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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A1
AMENDMENT TO
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 28, 1996
Commission file number 1-12082
HANOVER DIRECT, INC.
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(Exact name of registrant as specified in its charter
DELAWARE 13-0853260
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(State of incorporation) (I.R.S. Employer Identification No.)
1500 HARBOR BOULEVARD, WEEHAWKEN, NEW JERSEY 07087
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 201-863-7300
Securities registered pursuant to Section 12(b) of the Act:
name of each
exchange
Title of each class which registered
Common Stock, $.66 2/3 par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by a check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form.
As of March 24, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $38,280,286 (based on the closing price of
the Common Stock on the American Stock Exchange on March 24, 1997).
As of March 24, 1997, the registrant had 144,318,452 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's definitive proxy statement to be filed by the Company pursuant to
Regulation 14A is incorporated into items 10, 11, 12 and 13 of Part III of this
Form 10-K.
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Explanatory Note
This Form 10-K/A1 is being filed by Hanover Direct, Inc., a Delaware
corporation (the "Company"), as an amendment to its Annual Report on Form 10-K
for the fiscal year ended December 28, 1996, filed March 28, 1997, to add
certain additional exhibits in Part IV thereof.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to report to
be signed on its behalf by the undersigned, thereunto duly authorized.
HANOVER DIRECT, INC.
(registrant)
Dated: April 11, 1997 By: /s/ Rakesh K. Kaul
-------------------------------
Rakesh K. Kaul
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment to report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated and on the date indicated below.
Principal Financial Officer:
/s/ Larry J. Svoboda
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Larry J. Svoboda
Senior Vice President and
Chief Financial Officer
Board of Directors:
/s/ Ralph Destino /s/ Edmund R. Manwell
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Ralph Destino, Director Edmund R. Manwell, Director
/s/ J. David Hakman /s/ Jan du Plessis
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J. David Hakman, Director Jan du Plessis, Director
/s/ Rakesh K. Kaul /s/ Alan G. Quasha
- --------------------------------- ---------------------------------
Rakesh K. Kaul, Director Alan G. Quasha, Director
/s/ Howard M.S. Tanner
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Theodore H. Kruttschnitt, Howard M.S. Tanner,
Director Director
/s/ Elizabeth Valk Long /s/ Robert F. Wright
- --------------------------------- ---------------------------------
Elizabeth Valk Long, Director Robert F. Wright, Director
Dated: April 11, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER
ITEM 601 OF DESCRIPTION OF DOCUMENT AND INCORPORATION
REGULATION S-K BY REFERENCE WHERE APPLICABLE
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PAGE
NO.
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2.1 Asset Purchase Agreement dated as of December 1, 1994 among
the Company, LWI Holdings, Inc., Bankers Trust Company,
Leichtung, Inc. and DRI Industries, Inc. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
2.2 Stock Purchase Agreement dated as of February 16, 1995 among
the Company, Hanover Holdings, Inc., Aegis Safety Holdings,
Inc., F.L. Holdings, Inc., Roland A.E. Franklin, Martin E.
Franklin, Jonathan Franklin, Floyd Hall, Frederick Field,
Homer G. Williams, Frank Martucci, Norm Thompson Outfitters,
Inc. and Capital Consultants, Inc. (as agent) (collectively,
the "Aegis Sellers"). Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
2.3 Stock Purchase Agreement dated as of May 19, 1995 by and
among the Company, Austad Holdings, Inc. ("AHI"), The Austad
Company ("TAC"), David B. Austad ("DBA"), Denise Austad
("DA"), David Austad, as custodian ("DBAC"), Oscar Austad,
Dorothy Austad, Randall Austad, Kristi Austad, Lori Miller,
Robin Miller, Kerri Derenge, Sharon Stahl, Lori Miller, as
custodian, Dorothy Austad, as attorney-in-fact, and
</TABLE>
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Kara Miller (collectively, the "Austad Individuals").
Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 30, 1995.
2.4 Agreement and Plan of Corporate Separation and
Reorganization dated as of February 16, 1996 by and among
the Company, AHI, TAC, DBA, DBAC, and DA. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 30, 1995.
3.1 Restated Certificate of Incorporation.***
3.2 By-laws.***
4.1 Warrant Agreement dated as of October 25, 1991 ("NAR
Warrant") between the Company* and NAR Group Limited ("NAR")
for 279,110 shares of Common Stock. Incorporated by
reference to the Company's* Current Report on Form 8-K dated
October 25, 1991.
4.2 Registration Rights Agreement dated as of July 8, 1991 among
the Company*, NAR and Intercontinental Mining & Resources
Limited ("IMR"). Incorporated by reference to the Company's*
Current Report on Form 8-K Dated July 10, 1991.
4.3 Warrant Agreement dated as of January 1, 1994 between the
Company and Sears Shop At Home Services, Inc. ("Sears").
Incorporated by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994.
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4.4 Registration Rights Agreement dated as of February 16, 1995
among the Company and the Aegis Sellers. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994.
4.5 Warrant Agreement dated as of July 8, 1991 between the
Company and IMR for 1,750,000 shares of Common Stock.
Incorporated by reference to the Company's Current Report on
form 8-K dated July 10, 1991.
4.6 Warrant Agreement dated as of October 25, 1991 between the
Company and NAR for 931,791 shares of Common Stock.
Incorporated by reference to the Company's Current Report on
form 8-K dated October 25, 1991.
4.7 Second Amendment to Warrant Agreement and Warrant
Certificate for 931,791 shares of Common Stock, between the
Company and NAR dated as of November 13, 1995. Incorporated
by reference to the Company's Annual Report on Form 10-K for
the year ended December 30, 1995.
4.8 First Amendment to Warrant Agreement and Warrant Certificate
for 1,750,000 shares of Common Stock, between the Company
and IMR dated as of November 13, 1995. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 30, 1995.
4.9 First Amendment to Warrant Agreement and Warrant Certificate
for 279,110 shares of Common Stock, between the Company and
NAR dated as of November 13, 1995. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 30, 1995.
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4.10 Second Amendment to Warrant Agreement between the Company
and IMR dated as of August 23, 1996. FILED HEREWITH.
4.11 Second Amendment to Warrant Agreement between the Company
and NAR dated as of August 23, 1996.***
4.12 Third Amendment to Warrant Agreement between the Company and
NAR dated as of August 23, 1996.***
10.1 Stock Option Plan, as amended. Incorporated by reference to
the Company's* Annual Report on Form 10-K for the fiscal
year ended December 28, 1991.
10.2 Account Purchase Agreement dated as of December 21, 1992
among the Company*, Hanover Direct Pennsylvania, Inc.
("HDPI"), Brawn of California, Inc. ("Brawn") and General
Electric Capital Corporation ("GECC"). Incorporated by
reference to the Company's* Annual Report on Form 10-K for
the fiscal year ended December 26, 1992.
10.3 Amendment No. 1 to the Account Purchase Agreement dated as
of July 12, 1993 among the Company*, HDPI, Brawn, Gump's By
Mail, Gump's, Gump's Holdings and GECC. Incorporated by
reference to the Company's* Current Report on Form 8-K dated
July 12, 1993.
<PAGE> 8
10.4 Amendment No.2 to the Account Purchase Agreement dated as of
June 1, 1995 among the Company, HDPI, Brawn, Gump's, Gump's
By Mail, Gump's Holdings and GECC. Incorporated by reference
to the Company's Annual Report on Form 10-K for the year
ended December 30, 1995.
10.5 Waiver and Amendment No. 3 to the Account Purchase Agreement
dated as of December 14, 1995 among the Company, HDPI, Brawn
and GECC. Incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 30, 1995.
10.6 Amendment No. 4 to the Amended and Restated Account Purchase
Agreement dated as of June 28, 1996 among the Company, HDPI,
Brawn, Gump's, Gump's by Mail, Gump's Holdings and GECC.
FILED HEREWITH.
10.7 Form of Stock Option Agreement between the Company* and
certain Directors of the Company, as amended. Incorporated
by reference to the Company's* Annual Report on Form 10-K
for the fiscal year ended December 28, 1991.
10.8 Termination of Employment Agreement and Employment and
Consulting Agreement dated as of December 31, 1995 between
the Company and Jack E. Rosenfeld.***
10.9 Registration Rights Agreement between the Company and
Rakesh K. Kaul, dated as of August 23, 1996. FILED HEREWITH.
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10.10 Form of Indemnification Agreement among the Company* and
each of the Company's directors and executive officers.
Incorporated by reference to the Company's* Current Report
on Form 8-K dated October 25, 1991.
10.11 Letter Agreement dated May 5, 1989 among the Company*,
Theodore H. Kruttschnitt, J. David Hakman and Edmund R.
Manwell. Incorporated by reference to the Company's* Current
Report on Form 8-K dated May 10, 1989.
10.12 Hanover Direct, Inc. Savings Plan as amended. Incorporated
by reference to the Company's Annual Report on Form 10-K for
the year ended January 1, 1994.
10.13 Restricted Stock Award Plan. Incorporated by reference to
the Company's* Registration Statement on Form S-8 filed on
February 24, 1993, Registration No. 33-58760.
10.14 All Employee Equity Investment Plan. Incorporated by
reference to the Company's* Registration Statement on Form
S-8 filed on February 24, 1993, Registration No. 33-58756.
10.15 Executive Equity Incentive Plan, as amended.***
10.16 Form of Supplemental Retirement Plan. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended January 1, 1994.
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10.17 1996 Stock Option Plan. Incorporated by reference to the
Company's 1996 Proxy Statement.
10.18 Loan and Security Agreement dated as of November 14, 1995 by
and among Congress Financial Corporation ("Congress"),
Hanover Direct Pennsylvania, Inc. ("HDPA"), Brawn of
California, Inc. ("Brawn"), Gump's by Mail, Inc. ("Gump's by
Mail"), Gump's Corp.("Gump's"), The Company Store, Inc.
("The Company Store") , Tweeds, Inc. ("Tweeds"), LWI
Holdings, Inc.("LWI"), Aegis Catalog Corporation ("Aegis"),
Hanover Direct Virginia, Inc. ("HDVA") and Hanover Realty
Inc. ("Hanover Realty"). Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended
December 30, 1995.
10.19 First Amendment to Loan and Security Agreement dated as of
February 22, 1996 by and among Congress, HDPI, Brawn, Gump's
by Mail, Gump's, The Company Store, Tweeds, LWI, Aegis, HDVA
and Hanover Realty. FILED HEREWITH.
10.20 Second Amendment to Loan and Security Agreement dated as of
April 16, 1996 by and among Congress, HDPI, Brawn, Gump's by
Mail, Gump's, The Company Store, Tweeds, LWI, Aegis, HDVA
and Hanover Realty. FILED HEREWITH.
10.21 Third Amendment to Loan and Security Agreement dated as of
May 24, 1996 by and among Congress, HDPI, Brawn, Gump's by
Mail, Gump's, The Company Store, Tweeds, LWI, Aegis, HDVA
and Hanover Realty. FILED HEREWITH.
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10.22 Fourth Amendment to Loan and Security Agreement dated as of
May 31, 1996 by and among Congress, HDPI, Brawn, Gump's
by Mail, Gump's, The Company Store, Tweeds, LWI, Aegis, HDVA
and Hanover Realty. FILED HEREWITH.
10.23 Fifth Amendment to Loan and Security Agreement dated as of
September 11, 1996 by and among Congress, HDPI, Brawn,
Gump's by Mail, Gump's, The Company Store, Tweeds, LWI,
Aegis, HDVA and Hanover Realty. FILED HEREWITH.
10.24 Sixth Amendment to Loan and Security Agreement dated as of
December 5, 1996 by and among Congress, HDPI, Brawn, Gump's
by Mail, Gump's, The Company Store, Tweeds, LWI, Aegis, HDVA
and Hanover Realty. FILED HEREWITH.
10.25 Seventh Amendment to Loan and Security Agreement dated as of
December 18, 1996 by and among Congress, HDPI, Brawn, Gump's
by Mail, Gump's, The Company Store, Tweeds, LWI, Aegis, HDVA
and Hanover Realty. FILED HEREWITH.
10.26 Subordination Agreement, dated as of November 14, 1995,
among Congress, IMR, and the Trustee. Incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended December 30, 1995.
10.27 Long-Term Incentive Plan for Rakesh K. Kaul. FILED HEREWITH.
10.28 Short-Term Incentive Plan for Rakesh K. Kaul. ***
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10.29 Employment Agreement dated as of March 7, 1996 between the
Company and Rakesh K. Kaul.***
10.30 Tandem Option Plan dated as of August 23, 1996 between the
Company and Rakesh K. Kaul.***
10.31 Closing Price Option dated as of August 23, 1996 between the
Company and Rakesh K. Kaul.***
10.32 Performance Price Option dated as of August 23, 1996 between
the Company and Rakesh K. Kaul.***
10.33 Six-Year Stock Option dated as of August 23, 1996 between
NAR and Rakesh K. Kaul.***
10.34 Seven-Year Stock Option dated as of August 23, 1996 between
NAR and Rakesh K. Kaul.***
10.35 Eight-Year Stock Option dated as of August 23, 1996 between
NAR and Rakesh K. Kaul.***
10.36 Nine-Year Stock Option dated as of August 23, 1996 between
NAR and Rakesh K. Kaul.***
10.37 Letter of Credit, dated December 18, 1996, from Swiss Bank
Corporation, New York Branch ("Swiss Bank") in favor of
Fleet National Bank, as trustee ("Fleet Bank").***
10.38 Reimbursement Agreement, dated as of December 18, 1996, by
and among Swiss Bank and the Company.***
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10.39 Hanover Indemnity Agreement, dated as of December 18, 1996,
between Richemont Finance S.A. ("Richemont") and the
Company, HDPI, Brawn, Gump's, Gump's by Mail, The Company
Store, Tweeds, LWI, Aegis, HDVA and Hanover Realty. ***
10.40 Subordination Agreement, dated as of December 18, 1996,
between Congress and Swiss Bank. FILED HEREWITH.
10.41 Subordination Agreement, dated as of December 18, 1996
between Congress and Richemont. FILED HEREWITH.
10.42 Series A Note Agreement, dated as of November 9, 1994,
between the Company and Norwest Bank Minnesota, N.A.
("Norwest"), as trustee. FILED HEREWITH.
10.43 Placement Agreement, dated as of November 9, 1994, by and
between the Company and NationsBank of North Carolina, N.A.
FILED HEREWITH.
10.44 Remarketing and Interest Services Agreement, dated as of
November 9, 1994, by and between the Company and NationsBank
of North Carolina, N.A. FILED HEREWITH.
10.45 First Supplemental Series A Note Agreement, dated as of
December 29, 1995, between the Company and Norwest. FILED
HEREWITH.
10.46 First Amendment to Placement Agreement, dated as of December
29, 1995 by and between the Company and NationsBank of North
Carolina, N.A. FILED HEREWITH.
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10.47 First Amendment to Remarketing and Interest Services
Agreement, dated as of December 29, 1995 by and between the
Company and NationsBank of North Carolina, N.A. FILED
HEREWITH.
10.48 Second Supplemental Series A Note Agreement, dated as of
December 18, 1996, between the Company and Norwest. ***
10.49 Second Amendment to Series A Note, dated December 18, 1996
made by the Company. FILED HEREWITH
10.50 Second Amendment to Placement Agreement, dated as of
December 18, 1996 by and between the Company and NationsBank
of North Carolina, N.A. ***
10.51 Second Amendment to Remarketing and Interest Services
Agreement, dated as of December 18, 1996 by and between
the Company and NationsBank of North Carolina, N.A. ***
10.52 Series B Note Agreement dated as of April 25, 1995, between
the Company and Norwest. FILED HEREWITH.
10.53 [intentionally deleted]
10.54 [intentionally deleted]
10.55 First Amendment to Series B Note Agreement, dated as of
December 29, 1995, between the Company and Norwest. FILED
HEREWITH.
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10.56 Second Supplemental to Series B Note Agreement, dated as of
December 18, 1996, between the Company and Norwest. FILED
HEREWITH.
10.57 Second Amendment to Series B Note, dated December 18, 1996
made by the Company. ***
10.58 Series B Letter of Credit, dated as of December 18, 1996,
issued by Swiss Bank. ***
10.59 [intentionally deleted]
10.60 NAR Promissory Note dated as of September 11, 1996. ***
10.61 Series A Letter of Credit, dated as of December 18, 1996,
issued by Swiss Bank. ***
10.62 First Amendment to Series A Note, dated as of December 29,
1995 made by Hanover Direct, Inc. FILED HEREWITH.
10.63 $10,000,000 Series B Note, dated as of April 27, 1995 and
made by Hanover Direct, Inc. FILED HEREWITH.
10.64 First Supplemental Series B Note Agreement, dated as of
December 29, 1995. FILED HEREWITH.
10.65 $10,000,000 Series A Note, dated as of November 9, 1994 and
made by Hanover Direct, Inc. FILED HEREWITH.
11 Computation of Per Share Earnings. ***
21.1 Subsidiaries of the Registrant. ***
23.1 Consent of Independent Public Accountants. ***
27.1 Financial Data Schedule. **/***
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* Hanover Direct, Inc., a Delaware corporation, is the successor by merger
to The Horn & Hardart Company and The Hanover Companies.
** EDGAR filing only.
*** Previously submitted with Hanover's Annual Report on Form 10-K, filed on
March 28, 1997.
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EXHIBIT 4.10
SECOND AMENDMENT
TO
WARRANT AGREEMENT
BETWEEN HANOVER DIRECT, INC. AND
INTERCONTINENTAL MINING & RESOURCES LIMITED
This Second Amendment, dated as of August 23, 1996 (this
"Amendment"), to that certain Warrant Agreement, dated as of July 8, 1991,
between Intercontinental Mining & Resources Limited ("IMR") and The Horn &
Hardart Company ("H&H"), predecessor-in-interest to Hanover Direct, Inc. (the
"Company").
WHEREAS, H&H and IMR are parties to that certain Warrant
Agreement, dated as of July 8, 1991, amended by a First Amendment to Warrant
Agreement and Warrant Certificate, dated as of November 13, 1995 (as so amended,
the "Warrant Agreement").
WHEREAS, pursuant to an Assumption Agreement, dated as of
September 7, 1993, between H&H and the Company, the Company assumed the due and
punctual performance and observance of each and every covenant and condition of
H&H in the Warrant Agreement.
WHEREAS, the Company and IMR desire to further amend the
Warrant Agreement.
NOW, THEREFORE, in consideration of the premises and
agreements herein contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:
A. Amendments to the Warrant Agreement. The Warrant Agreement
is hereby amended as follows:
Section 5 is hereby amended by adding a new subparagraph (c)
as follows and redesignating subparagraphs 5(c) and 5(d) as subparagraphs 5(d)
and 5(e), respectively:
"(c) The Holder may also exercise all, but not less than all,
of its Warrants in a "cashless" or "net-issue" exercise of
each such Warrant by presentation and surrender of the
Holder's Warrant Certificate to the Company at its principal
executive offices with a Cashless Exercise Form annexed hereto
duly executed (a "Cashless Exercise"). In the event of a
Cashless Exercise, the Holder shall exchange each Warrant
subject to a Cashless Exercise for that number of Warrant
Shares stated in the Agreement, as the same may have been duly
adjusted from time to time, multiplied by a fraction, the
numerator of which shall
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be the difference between (x) the then current market price
per share of Common Stock (as defined in Section 1(d) of Annex
B hereto) and (y) the Exercise Price per share of Common Stock
for each such warrant, and the denominator of which shall be
the then current market price per share. The Cashless Exercise
Form shall set forth the calculation upon which the Cashless
Exercise is based."
B. Ratification. Except as expressly amended hereby all terms
and provisions of the Warrant Agreement, as heretofore amended, remain
unamended, unmodified and in full force and effect. The Warrant Agreement, as
amended hereby, and all rights and powers created thereby, is in all respects
ratified and confirmed. From and after the date hereof, all references to the
Warrant Agreement shall be deemed to mean the Warrant Agreement as amended by
this Amendment.
C. Counterparts. This Amendment may be executed in
counterparts, each of which, when executed and delivered, shall for all purposes
be deemed an original. Both of the counterparts, when taken together, shall
constitute but one and the same Amendment.
D. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.
E. Definitions. Except as otherwise expressed or provided or
unless the context otherwise requires, all terms used herein which are defined
in the Warrant Agreement shall have the meanings ascribed to them in the Warrant
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
HANOVER DIRECT, INC.
By: /s/ Wayne P. Garten
---------------------------------
Name: Wayne P. Garten
Title Executive Vice President
and CFO
INTERCONTINENTAL MINING & RESOURCES
LIMITED
By: /s/ Thomas A. Huser
---------------------------------
Name: Thomas A. Huser
Title Attorney-In-Fact
-3-
<PAGE> 4
CASHLESS EXERCISE FORM
(TO BE EXECUTED UPON EXERCISE OF WARRANT
PURSUANT TO SECTION 5(C))
To Hanover Direct, Inc.:
The undersigned hereby irrevocably elects to exchange its
Warrants for such number of shares of Common Stock set forth on the calculation
attached hereto pursuant to the Cashless Exercise provisions of Section 5(c) of
the Warrant Agreement, dated as of July 8, 1991, and a First Amendment thereto,
dated as of November 13, 1995, between Intercontinental Mining & Resources
Limited and Hanover Direct, Inc, successor-in-interest to The Horn & Hardart
Company. The undersigned's Warrant Certificate is attached hereto.
Please issue a certificate or certificates for such Common
Stock in the name of:
Name _______________________________________
(Please Print Name, Address and Federal
Tax ID Number)
Address ____________________________________
____________________________________________
____________________________________________
Federal Tax ID Number ______________________
Signature __________________________________
NOTE: The above signature should correspond exactly with the
name on the first page of this Warrant Certificate or with the
name of the assignee appearing in the assignment form below.
<PAGE> 5
Calculation of Cashless Exercise
Current Market Price $___________ = A
Exercise Price for Warrant Shares, as adjusted $___________ = B
A-B = $____________________
Number of Warrants to be exchanged, as adjusted ___________ = C
Number of Warrant Shares = (_______________ /____________) X ____________
(insert A-B) (insert A) (insert C)
<PAGE> 1
EXHIBIT 10.6
AMENDMENT NO. 4 TO AMENDED AND RESTATED
ACCOUNT PURCHASE AGREEMENT
AMENDMENT NO. 4, made and entered into as of June 28, 1996, by and
among HANOVER DIRECT, INC., a Delaware corporation and the successor-in-interest
to The Hanover Companies ("HDI"); HANOVER DIRECT PENNSYLVANIA, INC., a
Pennsylvania corporation formerly known as Hanover Direct, Inc. and Hanover
Direct Fulfillment, Inc. ("HDPI"); BRAWN OF CALIFORNIA, INC., a California
corporation ("Brawn"); GUMP'S CATALOG, INC., a Delaware corporation formerly
known as GSF Acquisition Corp. ("Gump's Corp."); GUMP'S HOLDINGS, INC., a
Delaware corporation ("Gump's Holdings"); GUMP'S BY MAIL, INC., a Delaware
corporation ("Gump's By Mail"); HANOVER DIRECT VIRGINIA, INC., a Delaware
corporation ("Hanover Virginia"); and TWEEDS, INC., a Delaware corporation
("Tweeds") ("HDI, HDPI, Brawn, GCI, Gump's Corp, Gump's Holdings, Gump's by
Mail, Hanover Virginia and Tweeds being hereinafter collectively and
individually referred to as "Hanover") and GENERAL ELECTRIC CAPITAL CORPORATION
("GE Capital"), a New York corporation.
W I T N E S S E T H:
WHEREAS, HDI, HDPI, Brawn, GCI, Gump's Corp., Gump's Holdings and GE
Capital are parties to an Amended and Restated Account Purchase Agreement dated
as of April 25, 1994, as amended by an Amended No. 1 to Amended and Restated
Purchase Agreement dated as of November 2, 1994, and by a Second Amendment to
Account Purchase Agreement dated as of June 1, 1995, and by a Waiver and
Amendment No. 3 to Amended and Restated Purchase Agreement dated as of November
14, 1995 (collectively, the "Purchase Agreement");
WHEREAS, it is the mutual desire of Hanover and GE Capital that the
Purchase Agreement be amended in accordance with the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual promises and subject to
the terms and conditions hereinafter set forth, the parties hereto hereby agree
as follows:
1. Capitalized terms used herein which are not otherwise defined shall
have the same meaning as in the Purchase Agreement.
2. Gump's By Mail, Hanover VirginIa, and Tweeds shall be made parties
to and shall be bound by the terms of the Purchase Agreement.
3. All references to "Gump's By Mail" throughout the Purchase Agreement
shall refer to the company now known as Gump's
<PAGE> 2
by Mail, Inc., and shall not refer to the company now known as Gump's Catalog,
Inc.
4. All references to "Hanover" throughout the Purchase Agreement shall
refer to HDI, HDPI, Brawn, GCI, Gump's Corp., Gump's Holdings, Gump's By Mail,
Hanover Virginia and Tweeds, collectively and individually.
5. All references to "Gump's" throughout the Purchase Agreement shall
refer to GCI, Gump's Corp., Gump's Holdings, and Gump's By Mail, collectively
and individually.
6. All references to "GSF" throughout the Purchase Agreement shall
refer to Gump's Corp.
7. Section 2.1(c)(2) of the Purchase Agreement shall be deleted and
replaced with the following language:
(2) from any of Gump's By Mail, Gump's Corp., Gump's Holdings or GCI
if any such party no longer is under the control of Hanover.
8. In Section 7.1 of the Purchase Agreement, the language at the
beginning of the first sentence reading "HDI, HDPI and Brawn" shall be deleted
and replaced with the following language:
HDI, HDPI, Brawn, GCI, Gump's Corp., Gump's Holdings, Gump's By
Mail, Hanover Virginia and Tweeds.
9. The first sentence of Section 8.20 of the Purchase Agreement shall
be deleted and replaced as follows:
The Corporate structure in connection with Hanover is as follows:
(a) Brawn, Gump's Holdings; HDPI, Hanover Virginia, and Tweeds are
wholly-owned subsidiaries of HDI, (b) International Mail is a
tradename and catalog asset owned by Brawn, and (c) Gump's By Mail,
Gump's Corp. and GCI are wholly-owned subsidiaries of Gump's
Holdings.
10. Each party shall pay its own out-of-pocket legal expenses in
connection with the execution and delivery of this Amendment and the closing of
the transactions relating thereto.
11. Except as specifically provided herein, the terms and conditions of
the Purchase Agreement shall continue in full force and effect and shall be
fully binding on the parties hereto. Upon execution of this Agreement, each
reference in the Purchase Agreement to "this Purchase Agreement," "hereunder,"
"hereof," or words of like import, shall mean and be a reference to the Purchase
Agreement as amended hereby. In the event of any conflict between the terms of
the Purchase Agreement and the
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<PAGE> 3
terms of this Amendment, the terms of this Amendment shall prevail.
12. This Amendment may be executed in any number of counterparts, all
of which taken together shall constitute one and the same amendatory instrument,
and any of the parties hereto may execute this Amendment by signing any such
counterpart.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date and year first above written.
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ J. Alex Aguilar
---------------------------
Name: J. Alex Aguilar
---------------------
Title: Program Manager
--------------------
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
---------------------------
Name: Edward J. O'Brien
----------------------
Title: Senior Vice President
---------------------
HANOVER DIRECT PENNSYLVANIA,
INC.
By: /s/ Edward J. O'Brien
---------------------------
Name: Edward J. O'Brien
----------------------
Title: Vice President
---------------------
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
---------------------------
Name: Edward J. O'Brien
----------------------
Title: Vice President
---------------------
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
---------------------------
Name: Edward J. O'Brien
----------------------
Title: Vice President
---------------------
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<PAGE> 4
GUMP'S CORP.
By: /s/ Edward J. O'Brien
____________________________
Name: Edward J. O'Brien
_______________________
Title: Vice President
______________________
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Name: Edward J. O'Brien
_______________________
Title: Vice President
______________________
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
____________________________
Name: Edward J. O'Brien
_______________________
Title: Vice President
______________________
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<PAGE> 1
EXHIBIT 10.9
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 23, 1996
(this "Agreement"), by and between HANOVER DIRECT, INC., a Delaware corporation
(the "Company"), having an address at 1500 Harbor Boulevard, Weehawken, New
Jersey 07087, and RAKESH K. KAUL (the "Executive"), President and Chief
Executive Officer of the Company, having an address at 7000 Boulevard East,
Tower 1, Apartment 32D, Guttenberg, N.J. 07093.
WHEREAS, the Company is concurrently entering into an
Executive Employment Agreement with the Executive that, among other things,
requires the Company to (i) sell certain shares of Common Stock to the Executive
and (ii) grant the Executive certain options to purchase shares of Common Stock.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the parties hereby agree as follows:
1. Registration.
(a) Registration Right. From and after the date
hereof, on one occasion, if the Company shall receive written
notice from the Executive (hereinafter referred to as a
"Notice") which:
(i) requests that the Company take action to
effect any registration with respect to any shares of
Common Stock now owned or hereafter acquired by the
Executive, pursuant to an option (granted by the
Company or NAR Group Limited ("NAR")) or otherwise
(the "Shares"); and
(ii) specifies the number of proposed Shares
intended to be offered and sold for the account of
the Executive, and describes the proposed nature or
method of the offer and sale of such Shares;
then, subject to the conditions, qualifications and
limitations set forth in this Registration Rights Agreement,
the Company shall cause to be prepared and filed, and use its
best efforts to cause to become effective under the Securities
Act of 1933, as amended (the "1933 Act"), and to be maintained
in effect for a period of not less than 180 days, a
Registration Statement (including a related prospectus) in
such applicable form under the 1933 Act (a "Registration
Statement") as the Company, in its sole discretion, determines
to be appropriate, covering the public offer and sale of the
number of Shares specified in the Notice. Notwithstanding
anything to the contrary herein, the foregoing rights shall
not apply to any Shares at any time two years or more after
<PAGE> 2
the date of the termination of the Executive's employment, for
any reason whatsoever (the "Expiration Date").
(b) Registration Steps. Whenever required to use
its best efforts to effect the registration of Shares, the
Company shall at its expense, as expeditiously as reasonably
possible:
(i) prepare and file with the Securities
and Exchange Commission (the "SEC") a Registration
Statement and such amendments and supplements to such
Registration Statement and the prospectus used in
connection therewith as may be necessary to comply
with the provisions of the 1933 Act with respect to
the disposition of all securities covered by such
Registration Statement and give the Executive and any
underwriter participating in any disposition pursuant
to a Registration Statement reasonable opportunities
to review the same before it becomes effective;
(ii) furnish to the Executive such numbers
of copies of a prospectus, including a preliminary
prospectus and all amendments and supplements
thereto, in conformity with the requirements of the
1933 Act, and such other documents as he may
reasonably request in order to facilitate the
disposition of Shares owned by him;
(iii) with respect to a Registration
Statement to be filed pursuant to Section 1 only, use
its best efforts to register or qualify the
securities covered by such Registration Statement
under the securities or blue sky laws of such
jurisdictions as shall be reasonably requested by the
Executive for the distribution of the securities
covered by the Registration Statement, provided that
the Company shall not be required in connection
therewith or as a condition thereof to qualify to do
business in any such states or jurisdictions or take
any other action which in the opinion of its counsel
may subject it to taxation in such jurisdiction, it
being understood that in connection with Registration
Statements filed pursuant to Section 5, the Company's
obligation is solely to include the Shares in such
blue sky filings as the Company is otherwise making;
(iv) notify the Executive, promptly after
it receives notice thereof, of the time when such
Registration Statement has become effective or an
amendment or supplement to any prospectus forming a
part of such Registration Statement has been filed;
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<PAGE> 3
(v) notify the Executive, at any time
when a prospectus is required to be delivered under
the 1933 Act, of an event causing the prospectus to
contain an untrue statement of a material fact or to
omit to state any material fact required to be stated
therein or necessary to make the statements therein
not misleading, and the Company will prepare a
supplement or amendment to such prospectus so that,
as thereafter delivered to the purchasers of the
Shares under such prospectus, such prospectus will
not contain an untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make the statements therein
not misleading;
(vi) cause the Shares to be listed on
each securities exchange on which similar securities
issued by the Company are then listed, provided that
the applicable listing requirements are satisfied or
could be satisfied by the Company's reasonable
efforts;
(vii) advise the Executive of the
issuance of any stop order by the SEC suspending the
effectiveness of such Registration Statement or the
initiation or threatening of any proceeding for that
purpose, and promptly use reasonable efforts to
prevent the issuance of any stop order or to obtain
its withdrawal; or
(viii) make available for inspection by
the Executive, any underwriter participating in any
disposition pursuant to a Registration Statement, and
any attorney, accountant or other agent retained by
the Executive or such underwriter (collectively, the
"Inspectors"), upon reasonable notice and during
normal business hours, all financial and other
records, pertinent corporate documents and properties
of the Company (collectively, the "Records") as shall
be reasonably necessary to enable them to exercise
their due diligence responsibility, and cause the
Company's and its subsidiaries, officers, directors
and employees to supply all information reasonably
requested by any such Inspector in connection with
the registration. Records which the Company
determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid
or correct a material misstatement or omission in the
Registration Statement, or (ii) the release of such
records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction. The
Executive agrees that he will, upon learning that
disclosure of such Records is
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<PAGE> 4
sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to
prevent disclosure of the Records deemed
confidential.
2. Conditions on Registration Right. The provisions of
Section 1 of this Registration Rights Agreement shall be subject to the
following additional conditions, qualifications and limitations:
(a) Financial Statement Requirements. The
Company shall not be obligated to file a Registration
Statement which under the Act would be required to contain
audited financial statements other than the Company's fiscal
year-end financial statements for its three full fiscal years
(or such other number of fiscal years as may then be
ordinarily required under the SEC regulations for Registration
Statements on Form S-1 or its equivalent) immediately
preceding the date of such filing together with any schedules
with respect to such financial statements as may be required
to be included in the Registration Statement.
(b) Year End Filing. Subject to subsection
(2)(c) hereof, the Company shall file a Registration Statement
pursuant to Section 1 hereof within 120 days following its
receipt of a Notice, provided, that if such 120 day period
would otherwise expire within 60 days prior to the end or
within 120 days after the beginning of any fiscal year, then
the Company may, at its option, defer such filing to the
closest subsequent date which is not less than 120 days after
the beginning of a fiscal year.
(c) Conflicting Company Activity. If prior to
the filing or effectiveness of a Registration Statement filed
by the Company pursuant to Section 1 hereof:
(i) at the time of receiving the
Notice, the Company shall have become a party to an
agreement or filed materials with the SEC
contemplating a material business acquisition by the
Company, and, if in the good faith judgment of the
Company it is impracticable for the Company to file
and have become effective a Registration Statement
prior to the consummation of the acquisition and, if
such proposed acquisition were consummated, the
Company would be required to include in such
Registration Statement financial statements and/or
other information concerning the business of any
other party to such proposed acquisition, then the
Company shall not be deemed to have breached its
agreement to file such
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<PAGE> 5
Registration Statement and to use its best efforts to
cause such Registration Statement to become effective
if it causes such Registration Statement to be filed
(or if such Registration Statement has been filed,
the use of its best efforts to cause such
Registration Statement to become effective) within
180 days from the date on which the Company was
required to file a Registration Statement or
recommence the use of its best efforts to cause such
Registration Statement to become effective, but in
any event as soon as practicable; or
(ii) at the time of receiving the Notice
the Company shall have become party to an agreement
contemplating a merger or consolidation of the
Company into or with, or a sale or transfer of all or
substantially all of the business and assets of the
Company to, any other corporation or entity, and if
in the good faith judgment of the Company it is
impracticable for the Company to file and have become
effective a Registration Statement prior to the
consummation of the merger or consolidation, then the
Company shall not be deemed to have breached its
agreement to file such Registration Statement and to
use its best efforts to cause such Registration
Statement to become effective if it causes the filing
of such Registration Statement (or, if filed, the
effective date of such Registration Statement) to be
deferred until the transaction contemplated by such
agreement or letter of intent becomes effective (in
which case the Company shall have no obligation to
file or cause such Registration Statement to become
effective) or is abandoned (in which case the Company
shall use its best efforts to make such filing, or to
recommence the use of its best efforts to cause such
filing to become effective, as promptly as
practicable after the abandonment thereof and in any
event not more than 60 days after such abandonment);
or
(iii) the Company shall have determined
in good faith based on written advice of counsel that
such Registration Statement is required to contain
information with respect to the Company or its
business and plans which has not been publicly
disclosed, and the disclosure of which, in the
Company's good faith judgment, would not be in the
best interest of the Company, then the Company shall
not be deemed to have breached its agreement to file
and to use its best efforts to cause such
Registration Statement to become effective if it
causes the filing of such Registration Statement to
be deferred (or, if such Registration Statement has
been filed, ceases its efforts to cause such
Registration Statement to become effective) for a
period of
-5-
<PAGE> 6
not more than 45 days from the date on which the
Company was required to file a Registration Statement
or recommence the use of its best efforts to cause
such Registration Statement to become effective
pursuant to this Agreement, but in any event as soon
as practicable; it being understood and agreed that,
the Company will promptly give written notice of such
deferral, specifying the basis therefor and the
anticipated duration thereof to the Executive;
provided, however, that any non-public underlying
information constituting the basis for a deferral
hereunder need not be specified.
The occurrence of any of the foregoing events shall not
relieve the Company from its obligations pursuant to Section
1.
(d) Sale Permitted Without Registration. The
Company shall have no obligation to effect registration under
Section 1 if all of the Executive's Shares requested to be
registered shall be in the unqualified written opinion of
counsel to the Company, which may be relied upon by the
Executive, eligible to be sold on a current basis to the
public without registration under they Act and without
restriction as to subsequent trading.
(e) Minimum Share Requirement. The Company shall
have no obligation to effect registration under Section 1 if
the Executive requests that less than 500,000 Shares be
registered.
3. Registration Exclusively for the Executive. The
Company shall not, without the written consent of the Executive,
include any shares for sale for its own account or for the account of
others in any Registration Statement filed pursuant to Section 1.
4. Prospectus Requirements. The Company shall be
obligated to cause any effective prospectus included in the
Registration Statement filed by the Company pursuant to Section 1 to
meet the requirements of Section 10 of the 1933 Act until the
expiration of a period of 180 days from the date on which the Executive
was first able to sell Shares pursuant to such Registration Statement;
provided, however, that if as a result of deferrals of the filing
and/or the effective date of such Registration Statement occurring
pursuant to subsection (2)(b) or (c), the aggregate period for which
the Executive was able to offer and sell his Shares pursuant to such
Registration Statement would be reduced to less than 180 days, then the
Company shall take such action as may be necessary to enable the
Executive to continue such offer and sale for an additional period or
periods sufficient to produce any aggregate offering period of 180 days
unless the expiration date should have occurred within such 180 day
period.
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<PAGE> 7
5. Piggyback Registration Rights.
(a) The Company agrees with the Executive that if the
Company proposes at any time to file with the SEC a
registration statement under the 1933 Act on Form S-1, S-2 or
S-3 or other comparable form relating to the sale of Common
Stock by the Company or by NAR or any affiliate thereof (other
than through the distribution of rights to purchase Common
Stock to its stockholders generally) (a "Company Registration
Statement"), then the Company shall give written notice to the
Executive at least thirty (30) days prior to the filing of
such Company Registration Statement of its intention to do so.
(b) If the Executive delivers a written notice to the
Company, within 15 days after delivery of the foregoing
notice, of his desire to have any of the Shares included in a
Company Registration Statement, such Shares shall be included
in any Company Registration Statement so filed and shall not
constitute an occasion on which the Executive requests the
Company to take action to effect any registration with respect
to any Shares of Common Stock now owned or hereafter acquired
by the Executive, pursuant to an option or otherwise, as
provided by Section 1 hereof, but subject to the other
provisions of this Registration Rights Agreement.
(c) If an underwriter with respect to a Company
Registration Statement (the "Underwriter") advises the Company
that the number of shares proposed to be sold by the Company
and the Executive is greater than the number of shares of
Common Stock which the underwriter believes feasible to sell
at that time, at the price and upon the terms approved by the
Company, then the number of shares of Common Stock which the
Underwriter in its sole discretion believes may be sold shall
first be allocated to the Company and the remaining number of
such shares of Common Stock shall then be allocated on a pro
rata basis to all other holders of Common Stock being
registered, including the Executive.
(d) The Company shall not be obligated to include in
any Registration Statement pursuant to this Section 5 any
Shares which, at the time of filing such Registration
Statement, have been covered by or included in any other
Registration Statement theretofore filed by the Company under
the 1933 Act and declared effective by the SEC.
(e) At the request of the Underwriter, and as a
condition to inclusion in the Company Registration Statement
of any Shares owned by the Executive, the Executive shall
agree in writing not to offer or
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<PAGE> 8
sell any Shares not included in a Company Registration
Statement filed pursuant to this Section 5 for a period
specified by the Underwriter, provided that such period shall
not exceed 120 days from the effective date of such Company
Registration Statement and that every other selling
shareholder subject to a provision identical or substantially
similar to this paragraph (e) of this Section 5 is similarly
restricted.
(f) Notwithstanding the inclusion of any Shares owned
by the Executive in any Company Registration Statement filed
pursuant to this Section 5, the Company shall have no
obligation to cause or permit such Company Registration
Statement to become effective under the 1933 Act at any time,
and in its sole discretion may withdraw such Company
Registration Statement at any time prior to the effectiveness
thereof for any reason whatsoever. The Company agrees in the
event of any such withdrawal of any Company Registration
Statement to give prompt notice of such withdrawal to the
Executive. In the event of such withdrawal the Executive will
not be deemed to have exercised his right to have Shares
included in a Company Registration Statement so withdrawn.
(g) The Company shall be obligated to cause any
effective prospectus included in the Company Registration
Statement to meet the requirements of Section 10 of the Act
for a period of 180 days from the date on which the Executive
was first able to sell Shares pursuant to such Company
Registration Statement provided, however, that if, as a result
of interruptions in the offer and sale of Shares covered
thereby, the aggregate period for which the Executive was able
to offer and sell his Shares pursuant to such Company
Registration Statement would be reduced to less than 180 days,
then the Company shall take such action as may be necessary to
enable the Executive to continue such offer and sale for an
additional period or periods sufficient to produce an
aggregate offering period of 180 days.
(h) The Company shall not, so long as this Agreement
is in effect, without the prior written consent of the
Executive, grant registration rights to any other person more
favorable than the registration rights granted to the
Executive hereunder.
6. Selling Expenses.
(a) Except as otherwise set forth in (b) below or as
required by the SEC or any other federal or state regulatory
authority or by any self regulatory agency, the costs and
expenses incurred in connection with the inclusion of the
Executive's Shares in a registration statement shall be borne
by the Company with respect to (i) any Registration
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<PAGE> 9
Statement filed under Section 1 and (ii) all Company
Registration Statements filed under Section 5 which included
Shares of the Executive, including, without limitation, all
costs and expenses arising from or related to the preparation
and filing of such registration statements, the prosecution of
such filings to effectiveness and the maintenance of such
registration statements in effect for the period determined
pursuant to Sections 4 or 5 hereof, as the case may be.
(b) Notwithstanding anything to the contrary set
forth in subsection (a), the Executive shall bear the
following costs and expenses incurred in connection with all
registration statements filed pursuant to this Agreement in
which Shares owned by him are included:
(i) The fees and disbursements of any
separate counsel retained by the Executive;
(ii) Any underwriting discounts,
commissions and expenses relating to Shares sold by
the Executive; and
(iii) Any taxes payable with respect to
the transfer by the Executive.
(c) Notwithstanding anything to the contrary set
forth herein, the Company shall have the obligation to bear
any state securities law ("blue sky") filing and registration
fees relating to such Shares with respect to a Registration
Statement filed under Section l(a) only in up to twenty (20)
states designated by the Executive and shall have no
obligation to bear such fees in connection with the inclusion
of Shares in a Company Registration Statement under Section 5
hereof in any states where the Company was not otherwise
intending to register or file with respect to shares covered
by the Company Registration Statement.
7. Reports Under Securities Exchange Act of 1934. With a
view to making available to the Executive the benefits of Rule 144 promulgated
under the 1933 Act and any other rule or regulation of the SEC that may at any
time permit the Executive to sell securities of the Company to the public
without registration or pursuant to a registration on Form S-3 (or any successor
form to Form S-3 regardless of its designation), the Company agrees to use all
reasonable efforts to:
(a) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at
all times;
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<PAGE> 10
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and
the Securities Exchange Act of 1934, as amended (the "1934
Act"); and
(c) furnish to the Executive, so long as the
Executive owns any Shares, forthwith upon request, whenever
applicable (i) a written statement by the Company that it has
complied with the reporting requirements of SEC Rule 144, the
1933 Act, and the 1934 Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most
recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested in
availing the Executive of any rule or regulation of the SEC
which permits the selling of any such securities without
registration or pursuant to such form.
8. Indemnification. In the event any of the shares are
included in any registration statement:
(a) the Company shall indemnify and hold harmless the
Executive or any underwriter (within the meaning of the 1933
Act) for the Company or the Executive, against any losses,
claims, damages or liabilities, joint or several, to which
they may become subject under the 1933 Act, or the 1934 Act,
state securities laws, other federal or state law or
regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect
thereof) (i) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in
such registration statement, including any preliminary
prospectus or final prospectus contained therein or any
amendments or supplements thereto or any documents prepared or
furnished by the Company incident thereto, or (ii) arise out
of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading, or
(iii) arise out of or are based upon any violation by the
Company of any rule or regulation promulgated under the 1933
Act, the 1934 Act, or other federal or state law applicable to
the Company and relating to any action or inaction required of
the Company in connection with such registration. The Company
shall reimburse the Executive or such underwriter for any
reasonable and actual legal or other expenses, as incurred by
them in connection with investigating or defending any such
loss, claim, damage, liability or action. Notwithstanding the
foregoing, the Company shall not be liable in any such case
for any loss, claim, damage, liability or action to the extent
that it arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made
in
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<PAGE> 11
connection with such registration statement, preliminary
prospectus, final prospectus or amendments or supplements
thereto or documents prepared or furnished by the Company
incident thereto in reliance upon and in conformity with
written information furnished expressly for use in connection
with such registration by the Executive or such underwriter.
(b) the Executive shall indemnify and hold harmless
the Company, each of its directors, each of its officers who
have signed such registration statement, each person, if any,
who controls the Company within the meaning of the 1933 Act or
the 1934 Act, any underwriter for the Company (within the
meaning of the 1933 Act) and each other holder and its
respective officers, directors, partners and controlling
persons to the same extent as the foregoing indemnity from the
Company to the Executive, in each case to the same extent, but
only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading was
made in such registration statement, preliminary prospectus,
final prospectus or amendments or supplements thereto or
document prepared or furnished by the Company incident thereto
in reliance upon and in conformity with written information
furnished by the Executive expressly for use in connection
with such registration. Notwithstanding the foregoing,
obligations of the Executive shall be limited to an amount
equal to the proceeds to the Executive of Shares sold pursuant
to the registration statement to which the loss, claim,
damage, liability or action relates.
(c) promptly after receipt by an indemnified party
under this section of notice of the commencement of any
action, such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under
this Section, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability
which it may have to any indemnified party unless such
liability is the proximate result of such failure. In case any
such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof,
the indemnifying party will be entitled to appoint counsel
reasonably satisfactory to such indemnified party to represent
the indemnified party in such action; provided, however, that
if the defendants in any such action include both the
indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded based on the
written opinion of counsel addressed to the indemnifying party
that there may be a conflict of interest between it and/or
other indemnified parties, on the one hand, and the
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<PAGE> 12
indemnifying party, on the other, the indemnified party or
parties shall have the right to select separate counsel to
defend such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to
such indemnified party of its election so to appoint counsel
to defend such action and approval by the indemnified party of
such counsel, the indemnifying party will not be liable to
such indemnified party under this section for any legal or
other expenses subsequently incurred by such indemnified party
in connection with the defense thereof unless (i) the
indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it
being understood, however, that the indemnifying party shall
not be liable for the expenses of more than one separate
counsel selected by the Executive), or (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the
action.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnification
provided for in paragraph (a) or (b) of this Section 8 is due
in accordance with its terms but is for any reason held by a
court to be unavailable from the Company on grounds of policy
or otherwise, the Company and the Executive shall contribute
to the aggregate losses, claims, damages and liabilities
(including legal or other expenses reasonably incurred in
connection with investigating or defending same) to which the
Company and the Executive may be subject in such proportions
as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or
omissions which resulted in such loss, liability, claim,
damage or expense as well as any other equitable
considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by a court of
law by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, obligations of the Executive
shall be limited to an amount equal to the proceeds to the
Executive of Shares sold pursuant to the registration
statement to which the loss, claim, damage, liability or
action relates. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another
party or parties under this paragraph (d), notify such party
or parties from whom contribution may be sought, but the
omission to so
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<PAGE> 13
notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any other
obligation it or they may have hereunder or otherwise than
under this paragraph (d).
IN WITNESS WHEREOF, the undersigned have executed this
Registration Rights Agreement as of the date first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
_________________________________
Name:
Title:
/s/ Rakesh K. Kaul
______________________________________
Rakesh K. Kaul
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<PAGE> 1
Exhibit 10.19
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of February
__, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California corporation
("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania corporation
("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation ("Brawn"), GUMP'S
BY MAIL, INC., a Delaware Corporation ("GBM"), GUMP'S CORP., a California
corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin corporation
("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI HOLDINGS, INC., a
Delaware Corporation ("LWI"), AEGIS CATALOG CORPORATION, a Delaware corporation
("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware corporation ("HDV"), and
HANOVER REALTY, INC., a Virginia corporation ("Hanover Realty"; and together
with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis and HDV, each
individually referred to herein as an "Existing Borrower" and collectively,
"Existing Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation ("Aegis Holding"), AEGIS VENTURES, INC.,
a Delaware corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin
corporation, BRAWN WHOLESALE CORP., a California corporation, THE COMPANY
FACTORY, INC., a Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin
corporation, COMPANY STORE HOLDINGS, INC., a Delaware corporation ("CSHI"), D.M.
ADVERTISING, INC., a New Jersey corporation, GUMP'S CATALOG, INC., a Delaware
corporation, GUMP'S HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS,
INC., a Delaware corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware
corporation ("Hanover Catalog"), HANOVER DIRECT NEW JERSEY, INC., a Delaware
corporation, HANOVER FINANCE CORPORATION, a Delaware corporation ("Hanover
Finance"), HANOVER HOLDINGS, INC., a Delaware corporation, HANOVER LIST
MANAGEMENT INC., a New Jersey corporation, HANOVER VENTURES, INC., a Delaware
corporation, LEICHTUNG OF MICHIGAN, INC., a Michigan corporation, LWI RETAIL,
INC., an Ohio corporation, SCANDIA DOWN CORPORATION, a Delaware corporation
("Scandia"), SKANDIA DOWNSALES, INC., a Wisconsin corporation, TW ACQUISITIONS
INC., a Delaware corporation, TWEEDS OF VERMONT, INC., a Delaware corporation,
and YORK FULFILLMENT COMPANY, INC., a Pennsylvania corporation (each
individually an "Existing Guarantor" and collectively, "Existing Guarantors"),
THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; as hereinafter further
defined) and AUSTAD HOLDINGS, INC., a Delaware corporation ("Austad Holdings";
as hereinafter further defined). Each Existing Borrower, together with Austad,
shall hereinafter be referred to individually as a "Borrower" and collectively
as "Borrowers", and each Existing Guarantor, together with Austad Holdings,
shall hereinafter be referred to individually as a "Guarantor" and collectively
as "Guarantors."
<PAGE> 2
W I T N E S S E T H:
WHEREAS, Existing Borrowers, Existing Guarantors and Lender
entered into the Loan and Security Agreement, dated November 14, 1995 (the "Loan
Agreement"), pursuant to which Lender has made loans and advances to Existing
Borrowers; and
WHEREAS, Existing Borrowers, Existing Guarantors and Lender
contemplated, pursuant to Section 2.11 of the Loan Agreement, that Austad may
become a Revolving Loan Borrower under the Loan Agreement and that Austad
Holdings may become a Guarantor under the Loan Agreement; and
WHEREAS, Hanover, Austad, Austad Holdings, David B. Austad,
individually and as custodian for certain members of his immediate family, and
Denise Austad (the "David Austad Group", as hereinafter further defined) have
agreed, among other things, to a plan of corporate separation and restructure of
the mail order and retail businesses of Austad; and
WHEREAS, to provide working capital financing for the mail
order business retained by Austad following such corporate separation and
reorganization, Austad has requested that it become a Revolving Loan Borrower
under the Loan Agreement and Austad Holdings has requested that it become a
Guarantor under the Loan Agreement; and
WHEREAS, Existing Borrowers and Existing Guarantors have also
requested that Austad become a Revolving Loan Borrower pursuant to the terms and
conditions of the Loan Agreement, as amended hereby, and that Austad Holdings
become a Guarantor pursuant to the terms and conditions of the Loan Agreement,
as amended hereby; and
WHEREAS, the parties to the Loan Agreement desire to enter
into a this Amendment to the Loan Agreement to amend and modify certain
provisions thereof in order to: (a) include Austad as a Revolving Loan Borrower
and Austad Holdings as a Guarantor thereunder, subject to the provisions set
forth herein, (b) provide that Lender shall have a security interest in and lien
upon all of the assets and properties of each of Austad and Austad Holdings to
secure their Obligations to Lender, and (c) make certain other amendments to the
Loan Agreement;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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<PAGE> 3
1. Definitions.
(a) Additional Definitions. As used herein or in any
of the other Financing Agreements, the following terms shall have the respective
meanings given to them below, and the Loan Agreement shall be deemed and is
hereby amended to include, in addition and not in limitation, each of the
following definitions:
(i) "AGS" shall mean AGS, Inc., a South
Dakota corporation, and its successors and assigns.
(ii) "Austad Catalog Division" shall mean
all of the assets and properties of Austad related to or used in connection with
the sale of golf equipment, golf supplies, golf apparel and related goods and
services through its "Austad's" mail order catalog.
(iii) "Austad Eligible Inventory" shall mean
all Inventory of Austad in the merchandise categories of golf equipment, golf
supplies, golf apparel and related finished goods offered for sale by Austad in
its "Austad's" catalog, or such other catalogs created or acquired by Austad
covering substantially similar merchandise which Austad has requested Lender to
include in this Inventory category.
(iv) "Austad Escrow Agreement" shall mean
the Escrow Agreement, dated February 16, 1996, by and among The First National
Bank in Sioux Falls, Austad and David Austad in his individual capacity and on
behalf of the other members of the David Austad Group, as the same now exists or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(v) "Austad Holdings" shall mean Austad
Holdings, a Delaware corporation, and its successors and assigns.
(vi) "Austad Reorganization Agreements"
shall mean, collectively, the Agreement and Plan of Corporate Separation and
Reorganization, dated as of February 16, 1996, by and among Hanover, Austad
Holdings, Austad and the David Austad Group, the Escrow Agreement and all other
agreements, documents and instruments now or at any time hereafter executed
and/or delivered by any Person in connection therewith or related thereto, as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(vii) "Austad Retail Division" shall mean
all assets and properties of Austad related to or used in connection with the
retail sale of golf equipment, golf supplies, apparel and related goods and
services through one retail store located in Sioux Falls, South Dakota, two
retail stores located in Blaine and Edina, Minnesota and one retail store
located in
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<PAGE> 4
Oak Brook, Illinois, but only to the extent such assets and properties are
transferred to AGS pursuant to the Austad Reorganization Agreements, and, in the
case of Inventory of Austad, limited to only such Inventory that is located on
the premises of the foregoing retail stores and such Inventory that is located
on the premises of the Sioux Falls, South Dakota fulfillment center of Austad
that was specifically purchased for the retail division of Austad.
(viii) "Austad Subordinated Notes" shall
mean, collectively, (A) the Promissory Note, dated May 25, 1995, by Austad
payable to Hanover Finance in the original principal amount of $400,000, the
payment of which is guaranteed by Austad Holdings, and (B) the Subordinated
Promissory Note, dated May 25, 1995, by Austad payable to Hanover Finance in the
original principal amount of $2,200,000, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.
(ix) "David Austad" shall mean David B.
Austad, and his heirs, executors, administrators, successors and assigns.
(x) "David Austad Group" shall mean,
individually and collectively, (A) David B. Austad, individually and as
custodian for certain members of his immediate family under the South Dakota
Uniform Transfer to Minors Act, (B) Denise Austad, individually and (C) each of
their respective heirs, executors, administrators, successors and assigns.
(xi) "FNBO" shall mean First National Bank
of Omaha, a national banking association, successor in interest to First Bank of
South Dakota, N.A., and its successors and assigns.
(xii) "HDV" shall mean Hanover Direct
Virginia Inc., a Delaware corporation, and its successors and assigns.
(b) Amendments of Certain Definitions.
(i) Section 1.117 of the Loan Agreement is
hereby amended to include Austad within the definition of "Revolving Loan
Borrowers" as set forth therein.
(ii) Section 1.100 of the Loan Agreement is
hereby amended such that neither Austad nor Austad Holdings shall be considered
Non-Guarantor Subsidiaries.
(iii) Austad and Austad Holdings shall each
be deemed included in the definition of "Guarantors" set forth in Section 1.51
of the Loan Agreement, and the parties hereto agree
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<PAGE> 5
that Austad and Austad Holdings are each hereby included as a Guarantor under
the Loan Agreement.
(iv) Section 1.34 of the Loan Agreement is
hereby amended to include Austad Eligible Inventory within the definition of
"Eligible Inventory" as set forth therein.
(v) Section 1.13 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"1.13 "Austad" shall mean The Austad
Company, a South Dakota corporation, and its
successors and assigns."
(c) Interpretation. For purposes of this
Amendment, unless otherwise defined herein, all capitalized terms used herein
which are defined in the Loan Agreement shall have the meaning given to such
terms in the Loan Agreement.
2. Assumption of Obligations; Amendments to
Guarantees and Financing Agreements.
(a) Austad hereby expressly (i) assumes and
agrees to be directly liable to Lender, jointly and severally with the other
Borrowers, for all Obligations under, contained in, or arising out of the Loan
Agreement and the other Financing Agreements applicable to all Borrowers and as
applied to Austad as a Borrower and Guarantor, (ii) agrees to perform, comply
with and be bound by all terms, conditions and covenants of the Loan Agreement
and the other Financing Agreements applicable to all Borrowers and as applied to
Austad as a Borrower and Guarantor, with the same force and effect as if Austad
had originally executed and been an original Borrower and Guarantor party
signatory to the Loan Agreement and the other Financing Agreements, and (iii)
agrees that Lender shall have all rights, remedies and interests, including
security interests in and to the Collateral granted pursuant to Section 3(a)
hereof, the Loan Agreement and the other Financing Agreements, with respect to
Austad and its properties and assets with the same force and effect as Lender
has with respect to the other Borrowers and their assets and properties as if
Austad had originally executed and had been an original Borrower and Guarantor
party signatory to the Loan Agreement and the other Financing Agreements.
(b) Austad Holdings hereby expressly (i) assumes
and agrees to be directly liable for all Obligations under, contained in, or
arising out of the Loan Agreement, the General Security Agreement, dated
November 14, 1995, by the Existing Guarantors, other than Hanover and Borrowers,
in favor of Lender (the "Subsidiary General Security Agreement") and the other
Financing Agreements applicable to all Guarantors and as applied to Austad
Holdings as a Guarantor, (ii) agrees to perform, comply with and be bound by all
terms, conditions and covenants of the
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<PAGE> 6
Loan Agreement, the Subsidiary General Security Agreement and the other
Financing Agreements applicable to all Guarantors and as applied to Austad
Holdings as a Guarantor with the same force and effect as if Austad Holdings had
originally executed and been an original Guarantor or Debtor, as the case may
be, party signatory to the Loan Agreement, the Subsidiary General Security
Agreement and the other Financing Agreements, and (iii) agrees that Lender shall
have all rights, remedies and interests, including security interests in the
Collateral granted pursuant to Section 3(b) hereof, the Loan Agreement, the
Subsidiary General Security Agreement, and the other Financing Agreements, with
respect to Austad Holdings and its properties and assets with the same force and
effect as if Austad Holdings had originally executed and had been an original
Guarantor or Debtor, as the case may be, party signatory to the Loan Agreement,
the Subsidiary General Security Agreement and the other Financing Agreements.
(c) Each of the Existing Borrowers, in their
capacities as Guarantors, hereby agrees that each of their respective Guarantee
and Waivers, dated November 14, 1995 (collectively, the "Borrower Guarantees")
is hereby amended to include Austad as an additional Guarantor party signatory
thereto. Austad hereby expressly (i) assumes and agrees to be directly liable to
Lender, jointly and severally with the other Borrowers signatories thereto and
the Guarantors, for all Obligations (as defined in the Borrower Guarantees),
(ii) agrees to perform, comply with and be bound by all terms, conditions and
covenants of the Borrower Guarantees with the same force and effect as if Austad
had originally executed and been an original party signatory to each of the
Borrower Guarantees, and (iii) agrees that Lender shall have all rights,
remedies and interests with respect to Austad and its property under the
Borrower Guarantees with the same force and effect as if Austad had originally
executed and been an original party signatory to each of the Borrower
Guarantees.
(d) Each of the Existing Guarantors which is a
party to the Guarantee and Waiver, dated November 14, 1995, executed by the
Existing Guarantors, other than Hanover and the Existing Borrowers, in favor of
Lender (the "Subsidiary Guarantee"), hereby agrees that such Guarantee is hereby
amended to include Austad Holdings as an additional Guarantor party signatory
thereto. Austad Holdings hereby expressly (i) assumes and agrees to be directly
liable to Lender, jointly and severally with the other Guarantors signatories
thereto and the Borrowers, for all Obligations (as defined in the Subsidiary
Guarantee), (ii) agrees to perform, comply with and be bound by all terms,
conditions and covenants of the Subsidiary Guarantee with the same force and
effect as if Austad Holdings had originally executed and been an original party
signatory to the Subsidiary Guarantee, and (iii) agrees that Lender shall have
all rights, remedies and interests with respect to Austad Holdings and its
property with the same force and effect as if Austad Holdings had
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<PAGE> 7
originally executed and been an original party signatory to the
Subsidiary Guarantee.
(e) Each Guarantor, including without limitation,
Austad, in its capacity as Guarantor, and Austad Holdings, hereby expressly and
specifically ratifies, restates and confirms the terms and conditions of its
respective Guarantees in favor of Lender and its liability for all of the
Obligations (as defined in its Guarantees), and other obligations, liabilities,
agreements and covenants thereunder.
(f) Each Borrower, including, without limitation,
Austad, and each Guarantor, including, without limitation, Austad Holdings,
hereby agrees that all references to Borrower or Borrowers contained in any of
the Financing Agreements are hereby amended to include Austad as an additional
Borrower. Each Borrower, including, without limitation, Austad, and each
Guarantor, including, without limitation, Austad Holdings, hereby agrees that
all references to Guarantor or Guarantors or Debtor or Debtors contained in any
of the Financing Agreements are hereby amended to include Austad Holdings as an
additional Guarantor or Debtor, as the case may be.
3. Collateral.
(a) Austad Collateral. Without limiting the
provisions of Section 2(a) hereof, the Loan agreement and the other Financing
Agreements, as collateral security for the prompt performance, payment and
performance when due of all of the Obligations of Austad to Lender, Austad
hereby grants to Lender, a continuing security interest in, and liens upon, and
rights of setoff against, and Austad hereby pledges and assigns to Lender, all
now owned and hereafter acquired and arising assets and properties of Austad,
all of which shall be included in the definition of Collateral as set forth in
the Loan Agreement (which definition is hereby amended accordingly), including,
without limitation, the following:
(i) all of the following, whether now owned
or hereafter acquired or arising: (A) all Accounts, including, without
limitation, all MasterCard/VISA Receivables and all other Third Party Credit
Card Receivables, and all monies, credit balances and other amounts due from or
through or held by Third Party Credit Card Issuers, or other parties to the
Third Party Credit Card Agreements, all monies paid by or through the Private
Credit Card Purchaser, all rentals or license fees receivable in respect of
sale, lease, or license of Customer Lists, all monies, securities and other
property and the proceeds thereof, now or hereafter held or received by, or in
transit to, Lender from or for Austad, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all of Austad's deposits (general or
special), balances, sums and credits with Lender at any time existing; (B) all
right, title
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<PAGE> 8
and interest, and all rights, remedies, security and liens, in, to and in
respect of the Accounts and other Collateral, including, without limitation,
rights of stoppage in transit, replevin, repossession and reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, guarantees or
other contracts of suretyship with respect to the Accounts, deposits or other
security for the obligations of any Account Debtor, all credit and other
insurance; (C) all right, title and interest in, to and in respect of all goods
relating to, or which by sale have resulted in, Accounts, including, without
limitation, all goods described in invoices, documents, contracts or instruments
with respect to, or otherwise representing or evidencing, any Account or other
Collateral, including, without limitation, all returned, reclaimed or
repossessed goods; (D) all deposit accounts; and (E) all other general
intangibles of every kind and description, including, without limitation, (1)
tradenames and trademarks, and the goodwill of the business symbolized thereby,
(2) patents, (3) copyrights, (4) licenses, (5) Federal, State and local tax and
duty refund claims of all kinds, (6) catalogs and promotional materials, (7) all
Customer Lists, and (8) all right, title and interest of Austad in and to Mail
Order Joint Ventures, and other joint ventures, partnerships and other Persons;
(ii) Inventory;
(iii) Equipment;
(iv) Real Property, other than the real
property located at 4500 East 10th Street, Sioux Falls, South Dakota;
(v) all present and future books, records,
ledger cards, computer software (including all manuals, upgrades, modifications,
enhancements and additions thereto), computer tapes, disks, other electronic
data storage media, documentation of file and record formats and source code,
documents, other property and general intangibles evidencing or relating to any
of the above, any other Collateral or any Account Debtor, together with the file
cabinets or containers in which the foregoing are stored; and
(vi) all present and future products and
proceeds of the foregoing, in any form whatsoever, including, without
limitation, any insurance proceeds and any claims against third persons for loss
or damage to or destruction of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any leasehold
interests of Austad.
(b) Austad Holdings Collateral. Without limiting the
provisions of Section 2(b) hereof, the Loan Agreement, the
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<PAGE> 9
Subsidiary General Security Agreement and the other Financing Agreements, as
collateral security for the prompt payment and performance when due of all of
the Obligations of Austad Holdings, Austad Holdings hereby grants to Lender, a
continuing security interest in, and liens upon, and rights of setoff against,
and Austad Holdings hereby pledges and assigns to Lender, all now owned and
hereafter acquired and arising assets and properties of Austad Holdings, all of
which shall be included in the definition of Collateral as set forth in the
Subsidiary General Security Agreement (which definition is hereby amended
accordingly), including, without limitation, the following:
(i) all present and future: (A) accounts,
credit card receivables (including credit card charge records and other
evidences of credit card transactions), contract rights, general intangibles,
chattel paper, documents and instruments (collectively, "Accounts"), including,
without limitation, all obligations for the payment of money arising out of the
sale, lease or other disposition of goods or other property or rendition of
services, all monies, all credit balances, reserve balances and other monies due
from or held by factors or credit card issuers or servicing agents or financial
intermediaries; (B) all monies, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, Lender or any
participant from or for Austad Holdings, whether for safekeeping, pledge,
custody, transmission, collection or otherwise, and all of Austad Holding's
deposits (general or special), balances, sums and credits with Lender or any
participant at any time existing; (C) all of Austad Holding's right, title and
interest, and all of Austad Holding's rights, remedies, security and liens, in,
to and in respect of the Accounts and other collateral, including, without
limitation, rights of stoppage in transit, replevin, repossession and
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party, guaranties or other contracts of suretyship with respect to the Accounts,
deposits or other security for the obligation of any account debtor, credit and
other insurance; (D) all of Austad Holding's right, title and interest in, to
and in respect of all goods relating to, or which by sale have resulted in
Accounts, including, without limitation, all goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, any Account or other collateral, including, without limitation,
all returned, reclaimed or repossessed goods; (E) all deposit accounts; and (F)
all other general intangibles of every kind and description, including, without
limitation, (1) trade names and trademarks, and the goodwill of the business
symbolized thereby, (2) patents, (3) copyrights, (4) licenses, (5) claims and
other choses in action, (6) Federal, State, local and foreign tax refund claims
of all kinds, (7) catalogs and promotional materials, customer and mailing
lists, and (8) all right, title and interest in and to joint ventures and
partnerships;
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(ii) all Inventory;
(iii) all Equipment;
(iv) all Real Property;
(v) all present and future books, records,
ledger cards, computer programs and other property and general intangibles
evidencing or relating to any of the above, any other collateral or any account
debtor, together with the file cabinets or containers in which the foregoing are
stored; and
(vi) all present and future products and
proceeds of the foregoing, in any form, including, without limitation, any
insurance proceeds and any claims against third persons for loss or damage to or
destruction of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any leasehold
interests of Austad Holdings.
