall be equal to an amount
approximating the value of the labor costs related to cut, make and trim work
for such finished goods inventory.
"Eligible In-Transit Finished Goods" shall mean finished goods inventory of
the Borrower which (i) have been paid for by the Borrower, (ii) are not included
in any category of Eligible Inventory, In-Transit CMT Letter of Credit Inventory
or In-Transit Letter of Credit Inventory, (iii) meets every condition contained
in the definition of Eligible Inventory other than clause (v) therein, (iv) have
been consigned and insured in a manner satisfactory to the Agent and (v) are
satisfactory to the Collateral Monitor in its reasonable business judgment (in
consultation with the Agent).
"Eligible Inventory" shall mean inventory of an Inventory Grantor comprised
solely of finished goods located in the United States which meets all of the
following specifications: (i) the inventory is owned by such Inventory Grantor
free and clear of any existing Lien, other than that of the Agent and the
Lenders under the Loan Documents or as otherwise permitted under the Loan
Documents, it is not held on consignment and may be lawfully sold and it
continues to be in full conformity with any representations and warranties made
under the Loan Documents by the Inventory Grantor to the Agent and the Lenders
with respect thereto; (ii) the Inventory Grantor has the right to assignment
thereof and the power to grant Liens thereon; (iii) the inventory
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arose or was acquired in the ordinary course of business of such Inventory
Grantor and does not represent returned goods (other than returned goods put
back into finished goods inventory for sale in the ordinary course of business),
second quality or damaged goods; (iv) the inventory is readily marketable for
sale by the Inventory Grantor; (v) the inventory is located at one of the
addresses for locations of Collateral set forth on Schedule I to the Security
Agreement and with respect to which the Agent has been granted and has perfected
a valid, first priority security interest therein; (vi) the inventory is not
goods to be returned to a supplier of an Inventory Grantor; (vii) the inventory
is not samples; (viii) if applicable, if the inventory is sold under a licensed
trademark not owned by the Borrower or any of its subsidiaries, the Agent shall
have entered into a licensor waiver letter, in form and substance satisfactory
to the Agent, with the licensor with respect to the rights of the Agent to use
the trademark to sell or otherwise dispose of such inventory; (ix) the inventory
is Eligible Prior Season Inventory, Eligible ASL Retail Prior Season Inventory
or Current Season Inventory; (x) the inventory has been reduced by the amount of
any Overcost Reserve applicable to the inventory of an Inventory Grantor; (xi)
the inventory is not obsolete, slow-moving or unmerchantable and is and at all
times shall continue to be acceptable to the Collateral Monitor (in consultation
with the Agent) in all respects in the exercise of its reasonable business
judgment based upon the lending practices of the Collateral Monitor, consistent
with practices customary in the commercial finance industry generally.
"Eligible Letter of Credit" shall mean a commercial letter of credit issued
by the Agent covering finished goods inventory (i) which has been or will be
consigned to the Agent, (ii) which has been shipped or will be shipped to a
location in the United States set forth on Schedule I to the Security Agreement,
and (iii) for which the amount of such letter of credit shall be equal to an
amount approximating the value of the fabric, trim and other materials used and
the labor costs related to cut, make and trim work for such finished goods
inventory.
"Eligible Prior Season Inventory" shall mean with respect to the Borrower:
(i) Prior Season Inventory which is "quick response" or "replenishment" finished
goods inventory, and (ii) Prior Season Inventory which the Collateral Monitor
may determine, in its reasonable business judgment (in consultation with the
Agent), to be eligible inventory.
"Eligible Receivables" shall mean (i) Receivables created by a Receivables
Grantor in the ordinary course of business arising out of the sale of goods by a
Receivables Grantor which (A) are subject to a valid, first priority, fully
perfected security interest in favor of the Agent and which conform to the
representations and warranties contained herein and in the other Loan Documents,
and (B) at all times shall continue to be reasonably acceptable to the
Collateral Monitor (in consultation with the Agent) in all respects and (ii)
Receivables which the Factor has credit approved and serves as collection agent
pursuant to the Factoring Agreement, and for which such Receivables remain
subject to the Assignment of Monies Due Under the Factoring Agreement (the
"Assignment of Monies Agreement"). A Receivable of the Receivables Grantor which
has not been credit approved (including as a result of withdrawal of credit
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<PAGE>
approval) by the Factor under the Factoring Agreement may, in the reasonable
business judgment of the Collateral Monitor (in consultation with the Agent), be
deemed eligible if: (i) the Factor serves as the collection agent for such
Receivable pursuant to the Factoring Agreement and such Receivable remains
subject to the Assignment of Monies Agreement; (ii) delivery of the merchandise
has been completed; (iii) no return, rejection or repossession has occurred;
(iv) the merchandise has been accepted by an account debtor or obligor ("Account
Debtor") with respect to such Receivable without dispute, setoff, defense or
counterclaim; (v) such Receivable is unconditionally payable in dollars within
90 days of the invoice date and is not evidenced by a promissory note, chattel
paper or any other instrument or document; (vi) no more than 60 days has elapsed
from the invoice due date and no more than 120 days have elapsed from the
invoice date; (vii) the Account Debtor is not an Affiliate of the Receivables
Grantor; (viii) such Receivable does not constitute an obligation of the United
States or any other governmental authority; (ix) the Account Debtor (or the
applicable office of the Account Debtor) with respect thereto is located in the
continental United States, unless the Receivable is supported by a letter of
credit or other similar obligation satisfactory to the Collateral Monitor (in
consultation with the Agent); (x) the Account Debtor with respect thereto is not
also a supplier or a creditor of the Receivables Grantor, unless such supplier
or creditor has executed a no offset letter satisfactory to the Collateral
Monitor (in consultation with the Agent); (xi) not more than 50% of the
aggregate amount of all Receivables from the Account Debtor thereto remain
unpaid more than 60 days past the invoice due date or 120 days past the invoice
date; (xii) the Account Debtor is not insolvent, subject to a bankruptcy,
reorganization, receivership, insolvency arrangement or any similar proceeding;
(xiii) no facts, events or occurrences exist that would impair the validity,
enforceability or collectability of such Receivable or reduce the amount
payable, or delay payment thereunder, all as determined in the good faith by the
Collateral Monitor (in consultation with the Agent). Without duplication of any
Availability Reserves, the aggregate amount of all Eligible Receivables of the
Receivables Grantor shall be reduced by any reserves deemed necessary by the
Collateral Monitor (in consultation with the Agent) in its reasonable business
judgment, including a reserve in an amount which would represent the historical
or anticipated ratio of dilution (i.e., returns, discounts, claims, credits, and
allowances) to sales.
"Environmental Claim" shall mean any written notice of violation, claim,
deficiency, demand, abatement or other order by any governmental authority or
any person for personal injury (including sickness, disease or death), tangible
or intangible property damage, damage to the environment, nuisance, pollution,
contamination or other adverse effects on the environment, or for fines,
penalties or deed or use restrictions, resulting from or based upon (i) the
existence, or the continuation of the existence, of a Release (including,
without limitation, sudden or non-sudden, accidental or nonaccidental Releases),
of, or exposure to, any Contaminant at, in, by or from any of the properties of
the Borrower or its subsidiaries, (ii) the environmental aspects of the
transportation, storage, treatment or disposal of Contaminants in connection
with the operation of any of the properties of the Borrower or its subsidiaries
or (iii) the violation, or alleged violation by the Borrower or any of its
subsidiaries, of any statutes, ordinances, orders, rules, regulations, Permits
or licenses of or from any governmental
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authority, agency or court relating to environmental matters connected with any
of the properties of the Borrower or its subsidiaries, under any applicable
Environmental Law.
"Environmental Laws" shall mean the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. ss. 1251 et seq.), the Oil Pollution Act of
1990 (33 U.S.C. ss. 2701 et seq.), the Safe Drinking Water Act (42 U.S.C. ss.
300f, et seq.), the Clear Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic
Substances Control Act, as amended (15 U.S.C. ss. 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.), and their
equivalent in each jurisdiction in which a non-domestic subsidiary is located as
such laws have been and hereafter may be amended or supplemented, and any
related or analogous present or future Federal, state or local, statutes, rules,
regulations, ordinances, licenses, permits and interpretations and orders of
regulatory and administrative bodies.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the applicable regulations promulgated thereunder, as in effect
from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) which together with the Borrower or any of its subsidiaries would
be treated as a single employer under Section 302 of Title I or Title IV of
ERISA or with respect to Section 412 or Section 414(b), (c), (m) or (o) of the
Code.
"Eurodollar Lending Office" shall mean, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" opposite its
name in Schedule 2.03 annexed hereto (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such Lender may
from time to time specify to the Borrower and the Agent.
"Eurodollar Loan" shall mean a Loan based on the Adjusted LIBO Rate in
accordance with Article II hereof.
"Event of Default" shall have the meaning assigned to such term in Article
VIII hereof.
"Existing Agents" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Existing Credit Agreement" shall have the meaning assigned to such term in
the preamble to this Agreement.
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"Existing Lenders" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Facility Agent" shall have the meaning assigned to such term in the
preamble of this Agreement.
"Factor" shall mean Heller Financial, Inc. and any successor or replacement
reasonably acceptable to the Agent.
"Factoring Agreement" shall mean the Factoring Agreement dated as of June
2, 1997, as amended to the Closing Date between the Borrower, any other
Receivables Grantor and the Factor, and any amendment to and/or replacement of
such agreement acceptable to the Agent.
"Financial Officer" shall mean, with respect to any person, the chief
financial officer or Executive Vice President, Finance and Administration of
such person.
"Fiscal Year" shall mean the fiscal year of the Borrower for accounting
purposes which ends on or about December 31 of each year.
"GAAP" shall have the meaning assigned to such term in Section 1.02 hereof.
"Grantor" shall mean any Grantor, Pledgor or Debtor, as such terms are
defined in any of the Security Documents.
"Guarantee" shall mean any obligation, contingent or otherwise, of any
person guaranteeing or having the economic effect of guaranteeing or giving
financial assistance in respect of the repayment of any Indebtedness or
obligation of any other person in any manner, whether directly or indirectly,
and shall include, without limitation, any obligation of such person, direct or
indirect, to (i) purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such
Indebtedness or obligation, (ii) purchase property, securities or services for
the purpose of assuring the owner of such Indebtedness or obligation of the
payment of such Indebtedness or obligation, or (iii) maintain working capital,
equity capital, available cash or other financial condition of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or
obligation; provided, however, that the term Guarantee shall not include
endorsements for collection or collections for deposit, in either case in the
ordinary course of business.
"Guarantor" shall mean, collectively, each subsidiary of the Borrower
executing this Agreement on the Closing Date or any subsidiary of the Borrower
which becomes a guarantor of the Obligations after the date hereof.
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"Hazardous Material" shall mean any pollutant, contaminant, chemical, or
industrial or hazardous, toxic or dangerous goods, waste, substance or material,
defined or regulated as such in (or for purposes of) any Environmental Law and
any other toxic, reactive, or flammable chemicals, including (without
limitation) any asbestos, any petroleum (including crude oil or any fraction),
any radioactive substance and any polychlorinated biphenyls; provided, in the
event that any Environmental Law is amended so as to broaden the meaning of any
term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment; and provided, further, to the extent that the
applicable laws of any state establish a meaning for "hazardous material,"
"hazardous substance," "hazardous waste," "solid waste" or "toxic substance"
which is broader than that specified in any Federal Environmental Law, such
broader meaning shall apply.
"Hong Kong Security Documents" shall mean the agreements and other
documents continuing the "Hong Kong Security Documents" under, and as defined
in, the Existing Credit Agreement.
"Indebtedness" shall mean, with respect to any person, (a) all obligations
of such person for borrowed money or with respect to deposits or advances of any
kind, (b) all obligations of such person evidenced by bonds, debentures, notes
or other similar instruments or upon which interest charges are customarily
paid, (c) all obligations of such person for the deferred purchase price of
property or services, except current accounts payable arising in the ordinary
course of business and not overdue beyond such period as is commercially
reasonable for such person's business, (d) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person and all Capitalized Lease Obligations, (e) all payment
obligations of such person with respect to interest rate or currency protection
agreements, including, without limitation, the Rate Agreements, (f) all
obligations of such person as an account party under any letter of credit or in
respect of bankers' acceptances, (g) all obligations of any third party secured
by property or assets of such person (regardless of whether or not such person
is liable for repayment of such obligations), (h) all Guarantees of such person
and (i) the redemption price of all redeemable preferred stock of such person,
but only to the extent that such stock is redeemable at the option of the holder
or requires sinking fund or similar payments at any time prior to the Revolving
Credit Termination Date.
"Indemnitees" shall have the meaning assigned to such term in Section
11.04(c) hereof.
"Information" shall have the meaning assigned to such term in Sec tion
11.11 hereof.
"Interest Coverage Ratio" shall mean, with respect to any person for any
period, the ratio of (i) EBITDA for such period ending on or prior to the date
of determination, to (ii) the Interest Expense of such person for such period.
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<PAGE>
"Interest Expense" shall mean, with respect to any person for any period,
the interest expense of such person during such period determined on a
Consolidated basis in accordance with GAAP, and shall in any event include,
without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness for borrowed money to the extent included in interest expense,
(iii) the portion of any Capitalized Lease Obligation allocable to interest
expense, (iv) all fixed and all calculable dividend payments on preferred stock,
(v) payments of interest expense in kind, (vi) fees and expenses incurred in
connection with the Factoring Agreement and (vii) write-off of fees and expenses
incurred in connection with the assignment of the Existing Credit Agreement as a
result of the assignment of the Loans thereunder.
"Interest Margin" shall mean, with respect to any Credit, the amount as set
forth below as corresponds to the Capitalization Ratio set forth below for the
four consecutive fiscal quarter periods ending prior to the date of
determination, determined on the Closing Date and adjusted thereafter, ten (10)
days after the delivery of the financial statements to the Agent required
pursuant to Section 6.05(a) or (b) hereof, as applicable, together with the
corresponding compliance certificates required pursuant to Section 6.05(e)
hereof, commencing upon the timely receipt by the Agent of such financial
statements and certificates for the period ending on or about December 31, 1999,
or if the Borrower shall fail to deliver timely such statements and certificates
for any such period or during the continuance of an Event of Default, then at
the highest Interest Margin provided for herein:
<TABLE>
<CAPTION>
Revolving Reducing Reducing
Revolving Credit Loan Standby Revolving Revolving Credit
Credit Loan Alternate Letter of Credit Loan Loan Alternate
LIBO Rate Base Rate Credit LIBO Rate Base Rate
Capitalization Ratio Interest Margin Interest Margin Interest Margin Interest Margin Interest Margin
- -------------------- --------------- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
Greater than or equal to 3.00% 1.00% 3.50% 3.50% 1.50%
62.50%
Less than 62.50% but 2.75% 0.75% 3.25% 3.25% 1.25%
greater than or equal to
60.00%
Less than 60.00% but 2.50% 0.50% 3.00% 3.00% 1.00%
greater than or equal to
55.00%
Less than 55.00% but 2.25% 0.25% 2.75% 3.00% 1.00%
greater than or equal to
50.00%
Less than 50.00% 2.00% 0.00% 2.50% 3.00% 1.00%
</TABLE>
On the Closing Date, the LIBO Rate Interest Margin shall be 2.50% in the
case of Revolving Credit Loans and 3.00% in the case of Reducing Revolving
Credit Loans, the Alternate Base Rate Interest Margin shall be 0.50% in the case
of Revolving
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<PAGE>
Credit Loans and 1.00% in the case of Reducing Revolving Credit Loans and the
Standby Letter of Credit Interest Margin shall be 3.00%; each shall thereafter
be adjusted in accordance with the provisions hereof.
"Interest Payment Date" shall mean (i) in the case of an Alternate Base
Loan, the first Business Day of each month commencing August 1, 1999, and (ii)
with respect to any Eurodollar Loan, the last day of the Interest Period
applicable thereto, and, in addition, in respect of any Eurodollar Loan of more
than three (3) months' duration, each earlier day which is three (3) months
after the first day of such Interest Period.
"Interest Period" shall mean, as to any Eurodollar Loan, the period
commencing on the date of such Eurodollar Loan and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is one (1), two (2), three (3) or six (6) months
thereafter, as the Borrower may elect with respect to its Eurodollar Loans;
provided, however, that (x) if an Interest Period would end on a day that is not
a Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, with respect to Eurodollar Loans, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, (y) no Interest Period
shall end later than the Revolving Credit Termination Date and (z) interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"In-Transit CMT Letter of Credit Inventory" shall mean "in transit"
finished goods inventory of the Borrower shipped under an Eligible CMT Letter of
Credit, the amount of which is equal to the face amount of the related Eligible
CMT Letter of Credit, provided that such inventory (i) has been paid for by the
Borrower and has not otherwise been included in Eligible Inventory or under an
Eligible Letter of Credit or an Eligible CMT Letter of Credit (ii) has been
consigned and insured to the satisfaction of the Agent and (iii) is otherwise
satisfactory to the Collateral Monitor in all respects, in the reasonable
business judgment of the Collateral Monitor (in consultation with the Agent).
"In-Transit Letter of Credit Inventory" shall mean "in transit" finished
goods inventory of the Borrower shipped under an Eligible Letter of Credit, the
amount of which is equal to the face amount of the related Eligible Letter of
Credit, provided that such inventory (i) has been paid for by the Borrower and
has not otherwise been included in Eligible Inventory or under an Eligible
Letter of Credit or an Eligible CMT Letter of Credit, (ii) has been consigned
and insured to the satisfaction of the Agent and (iii) is otherwise satisfactory
to the Collateral Monitor in all respects, in the reasonable business judgment
of the Collateral Monitor (in consultation with the Agent).
"Inventory Grantor" shall mean the Borrower and ASL Retail.
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<PAGE>
"Lenders" shall have the meaning assigned to such term in the preamble to
this Agreement.
"Letter of Credit" shall have the meaning assigned to such term in Section
2.17 hereof.
"Letter of Credit Usage" shall mean at any time, (i) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (ii) the
unreimbursed drawings at such time under all such Letters of Credit which have
not been converted to Revolving Credit Loans pursuant to the provisions hereof.
"LIBO Rate" shall mean, with respect to any Eurodollar Loan for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/100 of 1%) equal to the rate at which dollar deposits approximately
equal in principal amount to the Agent's portion of such Eurodollar Loan and for
a maturity equal to the applicable Interest Period are offered in immediately
available funds to the principal London office of the Agent in the London
interbank market at approximately 11:00 a.m., London time, two (2) Business Days
prior to the first day of such Interest Period.
"Lien" shall mean, with respect to any asset, (i) any mortgage, lien,
pledge, encumbrance, charge or security interest in or on such asset, (ii) the
interest of a vendor or a lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset, (iii) in the
case of securities, any purchase option, call or similar right of a third party
with respect to such securities or (iv) any other right of or arrangement with
any creditor to have such creditor's claim satisfied out of such assets, or the
proceeds therefrom, prior to the general creditors of the owner thereof.
"Lion Licensing" shall mean Lion Licensing, Ltd., a Delaware corporation
and a direct wholly-owned subsidiary of AKC Acquisition.
"Loan" shall mean any Revolving Credit Loan or any Reducing Revolving
Credit Loan.
"Loan Documents" shall mean this Agreement, each Security Document, each
Guarantee executed and delivered at any time with respect to the Obligations,
the Notes and each other document, instrument or agreement now or hereafter
delivered to the Agent or any Lender in connection herewith or therewith.
"Loan Party" shall mean the Borrower, each Grantor and each Guarantor.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on (i) the
business, assets, operations or financial or other condition of the Borrower and
its
16
<PAGE>
subsidiaries taken as a whole, (ii) the ability of any Loan Party to perform
or pay the Obligations to be performed or paid by it in accordance with the
terms hereof or of any other Loan Document, (iii) the rights of, or benefits
available to, the Lenders or the Agent under any Loan Document or (iv) the
Agent's Lien on any material portion of the Collateral or the priority of such
Lien.
"Maximum Revolving Credit Commitment" shall mean $160,000,000 as the same
may be reduced by an amount equal to any reduction to the Total Revolving Credit
Commitment pursuant to this Agreement including, without limitation, Section
2.07 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"Net Amount of Eligible Inventory" shall mean, at any time, the aggregate
Book Value of Eligible Inventory of an Inventory Grantor.
"Net Amount of Eligible Receivables" shall mean and include at any time,
without duplication, the gross amount of Eligible Receivables at such time less
(i) sales, excise or similar taxes and (ii) returns, discounts, claims, credits
and allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed.
"Net Income" shall mean, with respect to any person for any period, the
aggregate income (or loss) of such person for such period which shall be an
amount equal to net revenues and other proper items of income for such person
less the aggregate for such person of any and all items that are treated as
expenses under GAAP, and less Federal, state and local income taxes, but
excluding any extraordinary gains or losses or any gains or losses from the sale
or disposition of assets other than in the ordinary course of business, all
computed and calculated in accordance with GAAP.
"Net Worth" shall mean, with respect to any person at any time, (i) the sum
of such person's capital stock, capital in excess of par or stated value of
shares of its capital stock, retained earnings and any other account which, in
accordance with GAAP, constitutes stockholders' equity, less (ii) treasury stock
and any minority interest in subsidiaries, and less (iii) the amount of any
write-up subsequent to the Closing Date in the value of any asset above the cost
or depreciated cost thereof to such person.
"New Lending Office" shall have the meaning assigned to such term in
Section 2.16(f) hereof.
"Non Pro Rata Loans" shall have the meaning assigned to such term in
Section 2.13(f) hereof.
"Notes" shall mean the Reducing Revolving Credit Notes and the Revolving
Credit Notes.
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<PAGE>
"Obligations" shall mean all obligations, liabilities and Indebtedness of
the Borrower to the Lenders and the Agent, whether now existing or hereafter
created, direct or indirect, due or not, whether created directly or acquired by
assignment, participation or otherwise, including, without limitation, all
obligations, liabilities and Indebtedness of the Borrower with respect to the
Rate Agreements (so long as any Lender shall be party thereto),Security
Documents and other Loan Documents, the principal of and interest on the
Revolving Credit Loans, the Reducing Revolving Credit Loans and the payment or
performance of all other obligations, liabilities, and Indebtedness of the
Borrower to the Lenders and the Agent hereunder, under the Letters of Credit or
under any one or more of the other Loan Documents (including the payment of
amounts that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, and interest that, but for the filing of
a petition in bankruptcy with respect to the Borrower, would accrue on such
obligations, whether or not a claim is allowed against the Borrower for such
interest in the related bankruptcy proceeding), including without limitation all
fees, costs, expenses and indemnity obligations hereunder and thereunder.
"Other Taxes" shall have the meaning assigned to such term in Section
2.16(b) hereof.
"Overcost Reserve" shall mean the amount of any inventory reserve recorded
in the books and records of an Inventory Grantor, the purpose of which is to
reduce the standard costs of goods in inventory to their actual cost.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any employee pension benefit plan, other than a
Multiemployer Plan, within the meaning of Section 3(2) of ERISA which is subject
to the provisions of Title IV of ERISA or Section 412 of the Code with respect
to which the Borrower or any ERISA Affiliate has liability.
"Permits" shall have the meaning assigned to such term in Section 4.18
hereof.
"Permitted Overadvances" shall mean (i) involuntary overadvances that may
result from time to time due to the fact that any borrowing formulas set forth
in the Loan Documents were unintentionally exceeded (whether at the time of any
Loan or at the time of the issuance of any Letter of Credit or otherwise) for
any reason (other than the Agent's or Collateral Monitor's gross negligence or
willful misconduct), including Collateral believed to be eligible in fact being
or becoming ineligible and the return of uncollected checks or other items
applied to the reduction of the Loans, Letters of Credit or other Obligations,
and overadvances made by the Agent without Lenders' consent for up to two weeks
after discovering the unintentional overadvance, provided that the Agent does
not during that period voluntarily increase the amount by which the borrowing
formulas had been exceeded as of the start of that period, and (ii) voluntary
overadvances made by the Agent in its sole discretion which shall (x) not cause
the
18
<PAGE>
Obligations to exceed Availability by an amount in excess of $5,000,000 at any
one time outstanding, and (y) not be made on a date which is beyond ten (10)
days after the first voluntary overadvance is made during such overadvance
period, or (z) be with the consent of all Lenders. To the extent any Permitted
Overadvances are made, each Lender shall bear its pro rata (based on its
Revolving Credit Commitment) share thereof.
"person" shall mean any natural person, corporation, business trust,
limited liability company, association, company, joint venture, limited
liability partnership, partnership or government or any agency or political
subdivision thereof.
"Plan" shall mean any employee benefit plan, other than a Multiemployer
Plan, within the meaning of Section 3(3) of ERISA and which is maintained (in
whole or in part) for employees of the Borrower or any of its subsidiaries.
"Pledge Agreement" shall mean the Amended and Restated Pledge Agreement
dated as of the date hereof, between the Grantor(s) party thereto and the Agent,
for its own benefit and for the benefit of the Lenders, in substantially the
form of Exhibit D annexed hereto, as amended, modified or supplemented from time
to time.
"Pledged Stock" shall have the meaning assigned to such term in the Pledge
Agreement.
"Prior Season Inventory" shall mean, with respect to inventory of the
Borrower, finished goods inventory which was manufactured for sale in a shipping
season prior to the current shipping season of the Borrower.
"Rate Agreement" shall have the meaning assigned to such term in Section
6.17 hereof.
"Receivables" shall mean and include all of each Receivables Grantor's
accounts, instruments, documents, chattel paper and general intangibles, whether
secured or unsecured, whether now existing or hereafter created or arising, and
whether or not specifically assigned to the Agent for its own benefit and/or the
ratable benefit of the Lenders.
"Receivables Grantor" shall mean the Borrower and any Guarantor approved by
the Agent and the Collateral Monitor.
"Reducing Revolving Credit Alternate Base Loan" shall mean a Reducing
Revolving Credit Loan that is an Alternate Base Loan.
"Reducing Revolving Credit Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Reducing Revolving Credit Loans
hereunder in an aggregate amount at any time outstanding not in excess of the
amount opposite the name of such Lender in the column entitled "Reducing
Revolving
19
<PAGE>
Credit Commitment" in the table appearing in Schedule 2.01(b), or if applicable,
the amount set forth in the Assignment and Acceptance pursuant to which such
Lender became a Lender hereunder, as such amount may be (a) reduced from time to
time pursuant to this Agreement including, without limitation, Section 2.07
hereof and (b) reduced or increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 11.03 hereof.
"Reducing Revolving Credit Eurodollar Loan" shall mean a Reducing Revolving
Credit Loan that is a Eurodollar Loan.
"Reducing Revolving Credit Loan" shall mean a Reducing Revolving Credit
Loan made pursuant to Sections 2.01 and 2.02 hereof.
"Reducing Revolving Credit Notes" shall mean the Reducing Revolving Credit
Notes of the Borrower, executed and delivered as provided in Section 2.04
hereof, in substantially the form of Exhibit B-2 annexed hereto, as amended,
modified or supplemented from time to time.
"Reducing Revolving Credit Termination Date" shall mean the earlier to
occur of (i) June 30, 2001, (ii) such time that Agent receives the Special
Charter Amendment Opinion and (iii) such date as the Reducing Revolving Credit
Loans shall otherwise be payable in full and the Reducing Revolving Credit
Commitment shall terminate, expire or be canceled in accordance with the terms
of this Agreement.
"Register" shall have the meaning assigned to such term in Section 11.03(e)
hereof.
"Regulation D" shall mean Regulation D of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"Regulation T" shall mean Regulation T of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"Regulation U" shall mean Regulation U of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"Regulation X" shall mean Regulation X of the Board, as the same is from
time to time in effect, and all official rulings and interpretations thereunder
or thereof.
"Release" shall mean any releasing, spilling, leaking, seepage, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping, in each case as defined in Environmental Law, and shall
include any "Threatened Release," as defined in Environmental Law; provided, in
the event that any Environmental Law is amended so as to broaden the meaning of
any term defined thereby, such broader meaning shall apply subsequent to the
effective date of such amendment.
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<PAGE>
"Remedial Work" shall mean any investigation, site monitoring, containment,
cleanup, removal, restoration or other remedial work of any kind or nature with
respect to any property of any Loan Party (whether such property is owned,
leased, subleased or used), including, without limitation, with respect to
Contaminants and the Release thereof.
"Reportable Event" shall mean a Reportable Event as defined in Section
4043(c) of ERISA with respect to which the 30 day notice requirements have not
been waived.
"Required Lenders" shall mean, at any time, Lenders holding Loans,
participating interests in the Letter of Credit Usage and unused Total
Commitments representing at least 51% of the aggregate of (a) the aggregate
principal amount of Loans at such time, (b) the Letter of Credit Usage at such
time and (c) the aggregate unused Revolving Credit Commitments at such time, all
after giving effect to the terms of Section 2.13(d)(v).
"Responsible Officer" shall mean, with respect to any person, any vice
president or president, or the chief financial officer or controller, of such
person.
"Revolving Credit Alternate Base Loan" shall mean a Revolving Credit Loan
that is an Alternate Base Loan.
"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Credit Loans hereunder and
participate in Letters of Credit in an aggregate amount at any time outstanding
not in excess of the amount opposite the name of such Lender in the column
entitled "Revolving Credit Commitment" in the table appearing in Schedule
2.01(a), or if applicable, the amount set forth in the Assignment and Acceptance
pursuant to which such Lender became a Lender hereunder, as such amount may be
(a) reduced from time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof and (b) reduced or increased from time to time
pursuant to assignments by or to such Lender pursuant to Section 11.03 hereof.
"Revolving Credit Commitment Fee" shall have the meaning set forth in
Section 2.06(a) hereof.
"Revolving Credit Eurodollar Loan" shall mean a Revolving Credit Loan that
is a Eurodollar Loan.
"Revolving Credit Loan" shall mean a Revolving Credit Loan made pursuant to
Sections 2.01 and 2.02 hereof.
"Revolving Credit Notes" shall mean the Revolving Credit Notes of the
Borrower, executed and delivered as provided in Section 2.04 hereof, in
substantially
21
<PAGE>
the form of Exhibit B-1 annexed hereto, as amended, modified or supplemented
from time to time.
"Revolving Credit Termination Date" shall mean the earlier to occur of (i)
December 31, 2003 and (ii) such date as the Revolving Credit Loans shall
otherwise be payable in full and the Revolving Credit Commitment shall
terminate, expire or be canceled in accordance with the terms of this Agreement.
"Security Agreement" shall mean the Amended and Restated Security Agreement
dated as of the date hereof, between the Grantor(s) and the Agent, for its own
benefit and for the benefit of the Lenders, substantially in the form of Exhibit
E annexed hereto, as amended, modified or supplemented from time to time.
"Security Agreement - Trademarks, Patents and Copyrights" shall mean the
Amended and Restated Security Agreement and Mortgage - Trademarks, Patents and
Copyrights dated as of the date hereof, between the Debtor(s), as such term is
defined therein, and the Agent, for its own benefit and for the benefit of the
Lenders, substantially in the form of Exhibit G annexed hereto, as amended,
modified or supplemented from time to time.
"Security Documents" shall mean the Pledge Agreement, the Security
Agreement, the Security Agreement - Trademarks, Patents and Copyrights, the Hong
Kong Security Documents and each other agreement now existing or hereafter
created providing collateral security for the payment or performance of any
Obligations.
"Seller" shall mean Anne Klein Company LLC, certain of whose assets are
being purchased in accordance with the Acquisition Agreement.
"Senior Notes" shall mean the 12.75% senior unsecured notes, due 2004,
issued by the Borrower pursuant to the Senior Note Indenture, in an aggregate
principal amount not to exceed $110,000,000.
"Senior Note Indenture" shall mean the Indenture, dated as of June 4, 1997,
between the Borrower and IBJ Schroder Bank & Trust Company, as Trustee, as
amended by the First Supplemental Indenture dated as of June 30, 1997 and the
second Supplemental Indenture dated as of June 16, 1999.
"Settlement Date" shall have the meaning assigned to such term in Section
2.15(c) hereof.
"Special Charter Amendment" shall mean an amendment to clause (ii) of
Section 6 of the certificate of incorporation of the Borrower, reasonably
acceptable to the Agent, that removes the words "mortgage, pledge, transfer or
other disposition" from such clause.
22
<PAGE>
"Special Charter Amendment Opinion" shall mean an opinion of counsel,
reasonably acceptable to the Agent, opining that the Special Charter Amendment
has been properly executed and is effective.
"Subordinated Indebtedness" shall mean, with respect to the Borrower,
Indebtedness subordinated in right of payment to the Obligations upon terms
satisfactory to and approved in writing by the Agent and the Required Lenders.
"subsidiary" shall mean, with respect to any person, any corporation,
association or other business entity of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power are, at the time as of which any determination is being
made, owned or controlled, directly or indirectly, by such person or one or more
subsidiaries of such person.