(c) Additional Collateral. Without limiting the
foregoing, or the other grants of Collateral pursuant to the Loan Agreement or
any of the other Financing Agreements, in order to induce Lender to extend
loans, advances and other financial accommodations to Borrowers under the Loan
Agreement, and as additional collateral for the payment and performance when due
of all Obligations of Austad, Austad Holdings and Hanover Finance, as the case
may be, (i) each of Austad and Austad Holdings by its execution below, hereby
pledges and assigns to Lender and grants to Lender a security interest in, all
of its now existing and hereafter arising (A) rights, remedies, claims for
monies, indemnification claims and claims for damages or other relief pursuant
to or in respect of the Austad Escrow Agreement and the other Austad
Reorganization Agreements, (B) rights, remedies, claims for monies,
indemnification claims and claims for damages or other relief under or in
respect of the documents and instruments referred to in the Austad Escrow
Agreement and the other Austad Reorganization Agreements, and (C) all proceeds,
collections, recoveries and rights with respect to the foregoing and (ii)
Hanover Finance by its signature below hereby pledges and assigns to Lender all
of its right, title and interest in and to, and agrees to indorse to Lender,
each of the Austad Subordinated Notes. Nothing set forth herein, and no act
taken by Lender pursuant to the pledges, assignments and grants of security
interests set forth herein shall constitute an assumption by Lender of any
obligation or liability of Austad or Austad Holdings pursuant to or in
connection with the Escrow Agreement and the other Austad Reorganization
Agreements or otherwise, or of Hanover Finance pursuant to or in connection with
the Austad Subordinated Notes or otherwise.
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<PAGE> 11
4. Austad Inventory Advance Rate. Section 2.1(b) of
the Loan Agreement is hereby deleted in its entirety and replaced
with the following:
"(b) Revolving Inventory Loans. Subject to, and upon
the terms and conditions contained herein and in the other
Financing Agreements, Lender shall, from time to time, make
Revolving Inventory Loans (i) to each Revolving Loan Borrower,
other than Gump's and Austad's, at such Revolving Loan
Borrower's request, of up to the lesser of (A) sixty percent
(60%) of the Value of the Eligible Inventory of such Revolving
Loan Borrower or (B) the Net OLV Percentage of the Value of
such Eligible Inventory, and (ii) to Gump's, at its request,
of up to the lesser of (A) sixty percent (60%) of the Value of
Eligible Inventory of Gump's or (B) the Net GOB Percentage of
the Value of Eligible Inventory of Gump's, and (iii) to
Austad, at its request, of up to the lesser of (A) forty
percent (40%) of the Value of Eligible Inventory of Austad or
(B) the Net OLV Percentage of the Value of such Eligible
Inventory, or, in each of clauses (b)(i), (b)(ii) or (b)(iii),
such greater or lesser percentages thereof as Lender shall, in
its sole discretion, determine from time to time (the
"Inventory Loan Formulas"). Without limiting the foregoing,
the sixty percent (60%) lending formula component referred to
in clauses (b)(i)(A) and (b)(ii)(A) and the forty percent
(40%) lending formula component referred to in clause
(b)(iii)(A) may be adjusted downward by Lender based upon any
adverse change, individually or in the aggregate, in the
turnover of Eligible Inventory or deterioration in mix, nature
or quality of Eligible Inventory in the respective categories
of Eligible Inventory, and any such downward adjustment made
for such reason(s) (or on the basis of the lending formula
component set forth in clauses (b)(i)(B), (b)(ii)(B) or
(b)(iii)(B) above) shall not be considered solely
discretionary for purposes of the provision contained in the
definition of Interest Rate and Section 2.7(c) hereof."
5. Inventory Sublimits. Section 2.2(j) of the Loan Agreement
is hereby redesignated Section 2.2(k) and a new Section 2.2(j) of the Loan
Agreement is added as follows:
"(j) Subject to, and upon the terms and conditions
contained herein, the aggregate principal amount of Revolving
Loans and Letter of Credit Accommodations made available to
Austad shall not exceed Three Million Dollars ($3,000,000) at
any one time outstanding."
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6. Letter of Credit Accommodations. Without limiting the
rights of Lender to establish a greater percentage in connection with Letter of
Credit Accommodations established for the purchase of goods pursuant to Sections
2.3(b) and 2.3(d) of the Loan Agreement, Austad and the Existing Borrowers agree
for purposes of clarity that the reference to forty percent (40%) set forth in
Sections 2.3(b)(i)(A)(1) and 2.3(d)(i)(A) of the Loan Agreement shall apply only
to Existing Borrowers and that it is hereby agreed that such percentage as
applied to Austad shall be sixty percent (60%) in such Sections .
7. Guarantees. Section 4.2 of the Loan Agreement is hereby
deleted in its entirety and replaced with the following, effective November 14,
1995:
"4.2 Guarantees
Concurrently herewith, in order to induce Lender to
enter into this Agreement and the other Financing Agreements
to be entered into on the date hereof, each Borrower shall
execute and deliver to Lender the Guarantee by Borrowers, and
Borrowers shall cause Guarantors to execute and deliver to
Lender the Guarantees by the Guarantors, each in form and
substance satisfactory to Lender, as provided therein (as all
of such Guarantees, now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or
replaced, individually a "Guarantee" and collectively the
"Guarantees"). In its capacity as a party signatory to such
Guarantees, each Borrower shall be considered a Guarantor
hereunder."
8. Additional Amendments.
(a) Section 2.11(c), (d) and (e) of the Loan
Agreement are hereby redesignated Sections 2.11(a), (b) and (c), respectively.
(b) The name of the signatory party identified on
signature page 123 to the Loan Agreement as Skandia Down Sales, Inc. is hereby
corrected to be Skandia Downsales, Inc.
9. Exhibits.
(a) Exhibits A, B-1, B-4, C, D, F, G, H-1 and H-3, to
the Loan Agreement are hereby amended to include, in addition and not in
limitation, the information set forth on the First Supplements to each of such
Exhibits attached hereto.
(b) Exhibit A to the Subsidiary General Security
Agreement is hereby amended to include, in addition and not in limitation, the
information set forth on the First Supplement to Exhibit A attached hereto.
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<PAGE> 13
10. Representations and Warranties. Borrowers represent,
warrant and covenant with and to Lender as follows, which representations,
warranties and covenants are continuing and shall survive the execution and
delivery hereof, the truth and accuracy of, or compliance with each, together
with the representations, warranties and covenants in the other Financing
Agreements, being a continuing condition of the making of any Revolving Loans or
Letter of Credit Accommodations by Lender to Borrowers:
(a) As of the date hereof, Austad does not have a
Deferred Billing Option Program.
(b) This Amendment and each other agreement or
instrument to be executed and delivered by each of Austad, Austad Holdings, the
other Borrowers and/or the other Guarantors hereunder have been duly authorized,
executed and delivered by all necessary action on the part of each of Austad,
Austad Holdings, the other Borrowers and the other Guarantors which is a party
hereto and thereto and, if necessary, their respective stockholders, and is in
full force and effect as of the date hereof, as the case may be, and the
agreements and obligations of each of Austad, Austad Holdings, the other
Borrowers and/or the other Guarantors, as the case may be, contained herein and
therein constitute legal, valid and binding obligations of each of Austad,
Austad Holdings, the other Borrowers and/or the other Guarantors, as the case
may be, enforceable against them in accordance with their terms.
(c) Neither the execution and delivery of the Austad
Reorganization Agreements, nor the consummation of the transactions contemplated
by the Austad Reorganization Agreements, nor compliance with the provisions of
the Austad Reorganization Agreements, shall result in the creation or imposition
of any lien, claim, charge or encumbrance upon any assets of the Austad Catalog
Division or any other Collateral, except in favor of Lender pursuant to this
Amendment.
(d) Neither the execution and delivery of the Austad
Reorganization Agreements, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof, (i) has violated or
shall violate any Bulk Sales Act, Bulk Transfer Act or Article 6 of the UCC, if
applicable, or any Federal or State securities laws or any other law or
regulation or any order or decree of any court or governmental instrumentality
in any respect or (ii) does, or shall conflict with or result in the breach of,
or constitute a default in any respect under any mortgage, deed of trust,
security agreement, agreement or instrument to which Austad or Austad Holdings
or any other Borrower or other Guarantor is a party or may be bound, or (iii)
shall violate any provision of the Certificates of Incorporation or By-Laws of
Austad, Austad Holdings, or any other Borrower or other Guarantor.
-13-
<PAGE> 14
(e) All of the outstanding shares of capital stock of
each of Austad and Austad Holdings have been duly authorized, validly issued and
are fully paid and non-assessable, free and clear of all claims, liens, pledges
and encumbrances of any kind. Hanover is the beneficial and direct owner of
record of one hundred (100%) percent of the issued and outstanding capital stock
of Austad Holdings. Austad Holdings is the beneficial and direct owner of record
of one hundred (100%) percent of the issued and outstanding capital stock of
Austad. After giving effect to the consummation of the Austad Reorganization
Agreements, there is no debt outstanding that is convertible into capital stock
of Austad or Austad Holdings, and there are no outstanding rights, options or
warrants to acquire any capital stock or debt convertible into capital stock of
Austad or Austad Holdings.
(f) No action of, or filing with, or consent of any
governmental or public body or authority, other than the filing of UCC financing
statements, and no approval or consent of any other party, is required to
authorize, or is otherwise required in connection with, the execution, delivery
and performance of this Amendment.
(g) All of the representations and warranties set
forth in the Loan Agreement and the other Financing Agreements, each as amended
hereby, are true and correct in all material respects on and as of the date
hereof as if made on the date hereof, except as affected by transactions
expressly contemplated or permitted by this Amendment and except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
(h) As of the date hereof, and after giving effect to
the provisions of this Amendment, no Event of Default, and no condition or event
which, with the giving of notice or lapse of time, or both, would constitute an
Event of Default, exists or has occurred and is continuing.
(i) Austad Holdings is a Delaware corporation, duly
organized and validly existing in good standing under the laws of the State of
Delaware. Austad is a South Dakota corporation, duly organized and validly
existing in good standing under the laws of the State of South Dakota. Each of
Austad and Austad Holdings (i) is duly licensed or qualified to do business as a
foreign corporation and is in good standing in each of the jurisdictions set
forth in the First Supplement to Exhibit A to the Loan Agreement annexed hereto,
which are the only jurisdictions wherein the character of the properties owned
or licensed or the nature of the business of Austad and/or Austad Holdings,
makes such licensing or qualification to do business necessary; and (ii) has all
requisite power and authority to own,
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<PAGE> 15
lease and operate its properties and to carry on its business as it is now being
conducted and will be conducted in the future.
(j) The assets and properties of Austad and Austad
Holdings are owned by them, free and clear of all security interests, liens and
encumbrances of any kind, nature or description, as of the date hereof, except
those security interests granted pursuant hereto in favor of Lender and except
for Liens (if any) permitted under Section 6.4 of the Loan Agreement or the
other Financing Agreements.
11. Conditions Precedent. Concurrently with the execution
hereof (except to the extent otherwise indicated below), and as a further
condition to the effectiveness of this Amendment and the agreement of Lender to
the modifications and amendments set forth in this Amendment:
(a) Lender shall have received, in form and substance
satisfactory to Lender, evidence that (i) the Austad Reorganization Agreements
have been duly executed and delivered by and to the appropriate parties thereto
and (ii) the transactions contemplated under the terms of the Austad
Reorganization Agreements have been consummated prior to, or contemporaneously
with, the execution of this Amendment, including, without limitation, the
receipt by FNBO of the amount, to be paid by or on behalf of the David Austad
Group and/or AGS, representing a portion of the outstanding obligations owed by
Austad to FNBO under the financing arrangements between FNBO and Austad,
referred to as the "Balance Due Amount" in the Austad Reorganization Agreements;
(b) Lender shall have received, in form and substance
satisfactory to Lender, all releases, terminations and such other documents as
Lender may request to evidence and effectuate the termination by FNBO of its
financing arrangements with Austad and Austad Holdings, and the termination and
release by FNBO of any interest in and to any assets and properties of Austad
and Austad Holdings, duly authorized, executed and delivered by FNBO, including,
but not limited to (i) UCC-3 Termination Statements for all UCC-1 Financing
Statements previously filed by FNBO for its predecessors, as secured party, and
Austad or Austad Holdings, as debtor, and (ii) satisfactions and discharges of
any mortgages, deeds of trust or deeds to secure debt by Austad or Austad
Holdings in favor of FNBO, in form acceptable for recording in the appropriate
governmental office;
(c) Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions of this Amendment and
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<PAGE> 16
the other Financing Agreements, including, without limitation, a Mortgagee
Waiver by Valley Bank as mortgagee of Austad's Sioux Falls, South Dakota
distribution center real property;
(d) Each of Austad, Austad Holdings, Borrowers and
Guarantors shall have delivered to Lender, in form and substance satisfactory to
Lender, each of the following agreements duly authorized, executed and
delivered:
(i) First Amendment to Trademark Collateral
Assignment and Security Agreement, dated November 14, 1995, by and among
Hanover, Hanover Catalog, Scandia, Aegis Holdings, CSHI and Lender, providing
for the addition of Austad Holdings as a Debtor thereunder and the grant by
Austad Holdings of a security interest in any trademarks, and any such
documents, instruments or filings with respect thereto with the U.S. Patent and
Trademark Office to protect such Collateral;
(ii) five (5) Special Powers of Attorney
(Trademark) by Austad Holdings in favor of Lender;
(iii) amendments to the Third Party Credit
Card Acknowledgments setting forth such acknowledging parties' agreement to
transfer to the Blocked Accounts all monies due and other funds payable to or
for the account of Austad and/or Austad Holdings under any applicable Third
Party Credit Card Agreements;
(iv) evidence that all existing Customer
Lists, including the Customer Lists of Austad and/or Austad Holdings, have been
delivered by HDI to the Customer List Escrow Agent and are being held by the
Customer List Escrow Agent pursuant to the Customer List Escrow Agreement;
(v) Amended and Restated Intercompany
Subordination Agreement between Hanover and Lender;
(vi) Amended and Restated Agency Agreement
by and among Hanover, Austad and certain Borrowers;
(vii) Guarantee and Waiver by Borrowers,
other than Austad, in favor of Lender with respect to the Obligations of Austad
to Lender;
(viii) Guarantee and Waiver by Guarantors,
other than Borrowers, Hanover and Austad, in favor of Lender with respect to the
Obligations of Austad to Lender;
(ix) Guarantee and Waiver by Hanover in
favor of Lender with respect to the Obligations of Austad to Lender;
(x) Amended and Restated Blocked Account
Agreement by and among The First National Bank of Maryland,
-16-
<PAGE> 17
Borrowers, certain Guarantors and Lender providing for the establishment of a
Blocked Account for Austad; and
(xi) the delivery by Hanover Finance to
Lender of each of the Austad Subordinated Notes with an Allonge Indorsement
affixed to each such note providing for the payment of any amounts due under
each Austad Subordinated Note to the order of Lender;
(e) Austad and Austad Holdings and all other
Borrowers and Guarantors shall have duly executed and delivered to Lender such
UCC financing statements and other documents and instruments which Lender in its
sole discretion has determined are necessary to perfect the security interests
of Lender in all assets now or hereafter owned by Austad and Austad Holdings;
(f) Lender shall have received a current Appraisal
with respect to the Inventory of Austad, prepared at Revolving Loan Borrowers'
expense by the Appraiser in form, scope and methodology acceptable to Lender and
addressed to Lender, or upon which Lender is expressly permitted to rely, that
is satisfactory to Lender and will enable Lender to calculate the Net Orderly
Liquidation Value of such Inventory and the Net OLV Percentage with respect
thereto;
(g) Each of Austad and Austad Holdings shall have
delivered to Lender (i) a copy of its Certificate of Incorporation, and all
amendments thereto, certified by the Secretary of State of its jurisdiction of
incorporation as of the most recent practicable date certifying that each of the
foregoing documents remains in full force and effect and has not been modified
or amended, except as described therein, (ii) a copy of its By-Laws, certified
by the secretary of each of Austad and Austad Holdings, and (iii) a certificate
from the secretary of each of Austad and Austad Holdings dated the date hereof
certifying that each of the foregoing documents remains in full force and effect
and has not been modified or amended, except as described therein;
(h) Each of Austad and Austad Holdings shall have
delivered to Lender evidence, as of the most recent practicable date, that it is
duly qualified and in good standing in each jurisdiction set forth on the First
Supplement to Exhibit A to the Loan Agreement annexed hereto;
(i) Lender shall have received Secretary's
Certificates of Directors' Resolutions with Shareholders' Consent evidencing the
adoption and subsistence of corporate resolutions approving the execution,
delivery and performance by Austad, Austad Holdings and the other Borrowers and
other Guarantors of this Amendment and the agreements, documents and instruments
to be delivered pursuant to this Amendment, together with such opinions of
counsel to Austad, Austad Holdings, the other
-17-
<PAGE> 18
Borrowers and other Guarantors with respect thereto, addressed to Lender as
Lender shall reasonably require, all in form and substance and satisfactory to
Lender;
(j) Each of Borrowers and Guarantors shall deliver,
or cause to be delivered, to Lender a true and correct copy of any consent,
waiver or approval to or of this Amendment, which any Borrower or Guarantor is
required to obtain from any other Person, and such consent, approval or waiver
shall be in a form reasonably acceptable to Lender; and
(k) Hanover shall have delivered to Lender, in form
and substance satisfactory to Lender, consolidating pro forma opening balance
sheets as of February 16, 1996 for Austad and Austad Holdings reflecting the
separation of the Austad Catalog Division and the Austad Retail Division.
12. Effect of this Amendment. This Amendment and the
instruments and agreements delivered pursuant hereto constitute the entire
agreement of the parties with respect to the subject matter hereof and thereof,
and supersede all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof and thereof. Except as expressly amended pursuant hereto,
and except for the acknowledgements expressly set forth herein, no other changes
or modifications to the Financing Agreements or waivers of or consents under any
provisions thereof are intended or implied, and in all other respects the
Financing Agreements are hereby specifically ratified, restated and confirmed by
all parties hereto as of the effective date hereof. To the extent that any
provision of the Loan Agreement or any of the other Financing Agreements are
inconsistent with the provisions of this Amendment, such other provision shall
be deemed to be amended so that it is made consistent with the provisions of
this Amendment.
13. Further Assurances.
(a) Borrower shall execute and deliver such
additional documents and take such additional action as may be reasonably
requested by Lender to effectuate the provisions and purposes of this Amendment.
(b) Without limiting the provisions of Section 13(a)
hereof, Austad shall, or Borrowers and Hanover shall cause Austad to, (i) obtain
and deliver to Lender, within thirty (30) days from the date hereof, (A)
evidence that Austad has qualified to do business as a foreign corporation in
each of the State of Pennsylvania and the State of California and (B) the Final
Closing Balance Sheet (as defined in the Austad Reorganization Agreements) and
(ii) cause FNBO to remit to an account designated by Lender the balance of any
collections or other amounts received by FNBO in respect of the financing
arrangements between
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<PAGE> 19
FNBO and Austad being terminated pursuant to Section 11(b) hereof, after FNBO
first applies any such amounts to any checks made by Austad that are presented
to FNBO for payment.
14. Governing Law. The rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of laws).
15. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
16. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ Janet S. Last
-------------------------
Title: Vice President
----------------------
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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<PAGE> 20
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S CORP.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
TWEEDS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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<PAGE> 21
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this Amendment:
HANOVER DIRECT, INC.,
a Delaware corporation
By: /s/ Edward J. O'Brien
----------------------------
Title: Senior Vice President
-------------------------
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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<PAGE> 22
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
-22-
<PAGE> 23
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER DIRECT NEW JERSEY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
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<PAGE> 24
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
SKANDIA DOWNSALES, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
TW ACQUISITIONS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
-24-
<PAGE> 25
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
-25-
<PAGE> 26
FIRST SUPPLEMENT
TO
EXHIBIT __
TO
LOAN AND SECURITY AGREEMENT
The following additional information is hereby added to Exhibit __ to Loan and
Security Agreement:
-26-
<PAGE> 27
FIRST SUPPLEMENT
TO
EXHIBIT A
TO
GENERAL SECURITY AGREEMENT,
DATED NOVEMBER 14, 1995, BY
EXISTING GUARANTORS, OTHER THAN
HANOVER, IN FAVOR OF LENDER
The following information is hereby added to Exhibit A to General Security
Agreement, dated November 14, 1995, by Existing Guarantors, other than Hanover,
in favor of Lender:
-27-
<PAGE> 1
Exhibit 10.20
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
April __, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California
corporation ("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania
corporation ("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation
("Brawn"), GUMP'S BY MAIL, INC., a Delaware Corporation ("GBM"), GUMP'S CORP., a
California corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin
corporation ("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI
HOLDINGS, INC., a Delaware Corporation ("LWI"), AEGIS CATALOG CORPORATION, a
Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware
corporation ("HDV"), HANOVER REALTY, INC., a Virginia corporation ("Hanover
Realty"), and THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; and
together with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis, HDV and
Hanover Realty, each individually referred to herein as a "Borrower" and
collectively, "Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation ("Aegis Holding"), AEGIS VENTURES, INC.,
a Delaware corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin
corporation, BRAWN WHOLESALE CORP., a California corporation, THE COMPANY
FACTORY, INC., a Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin
corporation, COMPANY STORE HOLDINGS, INC., a Delaware corporation, D.M.
ADVERTISING, INC., a New Jersey corporation, GUMP'S CATALOG, INC., a Delaware
corporation, GUMP'S HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS,
INC., a Delaware corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware
corporation, HANOVER FINANCE CORPORATION, a Delaware corporation, HANOVER LIST
MANAGEMENT INC., a New Jersey corporation, HANOVER VENTURES, INC., a Delaware
corporation, LEICHTUNG OF MICHIGAN, INC., a Michigan corporation, LWI RETAIL,
INC., an Ohio corporation, SCANDIA DOWN CORPORATION, a Delaware corporation,
TWEEDS OF VERMONT, INC., a Delaware corporation, YORK FULFILLMENT COMPANY, INC.,
a Pennsylvania corporation, and AUSTAD HOLDINGS, INC., a Delaware corporation
(each individually a "Guarantor" and collectively, "Guarantors").
W I T N E S S E T H:
WHEREAS, Borrowers, Guarantors and Lender entered into the
Loan and Security Agreement, dated November 14, 1995, as amended by the First
Amendment to Loan and Security Agreement, dated February 22, 1996 (the "Loan
Agreement"), pursuant to which Lender has made loans and advances to Borrowers;
and
WHEREAS, Borrowers and Guarantors have requested that Lender
(a) provide temporary, supplemental revolving loans to HDPI of up to the maximum
amount of Four Million Dollars ($4,000,000) at any one time outstanding, (b)
reduce, on a temporary basis, the required maintenance levels under certain
financial covenants contained in the Loan Agreement, (c) release
<PAGE> 2
a portion of certain loan availability reserves previously established, and
establish a permanent availability reserve in the amount of One Million Dollars
($1,000,000), and (d) enter into certain related amendments to the Loan
Agreement and agreements in connection therewith;
WHEREAS, the parties to the Loan Agreement desire to enter
into this Second Amendment to Loan and Security Agreement (this "Amendment") to
evidence and effectuate the foregoing, to the extent set forth herein, and
subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Additional Definitions. As used herein or in any
of the other Financing Agreements, the following terms shall have the respective
meanings given to them below, and the Loan Agreement shall be deemed and is
hereby amended to include, in addition and not in limitation, each of the
following definitions:
(i) "Supplemental Revolving Inventory Loans"
shall have the meaning given in Section 2(a) of this Amendment.
(ii) "Hanover Rights Offering" shall mean
the proposed offering by Hanover of rights to purchase shares of common stock of
Hanover, for an aggregate gross issuance price of approximately $40,000,000, as
described in the press release, dated March 7, 1996, issued by Hanover, a copy
of which is annexed as Exhibit A hereto, and the consummation of the
transactions involving the exercise of such rights and the issuance of Hanover's
common stock in respect of such exercise, including the standby purchase of any
of such common stock by NAR.
(iii) "Permanent Availability Reserve" shall
have the meaning given in Section 3(a) of this Amendment.
(iv) "Temporary Loan Period" shall mean the
period commencing on the date hereof and ending on the earlier of (A) June 15,
1996 and (B) the first date of issuance of common stock of Hanover upon the
exercise of the rights under, and/or in the case of NAR, its standby purchase of
common stock of Hanover pursuant to, the Hanover Rights Offering (regardless of
the actual number of rights exercised or shares issued or the amounts received
by Hanover from such issuance or exercise).
(b) Interpretation. For purposes of this Amendment,
unless otherwise defined herein, all capitalized terms
-2-
<PAGE> 3
used herein that are defined in the Loan Agreement, shall have the respective
meanings given to such terms in the Loan Agreement.
2. Supplemental Revolving Inventory Loan Availability.
(a) Subject to the terms and conditions contained
herein and all of the terms and conditions of the Loan Agreement as amended
hereby, Lender agrees that, after giving effect to the adjustments to certain
availability reserves described in Section 3 hereof, to make available to HDPI
from time to time during the Temporary Loan Period and permit to remain
outstanding during the Temporary Loan Period, additional Revolving Inventory
Loans in the aggregate principal amount of Four Million Dollars ($4,000,000) at
any one time outstanding in excess of the aggregate amount of Revolving
Inventory Loans otherwise determined by Lender to be available to HDPI pursuant
to Section 2.1(b) of the Loan Agreement (the "Supplemental Revolving Inventory
Loans").
(b) The Supplemental Revolving Inventory Loans (i)
shall constitute part of and shall be deemed Revolving Inventory Loans, and as
such shall constitute Obligations of HDPI, for all purposes under the Loan
Agreement and the other Financing Agreements, except that during the Temporary
Loan Period the sublimit on Revolving Inventory Loans to HDPI contained in
Section 2.2(b) shall not be applicable to the Supplemental Revolving Inventory
Loans, (ii) shall be subject to (A) Lender's right to establish reserves against
availability of Revolving Loans and Letter of Credit Accommodations pursuant to
Section 2.6 of the Loan Agreement, and all the other terms and conditions set
forth herein and in the Loan Agreement and the other Financing Agreements,
except as expressly set forth in clause (i) of this Section , (iii) shall be
repaid on or prior to the expiration of the Temporary Loan Period in accordance
with the provisions of this Amendment, the Loan Agreement as amended hereby and
the other Financing Agreements, and (iv) shall be secured by all of the
Collateral.
3. Release of Part of Existing Availability Reserves;
Establishment of Permanent Availability Reserve.
(a) In place of Lender's continued maintenance of the
reserve against Revolving Loan Availability as provided in paragraph 2 of the
letter agreement re: Post-Closing Items, dated November 14, 1995, among Lender
and Borrowers, Lender shall release the remaining unreleased portion of such
reserve, except for $1,000,000 thereof, which shall be maintained at all times
hereafter by Lender as a permanent reserve against the Revolving Loan
availability of HDPI (the "Permanent Availability Reserve"), and the provisions
of such letter agreement providing for release of such previously established
availability reserve shall be of no further force and effect.
-3-
<PAGE> 4
(b) The Permanent Availability Reserve shall be in
addition to, and not in limitation of, the rights of Lender to establish other
and further reserves against the availability of Revolving Loans and Letter of
Credit Accommodations under the Loan Agreement and the other Financing
Agreements.
4. Amendment Fee. In addition to all other fees, charges,
interest and expenses payable by Borrowers to Lender under the Loan Agreement
and the other Financing Agreements, HDPI shall pay to Lender a fee for entering
into this Amendment in the amount of Forty Thousand Dollars ($40,000), which
amount is fully earned and payable as of the date hereof and may be charged
directly to HDPI's loan account maintained by Lender in respect of the Revolving
Loans.
5. Consolidated Working Capital. Notwithstanding Section 6.19
of the Loan Agreement, as of the end of each fiscal month occurring during the
period commencing on the date hereof and ending on the last day of the Temporary
Loan Period, Hanover shall only be required to maintain Consolidated Working
Capital, calculated on a consolidated basis for Hanover and its Subsidiaries, of
not less than Twenty One Million Dollars ($21,000,000). As of the end of each
fiscal month ending after the last day of the Temporary Loan Period, Hanover
shall maintain Consolidated Working Capital as provided in Section 6.19 of the
Loan Agreement.
6. Consolidated Net Worth. Notwithstanding Section 6.20 of the
Loan Agreement, as of the end of each fiscal month occurring during the period
commencing on the date hereof and ending on the last day of the Temporary Loan
Period, Hanover shall only be required to maintain Consolidated Net Worth,
calculated on a consolidated basis for Hanover and its Subsidiaries, of at least
Seventy-Five Million Dollars ($75,000,000). As of the end of each fiscal month
ending after the last day of the Temporary Loan Period, Hanover shall maintain
Consolidated Net Worth as provided in Section 6.20 of the Loan Agreement.
7. Hanover Rights Offering. Upon receipt of proceeds of the
Hanover Rights Offering, net of commissions and expenses relating thereto,
Hanover shall use all such net proceeds, to the extent necessary to satisfy
fully the following requirement, to make a capital contribution or intercompany
advance (i) to HDPI to be used by HDPI to repay to Lender all Supplemental
Revolving Inventory Loans then outstanding, and (ii) to the Borrowers (including
HDPI), to the extent the outstanding Obligations (excluding the aggregate
outstanding principal amount of the Term Loans) exceeds the aggregate amount of
Revolving Loans determined by Lender pursuant to the lending formulas and
subject to the sublimits and reserves provided for or established pursuant to
the Loan Agreement as amended hereby, to be used by the respective Borrowers to
repay to Lender such excess, in each case under clauses (i) and (ii) before
using any such proceeds for any
-4-
<PAGE> 5
other purpose, whether contemplated by the March 7, 1996 press release annexed
hereto as Exhibit A, or otherwise.
8. New Collateral Locations. For purposes of clarifying the
scope of Section 5.7(b) of the Loan Agreement, the movement of Inventory or
Equipment or other Collateral of a Borrower or Guarantor to a location which has
been disclosed on Exhibit C to the Loan Agreement as a location of Collateral of
that type of another Borrower or Guarantor, but not that particular Borrower or
Guarantor, shall be considered the opening of a new location, subject to the
prior notice and other requirements provided in or contemplated by Section
5.7(b). Concurrently herewith, Borrowers and Guarantors shall deliver an updated
Exhibit C to the Loan Agreement and shall execute or cause to be executed and/or
delivered such additional UCC financing statements and other agreements provided
in or contemplated by Section 5.7(b) or in connection with the mergers referred
to in Section 9 hereof, in each case as Lender shall require with respect to any
Collateral locations for particular Borrowers or Guarantors that were not
originally shown on Exhibit C to the Loan Agreement as Collateral locations as
to any type(s) of Collateral for those particular Borrowers or Guarantors.
9. Certain Mergers. Anything contained in Section 6.7 of the
Loan Agreement to the contrary notwithstanding, the mergers of certain
Guarantors as described in the footnotes appearing on the updated Exhibit C to
the Loan Agreement delivered pursuant to Section 8 of this Amendment are hereby
acknowledged and approved by Lender, Borrowers and Guarantors as of the
effective dates thereof.
10. Pledge of Note Payable to LWI. Upon execution and delivery
of the promissory note to be executed by Woodworkers Supply, Inc., payable to
LWI Holdings, Inc. in connection with the Asset Purchase Agreement, dated March
29, 1996, by and among LWI Holdings, Inc., Hanover and Woodworkers Supply, Inc.,
LWI Holdings, Inc. shall deliver to Lender, as pledgee pursuant to the Loan
Agreement, such note together with an allonge indorsement affixed to such note
providing for the payment of all amounts due thereunder to the order of Lender.
11. Representations and Warranties. Borrowers represent,
warrant and covenant with and to Lender as follows, which representations,
warranties and covenants are continuing and shall survive the execution and
delivery hereof, the truth and accuracy of, or compliance with each, together
with the representations, warranties and covenants in the other Financing
Agreements, being a condition of the effectiveness of this Amendment and a
continuing condition of the making or providing of any Revolving Loans or Letter
of Credit Accommodations by Lender to Borrowers:
(a) This Amendment has been duly authorized, executed
and delivered by all necessary action of each of the Borrowers and Guarantors
which is a party hereto, and is in full
-5-
<PAGE> 6
force and effect, and the agreements and obligations of Borrowers and
Guarantors, as the case may be, contained herein constitute legal, valid and
binding obligations of Borrowers and Guarantors, as the case may be, enforceable
against them in accordance with their terms.
(b) All of the representations and warranties set
forth in the Loan Agreement as amended hereby, and the other Financing
Agreements, are true and correct in all material respects, and except to the
extent any such representation or warranty is made as of a specified date, in
which case such representation or warranty shall have been true and correct as
of such date.
(c) After giving effect to the provisions of this
Amendment, no Event of Default or Incipient Default exists or has occurred and
is continuing.
12. Conditions Precedent. Concurrently with the execution
hereof, and as a further condition to the effectiveness of this Amendment and
the agreement of Lender to the modifications and amendments set forth in this
Amendment:
(a) Lender shall have received an original of this
Amendment, in form and substance satisfactory to Lender and its counsel, duly
authorized, executed and delivered by Borrowers and Guarantors; and
(b) each of Borrowers and Guarantors shall deliver,
or cause to be delivered, to Lender a true and correct copy of any consent,
waiver or approval to or of this Amendment, which any Borrower or Guarantor is
required to obtain from any other Person, and such consent, approval or waiver
shall be in a form reasonably acceptable to Lender.
13. Effect of this Amendment. This Amendment constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. Except as expressly provided herein, no other changes or
modifications to the Loan Agreement and no changes or modifications to the
Subordination Agreement dated November 14, 1995 between IMR and Lender, or any
of the other Financing Agreements, or waivers of or consents under any
provisions of any of the foregoing, are intended or implied, and in all other
respects the Financing Agreements are hereby specifically ratified, restated and
confirmed by all parties hereto as of the effective date hereof. To the extent
that any provision of the Loan Agreement or any of the other Financing
Agreements conflicts with any provision of this Amendment, the provision of this
Amendment shall control.
-6-
<PAGE> 7
14. Further Assurances. Borrowers and Guarantors shall execute
and deliver such additional documents and take such additional action as may be
reasonably requested by Lender to effectuate the provisions and purposes of this
Amendment.
15. Governing Law. The rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of laws).
16. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
17. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ Janet S. Last
-------------------------
Title: Vice President
----------------------
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Wayne Garten
-------------------------
Title: /s/ Executive Vice President
----------------------
BRAWN OF CALIFORNIA, INC.
By: /s/ Wayne Garten
-------------------------
Title: /s/ Vice President
----------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 8
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S BY MAIL, INC.
By: /s/ Wayne Garten
-------------------------
Title: Executive Vice President
----------------------
GUMP'S CORP.
By: /s/ Wayne Garten
-------------------------
Title: President
----------------------
THE COMPANY STORE, INC.
By: /s/ Wayne Garten
-------------------------
Title: Vice President
----------------------
TWEEDS, INC.
By: /s/ Wayne Garten
-------------------------
Title: Vice President
----------------------
LWI HOLDINGS, INC.
By: /s/ Wayne Garten
-------------------------
Title: President
----------------------
AEGIS CATALOG CORPORATION
By: /s/ Wayne Garten
-------------------------
Title: President
----------------------
HANOVER DIRECT VIRGINIA INC.
By: /s/ Wayne Garten
-------------------------
Title: President
----------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 9
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER REALTY, INC.
By: /s/ Wayne Garten
-------------------------
Title: President
----------------------
THE AUSTAD COMPANY
By: /s/ Wayne Garten
-------------------------
Title: Vice President
----------------------
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this Amendment:
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 10
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 11
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 12
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 13
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
-13-
<PAGE> 1
Exhibit 10.21
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
May __, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California
corporation ("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania
corporation ("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation
("Brawn"), GUMP'S BY MAIL, INC., a Delaware Corporation ("GBM"), GUMP'S CORP., a
California corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin
corporation ("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI
HOLDINGS, INC., a Delaware Corporation ("LWI"), AEGIS CATALOG CORPORATION, a
Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware
corporation ("HDV"), HANOVER REALTY, INC., a Virginia corporation ("Hanover
Realty"), and THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; and
together with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis, HDV and
Hanover Realty, each individually referred to herein as a "Borrower" and
collectively, "Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation ("Aegis Holding"), AEGIS VENTURES, INC.,
a Delaware corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin
corporation, BRAWN WHOLESALE CORP., a California corporation, THE COMPANY
FACTORY, INC., a Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin
corporation, COMPANY STORE HOLDINGS, INC., a Delaware corporation, D.M.
ADVERTISING, INC., a New Jersey corporation, GUMP'S CATALOG, INC., a Delaware
corporation, GUMP'S HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS,
INC., a Delaware corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware
corporation, HANOVER FINANCE CORPORATION, a Delaware corporation, HANOVER LIST
MANAGEMENT INC., a New Jersey corporation, HANOVER VENTURES, INC., a Delaware
corporation, LEICHTUNG OF MICHIGAN, INC., a Michigan corporation, LWI RETAIL,
INC., an Ohio corporation, SCANDIA DOWN CORPORATION, a Delaware corporation,
TWEEDS OF VERMONT, INC., a Delaware corporation, YORK FULFILLMENT COMPANY, INC.,
a Pennsylvania corporation, and AUSTAD HOLDINGS, INC., a Delaware corporation
(each individually a "Guarantor" and collectively, "Guarantors").
W I T N E S S E T H:
WHEREAS, Borrowers, Guarantors and Lender entered into the
Loan and Security Agreement, dated November 14, 1995, as amended by the First
Amendment to Loan and Security Agreement, dated February 22, 1996, and the
Second Amendment to Loan and Security Agreement, dated April 16, 1996 (the "Loan
Agreement"), pursuant to which Lender has made loans and advances to Borrowers;
and
WHEREAS, Borrowers and Guarantors have requested that Lender
enter into certain amendments to the Loan Agreement and agreements in connection
with the making of a loan by Quadrant
<PAGE> 2
Management, Inc. to Hanover of up to $25,000,000; and
WHEREAS, the parties to the Loan Agreement desire to enter
into this Third Amendment to Loan and Security Agreement (this "Amendment") to
evidence and effectuate the foregoing, to the extent set forth herein, and
subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Additional Definitions. As used herein or in any
of the other Financing Agreements, the following terms shall have the respective
meanings given to them below, and the Loan Agreement shall be deemed and is
hereby amended to include, in addition and not in limitation, each of the
following definitions:
(i) "Quadrant Management" shall mean
Quadrant Management, Inc., a Delaware corporation, and its successors and
assigns.
(ii) "$25,000,000 Subordinated Note" shall
mean the Subordinated Promissory Note, dated of even date herewith, by Hanover
payable to Quadrant Management in the original principal amount of up to
$25,000,000.
(b) Amendments to Definitions.
(i) Section 1.22 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"1.22 "Consolidated Net Worth" shall mean,
as to any Person, at any time, in accordance with
generally accepted accounting principles, as in
effect from time to time consistently applied, on a
consolidated basis for such Person and its
Subsidiaries, the amount equal to the result obtained
by taking total assets and subtracting therefrom
total liabilities of such Person and its
Subsidiaries; provided, however, (a) that solely for
purposes of calculating Consolidated Net Worth of
Hanover and its Subsidiaries as at the end of
Hanover's 1995 fiscal year, up to $4,500,000 in
write-downs of Hanover's deferred taxes asset, as
required pursuant to Financial Accounting Standards
No. 109, due to losses incurred by Hanover and its
Subsidiaries in such fiscal year, shall not be
considered reductions of the deferred taxes asset of
Hanover and (b) that for purposes
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<PAGE> 3
of calculating Consolidated Net Worth of Hanover and
its Subsidiaries, the outstanding Indebtedness for
Borrowed Money evidenced by the $25,000,000
Subordinated Note shall not be considered a liability
of Hanover."
(ii) Section 1.23 of the Loan Agreement is
hereby amended by deleting the proviso appearing at the end thereof and
substituting the following proviso therefor:
"; provided, however, that solely for purposes of
calculating Consolidated Working Capital hereunder,
the outstanding balance of the Revolving Loans and
Term Loans and the outstanding balance of the
$25,000,000 Subordinated Note shall not be considered
current liabilities."
(c) Interpretation. For purposes of this Amendment,
unless otherwise defined herein, all capitalized terms used herein that are
defined in the Loan Agreement, shall have the respective meanings given to such
terms in the Loan Agreement.
2. Proceeds of Subordinated Loan; Assignment. Hanover agrees
to use the proceeds of the loans evidenced by the $25,000,000 Subordinated Note
only for general operating, working capital of Borrowers and for other proper
corporate purposes of Hanover not otherwise prohibited by the terms of the
Financing Agreements. None of the proceeds of the loans evidenced by the
$25,000,000 Subordinated Note shall be used, directly or indirectly, for the
payment of any of the outstanding obligations of Hanover under the 9.25% Notes,
other than, after the assignment to NAR or a wholly-owned subsidiary of NAR the
$25,000,000 Subordinated Note, upon the application thereof to the obligations
of NAR or such subsidiary of NAR to purchase common stock of Hanover, in each
case, to the extent such assignment and application are permitted under the
subordination agreement referred to in Section 4(b) hereof. Following the
assignment of the $25,000,000 Subordinated Note to NAR or a wholly-owned
subsidiary of NAR as permitted under such subordination agreement, Hanover will
not borrow additional amounts under the $25,000,000 Subordinated Note unless and
until such assignee (which shall be the lender thereunder as to future loans
evidenced thereunder) shall have entered into the "NAR Agreement" as defined in
the subordination agreement referred to in Section 4(b) hereof, and delivered
the opinions and certified resolutions to be delivered to Lender pursuant
thereto, all in form and substance satisfactory to Lender.
3. Representations and Warranties. Borrowers represent,
warrant and covenant with and to Lender as follows, which representations,
warranties and covenants are continuing and shall survive the execution and
delivery hereof, the truth and accuracy of, or compliance with each, together
with the
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<PAGE> 4
representations, warranties and covenants in the other Financing Agreements,
being a condition of the effectiveness of this Amendment and a continuing
condition of the making or providing of any Revolving Loans or Letter of Credit
Accommodations by Lender to Borrowers:
(a) This Amendment has been duly authorized,
executed and delivered by all necessary action of each of the Borrowers and
Guarantors which is a party hereto, and is in full force and effect, and the
agreements and obligations of Borrowers and Guarantors, as the case may be,
contained herein constitute legal, valid and binding obligations of Borrowers
and Guarantors, as the case may be, enforceable against them in accordance with
their terms.
(b) Neither the execution and delivery of the
$25,000,000 Subordinated Note, nor the consummation of the transactions therein
contemplated, nor compliance with the provisions thereof, (i) has violated or
shall violate any Federal or State securities laws or any other law or
regulation or any order or decree of any court or governmental instrumentality
in any respect or (ii) does, or shall conflict with or result in the breach of,
or constitute a default in any respect under any mortgage, deed of trust,
security agreement, agreement or instruments to which Hanover or any other
Guarantor or any Borrower is a party or may be bound, or (iii) does or shall
violate any provision of the Certificate of Incorporation or ByLaws of Hanover
or any other Guarantor or any Borrower.
(c) All of the representations and warranties set
forth in the Loan Agreement as amended hereby, and the other Financing
Agreements, are true and correct in all material respects, except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
(d) After giving effect to the provisions of this
Amendment, no Event of Default or Incipient Default exists or has occurred and
is continuing.
4. Conditions Precedent. Concurrently with the
execution hereof, and as a further condition to the effectiveness
of this Amendment and the agreement of Lender to the modifica-
tions and amendments set forth in this Amendment:
(a) Lender shall have received an original of
this Amendment, in form and substance satisfactory to Lender and
its counsel, duly authorized, executed and delivered by Borrowers
and Guarantors;
(b) Lender shall have received, in form and
substance satisfactory to Lender, an original written
subordination agreement, dated of even date herewith, between
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<PAGE> 5
Quadrant Management and Lender, duly authorized, executed and delivered by
Quadrant Management, pursuant to which, among other things, Quadrant Management
shall have subordinated its right to payment under the $25,000,000 Subordinated
Note and related obligations to the right of Lender to receive the prior
indefeasible payment in full of all of the Obligations;
(c) Lender shall have received the Secretary's
Certificates of Directors' Resolutions evidencing the adoption and subsistence
of corporate resolutions approving the execution, delivery and performance by
Quadrant Management of the subordination agreement described in Section 4(b)
hereof, together with such opinions of counsel to Quadrant Management with
respect thereto, addressed to Lender, as Lender shall reasonably require, all in
form and substance satisfactory to Lender; and
(d) each of Borrowers and Guarantors shall deliver,
or cause to be delivered, to Lender a true and correct copy of any consent,
waiver or approval to or of this Amendment, which any Borrower or Guarantor is
required to obtain from any other Person, and such consent, approval or waiver
shall be in a form reasonably acceptable to Lender.
5. Effect of this Amendment. This Amendment constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. Except as expressly provided herein, no other changes or
modifications to the Loan Agreement or any of the other Financing Agreements, or
waivers of or consents under any provisions of any of the foregoing, are
intended or implied, and in all other respects the Financing Agreements are
hereby specifically ratified, restated and confirmed by all parties hereto as of
the effective date hereof. To the extent that any provision of the Loan
Agreement or any of the other Financing Agreements conflicts with any provision
of this Amendment, the provision of this Amendment shall control.
(a) Further Assurances. Borrowers and Guarantors
shall execute and deliver such additional documents and take such additional
action as may be reasonably requested by Lender to effectuate the provisions and
purposes of this Amendment.
(b) Governing Law. The rights and obligations
hereunder of each of the parties hereto shall be governed by and interpreted and
determined in accordance with the internal laws of the State of New York
(without giving effect to principles of conflicts of laws).
6. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
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<PAGE> 6
7. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ Jennifer S. Last
------------------------
Title: Vice President
---------------------
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
GUMP'S CORP.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 7
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
TWEEDS, INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
------------------------
Title: Vice President
---------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 8
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this
Amendment:
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Senior Vice President
------------------------
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
------------------------
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
------------------------
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
------------------------
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 9
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 10
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 11
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
___________________________
Title: Vice President
________________________
LMI RETAIL, INC.
By: /s/ Edward J. O'Brien
___________________________
Title: Vice President
________________________
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
___________________________
Title: Vice President
________________________
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
___________________________
Title: Vice President
________________________
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
___________________________
Title: Vice President
________________________
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
___________________________
Title: Vice President
________________________
-11-
<PAGE> 1
Exhibit 10.22
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
May __, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California
corporation ("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania
corporation ("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation
("Brawn"), GUMP'S BY MAIL, INC., a Delaware Corporation ("GBM"), GUMP'S CORP., a
California corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin
corporation ("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI
HOLDINGS, INC., a Delaware Corporation ("LWI"), AEGIS CATALOG CORPORATION, a
Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware
corporation ("HDV"), HANOVER REALTY, INC., a Virginia corporation ("Hanover
Realty"), and THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; and
together with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis, HDV and
Hanover Realty, each individually referred to herein as a "Borrower" and
collectively, "Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation ("Aegis Holding"), AEGIS VENTURES, INC.,
a Delaware corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin
corporation, BRAWN WHOLESALE CORP., a California corporation, THE COMPANY
FACTORY, INC., a Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin
corporation, COMPANY STORE HOLDINGS, INC., a Delaware corporation, D.M.
ADVERTISING, INC., a New Jersey corporation, GUMP'S CATALOG, INC., a Delaware
corporation, GUMP'S HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS,
INC., a Delaware corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware
corporation, HANOVER FINANCE CORPORATION, a Delaware corporation, HANOVER LIST
MANAGEMENT INC., a New Jersey corporation, HANOVER VENTURES, INC., a Delaware
corporation, LEICHTUNG OF MICHIGAN, INC., a Michigan corporation, LWI RETAIL,
INC., an Ohio corporation, SCANDIA DOWN CORPORATION, a Delaware corporation,
TWEEDS OF VERMONT, INC., a Delaware corporation, YORK FULFILLMENT COMPANY, INC.,
a Pennsylvania corporation, and AUSTAD HOLDINGS, INC., a Delaware corporation
(each individually a "Guarantor" and collectively, "Guarantors").
W I T N E S S E T H:
WHEREAS, Borrowers, Guarantors and Lender entered into the
Loan and Security Agreement, dated November 14, 1995, as amended by the First
Amendment to Loan and Security Agreement, dated February 22, 1996, and the
Second Amendment to Loan and Security Agreement, dated April 16, 1996 (the "Loan
Agreement"), pursuant to which Lender has made loans and advances to Borrowers;
and
WHEREAS, Borrowers and Guarantors have requested that Lender
enter into certain amendments to the Loan Agreement and agreements in connection
with the making of a loan of up to $25,000,000 to Hanover by Intercontinental
Mining & Resources
<PAGE> 2
Incorporated ("IMR") to be used in part to repay the loan previously made by
Quadrant Management, Inc. to Hanover in the principal amount of $4,000,000; and
WHEREAS, the parties to the Loan Agreement desire to enter
into this Fourth Amendment to Loan and Security Agreement (this "Amendment") to
evidence and effectuate the foregoing, to the extent set forth herein, and
subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Additional Definition. As used herein or in any
of the other Financing Agreements, the following term shall have the meaning
given to it below, and the Loan Agreement shall be deemed and is hereby amended
to include, in addition and not in limitation, the following definition:
"$25,000,000 IMR Subordinated Note" shall
mean the Subordinated Promissory Note, dated of even date herewith, by Hanover
payable to IMR in the original principal amount of up to $25,000,000.
(b) Amendments to Definitions.
(i) Section 1.22 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following, effective as of
the date hereof:
"1.22 "Consolidated Net Worth" shall mean,
as to any Person, at any time, in accordance with
generally accepted accounting principles, as in
effect from time to time consistently applied, on a
consolidated basis for such Person and its
Subsidiaries, the amount equal to the result obtained
by taking total assets and subtracting therefrom
total liabilities of such Person and its
Subsidiaries; provided, however, (a) that solely for
purposes of calculating Consolidated Net Worth of
Hanover and its Subsidiaries as at the end of
Hanover's 1995 fiscal year, up to $4,500,000 in
write-downs of Hanover's deferred taxes asset, as
required pursuant to Financial Accounting Standards
No. 109, due to losses incurred by Hanover and its
Subsidiaries in such fiscal year, shall not be
considered reductions of the deferred taxes asset of
Hanover and (b) that for purposes of calculating
Consolidated Net Worth of Hanover and its
Subsidiaries, the outstanding Indebtedness for
Borrowed Money evidenced by the $25,000,000
-2-
<PAGE> 3
IMR Subordinated Note shall not be considered a
liability of Hanover."
(ii) Section 1.23 of the Loan Agreement is
hereby amended by deleting the proviso appearing at the end thereof and
substituting the following proviso therefor, effective as of the date hereof:
"; provided, however, that solely for purposes of
calculating Consolidated Working Capital hereunder,
the outstanding balance of the Revolving Loans and
Term Loans and the outstanding balance of the
$25,000,000 IMR Subordinated Note shall not be
considered current liabilities."
(c) Interpretation. For purposes of this Amendment,
unless otherwise defined herein, all capitalized terms used herein that are
defined in the Loan Agreement, shall have the respective meanings given to such
terms in the Loan Agreement.
2. Proceeds of IMR Subordinated Loan; Assignment. Hanover
agrees to use the proceeds of the loans evidenced by the $25,000,000 IMR
Subordinated Note only to repay in full the unpaid principal indebtedness
evidenced by the $25,000,000 Subordinated Note (i.e., the Subordinated
Promissory Note dated May 24, 1996 by Hanover payable to Quadrant Management in
the principal amount of up to $25,000,000), which note shall thereupon be
cancelled, and thereafter such loans shall be used only for general operating,
working capital of Borrowers and for other proper corporate purposes of Hanover
not otherwise prohibited by the terms of the Financing Agreements. None of the
proceeds of the loans evidenced by the $25,000,000 IMR Subordinated Note shall
be used, directly or indirectly, for the payment of any of the outstanding
obligations of Hanover under the 9.25% Notes, other than, after the assignment
to NAR or a wholly-owned subsidiary of NAR the $25,000,000 IMR Subordinated
Note, upon the application thereof to the obligations of NAR or such subsidiary
of NAR to purchase common stock of Hanover, in each case, to the extent such
assignment and application are permitted under the subordination agreement
referred to in Section 4(b) hereof. Following the assignment of the $25,000,000
IMR Subordinated Note to NAR or a wholly-owned subsidiary of NAR as permitted
under such subordination agreement, Hanover will not borrow additional amounts
under the $25,000,000 IMR Subordinated Note unless and until such assignee
(which shall be the lender thereunder as to future loans evidenced thereunder)
shall have entered into the "NAR Agreement" as defined in the subordination
agreement referred to in Section 4(b) hereof, and delivered the opinions and
certified resolutions to be delivered to Lender pursuant thereto, all in form
and substance satisfactory to Lender.
3. Representations and Warranties. Borrowers represent,
warrant and covenant with and to Lender as follows,
-3-
<PAGE> 4
which representations, warranties and covenants are continuing and shall survive
the execution and delivery hereof, the truth and accuracy of, or compliance with
each, together with the representations, warranties and covenants in the other
Financing Agreements, being a condition of the effectiveness of this Amendment
and a continuing condition of the making or providing of any Revolving Loans or
Letter of Credit Accommodations by Lender to Borrowers:
(a) This Amendment has been duly authorized, executed
and delivered by all necessary action of each of the Borrowers and Guarantors
which is a party hereto, and is in full force and effect, and the agreements and
obligations of Borrowers and Guarantors, as the case may be, contained herein
constitute legal, valid and binding obligations of Borrowers and Guarantors, as
the case may be, enforceable against them in accordance with their terms.
(b) Neither the execution and delivery of the
$25,000,000 IMR Subordinated Note, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof, (i) has
violated or shall violate any Federal or State securities laws or any other law
or regulation or any order or decree of any court or governmental
instrumentality in any respect or (ii) does, or shall conflict with or result in
the breach of, or constitute a default in any respect under any mortgage, deed
of trust, security agreement, agreement or instruments to which Hanover or any
other Guarantor or any Borrower is a party or may be bound, or (iii) does or
shall violate any provision of the Certificate of Incorporation or ByLaws of
Hanover or any other Guarantor or any Borrower.
(c) All of the representations and warranties set
forth in the Loan Agreement as amended hereby, and the other Financing
Agreements, are true and correct in all material respects, except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
(d) After giving effect to the provisions of this
Amendment, no Event of Default or Incipient Default exists or has occurred and
is continuing.
4. Conditions Precedent. Concurrently with the execution
hereof, and as a further condition to the effectiveness of this Amendment and
the agreement of Lender to the modifications and amendments set forth in this
Amendment:
(a) Lender shall have received an original of this
Amendment, in form and substance satisfactory to Lender and its counsel, duly
authorized, executed and delivered by Borrowers and Guarantors;
(b) Lender shall have received, in form and
-4-
<PAGE> 5
substance satisfactory to Lender, an original written subordination agreement,
dated of even date herewith, between IMR and Lender, duly authorized, executed
and delivered by IMR, pursuant to which, among other things, IMR shall have
subordinated its right to payment under the $25,000,000 IMR Subordinated Note
and related obligations to the right of Lender to receive the prior indefeasible
payment in full of all of the Obligations;
(c) Lender shall have received the Secretary's
Certificates of Directors' Resolutions evidencing the adoption and subsistence
of corporate resolutions approving the execution, delivery and performance by
IMR of the subordination agreement described in Section 4(b) hereof, together
with such opinions of counsel to IMR with respect thereto, addressed to Lender,
as Lender shall reasonably require, all in form and substance satisfactory to
Lender;
(d) All of the unpaid principal indebtedness
evidenced by the $25,000,000 Subordinated Note (i.e., the Subordinated
Promissory Note dated May 24, 1996, in the principal amount of up to
$25,000,000, by Hanover payable to Quadrant Management) shall have been paid in
full and such note shall have been marked "canceled", and a copy thereof
furnished to Lender, who hereby consents to such payment out of a portion of the
proceeds of the initial loans made by IMR and evidenced by the $25,000,000 IMR
Subordinated Note; and
(e) each of Borrowers and Guarantors shall deliver,
or cause to be delivered, to Lender a true and correct copy of any consent,
waiver or approval to or of this Amendment, which any Borrower or Guarantor is
required to obtain from any other Person, and such consent, approval or waiver
shall be in a form reasonably acceptable to Lender.
5. Effect of this Amendment. This Amendment constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. Except as expressly provided herein, no other changes or
modifications to the Loan Agreement or any of the other Financing Agreements, or
waivers of or consents under any provisions of any of the foregoing, are
intended or implied, and in all other respects the Financing Agreements are
hereby specifically ratified, restated and confirmed by all parties hereto as of
the effective date hereof. To the extent that any provision of the Loan
Agreement or any of the other Financing Agreements conflicts with any provision
of this Amendment, the provision of this Amendment shall control.
(a) Further Assurances. Borrowers and Guarantors
shall execute and deliver such additional documents and take such additional
action as may be reasonably requested by Lender to effectuate the provisions and
purposes of this Amendment.
-5-
<PAGE> 6
(b) Governing Law. The rights and obligations
hereunder of each of the parties hereto shall be governed by and interpreted and
determined in accordance with the internal laws of the State of New York
(without giving effect to principles of conflicts of laws).
6. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
7. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ Janet S. Last
_________________________
Title: Vice President
______________________
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
GUMP'S CORP.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 7
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
TWEEDS, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 8
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this
Amendment:
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Senior Vice President
_________________________
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
-8-
<PAGE> 9
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 10
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 11
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
-11-
<PAGE> 1
Exhibit 10.23
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
September 11, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California
corporation ("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania
corporation ("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation
("Brawn"), GUMP'S BY MAIL, INC., a Delaware corporation ("GBM"), GUMP'S CORP., a
California corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin
corporation ("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI
HOLDINGS, INC., a Delaware corporation ("LWI"), AEGIS CATALOG CORPORATION, a
Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware
corporation ("HDV"), HANOVER REALTY, INC., a Virginia corporation ("Hanover
Realty"), and THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; and
together with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis, HDV and
Hanover Realty, each individually referred to herein as a "Borrower" and
collectively, "Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation, AEGIS VENTURES, INC., a Delaware
corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin corporation, BRAWN
WHOLESALE CORP., a California corporation, THE COMPANY FACTORY, INC., a
Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin corporation,
COMPANY STORE HOLDINGS, INC., a Delaware corporation, D.M. ADVERTISING, INC., a
New Jersey corporation, GUMP'S CATALOG, INC., a Delaware corporation, GUMP'S
HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS, INC., a Delaware
corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware corporation, HANOVER
FINANCE CORPORATION, a Delaware corporation, HANOVER LIST MANAGEMENT INC., a New
Jersey corporation, HANOVER VENTURES, INC., a Delaware corporation, LEICHTUNG OF
MICHIGAN, INC., a Michigan corporation, LWI RETAIL, INC., an Ohio corporation,
SCANDIA DOWN CORPORATION, a Delaware corporation, TWEEDS OF VERMONT, INC., a
Delaware corporation, YORK FULFILLMENT COMPANY, INC., a Pennsylvania
corporation, and AUSTAD HOLDINGS, INC., a Delaware corporation (each
individually a "Guarantor" and collectively, "Guarantors").
W I T N E S S E T H:
WHEREAS, Borrowers, Guarantors and Lender entered into the
Loan and Security Agreement, dated November 14, 1995, as amended by the First
Amendment to Loan and Security Agreement, dated February 22, 1996, the Second
Amendment to Loan and Security Agreement, dated April 16, 1996, the Third
Amendment to Loan and Security Agreement, dated May 24, 1996, and the Fourth
Amendment to Loan and Security Agreement, dated May 31, 1996 (the "Loan
Agreement"), pursuant to which Lender has made loans and advances to Borrowers;
and
<PAGE> 2
WHEREAS, Borrowers and Guarantors have informed Lender that an
Appraisal of the Inventory of Revolving Loan Borrowers presently being conducted
by the Appraiser is expected to indicate that the Value of the Eligible
Inventory of Revolving Loan Borrowers, the Net Orderly Liquidation Value of the
Eligible Inventory of Revolving Loan Borrowers, other than Gump's, and the Net
GOB Value of Eligible Inventory of Gump's are lower than such values of the
Eligible Inventory of such Revolving Loan Borrowers contained in the Appraisal,
dated September 28, 1995, with respect to the Inventory of Revolving Loan
Borrowers, which is the most recent Appraisal heretofore delivered to Lender;
and
WHEREAS, Borrowers and Guarantors have requested that Lender,
solely as an accommodation to Borrowers and Guarantors, defer on a temporary
basis making an adjustment to the Inventory Loan Formulas based on the results
of the Appraisal presently being conducted; and
WHEREAS, Borrowers and Guarantors have informed Lender that
IMR intends to make a loan to Hanover in the original principal amount of
$10,000,000, the proceeds of which will be used solely by Hanover to make
intercompany loan(s) to Revolving Loan Borrowers, to be used by Revolving Loan
Borrowers solely for working capital purposes of Revolving Loan Borrowers; and
WHEREAS, Borrowers and Guarantors have requested that Lender
waive the failure of Deferred Billing Borrowers to satisfy the Accounts Loan
Financial Test with respect to the Measurement Quarters for certain Program
Quarters, temporarily waive a certain Event of Default, and agree to increase
temporarily the Revolving Accounts Loan sublimit; and
WHEREAS, Lender is willing to agree to the foregoing,
subject to the terms and conditions contained herein; and
WHEREAS, the parties to the Loan Agreement desire to enter
into this Fifth Amendment to Loan and Security Agreement (this "Amendment") to
evidence and effectuate such amendments, agreements and waivers to the extent
set forth herein, and subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Additional Definitions. As used herein or in any
of the other Financing Agreements, the following terms shall have the meanings
given to them below, and the Loan Agreement
-2-
<PAGE> 3
shall be deemed and is hereby amended to include, in addition and
not in limitation, the following definitions:
(i) "Accounts Sublimit Increase Period"
shall mean the period commencing on November 15, 1996 and ending on January 15,
1997.
(ii) "Inventory Formula Non-Adjustment
Period" shall mean the period commencing on the date hereof and ending on the
earlier of (A) the close of business on November 14, 1996, subject to the second
proviso contained in Section 2(b)(i) of this Amendment, or (B) the occurrence or
existence of an Incipient Default or Event of Default.
(iii) "September 1996 Appraisal" shall mean
the Appraisal prepared by Daley-Hodkin Appraisal Corporation, expected to be
delivered to Lender during September 1996, setting forth the Values of the
Inventory of Revolving Loan Borrowers, the Net Orderly Liquidation Value of
Inventory of Revolving Loan Borrowers, other than Gump's, and the Net GOB Value
of Gump's Inventory.
(iv) "September 1996 Intercompany Loans"
shall mean the intercompany loans made, contemporaneously herewith, by Hanover
to the Revolving Loan Borrowers, funded with the proceeds of the $10,000,000 IMR
Loan.
(v) "$10,000,000 IMR Loan" shall mean the
loan in the original principal sum of $10,000,000 made by IMR to Hanover,
contemporaneously herewith.
(vi) "$10,000,000 IMR Note" shall mean the
Promissory Note, dated of even date herewith, by Hanover payable to IMR in the
original principal amount of $10,000,000 delivered to evidence the $10,000,000
IMR Loan plus interest thereon.
(b) Amendment to Definition. Section 1.23 of the Loan
Agreement is hereby amended by deleting the proviso appearing at the end thereof
and substituting the following proviso therefor, effective as of the date
hereof:
"; provided, however, that solely for
purposes of calculating Consolidated Working Capital
hereunder, the outstanding balance of the Revolving
Loans and Term Loans and the outstanding balance of
the $10,000,000 IMR Note shall not be considered
current liabilities."
(c) Interpretation. For purposes of this Amendment,
unless otherwise defined herein, all capitalized terms used herein that are
defined in the Loan Agreement, shall have
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<PAGE> 4
the respective meanings given to such terms in the Loan Agreement.
2. Use of Proceeds and Repayment of IMR Loan.
(a) Hanover agrees to use the proceeds of the
$10,000,000 IMR Loan solely to make the September 1996 Intercompany Loans to
Revolving Loan Borrowers and Revolving Loan Borrowers agree to use the proceeds
of such intercompany loans from Hanover solely for working capital purposes of
Revolving Loan Borrowers. Hanover and Revolving Loan Borrowers shall arrange for
the disbursement of the $10,000,000 IMR Loan and the corresponding September
1996 Intercompany Loans by Hanover to Revolving Loan Borrowers, by wire
transfer(s) directly from IMR to Lender, for credit to the applicable Revolving
Loan Borrowers' Revolving Loan accounts maintained by Lender.
(b) Notwithstanding Section 6.5(b)(ii) of the Loan
Agreement,
(i) Revolving Loan Borrowers may, on
November 14, 1996, use the proceeds of Revolving Loans made on November 14,
1996, to make payments to Hanover, or directly to IMR at the direction of
Hanover, in respect of the valid intercompany Indebtedness owed to Hanover in
respect of the September 1996 Intercompany Loans; provided, that, (A) Lender
shall have received from Hanover, by no later than 11:00 a.m. on November 14,
1996, (1) written notice setting forth the amount of the payment proposed to be
made on November 14, 1996 by Revolving Loan Borrowers to Hanover or to IMR at
the direction of Hanover, in respect of the then-outstanding amount of
Indebtedness in respect of the September 1996 Intercompany Loans, which amounts
shall then be used by Hanover (or credited by IMR if received directly) to repay
the then-outstanding balance of the Indebtedness of Hanover evidenced by the
$10,000,000 IMR Note, and (2) all information not then in the possession of
Lender necessary to make the calculation of Excess Availability on November 14,
1996 in accordance with clause (i)(B) below, and (B) Lender has advised Hanover
that Revolving Loan Borrowers will have Excess Availability of not less than
Twelve Million Five Hundred Thousand Dollars ($12,500,000) on November 14, 1996
immediately prior to making such payment but after giving effect to the
application of proceeds of Collateral received by Lender on such date and after
giving effect to any other Loans or Letter of Credit Accommodations to be made
or provided on such date; provided further, that, if Lender does not advise
Hanover on November 14, 1996 of the amount of Excess Availability (if any)
available to Revolving Loan Borrowers as provided in the foregoing clause
(i)(B), but subject to the conditions set forth in the foregoing clause (i)(A),
the Inventory Formula Non-Adjustment Period shall be extended until the close of
business
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<PAGE> 5
on the date Lender has advised Hanover of the amount of such Excess Availability
(if any); and
(ii) Revolving Loan Borrowers may use the
proceeds of Revolving Loans made on or after November 15, 1996 to make payments
on or after November 15, 1996 to Hanover, or to IMR at the direction of Hanover,
in respect of the valid intercompany Indebtedness owed to Hanover in respect of
the September 1996 Intercompany Loans; provided, that, (A) Lender shall have
received from Hanover, by no later than 11:00 a.m. on each date of proposed
payment, (1) written notice setting forth the amount of such proposed payment to
be made by Revolving Loan Borrowers to Hanover or to IMR at the direction of
Hanover, in respect of the then-outstanding amount of Indebtedness in respect of
the September 1996 Intercompany Loans, which amounts shall then be used by
Hanover (or credited by IMR if received directly) to repay the then-outstanding
balance of the Indebtedness of Hanover evidenced by the $10,000,000 IMR Note,
and (2) all information not then in the possession of Lender necessary to make
the calculation of Excess Availability on such date in accordance with clause
(ii)(B) below and (B) Lender has advised Hanover on such date of proposed
repayment that Revolving Loan Borrowers will have Excess Availability of not
less than Two Million Five Hundred Thousand Dollars ($2,500,000) immediately
after giving effect to such payment, the application of proceeds of Collateral
received by Lender on such date and after giving effect to any other Loans or
Letter of Credit Accommodations to be made or provided on such date.
(c) For purposes of Lender's determination of Excess
Availability, Excess Availability shall be calculated based upon the Revolving
Loan Formulas, the applicable lending sublimits with respect to each Revolving
Loan Borrower and the Revolving Loan Limit, as each is then in effect on the
date of any such determination.
3. Certain Reductions in Inventory Lending Formulas.
(a) Notwithstanding the absolute right of Lender to
reduce the Inventory Loan Formulas based upon the September 1996 Appraisal,
which right is hereby confirmed by Borrowers and Guarantors, but without
limiting any other rights or remedies of Lender under the Loan Agreement and in
the other Financing Agreements, Lender agrees, as an accommodation to Borrowers
and Guarantors, during the Inventory Formula Non-Adjustment Period, to defer
making adjustments in the Inventory Loan Formulas to the extent based on the
results of the September 1996 Appraisal.
(b) Immediately upon the termination of the Inventory
Formula Non-Adjustment Period, or at any time or times thereafter, Lender shall
have the right, in its absolute discretion, to make any adjustments to the
Inventory Loan
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<PAGE> 6
Formulas then or thereafter in effect as Lender shall determine based on the
results of the September 1996 Appraisal.
(c) Nothing contained in this Amendment shall in any
way (i) limit or affect Lender's rights or remedies to adjust the Revolving Loan
Formulas for any reasons, other than the deferral of adjustments based on than
the results of the September 1996 Appraisal for the period and on the terms
provided herein, or (ii) limit or affect Lender's rights or remedies upon an
Event of Default or Incipient Default.
4. Waivers. Subject to the terms and conditions contained
herein: (a) Lender hereby waives, but only with respect to the Program Quarters
ending prior to December 29, 1996, the failure of Deferred Billing Borrowers to
satisfy the Accounts Loan Financial Test with respect to the respective
Measurement Quarters applicable to such Program Quarters; and (b) Lender hereby
waives, but only for the period effective as of the date hereof and ending on
the close of business on December 31, 1996, any Event of Default arising under
Section 7.1(i) of the Loan Agreement consisting solely of the cumulative losses
of Hanover and its Subsidiaries incurred from November 14, 1995 through
September 28, 1996. The foregoing temporary waiver under Section 4(b) hereof
shall not be deemed to limit or impair Lender's rights or remedies in respect of
any Event of Default arising under Section 7.1(b) of the Loan Agreement by
reason of breach of the financial covenants set forth in Section 6.19 or Section
6.20 of the Loan Agreement, none of which Events of Default, rights or remedies
are being waived hereby, temporarily or otherwise.
5. Deferred Billing Receivables Advance Rate. Effective
immediately, Section 2.1(a) of the Loan Agreement shall be deemed amended by
deleting the words "eighty percent (80%)" between the word "to" and the word
"of" in the fifth line of Section 2.1(a) of the Loan Agreement and substituting
therefor the words "seventy percent (70%)."
6. Temporary Increase in Revolving Accounts Loan Sublimit.
Notwithstanding Section 2.2(j) of the Loan Agreement, but subject to all other
rights of Lender under the Loan Agreement and the other Financing Agreements,
during the Accounts Sublimit Increase Period, the aggregate amount of Revolving
Accounts Loans for all Deferred Billing Borrowers shall not at any one time
outstanding exceed Eleven Million Dollars ($11,000,000). Lender shall have the
right, from time to time during the Accounts Sublimit Increase Period, to
establish and revise Revolving Accounts Loan sublimits for each Deferred Billing
Borrower, within the overall Eleven Million Dollar ($11,000,000) sublimit
applicable to all Revolving Accounts Loans. On and after the close of business
on the last day of the Accounts Sublimit Increase Period, (i) the aggregate
amount of
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<PAGE> 7
Revolving Accounts Loans for all Deferred Billing Borrowers shall not at any one
time outstanding exceed Ten Million Dollars ($10,000,000) and (ii) Lender shall
have the right, from time to time thereafter, to establish and revise Revolving
Accounts Loan sublimits for each Deferred Billing Borrower, within the overall
Ten Million Dollar ($10,000,000) sublimit applicable to all Revolving Accounts
Loans.
7. Representations and Warranties. Borrowers represent,
warrant and covenant with and to Lender as follows, which representations,
warranties and covenants are continuing and shall survive the execution and
delivery hereof, the truth and accuracy of, or compliance with each, together
with the representations, warranties and covenants in the other Financing
Agreements, being a condition of the effectiveness of this Amendment and a
continuing condition of the making or providing of any Revolving Loans or Letter
of Credit Accommodations by Lender to Borrowers:
(a) This Amendment has been duly authorized, executed
and delivered by all necessary action of each of the Borrowers and Guarantors
which is a party hereto, and is in full force and effect, and the agreements and
obligations of Borrowers and Guarantors, as the case may be, contained herein
constitute legal, valid and binding obligations of Borrowers and Guarantors, as
the case may be, enforceable against them in accordance with their terms.
(b) Neither the execution and delivery of the
$10,000,000 IMR Note, the making of the September 1996 Intercompany Loans, or
any other agreements, documents or instruments in connection therewith, nor the
consummation of the transactions therein contemplated, nor compliance with the
provisions thereof (i) has violated or shall violate any Federal or State
securities laws or any other law or regulation or any order or decree of any
court or governmental instrumentality in any respect, or (ii) does, or shall
conflict with or result in the breach of, or constitute a default in any respect
under any mortgage, deed of trust, security agreement, agreement or instrument
to which Hanover or any other Guarantor or any Borrower is a party or may be
bound, or (iii) does or shall violate any provision of the Certificate of
Incorporation or ByLaws of Hanover or any other Guarantor or any Borrower.
(c) All of the representations and warranties set
forth in the Loan Agreement as amended hereby, and the other Financing
Agreements, are true and correct in all material respects, except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
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<PAGE> 8
(d) After giving effect to the provisions of this
Amendment, no Event of Default or Incipient Default exists or has occurred and
is continuing.
8. Conditions Precedent. Concurrently with the execution
hereof, and as a condition to the effectiveness of this Amendment and the
agreement of Lender to the modifications, waivers and amendments set forth in
this Amendment:
(a) Lender shall have received an original of this
Amendment, in form and substance satisfactory to Lender and its counsel, duly
authorized, executed and delivered by Borrowers and Guarantors; and
(b) Lender shall have received, each in form and
substance satisfactory to Lender, (i) a true and complete copy of the
$10,000,000 IMR Note and all agreements, documents and instruments relating
thereto, and (ii) a letter agreement among IMR, Hanover and Lender
acknowledging, among other things, the terms and conditions of the repayment of
the September 1996 Intercompany Loans and of the indebtedness evidenced by the
$10,000,000 IMR Note, each duly authorized, executed and delivered by Hanover
and IMR.
9. Effect of this Amendment. This Amendment constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. No waivers of Events of Default or Incipient Defaults
and, except as expressly provided herein, no other waivers or any modifications
to the Loan Agreement or any of the other Financing Agreements, or consents
under any provisions of any of the foregoing, are intended or implied by this
Amendment, and in all other respects the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent that any provision of the Loan Agreement or
any of the other Financing Agreements conflicts with any provision of this
Amendment, the provision of this Amendment shall control.
10. Further Assurances. Borrowers and Guarantors shall execute
and deliver such additional documents and take such additional action as may be
reasonably requested by Lender to effectuate the provisions and purposes of this
Amendment.
11. Governing Law. The rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of laws).
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<PAGE> 9
12. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
13. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ Janet S. Last
_________________________
Title: Vice President
______________________
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
GUMP'S CORP.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 10
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
TWEEDS, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 11
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this Amendment:
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Senior Vice President
------------------------
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 12
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 13
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 14
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
-------------------------
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
-------------------------
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
-------------------------
-14-
<PAGE> 1
Exhibit 10.24
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
December 5, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California
corporation ("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania
corporation ("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation
("Brawn"), GUMP'S BY MAIL, INC., a Delaware corporation ("GBM"), GUMP'S CORP., a
California corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin
corporation ("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI
HOLDINGS, INC., a Delaware corporation ("LWI"), AEGIS CATALOG CORPORATION, a
Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware
corporation ("HDV"), HANOVER REALTY, INC., a Virginia corporation ("Hanover
Realty"), and THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; and
together with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis, HDV and
Hanover Realty, each individually referred to herein as a "Borrower" and
collectively, "Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation, AEGIS VENTURES, INC., a Delaware
corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin corporation, BRAWN
WHOLESALE CORP., a California corporation, THE COMPANY FACTORY, INC., a
Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin corporation,
COMPANY STORE HOLDINGS, INC., a Delaware corporation, D.M. ADVERTISING, INC., a
New Jersey corporation, GUMP'S CATALOG, INC., a Delaware corporation, GUMP'S
HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS, INC., a Delaware
corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware corporation, HANOVER
FINANCE CORPORATION, a Delaware corporation, HANOVER LIST MANAGEMENT INC., a New
Jersey corporation, HANOVER VENTURES, INC., a Delaware corporation, LEICHTUNG OF
MICHIGAN, INC., a Michigan corporation, LWI RETAIL, INC., an Ohio corporation,
SCANDIA DOWN CORPORATION, a Delaware corporation, TWEEDS OF VERMONT, INC., a
Delaware corporation, YORK FULFILLMENT COMPANY, INC., a Pennsylvania
corporation, and AUSTAD HOLDINGS, INC., a Delaware corporation (each
individually a "Guarantor" and collectively, "Guarantors").
W I T N E S S E T H:
WHEREAS, Borrowers, Guarantors and Lender entered into the
Loan and Security Agreement, dated November 14, 1995, as amended by the First
Amendment to Loan and Security Agreement, dated February 22, 1996, the Second
Amendment to Loan and Security Agreement, dated April 16, 1996, the Third
Amendment to Loan and Security Agreement, dated May 24, 1996, the Fourth
Amendment to Loan and Security Agreement, dated May 31, 1996, and the Fifth
Amendment to Loan and Security Agreement, dated September 11, 1996
(collectively, the "Loan Agreement"), pursuant
<PAGE> 2
to which Lender has made loans and advances and provided other financial
accommodations to Borrowers; and
WHEREAS, Borrowers and Guarantors have informed Lender that
Richemont Finance S.A. intends to make a loan to Hanover in the original
principal amount of $10,000,000, the proceeds of which will be used solely by
Hanover to make intercompany loan(s) to Revolving Loan Borrowers, to be used by
Revolving Loan Borrowers solely for working capital purposes of Revolving Loan
Borrowers; and
WHEREAS, Borrowers and Guarantors have requested that Lender
amend the Consolidated Net Worth financial covenant; and
WHEREAS, Lender is willing to agree to the foregoing,
subject to the terms and conditions contained herein; and
WHEREAS, the parties to the Loan Agreement desire to enter
into this Sixth Amendment to Loan and Security Agreement (this "Amendment") to
evidence and effectuate such amendments and agreements to the extent set forth
herein, and subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Additional Definitions. As used herein or in any
of the other Financing Agreements, the following terms shall have the meanings
given to them below, and the Loan Agreement shall be deemed and is hereby
amended to include, in addition and not in limitation, the following
definitions:
(i) "CoreStates" shall mean CoreStates Bank,
N.A., a national banking association, and its successors and assigns.
(ii) "December 1996 Intercompany Loans"
shall mean the intercompany loans made, contemporaneously herewith, by Hanover
to the Revolving Loan Borrowers, funded with the proceeds of the $10,000,000
Richemont Loan.
(iii) "Richemont" shall mean Richemont
Finance S.A., a societe anonyme organized under the laws of the Grand Duchy of
Luxembourg, and its successors and assigns.
(iv) "$10,000,000 Richemont Loan" shall mean
the loan in the original principal sum of $10,000,000 made by Richemont to
Hanover, contemporaneously herewith.
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<PAGE> 3
(v) "$10,000,000 Richemont Note" shall mean
the Promissory Note, dated of even date herewith, by Hanover payable to
Richemont in the original principal amount of $10,000,000 delivered to evidence
the $10,000,000 Richemont Loan plus interest thereon.
(b) Amendment to Definition. Section 1.23 of the Loan
Agreement is hereby amended by deleting the proviso appearing at the end thereof
and substituting the following proviso therefor, effective as of the date
hereof:
"; provided, however, that solely for
purposes of calculating Consolidated Working Capital
hereunder, the outstanding balance of the Revolving
Loans and Term Loans and the outstanding balances of
the $10,000,000 IMR Note and the $10,000,000
Richemont Note shall not be considered current
liabilities."
(c) Interpretation. For purposes of this Amendment,
unless otherwise defined herein, all capitalized terms used herein that are
defined in the Loan Agreement, shall have the respective meanings given to such
terms in the Loan Agreement.
2. Use of Proceeds and Repayment of Richemont Loan.
(a) Hanover agrees to use the proceeds of the
$10,000,000 Richemont Loan solely to make the December 1996 Intercompany Loans
to Revolving Loan Borrowers and Revolving Loan Borrowers agree to use the
proceeds of such intercompany loans from Hanover solely for working capital
purposes of Revolving Loan Borrowers. Hanover and Revolving Loan Borrowers shall
arrange for the disbursement of the $10,000,000 Richemont Loan and the
corresponding December 1996 Intercompany Loans by Hanover to Revolving Loan
Borrowers, by wire transfer(s) directly from Richemont to Lender, for credit to
the applicable Revolving Loan Borrowers' Revolving Loan accounts maintained by
Lender.
(b) Notwithstanding Section 6.5(b)(ii) of the Loan
Agreement, Revolving Loan Borrowers may use the proceeds of Revolving Loans to
make payments to Hanover, or directly to Richemont at the direction of Hanover,
in respect of the valid intercompany Indebtedness owed to Hanover in respect of
the December 1996 Intercompany Loans, consisting of principal and accrued
interest, together with an amount equal to Hanover's reimbursement obligations
to Richemont for bank fees, not to exceed $100,000 in the aggregate, incurred by
Richemont in connection with the $10,000,000 Richemont Loan, and in addition
thereto, an amount equal to the attorneys' fees required to be reimbursed or
paid to Richemont incurred in connection with the making of the $10,000,000
Richemont Loan; provided, that, except
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<PAGE> 4
for such amounts paid to Hanover and used to make payment to Richemont of such
attorneys' fees, no such payment shall be made unless (i) prior to any such
payment, each of the following Letter of Credit Accommodations has been
cancelled and surrendered to Lender or CoreStates prior to any drawing under any
of them (other than drawings under the letters of credit referred to in clauses
(B) and/or (C) below that have been reinstated in accordance with the terms of
such letters of credit), and replaced with substitute letters of credit in
amounts and on terms satisfactory to Lender: (A) the Irrevocable Standby Letter
of Credit No. 516262P, dated November 14, 1995, issued by CoreStates for the
account of HDPI, Brawn and GBM in favor of NationsBank in the stated amount of
$8,560,000, which, together with the NationsBank letter of credit referred to
therein, must be replaced by a direct pay letter of credit in favor of Fleet
National Bank, as the successor trustee of certain industrial development
revenue bonds issued by the Littlestown Industrial Development Authority to
finance a project for HDPI, (B) the Irrevocable Transferable Letter of Credit
No. 516466P, dated December 27, 1995, in the initial stated amount of
$10,145,833 issued by CoreStates for the account of HDPI, HDV and Gump's in
favor of Norwest Bank Minnesota, N.A., as trustee, under the Series A Note
Agreement, dated as of November 9, 1994, as amended, with respect to the
issuance of the Series A Notes of Hanover in the original principal amount of
$10,000,000, and (C) the Irrevocable Transferable Letter of Credit No. 516467P,
dated December 27, 1995, in the initial stated amount of $10,145,833 issued by
CoreStates for the account of HDPI, HDV and Gump's in favor of Norwest Bank
Minnesota, N.A., as trustee, under the Series B Note Agreement, dated as of
April 27, 1995, as amended, with respect to the issuance of the Series B Notes
of Hanover in the original principal amount of $10,000,000 and (ii) no Event of
Default or Incipient Default exists or has occurred and is continuing at the
time of any such payment or would exist or occur as a result thereof.
(c) Prior to the incurrence by any Borrower or
Hanover of any reimbursement, indemnification or other obligations in favor of
any issuer of any of the replacement letters of credit described in Section 2(b)
hereof or in favor of Richemont as guarantor thereof or Hanover or any other
person in connection therewith, Borrowers and Hanover shall first obtain
Lender's prior written consent thereto. Lender's requirements for such consent
shall include, but are not necessarily limited to (i) Lender's satisfaction with
the terms and conditions of any such obligations and agreements evidencing such
obligations, and (ii) the execution and delivery of a written subordination
agreement in favor of Lender, by each of the obligees of such obligations,
subordinating each such obligee's rights to payment of such obligations to the
prior indefeasible payment and satisfaction in full of the Obligations of
Borrowers to Lender, such written subordination agreement to have terms and
provisions
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<PAGE> 5
substantially in the form of those contained in the subordination agreement by
Richemont delivered under Section 6(b)(ii) hereof and otherwise in form and
substance satisfactory to Lender.
3. Consolidated Net Worth. Section 6.20 of the Loan Agreement
is hereby deleted in its entirety and the following substituted therefor:
"6.20 Consolidated Net Worth. Hanover
shall, as at the end of each fiscal month, maintain
Consolidated Net Worth, calculated on a consolidated basis for
Hanover and its Subsidiaries, of at least Seventy Million
Dollars ($70,000,000)."
4. Amendment Fee. In addition to all other fees, charges,
interest and expenses payable by Borrowers to Lender under the Loan Agreement
and the other Financing Agreements, HDPI shall pay to Lender a fee for entering
into this Amendment in the amount of Fifty Thousand Dollars ($50,000), which
amount is fully earned and payable as of the date hereof and may be charged
directly to HDPI's loan account maintained by Lender in respect of the Revolving
Loans.
5. Representations, Warranties and Covenants. Borrowers
represent, warrant and covenant with and to Lender as follows, which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof, the truth and accuracy of, or compliance with
each, together with the representations, warranties and covenants in the other
Financing Agreements, being a condition of the effectiveness of this Amendment
and a continuing condition of the making or providing of any Revolving Loans or
Letter of Credit Accommodations by Lender to Borrowers:
(a) This Amendment has been duly authorized, executed
and delivered by all necessary action of each of the Borrowers and Guarantors
which is a party hereto, and is in full force and effect, and the agreements and
obligations of Borrowers and Guarantors, as the case may be, contained herein
constitute legal, valid and binding obligations of Borrowers and Guarantors, as
the case may be, enforceable against them in accordance with their terms.
(b) Neither the execution and delivery of the
$10,000,000 Richemont Note, the making of the December 1996 Intercompany Loans,
or any other agreements, documents or instruments in connection therewith, nor
the consummation of the transactions therein contemplated, nor compliance with
the provisions thereof (i) has violated or shall violate any Federal or State
securities laws or any other law or regulation or any order or decree of any
court or governmental instrumentality in
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<PAGE> 6
any respect, or (ii) does, or shall conflict with or result in the breach of, or
constitute a default in any respect under any mortgage, deed of trust, security
agreement, agreement or instrument to which Hanover or any other Guarantor or
any Borrower is a party or may be bound, or (iii) does or shall violate any
provision of the Certificate of Incorporation or By-Laws of Hanover or any other
Guarantor or any Borrower.
(c) All of the representations and warranties set
forth in the Loan Agreement as amended hereby, and the other Financing
Agreements, are true and correct in all material respects, except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
(d) Within ten (10) days after the date hereof,
Borrowers and Guarantors shall deliver to, or cause to be delivered to, Lender,
in form and substance satisfactory to Lender, the original executed
Subordination Agreement referred to in Section 6(b) hereof, together with (i)
evidence of the adoption and subsistence of authorizing resolutions of Richemont
approving the execution, delivery and performance by Richemont of such
Subordination Agreement and (ii) an opinion of Luxembourg counsel to Richemont
addressed to Lender with respect to the due authorization, execution, validity
and enforceability of such Subordination Agreement, and as to such other matters
as Lender shall reasonably require.
(e) After giving effect to the provisions of this
Amendment, no Event of Default or Incipient Default exists or has occurred and
is continuing.
6. Conditions Precedent. Concurrently with the execution
hereof, and as a condition to the effectiveness of this Amendment and the
agreement of Lender to the amendments set forth in this Amendment:
(a) Lender shall have received an original of this
Amendment, in form and substance satisfactory to Lender and its counsel, duly
authorized, executed and delivered by Borrowers and Guarantors;
(b) Lender shall have received, each in form and
substance satisfactory to Lender, (i) a true and complete copy of the
$10,000,000 Richemont Note and all agreements, documents and instruments
relating thereto, and (ii) a written subordination agreement, dated of even date
herewith, among Richemont, Hanover and Lender, pursuant to which, among other
things, Richemont shall have subordinated its right to payment under the
$10,000,000 Richemont Note to the prior indefeasible payment in full of all of
the Obligations, to the extent provided therein,
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<PAGE> 7
each duly authorized, executed and delivered by Hanover and Richemont; and
(c) Lender shall have received, in form and
substance satisfactory to Lender, a letter from Richemont's special New York
counsel providing for (i) such counsel's attestation of the genuineness of the
signatures appearing on the Subordination Agreement described in Section 6(b)
hereof, as executed on behalf of Richemont and delivered to Lender via facsimile
transmission and (ii) such counsel's undertaking to deliver, within ten (10)
days after the date hereof, such original Subordination Agreement executed by
Richemont, together with (A) evidence of the adoption and subsistence of
authorizing resolutions of Richemont approving the execution, delivery and
performance by Richemont of such Subordination Agreement and (B) an opinion of
Luxembourg counsel to Richemont addressed to Lender with respect to the due
authorization, execution, validity and enforceability of such Subordination
Agreement, and as to such other matters as Lender shall reasonably require.
7. Effect of this Amendment. This Amendment constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. Except as expressly provided herein, no other changes or
modifications to the Loan Agreement or any of the other Financing Agreements, or
waivers or consents under any provisions of any of the foregoing, are intended
or implied by this Amendment, and in all other respects the Financing Agreements
are hereby specifically ratified, restated and confirmed by all parties hereto
as of the effective date hereof. To the extent that any provision of the Loan
Agreement or any of the other Financing Agreements conflicts with any provision
of this Amendment, the provision of this Amendment shall control.
8. Further Assurances. Borrowers and Guarantors shall execute
and deliver such additional documents and take such additional action as may be
reasonably requested by Lender to effectuate the provisions and purposes of this
Amendment.
9. Governing Law. The rights and obligations hereunder of each
of the parties hereto shall be governed by and interpreted and determined in
accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of laws).
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<PAGE> 8
10. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
11. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ Janet S. Last
_________________________
Title: Vice President
______________________
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 9
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
GUMP'S CORP.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
TWEEDS, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 10
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this Amendment:
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Senior Vice President
--------------------------
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
--------------------------
Title: Vice President
--------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 11
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 12
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 13
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
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<PAGE> 1
Exhibit 10.25
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
SEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT, dated as of
December 18, 1996, by and among CONGRESS FINANCIAL CORPORATION, a California
corporation ("Lender"), HANOVER DIRECT PENNSYLVANIA, INC., a Pennsylvania
corporation ("HDPI"), BRAWN OF CALIFORNIA, INC., a California corporation
("Brawn"), GUMP'S BY MAIL, INC., a Delaware corporation ("GBM"), GUMP'S CORP., a
California corporation ("Gump's"), THE COMPANY STORE, INC., a Wisconsin
corporation ("TCSI"), TWEEDS, INC., a Delaware corporation ("Tweeds"), LWI
HOLDINGS, INC., a Delaware corporation ("LWI"), AEGIS CATALOG CORPORATION, a
Delaware corporation ("Aegis"), HANOVER DIRECT VIRGINIA INC., a Delaware
corporation ("HDV"), HANOVER REALTY, INC., a Virginia corporation ("Hanover
Realty"), and THE AUSTAD COMPANY, a South Dakota corporation ("Austad"; and
together with HDPI, Brawn, GBM, Gump's, TCSI, Tweeds, LWI, Aegis, HDV and
Hanover Realty, each individually referred to herein as a "Borrower" and
collectively, "Borrowers") and HANOVER DIRECT, INC., a Delaware corporation
("Hanover"), AEGIS RETAIL CORPORATION, a Delaware corporation, AEGIS SAFETY
HOLDINGS, INC., a Delaware corporation, AEGIS VENTURES, INC., a Delaware
corporation, AMERICAN DOWN & TEXTILE COMPANY, a Wisconsin corporation, BRAWN
WHOLESALE CORP., a California corporation, THE COMPANY FACTORY, INC., a
Wisconsin corporation, THE COMPANY OFFICE, INC., a Wisconsin corporation,
COMPANY STORE HOLDINGS, INC., a Delaware corporation, D.M. ADVERTISING, INC., a
New Jersey corporation, GUMP'S CATALOG, INC., a Delaware corporation, GUMP'S
HOLDINGS, INC., a Delaware corporation, HANOVER CASUALS, INC., a Delaware
corporation, HANOVER CATALOG HOLDINGS, INC., a Delaware corporation, HANOVER
FINANCE CORPORATION, a Delaware corporation, HANOVER LIST MANAGEMENT INC., a New
Jersey corporation, HANOVER VENTURES, INC., a Delaware corporation, LEICHTUNG OF
MICHIGAN, INC., a Michigan corporation, LWI RETAIL, INC., an Ohio corporation,
SCANDIA DOWN CORPORATION, a Delaware corporation, TWEEDS OF VERMONT, INC., a
Delaware corporation, YORK FULFILLMENT COMPANY, INC., a Pennsylvania
corporation, and AUSTAD HOLDINGS, INC., a Delaware corporation (each
individually a "Guarantor" and collectively, "Guarantors").
W I T N E S S E T H:
WHEREAS, Borrowers, Guarantors and Lender entered into the
Loan and Security Agreement, dated November 14, 1995, as amended by the First
Amendment to Loan and Security Agreement, dated February 22, 1996, the Second
Amendment to Loan and Security Agreement, dated April 16, 1996, the Third
Amendment to Loan and Security Agreement, dated May 24, 1996, the Fourth
Amendment to Loan and Security Agreement, dated May 31, 1996, the Fifth
Amendment to Loan and Security Agreement, dated September 11, 1996, and the
Sixth Amendment to Loan and Security
<PAGE> 2
Agreement, dated as of December 5, 1996 (the "Loan Agreement"), pursuant to
which Lender has made loans and advances to Borrowers; and
WHEREAS, pursuant to such financing arrangements, Lender has
previously arranged for the issuance of the CoreStates Letters of Credit (as
hereinafter defined); and
WHEREAS, Swiss Bank (as hereinafter defined) is about to enter
into the Swiss Bank Reimbursement Agreement (as hereinafter defined) with
Hanover, pursuant to which Swiss Bank will issue the Swiss Bank Letters of
Credit (as hereinafter defined) which will be substituted for the CoreStates
Letters of Credit and the NationsBank Littlestown Letter of Credit (as
hereinafter defined), each of which shall, concurrently with such substitution,
be surrendered for cancellation; and
WHEREAS, Richemont Finance S.A. is about to execute a Guaranty
in favor of Swiss Bank of Hanover's reimbursement obligations to Swiss Bank and
Hanover and Borrowers are about to enter into a reimbursement agreement in favor
of Richemont Finance S.A. relating thereto; and
WHEREAS, Lender is willing to agree to the foregoing, and
certain additional amendments, subject to the terms and conditions contained
herein; and
WHEREAS, the parties to the Loan Agreement desire to enter
into this Seventh Amendment to Loan and Security Agreement (this "Amendment") to
evidence and effectuate such amendments and agreements to the extent set forth
herein, and subject to the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and covenants
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions.
(a) Additional Definitions. As used herein or in any
of the other Financing Agreements, the following terms shall have the meanings
given to them below, and the Loan Agreement shall be deemed and is hereby
amended to include, in addition and not in limitation, the following
definitions:
(i) "Corestates Letters of Credit" shall
mean, individually and collectively, the CoreStates Series A Letter of Credit,
the CoreStates Series B Letter of Credit and the CoreStates Littlestown Backup
Letter of Credit.
(ii) "CoreStates Littlestown Backup Letter
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<PAGE> 3
of Credit" shall mean the Irrevocable Standby Letter of Credit No. 516262P,
dated November 14, 1995, issued in the initial stated amount of $8,560,000 by
CoreStates for the account of HDPI, Brawn and GBM, in favor of NationsBank.
(iii) "CoreStates Series A Letter of Credit"
shall mean the Irrevocable Transferable Letter of Credit No. 516466P, dated
December 27, 1995, issued in the initial stated amount of $10,145,833 by
CoreStates for the account of HDPI, HDV and Gump's, in favor of Norwest Bank
Minnesota, N.A., as Trustee under the Series A Note Agreements.
(iv) "CoreStates Series B Letter of Credit"
shall mean the Irrevocable Transferable Letter of Credit No. 516467P, dated
December 27, 1995, issued in the initial stated amount of $10,145,833 by
CoreStates for the account of HDPI, HDV and Gump's, in favor of Norwest Bank
Minnesota Bank, N.A., as Trustee under the Series B Note Agreements.
(v) "Littlestown Bonds" shall mean the
Variable Rate Demand Industrial Development Revenue Refunding Bonds, 1987 Series
(Hanover House Industries, Inc. Project), issued on behalf of Hanover House
Industries Inc., now known as Hanover Direct Pennsylvania, Inc., in the original
principal amount of $8,000,000, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(vi) "Littlestown IDB Agreements" shall
mean, collectively, the Indenture of Trust, dated as of September 1, 1987,
presently between the Littlestown Industrial Development Authority and Fleet
National Bank, as successor Trustee in connection with the Littlestown Bonds,
and all agreements, documents and instruments at any time executed and/or
delivered in connection therewith, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(vii) "NationsBank Littlestown Letter of
Credit" shall mean the letter of credit no. 41055, dated November 2, 1994,
issued in the initial stated amount of $8,560,000 by NationsBank for the account
of Hanover Direct Pennsylvania, Inc., in favor of Fleet National Bank, as
Trustee under the Littlestown IDB Agreements.
(viii) "Richemont" shall mean Richemont
Finance S.A., a societe anonyme organized under the laws of the Grand Duchy of
Luxembourg, and its successors and assigns.
(ix) "Richemont Guaranty" shall mean the
Guaranty, dated of even date herewith, by Richemont in favor of Swiss Bank with
respect to the obligations of Hanover to Swiss
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<PAGE> 4
Bank, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(x) "Richemont Reimbursement Agreement"
shall mean the Hanover Indemnity Agreement, dated of even date herewith, by and
among Hanover, Borrowers and Richemont pursuant to which Hanover and Borrowers
have agreed to reimburse Richemont for amounts that are paid by Richemont in
connection with the Swiss Bank Letters of Credit and/or the Richemont Guaranty,
as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(xi) "Series A Note Agreements" shall mean,
individually and collectively, the Series A Note Agreement, dated as of November
9, 1994, presently between Hanover and Norwest Bank Minnesota, N.A., as Trustee,
with respect to the issuance and sale of the Series A Notes, and all agreements,
documents and instruments at any time executed and/or delivered by Hanover or
any related parties in connection therewith, including, without limitation, the
Second Supplemental Series A Note Agreement, dated as of December 18, 1996, as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(xii) "Series A Notes" shall mean the
Flexible Term Notes, Series A, originally issued on November 9, 1994, by Hanover
in the original aggregate principal amount of $10,000,000, as replaced or
modified through the date hereof pursuant to the Series A Note Agreements, and
as the same may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(xiii) "Series B Note Agreements" shall
mean, individually and collectively, the Series B Note Agreement, dated as of
April 27, 1995, presently between Hanover and Norwest Bank Minnesota, N.A., as
Trustee, with respect to the issuance and sale of the Series B Notes, and all
other agreements, documents or instruments at any time executed and/or delivered
in connection therewith, including, without limitation, the Second Supplemental
Series B Note Agreement, dated as of December 18, 1996, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
(xiv) "Series B Notes" shall mean the
Flexible Term Notes, Series B, originally issued on April 27, 1995, by Hanover
in the original aggregate principal amount of $10,000,000, as replaced or
modified through the date hereof pursuant to the Series B Note Agreements, and
as the same may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(xv) "Swiss Bank" shall mean, individually
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<PAGE> 5
and collectively, Swiss Bank Corporation, a banking corporation organized under
the laws of Switzerland, acting through its New York Branch, and any other
issuer of a letter of credit or guaranty that hereafter replaces or substitutes
for any of the Swiss Bank Letters of Credit, and their respective successors and
assigns.
(xvi) "Swiss Bank Agreements" shall mean,
individually and collectively, (A) the Swiss Bank Reimbursement Agreement, (B)
the Swiss Bank Letters of Credit, (C) the rights of Swiss Bank under the Series
A Note Agreements and any Series A Notes at any time held by or for Swiss Bank,
(D) the rights of Swiss Bank under the Series B Note Agreements and any Series B
Notes at any time held by or for Swiss Bank, (E) the rights of Swiss Bank under
the Littlestown IDB Agreements and any Littlestown Bonds at any time held by or
for Swiss Bank and (F) all agreements, documents and instruments at any time
executed and/or delivered by Debtor or any other person to, with or in favor of
Swiss Bank in connection therewith or related thereto, as all of the foregoing
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(xvii) "Swiss Bank Letters of Credit" shall
mean, collectively, the Swiss Bank Littlestown Letter of Credit, the Swiss Bank
Series A Letter of Credit and the Swiss Bank Series B Letter of Credit, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
(xviii) "Swiss Bank Littlestown Letter of
Credit" shall mean the Letter of Credit No. S567171, dated December 18, 1996,
issued by Swiss Bank for the account of Hanover Direct Pennsylvania, Inc. in
favor of Fleet National Bank, as Trustee under the Littlestown IDB Agreements,
in the initial stated amount of $8,560,000, delivered in substitution for the
NationsBank Littlestown Letter of Credit and the CoreStates Littlestown Backup
Letter of Credit, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(xix) "Swiss Bank Reimbursement Agreement"
shall mean the Reimbursement Agreement, dated of even date herewith, by and
between Hanover and Swiss Bank with respect to the Swiss Bank Letters of Credit,
as the same now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(xx) "Swiss Bank Series A Letter of Credit"
shall mean the Letter of Credit No. S567169, dated December 18, 1996, issued by
Swiss Bank for the account of Hanover in the initial stated amount of
$9,638,541, delivered in substitution for the CoreStates Series A Letter of
Credit, as the same now
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<PAGE> 6
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
(xxi) "Swiss Bank Series B Letter of Credit"
shall mean the Letter of Credit No. S567170, dated December 18, 1996, issued by
Swiss Bank for the account of Hanover in the initial stated amount of
$9,638,541, delivered in substitution for the CoreStates Series B Letter of
Credit, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
(b) Interpretation. For purposes of this Amendment,
unless otherwise defined herein, all capitalized terms used herein that are
defined in the Loan Agreement, shall have the respective meanings given to such
terms in the Loan Agreement.
2. Indebtedness. Section 6.3 of the Loan Agreement is hereby
amended by deleting the word "and" appearing at the end of Section 6.3(f),
replacing the period with a semicolon and the word "and" appearing at the end of
Section 6.3(g) and adding a new Section 6.3(h) immediately thereafter, as
follows:
"(h) unsecured Indebtedness of Borrowers to Richemont
evidenced by the Richemont Reimbursement Agreement, which Indebtedness
and related obligations are subject to, and subordinated in right of
payment to, the prior right of Lender to receive the prior indefeasible
payment in full of the Obligations in accordance with the terms and
conditions of the written subordination agreement, dated December 18,
1996, between Lender and Richemont; provided, that, (i) Borrowers and
Hanover shall not, directly or indirectly, make any payments or
prepayments of principal or interest in respect of such Indebtedness,
or any expenses related thereto, other than a payment to Richemont
consisting of expenses and attorneys' fees, not to exceed the aggregate
amount of $45,000, required to be reimbursed to Richemont by Borrowers
or Hanover incurred in connection with the issuance of the Swiss Bank
Letters of Credit, plus the fee in the sum of $1,391,854.10 payable to
Richemont pursuant to Section 6 of the Richemont Reimbursement
Agreement as in effect on the date of execution and delivery thereof,
plus indemnification obligations when due and payable to the extent
permitted under such written subordination agreement between Lender and
Richemont, (ii) Borrowers and Hanover shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of the
arrangements or any agreements with respect to such Indebtedness, or
(B) redeem, retire, defease, purchase or otherwise acquire any such
Indebtedness or set aside or otherwise deposit or invest any sums for
such purpose, other than through the exercise by Richemont of the right
to convert all or any part of such Indebtedness
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<PAGE> 7
to common stock in accordance with the terms and conditions of the
Richemont Reimbursement Agreement as in effect on the date of execution
and delivery thereof, and (iii) Hanover and Borrowers shall furnish to
Lender all notices, demands or other materials in connection with such
Indebtedness promptly after the receipt thereof by them or currently
with the sending thereof by them or on their behalf, as the case may
be."
3. Reimbursement Obligations to Swiss Bank.
(a) Hanover has executed and delivered, concurrently
herewith, the Swiss Bank Reimbursement Agreement and the other Swiss Bank
Agreements in connection with the issuance of the Swiss Bank Letters of Credit.
The Indebtedness and related obligations of Hanover to Swiss Bank under the
Swiss Bank Agreements are subject to, and subordinated in right of payment to,
the prior right of Lender to receive the prior indefeasible payment in full of
the Obligations in accordance with the terms and conditions of the written
subordination agreement, dated of even date herewith, between Lender and Swiss
Bank.
(b) Revolving Loan Borrowers may use the proceeds of
Revolving Loans to repay valid intercompany Indebtedness to Hanover, such
repayments to be concurrently used by Hanover to make payments to Swiss Bank of
bank fees and other expenses set forth in Sections 2.03(a) through (f) of the
Swiss Bank Reimbursement Agreement as in effect on the date hereof, when due and
payable in accordance with such provisions, but not to exceed the aggregate
amount of $47,500 in respect of such bank fees and expenses accrued or incurred
through the date hereof; provided that, in the case of intercompany repayments
to be used to pay those fees or expenses accrued or incurred after the date
hereof, no Event of Default or Incipient Default exists or has occurred and is
continuing at the time of any such payment or would exist or occur as a result
thereof.
(c) Revolving Loan Borrowers may use the proceeds of
Revolving Loans to repay valid intercompany Indebtedness to Hanover, such
repayments to be concurrently used by Hanover to make payments of Hanover's
reimbursement obligations owed to Swiss Bank under the Swiss Bank Reimbursement
Agreement in respect of drawings paid under the Swiss Bank Letters of Credit for
(i) regularly scheduled monthly payments of interest when due under the Series A
Note Agreements, Series B Note Agreements and Littlestown IDB Agreements as each
is in effect on the date hereof and (ii) regularly scheduled reductions of
principal due and payable on October 1, 1997 under the Series A Notes and Series
B Notes, each such reduction to be in the amount of $500,000; provided, that, no
Event of Default or Incipient Default exists or has occurred and is continuing
at the time of any such payment or would exist or occur as a result thereof.
-7-
<PAGE> 8
(d) In the event Hanover wishes to arrange for
alternative letters of credit to replace the Swiss Bank Letters of Credit in
connection with which any of the Borrowers or Guarantors will incur any
obligations (whether absolute or contingent), liabilities or indebtedness,
Borrowers and Guarantors may do so; provided, that, (i) Borrowers and Guarantors
provide Lender at least thirty (30) days' prior written notice of such
arrangements, (ii) the bank providing such replacement letters of credit is
reasonably acceptable to Lender, (iii) such obligations (whether absolute or
contingent), liabilities and indebtedness incurred by Borrowers or Guarantors
are on terms and conditions satisfactory to Lender, (iv) Lender shall have
received one or more written subordination agreements, in form and substance
satisfactory to Lender, pursuant to which, among other things, such bank and
each other person who does or who may hold any liabilities, obligations (whether
absolute or contingent) or indebtedness of Borrowers or Guarantors in connection
with such replacement letters of credit, agree to subordinate their right to
payment of such liabilities, obligations (whether absolute or contingent) and
indebtedness to the prior, indefeasible payment and satisfaction in full of all
of the Obligations, and (v) Lender shall have received, in form and substance
satisfactory to Lender, a Secretary's Certificate of such bank and each such
other person evidencing the adoption and subsistence of corporate resolutions
approving the execution, delivery and performance by such bank and each such
other person of the written subordination agreements required in the immediately
preceding clause (iv) hereof, together with opinions of counsel to such bank and
each such other person with respect thereto, addressed to Lender, as Lender
shall reasonably require.
4. L/C Cancellation Availability. Lender agrees that, for the
period (the "Specified Period") commencing on the date hereof and ending on the
close of business on the earlier of (i) December 28, 1996 or (ii) the day
following the day upon which Lender indicates Revolving Loans are available,
subject to the lending formulas and the other terms and conditions of the Loan
Agreement, in the aggregate amount of the availability of Revolving Loans
resulting from the cancellation of the CoreStates Letters of Credit (such
availability, the "L/C Cancellation Availability"), Lender agrees that it will
not declare an Event of Default based solely on states of fact or occurrences
actually known by Lender as of the execution and delivery of this
-8-
<PAGE> 9
Amendment; provided, however, that (x) the foregoing shall not constitute a
waiver of any existing Event of Default or Incipient Default, (y) the L/C
Cancellation Availability shall at all times be subject to the lending formulas
and the other terms and conditions of the Loan Agreement and (z) nothing herein
contained shall in any manner limit or impair (1) the exercise by Lender during
the Specified Period of any of its rights or remedies in respect of any existing
Event of Default or Incipient Default not actually known by Lender as of the
execution and delivery of this Amendment or that occurs or arises thereafter, or
(2) the exercise by Lender after the Specified Period of any or all of its
default rights and remedies. As used herein, the term "actually known by Lender"
shall mean facts within the actual knowledge of an officer of Lender having
primary responsibility for the administration of the Loans, without regard to
any knowledge that would be acquired through inquiry, review or investigation of
any kind whatsoever.
5. Elimination of Certain Revolving Loan Availability Reserve.
Provided that Sears Shop at Home Services, Inc. ("Sears") has agreed in writing,
in form and substance satisfactory to Lender, to delete in its entirety
paragraph 3 of that certain letter agreement, dated November 14, 1995, by and
among Lender, Sears and Hanover Ventures, thereby eliminating the subordination
by Lender of up to $2,000,000 of the Obligations of Hanover Ventures, then the
Loan Agreement shall be deemed amended by deleting Section 2.6(c) in its
entirety and adding the following:
"(c) [INTENTIONALLY DELETED]."
6. Representations and Warranties. Borrowers represent,
warrant and covenant with and to Lender as follows, which representations,
warranties and covenants are continuing and shall survive the execution and
delivery hereof, the truth and accuracy of, or compliance with each, together
with the representations, warranties and covenants in the other Financing
Agreements, being a condition of the effectiveness of this Amendment and a
continuing condition of the making or providing of any Revolving Loans or Letter
of Credit Accommodations by Lender to Borrowers:
(a) This Amendment has been duly authorized, executed
and delivered by all necessary action of each of the Borrowers and Guarantors
which is a party hereto, and is in full force and effect, and the agreements and
obligations of Borrowers and Guarantors, as the case may be, contained herein
constitute legal, valid and binding obligations of Borrowers and Guarantors, as
the case may be, enforceable against them in accordance with their terms.
(b) The Swiss Bank Series A Letter of Credit has been
duly issued, delivered to and accepted by the Series A Note Trustee in
substitution of the CoreStates Series A Letter of Credit, the Swiss Bank Series
B Letter of Credit has been duly issued, delivered to and accepted by the Series
B Note Trustee in substitution of the CoreStates Series B Letter of Credit, and
the Swiss Bank Littlestown Letter of Credit has been duly issued, delivered to
and accepted by the Littlestown Trustee in substitution of the NationsBank
Littlestown Letter of Credits.
-9-
<PAGE> 10
(c) Borrowers and Guarantors have delivered, or
caused to be delivered, to Lender true, correct and complete copies of the Swiss
Bank Reimbursement Agreements and the Richemont Reimbursement Agreement and any
other agreements, documents, or instruments executed and delivered in connection
therewith.
(d) Neither the execution, delivery or performance of
the Swiss Bank Agreements nor the issuance by Swiss Bank of the letters of
credit contemplated thereby nor the execution, delivery or performance of the
Richemont Reimbursement Agreement, nor any other agreements, documents or
instruments in connection therewith, nor the consummation of the transactions
therein contemplated, nor compliance with the provisions thereof (i) has
violated or shall violate any Federal or State securities laws or any other law
or regulation or any order or decree of any court or governmental
instrumentality in any respect, or (ii) does, or shall conflict with or result
in the breach of, or constitute a default in any respect under any mortgage,
deed of trust, security agreement, agreement or instrument to which any
Guarantor or any Borrower is a party or may be bound, or (iii) does or shall
violate any provision of the Certificate of Incorporation or By-Laws of any
Borrower or any Guarantor.
(e) All necessary amendments, supplements and
agreements have been executed and delivered, and all necessary actions required
by the Series A Note Agreements, the Series B note Agreements and the
Littlestown IDB Agreements have been taken in accordance with the Series A Note
Agreements, the Series B Note Agreements and the Littlestown IDB Agreements,
respectively, and all notices, supplements and disclosure documents required to
be delivered to any trustee or other person under the Series A Note Agreements,
the Series B Note Agreements and the Littlestown IDB Agreements in connection
with the transactions contemplated by this Amendment, have been timely
delivered.
(f) All of the representations and warranties set
forth in the Loan Agreement as amended hereby, and the other Financing
Agreements, are true and correct in all material respects, except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
(g) After giving effect to the provisions of this
Amendment, no Event of Default or Incipient Default exists or has occurred and
is continuing.
7. Conditions Precedent. Concurrently with the execution
hereof, and as a condition to the effectiveness of this Amendment and the
agreement of Lender to the modifications,
-10-
<PAGE> 11
waivers and amendments set forth in this Amendment:
(a) Lender shall have received an original of this
Amendment, in form and substance satisfactory to Lender, duly authorized,
executed and delivered by Borrowers and Guarantors;
(b) Lender shall have received, in form and substance
satisfactory to Lender, evidence that each of the Swiss Bank Letters of Credit
has been duly issued by Swiss Bank and delivered to and accepted by the
respective beneficiaries thereof.
(c) Lender shall have received, each in form and
substance satisfactory to Lender, each of the following:
(i) a written subordination agreement, dated
of even date herewith, by and between Swiss Bank and Lender, duly authorized,
executed and delivered by Swiss Bank, Borrowers and Guarantors;
(ii) a written subordination agreement,
dated of even date herewith, by and between Richemont and Lender, duly
authorized, executed and delivered by Richemont, Borrowers and Guarantors;
(iii) letter, dated of even date herewith,
from NationsBank in favor of CoreStates authorizing and requesting the
cancellation of the CoreStates Littlestown Backup Letter of Credit, including
such indemnity as CoreStates shall require in lieu of surrender of the original
CoreStates Littlestown Backup Letter of Credit, and any amendments thereto;
(iv) letter, dated of even date herewith,
from Norwest Bank Minnesota, N.A., as Trustee under the Series A Notes and the
Series B Notes, in favor of CoreStates surrendering for cancellation the
CoreStates Series A Letter of Credit, together with the original CoreStates
Series A Letter of Credit, and any amendments thereto;
(v) letter, dated of even date herewith,
from Norwest Bank Minnesota, N.A., as Trustee under the Series A Notes and the
Series B Notes, in favor of CoreStates surrendering for cancellation the
CoreStates Series B Letter of Credit, together with the original CoreStates
Series B Letter of Credit and any amendments thereto; and
(vi) evidence that the following have been
delivered to NationsBank: letter, dated of even date herewith, from the
Littlestown IDB Trustee in favor of NationsBank surrendering for cancellation
the NationsBank Littlestown Letter of Credit, together with the original
NationsBank Littlestown Letter of Credit;
-11-
<PAGE> 12
(d) Lender shall have received, in form and substance
satisfactory to Lender, written evidence of the adoption and subsistence of
corporate resolutions approving the execution, delivery and performance by
Richemont of the written subordination agreement required under Section 7(c)(ii)
hereof, together with opinions of counsel to Richemont with respect thereto,
addressed to Lender, as Lender shall reasonably require; and
(e) each of Borrowers and Guarantors shall deliver,
or cause to be delivered, to Lender a true and correct copy of any consent,
waiver or approval to or of this Amendment, which any Borrower or Guarantor is
required to obtain from any other Person (if any) and each such consent,
approval or waiver shall be in a form reasonably acceptable to Lender.
8. Effect of this Amendment. This Amendment constitutes the
entire agreement of the parties with respect to the subject matter hereof, and
supersedes all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof. No waivers of Events of Default or Incipient Defaults
and, except as expressly provided herein, no waivers and no modifications to the
Loan Agreement or any of the other Financing Agreements, or consents under any
provisions of any of the foregoing, are intended or implied by this Amendment,
and in all other respects the Financing Agreements are hereby specifically
ratified, restated and confirmed by all parties hereto as of the effective date
hereof. To the extent that any provision of the Loan Agreement or any of the
other Financing Agreements conflicts with any provision of this Amendment, the
provision of this Amendment shall control.
9. Further Assurances. Borrowers and Guarantors shall execute
and deliver such additional documents and take such additional action as may be
reasonably requested by Lender to effectuate the provisions and purposes of this
Amendment.
10. Governing Law. The rights and obligations hereunder of
each of the parties hereto shall be governed by and interpreted and determined
in accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of laws).
11. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
12. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or
-12-
<PAGE> 13
account for more than one counterpart thereof signed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the day and year first written.
CONGRESS FINANCIAL CORPORATION
By: /s/ John T. Garvey
_________________________
Title: Assistant Vice President
______________________
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 14
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
GUMP'S CORP.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
TWEEDS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
-14-
<PAGE> 15
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
By their signatures below, the undersigned Guarantors acknowledge and agree to
be bound by the applicable provisions of this Amendment:
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Senior Vice President
_________________________
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
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<PAGE> 16
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
-16-
<PAGE> 17
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
-17-
<PAGE> 18
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON NEXT PAGE]
-18-
<PAGE> 19
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
----------------------------
Title: Vice President
-------------------------
-19-
<PAGE> 1
EXHIBIT 10.27
LONG-TERM INCENTIVE PLAN FOR RAKESH K. KAUL
1. PURPOSE. The purpose of this Long-Term Incentive Plan for
Rakesh K. Kaul (the "Plan") is to promote an alignment of the interests of
Rakesh K. Kaul ("Kaul"), who will have a significant impact on the long-term
success of Hanover Direct, Inc. (the "Company"), with the interests of the
Company and its shareholders by affording Kaul a proprietary interest in the
Company's growth while providing Kaul with an incentive to make a personal
financial investment in the Company and to remain in the Company's employ.
2. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee of the Company's Board of Directors (the "Committee").
The Committee shall consist of two or more members and shall be constituted in
such a manner as to satisfy the requirements of applicable law, the provisions
of Rule 16b-3 under the Securities Exchange Act of 1934 or any successor rule,
and the provisions of Section 162(m)(4)(C)(i) of the Internal Revenue Code of
1986, as amended. The Committee shall have full power and authority to grant
awards hereunder and to administer and interpret the Plan and to adopt such
rules, regulations, agreements, guidelines, and instruments for the
administration of the Plan as it deems necessary or advisable.
3. ELIGIBILITY. Kaul shall be the only person eligible to
participate in the Plan.
4. THE SHARES. The shares that may be purchased by Kaul under
the Plan shall not exceed an aggregate of 7,000,000 shares (subject to
adjustment pursuant to Section 6) of common stock of the Company, par value
$.66-2/3 per share ("Common Stock"). Except in the case of the NAR Options (as
hereinafter defined), such shares of Common Stock shall be set aside out of the
authorized but unissued shares of Common Stock not reserved for any other
purpose or out of previously issued shares acquired by the Company and held in
its treasury. The shares of Common Stock subject to the NAR Options are shares
owned by NAR Group Limited.
5. AWARDS. The following awards shall be granted under the
Plan:
a. Tandem Stock Purchase Right. The right to purchase
1,000,000 shares of Common Stock at a price equal to their fair market
value. For purposes of the Plan, fair market value shall mean the
average of the high and
<PAGE> 2
low per-share sale prices of the Common Stock on the American Stock
Exchange, as determined by the Committee, on the date of purchase.
Twenty percent of the purchase price for such shares shall be paid in
cash, and 80% shall be financed with a nonrecourse Note in
substantially the form set forth in APPENDIX A hereto, secured by a
pledge of the shares of Common Stock acquired in such purchase pursuant
to a Pledge Agreement in substantially the form set forth in APPENDIX B
hereto. The Company shall pay the Executive on before the date of such
purchase a sign-on bonus equal to the portion of the purchase price
required to be paid in cash, and shall pay the Executive, on or before
each due date during the Term of any payment of principal and/or
interest on the Note, a bonus equal to the amount of such principal
and/or interest then due.
b. Tandem Option. An option (the "Tandem Option") to purchase
2,000,000 shares of Common Stock, the terms of which option shall be as
set forth in APPENDIX C. The granting of this option shall be
conditioned upon Kaul's purchase of 1,000,000 shares of Common Stock
pursuant to his exercise of the tandem stock purchase right described
in the preceding paragraph.
c. Performance Year Option. An option (the "Performance Year
Option") to purchase 1,000,000 shares of Common Stock, the terms of
which option shall be as set forth in APPENDIX D.
d. Closing Price Option. An option (the "Closing Price
Option") to purchase 2,000,000 shares of Common Stock, the terms of
which option shall be as set forth in APPENDIX E.
e. NAR Options. Four options (the "NAR Options") for the
purchase of 250,000 shares of Common Stock each, to be granted by NAR
Group Limited. The terms of such options shall be as set forth in
APPENDICES F-1 through F-4, respectively.
All awards under the Plan shall be granted on or before September 1, 1996.
6. ADJUSTMENT OF AND CHANGES IN SHARES. In the event of any
change in the outstanding Common Stock by reason of any stock dividend, stock
split, combination of shares, recapitalization, or other similar change in the
capital stock of the Company, or in the event of the merger or consolidation of
the Company into or with any other corporation or the reorganization of the
Company, the number of shares covered by each outstanding award granted under
the Plan, the number of shares as to which an option is vested under the Plan,
the option price per share of each option granted under the Plan, the total
number of shares for which awards may be granted under the Plan, and the maximum
number of shares for which options may be granted to Kaul, shall be
appropriately adjusted by the Committee to preserve the
-2-
<PAGE> 3
value of the award. If, before the granting of the Tandem Stock Purchase Right,
the Tandem Option, or the NAR Options, respectively, a distribution is made on
the shares of Common Stock of rights or warrants to purchase securities of the
Company, there shall be added to the shares subject to such stock purchase right
or option ("Award Shares") the number and kind of securities of the Company
which would have been issued on the exercise of the rights or warrants that
would have been distributed with respect to such number of Award Shares.
7. EFFECTIVENESS OF PLAN. The Plan shall be effective as of
the date of its adoption by the Committee, subject to approval thereof at a
meeting of shareholders by the holders of a majority of the shares of Common
Stock present and entitled to vote at the meeting. In the event the shareholders
fail to approve the Plan, any awards shall be rescinded and all actions taken
hereunder shall be null and void.
The Plan shall terminate on December 31, 1996. Any option
outstanding at the time of such termination, whether or not vested, shall remain
in effect in accordance with its terms and those of the Plan.
-3-
<PAGE> 1
EXHIBIT 10.40
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Subordination Agreement"), dated as of
December 18, 1996, is by and between CONGRESS FINANCIAL CORPORATION, a
California corporation ("Senior Creditor", as hereinafter further defined), and
SWISS BANK CORPORATION, a banking corporation organized under the laws of
Switzerland acting through its New York Branch ("Junior Creditor", as
hereinafter further defined). Senior Creditor and Junior Creditor are sometimes
individually referred to herein as "Creditor" and collectively as "Creditors."
W I T N E S S E T H:
WHEREAS, Senior Creditor has entered into financing arrangements with
Hanover Direct, Inc. ("Hanover", as hereinafter further defined) and certain of
its subsidiaries, pursuant to which Senior Creditor has, upon certain terms and
conditions, made loans and provided other financial accommodations to certain
subsidiaries of Hanover, guaranteed by Hanover and certain subsidiaries of
Hanover, secured by substantially all of the assets and properties of Hanover
and of such borrower subsidiaries and guarantor subsidiaries of Hanover (such
subsidiaries, together with Hanover, individually and collectively, "Debtor", as
hereinafter further defined); and
WHEREAS, pursuant to such financing arrangements, Senior Creditor has
previously arranged for the issuance of the CoreStates Letters of Credit (as
hereinafter defined); and
WHEREAS, Junior Creditor is about to enter into the Swiss Bank
Reimbursement Agreement (as hereinafter defined) with Hanover, pursuant to which
Junior Creditor will issue the Swiss Bank Letters of Credit (as hereinafter
defined) which will be substituted for the CoreStates Letters of Credit and the
NationsBank Littlestown Letter of Credit (as hereinafter defined), each of which
shall, concurrently with such substitution, be surrendered for cancellation or
otherwise cancelled; and
WHEREAS, in order to induce Senior Creditor to continue the financing
arrangements with Hanover and certain subsidiaries of Hanover, Junior Creditor
has agreed to the subordination in favor of Senior Creditor as provided herein
of its right to payment of the existing and future obligations of Debtor to
Junior Creditor arising in connection with or relating to the Swiss Bank Letters
of Credit, and related matters as set forth below;
NOW THEREFORE, in consideration of the mutual benefits accruing to
Creditors hereunder and other good and valuable
<PAGE> 2
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
1. DEFINITIONS
As used above and in this Subordination Agreement, the following terms
shall have the meanings ascribed to them below:
1.1 "Agreements" shall mean, individually and collectively, the
Senior Creditor Agreements and the Junior Creditor Agreements.
1.2 "CoreStates" shall mean CoreStates Bank, N.A., a national
banking association, and its successors and assigns.
1.3 "Corestates Letters of Credit" shall mean, individually and
collectively, the CoreStates Series A Letter of Credit, the CoreStates Series B
Letter of Credit and the CoreStates Littlestown Backup Letter of Credit.
1.4 "CoreStates Littlestown Backup Letter of Credit" shall mean
the Irrevocable Standby Letter of Credit No. 516262P, dated November 14, 1995,
issued in the initial stated amount of $8,560,000 by CoreStates for the account
of certain subsidiaries of Debtor, in favor of NationsBank, National
Association.
1.5 "CoreStates Series A Letter of Credit" shall mean the
Irrevocable Transferable Letter of Credit No. 516466P, dated December 27, 1995,
issued in the initial stated amount of $10,145,833 by CoreStates for the account
of certain subsidiaries of Debtor, in favor of Norwest Bank Minnesota, N.A., as
Trustee under the Series A Note Agreements.
1.6 "CoreStates Series B Letter of Credit" shall mean the
Irrevocable Transferable Letter of Credit No. 516467P, dated December 27, 1995,
issued in the initial stated amount of $10,145,833 by CoreStates for the account
of certain subsidiaries of Debtor in favor of Norwest Bank Minnesota Bank, N.A.,
as Trustee under the Series B Note Agreements.
1.7 "Creditors" shall mean, individually and collectively, Senior
Creditor and Junior Creditor and their respective successors and assigns.
1.8 "Debtor" shall mean, individually and collectively, Hanover
and each of its existing and future subsidiaries who are or become parties (as
borrower or guarantor or who are or become otherwise obligated for all or part
of the Senior Debt) to the Senior Creditor Agreements, and their respective
successors and assigns, including, without limitation, a receiver, trustee, or
debtor-in-possession on behalf of any such person or on behalf of any such
successor or assign.
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1.9 "Hanover" shall mean Hanover Direct, Inc., a Delaware corporation
and its successors and assigns, including, without limitation, a receiver,
trustee or debtor-in-possession on behalf of such person or on behalf of any
such successor or assign.
1.10 "Junior Creditor" shall mean Swiss Bank Corporation, a banking
corporation organized under the laws of Switzerland acting through its New York
Branch, and its successors and assigns.
1.11 "Junior Creditor Agreements" shall mean, individually and
collectively, (a) The Swiss Bank Reimbursement Agreement, (b) the Swiss Bank
Letters of Credit, (c) the rights of Junior Creditor under the Series A Note
Agreements and any Series A Notes at any time held by or for Junior Creditor,
(d) the rights of Junior Creditor under the Series B Note Agreements and any
Series B Notes at any time held by or for Junior Creditor, (e) the rights of
Junior Creditor under the Littlestown IDB Agreements and any Littlestown Bonds
at any time held by or for Junior Creditor, and (f) all agreements, documents
and instruments at any time executed and/or delivered by Debtor or any other
person to, with or in favor of Junior Creditor in connection therewith or
related thereto, as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced. The Junior
Creditor Agreements shall not, however, mean or include the Richemont Guaranty.
1.12 "Junior Debt" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description owing by Debtor to Junior
Creditor, including principal, interest, charges, fees, premiums, indemnities
and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, arising under or evidenced by or in connection with the
Junior Creditor Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of the Junior
Creditor Agreements or after the commencement of any case with respect to Debtor
under the U.S. Bankruptcy Code or any similar statute (and including, without
limitation, any principal, interest, fees, costs, expenses and other amounts,
whether or not such amounts are allowable in whole or in part, in any such case
or similar proceeding), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and whether arising directly, or by way of
subrogation, contribution, reimbursement, indemnification, exoneration or
otherwise, or howsoever acquired by Junior Creditor. The Junior Debt shall not,
however, mean or include any of the obligations, liabilities and indebtedness of
Richemont to Junior Creditor pursuant to the Richemont Guaranty.
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1.13 "Littlestown Bonds" shall mean the Variable Rate Demand Industrial
Development Revenue Refunding Bonds, 1987 Series (Hanover House Industries, Inc.
Project), issued on behalf of Hanover House Industries Inc., now known as
Hanover Direct Pennsylvania, Inc., in the original principal amount of
$8,000,000, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.14 "Littlestown IDB Agreements" shall mean, collectively, the
Indenture of Trust, dated as of September 1, 1987, presently between the
Littlestown Industrial Development Authority and Fleet National Bank, as
successor Trustee in connection with the Littlestown Bonds, and all agreements,
documents and instruments at any time executed and/or delivered in connection
therewith, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.15 "NationsBank Littlestown Letter of Credit" shall mean the letter
of credit no. 41055, dated November 2 ,1994, issued in the initial stated amount
of $8,560,000 by NationsBank for the account of Hanover Direct Pennsylvania,
Inc., in favor of Fleet National Bank, as Trustee under the Littlestown IDB
Agreements.
1.16 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
company, trust, joint venture, limited liability company, limited liability
partnership, or other entity or any government or any agency or instrumentality
or political subdivision thereof.
1.17 "Remarketing Proceeds" shall have the meaning set forth in Section
2.2(c) hereof.
1.18 "Richemont" shall mean Richemont Finance S.A., a societe anonyme
organized under the laws of the Grand Duchy of Luxembourg, and its successors
and assigns.
1.19 "Richemont Guaranty" shall mean the Guaranty, dated of even date
herewith, by Richemont in favor of Junior Creditor with respect to the
obligations of Hanover to Junior Creditor, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.20 "Senior Creditor" shall mean Congress Financial Corporation, a
California corporation, and its successors and assigns.
1.21 "Senior Creditor Agreements" shall mean, individually and
collectively, the Loan and Security Agreement, dated November 14, 1995, by and
among Senior Creditor, Hanover and
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certain subsidiaries of Hanover, as amended (the "Loan Agreement"), the
Guarantee and Waivers, each dated November 14, 1995, by Hanover and certain of
its subsidiaries in favor of Senior Creditor, the General Security Agreements,
each dated November 14, 1995, by Hanover and certain of its subsidiaries in
favor of Senior Creditor and all agreements, documents and instruments at any
time executed and/or delivered by Debtor or any other person to, with or in
favor of Senior Creditor in connection therewith or related thereto, as all of
the foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.22 "Senior Debt" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description owing by Debtor to Senior
Creditor and/or its affiliates, or participants, including principal, interest,
charges, fees, premiums, indemnities and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under the
Senior Creditor Agreements or otherwise, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term
of the Senior Creditor Agreements or after the commencement of any case with
respect to Debtor under the U.S. Bankruptcy Code or any similar statute (and
including, without limitation, any principal, interest, fees, costs, expenses
and other amounts, whether or not such amounts are allowable either in whole or
in part, in any such case or similar proceeding), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and whether arising directly,
or by way of subrogation, contribution, reimbursement, indemnification,
exoneration or otherwise, or howsoever acquired by Senior Creditor.
1.23 "Senior Debt Default" shall mean any "Event of Default" or
"Incipient Default" as such terms are defined in the Loan Agreement referred to
in the definition of Senior Creditor Agreements.
1.24 "Series A Note Agreements" shall mean, individually and
collectively, the Series A Note Agreement, dated as of November 9, 1994,
presently between Hanover and Norwest Bank Minnesota, N.A., as Trustee, with
respect to the issuance and sale of the Series A Notes, and all agreements,
documents and instruments at any time executed and/or delivered by Hanover or
any related parties in connection therewith, including, without limitation, the
Second Supplemental Series A Note Agreement, dated as of December 18, 1996, as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
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1.25 "Series A Notes" shall mean the Flexible Term Notes, Series A,
originally issued on November 9, 1994, by Hanover in the original aggregate
principal amount of $10,000,000, as replaced or modified through the date hereof
pursuant to the Series A Note Agreements, and as the same may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.26 "Series B Note Agreements" shall mean, individually and
collectively, the Series B Note Agreement, dated as of April 27, 1995, presently
between Hanover and Norwest Bank Minnesota, N.A., as Trustee, with respect to
the issuance and sale of the Series B Notes, and all other agreements, documents
or instruments at any time executed and/or delivered in connection therewith,
including, without limitation, the Second Supplemental Series B Note Agreement,
dated as of December 18, 1996, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.27 "Series B Notes" shall mean the Flexible Term Notes, Series B,
originally issued on April 27, 1995, by Hanover in the original aggregate
principal amount of $10,000,000, as replaced or modified through the date hereof
pursuant to the Series B Note Agreements, and as the same may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.28 "Swiss Bank Letters of Credit" shall mean, collectively, the Swiss
Bank Littlestown Letter of Credit, the Swiss Bank Series A Letter of Credit and
the Swiss Bank Series B Letter of Credit, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.
1.29 "Swiss Bank Littlestown Letter of Credit" shall mean the Letter of
Credit No. S567171 dated December 18, 1996, issued by Swiss Bank for the account
of Hanover Direct Pennsylvania, Inc. in favor of Fleet National Bank, as Trustee
under the Littlestown IDB Agreements, in the initial stated amount of
$8,560,000, delivered in substitution for the NationsBank Littlestown Letter of
Credit and the CoreStates Littlestown Backup Letter of Credit, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.30 "Swiss Bank Reimbursement Agreement" shall mean the Reimbursement
Agreement, dated as of December 18, 1996, by and between Hanover and Junior
Creditor with respect to the Swiss Bank Letters of Credit, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
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<PAGE> 7
1.31 "Swiss Bank Series A Letter of Credit" shall mean the Letter of
Credit No. S567169 dated December 18, 1996, issued by Swiss Bank for the account
of Hanover in the initial stated amount of $9,638,541, delivered in substitution
for the CoreStates Series A Letter of Credit, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.32 "Swiss Bank Series B Letter of Credit" shall mean the Letter of
Credit No. S567170, dated December 18, 1996, issued by Swiss Bank for the
account of Hanover in the initial stated amount of $9,638,541, delivered in
substitution for the CoreStates Series B Letter of Credit, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.33 All terms used herein which are defined in the Uniform Commercial
Code as in effect in the State of New York, unless otherwise defined herein
shall have the meanings set forth therein. All references to any term in the
plural shall include the singular and all references to any term in the singular
shall include the plural.
2. SUBORDINATION OF JUNIOR DEBT
2.1 Subordination. Except as specifically set forth in Section 2.2
hereof, Junior Creditor hereby subordinates its right to payment and
satisfaction of the Junior Debt, and the payment and satisfaction thereof,
directly or indirectly, by any means whatsoever, is hereby deferred, to the
prior indefeasible payment and satisfaction in full of all Senior Debt.
2.2 Permitted Payments. Senior Creditor hereby agrees that,
notwithstanding anything to the contrary contained in Section 2.1:
(a) Debtor may make and Junior Creditor may receive and retain,
payments by Debtor of bank fees and other expenses set forth in Sections 2.03(a)
through (f) of the Swiss Bank Reimbursement Agreement as in effect on the date
hereof, when due and payable in accordance with such provisions; provided that,
such fees and expenses accrued or incurred through the date hererof do not
exceed $47,500 in the aggregate; and provided further that, in the case of those
fees or expenses accrued or incurred after the date hereof, written notice has
not been given to Junior Creditor to the effect that a Senior Debt Default
exists or has occurred and is continuing at the time of any such payment or
would exist or occur as a result thereof;
(b) Debtor may make, and Junior Creditor may receive and
retain, payments by Debtor of Debtor's reimbursement obligations owed to Junior
Creditor under the Swiss Bank
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Reimbursement Agreement in respect of drawings paid under the Swiss Bank Letters
of Credit for (i) regularly schedule monthly payments of interest when due under
the Series A Note Agreements, Series B Note Agreements and Littlestown IDB
Agreements as each is in effect on the date hereof and (ii) the regularly
scheduled reductions of principal due and payable on October 1, 1997 under the
Series A Notes and Series B Notes, each such reduction to be in the amount of
$500,000; provided that written notice has not been given to Junior Creditor to
the effect that a Senior Debt Default exists or has occurred and is continuing
at the time of any such payment or would exist or occur as a result thereof;
(c) if any of the Series A Notes, Series B Notes or the
Littlestown Bonds are purchased with funds drawn under the Swiss Bank Series A
Letter of Credit, the Swiss Bank Series B Letter of Credit and the Swiss Bank
Littlestown Letter of Credit in accordance with the terms thereof and of the
Series A Note Agreements, the Series B Note Agreements and the Littlestown IDB
Agreements, respectively, as each is in effect on the date hereof, the proceeds
(if any) obtained following such purchase from the remarketing of any of the
Series A Notes, Series B Notes and Littlestown Bonds so purchased, as the case
may be, but prior to Junior Creditor's receipt of written notice of the
existence or occurrence of a Senior Debt Default that is continuing
("Remarketing Proceeds"), may be received and retained by the Junior Creditor
(but such amounts permitted to be received and retained by the Junior Creditor
shall not in any event include any payment by Debtor, or amounts collected
from Debtor, in respect of or to purchase any of the obligations arising under
or evidenced by the Series A Notes, Series A Note Agreements, Series B Notes,
Series B Note Agreements, Littlestown Bonds or Littlestown IDB Agreements); and
(a) Richemont may make, and Junior Creditor may receive and
retain, payments by Richemont of its obligations when due under the Richemont
Guaranty, whether or not a Senior Debt Default exists or has occurred and is
continuing and whether or not notice thereof is given to the Junior Creditor
hereunder.
2.3 Distributions.
(a) In the event of any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of Debtor or the proceeds thereof
to the creditors of Debtor or readjustment of the obligations and indebtedness
of Debtor, whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors, marshalling of assets of
Debtor or any other action or proceeding involving the readjustment of all or
any part of indebtedness of Debtor or the application of the assets of Debtor to
the payment or liquidation thereof (each of the foregoing, an "Insolvency
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Proceeding"), or upon the dissolution or other winding up of Debtor's business,
or upon the sale of all or substantially all of Debtor's assets, then, and in
any such event, (i) Senior Creditor shall first receive indefeasible payment in
full in cash of all of the Senior Debt prior to the payment of all or any part
of the Junior Debt, and (ii) Senior Creditor shall be entitled to receive any
payment or distribution of any kind or character, whether in cash, securities or
other property, which is payable or deliverable in respect of any or all of the
Junior Debt.