"Taxes" shall have the meaning assigned to such term in Section 2.16(a)
hereof.
"Total Commitment" shall mean the sum of the Lenders' Total Revolving
Credit Commitments and Total Reducing Revolving Credit Commitments, as the same
may be reduced from time to time pursuant to this Agreement including, without
limitation, Section 2.07 hereof.
"Total Funded Debt" shall mean as of the date of determination thereof, all
Indebtedness upon which interest charges are customarily paid of the Borrower
and Consolidated subsidiaries on a Consolidated basis outstanding at such time
which matures more than one year after the date of calculation, and any such
Indebtedness maturing within one year from such date of calculation which is
renewable or extendable at the option of the obligor to a date more than one
year from such date and including in any event any outstanding Loans.
"Total Reducing Revolving Credit Commitment" shall mean the sum of the
Lenders' Reducing Revolving Credit Commitments, as the same may be reduced from
time to time pursuant to this Agreement including, without limitation, Section
2.07 hereof.
"Total Revolving Credit Commitment" shall mean the sum of the Lenders'
Revolving Credit Commitments, as the same may be reduced from time to time
pursuant to this Agreement including, without limitation, Section 2.07 hereof.
"Trademark Advance" shall mean (i) before the receipt by the Agent of the
Special Charter Amendment Opinion the lesser of (x) 50% of the appraised value
of the Kasper for A.S.L., Albert Nipon and Le Suit trademarks determined by an
independent appraiser acceptable to the Agent as at the Closing Date and updated
at the joint request of the Collateral Monitor and the Agent but in no event
more than once each Fiscal Year and not before the first anniversary of the
Closing Date and (y) $10,000,000
23
<PAGE>
and (ii) after receipt by the Agent of the Special Charter Amendment Opinion the
lesser of (x) 50% of the appraised value of the Anne Klein, Kasper for A.S.L.,
Albert Nipon and Le Suit trademarks determined by an independent appraiser
acceptable to the Agent as at the Closing Date and updated at the joint request
of the Collateral Monitor and the Agent but in no event more than once each
Fiscal Year and not before the first anniversary of the Closing Date, and (y)
the applicable trademark amount for the applicable period as set forth on
Exhibit A annexed hereto.
"Transactions" shall have the meaning assigned to such term in Section 4.02
hereof.
SECTION 1.02 Accounting Terms. Unless otherwise expressly provided herein,
each accounting term used herein shall have the meaning given it under generally
accepted accounting principles in effect from time to time in the United States
applied on a basis consistent with those used in preparing the financial
statements referred to in Section 6.05 hereof ("GAAP"); provided, however, that
each reference in Article VII hereof, or in the definition of any term used in
Article VII hereof, to GAAP shall mean GAAP as in effect on the date hereof.
II. THE LOANS
SECTION 2.01 Revolving Credit Commitments and Reducing Revolving Credit
Commitments. (a) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender, severally and not
jointly, agrees to make Revolving Credit Loans to the Borrower, at any time and
from time to time from the date hereof to the Revolving Credit Termination Date,
in an aggregate principal amount at any time outstanding not to exceed the
amount of such Lender's Revolving Credit Commitment set forth opposite its name
in Schedule 2.01(a) annexed hereto, as such Revolving Credit Commitment may be
reduced from time to time in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the aggregate principal amount of Revolving
Credit Loans outstanding at any time to the Borrower shall not exceed (1) the
lesser of (A) the Total Revolving Credit Commitment on the Closing Date (as such
amount may be increased as provided for in Schedule 2.01(a) annexed hereto or
reduced pursuant to this Agreement including, without limitation, Section 2.07
hereof) and (B) the Borrowing Base minus (2) the sum of the Availability
Reserves and the Letter of Credit Usage at such time. The Borrowing Base will be
computed daily and a compliance certificate from a Responsible Officer of the
Borrower presenting its computation will be delivered to the Collateral Monitor
and the Agent in accordance with Section 6.05 hereof.
Subject to the foregoing and within the foregoing limits, the Borrower may
borrow, repay (or, subject to the provisions of Section 2.09 hereof, prepay) and
reborrow Revolving Credit Loans, on and after the date hereof and prior to the
Revolving Credit Termination Date, subject to the terms, provisions and
limitations set forth herein, including, without limitation, the requirement
that no Revolving Credit Loan
24
<PAGE>
shall be made hereunder if the amount thereof exceeds the Availability
outstanding at such time.
(b) Subject to the terms and conditions and relying upon the
representations and warranties herein set forth, each Lender, severally and not
jointly, agrees to make Reducing Revolving Credit Loans to the Borrower, at any
time and from time to time from the date hereof until the Reducing Revolving
Credit Termination Date, in an aggregate principal amount at any time
outstanding not to exceed the amount of such Lender's Reducing Revolving Credit
Commitment set forth opposite its name in Schedule 2.01(b) annexed hereto, as
such Reducing Revolving Credit Commitment may be reduced from time to time in
accordance with the provisions of this Agreement, including, without limitation,
Section 2.07 hereof. Notwithstanding the foregoing, the aggregate amount of
Reducing Revolving Credit Loans outstanding to the Borrower at any time shall
not exceed the lesser of (A) the Total Reducing Revolving Credit Commitment (as
such amount may be reduced pursuant to this Agreement including, without
limitation, Section 2.07 hereof) and (B) the Anne Klein Trademark Value.
Subject to the foregoing and within the foregoing limits, the Borrower may
borrow, repay (or, subject to the provisions of Section 2.09 hereof, prepay) and
reborrow Reducing Revolving Credit Loans, on and after the date hereof and prior
to the Reducing Revolving Credit Termination Date, subject to the terms,
provisions and limitations set forth herein, including, without limitation, the
requirement that after giving effect to any Reducing Revolving Credit Loan the
aggregate of Reducing Revolving Credit Loans shall not exceed the Anne Klein
Trademark Value.
SECTION 2.02 Loans. (a) The Loans made by the Lenders on any date shall be
in integral multiples of $1,000,000 (except that the foregoing limitation shall
not be applicable to the extent that the proceeds of such Loans are requested to
be disbursed to the Borrowers' controlled disbursement account maintained with
the Agent); provided, however, that the Eurodollar Loans made on any date shall
be in a minimum aggregate principal amount equal to $5,000,000.
(b) Loans shall be made ratably by the Lenders in accordance with their
respective Revolving Credit Commitments or Reducing Revolving Credit
Commitments, as the case may be; provided, however, that the failure of any
Lender to make any Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder. The initial Revolving Credit Loans shall be made
by the Lenders against delivery of Revolving Credit Notes and the initial
Reducing Revolving Credit Loans shall be made by the Lenders against delivery of
Reducing Revolving Credit Notes, in each case, payable to the order of the
Lenders, as referred to in Section 2.04 hereof.
(c) Each Loan shall be either an Alternate Base Loan or a Eurodollar Loan
as the Borrower may request pursuant to Section 2.03 hereof. Each Lender may
fulfill its obligations under this Agreement by causing its Applicable Lending
Office to make such Loan; provided, however, that the exercise of such option
shall not affect
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the obligation of the Borrower to repay such Loan in accordance with the terms
of the applicable Note. Loans of more than one type may be outstanding at the
same time, provided, however, not more than four (4) Eurodollar Loans may be
outstanding at any one time.
(d) Subject to the provisions of paragraph (e) below, each Lender shall
make its Loans on the proposed dates thereof by paying the amount required to
the Agent in New York, New York in immediately available funds not later than
12:00 noon, New York City time, and the Agent shall as soon as practicable, but
in no event later than 3:00 p.m., New York City time, credit the amounts so
received to the general deposit account of the Borrower with the Agent in
immediately available funds or, if Loans are not to be made on such date because
any condition precedent to a borrowing herein specified is not met, return the
amounts so received to the respective Lenders.
(e) The Borrower shall have the right at any time upon prior irrevocable
written, facsimile or telephonic notice (promptly confirmed by written or
facsimile notice) to the Agent given in the manner and at the times specified in
Section 2.03 hereof with respect to the Loans into which conversion or
continuation is to be made, to convert all or any portion of Eurodollar Loans
into Alternate Base Loans, to convert all or any portion of Alternate Base Loans
into Eurodollar Loans (specifying the Interest Period to be applicable thereto),
to convert the Interest Period with respect to all or any portion of any
Eurodollar Loans to another permissible Interest Period, and to continue all or
any portion of any Eurodollar Loans into a subsequent Interest Period, subject
to the terms and conditions of this Agreement (including the last sentence of
Section 2.02(c) hereof) and to the following:
(i) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the conversion or continuation; and in the case of a conversion
or continuation of fewer than all the Loans, the aggregate principal amount
of Loans converted or continued shall not be less than $1,000,000 in the
case of Alternate Base Loans (except that the foregoing limitation shall
not be applicable to the extent that the proceeds of such Loans are
requested to be disbursed to the Borrowers' controlled disbursement account
maintained with the Agent) or $5,000,000 in the case of Eurodollar Loans
and shall be an integral multiple of $1,000,000;
(ii) accrued interest on a Eurodollar Loan (or portion thereof) being
converted shall be paid by the Borrower at the time of conversion;
(iii) if any Eurodollar Loan is converted at any time other than the
end of an Interest Period applicable thereto, the Borrower shall make such
payments associated therewith as are required pursuant to Section 2.12
hereof;
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(iv) any portion of a Revolving Credit Eurodollar Loan which is
subject to an Interest Period ending on a date that is less than one month
prior to the Revolving Credit Termination Date may not be converted into,
or continued as, a Eurodollar Loan and shall be automatically converted at
the end of such Interest Period into a Revolving Credit Alternate Base
Loan;
(v) any portion of a Reducing Revolving Credit Eurodollar Loan which
is subject to an Interest Period ending on a date that is less than one
month either prior to the Reducing Revolving Credit Termination Date or, as
to the portion so prepaid, prior to a date pursuant to which such Loan will
require prepayment by reason of the provisions of Section 2.07(a) hereof
may not be converted into, or continued as, a Eurodollar Loan and shall be
automatically converted at the end of such Interest Period into a Reducing
Revolving Credit Alternate Base Loan; and
(vi) at the time of any conversion to, or continuation of, a
Eurodollar Loan, no Default or Event of Default shall have occurred and be
continuing.
The Interest Period applicable to any Eurodollar Loan resulting from a
conversion shall be specified by the Borrower in the irrevocable notice of
conversion delivered pursuant to this Section; provided, however, that if no
such Interest Period shall be specified, the Borrower shall be deemed to have
selected an Interest Period of one month's duration. If the Borrower shall not
have given timely notice to continue any Eurodollar Loan into a subsequent
Interest Period (and shall not otherwise have given notice to convert such
Loan), such Loan (unless repaid or required to be repaid pursuant to the terms
hereof) shall automatically be converted into an Alternate Base Loan. The Agent
shall promptly advise the Lenders of any notice given pursuant to this Section
and of each Lender's portion of the continuation or conversion hereunder.
SECTION 2.03 Notice of Loans. The Borrower shall, through a Responsible
Officer of the Borrower, give the Agent irrevocable written, facsimile or
telephonic notice (promptly confirmed by written or facsimile notice) of each
borrowing (including, without limitation, a conversion or continuation as
permitted by Section 2.02(e) hereof) not later than 11:00 a.m., New York City
time, (i) three (3) Business Days before a proposed Eurodollar Loan borrowing or
conversion or continuation and (ii) one Business Day before an Alternate Base
Loan borrowing or conversion or continuation (except that no such confirmation
will be required, unless requested by the Agent, to the extent that the proceeds
of such borrowing are requested to be disbursed to Borrower's controlled
disbursement account maintained with the Agent). Such notice shall specify (w)
whether the Loans then being requested are to be Alternate Base Loans or
Eurodollar Loans, it being agreed that all Loans made on the Closing Date shall
be Alternate Base Loans, (x) the date of such borrowing (which shall be a
Business Day) and amount thereof and (y) if such Loans are to be Eurodollar
Loans, the Interest Period with respect thereto. If no election as to the type
of Loan is specified in any
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such notice, all such Loans shall be Alternate Base Loans. If no Interest Period
with respect to any Eurodollar Loan is specified in any such notice, then an
Interest Period of one month's duration shall be deemed to have been selected.
The Agent shall promptly advise the Lenders of any notice given pursuant to this
Section 2.03 and of each Lender's portion of the requested borrowing.
SECTION 2.04 Notes; Repayment of Loans. (a) All Revolving Credit Loans made
by a Lender to the Borrower shall be evidenced by a single Revolving Credit
Note, duly executed on behalf of the Borrower, dated the Closing Date, in
substantially the form of Exhibit B-1 annexed hereto, delivered and payable to
such Lender in a principal amount equal to its Revolving Credit Commitment on
such date. The outstanding balance of each Revolving Credit Loan, as evidenced
by any such Revolving Credit Note, shall mature and be due and payable on the
Revolving Credit Termination Date. All Reducing Revolving Credit Loans made by a
Lender to the Borrower shall be evidenced by a single Reducing Revolving Credit
Note, duly executed on behalf of the Borrower, dated the Closing Date, in
substantially the form of Exhibit B-2 annexed hereto, delivered and payable to
such Lender in a principal amount equal to its Reducing Revolving Credit
Commitment on such date. The outstanding balance of each Reducing Revolving
Credit Loan, as evidenced by any such Reducing Revolving Credit Note, shall
mature and be due and payable on the Reducing Revolving Credit Termination Date.
(b) Each Revolving Credit Note and each Reducing Revolving Credit Note
shall bear interest from its date on the outstanding principal balance thereof,
as provided in Section 2.05 hereof.
(c) Each Lender, or the Agent on its behalf, shall, and is hereby
authorized by the Borrower to, endorse on the schedule attached to the Revolving
Credit Note or Reducing Revolving Credit Note, as the case may be, of such
Lender (or on a continuation of such schedule attached to such Note and made a
part thereof) an appropriate notation evidencing the date and amount of each
Loan to the Borrower from such Lender, as well as the date and amount of each
payment and prepayment with respect thereto; provided, however, that the failure
of any person to make such a notation on a Note shall not affect any obligations
of the Borrower under such Note. Any such notation shall be conclusive and
binding as to the date and amount of such Loan or portion thereof, or payment or
prepayment of principal or interest thereon, absent manifest error.
SECTION 2.05 Interest on Loans. (a) Subject to the provisions of Section
2.05(c) and Section 2.08 hereof, each Alternate Base Loan shall bear interest at
a rate per annum equal to the Alternate Base Rate plus applicable Interest
Margin.
(b) Subject to the provisions of Section 2.05(c) and Section 2.08 hereof,
each Eurodollar Loan shall bear interest at a rate per annum equal to the
Adjusted LIBO Rate plus the applicable Interest Margin.
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(c) Interest on each Loan shall be payable in arrears on each applicable
Interest Payment Date and the Revolving Credit Termination Date. Interest on
each Alternate Base Loan and Eurodollar Loan shall be computed based on the
number of days elapsed in a year of 360 days. The Agent shall determine each
interest rate applicable to the Loans and shall promptly advise the Borrower and
the Lenders of the interest rate so determined.
SECTION 2.06 Fees. (a)The Borrower shall pay each Lender, through the
Agent, (i) on the first Business Day of each January, April, July and October
commencing October 1, 1999, (ii) on the date of any reduction of the Revolving
Credit Commitments pursuant to this Agreement including, without limitation,
Section 2.07 hereof and (iii) on the Revolving Credit Termination Date, in
immediately available funds a commitment fee (the "Revolving Credit Commitment
Fee") of one-half of one percent (1/2 of 1%) per annum on the average daily
unused amount of the Maximum Revolving Credit Commitment of such Lender, during
the preceding quarter (or shorter period commencing with the Closing Date or
ending with the Revolving Credit Termination Date) ending immediately prior to
such date it being understood that Letter of Credit Usage shall constitute "use"
of the Revolving Credit Commitment in a corresponding amount. The Revolving
Credit Commitment Fee due to each Lender under this Section 2.06 shall commence
to accrue on the date hereof and cease to accrue on the earlier of (i) the
Revolving Credit Termination Date and (ii) the termination of the Revolving
Credit Commitment of such Lender pursuant to this Agreement including, without
limitation, pursuant to Section 2.07 hereof. The Revolving Credit Commitment Fee
shall be calculated on the basis of the actual number of days elapsed in a year
of 360 days.
(b) If the Agent shall not have received the Special Charter Amendment
Opinion on or before the date 120 days after the Closing Date the Borrower shall
pay to the Agent for the pro rata benefit of the Lenders a fee equal to 0.25% of
the Maximum Revolving Credit Commitment on the next Business Day.
SECTION 2.07 Termination and Reduction of Revolving Credit Commitments. (a)
Notwithstanding any reduction in the Reducing Revolving Credit Commitment
pursuant to any other subsection of this Section 2.07, the Total Reducing
Revolving Credit Commitment shall be automatically and permanently reduced (pro
rata among the Lenders in accordance with their respective Reducing Revolving
Credit Commitments) to $20,000,000 on December 31, 2000. In addition, upon the
receipt by the Agent of the Special Charter Amendment Opinion the Total Reducing
Revolving Credit Commitment shall automatically be reduced to $0 and (i) all
Reducing Revolving Credit Eurodollar Loans outstanding at such time, if any,
shall be deemed converted into Revolving Credit Eurodollar Loans and continued
to the end of the applicable Interest Period and (ii) all Reducing Revolving
Credit Alternate Base Loans outstanding at such time, if any, shall be deemed
converted into a Revolving Credit Alternate Base Loan.
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(b) Upon at least three (3) Business Days' prior irrevocable written notice
(or facsimile notice promptly confirmed in writing) to the Agent, the Borrower
may at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Total Commitment, ratably among the Lenders in
accordance with the amounts of their Revolving Credit Commitments and Reducing
Revolving Credit Commitments, as applicable; provided, however, that (i) the
Total Revolving Credit Commitment shall not be reduced at any time (x) to an
amount less than the Revolving Credit Loans outstanding under the Revolving
Credit Commitments and the Letter of Credit Usage at such time without any
corresponding repayment in accordance with Section 2.09(b) hereof or other
permitted reduction in the Letter of Credit Usage or (y) prior to the Reducing
Revolving Credit Commitment being reduced to zero and (ii) the Total Reducing
Revolving Credit Commitment shall not be reduced at any time to an amount less
than the Reducing Revolving Credit Loans outstanding under the Reducing
Revolving Credit Commitments at such time without any corresponding repayment in
accordance with Section 2.09(b) hereof. Each partial reduction of the Total
Revolving Credit Commitment or the Total Reducing Revolving Credit Commitment
shall be in a minimum of $5,000,000 or an integral multiple of $5,000,000.
(c) Simultaneously with any termination or reduction of the Revolving
Credit Commitment pursuant to paragraph (b) of this Section 2.07, the Borrower
shall pay to each Lender, through the Agent, the Revolving Credit Commitment Fee
due and owing through and including the date of such termination or reduction on
the amount of the Revolving Credit Commitment of such Lender so terminated or
reduced.
SECTION 2.08 Interest on Overdue Amounts; Alternate Rate of Interest. (a)
If the Borrower shall default in the payment of the principal of or interest on
any Loan or any other amount becoming due hereunder, by acceleration or
otherwise, the Borrower shall on demand from time to time pay interest, to the
extent permitted by law, on all Obligations outstanding up to the date of actual
payment of such defaulted amount (after as well as before judgment) at a rate
per annum equal to two percent (2%) in excess of the rates otherwise applicable
to the Obligations outstanding pursuant to Section 2.05 hereof in the case of
Loans or Section 2.20 hereof in the case of the letter of credit fees with
respect to Letters of Credit.
(b) In the event, and on each occasion, that on the day two (2) Business
Days prior to the commencement of any Interest Period for a Eurodollar Loan the
Agent shall have determined that dollar deposits in the amount of each
Eurodollar Loan are not generally available in the London interbank market, or
that the rate at which dollar deposits are being offered will not reflect
adequately and fairly the cost to any Lender of making or maintaining such
Eurodollar Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Agent shall as soon as
practicable thereafter give written notice (or facsimile notice promptly
confirmed in writing) of such determination to the Borrower and the Lenders, and
any request by the Borrower for the making of a Eurodollar Loan pursuant to
Section 2.03 hereof or conversion or continuation of any Loan into a Eurodollar
Loan pursuant to Section 2.02 hereof shall, until the circumstances giving rise
to such notice
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no longer exist, be deemed to be a request for an Alternate Base Loan. Each
determination by the Agent made hereunder shall be conclusive absent manifest
error.
SECTION 2.09 Prepayment of Loans. (a) Subject to the terms and conditions
contained in this Section 2.09 and elsewhere in this Agreement, the Borrower
shall have the right to prepay any Loan at any time in whole or from time to
time in part (except in the case of a Eurodollar Loan where the Borrower shall
have a right to repay, but only on the last day of an Interest Period) without
penalty (except as otherwise provided for herein); provided, however, that each
such partial prepayment of a Loan shall be in an integral multiple of
$1,000,000.
(b) On the date of any termination or reduction of the Total Revolving
Credit Commitment or the Total Reducing Revolving Credit Commitment pursuant to
Section 2.07 hereof or elsewhere in this Agreement (other than the automatic
termination of the Total Reducing Revolving Credit Commitment to occur upon the
delivery of the Special Charter Amendment Opinion pursuant to Section 2.07(a)
hereof), the Borrower shall pay or prepay so much of the Revolving Credit Loans
or the Reducing Revolving Credit Loans, as the case may be, as shall be
necessary in order that (i) the Availability equals or exceeds zero in the case
of Revolving Credit Loans and (ii) the Total Reducing Revolving Credit
Commitment exceeds the Reducing Revolving Credit Loans outstanding under the
Reducing Revolving Credit Commitments following such termination or reduction.
Any prepayments of Revolving Credit Loans or Reducing Revolving Credit Loans
required by this paragraph (b) shall be applied to outstanding Revolving Credit
Alternate Base Loans or Reducing Revolving Credit Alternate Base Loans, as
applicable, up to the full amount thereof before they are applied to outstanding
Revolving Credit Eurodollar Loans or Reducing Revolving Credit Eurodollar Loans,
as applicable; provided, however, that the Borrower shall not be required to
make any prepayment of any Eurodollar Loan pursuant to this Section until the
last day of the Interest Period with respect thereto so long as an amount equal
to such prepayment is deposited by the Borrower in a cash collateral account
with the Agent to be held in such account on terms satisfactory to the Agent (if
not previously applied, such cash collateral may be applied by the Agent on the
last day of the applicable Interest Period to repay outstanding Eurodollar Loans
as they become due).
(c) The Borrower shall make prepayments of the Revolving Credit Loans from
time to time such that the Availability equals or exceeds zero at all times. In
addition, the Borrower shall make prepayments of the Reducing Revolving Credit
Loans from time to time such that the Anne Klein Trademark Value exceeds the
aggregate outstanding balance of all Reducing Revolving Credit Loans at all
times. Any prepayments required by this paragraph (c) shall be applied to
outstanding Revolving Credit Alternate Base Loans or Reducing Revolving Credit
Alternate Base Loans, as applicable, up to the full amount thereof before they
are applied to outstanding Revolving Credit Eurodollar Loans or Reducing
Revolving Credit Eurodollar Loans, as applicable; provided, however, that the
Borrower shall not be required to make any prepayment of any Eurodollar Loan
pursuant to this Section until the last day of the Interest Period with respect
thereto so long as an amount equal to such prepayment is
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deposited by the Borrower in a cash collateral account with the Agent to be held
in such account on terms satisfactory to the Agent (if not previously applied,
such cash collateral may be applied by the Agent on the last day of the
applicable Interest Period to repay outstanding Eurodollar Loans as they become
due).
(d) (i) Except as provided in clause (ii) below, promptly and in any event
not more than three (3) Business Days following the receipt by the Agent or the
Borrower or any of its subsidiaries of any net proceeds of (x) any casualty
insurance required to be maintained pursuant to Section 6.03 hereof on account
of each separate loss, damage or injury (each, a "Casualty Event") in excess of
$500,000 (or, if there shall be continuing a Default or an Event of Default, of
the full amount of net proceeds) to any asset of the Borrower or such subsidiary
(including, without limitation, any Collateral), or (y) any business
interruption insurance required to be maintained pursuant to Section 6.03 hereof
on account of any business interruption event (each, a "BI Event") in excess of
$500,000 (or, if there shall be continuing a Default or Event of Default, of the
full amount of net proceeds), the Borrower or such subsidiary shall notify the
Agent of such receipt in writing or by telephone promptly confirmed in writing,
and not later than three (3) Business Days following receipt by the Agent or the
Borrower or such subsidiary of any such proceeds, there shall become due and
payable a prepay ment of the Loans in an amount equal to 100% of such proceeds.
Prepayments from such net proceeds shall be applied as set forth in paragraph
(e) below.
(ii) In the case of the receipt of net proceeds described in clause (i)
above with respect to a Casualty Event or BI Event, the Borrower may elect, by
written notice delivered to the Agent not later than the day on which a
prepayment would otherwise be required under clause (i), (x) in the case of
proceeds received with respect to a BI Event, to use such proceeds in the
ordinary course of Borrower's business and (y) in the case of proceeds received
with respect to any Casualty Event, to apply all or a portion of such net
proceeds for the purpose of replacing, repairing, restoring or rebuilding
(referred to herein as a "Rebuilding") the relevant tangible property, and, in
any such event, any required prepayment under clause (i) above shall be reduced
dollar for dollar by the amount of such election under clause (x) or clause (y)
of this sentence. An election under this clause (ii) shall not be effective
unless: (x) at the time of such election there is continuing no Default or Event
of Default; (y) the Borrower shall have certified to the Agent that: (i) the net
proceeds of the insurance adjustment with respect to a Casualty Event, together
with other funds available to the Borrower, shall be sufficient to complete such
proposed Rebuilding in accordance with all applicable laws, regulations and
ordinances; and (ii) no Default or Event of Default has arisen or will arise as
a result of such BI Event, Casualty Event or Rebuilding; and (z) if the amount
of net proceeds in question exceeds $1,000,000, the Borrower shall have obtained
the written consent of the Required Lenders to such election.
(iii) In the event of an election under clause (ii) above, pending
application of the net proceeds to business operations with respect to a BI
Event or to Rebuilding with respect to a Casualty Event, the Borrower shall not
later than the time at which prepayment would have been, in the absence of such
election, required under
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clause (i) above, apply such net proceeds to the prepayment of the outstanding
principal balance, if any, of the Loans (not in permanent reduction of theTotal
Commitment), and deposit (the "Special Deposit") with the Agent, the balance, if
any, of such net proceeds remaining after such application, pursuant to
agreements in form, scope and substance reasonably satisfactory to the Agent.
The Special Deposit, together with all earnings on such Special Deposit, shall
be available to the Borrower solely for the applicable Rebuilding or ordinary
course business operations, as the case may be; provided, however, that at such
time as a Default or Event of Default shall occur, the balance of the Special
Deposit and earnings thereon may be applied by the Agent to repay the
Obligations in such order as the Agent shall elect. The Agent shall be entitled
to require proof, as a condition to the making of any withdrawal from the
Special Deposit, that the proceeds of such withdrawal are being applied for the
purposes permitted hereunder, and, in the case of Rebuilding, that the
withdrawal is equivalent to the value of the improvements being rebuilt.
(e) When making a prepayment, whether mandatory or otherwise, pursuant to
paragraph (a) above, the Borrower shall furnish to the Agent, not later than
11:00 a.m. (New York City time) (i) three (3) Business Days prior to the date of
such prepayment of Alternate Base Loans and (ii) five (5) Business Days prior to
the date of such prepayment of Eurodollar Loans, written, facsimile or
telephonic notice (promptly confirmed by written or facsimile notice) of
prepayment which shall specify the prepayment date and the principal amount of
each Loan (or portion thereof) to be prepaid, which notice shall be irrevocable
and shall commit the Borrower to prepay such Loan by the amount stated therein
on the date stated therein. Prepayments made pursuant to paragraph (d)(i) above
shall be applied to outstanding Reducing Revolving Credit Alternate Base Loans
up to the full amount thereof and then to Reducing Revolving Credit Eurodollar
Loans up to the full amount thereof and then to Revolving Credit Alternate Base
Loans up to the full amount thereof and then to Revolving Credit Eurodollar
Loans up to the full amount thereof; provided, however, that the Borrower shall
not be required to make any prepayment of any Reducing Revolving Credit
Eurodollar Loan or Revolving Credit Eurodollar Loan required pursuant to this
Section 2.09(e) until the last day of the Interest Period with respect thereto
so long as an amount equal to such prepayment is deposited by the Borrower into
a cash collateral account with the Agent to be held in such account pursuant to
terms satisfactory to the Agent (if not previously applied, such cash collateral
may be applied by the Agent on the last day of the applicable Interest Periods
to repay outstanding Eurodollar Loans as they become due).
(f) All prepayments under this Section 2.09 shall be subject to Section
2.12 hereof.
(g) Except as otherwise expressly provided in this Section 2.09, payments
with respect to any paragraph of this Section 2.09 are in addition to payments
made or required to be made under any other paragraph of this Section 2.09.
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SECTION 2.10 Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
(or in the case of any assignee of any Lender, the date of assignment) any
change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law), or any change in GAAP or regulatory accounting principles applicable to
the Agent or any Lender shall: (i) change the basis of taxation of payments to
any Lender or the Agent of the principal of or interest on any Eurodollar Loan
or any other fees or amounts payable with respect to any Letter of Credit or
otherwise hereunder (other than taxes imposed on or based on or measured by the
income or overall gross receipts of such Lender or the Agent by the jurisdiction
in which such Lender or the Agent has its principal office or by any political
subdivision or taxing authority therein); (ii) impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of, deposits
with or for the account of, or loans or loan commitments extended by, or Letters
of Credit issued and maintained by, such Lender; or (iii) impose on any Lender
or, with respect to Eurodollar Loans, the London interbank market, any other
condition affecting this Agreement, Letters of Credit issued and maintained by
or Eurodollar Loans made by such Lender; and the result of any of the foregoing
shall be to increase the cost to any such Lender of making or maintaining any
Eurodollar Loan or Letter of Credit, or to reduce the amount of any payment
(whether of principal, interest, fee, compensation or otherwise) receivable by
such Lender or to require such Lender to make any payment in respect of any
Eurodollar Loan or Letter of Credit, then the Borrower shall pay to such Lender
or the Agent, as the case may be, upon such Lender's or the Agent's demand, such
additional amount or amounts as will compensate such Lender or the Agent for
such additional costs or reduction. The Agent and each Lender agree to give
notice to the Borrower of any such change in law, regulation, interpretation or
administration with reasonable promptness after becoming actually aware thereof
and of the applicability thereof to the Transactions. Notwithstanding anything
contained herein to the contrary, nothing in clause (i) or (ii) of this Section
2.10(a) shall be deemed to (x) permit the Agent or any Lender to recover any
amount thereunder which would not be recoverable under Section 2.16 hereof or
(y) require the Borrower to make any payment of any amount to the extent that
such payment would duplicate any payment made by the Borrower pursuant to
Section 2.16 hereof
(b) If at any time and from time to time after the date of this Agree ment,
any Lender shall determine that the adoption of any applicable law, rule,
regulation or guideline regarding capital adequacy, or any change in any
applicable law, rule, regulation or guideline regarding capital adequacy,
including, without limitation, the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards" and any amendment or
successor agreement in effect on the date hereof, or any change in the
interpretation or administration of any thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Lender (or its lending office)
with any request or directive regarding capital adequacy (whether or not having
the force of law)
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of any such authority, central bank or comparable agency, has or will have the
effect of reducing the rate of return on such Lender's capital or on the capital
of such Lender's holding company, if any, as a consequence of its obligations
hereunder to a level below that which such Lender could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction. Each Lender agrees to give notice to the Borrower of any adoption of,
change in, or change in interpretation or administration of, any such law, rule,
regulation or guideline with reasonable promptness after becoming actually aware
thereof and of the applicability thereof to the Transactions. Notwith standing
any other provision in this paragraph (b), none of any Lender or the Agent shall
be entitled to demand compensation pursuant to this paragraph (b) if it shall
not be the general practice of such Lender or the Agent, as applicable, to
demand such compensation in similar circumstances under comparable provisions of
other comparable credit agreements.
(c) A statement of any Lender or the Agent setting forth such amount or
amounts, supported by calculations in reasonable detail, as shall be necessary
to compensate such Lender (or the Agent) as specified in paragraphs (a) and (b)
above shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender or the Agent, as the case may be, the
amount shown as due on any such statement within ten (10) days after its receipt
of the same.
(d) Failure on the part of any Lender or the Agent to demand compen sation
for any increased costs, reduction in amounts received or receivable with
respect to any Interest Period or any Letter of Credit or reduction in the rate
of return earned on such Lender's capital, shall not constitute a waiver of such
Lender's or the Agent's rights to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in rate of return in
such Interest Period or in any other Interest Period or with respect to such
Letter of Credit. The protection under this Section 2.10 shall be available to
each Lender and the Agent regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other condition which
shall give rise to any demand by such Lender or the Agent for compensation.
Notwithstanding the foregoing, the Borrower shall not be required to compensate
a Lender or the Agent pursuant to this Section for any increased costs or
reductions incurred more than six months prior to the date that such Lender or
the Agent, as the case may be, notifies the Borrower of the change giving rise
to such increased costs or reductions and of such Lender's or the Agent's
intention to claim compensation therefor; provided that, if the change giving
rise to such increased costs or reductions is retroactive, then the six-month
period referred to above shall be extended by a period of time equal to the
period from the date of such change through and including the earliest date of
such retroactive effect.
(e) Any Lender claiming any additional amounts payable pursuant to this
Section 2.10 agrees to use reasonable efforts (consistent with legal and
regulatory
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restrictions) to designate a different Applicable Lending Office if the making
of such a designation would avoid the need for, or reduce the amount of, any
such additional amounts and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
SECTION 2.11 Change in Legality. (a) Notwithstanding anything to the
contrary herein contained, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations to
make Eurodollar Loans as contemplated hereby, then, by written notice to
Borrower and to the Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by such
Lender hereunder, whereupon the Borrower shall be prohibited from
requesting Eurodollar Loans from such Lender hereunder unless such
declaration is subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by such Lender
be converted to Alternate Base Loans, in which event (A) all such
Eurodollar Loans shall be automatically converted to Alternate Base Loans
as of the effective date of such notice as provided in paragraph (b) below
and (B) all payments of principal which would otherwise have been applied
to repay the converted Eurodollar Loans shall instead be applied to repay
the Alternate Base Loans resulting from the conversion of such Eurodollar
Loans.
(b) For purposes of Section 2.11(a) hereof, a notice to the Borrower by any
Lender shall be effective, (x) if lawful, on the last day of the then current
Interest Period or, if there are then two or more current Interest Periods, on
the last day of each such Interest Period, respectively or (y) otherwise, on the
date of receipt by the Borrower.
SECTION 2.12 Indemnity. The Borrower shall indemnify the Agent and each
Lender against any loss or reasonable expense (including, but not limited to,
any loss or reasonable expense sustained or incurred or to be sustained or
incurred by reason of or in connection with the execution and delivery or
assignment of, or payment under, any Letter of Credit, or in liquidating or
employing deposits from third parties acquired to affect or maintain any Loan or
part thereof as a Eurodollar Loan) which the Agent or such Lender may sustain or
incur as a consequence of the following events (regardless of whether such
events occur as a result of the occurrence of an Event of Default or the
exercise of any right or remedy of the Agent or the Lenders under this Agreement
or any other agreement, or at law): any failure of the Borrower to fulfill on
the date of any Credit Event the applicable conditions set forth in Article V
hereof applicable to it; any failure of the Borrower to borrow hereunder after
irrevocable notice of borrowing pursuant to Section 2.03 hereof has been given;
any payment, prepayment or conversion of a Eurodollar Loan on a date other than
the last day of the
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relevant Interest Period; any default in payment or prepayment of the principal
amount of any Loan or any part thereof or interest accrued thereon, or with
respect to any Letter of Credit, in each case as and when due and payable (at
the due date thereof, by irrevocable notice of prepayment or otherwise); or the
occurrence of an Event of Default. Such loss or reasonable expense shall
include, without limitation, an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the principal or other amount so
paid, prepaid or converted or not borrowed for the period from the date of such
payment, prepayment or conversion or failure to borrow to, in the case of a
Loan, the last day of the Interest Period for such Loan (or, in the case of a
failure to borrow, the Interest Period for such Loan which would have commenced
on the date of such failure to borrow), at the applicable rate of interest for
such Loan provided for herein over (ii) the amount of interest (as reasonably
determined by such Lender) that would be realized by such Lender in reemploying
the funds so paid, prepaid or converted or not borrowed for such period or
Interest Period, as the case may be. Any such Lender shall provide to the
Borrower a statement, signed by an officer of such Lender, explaining any loss
or expense and setting forth, if applicable, the computation pursuant to the
preceding sentence, and such statement shall be conclusive absent manifest
error. The Borrower shall pay such Lender the amount shown as due on any such
statement within ten (10) days after the receipt of the same. The indemnities
contained herein shall survive the expiration or termination of this Agreement
and of the Letters of Credit.
SECTION 2.13 Pro Rata Treatment; Assumption by and Delegation of Authority
to the Agent. (a) Except as permitted under Sections 2.10, 2.11, 2.15(c) or 2.16
hereof or as described in subsection (d) below each borrowing, each payment or
prepayment of principal of the Notes, each payment of interest on the Notes,
each payment of any fee or other amount payable hereunder, each reduction of the
Total Revolving Credit Commitment and each reduction of the Total Reducing
Revolving Credit Commitment shall be made pro rata among the Lenders in the
proportions that their Revolving Credit Commitments bear to the Total Revolving
Credit Commitment and in the proportions that their Reducing Revolving Credit
Commitments bear to the Total Reducing Revolving Credit Commitment, as
applicable.
(b) Notwithstanding the occurrence or continuance of a Default or Event of
Default or other failure of any condition to the making of Loans or occurrence
of other Credit Events hereunder subsequent to the Credit Events on the Closing
Date, unless the Agent shall have been notified in writing by any Lender in
accordance with the provisions of paragraph (c) below prior to the date of a
proposed Credit Event that such Lender will not make the amount that would
constitute its pro rata share of the applicable Credits on such date available
to the Agent, the Agent may assume that such Lender has made such amount
available to the Agent on such date, and the Agent may, in reliance upon such
assumption, make available to the Borrower a corresponding amount. If such
amount is made available to the Agent on a date after such Credit Event date,
such Lender shall pay to the Agent on demand an amount equal to the product of
(i) the daily average Federal funds rate during such period as quoted by the
Agent, times (ii) the amount of such Lender's pro rata share of such Credits,
times (iii) a fraction the numerator of which is the number of days that elapse
from and including such Credit Event date to the date on which such Lender's pro
rata share of such
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Credits shall have become immediately available to the Agent and the denominator
of which is 360. A certificate of the Agent submitted to any Lender with respect
to any amounts owing under this subsection shall be conclusive in the absence of
manifest error. If such Lender's pro rata share of such Credits is not in fact
made available to the Agent by such Lender within three Business Days of such
Credit Event date, the Agent (without releasing such Lender from any liability
it might have to the Agent or the Borrower by reason of its failure to fund)
shall be entitled to recover such amount with interest thereon at the rate per
annum applicable to the Loans hereunder, on demand, from the Borrower.
(c) Unless and until the Agent shall have received notice from the Required
Lenders as to the existence of a Default, an Event of Default or some other
circumstance which would relieve the Lenders of their respective obligations to
extend Credits hereunder, which notice shall be in writing and shall be signed
by the Required Lenders and shall expressly state that the Required Lenders do
not intend to make available to the Agent such Lenders' ratable share of Credits
extended after the effective date of such notice, the Agent shall be entitled to
continue to make the assumptions described in Section 2.13(b) above. After
receipt of the notice described in the preceding sentence, which shall become
effective on the third Business Day after receipt of such notice by the Agent
(unless otherwise agreed by the Agent), the Agent shall be entitled to make the
assumptions described in Section 2.13(b) above as to any Credits as to which it
has not received a written notice to the contrary prior to 11:00 a.m. (New York
City time) on the Business Day next preceding the day on which such Credits are
to be extended. The Agent shall not be required to extend any Credits as to
which it shall have received notice by a Lender of such Lender's intention not
to make its ratable portion of such Credits available to the Agent. Any
withdrawal of authoriza tion as described under this Section 2.13(c) shall not
affect the validity of any Credits extended prior to the effectiveness thereof.
(d) In the event that any Lender fails to fund its ratable portion (based
on its Revolving Credit Commitment or Reducing Revolving Credit Commitment) of
any Revolving Credit Loan or any Reducing Revolving Credit Loan, as applicable,
which such Lender is obligated to fund under the terms of this Agreement (the
funded portion of such borrowing being hereinafter referred to as a "Non Pro
Rata Loan"), until the earlier of such Lender's cure of such failure or the
termination of the Total Revolving Credit Commitment or the Total Reducing
Revolving Credit Commitment, as applicable, in the Agent's sole discretion, the
proceeds of all amounts thereafter repaid to Agent by Borrower and otherwise
required to be applied to such Lender's share of all other Obligations pursuant
to the terms of this Agreement, may be advanced to Borrower by Agent on behalf
of such Lender to cure, in full or in part, such failure by such Lender, but
shall nevertheless be deemed to have been paid to such Lender in satisfaction of
such other Obligations. Notwithstanding anything in this Agreement to the
contrary:
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(i) the foregoing provisions to this subsection (d) shall apply only
with respect to the proceeds of payments of Obligations and shall not
affect the conversion or continuation of Loans pursuant to Section 2.02
hereof;
(ii) any such Lender shall be deemed to have cured its failure to fund
at such time as an amount equal to such Lender's ratable portion (based on
its applicable Revolving Credit Commitment or Reducing Revolving Credit
Commitment) of the requested principal portion of such Revolving Credit
Loan or Reducing Revolving Credit Loan, as the case may be, is fully funded
to Borrower whether made by such Lender itself or by operation of the terms
of this subsection (d) and whether or not the Non Pro Rata Loan with
respect thereto has been converted or continued;
(iii) amounts advanced to Borrower to cure, in full or in part, any
such Lender's failure to fund its Revolving Credit Loans or Reducing
Revolving Credit Loans ("Cure Loans") shall bear interest at the rate
applicable to Alternate Base Loans under Section 2.05 hereof in effect from
time to time, and for all other purposes of this Agreement shall be treated
as if they were Alternate Base Loans;
(iv) Regardless of whether or not an Event of Default has occurred and
is continuing, and notwithstanding the instructions of Borrower as to their
desired application, all repayments of principal which would be applied to
the outstanding Revolving Credit Alternate Base Loans or Reducing Revolving
Credit Alternate Base Loans shall be applied first, ratably to Revolving
Credit Alternate Base Loans or Reducing Revolving Credit Alternate Base
Loans, as applicable, constituting Non Pro Rata Loans, second, ratably to
Revolving Credit Alternate Base Loans or Reducing Revolving Credit
Alternate Base Loans, as applicable, other than those constituting Non Pro
Rata or Cure Loans and, third, ratably to Revolving Credit Alternate Base
Loans or Reducing Revolving Credit Alternate Base Loans, as applicable,
constituting Cure Loans;
(v) for so long as such Lender shall fail to cure, and until the
earlier of any such Lender's cure of the failure to fund its ratable
portion (based on its Revolving Credit Commitment or Reducing Revolving
Credit Commitment, as applicable) of any Revolving Credit Loan or Reducing
Revolving Credit Loan, as the case may be, and the termination of the Total
Revolving Credit Commitment or the Total Reducing Revolving Credit
Commitment, as applicable, the term "Required Lenders" for all purposes of
this Agreement shall exclude all Lenders whose failure to fund their
ratable portion (based on their respective applicable Revolving Credit
Commitments or Reducing Revolving Credit Commitments) of any Revolving
Credit Loan or any Reducing Revolving Credit Loan, as the case may be, have
not been cured; and
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(vi) for so long as such Lender shall fail to fund its ratable portion
(based on its Revolving Credit Commitment or Reducing Revolving Credit
Commitment, as applicable) of any Revolving Credit Loan or Reducing
Revolving Credit Loan, as the case may be, and until any such Lender's
failure is cured in accordance with this subsection (d), such Lender shall
not be entitled to any Revolving Credit Commitment Fee with respect to its
Revolving Credit Commitment.
SECTION 2.14 Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
the Borrower, including, but not limited to, a secured claim under Section 506
of Title 11 of the United States Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, obtain
payment (voluntary or involuntary) in respect of a Note or exposure under the
Letter of Credit Usage held by it as a result of which the unpaid principal
portion of the Notes or exposure under the Letter of Credit Usage held by it
shall be proportionately less than the unpaid principal portion of the Notes or
exposure under the Letter of Credit Usage held by any other Lender, it shall be
deemed to have simultaneously purchased from such other Lender a participation
in the Notes and exposure under the Letter of Credit Usage held by such other
Lender, so that the aggregate unpaid principal amount of the Notes and exposure
under the Letter of Credit Usage and participations in Notes and exposure under
the Letter of Credit Usage held by it shall be in the same proportion to the
aggregate unpaid principal amount of all Notes and exposure under the Letter of
Credit Usage then outstanding as the principal amount of the Notes and exposure
under the Letter of Credit Usage held by it prior to such exercise of banker's
lien, setoff or counterclaim was to the principal amount of all Notes and
exposure under the Letter of Credit Usage outstanding prior to such exercise of
banker's lien, setoff or counterclaim; provided, however, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section 2.14
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of such recovery
and the purchase price or prices or adjustments restored without interest. The
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Note and exposure under the Letter of Credit
Usage deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by the Borrower to such Lender as fully as if such Lender held a Note in the
amount of such participation.
SECTION 2.15 Payments and Computations. (a) The Borrower shall make each
payment hereunder and under any instrument delivered hereunder not later than
12:00 noon (New York City time) on the day when due in lawful money of the
United States (in freely transferable dollars) to the Agent at its offices at 1
Chase Manhattan Plaza, 8th Floor, New York, New York 10081, Attention: Loan and
Agency Services, for the account of the Lenders, in immediately available funds,
without set-off or counterclaim. Any amounts received after such time on any
date may, in the
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discretion of the Agent, be deemed to have been received on the next succeeding
Business Day for purposes of calculating interest thereon. The Agent shall
distribute any such payments received by it for the account of any other person
to the appropriate recipient promptly following receipt thereof. The Agent may
charge, when due and payable, the Borrower's account with the Agent for all
interest, principal and Revolving Credit Commitment Fees or other fees owing to
the Agent, the Collateral Monitor or the Lenders on or with respect to this
Agreement and/or the Loans and other Loan Documents. If at any time there is not
sufficient availability to cover any of the payments referred to in the prior
sentence, and in any event upon the occurrence of any Default, the Borrower
shall make any such payments upon demand.
(b) If Agent pays an amount to a Lender under this Agreement in the belief
or expectation that a related payment has been or will be received by Agent from
Borrower and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender without setoff, counterclaim or
deduction of any kind. If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to Borrower or paid to any other
person pursuant to any solvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement, Agent will not be required to
distribute any portion thereof to any Lender. In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrower or such other person, without setoff, counterclaim
or deduction of any kind.
(c) The outstanding principal balance of Revolving Credit Loans may
fluctuate from day to day, through Agent's disbursement of funds to, and receipt
of funds from, Borrower. In order to minimize the frequency of transfers of
funds between Agent and each Lender, Revolving Credit Loans and payments may be
settled according to the following procedures, although it is the intention of
the Agent to settle on a daily basis. On the second Business Day of each week,
or more frequently (including daily), if Agent so elects (each such day being a
"Settlement Date"), Agent will advise each Lender by telephone, telex or
telecopy of the amount of each such Lender's actual dollar investment and its
ratable portion (based on its applicable Revolving Credit Commitment) of the
outstanding principal balance of Revolving Credit Loans as of the close of
business on the second Business Day immediately preceding the Settlement Date.
In the event that payments are necessary to adjust the amount of such Lender's
actual dollar investment in the outstanding principal balance of Revolving
Credit Loans to such Lender's ratable portion (based on its applicable Revolving
Credit Commitment) of the outstanding principal balance of Revolving Credit
Loans as of any Settlement Date (based on the outstanding balances as of the
close of business on the third Business Day immediately preceding such
Settlement Date), the party from which such payment is due will pay the other,
in immediately available funds, by wire transfer to the other's account not
later than 2:00 p.m. (New York time) on the Business Day immediately following
the Settlement Date. Notwithstanding the foregoing, if Agent so elects, Agent
may require that each Lender make its ratable portion (based on its applicable
Revolving Credit Commitment) of any requested Revolving Credit Loan
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available to the Agent for disbursement on the date of funding applicable to
such Revolving Credit Loan in accordance with Section 2.03 hereof.
Notwithstanding these procedures, each Lender's obligation to fund its portion
of each Loan made by Agent to Borrower will commence on the date such advance is
made by Agent.
SECTION 2.16 Taxes. (a) Any and all payments by the Borrower hereunder
shall be made, in accordance with Section 2.15 hereof, free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding taxes imposed or based on or measured by the Agent's or any Lender's
(or any transferee's or assignee's, including a participation holder's (any such
entity a "Transferee")) income or overall gross receipts, and franchise or
capital taxes imposed on the Agent or any Lender (or Transferee) by the United
States or any jurisdiction under the laws of which it is organized or any
political subdivision thereof, (all such nonexcluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder to the Lenders (or any Transferee) or
the Agent, (i) the sum payable shall be increased by the amount necessary so
that after making all required deductions (including without limitation
deductions applicable to additional sums payable under this Section 2.16) such
Lender (or any Transferee) or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
the Borrower shall make such deductions and (iii) the Borrower shall pay the
full amount deducted to the relevant tax authority or other authority in
accordance with applicable law; provided, however, that the Borrower shall not
be required to increase any such amounts payable to any Lender (or Transferee)
with respect to any Taxes (i) to the extent that the obligation to withhold
amounts with respect to United States federal withholding tax existed on the
date such Lender became a party to this Agreement (or in the case of a
participant, on the date such participant became a participant hereunder) or,
with respect to payment to a New Lending Office, the date such Lender designated
such New Lending Office with respect to a Loan, except to the extent such
Lender's assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrower with respect to such Taxes pursuant to this
Section 2.16(a).
(b) In addition, the Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender (or Transferee) and the Agent
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.16) paid by such Lender (or Transferee) or the Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally
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asserted by the relevant tax authority or other authority. This indemnification
shall be made within 30 days from the date such Lender (or Transferee) or the
Agent (as the case may be) makes written demand therefor. If any Lender (or
Transferee) or the Agent receives a refund in respect of any Taxes or Other
Taxes for which such Lender (or Transferee) or the Agent has received payment
from the Borrower hereunder, such Lender (or Transferee) or the Agent shall
promptly notify the Borrower of such refund and such Lender (or Transferee) or
the Agent shall, within 30 days of receipt of a request by the Borrower, repay
such refund to the Borrower, net of all out-of-pocket expenses and without
interest, provided that the Borrower, upon the request of such Lender (or
Transferee) or the Agent, agrees to return such refund (plus any penalties,
interest or other charges) to such Lender (or Transferee) or the Agent in the
event such Lender (or Transferee) or the Agent is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes or Other Taxes
withheld by the Borrower in respect of any payment to any Lender (or Transferee)
or the Agent, the Borrower will furnish to the Agent, at its address referred to
in Section 11.01 hereof, such certificates, receipts and other documents as may
be reasonably required to evidence payment thereof.
(e) Without prejudice to the survival of any other agreement here under,
the agreements and obligations contained in this Section 2.16 shall survive the
payment in full of principal and interest hereunder.
(f) Each Lender (or Transferee) that is organized outside of the United
States and that is entitled to an exemption from or reduction of withholding tax
under the law of the jurisdiction in which the Borrower is located, or any
treaty to which such jurisdiction is a party, with respect to payments under
this Agreement shall deliver to the Borrower (with a copy to the Agent) on the
date hereof (or, in the case of a Transferee, on the date of the transfer) and
from time to time as required for renewal under applicable law (x) duly
completed copies of United States Internal Revenue Service Form 1001 or 4224 (or
any successor or additional forms), as appropriate, indicating in each case that
such Lender is entitled to receive payments under this Agreement without any (or
without full) deduction or withholding of any United States federal income taxes
and (y) any other related documents reasonable requested by the Borrower. The
Agent (if the Agent is an entity organized outside the United States) and each
Lender (or Transferee) that is organized outside the United States shall
promptly notify the Borrower and the Agent of any change in its Applicable
Lending Office (a "New Lending Office") and upon written request of the
Borrower, the Agent or such Lender (or Transferee), as the case may be, shall,
prior to the immediately following due date of any payment by the Borrower or
any Guarantor hereunder or under any other Loan Document, deliver to the
Borrower or such Guarantor, as the case may be (with copies to the Agent), such
certificates, documents or other evidence, as required by the Code or Treasury
Regulations issued pursuant thereto, including, to the extent applicable,
Internal Revenue Service Form 4224, Form 1001 and any other certificate or
statement of exemption required by Treasury Regulation Section 1.1441-4(a) or
Sec tion 1.1441-6(c) or any subsequent version thereof, properly completed and
duly
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executed by the Agent or such Lender (or Transferee), as the case may be,
establishing that such payment is not subject to withholding under the Code to
any greater extent than was the case prior to the change in Applicable Lending
Office. The Borrower shall be entitled to rely on such forms in their possession
until receipt of any revised or successor form pursuant to this Section 2.16(f).
If the Agent or a Lender (or Transferee) fails to provide a certificate,
document or other evidence required pursuant to this Section 2.16(f), then the
Borrower or the Agent shall be entitled to deduct or withhold on payments to the
Agent or such Lender (or Transferee) as a result of such failure, as required by
law.
(g) The Borrower shall not be required to pay any additional amounts to the
Agent or any Lender (or Transferee) in respect of United States withholding tax
pursuant to paragraph (a) above if the obligation to pay such additional amounts
would not have arisen but for a failure by the Agent or such Lender (or
Transferee) to comply with the provisions of paragraph (f) above unless such
failure results from (i) a change in applicable law, regulation or official
interpretation thereof or (ii) an amendment, modification or revocation of any
applicable tax treaty or a change in official position regarding the application
or interpretation thereof, in each case after the Closing Date (or, in the case
of a Transferee, after the date of assignment or transfer); provided, however,
the Borrower shall be required to pay those amounts to the Agent or any Lender
(or Transferee) that it was required to pay hereunder prior to the failure of
the Agent or such Lender (or Transferee) to comply with the provisions of such
paragraph (f).
(h) Each Lender (or Transferee) and the Agent shall use reasonable efforts
(consistent with legal and regulatory restrictions) to avoid or minimize any
amounts which might otherwise be payable pursuant to this Section 2.16
(including seeking refunds of any amounts that are reasonably believed not to
have been correctly or legally asserted); provided, however, that such efforts
shall not include the taking of any actions by such Lender (or Transferee) or
the Agent that would result in any tax, costs or other expense to such Lender
(or Transferee) or the Agent (other than a tax, cost or other expense for which
such Lender (or Transferee) or the Agent shall have been reimbursed or
indemnified by the Borrower pursuant to this Agreement or otherwise) or any
action which would or might in the reasonable opinion of such Lender (or
Transferee) or the Agent have a material adverse effect upon its business,
operations or financial condition or otherwise be materially disadvantageous to
such Lender (or Transferee) or the Agent.
SECTION 2.17 Issuance of Letters of Credit. Upon the request of the
Borrower, and subject to the conditions set forth in Article V hereof and such
other conditions to the opening of Letters of Credit as the Agent requires of
its customers generally, the Agent shall from time to time open commercial and
standby letters of credit and including those letters of credit set forth on
Schedule 2.17 hereto (each, a "Letter of Credit"; each reference to "Letters of
Credit" contained in this Agreement and the other Loan Documents shall be
applicable to each Letter of Credit opened by the Agent and each Letter of
Credit set forth on Schedule 2.17 hereto) for the account of
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the Borrower, the aggregate undrawn amount of all outstanding standby Letters of
Credit not at any time to exceed $20,000,000; provided, however, that the
Borrower may not request the Agent to open a Letter of Credit if after giving
effect thereto (measured by the face amount of such Letter of Credit)
Availability would be less than zero. The issuance of each Letter of Credit
shall be made upon prior written notice from the Borrower to the Agent, within
three Business Days thereof, at its Domestic Lending Office, which written
notice shall be an application for a Letter of Credit on the Agent's customary
form completed to the satisfaction of the Agent, together with the proposed form
of the Letter of Credit (which shall be satisfactory to the Agent) and such
other certificates, documents and other papers and information as the Agent may
reasonably request (to the extent any term or provision contained in such
application for a Letter of Credit conflicts with any term or provision
contained in this Agreement the term or provision contained herein shall
prevail). The Agent shall not at any time be obligated to issue any Letter of
Credit if such issuance would conflict with, or cause the Agent or any Lender to
exceed any limits imposed by, any applicable requirements of law. The expiration
date of any (i) commercial Letter of Credit shall not be later than 120 days
from the date of issuance thereof and (ii) any standby Letter of Credit shall
not be later than 365 days from the date of issuance thereof, and, in any event,
no Letter of Credit shall have an expiration date later than 30 days prior to
the Revolving Credit Termination Date. The Letters of Credit shall be issued
with respect of transactions occurring in the ordinary course of business of the
Borrower.
SECTION 2.18 Payment of Letters of Credit; Reimbursement. On the fifteenth
day following the end of each calendar quarter the Agent shall notify each
Lender of the principal amount, the number and the expiration date of each
Letter of Credit issued during such calendar quarter. By the issuance of a
Letter of Credit hereunder and without further action on the part of the Agent
or the Lenders, each Lender hereby accepts from the Agent a participation (which
participation shall be nonrecourse to the Agent) in such Letter of Credit equal
to such Lender's pro rata (based on its Revolving Credit Commitment) share of
such Letter of Credit, effective upon the issuance of such Letter of Credit.
Each Lender hereby absolutely and unconditionally assumes, as primary obligor
and not as a surety, and agrees to pay and discharge, and to indemnify and hold
the Agent harmless from liability in respect of, such Lender's pro rata share of
the amount of any drawing under a Letter of Credit. Each Lender acknowledges and
agrees that its obligation to acquire participations in each Letter of Credit
issued by the Agent and its obligation to make the payments specified herein,
and the right of the Agent to receive the same, in the manner specified herein,
are absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, (i) the occurrence and continuance of
a Default or an Event of Default hereunder; (ii) any lack of validity or
enforceability of this Agreement or any of the other Loan Documents; (iii) the
existence of any claim, setoff, defense or other right which a Borrower may have
at any time against a beneficiary named in such Letter of Credit or any
transferee of such Letter of Credit (or any person for whom any such transferee
may be acting), the Agent, any Lender, or any other person, whether in
connection with this Agreement, such Letter of Credit, the transactions
contemplated herein or any unrelated transactions (including any
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underlying transactions between the Borrower or any other party and the
beneficiary named in such Letter of Credit); (iv) any draft, certificate or any
other document presented under such Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect; (v) the surrender or impairment of
any security for the performance or observance of any of the terms of any of the
Loan Documents; (vi) any failure by the Agent to provide any notices required
pursuant to this Agreement relating to such Letter of Credit; or (vii) any
payment under any of the Letters of Credit against presentation of a draft or
certificate which does not comply with the terms of such Letter of Credit and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Promptly after it shall have ascertained that any draft
and any accompanying documents presented under such Letter of Credit appear on
their face to be in substantial conformity with the terms and conditions of the
Letter of Credit, the Agent shall give telephonic or facsimile notice to the
Borrower of the receipt and amount of such draft and the date on which payment
thereon will be made, and the Lenders shall, by 11:00 a.m., New York City time
on the date such payment is to be made, pay the amounts required to the Agent in
New York, New York in immediately available funds, and the Agent, on such day,
shall make the appropriate payment to the beneficiary of such Letter of Credit.
If in accordance with the prior sentence the Lenders shall pay any draft
presented under a Letter of Credit, then the Agent, on behalf of the Lenders,
shall charge the revolving credit loan account of the Borrower with the Agent
for the amount thereof, together with the Agent's customary overdraft fee in the
event the funds available in such account shall not be sufficient to reimburse
the Lenders for such payment and the Borrower shall not otherwise have
discharged such reimbursement obligation by 11:00 a.m., New York City time, on
the date of such payment. If the Lenders have not been reimbursed with respect
to such drawing as provided above, the Borrower shall pay to the Agent, for the
account of the Lenders, the amount of the drawing together with interest on such
amount at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 360 days) equal to the rate applicable to Alternate Base
Loans hereunder plus two percent (2%), payable on demand. The obligations of the
Borrower under this Section 2.18 to reimburse the Lenders and the Agent for all
drawings under Letters of Credit shall be joint and several, absolute,
unconditional and irrevocable and shall be satisfied strictly in accordance with
their terms, irrespective of:
(a) any lack of validity or enforceability of any Letter of Credit;
(b) the existence of any claim, setoff, defense or other right which
the Borrower or any other person may at any time have against the
beneficiary under any Letter of Credit, the Agent or any Lender (other than
the defense of payment in accordance with the terms of this Agreement or a
defense based on the gross negligence or willful misconduct of the Agent or
any Lender) or any other person in connection with this Agreement or any
other transaction;
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(c) any draft or other document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(d) payment by the Agent or any Lender under any Letter of Credit
against presentation of a draft or other document which does not comply
with the terms of such Letter of Credit; and
(e) any other circumstance or event whatsoever, whether or not similar
to any of the foregoing that might, but for the provisions of this Section,
constitute legal or equitable discharge of the Borrower's obligations under
this Section.
It is understood that in making any payment under any Letter of Credit (x)
the Agent's and any Lender's exclusive reliance on the documents presented to it
under such Letter of Credit as to any and all matters set forth therein,
including, without limitation, reliance on the amount of any draft presented
under such Letter of Credit, whether or not the amount due to the beneficiary
equals the amount of such draft and whether or not any document presented
pursuant to such Letter of Credit proves to be insufficient in any respect, if
such document on its face appears to be in order, and whether or not any other
statement or any other document presented pursuant to such Letter of Credit
proves to be forged or invalid or any statement therein proves to be inaccurate
or untrue in any respect whatsoever and (y) any noncompliance in any immaterial
respect of the documents presented under such Letter of Credit with the terms
thereof shall, in each case, not be deemed willful misconduct or gross
negligence of the Agent or any Lender.
SECTION 2.19 Agent's Actions with respect to Letters of Credit. Any Letter
of Credit may, in the discretion of the Agent or its correspondents, be
interpreted by them (to the extent not inconsistent with such Letter of Credit)
in accordance with the Uniform Customs and Practice for Documentary Credits of
the International Chamber of Commerce, as adopted or amended from time to time,
or any other rules, regulations and customs prevailing at the place where any
Letter of Credit is available or the drafts are drawn or negotiated. The Agent
and its correspondents may accept and act upon the name, signature, or act of
any party purporting to be the executor, administrator, receiver, trustee in
bankruptcy, or other legal representative of any party designated in any Letter
of Credit in the place of the name, signature, or act of such party.
SECTION 2.20 Letter of Credit Fees. The Borrower agrees to pay to the Agent
for the account of each Lender a participation fee with respect to its
participations in Letters of Credit, which shall accrue at a rate per annum
equal to the applicable Interest Margin in the case of standby Letters of Credit
and 0.15% per month in the case of commercial Letters of Credit on the average
daily amount of such Lender's pro rata share of the Letter of Credit Usage
(excluding any portion attributable to unreimbursed drawings) during the period
from and including the Closing Date to but excluding the later of the date on
which such Lender's Revolving Credit Commitment
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terminates and the date on which such Lender ceases to have any share of the
Letter of Credit Usage, as well as the Agent's fees, for its own account, with
respect to the issuance, amendment, renewal or extension of any Letter of Credit
or processing of drawings thereunder. Participation fees accrued for each
calendar quarter shall be payable within fifteen (15) Business Days after the
end of such calendar quarter, commencing October 1, 1999; provided that all such
fees shall be payable on the date on which the Revolving Credit Commitment
terminates and any such fees accruing after the date on which the Revolving
Credit Commitment terminates shall be payable on demand. Any other fees payable
to the Agent pursuant to this paragraph shall be payable as incurred. All
participation fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
SECTION 2.21 Change of Lending Office. Each Lender (or Transferee) agrees
that, upon the occurrence of any event giving rise to the operation of Section
2.16(a) with respect to such Lender (or Transferee), it will, if requested by
the Borrower, use reasonable efforts to designate another lending office for any
loans affected by such event with the object of avoiding the consequences of
such event.
III. COLLATERAL SECURITY
SECTION 3.01 Security Documents. The Obligations shall be secured by the
Collateral described in the Security Documents and the Agent and the Lenders are
entitled to the benefits thereof. The Borrower shall duly execute and deliver,
or cause each other Grantor to duly execute and deliver, the Security Documents,
all consents of third parties necessary to permit the effective granting of the
Liens created in such agreements, financing statements pursuant to the Uniform
Commercial Code and other documents, all in form and substance satisfactory to
the Agent, as may be reasonably required by the Agent to grant to the Lenders a
valid, perfected and enforceable first priority Lien on and security interest in
(subject only to the Liens permitted under Section 7.01 hereof) the Collateral.