(b) In order to enable Senior Creditor to enforce its rights
under Section 2.3(a) hereof, Senior Creditor is hereby irrevocably authorized
and empowered (in its own name or in the name of Junior Creditor or otherwise),
but shall have no obligation, to enforce claims comprising any of the Junior
Debt by proof of debt, proof of claim, suit or otherwise and take generally any
action which Junior Creditor might otherwise be entitled to take, as Senior
Creditor may deem necessary or advisable for the enforcement of its rights or
interests hereunder.
(c) To the extent necessary for Senior Creditor to realize the
benefits of the subordination of the Junior Debt provided for herein (including
the right to receive any and all payments and distributions which might
otherwise be payable or deliverable with respect to the Junior Debt in any
Insolvency Proceeding or otherwise), Junior Creditor shall execute and deliver
to Senior Creditor such instruments or documents (together with such assignments
or endorsements as Senior Creditor shall deem necessary), as may be requested by
Senior Creditor.
2.4 Payments Received by Junior Creditor. Except for payments
received by Junior Creditor as provided in Section 2.2 hereof, should any
payment or distribution or security or instrument or proceeds thereof be
received by the Junior Creditor in respect of the Junior Debt, Junior Creditor
shall receive and hold the same in trust, as trustee, for the benefit of Senior
Creditor, segregated from other funds and property of Junior Creditor and shall
forthwith deliver the same to Senior Creditor (together with any endorsement or
assignment of Junior Creditor where necessary), for application to any of the
Senior Debt. In the event of the failure of Junior Creditor to make any such
endorsement or assignment to Senior Creditor, Senior Creditor, or any of its
officers or employees, are hereby irrevocably authorized on behalf of Junior
Creditor to make the same.
2.5 Instrument Legend and Notation. Any instrument at any time
evidencing the Junior Debt, or any portion thereof, shall be permanently marked
on its face with a legend conspicuously indicating that payment thereof is
subordinate in right of payment to the Senior Debt and subject to the terms and
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conditions of this Subordination Agreement, and (a) after being so marked
certified copies thereof shall be delivered to Senior Creditor and (b) the
original of any such instrument shall be immediately delivered to Senior
Creditor upon Senior Creditor's request, at any time on or after the
commencement of an Insolvency Proceeding. In the event any legend or endorsement
is omitted, Senior Creditor, or any of its officers or employees, are hereby
irrevocably authorized on behalf of Junior Creditor to make the same. No
specific legend, further assignment or endorsement or delivery of notes,
guarantees or instruments shall be necessary to subject any Junior Debt to the
subordination thereof contained in this Agreement.
3. COVENANTS, REPRESENTATIONS AND WARRANTIES
3.1 Additional Covenants. Junior Creditor and Debtor agree in
favor of Senior Creditor that:
(a) except as specifically set forth in Section 2.2 hereof,
Debtor shall not, directly or indirectly, make and Junior Creditor shall not,
directly or indirectly, accept or receive any payment of or any prepayment or
any payment pursuant to acceleration or claims of breach or any payment to
acquire Junior Debt or otherwise in respect of any Junior Debt;
(b) notwithstanding any rights or remedies available to it
under the Junior Creditor Agreements, applicable law or otherwise, Junior
Creditor shall not, directly or indirectly, (i) seek to collect from Debtor any
of the Junior Debt or exercise any of its rights or remedies against Debtor upon
a default or event of default by Debtor under the Junior Creditor Agreements or
otherwise or (ii) commence any action or proceeding against Debtor or Debtor's
properties under the U.S. Bankruptcy Code or any state insolvency law or any
similar present or future statute, law or regulation or any proceedings for
voluntary liquidation, dissolution or other winding up of Debtor's business, or
the appointment of any trustee, receiver or liquidator for Debtor or any part of
Debtor's properties or any assignment for the benefit of creditors or any
marshalling of assets of Debtor or (iii) take any other action against Debtor or
Debtor's properties in respect of the Junior Debt;
(c) Junior Creditor shall not acquire any guarantees for the
Junior Debt or other agreements under which any person, other than Hanover, is
or may become obligated, directly or indirectly, for all or any portion of the
Junior Debt, except the Richemont Guaranty, and Debtor shall not grant to Junior
Creditor and Junior Creditor shall not acquire any security interest, lien,
claim or encumbrance on any assets or properties of Debtor, except for the
rights and interests of Junior Creditor in any Remarketing Proceeds as permitted
pursuant to Section 2.2(c) hereof and any security interest in any Series A
Notes, Series B
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Notes, or Littlestown Bonds Purchased with funds drawn under the Swiss Bank
Letters of Credit, but only to the extent of entitling Junior Creditor to
receive any Remarketing Proceeds arising therefrom;
(d) Junior Creditor and Debtor shall not amend, modify, alter
or change in any material respect the terms of any arrangements related to the
Junior Debt;
(e) Junior Creditor shall not sell, assign, pledge, encumber
or otherwise dispose of any of the Junior Debt, or subordinate any of the Junior
Debt to any indebtedness of Debtors other than the Senior Debt, except that
Junior Creditor may assign or sell participations expressly subject hereto, a
portion of the Junior Debt to certain other financial institutions
("Participating Banks") so long as (i) Junior Creditor provides Senior Creditor
five (5) days' prior written notice of such participation, (ii) such
Participating Bank is reasonably acceptable to Senior Creditor, (iii)
contemporaneously with such assignment, Junior Creditor causes such
Participating Bank to enter into a written agreement in favor of Junior Creditor
(the "Participating Bank Agreement"), in form and substance satisfactory to
Senior Creditor, pursuant to which such Participating Bank, shall agree, among
other things, to be bound by the terms of this Subordination Agreement, and (iv)
such Participating Bank delivers, in form and substance satisfactory to Senior
Creditor (A) evidence of the adoption and subsistence of authorizing resolutions
of such Particpating Bank approving the execution, delivery and performance by
such Participating Bank of the Participating Bank Agreement and (B) an opinion
of counsel to such Participating Bank addressed to Senior Creditor with respect
to the due authorization, execution, validity and enforceability of the
Participating Bank Agreement, and as to such other matters as Senior Creditor
shall reasonably require;
(f) Junior Creditor and Debtor shall, at any time or times
upon the request of Senior Creditor, promptly furnish to Senior Creditor a true,
correct and complete statement of the outstanding Junior Debt; and
(g) Junior Creditor and Debtor shall execute and deliver to
Senior Creditor such additional agreements, documents and instruments and take
such further actions as may be necessary or desirable in the opinion of Senior
Creditor to effectuate the provisions and purposes of this Subordination
Agreement.
3.2 Additional Representations and Warranties. Junior Creditor and
Debtor represent and warrant to Senior Creditor that:
(a) Junior Creditor has no guarantee or other agreement from
any person, other than Hanover, under which such
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person is or may become obligated, directly or indirectly, for all or any
portion of the Junior Debt, except for the Richemont Guaranty, and Junior
Creditor has no security interest, lien, claim or encumbrance on any assets and
properties of Debtor and the Junior Debt is unsecured, except that Junior
Creditor has a right to receive Remarketing Proceeds as permitted under Section
2.2(c) hereof, and may hold an interest in the Series A Notes, Series B Notes or
Littlestown Bonds purchased with funds drawn under the Swiss Bank Letters of
Credit, but only to the extent of entitling Junior Creditor to receive any
Remarketing Proceeds arising therefrom; and expressly provided that no Series A
Notes, Series B Notes or Littlestown Bonds purchased with drawings under the
Swiss Bank Letters of Credit shall be remarketed, sold or otherwise disposed of
by or for Junior Creditor after receipt of written notice that a Senior Debt
Default exists or has occurred and is continuing;
(b) as of the date hereof, no default or event of default, or
event which with notice or passage of time or both would constitute an event of
default exists or has occurred under the Junior Creditor Agreements;
(c) Junior Creditor is the exclusive legal and beneficial
owner of all of the Junior Debt;
(d) Junior Creditor has established a New York Branch, duly
licensed by the New York Superintendent of Banks, and has obtained all
approvals, licenses and permits from all Federal and State banking and other
governmental entities necessary to issue the Swiss Bank Letters of Credit and to
execute, deliver and perform this Subordination Agreement;
(e) none of the Junior Debt is subject to any lien, security
interest, financing statements, subordination, assignment or other claim, except
in favor of Senior Creditor; and
(f) this Subordination Agreement constitutes the legal, valid
and binding obligations of Junior Creditor, enforceable in accordance with its
terms.
3.3 Waivers. Notice of acceptance hereof, the making of loans,
advances and extensions of credit or other financial accommodations to, and the
incurring of any expenses by or in respect of, Hanover or its subsidiaries by
Senior Creditor, and presentment, demand, protest, notice of protest, notice of
nonpayment or default and all other notices to which Junior Creditor and Debtor
are or may be entitled are hereby waived (except as expressly provided for
herein or as to Debtor, in the Senior Creditor Agreements). Junior Creditor also
waives notice of, and hereby consents to, (a) any amendment, modification,
supplement, renewal, restatement or extensions of time of payment
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of or increase or decrease in the amount of any of the Senior Debt or to the
Senior Creditor Agreements or any collateral at any time granted to or held by
Senior Creditor, (b) the taking, exchange, surrender and releasing of collateral
at any time granted to or held by Senior Creditor or guarantees now or at any
time held by or available to Senior Creditor for the Senior Debt or any other
person at any time liable for or in respect of the Senior Debt, (c) the exercise
of, or refraining from the exercise of any rights against Debtor or any other
obligor or any collateral at any time granted to or held by Senior Creditor, (d)
the settlement, compromise or release of, or the waiver of any default with
respect to, any of the Senior Debt, and/or (e) Senior Creditor's election, in
any proceeding instituted under the U.S. Bankruptcy Code of the application of
Section 1111(b)(2) of the U.S. Bankruptcy Code. Any of the foregoing shall not,
in any manner, affect the terms hereof or impair the obligations of Junior
Creditor hereunder. All of the Senior Debt shall be deemed to have been made or
incurred in reliance upon this Subordination Agreement.
3.4 Subrogation; Marshalling. Junior Creditor shall not be subrogated
to, or be entitled to any assignment of any Senior Debt or of any collateral for
or guarantees or evidence of any thereof until all of the Senior Debt is
indefeasibly paid and satisfied in full. Junior Creditor hereby waives any and
all rights to have any collateral or any part thereof granted to or held by
Senior Creditor marshalled upon any foreclosure or other disposition of such
collateral by Senior Creditor or Debtor with the consent of Senior Creditor.
3.5 No Offset. In the event Junior Creditor at any time incurs any
obligation to pay money to Debtor, Junior Creditor hereby irrevocably agrees
that it shall pay such obligation in cash or cash equivalents in accordance with
the terms of the contract governing such obligation and shall not deduct from or
setoff against any amounts owed by Junior Creditor to Debtor in connection with
any such transaction any amounts the Junior Creditor claims are due to it with
respect to the Junior Debt.
4. MISCELLANEOUS
4.1 Amendments. Any waiver, permit, consent or approval by either
Creditor of or under any provision, condition or covenant to this Subordination
Agreement must be in writing and shall be effective only to the extent it is set
forth in writing and as to the specific facts or circumstances covered thereby.
Any amendment of this Subordination Agreement must be in writing and signed by
each of the parties to be bound thereby.
4.2 Successors and Assigns.
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(a) This Subordination Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of each of Creditors and its respective successors, participants and
assigns.
(b) Senior Creditor reserves the right to grant participations
in, or otherwise sell, assign, transfer or negotiate all or any part of, or any
interest in, the Senior Debt and the collateral securing same; provided, that,
Junior Creditor shall not be obligated to give any notices to or otherwise in
any manner deal directly with any participant in the Senior Debt and no
participant shall be entitled to any rights or benefits under this Subordination
Agreement except through Senior Creditor. In connection with any participation
or other transfer or assignment, Senior Creditor (i) may disclose to such
assignee, participant or other transferee or assignee all documents and
information which Senior Creditor now or hereafter may have relating to the
Senior Debt or any collateral and (ii) shall disclose to such participant or
other transferee or assignee the existence and terms and conditions of this
Subordination Agreement.
(c) In connection with any assignment or transfer of any or
all of the Senior Debt, or any or all rights of Senior Creditor in any of the
property of Hanover or its subsidiaries (other than pursuant to a
participation), Junior Creditor agrees to execute and deliver an agreement
containing terms substantially identical to those contained herein in favor of
any such assignee or transferee and, in addition, will execute and deliver an
agreement containing terms substantially identical to those contained herein in
favor of any third person who succeeds to or replaces any or all of Senior
Creditor's financing of certain subsidiaries of Hanover, whether such successor
financing or replacement occurs by transfer, assignment, "takeout" or any other
means.
4.3 Insolvency. This Subordination Agreement shall be applicable
both before and after the filing of any petition by or against Hanover or any of
its subsidiaries under the U.S. Bankruptcy Code and all converted or succeeding
cases in respect thereof, and all references herein to Debtor or any of
Hanover's subsidiaries shall be deemed to apply to a trustee for Hanover or any
of its subsidiaries, as well as to Hanover or any of its subsidiaries as
debtor-in-possession. The relative rights of Senior Creditor and Junior Creditor
to repayment of the Senior Debt and the Junior Debt, respectively, and in or to
any distributions from or in respect of Debtor or any proceeds of Debtor's
property and assets, shall continue after the filing thereof on the same basis
as prior to the date of the petition, subject to any court order approving the
financing of, or use of cash collateral by, Hanover or any of its subsidiaries
as debtor-in-possession.
- 14 -
<PAGE> 15
4.4 Bankruptcy Financing. If Hanover or any of its subsidiaries
shall become subject to a proceeding under the U.S. Bankruptcy Code and if
Senior Creditor desires to permit the use of cash collateral or to provide
financing to Hanover or any of its subsidiaries under either Section 363 or
Section 364 of the U.S. Bankruptcy Code, Junior Creditor agrees as follows: (a)
adequate notice to Junior Creditor (if required) shall have been provided for
such financing or use of cash collateral if Junior Creditor receives notice two
(2) business days prior to the entry of the order approving such financing or
use of cash collateral and (b) no objection will be raised by Junior Creditor to
any such use of cash collateral or financing. For purposes of this Section,
notice of a proposed financing or use of cash collateral shall be deemed given
when given in the manner prescribed by Section 4.5 hereof to Junior Creditor.
4.5 Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing and shall be deemed to have been
duly given or made: if delivered in person, immediately upon delivery; if by
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if mailed by certified mail, return receipt requested, five (5)
days after mailing. All notices, requests and demands are to be given or made to
the respective parties at their addresses set forth below (or to such other
addresses as either party may designate by notice in accordance with the
provisions of this Section:
To Senior Creditor: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Mark Fagnani
To Junior Creditor: Swiss Bank Corporation
New York Branch
10 East 50th Street
New York, New York 10022
Attention: Jorg Rauthe
with a copy to: Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
Attention: D. de La Chapelle, Esq.
Either Creditor may change the address(es) to which all notices, requests and
other communications are to be sent by giving written notice of such address
change to the other Creditor in conformity with this Section 4.5, but such
change shall not be effective until notice of such change has been received by
the other Creditor.
- 15 -
<PAGE> 16
4.6 Counterparts. This Subordination Agreement may be executed in any
number of counterparts, each of which shall be an original with the same force
and effect as if the signatures thereto and hereto were upon the same
instrument.
4.7 Governing Law. The validity, construction and effect of this
Subordination Agreement shall be governed by the laws of the State of New York
(without giving effect to principles of conflicts of law).
4.8 Consent to Jurisdiction; Waiver of Jury Trial. Each of the
parties hereto hereby irrevocably consents to the non-exclusive jurisdiction of
the Supreme Court of the State of New York for New York County and the United
States District Court for the Southern District of New York and waives trial by
jury in any action or proceeding with respect to this Subordination Agreement.
4.9 Complete Agreement. This written Subordination Agreement is
intended by the parties as a final expression of their agreement and is intended
as a complete statement of the terms and conditions of their agreement.
4.10 No Third Parties Benefitted. This Subordination Agreement is
solely for the benefit of the Creditors and their respective successors,
participants and assigns, and no other person shall have any right, benefit,
priority or interest under, or because of the existence of, this Subordination
Agreement.
4.11 Disclosures, Non-Reliance. Each Creditor has the means to, and
shall in the future remain, fully informed as to the financial condition and
other affairs of Debtor and neither Creditor shall have any obligation or duty
to disclose any such information to any other Creditor. Except as expressly set
forth in this Subordination Agreement, the parties hereto have not otherwise
made to each other nor do they hereby make to each other any warranties, express
or implied, nor do they assume any liability to each other with respect to: (a)
the enforceability, validity, value or collectability of any of the Junior Debt
or the Senior Debt or any collateral or guarantee which may have been granted to
any of them in connection therewith, (b) Debtor's title to or right to any of
Debtor's assets and properties or (c) any other matter except as expressly set
forth in this Subordination Agreement.
4.12 Term. This Subordination Agreement is a continuing agreement and
shall remain in full force and effect until the indefeasible satisfaction in
full of all Senior Debt and the termination of the financing arrangements among
Senior Creditor, Hanover and certain subsidiaries of Hanover.
- 16 -
<PAGE> 17
IN WITNESS WHEREOF, the parties have caused this Subordination
Agreement to be duly executed as of the day and year first above written.
CONGRESS FINANCIAL CORPORATION
By: /s/ John T. Garvey
----------------------------
Title: Assistant Vice President
------------------------
SWISS BANK CORPORATION,
New York Branch
By: /s/ Guido W. Schuler
--------------------------
Title: Executive Director
-----------------------
By: /s/ Jorg Rauthe
--------------------------
Title: Associate Director
-----------------------
- 17 -
<PAGE> 18
ACKNOWLEDGMENT
Each of the undersigned hereby acknowledges and agrees to the foregoing
terms and provisions. By its signature below, each of the undersigned agrees
that it shall, together with its successors and assigns, be bound by the
provisions hereof.
Each of the undersigned acknowledges and agrees that: (i) although it
may sign this Subordination Agreement, it is not a party hereto and does not and
shall not receive any right, benefit, priority or interest under or because of
the existence of the foregoing Subordination Agreement, (ii) in the event of a
breach by the undersigned of any of the terms and provisions contained in the
foregoing Subordination Agreement, such a breach shall constitute an "Event of
Default" as defined in and under the Senior Creditor Agreements, and (iii) it
shall execute and deliver such additional documents and take such additional
action as may be necessary in the opinion of either Creditor to effectuate the
provisions and purposes of the foregoing Subordination Agreement.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
__________________________
Title: Senior Vice President
_______________________
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
__________________________
Title: Vice President
_______________________
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
__________________________
Title: Vice President
_______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
- 18 -
<PAGE> 19
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
GUMP'S CORP.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
TWEEDS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
-------------------------
Title: Vice President
----------------------
[SIGNATURES CONTINUE ON NEXT PAGE]
- 19 -
<PAGE> 20
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
________________________
Title: Vice President
______________________
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
________________________
Title: Vice President
______________________
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
________________________
Title: Vice President
______________________
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
________________________
Title: Vice President
______________________
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
________________________
Title: Vice President
______________________
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
- 20 -
<PAGE> 21
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
- 21 -
<PAGE> 22
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
- 22 -
<PAGE> 23
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
____________________________
Title: Vice President
_________________________
- 23 -
<PAGE> 1
Exhibit 10.41
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT ("Subordination Agreement"), dated as of
December 18, 1996, is by and between CONGRESS FINANCIAL CORPORATION, a
California corporation ("Senior Creditor", as hereinafter further defined), and
RICHEMONT FINANCE S.A., a societe anonyme organized under the laws of the Grand
Duchy of Luxembourg ("Junior Creditor", as hereinafter further defined). Senior
Creditor and Junior Creditor are sometimes individually referred to herein as
"Creditor" and collectively as "Creditors."
W I T N E S S E T H:
WHEREAS, Senior Creditor has entered into financing arrangements with
Hanover Direct, Inc. ("Hanover", as hereinafter further defined) and certain of
its subsidiaries, pursuant to which Senior Creditor has, upon certain terms and
conditions, made loans and provided other financial accommodations to certain
subsidiaries of Hanover, guaranteed by Hanover and certain subsidiaries of
Hanover, secured by substantially all of the assets and properties of Hanover
and of such borrower subsidiaries and guarantor subsidiaries of Hanover (such
subsidiaries, together with Hanover, individually and collectively, "Debtor", as
hereinafter further defined); and
WHEREAS, pursuant to such financing arrangements, Senior Creditor has
previously arranged for the issuance of the CoreStates Letters of Credit (as
hereinafter defined); and
WHEREAS, Swiss Bank (as hereinafter defined) is about to enter into the
Swiss Bank Reimbursement Agreement with Hanover, pursuant to which Swiss Bank
will issue the Swiss Bank Letters of Credit (as hereinafter defined) which will
be substituted for the CoreStates Letters of Credit and the NationsBank
Littlestown Letter of Credit, each of which shall, concurrently with such
substitution, be surrendered for cancellation or otherwise cancelled; and
WHEREAS, Junior Creditor is about to execute a Guaranty in favor of
Swiss Bank of Hanover's reimbursement obligations to Swiss Bank and Debtor and
Junior Creditor are about to enter into a reimbursement agreement relating
thereto; and
WHEREAS, in order to induce Senior Creditor to continue the financing
arrangements with Hanover and certain subsidiaries of Hanover, Junior Creditor
has agreed to the subordination in favor of Senior Creditor as provided herein
of its right to payment of the existing and future obligations of Debtor to
Junior Creditor arising in connection with or relating to the Swiss Bank Letters
<PAGE> 2
of Credit and the Guaranty by Junior Creditor relating thereto, and related
matters as set forth below;
NOW THEREFORE, in consideration of the mutual benefits accruing to
Creditors hereunder and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
1. DEFINITIONS
As used above and in this Subordination Agreement, the following terms
shall have the meanings ascribed to them below:
1.1 "Agreements" shall mean, individually and collectively, the Senior
Creditor Agreements and the Junior Creditor Agreements.
1.2 "CoreStates" shall mean CoreStates Bank, N.A., a national banking
association, and its successors and assigns.
1.3 "Corestates Letters of Credit" shall mean, individually and
collectively, the CoreStates Series A Letter of Credit, the CoreStates Series B
Letter of Credit and the CoreStates Littlestown Backup Letter of Credit.
1.4 "CoreStates Littlestown Backup Letter of Credit" shall mean the
Irrevocable Standby Letter of Credit No. 516262P, dated November 14, 1995,
issued in the initial stated amount of $8,560,000 by CoreStates for the account
of certain subsidiaries of Debtor, in favor of NationsBank, National
Association.
1.5 "CoreStates Series A Letter of Credit" shall mean the Irrevocable
Transferable Letter of Credit No. 516466P, dated December 27, 1995, issued in
the initial stated amount of $10,145,833 by CoreStates for the account of
certain subsidiaries of Debtor, in favor of Norwest Bank Minnesota, N.A., as
Trustee under the Series A Note Agreements.
1.6 "CoreStates Series B Letter of Credit" shall mean the Irrevocable
Transferable Letter of Credit No. 516467P, dated December 27, 1995, issued in
the initial stated amount of $10,145,833 by CoreStates for the account of
certain subsidiaries of Debtor in favor of Norwest Bank Minnesota Bank, N.A., as
Trustee under the Series B Note Agreements.
1.7 "Creditors" shall mean, individually and collectively, Senior
Creditor and Junior Creditor and their respective successors and assigns.
1.8 "Debtor" shall mean, individually and collectively, Hanover and
each of its existing and future subsidiaries who are or become parties (as
borrower or guarantor or who are or become
- 2 -
<PAGE> 3
otherwise obligated for all or part of the Senior Debt) to the Senior Creditor
Agreements, and their respective successors and assigns, including, without
limitation, a receiver, trustee, or debtor-in-possession on behalf of any such
person or on behalf of any such successor or assign.
1.9 "Hanover" shall mean Hanover Direct, Inc., a Delaware corporation
and its successors and assigns, including, without limitation, a receiver,
trustee or debtor-in-possession on behalf of such person or on behalf of any
such successor or assign.
1.10 "Insolvency Proceeding" shall have the meaning given in Section
2.3 hereof.
1.11 "Junior Creditor" shall mean Richemont Finance S.A., a societe
anonyme organized under the laws of the Grand Duchy of Luxembourg, and its
successors and assigns.
1.12 "Junior Creditor Agreements" shall mean, individually and
collectively, the Richemont Reimbursement Agreement, the rights of Junior
Creditor at any time under any of the Swiss Bank Agreements, or under or by
reason of the Richemont Guaranty, and all agreements, documents and instruments
at any time executed and/or delivered by Debtor or any other person to, with or
in favor of Junior Creditor in connection therewith or related thereto, as all
of the foregoing now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.13 "Junior Debt" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description owing by Debtor to Junior
Creditor, including principal, interest, charges, fees, premiums, indemnities
and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, arising under or evidenced by or in connection with the
Junior Creditor Agreements, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of the Junior
Creditor Agreements or after the commencement of any case with respect to Debtor
under the U.S. Bankruptcy Code or any similar statute (and including, without
limitation, any principal, interest, fees, costs, expenses and other amounts,
whether or not such amounts are allowable in whole or in part, in any such case
or similar proceeding), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and whether arising directly, or by way of
subrogation, contribution, reimbursement, indemnification, exoneration or
otherwise, or howsoever acquired by Junior Creditor.
1.14 "Littlestown Bonds" shall mean the Variable Rate Demand
Industrial Development Revenue Refunding Bonds, 1987 Series
- 3 -
<PAGE> 4
(Hanover House Industries, Inc. Project), issued on behalf of Hanover House
Industries Inc., now known as Hanover Direct Pennsylvania, Inc., in the original
principal amount of $8,000,000, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.15 "Littlestown IDB Agreements" shall mean, collectively, the
Indenture of Trust, dated as of September 1, 1987, presently between the
Littlestown Industrial Development Authority and Fleet National Bank, as
successor Trustee in connection with the Littlestown Bonds, and all agreements,
documents and instruments at any time executed and/or delivered in connection
therewith, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.16 "NationsBank Littlestown Letter of Credit" shall mean the letter
of credit no. 41055, dated November 2 ,1994, issued in the initial stated amount
of $8,560,000 by NationsBank for the account of Hanover Direct Pennsylvania,
Inc., in favor of Fleet National Bank, as Trustee under the Littlestown IDB
Agreements.
1.17 "Person" or "person" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
company, trust, joint venture, limited liability company, limited liability
partnership, or other entity or any government or any agency or instrumentality
or political subdivision thereof.
1.18 "Richemont Guaranty" shall mean the Guaranty, dated of even date
herewith, by Junior Creditor in favor of Swiss Bank with respect to the
obligations of Hanover to Swiss Bank, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.19 "Richemont Reimbursement Agreement" shall mean the Hanover
Indemnity Agreement, dated of even date herewith, by and between Debtor and
Junior Creditor pursuant to which Debtor has agreed to reimburse Junior Creditor
for amounts that are paid by Junior Creditor in connection with the Swiss Bank
Letters of Credit and/or the Richemont Guaranty.
1.20 "Senior Creditor" shall mean Congress Financial Corporation, a
California corporation, and its successors and assigns.
1.21 "Senior Creditor Agreements" shall mean, individually and
collectively, the Loan and Security Agreement, dated November 14, 1995, by and
among Senior Creditor, Hanover and certain subsidiaries of Hanover, as amended
(the "Loan Agreement"), the Guarantee and Waivers, each dated November 14,
- 4 -
<PAGE> 5
1995, by Hanover and certain of its subsidiaries in favor of Senior Creditor,
the General Security Agreements, each dated November 14, 1995, by Hanover and
certain of its subsidiaries in favor of Senior Creditor and all agreements,
documents and instruments at any time executed and/or delivered by Debtor or any
other person to, with or in favor of Senior Creditor in connection therewith or
related thereto, as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
1.22 "Senior Debt" shall mean all obligations, liabilities and
indebtedness of every kind, nature and description owing by Debtor to Senior
Creditor and/or its affiliates, or participants, including principal, interest,
charges, fees, premiums, indemnities and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under the
Senior Creditor Agreements or otherwise, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term
of the Senior Creditor Agreements or after the commencement of any case with
respect to Debtor under the U.S. Bankruptcy Code or any similar statute (and
including, without limitation, any principal, interest, fees, costs, expenses
and other amounts, whether or not such amounts are allowable either in whole or
in part, in any such case or similar proceeding), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and whether arising directly,
or by way of subrogation, contribution, reimbursement, indemnification,
exoneration or otherwise, or howsoever acquired by Senior Creditor.
1.23 "Series A Note Agreements" shall mean, individually and
collectively, the Series A Note Agreement, dated as of November 9, 1994,
presently between Hanover and Norwest Bank Minnesota, N.A., as Trustee, with
respect to the issuance and sale of the Series A Notes, and all agreements,
documents and instruments at any time executed and/or delivered by Hanover or
any related parties in connection therewith, including, without limitation, the
Second Supplemental Series A Note Agreement, dated as of December 18, 1996, as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
1.24 "Series A Notes" shall mean the Flexible Term Notes, Series A,
originally issued on November 9, 1994, by Hanover in the original aggregate
principal amount of $10,000,000, as replaced or modified through the date hereof
pursuant to the Series A Note Agreements, and as the same may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
- 5 -
<PAGE> 6
1.25 "Series B Note Agreements" shall mean, individually and
collectively, the Series B Note Agreement, dated as of April 27, 1995, presently
between Hanover and Norwest Bank Minnesota, N.A., as Trustee, with respect to
the issuance and sale of the Series B Notes, and all other agreements, documents
or instruments at any time executed and/or delivered in connection therewith,
including, without limitation, the Second Supplemental Series B Note Agreement,
dated as of December 18, 1996, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.26 "Series B Notes" shall mean the Flexible Term Notes, Series B,
originally issued on April 27, 1995, by Hanover in the original aggregate
principal amount of $10,000,000, as replaced or modified through the date hereof
pursuant to the Series B Note Agreements, and as the same may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.27 "Swiss Bank" shall mean, individually and collectively, Swiss Bank
Corporation, a banking corporation organized under the laws of Switzerland,
acting through its New York Branch, and any other issuer of a letter of credit
or guaranty that hereafter replaces or substitutes for any of the Swiss Bank
Letters of Credit, and their respective successors and assigns.
1.28 "Swiss Bank Agreements" shall mean, individually and collectively,
(a) the Swiss Bank Reimbursement Agreement, (b) the Swiss Bank Letters of
Credit, (c) the rights of Swiss Bank under the Series A Note Agreements and any
Series A Notes at any time held by or for Swiss Bank, (d) the rights of Swiss
Bank under the Series B Note Agreements and any Series B Notes at any time held
by or for Swiss Bank, (e) the rights of Swiss Bank under the Littlestown IDB
Agreements and any Littlestown Bonds at any time held by or for Swiss Bank and
(f) all agreements, documents and instruments at any time executed and/or
delivered by Debtor or any other person to, with or in favor of Swiss Bank in
connection therewith or related thereto, as all of the foregoing now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.29 "Swiss Bank Letters of Credit" shall mean, collectively, the Swiss
Bank Littlestown Letter of Credit, the Swiss Bank Series A Letter of Credit and
the Swiss Bank Series B Letter of Credit, as the same now exist or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced.
1.30 "Swiss Bank Littlestown Letter of Credit" shall mean the Letter of
Credit No. S567171 dated December 18, 1996, issued by Swiss Bank for the account
of Hanover Direct Pennsylvania, Inc. in favor of Fleet National Bank, as Trustee
under the Littlestown IDB Agreements, in the initial stated amount of
$8,560,000, delivered in substitution for the NationsBank
- 6 -
<PAGE> 7
Littlestown Letter of Credit and the CoreStates Littlestown Backup Letter of
Credit, as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.31 "Swiss Bank Reimbursement Agreement" shall mean the Reimbursement
Agreement, dated of even date herewith, by and between Hanover and Swiss Bank
with respect to the Swiss Bank Letters of Credit, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.32 "Swiss Bank Series A Letter of Credit" shall mean the Letter of
Credit No. S567169 dated December 18, 1996, issued by Swiss Bank for the account
of Hanover in the initial stated amount of $9,638,541, delivered in substitution
for the CoreStates Series A Letter of Credit, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.33 "Swiss Bank Series B Letter of Credit" shall mean the Letter of
Credit No. S567170, dated December 18, 1996, issued by Swiss Bank for the
account of Hanover in the initial stated amount of $9,638,541, delivered in
substitution for the CoreStates Series B Letter of Credit, as the same now
exists or may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
1.34 All terms used herein which are defined in the Uniform Commercial
Code as in effect in the State of New York, unless otherwise defined herein
shall have the meanings set forth therein. All references to any term in the
plural shall include the singular and all references to any term in the singular
shall include the plural.
2. SUBORDINATION OF JUNIOR DEBT
2.1 Subordination. Except as specifically set forth in Section 2.2
hereof, Junior Creditor hereby subordinates its right to payment and
satisfaction of the Junior Debt, and the payment and satisfaction thereof,
directly or indirectly, by any means whatsoever, is hereby deferred, to the
prior indefeasible payment and satisfaction in full of all Senior Debt.
2.2 Permitted Payments.
(a) Senior Creditor hereby agrees that, notwithstanding
anything to the contrary contained in Section 2.1 hereof, Debtor may make and
Junior Creditor may receive and retain from Debtor, a payment consisting of
expenses and attorneys' fees, not to exceed the aggregate amount of $45,000,
required to be reimbursed or paid by Debtor to Junior Creditor
- 7 -
<PAGE> 8
incurred in connection with the issuance of the Swiss Bank Letters of Credit,
plus the fee in the sum of $1,391,854.10, payable to Junior Creditor pursuant to
Section 6 of the Richemont Reimbursement Agreement, as in effect on the date
hereof, but not any other payments whatsoever in respect of the Junior Debt.
(b) Debtor may make, and Junior Creditor may receive and
retain, payments by Debtor to Junior Creditor of its indemnification obligations
when due and payable pursuant to the provisions of Section 5 of the Richemont
Reimbursement Agreement, as in effect on the date hereof, excluding those
arising from the payment by Richemont of any amounts to Swiss Bank under the
Richemont Guaranty; provided, that the aggregate amount of such indemnification
obligations permitted to be so paid after the date hereof shall not exceed the
amount of $250,000; and provided, further, that no such payment otherwise
permitted shall be made if any "Event of Default" or "Incipient Default" (as
such terms are defined in the Loan Agreement referred to in the definition of
Senior Creditor Agreements) exists or has occurred and is continuing or would
exist or occur as a result thereof.
(c) Nothing herein contained shall restrict the right of
Junior Creditor to convert all or any part of the Junior Debt to common stock of
Hanover in accordance with the Richemont Reimbursement Agreement as in effect on
the date hereof.
2.3 Distributions.
(a) In the event of any distribution, division, or
application, partial or complete, voluntary or involuntary, by operation of law
or otherwise, of all or any part of the assets of Debtor or the proceeds thereof
to the creditors of Debtor or readjustment of the obligations and indebtedness
of Debtor, whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors, marshalling of assets of
Debtor or any other action or proceeding involving the readjustment of all or
any part of indebtedness of Debtor or the application of the assets of Debtor to
the payment or liquidation thereof (each of the foregoing, an "Insolvency
Proceeding"), or upon the dissolution or other winding up of Debtor's business,
or upon the sale of all or substantially all of Debtor's assets, then, and in
any such event, (i) Senior Creditor shall first receive indefeasible payment in
full in cash of all of the Senior Debt prior to the payment of all or any part
of the Junior Debt, and (ii) Senior Creditor shall be entitled to receive any
payment or distribution of any kind or character, whether in cash, securities or
other property, which is payable or deliverable in respect of any or all of the
Junior Debt.
(b) In order to enable Senior Creditor to enforce its rights
under Section 2.3(a) hereof, Senior Creditor is hereby irrevocably authorized
and empowered (in its own name or in the
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<PAGE> 9
name of Junior Creditor or otherwise), but shall have no obligation, to enforce
claims comprising any of the Junior Debt by proof of debt, proof of claim, suit
or otherwise and take generally any action which Junior Creditor might otherwise
be entitled to take, as Senior Creditor may deem necessary or advisable for the
enforcement of its rights or interests hereunder.
(c) To the extent necessary for Senior Creditor to realize the
benefits of the subordination of the Junior Debt provided for herein (including
the right to receive any and all payments and distributions which might
otherwise be payable or deliverable with respect to the Junior Debt in any
Insolvency Proceeding or otherwise), Junior Creditor shall execute and deliver
to Senior Creditor such instruments or documents (together with such assignments
or endorsements as Senior Creditor shall deem necessary), as may be requested by
Senior Creditor.
2.4 Payments Received by Junior Creditor. Except for payments received
by Junior Creditor as provided in Section 2.2 hereof, should any payment or
distribution or security or instrument or proceeds thereof be received by the
Junior Creditor in respect of the Junior Debt, Junior Creditor shall receive and
hold the same in trust, as trustee, for the benefit of Senior Creditor,
segregated from other funds and property of Junior Creditor and shall forthwith
deliver the same to Senior Creditor (together with any endorsement or assignment
of Junior Creditor where necessary), for application to any of the Senior Debt.
In the event of the failure of Junior Creditor to make any such endorsement or
assignment to Senior Creditor, Senior Creditor, or any of its officers or
employees, are hereby irrevocably authorized on behalf of Junior Creditor to
make the same.
2.5 Instrument Legend and Notation. Any instrument at any time
evidencing the Junior Debt, or any portion thereof, shall be permanently marked
on its face with a legend conspicuously indicating that payment thereof is
subordinate in right of payment to the Senior Debt and subject to the terms and
conditions of this Subordination Agreement, and (a) after being so marked
certified copies thereof shall be delivered to Senior Creditor and (b) the
original of any such instrument shall be immediately delivered to Senior
Creditor upon Senior Creditor's request, at any time on or after the
commencement of an Insolvency Proceeding. In the event any legend or endorsement
is omitted, Senior Creditor, or any of its officers or employees, are hereby
irrevocably authorized on behalf of Junior Creditor to make the same. No
specific legend, further assignment or endorsement or delivery of notes,
guarantees or instruments shall be necessary to subject any Junior Debt to the
subordination thereof contained in this Agreement.
- 9 -
<PAGE> 10
3. COVENANTS, REPRESENTATIONS AND WARRANTIES
3.1 Additional Covenants. Junior Creditor and Debtor
agree in favor of Senior Creditor that:
(a) Except as specifically set forth in Section 2.2 hereof,
Debtor shall not, directly or indirectly, make and Junior Creditor shall not,
directly or indirectly, accept or receive any payment of or any prepayment or
any payment pursuant to acceleration or claims of breach or any payment to
acquire Junior Debt or otherwise in respect of any Junior Debt;
(b) notwithstanding any rights or remedies available to it
under the Junior Creditor Agreements, applicable law or otherwise, Junior
Creditor shall not, directly or indirectly, (i) seek to collect from Debtor any
of the Junior Debt or exercise any of its rights or remedies upon a default or
event of default by Debtor under the Junior Creditor Agreements or otherwise or
(ii) commence any action or proceeding against Debtor or Debtor's properties
under the U.S. Bankruptcy Code or any state insolvency law or any similar
present or future statute, law or regulation or any proceedings for voluntary
liquidation, dissolution or other winding up of Debtor's business, or the
appointment of any trustee, receiver or liquidator for Debtor or any part of
Debtor's properties or any assignment for the benefit of creditors or any
marshalling of assets of Debtor or (iii) take any other action against Debtor or
Debtor's properties in respect of the Junior Debt;
(c) Debtor shall not grant to Junior Creditor and Junior
Creditor shall not acquire any security interest, lien, claim or encumbrance on
any assets or properties of Debtor, and Junior Creditor shall not acquire any
guarantees or other agreements under which any person, other than Debtor, is or
may become obligated, directly or indirectly, for all or any portion of the
Junior Debt;
(d) Junior Creditor and Debtor shall not amend, modify, alter
or change in any material respect the terms of any arrangements related to the
Junior Debt;
(e) Junior Creditor shall not sell, assign, pledge, encumber
or otherwise dispose of any of the Junior Debt, or subordinate any of the Junior
Debt to any indebtedness of Debtors other than the Senior Debt, except that
Junior Creditor may assign, expressly subject hereto, all of the Junior Debt to
an affiliate of Junior Creditor so long as (i) Junior Creditor provides Senior
Creditor five (5) days' prior written notice of such assignment, (ii) such
affiliate of Junior Creditor is reasonably acceptable to Senior Creditor, (iii)
contemporaneously with such assignment, Junior Creditor causes such affiliate to
enter into a written agreement in favor of Junior Creditor (the
- 10 -
<PAGE> 11
"Richemont Affiliate Agreement"), in form and substance satisfactory to Senior
Creditor, pursuant to which such affiliate of Junior Creditor, shall agree,
among other things, to be bound by the terms of this Subordination Agreement,
and (iv) such affiliate of Junior Creditor delivers, in form and substance
satisfactory to Senior Creditor (A) evidence of the adoption and subsistence of
authorizing resolutions of such affiliate of Junior Creditor approving the
execution, delivery and performance by such affiliate of Junior Creditor of the
Richemont Affiliate Agreement and (B) an opinion of counsel to such affiliate of
Junior Creditor addressed to Senior Creditor with respect to the due
authorization, execution, validity and enforceability of the Richemont Affiliate
Agreement, and as to such other matters as Senior Creditor shall reasonably
require;
(f) Junior Creditor and Debtor shall, at any time or times
upon the request of Senior Creditor, promptly furnish to Senior Creditor a true,
correct and complete statement of the outstanding Junior Debt; and
(g) Junior Creditor and Debtor shall execute and deliver to
Senior Creditor such additional agreements, documents and instruments and take
such further actions as may be necessary or desirable in the opinion of Senior
Creditor to effectuate the provisions and purposes of this Subordination
Agreement.
3.2 Additional Representations and Warranties. Junior Creditor and
Debtor represent and warrant to Senior Creditor that:
(a) Junior Creditor has no guarantee or other agreement from
any person, other than Debtor, under which such person is or may become
obligated, directly or indirectly, for all or any portion of the Junior Debt,
and Junior Creditor has no security interest, lien, claim or encumbrance on any
assets and properties of Debtor and the Junior Debt is unsecured;
(b) as of the date hereof, no default or event of default, or
event which with notice or passage of time or both would constitute an event of
default exists or has occurred under the Junior Creditor Agreements;
(c) Junior Creditor is the exclusive legal and beneficial
owner of all of the Junior Debt;
(d) none of the Junior Debt is subject to any lien, security
interest, financing statements, subordination, assignment or other claim, except
in favor of Senior Creditor; and
- 11 -
<PAGE> 12
(e) this Subordination Agreement constitutes the legal, valid
and binding obligations of Junior Creditor, enforceable in accordance with its
terms.
3.3 Waivers. Notice of acceptance hereof, the making of loans,
advances and extensions of credit or other financial accommodations to, and the
incurring of any expenses by or in respect of, Hanover or its subsidiaries by
Senior Creditor, and presentment, demand, protest, notice of protest, notice of
nonpayment or default and all other notices to which Junior Creditor and Debtor
are or may be entitled are hereby waived (except as expressly provided for
herein or as to Debtor, in the Senior Creditor Agreements). Junior Creditor also
waives notice of, and hereby consents to, (a) any amendment, modification,
supplement, renewal, restatement or extensions of time of payment of or increase
or decrease in the amount of any of the Senior Debt or to the Senior Creditor
Agreements or any collateral at any time granted to or held by Senior Creditor,
(b) the taking, exchange, surrender and releasing of collateral at any time
granted to or held by Senior Creditor or guarantees now or at any time held by
or available to Senior Creditor for the Senior Debt or any other person at any
time liable for or in respect of the Senior Debt, (c) the exercise of, or
refraining from the exercise of any rights against Debtor or any other obligor
or any collateral at any time granted to or held by Senior Creditor, (d) the
settlement, compromise or release of, or the waiver of any default with respect
to, any of the Senior Debt, and/or (e) Senior Creditor's election, in any
proceeding instituted under the U.S. Bankruptcy Code of the application of
Section 1111(b)(2) of the U.S. Bankruptcy Code. Any of the foregoing shall not,
in any manner, affect the terms hereof or impair the obligations of Junior
Creditor hereunder. All of the Senior Debt shall be deemed to have been made or
incurred in reliance upon this Subordination Agreement.
3.4 Subrogation; Marshalling. Junior Creditor shall not be subrogated
to, or be entitled to any assignment of any Senior Debt or Junior Debt or of any
collateral for or guarantees or evidence of any thereof until all of the Senior
Debt is indefeasibly paid and satisfied in full. Junior Creditor hereby waives
any and all rights to have any collateral or any part thereof granted to or held
by Senior Creditor marshalled upon any foreclosure or other disposition of such
collateral by Senior Creditor or Debtor with the consent of Senior Creditor.
3.5 No Offset. In the event Junior Creditor at any time incurs any
obligation to pay money to Debtor, Junior Creditor hereby irrevocably agrees
that it shall pay such obligation in cash or cash equivalents in accordance with
the terms of the contract governing such obligation and shall not deduct from or
setoff against any amounts owed by Junior Creditor to Debtor in
- 12 -
<PAGE> 13
connection with any such transaction any amounts the Junior Creditor claims are
due to it with respect to the Junior Debt.
4. MISCELLANEOUS
4.1 Amendments. Any waiver, permit, consent or approval by either
Creditor of or under any provision, condition or covenant to this Subordination
Agreement must be in writing and shall be effective only to the extent it is set
forth in writing and as to the specific facts or circumstances covered thereby.
Any amendment of this Subordination Agreement must be in writing and signed by
each of the parties to be bound thereby.
4.2 Successors and Assigns.
(a) This Subordination Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of each of Creditors and its respective successors, participants and
assigns.
(b) Senior Creditor reserves the right to grant participations
in, or otherwise sell, assign, transfer or negotiate all or any part of, or any
interest in, the Senior Debt and the collateral securing same; provided, that,
Junior Creditor shall not be obligated to give any notices to or otherwise in
any manner deal directly with any participant in the Senior Debt and no
participant shall be entitled to any rights or benefits under this Subordination
Agreement except through Senior Creditor. In connection with any participation
or other transfer or assignment, Senior Creditor (i) may disclose to such
assignee, participant or other transferee or assignee all documents and
information which Senior Creditor now or hereafter may have relating to the
Senior Debt or any collateral and (ii) shall disclose to such participant or
other transferee or assignee the existence and terms and conditions of this
Subordination Agreement.
(c) In connection with any assignment or transfer of any or
all of the Senior Debt, or any or all rights of Senior Creditor in any of the
property of Hanover or its subsidiaries (other than pursuant to a
participation), Junior Creditor agrees to execute and deliver an agreement
containing terms substantially identical to those contained herein in favor of
any such assignee or transferee and, in addition, will execute and deliver an
agreement containing terms substantially identical to those contained herein in
favor of any third person who succeeds to or replaces any or all of Senior
Creditor's financing of certain subsidiaries of Hanover, whether such successor
financing or replacement occurs by transfer, assignment, "takeout" or any other
means.
- 13 -
<PAGE> 14
4.3 Insolvency. This Subordination Agreement shall be applicable both
before and after the filing of any petition by or against Hanover or any of its
subsidiaries under the U.S. Bankruptcy Code and all converted or succeeding
cases in respect thereof, and all references herein to Debtor or any of
Hanover's subsidiaries shall be deemed to apply to a trustee for Hanover or any
of its subsidiaries, as well as to Hanover or any of its subsidiaries as
debtor-in-possession. The relative rights of Senior Creditor and Junior Creditor
to repayment of the Senior Debt and the Junior Debt, respectively, and in or to
any distributions from or in respect of Debtor or any proceeds of Debtor's
property and assets, shall continue after the filing thereof on the same basis
as prior to the date of the petition, subject to any court order approving the
financing of, or use of cash collateral by, Hanover or any of its subsidiaries
as debtor-in-possession.
4.4 Bankruptcy Financing. If Hanover or any of its subsidiaries shall
become subject to a proceeding under the U.S. Bankruptcy Code and if Senior
Creditor desires to permit the use of cash collateral or to provide financing to
Hanover or any of its subsidiaries under either Section 363 or Section 364 of
the U.S. Bankruptcy Code, Junior Creditor agrees as follows: (a) adequate notice
to Junior Creditor (if required) shall have been provided for such financing or
use of cash collateral if Junior Creditor receives notice two (2) business days
prior to the entry of the order approving such financing or use of cash
collateral and (b) no objection will be raised by Junior Creditor to any such
use of cash collateral or financing. For purposes of this Section, notice of a
proposed financing or use of cash collateral shall be deemed given when given in
the manner prescribed by Section 4.5 hereof to Junior Creditor.
4.5 Notices. All notices, requests and demands to or upon the
respective parties hereto shall be in writing and shall be deemed to have been
duly given or made: if delivered in person, immediately upon delivery; if by
telex, telegram or facsimile transmission, immediately upon sending and upon
confirmation of receipt; if by nationally recognized overnight courier service
with instructions to deliver the next business day, one (1) business day after
sending; and if mailed by certified mail, return receipt requested, five (5)
days after mailing. All notices, requests and demands are to be given or made to
the respective parties at their addresses set forth below (or to such other
addresses as either party may designate by notice in accordance with the
provisions of this Section:
To Senior Creditor: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Mark Fagnani
- 14 -
<PAGE> 15
To Junior Creditor: Richemont Finance S.A.
35 Boulevard Prince Henri
L 1724 Luxembourg
Attention: Mr. Alan Grieve
with a copy to: Robert P. Wessely, Esq.
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Either Creditor may change the address(es) to which all notices, requests and
other communications are to be sent by giving written notice of such address
change to the other Creditor in conformity with this Section 4.5, but such
change shall not be effective until notice of such change has been received by
the other Creditor.
4.6 Counterparts. This Subordination Agreement may be executed in any
number of counterparts, each of which shall be an original with the same force
and effect as if the signatures thereto and hereto were upon the same
instrument.
4.7 Governing Law. The validity, construction and effect of this
Subordination Agreement shall be governed by the laws of the State of New York
(without giving effect to principles of conflicts of law).
4.8 Consent to Jurisdiction; Waiver of Jury Trial. Each of the parties
hereto hereby irrevocably consents to the non-exclusive jurisdiction of the
Supreme Court of the State of New York for New York County and the United States
District Court for the Southern District of New York and waives trial by jury in
any action or proceeding with respect to this Subordination Agreement.
4.9 Complete Agreement.
(a) This written Subordination Agreement is intended by the
parties as a final expression of their agreement and is intended as a complete
statement of the terms and conditions of their agreement.
(b) The obligations of Junior Creditor under this
Subordination Agreement are in addition to, and in no way limited by the terms
of the Subordination Agreement, dated as of December 5, 1996, between Junior
Creditor and Senior Creditor, as acknowledged by Hanover, nor shall any of the
terms thereof be limited or affected by the terms of this Subordination
Agreement.
4.10 No Third Parties Benefitted. This Subordination Agreement is
solely for the benefit of the Creditors and their respective successors,
participants and assigns, and no other
- 15 -
<PAGE> 16
person shall have any right, benefit, priority or interest under, or because of
the existence of, this Subordination Agreement.
4.11 Disclosures, Non-Reliance. Each Creditor has the means to, and
shall in the future remain, fully informed as to the financial condition and
other affairs of Debtor and neither Creditor shall have any obligation or duty
to disclose any such information to any other Creditor. Except as expressly set
forth in this Subordination Agreement, the parties hereto have not otherwise
made to each other nor do they hereby make to each other any warranties, express
or implied, nor do they assume any liability to each other with respect to: (a)
the enforceability, validity, value or collectability of any of the Junior Debt
or the Senior Debt or any collateral or guarantee which may have been granted to
any of them in connection therewith, (b) Debtor's title to or right to any of
Debtor's assets and properties or (c) any other matter except as expressly set
forth in this Subordination Agreement.
4.12 Term. This Subordination Agreement is a continuing agreement and
shall remain in full force and effect until the indefeasible satisfaction in
full of all Senior Debt and the termination of the financing arrangements among
Senior Creditor, Hanover and certain subsidiaries of Hanover.
IN WITNESS WHEREOF, the parties have caused this Subordination
Agreement to be duly executed as of the day and year first above written.
CONGRESS FINANCIAL CORPORATION
By: /s/ John T. Garvey
____________________________
Title: Assistant Vice President
RICHEMONT FINANCE S.A.
By: /s/ Jan du Plessis
____________________________
Title: Director
_________________________
By: /s/ Howard M.S. Tanner
____________________________
Title: Director
_________________________
- 16 -
<PAGE> 17
ACKNOWLEDGMENT
Each of the undersigned hereby acknowledges and agrees to the foregoing
terms and provisions. By its signature below, each of the undersigned agrees
that it shall, together with their successors and assigns, be bound by the
provisions hereof.
Each of the undersigned acknowledges and agrees that: (i) although it
may sign this Subordination Agreement, it is not a party hereto and does not and
shall not receive any right, benefit, priority or interest under or because of
the existence of the foregoing Subordination Agreement, (ii) in the event of a
breach by the undersigned of any of the terms and provisions contained in the
foregoing Subordination Agreement, such a breach shall constitute an "Event of
Default" as defined in and under the Senior Creditor Agreements, and (iii) it
shall execute and deliver such additional documents and take such additional
action as may be necessary in the opinion of either Creditor to effectuate the
provisions and purposes of the foregoing Subordination Agreement.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
__________________________
Title: Senior Vice President
Secretary & Treasurer
_______________________
HANOVER DIRECT PENNSYLVANIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
BRAWN OF CALIFORNIA, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
- 17 -
<PAGE> 18
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S BY MAIL, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
GUMP'S CORP.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
THE COMPANY STORE, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
TWEEDS, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
LWI HOLDINGS, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
AEGIS CATALOG CORPORATION
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
- 18 -
<PAGE> 19
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER DIRECT VIRGINIA INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
HANOVER REALTY, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
THE AUSTAD COMPANY
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
AEGIS RETAIL CORPORATION
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
AEGIS SAFETY HOLDINGS, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
AEGIS VENTURES, INC.
By: /s/ Edward J. O'Brien
_________________________
Title: Vice President
______________________
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
- 19 -
<PAGE> 20
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AMERICAN DOWN & TEXTILE COMPANY
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
BRAWN WHOLESALE CORP.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
THE COMPANY FACTORY, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
THE COMPANY OFFICE, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
COMPANY STORE HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
D.M. ADVERTISING, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
- 20 -
<PAGE> 21
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
GUMP'S CATALOG, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
GUMP'S HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
HANOVER CASUALS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
HANOVER CATALOG HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
HANOVER FINANCE CORPORATION
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
HANOVER LIST MANAGEMENT, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
- 21 -
<PAGE> 22
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
HANOVER VENTURES, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
LEICHTUNG OF MICHIGAN, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
LWI RETAIL, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
SCANDIA DOWN CORPORATION
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
TWEEDS OF VERMONT, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
YORK FULFILLMENT COMPANY, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
AUSTAD HOLDINGS, INC.
By: /s/ Edward J. O'Brien
---------------------------
Title: Vice President
------------------------
- 22 -
<PAGE> 1
EXHIBIT 10.42
SERIES A NOTE AGREEMENT
DATED AS OF NOVEMBER 9, 1994
BETWEEN
HANOVER DIRECT, INC.
AND
NORWEST BANK MINNESOTA, N.A.,
AS TRUSTEE AND PAYING AGENT
$10,000,000
HANOVER DIRECT, INC.
FLEXIBLE TERM NOTES,
SERIES A
B-2
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION
PAGE
SECTION 1.01. DEFINITIONS................................................. 3
SECTION 1.02. RULES OF CONSTRUCTION....................................... 9
ARTICLE II THE SERIES A NOTES
SECTION 2.01. AUTHORIZATION OF SERIES A NOTES; FORM OF SERIES A; DETAILS
OF SERIES A NOTES...................................... 10
SECTION 2.02. INTEREST ON THE SERIES A NOTES.............................. 11
SECTION 2.03. EXECUTION AND AUTHENTICATION................................ 13
SECTION 2.04. SERIES A NOTE REGISTER...................................... 13
SECTION 2.05. REGISTRATION AND EXCHANGE OF SERIES A NOTES; PERSONS TREATED
AS OWNERS.............................................. 14
SECTION 2.06. AUTHORIZATION OF SERIES A NOTES............................. 14
SECTION 2.07. BOOK-ENTRY SYSTEM; RECORDING AND TRANSFER OF OF THE
SERIES A NOTES......................................... 17
SECTION 2.08. MUTILATED, LOST, STOLEN, DESTROYED OR UNDELIVERED
SERIES A NOTES......................................... 18
SECTION 2.09. CANCELLATION OF SERIES A NOTES.............................. 19
ARTICLE III REDEMPTION, PURCHASE AND REMARKETING
SECTION 3.01. REDEMPTION OF SERIES A NOTES................................ 20
SECTION 3.02. REDEMPTION DATE............................................. 22
SECTION 3.03. SELECTION OF SERIES A NOTES TO BE REDEEMED.................. 22
SECTION 3.04. NOTICE OF REDEMPTION........................................ 23
SECTION 3.05. PAYMENT OF SERIES A NOTES CALLED FOR REDEMPTION; EFFECT OF
REDEMPTION............................................. 24
SECTION 3.06. SERIES A NOTES REDEEMED IN PART............................. 24
SECTION 3.07. PURCHASE OF SERIES A NOTES.................................. 24
SECTION 3.08. REMARKETING OF PURCHASED SERIES A NOTES..................... 25
ARTICLE IV PAYMENT OF SERIES A NOTES AND CREATION OF SERIES A
LETTER OF CREDIT FUND
SECTION 4.01. PAYMENT OF SERIES A NOTES................................... 28
SECTION 4.02. CREATION OF SERIES A LETTER OF CREDIT FUND. ................ 28
SECTION 4.03. FUNDS RECEIVED; APPLICATION OF MONEY IN SERIES A LETTER OF
CREDIT FUND. .......................................... 29
SECTION 4.04. MONEYS TO BE HELD IN TRUST. ............................... 30
SECTION 4.05. INVESTMENT OF MONEYS. ..................................... 30
ARTICLE V SERIES A LETTER OF CREDIT
SECTION 5.01. REQUIREMENTS FOR SERIES A LETTER OF CREDIT. ............... 32
SECTION 5.02. DRAWS ON SERIES A LETTER OF CREDIT; EXTENSIONS. ............ 32
SECTION 5.03. SUBSTITUTE SERIES A LETTER OF CREDIT........................ 34
SECTION 5.04. ENFORCEMENT OF THE SERIES A LETTER OF CREDIT. ............. 35
<PAGE> 3
ARTICLE VI GENERAL COVENANTS AND REPRESENTATIONS
SECTION 6.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM. ............... 37
SECTION 6.02. COVENANT TO PERFORM AND REPRESENTATIONS AND WARRANTIES OF THE
BORROWER AS TO AUTHORITY, ETC. ....................... 37
SECTION 6.03. FURTHER INSTRUMENTS AND ACTIONS. .......................... 38
SECTION 6.04. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
BORROWER. ............................................ 38
ARTICLE VII DEFAULTS AND REMEDIES
SECTION 7.01. EVENTS OF DEFAULT. ........................................ 39
SECTION 7.02. ACCELERATION AND DUTY TO DRAW ON SERIES A LETTER OF CREDIT.. 39
SECTION 7.03. DISPOSITION OF AMOUNTS DRAWN ON SERIES A LETTER OF CREDIT... 40
SECTION 7.04. NO REMEDY EXCLUSIVE. ...................................... 40
SECTION 7.05. APPLICATION OF MONEYS. .................................... 41
SECTION 7.06. WAIVERS OF EVENTS OF DEFAULT. ............................. 41
SECTION 7.07. UNCONDITIONAL RIGHT TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST............................................... 42
SECTION 7.08. [RESERVED]. ............................................... 42
SECTION 7.09. BANK DEEMED HOLDER. ....................................... 42
ARTICLE VIII TRUSTEE, REMARKETING AGENT AND PAYING AGENT
SECTION 8.01. DUTIES OF TRUSTEE........................................... 43
SECTION 8.02. RIGHTS OF TRUSTEE........................................... 44
SECTION 8.03. INDIVIDUAL RIGHTS OF TRUSTEE, ETC........................... 45
SECTION 8.04. TRUSTEE'S DISCLAIMER. ..................................... 45
SECTION 8.05. NOTICE OF DEFAULTS. ....................................... 45
SECTION 8.06. COMPENSATION AND INDEMNIFICATION OF TRUSTEE. .............. 45
SECTION 8.07. ELIGIBILITY OF TRUSTEE. ................................... 45
SECTION 8.08. REPLACEMENT OF TRUSTEE. ................................... 46
SECTION 8.09. DUTIES OF REMARKETING AGENT................................. 47
SECTION 8.10. ELIGIBILITY OF REMARKETING AGENT; REPLACEMENT. ............ 47
SECTION 8.11. DUTIES OF PLACEMENT AGENT................................... 48
SECTION 8.12. ELIGIBILITY OF PLACEMENT AGENT; REPLACEMENT. .............. 48
SECTION 8.13. APPOINTMENT OF AND DUTIES OF PAYING AGENT. ............... 49
SECTION 8.14. QUALIFICATIONS OF PAYING AGENT; RESIGNATION; REMOVAL. ..... 49
SECTION 8.15. SUCCESSOR TRUSTEE, PAYING AGENT OR REMARKETING AGENT BY
MERGER ................................................ 50
SECTION 8.16. TRUSTEE'S COVENANT AS TO BANK NOTES. ...................... 50
SECTION 8.16. TRUSTEE AND PAYING AGENT AS ONE ENTITY. ................... 51
ARTICLE IX AMENDMENTS OF AGREEMENT
SECTION 9.01. WITHOUT CONSENT OF NOTEHOLDERS. ........................... 52
SECTION 9.02. WITH CONSENT OF NOTEHOLDERS. .............................. 53
SECTION 9.03. EFFECT OF CONSENTS. ....................................... 53
SECTION 9.04. NOTATION ON OR EXCHANGE OF SERIES A NOTES. ................ 53
SECTION 9.05. SIGNING BY TRUSTEE OF AMENDMENTS. ......................... 53
SECTION 9.06. BANK AND REMARKETING AGENT CONSENT REQUIRED. ............. 54
ii
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SECTION 9.07. NOTICE TO NOTEHOLDERS. .................................... 54
ARTICLE X MISCELLANEOUS
SECTION 10.01. NOTICES.................................................... 55
SECTION 10.02. NOTEHOLDERS' CONSENTS. ................................... 56
SECTION 10.03. NOTICES TO RATING AGENCY. ................................ 57
SECTION 10.04. LIMITATION OF RIGHTS. .................................... 57
SECTION 10.05. SEVERABILITY. ............................................ 57
SECTION 10.06. PAYMENTS DUE ON NON-BUSINESS DAYS. ....................... 58
SECTION 10.07. GOVERNING LAW. ........................................... 58
SECTION 10.08. COUNTERPARTS. ............................................ 58
SECTION 10.09. BINDING EFFECT. .......................................... 59
EXHIBIT A - FORM OF SERIES A NOTE.......................................... A-1
EXHIBIT B - NOTICE OF MANDATORY REPURCHASE................................. B-1
iii
<PAGE> 5
SERIES A NOTE AGREEMENT
THIS SERIES A NOTE AGREEMENT dated as of November 9, 1994 between
HANOVER DIRECT, INC., a Delaware corporation (the "Borrower"), and NORWEST BANK
MINNESOTA, N.A., a national banking association organized under the laws of the
United States of America and having its principal office in Minneapolis,
Minnesota (the "Trustee"), as trustee of the Series A Letter of Credit
(hereinafter defined) and as Paying Agent (hereinafter defined) for the Series A
Notes (hereinafter defined);
W I T N E S S E T H:
WHEREAS, the Borrower intends to issue and sell its interest bearing
flexible term notes in substantially the form of Exhibit A attached hereto (the
"Series A Notes"; individually, a "Series A Note") in an aggregate principal
amount not to exceed Ten Million Dollars ($10,000,000) (the "Series A Facility
Amount"), and to use the proceeds from such issuance and sale (together with the
proceeds from the issuance and sale of a subsequent series of notes) to
refinance and/or finance certain construction, refurbishment and related costs
of an approximately 530,000 square foot distribution facility of the Borrower
located in Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower, located in San Francisco, California (the
"Project"); and
WHEREAS, the payment when due of the principal of, interest on and
Purchase Price (hereinafter defined) of the Series A Notes will be supported, to
the extent provided therein, by the Series A Letter of Credit issued in favor of
the Trustee by the Bank (hereinafter defined) in the initial amount of
$10,145,833, representing the Series A Facility Amount (hereinafter defined)
plus 35 days interest on such amount computed at the Maximum Rate (hereinafter
defined), on the basis of actual number of days elapsed in a year of 360 days,
all pursuant to and as more fully set forth in the Reimbursement Agreement
(hereinafter defined); and
WHEREAS, the Borrower has requested that the Trustee act (i) hereunder
for the benefit of the Noteholders (hereinafter defined) to perform certain
services in connection with the issuance, authentication and delivery of, the
registration, transfer and exchange of, and the payment of principal, interest
and Purchase Price with respect to the Series A
<PAGE> 6
Notes issued hereunder and (ii) as the custodian of the Series A Letter of
Credit for the benefit of the Noteholders, and the Trustee is willing to accept
such appointments and perform such services on the terms and subject to the
conditions set forth herein; and
WHEREAS, the Borrower has requested that NationsBank of North Carolina,
N.A. act as its agent hereunder to perform certain services in connection with
the placement of the Series A Notes upon issuance thereof, and NationsBank of
North Carolina, N.A. is willing to accept such appointment and perform such
services on the terms and subject to the conditions set forth herein and in the
Placement Agreement (hereinafter defined); and
WHEREAS, the Borrower has requested that NationsBank of North Carolina,
N.A. act as its agent hereunder to perform certain services in connection with
the remarketing of Series A Notes tendered for purchase and the determination of
the interest rates and interest periods with respect to the Series A Notes, and
NationsBank of North Carolina, N.A. is willing to accept such appointment and
perform such services on the terms and subject to the conditions set forth
herein and in the Remarketing Agreement (hereinafter defined); and
WHEREAS, the Borrower and the Trustee desire to set forth certain of
the terms and conditions with respect to the issuance of the Series A Notes;
NOW, THEREFORE, the parties hereto agree as follows:
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<PAGE> 7
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. DEFINITIONS. For all purposes of this Agreement, unless
the context requires otherwise, the following terms shall have the following
meanings:
"AFFILIATE" means singularly and collectively, any Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, the Borrower, and the legal representative, successor or assign of
any such Person. For purposes of this definition, a Person shall be deemed to be
"controlled by" the Borrower if the Borrower possesses, directly or indirectly,
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
"AGREEMENT" means this Series A Note Agreement, as it may be amended
from time to time in accordance with its terms.
"AUTHORIZED DENOMINATIONS" means with respect to all Series A Notes
$100,000 or any integral multiple of $100,000 in excess thereof.
"BALANCE CERTIFICATE AGREEMENT" means the Balance Certificate Agreement
dated as of the date hereof between the Trustee, as transfer agent, and DTC, as
Securities Depository, governing the mechanisms for the registration of transfer
of the Series A Notes while the Series A Notes are held pursuant to a book-entry
system maintained by DTC.
"BANK" means the issuer of the Series A Letter of Credit, initially
NationsBank of North Carolina, N.A. and upon the issuance and delivery of a
Substitute Series A Letter of Credit, shall mean the issuer of such Substitute
Series A Letter of Credit.
"BANK NOTES" means any Series A Notes purchased with proceeds from a
draw under the Series A Letter of Credit and pledged to the Bank under the
Reimbursement Agreement, including, in the event a book-entry system with
respect to the Series A Notes is in effect, any beneficial ownership interest
therein; provided that in the event that the Bank fails to honor a drawing under
the Series A Letter of Credit to fund such a purchase and the Borrower purchases
such Series A Notes with its own funds, "Bank Notes" shall include such Series A
Notes except that such Series A Notes shall not be pledged to the Bank under the
Reimbursement Agreement.
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<PAGE> 8
"BANKRUPTCY COUNSEL" means any counsel nationally recognized in
bankruptcy matters which is independent of the Borrower and is reasonably
acceptable to the Trustee.
"BENEFICIAL OWNER" or "BENEFICIAL OWNER" means the holder of the
beneficial ownership interest in each Series A Note as evidenced on (i) if such
Series A Note is held pursuant to a book-entry system, the books maintained by
the Securities Depository (and, as applicable, its participants or persons
acting through such participants), as more fully described in the Letter of
Representations, or (ii) if such Series A Note is not held pursuant to a
book-entry system, the register maintained by the Paying Agent.
"BORROWER" means Hanover Direct, Inc., a Delaware corporation, and any
successor thereto.
"BORROWER REPRESENTATIVE" means a Person at the time designated to act
on behalf of the Borrower by a written instrument furnished to the Trustee
containing the specimen signature of such person and signed on behalf of the
Borrower by such Person's President, any Executive Vice President, any Senior
Vice President, any Vice President or the Chairman of such Person's Board of
Directors, or, in the case of a Person other than a corporation, the person or
persons having comparable positions or roles. The certificate may designate an
alternate or alternates.
"BUSINESS DAY" means any day other than (a) a Saturday or Sunday, (b) a
day on which commercial banks in New York, New York, or in the city or cities in
which the corporate trust office of the Trustee or the Paying Agent, the primary
office of the Remarketing Agent or the Placement Agent or the paying office of
the Bank are authorized by law or executive order to close or (c) a day on which
the New York Stock Exchange is closed. For purposes of this definition, "paying
office of the Bank" means the Bank office responsible for making payments under
any Series A Letter of Credit.
"CEDE & CO." means Cede & Co., the nominee of DTC or any successor
nominee of DTC with respect to the Series A Notes.
"CREDIT MODIFICATION" means and shall be deemed to occur upon the
acceptance of a Substitute Series A Letter of Credit by the Trustee if (a) as a
result of such acceptance, the rating then assigned to the Series A Notes by any
Rating Agency then rating the Series A Notes would be lowered or eliminated or
(b) in the event the Series A Notes are not then rated, the issuer of such
Substitute Series A Letter of Credit has (i) senior debt or long-term bank
deposits which are rated by a Rating Agency at a lower rating than the rating
then assigned to the senior debt or long-term bank deposits of the issuer of the
expiring Series A
4
<PAGE> 9
Letter of Credit, or (ii) outstanding letters of credit or other similar
instruments supporting debt obligations which are rated by a Rating Agency at a
lower rating than the rating assigned to debt obligations supported with letters
of credit or similar instruments issued by the issuer of the expiring Series A
Letter of Credit.
"DATE OF ISSUANCE" means the date upon which the Series A Notes are
issued, authenticated and delivered in accordance with Section 2.06.
"DTC" means The Depository Trust Company, a limited purpose company
organized under the laws of the State of New York, and its successors and
assigns.
"EVENT OF DEFAULT" is defined in Section 7.01.
"INTEREST PAYMENT DATE" means the first day after the last day of each
Interest Period.
"INTEREST PERIOD" means, with respect to any Series A Note, each period
of between one (1) and one hundred eighty (180) days established from time to
time in accordance with Section 2.02(a).
"INTEREST RATE" means, with respect to any Series A Note, the term,
nonvariable interest rate on such Series A Note established from time to time in
accordance with Section 2.02(a). In no event shall the Interest Rate exceed the
Maximum Rate.
"INTEREST RESERVE ACCOUNT" means the Interest Reserve Account of the
Series A Letter of Credit Fund created by Section 4.02.
"LETTER OF REPRESENTATIONS" has the meaning given to that term in
Section 2.07.
"MATURITY DATE" means October 1, 2009.
"MAXIMUM RATE" means the lesser of (a) the highest interest rate which
may be borne by the Series A Notes under State law and (b) fifteen percent (15%)
per annum.
"NOTICE OF MANDATORY PURCHASE" means that notice required to be
prepared and given by the Trustee pursuant to Section 3.07.
"OFFERING MEMORANDUM" means, collectively, the Preliminary Private
Placement Memorandum of the Borrower dated October 25, 1994 and the Private
Placement Memorandum of the Borrower dated as of the date of the initial
issuance of Series A Notes hereunder, each prepared in connection with the
initial offering of the Series A Notes, as the same may be amended or
supplemented.
5
<PAGE> 10
"OPINION OF COUNSEL" means a written opinion of counsel who is
reasonably acceptable to the Trustee, the Bank, the Placement Agent and the
Remarketing Agent. The counsel may be an employee of or counsel to the Borrower,
the Placement Agent, the Remarketing Agent, the Bank or the Trustee.
"OUTSTANDING" when used with reference to Series A Notes means all
Series A Notes which have been authenticated and delivered by the Paying Agent
under this Agreement, except the following:
(a) Series A Notes cancelled, or purchased by or delivered to
the Paying Agent for cancellation, pursuant to the provisions of this Agreement;
(b) Series A Notes that have become due (at maturity or on
redemption, acceleration or otherwise) and for the payment of which, including
interest accrued to the due date, sufficient moneys are held by the Paying
Agent; and
(c) Series A Notes in lieu of which others have been
authenticated under Section 2.05 (relating to registration and exchange of
Series A Notes) or Section 2.08 (relating to mutilated, lost, stolen, destroyed
or undelivered Series A Notes).
"OWNER", "OWNERS", "NOTEHOLDER" "NOTEHOLDER", "HOLDER", "HOLDER" or
words of similar import means: (a) in the event that the book-entry system of
evidence and transfer of ownership of the Series A Notes is employed pursuant to
Section 2.07, the Securities Depository Nominee, and (b) in all other cases, the
registered owner or owners of any Series A Note as shown on the register
maintained by the Paying Agent.
"PARTICIPANTS" means securities brokers and dealers, banks, trust
companies and clearing corporations which have access to the Securities
Depository's system.
"PAYING AGENT" shall mean the issuing and paying agent with respect to
the Series A Notes, initially Norwest Bank Minnesota, N.A.
"PERMITTED INVESTMENTS" means:
(i) investments in direct obligations of the United States of
America or any agency or instrumentality of the United States of America, the
payment or guarantee of which constitutes a full faith and credit obligation of
the United States of America or any agency or instrumentality thereof; provided,
that such obligations mature within one year from the date of acquisition
thereof;
(ii) investments in certificates of deposit maturing within
one year from the date of acquisition issued by a bank or trust company
organized under the laws of the United States of America or any state thereof
having capital surplus and undivided
6
<PAGE> 11
profits aggregating at least $100,000,000 and having ratings from each Rating
Agency then rating the Series A Notes at least equivalent to each such Rating
Agency's then current rating on the Series A Notes and which are fully secured
by obligations described in paragraph (i) above; and
(iii) investments in money-market instruments rated by each
Rating Agency then rating the Series A Notes at least equivalent to each such
Rating Agency's then current rating on the Series A Notes.
"PERSON" means (a) any individual, (b) any corporation, partnership,
joint venture, association, joint-stock company, business trust or
unincorporated organization, or grouping of any such entities, in each case
formed or organized under the laws of the United States of America, any state
thereof or the District of Columbia or (c) the United States of America or any
state thereof, or any political subdivision of either thereof, or any agency,
authority or other instrumentality of any of the foregoing.
"PLACEMENT AGENT" means initially NationsBank of North Carolina, N.A.
and any successor agent or agents appointed from time to time pursuant to
Section 8.12.
"PLACEMENT AGREEMENT" means the Placement Agreement dated as of
November 9, 1994, between the Borrower and the Placement Agent with respect to
the placement of the Series A Notes upon issuance thereof, and any and all
modifications, alterations, amendments and supplements thereto.
"PROJECT" means the refinancing and/or financing of certain
construction, refurbishment and related costs of an approximately 530,000 square
foot distribution facility of the Borrower located in Roanoke, Virginia and a
new retail store of Gump's, Inc., a subsidiary of the Borrower located in San
Francisco, California..
"PURCHASE DATE" means, with respect to any Series A Notes, the date on
which such Series A Notes are required to be purchased pursuant to Section
3.07(a).
"PURCHASE PRICE" means an amount equal to 100% of the principal amount
of any Series A Note tendered or deemed tendered to the Trustee for purchase
pursuant to Section 3.07 hereof, plus accrued and unpaid interest thereon to,
but excluding, the Purchase Date.
"RATING AGENCY" means Moody's Investors Service, Inc., if such agency's
ratings are in effect with respect to the Series A Notes, and Standard & Poor's
Ratings Group, if such agency's ratings are in effect with respect to the Series
A Notes, and their respective successors and assigns. If either such corporation
ceases to act as a securities rating agency, the Borrower may, with the approval
of the Placement Agent, the
7
<PAGE> 12
Remarketing Agent and the Bank, appoint any nationally recognized securities
rating agency as a replacement.
"RECORD DATE" means, with respect to each Interest Payment Date, the
Trustee's close of business on the Business Day next preceding such Interest
Payment Date.
"REIMBURSEMENT AGREEMENT" means (a) the Credit Facilities and
Reimbursement Agreement dated as of October 12, 1994, by and among the Borrower,
the financial lenders listed on the signature pages of the Reimbursement
Agreement, including the Bank, and the Bank, as Agent, pursuant to which, among
other things, the Series A Letter of Credit is issued by the Bank and delivered
to the Trustee, and any and all modifications, alterations, amendments and
supplements thereto and (b) any similar agreement between the Borrower and the
issuer of a Substitute Series A Letter of Credit.
"REMARKETING AGENT" means initially NationsBank of North Carolina, N.A.
and any successor agent or agents appointed from time to time pursuant to
Section 8.10.
"REMARKETING AGREEMENT" means (a) the Remarketing and Interest Services
Agreement dated as of November 9, 1994, between the Remarketing Agent and the
Borrower, with respect to the remarketing of the Series A Notes and the
determination of interest rates and interest periods for the Series A Notes, and
any and all modifications, alterations, amendments and supplements thereto and
(b) any agreement between the Borrower and any successor remarketing agent
appointed pursuant to Section 8.10.
"REMARKETING PROCEEDS" means funds received from purchasers (other than
the Borrower or any Affiliate) of Series A Notes which have been remarketed by
the Remarketing Agent as payment for such Series A Notes.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee or
the Paying Agent, any officer within the Corporate Trust Division (or any
successor group of the Trustee or the Paying Agent) including any vice
president, assistant vice president, assistant secretary or any other officer or
assistant officer of the Trustee or the Paying Agent customarily performing
functions similar to those performed by the persons who at the time shall be
such officers, respectively.
"SECURITIES DEPOSITORY" means, initially, DTC, or any successor or
substitute securities depository selected by the Borrower (with the consent of
the Trustee and the Remarketing Agent), which shall maintain a book-entry system
in respect of the Series A Notes.
"SECURITIES DEPOSITORY NOMINEE" means, as to any Securities Depository,
such Securities Depository or the nominee of such Securities Depository in whose
name there shall be registered on the register maintained by the Paying Agent
the Series A Note
8
<PAGE> 13
certificate to be delivered to and immobilized with the Paying Agent during
continuation with such Securities Depository of participation in its book-entry
system, and shall initially be Cede & Co.
"SERIES A FACILITY AMOUNT" means $10,000,000, being the maximum
aggregate principal amount of Series A Notes that may be issued hereunder.
"SERIES A LETTER OF CREDIT" means an irrevocable letter of credit
having the characteristics of a "credit" or "letter of credit" set forth in
Section 5-103 of the Uniform Commercial Code of the State of North Carolina (or,
in the case of a Substitute Series A Letter of Credit, Section 5-103 of the
Uniform Commercial Code of the state under whose laws such Substitute Series A
Letter of Credit is governed) except that a Series A Letter of Credit (a) may
not be revocable and (b) may only be issued by (i) a national bank, (ii) any
banking institution organized under the laws of any state, territory or the
District of Columbia, the business of which is substantially confined to banking
and is supervised by the state or territorial banking commission or similar
officials or (iii) a branch or agency of a foreign bank, provided that the
nature and extent of federal and/or state regulation and the supervision of the
particular branch or agency is substantially equivalent to that applicable to
federal or state chartered domestic banks doing business in the same
jurisdiction and which meets the requirements of Section 5.01. Initially, the
term "Series A Letter of Credit" shall mean the irrevocable letter of credit
issued by the Bank to the Trustee in accordance with Section 5.01, supporting
the payment of the principal of, interest on and Purchase Price of the Series A
Notes, including any permitted supplements or amendments and any renewals or
extensions thereof, and, upon the expiration or termination of the Series A
Letter of Credit and the issuance and delivery of a Substitute Series A Letter
of Credit meeting the requirements set forth in this paragraph and in Sections
5.01 and 5.03, "Series A Letter of Credit" shall mean such Substitute Letter of
Credit.
"SERIES A LETTER OF CREDIT FUND" means the Series A Letter of Credit
Fund created by Section 4.02.
"SERIES A NOTE DOCUMENTS" mean the Series A Note, the Series A Note
Agreement, the Series A Letter of Credit, the Placement Agreement, the
Remarketing Agreement and the Reimbursement Agreement.
"STATE" means the State of New York.
"SUBSTITUTE SERIES A LETTER OF CREDIT" shall have the meaning set forth
in Section 5.03.
"TRUSTEE" means the entity identified as such in the heading of this
Agreement and such entity's successors under this Agreement.
9
<PAGE> 14
SECTION 1.02. RULES OF CONSTRUCTION. Unless the context otherwise
requires,
(a) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
applied on a consistent basis;
(b) references to Articles and Sections are to the Articles
and Sections of this Agreement;
(c) terms defined elsewhere in this Agreement shall have the
meanings therein prescribed for them;
(d) words of the masculine gender shall be deemed and
construed to include correlative words of the feminine and neuter genders;
(e) headings used in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof;
(f) each reference herein or in the Series A Notes to a
percentage of Series A Notes required for notices, consents or for any other
reason shall be deemed to refer to Series A Notes then Outstanding; and
(g) all references herein to time shall be Charlotte, North
Carolina time unless otherwise expressly stated.
END OF ARTICLE I
10
<PAGE> 15
ARTICLE II
THE SERIES A NOTES
SECTION 2.01. AUTHORIZATION OF SERIES A NOTES; FORM OF SERIES A NOTES;
DETAILS OF SERIES A NOTES.
(a) AUTHORIZATION OF SERIES A NOTES; FORM OF SERIES A NOTES.
The Borrower hereby authorizes and creates under this Series A Note Agreement an
issue of Series A Notes to be designated "Hanover Direct, Inc. Flexible Term
Notes, Series A." The total principal amount of Series A Notes that may be
issued and outstanding hereunder shall not exceed the Series A Facility Amount
(except as provided in Section 2.08 with respect to replacement of mutilated,
lost, stolen, destroyed or undelivered Series A Notes). The Series A Notes are
issuable in registered form without coupons in Authorized Denominations only,
and shall be substantially in the form of Exhibit A to this Agreement, with
appropriate variations, omissions, insertions, notations, legends or
endorsements required by law or usage or permitted or required by this
Agreement. The Series A Notes may be in printed or typewritten form. No Series A
Notes may be issued under the provisions of this Agreement except in accordance
with this Article.
(b) DETAILS OF SERIES A NOTES. Each Series A Note will be
dated the date of its original authentication and delivery hereunder and all
Series A Notes shall mature, subject to prior redemption or repurchase, on the
Maturity Date. Interest on each Series A Note shall be computed from the
Interest Payment Date applicable to such Series A Note next preceding the date
of authentication thereof, unless such authentication date (i) is prior to the
first Interest Payment Date following the initial delivery of the Series A
Notes, in which case interest shall be computed from such initial delivery date,
or (ii) is an Interest Payment Date, in which case interest shall be computed
from such authentication date; provided, that if interest on the Series A Notes
is in default, Series A Notes shall bear interest from the last date to which
interest has been paid.
The principal and Purchase Price of and interest on the Series
A Notes shall be payable in lawful currency of the United States of America. The
principal and Purchase Price of the Series A Notes shall be payable at the
principal corporate trust office of the Paying Agent upon presentation and
surrender of such Series A Notes as the same shall become due and payable.
Payments of interest on the Series A Notes will be mailed, except as otherwise
provided herein, to the persons in whose names the Series A Notes are registered
on the register of the Paying Agent at the close of business on the Record Date
next preceding each Interest Payment Date, including, when a book-entry system
is in
11
<PAGE> 16
effect with respect to some or all of the Series A Notes, Persons, including the
Participants, who are registered as owning beneficial interests in the Series A
Notes on the registration books of the Securities Depository; provided that, any
Holder (or beneficial owner, if Series A Notes are held under a book-entry
system) of a Series A Note or Series A Notes in an aggregate principal amount of
not less than $500,000 may, by prior written instructions filed with the Paying
Agent (which instructions shall remain in effect until revoked by subsequent
written instructions), instruct that interest payments for any period be made by
wire transfer to an account in the continental United States or other means
acceptable to the Paying Agent. Series A Notes will be numbered from 1 upward as
determined by the Trustee and will contain the designation "R."
SECTION 2.02. INTEREST ON THE SERIES A NOTES. The Series A Notes will
bear interest as herein provided from the date thereof until paid in full.
Interest accrued on each Series A Note shall be paid on the applicable Interest
Payment Date therefor. The Interest Rate on the Series A Notes will be
determined as provided in this Section 2.02; provided that the Interest Rate
shall not exceed the Maximum Rate. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of the actual number of
days elapsed over a year of 360 days.
(a) INTEREST PERIOD AND INTEREST RATE DETERMINATION METHOD.
There shall be established and reestablished for each of the Series A Notes an
Interest Period, and each of the Series A Notes shall bear interest at the
Interest Rate for such Series A Note during the applicable Interest Period. The
Interest Period and corresponding Interest Rate for each Series A Note shall be
determined by the Remarketing Agent initially no later than the first day of the
Interest Period and thereafter on the first day of each succeeding Interest
Period or on a Business Day selected by the Remarketing Agent not more than five
Business Days prior to the first day of such succeeding Interest Period. Each
Interest Period for any Series A Note shall be a period, not less than one (1)
nor more than one hundred eighty (180) days, determined by the Remarketing Agent
in its sole discretion to be the period which, together with all other Interest
Periods for all Series A Notes then Outstanding, will result in the lowest
overall interest expense on the Series A Notes over the next succeeding one
hundred eighty (180) days; provided, however, that:
(i) each Interest Period shall end on a day which immediately
precedes a Business Day, or on the day prior to the Maturity Date;
(ii) if the Remarketing Agent shall not have determined an
Interest Period for any Series A Note or if for any
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<PAGE> 17
reason an Interest Period for any Series A Note determined by the Remarketing
Agent shall be held to be invalid or unenforceable by a court of law, such
Interest Period shall have seven days or, if the last day of such Interest
Period would fall on or after the Maturity Date, such Interest Period shall end
on the day preceding the Maturity Date;
(iii) no Interest Period shall extend beyond the fifth (5th)
Business Day prior to the stated expiration date of the Series A Letter of
Credit or Substitute Series A Letter of Credit then in effect, unless a
Substitute Series A Letter of Credit, which will not result in a Credit
Modification has been timely delivered and accepted by the Trustee pursuant to
the terms of Section 5.03;
(iv) if, pursuant to Section 5.03(a)(iii), the Remarketing
Agent has approved a Substitute Series A Letter of Credit which will result in a
Credit Modification, no Interest Period commencing prior to the effective date
of such Substitute Series A Letter of Credit shall extend beyond the effective
date of such Substitute Series A Letter of Credit; and
(v) in the event any Series A Note is purchased with the
proceeds from a draw under the Series A Letter of Credit, the Interest Period
for such Series A Note will be determined for successive one-day terms until
such Series A Note is remarketed and released by the Bank in accordance with
Section 3.08(d)(ii).
In determining the number of days in each Interest Period, the Remarketing Agent
shall take into account the following factors: (1) all other Interest Periods
for all of the Series A Notes, (2) general economic and market conditions
relevant to the Series A Notes, (3) optional redemption dates, the notice of
which it has been given, (4) the date and principal amount of any mandatory
sinking fund redemption pursuant to Section 3.01(b), notice of which has been
provided to the Remarketing Agent by the Trustee pursuant to Section
3.01(b)(ii), and (5) such other facts, circumstances and conditions as the
Remarketing Agent determines in its sole discretion to be relevant.
The Interest Rate for each Interest Period for each Series A
Note shall be the minimum rate of interest which, in the opinion of the
Remarketing Agent, would be necessary to sell the Series A Note on such date of
determination in a secondary market sale at the principal amount thereof. If the
Remarketing Agent shall not have determined an Interest Rate with respect to any
or all of the Series A Notes, the Interest Rate for such Series A Notes shall be
identical to the immediately preceding Interest Rate for such Series A Notes. If
for any reason an Interest Rate determined by the Remarketing Agent for any
Interest Period shall be held to be invalid or unenforceable by a court of law,
the
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<PAGE> 18
Interest Rate for such Interest Period shall be a rate per annum equal to
125% of the rate published in the most recent edition of The Bond Buyer for
30-day prime commercial paper or, if The Bond Buyer no longer publishes such
information, such other publication or provider of such information as the
Remarketing Agent shall select.
(b) NOTIFICATION OF INTEREST PERIOD AND INTEREST RATE;
CALCULATION OF INTEREST. The Remarketing Agent will notify the Paying Agent in
writing (which may be in telecopy form) or by telephone promptly confirmed in
writing by 10:00 a.m. on the first Business Day of each Interest Period with
respect to any Series A Note, of the identity of such Series A Note, the length
of such Interest Period, the Interest Rate therefor and the principal amount of
such Series A Note, and, upon the request of the Borrower or the Bank, the
Paying Agent shall promptly (but in no event later than the end of such Business
Day) after its receipt of such information, forward such information to the
Borrower and the Bank. The failure by the Remarketing Agent or the Paying Agent,
as applicable, to give any such notice shall not affect the change in the
Interest Period and/or Interest Rate.
Using the Interest Rates and Interest Periods supplied by the
Remarketing Agent, the Trustee will (i) calculate the amount of interest payable
on the Series A Notes and (ii) take action as set forth in Section 5.02 such
that timely payment of such interest is made under Section 4.02.
The establishment of the Interest Rates and the Interest
Periods as provided in this Agreement will be conclusive and binding on the
Borrower, the Bank, the Trustee, the Paying Agent, the Remarketing Agent and the
Noteholders. The calculation of interest payable on the Series A Notes as
provided in this Agreement will be conclusive and binding on the Borrower, the
Bank, the Trustee, the Paying Agent, the Remarketing Agent and the Noteholders,
absent manifest error.
(c) NO LIABILITY. Neither the Remarketing Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Trustee, the Paying Agent, the Placement Agent, the Bank or any Noteholder for
any action taken or not taken by the Remarketing Agent or any of its directors,
officers, agents or employees in connection with the determination of the
Interest Period and Interest Rate for each Series A Note pursuant to this
Section 2.02, in the absence of its own negligence or willful misconduct.
SECTION 2.03. EXECUTION AND AUTHENTICATION. The Series A Notes will be
signed on behalf of the Borrower by the manual or facsimile signatures of the
President, any Executive Vice President, any Senior Vice President, any Vice
President or
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<PAGE> 19
Treasurer of the Borrower, attested by the manual or facsimile signatures of the
Borrower's Secretary or Assistant Secretary, and the seals of the Borrower will
be impressed or imprinted on the Series A Notes by facsimile or otherwise. If an
officer of the Borrower whose signature is on a Series A Note no longer holds
that office at the time the Trustee authenticates the Series A Note, the Series
A Note shall nevertheless be valid. If a person signing a Series A Note is the
proper officer on the actual date of execution, the Series A Note shall be valid
even if that person is not the proper officer on the nominal date of action.
A Series A Note shall not be valid for any purpose under this Agreement
unless and until the Paying Agent manually signs the certificate of
authentication on the Series A Note, and such signature shall be conclusive
evidence that the Series A Note has been authenticated under this Agreement.
SECTION 2.04. SERIES A NOTE REGISTER. The Paying Agent shall keep a
register of Series A Notes and of their transfer and exchange. Except as
otherwise provided in Section 2.07, Series A Notes must be presented at the
principal corporate trust office of the Paying Agent for registration, transfer
and exchange, and Series A Notes may be presented at that office for payment.
SECTION 2.05. REGISTRATION AND EXCHANGE OF SERIES A NOTES; PERSONS
TREATED AS OWNERS.
(a) Except as otherwise provided in Section 2.07, Series A
Notes may be transferred only on the register maintained by the Paying Agent.
Upon surrender for transfer of any Series A Note to the Paying Agent, duly
endorsed for transfer or accompanied by an assignment duly executed by the
holder or the holder's attorney duly authorized in writing and in either case,
with an appropriate guarantee of signature conforming to the requirements of
Exhibit A attached hereto, the Paying Agent will authenticate a new Series A
Note or Series A Notes in an equal total principal amount and registered in the
name or names of the transferee or transferees.
Series A Notes may be exchanged for an equal total principal
amount of Series A Notes of different Authorized Denominations. The Paying Agent
will authenticate and deliver Series A Notes that the Noteholder making the
exchange is entitled to receive, bearing numbers not then outstanding.
The Paying Agent will not be required to transfer or exchange
any Series A Note during the period beginning two (2) days before the mailing of
notice calling the Series A Note or any portion of the Series A Note for
redemption and ending on the redemption date. Series A Notes subject to
redemption or mandatory purchase may be transferred or exchanged only if the
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<PAGE> 20
Paying Agent provides the new holder thereof with a copy of the notice of
redemption or mandatory purchase, as the case may be.
The holder of a Series A Note as shown on the register of the
Paying Agent shall be the absolute owner of the Series A Note for all purposes,
and payment of principal, interest or Purchase Price shall be made only to or
upon the written order of such holder or the holder's legal representative;
provided that interest shall be paid to the Person shown on the register as a
holder of a Series A Note on the applicable Record Date.
(b) The Paying Agent may require the payment by a Noteholder
requesting exchange or registration of transfer of any tax or other governmental
charge required to be paid in respect of the exchange or registration of
transfer but will not impose any other charge.
SECTION 2.06. AUTHORIZATION OF SERIES A NOTES.
(a) AUTHORIZATION OF SERIES A FACILITY AMOUNT AND ISSUANCE OF
SERIES A NOTES. The Borrower hereby requests and authorizes the issuance,
authentication and delivery under this Agreement of Series A Notes in the
aggregate principal amount of $10,000,000, said Series A Notes to be dated
November 9, 1994.
The Series A Notes shall be executed substantially in the form
and in the manner hereinabove set forth and shall be deposited with the Paying
Agent for authentication, but before the Series A Notes shall be delivered by
the Paying Agent, there shall be filed or deposited with the Trustee the
following:
(1) a copy, certified by the secretary or assistant
secretary of the Borrower of a resolution of the board of directors or executive
committee of the board of directors of the Borrower, authorizing (I) the
execution and delivery of this Agreement, (II) the execution, delivery, issuance
and sale of Series A Notes in an aggregate principal amount not to exceed the
Series A Facility Amount, and (III) the use by the Placement Agent and the
Remarketing Agent of the Offering Memorandum;
(2) the Series A Letter of Credit, in an amount not
less than $10,145,833, representing the Series A Facility Amount plus 35 days'
interest on such amount computed at the Maximum Rate on the basis of actual
number of days elapsed in a year of 360 days;
(3) original executed counterparts of this Agreement,
the Placement Agreement and the Remarketing Agreement;
(4) an executed copy of the Reimbursement Agreement,
certified by the Secretary of the Borrower to be a true, correct and complete
copy of the original thereof;
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<PAGE> 21
(5) the written opinion of Whitman Breed Abbott &
Morgan, counsel to the Borrower, addressed to the Trustee, the Bank, the
Placement Agent and the Remarketing Agent, to the effect that (I) the issuance
of the Series A Notes has been duly authorized by the Borrower, (II) the Series
A Notes have been duly executed and delivered by the Borrower, (III) this
Agreement is enforceable and of binding effect against the Borrower in
accordance with its terms under State law, (IV) the Remarketing Agreement and
the Placement Agreement are enforceable against the Borrower in accordance with
their respective terms assuming the law of the state of North Carolina is
identical State law, (V) nothing has come to their attention that would lead
them to believe that the information concerning the Borrower contained in the
Offering Memorandum contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, and
(VI) the Series A Notes are not subject to registration under the Securities Act
of 1933, as amended, and otherwise in form and substance satisfactory to the
Trustee and the Remarketing Agent;
(6) an Opinion of Counsel to the Bank addressed to
the Trustee, or upon which the Trustee may rely, to the effect that the Series A
Letter of Credit is a binding and valid obligation of the Bank and is not
subject to registration under the Securities Act of 1933, as amended;
(7) an authorization request from the Borrower to
authenticate and deliver $10,000,000 aggregate principal amount of the Series A
Notes in specified Authorized Denominations to the initial purchaser or
purchasers upon payment to the Placement Agent of the Purchase Price for such
principal amount of Series A Notes; and
(8) such other documentation, certificates and
assurances as may reasonably be required by the Bank, the Paying Agent, the
Remarketing Agent or the Placement Agent or their respective counsel.
When the documents referred to in paragraphs (1) through (8), inclusive, of this
subsection (a) have been filed with the Trustee, the Paying Agent shall
authenticate the Series A Notes issued under this subsection (a) and the Trustee
shall deliver such executed and authenticated Series A Notes to the purchaser or
purchasers thereof as directed by the Borrower.
(b) LIMITATIONS ON THE ISSUANCE OF SERIES A NOTES.
Notwithstanding any other provision of this Article II, the Paying Agent shall
not authenticate and deliver Series A Notes (i) on any day on which the Trustee
is to receive payment from the Bank in respect of a drawing under the Series A
Letter of Credit until after the Trustee has received such payments in an
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<PAGE> 22
amount equal to the amount of such drawing; (ii) if the issuance of such Series
A Notes would, after giving effect to such issuance, cause the aggregate
principal amount of all Series A Notes issued and Outstanding pursuant to this
Article II to exceed the Series A Facility Amount; (iii) on or after a date
which is five (5) days prior to the Maturity Date; (iv) on or after any date on
which the Trustee has delivered a notice of mandatory redemption pursuant to
Section 3.01(c) and until the Series A Letter of Credit is extended or a
Substitute Series A Letter of Credit has been provided; (v) on any date as of
which an Event of Default has occurred and is continuing and of which the
Trustee has received notice or is deemed to have received notice as provided in
Section 8.05; (vi) on and after the date as of which the Trustee has been
notified that the Placement Agent has resigned or been removed (as provided in
Section 8.12) and until a successor Placement Agent has delivered its acceptance
of its appointment to the Trustee; and (vii) on and after the date as of which
the Trustee has been notified that the Remarketing Agent has resigned or been
removed (as provided in Section 8.10) and until a successor Remarketing Agent
has delivered its acceptance of its appointment to the Trustee. Notwithstanding
any other provision of this Agreement to the contrary, the Paying Agent shall
not authenticate and deliver Series A Notes if prior to any proposed issuance
date or by 10:00 on such date the Trustee receives a written notice from the
Bank that the conditions precedent to an issuance of additional Series A Notes,
as provided in Section 6.02 of the Reimbursement Agreement, have not been met.
(c) SERIES A NOTE PROCEEDS. All proceeds from the sale of
Series A Notes issued hereunder shall be paid on the Date of Issuance by the
Placement Agent to the Paying Agent and, upon receipt thereof, the Paying Agent
shall promptly pay such proceeds to or at the direction of the Borrower on such
date.
SECTION 2.07. BOOK-ENTRY SYSTEM; RECORDING AND TRANSFER OF OWNERSHIP OF
THE SERIES A NOTES.
(a) Initially, all of the Series A Notes shall be held by
means of a book-entry system administered by the Securities Depository. One
Series A Note certificate in registered form will be issued for the Series A
Notes in the aggregate principal amount of $10,000,000, and will be registered
in the name of the Securities Depository Nominee and will be deposited with the
Paying Agent. Thereafter, in the event that Series A Notes are issued to the
Beneficial Owners thereof in certificated (physical) form (and in each and every
case thereafter in which a change in the principal amount of Series A Notes held
pursuant to a book-entry system is made), the Paying Agent will take all actions
necessary to comply with the Balance Certificate Agreement dated as of the date
hereof between Norwest Bank Minnesota, N.A., as transfer agent, and the
Securities
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<PAGE> 23
Depository, which Agreement governs the mechanisms for the registration of
transfer of Series A Note certificates registered in the name of the Securities
Depository Nominee.
(b) With respect to any Series A Notes that are held by means
of a book-entry system, such book-entry system will evidence beneficial
ownership of the Series A Notes so held in Authorized Denominations (or, as
applicable, positions held by the Participants, beneficial ownership being
evidenced in the records of such Participants). Registration and transfers of
ownership shall be effected on the records of the Securities Depository and the
Participants, as applicable, pursuant to rules and procedures established by the
Securities Depository and the Participants. Subject to the provisions of Section
7.09, the Borrower, the Trustee and the Paying Agent will recognize the
Securities Depository Nominee, while the registered owner of the Series A Notes
so held, as the owner of the Series A Notes for all purposes, including (i)
payments of principal and Purchase Price of, and interest on, the Series A
Notes, (ii) notices and (iii) voting. Transfer of principal, interest and
Purchase Price payments to beneficial owners of the Series A Notes so held will
be the responsibility of the Securities Depository and the Participants. The
Borrower, the Trustee, the Bank and the Paying Agent will not be responsible or
liable for such transfers of payments or for maintaining, supervising or
reviewing the records maintained by the Securities Depository, the Securities
Depository Nominee or the Participants. While the Securities Depository Nominee
is the owner of the Series A Notes so held, notwithstanding the provision
hereinabove contained, payments of principal and Purchase Price of and interest
on such Series A Notes shall be made in accordance with the terms of the Letter
of Representations dated as of November 9, 1994 (the "Letter of
Representations") among the Borrower, the Trustee, the Remarketing Agent and the
Paying Agent (as issuing agent and paying agent thereunder) and received and
accepted by the Securities Depository.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE OF OWNERSHIP IS MAINTAINED IN
ACCORDANCE HEREWITH FOR ANY SERIES A NOTES, (1) THE PROVISIONS OF THIS AGREEMENT
RELATING TO THE DELIVERY OF PHYSICAL SERIES A NOTES SHALL BE DEEMED INAPPLICABLE
OR BE OTHERWISE SO CONSTRUED WITH REGARD TO SUCH SERIES A NOTES AS TO GIVE FULL
EFFECT TO SUCH BOOK-ENTRY SYSTEM AND (2) THE PROVISIONS OF THIS AGREEMENT
RELATING TO ISSUANCE, PAYMENTS OF PRINCIPAL, PURCHASE PRICE AND INTEREST, AND
ESTABLISHMENT OF INTEREST RATES AND INTEREST PERIODS WITH RESPECT TO THE SERIES
A NOTES SHALL BE APPLICABLE TO BENEFICIAL OWNERSHIP INTERESTS IN THE SERIES A
NOTES IN AUTHORIZED DENOMINATIONS TO THE SAME EXTENT AS SUCH PROVISIONS ARE
APPLICABLE TO REGISTERED OWNERSHIP INTERESTS IN THE SERIES A NOTES.
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SECTION 2.08. MUTILATED, LOST, STOLEN, DESTROYED OR UNDELIVERED SERIES
A NOTES.
(a) If any Series A Note is mutilated, lost, stolen or
destroyed, the Paying Agent will authenticate a new Series A Note of the same
denomination , provided that, with respect to any mutilated Series A Note, such
Series A Note shall first be surrendered by the Noteholder to the Trustee at its
principal corporate trust office, and with respect to any lost, stolen or
destroyed Series A Note, there shall first be furnished to the Borrower, the
Trustee, the Paying Agent and the Bank, evidence of such loss, theft or
destruction, together with an indemnity from the Noteholder, satisfactory to
them. If the Series A Note has matured and if the evidence and indemnity
described above have been provided by the Noteholder, instead of issuing a
duplicate Series A Note, the Paying Agent, with the consent of the Borrower,
shall pay the Series A Note without requiring surrender of the Series A Note and
make such requirements as the Paying Agent deems fit for its protection,
including a lost instrument bond. The Borrower and the Paying Agent may charge
the Noteholder their reasonable fees and expenses in this connection.
(b) In the event that any Series A Note purchased pursuant to
a mandatory purchase is not delivered by the holder thereof on the date such
Series A Note is purchased, the Borrower shall execute (if necessary) and the
Paying Agent will authenticate and deliver a new Series A Note of like aggregate
principal amount as the Series A Note purchased, the Series A Note purchased
shall no longer be deemed outstanding and the owner thereof shall be entitled to
receive only those funds held on deposit with respect thereto, and the new
Series A Note shall, for all purposes of this Agreement, be deemed to evidence
the same debt as the Series A Note purchased and shall be remarketed, delivered
and registered in accordance with Section 3.08.
(c) Every new Series A Note issued pursuant to this Section
2.08 shall (i) constitute an additional contractual obligation of the Borrower
regardless of whether, in the case of (a) above, the mutilated, lost, stolen or
destroyed Series A Note and, in the case of (b) above, the Series A Note
purchased, shall be enforceable at any time by anyone, and (ii) be entitled to
all of the benefits of this Agreement equally and proportionately with any and
all other Series A Notes issued and outstanding hereunder.
(d) All Series A Notes shall be held and owned on the express
condition that the foregoing provisions of this Section are exclusive with
respect to the replacement or payment of mutilated, lost, stolen or destroyed
Series A Notes and the replacement of any Series A Note purchased pursuant to a
mandatory purchase and, to the extent permitted by law, shall preclude any and
all other rights and remedies with respect to
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<PAGE> 25
the replacement or payment of negotiable instruments or other investment
securities without their surrender, notwithstanding any law or statute to the
contrary now existing or enacted hereafter.
SECTION 2.09. CANCELLATION OF SERIES A NOTES. All Series A Notes paid,
redeemed or purchased by the Borrower, either at or before maturity, shall be
delivered to the Paying Agent when such payment, redemption or purchase is made,
and except as otherwise provided herein shall be cancelled. Whenever a Series A
Note is delivered to the Paying Agent for cancellation (upon payment, redemption
or purchase), or for transfer, exchange or replacement pursuant to Section 2.05,
2.07 or 2.08, the Paying Agent shall promptly cancel the Series A Note and
prepare a certificate of destruction therefor.
END OF ARTICLE II
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<PAGE> 26
ARTICLE III
REDEMPTION, PURCHASE AND REMARKETING
SECTION 3.01. REDEMPTION OF SERIES A NOTES.
(a) OPTIONAL REDEMPTION. (i) The Series A Notes are subject to
redemption at the option of the Borrower, in whole or in part, at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest
thereon to, but excluding, the redemption date; provided that any such
redemption in part shall be in a minimum principal amount of $100,000.
(ii) For any optional redemption, the Borrower will
provide written notice to the Trustee, the Paying Agent, the Bank and the
Remarketing Agent stating the redemption date (consistent with Section 3.02),
the principal amount of Series A Notes to be redeemed and other particulars with
respect thereto as the Trustee, the Paying Agent or the Remarketing Agent deem
necessary. The Borrower will give such notice not more than sixty (60) days and
not less than thirty (30) Business Days prior to the redemption date.
(b) MANDATORY SINKING FUND REDEMPTION.
(i) The Series A Notes are subject to mandatory
sinking fund redemption prior to the Maturity Date, in part, with the Series A
Notes to be redeemed being selected pursuant to Section 3.03, at a redemption
price equal to the principal amount thereof, on October 1, or if any such date
is not a Business Day, on the next succeeding Business Day with the same force
and effect, in the years and in the principal amounts indicated below:
<TABLE>
<CAPTION>
REDEMPTION DATE PRINCIPAL
(OCTOBER 1) AMOUNT
----------- --------
<S> <C>
1996 $500,000
1997 500,000
1998 500,000
1999 500,000
2000 800,000
2001 800,000
2002 800,000
2003 800,000
2004 800,000
2005 800,000
2006 800,000
2007 800,000
2008 800,000
2009 800,000
</TABLE>
(ii) Not more than two hundred five (205) days nor
less than one hundred ninety-five (195) days prior to any date on
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<PAGE> 27
which the Series A Notes are subject to mandatory sinking fund redemption, the
Trustee shall deliver to the Remarketing Agent written notice of such redemption
date and the principal amount of Series A Notes subject to redemption on such
date, which notice shall also state that (A) pursuant to Section 2.02(a), the
Remarketing Agent shall take into account the date and principal amount of any
sinking fund redemption in determining the number of days in each Interest
Period, and (B) pursuant to Section 3.03, the Remarketing Agent shall select the
Series A Notes for redemption on or before the sixtieth (60th) day prior to the
sinking fund redemption date and in making such selection shall take into
account the Interest Periods with respect to such Series A Notes. Not more than
eighty (80) days nor less than sixty-five (65) days prior to any date on which
the Series A Notes are subject to mandatory sinking fund redemption, the Trustee
shall deliver to the Remarketing Agent another written notice identical to the
notice described in the preceding sentence.
(iii) At its option, to be exercised on or before the
tenth (10th) Business Day next preceding any sinking fund redemption date, the
Borrower may:
(1) deliver to the Paying Agent for
cancellation Series A Notes in any aggregate principal amount desired to be
credited against the Borrower's sinking fund redemption obligations; or
(2) instruct the Paying Agent to credit
against the Borrower's sinking fund redemption obligations any Series A Notes
which prior to such date have been redeemed (otherwise than through the
operation of the sinking fund) and cancelled by the Paying Agent and not
theretofore applied as a credit against any sinking fund redemption obligation.
Each Series A Note so delivered or previously
redeemed shall be credited by the Paying Agent at 100% of the principal amount
thereof against the obligation of the Borrower on such sinking fund redemption
dates. Any excess over such obligation shall be credited against future sinking
fund redemption obligations in chronological order, and the principal amount of
the Series A Notes to be redeemed by operation of the sinking fund shall be
accordingly reduced.
(c) MANDATORY REDEMPTION ON EXPIRATION OR TERMINATION OF
SERIES A LETTER OF CREDIT WITHOUT EXTENSION OR PROVIDING A SUBSTITUTE SERIES A
LETTER OF CREDIT. (i) The Series A Notes are subject to mandatory redemption in
whole on the fifth (5th) Business Day prior to the stated date of expiration or
termination of the Series A Letter of Credit, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest thereon to, but
excluding, the redemption date, unless by the twentieth (20th) day prior to such
redemption date
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<PAGE> 28
the Borrower provides to the Trustee, and the Trustee has accepted, (1) evidence
that such Series A Letter of Credit has been extended or (2) a Substitute Series
A Letter of Credit to be effective on or prior to such redemption date.
(ii) Not more than two hundred five (205) days nor
less than one hundred ninety-five (195) days prior to the stated expiration date
of the Series A Letter of Credit then in effect, the Trustee shall deliver to
the Remarketing Agent written notice stating (A) the date on which such Series A
Letter of Credit is scheduled to expire, (B) that all of the Series A Notes are
subject to redemption on the fifth (5th) Business Day prior to such expiration
date, and (C) that pursuant to Section 2.02(a)(iii), no Interest Period shall
extend beyond the fifth (5th) Business Day prior to such expiration date, unless
by the twentieth (20th) day prior to such redemption date the Trustee has
received and accepted from the Borrower (1) evidence that such Series A Letter
of Credit has been extended or (2) a Substitute Series A Letter of Credit to be
effective on or prior to such redemption date. If the Trustee shall not have
received either of the items referenced in (1) and (2) of the preceding
sentence, then not more than eighty (80) days nor less than sixty-five (65) days
prior to the expiration date of the Series A Letter of Credit then in effect,
the Trustee shall deliver to the Remarketing Agent another written notice
identical to the notice described in the preceding sentence.
SECTION 3.02. REDEMPTION DATE. The redemption date for Series A Notes
to be redeemed pursuant to Section 3.01(a) must be an Interest Payment Date with
respect to the Series A Notes being redeemed. The redemption date for mandatory
redemptions will be as specified in Section 3.01(b) or (c), as the case may be,
or determined by the Trustee or the Remarketing Agent consistently with the
provisions thereof.
SECTION 3.03. SELECTION OF SERIES A NOTES TO BE REDEEMED. Except as
otherwise provided in this Section 3.03, if fewer than all the Series A Notes
are to be redeemed, the Remarketing Agent will select the Series A Notes to be
redeemed by lot or such other method as it deems in its sole discretion to be
fair and appropriate and shall notify the Paying Agent (which notice may be
provided by telephone, immediately confirmed in writing by legible facsimile
transmission, registered or certified mail, overnight express delivery, or other
secure means) of the holders and denominations of Series A Notes to be redeemed;
provided, however, that in selecting Series A Notes to be redeemed the
Remarketing Agent shall (i) select only Series A Notes not previously called for
redemption, (ii) select Bank Notes prior to any other Series A Notes, and (iii)
with respect to any mandatory sinking fund redemption pursuant to Section
3.01(b), select the Series A Notes to be redeemed on or before the sixtieth
(60th) day prior to the redemption date, and in making such selection
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<PAGE> 29
take into account the duration of the Interest Periods with respect to such
Series A Notes.
In the event the Remarketing Agent fails to notify the Paying Agent of
the Series A Notes to be redeemed on or before the ninth (9th) Business Day
prior to the redemption date, the Paying Agent shall proceed to select Series A
Notes for redemption from among the Outstanding Series A Notes in the
chronological order in which their Purchase Dates occur, beginning with the
earliest Purchase Date; provided, however, that in selecting Series A Notes to
be redeemed the Paying Agent shall (i) select only Series A Notes not previously
called for redemption and (ii) select Bank Notes prior to any other Series A
Notes. If fewer than all Series A Notes having the same Purchase Date (selected
for redemption as provided in the immediately preceding sentence) are to be
redeemed, the Paying Agent shall treat each owner of Series A Notes as the owner
of one Series A Note for purposes of selection for redemption, and shall select
Series A Notes for redemption by lot or such other method as it deems fair and
appropriate, (1) from among the holders of less than $1,000,000 in aggregate
principal amount, provided that if there are no such holders, or if, after
selection from among such holders such selection has not resulted in redemption
of a sufficient amount of Series A Notes, then (2) from among the holders of
$1,000,000 or more in aggregate principal amount of Series A Notes. In the event
the Paying Agent selects Series A Notes for redemption, the Paying Agent shall,
on or before the day on which notice of redemption is mailed to the holders,
give telephonic notice to the Remarketing Agent of the Series A Notes selected
for redemption and the name of the holder or holders thereof.
No portion of a Series A Note may be redeemed that would result in a
Series A Note which is smaller than the then permitted minimum Authorized
Denomination. For this purpose, the Remarketing Agent or the Paying Agent will
consider each Series A Note in a denomination larger than the minimum
denomination permitted by the Series A Notes at the time to be separate Series A
Notes each in the minimum denomination. Provisions of this Agreement that apply
to Series A Notes called for redemption also apply to portions of Series A Notes
called for redemption.
Notwithstanding anything to the contrary in this Agreement, there shall
be no redemption of less than all of the Series A Notes if there shall have
occurred and be continuing an Event of Default.
SECTION 3.04. NOTICE OF REDEMPTION. The Trustee will prepare and cause
the Paying Agent to send notice of each redemption to each Noteholder whose
Series A Notes are being redeemed, the Borrower, the Remarketing Agent and the
Bank by first-class mail at least seven (7) Business Days but not more than
sixty (60) (or twenty (20), in the case of a mandatory
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redemption pursuant to Section 3.01(c)) days before each redemption. The notice
shall identify the Series A Notes or portions thereof to be redeemed and will
state (i) the type of redemption and the redemption date, (ii) the redemption
price, (iii) that the Series A Notes called for redemption must be surrendered
to collect the redemption price, (iv) the address of the Paying Agent at which
the Series A Notes must be surrendered, (v) that interest on the Series A Notes
called for redemption ceases to accrue on the redemption date, (vi) the CUSIP
number of the Series A Notes called for redemption and (vii) any condition to
the redemption.
With respect to any Series A Notes to be redeemed which have not been
presented for redemption within sixty (60) days after the redemption date, the
Trustee shall prepare and cause the Paying Agent, at the expense of the
Borrower, to give a second notice of redemption to the holder of any such Series
A Notes which have not been presented for redemption, by first-class mail,
within thirty (30) days of the end of such 60-day period.
Failure by the Trustee or the Paying Agent to give any notice of
redemption as to any particular Series A Notes will not affect the validity of
the call for redemption of any Series A Notes in respect of which no such
failure has occurred. Any notice mailed as provided in the Series A Notes will
be conclusively presumed to have been given whether or not actually received by
any holder or beneficial owner.
SECTION 3.05. PAYMENT OF SERIES A NOTES CALLED FOR REDEMPTION; EFFECT
OF REDEMPTION. Upon surrender to the Paying Agent, Series A Notes called for
redemption shall be paid as provided in this Article at the redemption price
provided for in this Article, to the extent that sufficient moneys have been
made available therefor to the Paying Agent by 3:45 p.m. on the redemption date
pursuant to Section 5.02(a). On the date fixed for redemption, notice having
been given in the manner and under the conditions hereinabove provided, the
Series A Notes or portions thereof called for redemption shall be due and
payable at the redemption price provided therefor, plus accrued interest to such
date. On such redemption date, if moneys sufficient to pay the redemption price
of the Series A Notes to be redeemed, plus accrued interest thereon to the date
fixed for redemption, are held by the Paying Agent, interest on the Series A
Notes called for redemption shall cease to accrue; such Series A Notes shall
cease to be entitled to any benefits or security under this Agreement or to be
deemed Outstanding; and the holders and beneficial owners of such Series A Notes
shall have no rights in respect thereof except to receive payment of the
redemption price thereof, plus accrued interest to, but excluding, the date of
redemption. Any Series A Note so redeemed shall be cancelled by the Paying Agent
and shall not be reissued or remarketed.
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SECTION 3.06. SERIES A NOTES REDEEMED IN PART. Upon surrender of a
Series A Note redeemed in part, the Paying Agent will authenticate for the
holder a new Series A Note or Series A Notes equal in principal amount to the
unredeemed portion of the Series A Note surrendered.
SECTION 3.07. PURCHASE OF SERIES A NOTES.
(a) MANDATORY PURCHASE OF SERIES A NOTES; NOTICE. Except as
provided in Section 3.07(c), Series A Notes are subject to mandatory purchase at
the Purchase Price:
(i) on each Interest Payment Date applicable to such
Series A Note; and
(ii) on the effective date of any Substitute Series A
Letter of Credit delivered pursuant to Section 5.03, if, but only if, such
Substitute Series A Letter of Credit will result in a Credit Modification.
The Trustee will prepare and cause the Paying Agent to send
written notice of each mandatory purchase pursuant to Section 3.07(a)(ii) above
(a "Notice of Mandatory Purchase") to each Noteholder whose Series A Notes are
being purchased, the Remarketing Agent, the Bank and the Borrower at least 15
days but not more than 60 days before the Purchase Date. No Notice of Mandatory
Purchase will be given to holders or beneficial owners of Series A Notes if the
mandatory purchase is being made pursuant to Section 3.07(a)(i) above. Any
Notice of Mandatory Purchase will be given by first-class mail and will be
substantially in the form attached hereto as Exhibit B.
With respect to any Series A Notes to be purchased which have
not been presented for purchase within 60 days after the Purchase Date, the
Paying Agent, at the expense of the Borrower, shall prepare and give a second
notice of purchase pursuant to Section 3.07(a)(ii) to the holder of any such
Series A Notes which have not been presented for purchase, by first-class mail,
within 30 days of the end of such 60-day period.
(b) PAYMENT FOR PURCHASED SERIES A NOTES. The Purchase Price
of Series A Notes to be purchased on a Purchase Date shall be paid from
Remarketing Proceeds available to pay the Purchase Price of such Series A Notes
and, to the extent Remarketing Proceeds are not available to pay the Purchase
Price of such Series A Notes, from proceeds of a draw on the Series A Letter of
Credit pursuant to Section 5.02(a)(iv). To the extent that sufficient moneys
have been made available therefor to the Paying Agent or the Remarketing Agent,
as applicable, by 3:45 p.m. on the Purchase Date pursuant to Sections 3.08 and
5.02, upon surrender to the Paying Agent of Series A Notes called for mandatory
purchase as provided herein, the Purchase Price
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therefor shall be paid in immediately available funds by the Paying Agent's
close of business (or, if applicable, the Remarketing Agent's close of business)
on the Purchase Date. From and after the Purchase Date or, if later, the date on
which such moneys are made available to the Paying Agent or the Remarketing
Agent, as applicable, interest accruing on such Series A Notes shall cease to be
payable to the prior holder thereof, such Series A Notes shall cease to be
entitled to the benefits of this Agreement and to such extent the prior holder
shall have recourse solely to the funds held by the Paying Agent or the
Remarketing Agent, as applicable, for the purchase of such Series A Notes as
provided in Section 4.03. Notwithstanding any provision to the contrary herein,
for so long as the Series A Notes are held pursuant to a book-entry system
maintained by DTC, payments of Purchase Price with respect to such Series A
Notes shall be made pursuant to the rules and procedures established by DTC and
its Participants.
(c) LIMITATION ON TENDERS. The holders shall not be required
to tender any Series A Note for purchase on a Purchase Date if on such date,
following the occurrence of an Event of Default, the Trustee shall have declared
the principal of and interest on the Series A Notes immediately due and payable
pursuant to Section 7.02.
SECTION 3.08. REMARKETING OF PURCHASED SERIES A NOTES.
(a) SERIES A NOTES TO BE REMARKETED. Series A Notes purchased
as provided herein will be remarketed by the Remarketing Agent as provided in
this Section, except that:
(i) Series A Notes purchased pursuant to a mandatory
purchase and as to which the Remarketing Agent has received a notice of
redemption may be remarketed before the date fixed for redemption only if the
new purchaser receives, prior to purchasing such Series A Note, a notice that
such Series A Note is subject to redemption on the date fixed for redemption,
notwithstanding the fact that such notice of redemption may be sent to such
purchaser after the time period mentioned in Section 3.04;
(ii) the Remarketing Agent shall not be required to
remarket Series A Notes under this Section (A) during the continuance of an
Event of Default or (B) as otherwise provided in the Remarketing Agreement;
(iii) if the Remarketing Agent resigns or is removed
pursuant to the terms of this Agreement and the Borrower has failed to appoint a
successor in accordance with the terms of this Agreement, on and after the
effective date of such resignation or removal (as provided in Section 8.10) and
until a successor Remarketing Agent has delivered an acceptance of its
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appointment to the Trustee, the Series A Notes shall not be remarketed; and
(iv) The Remarketing Agent shall not at any time
remarket the Series A Notes (other than Bank Notes) to the Borrower or any
Affiliate.
(b) REMARKETING EFFORT. Except as provided in Section 3.08(a)
above, the Remarketing Agent will use reasonable best efforts to remarket on the
Purchase Date all Series A Notes purchased pursuant to Section 3.07 and, to the
extent such purchased Series A Notes are not remarketed on the Purchase Date,
thereafter will continue to use reasonable best efforts to remarket such
purchased Series A Notes, upon the terms and subject to the conditions of the
Remarketing Agreement.
As early as practicable but not later than 10:00 a.m. on the
Purchase Date and on each Business Day on which the Remarketing Agent is
required to remarket Series A Notes pursuant to this Section 3.08, the
Remarketing Agent will (i) notify the Trustee and the Paying Agent by telephone
(promptly confirmed in writing) of (A) the amount of Remarketing Proceeds which
the Remarketing Agent actually has on hand, and (B), if the Series A Notes are
not being held pursuant to a book-entry system, the information to enable the
Paying Agent to prepare new Series A Note certificates with respect to Series A
Notes which were remarketed and (ii) (A) if the Remarketing Agent has received
Remarketing Proceeds with respect to all of the Series A Notes to be remarketed
on such Purchase Date, transfer such Remarketing Proceeds to the holders
tendering such Series A Notes for purchase as provided in (c) below, or (B) if
the Remarketing Agent has not received Remarketing Proceeds with respect to all
of such Series A Notes, transfer to the Paying Agent the Remarketing Proceeds
which the Remarketing Agent has received as provided in (c) below. In the event
that any of the Series A Notes tendered for purchase have not been remarketed,
the Trustee shall immediately notify the Borrower and the Paying Agent of the
amount of such Series A Notes and shall take action as set forth in Section
5.02(a)(iv). If the Trustee shall fail to receive the notice described in the
first sentence of this paragraph from the Remarketing Agent by 10:00 a.m., the
Trustee shall contact the Remarketing Agent by telephone to confirm the
information required in such notice and, if required, the Trustee shall take
action as set forth in Section 5.02(a)(iv).
(c) REMARKETING PROCEEDS. To the extent the Remarketing Agent
has remarketed Series A Notes and has received Remarketing Proceeds from the
purchasers thereof, the Remarketing Agent will promptly forward the Remarketing
Proceeds by wire transfer (or in such other manner as is acceptable to the
Remarketing Agent) to the holders tendering such Series A Notes for purchase
(or, if required pursuant to Section 3.08(b), to the Paying Agent). Except as
otherwise provided below with respect
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to Bank Notes, until such transfer, all such Remarketing Proceeds shall be
deposited in a separate, segregated account of the Remarketing Agent (or, if
transferred to the Paying Agent, in a separate, segregated account of the Paying
Agent) for application in accordance with the provisions of this Section 3.08,
and until so applied shall be held for the benefit of the holders tendering such
Series A Notes for purchase. Upon the reasonable written request of the
Borrower, the Remarketing Agent (and the Paying Agent, if applicable) shall
provide to the Borrower evidence that all Remarketing Proceeds have been
maintained in a separate, segregated account. If within ten Business Days of the
aforementioned request by Borrower, the Paying Agent cannot provide evidence
that Remarketing Proceeds have been segregated, or if the Remarketing Proceeds
have been commingled with other moneys, the Borrower shall be entitled, in
either case, to remove the Paying Agent without obtaining the consent of the
Bank or any other party. Notwithstanding any provision to the contrary herein,
for so long as the Series A Notes are held pursuant to a book-entry system
maintained by DTC, payments of Remarketing Proceeds with respect to such Series
A Notes shall be made pursuant to the rules and procedures established by DTC
and its Participants.
(d) DELIVERY OF PURCHASED SERIES A NOTES. Series A Notes
purchased pursuant to Section 3.07 shall be delivered as follows:
(i) Series A Notes purchased with Remarketing
Proceeds (other than Bank Notes) shall be delivered to the purchasers thereof
upon receipt of payment therefor. Prior to such delivery the Paying Agent shall
provide for registration of transfer to the Holders, as provided in a written
notice from the Remarketing Agent;
(ii) All Bank Notes (other than Bank Notes purchased
with the Borrower's own funds and not with the proceeds of a draw on the Series
A Letter of Credit) will be registered in the name of the Trustee, as agent and
bailee of the Bank, subject to the pledge by the Borrower to the Bank, and shall
be held by the Trustee pursuant to the Reimbursement Agreement. Upon receipt of
Remarketing Proceeds in respect of Bank Notes, the Remarketing Agent shall
notify the Bank, the Trustee and the Borrower of such receipt. Upon its receipt
of such notice, the Bank shall, pursuant to the Reimbursement Agreement, notify
the Remarketing Agent and the Trustee by telephone, telecopy or telex, promptly
confirmed in writing, that the Series A Notes have ceased to be Bank Notes and
that the amount of the Letter of Credit has been automatically reinstated as
provided therein, whereupon the Remarketing Agent will remit such Remarketing
Proceeds as directed by the Bank. The Trustee shall not release the Bank Notes
until it receives from the Bank the notice referred to in the preceding
sentence. The Remarketing Agent shall hold such Remarketing Proceeds in a
segregated account of the Remarketing Agent for the benefit of the Bank, except
that if
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the Series A Letter of Credit is not reinstated by an amount equal to the
Remarketing Proceeds, then the Remarketing Agent shall hold such funds for the
benefit of the purchasers which provided such Remarketing Proceeds.
END OF ARTICLE III
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ARTICLE IV
PAYMENT OF SERIES A NOTES AND CREATION OF SERIES A
LETTER OF CREDIT FUND
SECTION 4.01. PAYMENT OF SERIES A NOTES. The Paying Agent shall make
payments when due of principal of and interest on Series A Notes, and the Paying
Agent or the Remarketing Agent, if applicable, shall make payments when due of
the Purchase Price of Series A Notes purchased pursuant to a mandatory purchase:
(a) FIRST, (but only with respect to payments of Purchase Price) from
Remarketing Proceeds; and
(b) SECOND, (but only with respect to payments of interest on the
Series A Notes) from moneys (including moneys drawn under the Series A Letter of
Credit) on deposit in the Interest Reserve Account of the Series A Letter of
Credit Fund; and
(c) THIRD, (but only with respect to principal, or the portion of the
Purchase Price corresponding to principal, on the Series A Notes) from moneys
(including moneys drawn under the Series A Letter of Credit) on deposit in the
Principal Account of the Series A Letter of Credit Fund; and
(d) LAST, from any other moneys available to the Trustee, including,
without limitation, moneys paid by the Borrower pursuant to Section 6.01.
The Trustee shall transfer moneys to the Paying Agent at such times and in
sufficient amounts so as to permit the Paying Agent to make such payments when
due. Notwithstanding the foregoing, however, payments of Purchase Price,
principal and interest on Bank Notes will be paid only from the first and last
categories of moneys. The proceeds of investments of any moneys in any of these
categories may be used to the same extent as the moneys invested could be used.
SECTION 4.02. CREATION OF SERIES A LETTER OF CREDIT FUND. There is
hereby established the Hanover Direct, Inc. Flexible Term Notes Series A Letter
of Credit Fund, in which the Trustee shall establish and maintain a Series A
Principal Account and a Series A Interest Reserve Account.
Such fund and accounts shall be held and maintained by the Trustee and
the moneys and securities therein shall be applied as hereinbefore and
hereinafter provided. Except as otherwise provided in Sections 4.03(c) and 7.05,
the Borrower shall have no interest whatsoever in the moneys and securities
maintained by the Trustee in each said fund and accounts.
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SECTION 4.03. FUNDS RECEIVED; APPLICATION OF MONEY IN SERIES A LETTER
OF CREDIT FUND.
(a) There shall be deposited in the Series A Letter of Credit Fund all
proceeds of drawings under the Series A Letter of Credit received by the
Trustee. No other funds (other than investment proceeds from moneys deposited
therein) shall be deposited in or commingled with the Series A Letter of Credit
Fund. All amounts received by the Trustee as proceeds of draws on the Series A
Letter of Credit made pursuant to Section 5.02(a)(i) and (ii) or otherwise with
respect to accrued interest on, the Series A Notes shall be deposited in the
Interest Reserve Account of the Series A Letter of Credit Fund. All amounts
received by the Trustee as proceeds of draws on the Series A Letter of Credit
made pursuant to Section 5.02(a)(iii) and (iv) with respect to the principal
amount of, or the portion of the Purchase Price representing the principal
amount of, the Series A Notes shall be deposited in the Principal Account of the
Series A Letter of Credit Fund.
(b) To the extent that the remarketing proceeds are insufficient to pay
the principal amount of, or the portion of the Purchase Price representing the
principal amount of, the Series A Notes, the Borrower hereby authorizes and
directs the Trustee, and the Trustee hereby agrees, to withdraw and transfer to
the Paying Agent sufficient funds from (i) the Principal Account of the Series A
Letter of Credit Fund to pay the principal amount of, and the portion of the
Purchase Price representing the principal amount of, the Series A Notes (other
than Bank Notes) as the same become due and payable, and (ii) the Interest
Reserve Account of the Series A Letter of Credit Fund to pay the accrued
interest on the Series A Notes (other than Bank Notes) as the same become due
and payable. Except as otherwise provided in Section 4.03(c) and in Section
7.05, amounts on deposit in the Interest Reserve Account shall be used solely by
the Trustee and the Paying Agent for the payment of interest on the Series A
Notes and the portion of the Purchase Price representing interest on Series A
Notes subject to mandatory purchase.
(c) Any amounts remaining in the Series A Letter of Credit Fund and all
other amounts required to be paid under this Agreement shall be paid to the Bank
or, if the Bank shall certify to the Trustee in writing that no obligations
remain owing to the Bank under the Reimbursement Agreement at the time of
payment of the Series A Notes in full, to the Borrower. Prior to making any
payment under this Section 4.03(c), the Trustee shall request, in writing,
written certification from the Bank as to amounts owed by the Borrower to the
Bank. The Trustee shall be entitled to receive and rely upon such certificate
from the Bank as to amounts owed to the Bank and shall be entitled to retain all
amounts held hereunder until receipt of such certificate.
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(d) All proceeds of draws on the Series A Letter of Credit received by
the Trustee for the payment of principal of or interest accrued on Series A
Notes that have been accelerated pursuant to Section 7.02 hereof will be
deposited in the appropriate account of the Series A Letter of Credit Fund in
accordance with the terms of this Section 4.03 and applied in accordance with
the terms of Section 7.03.
(e) The proceeds of investments of any moneys in the Series A Letter of
Credit Fund may be used to the same extent as the moneys invested could be used.
No principal or Purchase Price of or interest on the Series A Notes will be paid
from funds provided directly or indirectly by the Borrower or any Affiliate,
except in the case of the failure by the Bank to honor a valid draw under the
Series A Letter of Credit.
(f) (1) Upon the reasonable written request of the Borrower, the
Trustee shall provide to the Borrower evidence that all moneys in the Series A
Letter of Credit Fund have been maintained in a separate and segregated account.
(2) If, within ten Business Days of the request made by Borrower
pursuant to Section 4.03 (f)(1) above, the Trustee cannot provide evidence that
moneys in the Series A Letter of Credit Fund have been segregated, or if the
moneys in the Series A Letter of Credit Fund have been commingled with other
moneys, the Borrower shall be entitled, in either case, to remove the Trustee
without obtaining the consent of the Bank or any other party.
SECTION 4.04. MONEYS TO BE HELD IN TRUST. All proceeds of a draw on the
Series A Letter of Credit received by the Trustee and all money that the Trustee
or the Paying Agent shall hold in, or shall have withdrawn from, the Series A
Letter of Credit Fund or shall have received from any other source and set aside
for the purpose of paying any of the Series A Notes, either on the Maturity Date
or by purchase (other than as provided in Section 3.08 hereof) or call for
redemption or for the purpose of paying any interest on the Series A Notes,
shall be held in trust for the respective holders or beneficial owners of the
Series A Notes. Moneys received by the Remarketing Agent, the Paying Agent or
the Trustee from the sale of a Series A Note under Section 3.08 or from the
purchase of any Series A Note will be held segregated from other funds held by
the Remarketing Agent, the Paying Agent or the Trustee for the benefit of the
Person from whom such Series A Note was purchased and will not be invested while
so held. Any money that is so set aside and that remains unclaimed by the
holders or beneficial owners for a period of five (5) years after the date on
which such Series A Notes have become payable shall be remitted to the Borrower
and thereafter the holders and beneficial owners shall look only to the Borrower
for payment and then only to the extent of the amounts so received, without any
interest thereon, and the
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Trustee, the Placement Agent, the Remarketing Agent, the Paying Agent and the
Bank shall have no responsibility with respect to such money.
SECTION 4.05. INVESTMENT OF MONEYS. Except as otherwise provided
herein, money held for the credit of the Series A Letter of Credit Fund shall be
continuously invested and reinvested by the Trustee only in Permitted
Investments in accordance with the instructions of the Borrower Representative
as provided herein. Any such Permitted Investments shall mature not later than
the respective dates when the money held for the credit of such funds or
accounts will be required for the purposes intended. Unclaimed moneys held by
the Trustee, the Paying Agent or the Remarketing Agent under Section 4.04 shall
be held uninvested by the Trustee, the Paying Agent or the Remarketing Agent.
The Borrower Representative shall give to the Trustee written
directions respecting the investment of any money required to be invested
hereunder, subject, however, to the provisions of this Article, and the Trustee
shall then invest such money under this Section as so directed by the Borrower
Representative.
The Trustee shall sell at the best price attainable or reduce to cash a
sufficient amount of such Permitted Investments whenever it shall be necessary
in order to provide money to make any payment or transfer of money from such
fund. The Trustee shall not be liable or responsible for any loss resulting from
any such investment.
END OF ARTICLE IV
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ARTICLE V
SERIES A LETTER OF CREDIT
SECTION 5.01. REQUIREMENTS FOR SERIES A LETTER OF CREDIT. In order to
support its obligations to make payments pursuant to Section 6.01, the Borrower
has agreed, upon the authentication and delivery of the Series A Notes to
deliver to the Trustee the Series A Letter of Credit. For so long as any Series
A Notes remain Outstanding, a Series A Letter of Credit (i) in an amount not
less than the aggregate principal amount of Series A Notes Outstanding plus 35
days' interest on such amount computed at the Maximum Rate on the basis of
actual number of days elapsed in a year of 360 days and (ii) otherwise with
terms substantially conforming to those of the original Series A Letter of
Credit, shall be in effect with respect to such Series A Notes. Any Series A
Letter of Credit securing the payment of principal and Purchase Price of and
interest on Series A Notes issued hereunder, shall provide for reductions in the
principal component and interest component thereof upon any partial redemption
of Series A Notes pursuant to this Agreement.
SECTION 5.02. DRAWS ON SERIES A LETTER OF CREDIT; EXTENSIONS.
(a) The Borrower hereby irrevocably authorizes and directs the Trustee
to make timely draws under the Series A Letter of Credit in accordance with the
terms thereof in amounts sufficient to make or provide for when due the payments
referred to in Section 6.01, except with respect to Bank Notes, which are not
entitled to any benefit of the Series A Letter of Credit. All moneys drawn under
the Series A Letter of Credit to pay the principal of and interest on, or the
Purchase Price of, the Series A Notes shall be credited immediately against the
obligation of the Borrower to make payments pursuant to Section 6.01. The
authorization and direction for the Trustee to draw under the Series A Letter of
Credit is irrevocable prior to payment in full of the Series A Notes. Without
intending to limit the foregoing, the Trustee shall:
(i) On the Date of Issuance of the Series A Notes, for deposit
by the Trustee in the Series A Interest Reserve Account, draw on the Series A
Letter of Credit in order to obtain an amount equal to 35 days' interest on the
Series A Notes being issued, calculated on the basis of actual number of days
elapsed in a year of 360 days at the Maximum Rate;
(ii) On the first Business Day immediately preceding the first
Business Day of each month while Series A Notes are Outstanding, for deposit by
the Trustee in the Series A Interest Reserve Account, draw on the Series A
Letter of Credit in order to obtain an amount calculated by the Trustee to be
sufficient to make the moneys on deposit in the Series A Interest
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Reserve Account of the Series A Letter of Credit Fund on such day equal the sum
of (1) the amount of accrued and unpaid interest on all Outstanding Series A
Notes (other than Bank Notes) and (2) 35 days' interest on all Outstanding
Series A Notes (including Bank Notes), calculated on the basis of actual number
of days elapsed in a year of 360 days at the Maximum Rate;
(iii) on each date on which a principal amount of the Series A
Notes is due and payable (whether at maturity, by acceleration or call for
redemption, but not with respect to the purchase of Series A Notes provided for
in (iv) below), for deposit by the Trustee in the Series A Principal Account,
draw on the Series A Letter of Credit in order to obtain an amount necessary to
make full and timely payment of the principal then due; and
(iv) on each Purchase Date, with respect to any Series A Notes
to be purchased on such date and as to which the Trustee has received from the
Remarketing Agent the notice of remarketing provided for in Section 3.08(b) (or
has confirmed the information required in such notice as provided in Section
3.08(b)) and such notice (or confirmation) states that less than the aggregate
amount of the Purchase Price of all Series A Notes to be purchased on such date
has been received in the form of Remarketing Proceeds, draw on the Series A
Letter of Credit in order to obtain an amount equal to the portion of the
Purchase Price representing the principal amount of Series A Notes to be
purchased on such date less the amount which has been received by the
Remarketing Agent in the form of Remarketing Proceeds. The proceeds of a draw on
the Series A Letter of Credit made pursuant to this paragraph (iv) shall be
transferred by the Trustee to the Paying Agent for payment pursuant to Sections
3.07(b) and 4.01.