Upon the execution of the Special Charter Amendment the Borrower shall pledge to
the Agent for the benefit of the Lenders the capital stock of AKC Acquisition,
as collateral security for the Obligations. Notwithstanding anything herein or
in the Security Documents to the contrary, none of the Obligations in respect of
the Reducing Revolving Credit Loans shall be secured by any Lien on the property
of the Borrower.
SECTION 3.02 Filing and Recording. The Borrower shall, at its sole cost and
expense, cause all instruments and documents given as evidence of security
pursuant to this Agreement to be duly recorded and/or filed or otherwise
perfected in all places necessary, in the opinion of the Agent, and take such
other actions as the Agent may reasonably request, in order to perfect and
protect the Liens of the Agent and Lenders in the Collateral. The Borrower, to
the extent permitted by law, hereby authorizes the Agent to file any financing
statement in respect of any Lien created pursuant to the Security Documents
which may at any time be required or which, in the opinion of the Agent, may at
any time be desirable although the same may have been
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executed only by the Agent or, at the option of the Agent, to sign such
financing statement on behalf of the Borrower and file the same, and the
Borrower hereby irrevocably designates the Agent, its agents, representatives
and designees as its agent and attorney-in-fact for this purpose. In the event
that any re-recording or refiling thereof (or the filing of any statements of
continuation or assignment of any financing statement) is required to protect
and preserve such Lien, the Borrower shall, at the Borrower's cost and expense,
cause the same to be recorded and/or refiled at the time and in the manner
requested by the Agent.
IV. REPRESENTATIONS AND WARRANTIES
The Borrower and each of the Guarantors jointly and severally represents
and warrants to each of the Lenders that both before and after giving effect to
the consummation of the Transactions (including, without limitation, under the
Acquisition Documents):
SECTION 4.01 Organization, Legal Existence. Each of the Loan Parties and
each of its subsidiaries are legal entities duly organized, validly existing and
in good standing under the laws of the jurisdiction of their respective
organization, have the requisite power and authority to own their property and
assets and to carry on their business as now conducted and as currently proposed
to be conducted and are qualified to do business in every jurisdiction where the
nature of its business so requires (all such jurisdictions being listed in
Schedule 4.01 annexed hereto) except where the failure to so qualify or be in
good standing would not result or reasonably be expected to result in a Material
Adverse Effect. Each of the Loan Parties has the corporate power to execute,
deliver and perform its obligations under this Agreement and the other Loan
Documents to which it is a party, and with respect to the Borrower, to borrow
hereunder and to execute and deliver the Notes.
SECTION 4.02 Authorization. The execution, delivery and performance by the
Loan Parties of this Agreement and each of the other Loan Documents to which it
is a party, the borrowings hereunder by the Borrower, the execution and delivery
by the Borrower of the Notes, the grant of security interests in the Collateral
created by the Security Documents and the transactions contemplated to occur
under or in connection with the Acquisition Documents (collectively, the
"Transactions") (a) have been duly authorized by all requisite corporate and, if
required, stockholder action on the part of the applicable Loan Party and (b)
will not (i) violate (A) provision of law, statute, rule or regulation or the
certificate or articles of incorporation or other applicable constitutive
documents or the by-laws of the Loan Parties, or their subsidiaries, as the case
may be, (B) any order of any court, or any rule, regulation or order of any
other agency of government binding upon the Loan Parties, or their subsidiaries,
or (C) any provision of any material indenture, agreement or other instrument
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to which the Loan Parties, or their subsidiaries, or any of their respective
properties or assets are or may be bound, (ii) be in conflict with, result in a
breach of or constitute (alone or with notice or lapse of time or both) a
default under any material indenture, agreement or other instrument referred to
in (b)(i)(C) above except where any such conflict, violation, breach or default
referred to in (i) or (ii) would not reasonably be expected to result in a
Material Adverse Effect or (iii) result in the creation or imposition of any
Lien of any nature whatsoever (other than in favor of the Agent, for its own
benefit and for the benefit of the Lenders, as contemplated by this Agreement
and the Security Documents) upon any property or assets of the Loan Parties, or
their subsidiaries.
SECTION 4.03 Governmental Approvals. No registration or filing with consent
or approval of, or other action by, any Federal, state or other governmental
agency, authority or regulatory body is or will be required in connection with
the Transactions, except for (a) such registrations, filings, consents,
approvals or actions the failure of which to obtain or make would not reasonably
be expected to have a Material Adverse Effect or (b) such as have been made or
obtained or (c) the filings necessary to perfect the Liens created by the
Security Documents.
SECTION 4.04 Binding Effect. This Agreement and each of the other Loan
Documents to which it is a party constitutes, and each of the Notes when duly
executed and delivered by the Borrower will constitute, a legal, valid and
binding obligation of the applicable Loan Party enforceable against such Loan
Party in accordance with its terms subject (a) as to the enforcement of
remedies, to applicable bankruptcy, insolvency reorganization, moratorium and
other similar laws affecting the enforcement of creditors' rights generally,
from time to time in effect and (b) to general principles of equity.
SECTION 4.05 Material Adverse Change. Except as set forth in Schedule 4.05
annexed hereto, there has been no change since January 2, 1999 that is
reasonably expected to result in a Material Adverse Effect.
SECTION 4.06 Litigation; Compliance with Laws; etc. (a) Except as set forth
in Schedule 4.06(a) annexed hereto, there are not any actions, suits or
proceedings at law or in equity or by or before any governmental instrumentality
or other agency or regulatory authority now pending or, to the knowledge of any
Respon sible Officer of the Borrower, threatened against or affecting the Loan
Parties or any of their subsidiaries or the businesses, assets or rights of the
Loan Parties or any of their subsidiaries (i) which involve any of the
Transactions or (ii) as to which it is probable (within the meaning of Statement
of Financial Accounting Standards No. 5) that there will be an adverse
determination and which, if adversely determined, would, reasonably be expected
to result in a Material Adverse Effect.
(b) Except as set forth in Schedule 4.06(b) annexed hereto, none of the
Loan Parties or any of their subsidiaries is in violation of any law, or in
default with respect to any judgment, writ, injunction, decree, rule or
regulation of any court or governmental agency or instrumentality where such
violation or default would result in a Material Adverse Effect.
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SECTION 4.07 Financial Statements. (a) The Borrower has heretofore
furnished to the Agent Consolidated balance sheets and statements of income and
cash flows of the Borrower (i) dated as of January 2, 1999 audited by and
accompanied by the opinion of independent public accountants and (ii) dated as
of April 3, 1999, for the three month period then ended prepared by management.
Such balance sheets and statements of income and cash flows present fairly the
Consolidated financial condition and results of operations of the Borrower and
its subsidiaries as of the dates and for the periods indicated, and such balance
sheets and, to the knowledge of the Responsible Officers of the Borrower, the
notes thereto disclose all liabilities, direct or contingent, of the Borrower
and its subsidiaries, as of the dates thereof except for those liabilities which
would not, individually or in the aggregate have a Material Adverse Effect.
(b) The Borrower has heretofore furnished to the Agent for 1999 and 2000
monthly projected income statements, balance sheets and cash flows of the
Borrower on a Consolidated basis, together with a schedule confirming the
ability of the Borrower to consummate the Transactions and demonstrating
prospective compliance with all financial covenants contained in this Agreement,
such projections disclosing all assumptions made by the Borrower in formulating
such projections and giving effect to the Transactions. The projections are
based upon estimates and assumptions, all of which are reasonable in light of
the conditions which existed at the time the projections were made, have been
prepared on the basis of the assumptions stated therein, and reflect as of the
Closing Date the estimate of the Borrower of the results of operations and other
information projected therein.
(c) The Borrower has heretofore furnished to the Agent a Consolidated
balance sheet of the Borrower and which sets forth information before and after
giving effect to the Transactions.
(d) The financial statements referred to in this Section 4.07 have been
prepared in accordance with GAAP except that the unaudited statements do not
contain footnotes and are subject to year-end audit adjustments.
SECTION 4.08 Federal Reserve Regulations. (a) No Loan Parties or any of
their subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) No part of the proceeds of the Loans will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, (i) to purchase
or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is inconsistent with, the provisions of the Regulations of the Board,
including, without limitation, Regulation T, U or X thereof.
SECTION 4.09 Taxes. The Loan Parties and each of their subsidiaries (a)
have filed or caused to be filed all Federal, state, local and foreign tax
returns which
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are required to be filed by them, on or prior to the date hereof, other than tax
returns in respect of taxes that (x) are not franchise, capital or income taxes,
(y) in the aggregate are not material and (z) would not, if unpaid, result in
the imposition of any material Lien on any property or assets of any Loan Party
or any of their subsidiaries and (b) have paid or caused to be paid all taxes
shown to be due and payable on such filed returns or on any assessments received
by them, other than (i) any taxes or assessments the validity of which such Loan
Party or such subsidiary is contesting in good faith by appropriate proceedings,
and with respect to which the Borrower or such subsidiary shall, to the extent
required by GAAP have set aside on its books adequate reserves and (ii) taxes
other than income, capital or franchise taxes that in the aggregate are not
material and which would not, if unpaid, result in the imposition of any
material Lien on any property or assets of any Loan Party or any of its
subsidiaries. No Federal income tax returns of any of the Loan Parties or any of
their subsidiaries have been audited by the United States Internal Revenue
Service and no Loan Party nor any of its subsidiaries has as of the date hereof
requested or been granted any extension of time to file any Federal, state,
local or foreign tax return. None of the Loan Parties nor any of their
subsidiaries is party to or has any obligation under any tax sharing agreement.
SECTION 4.10 Employee Benefit Plans. With respect to the provisions of
ERISA:
(i) No Reportable Event has occurred or is continuing with respect to any
Pension Plan.
(ii) No material non-exempt prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to
any Plan subject to Part 4 of Subtitle B of Title I of ERISA.
(iii) Except as set forth on Schedule 4.10 hereto, neither the Loan Parties
nor any ERISA Affiliate is now, or has been during the preceding five years,
obligated to contribute to a Pension Plan or a Multiemployer Plan. None of the
Loan Parties nor any ERISA Affiliate has (A) ceased operations at a facility so
as to become subject to the provisions of Section 4062(e) of ERISA, (B)
withdrawn as a substantial employer so as to become subject to the provisions of
Section 4063 of ERISA, (C) ceased making contributions to any Pension Plan
subject to the provisions of Section 4064(a) of ERISA, (D) incurred or caused to
occur a "complete withdrawal" (within the meaning of Section 4203 of ERISA) or a
"partial withdrawal" (within the meaning of Section 4205 of ERISA) from a
Multiemployer Plan so as to incur withdrawal liability under Section 4201 of
ERISA (without regard to subsequent reduction or waiver of such liability under
Section 4207 or 4208 of ERISA) that remains unsatisfied, or (E) been a party to
any transaction or agreement under which the provisions of Section 4204 of ERISA
were applicable.
(iv) No notice of intent to terminate a Pension Plan has been filed, nor
has any Plan been terminated, pursuant to the provisions of Section 4041(c) of
ERISA.
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(v) The PBGC has not instituted proceedings to terminate (or appoint a
trustee to administer) a Pension Plan and no event has occurred or condition
exists which might constitute grounds under the provisions of Section 4042 of
ERISA for the termination of (or the appointment of a trustee to administer) any
such Plan.
(vi) No Pension Plan has any "accumulated funding deficiency" (as defined
in Section 412 of the Code), whether or not waived.
(vii) There are no material actions, suits or claims pending (other than
routine claims for benefits) or, to the knowledge of the Borrower or any ERISA
Affiliate, which could reasonably be expected to be asserted, against any Plan
or the assets of any such Plan. Except as would not have a Material Adverse
Effect, none of the Plans or any fiduciary thereof (in its capacity as such) has
been the direct or indirect subject of any audit, investigation or examination
by any governmental or quasi-governmental agency.
(viii) Except as would not have a Material Adverse Effect, all of the Plans
comply currently, and have complied in the past, both as to form and operation,
with their terms and with the provisions of ERISA and the Code, and all other
applicable laws, rules and regulations; all necessary governmental approvals for
the Plans have been obtained and a favorable determination as to the
qualification under Section 401(a) of the Code of each of the Plans which is an
employee pension benefit plan (within the meaning of Section 3(2) of ERISA) has
been made by the Internal Revenue Service and a recognition of exemption from
federal income taxation under Section 501(c) of the Code of each of the funded
employee welfare benefit plans (within the meaning of Section 3(1) of ERISA) has
been made by the Internal Revenue Service, and nothing has occurred since the
date of each such determination or recognition letter that would adversely
affect such qualification.
SECTION 4.11 No Material Misstatements. No information, report, financial
statement, exhibit or schedule prepared or furnished by or on behalf of the
Borrower to the Agent or any Lender in connection with any of the Transactions
or this Agreement, the Security Documents, the Notes or any other Loan Documents
or included therein contained or contains any material misstatement of fact or
omitted or omits to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 4.12 Investment Company Act; Public Utility Holding Company Act. No
Loan Parties nor any of their subsidiaries is an "investment company" as defined
in, or is otherwise subject to regulation under, the Investment Company Act of
1940. No Loan Parties nor any of their subsidiaries is a "holding company" as
that term is defined in or is otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 4.13 Security Interest. Each of the Security Documents creates and
grants to the Agent, for its own benefit and for the benefit of the Lenders, a
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legal and valid perfected first priority (except as permitted pursuant to
Section 7.01 hereof) Lien in the Collateral identified therein. Such Collateral
is not subject to any other Liens whatsoever, except Liens permitted by Section
7.01 hereof.
SECTION 4.14 Use of Proceeds. All proceeds of the borrowing under the
Revolving Credit Commitment and the Reducing Revolving Credit Commitment on the
Closing Date shall be used to finance partially the consideration required under
the Acquisition Agreement (including the purchase of certain retail stores of
the Seller), related transaction costs, to capitalize Lion Licensing and to
provide for working capital requirements and for general corporate purposes of
the Borrower including the purchase of certain retail stores of the Seller and
in the case of the Revolving Credit Commitment to repay outstanding Reducing
Revolving Credit Loans on the date the Agent receives the Special Charter
Amendment Opinion. All proceeds of each subsequent borrowing under the Revolving
Credit Commitment and the Reducing Revolving Credit Commitment after the Closing
Date shall be used to provide for working capital requirements and for general
corporate purposes of the Borrower. No proceeds of any borrowing under the
Revolving Credit Commitment or the Reducing Revolving Credit Commitment shall be
used, directly or indirectly to prepay, redeem, purchase or retire any
Indebtedness, including, without limitation, any Subordinated Indebtedness,
other than Indebtedness incurred hereunder.
SECTION 4.15 Subsidiaries. As of the Closing Date, Schedule 4.15 annexed
hereto sets forth each subsidiary of the Borrower, its jurisdiction of incorpora
tion, its capitalization and ownership of capital stock of each such subsidiary.
SECTION 4.16 Title to Properties; Possession Under Leases; Trademarks. (a)
Each of the Loan Parties and each of its subsidiaries have good and marketable
title to, or valid leasehold interest in, all of their respective properties and
assets shown on the most recent balance sheet referred to in Section 4.07(a)
hereof and all assets and properties acquired since the date of such balance
sheet, except for such properties as are no longer used or useful in the conduct
of its business or as have been disposed of in the ordinary course of business,
and except for defects in title that do not materially interfere with the
ability of the Loan Parties or any of its subsidiaries to conduct its business
as now conducted. All such assets and properties are free and clear of all Liens
other than those permitted by Section 7.01 hereof.
(b) Each of the Loan Parties and each of its subsidiaries have complied in
all material respects with all obligations under all leases to which they are a
party and under which they are in occupancy, and all such leases are in full
force and effect and each of the Loan Parties and each of their subsidiaries
enjoy peaceful and undisturbed possession under all such leases.
(c) Each of the Loan Parties and each of its subsidiaries own or control
all material trademarks, trademark rights, trade names, trade name rights,
copyrights, patents, patent rights and licenses which they are using and are
necessary for the conduct of the business of such Loan Parties and each of its
subsidiaries. To its
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knowledge no Loan Party or any of its subsidiaries is infringing upon any of
such trademarks, trademark rights, trade names, trade name rights, copyrights,
patent rights or licenses owned by any other person or persons except for such
actions which are not individually or in the aggregate reasonably expected to
result in a Material Adverse Effect. There is no claim or action by any such
other person pending, or to the knowledge of any Responsible Officer of the
Borrower or any subsidiary thereof, threatened, against any of the Loan Parties
or any of its subsidiaries with respect to any of the rights or property
referred to in this Section 4.16(c).
SECTION 4.17 Solvency. (a) The fair salable value of the assets of the
Borrower and its Consolidated subsidiaries is not less than the amount that will
be required to be paid on or in respect of the probable liability on the
existing debts and other liabilities (including contingent liabilities) of the
Borrower and its Consolidated subsidiaries, as they become absolute and mature.
(b) The assets of the Borrower and its Consolidated subsidiaries do not
constitute unreasonably small capital for the Borrower and its Consolidated
subsidiaries to carry out their business as now conducted and as proposed to be
conducted including the capital needs of the Borrower and its Consolidated
subsidiaries, taking into account the particular capital requirements of the
business conducted by the Borrower and its Consolidated subsidiaries and
projected capital requirements and capital availability thereof.
(c) Neither the Borrower nor any of its subsidiaries intends to incur debts
beyond its ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be received by the Borrower and any of its
subsidiaries, and of amounts to be payable on or in respect of debt of the
Borrower and any of its subsidiaries). The cash flow of the Borrower and its
Consolidated subsidiaries, after taking into account all anticipated uses of the
cash of the Borrower and its Consolidated subsidiaries, is expected at all times
to be sufficient to pay all such amounts on or in respect of debt of the
Borrower and its Consolidated subsidiaries when such amounts are required to be
paid.
(d) Neither the Borrower nor any of its subsidiaries believes that final
judgments against them in actions for money damages presently pending will be
rendered at a time when, or in an amount such that, they will be unable to
satisfy any such judgments promptly in accordance with their terms (taking into
account the maximum reasonable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered). The
cash flow of the Borrower and its Consolidated subsidiaries, after taking into
account all other antici pated uses of the cash of the Borrower and its
Consolidated subsidiaries (including the payments on or in respect of debt
referred to in paragraph (c) of this Section), will at all times be sufficient
to pay all such judgments promptly in accordance with their terms.
SECTION 4.18 Permits, etc. Each of the Loan Parties and each of its
subsidiaries possess all licenses, permits, approvals and consents, including,
without
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limitation, all environmental, health and safety licenses, permits, approvals
and consents of all Federal, state and local governmental authorities as
required to conduct properly their business except where failure does not
materially interfere with the ability of such Loan Party or subsidiary to
conduct its business as concurrently conducted or proposed to be conducted or
does not have a Material Adverse Effect (collectively, "Permits"), each such
Permit is in full force and effect, each of the Loan Parties and each of its
subsidiaries is in compliance in all material respects with all such Permits
except where such compliance is not reasonably expected to have a Material
Adverse Effect, and to the knowledge of the Responsible Officers of the Borrower
no event (including, without limitation, any violation of any law, rule or
regulation) has occurred which allows the revocation or termination of any such
Permit or any restriction thereon except in respect of those events which would
not individually or in the aggregate have a Material Adverse Effect.
SECTION 4.19 Compliance with Environmental Laws. Except as disclosed in
Schedule 4.19 hereto: (i) the operations of the Loan Parties and their
subsidiaries comply with all applicable Environmental Laws except where failure
to so comply would not reasonably be expected to have a material Adverse Effect;
(ii) the Loan Parties and their subsidiaries and all of their present facilities
or operations, as well as to the knowledge of the Borrower their past facilities
or operations, are not subject to any judicial proceeding or administrative
proceeding or any outstanding written order or agreement with any governmental
authority or private party respecting (a) any Environmental Law, (b) any
Remedial Work, or (c) any Environmental Claims arising from the Release of a
Contaminant into the environment; (iii) to the best of the knowledge of the
Borrower, none of its or its subsidiaries operations is the subject of any
Federal or state investigation evaluating whether any Remedial Work is needed to
respond to a Release of any Contaminant into the environment in violation of any
Environmental Law; (iv) none of the Loan Parties nor any of their subsidiaries
nor any predecessor of the Loan Parties or any subsidiaries of the Loan Parties
has filed any notice under any Environmental Law indicating past or present
treatment, storage, or disposal of a Hazardous Material or reporting a spill or
Release of a Contaminant into the environment; (v) to the knowledge of the
Borrower, none of the Loan Parties or any of their subsidiaries has any
contingent liability in connection with any Release of any Contaminant into the
environment that would be reasonably expected to result in a Material Adverse
Effect; (vi) none of the operations of the Loan Parties or any of their
subsidiaries involves the generation, transportation, treatment or disposal of
Hazardous Materials; (vii) neither the Loan Parties nor any of their
subsidiaries has disposed of any Contaminant by placing it in or on the ground
or waters of any premises owned, leased or used by any of them and to the
knowledge of the Borrower neither has any lessee, prior owner, or other person;
(viii) to the knowledge of the Responsible Officers of the Borrower no
underground storage tanks or surface impoundments are on any property of the
Loan Parties and their subsidiaries; and (ix) no Lien in favor of any
governmental authority for (A) any liability under any Environmental Law or
regulation, or (B) damages arising from or costs incurred by such governmental
authority in response to a Release of a Contaminant into the environment, has
been filed or attached to the property of the Loan Parties and their
subsidiaries.
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SECTION 4.20 No Change in Credit Criteria or Collection Policies. There has
been no material change in credit criteria or collection policies concerning
account receivables of the Borrower since January 2, 1999. Without duplication,
all Eligible Receivables of the Borrower are valid, binding and enforceable
obligations of account debtors and are not subject to any claims, defenses or
setoffs except as indicated in the Borrowing Base certificate. All account
receivables (other than Eligible Receivables) are valid, binding and enforceable
obligations of account debtors.
SECTION 4.21 Employee Matters. Except as disclosed in Schedule 4.21 hereto,
(a) neither the Loan Parties nor any of their subsidiaries nor any of such
person's employees is subject to any collective bargaining agreement, (b) to the
knowledge of the Loan Parties, no petition for certification, union election or
written demand for recognition is pending with respect to the employees of the
Loan Parties or any of their subsidiaries and (c) there are no strikes,
slowdowns, work stoppages or similar labor disputes pending or, to the knowledge
of the Loan Parties threatened between the Loan Parties or any of their
subsidiaries and their respective employees, other than employee grievances
arising in the ordinary course of business none of which would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.
SECTION 4.22 Acquisition. (a) (i) The execution, delivery and perfor mance
by the Borrower and Seller of the Acquisition Documents have been duly
authorized by all necessary action on the part of the Borrower, (ii) the
Acquisition Documents constitute the valid, binding and enforceable obligation
of each party thereto, subject to the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, and to general principles of equity and are in full force and
effect without default or waiver of any of the conditions thereunder and (iii)
there are no governmental consents, filings, approvals or notices required to be
made or obtained in connection with the execution, delivery and performance of
the Acquisition Documents except such as have been duly made, obtained or
delivered.
(b) To the knowledge of the Responsible Officers of the Borrower, each of
the representations and warranties made by the Seller in the Acquisition
Documents is true and correct in all material respects.
SECTION 4.23 Year 2000. The cost to the Borrower of reprogramming and
testing of the Borrower's and its subsidiaries' computer systems and related
equipment to permit proper functioning in and following the year 2000
(including, without limitation, reprogramming errors) is not reasonably expected
to result in a Material Adverse Effect.
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V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend other Credits
hereunder shall be subject to the following conditions precedent:
SECTION 5.01 All Credit Events. On each date on which a Credit Event is to
occur:
(a) The Agent shall have received a notice of borrowing as required by
Section 2.03 hereof or a request for the issuance of a Letter of Credit
pursuant to Section 2.17 hereof.
(b) The representations and warranties set forth in Article IV hereof
and in any documents delivered herewith, including, without limitation, the
Loan Documents, shall be true and correct in all material respects with the
same effect as though made on and as of such date (except insofar as such
representations and warranties relate expressly to an earlier date).
(c) The Borrower shall be in compliance with all the terms and
provisions contained herein on its part to be observed or performed, and at
the time of and immediately after such Credit Event no Default or Event of
Default shall have occurred and be continuing.
The submission of a notice of borrowing (or a request to disburse funds to
the Borrower's controlled disbursement account) or a request for the issuance of
a Letter of Credit pursuant to (a) above shall be deemed a representation by the
Borrower that (i) the Borrower is in compliance with (b) and (c) above and (ii)
with respect to each Revolving Credit Loan and each Letter of Credit, after
giving effect thereto Availability is zero or greater and with respect to each
Reducing Revolving Credit Loan, after giving effect thereto the aggregate of all
outstanding Reducing Revolving Credit Loans would not exceed the Anne Klein
Trademark Value.
SECTION 5.02 First Borrowing. The obligations of the Lenders in respect of
the first Credit Event hereunder is subject to the following additional
conditions precedent (it being agreed that the condition described in paragraph
(i)(xi) of this Section 5.02 has been satisfied prior to the Closing Date):
(a) The Lenders shall have received the favorable written opinion of
counsel for the Borrower and each of the Guarantors and Grantors, dated the
Closing Date, addressed to the Lenders and satisfactory to the Agent.
(b) The Lenders shall have received (i) a copy of the certificate or
articles of incorporation or constitutive documents, in each case as
amended to date, of each of the Borrower, the Grantors and the Guarantors,
certified as of a recent date by the Secretary of State or other
appropriate official of the state of its organization, and a certificate as
to the good standing of each from such
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Secretary of State or other official, and a certificate of good standing
from the appropriate official of each state in which it is qualified to do
business, in each case dated as of a recent date; (ii) a certificate of the
Secretary of each of the Borrower, Grantor and Guarantor, dated the Closing
Date and certifying (A) that attached thereto is a true and complete copy
of such person's By-laws as in effect on the date of such certificate and
at all times since a date prior to the date of the resolution described in
item (B) below, (B) that attached thereto is a true and complete copy of a
resolution adopted by such person's Board of Directors authorizing the
execution, delivery and performance of this Agreement, the Security
Documents, the Notes, the other Loan Documents and the Credit Events
hereunder, as applicable, and that such resolution has not been modified,
rescinded or amended and is in full force and effect, (C) that such
person's certificate or articles of incorporation or constitutive documents
has not been amended since the date of the last amendment thereto shown on
the certificate of good standing furnished pursuant to (i) above, and (D)
as to the incumbency and specimen signature of each of such person's
officers executing this Agreement, the Notes, each Security Document or any
other Loan Document delivered in connection herewith or therewith, as
applicable; (iii) a certificate of another of such person's officers as to
incumbency and signature of its Secretary; and (iv) such other documents as
the Agent or any Lender may reasonably request.
(c) The Agent shall have received a certificate, dated the Closing
Date and signed by the Financial Officer of the Borrower, confirming
compliance with the conditions precedent set forth in paragraphs (b) and
(c) of Section 5.01 hereof and the conditions set forth in this Section
5.02.
(d) Each Lender shall have received its Revolving Credit Note and its
Reducing Revolving Credit Note, in each case, duly executed by the
Borrower, payable to its order and otherwise complying with the provisions
of Section 2.04 hereof.
(e) The Agent shall have received the Security Documents and
certificates evidencing the Pledged Stock, together with undated stock
powers executed in blank, each duly executed by the applicable Grantors.
(f) The Agent shall have received certified copies of requests for
copies or information on Form UCC-11 or certificates satisfactory to the
Lenders of a UCC Reporter Service, listing all effective financing
statements which name as debtor the Borrower, any Guarantor or any Grantor
and which are filed in the appropriate offices in the States in which are
located the chief executive office and other operating offices of such
person, together with copies of such financing statements. With respect to
any Liens not permitted pursuant to Section 7.01 hereof, the Agent shall
have received termination statements in form and substance satisfactory to
it.
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(g) Each document (including, without limitation, each Uniform
Commercial Code financing statement) required by law or requested by the
Agent to be filed, registered or recorded in order to create in favor of
the Agent for its own benefit and for the benefit of the Lenders a first
priority perfected Lien in the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested. The Agent
shall have received an acknowledgment copy, or other evidence satisfactory
to it, of each such filing, registration or recordation.
(h) The Agent shall have received the results of a search of tax and
other Liens, and judgments and of the Uniform Commercial Code filings made
with respect to the Borrower and each Grantor in the jurisdictions in which
the Borrower is doing business and/or in which any Collateral is located,
and in which Uniform Commercial Code filings have been made against the
Borrower, each Guarantor and each Grantor pursuant to paragraph (g) above.
(i) The Agent and the Collateral Monitor shall have received and
determined to be in form and substance satisfactory to them:
(i) the most recent (dated within thirty (30) days of the Closing
Date) schedule and aging of accounts receivable and inventory
designations of the Borrower;
(ii) a certificate prepared by the Borrower setting forth the
Borrowing Base on the Closing Date and evidencing that the Borrower
has not less than $7,000,000 in Availability on such date;
(iii) evidence (which may consist of the certificate to be
provided in accordance with Section 5.02(c) hereof) that the holders
of the existing senior unsecured Indebtedness of the Borrower have
consented to the Transactions;
(iv) a copy of a field examination of the Borrower's books and
records;
(v) evidence (which may consist of the certificate to be provided
in accordance with Section 5.02(c) hereof) of the compliance by the
Borrower with Section 6.03 hereof;
(vi) the financial statements described in Section 4.07 hereof;
(vii) evidence (which may consist of the certificate to be
provided in accordance with Section 5.02(c) hereof) that the
Transactions are in compliance with all applicable laws and
regulations;
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(viii) the results of any environmental due diligence shall be
satisfactory to the Agent in all respects;
(ix) evidence (which may consist of the certificate to be
provided in accordance with Section 5.02(c) hereof) of payment of all
fees owed to the Agent, the Collateral Monitor and the Lenders by the
Borrower under this Agreement, the Commitment Letter or otherwise;
(x) evidence (which may consist of the certificate to be provided
in accordance with Section 5.02(c) hereof) that all requisite third
party consents (including, without limitation, consents with respect
to the Borrower and each of the Grantors and Guarantors) to the
Transactions have been received;
(xi) the results of appraisals of the Borrower's and its
subsidiaries' trademarks shall be in form, scope and substance
satisfactory to the Agent and Collateral Monitor;
(xii) intentionally omitted;
(xiii) evidence (which may consist of the certificate to be
provided in accordance with Section 5.02(c) hereof) that there has
been no change reasonably expected to result in a Material Adverse
Effect, except for the transactions contemplated in the Acquisition
Documents, since January 2, 1999;
(xiv) assignments of the Existing Credit Agreement and related
collateral and agencies executed by the Existing Lenders and Facility
Agent; and
(xv) evidence (which may consist of the certificate to be
provided in accordance with Section 5.02(c) hereof) that there are no
actions, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority
now pending or threatened against or affecting the Borrower or any of
its subsidiaries or any of their respective businesses, assets or
rights which involve any of the Transactions.
(j) The Agent and the Collateral Monitor shall have had the
opportunity, if they so choose, to examine the books of account and other
records and files of the Borrower, its subsidiaries, the Grantors and the
Guarantors and to make copies thereof, to conduct customer and supplier
checkings and to conduct a pre-closing audit which shall include, without
limitation, verification of Eligible Receivables, payment of payroll taxes
and accounts payable and formulation of an opening Borrowing Base, and the
results
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of such examination and audit shall have been satisfactory to the Agent and
the Collateral Monitor in all respects.
(k) The Agent shall have received and had the opportunity to review
and determine to be in form and substance satisfactory to it:
(i) a schedule of litigation and contingent liabilities and an
analysis of the expected disposition thereof;
(ii) copies of all lease agreements entered into by the Borrower
and its subsidiaries; and in connection with any real property leases
appropriate landlord and/or mortgagee waivers or rent escrow
arrangements with the Agent (covering at least six months' rent); and
(iii) copies of all loan agreements, notes and other documen
tation evidencing Indebtedness for borrowed money of the Borrower, its
subsidiaries, Grantors or Guarantors.
(l) Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to
the Agent, shall have received payment in full for all legal fees charged,
and all costs and expenses incurred, by such counsel through the Closing
Date in connection with the transactions contemplated under this Agreement,
the Security Documents and the other Loan Documents and instruments in
connection herewith and therewith.
(m) The Agent shall have:
(i) received copies of each of the Acquisition Documents,
including all amendments and schedules thereto, each certified by a
Responsible Officer of the Borrower;
(ii) received evidence (which may consist of the certificate to
be provided in accordance with Section 5.02(c) hereof) that the
Acquisition Agreement is in full force and effect and all consents,
filings and approvals required by applicable law in connection
therewith shall have been obtained and made;
(iii) received evidence (which may consist of the certificate to
be provided in accordance with Section 5.02(c) hereof) that the
acquisition shall have been duly and validly consummated, without
modification, amendment or waiver (except for such as shall have been
approved in writing by the Agent), in accordance with the terms,
conditions and provisions of the Acquisition Agreement and the other
Acquisition Documents; and
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(iv) determined that the terms and provisions of all agreements
and documents in connection with the Acquisition and the Acquisition
Documents, are satisfactory in form and substance and the Agent shall
have received such legal opinions, certificates and copies of
necessary governmental filings and consents as the Agent shall have
requested in connection therewith, and shall have determined to its
satisfaction that the consummation of the Acquisition and other
transactions contemplated by the Acquisition Documents are in
compliance with all applicable laws and regulations.