If any such draws are made on a Purchase Date in connection
with the delivery of a Substitute Series A Letter of Credit which results in a
Credit Modification, such draws shall be made under the existing Series A Letter
of Credit and not under the Substitute Series A Letter of Credit. The Trustee
agrees to make all such draws so as to be able to obtain the requested funds by
3:45 p.m. on the payment date or Purchase Date, as the case may be.
(b) The Trustee shall advise the Borrower by telecopy or telex
on the date of each draw on the Series A Letter of Credit of the amount and date
of such draw and of the reason for such draw.
(c) The Series A Letter of Credit may be amended or its
expiration date extended as provided therein or in this Section 5.02(c). For
amendments or for extensions of the term of the Series A Letter of Credit, the
Trustee shall, at the direction of the Borrower Representative, but only if
required by the Bank to evidence such an amendment or extension, surrender
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the Series A Letter of Credit to the Bank in exchange for a new Series A Letter
of Credit of the Bank or the Series A Letter of Credit with notations thereon,
as the Bank may so elect, conforming in all material respects to the Series A
Letter of Credit except that the expiration date shall be extended. Any such
extension shall be for a period of at least one year, or if less, until the
fifteenth day following the maturity date of the Series A Notes. Any such
amendment or, except as otherwise provided in the Series A Letter of Credit,
extension shall be in a form acceptable to the Trustee and the Remarketing
Agent, and any of them may require delivery in connection therewith of such
other documents, certificates, and assurances as it deems reasonably necessary.
SECTION 5.03. SUBSTITUTE SERIES A LETTER OF CREDIT.
(a) (i) At any time, upon at least sixty (60) days' prior
written notice to the Trustee, the Bank and the Remarketing Agent, the Borrower
may, subject to the provisions of Section 5.03(a)(iii), provide for the delivery
to the Trustee of a substitute letter of credit complying with the provisions of
this Agreement (the "Substitute Series A Letter of Credit"). Any notice
delivered pursuant to this Section 5.03(a) shall state (A) the identity of the
issuer of the Substitute Series A Letter of Credit, (B) the date the Substitute
Series A Letter of Credit will be effective, (C) whether the Substitute Series A
Letter of Credit is expected to result in a Credit Modification, and (D) if the
Substitute Series A Letter of Credit is expected to result in a Credit
Modification and become effective on any day preceding the fifth (5th) Business
Day prior to the stated expiration date of the Series A Letter of Credit then in
effect, that to the extent provided in Section 2.02(a)(iv) no Interest Period
commencing before the effective date of the Substitute Series A Letter of Credit
shall extend beyond the effective date of such Substitute Series A Letter of
Credit. If a Substitute Series A Letter of Credit is expected to result in a
Credit Modification the Trustee shall not accept such Substitute Series A Letter
of Credit without the prior written consent of the Bank. If a Series A Letter of
Credit is extended or renewed pursuant to the terms thereof, such Series A
Letter of Credit as extended or renewed shall not be deemed to be a Substitute
Series A Letter of Credit for purposes of this Agreement or the Series A Notes.
(ii) Any Substitute Series A Letter of Credit shall have an
effective date which is a Business Day occurring at least five (5) Business Days
prior to the stated expiration date of the Series A Letter of Credit then in
effect, and a stated expiration date which is at least one year following the
effective date thereof.
(iii) Any Substitute Series A Letter of Credit that would
result in a Credit Modification is subject to the approval of the Remarketing
Agent. The Remarketing Agent shall not
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approve any Substitute Series A Letter of Credit that will result in a Credit
Modification unless, in the sole judgment of the Remarketing Agent, the
effective date of such Substitute Series A Letter of Credit will be an Interest
Payment Date for all outstanding Series A Notes.
(b) At least two Business Days prior to the effective date of
any Substitute Series A Letter of Credit (and as a condition to the acceptance
by the Trustee of such Substitute Letter of Credit) the Borrower shall deliver
to the Trustee the original executed Substitute Series A Letter of Credit,
together with:
(i) an Opinion of Counsel addressed to the Trustee to the
effect that (A) the Substitute Series A Letter of Credit is the valid and
binding obligation of the issuer thereof enforceable against such issuer in
accordance with its terms except insofar as its enforceability may be limited by
any insolvency or similar proceedings applicable to the issuer or by proceedings
affecting generally the rights of the issuer's creditors or by general equitable
principles; (B) payments of principal or Purchase Price of or interest on the
Series A Notes from the proceeds of a draw on the Substitute Series A Letter of
Credit will not, in the case of a bankruptcy of the Borrower or any Guarantor
(as defined in the Reimbursement Agreement), constitute avoidable preferences
under any applicable bankruptcy, reorganization, insolvency or other similar
laws; and (C) the Substitute Series A Letter of Credit does not constitute a
separate security requiring registration under any applicable federal or state
securities laws. In the case of a Substitute Series A Letter of Credit issued by
a branch or agency of a foreign commercial bank, there shall also be delivered
an Opinion of Counsel from a firm licensed to practice law in the jurisdiction
in which the head office of such bank is located, addressed to the Trustee to
the effect that the Substitute Series A Letter of Credit is the valid and
binding obligation of such bank, enforceable against such bank in accordance
with its terms, subject to the limitations referred to in Section 5.03(b)(i)(A)
above;
(ii) written evidence satisfactory to the Trustee that the
issuer of the Substitute Series A Letter of Credit meets the requirements for an
issuer of a Series A Letter of Credit as set forth in Article I;
(iii) evidence of written approval of the Remarketing Agent;
and
(iv) a letter from each Rating Agency then rating the Series A
Notes or, in the event the Series A Notes are not then rated, other written
evidence satisfactory to the Trustee, stating whether the acceptance of the
Substitute Series A Letter of Credit will result in a Credit Modification.
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The Trustee shall accept any such Substitute Series A Letter of Credit only in
accordance with the terms, and upon satisfaction of the conditions, contained in
this Section and any other applicable provisions of this Agreement. In the event
that acceptance of the Substitute Series A Letter of Credit results in the
occurrence of a mandatory Purchase Date, the Trustee shall not terminate or
surrender the Series A Letter of Credit until the Trustee shall have made such
drawings thereunder, if any, as shall be required under this Agreement to
provide for payment of the Purchase Price of the Series A Notes, and shall have
received the proceeds of such drawing from the Bank.
(c) Not more than 60 days and not less than 15 days prior to
the effective date of the Substitute Series A Letter of Credit, the Trustee
shall prepare and cause the Paying Agent to send, in addition to the notice
required by Section 3.07(a), by registered or certified mail to each holder
(with a copy to the Bank) notice of the issuance of the Substitute Series A
Letter of Credit, which notice shall include (i) the identity of the issuer
thereof, (ii) the date the Substitute Series A Letter of Credit will be
effective, (iii) whether the Substitute Series A Letter of Credit will result in
a Credit Modification and (iv) if applicable, notice pursuant to Section 3.07(a)
that the Series A Notes are subject to mandatory purchase pursuant to Section
3.07.
SECTION 5.04. ENFORCEMENT OF THE SERIES A LETTER OF CREDIT. The Trustee
shall have the obligation to hold and maintain the Series A Letter of Credit for
the benefit of the Owners of the Series A Notes until the Series A Letter of
Credit terminates or expires in accordance with its terms.
When the Series A Letter of Credit terminates or expires in accordance
with its terms or a Substitute Series A Letter of Credit therefor is accepted
hereunder, the Trustee shall immediately surrender the Series A Letter of Credit
to the Bank. The Trustee hereby agrees that, except in the case of a redemption
in part pursuant to Article III hereof or any other reduction in the principal
amount of Series A Notes Outstanding, it will not under any circumstances
request that the Bank reduce the amount of the Series A Letter of Credit. If at
any time, all Series A Notes shall cease to be Outstanding, the Trustee shall
surrender the Series A Letter of Credit to the Bank, in accordance with the
terms thereof.
If at any time, the Bank shall fail to honor a draft presented under
the Series A Letter of Credit, in conformity with the terms thereof, the Trustee
shall give immediate telephonic notice thereof to the Remarketing Agent and the
Borrower.
END OF ARTICLE V
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ARTICLE VI
GENERAL COVENANTS AND REPRESENTATIONS
SECTION 6.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM. The Borrower
shall pay or cause to be paid, when due, the principal of (whether at maturity,
by acceleration, by call for redemption or otherwise), the Purchase Price of and
interest on the Series A Notes at the places, on the dates and in the manner
provided herein and in said Series A Notes according to the true intent and
meaning thereof. The obligation of the Borrower to make or cause to be made the
payments on the Series A Notes and under this Agreement is absolute and
unconditional.
SECTION 6.02. COVENANT TO PERFORM AND REPRESENTATIONS AND WARRANTIES OF
THE BORROWER AS TO AUTHORITY, ETC. (a) The Borrower shall faithfully perform at
all times all of its covenants, undertakings and agreements contained in this
Agreement and in any Series A Note executed, authenticated and delivered
hereunder.
(b) The Borrower represents and warrants that:
(i) it has full corporate power and authority to execute and
deliver this Agreement and to issue the Series A Notes authorized hereby and to
consummate the transactions contemplated hereby and thereby;
(ii) the execution and delivery of this Agreement and the
issuance of the Series A Notes authorized hereby and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
board of directors or executive committee of the board of directors of the
Borrower and no other action or proceeding on the part of the Borrower is
necessary to authorize this Agreement, to issue the Series A Notes or to
consummate the transactions contemplated hereby or thereby;
(iii) the execution, delivery and performance of this
Agreement by the Borrower, the issuance of the Series A Notes authorized hereby
and the consummation by the Borrower of the transactions contemplated hereby and
thereby will not (with or without the giving of notice or the lapse of time or
both)
(A) violate or result in any default under any
provision of the Certificate of Incorporation or bylaws of the Borrower;
(B) violate or require any consent or approval under
any provision of any law, order, injunction, rule or regulation applicable to
the Borrower;
(C) require any consent or approval under, result in
the breach of any provision of or constitute a default
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under, or otherwise violate the terms of any material agreements, indentures or
instruments or obligations to which the Borrower is a party or by which the
Borrower may be bound or affected; or
(D) require any consent or approval by, notice to or
registration with any governmental authority; and
(iv) this Agreement and the Series A Notes authorized hereby
have been duly and validly executed and delivered by the Borrower and constitute
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
SECTION 6.03. FURTHER INSTRUMENTS AND ACTIONS. At the request of the
Trustee, the Borrower shall execute and deliver such further instruments or take
such further actions as may be reasonably required to carry out the purposes of
this Agreement.
SECTION 6.04. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE BORROWER. (a) Each of the Borrower's representations and warranties
contained in the Reimbursement Agreement and the Placement Agreement are true
and correct in all material respects on and as of the date hereof and are hereby
made to the Trustee as if set forth herein. (b) The Borrower shall at all times
comply, in all material respects, with the terms, conditions and covenants of
the Reimbursement Agreement and the other Series A Note Documents.
END OF ARTICLE VI
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ARTICLE VII
DEFAULTS AND REMEDIES
SECTION 7.01. EVENTS OF DEFAULT. Each of the following events shall be
an Event of Default:
(a) Default in the due and punctual payment of any interest on
any Series A Note;
(b) Default in the due and punctual payment of the principal
or Purchase Price of any Series A Note (whether at maturity, by acceleration or
redemption, upon the Purchase Date or otherwise);
(c) Default in the observance or performance of any other of
the covenants, conditions or agreements on the part of the Borrower under this
Agreement and such default shall continue for thirty (30) days (or such further
time as may be granted in writing by the Trustee, with the consent of the Bank)
after receipt by the Borrower Representative of a written notice from the
Trustee or the Bank specifying such default and requiring the same to be
remedied; or
(d) Receipt by the Trustee of notice from the Bank that an
Event of Default has occurred under the Reimbursement Agreement accompanied by a
demand by the Bank that the Trustee declare the Series A Notes to be immediately
due and payable.
SECTION 7.02. ACCELERATION AND DUTY TO DRAW ON SERIES A LETTER OF
CREDIT.
(a) Upon the occurrence of an Event of Default under Section
7.01(a), (b) or (d) hereof, the Trustee shall, by notice to the Borrower, the
Bank, the Paying Agent (who shall promptly give such notice to the holders) and
the Remarketing Agent, declare the entire unpaid principal of and interest on
the Series A Notes immediately due and payable and, thereupon, the entire unpaid
principal of and interest on the Series A Notes shall forthwith become
immediately due and payable.
(b) Upon the occurrence of any Event of Default specified in
Section 7.01(c), the Trustee shall notify the Bank of such Event of Default and
shall, by notice to the Borrower, the Paying Agent (who shall promptly give such
notice to the holders) and the Remarketing Agent declare the entire unpaid
principal of and interest on the Series A Notes immediately due and payable, but
only if directed to do so by the Bank, unless the Bank has dishonored a valid
draw under the Series A Letter of Credit, in which event the Trustee may declare
the entire unpaid principal of and interest on the Series A Notes immediately
due and payable and, thereupon, in either case, the entire unpaid
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principal of and interest on the Series A Notes shall forthwith become due and
payable.
(c) In the event the Trustee fails to accelerate as required
by this Section 7.02(a), the owners of a majority in aggregate principal amount
of Series A Notes Outstanding shall have the right to take such action.
(d) Upon the acceleration of the maturity of the Series A
Notes, by declaration or otherwise, the Trustee shall immediately draw upon the
Series A Letter of Credit for the aggregate unpaid principal amount of the
Series A Notes and all interest accrued thereon which shall be applied
immediately as set forth in Section 7.03. Upon such acceleration, interest on
the Series A Notes shall cease to accrue as of the date of declaration of such
acceleration.
SECTION 7.03. DISPOSITION OF AMOUNTS DRAWN ON SERIES A LETTER OF
CREDIT. All amounts drawn on the Series A Letter of Credit by the Trustee in
accordance with Section 7.02(b) shall be held by the Trustee in the Series A
Letter of Credit Fund (and invested in accordance with Section 4.05), and,
together with moneys on deposit in the Interest Reserve Account of the Series A
Letter of Credit Fund which have been previously drawn on the Series A Letter of
Credit pursuant to Section 5.02(a)(i) and (ii), shall be applied immediately to
the payment of principal of and interest accrued on the Series A Notes unless,
prior to or with the proceeds of the draw on the Series A Letter of Credit, the
Trustee receives written instructions from the Bank to use such proceeds,
together with the moneys on deposit in the Interest Reserve Account of the
Series A Letter of Credit Fund, to purchase all Series A Notes. If such
instructions are received by the Trustee, such draw proceeds and, if necessary,
the moneys on deposit in the Interest Reserve Account, shall be immediately
applied to the purchase of the Series A Notes, the acceleration of the Series A
Notes shall be cancelled, the Series A Notes shall become Bank Notes and the
Series A Notes shall be registered in the name of the Trustee, as agent and
bailee of the Bank, and pledged under the Reimbursement Agreement as additional
security for repayment of the Borrower's reimbursement obligations under the
Reimbursement Agreement. Thereafter, such Series A Notes shall not be remarketed
by the Remarketing Agent unless the Series A Letter of Credit is reinstated or a
Substitute Series A Letter of Credit is delivered to the Trustee pursuant to
Section 5.03.
SECTION 7.04. NO REMEDY EXCLUSIVE. Subject to the limitations imposed
on the Trustee's ability to act without the consent of the Bank, no remedy
conferred by this Agreement upon or reserved to the Trustee or to the Bank is
intended to be exclusive of any other remedy, but each such remedy shall be
cumulative and shall be in addition to any other remedy given to
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the Trustee or to the Bank hereunder or now or hereafter existing at law or in
equity or by statute.
No delay or omission to exercise any right or power accruing upon any
default or Event of Default shall impair any such right or power or shall be
construed to be a waiver of any such default or Event of Default or acquiescence
therein, and every such right and power may be exercised from time to time and
as often as may be deemed expedient.
No waiver of any default or Event of Default hereunder, whether by the
Trustee pursuant to Section 7.06 or by the Noteholders, shall extend to or shall
affect any subsequent default or Event of Default or shall impair any rights or
remedies consequent thereon.
SECTION 7.05. APPLICATION OF MONEYS. All amounts received by the
Trustee from a draw upon the Series A Letter of Credit shall be applied
exclusively to the payment of principal of and interest on the Series A Notes or
the Purchase Price thereof as herein provided; provided, however, that whenever
all principal and Purchase Price of and interest on all Series A Notes have been
paid under the provisions of this Section and the Series A Note Facility has
been terminated and all expenses and charges of the Trustee have been paid, and
all obligations of the Borrower to the Bank pursuant to the Reimbursement
Agreement shall have been paid in full, the balance remaining in the Series A
Letter of Credit Fund shall be paid to the Borrower as provided in Section 4.03.
SECTION 7.06. WAIVERS OF EVENTS OF DEFAULT. The Trustee, with the
written consent of the Bank, may waive any Event of Default hereunder and its
consequences and rescind any declaration of maturity of principal of and
interest on the Series A Notes, and shall do so, with the consent of the Bank,
upon the written request of the holders of a majority in aggregate principal
amount of Series A Notes then Outstanding; provided, however, that:
(a) there shall not be waived without the consent of the
holders of all Series A Notes then outstanding:
(i) any default in the payment when due of the principal or
Purchase Price of any Outstanding Series A Notes (whether at maturity or by
mandatory or optional redemption), or
(ii) any default in the payment when due of the interest on
any such Series A Notes unless, prior to such waiver or rescission:
(1) there shall have been paid or provided for all
arrears of interest at the rate borne by the Series A Notes on overdue
installments of principal, all arrears of
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payments of principal and Purchase Price when due and all expenses of the
Trustee in connection with such default, and
(2) in case of any such waiver or rescission, or in
case of the discontinuance, abandonment or adverse determination of any
proceeding taken by the Trustee on account of any such default, the Trustee and
the Noteholders shall be restored to their respective former positions and
rights hereunder; and
(b) unless the Series A Letter of Credit is reinstated in full
as evidenced in writing by the Bank as to principal and interest, there shall be
no waiver or rescission if the Series A Letter of Credit shall have been drawn
upon due to the occurrence of an Event of Default.
No such waiver or rescission shall extend to any subsequent or other
default or Event of Default, or impair any right consequent thereon.
SECTION 7.07. UNCONDITIONAL RIGHT TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST. Except as otherwise provided in Section 7.09 nothing in this Agreement
shall, however, affect or impair the right of any Noteholder to enforce, by
action at law, payment of the principal or Purchase Price of or interest on any
Series A Note at and after the maturity thereof, or on the date fixed for
redemption or purchase or (subject to the provisions of Section 7.02) on the
same being declared due prior to maturity as herein provided, or the obligation
of the Borrower to pay the principal or Purchase Price of and interest on each
of the Series A Notes issued hereunder to the respective holders thereof at the
time, place and in the manner herein and in the Series A Notes expressed.
SECTION 7.08. [RESERVED.]
SECTION 7.09. BANK DEEMED HOLDER. For all purposes of this Article VII
(other than receipt of payments), the Bank shall, so long as the Series A Letter
of Credit shall not have been dishonored (other than for failure to receive a
drawing in strict compliance with the terms thereof or other reason permitted by
the Series A Letter of Credit), be deemed the holder and registered owner of all
Series A Notes. As such, the Bank may take all actions permitted by this Article
VII to be taken by the holders or registered owners of the Series A Notes, to
the exclusion of the actual beneficial owners and registered owners of the
Series A Notes. NOTWITHSTANDING ANY PROVISION TO THE CONTRARY HEREIN, ON OR
AFTER THE EFFECTIVE DATE OF A SUBSTITUTE SERIES A LETTER OF CREDIT WHICH RESULTS
IN A CREDIT MODIFICATION, THE BANK, AS ISSUER OF THE SERIES A LETTER OF CREDIT
REPLACED BY SUCH SUBSTITUTE SERIES A LETTER OF CREDIT, SHALL BE DEEMED TO BE THE
"BANK" HEREUNDER FOR PURPOSES OF GIVING NOTICE OF DEFAULT UNDER SECTION 7.01(D)
AND FOR PURPOSES OF EXERCISING REMEDIES
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HEREUNDER, BUT ONLY SO LONG AS (I) OBLIGATIONS REMAIN OWING TO THE BANK UNDER
THE REIMBURSEMENT AGREEMENT OR THE LOAN DOCUMENTS (AS DEFINED IN THE
REIMBURSEMENT AGREEMENT) OR (II) THERE REMAIN OUTSTANDING HEREUNDER ANY BANK
NOTES PLEDGED TO THE BANK UNDER THE REIMBURSEMENT AGREEMENT.
END OF ARTICLE VII
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ARTICLE VIII
TRUSTEE, REMARKETING AGENT, PLACEMENT AGENT
AND PAYING AGENT
SECTION 8.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise its rights and powers and use the same degree of care and
skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that
are specifically set forth in this Agreement and no others and no implied
covenants or obligations shall be read into this Agreement against the Trustee,
and
(ii) in the absence of bad faith, gross negligence or
willful misconduct on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement. However, the Trustee shall examine the
certificates and opinions to determine whether they conform to the requirements
of this Agreement.
(c) The Trustee may not be relieved from liability for its own
grossly negligent action, its own grossly negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of (b)
above; and
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved that
the Trustee was grossly negligent in ascertaining the pertinent facts.
(d) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity reasonably satisfactory to it
against any loss, liability or expense, but the Trustee may not require
indemnity as a condition to declaring the principal of and interest on the
Series A Notes to be due immediately under Section 7.02 or to drawing on the
Series A Letter of Credit or to taking action under the Series A Letter of
Credit or in making payment of the principal of, interest on and Purchase Price
of Series A Notes when due.
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(e) The Trustee shall not be liable for interest on any cash
held by it except as the Trustee may agree with the Borrower.
(f) The Trustee shall strictly comply with the terms of the
Series A Letter of Credit.
(g) The Trustee shall maintain adequate records pertaining to
the funds in the Series A Letter of Credit Fund, the investment thereof and the
disbursement therefrom; notwithstanding anything to the contrary in this
Agreement, the Trustee shall not be required to advance its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder.
(h) Every provision of this Agreement that in any way relates
to the Trustee is subject to all the foregoing paragraphs of this Section.
(i) The Trustee shall in no event be responsible for ensuring
that the rate of interest due and payable on the Series A Notes under this
Agreement does not exceed the highest legal rate of interest permissible under
federal or state law applicable thereto.
SECTION 8.02. RIGHTS OF TRUSTEE.
(a) Subject to the foregoing Section, including, but not
limited to, Section 8.01(b)(ii) and 8.01(c), the Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document. Any action taken by the Trustee pursuant to this Agreement upon
the request or authority or consent of any person, who at the time of making
such request or authority or consent is the owner of any Series A Note, shall be
conclusive and binding upon all future owners of any Series A Note issued in
replacement thereof.
(b) Before the Trustee acts or refrains from acting, it may
require a certificate of an appropriate officer or officers of the Borrower or
an Opinion of Counsel stating that (i) the person making such certificate or
opinion has read such covenant or condition; (ii) the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (iii) in the opinion of such person, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (iv) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with. The Trustee
shall not be liable
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for any loss or damage or action it takes or omits to take in good faith in
reliance on the certificate or Opinion of Counsel.
(c) Subject to the consent of the Borrower, the Trustee may
execute any of its powers hereunder and perform any of its duties through
agents, attorneys or employees or co-Trustees and shall not be responsible for
the misconduct or negligence of any agent, attorney, employee or co-Trustee
appointed with due care.
SECTION 8.03. INDIVIDUAL RIGHTS OF TRUSTEE, ETC. The Trustee in its
individual or any other capacity may become the owner, Trustee or pledgee of
Series A Notes and may otherwise deal with the Bank or with the Borrower or its
affiliates with the same rights it would have if it were not Trustee.
SECTION 8.04. TRUSTEE'S DISCLAIMER. Subject to Sections 8.01(b) and
8.01(c):
(a) the Trustee makes no representation as to the validity or
adequacy of this Agreement or the Series A Notes and it shall not be accountable
for the Borrower's use of the proceeds from the Series A Notes paid to the
Borrower;
(b) the Trustee shall not be responsible for the application
of any of the proceeds of the Series A Notes or any other moneys deposited with
it and paid out, withdrawn or transferred hereunder if such application,
payment, withdrawal or transfer shall be made in accordance with the provisions
of this Agreement.
SECTION 8.05. NOTICE OF DEFAULTS. The Trustee shall not be required to
take notice, or be deemed to have notice, of any default or Event of Default
under this Agreement, other than an Event of Default under Section 7.01(a), (b)
or (d), unless specifically notified in writing at such address as set forth in
Section 10.01 hereof of such default or Event of Default by Noteholders of at
least 25% in principal amount of the Series A Notes then Outstanding, by the
Bank, by the Remarketing Agent or by the Borrower. If an event occurs which with
the giving of notice or lapse of time or both would be an Event of Default, and
if the event is continuing and if the Trustee has actual notice or is deemed to
have notice thereof as herein provided, the Trustee shall cause the Paying Agent
to mail to each Noteholder, the Remarketing Agent and the Bank notice of the
event upon such occurrence.
SECTION 8.06. COMPENSATION AND INDEMNIFICATION OF TRUSTEE. For acting
under this Agreement, the Trustee shall be entitled to compensation by the
Borrower of reasonable fees for the Trustee's services and reimbursement of
advances, counsel fees and other
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expenses reasonably and necessarily made or incurred by the Trustee in
connection with its services under this Agreement.
The Trustee shall be indemnified by the Borrower for, and shall be held
harmless against, any loss, liability or expense incurred without negligence,
willful misconduct or bad faith on the Trustee's part, arising out of or in
connection with the acceptance or administration of the exercise or performance
of any of its powers or duties hereunder.
SECTION 8.07. ELIGIBILITY OF TRUSTEE. This Agreement shall always have
a Trustee that meets the qualifications set forth in this Section 8.07. The
Trustee shall: (i) be a corporation or national banking association duly
organized under the laws of the United States of America or any state or
territory thereof, doing business and having an office in such location as shall
be approved by the Remarketing Agent, (ii) have a combined capital and surplus
of at least $100,000,000 as set forth in its most recent published annual report
of condition, (iii) either have senior long-term debt securities rated
"Baa3/P-3" or better by Moody's Investors Service, Inc. or "BBB-/A3" by Standard
& Poor's Ratings Group or be a direct or indirect subsidiary of a bank or bank
holding company which has senior long-term debt securities rated Baa3/P-3 or
better by Moody's Investors Service, Inc. or BBB-/A3 by Standard & Poor's
Ratings Group and (iv) be authorized by law to perform all the duties imposed
upon it by this Agreement.
SECTION 8.08. REPLACEMENT OF TRUSTEE. The Trustee may resign and be
discharged of the duties and obligations created by this Agreement by notifying
the Borrower, the Paying Agent, the Bank and the Remarketing Agent; provided,
however, that no such resignation shall become effective until the appointment
of a successor Trustee, as hereinafter provided. The holders of not less than a
majority in principal amount of the Series A Notes may remove the Trustee by
notifying the removed Trustee and may appoint a successor Trustee with the
Borrower's, the Bank's, the Paying Agent's and the Remarketing Agent's prior
written consent; provided, however, that no such removal shall become effective
until the appointment of a successor Trustee, as hereinafter provided. Except
upon the occurrence and during the continuance of an Event of Default hereunder,
the Borrower may remove the Trustee, but (except to the extent otherwise
provided herein) only after obtaining the prior written consent of the Bank and
giving written notice thereof to the Paying Agent, the Remarketing Agent and the
Bank by first-class mail, postage prepaid; provided, however, that no such
removal shall become effective until the appointment of a successor Trustee, as
hereinafter provided.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Borrower, with the
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prior written consent of the Paying Agent, the Bank and the Remarketing Agent
shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Borrower, the Paying Agent, the
Bank and the Remarketing Agent. Immediately thereafter, the retiring Trustee
shall transfer all property held by it as Trustee to the successor Trustee, the
resignation or removal of the retiring Trustee shall then (but only then) become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Agreement. The successor Trustee shall notify
the holders of the Series A Notes of its acceptance of the duties and
obligations hereunder in writing by first-class mail promptly following such
acceptance.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Borrower, the
Paying Agent, the Bank or the holders of a majority in principal amount of the
Series A Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 8.07, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
SECTION 8.09. DUTIES OF REMARKETING AGENT.
(a) The Remarketing Agent will, in accordance with the
Remarketing Agreement, establish the Interest Periods and corresponding Interest
Rates for the Series A Notes and perform the other duties provided for to be
done by it in this Agreement and the Remarketing Agreement.
(b) Subject to the consent of the Borrower, the Remarketing
Agent may execute and perform any of its duties hereunder through agents,
attorneys, employees or co-remarketing agents and shall not be responsible for
the misconduct or negligence of any agent, attorney, employee or co-remarketing
agent appointed with due care.
SECTION 8.10. ELIGIBILITY OF REMARKETING AGENT; REPLACEMENT. The
Remarketing Agent will be (i) a member of the National Association of Securities
Dealers, Inc. having excess net capital (as defined in Rule 15c3-1 of the
Securities Exchange Act of 1934, as amended) of at least $25,000,000 or, in the
alternative, a national banking association having a combined capital stock,
surplus and undivided profits of at least $100,000,000, (ii) a participant of
the Securities Depository (but only if DTC is Securities Depository hereunder),
and (iii)
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if the Series A Notes are rated by a Rating Agency, rated at least Baa3/P-3 or
otherwise be acceptable to the Rating Agency.
NationsBank of North Carolina, N.A. is hereby appointed as the initial
Remarketing Agent and is herein referred to as the "Remarketing Agent." Any
Remarketing Agent shall accept its appointment hereunder in writing. The
Remarketing Agent may resign by notifying the Borrower, the Trustee, the Paying
Agent and the Bank at least 45 days before the effective date of the
resignation. The Borrower may at any time remove the Remarketing Agent and
appoint a successor by notifying the Remarketing Agent, the Bank, the Paying
Agent and the Trustee at least 60 days prior to the effective date of such
removal. Upon the resignation or removal of the Remarketing Agent, the Borrower
shall appoint a successor by notifying the Remarketing Agent, the Bank, the
Paying Agent and the Trustee. If the Remarketing Agent resigns or is removed
pursuant to the terms of this Agreement and, after 45 days in the case of notice
of resignation or 60 days in the case of notice of removal, the Borrower has
failed to appoint a successor in accordance with the terms of this Agreement,
such resignation or removal shall take effect immediately and, as provided in
Section 3.08(a)(iii), the Series A Notes shall not be remarketed until a
successor Remarketing Agent has delivered an acceptance of its appointment to
the Trustee.
Notwithstanding the foregoing, with the consent of the Borrower and
with prior written notice to (but without the consent of), the Trustee, the
Bank, the Paying Agent and the Noteholders, NationsBank of North Carolina, N.A.
may assign or transfer any or all of its rights and obligations hereunder and
under the Remarketing Agreement to any other direct or indirect, wholly-owned
subsidiary of NationsBank Corporation so long as such subsidiary meets the
qualifications for a Remarketing Agent set forth herein and is otherwise
permitted to perform such obligations under all applicable federal and state
banking and securities laws, rules and regulations.
SECTION 8.11. DUTIES OF PLACEMENT AGENT.
(a) The Placement Agent will, in accordance with the Placement
Agreement, arrange to place the Series A Notes with qualified investors and
perform the other duties provided for to be done by it in this Agreement and the
Placement Agreement.
(b) Subject to the consent of the Borrower, the Placement
Agent may execute and perform any of its duties hereunder through agents or
attorneys and shall not be responsible for the misconduct or negligence of any
agent or attorney appointed with due care.
(c) Upon the issuance of the Series A Notes hereunder, the
Placement Agent shall assist the Borrower in obtaining from
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Standard & Poor's Ratings Group a long-term and a short-term rating on the
Series A Notes, which ratings shall be equivalent to the long-term and
short-term ratings of the Bank. The Borrower hereby agrees to pay (or, to the
extent incurred directly by the Placement Agent, reimburse the Placement Agent
for) all fees, costs and expenses incurred in connection with obtaining and
maintaining such ratings.
SECTION 8.12. ELIGIBILITY OF PLACEMENT AGENT; REPLACEMENT. The
Placement Agent will be (i) a member of the National Association of Securities
Dealers, Inc. having a capitalization of at least $25,000,000 or, in the
alternative, a national banking association having a combined capital stock,
surplus and undivided profits of at least $100,000,000, (ii) if the Series A
Notes are rated by a Rating Agency, rated at least Baa3/P-3 or otherwise be
acceptable to the Rating Agency and (iii) otherwise satisfactory to the Bank,
the Remarketing Agent and the Trustee.
NationsBank of North Carolina, N.A. is hereby appointed as the initial
Placement Agent. Any Placement Agent shall accept its appointment hereunder in
writing. The Placement Agent may resign by notifying the Borrower, the
Remarketing Agent, the Trustee, the Paying Agent and the Bank at least 45 days
before the effective date of the resignation. The Borrower may at any time
remove the Placement Agent and appoint a successor by notifying the Placement
Agent, the Remarketing Agent, the Bank, the Paying Agent and the Trustee at
least 60 days prior to the effective date of such removal. Upon the resignation
or removal of the Placement Agent, the Borrower shall appoint a successor by
notifying the Placement Agent, the Bank, the Remarketing Agent, the Paying Agent
and the Trustee. If the Placement agent resigns or is removed pursuant to the
terms of this Agreement and, after 45 days in the case of resignation or 60 days
in the case of removal, the Borrower has failed to appoint a successor in
accordance with the terms of this Agreement, such resignation or removal shall
take effect immediately.
Notwithstanding the foregoing, with the consent of the Borrower and
with prior written notice to (but without the consent of), the Trustee, the
Bank, the Remarketing Agent, the Paying Agent and the Noteholders, NationsBank
of North Carolina, N.A. may assign or transfer any or all of its rights and
obligations hereunder and under the Placement Agreement to any other direct or
indirect, wholly-owned subsidiary of NationsBank Corporation so long as such
subsidiary meets the qualifications for a Placement Agent set forth herein and
is otherwise permitted to perform such obligations under all applicable federal
and state banking and securities laws, rules and regulations.
SECTION 8.13. APPOINTMENT OF AND DUTIES OF PAYING AGENT. Norwest Bank
Minnesota, N.A. is hereby appointed the Paying Agent under this Agreement. The
Paying Agent, by its execution hereof,
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hereby accepts all duties and obligations imposed upon it under this Agreement.
The Paying Agent shall designate to the Trustee its principal office for
purposes hereof, which shall be the office of the Paying Agent at which all
notices and other communications in connection herewith may be delivered to it.
Any successor Paying Agent, by written instrument delivered to the Trustee, the
Borrower, the Bank and the Remarketing Agent, shall accept the duties and
obligations imposed upon it under this Agreement. The Paying Agent shall not be
liable in connection with its duties hereunder except for its own willful
misconduct, negligence or bad faith. The Paying Agent hereby agrees to make
payments of principal and Purchase Price of and interest on the Series A Notes
and perform its other duties and obligations all as more fully set forth herein
and to keep such books and records as shall be consistent with prudent industry
practice and to make such books and records available for inspection by the
Borrower, the Bank, the Remarketing Agent and the Trustee at all reasonable
times.
SECTION 8.14. QUALIFICATIONS OF PAYING AGENT; REPLACEMENT OF PAYING
AGENT . Any successor Paying Agent shall be a banking association or corporation
duly organized under the laws of the United States of America or any state or
territory thereof and authorized by law to perform all the duties imposed upon
it by this Agreement.
The Paying Agent may resign and be discharged of the duties and
obligations created by this Agreement by notifying the Borrower, the Trustee,
the Bank and the Remarketing Agent; provided, however, that no such resignation
shall become effective until the appointment of a successor Paying Agent, as
hereinafter provided. The holders of not less than a majority in principal
amount of the Series A Notes may remove the Paying Agent by notifying the
removed Paying Agent and may appoint a successor Paying Agent with the
Borrower's, the Bank's, the Trustee's and the Remarketing Agent's prior written
consent; provided, however, that no such removal shall become effective until
the appointment of a successor Paying Agent, as hereinafter provided. Except
upon the occurrence and during the continuance of an Event of Default hereunder,
the Borrower may remove the Paying Agent, but (except to the extent otherwise
provided herein) only after obtaining the prior written consent of the Bank and
giving written notice thereof to the Trustee, the Remarketing Agent and the Bank
by first-class mail, postage prepaid; provided, however, that no such removal
shall become effective until the appointment of a successor Paying Agent, as
hereinafter provided.
If the Paying Agent resigns or is removed or if a vacancy exists in the
office of Paying Agent for any reason, the Borrower, with the prior written
consent of the Trustee, the Bank and the Remarketing Agent shall promptly
appoint a successor Paying Agent.
A successor Paying Agent shall deliver a written acceptance of its
appointment to the retiring Paying Agent and to the
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Borrower, the Trustee, the Bank and the Remarketing Agent. Immediately
thereafter, the retiring Paying Agent shall transfer all property held by it as
Paying Agent to the successor Paying Agent, the resignation or removal of the
retiring Paying Agent shall then (but only then) become effective, and the
successor Paying Agent shall have all the rights, powers and duties of the
Paying Agent under this Agreement. The successor Paying Agent shall notify the
holders of the Series A Notes of its acceptance of the duties and obligations
hereunder in writing by first-class mail promptly following such acceptance.
If a successor Paying Agent does not take office within 60 days after
the retiring Paying Agent resigns or is removed, the retiring Paying Agent, the
Borrower, the Trustee, the Bank or the holders of a majority in principal amount
of the Series A Notes may petition any court of competent jurisdiction for the
appointment of a successor Paying Agent.
If the Paying Agent fails to comply with this Section 8.14, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Paying Agent and the appointment of a successor Paying Agent.
SECTION 8.15. SUCCESSOR TRUSTEE, PAYING AGENT OR REMARKETING AGENT BY
MERGER. If the Trustee, Paying Agent or Remarketing Agent consolidates with,
merges or converts into, or transfers all or substantially all its assets (or,
in the case of a bank or trust company, its corporate trust assets) to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee, Paying Agent or Remarketing Agent, provided that
such corporation or national banking association shall otherwise be eligible to
serve in such capacity under this Agreement.
SECTION 8.16. TRUSTEE'S COVENANT AS TO BANK NOTES. The Trustee shall
register all Series A Notes (or beneficial interests in Series A Notes) which
constitute Bank Notes (other than Bank Notes purchased with the Borrower's own
funds and not with the proceeds of a draw on the Series A Letter of Credit) in
its name as provided in Section 3.08(d)(ii) and shall hold such Bank Notes as
agent and bailee of the Bank subject to and in accordance with the terms of this
Agreement and the Reimbursement Agreement.
SECTION 8.17. TRUSTEE AND PAYING AGENT AS ONE ENTITY. Notwithstanding
any provision to the contrary in this Agreement, including, without limitation,
Sections 8.08 and 8.14, except as otherwise provided in this Section 8.17, the
Trustee and the Paying Agent shall be and shall remain, at all times and for all
purposes hereunder, one and the same entity, and (a) in the event that the
Trustee shall resign or be removed pursuant to the terms
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of Section 8.08, the Paying Agent shall be deemed simultaneously to have
resigned or to have been removed, as applicable, pursuant to Section 8.14, and
(b) in the event that the Paying Agent shall resign or be removed pursuant to
the terms of Section 8.14, the Trustee shall be deemed simultaneously to have
resigned or to have been removed, as applicable, pursuant to Section 8.08;
provided, however, that more than one entity may serve as Trustee and Paying
Agent hereunder if the Borrower, the Remarketing Agent and each such entity
shall expressly consent in writing to such arrangement.
END OF ARTICLE VIII
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ARTICLE IX
AMENDMENTS OF AGREEMENT
SECTION 9.01. WITHOUT CONSENT OF NOTEHOLDERS. The Borrower ,the Trustee
and the Paying Agent may amend or supplement this Agreement or the Series A
Notes without prior notice to or consent of any Noteholder:
(a) to cure any ambiguity, inconsistency or formal defect or
omission;
(b) to grant to the Trustee for the benefit of the Noteholders
additional rights, remedies, powers or authority;
(c) to modify this Agreement or the Series A Notes to permit
qualification under the Trust Indenture Act of 1939, as amended, or any similar
federal statute at the time in effect; to permit the qualification of the Series
A Notes for sale under the securities laws of any state of the United States; or
to prevent the application of the Investment Company Act of 1940, as amended, to
any of the transactions contemplated by, or any of the parties to this Agreement
or the Series A Notes;
(d) to provide for uncertificated Series A Notes or to make
any change necessary to give effect to a book-entry system pursuant to Section
2.07;
(e) to evidence the succession of a new Trustee or the
appointment by the Trustee of a co-Trustee;
(f) to make any change not materially adversely affecting any
Noteholder's rights requested by each Rating Agency then rating the Series A
Notes in order (i) to obtain a rating from each such Rating Agency after the
initial issuance of the Series A Notes if the Series A Notes are initially
issued without a rating equivalent to the rating assigned to other securities
supported by a Series A Letter of Credit of the Bank or (ii) to maintain any
rating on the Series A Notes;
(g) to make any change not materially adversely affecting any
Noteholder's rights to provide for or to implement the provisions of a Series A
Letter of Credit or a Substitute Series A Letter of Credit;
(h) to make any change to provide for or to implement the
provisions of a Series A Letter of Credit or a Substitute Series A Letter of
Credit only if such Series A Letter of Credit or Substitute Series A Letter of
Credit and the changes to this Agreement become effective on a Purchase Date
applicable to all of the Series A Notes;
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(i) to make any change that does not materially adversely
affect the rights of any Noteholder; or
(j) to add to this Agreement the obligation of the Trustee or
the Borrower to disclose such information regarding the Series A Notes, the
Project, the Borrower or the Bank as shall be required or recommended to be
disclosed in accordance with applicable regulations or guidelines established
by, among others, the American Bankers Association Corporate Trust Committee.
SECTION 9.02. WITH CONSENT OF NOTEHOLDERS. If an amendment of either
this Agreement or the Series A Notes is permitted by the preceding Section, the
Borrower, the Trustee and the Paying Agent may enter into such amendment,
without prior notice to any Noteholders; provided, however, that if the Trustee
determines in its sole discretion that such amendment materially adversely
affects the Owners, then prior to entering into such an amendment, the Borrower
and the Trustee shall obtain the consent of the holders of at least a majority
in principal amount of the Series A Notes then Outstanding. Without the consent
of all Noteholders affected, however, no amendment or supplement may (a) extend
the final stated maturity of any Series A Note, (b) reduce the principal amount
of, or Interest Rate on (prior to its Purchase Date), any Series A Note or
change the terms of any redemption or mandatory purchase thereof, (c) effect a
privilege or priority of any Series A Note or Series A Notes over any other
Series A Note or Series A Notes (except as provided herein), (d) reduce the
percentage of the principal amount of the Series A Notes required for consent to
such amendment or (f) alter the obligation of the Bank under the Series A Letter
of Credit or of the Borrower under the Series A Note Documents such that the
Owners are materially adversely affected.
SECTION 9.03. EFFECT OF CONSENTS. After an amendment becomes effective,
it will bind every Noteholder unless it makes a change described in any of the
lettered clauses of the preceding Section. In such case, the amendment will bind
each Noteholder who consented to it and each subsequent holder of a Series A
Note or portion of a Series A Note evidencing the same debt as the consenting
holder's Series A Note.
SECTION 9.04. NOTATION ON OR EXCHANGE OF SERIES A NOTES. If an
amendment or supplement changes the terms of a Series A Note, the Trustee may
require the holder to deliver such Series A Note to the Paying Agent. The Paying
Agent may place an appropriate notation on the Series A Note regarding the
changed terms and return it to the holder. Alternatively, if the Trustee and the
Borrower determine, the Borrower in exchange for the Series A Note will issue
and the Paying Agent will authenticate a new Series A Note that reflects the
changed terms. In either
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event, the cost of placing such notation on the Series A Note(s) shall be borne
by the Borrower.
SECTION 9.05. SIGNING BY TRUSTEE OF AMENDMENTS. The Trustee and the
Paying Agent will sign any amendment to this Agreement or the Series A Notes
authorized by this Article if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee or the Paying Agent. If
it does, the Trustee or the Paying Agent may, but need not, sign it. In signing
an amendment, the Trustee will be entitled to receive and (subject to Section
8.01) will be fully protected in relying on an Opinion of Counsel stating that
such amendment or supplement is authorized by this Agreement and is duly
authorized, executed and delivered and enforceable in accordance with its terms.
SECTION 9.06. BANK AND REMARKETING AGENT CONSENT REQUIRED. Except to
the extent that the consent of the Remarketing Agent or the Bank is not required
for the action that is the subject of the amendment (e.g., removal of the
Remarketing Agent , the Trustee or the Paying Agent by the Borrower upon the
terms specified herein), an amendment to this Agreement or the Series A Notes
shall not become effective unless the Remarketing Agent (but only to the extent
that such amendment affects the rights, duties or obligations of the Remarketing
Agent hereunder) and the Bank deliver to the Trustee their written consents to
the amendment. In any event, no amendment hereto shall become effective until
the Remarketing Agent receives a copy of the amendment and acknowledges such
receipt; provided, however, that receipt and acknowledgement of a copy of any
such amendment by the Remarketing Agent shall be deemed to have occurred if the
copy of the amendment is accompanied by notice requesting acknowledgement within
three (3) Business Days, and the copy of the amendment is sent by facsimile to
the Remarketing Agent (confirmed immediately by a telephone conversation between
the sender of the facsimile and an authorized representative of the Remarketing
Agent) and the Remarketing Agent fails to acknowledge receipt within three (3)
Business Days. For purposes of this section, for so long as NationsBank of North
Carolina, N.A. serves as Remarketing Agent hereunder, an "authorized
representative" of the Remarketing Agent shall mean a VRDN Product Manager. On
the Date of Issuance, the Remarketing Agent shall deliver to the Borrower a
certificate identifying each officer of the Remarketing Agent qualifying as a
VRDN Product Manager on such date, and each such officer's title, address and
telephone number.
SECTION 9.07. NOTICE TO NOTEHOLDERS. The Trustee shall cause the Paying
Agent to promptly mail notice of the execution of an amendment hereto to be
mailed promptly by first-class mail to each Noteholder at the holder's
registered address. The notice shall state briefly the nature of the amendment
and that
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copies thereof are on file with the Trustee for inspection by all Noteholders.
END OF ARTICLE IX
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. NOTICES.
(a) Any notice, request, direction, designation, consent,
acknowledgment, certification, appointment, waiver or other communication
required or permitted by this Agreement or the Series A Notes must be in writing
except as expressly provided otherwise in this Agreement or the Series A Notes.
(b) Except as otherwise provided herein, any notice or other
communication shall be sufficiently given and deemed given when delivered by
hand or overnight express delivery or mailed by first-class mail, postage
prepaid, addressed as follows or, if the communication may be given by telex or
telecopy under the provisions of this Agreement, when telexed or telecopied to
the following numbers (and, in the case of any telex or telecopy to the
Borrower, confirmed in writing within 24 hours by receipted hand delivery):
If to the Borrower: Hanover Direct, Inc.
1500 Harbor Boulevard, 1st Floor
Weehawken, New Jersey 07087
Attention: General Counsel
Telephone No.: (201) 319-3403
Fax No.: (201) 392-5005
If to the Trustee or the
Paying Agent: Norwest Bank Minnesota, N.A.
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Telephone No.: (612) 667-8058
Fax No.: (612) 667-9825
If to the Remarketing NationsBank of North Carolina, N.A.
Agent or Placement Agent: NationsBank Corporate Center
100 North Tryon Street
NC1-007-06-07
Charlotte, North Carolina 28255
Attention: Money Market Sales
Department
Telephone No.: (704) 386-1752
Fax No.: (704) 386-6490
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with a copy to: NationsBank of North Carolina, N.A.
NationsBank Corporate Center, 6th Floor
100 North Tryon Street
NC1-007-06-01
Charlotte, North Carolina 28255
Attention: VRDN Product Manager
Telephone No.: (704) 386-8783
Fax No.: (704) 388-9366
If to the Bank: NationsBank of North Carolina, N.A.
767 5th Avenue, 5th Floor
New York, New York 10153
Attention: Christopher C. Browder
Telephone No.: (212) 407-5322
Fax No.: (212) 751-6909
Any addressee may designate by giving notice in accordance with the
foregoing additional or different addresses or telex or telecopy numbers for
purposes of this Section.
A copy of any notice to any party given hereunder (with the exception
of notices required for drawings under any Series A Letter of Credit) shall be
provided to the Remarketing Agent in the manner such notice is otherwise given.
Upon the reasonable request of the Borrower (and at the Borrower's
expense), (a) the Trustee and the Paying Agent will provide to the Borrower a
list of names and addresses of and principal amounts held by the registered
owners or Beneficial Owners of the Series A Notes for purposes of enabling the
Borrower to obtain any consents or amendments or waivers hereunder and (b) the
Remarketing Agent will cooperate in good faith with the Borrower in connection
with any solicitation by the Borrower of Beneficial Owners of the Series A Notes
relating to any consents or amendments or waivers hereunder; provided, however,
that the Borrower covenants that it will use any information obtained from the
Trustee, the Paying Agent or the Remarketing Agent regarding the Beneficial
Owners of the Series A Notes only for the purpose of obtaining consents,
amendments or waivers as required in the Series A Note Agreement; provided
further, that the Borrower will not disclose the identity of any of the
Beneficial Owners of the Series A Notes to any other Person except with the
prior written consent of the Remarketing Agent in each and every instance.
The beneficial owner of $1,000,000 or more of Series A Notes may, by
written notice to the Paying Agent, request that all notices given with respect
to such Series A Notes be given to the registered owner thereof and to a second
address provided in such written notice to the Trustee. Upon receipt of such
notice described in the preceding sentence, the Trustee shall send all
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notices relating to the relevant Series A Notes to the registered owner and the
second address so designated.
SECTION 10.02. NOTEHOLDERS' CONSENTS. Any consent or other instrument
required by this Agreement to be signed by Noteholders may be in any number of
concurrent documents and may be signed by a Noteholder or by the holder's agent
appointed in writing. Proof of the execution of such instrument or of the
instrument appointing an agent and of the ownership of Series A Notes, if made
in the following manner, shall be conclusive for any purposes of this Agreement
with regard to any action taken by the Trustee under the instrument:
(a) The fact and date of a person's signing an instrument may
be proved by the certificate of any officer in any jurisdiction who by law has
power to take acknowledgments within that jurisdiction that the person signing
the writing acknowledged before the officer the execution of the writing, or by
an affidavit of any witness to the signing.
(b) The fact of ownership of Series A Notes, the amount or
amounts, numbers and other identification of such Series A Notes and the date of
holding shall be proved by the registration books kept by the Paying Agent
pursuant to this Agreement.
In determining whether the holders of the required principal amount of
Series A Notes Outstanding have taken any action under this Agreement, the
Trustee will disregard Bank Notes and Bank Notes will be deemed not to be
Outstanding for such purpose. In determining whether the Trustee shall be
protected in relying on any such action, only Series A Notes which the Trustee
knows to be so owned shall be disregarded.
SECTION 10.03. NOTICES TO RATING AGENCY. The Trustee shall notify the
Rating Agency in writing of the occurrence of any of the following events prior
to the proposed effective date thereof: (a) any change in the identity of the
Trustee or the Remarketing Agent; (b) any amendment or modification of or change
to this Agreement, the Reimbursement Agreement or the Series A Letter of Credit;
(c) the expiration or termination of the Series A Letter of Credit, or any
extension thereof; (d) the payment in full of the principal of and interest on
the Series A Notes; and (e) the delivery of any written opinion of Bankruptcy
Counsel required to be delivered pursuant to Section 5.03(b)(i)(B).
SECTION 10.04. LIMITATION OF RIGHTS. Nothing expressed or implied in
this Agreement or the Series A Notes shall give any person other than the
Trustee, the Borrower, the Bank, the Remarketing Agent and the Noteholders any
right, remedy or claim under or with respect to this Agreement.
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SECTION 10.05. SEVERABILITY. If any provision of this Agreement shall
be determined to be unenforceable by a court of law, that shall not affect any
other provision of this Agreement.
SECTION 10.06. PAYMENTS DUE ON NON-BUSINESS DAYS. If a payment date is
not a Business Day at the place of payment, then payment shall be made at that
place on the next succeeding Business Day, with the same force and effect as if
made on the payment date, and, in the case of any such payment, no interest
shall accrue for the intervening period.
SECTION 10.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State.
SECTION 10.08. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will be an original and all of which together will
constitute the same instrument.
SECTION 10.09. BINDING EFFECT. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns, except that no party hereto may assign any of its rights or
obligations hereunder without the consent of the other parties, the Bank, the
Remarketing Agent and the Placement Agent, unless otherwise provided herein.
END OF ARTICLE X
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IN WITNESS WHEREOF, the Borrower and the Trustee and Paying Agent have
caused this Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of November 9, 1994.
HANOVER DIRECT, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
ATTEST
By:_________________________________________________________
Title:______________________________________________________
[CORPORATE SEAL]
NORWEST BANK MINNESOTA, N.A., AS
TRUSTEE AND PAYING AGENT
By:_____________________________________
Name: Polly B. Berquist
Title: Corporate Trust Officer
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THIS SERIES A NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE REGULATORY
AUTHORITY UNDER ANY STATE SECURITIES LAWS AND THEREFORE CANNOT BE RESOLD UNLESS
IT IS REGISTERED UNDER SUCH ACT OR APPLICABLE LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
THIS SERIES A NOTE IS NOT A DEPOSIT OR OBLIGATION OF NATIONSBANK CORPORATION OR
ANY OF ITS AFFILIATED BANKS INCLUDING NATIONSBANK OF NORTH CAROLINA, N.A. (THE
"BANK"), OR GUARANTEED BY, IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION AND IS SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED. ALTHOUGH NOT GUARANTEED BY THE BANK, PAYMENTS OF
PRINCIPAL AND INTEREST ON THIS SERIES A NOTE AND, IF REMARKETING PROCEEDS ARE
NOT AVAILABLE, THE PURCHASE PRICE OF THIS SERIES A NOTE, WILL BE MADE FROM
DRAWINGS UNDER THE SERIES A LETTER OF CREDIT ISSUED BY THE BANK. THE FAILURE OF
THE BANK TO HONOR ANY DRAWING UNDER OTHER SERIES A LETTER OF CREDIT WILL NOT
GIVE RISE TO ANY CLAIM OTHER THAN AGAINST THE BANK.
EXHIBIT A
FORM OF SERIES A NOTE
REGISTERED REGISTERED
No. R-............... $......................
HANOVER DIRECT, INC.
FLEXIBLE TERM SERIES A NOTES,
SERIES A
INTEREST RATE MATURITY DATE DATE OF ISSUANCE
As Described October 1, 2009 ..............................
REGISTERED OWNER:
PRINCIPAL AMOUNT:
Hanover Direct, Inc., a Delaware corporation (the "Borrower"), for
value received, hereby promises to pay, solely from the sources and in the
manner hereinafter provided, to the registered owner, or registered assigns or
legal representative, upon presentation and surrender hereof at the principal
corporate trust office of Norwest Bank Minnesota, N.A., or its successor (in
such capacity, the "Paying Agent"), or by wire transfer, as provided in the
Series A Note Agreement, as hereinafter defined, the principal sum set forth
above on the Maturity Date set forth above, subject to the prior mandatory or
optional redemption of this
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Series A Note as hereinafter provided, and to pay solely from such source
interest hereon at the Interest Rate, as hereinafter defined, payable in arrears
on the Interest Payment Date, as hereinafter defined, until payment in full and,
to the extent permitted by law, interest on overdue installments of such
interest, from the Interest Payment Date applicable to this Series A Note next
preceding the date on which this Series A Note is authenticated, unless this
Series A Note is (a) authenticated before the first Interest Payment Date
following the initial delivery of the Series A Notes issued herein, in which
case it shall bear interest from the date of such initial delivery or (b)
authenticated upon an Interest Payment Date, in which case it shall bear
interest from such Interest Payment Date (unless interest on this Series A Note
is in default at the time of authentication, in which case this Series A Note
shall bear interest from the last date to which interest has been paid). Except
as otherwise provided in the Series A Note Agreement, interest hereon shall be
paid to the person in whose name this Series A Note is registered on the
register of the Paying Agent at the close of business on the Record Date next
preceding each Interest Payment Date, by check or draft mailed to such person at
his address as it appears on the register maintained by the Paying Agent, or by
wire transfer for holders of an aggregate principal amount of at least $500,000,
at the request of such holders, as provided in the Series A Note Agreement.
Principal and Purchase Price, as hereinafter defined, of and interest on this
Series A Note are payable in lawful currency of the United States of America. If
any payment hereon is due on a day which is not a Business Day, as hereinafter
defined, payment shall be made on the next succeeding Business Day with the same
force and effect as if made on the day such payment was due and, in the case of
such payment, no interest shall accrue for the intervening period.
This Series A Note is one of an issue not to exceed $10,000,000 Hanover
Direct, Inc. Flexible Term Notes, Series A (the "Series A Notes"), issued
pursuant to a Series A Note Agreement dated as of November 9, 1994 (the "Series
A Note Agreement"), between the Borrower and Norwest Bank Minnesota, N.A., as
trustee (in such capacity, the "Trustee") and Paying Agent, for the purpose of
refinancing and/or financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution facility of the
Borrower located in Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower located in San Francisco, California. Pursuant to the
Series A Note Agreement, the Borrower has caused NationsBank of North Carolina,
N.A. (the "Bank") to issue its irrevocable Series A Letter of Credit dated the
Date of Issuance (as hereinafter defined and as set forth above) of the Series A
Notes (the "Series A Letter of Credit") in favor of the Trustee, in an amount
sufficient to pay the Series A Facility Amount and unpaid interest on or
Purchase Price of the Series A Notes, but not to exceed $10,145,833, pursuant to
a Credit Facilities and Reimbursement Agreement dated as of October 12, 1994
(the "Reimbursement Agreement") by and among the Borrower, the financial lenders
listed on the signature pages of the Reimbursement Agreement, including the
Bank, and the Bank, as agent, which Series A Letter of Credit initially expires
(subject to extension or earlier termination as provided in the Reimbursement
Agreement and the Series A Note Agreement) on November 9, 1994. Substitute
letters of credit may be delivered in accordance with the Series A Note
Agreement. The Trustee is authorized and
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directed pursuant to the Series A Note Agreement to make timely draws under the
Series A Letter of Credit in accordance with the terms thereof, to the extent
necessary to make when due the payments of principal of (whether on the Maturity
Date referenced above, by acceleration, or by call for redemption), the Purchase
Price of and interest on the Series A Notes, except as otherwise provided in the
Series A Note Agreement and the Series A Letter of Credit. Reference is hereby
made to the Series A Note Agreement, the Series A Letter of Credit, the
Reimbursement Agreement and to all amendments and supplements thereto for a
description of the provisions, among others, with respect to the nature and
extent of the security, the default provisions, the rights, duties and
obligations of the Borrower and the Trustee and the rights of the holders of the
Series A Notes and the terms upon which the Series A Notes are issued and
secured.
The Series A Notes are issuable in registered form without coupons in
denominations of $100,000 or any integral multiple of $100,000 in excess thereof
(the "Authorized Denominations"). This Series A Note, upon surrender hereof at
the principal corporate trust office of the Paying Agent with a written
instrument of transfer satisfactory to the Paying Agent duly endorsed for
transfer or accompanied by an assignment duly executed by the holder hereof or
his attorney duly authorized in writing and, in either case, with an appropriate
guarantee of signature conforming to the requirements of the assignment attached
hereto, may, at the option of the holder hereof, be exchanged for Series A Notes
of the same aggregate principal amount and tenor as the Series A Notes being
exchanged and of any Authorized Denomination. This Series A Note is transferable
as provided in the Series A Note Agreement, subject to certain limitations
therein contained, only upon the register of the Paying Agent, and only upon
surrender of this Series A Note for transfer to the Paying Agent duly endorsed
for transfer or accompanied by a written instrument of transfer (in
substantially the form of the assignment attached hereto) duly executed by the
holder hereof or his duly authorized attorney. Thereupon, one or more new Series
A Notes of any Authorized Denomination or Authorized Denominations and in the
same aggregate principal amount and tenor as the Series A Note surrendered will
be issued to the designated transferee or transferees.
The person in whose name this Series A Note is registered shall be
deemed and regarded as the absolute owner hereof for any purpose, as provided in
and as qualified by the Series A Note Agreement.
The Paying Agent or NationsBank of North Carolina, N.A., as Remarketing
Agent (the "Remarketing Agent"), may make appropriate arrangements for some or
all of the Series A Notes to be issued or held by means of a book-entry system
administered by a Securities Depository, as hereinafter defined, with no
physical distribution of Series A Notes made to the public (other than those
Series A Notes, if any, not held under such book-entry system).
Initially, all of the Series A Notes will be held by means of a
book-entry system administered by the Securities Depository. One Series A Note
certificate in registered form
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will be issued for the Series A Notes in the aggregate principal amount of
$10,000,000, and will be registered in the name of the Securities Depository
Nominee and will be deposited with the Paying Agent. Thereafter, in the event
that Series A Notes are issued to the Beneficial Owners thereof in certificated
(physical) form (and in each and every case thereafter in which a change in the
principal amount of Series A Notes held pursuant to a book-entry system is
made), the Paying Agent will take all actions necessary to comply with the
Balance Certificate Agreement dated as of the date hereof between Norwest Bank
Minnesota, N.A., as transfer agent, and the Securities Depository, which
agreement governs the mechanisms for the registration of transfer of Series A
Note certificates registered in the name of the Securities Depository Nominee.
With respect to any Series A Notes that are held by means of a
book-entry system, such book-entry system will evidence beneficial ownership of
the Series A Notes so held in Authorized Denominations (or, as applicable,
positions held by the Participants, beneficial ownership being evidenced in the
records of such Participants). Registration and transfers of ownership shall be
effected on the records of the Securities Depository and the Participants, as
applicable, pursuant to rules and procedures established by the Securities
Depository and the Participants. Subject to the provisions of Section 7.09 of
the Series A Note Agreement relating to the Bank as holder of the Series A
Notes, the Borrower, the Trustee and the Paying Agent will recognize the
Securities Depository Nominee, as hereinafter defined, while the registered
owner of the Series A Notes so held, as the owner of the Series A Notes for all
purposes, including (i) payments of principal and Purchase Price of, and
interest on, the Series A Notes, (ii) notices and (iii) voting, subject to
certain qualifications as stated in the Series A Note Agreement. Transfer of
principal, interest and Purchase Price payments to beneficial owners of the
Series A Notes so held will be the responsibility of the Securities Depository
and the Participants. The Borrower, the Trustee, the Bank and the Paying Agent
will not be responsible or liable for such transfers of payments or for
maintaining, supervising or reviewing the records maintained by the Securities
Depository, the Securities Depository Nominee or the Participants.
While the Securities Depository Nominee is the owner of the Series A
Notes so held, notwithstanding the provision hereinabove contained, payments of
principal and Purchase Price of and interest on such Series A Notes shall be
made in accordance with the Letter of Representations dated as of November 9,
1994 among the Borrower, the Trustee, the Remarketing Agent and Paying Agent and
received and accepted by the Securities Depository.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE AND TRANSFER OF OWNERSHIP IS
MAINTAINED WITH RESPECT TO THIS SERIES A NOTE IN ACCORDANCE WITH THE TERMS OF
THE SERIES A NOTE AGREEMENT, (1) THE PROVISIONS OF THIS SERIES A NOTE RELATING
TO THE DELIVERY OF PHYSICAL SERIES A NOTES SHALL BE DEEMED INAPPLICABLE OR BE
OTHERWISE SO CONSTRUED WITH REGARD TO THIS SERIES A NOTE AS TO GIVE FULL EFFECT
TO SUCH BOOK-ENTRY SYSTEM AND (2) THE PROVISIONS
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OF THIS SERIES A NOTE RELATING TO ISSUANCE, PAYMENTS OF PRINCIPAL, PURCHASE
PRICE AND INTEREST, AND ESTABLISHMENT OF INTEREST RATES AND INTEREST PERIODS
WITH RESPECT TO THE SERIES A NOTES SHALL BE APPLICABLE TO BENEFICIAL OWNERSHIP
INTERESTS IN THE SERIES A NOTES IN AUTHORIZED DENOMINATIONS TO THE SAME EXTENT
AS SUCH PROVISIONS ARE APPLICABLE TO REGISTERED OWNERSHIP INTERESTS IN THE
SERIES A NOTES.
In the event that a book-entry system of evidence and transfer of
ownership of the Series A Notes is discontinued pursuant to the provisions of
the Series A Note Agreement, the Series A Notes shall be delivered solely in
registered form without coupons in the Authorized Denominations, shall be
lettered "R" and numbered separately from 1 upward, and shall be payable,
executed, authenticated, registered, exchanged and cancelled pursuant to the
provisions hereof and of the Series A Note Agreement.
All references herein to time shall be Charlotte, North Carolina time
unless otherwise expressly stated herein.
Except as otherwise specifically provided herein, all capitalized words
and terms shall have the same meaning when used herein as set forth in the
Series A Note Agreement.
1. CERTAIN DEFINITIONS.
"BUSINESS DAY" means any day other than (a) Saturday or
Sunday, (b) a day on which commercial banks in New York, New York, or in the
city or cities in which the corporate trust office of the Trustee or the Paying
Agent, the primary office of the Remarketing Agent or the Placement Agent or the
paying office of the Bank are authorized by law or executive order to close or
(c) a day on which the New York Stock Exchange is closed. For purposes of this
definition, "paying office of the Bank" means the Bank office responsible for
making payments under any Series A Letter of Credit.
"DATE OF ISSUANCE" means the date upon which the Series A
Notes are issued, authenticated and delivered in accordance with the terms and
conditions of Section 2.06 of the Series A Note Agreement.
"INTEREST PAYMENT DATE" means the first day after the last day
of each Interest Period.
"INTEREST PERIOD" means, with respect to any Series A Note,
each period of between one (1) and one hundred eighty (180) days established
from time to time by the Remarketing Agent in accordance with the Interest
Period determination method described in Section 2.02(a) of the Series A Note
Agreement.
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"INTEREST RATE" means, with respect to any Series A Note, the
interest rate on such Series A Note determined from time to time by the
Remarketing Agent in accordance with the Interest Rate determination method
described in Section 2.02(a) of the Series A Note Agreement. In no event shall
the Interest Rate exceed the lesser of fifteen percent (15%) per annum or the
highest interest rate which may be borne by the Series A Notes under applicable
law.
"PARTICIPANTS" means securities brokers and dealers, banks,
trust companies and clearing corporations which have access to the Securities
Depository's system.
"PURCHASE DATE" means, with respect to any Series A Notes, the
date on which such Series A Notes are required to be purchased pursuant to the
terms and conditions of Section 3.07(a) of the Series A Note Agreement.
"PURCHASE PRICE" means an amount equal to 100% of the
principal amount of any Series A Note tendered or deemed tendered to the Trustee
for purchase pursuant to the terms and conditions of Section 3.07 of the Series
A Note Agreement, plus accrued and unpaid interest thereon to, but excluding,
the Purchase Date.
"RECORD DATE" means, with respect to each Interest Payment
Date, the Trustee's close of business on the Business Day next preceding such
Interest Payment Date.
"SECURITIES DEPOSITORY" means, initially, The Depository Trust
Company, or any successor or substitute securities depository selected by the
Borrower (with the consent of the Trustee and the Remarketing Agent), which
shall maintain a book-entry system in respect of the Series A Notes.
"SECURITIES DEPOSITORY NOMINEE" means, as to any Securities
Depository, such Securities Depository or the nominee of such Securities
Depository in whose name there shall be registered on the register maintained by
the Paying Agent the Series A Note certificate to be delivered to and
immobilized with the Paying Agent during continuation with such Securities
Depository of participation in its book-entry system, and shall initially be
Cede & Co., nominee of The Depository Trust Company.
2. INTEREST ON THE SERIES A NOTES.
The Series A Notes will bear interest at the Interest Rate
from the Date of Issuance until paid in full. Interest accrued on each Series A
Note shall be paid on the applicable Interest Payment Date therefor. The amount
of interest payable on any Interest Payment Date shall be computed on the basis
of the actual number of days elapsed over a year of 360 days. The initial
Interest Period and corresponding Interest Rate for each Series A Note will be
determined by the Remarketing Agent on the Date of Issuance. After the initial
determination of the Interest Period and corresponding Interest Rate, the
applicable Interest Period and corresponding Interest Rate shall be determined
by the
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Remarketing Agent at the time and in the manner specified in Section 2.02 of the
Series A Note Agreement. The Remarketing Agent's determination of the Interest
Periods and Interest Rates shall be conclusive and binding on the Noteholders,
the Paying Agent, the Remarketing Agent, the Borrower, the Bank and the Trustee.
The Remarketing Agent will notify the Paying Agent in writing (which may be in
telecopy form) or by telephone promptly confirmed in writing by 10:00 a.m. on
the first Business Day of each Interest Period with respect to any Series A
Note, of the identity of such Series A Note, the length of such Interest Period,
the Interest Rate therefor and the principal amount of such Series A Note, and,
upon the request of the Borrower or the Bank, the Paying Agent shall promptly
(but in no event later than the end of such Business Day) after its receipt of
such information, forward such information to the Borrower and the Bank. The
failure by the Remarketing Agent or the Paying Agent, as applicable, to give any
such notice shall not affect the change in the Interest Period and/or Interest
Rate.
The calculation of interest payable on the Series A Notes as
provided in this Agreement will be conclusive and binding on the Borrower, the
Bank, the Trustee, the Paying Agent, the Remarketing Agent and the Noteholders,
absent manifest error.
Neither the Remarketing Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Trustee, the
Paying Agent, the Bank or any Noteholder for any action taken or not taken by
the Remarketing Agent or any of its directors, officers, agents or employees in
connection with the determination of the Interest Period and Interest Rate for
each Series A Note pursuant to the Series A Note Agreement, in the absence of
its own negligence or willful misconduct.
3. REDEMPTION OF SERIES A NOTES.
(a) OPTIONAL REDEMPTION. The Series A Notes are subject to
redemption at the option of the Borrower, in whole or in part, at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest
thereon to, but excluding, the redemption date; provided that any such
redemption in part shall be in a minimum principal amount of $100,000.
(b) MANDATORY SINKING FUND REDEMPTION. The Series A Notes are
subject to mandatory sinking fund redemption prior to the Maturity Date, in
part, with the Series A Notes to be redeemed being selected pursuant to Section
3.03, at a redemption price equal to the principal amount thereof, on October 1,
or if any such date is not a Business Day, on the next succeeding Business Day
with the same force and effect, in the years and in the principal amounts
indicated below:
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<TABLE>
<CAPTION>
REDEMPTION DATE PRINCIPAL
(OCTOBER 1) AMOUNT
----------- ------
<S> <C>
1996 $500,000
1997 500,000
1998 500,000
1999 500,000
2000 800,000
2001 800,000
2002 800,000
2003 800,000
2004 800,000
2005 800,000
2006 800,000
2007 800,000
2008 800,000
2009 800,000
</TABLE>
(c) MANDATORY REDEMPTION ON EXPIRATION OR TERMINATION OF
SERIES A LETTER OF CREDIT WITHOUT EXTENSION OR PROVIDING A SUBSTITUTE SERIES A
LETTER OF CREDIT. The Series A Notes are subject to mandatory redemption in
whole on the fifth (5th) Business Day prior to the stated date of expiration or
termination of the Series A Letter of Credit, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest thereon to, but
excluding, the redemption date, unless by the twentieth (20th) day prior to such
redemption date the Borrower provides to the Trustee, and the Trustee has
accepted, (1) evidence that such Series A Letter of Credit has been extended or
(2) a Substitute Series A Letter of Credit to be effective on or prior to such
redemption date.
(d) REDEMPTION DATE. The redemption date for Series A Notes to
be redeemed as described in paragraph 3(a) above must be an Interest Payment
Date with respect to the Series A Notes being redeemed. The redemption date for
mandatory redemptions will be as specified in paragraph 3(b) or (c) above, as
the case may be, or determined by the Trustee or the Remarketing Agent
consistently with the provisions thereof and of the Series A Note Agreement.
(e) SELECTION OF SERIES A NOTES TO BE REDEEMED. Except as
otherwise provided herein or in Section 3.03 of the Series A Note Agreement, if
fewer than all the Series A Notes are to be redeemed, the Remarketing Agent will
select the Series A Notes to be redeemed by lot or such other method as it deems
in its sole discretion to be fair and appropriate and shall notify the Paying
Agent (which notice may be provided by telephone, immediately confirmed in
writing by legible facsimile transmission, registered or certified mail,
overnight express delivery, or other secure means) of the holders and
denominations of Series A Notes to be redeemed; provided, however, that in
selecting Series A Notes to be redeemed the Remarketing Agent shall (i) select
only Series A Notes not previously
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called for redemption, (ii) select Bank Notes prior to any other Series A Notes,
and (iii) with respect to any mandatory sinking fund redemption as described in
paragraph 3(b) above, select the Series A Notes to be redeemed on or before the
sixtieth (60th) day prior to the redemption date, and in making such selection
take into account the duration of the Interest Periods with respect to such
Series A Notes.
In the event the Remarketing Agent fails to notify the Paying
Agent of the Series A Notes to be redeemed on or before the ninth (9th) Business
Day prior to the redemption date, the Paying Agent shall proceed to select
Series A Notes for redemption from among the Outstanding Series A Notes in the
chronological order in which their Purchase Dates occur, beginning with the
earliest Purchase Date; provided, however, that in selecting Series A Notes to
be redeemed the Paying Agent shall (i) select only Series A Notes not previously
called for redemption and (ii) select Bank Notes prior to any other Series A
Notes. If fewer than all Series A Notes having the same Purchase Date (selected
for redemption as provided in the immediately preceding sentence) are to be
redeemed, the Paying Agent shall treat each owner of Series A Notes as the owner
of one Series A Note for purposes of selection for redemption, and shall select
Series A Notes for redemption by lot or such other method as it deems fair and
appropriate, (1) from among the holders of less than $1,000,000 in aggregate
principal amount, provided that if there are no such holders, or if, after
selection from among such holders such selection has not resulted in redemption
of a sufficient amount of Series A Notes, then (2) from among the holders of
$1,000,000 or more in aggregate principal amount of Series A Notes.
No portion of a Series A Note may be redeemed that would
result in a Series A Note which is smaller than the then permitted minimum
Authorized Denomination. For this purpose, the Remarketing Agent or the Paying
Agent will consider each Series A Note in a denomination larger than the minimum
denomination permitted by the Series A Notes at the time to be separate Series A
Notes each in the minimum denomination.
(f) NOTICE OF REDEMPTION. The Trustee will prepare and cause
the Paying Agent to send notice of each redemption to each Noteholder whose
Series A Notes are being redeemed, the Borrower, the Remarketing Agent and the
Bank by first-class mail at least seven (7) Business Days but not more than
sixty (60) (or twenty (20), in the case of a mandatory redemption pursuant to
paragraph 3(c) above) days before each redemption. The notice shall identify the
Series A Notes or portions thereof to be redeemed and will state: (i) the type
of redemption and the redemption date, (ii) the redemption price, (iii) that the
Series A Notes called for redemption must be surrendered to collect the
redemption price, (iv) the address of the Paying Agent at which the Series A
Notes must be surrendered, (v) that interest on the Series A Notes called for
redemption ceases to accrue on the redemption date, (vi) the CUSIP number of the
Series A Notes called for redemption and (vii) any condition to the redemption.
Failure by the Trustee or the Paying Agent to give any notice of redemption as
to any particular Series A Notes will not affect the validity of the call for
redemption of any Series A Notes in respect of which no such failure has
occurred. Any notice mailed as provided in the Series A Notes will be
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conclusively presumed to have been given whether or not actually received by any
holder or beneficial owner.
(g) EFFECT OF REDEMPTION. On the date fixed for redemption,
notice having been given in the manner and under the conditions provided in the
Series A Note Agreement, the Series A Notes or portions thereof called for
redemption shall be due and payable at the redemption price provided therefor,
plus accrued interest to such date. On such redemption date, if moneys
sufficient to pay the redemption price of the Series A Notes to be redeemed,
plus accrued interest thereon to the date fixed for redemption, are held by the
Paying Agent, interest on the Series A Notes called for redemption shall cease
to accrue; such Series A Notes shall cease to be entitled to any benefits or
security under the Series A Note Agreement or to be deemed Outstanding; and the
holders and beneficial owners of such Series A Notes shall have no rights in
respect thereof except to receive payment of the redemption price thereof, plus
accrued interest to, but excluding, the date of redemption.
(h) SERIES A NOTES REDEEMED IN PART. Upon surrender of a
Series A Note redeemed in part, the Paying Agent will authenticate for the
holder a new Series A Note or Series A Notes equal in principal amount to the
unredeemed portion of the Series A Note surrendered.
4. PURCHASE OF SERIES A NOTES.
(a) MANDATORY PURCHASE OF SERIES A NOTES; NOTICE. Except as
provided in paragraph 4(c) below, Series A Notes are subject to mandatory
purchase at the Purchase Price:
(i) on each Interest Payment Date applicable to such
Series A Note; and
(ii) on the effective date of any Substitute Series A
Letter of Credit delivered in accordance with the terms and conditions of the
Series A Note Agreement, if, but only if, such Substitute Series A Letter of
Credit will result in a Credit Modification.
The Trustee will prepare and cause the Paying Agent to send
written notice of each mandatory purchase described in paragraph 4(a)(ii) above
(a "Notice of Mandatory Purchase") to each Noteholder whose Series A Notes are
being purchased, the Remarketing Agent, the Bank and the Borrower at least 15
days but not more than 60 days before the Purchase Date. No Notice of Mandatory
Purchase will be given to holders or beneficial owners of Series A Notes if the
mandatory purchase is being made as described in paragraph 4(a)(i) above.
(b) PAYMENT FOR PURCHASED SERIES A NOTES. The Purchase Price
of Series A Notes to be purchased on a Purchase Date shall be paid from
Remarketing
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Proceeds available to pay the Purchase Price of such Series A Notes and, to the
extent Remarketing Proceeds are not available to pay the Purchase Price of such
Series A Notes, from proceeds of a draw on the Series A Letter of Credit
pursuant to the applicable provisions of Section 5.02(a)(iv) of the Series A
Note Agreement. To the extent that sufficient moneys have been made available
therefor to the Paying Agent or the Remarketing Agent, as applicable, by 3:45
p.m. on the Purchase Date pursuant to Sections 3.08 and 5.02 of the Series A
Note Agreement, upon surrender to the Paying Agent of Series A Notes called for
mandatory purchase as provided in the Series A Note Agreement, the Purchase
Price therefor shall be paid in immediately available funds by the Paying
Agent's or the Remarketing Agent's, as applicable, close of business on the
Purchase Date. From and after the Purchase Date or, if later, the date on which
such moneys are made available to the Paying Agent or the Remarketing Agent, as
applicable, interest accruing on such Series A Notes shall cease to be payable
to the prior holder thereof, such Series A Notes shall cease to be entitled to
the benefits of the Series A Note Agreement and to such extent the prior holder
shall have recourse solely to the funds held by the Paying Agent or the
Remarketing Agent, as applicable, for the purchase of such Series A Notes as
provided in Section 4.03 of the Series A Note Agreement. Notwithstanding any
provision to the contrary herein or in the Series A Note Agreement, for so long
as the Series A Notes are held pursuant to a book-entry system maintained by
DTC, payments of Purchase Price with respect to such Series A Notes shall be
made pursuant to the rules and procedures established by DTC and its
Participants.
(c) LIMITATION ON TENDERS. The holders shall not be required
to tender any Series A Note for purchase on a Purchase Date if on such date,
following the occurrence of an Event of Default, the Trustee shall have declared
the principal of and interest on the Series A Notes immediately due and payable
pursuant to Section 7.02 of the Series A Note Agreement.
(d) In the event that any Series A Note purchased pursuant to
a mandatory purchase is not delivered by the holder thereof on the date such
Series A Note is purchased, the Borrower shall execute (if necessary) and the
Paying Agent will authenticate and deliver a new Series A Note of like aggregate
principal amount as the Series A Note purchased, the Series A Note purchased
shall no longer be deemed outstanding and the owner thereof shall be entitled to
receive only those funds held on deposit with respect thereto, and the new
Series A Note shall, for all purposes of the Series A Note Agreement, be deemed
to evidence the same debt as the Series A Note purchased and shall be
remarketed, delivered and registered in accordance with the terms of this Series
A Note and the Series A Note Agreement.
5. REMARKETING OF PURCHASED SERIES A NOTES.
(a) REMARKETING EFFORT. Except as otherwise provided in
Section 3.08(a) of the Series A Note Agreement, the Remarketing Agent will use
reasonable best efforts to remarket on the Purchase Date all Series A Notes
purchased in accordance with the terms
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of Section 3.07 of the Series A Note Agreement and, to the extent such purchased
Series A Notes are not remarketed on the Purchase Date, thereafter will continue
to use reasonable best efforts to remarket such purchased Series A Notes, upon
the terms and subject to the conditions of the Remarketing Agreement.
(b) REMARKETING PROCEEDS. To the extent the Remarketing Agent
has remarketed Series A Notes and has received funds representing a payment for
such Series A Notes (the "Remarketing Proceeds") from the purchasers thereof,
the Remarketing Agent will promptly forward the Remarketing Proceeds by wire
transfer (or in such other manner as is acceptable to the Remarketing Agent) to
the holders tendering such Series A Notes for purchase (or, if required pursuant
to Section 3.08(b) of the Series A Note Agreement, to the Paying Agent). Except
as otherwise provided below with respect to Bank Notes, until such transfer, all
such Remarketing Proceeds shall be deposited in a separate, segregated account
of the Remarketing Agent (or, if transferred to the Paying Agent as provided in
the Series A Note Agreement, in a separate, segregated account of the Paying
Agent) for application in accordance with the applicable provisions of Section
3.08(b) of the Series A Note Agreement, and until so applied shall be held in
trust for the benefit of the holders tendering such Series A Notes for purchase.
Notwithstanding any provision to the contrary herein or in the Series A Note
Agreement, for so long as the Series A Notes are held pursuant to a book-entry
system maintained by DTC, payments of Remarketing Proceeds with respect to such
Series A Notes shall be made pursuant to the rules and procedures established by
DTC and its Participants.
(c) DELIVERY OF PURCHASED SERIES A NOTES. Series A Notes
purchased with Remarketing Proceeds (other than Bank Notes) shall be delivered
to the purchasers thereof upon receipt of payment therefor. Prior to such
delivery, the Paying Agent shall provide for registration of transfer to the
Holders, as provided in a written notice from the Remarketing Agent.
6. MONEYS TO BE HELD IN TRUST. All proceeds of a draw on the Series A
Letter of Credit received by the Trustee and all money that the Trustee or the
Paying Agent shall hold in, or shall have withdrawn from, the Series A Letter of
Credit Fund or shall have received from any other source and set aside for the
purpose of paying any of the Series A Notes, either on the Maturity Date set
forth above or by purchase (other than as provided in Section 3.08 of the Series
A Note Agreement regarding remarketing of Series A Notes) or call for redemption
or for the purpose of paying any interest on the Series A Notes, shall be held
in trust for the respective holders or beneficial owners of the Series A Notes.
Moneys received by the Remarketing Agent, the Paying Agent or the Trustee from
the sale of a Series A Note under Section 3.08 of the Series A Note Agreement
regarding remarketing of Series A Notes or from the purchase of any Series A
Note will be held segregated from other funds held by the Remarketing Agent, the
Paying Agent or the Trustee for the benefit of the Person from whom such Series
A Note was purchased and will not be invested while so held. Any money that is
so set aside and that remains unclaimed by the holders or beneficial owners for
a period of five (5) years after the date on which such Series A Notes
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have become payable shall be remitted to the Borrower and thereafter the holders
or beneficial owners shall look only to the Borrower for payment and then only
to the extent of the amounts so received, without any interest thereon, and the
Trustee, the Remarketing Agent, the Paying Agent and the Bank shall have no
responsibility with respect to such money.
7. DEFAULTS AND REMEDIES. Upon the occurrence of certain events, and on
the conditions, in the manner and with the effect set forth in Article VII of
the Series A Note Agreement, the principal of all Series A Notes then
outstanding under the Series A Note Agreement may become or may be declared due
and payable before the stated maturity thereof, together with interest accrued
thereon. The Series A Note Agreement directs the Trustee to declare an
acceleration upon notice by the Bank of the occurrence and continuance of an
event of default under the Reimbursement Agreement, and upon the occurrence of
certain other Events of Default under the Series A Note Agreement. The Trustee
has the right to accelerate the entire unpaid principal of and interest on the
Series A Notes in certain events only with the Bank's consent, all as provided
in more detail in Article VII of the Series A Note Agreement to which reference
is hereby made.
The owner of this Series A Note shall have no right to enforce the
provisions of the Series A Note Agreement or to institute action to enforce the
covenants therein, or to take any action with respect to any Event of Default
under the Series A Note Agreement, or to institute, appear in or defend any suit
or other proceeding with respect thereto, except as provided in the Series A
Note Agreement and except that any registered owner may institute action to
enforce the payment of the principal of or interest on his Series A Note.
8. MISCELLANEOUS. Modifications or alterations of the Series A Note
Agreement may be made only to the extent and in the circumstances permitted by
Article IX of the Series A Note Agreement.
Executed counterparts of the Series A Note Agreement are on file at the
principal corporate trust office of the Trustee. The holder of this Series A
Note, by acceptance hereof, consents to all of the terms and provisions of the
Series A Note Agreement.
It is hereby certified that all acts, conditions and things required to
happen, exist and be performed under the laws of the State of New York, and
under the Series A Note Agreement precedent to and in connection with the
issuance of this Series A Note have happened, exist and have been performed as
so required, and that the issuance, authentication and delivery of this Series A
Note have been duly authorized by the Borrower.
Unless the Certificate of Authentication hereto has been executed by
the Paying Agent by manual signature of one of its Responsible Officers, this
Series A Note shall not be entitled to any benefit under the Series A Note
Agreement, or be valid or obligatory for any purpose.
A-13
<PAGE> 84
IN WITNESS WHEREOF, Hanover Direct, Inc. has caused this Series A Note
to be executed in its name and on its behalf by the manual or facsimile
signature of the President and Treasurer and attested by manual or facsimile
signature of the Secretary or Assistant Secretary and sealed with the corporate
seal of Hanover Direct, Inc., all as of the Date of Issuance set forth above.
HANOVER DIRECT, INC.
By: /s/ Jack Rosenfeld
____________________________________
Name: Jack Rosenfeld
Title: President and CEO
ATTEST:
By:________________________________
Name:______________________________
Title:_____________________________
[CORPORATE SEAL] By: /s/ Edward J. O'Brien
____________________________________
Name: Edward J. O'Brien
Title: Senior Vice President and
Treasurer
A-14
<PAGE> 85
CERTIFICATE OF AUTHENTICATION
This Series A Note is one of the Series A Notes issued under the
provisions of the within-mentioned Series A Note Agreement.
NORWEST BANK MINNESOTA, N.A.,
as Paying Agent
By:_____________________________________
Responsible Officer
Dated:______________
A-15
<PAGE> 86
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
________________________________________________________________________________
(PLEASE PRINT OR TYPE THE NAME AND ADDRESS, INCLUDING THE ZIP CODE OF THE
TRANSFEREE, AND THE FEDERAL TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
the within Series A Note and all rights thereunder, and hereby irrevocably
constitutes and appoints _______________ Attorney to transfer the within Series
A Note on the books kept for registration and transfer thereof, with full power
of substitution in the premises.
Dated:______________
By:_____________________________________
NOTICE: The signature of the
Registered Owner above must
correspond with the name of
the Registered Owner as it
appears on the registration
books maintained by the Paying
Agent.
Signature Guaranteed
By:_________________
NOTICE: Signature(s) must be guaranteed by a
member firm of the New York Stock
Exchange or a commercial bank or
trust company.
A-16
<PAGE> 87
EXHIBIT B
NOTICE OF MANDATORY REPURCHASE
TO THE OWNERS OF
$10,000,000 HANOVER DIRECT, INC.
FLEXIBLE TERM NOTES, SERIES A
NOTICE IS HEREBY GIVEN pursuant to Section 3.07 of the Series A Note
Agreement dated as of November 9, 1994 (the "Agreement") between Hanover Direct,
Inc. (the "Borrower") and Norwest Bank Minnesota, N.A., as trustee and paying
agent (the "Trustee" and the "Paying Agent", as applicable), that the
above-referenced Series A Notes are subject to mandatory purchase on [DATE] (the
"Purchase Date").
The Series A Letter of Credit currently in effect is [DESCRIPTION OF
Series A Letter of Credit]. Such Series A Letter of Credit will expire/be
terminated and replaced with [DESCRIPTION OF SUBSTITUTE Series A Letter of
Credit] on [EFFECTIVE DATE]. [DESCRIBE TERMS OF NEW Series A Letter of Credit].
[The existing rating or ratings assigned to the Series A Notes will be reduced
to [RATING/RATINGS]/withdrawn due to the termination/expiration and replacement
of the Series A Letter of Credit currently in effect.]
The Series A Notes are subject to mandatory purchase on the Purchase
Date at a Purchase Price of 100% of the principal amount of Series A Notes being
purchased plus interest accrued to, but excluding, the Purchase Date. The owners
are required to tender their Series A Notes, properly endorsed to the Paying
Agent by 10:00 a.m. on the Purchase Date. All purchases will be made in
immediately available funds on the Purchase Date. From and after the Purchase
Date, interest accruing on the Series A Notes shall cease to be payable to the
prior holder thereof, the Series A Notes shall cease to be entitled to the
benefits of the Agreement and the prior holder will have recourse solely to the
funds held by the Paying Agent or the Remarketing Agent, as applicable, for the
purchase of the Series A Notes.
All terms used herein which are not defined herein shall have the
meanings assigned to them in the Agreement.
Dated: NORWEST BANK MINNESOTA,
N.A., AS PAYING AGENT FOR HANOVER
DIRECT, INC.
By:_____________________________________
Title:__________________________________
B-1
<PAGE> 1
Exhibit 10.43
PLACEMENT AGREEMENT
This PLACEMENT AGREEMENT, dated as of November 9, 1994, by and between
HANOVER DIRECT, INC., a corporation organized and existing under the laws of the
State of Delaware (the "Borrower"), and NATIONSBANK OF NORTH CAROLINA, N.A., a
national banking association (the "Placement Agent");
W I T N E S S E T H:
WHEREAS, the Borrower intends to issue and sell from time to time its
interest bearing flexible term notes in an aggregate principal amount not to
exceed Twenty Million Dollars ($20,000,000) (the "Facility Amount") in two
separate series (the first series of such notes being hereinafter referred to as
the "Series A Notes," the second series of such notes being hereinafter referred
to as the "Series B Notes" and the Series A Notes and the Series B Notes being
hereinafter collectively referred to as the "Notes") each in an aggregate
principal amount not to exceed Ten Million Dollars ($10,000,000), pursuant to
the provisions of a Series A Note Agreement dated as of November 9, 1994 (the
"Series A Note Agreement") by and between the Borrower and Norwest Bank
Minnesota, N.A. (the "Trustee" or the "Paying Agent," as applicable), and the
Series B Note Agreement to be entered into among the Borrower, the Trustee and
the Paying Agent (the "Series B Note Agreement"; the Series A Note Agreement and
the Series B Note Agreement being hereinafter collectively referred to as the
"Note Agreement"), and to use the proceeds from such issuance and sale to
refinance and/or finance certain construction, refurbishment and related costs
of an approximately 500,000 square foot distribution facility of the Borrower
located in Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower located in San Francisco, California (the "Project");
and
WHEREAS, the payment when due of the principal of, interest on and
Purchase Price (as defined in the Note Agreement) of the Series A Notes will be
supported, to the extent provided therein, by the Series A Letter of Credit and
the payment when due of the principal of, interest on and Purchase Price of the
Series B Notes will be supported, to the extent provided therein, by the Series
B Letter of Credit (the Series A Letter of Credit and the Series B Letter of
Credit are sometimes hereinafter collectively referred to as the "Letter of
Credit"), each issued in favor of the Trustee by NationsBank of North Carolina,
N.A. (the "Bank") and each in an amount of not less than $10,145,833,
representing the principal amount of the applicable series of Notes plus 35 days
interest on such amount computed at the Maximum Rate (as defined in the Note
Agreement) on the basis of actual number of days elapsed in a year of 360 days,
all pursuant to a Credit Facilities and Reimbursement Agreement dated as of
October 12, 1994 (the "Reimbursement Agreement") by and among the Borrower, the
financial lenders listed on the signature pages of the Reimbursement Agreement,
including the Bank, and the Bank, as Agent; and
<PAGE> 2
WHEREAS, the Series A Notes are more fully described in the preliminary
private placement memorandum dated October 25, 1994 and the private placement
memorandum dated November 9, 1994 (collectively, the "Series A Placement
Memorandum") prepared in connection with the initial placement of the Notes; and
WHEREAS, the Series B Notes will be more fully described in a
Preliminary Private Placement Memorandum to be dated approximately seven days
prior to the issuance of the Series B Notes and a Private Placement Memorandum
to be dated the date of issuance of the Series B Notes (collectively, the
"Series B Placement Memorandum"; the Series A Placement Memorandum and the
Series B Placement Memorandum are hereinafter sometimes collectively referred to
as the "Placement Memorandum") prepared in connection with the initial placement
of the Series B Notes; and
WHEREAS, the Borrower has requested that the Placement Agent act as its
agent hereunder to perform certain services in connection with the placement of
the Notes upon issuance thereof, and the Placement Agent is willing to accept
such appointment and perform such services on the terms and subject to the
conditions set forth herein and in the Note Agreement;
NOW, THEREFORE, for and in consideration of the covenants herein made,
and upon the terms and subject to the conditions herein set forth, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein and not
otherwise herein defined shall have the meanings ascribed to them in the
applicable Note Agreement.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to, and agrees with, the Placement Agent
that:
(a) Each of the Borrower's representations and warranties contained in
the Note Agreement and the Reimbursement Agreement are true and correct on and
as of the date hereof and are hereby made to the Placement Agent as if set forth
herein.
(b) The Borrower has taken all necessary corporate action to authorize,
execute and deliver this Agreement, the Note Agreement, the Notes and the other
documents and agreements (including, without limitation, the Reimbursement
Agreement and the Remarketing Agreement) executed and delivered (or to be
executed and delivered) in connection with the issuance of the Notes and the
other transactions contemplated hereby (collectively, the "Related Documents")
to which it is or is to be, a party, and this Agreement has been duly executed
and delivered and constitutes, and the Note Agreement, the Notes and the Related
Documents to which it is or is to be a party when duly executed and delivered by
the Borrower, will constitute the legal, valid and binding obligations of the
Borrower enforceable in accordance with their respective terms except as the
enforceability thereof may be limited
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<PAGE> 3
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally and the application of general principles of equity.
(c) There is no action, suit, proceeding or inquiry, or, to the best
knowledge and information of the Borrower, any investigation, at law or in
equity, or before or by any court, public board or body or other governmental
authority, pending or, to the best knowledge and information of the Borrower,
threatened against or affecting the Borrower wherein an unfavorable decision,
ruling or finding could materially adversely affect the condition (financial or
otherwise) of the Borrower, or the transactions contemplated by this Placement
Agreement or the Placement Memorandum, or that in any manner raises any question
concerning the legality, validity or enforceability of this Placement Agreement,
the Notes, the Note Agreement or any Related Document, nor to the best knowledge
and belief of the Borrower is there any basis therefor.
(d) The execution, delivery and performance by the Borrower of this
Placement Agreement, the Note Agreement, the Notes and the Related Documents are
within the powers of the Borrower and do not and will not conflict with or
violate the articles of incorporation or bylaws of the Borrower or any order,
injunction, ruling or decree by which the Borrower or its property is bound, and
do not and will not constitute a breach of or default under any agreement,
indenture, mortgage, lease, note or other obligation, instrument or arrangement
to which the Borrower is a party or by which the Borrower or any of its property
is bound, or contravene or constitute a violation of any federal or state
constitutional or statutory provision, rule or regulation to which the Borrower
or any of its property is subject, the breach, default, contravention or
violation of which could have a material adverse effect on the business or
financial condition of the Borrower, and no approval or other action by, or
filing or registration with, any governmental authority or agency is required in
connection therewith that has not been obtained or accomplished or will not be
obtained or accomplished by the date hereof.
(e) The information relating to the Borrower and the Project contained
or incorporated by reference in the Placement Memorandum or otherwise supplied
by the Borrower in writing for inclusion therein, including, without limitation,
Appendix B thereto, does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Borrower has approved of the use and distribution of the
Placement Memorandum in connection with the placement and remarketing of the
Notes from time to time.
(f) The Borrower is not in default in the payment of the principal of
or interest on any other of its indebtedness for borrowed money or under any
instrument under or subject to which any indebtedness has been incurred and no
event has occurred and is continuing that, with the lapse of time or the giving
of notice or both, would constitute an event of default under any such
instrument.
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<PAGE> 4
(g) The Borrower agrees to make available to the Placement Agent,
without cost, sufficient copies of any relevant documents pertaining to the
Borrower, as reasonably may be required from time to time for the prompt and
efficient performance by the Placement Agent of its obligations hereunder,
including its obligations in connection with the placement of the Notes from
time to time.
SECTION 3. PLACEMENT OF THE NOTES.
The Placement Agent shall, as the agent of the Borrower, arrange to
place the Notes with investors, each of which shall be an "accredited investor"
within the meaning of Rule 501(a) of Regulation D of the Securities Exchange
Commission (the "Purchasers"), on or before each Date of Issuance. The
Purchasers are to purchase the Notes at a price equal to 100% of the principal
amount thereof. It is understood that the purchase of the Notes by the
Purchasers is subject to (a) on the Date of Issuance of the Series A Notes, (i)
receipt by the Placement Agent of: opinions of counsel to the Bank and the
Borrower meeting the requirements specified in Section 2.06(a) of the Series A
Note Agreement; a letter from any Rating Agency evidencing a rating on the
Series A Notes satisfactory to the Placement Agent; a certified copy of
resolutions of the board of directors of the Borrower authorizing the execution,
delivery and performance by the Borrower of this Agreement, the Note Agreement,
the Notes and the Related Documents to which it is a party; executed copies (or
duplicates thereof) of the Related Documents, each of which shall be in form and
substance satisfactory to the Placement Agent, and such other documents,
instruments and approvals (and, if requested by the Placement Agent, certified
duplicates of executed copies thereof) and opinions as the Placement Agent may
reasonably request; and (ii) satisfaction of the other conditions specified in
Section 2.06(a) of the Series A Note Agreement and in the Related Documents; and
(b) on the Date of Issuance of the Series B Notes, satisfaction of the
conditions specified in Section 2.06(a) of the Series B Note Agreement.
Purchasers shall be required to deposit the purchase price of Notes with the
Placement Agent on or before each Date of Issuance for transfer by the Placement
Agent on such Date of Issuance as provided in Section 4 below. The Borrower
hereby approves the Placement of the Notes by the Placement Agent from time to
time to prospective Purchasers on the terms set forth herein. The Placement
Agent may execute and perform any of its duties hereunder or under the Note
Agreement through agents, attorneys, employees or co-placement agents and shall
not be responsible for the misconduct or negligence of any agent, attorney,
employee or co-placement agent appointed with due care.
SECTION 4. NOTE PROCEEDS. The Placement Agent agrees that it will, on
the applicable Date of Issuance, transfer to or at the direction of the Borrower
all proceeds from the sale of Notes issued from time to time under the Note
Agreement, but only to the extent that each Purchaser has deposited the purchase
price of the Notes to be purchased by it with the Placement Agent. If any
Purchaser does not deposit with the Placement Agent the purchase price of the
Notes to be purchased by it or otherwise refuses to purchase the Notes to be
purchased
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<PAGE> 5
by it, the Placement Agent will use its best efforts to arrange for a substitute
Purchaser for such Notes on the terms set forth in Section 3 above.
SECTION 5. LIMITATION. Nothing contained in this Placement Agreement
shall obligate the Placement Agent to purchase the Notes in the event any
Purchaser fails to pay the purchase price of any Notes to be purchased by it or
in the event the Placement Agent is unable to arrange for the purchase of any of
the Notes.
SECTION 6. FEES AND EXPENSES.
(a) On each Date of Issuance, upon consummation of the transfer of all
proceeds from the sale of the Notes issued on such Date of Issuance as provided
in Section 4 above, the Borrower agrees to pay the Placement Agent a fee for its
services hereunder as set forth in that certain Engagement Letter dated July 15,
1994 from the Placement Agent to the Borrower and accepted and agreed to by the
Borrower.
(b) The Borrower also agrees to pay to the Placement Agent all
reasonable out-of-pocket costs and expenses of the Placement Agent to the extent
incurred in connection with: (i) each issuance and placement of the Notes from
time to time; (ii) the preparation, execution and delivery of this Placement
Agreement, the Placement Memorandum, the Note Agreement, the Notes, any Related
Document and any other documents contemplated to be delivered in connection
herewith or therewith; (iii) any amendment or modification of, or any default or
waiver (whether or not executed) under, this Placement Agreement, the Placement
Memorandum, the Note Agreement, the Notes, any Related Document and any other
documents contemplated to be delivered in connection herewith or therewith; and
(iv) the enforcement of any rights hereunder or thereunder or the defense of any
claim arising out of or in any way related to or connected with this Placement
Agreement, the Placement Memorandum, the Note Agreement, the Notes, any Related
Document and any other documents contemplated to be delivered in connection
herewith or therewith.
(c) The Borrower shall also pay all other fees and expenses incurred in
connection with: (i) each issuance and placement of the Notes; (ii) the
preparation, execution and delivery of this Placement Agreement, the Placement
Memorandum, the Note Agreement, the Notes, any Related Document and any other
document that may be delivered in connection herewith or therewith; (iii) any
amendment or modification of, or any default or waiver (whether or not executed)
under, this Placement Agreement, the Placement Memorandum, the Note Agreement,
the Notes, any Related Document and any other documents contemplated to be
delivered in connection herewith or therewith; and (iv) the enforcement of any
rights hereunder or thereunder or the defense of any claim arising out of or in
any way related to or connected with this Placement Agreement, the Placement
Memorandum, the Note Agreement, the Notes, any Related Document and any other
documents contemplate to be delivered in connection herewith or therewith;
including, but not limited to, the fees and expenses of counsel for the
Placement Agent, counsel for the Bank, counsel for the Borrower and counsel
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<PAGE> 6
for the Trustee, the fees and expenses of the Trustee, the cost of printing and
delivery of the Notes and the Placement Memorandum, Rating Agency fees, if any,
and fees and expenses of the Bank.
(d) The fees and expenses described in paragraphs (b) and (c) above
shall be paid by the Borrower whether or not the Notes are issued or placed. All
fees and expenses described in this Section 6, to the extent they are
identifiable and billed, shall be paid on the initial Date of Issuance, and the
remainder shall be paid promptly upon receipt of statements therefor. The
obligations of the Borrower under this Section 6 shall survive the issuance and
maturity of the Notes and any termination of this Placement Agreement.
SECTION 7. RESIGNATION OR REMOVAL OF PLACEMENT AGENT.
(a) The Placement Agent may resign and be discharged of its duties and
obligations hereunder and under the applicable Note Agreement and may be removed
from all or a portion of its duties and obligations hereunder and under the
applicable Note Agreement in the manner and at the times specified in Section
8.12 of the applicable Note Agreement. Upon the resignation or removal of the
Placement Agent, the Borrower agrees to appoint a successor Placement Agent in
accordance with Section 8.12 of the applicable Note Agreement.
(b) Notwithstanding the foregoing, with the consent of the Borrower and
with prior written notice to (but without the consent of) the Trustee, the
Remarketing Agent, the Paying Agent, the Bank and the Noteholders, NationsBank
of North Carolina, N.A. may assign or transfer any or all of its rights and
obligations as Placement Agent hereunder and under the Note Agreement to any
other wholly-owned subsidiary of NationsBank Corporation so long as such
subsidiary meets the qualifications for a Placement Agent set forth in the Note
Agreement and is otherwise permitted to perform such obligations under all
applicable federal and state banking and securities laws, rules and regulations.
SECTION 8. DISCLOSURE COVENANTS. The Borrower hereby approves of the
use and distribution of the Placement Memorandum (including any amendments,
modifications and supplements thereto) and all exhibits and appendices thereto
and all other documents provided by the Borrower to the Placement Agent for use
in the placement of the Notes from time to time. The Borrower agrees to cause
the Placement Agent to be furnished with as many copies of the Placement
Memorandum and all exhibits and appendices thereto and documents incorporated by
reference therein as the Placement Agent may reasonably request and the Borrower
agrees to furnish the Placement Agent with such other information as the
Borrower deems necessary or as the Placement Agent may reasonably request from
time to time in connection with the placement of the Notes in accordance with
the terms hereof. If at any time during the term of this Placement Agreement any
event or condition known to the Borrower relating to or affecting the Borrower,
the Bank, the Project or the Notes or any document or agreement related to the
Notes or executed in connection with the issuance or
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<PAGE> 7
placement thereof shall occur which might affect the accuracy or completeness of
any statement of a material fact contained in the Placement Memorandum or any
exhibit or appendix thereto or document incorporated by reference therein or any
other materials or information furnished by the Borrower to the Placement Agent
in connection with the placement, remarketing or sale of any Note hereunder, the
Borrower shall promptly notify the Placement Agent in writing of the
circumstances and details of such event or condition.
SECTION 9. INDEMNIFICATION. The Borrower agrees to indemnify and hold
harmless the Placement Agent and any member, commissioner, officer, director,
employee or agent of the Placement Agent and each person, if any, who controls
the Placement Agent within the meaning of Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended (collectively, the "Indemnified Parties") against any and all losses,
claims, damages, liabilities or expenses whatsoever (collectively, "Loss") which
any of them may incur or suffer, without negligence, willful misconduct or bad
faith on their part, arising out of, in connection with or relating to the
placement of the Notes from time to time, including, without limitation, any
Loss caused by, or which arises out of or relates to, any breach (or alleged
breach) by the Borrower of its representations or warranties set forth herein,
or any untrue statement or misleading statement of a material fact contained in
the Placement Memorandum or incorporated therein by reference (except statements
pertaining to the Bank, the Remarketing Agent or the Placement Agent) or
supplied by the Borrower in writing in connection with the placement of Notes
from time to time in accordance with the terms hereof and of the Remarketing
Agreement (collectively, the "Disclosure Materials"), or which arises out of or
relates to, any omission or alleged omission from such Disclosure Materials of
any material fact required to be stated therein or necessary in order to make
the statements contained therein, in light of the circumstances under which they
were made, not misleading (except omissions or alleged omissions pertaining to
the Bank, the Remarketing Agent or the Placement Agent). This indemnity
agreement is in addition to any other liability that the Borrower may otherwise
have.
In case any action (including any governmental investigation) shall be
brought against one or more of the Indemnified Parties and in respect of which
indemnity may be sought as provided herein, such Indemnified Party or
Indemnified Parties shall promptly notify the Borrower in writing and the
Borrower shall promptly assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party or Indemnified
Parties, payment of all expenses and the right to negotiate and consent to
settlement; but the omission to notify the Borrower as provided herein shall not
relieve the Borrower from any liability that it may have (i) under this Section
9, so long as the Borrower is given the reasonable opportunity to defend such
claim, and (ii) otherwise than under this Section 9. Any one or more of the
Indemnified Parties shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party or Indemnified
Parties. The Borrower shall not be liable for any settlement of any such action
effected without its consent,
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<PAGE> 8
but if settled with such consent or if there is a final judgment in any such
action with or without consent, the Borrower agrees to indemnify and hold
harmless the Indemnified Party or Indemnified Parties from and against any Loss
by reason of such settlement or judgment.
In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 9 is due
in accordance with its terms but is for any reason held by a court to be
unavailable from the Borrower or unenforceable against the Borrower on grounds
of policy or otherwise, the Borrower and the Placement Agent shall contribute
severally to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating or
defending same) to which the Borrower and the Placement Agent may be subject in
such proportion so that the Placement Agent is responsible for that portion
represented by the percentage that the fee referred to in Section 6(a) hereof
bears to the initial placement price for the Notes set forth in the Placement
Memorandum and the Borrower is responsible for the balance; provided, however,
that no person guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the Securities Act of 1933, as amended, shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any party entitled to contribution shall, promptly after
receipt of notice of commencement of any action, suit or proceeding against such
party in respect of which a claim for contribution may be made against another
party under this paragraph, notify such party from whom contribution may be
sought, but the omission so to notify such party shall not relieve the party
from whom contribution may be sought from any other obligation it or they may
have hereunder or otherwise. The liabilities under this paragraph are in
addition to any other liabilities that the parties may have.
The obligations under this Section 9 shall survive the issuance and the
maturity of the Notes and any termination of this Placement Agreement.
SECTION 10. NOTICES. Unless otherwise provided herein, all notices,
certificates, requests or other communications hereunder shall be sufficiently
given when delivered in writing by hand or sent by facsimile transmission,
tested telex or registered or certified mail, return receipt requested, postage
prepaid, or sent by any other electronic method capable of creating a written
document, addressed as follows:
If to the Trustee or the Paying Agent:
Norwest Bank Minnesota, N.A.
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Polly B. Berquist
Facsimile Transmission Number: (612) 667-9825
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<PAGE> 9
If to the Borrower:
Hanover Direct, Inc.
1500 Harbor Boulevard, 1st Floor
Weehawken, New Jersey 07087
Attention: Diana Faillace
Facsimile Transmission Number: (201) 392-5004
If to the Remarketing Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center
NC1-007-06-07
Charlotte, North Carolina 28255
Attention: Money Market Sales Department
Facsimile Transmission Number: (704) 386-6490
If to the Placement Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center, 6th Floor
NC1-007-06-01
Charlotte, North Carolina 28255
Attention: VRDN Project Manager
Facsimile Transmission Number: (704) 388-9366
If to the Bank:
NationsBank of North Carolina, N.A.
767 5th Avenue, 5th Floor
New York, New York 10153
Attention: Christopher C. Browder
Facsimile Transmission Number: (212) 751-6909
Each of the above parties may, by written notice given hereunder to the
others, designate any further or different addresses to which or means by which,
subsequent notices, certificates, requests or other communications shall be
sent.
SECTION 11. GOVERNING LAW. THIS PLACEMENT AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
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<PAGE> 10
SECTION 12. COUNTERPARTS. This Placement Agreement may be executed in
several counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
SECTION 13. BINDING EFFECT. This Placement Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns, except that the Borrower may not assign any of its
rights or obligations hereunder without the consent of the Placement Agent.
SECTION 14. TERMINATION. This Placement Agreement shall terminate
(except as to rights to any fees payable and rights to indemnity or
contribution, which shall survive any termination) on the earlier of (i) the
removal or resignation of the Placement Agent pursuant to Section 7 hereof or
(ii) payment in full of the Notes.
SECTION 15. MISCELLANEOUS.
(a) Nothing herein shall be construed to make any party hereto an
employee of the other or to establish any fiduciary relationship between the
Borrower and the Placement Agent, except as expressly provided herein.
(b) This Placement Agreement may be amended from time to time only by
an instrument in writing executed by all the parties hereto.
(c) The headings contained herein are for convenience of reference only
and shall not affect in any way the meaning or interpretation of this Agreement.
(d) If any one or more of the covenants, provisions or agreements
contained in this Placement Agreement shall be determined by a court of
competent jurisdiction to be invalid, the invalidity of such covenants,
provisions and agreements shall in no way affect the validity or effectiveness
of the remainder of this Placement Agreement, and this Placement Agreement shall
continue in full force and effect to the fullest extent permitted by law.
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
______________________________________
Title: Senior Vice President & Treasurer
_____________________________________
NATIONSBANK OF NORTH CAROLINA,
N.A.
By: /s/ Jennifer W. Arens
______________________________________
Jennifer W. Arens
Vice President
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<PAGE> 1
Exhibit 10.44
REMARKETING AND INTEREST SERVICES AGREEMENT
This REMARKETING AND INTEREST SERVICES AGREEMENT, dated as of November
9, 1994, by and between HANOVER DIRECT, INC., a corporation organized and
existing under the laws of the State of Delaware (the "Borrower"), and
NATIONSBANK OF NORTH CAROLINA, N.A., a national banking association (the
"Remarketing Agent");
W I T N E S S E T H:
WHEREAS, the Borrower intends to issue and sell from time to time its
interest bearing flexible term notes in an aggregate principal amount not to
exceed Twenty Million Dollars ($20,000,000) (the "Facility Amount") in two
separate series (the first series of such notes being hereinafter referred to as
the "Series A Notes," the second series of such notes being hereinafter referred
to as the "Series B Notes" and the Series A Notes and the Series B Notes being
hereinafter collectively referred to as the "Notes") each series in an aggregate
principal amount not to exceed Ten Million Dollars ($10,000,000), pursuant to
the provisions of a Series A Note Agreement dated as of November 9, 1994 (the
"Series A Note Agreement") by and between the Borrower and Norwest Bank
Minnesota, N.A. (the "Trustee" or the "Paying Agent", as applicable), and the
Series B Note Agreement to be entered into among the Borrower, the Trustee and
the Paying Agent (the "Series B Note Agreement"; the Series A Note Agreement and
the Series B Note Agreement being hereinafter collectively referred to as the
"Note Agreement") between the Borrower and the Trustee, and to use the proceeds
from such issuance and sale to refinance and/or finance certain construction,
refurbishment and related costs of an approximately 530,000 square foot
distribution facility of the Borrower located in Roanoke, Virginia and a new
retail store of Gump's, Inc., a subsidiary of the Borrower, located in San
Francisco, California (the "Project"); and
WHEREAS, the payment when due of the principal of, interest on and
Purchase Price (as defined in the Note Agreement) of the Series A Notes will be
supported, to the extent provided therein, by the Series A Letter of Credit and
the payment when due of the principal of, interest on and Purchase Price of the
Series B Notes will be supported, to the extent provided therein, by the Series
B Letter of Credit (the Series A Letter of Credit and the Series B Letter of
Credit are sometimes hereinafter collectively referred to as the "Letter of
Credit"), each issued in favor of the Trustee by NationsBank of North Carolina,
N.A. (the "Bank") and each in an amount of not less than $10,145,833,
representing the principal amount of the applicable series of Notes plus 35 days
interest on such amount computed at the Maximum Rate (as defined in the Note
Agreement) on the basis of actual number of days elapsed in a year of 360 days,
all pursuant to a Credit Facilities and Reimbursement Agreement dated as of
October 12, 1994 (the "Reimbursement Agreement") by and among the Borrower, the
financial lenders listed on the signature pages of the Reimbursement Agreement,
including the Bank, and the Bank, as Agent; and
<PAGE> 2
WHEREAS, the Notes are subject to mandatory tender for purchase by the
holders thereof and to remarketing, all as provided in the Note Agreement; and
WHEREAS, the Series A Notes are more fully described in the Preliminary
Private Placement Memorandum dated October 25, 1994 and the Private Placement
Memorandum dated November 9, 1994 (collectively, the "Series A Placement
Memorandum") prepared in connection with the initial placement of the Notes; and
WHEREAS, the Series B Notes will be more fully described in a
Preliminary Private Placement Memorandum to be dated approximately seven days
prior to the issuance of the Series B Notes and a Private Placement Memorandum
to be dated the date of issuance of the Series B Notes (collectively, the
"Series B Placement Memorandum") prepared in connection with the initial
placement of the Series B Notes (the Series A Placement Memorandum and the
Series B Placement Memorandum are hereinafter sometimes collectively referred to
as the "Placement Memorandum"); and
WHEREAS, the Borrower has requested that the Remarketing Agent act as
its agent hereunder to perform certain services in connection with the
remarketing of Notes tendered for purchase and the determination of the interest
rates and interest periods with respect to the Notes, and the Remarketing Agent
is willing to accept such appointment and perform such services on the terms and
subject to the conditions set forth herein and in the Note Agreement;
NOW, THEREFORE, for and in consideration of the covenants herein made,
and upon the terms and subject to the conditions herein set forth, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein and not
otherwise herein defined shall have the meanings ascribed to them in the
applicable Note Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants to the Remarketing Agent that each of the Borrower's
representations and warranties contained in the Placement Agreement, the Note
Agreement and the Reimbursement Agreement is true and correct, in all material
respects, as of the date hereof and is hereby made to the Remarketing Agent as
if set forth herein, and the Borrower is in compliance, in all material
respects, with all terms, covenants and conditions of the Placement Agreement
and each other agreement or document relating to the Notes to which it is a
party.
SECTION 3. REMARKETING OF NOTES. The Remarketing Agent hereby agrees to
perform the duties and obligations, and only such duties and obligations, as are
expressly imposed upon it as Remarketing Agent herein and under the Note
Agreement and, except as otherwise provided in and subject to the limitations
set forth in the Note Agreement, agrees to use its reasonable best efforts to
remarket the Notes as set forth in the Note Agreement, as agent for the Borrower
and not as principal, to "accredited investors" within the meaning of Rule
501(a) of Regulation D of the Securities and Exchange Commission.
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<PAGE> 3
SECTION 4. DETERMINATION OF INTEREST PERIODS AND INTEREST RATES. The
Remarketing Agent shall determine the Interest Period and the Interest Rate with
respect to each Note in accordance with Section 2.02(a) of the applicable Note
Agreement and shall provide notice thereof to the parties, in the manner and at
the times set forth in Section 2.02(b) of the applicable Note Agreement.
SECTION 5. REMARKETING AGENT COMPENSATION. The Borrower agrees to pay
to the Remarketing Agent a continuing remarketing and administration fee as set
forth in that certain Engagement Letter dated July 15, 1994 from the Remarketing
Agent to the Borrower and accepted and agreed to by the Borrower, and such fee
shall be payable in advance on the initial Date of Issuance and on each October
1 thereafter until payment in full of the Notes. The Borrower also agrees to
reimburse the Remarketing Agent for all reasonable out-of-pocket expenses
incurred by it in connection herewith, including, but not limited to, fees and
disbursements of counsel to the Remarketing Agent.
SECTION 6. DUTIES OF REMARKETING AGENT. The Remarketing Agent shall
have no duty to act hereunder to the extent the Remarketing Agent is not
required to perform its obligations under the Note Agreement. To the extent
permitted under the applicable Note Agreement, or otherwise with the consent of
the Borrower, the Remarketing Agent may execute and perform any of its duties
hereunder or under the Note Agreement through agents, attorneys, employees or
co-remarketing agents and shall not be responsible for the misconduct or
negligence of any agent, attorney, employee or co-remarketing agent appointed
with due care. Notwithstanding any provision to the contrary herein, the
Remarketing Agent hereby expressly assumes the duties and obligations of the
Remarketing Agent under the Note Agreement, but only as specifically set forth
therein.
SECTION 7. RESIGNATION OR REMOVAL OF REMARKETING AGENT.
(a) The Remarketing Agent may resign and be discharged of its
duties and obligations hereunder and under the applicable Note Agreement and may
be removed from all or a portion of its duties and obligations hereunder and
under the applicable Note Agreement in the manner and at the times specified in
Section 8.10 of the applicable Note Agreement. Upon the resignation or removal
of the Remarketing Agent, the Borrower agrees to appoint a successor Remarketing
Agent in accordance with Section 8.10 of the applicable Note Agreement.
(b) Notwithstanding the foregoing, with the consent of the
Borrower and with prior written notice to (but without the consent of) the
Trustee, the Placement Agent, the Paying Agent, the Bank and the Noteholders,
NationsBank of North Carolina, N.A. may assign or transfer any or all of its
rights and obligations as Remarketing Agent hereunder and under the Note
Agreement to any other direct or indirect wholly-owned subsidiary of NationsBank
Corporation so long as such subsidiary meets the qualifications for a
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<PAGE> 4
Remarketing Agent set forth in the Note Agreement and is otherwise permitted to
perform such obligations under all applicable federal and state banking and
securities laws, rules and regulations.
SECTION 8. DISCLOSURE COVENANTS. The Borrower hereby approves of the
use and distribution of the Placement Memorandum (including any amendments,
modifications and supplements thereto made or approved by the Borrower) and all
exhibits and appendices thereto and all other documents provided by the Borrower
to the Remarketing Agent for use in the remarketing of the Notes. The Borrower
agrees to cause the Remarketing Agent to be furnished with as many copies of the
Placement Memorandum and all exhibits and appendices thereto and documents
incorporated by reference therein as the Remarketing Agent may reasonably
request and the Borrower agrees to furnish the Remarketing Agent with such other
information as the Borrower deems necessary or as the Remarketing Agent may
reasonably request from time to time in connection with the remarketing of the
Notes in accordance with the terms hereof. If at any time during the term of
this Remarketing Agreement any event or condition known to the Borrower relating
to or affecting the Borrower, the Bank, the Project or the Notes or any document
or agreement related to the Notes or executed in connection with the issuance or
placement thereof shall occur which might affect the accuracy or completeness of
any statement of a material fact contained in the Placement Memorandum or any
exhibit or appendix thereto or document incorporated by reference therein or any
other materials or information furnished by the Borrower to the Remarketing
Agent in connection with the placement, remarketing or sale of any Note
hereunder, the Borrower shall promptly notify the Remarketing Agent in writing
of the circumstances and details of such event or condition.
SECTION 9. INDEMNIFICATION. The Remarketing Agent, and any member,
director, officer, official, employee or agent of the Remarketing Agent, and
each person, if any, who controls the Remarketing Agent within the meaning of
Section 15 of the Securities Act of 1933, as amended, or Section 20 of the
Securities Exchange Act of 1934, as amended (collectively, the "Indemnified
Parties") shall be entitled to all rights and benefits provided to the Placement
Agent under Section 9 of the Placement Agreement, subject to any conditions and
qualifications thereunder. The Borrower agrees to indemnify any Indemnified
Party for, and to hold it harmless against, any losses, liabilities, claims
(whether or not valid or meritorious), damages, and reasonable costs and
expenses (including, without limitation, reasonable counsel fees and
disbursements) incurred by such Indemnified Party arising out of or in
connection with the Indemnified Party's performance of its obligations pursuant
to this Agreement, except to the extent caused by the Indemnified Party's
negligence or willful misconduct.
SECTION 10. FAILURES BY PURCHASERS. The Remarketing Agent shall not be
liable to the Borrower on account of the failure of any person to whom the
Remarketing Agent has remarketed a Note to pay for such Note or deliver any
document in respect of such placement.
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<PAGE> 5
SECTION 11. NOTICES. Unless otherwise provided herein, all notices,
certificates, requests or other communications hereunder shall be sufficiently
given when delivered in writing by hand or sent by facsimile transmission,
tested telex or registered or certified mail, return receipt requested, postage
prepaid, or sent by any other electronic method capable of creating a written
document, addressed as follows:
If to the Trustee or Paying Agent:
Norwest Bank Minnesota, N.A.
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Facsimile Transmission Number: (612) 667-9835
If to the Borrower:
Hanover Direct, Inc.
1500 Harbor Boulevard, 1st Floor
Weehawken, New Jersey 07087
Attention: General Counsel
Facsimile Transmission Number: (201)-392-5004
If to the Remarketing Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center
NC1-007-06-07
Charlotte, North Carolina 28255-0001
Attention: Money Market Sales Department
Facsimile Transmission Number: (704) 386-6490
If to the Placement Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center, 6th Floor
NC1-007-06-01
Charlotte, North Carolina 28255
Attention: VRDN Product Manager
Facsimile Transmission Number: (704) 388-9366
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<PAGE> 6
If to the Bank:
NationsBank of North Carolina, N.A.
767 5th Avenue, 5th Floor
New York, New York 10153
Attention: Christopher L. Browder
Facsimile Transmission Number: (212) 751-6909
Upon the reasonable request of the Borrower (and at the Borrower's
expense), (a) the Trustee and the Paying Agent will provide to the Borrower a
list of names and addresses of and principal amounts held by the registered
owners or Beneficial Owners of the Notes for purposes of enabling the Borrower
to obtain any consents or amendments or waivers hereunder or under the Note
Agreement and (b) the Remarketing Agent will cooperate in good faith with the
Borrower in connection with any solicitation by the Borrower of Beneficial
Owners of the Notes relating to any consents or amendments or waivers hereunder
or under the Note Agreement; provided, however, that the Borrower covenants that
it will use any information obtained from the Trustee, the Paying Agent or the
Remarketing Agent regarding the Beneficial Owners of the Notes only for the
purpose of obtaining consents, amendments or waivers hereunder or under the Note
Agreement; as required hereunder or in the Note Agreement; provided further,
that the Borrower will not disclose the identity of any of the Beneficial Owners
of the Notes to any other Person except with the prior written consent of the
Remarketing Agent in each and every instance.
Each of the above parties may, by written notice given hereunder to the
others, designate any further or different addresses to which or means by which,
subsequent notices, certificates, requests or other communications shall be
sent.
SECTION 12. GOVERNING LAW. THIS REMARKETING AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
SECTION 13. COUNTERPARTS. This Remarketing Agreement may be executed in
several counterparts, each of which shall be an original and all of which, taken
together, shall constitute but one and the same instrument.
SECTION 14. BINDING EFFECT. This Remarketing Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns, except that the Borrower may not assign any of its
rights or obligations hereunder without the consent of the Remarketing Agent.
SECTION 15. TERMINATION. This Remarketing Agreement shall terminate
(except as to unsatisfied obligations of either party arising prior to the
Termination Date (as hereinafter defined) and rights to any fees payable and
rights to indemnity or contribution, which shall survive any termination) on the
earlier of either of the following dates (the "Termination
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<PAGE> 7
Date") (i) the date of the removal or resignation of the Remarketing Agent
pursuant to Section 7 hereof or (ii) the date of the payment in full of the
Notes.
SECTION 16. MISCELLANEOUS.
(a) Nothing herein shall be construed to make any party hereto
an employee of the other or to establish any fiduciary relationship between the
Borrower and the Remarketing Agent, except as expressly provided herein.
(b) This Remarketing Agreement may be amended from time to
time only by an instrument in writing executed by all the parties hereto.
(c) The headings contained herein are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Remarketing Agreement.
(d) If any one or more of the covenants, provisions or
agreements contained in this Remarketing Agreement shall be determined by a
court of competent jurisdiction to be invalid, the invalidity of such covenants,
provisions and agreements shall in no way affect the validity or effectiveness
of the remainder of this Remarketing Agreement, and this Remarketing Agreement
shall continue in full force and effect to the fullest extent permitted by law.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Remarketing
Agreement to be duly executed as of the day and year first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
______________________________________
Title: Senior VP & Treasurer
_____________________________________
NATIONSBANK OF NORTH CAROLINA,
N.A.
By: /s/ Jennifer W. Arens
_______________________________________
Jennifer W. Arens
Vice President
-8-
<PAGE> 1
Exhibit 10.45
FIRST SUPPLEMENTAL SERIES A NOTE AGREEMENT
This FIRST SUPPLEMENTAL SERIES A NOTE AGREEMENT dated as of December
29, 1995, between HANOVER DIRECT, INC., a Delaware corporation (the "Borrower"),
and NORWEST BANK MINNESOTA, N.A., a national banking association organized under
the laws of the United States of America and having its principal office in
Minneapolis, Minnesota, as trustee and paying agent (the "Trustee" or the
"Paying Agent", as applicable);
W I T N E S S E T H:
WHEREAS, the Borrower and the Trustee entered into the Series A Note
Agreement dated as of November 9, 1994 (the "Series A Note Agreement") pursuant
to which the Borrower issued and sold its interest bearing Flexible Term Notes,
Series A (the "Series A Notes") in the aggregate principal amount of
$10,000,000; and
WHEREAS, the Borrower has this day delivered to the Trustee a
Substitute Series A Letter of Credit in substitution for the Series A Letter of
Credit (each as defined in the Series A Note Agreement); and
WHEREAS, in order to more fully evidence the delivery of the Substitute
Series A of Letter of Credit referenced above, the Borrower and the Trustee
desire to amend the Series A Note Agreement, subject to the terms and conditions
set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this First
Supplemental Series A Note Agreement and not otherwise herein defined shall have
the meaning ascribed to them in the Series A Note Agreement.
SECTION 2. AMENDMENT TO SECOND RECITAL OF THE SERIES A NOTE AGREEMENT.
The second recital of the Series A Note Agreement on page 1 thereof is hereby
amended by deleting the reference to the "Bank" in the third line thereof and
replacing it with a reference to the "L/C Issuer".
SECTION 3. AMENDMENTS TO SECTION 1.01 OF THE SERIES A NOTE AGREEMENT.
(a) The definition of "BANK" set forth in Section 1.01 of the Series A
Note Agreement is hereby deleted in its entirety and replaced with the
following:
"BANK" means, individually and collectively, the Lender and
the L/C Issuer.
(b) The definition of "BANK NOTES" set forth in Section 1.01 of the
Series A Note Agreement is hereby deleted in its entirety and replaced with the
following:
<PAGE> 2
"BANK NOTES" means any Series A Notes purchased from
proceeds from a draw under the Series A Letter of Credit and
pledged to the Lender under the Reimbursement Agreement, to
the extent provided therein, including, in the event a
book-entry system with respect to the Series A Notes is in
effect, any beneficial ownership interest therein; provided
that in the event that the L/C Issuer fails to honor a drawing
under the Series A Letter of Credit to fund such a purchase
and the Borrower purchases such Series A Notes with its own
funds, "Bank Notes" shall include such Series A Notes, except
that such Series A Notes shall not be pledged to the Lender
under the Reimbursement Agreement.
(c) The definition of "BUSINESS DAY" set forth in Section 1.01 of the
Series A Note Agreement is amended by deleting the last sentence thereof in its
entirety and replacing it with the following:
For purposes of this definition, "paying office of the Bank"
means the office of the L/C Issuer responsible for making
payments under any Series A Letter of Credit.
(d) The definition of "OPINION OF COUNSEL" set forth in Section 1.01 of
the Series A Note Agreement is hereby deleted in its entirety and replaced with
the following:
"OPINION OF COUNSEL" means a written opinion of
counsel who is reasonably acceptable to the Trustee, the
Placement Agent and Remarketing Agent. The counsel may be an
employee of or counsel to the Borrower, the Placement Agent,
the Remarketing Agent, the L/C Issuer or the Trustee.
(e) The definition of "REIMBURSEMENT AGREEMENT" set forth in Section
1.01 of the Series A Note Agreement is hereby deleted in its entirety and
replaced with the following:
"REIMBURSEMENT AGREEMENT" means, individually and
collectively, (a) the Application for Irrevocable Standby
Letter of Credit dated as of December 22, 1995 executed and
delivered to the L/C Issuer by the Account Parties and the
Lender requesting the issuance by the L/C Issuer of the Series
A Letter of Credit (the "Application"), (b) the Loan and
Security Agreement dated as of November 14, 1995 (the "Loan
Agreement"), by and among the Account Parties and certain
other subsidiaries of the Borrower, and the Lender,
acknowledged and agreed to by the Borrower and certain other
subsidiaries of the Borrower, pursuant to which, among other
things, the Lender has executed the Application pursuant to
which the Series A Letter of Credit is issued by the L/C
Issuer and delivered to the Trustee, and any and all
modifications, alterations, amendments and supplements
thereto, (c) the other "Financing Agreements" as defined in
the Loan Agreement and (d) any similar agreements between or
among the Account Parties, the Borrower and the issuer of a
Substitute Series A Letter of Credit or lender providing
credit support to such issuer.
2
<PAGE> 3
(f) The definition of "SERIES A LETTER OF CREDIT" set forth in Section
1.01 of the Series A Note Agreement is amended by (a) deleting the words "State
of North Carolina" in the third line thereof and replacing them with
"Commonwealth of Pennsylvania" and (b) by deleting the word "Bank" in the
fourteenth line thereof and replacing it with "L/C Issuer".
(g) Section 1.01 of the Series A Note Agreement is hereby amended by
adding the following new definitions thereto:
"ACCOUNT PARTIES" means Hanover Direct Pennsylvania,
Inc., Hanover Direct Virginia Inc. and Gump's Corp., and their
successors and assigns.
"L/C ISSUER" means the issuer of the Series A Letter
of Credit, initially CoreStates Bank, N.A., and upon the
issuance and delivery of a Substitute Series A Letter of
Credit, shall mean the issuer of such Substitute Series A
Letter of Credit.
"LENDER" means Congress Financial Corporation, its
successors and assigns, or other lender that refinances the
obligations to Lender under the Reimbursement Agreement and
replaces all credit support given by Lender to the L/C Issuer
in respect of the Series A Letter of Credit or any Substitute
Series A Letter of Credit.
SECTION 4. AMENDMENT TO SECTION 1.02 OF THE SERIES A NOTE AGREEMENT.
Subsection (g) of Section 1.02 of the Series A Note Agreement is hereby deleted
in its entirety and replaced with the following:
(g) All references herein to time shall be Eastern Time unless
otherwise expressly stated.
SECTION 5. AMENDMENT TO SECTION 2.07 OF THE SERIES A NOTE AGREEMENT.
Subsection (b) of Section 2.07 of the Series A Note Agreement is amended by
deleting the third sentence thereof in its entirety and replacing it with the
following:
The Borrower, the Trustee and the Paying Agent will recognize
the Securities Depository Nominee, while the registered owner
of the Series A Notes so held, as the owner of the Series A
Notes for all purposes, including (i) payments of principal
and Purchase Price of, and interest on, the Series A Notes,
(ii) notices and (iii) voting.
SECTION 6. AMENDMENT TO SECTION 2.08 OF THE SERIES A NOTE AGREEMENT.
Subsection (a) of Section 2.08 of the Series A Note Agreement is amended by
deleting the reference to the "Bank" in the sixth line thereof and replacing it
with a reference to the "Lender".
SECTION 7. AMENDMENT TO SECTION 3.01 OF THE SERIES A NOTE AGREEMENT.
Subsection (a)(ii) of Section 3.01 of the Series A Note Agreement is amended by
deleting the reference to the "Bank" in the second line thereof and replacing it
with a reference to the "Lender".
3
<PAGE> 4
SECTION 8. AMENDMENT TO SECTION 3.04 OF THE SERIES A NOTE AGREEMENT.
Section 3.04 of the Series A Note Agreement is amended by deleting the reference
to the "Bank" in the third line thereof and replacing it with a reference to the
"Lender".
SECTION 9. AMENDMENT TO SECTION 3.08 OF THE SERIES A NOTE AGREEMENT.
Subsection (d)(ii) of Section 3.08 of the Series A Note Agreement is hereby
deleted in its entirety and replaced with the following:
(ii) All Bank Notes (other than Bank Notes purchased
with the Borrower's own funds and not with the proceeds of a
draw on the Series A Letter of Credit) will be registered in
the name of the Trustee, and, to the extent so provided under
the Reimbursement Agreement, held by the Trustee as agent and
bailee of the Lender and subject to the pledge by the Borrower
to the Lender and shall be held by the Trustee pursuant to
this Agreement and the Reimbursement Agreement. Upon receipt
of Remarketing Proceeds in respect of Bank Notes, the
Remarketing Agent shall notify the Lender, the Trustee and the
Borrower of such receipt, and the Remarketing Agent shall
execute and deliver to the L/C Issuer, a certificate in the
form of Exhibit C attached hereto requesting reinstatement of
the Series A Letter of Credit as provided therein. Thereafter,
upon the Trustee's receipt of notice from the L/C Issuer, as
provided in the Series A Letter of Credit, that the Available
Amount of the Series A Letter of Credit has been automatically
reinstated as provided therein, the Trustee shall so notify
the Remarketing Agent and the Lender, whereupon the
Remarketing Agent will remit such Remarketing Proceeds as
directed by the Lender. The Trustee shall not release the Bank
Notes until it receives from the L/C Issuer the notice
referred to in the preceding sentence. The Remarketing Agent
shall hold such Remarketing Proceeds in a segregated account
of the Remarketing Agent for the benefit of the Borrower,
subject to the security interest of the Lender therein
pursuant to the Reimbursement Agreement, except that if the
Series A Letter of Credit is not reinstated by an amount equal
to the Remarketing Proceeds, then the Remarketing Agent shall
hold such funds for the benefit of the purchasers which
provided such Remarketing Proceeds.
4
<PAGE> 5
SECTION 10. AMENDMENTS TO SECTION 4.03 OF THE SERIES A NOTE AGREEMENT.
(a) Subsection (c) of Section 4.03 of the Series A Note Agreement is
amended by deleting all references to the "Bank" therein and replacing them with
references to the "Lender".
(b) Subsection (e) of Section 4.03 of the Series A Note Agreement is
amended by deleting the reference to the "Bank" in the last line thereof and
replacing it with a reference to the "L/C Issuer".
SECTION 11. AMENDMENT TO SECTION 5.02 OF THE SERIES A NOTE AGREEMENT.
Subsection (c) of Section 5.02 of the Series A Note Agreement is amended by
deleting all references therein to the "Bank" and replacing them with references
to the "L/C Issuer".
SECTION 12. AMENDMENT TO SECTION 5.03 OF THE SERIES A NOTE AGREEMENT.
Subsection (b) of Section 5.03 of the Series A Note Agreement is amended by
deleting the reference to the "Bank" in the last line thereof and replacing it
with a reference to the "L/C Issuer".
SECTION 13. AMENDMENT TO SECTION 5.04 OF THE SERIES A NOTE AGREEMENT.
Section 5.04 of the Series A Note Agreement is amended by deleting the second
and third paragraphs thereof in their entirety and replacing them with the
following:
When the Series A Letter of Credit terminates or expires in
accordance with its terms or a Substitute Series A Letter of Credit
therefor is accepted hereunder, the Trustee shall immediately surrender
the Series A Letter of Credit to the L/C Issuer. The Trustee hereby
agrees that, except in the case of a redemption in part pursuant to
Article III hereof or any other reduction in the principal amount of
Series A Notes Outstanding, it will not under any circumstances request
that the L/C Issuer reduce the amount of the Series A Letter of Credit.