(n) The corporate structure and capitalization of the Borrower shall
be satisfactory to the Agent in all respects.
(o) All legal matters in connection with the Transactions shall be
satisfactory to the Agent and its counsel in their sole discretion.
(p) The Borrower shall have executed and delivered to the Agent a
disbursement authorization letter with respect to the disbursement of the
proceeds of the Credit Events made on the Closing Date, in form and
substance satisfactory to the Agent.
(q) The Borrower, the Agent and the Collateral Monitor (or another
financial institution acceptable to the Agent) shall have entered into
lockbox and cash management arrangements pursuant to documentation
satisfactory in form and substance to the Agent and Collateral Monitor.
(r) The Agent and the Factor shall have entered into intercreditor
arrangements in form and substance satisfactory to the Agent and Collateral
Monitor.
(s) A fully executed copy of the Factoring Agreement certified by a
Responsible Officer of the Borrower to be true, complete and correct.
(t) Lion Licensing shall have acquired the Anne Klein trademarks and
the intangible assets related thereto.
(u) The Agent shall have received such other documents as the
Collateral Monitor, the Lenders or the Agent or Agent's counsel shall
reasonably deem necessary.
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VI. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect or the principal of or interest on any Note,
any amount under any Letter of Credit or any fee, expense or other Obligation
payable hereunder or in connection with any of the Transactions shall be unpaid,
it will, and will cause each of its subsidiaries and, with respect to Section
6.07 hereof, each ERISA Affiliate, to:
SECTION 6.01 Legal Existence. Do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence except
as otherwise permitted by Section 7.05 hereof; provided, however, that Viewmon
Limited may be dissolved and its assets distributed to other Loan Parties.
SECTION 6.02 Businesses and Properties. At all times do or cause to be done
all things reasonably necessary to preserve, renew and keep in full force and
effect the rights, licenses, Permits, franchises, patents, copyrights,
trademarks and trade names material to the conduct of its businesses; maintain
and operate such businesses in the same general manner in which they are
presently conducted and operated; comply in all material respects with all
applicable laws, rules, regulations and governmental orders (whether Federal,
state or local in all applicable jurisdictions) applicable to the operation of
such businesses whether now in effect or hereafter enacted (including, without
limitation, all applicable laws, rules, regulations and govern mental orders
relating to employment matters, public and employee health and safety and all
Environmental Laws) and with any and all other applicable laws, rules,
regulations and governmental orders, the lack of compliance of any of which
would be reasonably expected to have a Material Adverse Effect; and at all times
maintain, preserve and protect all property material to the conduct of such
businesses and keep such property in good repair, working order and condition
(reasonable wear and tear excepted) and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times.
SECTION 6.03 Insurance. (a) Keep its insurable properties adequately
insured at all times by financially sound and reputable insurers, (b) maintain
such other insurance, to such extent and against such risks, including fire and
other risks insured against by extended coverage, as is customary with companies
similarly situated and in the same or similar businesses, provided, however,
that such insurance shall insure the property of the Borrower against all risk
of physical damage, including, without limitation, loss by fire, explosion,
theft, fraud and such other casualties as may be reasonably satisfactory to the
Agent, but in no event at any time in an amount less than the replacement value
of the Collateral, (c) maintain in full force and effect public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any properties owned,
occupied or controlled by the Borrower or any of its subsidiaries, in such
amount as the
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Agent shall reasonably deem necessary, (d) maintain product liability and
business interruption insurance to such extent as is customary with companies
similarly situated and in the same or similar businesses, (and to the extent
business interruption insurance is so maintained, assign such insurance to the
Agent for its own benefit and the benefit of the Lenders), and (e) maintain such
other insurance as may be required by law or as may be reasonably requested by
the Agent for purposes of assuring compliance with this Section 6.03. All
insurance covering tangible personal property subject to a Lien in favor of the
Agent for its own benefit and for the benefit of the Lenders granted pursuant to
the Security Documents shall provide that, in the case of each separate loss the
full amount of insurance proceeds shall be payable to the Agent and shall
further provide for at least 30 days' prior written notice to the Agent of the
cancellation or substantial modification thereof. The Agent shall be named as an
additional insured on all other insurance.
SECTION 6.04 Taxes. Pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise, which, if unpaid, might give rise to Liens upon such
properties or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to (i) any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and the applicable party,
shall have set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend collection of the
contested tax, assessment, charge, levy or claims and enforcement of a Lien or
(ii) any tax, assessment, charge, levy or claims, the failure to pay and
discharge when due which, individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect.
SECTION 6.05 Financial Statements, Reports, etc. Furnish to the Agent or
Collateral Monitor, as applicable, with copies for each of the Lenders:
(a) within 90 days after the end of each Fiscal Year, (i) Consolidated
balance sheets and Consolidated and consolidating income statements showing
the Consolidated financial position of the Borrower and its subsidiaries as
of the close of such Fiscal Year and the Consolidated results of their
operations during such year, and (ii) a Consolidated statement of
shareholders' equity and a Con solidated statement of cash flow, as of the
close of such Fiscal Year, comparing such financial position and results of
operations to such financial condition and results of operations for the
comparable period during the immediately preceding Fiscal Year, all the
foregoing Consolidated financial statements to be audited by independent
public accountants acceptable to the Agent (which report shall not contain
any qualification except with respect to new accounting principles mandated
by the Financial Accounting Standards Board), and to be in form and
substance acceptable to the Agent; together with supplemental balance
sheets and statements of income, shareholders equity and cash flow prepared
by such
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independent public accountants as being fairly stated in relation to such
audited financial statements taken as a whole;
(b) within 45 days after the end of each of the first three (3) fiscal
quarters of the Borrower, (i) unaudited Consolidated balance sheets and
Consolidated income statements showing the financial position and results
of operations of the Borrower and its subsidiaries as of the end of each
such quarter, (ii) a Consolidated statement of shareholders' equity and
(iii) a Consolidated statement of cash flow, in each case for the fiscal
quarter just ended and for the period commencing at the end of the
immediately preceding Fiscal Year and ending with the last day of such
quarter, and comparing such financial position and results of operations to
the projections for the applicable period provided under paragraph (h)
below and to the results for the comparable period during the immediately
preceding Fiscal Year, in each case prepared and certified by the Financial
Officer of the Borrower as presenting fairly in all material respects the
financial position and results of operations of the Borrower and its
subsidiaries and as having been prepared in accordance with GAAP, (except
the absence of footnote disclosure), in each case subject to normal
year-end audit adjustments;
(c) within 30 days after the end of each month, (i) unaudited
Consolidated balance sheets and income statements showing the financial
position and results of operations of the Borrower and its subsidiaries as
of the end of each such month, (ii) a Consolidated statement of
shareholders' equity and (iii) a Consolidated statement of cash flow, in
each case for the month just ended and for the period commencing at the end
of the immediately preceding Fiscal Year and ending with the last day of
such month, and comparing such financial position and results of operations
to the projections for the applicable period provided under paragraph (h)
below and to the results for the comparable period during the immediately
preceding Fiscal Year, prepared and certified by the Financial Officer of
the Borrower as presenting fairly in all material respects the financial
condition and results of operations of the Borrower and its subsidiaries
and as having been prepared in accordance with GAAP (except the absence of
footnote disclosure), in each case subject to normal year-end audit
adjustments;
(d) promptly after the same become publicly available, copies of such
registration statements, annual, periodic and other reports, and such proxy
statements and other information, if any, as shall be filed by the Borrower
or any subsidiaries with the Securities and Exchange Commission pursuant to
the requirements of the Securities Act of 1933 or the Securities Exchange
Act of 1934;
(e) (i) concurrently with any delivery under (a) or (b) above, a
certificate of the firm or person referred to therein (x) which certificate
shall, in the case of the certificate of the Financial Officer of the
Borrower, certify that to the best of
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his or her knowledge no Default or Event of Default has occurred (including
calculations demonstrating compliance, as of the dates of the financial
statements being furnished, with the covenants set forth in Sections 7.07,
7.08, 7.09 and 7.10 hereof) and, if such a Default or Event of Default has
occurred, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and (y) which
certificate, in the case of the certificate furnished by the independent
public accountants referred in paragraph (a) above, may be limited to
accounting matters and disclaim responsibility for legal interpretations,
but shall in any event certify that to the best of such accountants'
knowledge, as of the dates of the financial statements being furnished no
Default or Event of Default has occurred under any of the covenants set
forth in Sections 7.07, 7.08, 7.09 and 7.10 hereof (such certificate to
include calculations demonstrating compliance with such covenants) and, if
such a Default or Event of Default has occurred, a separate certificate
signed by the Financial Officer of the Borrower specifying the nature and
extent thereof and any corrective action taken or proposed to be taken with
respect thereof; provided, however, that any certificate delivered
concurrently with (a) above shall be accompanied by a supplemental
certificate confirming the accuracy of the accountants' certificate and
signed by the Financial Officer of the Borrower;
(f) concurrently with any delivery under (a) above, a management
letter prepared by the independent public accountants who reported on the
financial statements delivered under (a) above, with respect to the
internal audit and financial controls of the Borrower and its subsidiaries;
(g) together with the last Borrowing Base Certificate of a fiscal
month to be delivered pursuant to Section 6.05(k) hereof, an aging schedule
of the Receivables in the form of the aging schedule of Receivables dated
June 30, 1999 previously furnished to the Agent and Collateral Monitor,
together with an executive summary with respect to the Borrower's top five
accounts for which Receivables are more than 90 days past due, comparing
the total of such past due Receivables for the month then ended to the
total of past due Receivables for the previous month and the Borrower's
plan with respect to the collection of such past due Receivables, executed
by the Financial Officer of the Borrower;
(h) within 30 days prior to the beginning of each Fiscal Year, a
summary of business plans and financial operation projections (including,
without limitation, with respect to Capital Expenditures) for the Borrower
and its respective subsidiaries for such Fiscal Year (including monthly
balance sheets, statements of income and of cash flow) and annual
projections through the Revolving Credit Termination Date prepared by
management and in form, substance and detail (including, without
limitation, principal assumptions) satisfactory to the Agent and Collateral
Monitor;
(i) within 30 days after the end of each fiscal quarter a backlog
report in form satisfactory to the Agent and Collateral Monitor;
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(j) as soon as practicable, copies of all reports, forms, filings,
loan documents and financial information submitted to governmental agencies
and/or its shareholders;
(k) (deliver to the Agent and the Collateral Monitor without copies to
the Lenders) each Friday a Borrowing Base Certificate in the form of
Schedule 6.05(k) annexed hereto, current as of the close of business on the
Saturday of the immediately preceding week, setting forth the calculation
of the Borrowing Base and Availability of the Borrower, supported by a
schedule showing (by season and dollar valuation) inventory which is Prior
Season Inventory and ASL Retail Prior Season Inventory, provided that (1)
the Borrowing Base and the Availability set forth in the Borrowing Base
Certificate shall be effective from and including the date such Borrowing
Base Certificate is duly received by the Collateral Monitor to but not
including the date on which a subsequent Borrowing Base Certificate is duly
received by the Collateral Monitor, unless the Collateral Monitor disputes
the eligibility of any asset for inclusion in the calculation of the
Borrowing Base or the valuation thereof by notice of such dispute to the
Borrower and (2) in the event of any dispute about the eligibility of an
asset for inclusion in the calculation of the Borrowing Base or the
valuation thereof, the Collateral Monitor's good faith judgment (in
consultation with the Agent) shall control;
(l) immediately upon becoming aware thereof, notice to the Agent of
the breach by any party of any material agreement with the Borrower;
(m) (deliver to the Agent and the Collateral Monitor without copies to
the Lenders) within 30 days after the end of each fiscal month, an
Inventory Designation Schedule in the form of Schedule 6.05(m), current as
of the close of business on the last day of such fiscal month, certified by
the Financial Officer of the Borrower, containing the breakdown of the
consolidated inventory of the Borrower and its subsidiaries valued at cost;
(n) such other information (including, without limitation,
consolidating balance sheets, statements of income, shareholders equity and
cash flow of the Borrower) as the Agent or Collateral Monitor may
reasonably request.
SECTION 6.06 Litigation and Other Notices. Promptly after becoming aware
thereof, give the Agent written notice of the following:
(a) the issuance by any court or governmental agency or authority of
any injunction, order, decision or other restraint prohibiting, or having
the effect of prohibiting, the making of the Loans or occurrence of other
Credit Events, or invalidating, or having the effect of invalidating, any
provision of this Agreement, the Notes or the other Loan Documents, or the
initiation of any litigation or similar proceeding seeking any such
injunction, order, decision or other restraint;
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(b) the filing or commencement of any action, suit or proceeding
against the Borrower or any of its subsidiaries, whether at law or in
equity or by or before any court or any Federal, state, municipal or other
governmental agency or authority as to which it is probable (within the
meaning of Statement of Financial Accounting Standards No. 5) that there
will be an adverse determi nation and which, if adversely determined, would
(A) reasonably be expected to result in liability of one or more Borrower
or a subsidiary thereof in an aggregate amount of $500,000 or more, not
reimbursable by insurance, or (B) materially impair the right of the
Borrower or a subsidiary thereof to perform its obligations under this
Agreement, any Note or any other Loan Document to which it is a party;
(c) any Default or Event of Default, specifying the nature and extent
thereof and the action (if any) which is proposed to be taken with respect
thereto; and
(d) any development in the business or affairs of the Borrower or any
of its subsidiaries which has had or which is likely to have, in the
reasonable judgment of any Responsible Officer of the Borrower, a Material
Adverse Effect.
SECTION 6.07 ERISA. (a) Pay and discharge promptly any liability imposed
upon it pursuant to the provisions of Title IV of ERISA; provided, however, that
neither the Borrower nor any ERISA Affiliate shall be required to pay any such
liability if (1) the amount, applicability or validity thereof shall be
diligently contested in good faith by appropriate proceedings, and (2) such
person shall have set aside on its books reserves which, in the opinion of the
independent certified public accountants of such person, are adequate with
respect thereto.
(b) Deliver to the Agent, promptly, and in any event within 30 days, after
(i) the occurrence of any Reportable Event with respect to a Pension Plan, a
copy of the materials that are filed with the PBGC, (ii) the Borrower or any
ERISA Affiliate or an administrator of any Pension Plan files with participants,
beneficiaries or the PBGC a notice of intent to terminate any such Plan, a copy
of any such notice, (iii) the receipt of notice by the Borrower or any ERISA
Affiliate or an administrator of any Pension Plan from the PBGC of the PBGC's
intention to terminate any Pension Plan or to appoint a trustee to administer
any such Plan, a copy of such notice, (iv) the filing thereof with the Internal
Revenue Service, copies of each annual report that is filed on Treasury Form
5500 with respect to any Pension Plan, together with certified financial
statements (if any) for the Plan and any actuarial statements on Schedule B to
such Form 5500, (v) the Borrower or any ERISA Affiliate knows or has reason to
know of any event or condition which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination of (or the appointment
of a trustee to administer) any Pension Plan, an explanation of such event or
condition, (vi) the receipt by the Borrower or any ERISA Affiliate of an
assessment of withdrawal liability under Section 4201 of ERISA from a
Multiemployer Plan, a copy of such assessment, (vii) the Borrower or any
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ERISA Affiliate knows or has reason to know of any event or condition which
might cause any one of them to incur a liability under Section 4062, 4063, 4064
or 4069 of ERISA or Section 412(n) or 4971 of the Code, an explanation of such
event or condition, and (viii) the Borrower or any ERISA Affiliate knows or has
reason to know that an application is to be, or has been, made to the Secretary
of the Treasury for a waiver of the minimum funding standard under the
provisions of Section 412 of the Code, a copy of such application, and in each
case described in clauses (i) through (iii) and (v) through (vii) together with
a statement signed by the Financial Officer setting forth details as to such
Reportable Event, notice, event or condition and the action which the Borrower
or such ERISA Affiliate proposes to take with respect thereto.
SECTION 6.08 Maintaining Records; Access to Properties and Inspections;
Right to Audit. Maintain financial records in accordance with accepted financial
practices, maintain its computer systems and software so as to calculate,
compare and sequence from, into and between 1999 and 2000, including leap year
calculations and, upon reasonable notice (which may be telephonic), at all
reasonable times and as often as the Agent or the Collateral Monitor may
reasonably request, permit any authorized representative designated by the Agent
or the Collateral Monitor to visit and inspect the properties and financial
records of the Borrower and its subsidiaries and to make extracts from such
financial records at the Agent's and the Collateral Monitor's expense, and
permit any authorized representative designated by the Agent and the Collateral
Monitor to discuss the affairs, finances and condition of the Borrower and its
subsidiaries with the appropriate Financial Officer and such other officers as
the Borrower shall deem appropriate and the Borrower's independent public
accountants, as applicable. The Agent agrees that it shall schedule any meeting
with any such independent public accountant through the Borrower and a
Responsible Officer of the Borrower shall have the right to be present at any
such meeting. At the Borrower's expense, the Collateral Monitor at the direction
of the Agent shall have the right to audit, as often as it may reasonably
request, the existence and condition of the accounts receivables, inventory,
books and records of the Borrower and its subsidiaries and to review their
compliance with the terms and conditions of this Agreement and the other Loan
Documents (any authorized representative of any Lender being entitled to
accompany the Collateral Monitor at such Lender's own expense).
SECTION 6.09 Use of Proceeds. Use the proceeds of the Credit Events only
for the purposes set forth in Section 4.14 hereof.
SECTION 6.10 Fiscal Year-End. Cause its Fiscal Year to end on or about
December 31 in each year.
SECTION 6.11 Further Assurances. Execute any and all further documents and
take all further actions which may be required under applicable law, or which
the Agent may reasonably request, to grant, preserve, protect and perfect the
first priority Lien created by the Security Documents in the Collateral.
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SECTION 6.12 Additional Grantors and Guarantors. Promptly inform the Agent
of the creation or acquisition of any direct or indirect subsidiary (subject to
the provisions of Section 7.06 hereof) and cause each direct or indirect
subsidiary not in existence on the date hereof to enter into a Guarantee of the
Obligations in form and substance satisfactory to the Agent, and to execute the
Security Documents, as applicable, as a Grantor, and cause the direct parent of
each such subsidiary to pledge all of the capital stock of such subsidiary
pursuant to the Pledge Agreement and cause each such subsidiary to pledge its
accounts receivable and all other assets pursuant to the Security Agreement;
provided, however, that non-domestic direct and indirect subsidiaries of the
Borrower established after the Closing Date whose total assets are worth
$500,000 or less shall not be required to comply with the terms of this Section
6.12 unless all such non-domestic direct and indirect subsidiaries of the
Borrower in the aggregate own assets worth more than $1,000,000 at which time
all such subsidiaries must comply with the terms of this Section 6.12.
SECTION 6.13 Environmental Laws. (a) Comply, and cause each of its
subsidiaries or tenants or other licensed users of their properties to comply,
in all material respects with the provisions of all Environmental Laws, and
shall keep its properties and the properties of its subsidiaries free of any
Lien imposed pursuant to any Environmental Law. The Borrower shall not cause or
suffer or permit, and shall not suffer or permit any of its subsidiaries to
cause or suffer or permit, the property of the Borrower or its subsidiaries to
be used for the generation, production, processing, handling, storage,
transporting or disposal of any Hazardous Material, except for Hazardous
Materials used, generated, produced, processed, handled, stored, transported or
disposed of in the ordinary course of business of the Borrower and its
subsidiaries and disclosed in Schedule 6.13 hereto, in which case such Hazardous
Materials shall be used, stored, generated, treated and disposed of only in
compliance in all material respects with Environmental Law.
(b) Supply to the Agent copies of all Permits and all submissions by the
Borrower or any of its subsidiaries to any governmental body and of the reports
of all environmental audits and of all other environmental tests, studies or
assessments (including the data derived from any sampling or survey of asbestos,
soil, or subsurface or other materials or conditions) that may be conducted or
performed (by or on behalf of the Borrower or any of its subsidiaries) on or
regarding the properties owned, operated, leased or occupied by the Borrower or
any of its subsidiaries or regarding any conditions that might have been
affected by Hazardous Materials on or Released or removed from such properties.
The Borrower shall also permit and authorize, and shall cause its subsidiaries
to permit and authorize, the consultants, attorneys or other persons that
prepare such submissions or reports or perform such audits, tests, studies or
assessments to discuss such submissions, reports or audits with the Agent and
the Lenders.
(c) Promptly (and in no event more than two Business Days after the
Borrower becomes aware or is otherwise informed of such event) provide oral and
written notice to the Agent upon the happening of any of the following:
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(i) the Borrower, any subsidiary of the Borrower, or any tenant
or other occupant of any property of the Borrower or such subsidiary
receives written notice of any claim, complaint, charge or notice of a
violation or potential violation of any Environmental Law;
(ii) there has been a spill or other Release of Hazardous
Materials upon, under or about or affecting any of the properties
owned, operated, leased or occupied by the Borrower or any of its
subsidiaries, in amounts that are required to be reported under
Environmental Law or Hazardous Materials at levels or in amounts that
may have to be reported, remedied or responded to under Environmental
Law are detected on or in the soil or groundwater;
(iii) the Borrower or any of its subsidiaries is or may be liable
for any costs of cleaning up or otherwise remedying a Release of
Hazardous Materials;
(iv) any part of the properties owned, operated, leased or
occupied by the Borrower or any of its subsidiaries is or may be
subject to a Lien under any Environmental Law; or
(v) the Borrower or any of its subsidiaries undertakes any
Remedial Work with respect to any Hazardous Materials.
(d) Without in any way limiting the scope of Section 11.04(c) and in
addition to any obligations thereunder, the Borrower hereby indemnifies and
agrees to hold the Agent and the Lenders harmless from and against any
liability, loss, damage, suit, action or proceeding arising out of its business
or the business of its subsidiaries pertaining to Hazardous Materials,
including, but not limited to, claims of any govern mental body or any third
person arising under any Environmental Law or under tort, contract or common
law. To the extent laws of the United States or any applicable state or local
law in which property owned, operated, leased or occupied by the Borrower or any
of its subsidiaries is located provide that a Lien upon such property of the
Borrower or such subsidiary may be obtained for the removal of Hazardous
Materials which have been or may be Released, no later than sixty days after
notice that a Release has occurred is given by the Agent to the Borrower or such
subsidiary, the Borrower or such subsidiary shall deliver to the Agent a report
issued by a qualified third party engineer assessing the existence and extent of
any Hazardous Materials located upon or beneath the specified property. To the
extent any Hazardous Materials located therein or thereunder either subject the
property to Lien or require removal to safeguard the health of any persons, the
removal thereof shall be an affirmative covenant of the Borrower hereunder.
(e) In the event that any Remedial Work is required to be performed by the
Borrower or any of its subsidiaries under any applicable Environmental Law, any
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judicial order, or by any governmental entity, the Borrower or such subsidiary
shall commence all such Remedial Work at or prior to the time required therefor
under such Environmental Law or applicable judicial orders and thereafter
diligently prosecute to completion all such Remedial Work in accordance with and
within the time allowed under such applicable Environmental Laws or judicial
orders ;provided, however, that such Remedial Work shall not be required so long
as it shall be contested in good faith by appropriate proceedings and the
applicable party shall have set aside on its books adequate reserves with
respect thereto in accordance with GAAP and such contest operates to suspend any
requirement that such Remedial Work be performed.
SECTION 6.14 Pay Obligations to Lenders and Perform Other Covenants. (a)
Make full and timely payment of the Obligations when due, whether now existing
or hereafter arising, (b) duly comply with all the terms and covenants contained
in this Agreement (including, without limitation, the borrowing limitations and
mandatory prepayments in accordance with Article II hereof) and in each of the
other Loan Documents, all at the times and places and in the manner set forth
therein, subject to applicable cure and grace periods and (c) except for the
filing of continuation statements and the making of other filings by the Agent
as secured party or assignee, at all times take all actions reasonably necessary
to maintain the Liens and security interests provided for under or pursuant to
this Agreement and the Security Documents as valid and perfected first Liens on
the property intended to be covered thereby (subject only to Liens expressly
permitted hereunder) and supply all information to the Agent necessary for such
maintenance. In addition, at the reasonable request of the Agent, the Borrower
shall pursue any claim arising in connection with the Acquisition Documents.
SECTION 6.15 Year 2000. Take all actions reasonably necessary to permit the
proper functioning, in and following the year 2000 of (a) the Borrower's
computer systems and (b) equipment containing embedded microchips (including
systems and equipment supplied by others or with which the Borrower's systems
interface and which are within the control of the Borrower and the testing of
all such systems and equipment, as so programmed, unless the failure to take
such actions would not reasonably be expected to have a Material Adverse Effect.
SECTION 6.16 Special Charter Amendment. Use reasonable best efforts to
deliver to the Agent within 120 days of the Closing Date (i) a copy of the
certificate of incorporation of the Borrower, certified by the Secretary of
State of the State of Delaware reflecting the Special Charter Amendment and (ii)
the Special Charter Amendment Opinion; provided, however, that the failure of
the Borrower to comply with the requirements of this Section 6.16 shall not
constitute a Default or an Event of Default.
SECTION 6.17 Rate Agreement. Within ten (10) Business Days of the Closing
Date the Borrower shall have entered into an interest rate cap, swap or collar
(the "Rate Agreement") with a Lender covering a notional principal amount of at
least
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$25,000,000 and having a tenor through the Revolving Credit Termination Date and
on such other terms and conditions as shall be reasonably satisfactory to the
Agent.
VII. NEGATIVE COVENANTS
The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect or the principal of or interest on any Note,
any amount under any Letter of Credit, or any fee, expense or other Obligation
payable hereunder or in connection with any of the Transactions shall be unpaid,
it will not and will not cause or permit any of its subsidiaries and, in the
case of Section 7.14 hereof, any ERISA Affiliate to, either directly or
indirectly:
SECTION 7.01 Liens. Incur, create, assume or permit to exist any Lien on
any of its property or assets (including the stock of any direct or indirect
subsidiary), whether owned at the date hereof or hereafter acquired, or assign
or convey any rights to or security interests in any future revenues, except:
(a) Liens incurred and pledges and deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance, old-age pensions and other social security benefits (not
including any lien described in Section 412(m) of the Code);
(b) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens,
incurred in good faith in the ordinary course of business and securing
obligations which are not overdue for a period of more than 20 days or
which are being contested in compliance with Section 6.04 hereof;
(c) Liens securing the payment of taxes, assessments and govern mental
charges or levies, that are not delinquent or are being diligently
contested in compliance with Section 6.04 hereof;
(d) zoning restrictions, easements, rights of way, licenses, flowage
rights, reservations, provisions, covenants, conditions, waivers,
restrictions on the use of property or minor defects or irregularities of
title and similar encumbrances (and with respect to leasehold interests,
mortgages, obligations, liens and other encumbrances incurred, created,
assumed or permitted to exist and arising by, through or under a landlord
or owner of the leased property, with or without consent of the lessee)
which do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation of
its business;
(e) Purchase money Liens granted in connection with the incurrence of
Indebtedness permitted by Section 7.03(vii) hereof, to the vendor or person
financing the construction or acquisition of property, plant or equipment
provided that (i) such Lien is limited to the particular assets constructed
or acquired, (ii)
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the debt secured by the Lien does not exceed the amount financed for the
construction or acquisition cost (including transaction costs and
indemnities customarily secured by a Lien of such type) of the specific
assets on which the Lien is granted, (iii) such Lien arises and the
Indebtedness secured thereby is created within 60 days of the completion of
such construction or of such acquisition or are incurred to extend, renew
or refinance such Liens and Indebtedness incurred within such 60-day period
and (iv) such transaction does not otherwise violate this Agreement;
(f) Liens existing on the date of this Agreement and set forth in
Schedule 7.01 annexed hereto but not the extension, renewal or refunding of
the Indebtedness secured thereby;
(g) Liens created in favor of the Agent for its own benefit and for
the benefit of the Lenders pursuant to the Loan Documents;
(h) Liens and deposits securing the performance of bids, tenders,
leases, contracts (other than for the repayment of borrowed money),
statutory obligations, surety, customs and appeal bonds, performance bonds
and other obligations of like nature, incurred as an incident to and in the
ordinary course of business;
(i) Judgment Liens securing judgments and decrees, which would not
constitute an Event of Default under paragraph (i) of Article VIII hereof;
(j) Liens on property prior to the acquisition thereof by a Borrower,
a Guarantor or any subsidiary thereof, provided that such Lien is not
created in contemplation of or in connection with such acquisition, such
Lien does not apply to any other property and such Lien does not materially
interfere with the use, occupancy and operation of any property, materially
reduce the fair market value of such property but for such Lien or result
in any material increase in the cost of operating, occupying or owning (or
leasing) such property;
(k) Liens arising from precautionary UCC financing statement filings
regarding operating leases, equipment under construction for the Borrower
or any of its subsidiaries or equipment being used by the Borrower or any
of its subsidiaries on a trial basis (and anticipated to be leased pursuant
to an operating lease, or purchased, by the Borrower or such subsidiary);
(l) subject to the rights of the Agent and the Lenders under the
Security Documents, interest of licensees and sub-licensees in any
trademarks or other intellectual property license or sub-license by the
Borrower or any of its subsidiaries;
(m) customary restrictions imposed by licensors of software or
trademarks on users thereof; or
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(n) Liens in favor of the Factor in "Purchased Receivables" only as
set forth in the Factoring Agreement.
SECTION 7.02 Sale and Lease-Back Transactions. Enter into any arrangement,
directly or indirectly, with any person whereby the Borrower or any of its
subsidiaries shall sell or transfer any property, real or personal, and used or
useful in its business, whether now owned or hereafter acquired, and thereafter
rent or lease such property or other property which the Borrower or such
subsidiary intends to use for substantially the same purpose or purposes as the
property being sold or transferred.
SECTION 7.03 Indebtedness. Incur, create, assume or permit to exist any
Indebtedness other than (i) Indebtedness secured by Liens permitted under
Section 7.01 hereof, (ii) Indebtedness (including, without limitation,
Guarantees) existing on the date hereof and listed in Schedule 7.03 annexed
hereto, and the extension or renewal thereof (other than the Senior Notes) not
in excess of the maximum principal amount thereof and not at interest rates
higher than those in existence, (iii) Indebtedness incurred hereunder, (iv)
Indebtedness to trade creditors incurred in the ordinary course of business, (v)
Guarantees constituting the endorsement of negotiable instruments for deposit or
collection in the ordinary course of business, (vi) Guarantees of the
Obligations, (vii) purchase money Indebtedness (including Capitalized Lease
Obligations) to finance Capital Expenditures permitted by Section 7.07 hereof
provided that any Lien granted with respect to such Indebtedness is permitted by
Section 7.01(e) hereof, (viii) Subordinated Indebtedness, (ix) Indebtedness
constituting contingent obligations with respect to pending litigation which is
being contested in good faith by appropriate proceedings and as to which
appropriate reserves have been established, (x) unsecured intercompany
Indebtedness between and among Loan Parties but only to the extent investments
in such Indebtedness are permitted pursuant to Section 7.06(f) hereof, (xi)
Indebtedness of the Borrower and its subsidiaries incurred in connection with
employment contracts, severance agreement and stock option plans entered into in
the ordinary course of business in an amount not to exceed $15,000,000; and
(xii) other Indebtedness of the Borrower and its subsidiaries provided that the
aggregate amount of Indebtedness permitted pursuant to this clause (xii) shall
not exceed, at any time, $2,500,000.
SECTION 7.04 Dividends, Distributions and Payments. Declare or pay,
directly and indirectly, any cash dividends or make any other distribution
whether in cash, property, securities or a combination thereof, with respect to
(whether by reduc tion of capital or otherwise) any shares of its capital stock
or directly or indirectly redeem, purchase, retire or otherwise acquire for
value (or permit any subsidiary to purchase or acquire) any shares of any class
of its capital stock or set aside any amount for any such purpose except that
any wholly-owned subsidiary of the Borrower may pay dividends or make other
distributions to the Borrower or a wholly-owned subsidiary of the Borrower.
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SECTION 7.05 Consolidations, Mergers and Sales of Assets. Consolidate with
or merge into any other person, or sell, lease, transfer or assign to any
persons or otherwise dispose of (whether in one transaction or a series of
transactions) any portion of its assets (whether now owned or hereafter
acquired), or permit another person to merge into it, or acquire all or
substantially all the capital stock or assets of any other person; provided,
however, that the foregoing shall not prohibit:
(a) purchases and sales of inventory in the ordinary course;
(b) (i) sales of assets (excluding capital stock of a subsidiary) and
(ii) sales of worn out, obsolete, scrap or surplus assets not to exceed for
(i) and (ii) $500,000 in the aggregate in any Fiscal Year; provided that
the net proceeds realized are applied within 30 days of any such sale or
other disposition to purchase other assets;
(c) sales of accounts receivable permitted by Section 7.12 hereof;
(d) Capital Expenditures permitted by Section 7.07 hereof;
(e) liquidation of investments permitted pursuant to Sections 7.06(a)
through (e) hereof;
(f) so long as at the time thereof and immediately after giving effect
thereto no Event of Default shall have occurred and be continuing, the
merger or consolidation of any subsidiary incorporated in the United States
with or into any other subsidiary incorporated in the United States in
which no person other than the parent of such subsidiary receives
consideration and the Agent in its sole discretion is satisfied that the
surviving person has assumed all Obligations of the person merging with or
consolidating into such surviving person and that there has been no
Material Adverse Effect with respect to the Collateral; and
(g) transfers of assets from a wholly-owned subsidiary of the Borrower
to the Borrower or another wholly-owned subsidiary of the Borrower which is
a Guarantor hereunder and which do not in the aggregate exceed $500,000.
SECTION 7.06 Investments. Own, purchase or acquire any stock, obligations,
assets (not in the ordinary course of business) or securities of, or any
interest in, or make any capital contribution or loan or advance to, any other
person, or make any other investments, except:
(a) demand deposits, bankers acceptances, certificates of deposit,
time deposits and money market accounts in dollars of any commercial banks
registered to do business in any state of the United States (i) having
capital and surplus in excess of $1,000,000,000 and (ii) whose long-term
debt rating is at least investment grade as determined by either Standard &
Poor's Ratings Group
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or Moody's Investors Service, Inc.; and certificates of deposit in dollars
offered by money market mutual funds meeting the criteria in (c) below;
(b) readily marketable direct obligations of the United States govern
ment or any agency thereof which are backed by the full faith and credit of
the United States;
(c) investments in money market mutual funds having assets in excess
of $2,500,000,000;
(d) commercial paper at the time of acquisition having the highest
rating obtainable from either Standard & Poor's Ratings Group or Moody's
Investors Service, Inc.;
(e) federally tax exempt securities rated A or better by either
Standard & Poor's Ratings Group or Moody's Investors Service, Inc.;
(f) investments in the stock of any subsidiary existing on the Closing
Date, and any additional investments therein and otherwise among the Loan
Parties not to exceed $2,500,000 at any one time outstanding;
(g) investments in non-cash consideration received in connection with
a permitted sale of assets (subject to the granting of a Lien as required
by the Security Documents);
(h) investments arising from transactions by the Borrower or any of
its subsidiaries with customers or suppliers in the ordinary course of
business, including, without limitation, endorsements of negotiable
instruments and debt obligations and other investments received in
connection with the bankruptcy or reorganization of customers and suppliers
or in settlement of delinquent obligations of, or other disputes with,
customers or suppliers, arising in the ordinary course of business (subject
to the granting of a Lien as required by the Security Documents);
(i) loans or advances to employees to cover payroll, travel and
similar expenses, arising in the ordinary course, so long as the aggregate
amount of such loans and advances does not exceed $500,000 at any one time
outstanding;
(j) Capital Expenditures and other purchases permitted under other
provisions of this Agreement;
(k) Indebtedness permitted by Section 7.03;
(l) transactions permitted pursuant to Section 7.05;
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(m) investments set forth on Schedule 7.06 annexed hereto;
(n) investment consisting of the Guarantees existing pursuant to
Article XII hereof;
(o) investments consisting of accounts receivables owing to the
Borrower or any of its subsidiaries, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with
customary terms; or
(p) investments consisting of loans, advances and other investments in
partnerships, joint ventures and similar investments with persons that are
not Affiliates of the Borrower so long as the aggregate principal amount
thereof at any time outstanding shall not exceed $500,000;
provided that, in each case mentioned in (a), (b), (d) and (e) above, such
obligations shall mature not more than one year from the date of acquisition
thereof.
SECTION 7.07 Capital Expenditures. Permit the aggregate amount of payments
made for Capital Expenditures, including Capitalized Lease Obligations and
Indebtedness secured by Liens permitted under Section 7.01(e) hereof, in each of
the periods indicated below to exceed the following amounts for the Borrower and
its subsidiaries:
Period Maximum Amount
------ --------------
Fiscal Year ending on or about December 31, 1999 $8,000,000
Fiscal Year ending on or about December 31, 2000 $7,504,000
Fiscal Year ending on or about December 31, 2001 $7,500,000
Fiscal Year ending on or about December 31, 2002 $6,500,000
Fiscal Year ending on or about December 31, 2003 $6,500,000
Permitted Capital Expenditures up to $2,500,000 not utilized in the 1999
Fiscal Year may be expended only in Fiscal Year 2000.
SECTION 7.08 Capitalization Ratio. Permit the Capitalization Ratio of the
Borrower and its subsidiaries on a Consolidated basis for the four consecutive
fiscal quarter period ending on the dates set forth below to be greater than the
respective amounts set forth below opposite such dates:
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Quarter Ending on or about Ratio
-------------------------- -----
June 30, 1999 64%
September 30, 1999 65%
December 31, 1999 62%
March 31, 2000 65%
June 30, 2000 62%
September 30, 2000 65%
December 31, 2000 59%
March 31, 2001 64%
June 30, 2001 61%
September 30, 2001 64%
December 31, 2001 58%
March 31, 2002 63%
June 30, 2002 60%
September 30, 2002 63%
December 31, 2002 57%
March 31, 2003 62%
June 30, 2003 59%
September 30, 2003 62%
SECTION 7.09 Interest Coverage Ratio. Permit the Interest Coverage Ratio of
the Borrower and its subsidiaries on a Consolidated basis for the four
consecutive fiscal quarter periods ending on the dates set forth below to be
less than the respective amounts set forth below opposite such dates:
Quarter ending on or about Ratio
-------------------------- -----
June 30, 1999 1.50:1.00
September 30, 1999 1.40:1.00
December 31, 1999 1.45:1.00
March 31, 2000 1.55:1.00
June 30, 2000 1.50:1.00
September 30, 2000 1.75:1.00
December 31, 2000 1.80:1.00
March 31, 2001 1.80:1.00
June 30, 2001 1.80:1.00
September 30, 2001 1.80:1.00
December 31, 2001 2.30:1.00
March 31, 2002 2.30:1.00
June 30, 2002 2.30:1.00
September 30, 2002 2.30:1.00
December 31, 2002 2.80:1.00
March 31, 2003 2.80:1.00
June 30, 2003 2.80:1.00
September 30, 2003 2.80:1.00
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SECTION 7.10 Net Worth. Permit the Net Worth of the Borrower and its
subsidiaries on a Consolidated basis at any time to be less than $120,000,000
through December 31, 2000 and thereafter at any time to be less than the
respective amounts set forth below for the periods indicated:
Period Amount
------ ------
January 1, 2001 through March 31, 2001 $122,000,000
April 1, 2001 through June 30, 2001 $124,000,000
July 1, 2001 through September 30, 2001 $126,000,000
October 1, 2001 through December 31, 2001 $128,000,000
January 1, 2002 through March 31, 2002 $130,000,000
April 1, 2002 through June 30, 2002 $132,000,000
July 1, 2002 through September 30, 2002 $134,000,000
October 1, 2002 through December 31, 2002 $136,000,000
January 1, 2003 through March 31, 2003 $138,000,000
April 1, 2003 through June 30, 2003 $140,000,000
July 1, 2003 through September 30, 2003 $142,000,000
October 1, 2003 through December 31, 2003 $144,000,000
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SECTION 7.11 Business. Alter the nature of its business as operated on the
date of this Agreement in any material respect, and in any event permit AKC
Acquisition to engage in any activity other than its ownership of Lion Licensing
or permit Lion Licensing to engage in any activity other than its ownership of
the trademarks and other intellectual property and related intangibles being
acquired pursuant to the Acquisition and the licensing thereof and activities
related thereto in the ordinary course of business.
SECTION 7.12 Sales of Receivables. Sell, assign, discount, transfer, or
otherwise dispose of any accounts receivable, promissory notes, drafts or trade
acceptances or other rights to receive payment held by it, with or without
recourse, except (i) for the purpose of collection or settlement in the ordinary
course of business, (ii) the sale of any such accounts to the Agent or (iii) the
sale of "Purchased Receivables" to the Factor pursuant to the Factoring
Agreement.
SECTION 7.13 Use of Proceeds. Permit the proceeds of any Credit Event to be
used for any purpose which entails a violation of, or is inconsistent with,
Regulation T, U or X of the Board, or for any purpose other than those set forth
in Section 4.14 hereof.
SECTION 7.14 ERISA. (a) Engage in any transaction in connection with which
the Borrower or any ERISA Affiliate could be subject to either a material civil
penalty assessed pursuant to the provisions of Section 502 of ERISA or a
material tax imposed under the provisions of Section 4975 of the Code.
(b) Terminate any Pension Plan in a "distress termination" under Section
4041 of ERISA, or take any other action which could result in a material
liability of the Borrower or any ERISA Affiliate to the PBGC.
(c) Fail to make payment when due of any material amounts which, under the
provisions of any Pension Plan or Multiemployer Plan, the Borrower or any ERISA
Affiliate is required to pay as contributions thereto, or, with respect to any
Pension Plan, permit to exist any material "accumulated funding deficiency"
(within the meaning of Section 302 of ERISA and Section 412 of the Code),
whether or not waived, with respect thereto.
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(d) Adopt an amendment to any Pension Plan requiring the provision of
security under Section 307 of ERISA or Section 401(a)(29) of the Code.
SECTION 7.15 Accounting Changes. Make any change in their accounting
treatment or financial reporting practices except as required or permitted by
GAAP.
SECTION 7.16 Prepayment or Modification of Indebtedness; Modification of
Charter Documents. (a) Prior to the maturity date hereof, directly or indirectly
prepay, redeem, purchase or retire any Indebtedness, including, without
limitation, any Subordinated Indebtedness, other than Indebtedness incurred
hereunder.
(b) Modify, amend or otherwise alter the terms and provisions of any
Subordinated Indebtedness or of the Factoring Agreement if such modification,
amendment or other alteration is reasonably expected to have a Material Adverse
Effect.
(c) Modify, amend or alter their certificates or articles of incorporation
or other constitutive documents or preferred stock/certificates of designations
if such modification, amendment or alteration is reasonably expected to have an
Material Adverse Effect, except for (i) the Special Charter Amendment and (ii)
the dissolution of Viewmon Limited as permitted under Section 6.01 hereof.
SECTION 7.17 Transactions with Affiliates. Except as otherwise specifically
set forth in this Agreement, directly or indirectly purchase, acquire or lease
any property from, or sell, transfer or lease any property to, or enter into any
other transaction with, any stockholder, Affiliate or agent of the Borrower,
except at prices and on terms not less favorable to it than that which would
have been obtained in an arm's-length transaction with a non-affiliated third
party.
SECTION 7.18 Consulting Fees. Pay any management, consulting or other fees
of any kind to any Affiliate of the Borrower other than any of the Borrower's
wholly-owned subsidiaries in the ordinary course of business.
SECTION 7.19 Negative Pledges, etc. Enter into any agreement (other than
this Agreement or any other Loan Document or any agreement relating to any
Indebtedness permitted pursuant to Sections 7.03(ii) and (vii) hereof and the
Factoring Agreement but only with respect to the property securing such
Indebtedness) which (a) prohibits the creation or assumption of any Lien upon
any of the Collateral, including, without limitation, any hereafter acquired
property, or (b) specifically prohibits the amendment or other modification of
this Agreement or any other Loan Document.
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VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events (herein called
"Events of Default"):
(a) any representation or warranty made or deemed made by any Loan
Party or subsidiary thereof in or in connection with this Agreement, any of
the Security Documents, the Notes or other Loan Documents or any Credit
Events hereunder, shall prove to have been incorrect in any material
respect when made or deemed to be made;
(b) default shall be made in the payment of any principal of any Note
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on any Note,
or any fee or any other amount payable hereunder, or under the Notes,
Letters of Credit, or any other Loan Document or the Commitment Letter or
in connection with any other Credit Event or the Transactions when and as
the same shall become due and payable;
(d) default shall be made in the due observance or performance of any
covenant, condition or agreement to be observed or performed on the part of
any Loan Party pursuant to the terms of (i) Article VI or Article VII
hereof, any of the Notes, or any of the Security Documents, subject in the
case of any Security Document to any applicable grace period, or (ii) any
other terms of this Agreement (other than as specified in (a), (b), (c) or
(d)(i) above) and such default with respect to any such other terms
described in this clause (ii) shall remain unremedied for a period of 20
days;
(e) any Loan Party or subsidiary thereof shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Title 11
of the United States Code or any other Federal, state or foreign
bankruptcy, insolvency, liquidation, reorganization or similar law, (ii)
consent to the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such petition,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any Loan Party or
subsidiary thereof or for a substantial part of its property or assets,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the
benefit of creditors, (vi) become unable, admit in writing its inability or
fail generally to pay its debts as they become due, (vii) be wound up
(except for the dissolution of Viewmon Limited permitted under Section 6.01
hereof) or (viii) take corporate action for the purpose of effecting any of
the foregoing;
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(f) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of any Loan Party or subsidiary thereof, or of a
substantial part of the property or assets of any Loan Party or subsidiary
thereof, under Title 11 of the United States Code or any other Federal
state or foreign bankruptcy, insolvency, receivership or similar law, (ii)
the appointment of a receiver, trustee, custodian, sequestrator or similar
official for any Loan Party or subsidiary thereof or for a substantial part
of the property of any Loan Party or (iii) the winding-up or liquidation of
any Loan Party or subsidiary thereof (except for the dissolution of Viewmon
Limited permitted under Section 6.01 hereof); and such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall continue unstayed and in
effect for 60 days;
(g) default shall be made with respect to any Indebtedness or
Capitalized Lease Obligation of any Loan Party or subsidiary thereof
(excluding Indebtedness outstanding hereunder) which either individually or
taken together with other such Indebtedness as to which a default has
occurred shall exceed $500,000 if the effect of any such default shall be
to accelerate, or to permit the holder or obligee of any such Indebtedness
(or any trustee on behalf of such holder or obligee) at its option to
accelerate, the maturity of such Indebtedness;
(h) (i) a Reportable Event shall have occurred with respect to a
Pension Plan, (ii) the filing by any Loan Party or a subsidiary thereof,
any ERISA Affiliate, or an administrator of any Plan of a notice of intent
to terminate such a Plan in a "distress termination" under the provisions
of Section 4041 of ERISA, (iii) the receipt of notice by any Loan Party or
a subsidiary thereof, any ERISA Affiliate, or an administrator of a Plan
that the PBGC has instituted proceedings to terminate (or appoint a trustee
to administer) such a Pension Plan, (iv) any other event or condition
exists which might, in the opinion of the Agent, constitute grounds under
the provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Plan by the PBGC, (v) a
Pension Plan shall fail to maintain the minimum funding standard required
by Section 412 of the Code for any plan year or a waiver of such standard
is sought or granted under the provisions of Section 412(d) of the Code,
(vi) any Loan Party or a subsidiary thereof or any ERISA Affiliate has
incurred a liability under the provisions of Section 4062, 4063, 4064 or
4201 of ERISA, (vii) any Loan Party or a subsidiary thereof or any ERISA
Affiliate fails to pay the full amount of an installment required under
Section 412(m) of the Code, (viii) the occurrence of any other event or
condition with respect to any Plan which would constitute an event of
default under any other agreement entered into by any Loan Party or a
subsidiary thereof or any ERISA Affiliate, and in each case in clauses (i)
through (viii) of this subsection (i), such event or condition, together
with all other such events or conditions, if any, could subject any Loan
Party or any ERISA Affiliate to any taxes, penalties or other liabilities
which, in the opinion of the Agent, could
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have a Material Adverse Effect with respect to any Loan Party or any ERISA
Affiliate;
(i) any Loan Party or any ERISA Affiliate (i) shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred any material
with drawal liability to such Multiemployer Plan, and (ii) does not have
reasonable grounds for contesting such withdrawal liability and is not in
fact contesting such withdrawal liability in a timely and appropriate
manner;
(j) a judgment (not reimbursed by insurance policies of any Loan Party
or subsidiary thereof) or decree for the payment of money, a fine or
penalty which when taken together with all other such judgments, decrees,
fines and penalties shall exceed $500,000 shall be rendered by a court or
other tribunal against any Loan Party or a subsidiary thereof and (i) shall
remain undischarged or unbonded for a period of 30 consecutive days during
which the execution of such judgment, decree, fine or penalty shall not
have been stayed effectively or (ii) any judgment creditor or other person
shall legally commence actions to levy upon assets or properties to enforce
such judgment, decree, fine or penalty;
(k) this Agreement, any Note, any of the Security Documents, any
Guarantee or other Loan Documents shall for any reason cease to be, or
shall be asserted by any Loan Party or a subsidiary thereof not to be, a
legal, valid and binding obligation of any Loan Party or a subsidiary
thereof, enforceable in accordance with its terms, or the Lien purported to
be created by any of the Security Documents shall for any reason cease to
be, or be asserted by any Loan Party or a subsidiary thereof not to be, a
valid, first priority perfected Lien (except to the extent otherwise
permitted under this Agreement or any of the Security Documents);
(l) any material damage to, or loss, theft or destruction of, any
material Collateral, whether or not insured, or any strike, lockout, labor
dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than thirty (30) consecutive days beyond
the coverage period of any applicable business interruption insurance, the
cessation or substantial curtailment of revenue producing activities at any
facility of a Loan Party or a subsidiary thereof, if in the case of any of
the foregoing, if any such event or circumstance is reasonably expected to
have a Material Adverse Effect; or
(m) a "Change of Control" as defined in the Senior Note Indenture
shall occur;
then, and in any such event (other than an event described in paragraph (e) or
(f) above), and at any time thereafter during the continuance of such event, the
Agent may, and upon the written request of the Required Lenders shall, by
written notice (or facsimile notice promptly confirmed in writing) to the
Borrower, take any or all of the following actions at the same or different
times: (i) terminate forthwith all or any portion
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of the Total Commitment and the obligations of the Lenders to issue Letters of
Credit hereunder; and (ii) declare the Notes and any amounts then owing to the
Lenders on account of drawings under any Letters of Credit to be forthwith due
and payable, and (iii) require that the Borrower remit to the Agent cash
collateral in an amount equal to the aggregate undrawn amount of all outstanding
Letters of Credit at such time, such cash collateral to be held by the Agent for
its own benefit and the benefit of the Lenders in a cash collateral account on
terms and conditions satisfactory to the Agent, whereupon the principal of such
Notes, together with accrued interest and fees thereon and any amounts then
owing to the Lenders on account of drawings under any Letters of Credit and
other liabilities of the Borrower accrued hereunder, shall become forthwith due
and payable both as to principal and interest, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by the Borrower, anything contained herein or in the Notes to the
contrary notwithstanding; provided, however, that with respect to a default
described in paragraph (e) or (f) above, the Total Commitment and the obligation
of the Lenders to issue Letters of Credit shall automatically terminate and the
principal of the Notes, together with accrued interest and fees thereon and any
amounts then owing to the Lenders on account of drawings under any Letters of
Credit and any other liabilities of the Borrower accrued hereunder shall
automatically become due and payable, both as to principal and interest, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower, anything contained herein or in the
Notes to the contrary notwithstanding.
IX. AGENT AND COLLATERAL MONITOR
In order to expedite the transactions contemplated by this Agreement, The
Chase Manhattan Bank is hereby appointed to act as Agent on behalf of the
Lenders and The CIT Group/Commercial Services, Inc. is hereby appointed to act
as Collateral Monitor on behalf of the Lenders. Each of the Lenders and each
subsequent holder of any Note or issuer of any Letter of Credit by its
acceptance thereof, irrevocably authorizes the Agent and Collateral Monitor to
take such action on its behalf and to exercise such powers hereunder and under
the Security Documents and other Loan Documents as are specifically delegated to
or required of the Agent or Collateral Monitor, as applicable, by the terms
hereof and the terms thereof together with such actions and powers as are
reasonably incidental thereto. Neither the Agent nor the Collateral Monitor nor
any of their respective directors, officers, employees or agents shall be liable
as such for any action taken or omitted to be taken by it or them hereunder or
under any of the Security Documents and other Loan Documents or in connection
herewith or therewith (a) at the request or with the approval of the Required
Lenders (or, if otherwise specifically required hereunder or thereunder, the
consent of all the Lenders) or (b) in the absence of its or their own gross
negligence or willful misconduct.
The Agent is hereby expressly authorized on behalf of the Lenders, without
hereby limiting any implied authority, (a) to receive on behalf of each of the
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Lenders any payment of principal of or interest on the Notes outstanding
hereunder and all other amounts accrued hereunder which are paid to the Agent,
and promptly to distribute to each Lender its proper share of all payments so
received, (b) to distribute to each Lender copies of all notices, agreements and
other material as provided for in this Agreement or in the Security Documents
and other Loan Documents as received by the Agent, (c) to maintain, in
accordance with its customary business practices, ledgers and records reflecting
the status of the Loans, the Collateral and related matters, (d) to open and
maintain bank accounts and lock boxes as the Agent deems necessary and
appropriate in accordance with the Loan Documents with respect to the
Collateral, (e) to take all actions with respect to this Agreement and the
Security Documents and other Loan Documents as are specifically delegated to the
Agent, and (f) to incur and pay such expenses as the Agent may deem necessary or
appropriate in connection with the foregoing.
In the event that (a) the Borrower fails to pay when due the principal of
or interest on any Note, any amount payable under any Letter of Credit, or any
fee payable hereunder or (b) the Agent receives written notice of the occurrence
of a Default or an Event of Default (the Agent being deemed not to have
knowledge of any Default or Event of Default unless and until written notice
thereof is given to the Agent by the Borrower or a Lender), the Agent within a
reasonable time shall give written notice thereof to the Lenders, and shall take
such action with respect to such Event of Default or other condition or event as
it shall be directed to take by the Required Lenders; provided, however, that,
unless and until the Agent shall have received such directions, the Agent may
take such action or refrain from taking such action hereunder or under the
Security Documents or other Loan Documents with respect to a Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
Neither the Agent nor the Collateral Monitor shall be responsible in any
manner to any of the Lenders for the effectiveness, enforceability, perfection,
value, genuineness, validity or due execution of this Agreement, the Notes or
any of the other Loan Documents or Collateral or any other agreements or
certificates, requests, financial statements, notices or opinions of counsel or
for any recitals, statements, warranties or representations contained herein or
in any such instrument or be under any obligation to ascertain or inquire as to
the performance or observance of any of the terms, provisions, covenants,
conditions, agreements or obligations of this Agreement or any of the other Loan
Documents or any other agreements on the part of the Borrower and, without
limiting the generality of the foregoing, both the Agent and the Collateral
Monitor shall, in the absence of knowledge to the contrary, be entitled to
accept any certificate furnished pursuant to this Agreement or any of the other
Loan Documents as conclusive evidence of the facts stated therein and shall be
entitled to rely on any note, notice, consent, certificate, affidavit, letter,
telegram, teletype message, statement, order or other document which it believes
in good faith to be genuine and correct and to have been signed or sent by the
proper person or persons. It is understood and agreed that both the Agent and
the Collateral Monitor may exercise its rights and powers under other agreements
and instruments to which it is or may be a
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party, and engage in other transactions with the Borrower, as though it were not
Agent or the Collateral Monitor of the Lenders hereunder.
The Agent shall promptly give notice to the Lenders of the receipt or
sending of any notice, schedule, report, projection, financial statement or
other document or information pursuant to this Agreement or any of the other
Loan Documents and shall promptly forward a copy thereof to each Lender.
Neither the Agent nor the Collateral Monitor nor any of their respective
directors, officers, employees or agents shall have any responsibility to the
Borrower on account of the failure or delay in performance or breach by any
Lender other than the Agent or the Collateral Monitor of any of their respective
obligations hereunder or to any Lender on account of the failure of or delay in
performance or breach by any other Lender or the Borrower of any of their
respective obligations hereunder or in connection herewith.
Each of the Agent and the Collateral Monitor may consult with legal counsel
selected by it in connection with matters arising under this Agreement or any of
the other Loan Documents and any action taken or suffered in good faith by it in
accordance with the opinion of such counsel shall be full justification and
protection to it. Each of the Agent and the Collateral Monitor may exercise any
of its powers and rights and perform any duty under this Agreement or any of the
other Loan Documents through agents or attorneys.
The Agent and the Borrower may deem and treat the payee of any Note as the
holder thereof until written notice of transfer shall have been delivered as
provided herein by such payee to the Agent and the Borrower.
With respect to the Loans made hereunder, the Notes issued to it and any
other Credit Event applicable to it, the Agent in its individual capacity and
not as an Agent shall have the same rights, powers and duties hereunder and
under any other agreement executed in connection herewith as any other Lender
and may exercise the same as though it were not the Agent, and the Agent and its
affiliates may accept deposits from, lend money to and generally engage in any
kind of business with the Borrower or other affiliate thereof as if it were not
the Agent. Each of the Lenders hereby acknowledges that the Agent and/or one or
more Affiliates of the Agent may at any time and from time to time be a holder
of equity interests in a Loan Party, provided, that no Loan Party may be an
Affiliate of the Agent.
Each Lender agrees (i) to reimburse the Agent and Collateral Monitor in the
amount of such Lender's pro rata share (based on its Total Commitment hereunder)
of any expenses incurred for its own benefit and for the benefit of the Lenders
by the Agent and Collateral Monitor including counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders, not
reimbursed by the Borrower and (ii) to indemnify and hold harmless the Agent and
Collateral Monitor and any of their respective directors, officers, employees or
agents, on demand, in the
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amount of its pro rata share, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against it in its capacity as the Agent or
Collateral Monitor, as applicable, or any of them in any way relating to or
arising out of this Agreement or any of the other Loan Documents or any action
taken or omitted by it or any of them under this Agreement or any of the other
Loan Documents, to the extent not reimbursed by the Borrower; provided, however,
that no Lender shall be liable to the Agent or the Collateral Monitor, as
applicable, for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgment, suits, costs, expenses or disbursements resulting
from the gross negligence or willful misconduct of the Agent or the Collateral
Monitor, as applicable, or any of their respective directors, officers,
employees or agents. The foregoing agreement shall survive the repayment of all
Obligations and the termination of this Agreement.
With respect to the release of Collateral, Lenders hereby irrevocably
authorize the Agent, at its option and in its discretion, to release any Lien
granted to or held by the Agent upon any property covered by this Agreement or
the other Loan Documents (i) upon termination of the Total Commitment and
payment and satisfaction of all Obligations; (ii) constituting property being
sold or disposed of in compliance with the provisions of this Agreement (and the
Agent may rely in good faith conclusively on any such certificate, without
further inquiry); (iii) constituting property leased to the Borrower or any
subsidiary under a lease which has expired or been terminated in a transaction
permitted under this Agreement or is about to expire and which has not been, and
is not intended by the Borrower or such subsidiary to be, renewed or extended,
(iv) constituting past-due receivables to the Factor, or (v) constituting
property subject to a Lien permitted under Section 7.01(e) hereof to the extent
required by the holders of such Lien; provided, however, that (x) the Agent
shall not be required to execute any release on terms which, in the Agent's
opinion, would expose the Agent to liability or create any obligation or entail
any consequence other than the release of such Liens without recourse or
warranty, and (y) such release shall not in any manner discharge, affect or
impair the Obligations or any Liens upon (or obligations of any Loan Party, in
respect of), all interests retained by any Loan Party, including (without
limitation) the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.
With respect to perfecting Lenders' security interest in Collateral which,
in accordance with Article 9 of the Uniform Commercial Code or any comparable
provision of any Lien perfection statute in any applicable jurisdiction, can be
perfected only by possession, each Lender hereby appoints each other Lender for
the purpose of perfecting such interest. Should any Lender (other than the
Agent) obtain possession of any such Collateral, such Lender shall notify the
Agent, and, promptly upon the Agent's request, shall deliver such Collateral to
the Agent or in accordance with the Agent's instructions. Each Lender agrees
that it will not have any right individually to enforce or seek to enforce this
Agreement or any Loan Document or to realize upon
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any Collateral for the Loans, it being understood and agreed that such rights
and remedies may be exercised only by the Agent.
In the event that a petition seeking relief under Title 11 of the United
States Code or any other Federal, state or foreign bankruptcy, insolvency,
liquidation or similar law is filed by or against any Loan Party, the Agent is
authorized to file a proof of claim on behalf of itself and the Lenders in such
proceeding for the total amount of Obligations owed by such Loan Party. With
respect to any such proof of claim which the Agent may file, each Lender
acknowledges that without reliance on such proof of claim, such Lender shall
make its own evaluation as to whether an individual proof of claim must be filed
in respect of such Obligations owed to such Lender and, if so, take the steps
necessary to prepare and timely file such individual claim.
Each Lender acknowledges that it has, independently and without reliance
upon the Agent or Collateral Monitor or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and any other Loan Document
to which such Lender is party. Each Lender also acknowledges that it will,
independently and without reliance upon the Agent or Collateral Monitor or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document, any
related agreement or any document furnished hereunder.
Subject to the appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such resignation, the Lenders shall have the right to appoint
a successor Agent with the consent of the Borrower which shall not be
unreasonably withheld (but no such consent shall be required if an Event of
Default has occurred and is continuing) . If no successor Agent shall have been
so appointed by such Lenders and shall have accepted such appointment within 30
days after the retiring Agent gives notice of its resignation, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Agent which shall be a
bank with an office (or an affiliate with an office) in New York, New York,
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor bank, such
successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent and the retiring Agent shall
be discharged from its duties and obligations hereunder and under each of the
other Loan Documents. After any Agent's resignation hereunder, the provisions of
this Article shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Agent. The Collateral
Monitor may resign at any time by notifying the Agent and the Borrower. Upon any
such resignation, the Agent may become the Collateral Monitor or with the
concurrence of the Borrower (not to be unreasonably withheld) appoint a
successor Collateral Monitor. After any Collateral Monitor's resignation
hereunder, the provisions of this Article shall continue in effect for
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its benefit in respect of any actions taken or omitted to be taken by it while
acting as Collateral Monitor.
The Lenders hereby acknowledge that neither the Agent nor the Collateral
Monitor shall be under any duty to take any discretionary action permitted to be
taken by the Agent or the Collateral Monitor pursuant to the provisions of this
Agreement or any of the other Loan Documents unless it shall be requested in
writing to do so by the Required Lenders. The Lenders hereby further acknowledge
that neither the Agent nor the Collateral Monitor is acting as the fiduciary of,
or the trustee for, any of the Lenders and except as expressly set forth herein,
neither the Agent nor the Collateral Monitor shall have any duty to disclose,
and shall not be liable for the failure to disclose, any information
communicated to the Agent or the Collateral Monitor by or relating to the
Borrower or any of its subsidiaries.
X. MANAGEMENT, COLLECTION AND STATUS OF RECEIVABLES AND OTHER COLLATERAL
SECTION 10.01 Collection of Receivables; Management of Collateral. (a) The
Borrower will, at its own cost and expense, (i) arrange for remittances on
Receivables and all other cash receipts of the Borrower and its subsidiaries
from any source including, without limitation, payments from retail stores,
licensees, the Factor and trade debtors to be made directly to lockboxes
designated by the Agent or in such other manner as the Agent may direct, and
(ii) promptly deposit, or cause to be deposited, all payments received by the
Borrower and its subsidiaries on account of Receivables and all other cash
receipts described in clause (i) above, whether in the form of cash, checks,
notes, drafts, bills of exchange, money orders or otherwise, in one or more
accounts designated by the Agent in precisely the form received (but with any
endorsements of the Borrower necessary for deposit or collection), subject to
withdrawal by the Agent only, as hereinafter provided, and until such payments
are deposited, such payments shall be deemed to be held in trust by the Borrower
for and as the Lenders' property and shall not be commingled with the Borrower's
other funds. Each Business Day, provided (i) that Availability is greater than
zero dollars and (ii) the aggregate amount of all funds being held in such
designated accounts in accordance with the foregoing is less than $500,000, the
Agent may transfer all such funds to the Borrower's general operating account;
otherwise, all such funds not so transferred will be applied by the Agent to
reduce the outstanding balance (or if such balance is reduced to zero, to be
held by the Agent as cash collateral) of the Revolving Credit Loans subject to
final collection in cash of the item deposited and subject to the assessment of
a two-day collection charge. In the event that Availability is less than zero
dollars, as determined by the Agent in its sole discretion, any or all funds on
deposit in the Borrower's general operating account may be applied by the Agent
to reduce the outstanding balance (or if such balance is reduced to zero, to be
held by the Agent as cash collateral) of the Revolving Credit Loans. The Agent,
in its sole discretion, shall have the right to modify any provision of this
Section 10.01(a),
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including, without limitation, applying all funds being held in the designated
accounts to satisfy the Obligations.
Upon the occurrence and continuance of an Event of Default, the Agent may
send a notice of assignment and/or notice of the Agent's security interest to
any and all Customers or any third party holding or otherwise concerned with any
of the Collateral, and thereafter the Agent shall have the sole right to collect
the Receivables and/or take possession of the Collateral and the books and
records relating thereto. The Borrower shall not, without the Agent's prior
written consent, grant any extension of the time of payment of any Receivable,
compromise or settle any Receivable for less than the full amount thereof,
release, in whole or in part, any person or property liable for the payment
thereof, or allow any credit or discount whatsoever thereon except, prior to the
occurrence and continuance of an Event of Default, in the ordinary course of
business.
(b) Subject to the Factoring Agreement as to "Purchased Receivables" (i)
The Borrower hereby constitutes the Agent or the Agent's designee as the
Borrower's attorney-in-fact with power to do any of the following: (1) to
endorse the Borrower's name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment or Collateral that may come into its
possession; (2) to sign the Borrower's name on any invoice or bill of lading
relating to any Receivables, drafts against Customers, assignments and
verifications of Receivables and notices to Customers; (3) to send verifications
of Receivables; (4) upon the occurrence and during the continuance of an Event
of Default to notify the Postal Service authorities to change the address for
delivery of mail addressed to the Borrower to such address as the Agent may
designate; and (5) to do all other acts and things necessary to carry out this
Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission, for any error of judgment or for any mistake of fact or
law, provided that the Agent or its designee shall not be relieved of liability
to the extent it is determined by a final judicial decision that its act, error
or mistake constituted gross negligence or willful misconduct. This power of
attorney being coupled with an interest is irrevocable until all of the
Obligations are paid in full and this Agreement and the Total Commitment is
terminated.
(ii) The Agent, without notice to or consent of the Borrower, upon the
occurrence and during the continuance of an Event of Default, (A) may sue upon
or otherwise collect, extend the time of payment of, or compromise or settle for
cash, credit or otherwise upon any terms, any of the Receivables or any
securities, instruments or insurance applicable thereto and/or release the
obligor thereon; (B) is authorized and empowered to accept the return of the
goods represented by any of the Receivables; and (C) shall have the right to
receive, endorse, assign and/or deliver in its name or the name of the Borrower
any and all checks, drafts and other instruments for the payment of money
relating to the Receivables, and the Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed.
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(c) Nothing herein contained shall be construed to constitute the Borrower
as agent of the Agent for any purpose whatsoever, and the Agent shall not be
responsible or liable for any shortage, discrepancy, damage, loss or destruction
of any part of the Collateral wherever the same may be located and regardless of
the cause thereof (except to the extent it is determined by a final judicial
decision that the Agent's or a Lender's act or omission constituted gross
negligence or willful misconduct). The Agent and the Lenders shall not, under
any circumstances or in any event whatsoever, have any liability for any error
or omission or delay of any kind occurring in the settlement, collection or
payment of any of the Receivables or any instrument received in payment thereof
or for any damage resulting therefrom (except to the extent it is determined by
a final judicial decision that the Agent's or such Lender's error, omission or
delay constituted gross negligence or willful misconduct). The Agent and the
Lenders do not, by anything herein or in any assignment or otherwise, assume the
Borrower's obligations under any contract or agreement assigned to the Agent or
the Lenders, and the Agent and the Lenders shall not be responsible in any way
for the performance by the Borrower of any of the terms and conditions thereof.
(d) If any of the Receivables includes a charge for any tax payable to any
governmental tax authority, the Agent is hereby authorized (but in no event
obligated) in its discretion to pay the amount thereof to the proper taxing
authority for the account of the Borrower and to charge the Borrower's account
therefor. The Borrower shall notify the Agent if any Receivables include any tax
due to any such taxing authority and, in the absence of such notice, the Agent
shall have the right to retain the full proceeds of such Receivables and shall
not be liable for any taxes that may be due from the Borrower by reason of the
sale and delivery creating such Receivables.
SECTION 10.02 Receivables Documentation. The Borrower will, in addition to
the monthly Receivables agings delivered pursuant to this Agreement, at such
intervals as the Collateral Monitor (in consultation with the Agent) may
reasonably require, furnish, or cause to be furnished, such further schedules
and/or information as the Collateral Monitor (in consultation with the Agent)
may reasonably require relating to the Receivables, including, without
limitation, sales invoices. In addition, the Borrower shall notify the Agent of
any non-compliance in respect of the representations, warranties and covenants
contained in Section 10.03 hereof. The items to be provided under this Section
10.02 are to be in form reasonably satisfactory to the Collateral Monitor and
the Agent and are to be executed and delivered to the Collateral Monitor and the
Agent from time to time solely for its convenience in maintaining records of the
Collateral; the Borrower's failure to give any of such items to the Collateral
Monitor and the Agent shall not affect, terminate, modify or otherwise limit the
Agent's Lien or security interest in the Collateral.
SECTION 10.03 Status of Receivables and Other Collateral. The Borrower
covenants, represents and warrants that: (a) it shall be the sole owner, free
and clear of all Liens except in favor of the Agent or otherwise permitted
hereunder, of and fully authorized to sell, transfer, pledge and/or grant a
security interest in each and
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every item of said Collateral owned by it; (b) it will not seek to qualify, or
maintain the qualification of, a Receivable as an Eligible Receivable unless
such Receivable shall be a good and valid account representing an undisputed
bona fide indebtedness incurred or an amount indisputably owed by the Customer
therein named, for a fixed sum as set forth in the invoice relating thereto with
respect to an absolute sale and delivery upon the specified terms of goods sold
by the Borrower, or work, labor and/or services theretofore rendered by the
Borrower; (c) it will not seek to qualify, or maintain the qualification of, a
Receivable as an Eligible Receivable unless such Receivable or portion thereof
which it seeks to so qualify is not subject to any defense, offset,
counterclaim, discount or allowance (as of the time of its creation) except as
may be stated in the invoice relating thereto or discounts and allowances as may
be customary in the Borrower's business; (d) none of the transactions underlying
or giving rise to any Eligible Receivable shall violate any applicable state or
Federal laws or regulations in any material respect, and all documents relating
to any Eligible Receivable shall be legally sufficient under such laws or
regulations and shall be legally enforceable in accordance with their terms
(subject as to enforcement of remedies to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the enforcement of
creditors' rights generally from time to time in effect and to general
principles of equity); (e) it will not seek to qualify, or maintain the
qualification of, a Receivable as an Eligible Receivable unless to the best of
its knowledge, each Customer, guarantor or endorser with respect to such
Receivable is solvent and will continue to be fully able to pay all Eligible
Receivables on which it is obligated in full when due; (f) it will not seek to
qualify, or maintain the qualification of, a Receivable as an Eligible
Receivable unless all documents and agreements relating to such Receivable shall
be true and correct and in all respects what they purport to be; (g) it will not
seek to qualify, or maintain the qualification of, a Receivable as an Eligible
Receivable unless to the best of its knowledge, all signatures and endorsements
that appear on all documents and agreements relating to such Receivable shall be
genuine and all signatories and endorsers with respect thereto shall have full
capacity to contract; (h) it shall maintain books and records pertaining to the
Collateral in such detail, form and scope as are customary for businesses
similarly situated; (i) it will not seek to qualify, or maintain the
qualification of, a Receivable as an Eligible Receivable unless it shall have
immediately notified the Agent as to any accounts arising out of contracts with
the United States or any department, agency or instrumentality thereof, and
shall have executed any instruments and taken any steps required by the Agent in
order that all monies due or to become due under any such contract shall be
assigned to the Agent and notice thereof given to the United States Government
under the Federal Assignment of Claims Act; (j) it will, immediately upon
learning thereof, report to the Agent any material loss or destruction of, or
substantial damage to, any of the Collateral, and any other matters affecting
the value, enforceability or collectability of any of the Collateral; (k) if any
amount payable under or in connection with any Receivable in excess of $100,000
is evidenced by a promissory note or other instrument, as such terms are defined
in the Uniform Commercial Code, such promissory note or instrument shall be
immediately pledged, endorsed, assigned and delivered to the Agent as additional
collateral; (l) it shall not re-date any invoice or sale or make sales on
extended dating beyond that customary in the industry; (m) it shall
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conduct a physical count of its inventory at such intervals as the Collateral
Monitor (in consultation with the Agent) may request and promptly supply the
Collateral Monitor and the Agent with a copy of such counts accompanied by a
report of the value (based on the lower of cost (on a FIFO basis) or market
value) of such inventory; and (n) it is not nor shall it be entitled to pledge
the Lenders' credit on any purchases or for any purpose whatsoever.
SECTION 10.04 Monthly Statement of Account. The Agent shall render to the
Borrower each month a statement of the Borrower's account, which shall
constitute an account stated and shall be deemed to be correct and accepted by
and be binding upon the Borrower unless the Agent receives a written statement
of the Borrower's exceptions within 30 days after such statement was rendered to
the Borrower.
SECTION 10.05 Collateral Custodian. Upon the occurrence and continuance of
an Event of Default, the Agent may at any time and from time to time employ and
maintain in the premises of the Borrower a custodian selected by the Agent who
shall have full authority to do all acts necessary to protect the Agent's and
Lenders' interests and to report to the Agent thereon. The Borrower hereby
agrees to cooperate with any such custodian and to do whatever the Agent may
reasonably request to pre serve the Collateral. All costs and expenses incurred
by the Agent by reason of the employment of the custodian shall be charged to
the Borrower's account and added to the Obligations.
XI. MISCELLANEOUS
SECTION 11.01 Notices. Notices, consents and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service or mailed by certified or registered mail or sent by telecopy
addressed,
(a) if to the Borrower, Guarantors, or Grantors, at 77 Metro Way,
Secaucus, New Jersey 07094, Attention: Mary Ann Domuracki, Executive Vice
President Finance and Administration (Telecopy No. 201-864-7768), with a
copy to Weil, Gotshal & Manges LLP, 767 5th Avenue, New York, New York,
10153- 0119, Attention: Daniel S. Dokos, Esq. (Telecopy No. 212-310-8007);
(b) if to the Agent, at The Chase Manhattan Bank, 1411 Broadway, 5th
Floor, New York, New York 10018, Attention: Kasper Account Executive
(Telecopy No. 212-391-7118), with a copy to Loan and Agency Services, The
Chase Manhattan Bank, 1 Chase Manhattan Plaza - 8th Floor, New York, New
York 10081, Attention: Jesus Sang (Telecopy No. 212-552-5650), and with a
copy to Kaye, Scholer, et al., LLP, at 425 Park Avenue, New York, New York
10022, Attention: Jeffrey M. Epstein, Esq. (Telecopy No. 212-836-6475);
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(c) if to the Collateral Monitor, at The CIT Group/Commercial
Services, 1211 Avenue of the Americas, 12th Floor, New York, New York
10036, Attention: Deborah B. Rogut, Vice President, Kasper Account
Executive (Telecopy No. 212-382-6814); and
(d) if to any Lender, at the address set forth below its name in
Schedule 2.01(a) annexed hereto or in the Assignment and Acceptance
pursuant to which such Lender became a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or sent by overnight courier service or three
days after being sent by registered or certified mail, postage prepaid, return
receipt requested, if by mail, or when receipt is acknowledged if sent by
telecopy, in each case addressed to such party as provided in this Section 11.01
or in accordance with the latest unrevoked direction from such party.
SECTION 11.02 Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower or any of its subsidiaries
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement, any of the Security Documents, any Guarantee or
any other Loan Document, shall be considered to have been relied upon by the
Lenders and shall survive the making by the Lenders of the Loans and the
execution and delivery to the Lenders of the Notes and the occurrence of any
other Credit Event and shall continue in full force and effect as long as the
principal of or any accrued interest on the Notes or any other fee or amount
payable under the Notes or this Agreement or any other Loan Document is
outstanding and unpaid and so long as the Total Commitment has not been
terminated.
SECTION 11.03 Successors and Assigns; Participations. (a) Whenever in this
Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, any Guarantor, any
Grantor, any ERISA Affiliate, any subsidiary of any thereof, the Agent or the
Lenders, that are contained in this Agreement shall bind and inure to the
benefit of their respective successors and assigns. Without limiting the
generality of the foregoing, the Borrower specifically confirms that any Lender
may at any time and from time to time pledge or otherwise grant a security
interest in any Loan or any Note (or any part thereof) to any Federal Reserve
Bank. The Borrower may not assign or transfer any of its rights or obligations
hereunder without the written consent of all the Lenders.
(b) Each Lender, without the consent of the Borrower or the Agent, may sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Total Commitment) and the Loans owing to it and undrawn
Letters of Credit and the Notes held by it); provided, however, that (i) such
Lender's obligations under this
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Agreement (including, without limitation, its Total Commitment) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the banks or other
entities buying participations shall be entitled to the cost protection
provisions contained in Sections 2.10, 2.12 and 2.16 hereof, but only to the
extent any of such Sections would be available to the Lender which sold such
participation, and (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement; provided, further,
however, that such Lender shall retain the sole right and responsibility to
enforce the obligations of the Borrower, Grantors and the Guarantors relating to
the Loans, including, without limitation, the right to approve any amendment,
modification or waiver of any provision of this Agreement, other than
amendments, modifications or waivers with respect to decreasing any fees payable
hereunder or the amount of principal or the rate of interest payable on the
Loans, or extending the dates fixed for any payment of principal of or interest
on, the Loans or increasing or extending the Commitments or the release of all
Collateral.
(c) Each Lender may assign by novation, to any one or more banks or other
entities without the prior written consent of the Borrower but with the prior
written consent of the Agent, all or a portion of its interests, rights and
obligations under this Agreement and the other Loan Documents (including,
without limitation, all or a portion of its Total Commitment and the same
portion of the Loans and undrawn Letters of Credit at the time owing to it and
the Note or Notes held by it), provided, however, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all of the assigning
Lender's rights and obligations under this Agreement, which shall include the
same percentage interest in the Revolving Credit Commitment, the Reducing
Revolving Credit Commitment, Revolving Credit Loans, Reducing Revolving Credit
Loans, Letters of Credit, Revolving Credit Notes and Reducing Revolving Credit
Notes, (ii) the amount of the Total Commitment of the assigning Lender being
assigned pursuant to each such assignment (determined as of the date the
Assignment and Acceptance with respect to such assignment is delivered to the
Agent) shall be in a minimum principal amount of $5,000,000 (unless to another
Lender, in which event there shall be no minimum requirement) for the Total
Commitment of such Lender and the amount of the Total Commitment of such Lender
shall not be less than $5,000,000 or shall be zero (unless such Lender's minimum
hold position shall fall below $5,000,000 by reason of an assignment to another
Lender), (iii) the parties to each such assignment shall execute and deliver to
the Agent, for its acceptance and recording in the Register (as defined below),
an Assignment and Acceptance, together with any Note subject to such assignment
and a processing and recordation fee of $5,000 and (iv) the Assignee, if it
shall not be a Lender, shall deliver to the Agent an Administrative
Questionnaire in the form provided to such Assignee by the Agent. Upon such
execution, delivery, acceptance and recording and after receipt of the written
consent of the Agent, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five (5)
Business Days after the execution thereof, (x) the assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a
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Lender hereunder and under the other Loan Documents and (y) the Lender which is
assignor thereunder shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.10, 2.12, 2.16 and 11.04, as well as any fees accrued for
its account hereunder and not yet paid).
(d) By executing and delivering an Assignment and Acceptance, the Lender
which is assignor thereunder and the assignee thereunder confirm to, and agree
with, each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereunder free and clear of any adverse claim, and that
its Total Commitment and the outstanding balance of its Loans and participations
in Letters of Credit, in each case without giving effect to assignments thereof
which have not become effective, are as set forth in such Assignment and
Acceptance, such Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, perfection, genuineness, sufficiency or value of this
Agreement, the other Loan Documents or any Collateral with respect thereto or
any other instrument or document furnished pursuant hereto or thereto; (ii) such
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Loan Party or the performance or
observance by any Loan Party of any of its obligations under this Agreement, any
Guarantees or any of the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance and confirms that it has received a copy of this Agreement, any
Guarantees and of the other Loan Documents, together with copies of financial
statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Agent, such Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee appoints and authorizes the Agent to take such action as the Agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vi) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(e) The Agent shall maintain at its address referred to in Section 11.01
hereof a copy of each Assignment and Acceptance delivered to it and a register
for the recordation of the names and addresses of the Lenders and the Revolving
Credit Commitment and Reducing Revolving Credit Commitment, of, and principal
amount of the Revolving Credit Loans and Reducing Revolving Credit Loans owing
to, each
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Lender from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Agent and
the Lenders may treat each person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Effective upon the
assignment of an interest hereunder, Schedules 2.01(a) and (b) shall be amended
by the Agent to reflect such assignment.
(f) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee together with any Note or Notes subject to such
assignment, any processing and recordation fee and, if required, an
Administrative Questionnaire and the written consent to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is
precisely in the form of Exhibit F annexed hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the Register
and (iii) give prompt notice thereof to the Lenders and the Borrower. Within
five (5) Business Days after receipt of such notice, the Borrower, at its own
expense, shall execute and deliver to the Agent in exchange for each surrendered
Note or Notes a new Note or Notes to the order of such assignee in an amount
equal to its portion of the Revolving Credit Commitment and Reducing Revolving
Credit Commitment assumed by it pursuant to such Assignment and Acceptance and,
if the assigning Lender has retained any Revolving Credit Commitment and
Reducing Revolving Credit Commitment hereunder, a new Note or Notes to the order
of the assigning Lender in an amount equal to the Revolving Credit Commitment
and the Reducing Revolving Credit Commitment, as applicable, retained by it
hereunder. Such new Note or Notes shall be in an aggregate principal amount
equal to the aggregate principal amount of such surrendered Note or Notes, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit B-1, and Exhibit B-2. Notes
surrendered to the Borrower shall be canceled by the Borrower.
(g) Notwithstanding any other provision herein, any Lender may, in
connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 11.03, disclose to the assignee or
participant or proposed assignee or participant, any information, including,
without limitation, any Information, relating to the Borrower furnished to such
Lender by or on behalf of the Borrower in connection with this Agreement;
provided, however, that prior to any such disclosure, each such assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential Information relating to the Borrower
received from such Lender (other than disclosures permitted pursuant to Section
11.11 hereof).
SECTION 11.04 Expenses; Indemnity. (a) The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Agent in connection with the
preparation of this Agreement and the other Loan Documents or with any
amendments, modifications, waivers, extensions, renewals, renegotiations or
"workouts" of the provisions hereof or thereof (whether or not the transactions
hereby contemplated shall
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be consummated) or incurred by the Collateral Monitor in the performance of its
services hereunder or incurred by the Agent or any of the Lenders in connection
with the enforcement or protection of its rights in connection with this
Agreement or any of the other Loan Documents or with the Loans made or the Notes
or Letters of Credit issued hereunder, or in connection with any pending or
threatened action, proceeding, or investigation relating to the foregoing,
including but not limited to the reasonable fees and disbursements of counsel
for the Agent and ongoing field examination expenses and charges, and, in
connection with such enforcement or protection, the reasonable fees and
disbursements of counsel for the Lenders. The Borrower further indemnifies the
Lenders from and agrees to hold them harmless against any documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution and delivery of this Agreement or the Notes.
(b) The Borrower indemnifies the Agent, the Collateral Monitor and each
Lender and their respective directors, officers, employees and agents against,
and agrees to hold the Agent, the Collateral Monitor, each Lender and each such
person harmless from, any and all losses, claims, damages, liabilities and
related expenses, including reasonable counsel fees and expenses, incurred by or
asserted against the Lender or any such person arising out of, in any way
connected with, or as a result of (i) the use of any of the proceeds of the
Loans, (ii) this Agreement, the Guarantees, any of the Security Documents,
Acquisition Documents or the other documents contemplated hereby or thereby,
(iii) the performance by the parties hereto and thereto of their respective
obligations hereunder and thereunder (including but not limited to the making of
the Total Commitment) and consummation of the transactions contemplated hereby
and thereby, (iv) breach of any representation or warranty or (v) any claim,
litigation, investigation or proceedings relating to any of the foregoing,
whether or not the Agent, the Collateral Monitor, any Lender or any such person
is a party thereto; provided, however, that such indemnity shall not, as to the
Agent, the Collateral Monitor or any Lender, apply to any such losses, claims,
damages, liabilities or related expenses to the extent that they result from the
gross negligence or willful misconduct of the Agent, the Collateral Monitor or
any Lender.
(c) The Borrower indemnifies, and agrees to defend and hold harmless the
Agent, the Collateral Monitor and the Lenders and their respective officers,
directors, shareholders, agents and employees (collectively, the "Indemnitees")
from and against any loss, cost, damage, liability, lien, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorneys' fees
and reasonable expenses for investigation, removal, cleanup and remedial costs
and modification costs incurred to permit, continue or resume normal operations
of any property or assets or business of the Borrower or any subsidiary thereof)
arising from a violation of, or failure to comply with any Environmental Law and
to remove any Lien arising therefrom except to the extent caused by the gross
negligence or willful misconduct of any Indemnitee, which any of the Indemnitees
may incur or which may be claimed or recorded against any of the Indemnitees by
any person.
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(d) The provisions of this Section 11.04 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the invalidity or unenforceability of any term or provision of this
Agreement or the Notes, or any investigation made by or on behalf of the Agent,
the Collateral Monitor or any Lender. All amounts due under this Section 11.04
shall be payable on written demand therefor.
SECTION 11.05 Applicable Law. THIS AGREEMENT AND THE NOTES AND THE OTHER
LOAN DOCUMENTS, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATION LAW
OF THE STATE OF NEW YORK, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAWS
PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF ANY OTHER
JURISDICTION.
SECTION 11.06 Right of Setoff. If an Event of Default shall have occurred
and be continuing, upon the request of the Agent each Lender shall and is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender to or for the credit or the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement and the Notes held by such Lender, irrespective of whether
or not such Lender shall have made any demand under this Agreement or the Notes
and although such obligations may be unmatured. Each Lender agrees to notify
promptly the Agent and the Borrower after any such setoff and application made
by such Lender, but the failure to give such notice shall not affect the
validity of such setoff and application. The rights of each Lender under this
Section are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which may be available to such Lender.
SECTION 11.07 Payments on Business Days. (a) Should the principal of or
interest on the Notes or any fee or other amount payable hereunder become due
and payable on other than a Business Day, payment in respect thereof may be made
on the next succeeding Business Day (except as otherwise specified in the
definition of "Interest Period"), and such extension of time shall in such case
be included in computing interest, if any, in connection with such payment.
(b) All payments by the Borrower hereunder and all Loans made by the
Lenders hereunder shall be made in lawful money of the United States of America
in immediately available funds at the office of the Agent set forth in Section
11.01 hereof.
SECTION 11.08 Waivers; Amendments. (a) No failure or delay of any Lender in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or
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discontinuance of steps to enforce such right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Lenders hereunder are cumulative and not exclusive of any
rights or remedies which they may otherwise have. No waiver of any provision of
this Agreement or the Notes nor consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be authorized as
provided in paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Borrower in any case shall entitle it to any other or
further notice or demand in similar or other circumstances. Each holder of any
of the Notes shall be bound by any amendment, modification, waiver or consent
authorized as provided herein, whether or not such Note shall have been marked
to indicate such amendment, modification, waiver or consent.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrower and the Required Lenders; provided, however, that no such
agree ment shall (i) change the principal amount of, or extend or advance the
maturity of or the dates for the payment of principal of or interest on, any
Note or reduce the rate of interest on any Note, or decrease any fees payable
pro rata to the Lenders, (ii) change the Revolving Credit Commitment or the
Reducing Revolving Credit Commitment of any Lender, increase any percentage or
amount contained in the definition of Borrowing Base or make overadvances other
than Permitted Overadvances or amend or modify the provisions of this Section,
Section 2.06, Section 2.13, Section 4.14 or Section 11.04 hereof or the
definition of "Required Lenders," or (iii) release any Guarantee (except in
connection with a sale or dissolution of a Guarantor otherwise permitted
hereunder) or any material portion of Collateral or share or subordinate any
Lien priority (not otherwise permitted hereunder), in each case without the
prior written consent of each Lender affected thereby and provided, further,
however, that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Agent or Collateral Monitor under this Agreement or the
other Loan Documents without the written consent of the Agent or Collateral
Monitor, as applicable. Each Lender and holder of any Note shall be bound by any
modification or amendment or waiver authorized in accordance with this Section
regardless of whether its Notes shall be marked to make reference thereto, and
any consent by any Lender or holder of a Note pursuant to this Section shall
bind any person subsequently acquiring a Note from it, whether or not such Note
shall be so marked.
(c) In the event that the Borrower requests, with respect to this Agreement
or any other Loan Document, an amendment, modification or waiver and such
amendment, modification or waiver would require the unanimous consent of all of
the Lenders in accordance with Section 11.08(b) above, and such amendment,
modification or waiver is agreed to in writing by the Borrower and the Required
Lenders but not by all of the Lenders, then notwithstanding anything to the
contrary in Section 11.08(b) above, with the written consent of the Borrower and
such Required Lenders, the Borrower and Required Lenders may, but shall not be
obligated to, amend this Agreement without the consent of the Lender or Lenders
who did not agree to the proposed amendment, modification or waiver (the
"Minority Lenders") solely to provide
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for (i) the termination of the Total Commitment of each Minority Lender, (ii)
the assignment in accordance with Section 11.03 hereof to one or more persons of
each Minority Lender's interests, rights and obligations under this Agreement
(including, without limitation, all of such Minority Lender's Total Commitment
as well as its portion of all outstanding Loans and the Note or Notes held by
such Minority Lender) and the other Loan Documents and/or an increase in the
Revolving Credit Commitment and the Reducing Revolving Credit Commitment of one
or more Required Lenders, in each case so that after giving effect thereto the
Total Revolving Credit Commitment and the Total Reducing Revolving Credit
Commitment shall be in the same amounts as prior to the events described in this
paragraph, (iii) the repayment to the Minority Lenders in full of all Loans
outstanding and accrued interest thereon at the time of the assignment and/or
increase in Revolving Credit Commitments and Reducing Revolving Credit
Commitment described in clause (ii) above with the proceeds of Loans made by
such persons who are to become Lenders by assignment or with the proceeds of
Loans made by Required Lenders who have agreed to increase their Revolving
Credit Commitment and Reducing Revolving Credit Commitment, (iv) the payment to
the Minority Lenders by the Borrower of all fees and other compensation due and
owing such Minority Lenders under the terms of this Agreement and the other Loan
Documents and (v) such other modifications as the Required Lenders and Borrower
shall deem necessary in order to effect the changes specified in clauses (i)
through (iv) hereof.
SECTION 11.09 Severability. In the event any one or more of the provisions
contained in this Agreement or in the Notes or any of the other Loan Documents
should be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein or
therein shall not in any way be affected or impaired thereby.
SECTION 11.10 Entire Agreement; Waiver of Jury Trial, etc. (a) This
Agreement, the Notes and the other Loan Documents constitute the entire contract
between the parties hereto relative to the subject matter hereof. Any previous
agreement among the parties hereto with respect to the Transactions is
superseded by this Agreement, the Notes and the other Loan Documents. Except as
expressly provided herein or in the Notes or the Loan Documents (other than this
Agreement), nothing in this Agreement, the Notes or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, the Notes or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby waives any right
it may have to a trial by jury in respect of any litigation directly or
indirectly arising out of, under or in connection with this Agreement, the
Notes, any of the other Loan Documents or the Transactions.
(c) Except as prohibited by law, each party hereto hereby waives any right
it may have to claim or recover in any litigation referred to in paragraph (b)
of this
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Section 11.10 any special, exemplary, punitive or consequential damages or any
damages other than, or in addition to, actual damages.
(d) Each party hereto (i) certifies that no representative, agent or
attorney of any Lender has represented, expressly or otherwise, that such Lender
would not, in the event of litigation, seek to enforce the foregoing waivers and
(ii) acknowledges that it has been induced to enter into this Agreement, the
Notes or the other Loan Documents, as applicable, by, among other things, the
mutual waivers and certifications herein.
SECTION 11.11 Confidentiality. The Agent and each of the Lenders agree to
keep confidential (and to cause their respective officers, directors, employees,
agents and representatives to keep confidential) all information, materials and
documents furnished to the Agent or any Lender (the "Information").
Notwithstanding the foregoing, the Agent and each Lender shall be permitted to
disclose Information (i) to such of its officers, directors, employees, agents
and representatives as need to know such Information in connection with its
participation in any of the Transactions or the administration of the Factoring
Agreement, the Senior Notes, this Agreement or the other Loan Documents; (ii) to
the extent required by applicable laws and regulations or by any subpoena or
similar legal process, or requested by any governmental agency or authority;
(iii) to the extent such information (A) becomes publicly available other than
as a result of a breach of this Agreement, (B) becomes available to the Agent or
such Lender on a non-confidential basis from a source other than a Loan Party or
(C) was available to the Agent or such Lender on a non-confidential basis prior
to its disclosure to the Agent or such Lender by a Loan Party; (iv) to the
extent any Loan Party shall have consented to such disclosure in writing; (v) in
connection with the sale of any Collateral pursuant to the provisions of any of
the other Loan Documents; or (vi) pursuant to Section 11.03(g) hereof.
SECTION 11.12 Submission to Jurisdiction. (a) Any legal action or
proceeding with respect to this Agreement or the Notes or any other Loan
Document may be brought in the courts of the State of New York or of the United
States of America for the Southern District of New York, and, by execution and
delivery of this Agreement, each Loan Party hereby accept for itself and in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts.
(b) The Borrower and each other Loan Party hereby irrevocably waive, in
connection with any such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which they may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions.
(c) The Borrower and each other Loan Party hereby irrevocably consent to
the service of process of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage
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prepaid, to each such person, as the case may be, at its address set forth in
Section 11.01 hereof.
(d) Nothing herein shall affect the right of the Agent or any Lender to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against any Loan Party in any other
jurisdiction.
SECTION 11.13 Counterparts; Facsimile Signature. This Agreement may be
executed in counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract, and shall become
effective when copies hereof which, when taken together, bear the signatures of
each of the parties hereto shall be delivered to the Agent. Delivery of an
executed counterpart of a signature page to this Agreement by telecopier shall
be effective as delivery of a manually executed signature page hereto.
SECTION 11.14 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only and are not to affect
the construction of, or to be taken into consideration in interpreting, this
Agreement.
XII. GUARANTEES
Each Guarantor unconditionally guarantees, as a primary obligor and not
merely as a surety, jointly and severally with each other Guarantor, the due and
punctual payment of the principal of and interest on each of the Notes, when and
as due, whether at maturity, by acceleration, by notice of prepayment or
otherwise, and the due and punctual payment and performance of all other
Obligations. Each Guarantor further agrees that the Obligations may be extended
and renewed, in whole or in part, without notice to or further assent from it,
and that it will remain bound upon its guarantee notwithstanding any extension
or renewal of any Obligations.
Each Guarantor waives presentment to, demand of payment from and protest to
the Borrower of any of the Obligations, and also waives notice of acceptance of
its guarantee and notice of protest for nonpayment. The obligations of a
Guarantor hereunder shall not be affected by (a) the failure of any Lender or
the Agent to assert any claim or demand or to enforce any right or remedy
against the Borrower or any other Guarantor under the provisions of this
Agreement, the Notes or any of the other Loan Documents or otherwise; (b) any
rescission, waiver, amendment or modification of any of the terms or provisions
of this Agreement, the Notes, any of the other Loan Documents, any guarantee or
any other agreement; (c) the release of any security held by the Agent for the
Obligations or any of them; or (d) the failure of any Lender or the Agent to
exercise any right or remedy against any other Guarantor of the Obligations; or
(e) the failure of any Lender or the Agent to take, register, perfect or
preserve any security for any of the Obligations.
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Each Guarantor further agrees that its guarantee constitutes a guarantee of
payment when due and not of collection, and waives any right to require that any
resort be had by the Agent or any Lender to any security (including, without
limitation, any Collateral) held for payment of the Obligations or to any
balance of any deposit account or credit on the books of any Lender or the Agent
in favor of the Borrower or any other person.
The obligations of each Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceability of the Obligations or otherwise. Without limiting the
generality of the foregoing, the obligations of each Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the Agent
or any Lender to assert any claim or demand or to enforce any remedy under this
Agreement, the Notes or under any other Loan Document, any guarantee or any
other agreement, by any waiver or modification of any provision thereof, by any
default, failure or delay, willful or otherwise, in the performance of the
Obligations, or by any other act or omission which may or might otherwise in any
manner or to any extent vary the risk or reduce or extinguish the liability of
such Guarantor or otherwise operate as a discharge of such Guarantor as a matter
of law or equity.
Each Guarantor further agrees that its guarantee shall be a continuing
guarantee and shall stand as a guarantee of full and final payment and
performance of all Obligations from time to time and shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be returned by the Agent or any Lender upon the bankruptcy or
reorganization of the Borrower or otherwise.
Each Guarantor hereby waives and releases in favor of the Lenders and the
Agent all rights of subrogation against or in respect of the Borrower and its
property and all rights of indemnification, contribution and reimbursement from
the Borrower and its property, in each case in connection with this guarantee
and any payments made hereunder, and regardless of whether such rights arise by
operation of law, pursuant to contract or otherwise until such time as the
Obligations have been fully and finally performed and paid.
Any term or provision of this Agreement or any other Loan Document to the
contrary notwithstanding, the maximum aggregate amount of the Obligations for
which any Guarantor shall be liable shall not exceed the maximum amount for
which such Guarantor can be liable without rendering this Agreement or any other
Loan Document, as it relates to such Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer.
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<PAGE>
IN WITNESS WHEREOF, the Borrower, Guarantors, the Agent, the Collateral
Monitor and the Lenders have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.
KASPER A.S.L., LTD., as Borrower
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Chief Financial Officer
A.S.L. RETAIL OUTLETS, INC., as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Vice President and
Chief Financial Officer
ASL/K LICENSING CORP., as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Treasurer
KASPER A.S.L. EUROPE, LTD., as a
Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Secretary
KASPER HOLDINGS INC., as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Vice President
<PAGE>
AKC ACQUISITION, LTD., as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Secretary
LION LICENSING, LTD., as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Secretary
ASIA EXPERT LIMITED, as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Secretary
TOMWELL LIMITED, as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Secretary
VIEWMON LIMITED, as a Guarantor
By: /s/ Dennis P. Kelly
---------------------------------------
Name: Dennis P. Kelly
Title: Secretary
THE CHASE MANHATTAN BANK, as Lender
By: /s/ Daniel Greene
---------------------------------------
Name: Daniel Greene
Title: Vice President
<PAGE>
THE CHASE MANHATTAN BANK, as Agent
By: /s/ Daniel Greene
---------------------------------------
Name: Daniel Greene
Title: Vice President
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Lender
By: /s/ Richard Lyons
---------------------------------------
Name: Richard Lyons
Title: Vice President
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Collateral Monitor
By: /s/ Richard Lyons
---------------------------------------
Name: Richard Lyons
Title: Vice President
LASALLE BANK, N.A., as Lender
By: /s/ Shonagh Aylsworth
---------------------------------------
Name: Shonagh Aylsworth
Title: First Vice President
FLEET CAPITAL CORPORATION, as Lender
By: /s/ Frank J. Galle
---------------------------------------
Name: Frank J. Galle
Title: Vice President
FINOVA CAPITAL CORPORATION, as Lender
By: /s/ Jason S. Ito
---------------------------------------
Name: Jason S. Ito
Title: Director
<PAGE>
ISRAEL DISCOUNT BANK OF NEW YORK, as
Lender
By: /s/ R. David Korngruen By: /s/ Howard Weinberg
------------------------------ ---------------------------------------
Name: R. David Korngruen Name: Howard Weinberg
Title: Vice President Title: First Vice President
BANKBOSTON, N.A., as Lender
By: /s/ Robert J. Brandon
---------------------------------------
Name: Robert J. Brandon
Title: Managing Director
PNC BANK, NATIONAL ASSOCIATION, as
Lender
By: /s/ David L. Raphaels
---------------------------------------
Name: David L. Raphaels
Title: Vice President
DEBIS FINANCIAL SERVICES, INC., as
Lender
By: /s/ Michael L. Miller
---------------------------------------
Name: Michael L. Miller
Title: Managing Director
BANK LEUMI USA, as Lender
By: /s/ Steven Farron
---------------------------------------
Name: Steven Farron
Title: Vice President
<PAGE>
SCHEDULE 2.01(a)
Revolving Credit Commitments
Prior to receipt by the Agent of the Special Charter Amendment Opinion each
Lender's Revolving Credit Commitment shall be as follows:
Approximate
Revolving Percentage of
Credit Total Revolving
Lender Commitment Credit Commitment
- ------ ---------- -----------------
The Chase Manhattan Bank
1411 Broadway, 5th Floor
New York, NY 10018 $14,843,750 14.84375 %
Attention: Kasper Relationship
Manager
The CIT Group/Commercial
Services, Inc.
1211 Avenue of the Americas
12th Floor
New York, NY 10036 $14,843,750 14.84375 %
Attention: Deborah B. Rogut
LaSalle National Bank, N.A
135 South LaSalle St
Chicago, IL 60803 $ 9,375,000 9.37500 %
Attention: Shonagh Aylsworth
Fleet Capital Corporation
60 East 42 St., 3rd Floor
New York, NY 10022 $12,500,000 12.50000 %
Attention: Jack Donlon
Finova Capital Corporation
400 Northridge Rd., Suite 1100
Atlanta, GA 30350 $ 7,812,500 7.81250 %
Attention: Bruce Sim
2.01(a) - 1
<PAGE>
Israel Discount Bank of New York
511 Fifth Ave.
New York, NY 10017 $ 6,250,000 6.25000 %
Attention: Howard Weinberg
BankBoston, N.A.
100 Federal St.
Boston, MA 02110 $ 12,500,000 12.50000 %
Attention: Tricia Malerba
PNC Bank, National Association
Two Tower Center
East Brunswick, NJ 08818 $ 9,375,000 9.37500 %
Attention: Dave Raphaels
debis Financial Services, Inc
201 Merritt 7, Suite 700
Norwalk, CT 06856 $ 9,375,000 9.37500 %
Attention: Jim Stone
Bank Leumi, USA
562 Fifth Avenue, 11th Floor
New York, NY 10036 $ 3,125,000 3.12500 %
Attention: Mel Plotzker
============= ====
Total $ 100,000,000 100%
2.01(a) - 2
<PAGE>
After receipt by the Agent of the Special Charter Amendment Opinion each
Lender's Revolving Credit Commitment shall be as follows:
Approximate
Revolving Percentage of
Credit Total Revolving
Lender Commitment Credit Commitment
- ------ ---------- -----------------
The Chase Manhattan Bank
1411 Broadway, 5th Floor
New York, NY 10018 $ 23,750,000 14.84375 %
Attention: Kasper Relationship
Manager
The CIT Group/ Commercial
Services, Inc.
12th Floor
1211 Avenue of the Americas
New York, NY 10036 $ 23,750,000 14.84375 %
Attention: Deborah B. Rogut
LaSalle National Bank, N.A.
135 South LaSalle St.
Chicago, IL 60803 $ 15,000,000 9.37500 %
Attention: Shonagh Aylsworth
Fleet Capital Corporation
60 East 42 St., 3rd Floor
New York, NY 10022 $ 20,000,000 12.50000 %
Attention: Jack Donlon
Finova Capital Corporation
400 Northridge Rd., Suite 1100
Atlanta, GA 30350 $ 12,500,000 7.81250 %
Attention: Bruce Sim
Israel Discount Bank of New York
511 Fifth Ave.
New York, NY 10017 $ 10,000,000 6.25000 %
Attention: Howard Weinberg
2.01(a) - 3
<PAGE>
BankBoston, N.A.
100 Federal Street
Boston, MA 02110 $ 20,000,000 12.50000 %
Attention: Tricia Malerba
PNC Bank, National Association
Two Tower Center
East Brunswick, NJ 08818 $ 15,000,000 9.37500 %
Attention: Dave Raphaels
debis Financial Services, Inc
201 Merritt 7, Suite 700
Norwalk, CT 06856 $ 15,000,000 9.37500 %
Attention: Jim Stone
Bank Leumi, USA
562 Fifth Avenue, 11th Floor
New York, NY 10036 $ 5,000,000 3.12500 %
Attention: Mel Plotzker
============= ====
Total $ 160,000,000 100%
2.01(a) - 4
<PAGE>
SCHEDULE 2.01(b)
Reducing Revolving Credit Commitments
Approximate
Revolving Percentage of
Credit Total Revolving
Lender Commitment Credit Commitment
- ------ ---------- -----------------
The Chase Manhattan Bank
1411 Broadway, 5th Floor
New York, NY 10018 $ 3,710,937.50 14.84375 %
Attention: Kasper Relationship
Manager
The CIT Group/Commercial
Services, Inc.
1211 Avenue of the Americas
12th Floor
New York, NY 10036 $ 3,710,937.50 14.84375 %
Attention: Deborah B. Rogut
LaSalle National Bank, N.A.
135 South LaSalle St.
Chicago, IL 60803 $ 2,343,750 9.37500 %
Attention: Shonagh Aylsworth
Fleet Capital Corporation
60 East 42 St., 3rd Floor
New York, NY 10022 $ 3,125,000 12.50000 %
Attention: Jack Donlon
Finova Capital Corporation
400 Northridge Rd., Suite 1100
Atlanta, GA 30350 $ 1,953,125 7.81250 %
Attention: Bruce Sim
Israel Discount Bank of New York
511 Fifth Ave.
New York, NY 10017 $ 1,562,500 6.25000 %
Attention: Howard Weinberg
2.01(b) - 1
<PAGE>
BankBoston, N.A.
100 Federal Street
Boston, MA 02110 $ 3,125,000 12.50000 %
Attention: Tricia Malerba
PNC Bank, National Association
Two Tower Center
East Brunswick, NJ 08818 $ 2,343,750 9.37500 %
Attention: Dave Raphaels
debis Financial Services, Inc
201 Merritt 7, Suite 700
Norwalk, CT 06856 $ 2,343,750 9.37500 %
Attention: Jim Stone
Bank Leumi, USA
562 Fifth Avenue, 11th Floor
New York, NY 10036 $ 781,250 3.12500 %
Attention: Mel Plotzker
============= ====
Total $ 25,000,000 100%
2.01(b) - 2
<PAGE>
SCHEDULE 2.02
Domestic Lending Offices
Lender Domestic Lending Office
The Chase Manhattan Bank The Chase Manhattan Bank
1411 Broadway, 5th Floor
New York, NY 10018
Attn: Kasper Relationship Manager
The CIT Group/Commercial The CIT Group/Commercial Services, Inc.
Services, Inc. 1211 Avenue of the Americas
12th Floor
New York, NY 10036
Attention: Deborah B. Rogut
LaSalle National Bank, N.A. LaSalle National Bank, N.A.
135 South LaSalle St.
Chicago, IL 60803
Attention: Shonagh Aylsworth
Fleet Capital Corporation Fleet Capital Corporation
60 East 42 St., 3rd Floor
New York, NY 10022
Attention: Jack Donlon
Finova Capital Corporation Finova Capital Corporation
400 Northridge Rd., Suite 1100
Atlanta, GA 30350
Attention: Bruce Sim
Israel Discount Bank of Israel Discount Bank of New York
New York 511 Fifth Ave.
New York, NY 10017
Attention: Howard Weinberg
BankBoston, N.A. BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Attention: Tricia Malerba
2.02 - 1
<PAGE>
PNC Bank, National Association PNC Bank, National Association
Two Tower Center
East Brunswick, NJ 08818
Attention: Dave Raphaels
debis Financial Services, Inc debis Financial Services, Inc.
201 Merritt 7, Suite 700
Norwalk, CT 06856
Attention: Jim Stone
Bank Leumi, USA Bank Leumi, USA
562 Fifth Avenue, 11th Floor
New York, NY 10036
Attention: Mel Plotzker
2.02 - 2
<PAGE>
SCHEDULE 2.03
Eurodollar Lending Offices
Lender Eurodollar Lending Office
The Chase Manhattan Bank The Chase Manhattan Bank
1411 Broadway, 5th Floor
New York, NY
Attention: Kasper Relationship Manager
The CIT Group/Commercial The CIT Group/Commercial Services, Inc.
Services, Inc. 1211 Avenue of the Americas
12th Floor
New York, NY 10036
Attention: Deborah B. Rogut
LaSalle National Bank, N.A. LaSalle National Bank, N.A.
135 South LaSalle St.
Chicago, IL 60803
Attention: Shonagh Aylsworth
Fleet Capital Corporation Fleet Capital Corporation
60 East 42 St., 3rd Floor
New York, NY 10022
Attention: Jack Donlon
Finova Capital Corporation Finova Capital Corporation
400 Northridge Rd., Suite 1100
Atlanta, GA 30350
Attention: Bruce Sim
Israel Discount Bank Israel Discount Bank of New York
511 Fifth Ave.
New York, NY 10017
Attention: Howard Weinberg
BankBoston, N.A. BankBoston, N.A.
100 Federal Street
Boston, MA 02110
Attention: Tricia Malerba
2.03 - 1
<PAGE>
PNC Bank, National Association PNC Bank, National Association
Two Tower Center
East Brunswick, NJ 08818
Attention: Dave Raphaels
debis Financial Services, Inc debis Financial Services, Inc.
201 Merritt 7, Suite 700
Norwalk, CT 06856
Attention: Jim Stone
Bank Leumi, USA Bank Leumi, USA
562 Fifth Avenue, 11th Floor
New York, NY 10036
Attention: Mel Plotzker
2.03 - 2
<PAGE>
SCHEDULE 6.05(g)
INVENTORY DESIGNATION
The Chase Manhattan Bank, as Agent
________________________
New York, ______________
Gentlemen:
We certify, represent to you and agree with you as follows:
1) As of , the value of our inventories was set forth on the attached
schedule(s) and/or paper(s). For purposes of the attached "Comp 1" shall mean
the Borrower, "Comp 2" shall mean ASL Retail, "Comp 3" shall mean Asia Expert
Limited, "Comp 4" shall mean ________, "Comp 5" shall mean ________, "Comp 6"
shall mean ________, "Comp 7" shall mean ________ and "Comp 8" shall mean
________.
2) Such figures are taken from our inventory records, kept in accordance with
generally accepted accounting principles and used in our business or, if so
indicated, taken from a physical inventory. Such figures are at the lower of
cost or market (unless otherwise indicated), with appropriate allowances for
slow moving, returned or second quality goods. This certificate and agreement is
mailed to you upon the understanding that you will rely upon it in making or
continuing loans to us under the Credit Agreement dated as of ____, 199__ (as
amended, modified or supplemented from time to time, the "Credit Agreement," the
terms defined therein being used herein as therein defined) among the
undersigned, the Lenders named therein, and The Chase Manhattan Bank, as Agent,
and/or advances upon our receivables, or in otherwise extending credit to us.
3) We confirm that the agreements, warranties and representations contained in
such Credit Agreement apply to all such inventories. We hereby pledge and
consign to you, grant you a continuing general lien upon and designate as
subject to your continuing general lien and security interest all of said
inventories, confirming any lien statements or security agreements given you in
respect to same.
4) Your lien and security interest shall attach to such inventories through all
stages of manufacture to and including the finished product, to all accounts
receivable or other proceeds resulting from the sale thereof, to any merchandise
returned to us, and to all inventories acquired by us from time to time in the
future, whether in substitution for or in addition to this merchandise.
5) Such inventories are located at the following addresses:
Dated: _____________, 19__ [BORROWER]
By:____________________________
Name:
Title:
<PAGE>
Exhibit A
Trademark Amount (000's omitted)
Jul '99 Aug '99 Sep '99 Oct '99 Nov '99 Dec '99
$40,000 $47,000 $47,000 $40,000 $40,000 $40,000
Jan '00 Feb '00 Mar '00 Apr '00 May '00 Jun '00
$43,000 $45,000 $48,000 $45,000 $43,000 $43,000
Jul '00 Aug '00 Sep '00 Oct '00 Nov '00 Dec '00
$45,000 $45,000 $43,000 $40,000 $40,000 $40,000
Jan '01 Feb '01 Mar '01 Apr '01 May '01 Jun '01
$43,000 $45,000 $38,000 $35,000 $33,000 $33,000
Jul '01 Aug '01 Sep '01 Oct '01 Nov '01 Dec '01
$35,000 $35,000 $33,000 $30,000 $30,000 $30,000
Jan '02 Feb '02 Mar '02 Apr '02 May '02 Jun '02
$33,000 $35,000 $28,000 $25,000 $23,000 $23,000
Jul '02 Aug '02 Sep '02 Oct '02 Nov '02 Dec '02
$25,000 $25,000 $23,000 $20,000 $20,000 $20,000
Jan '03 Feb '03 Mar '03 Apr '03 May '03 Jun '03
$23,000 $25,000 $18,000 $15,000 $13,000 $13,000
Jul '03 Aug '03 Sep '03 Oct '03 Nov '03 Dec '03
$15,000 $15,000 $13,000 $10,000 $10,000 $10,000
Exhibit 10.2
KASPER A.S.L., LTD.
(f/k/a Sassco Fashions, Ltd.)
--------------------------------
12.75% Senior Notes Due 2004
--------------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of June 16, 1999
to
Indenture
Dated as of June 1, 1997
--------------------------------
IBJ WHITEHALL BANK & TRUST COMPANY
(f/k/a IBJ Schroder Bank & Trust Company),
as Trustee
#457762 v8
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
--------------------------------
KASPER A.S.L., LTD.
(f/k/a Sassco Fashions, Ltd.)
IBJ WHITEHALL BANK & TRUST COMPANY
(f/k/a IBJ Schroder Bank & Trust Company),
as Trustee
Dated as of June 16, 1999
--------------------------------
Second Supplemental Indenture, dated as of June 16, 1999 (this "Second
Supplemental Indenture"), between Kasper A.S.L., Ltd. (f/k/a Sassco Fashions,
Ltd.), a Delaware corporation ("Kasper" or the "Company"), and IBJ Whitehall
Bank & Trust Company (f/k/a IBJ Schroder Bank & Trust Company), as trustee (the
"Trustee"), to the Indenture, dated as of June 1, 1997 and effective as of June
4, 1997 (as amended by the Supplemental Indenture, dated as of June 30, 1997,
the "Indenture"), between Kasper and the Trustee, relating to the 12.75% Senior
Notes due 2004 of Kasper (the "Notes"). Capitalized terms used herein and not
defined herein have the meanings set forth in the Indenture.
WHEREAS, pursuant to an Asset Purchase Agreement (the "Asset Purchase
Agreement"), dated as of March 15, 1999, among Kasper, Anne Klein Company LLC
("Anne Klein") and Takihyo Inc. ("Takihyo" and, together with Anne Klein, the
"Sellers"), Kasper has agreed to purchase from the Sellers certain trademarks
and related license agreements and other selected assets of Anne Klein (the
"Trademark Purchase"); and
WHEREAS, Kasper intends to enter into a new working capital facility to
refinance its existing revolving credit facility, fund its working capital
requirements and finance the Trademark Purchase; and
WHEREAS, Kasper is also proposing to purchase from Fashions of Seventh
Avenue, Inc. ("FSA") 27 retail leases, together with certain specified
inventory, receivables and pre-paid expenses of FSA (the "Retail Acquisition");
and
WHEREAS, in order to effectuate the Trademark Purchase and the Retail
Acquisition, Kasper desires to amend certain provisions of the Indenture; and
WHEREAS, Section 7.2 of the Indenture authorizes Kasper to amend
certain provisions of the Indenture with the consent of the holders of at least
a majority in principal amount of the Notes outstanding; and
2
<PAGE>
WHEREAS, the holders of at least a majority in principal amount of the
Notes outstanding have consented to all of the amendments set forth herein; and
WHEREAS, the Board of Directors of Kasper has duly adopted resolutions
authorizing Kasper to execute and deliver this Second Supplemental Indenture;
and
WHEREAS, pursuant to Section 7.2 of the Indenture, the Trustee is
authorized to execute and deliver this Second Supplemental Indenture.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Amendment of the Indenture.
(a) The definition of "Permitted Investments" in Section 1.1
of the Indenture is amended in its entirety to read as follows:
"Permitted Investments" means (i) Restricted
Investments in existence as of the date hereof, (ii)
certificates of deposit with final maturities of one year or
less issued by commercial banks chartered in the United States
of America (a "Commercial Bank") with capital and surplus in
excess of $100,000,000, (iii) commercial paper rated at least
P-1 by Moody's Investors Service, Inc. or at least A-1 by
Standard & Poor's Corporation, (iv) direct obligations issued
by the United States of America or any agency thereof with a
maturity not more than one year from the date of acquisition,
(v) money market preferred stock rated A or above, (vi)
tax-exempt floating rate option tender bonds, backed by a
letter of credit issued by a Commercial Bank rated AA by
Standard & Poor's Corporation or Aa by Moody's Investors
Service, Inc., (vii) equity or debt investments in
wholly-owned Subsidiaries with lines of business similar to
that of the Company or any of its Subsidiaries' existing lines
of business or lines of business permitted by Section 4.22 of
the Indenture, (viii) investments in prepaid expenses,
negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar
deposits, (ix) investments represented by accounts receivable
created or acquired in the ordinary course of business, (x)
loans or advances to vendors in the ordinary course of
business and (xi) other debt or equity investments in any
person having an aggregate fair market value (measured on the
date each such investment was made and without giving effect
to subsequent changes in value), when taken together with all
other investments made pursuant to this clause (xi) since the
date of the Indenture, not to exceed $5.0 million.
(b) The definition of "Working Capital Facility" in Section
1.1 of the Indenture is amended in its entirety to read as follows:
3
<PAGE>
"Working Capital Facility" means, with respect to
Kasper, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of
receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables)
or letters of credit, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole
or in part from time to time.
(c) Section 2.3(b) of the Indenture is amended and restated in
its entirety to read as follows:
(b) The Securities shall have a Maturity Date of
March 31, 2004 and shall bear interest at the rate of 12.75%
per annum, through and including December 31, 1999, and 13.00%
per annum, commencing as of January 1, 2000. Interest shall be
(i) computed on the basis of a 360-day year of twelve 30-day
months and (ii) payable in arrears on September 30, 1997 and
semiannually on each March 31 and September 30 thereafter.
(d) Section 4.8 of the Indenture is amended and restated in
its entirety to read as follows:
Section 4.8. Limitation on Additional Indebtedness.
Neither the Company nor any of its Subsidiaries shall
contract, create, incur, assume, guarantee, suffer to exist
nor otherwise become liable with respect to (collectively,
"incur") any Indebtedness except for the following (each of
which shall be given independent effect):
(1) Indebtedness incurred pursuant to this Indenture
and the Securities;
(2) Indebtedness under the Working Capital
Facility in an aggregate outstanding principal amount not to
exceed $160,000,000 at any one time;
(3) Indebtedness of the Company and any of its
Subsidiaries outstanding on the Effective Date;
(4) Indebtedness consisting of Capital Lease
Obligations so long as the aggregate annual rental obligations
in respect thereof do not exceed $1,000,000 at any one time
and purchase money obligations incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment
used in the business of the Company or any of its
Subsidiaries, in an aggregate principal amount not to exceed
$5.0 million at any time outstanding;
4
<PAGE>
(5) Indebtedness to refinance its Indebtedness (or
Indebtedness of a Subsidiary, in the case of the Company),
provided that any such Indebtedness shall not (i) have a final
maturity or mandatory redemption payments prior to the earlier
of the final maturity of the Indebtedness being so refinanced
and the Maturity Date, or (ii) have a principal amount in
excess of the principal amount and accrued interest of the
Indebtedness being so refinanced (unless such Indebtedness is
issued at a discount in which case the issuance price of such
discount Indebtedness shall not exceed the principal amount of
the Indebtedness being so refinanced (it being understood
that, with respect to any Indebtedness issued at a discount in
compliance with this covenant, the accrual of amortization of
the original issue discount on such Indebtedness after the
date of issuance thereof shall not be deemed to be incurrence
of additional Indebtedness for the purpose of this covenant))
plus all fees and expenses related to the negotiation,
consummation or execution of such Indebtedness;
(6) additional Indebtedness (including any
refinancings thereof) in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, not to
exceed $5.0 million; and
(7) additional Indebtedness of the Company (but not
any Subsidiary), so long as, after giving effect to the
incurrence of such Indebtedness and the application of the net
proceeds thereof as if such Indebtedness was incurred and the
proceeds thereof applied at the beginning of the relevant
period, the Consolidated Interest Coverage Ratio for the most
recent four quarter period in respect of which financial
statements are available is not less than 1.75 to 1.
(e) Section 4.9 of the Indenture is deleted in its
entirety and replaced by the following:
Section 4.9. [Text Intentionally Deleted]
(f) Subparagraph (7) of Section 4.10 of the Indenture is
amended and restated in its entirety to read as follows:
(7) Liens on assets or property of the Company or any
Subsidiary relating to Indebtedness incurred in respect of the
Working Capital Facility to the extent permitted by Section
4.8(2) hereof, provided, however, that the aggregate principal
amount of the Indebtedness secured by such Liens shall not
exceed $160,000,000 at any one time;
(g) A new subparagraph (12) is added to Section 4.10 of the
Indenture to read as follows
5
<PAGE>
(12) additional Liens incurred with respect to
obligations that do not exceed $5.0 million at any one time
outstanding.
(h) Section 4.15 of the Indenture is amended and restated in
its entirety to read as follows:
Section 4.15. Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any
encumbrance or restriction on the ability of any Subsidiary to
(a) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in, or
measured by, its profits, owned by the Company or any
Subsidiary of the Company, or pay any Indebtedness owed to,
the Company or any Subsidiary, (b) make loans or advances to
the Company or any Subsidiary or (c) transfer any of its
properties or assets to the Company, except for such
encumbrances or restrictions existing under or by reason of
(i) applicable law, (ii) this Indenture, (iii) customary
provisions restricting subletting or assignment of any lease
governing a leasehold interest of the Company or any
Subsidiary, (iv) any instrument governing Indebtedness of a
Person acquired by the Company or any Subsidiary at the time
of such acquisition, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of
the Person, so acquired, (v) Indebtedness existing on the date
hereof (and Indebtedness under the Working Capital Facility)
and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in such
Indebtedness, as in effect on the date of the Indenture (or
contained in the Working Capital Facility); (vi) purchase
money obligations for property acquired in the ordinary course
of business that impose restrictions on the property so
acquired of the nature described in clause (c) of this
paragraph; (vii) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of Section
4.10 hereof that limit the right of the Company or any of its
Subsidiaries to dispose of the assets subject to such Lien; or
(viii) any guarantee of any of the foregoing.
(i) Section 4.22 of the Indenture is amended and restated in
its entirety to read as follows:
6
<PAGE>
Section 4.22. Change in Business.
The Company shall not materially change or alter, or
permit or suffer any of its Subsidiaries to materially change
or alter, the nature of its business as conducted or as
proposed to be conducted as of the Effective Date, which shall
include, but not be limited to, the design, manufacture,
distribution, license and sale of apparel and apparel
accessories and the licensing and exploitation of trademarks,
trade names and other intellectual property of the Company.
(j) The first paragraph of Section Exhibit A to the
Indenture is amended and restated in its entirety to read as follows:
1. Interest. Sassco Fashions, Ltd., a
Delaware corporation (the "Company"), promises to pay interest
on the principal amount of this Security from June 1, 1997
(the "Issue Date") until maturity at the interest rate of
12.75% per annum, through and including December 31, 1999, and
13.00% per annum, commencing as of January 1, 2000, payable as
set forth in paragraph 2.
2. Confirmation. Except as expressly amended hereby, all of the
provisions of the Indenture are in all respects ratified and confirmed, and
nothing herein shall affect the validity or enforceability of the Indenture, as
amended hereby.
3. Counterparts. This Second Supplemental Indenture may be executed in
any number of counterparts, each of which, when so executed, shall be deemed to
be an original, but all of which shall together constitute but one and the same
instrument.
4. Effectiveness. This Second Supplemental Indenture shall become
effective immediately upon (i) the execution and delivery hereof by Kasper and
the Trustee, (ii) the execution and delivery to the Trustee by Kasper of an
Officer's Certificate and an opinion of counsel, in form and substance
acceptable to the Trustee and (iii) the execution and deliver of definitive
agreements for a new senior revolving credit facility in an aggregate amount of
up to $160,000,000 to be provided to the Company pursuant to the Commitment
Letter, dated as of June 1, 1999, between the Company, The Chase Manhattan Bank
and Chase Securities Inc.
5. Governing Law. This Second Supplemental Indenture shall be governed
by and construed in accordance with the law of the State of New York.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Second
Supplemental Indenture to be duly executed, all as of the date and year above
first written.
KASPER A.S.L., LTD
By: /s/ Mary Ann Domuracki
-----------------------------------------------
Name: Mary Ann Domuracki
Title: Executive Vice President -
Finance and Administration
/s/ Dennis P. Kelly
-----------------------------------------------
Name: Dennis P. Kelly
Title: Chief Financial Officer
IBJ WHITEHALL BANK & TRUST COMPANY, as Trustee
By: /s/ Barbara McCluskey
-----------------------------------------------
Name: Barbara McCluskey
Title: Vice President
8
Exhibit 99
For: Kasper A.S.L., Ltd.
Contact: Mary Ann Domuracki
Kasper A.S.L., Ltd.
Executive Vice President -
Finance and Administration
(201) 864-0328
For Immediate Release
- ---------------------
Investors: Stacey Bibi/Caroline
Eustace/Bernadette Maglione
Media: Stacy Roth
Morgen-Walke Associates
(212) 850-5600
KASPER A.S.L., LTD. COMPLETES ACQUISITION OF
ANNE KLEIN TRADEMARKS
Secaucus, NJ, July 12, 1999 - Kasper A.S.L., Ltd. (Nasdaq: KASP)
announced today that it has completed the acquisition of Anne Klein trademarks,
including ANNE KLEIN(R), ANNE KLEIN II(R), A LINE ANNE KLEIN(TM) and the "Lion
Head Design" from Anne Klein Company LLC.
The Anne Klein brand is expected to provide Kasper with the strategic
opportunity to expand its business with a high quality brand through a
combination of strong licensed products and apparel categories such as
sportswear and casual career apparel.
Commenting on the transaction, Arthur S. Levine, Chairman and Chief
Executive Officer of Kasper, stated, "The addition of a high-profile brand name
such as Anne Klein will enable us to significantly strengthen our presence among
our wholesale accounts, as well as broaden our international presence.
Importantly, we will be able to leverage our existing infrastructure to support
the profitable growth of this dynamic brand."
<PAGE>
"Our introduction of the Anne Klein(R) and A Line Anne Klein(R) Resort
collections in June has met with excellent response from our retail customers.
We expect to further build the Anne Klein brand with the Fall 2000 launch of our
new suit and sportswear product lines. The strong consumer awareness of the Anne
Klein brand combined with our sourcing and production capabilities, as well as
our broad distribution, will create substantial worldwide growth opportunities
for Kasper."
Frank R. Mori, President of Takihyo, Anne Klein's parent company,
further commented, "Anne Klein is a wonderful brand with a storied past and an
exciting future. We are convinced that Arthur Levine and his Kasper team are the
perfect fit for Anne Klein. Tomio Taki and I wish them every success."
Kasper also announced that it had entered into a Revolving Credit
Facility led by The Chase Manhattan Bank in order to fund Kasper's working
capital requirements and to finance the purchase of the Anne Klein trademarks.
The Revolving Credit Facility provides Kasper with two revolving credit lines
aggregating up to $125 million and will increase up to $160 million upon the
satisfaction of certain conditions.
Mr. Levine concluded, "The Chase credit facility will provide us with
the financial flexibility to pursue our strategic initiatives which include
brand marketing, additional in-store shops, expansion of our retail outlet store
network, and additional licensing agreements."
In addition, the Company's previously announced Second Supplemental
Indenture, dated as of June 16, 1999, with respect to it's 12.75% Senior Notes
due 2004, has become effective.
<PAGE>
Kasper is the leading manufacturer of women's suits, as well as career
sportswear and dresses. Kasper's product lines are sold in over 2,000 retail
locations throughout the United States, Europe and Canada, and in Kasper's 58
retail outlet stores. Kasper currently distributes its products under the Kasper
for A.S.L. (R), LeSuit (TM), Albert Nipon (R), b.bennett(TM), Kasper and
Company(R) and Kasper Dress(R) labels and has begun selling Anne Klein(R) and A
Line Anne Klein (R) Resort Collections in June 1999. Kasper also licenses its
Kasper(R) and Nipon(R) labels for various men's and women's products.
This press release contains forward-looking statements within the
meaning of the U.S. federal securities laws. Such forward-looking statements are
not guarantees of future performance and are subject to a number of risks and
uncertainties that could cause actual results to differ materially from those
forward-looking statements. For a discussion of those risks and uncertainties,
please see "Disclosure Regarding Forward-Looking Information" in Kasper's
Quarterly Report on Form 10-Q, filed with the U.S. Securities and Exchange
Commission on May 18, 1999.
# # #