If at any time, all Series A Notes shall cease to be Outstanding, the
Trustee shall execute and deliver to the L/C Issuer the certificate in
the form of Annex E to the Series A Letter of Credit and shall
surrender the Series A Letter of Credit to the L/C Issuer for
cancellation.
If at any time, the L/C Issuer shall fail to honor a draft
presented under the Series A Letter of Credit, in conformity with the
terms thereof, the Trustee shall give immediate telephonic notice
thereof to the Remarketing Agent, the Lender and the Borrower.
SECTION 14. AMENDMENT TO SECTION 7.01 OF THE SERIES A NOTE AGREEMENT.
Subsection (d) of Section 7.01 of the Series A Note Agreement is hereby deleted
in its entirety and replaced with the following:
(d) Receipt by the Trustee of written notice from the Lender
that an Event of Default has occurred under the Reimbursement
Agreement.
SECTION 15. AMENDMENTS TO SECTION 7.02 OF THE SERIES A NOTE AGREEMENT.
5
<PAGE> 6
(a) Subsection (a) of Section 7.02 of the Series A Note Agreement is
amended by deleting the reference to the "Bank" in the second line thereof and
replacing it with a reference to the "Lender".
(b) Subsection (b) of Section 7.02 of the Series A Note Agreement is
hereby deleted in its entirety and replaced with the following:
(b) Upon the occurrence of any Event of Default
specified in Section 7.01(c), the Trustee shall notify the
Lender of such Event of Default and shall, by notice to the
Borrower, the Paying Agent (who shall promptly give such
notice to the holders) and the Remarketing Agent declare the
entire unpaid principal of and interest on the Series A Notes
immediately due and payable, and, thereupon, the entire unpaid
principal of and interest on the Series A Notes shall
forthwith become due and payable.
SECTION 16. AMENDMENT TO SECTION 7.03 OF THE SERIES A NOTE AGREEMENT.
Section 7.03 of the Series A Note Agreement is amended (a) by deleting the
reference to the "Bank" in the first sentence thereof and replacing it with a
reference to the "Lender" and (b) by deleting the second sentence thereof in its
entirety and replacing it with the following:
If such instructions are received by the Trustee, such draw proceeds
and, if necessary, the moneys on deposit in the Interest Reserve
Account, shall be immediately applied to the purchase of the Series A
Notes, the acceleration of the Series A Notes shall be cancelled, the
Series A Notes shall become Bank Notes and the Series A Notes shall be
registered in the name of the Trustee, and, to the extent so provided
under the Reimbursement Agreement, held by the Trustee as agent and
bailee of the Lender, and pledged under the Reimbursement Agreement as
additional security for repayment of the Borrower's obligations under
the Reimbursement Agreement.
SECTION 17. AMENDMENT TO SECTION 7.05 OF THE SERIES A NOTE AGREEMENT.
Section 7.05 of the Series A Note Agreement is amended by adding the phrase "and
the Account Parties" between the words "Borrower" and "to" in the seventh line
thereof.
SECTION 18. AMENDMENT TO SECTION 7.06 OF THE SERIES A NOTE AGREEMENT.
Section 7.06 of the Series A Note Agreement is amended (a) by deleting the
references to the "Bank" in the second and fourth lines thereof and replacing
them with references to the "Lender" and (b) by deleting the reference to the
"Bank" in the second line of subsection (b) thereof and replacing it with a
reference to the "L/C Issuer".
6
<PAGE> 7
SECTION 19. AMENDMENT TO SECTION 7.09 OF THE SERIES A NOTE AGREEMENT.
Section 7.03 of the Series A Note Agreement is deleted in its entirety and
replaced with the following:
SECTION 7.09 [RESERVED].
SECTION 20. AMENDMENT TO SECTION 8.05 OF THE SERIES A NOTE AGREEMENT.
Section 8.05 of the Series A Notes Agreement is amended by deleting the
references to the "Bank" in the sixth and tenth lines thereof and replacing them
with references to the "Lender".
SECTION 21. AMENDMENT TO SECTION 8.08 OF THE SERIES A NOTE AGREEMENT.
Section 8.08 of the Series A Note Agreement is amended (a) by deleting all
references therein to the "Bank" or "Banks" and replacing them with references
to the "Lender" or "Lender's", as applicable, and (b) by adding the following
sentence after the last paragraph thereof:
No resignation or removal of the Trustee shall be binding upon
the L/C Issuer for purposes of the Series A Letter of Credit, and no
successor Trustee shall have any rights to draw, except upon compliance
with the transfer provisions therein set forth.
SECTION 22. AMENDMENT TO SECTION 8.10 OF THE SERIES A NOTE AGREEMENT.
Section 8.10 of the Series A Note Agreement is amended (a) by deleting all
references therein to the "Bank" and replacing them with references to the
"Lender" and (b) by adding the following sentence after the last paragraph
thereof:
No such resignation or removal of the Remarketing Agent or
appointment of or assignment to a successor Remarketing Agent shall be
binding upon the L/C Issuer for purposes of the Series A Letter of
Credit, unless set forth in an amendment to the Series A Letter of
Credit issued by the L/C Issuer.
SECTION 23. AMENDMENT TO SECTION 8.11 OF THE SERIES A NOTE AGREEMENT.
Subsection (c) of Section 8.11 of the Series A Note Agreement is amended by
deleting the reference to the "Bank" in the fourth line thereof and replacing it
with a reference to the "L/C Issuer".
SECTION 24. AMENDMENT TO SECTION 8.12 OF THE SERIES A NOTE AGREEMENT.
Section 8.12 of the Series A Note Agreement is amended by deleting all
references to the "Bank" therein and replacing them with references to the
"Lender".
SECTION 25. AMENDMENT TO SECTION 8.13 OF THE SERIES A NOTE AGREEMENT.
Section 8.13 of the Series A Note Agreement is amended by deleting all
references to the "Bank" therein and replacing them with references to the
"Lender".
7
<PAGE> 8
SECTION 26. AMENDMENT TO SECTION 8.14 OF THE SERIES A NOTE AGREEMENT.
Section 8.14 of the Series A Note Agreement is amended by deleting all
references to the "Bank" or "Bank's" therein and replacing them with references
to the "Lender" or "Lender's", as applicable.
SECTION 27. AMENDMENT TO SECTION 8.16 OF THE SERIES A NOTE AGREEMENT.
Section 8.16 of the Series A Note Agreement is amended (a) by adding the phrase
", to the extent provided in the Reimbursement Agreement," after the word
"shall" at the end of the fourth line thereof and (b) by deleting the reference
to the "Bank" in the fifth line thereof and replacing it with a reference to the
"Lender".
SECTION 28. AMENDMENT TO SECTION 9.01 OF THE SERIES A NOTE AGREEMENT.
Subsection (f) of Section 9.01 of the Series A Note Agreement is amended by
deleting the reference to the "Bank" in the fifth line thereof and replacing it
with a reference to the "L/C Issuer".
SECTION 29. AMENDMENT TO SECTION 9.02 OF THE SERIES A NOTE AGREEMENT.
Section 9.02 of the Series A Note Agreement is amended by deleting the reference
to the "Bank" in the fourteenth line thereof and replacing it with a reference
to the "L/C Issuer".
SECTION 30. AMENDMENT TO SECTION 9.06 OF THE SERIES A NOTE AGREEMENT.
The heading and the first sentence of Section 9.06 of the Series A Note
Agreement are hereby deleted in their entirety and replaced with the following:
Section 9.06. LENDER AND REMARKETING AGENT CONSENT REQUIRED.
Except to the extent that the consent of the Remarketing Agent or the
Lender is not required for the action that is the subject of the
amendment (e.g., removal of the Remarketing Agent, the Trustee or the
Paying Agent by the Borrower upon the terms specified herein), an
amendment to this Agreement or the Series A Notes shall not become
effective unless the Remarketing Agent (but only to the extent that
such amendment affects the rights, duties or obligations of the
Remarketing Agent hereunder) and the Lender deliver to the Trustee
their written consents to the amendment.
SECTION 31. AMENDMENT TO SECTION 10.01 OF THE SERIES A NOTE AGREEMENT.
Subsection (b) of Section 10.01 of the Series A Note Agreement is amended by
deleting the reference to, and the address of, the "Bank" therein and replacing
them with the following:
If to the L/C Issuer: CoreStates Bank, N.A.
530 Walnut Street
Philadelphia, Pennsylvania 19106
Attention: Ms. Cheryl Morton, Letter of Credit Department,
7th Floor
Telephone No.: (215) 973-8157
Fax No.: (215) 973-6352
8
<PAGE> 9
If to the Lender: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Mark Fagnani
Telephone No.: (212) 840-2000
Fax No.: (212) 545-4283
SECTION 32. AMENDMENT TO SECTION 10.09 OF THE SERIES A NOTE AGREEMENT.
Section 10.09 of the Series A Note Agreement is amended by deleting the
reference to the "Bank" in the fourth line thereof and replacing it with a
reference to the "Lender".
SECTION 33. AMENDMENTS TO EXHIBIT A TO THE SERIES A NOTE AGREEMENT -
FORM OF SERIES A NOTE. Exhibit A to the Series A Note Agreement (the "Form of
Series A Note") is hereby amended as follows:
(a) The second boldface paragraph on the first page of the Form of
Series A Note (prior to the text thereof) is hereby deleted in its entirety and
replaced with the following:
PAYMENTS OF PRINCIPAL AND PURCHASE PRICE OF AND INTEREST ON
THIS SERIES A NOTE WILL BE MADE FROM DRAWINGS UNDER THE SERIES
A LETTER OF CREDIT (HEREINAFTER DEFINED) IF REMARKETING
PROCEEDS ARE NOT AVAILABLE OR IF AN EVENT OF DEFAULT HAS
OCCURRED. ALTHOUGH THE SERIES A LETTER OF CREDIT IS A BINDING
OBLIGATION OF CORESTATES BANK, N.A. (THE "L/C ISSUER"), THIS
SERIES A NOTE IS NOT A DEPOSIT OR OBLIGATION OF CORESTATES
FINANCIAL CORP OR ANY OF ITS AFFILIATES, INCLUDING THE L/C
ISSUER AND CONGRESS FINANCIAL CORPORATION, NOR IS THIS SERIES
A NOTE A DEPOSIT OR OBLIGATION OF NATIONSBANK CORPORATION OR
ANY OF ITS AFFILIATED BANKS, INCLUDING NATIONSBANK, N.A., AND
THIS SERIES A NOTE IS NOT GUARANTEED BY ANY OF THESE ENTITIES.
THIS SERIES A NOTE IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION AND IS SUBJECT TO CERTAIN INVESTMENT
RISKS INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
9
<PAGE> 10
(b) The second paragraph of the text of the Form of Series A Note,
beginning on page A-2 thereof, is amended by deleting the first two sentences
thereof and replacing them with the following:
This Series A Note is one of an issue not to exceed
$10,000,000 Hanover Direct, Inc. Flexible Term Notes, Series A
(the "Series A Notes"), issued pursuant to a Series A Note
Agreement dated as of November 9, 1994, between the Borrower,
and Norwest Bank Minnesota, N.A., as trustee (in such
capacity, the "Trustee") and Paying Agent, as amended by that
certain First Supplemental Series A Note Agreement dated as of
December 29, 1995 between the Borrower and the Trustee (as
further amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms, the "Series A
Note Agreement"), for the purpose of refinancing and/or
financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution
facility owned and used by certain subsidiaries of the
Borrower located in Roanoke, Virginia and a new retail store
of Gump's Corp., a subsidiary of the Borrower located in San
Francisco, California. Pursuant to the Series A Note
Agreement, the Borrower has arranged, through a credit
facility established with Lender for certain of Borrower's
subsidiaries, and as guarantor of such financing arrangements
with Lender, for L/C Issuer to issue for the account of such
subsidiaries its irrevocable Series A Letter of Credit dated
December 29, 1995 (the "Series A Letter of Credit") in favor
of the Trustee, in an amount sufficient to pay the Series A
Facility Amount and unpaid interest on or Purchase Price of
the Series A Notes, but not to exceed $10,145,833, pursuant to
(a) the Application for Irrevocable Standby Letter of Credit
dated as of December 22, 1995 executed and delivered to the
L/C Issuer by the Account Parties (as defined in the Series A
Note Agreement) and the Lender requesting the issuance by the
L/C Issuer of the Series A Letter of Credit (the
"Application"), (b) the Loan and Security Agreement dated as
of November 14, 1995 (the "Loan Agreement"), by and among the
Account Parties and certain other subsidiaries of the
Borrower, and the Lender, acknowledged and agreed to by the
Borrower and certain other subsidiaries of the Borrower,
pursuant to which, among other things, the Lender has executed
the Application pursuant to which the Series A Letter of
Credit is issued by the L/C Issuer and delivered to the
Trustee, and any and all modifications, alterations,
amendments and supplements thereto, (c) the other "Financing
Agreements" as defined in the Loan Agreement and (d) any
similar agreements between or among the Account Parties, the
Borrower and the issuer of a Substitute Series A Letter of
Credit or lender providing credit support to such issuer
(individually and collectively, the "Reimbursement
Agreement").
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<PAGE> 11
(c) The seventh paragraph of the text of the Form of Series A Note,
beginning on page A-4 thereof, is amended by deleting the third sentence thereof
in its entirety and replacing it with the following:
The Borrower, the Trustee and the Paying Agent will recognize
the Securities Depository Nominee, as hereinafter defined,
while the registered owner of the Series A Notes so held, as
the owner of the Series A Notes for all purposes, including
(i) payments of principal and Purchase Price of, and interest
on, the Series A Notes, (ii) notices and (iii) voting.
(d) Section 1 of the Form of Series A Note, beginning on page A-5
thereof, is amended by adding the following definition:
"BANK" means, individually and collectively, the Lender and
the L/C Issuer.
(e) Subsection (f) of Section 3 of the Form of Series A Note, beginning
on page A-9 thereof, is amended by deleting the reference to the "Bank" in the
third line thereof and replacing it with a reference to the "Lender."
(f) Subsection (a) of Section 4 of the Form of Series A Note, beginning
on page A-10 thereof, is amended by deleting the reference to the "Bank" in the
fourth line of the last paragraph thereof and replacing it with a reference to
the "Lender."
(g) Section 7 of the Form of Series A Note, beginning on page A-13
thereof, is amended by deleting the second and third sentences of the first
paragraph thereof in their entirety and replacing them with the following:
The Series A Note Agreement directs the Trustee to declare an
acceleration upon written notice by the Lender of the
occurrence and continuance of an event of default under the
Reimbursement Agreement and upon the occurrence of certain
other Events of Default under the Series A Note Agreement.
SECTION 34. ADDITION OF EXHIBIT C TO SERIES A NOTE AGREEMENT. The
Series A Note Agreement is amended by adding Exhibit C thereto, a copy of which
is attached hereto and incorporated herein and in the Series A Note Agreement by
this reference.
SECTION 35. EFFECT OF FIRST SUPPLEMENTAL SERIES A NOTE AGREEMENT.
Except as modified hereby, all of the terms and provisions of the Series A Note
Agreement shall remain in full force and effect.
11
<PAGE> 12
SECTION 36. GOVERNING LAW. This First Supplemental Series A Note
Agreement and the Series A Note Agreement, as amended hereby, shall be deemed to
be contracts made under, and for all purposes shall be construed in accordance
with, the laws of the State of New York.
SECTION 37. SEVERABILITY. If any provision of this First Supplemental
Series A Note Agreement shall be determined to be unenforceable by a court of
law, that shall not affect any other provision of this First Supplemental Series
A Note Agreement.
SECTION 38. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will be an original and all of which together will
constitute the same instrument.
[Signatures on following page.]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have cause this First
Supplemental Series A Note Agreement to be duly executed as of the day and year
first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
_________________________________
Name: Edward J. O'Brien
_________________________________
Title: Executive Vice President &
Treasurer
_________________________________
[CORPORATE SEAL]
NORWEST BANK MINNESOTA, N.A. as
Trustee and Paying Agent
By: /s/ Polly B. Berquist
_________________________________
Name: Polly B. Berquist
_________________________________
Title: Assistant Vice President
_________________________________
13
<PAGE> 14
EXHIBIT C
CERTIFICATE OF REMARKETING OF NOTES TO EFFECT
REINSTATEMENT OF PURCHASE DRAWING
[DATE]
CoreStates Bank, N.A.
530 Walnut Street
Philadelphia, Pennsylvania 19106
Attention: Ms. Cheryl Morton
Letter of Credit Department, 7th Floor
RE: IRREVOCABLE LETTER OF CREDIT REF. NO. ___________
FOR THE ACCOUNT OF HANOVER DIRECT PENNSYLVANIA, INC., HANOVER
DIRECT VIRGINIA INC. AND GUMP'S CORP. (THE LETTER OF CREDIT")
Ladies and Gentlemen:
The undersigned, being the Remarketing Agent, as defined in the
above-referenced Letter of Credit, hereby certifies that Bank Notes in the
principal amount of $_______ (the "Remarketed Notes") for which a Purchase
Drawing was made by the Trustee and previously paid by you, have been remarketed
by us and we are holding the remarketing proceeds pursuant to Section
3.08(d)(ii) of the Note Agreement.
Please confirm to the Trustee that the Principal Component has been
reinstated automatically by an amount equal to the said principal amount of the
Remarketed Notes and that the Interest Component has been reinstated
automatically by an amount equal to thirty-five (35) days' interest on the
Principal Component so reinstated computed at the Maximum Rate.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the above-referenced Letter of
Credit.
IN WITNESS WHEREOF, the Remarketing Agent has executed and delivered
this Certificate as of ___ of ____, ___.
NATIONSBANK, NATIONAL ASSOCIATION,
as Remarketing Agent
By: _______________________________________
[Name and Title]
<PAGE> 1
EXHIBIT 10.46
FIRST AMENDMENT TO PLACEMENT AGREEMENT
This FIRST AMENDMENT TO PLACEMENT AGREEMENT (the "First Amendment"),
dated as of December 29, 1995, by and between HANOVER DIRECT, INC., a
corporation organized and existing under the laws of the State of Delaware (the
"Borrower"), and NATIONSBANK, N.A., a national banking association and the
successor to NationsBank of North Carolina, N.A. (the "Placement Agent");
W I T N E S S E T H:
WHEREAS, the Borrower has previously issued and sold its interest
bearing flexible term notes in two separate series (the first series of such
notes, as amended as of the date hereof, being hereinafter referred to as the
"Series A Notes", the second series of such notes, as amended as of the date
hereof, being hereinafter referred to as the "Series B Notes", and the Series A
Notes and the Series B Notes being hereinafter collectively referred to as the
"Notes") each in the aggregate principal amount of $10,000,000, pursuant to the
provisions of a Series A Note Agreement dated as of November 9, 1994 between the
Borrower and Norwest Bank Minnesota, N.A., as Trustee and Paying Agent (the
"Trustee") (as amended by that certain First Supplemental Series A Note
Agreement dated as of December 29, 1995 between the Borrower and the Trustee and
as hereinafter amended, the "Series A Note Agreement"), and the Series B Note
Agreement dated as of April 27, 1995 between the Borrower and the Trustee (as
amended by that certain First Supplemental Series B Note Agreement dated as of
December 29, 1995 and as hereinafter amended, the "Series B Note Agreement", and
together with the Series A Note Agreement being hereinafter collectively
referred to as the "Note Agreements"), respectively; and
WHEREAS, the Borrower and the Placement Agent entered into the
Placement Agreement dated as of November 9, 1994 (the "Placement Agreement")
pursuant to which the Borrower appointed the Placement Agent as its agent to
perform certain services in connection with the placement of the Notes upon
initial issuance thereof; and
WHEREAS, the Borrower has this day delivered to the Trustee a
Substitute Series A Letter of Credit in substitution for the Series A Letter of
Credit (each as defined in the Series A Note Agreement) and a Substitute Series
B Letter of Credit in substitution for the Series B Letter of Credit (each as
defined in the Series B Note Agreement) pursuant to the terms of the respective
Note Agreements; and
WHEREAS, in order to more fully evidence the substitution of letters of
credit referenced above, the Borrower and the Placement Agent desire to amend
the Placement Agreement, subject to the terms and conditions set forth herein;
<PAGE> 2
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein and not
otherwise herein defined shall have the meanings ascribed to them in the
applicable Note Agreement.
SECTION 2. AMENDMENT TO SECOND RECITAL OF THE PLACEMENT AGREEMENT. The
Second Recital of the Placement Agreement set forth on page 1 thereof is hereby
deleted in its entirety and replaced with the following:
WHEREAS, the payment when due of the principal of, interest on
and Purchase Price (as defined in the applicable Note Agreement) of the
Series A Notes will be supported, to the extent provided therein, by
the Series A Letter of Credit, and the payment when due of the
principal of, interest on and Purchase Price of the Series B Notes will
be supported, to the extent provided therein, by the Series B Letter of
Credit (the Series A Letter of Credit and the Series B Letter of Credit
are sometimes hereinafter collectively referred to as the "Letter of
Credit"), each issued in favor of the Trustee by CoreStates Bank, N.A.
(the "L/C Issuer") and each in an amount of not less than $10,145,833,
representing the principal amount of the applicable series of Notes
plus 35 days interest on such amount computed at the Maximum Rate (as
defined in the applicable Note Agreement) on the basis of actual number
of days elapsed in a year of 360 days, all pursuant to (a) the
respective Applications for Irrevocable Standby Letter of Credit (the
"Applications"), each dated as of December 22, 1995 executed and
delivered to the L/C Issuer by the Account Parties (as defined in the
applicable Note Agreement) and Congress Financial Corporation (the
"Lender") requesting the issuance by the L/C Issuer of the Series A
Letter of Credit and the Series B Letter of Credit, respectively, (b)
the Loan and Security Agreement dated as of November 14, 1995 (the
"Loan Agreement"), by and among the Account Parties and certain other
subsidiaries of the Borrower, and the Lender (the Lender and the L/C
issuer are hereinafter sometimes collectively referred to as the
"Bank"), acknowledged and agreed to by the Borrower and certain other
subsidiaries of the Borrower, pursuant to which, among other things,
the Lender has executed the respective Applications pursuant to which
the Series A Letter of Credit and the Series B Letter of Credit are
issued by the L/C Issuer and delivered to the Trustee, and any and all
modifications, alterations, amendments and supplements thereto, (c) the
other "Financing Agreements" as defined in the Loan Agreement, and (d)
any similar agreements between or among the Account Parties, the
Borrower and the issuer of a Substitute Series A Letter of Credit or
Substitute Series B Letter of Credit or the lender providing credit
support to such issuer (individually and collectively, the
"Reimbursement Agreement");
SECTION 3. AMENDMENT TO SECTION 7 OF THE PLACEMENT AGREEMENT.
Subsection (b) of Section 7 of the Placement Agreement is hereby amended by
deleting the reference to the "Bank" in the third line thereof and replacing it
with a reference to the "Lender".
2
<PAGE> 3
SECTION 4. AMENDMENT TO SECTION 10 OF THE PLACEMENT AGREEMENT. Section
10 of the Placement Agreement is hereby amended by deleting the reference to,
and the address of, the "Bank" therein and replacing them with the following:
If to the L/C Issuer: CoreStates Bank, N. A.
530 Walnut Street
Philadelphia, Pennsylvania 19106
Attention: Ms. Cheryl Morton, Letter of Credit
Department, 7th Floor
Telephone No.: (215) 973-8157
Fax No.: (215) 973-6352
If to the Lender: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Mark Fagnani
Telephone No.: (212) 840-2000
Fax No.: (212) 545-4283
SECTION 5. AMENDMENT TO PLACEMENT AGREEMENT. The Placement Agreement is
hereby amended by deleting each reference therein to "NationsBank of North
Carolina, N.A." and replacing it with a reference to "NationsBank, N.A.".
SECTION 6. EFFECT OF FIRST AMENDMENT. Except as modified hereby, all of
the terms and provisions of the Placement Agreement shall remain in full force
and effect.
SECTION 7. GOVERNING LAW. This First Amendment and the Placement
Agreement, as amended hereby, shall be deemed to be contracts made under, and
for all purposes shall be construed in accordance with, the laws of the State of
North Carolina.
SECTION 8. SEVERABILITY. If any provision of this First Amendment shall
be determined to be unenforceable by a court of law, that shall not affect any
other provision of this First Amendment.
SECTION 9. COUNTERPARTS. This First Amendment may be executed in
several counterparts, each of which shall be an original and all of which, taken
together, shall constitute one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the day and year first above written.
HANOVER DIRECT, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
NATIONSBANK, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
4
<PAGE> 1
EXHIBIT 10.47
FIRST AMENDMENT TO
REMARKETING AND INTEREST SERVICES AGREEMENT
This FIRST AMENDMENT TO REMARKETING AND INTEREST SERVICES AGREEMENT
(the "First Amendment"), dated as of December 29, 1995, by and between HANOVER
DIRECT, INC., a corporation organized and existing under the laws of the State
of Delaware (the "Borrower"), and NATIONSBANK, N.A., a national banking
association and the successor to NationsBank of North Carolina, N.A. (the
"Remarketing Agent");
W I T N E S S E T H:
WHEREAS, the Borrower has previously issued and sold its interest
bearing flexible term notes in two separate series (the first series of such
notes, as amended as of the date hereof, being hereinafter referred to as the
"Series A Notes", the second series of such notes, as amended as of the date
hereof, being hereinafter referred to as the "Series B Notes", and the Series A
Notes and the Series B Notes being hereinafter collectively referred to as the
"Notes") each in the aggregate principal amount of $10,000,000, pursuant to the
provisions of a Series A Note Agreement dated as of November 9, 1994 between the
Borrower and Norwest Bank Minnesota, N.A., as Trustee and Paying Agent (the
"Trustee") (as amended by that certain First Supplemental Series A Note
Agreement dated as of December 29, 1995 between the Borrower and the Trustee and
as hereinafter amended, the "Series A Note Agreement"), and the Series B Note
Agreement dated as of April 27, 1995 between the Borrower and the Trustee (as
amended by that certain First Supplemental Series B Note Agreement dated as of
December 29, 1995 and as hereinafter amended, the "Series B Note Agreement", and
together with the Series A Note Agreement being hereinafter collectively
referred to as the "Note Agreements"), respectively; and
WHEREAS, the Borrower and the Remarketing Agent entered into the
Remarketing and Interest Services Agreement dated as of November 9, 1994 (the
"Remarketing Agreement") pursuant to which the Borrower appointed the
Remarketing Agent as its agent to perform certain services in connection with
the remarketing of the Notes tendered for purchase and the determination of the
interest rates and interest periods with respect to the Notes; and
WHEREAS, the Borrower has this day delivered to the Trustee a
Substitute Series A Letter of Credit in substitution for the Series A Letter of
Credit (each as defined in the Series A Note Agreement) and a Substitute Series
B Letter of Credit in substitution for the Series B Letter of Credit (each as
defined in the Series B Note Agreement) pursuant to the terms of the respective
Note Agreements; and
WHEREAS, in order to more fully evidence the substitution of letters of
credit referenced above, the Borrower and the Remarketing Agent desire to amend
the Remarketing Agreement, subject to the terms and conditions set forth herein;
<PAGE> 2
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein and not
otherwise herein defined shall have the meanings ascribed to them in the
applicable Note Agreement.
SECTION 2. AMENDMENT TO SECOND RECITAL OF THE REMARKETING AGREEMENT.
The Second Recital of the Placement Agreement set forth on page 1 thereof is
hereby deleted in its entirety and replaced with the following:
WHEREAS, the payment when due of the principal of, interest on
and Purchase Price (as defined in the applicable Note Agreement) of the
Series A Notes will be supported, to the extent provided therein, by
the Series A Letter of Credit, and the payment when due of the
principal of, interest on and Purchase Price of the Series B Notes will
be supported, to the extent provided therein, by the Series B Letter of
Credit (the Series A Letter of Credit and the Series B Letter of Credit
are sometimes hereinafter collectively referred to as the "Letter of
Credit"), each issued in favor of the Trustee by CoreStates Bank, N.A.
(the "L/C Issuer") and each in an amount of not less than $10,145,833,
representing the principal amount of the applicable series of Notes
plus 35 days interest on such amount computed at the Maximum Rate (as
defined in the applicable Note Agreement) on the basis of actual number
of days elapsed in a year of 360 days, all pursuant to (a) the
respective Applications for Irrevocable Standby Letter of Credit (the
"Applications"), each dated as of December 22, 1995 executed and
delivered to the L/C Issuer by the Account Parties (as defined in the
applicable Note Agreement) and Congress Financial Corporation (the
"Lender") requesting the issuance by the L/C Issuer of the Series A
Letter of Credit and the Series B Letter of Credit, respectively, (b)
the Loan and Security Agreement dated as of November 14, 1995 (the
"Loan Agreement"), by and among the Account Parties and certain other
subsidiaries of the Borrower, and the Lender (the Lender and the L/C
issuer are hereinafter sometimes collectively referred to as the
"Bank"), acknowledged and agreed to by the Borrower and certain other
subsidiaries of the Borrower, pursuant to which, among other things,
the Lender has executed the respective Applications pursuant to which
the Series A Letter of Credit and the Series B Letter of Credit are
issued by the L/C Issuer and delivered to the Trustee, and any and all
modifications, alterations, amendments and supplements thereto, (c) the
other "Financing Agreements" as defined in the Loan Agreement, and (d)
any similar agreements between or among the Account Parties, the
Borrower and the issuer of a Substitute Series A Letter of Credit or
Substitute Series B Letter of Credit or the lender providing credit
support to such issuer (individually and collectively, the
"Reimbursement Agreement");
SECTION 3. AMENDMENT TO SECTION 7 OF THE REMARKETING AGREEMENT.
Subsection (b) of Section 7 of the Remarketing Agreement is hereby amended by
deleting the reference to the "Bank" in the third line thereof and replacing it
with a reference to the "Lender".
2
<PAGE> 3
SECTION 4. AMENDMENT TO SECTION 11 OF THE REMARKETING AGREEMENT.
Section 11 of the Remarketing Agreement is hereby amended by deleting the
reference to, and the address of, the "Bank" therein and replacing them with the
following:
If to the L/C Issuer: CoreStates Bank, N. A.
530 Walnut Street
Philadelphia, Pennsylvania 19106
Attention: Ms. Cheryl Morton, Letter of Credit
Department, 7th Floor
Telephone No.: (215) 973-8157
Fax No.: (215) 973-6352
If to the Lender: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Mark Fagnani
Telephone No.: (212) 840-2000
Fax No.: (212) 545-4283
SECTION 5. AMENDMENT TO REMARKETING AGREEMENT. The Remarketing
Agreement is hereby amended by deleting each reference therein to "NationsBank
of North Carolina, N.A." and replacing it with a reference to "NationsBank,
N.A.".
SECTION 6. EFFECT OF FIRST AMENDMENT. Except as modified hereby, all of
the terms and provisions of the Remarketing Agreement shall remain in full force
and effect.
SECTION 7. GOVERNING LAW. This First Amendment and the Remarketing
Agreement, as amended hereby, shall be deemed to be contracts made under, and
for all purposes shall be construed in accordance with, the laws of the State of
North Carolina.
SECTION 8. SEVERABILITY. If any provision of this First Amendment shall
be determined to be unenforceable by a court of law, that shall not affect any
other provision of this First Amendment.
SECTION 9. COUNTERPARTS. This First Amendment may be executed in
several counterparts, each of which shall be an original and all of which, taken
together, shall constitute one and the same instrument.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the day and year first above written.
HANOVER DIRECT, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
NATIONSBANK, N.A.
By:______________________________________
Name:____________________________________
Title:___________________________________
4
<PAGE> 1
EXHIBIT 10.49
SECOND AMENDMENT TO SERIES A NOTE
This SECOND AMENDMENT TO SERIES A NOTE dated as of December 18, 1996,
is made by HANOVER DIRECT, INC., a Delaware corporation (the "Borrower"), with
the consent of Norwest Bank Minnesota, N.A., as trustee and paying agent (the
"Trustee" or the "Paying Agent", as applicable);
W I T N E S S E T H:
WHEREAS, the Borrower and the Trustee entered into the Series A Note
Agreement dated as of November 9, 1994, as amended pursuant to that certain
First Supplemental Series A Note Agreement dated as of December 29, 1995 and
that certain Second Supplement Series A Note Agreement dated as of December 18,
1996 between the Borrower and the Trustee (as further amended, restated,
supplemented or otherwise modified from time to time in accordance with its
terms, the "Series A Note Agreement") pursuant to which the Borrower issued and
sold its interest bearing Flexible Term Notes, Series A (the "Series A Notes")
in the aggregate principal amount of $10,000,000 and in the form of Series A
Note R-1, registered in the name of Cede & Co. (as defined in the Series A Note
Agreement) and deposited with the Paying Agent ("Series A Note R-1"); and
WHEREAS, the Borrower has this day delivered to the Trustee a
Substitute Series A Letter of Credit in substitution for the Series A Letter of
Credit (each as defined in the Series A Note Agreement); and
WHEREAS, in order to more fully evidence the delivery of the Substitute
Series A of Letter of Credit referenced above, the Borrower and the Trustee
desire to amend Series A Note R-1. subject to the terms and conditions set forth
herein,
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this Second
Amendment to Series A Note and not otherwise herein defined shall have the
meaning ascribed to them in the Series A Note Agreement.
SECTION 2. AMENDMENTS TO SERIES A NOTE R-1. Series A Note R-1 is hereby
amended as follows:
(a) The second boldface paragraph on the first page of Series A Note
R-1 (prior to the text thereof) is hereby, deleted in its entirety and replaced
with the following:
<PAGE> 2
THIS SERIES A NOTE IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED BY,
SWISS BANK CORPORATION, NEW YORK BRANCH (THE "BANK"), IS NOT INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, AND IS SUBJECT TO INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
ALTHOUGH NOT GUARANTEED BY THE BANK, PAYMENTS OF PRINCIPAL AND INTEREST
ON THIS SERIES A NOTE AND, IF REMARKETING PROCEEDS ARE NOT AVAILABLE,
THE PURCHASE PRICE OF THIS SERIES A NOTE, WILL BE MADE FROM DRAWINGS
UNDER THE SERIES A LETTER OF CREDIT ISSUED BY THE BANK. THE FAILURE OF
THE BANK TO HONOR ANY DRAWING UNDER THE SERIES A LETTER OF CREDIT WILL
NOT GIVE RISE TO ANY CLAIM OTHER THAN AGAINST THE BANK.
(b) The second paragraph of the text of Series A Note R-1, beginning on
page 2 thereof, is amended by deleting the first sentence thereof and replacing
it with the following:
This Series A Note is one of an issue not to exceed $10,000,000 Hanover
Direct, Inc. Flexible Term Notes, Series A (the "Series A Notes"),
issued pursuant to a Series A note Agreement dated as of November 9,
1994 (the "Series A Note Agreement"), as amended by the First
Supplemental Series A Note Agreement dated December 29, 1995 and the
Second Supplemental Note Agreement dated December 18, 1996 between the
Borrower and Norwest Bank Minnesota, N.A., as trustee (in such
capacity, the "Trustee") and Paying Agent, for the purpose of
refinancing and/or financing certain construction, refurbishment and
costs of an approximately 530,000 square foot distribution facility of
the Borrower located in Roanoke, Virginia and a new retail store of
Gump's, Inc., a subsidiary of the Borrower located in San Francisco,
California. Pursuant to the Series A Note Agreement, the Borrower has
caused Swiss Bank Corporation, New York Branch (the "Bank") to issue
its irrevocable Series A Letter of Credit dated the Date of Issuance
(as hereinafter defined and set forth above) of the Series A Notes (the
"Series A Letter of Credit") in favor of the Trustee, in an amount
sufficient to pay the Series A Facility Amount and unpaid interest on
or Purchase Price of the Series A Notes, but not to exceed $9,638,541,
pursuant to Reimbursement Agreement dated as of December 18, 1996 (the
"Reimbursement Agreement") by and among the Borrower and the Bank,
which Series A Letter of Credit initially expires (subject to extension
of earlier termination as provided in the Reimbursement Agreement and
the Series A Note Agreement) on February 28, 1998. Substitute letters
of credit may be delivered in accordance with the Series A Note
Agreement.
(c) The seventh paragraph of the text of Series A Note R-1 beginning on
page 4 thereof, is amended by deleting the third
2
<PAGE> 3
sentence thereof in its entirety, and replacing it with the following:
Subject to the provisions of Section 7.09 of the Series A Note
Agreement relating to the Bank as holder of the Series A Notes, the
Borrower, the Trustee and the Paying Agent will recognize the
Securities Depository Nominee, as hereinafter defined, while the
registered owner of the Series A Notes so held, as the owner of the
Series A Notes for all purposes, including (i) payments of principal
and Purchase Price of. and interest on, the Series A Notes, (ii)
notices and (iii) voting, subject to certain qualifications as stated
in the Series A Note Agreement.
(d) Section 1 of Series A Note R-1, beginning on page 5 thereof, is
amended by deleting the following definition:
"BANK" means, individually and collectively, the Lender and the L/C
Issuer.
(e) Subsection (f) of Section 3 of Series A Note R-1, beginning on page
9 thereof, is amended by deleting the reference to the "Lender" in the third
line thereof and replacing it with a reference to the "Bank."
(f) Subsection (a) of Section 4 of Series A Note R-1, beginning on page
10 thereof, is amended by deleting the reference to the "Lender" in the fourth
line of the last paragraph thereof and replacing it with a reference to the
"Bank."
(g) Section 7 of Series A Note R-1, beginning on page 13 thereof, is
amended by deleting the second sentence of the first paragraph thereof in their
entirety and replacing them with the following:
The Series A Note Agreement directs the Trustee to declare an
acceleration upon written notice be, the Bank of the occurrence and
continuance of an event of default under the Reimbursement Agreement
and upon the occurrence of certain other Events of Default under the
Series A Note Agreement. The Trustee has the right to accelerate the
entire unpaid principal of and interest on the Series A Notes in
certain events only with the Banks consent, all as provided in Article
VII of the Series A Note Agreement to which reference is hereby made.
Section 3. Effect of Second Amendment to Series A Note; No Novation.
Except as modified hereby, all of the terms and provisions of Series A Note R-1
shall remain in full force and effect. This Second Amendment to Series A Note
amends Series A
3
<PAGE> 4
Note R-1 and shall not be construed to constitute a novation thereof in any
manner whatsoever.
Section 4. Governing Law. This Second Amendment to Series A Note and
Series A Note R-1, as amended hereby, shall be deemed to be contracts made
under, and for all purposes shall be construed in accordance with the laws of
the State of New York.
Section 5. Severability. If any provision of this Second Amendment to
Series A Note shall be determined to be unenforceable by a court of law, that
shall not affect any other provision of this Second Amendment to Series A Note.
[Signatures on following page]
4
<PAGE> 5
IN WITNESS WHEREOF, the Borrower has caused this Second Amendment to
Series A Note to be duly executed as of the day and year first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
________________________________
Name: Edward J. O'Brien
______________________________
Title: Senior Vice President
Secretary & Treasurer
_____________________________
[CORPORATE SEAL]
5
<PAGE> 6
CONSENT TO SECOND AMENDMENT TO SERIES A NOTE
Norwest Bank Minnesota, N.A., as Paying Agent, hereby consents to the
amendments to Series A Note R-1 provided for herein.
NORWEST BANK MINNESOTA, N.A.,
as Trustee and Paying Agent
By: /s/ Marianna C. Sterson
_____________________________________
Name: Marianna C. Sterson
___________________________________
Title: Corporate Trust Officer
__________________________________
6
<PAGE> 1
Exhibit 10.52
SERIES B NOTE AGREEMENT
Dated as of April 27, 1995
Between
HANOVER DIRECT, INC.
and
NORWEST BANK MINNESOTA, N.A.,
as Trustee and Paying Agent
$10,000,000
HANOVER DIRECT, INC.
FLEXIBLE TERM NOTES,
SERIES B
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION
<TABLE>
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Section 1.01. Definitions........................................................................................3
Section 1.02. Rules of Construction..............................................................................9
ARTICLE II THE SERIES B NOTES
Section 2.01. Authorization of Series B Notes; Form of Series B Notes; Details
of Series B Notes............................................................................10
Section 2.02. Interest on the Series B Notes....................................................................11
Section 2.03. Execution and Authentication......................................................................13
Section 2.04. Series B Note Register............................................................................13
Section 2.05. Registration and Exchange of Series B Notes; Persons Treated
as Owners....................................................................................14
Section 2.06. Authorization of Series B Notes...................................................................14
Section 2.07. Book-Entry System; Recording and Transfer of Ownership of the
Series B Notes...............................................................................17
Section 2.08. Mutilated, Lost, Stolen, Destroyed or Undelivered Series B Notes..................................18
Section 2.09. Cancellation of Series B Notes....................................................................19
ARTICLE III REDEMPTION, PURCHASE AND REMARKETING
Section 3.01. Redemption of Series B Notes......................................................................20
Section 3.02. Redemption Date...................................................................................22
Section 3.03. Selection of Series B Notes To Be Redeemed........................................................22
Section 3.04. Notice of Redemption..............................................................................23
Section 3.05. Payment of Series B Notes Called for Redemption; Effect of
Redemption...................................................................................24
Section 3.06. Series B Notes Redeemed in Part...................................................................24
Section 3.07. Purchase of Series B Notes........................................................................24
Section 3.08. Remarketing of Purchased Series B Notes...........................................................25
ARTICLE IV PAYMENT OF SERIES B NOTES AND CREATION OF SERIES B LETTER OF CREDIT FUND
Section 4.01. Payment of Series B Notes.........................................................................28
Section 4.02. Creation of Series B Letter of Credit Fund. ......................................................28
Section 4.03. Funds Received; Application of Money in Series B Letter of
Credit Fund. ...............................................................................29
Section 4.04. Moneys To Be Held in Trust. .....................................................................30
Section 4.05. Investment of Moneys. ...........................................................................30
ARTICLE V SERIES B LETTER OF CREDIT
Section 5.01. Requirements for Series B Letter of Credit. .....................................................32
Section 5.02. Draws on Series B Letter of Credit; Extensions. ..................................................32
</TABLE>
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<TABLE>
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Section 5.03. Substitute Series B Letter of Credit..............................................................34
Section 5.04. Enforcement of the Series B Letter of Credit. ...................................................35
ARTICLE VI GENERAL COVENANTS AND REPRESENTATIONS
Section 6.01. Payment of Principal, Interest and Premium. .....................................................37
Section 6.02. Covenant to Perform and Representations and Warranties of the
Borrower as to Authority, Etc. .............................................................37
Section 6.03. Further Instruments and Actions. ................................................................38
Section 6.04. Additional Representations, Warranties and Covenants of the Borrower. ..........................38
ARTICLE VII DEFAULTS AND REMEDIES
Section 7.01. Events of Default. ..............................................................................39
Section 7.02. Acceleration and Duty to Draw on Series B Letter of Credit........................................39
Section 7.03. Disposition of Amounts Drawn on Series B Letter of Credit.........................................40
Section 7.04. No Remedy Exclusive. ............................................................................40
Section 7.05. Application of Moneys. ..........................................................................41
Section 7.06. Waivers of Events of Default. ...................................................................41
Section 7.07. Unconditional Right to Receive Principal, Premium and Interest....................................42
Section 7.08. [Reserved]. .....................................................................................42
Section 7.09. Bank Deemed Holder. .............................................................................42
ARTICLE VIII TRUSTEE, REMARKETING AGENT AND PAYING AGENT
Section 8.01. Duties of Trustee.................................................................................43
Section 8.02. Rights of Trustee.................................................................................44
Section 8.03. Individual Rights of Trustee, Etc.................................................................45
Section 8.04. Trustee's Disclaimer. ...........................................................................45
Section 8.05. Notice of Defaults. .............................................................................45
Section 8.06. Compensation and Indemnification of Trustee. ....................................................45
Section 8.07. Eligibility of Trustee. .........................................................................45
Section 8.08. Replacement of Trustee. .........................................................................46
Section 8.09. Duties of Remarketing Agent.......................................................................47
Section 8.10. Eligibility of Remarketing Agent; Replacement. ..................................................47
Section 8.11. Duties of Placement Agent.........................................................................48
Section 8.12. Eligibility of Placement Agent; Replacement. ....................................................48
Section 8.13. Appointment of and Duties of Paying Agent. .....................................................49
Section 8.14. Qualifications of Paying Agent; Resignation; Removal. ...........................................49
Section 8.15. Successor Trustee, Paying Agent or Remarketing Agent by Merger....................................50
Section 8.16. Trustee's Covenant as to Bank Notes. ............................................................50
Section 8.16. Trustee and Paying Agent as One Entity. .........................................................51
ARTICLE IX AMENDMENTS OF AGREEMENT
Section 9.01. Without Consent of Noteholders. .................................................................52
Section 9.02. With Consent of Noteholders. ....................................................................53
Section 9.03. Effect of Consents. .............................................................................53
Section 9.04. Notation on or Exchange of Series B Notes. ......................................................53
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
Section 9.05. Signing by Trustee of Amendments. ...............................................................53
Section 9.06. Bank and Remarketing Agent Consent Required. ...................................................54
Section 9.07. Notice to Noteholders. ..........................................................................54
ARTICLE X MISCELLANEOUS
Section 10.01. Notices..........................................................................................55
Section 10.02. Noteholders' Consents. .........................................................................56
Section 10.03. Notices to Rating Agency. ......................................................................57
Section 10.04. Limitation of Rights. ..........................................................................57
Section 10.05. Severability. ..................................................................................57
Section 10.06. Payments Due on Non-Business Days. .............................................................58
Section 10.07. Governing Law. .................................................................................58
Section 10.08. Counterparts. ..................................................................................58
Section 10.09. Binding Effect. ................................................................................59
EXHIBIT A - FORM OF SERIES B NOTE...............................................................................A-1
EXHIBIT B - NOTICE OF MANDATORY REPURCHASE......................................................................B-1
</TABLE>
iii
<PAGE> 5
NEW YORK CITY
JUNE 1997
<PAGE> 6
SERIES B NOTE AGREEMENT
THIS SERIES B NOTE AGREEMENT dated as of April 27, 1995 between HANOVER
DIRECT, INC., a Delaware corporation (the "Borrower"), and NORWEST BANK
MINNESOTA, N.A., a national banking association organized under the laws of the
United States of America and having its principal office in Minneapolis,
Minnesota (the "Trustee"), as trustee of the Series B Letter of Credit
(hereinafter defined) and as Paying Agent (hereinafter defined) for the Series B
Notes (hereinafter defined);
W I T N E S S E T H:
WHEREAS, the Borrower intends to issue and sell its interest bearing
flexible term notes in substantially the form of Exhibit A attached hereto (the
"Series B Notes"; individually, a "Series B Note") in an aggregate principal
amount not to exceed Ten Million Dollars ($10,000,000) (the "Series B Facility
Amount"), and to use the proceeds from such issuance and sale (together with the
proceeds from the issuance and sale of a subsequent series of notes) to
refinance and/or finance certain construction, refurbishment and related costs
of an approximately 530,000 square foot distribution facility of the Borrower
located in Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower, located in San Francisco, California (the
"Project"); and
WHEREAS, the payment when due of the principal of, interest on and
Purchase Price (hereinafter defined) of the Series B Notes will be supported, to
the extent provided therein, by the Series B Letter of Credit issued in favor of
the Trustee by the Bank (hereinafter defined) in the initial amount of
$10,145,833, representing the Series B Facility Amount (hereinafter defined)
plus 35 days interest on such amount computed at the Maximum Rate (hereinafter
defined), on the basis of actual number of days elapsed in a year of 360 days,
all pursuant to and as more fully set forth in the Reimbursement Agreement
(hereinafter defined); and
WHEREAS, the Borrower has requested that the Trustee act (i) hereunder
for the benefit of the Noteholders (hereinafter defined) to perform certain
services in connection with the issuance, authentication and delivery of, the
registration, transfer and exchange of, and the payment of principal, interest
and Purchase Price with respect to the Series B Notes issued hereunder and (ii)
as the custodian of the Series B Letter of Credit for the benefit of the
Noteholders, and the Trustee is willing to accept such appointments and perform
such services on the terms and subject to the conditions set forth herein; and
WHEREAS, the Borrower has requested that NationsBank, N.A. (Carolinas)
(formerly NationsBank of North Carolina, N.A.) act as its agent hereunder to
perform certain services in connection with the placement of the Series B Notes
upon issuance thereof, and NationsBank, N.A. (Carolinas) (formerly NationsBank
of North Carolina, N.A.) is willing to accept such appointment and perform such
services on the terms and subject to the conditions set forth herein and in the
Placement Agreement (hereinafter defined); and
<PAGE> 7
WHEREAS, the Borrower has requested that NationsBank, N.A. (Carolinas)
(formerly NationsBank of North Carolina, N.A.) act as its agent hereunder to
perform certain services in connection with the remarketing of Series B Notes
tendered for purchase and the determination of the interest rates and interest
periods with respect to the Series B Notes, and NationsBank, N.A. (Carolinas)
(formerly NationsBank of North Carolina, N.A.) is willing to accept such
appointment and perform such services on the terms and subject to the conditions
set forth herein and in the Remarketing Agreement (hereinafter defined); and
WHEREAS, the Borrower and the Trustee desire to set forth certain of
the terms and conditions with respect to the issuance of the Series B Notes;
NOW, THEREFORE, the parties hereto agree as follows:
2
<PAGE> 8
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. DEFINITIONS. For all purposes of this Agreement, unless
the context requires otherwise, the following terms shall have the following
meanings:
"AFFILIATE" means singularly and collectively, any Person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, the Borrower, and the legal representative, successor or assign of
any such Person. For purposes of this definition, a Person shall be deemed to be
"controlled by" the Borrower if the Borrower possesses, directly or indirectly,
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities, by contract or
otherwise.
"AGREEMENT" means this Series B Note Agreement, as it may be amended
from time to time in accordance with its terms.
"AUTHORIZED DENOMINATIONS" means with respect to all Series B Notes
$100,000 or any integral multiple of $100,000 in excess thereof.
"BALANCE CERTIFICATE AGREEMENT" means the Balance Certificate Agreement
dated as of March 18, 1992 between the Trustee, as transfer agent, and DTC, as
Securities Depository, governing the mechanisms for the registration of transfer
of the Series B Notes while the Series B Notes are held pursuant to a book-entry
system maintained by DTC.
"BANK" means the issuer of the Series B Letter of Credit, initially
NationsBank, N.A. (Carolinas) (formerly NationsBank of North Carolina, N.A.) and
upon the issuance and delivery of a Substitute Series B Letter of Credit, shall
mean the issuer of such Substitute Series B Letter of Credit.
"BANK NOTES" means any Series B Notes purchased with proceeds from a
draw under the Series B Letter of Credit and pledged to the Bank under the
Reimbursement Agreement, including, in the event a book-entry system with
respect to the Series B Notes is in effect, any beneficial ownership interest
therein; provided that in the event that the Bank fails to honor a drawing under
the Series B Letter of Credit to fund such a purchase and the Borrower purchases
such Series B Notes with its own funds, "Bank Notes" shall include such Series B
Notes except that such Series B Notes shall not be pledged to the Bank under the
Reimbursement Agreement.
"BENEFICIAL OWNER" or "BENEFICIAL OWNER" means the holder of the
beneficial ownership interest in each Series B Note as evidenced on (i) if such
Series B Note is held pursuant to a book-entry system, the books maintained by
the Securities Depository (and, as applicable, its participants or persons
acting through such participants), as more fully
3
<PAGE> 9
described in the Letter of Representations, or (ii) if such Series B Note is not
held pursuant to a book-entry system, the register maintained by the Paying
Agent.
"BORROWER" means Hanover Direct, Inc., a Delaware corporation, and any
successor thereto.
"BORROWER REPRESENTATIVE" means a Person at the time designated to act
on behalf of the Borrower by a written instrument furnished to the Trustee
containing the specimen signature of such person and signed on behalf of the
Borrower by such Person's President, any Executive Vice President, any Senior
Vice President, any Vice President or the Chairman of such Person's Board of
Directors, or, in the case of a Person other than a corporation, the person or
persons having comparable positions or roles. The certificate may designate an
alternate or alternates.
"BUSINESS DAY" means any day other than (a) a Saturday or Sunday, (b) a
day on which commercial banks in New York, New York, or in the city or cities in
which the corporate trust office of the Trustee or the Paying Agent, the primary
office of the Remarketing Agent or the Placement Agent or the paying office of
the Bank are authorized by law or executive order to close or (c) a day on which
the New York Stock Exchange is closed. For purposes of this definition, "paying
office of the Bank" means the Bank office responsible for making payments under
any Series B Letter of Credit.
"CEDE & CO." means Cede & Co., the nominee of DTC or any successor
nominee of DTC with respect to the Series B Notes.
"CREDIT MODIFICATION" means and shall be deemed to occur upon the
acceptance of a Substitute Series B Letter of Credit by the Trustee if (a) as a
result of such acceptance, the rating then assigned to the Series B Notes by any
Rating Agency then rating the Series B Notes would be lowered or eliminated or
(b) in the event the Series B Notes are not then rated, the issuer of such
Substitute Series B Letter of Credit has (i) senior debt or long-term bank
deposits which are rated by a Rating Agency at a lower rating than the rating
then assigned to the senior debt or long-term bank deposits of the issuer of the
expiring Series B Letter of Credit, or (ii) outstanding letters of credit or
other similar instruments supporting debt obligations which are rated by a
Rating Agency at a lower rating than the rating assigned to debt obligations
supported with letters of credit or similar instruments issued by the issuer of
the expiring Series B Letter of Credit.
"DATE OF ISSUANCE" means the date upon which the Series B Notes are
issued, authenticated and delivered in accordance with Section 2.06.
"DTC" means The Depository Trust Company, a limited purpose company
organized under the laws of the State of New York, and its successors and
assigns.
"EVENT OF DEFAULT" is defined in Section 7.01.
4
<PAGE> 10
"INTEREST PAYMENT DATE" means the first day after the last day of each
Interest Period.
"INTEREST PERIOD" means, with respect to any Series B Note, each period
of between one (1) and one hundred eighty (180) days established from time to
time in accordance with Section 2.02(a).
"INTEREST RATE" means, with respect to any Series B Note, the term,
nonvariable interest rate on such Series B Note established from time to time in
accordance with Section 2.02(a). In no event shall the Interest Rate exceed the
Maximum Rate.
"INTEREST RESERVE ACCOUNT" means the Interest Reserve Account of the
Series B Letter of Credit Fund created by Section 4.02.
"LETTER OF REPRESENTATIONS" has the meaning given to that term in
Section 2.07.
"MATURITY DATE" means October 1, 2009.
"MAXIMUM RATE" means the lesser of (a) the highest interest rate which
may be borne by the Series B Notes under State law and (b) fifteen percent (15%)
per annum.
"NOTICE OF MANDATORY PURCHASE" means that notice required to be
prepared and given by the Trustee pursuant to Section 3.07.
"OFFERING MEMORANDUM" means, collectively, the Preliminary Private
Placement Memorandum of the Borrower dated April 19, 1995 and the Private
Placement Memorandum of the Borrower dated as of the date of the initial
issuance of Series B Notes hereunder, each prepared in connection with the
initial offering of the Series B Notes, as the same may be amended or
supplemented.
"OPINION OF COUNSEL" means a written opinion of counsel who is
reasonably acceptable to the Trustee, the Bank, the Placement Agent and the
Remarketing Agent. The counsel may be an employee of or counsel to the Borrower,
the Placement Agent, the Remarketing Agent, the Bank or the Trustee.
"OUTSTANDING" when used with reference to Series B Notes means all
Series B Notes which have been authenticated and delivered by the Paying Agent
under this Agreement, except the following:
(a) Series B Notes cancelled, or purchased by or delivered to
the Paying Agent for cancellation, pursuant to the provisions of this Agreement;
(b) Series B Notes that have become due (at maturity or on
redemption, acceleration or otherwise) and for the payment of which, including
interest accrued to the due date, sufficient moneys are held by the Paying
Agent; and
(c) Series B Notes in lieu of which others have been
authenticated under Section 2.05 (relating to registration and exchange of
Series B Notes) or Section 2.08 (relating to mutilated, lost, stolen, destroyed
or undelivered Series B Notes).
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"OWNER", "OWNERS", "NOTEHOLDER" "NOTEHOLDER", "HOLDER", "HOLDER" or
words of similar import means: (a) in the event that the book-entry system of
evidence and transfer of ownership of the Series B Notes is employed pursuant to
Section 2.07, the Securities Depository Nominee, and (b) in all other cases, the
registered owner or owners of any Series B Note as shown on the register
maintained by the Paying Agent.
"PARTICIPANTS" means securities brokers and dealers, banks, trust
companies and clearing corporations which have access to the Securities
Depository's system.
"PAYING AGENT" shall mean the issuing and paying agent with respect to
the Series B Notes, initially Norwest Bank Minnesota, N.A.
"PERMITTED INVESTMENTS" means:
(i) investments in direct obligations of the United States of
America or any agency or instrumentality of the United States of America, the
payment or guarantee of which constitutes a full faith and credit obligation of
the United States of America or any agency or instrumentality thereof; provided,
that such obligations mature within one year from the date of acquisition
thereof;
(ii) investments in certificates of deposit maturing within one
year from the date of acquisition issued by a bank or trust company organized
under the laws of the United States of America or any state thereof having
capital surplus and undivided profits aggregating at least $100,000,000 and
having ratings from each Rating Agency then rating the Series B Notes at least
equivalent to each such Rating Agency's then current rating on the Series B
Notes and which are fully secured by obligations described in paragraph (i)
above; and
(iii) investments in federal funds, time deposits or bankers'
acceptances maturing within 365 days from the date of issuance or money-market
mutual funds or fully insured FDIC deposits, in each case rated by each Rating
Agency then rating the Series B Notes at least equivalent to such Rating
Agency's then current rating on the Series B Notes.
"PERSON" means (a) any individual, (b) any corporation, partnership,
joint venture, association, joint-stock company, business trust or
unincorporated organization, or grouping of any such entities, in each case
formed or organized under the laws of the United States of America, any state
thereof or the District of Columbia or (c) the United States of America or any
state thereof, or any political subdivision of either thereof, or any agency,
authority or other instrumentality of any of the foregoing.
"PLACEMENT AGENT" means initially NationsBank, N.A. (Carolinas)
(formerly NationsBank of North Carolina, N.A.) and any successor agent or agents
appointed from time to time pursuant to Section 8.12.
"PLACEMENT AGREEMENT" means the Placement Agreement dated as of
November 9, 1994, between the Borrower and the Placement Agent with respect to
the placement of the Series B Notes upon issuance thereof, and any and all
modifications, alterations, amendments and supplements thereto.
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"PROJECT" means the refinancing and/or financing of certain
construction, refurbishment and related costs of an approximately 530,000 square
foot distribution facility of the Borrower located in Roanoke, Virginia and a
new retail store of Gump's, Inc., a subsidiary of the Borrower located in San
Francisco, California..
"PURCHASE DATE" means, with respect to any Series B Notes, the date on
which such Series B Notes are required to be purchased pursuant to Section
3.07(a).
"PURCHASE PRICE" means an amount equal to 100% of the principal amount
of any Series B Note tendered or deemed tendered to the Trustee for purchase
pursuant to Section 3.07 hereof, plus accrued and unpaid interest thereon to,
but excluding, the Purchase Date.
"RATING AGENCY" means Moody's Investors Service, Inc., if such agency's
ratings are in effect with respect to the Series B Notes, and Standard & Poor's
Ratings Group, if such agency's ratings are in effect with respect to the Series
B Notes, and their respective successors and assigns. If either such corporation
ceases to act as a securities rating agency, the Borrower may, with the approval
of the Placement Agent, the Remarketing Agent and the Bank, appoint any
nationally recognized securities rating agency as a replacement.
"RECORD DATE" means, with respect to each Interest Payment Date, the
Trustee's close of business on the Business Day next preceding such Interest
Payment Date.
"REIMBURSEMENT AGREEMENT" means (a) the Credit Facilities and
Reimbursement Agreement dated as of October 12, 1994, by and among the Borrower,
the financial lenders listed on the signature pages of the Reimbursement
Agreement, including the Bank, and the Bank, as Agent, pursuant to which, among
other things, the Series B Letter of Credit is issued by the Bank and delivered
to the Trustee, and any and all modifications, alterations, amendments and
supplements thereto and (b) any similar agreement between the Borrower and the
issuer of a Substitute Series B Letter of Credit.
"REMARKETING AGENT" means initially NationsBank, N.A. (Carolinas)
(formerly NationsBank of North Carolina, N.A.) and any successor agent or agents
appointed from time to time pursuant to Section 8.10.
"REMARKETING AGREEMENT" means (a) the Remarketing and Interest Services
Agreement dated as of November 9, 1994, between the Remarketing Agent and the
Borrower, with respect to the remarketing of the Series B Notes and the
determination of interest rates and interest periods for the Series B Notes, and
any and all modifications, alterations, amendments and supplements thereto and
(b) any agreement between the Borrower and any successor remarketing agent
appointed pursuant to Section 8.10.
"REMARKETING PROCEEDS" means funds received from purchasers (other than
the Borrower or any Affiliate) of Series B Notes which have been remarketed by
the Remarketing Agent as payment for such Series B Notes.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee or
the Paying Agent, any officer within the Corporate Trust Division (or any
successor group of the Trustee or the Paying Agent) including any vice
president, assistant vice president, assistant secretary
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or any other officer or assistant officer of the Trustee or the Paying Agent
customarily performing functions similar to those performed by the persons who
at the time shall be such officers, respectively.
"SECURITIES DEPOSITORY" means, initially, DTC, or any successor or
substitute securities depository selected by the Borrower (with the consent of
the Trustee and the Remarketing Agent), which shall maintain a book-entry system
in respect of the Series B Notes.
"SECURITIES DEPOSITORY NOMINEE" means, as to any Securities Depository,
such Securities Depository or the nominee of such Securities Depository in whose
name there shall be registered on the register maintained by the Paying Agent
the Series B Note certificate to be delivered to and immobilized with the Paying
Agent during continuation with such Securities Depository of participation in
its book-entry system, and shall initially be Cede & Co.
"SERIES B FACILITY AMOUNT" means $10,000,000, being the maximum
aggregate principal amount of Series B Notes that may be issued hereunder.
"SERIES B LETTER OF CREDIT" means an irrevocable letter of credit
having the characteristics of a "credit" or "letter of credit" set forth in
Section 5-103 of the Uniform Commercial Code of the State of North Carolina (or,
in the case of a Substitute Series B Letter of Credit, Section 5-103 of the
Uniform Commercial Code of the state under whose laws such Substitute Series B
Letter of Credit is governed) except that a Series B Letter of Credit (a) may
not be revocable and (b) may only be issued by (i) a national bank, (ii) any
banking institution organized under the laws of any state, territory or the
District of Columbia, the business of which is substantially confined to banking
and is supervised by the state or territorial banking commission or similar
officials or (iii) a branch or agency of a foreign bank, provided that the
nature and extent of federal and/or state regulation and the supervision of the
particular branch or agency is substantially equivalent to that applicable to
federal or state chartered domestic banks doing business in the same
jurisdiction and which meets the requirements of Section 5.01. Initially, the
term "Series B Letter of Credit" shall mean the irrevocable letter of credit
issued by the Bank to the Trustee in accordance with Section 5.01, supporting
the payment of the principal of, interest on and Purchase Price of the Series B
Notes, including any permitted supplements or amendments and any renewals or
extensions thereof, and, upon the expiration or termination of the Series B
Letter of Credit and the issuance and delivery of a Substitute Series B Letter
of Credit meeting the requirements set forth in this paragraph and in Sections
5.01 and 5.03, "Series B Letter of Credit" shall mean such Substitute Letter of
Credit.
"SERIES B LETTER OF CREDIT FUND" means the Series B Letter of Credit
Fund created by Section 4.02.
"SERIES B NOTE DOCUMENTS" mean the Series B Note, the Series B Note
Agreement, the Series B Letter of Credit, the Placement Agreement, the
Remarketing Agreement and the Reimbursement Agreement.
"STATE" means the State of New York.
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"SUBSTITUTE SERIES B LETTER OF CREDIT" shall have the meaning set forth
in Section 5.03.
"TRUSTEE" means the entity identified as such in the heading of this
Agreement and such entity's successors under this Agreement.
SECTION 1.02. RULES OF CONSTRUCTION. Unless the context otherwise
requires,
(a) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
applied on a consistent basis;
(b) references to Articles and Sections are to the Articles
and Sections of this Agreement;
(c) terms defined elsewhere in this Agreement shall have the
meanings therein prescribed for them;
(d) words of the masculine gender shall be deemed and
construed to include correlative words of the feminine and neuter genders;
(e) headings used in this Agreement are for convenience of
reference only and shall not define or limit the provisions hereof;
(f) each reference herein or in the Series B Notes to a
percentage of Series B Notes required for notices, consents or for any other
reason shall be deemed to refer to Series B Notes then Outstanding; and
(g) all references herein to time shall be Charlotte, North
Carolina time unless otherwise expressly stated.
END OF ARTICLE I
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ARTICLE II
THE SERIES B NOTES
SECTION 2.01. AUTHORIZATION OF SERIES B NOTES; FORM OF SERIES B NOTES;
DETAILS OF SERIES B NOTES.
(a) AUTHORIZATION OF SERIES B NOTES; FORM OF SERIES B NOTES.
The Borrower hereby authorizes and creates under this Series B Note Agreement an
issue of Series B Notes to be designated "Hanover Direct, Inc. Flexible Term
Notes, Series B." The total principal amount of Series B Notes that may be
issued and outstanding hereunder shall not exceed the Series B Facility Amount
(except as provided in Section 2.08 with respect to replacement of mutilated,
lost, stolen, destroyed or undelivered Series B Notes). The Series B Notes are
issuable in registered form without coupons in Authorized Denominations only,
and shall be substantially in the form of Exhibit A to this Agreement, with
appropriate variations, omissions, insertions, notations, legends or
endorsements required by law or usage or permitted or required by this
Agreement. The Series B Notes may be in printed or typewritten form. No Series B
Notes may be issued under the provisions of this Agreement except in accordance
with this Article.
(b) DETAILS OF SERIES B NOTES. Each Series B Note will be
dated the date of its original authentication and delivery hereunder and all
Series B Notes shall mature, subject to prior redemption or repurchase, on the
Maturity Date. Interest on each Series B Note shall be computed from the
Interest Payment Date applicable to such Series B Note next preceding the date
of authentication thereof, unless such authentication date (i) is prior to the
first Interest Payment Date following the initial delivery of the Series B
Notes, in which case interest shall be computed from such initial delivery date,
or (ii) is an Interest Payment Date, in which case interest shall be computed
from such authentication date; provided, that if interest on the Series B Notes
is in default, Series B Notes shall bear interest from the last date to which
interest has been paid.
The principal and Purchase Price of and interest on the Series
B Notes shall be payable in lawful currency of the United States of America. The
principal and Purchase Price of the Series B Notes shall be payable at the
principal corporate trust office of the Paying Agent upon presentation and
surrender of such Series B Notes as the same shall become due and payable.
Payments of interest on the Series B Notes will be mailed, except as otherwise
provided herein, to the persons in whose names the Series B Notes are registered
on the register of the Paying Agent at the close of business on the Record Date
next preceding each Interest Payment Date, including, when a book-entry system
is in effect with respect to some or all of the Series B Notes, Persons,
including the Participants, who are registered as owning beneficial interests in
the Series B Notes on the registration books of the Securities Depository;
provided that, any Holder (or beneficial owner, if Series B Notes are held under
a book-entry system) of a Series B Note or Series B Notes in an aggregate
principal amount of not less than $500,000 may, by prior written instructions
filed with the Paying Agent (which
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instructions shall remain in effect until revoked by subsequent written
instructions), instruct that interest payments for any period be made by wire
transfer to an account in the continental United States or other means
acceptable to the Paying Agent. Series B Notes will be numbered from 1 upward as
determined by the Trustee and will contain the designation "R."
SECTION 2.02. INTEREST ON THE SERIES B NOTES. The Series B Notes will
bear interest as herein provided from the date thereof until paid in full.
Interest accrued on each Series B Note shall be paid on the applicable Interest
Payment Date therefor. The Interest Rate on the Series B Notes will be
determined as provided in this Section 2.02; provided that the Interest Rate
shall not exceed the Maximum Rate. The amount of interest payable on any
Interest Payment Date shall be computed on the basis of the actual number of
days elapsed over a year of 360 days.
(a) INTEREST PERIOD AND INTEREST RATE DETERMINATION METHOD.
There shall be established and reestablished for each of the Series B Notes an
Interest Period, and each of the Series B Notes shall bear interest at the
Interest Rate for such Series B Note during the applicable Interest Period. The
Interest Period and corresponding Interest Rate for each Series B Note shall be
determined by the Remarketing Agent initially no later than the first day of the
Interest Period and thereafter on the first day of each succeeding Interest
Period or on a Business Day selected by the Remarketing Agent not more than five
Business Days prior to the first day of such succeeding Interest Period. Each
Interest Period for any Series B Note shall be a period, not less than one (1)
nor more than one hundred eighty (180) days, determined by the Remarketing Agent
in its sole discretion to be the period which, together with all other Interest
Periods for all Series B Notes then Outstanding, will result in the lowest
overall interest expense on the Series B Notes over the next succeeding one
hundred eighty (180) days; provided, however, that:
(i) each Interest Period shall end on a day which
immediately precedes a Business Day, or on the day prior to the Maturity Date;
(ii) if the Remarketing Agent shall not have
determined an Interest Period for any Series B Note or if for any reason an
Interest Period for any Series B Note determined by the Remarketing Agent shall
be held to be invalid or unenforceable by a court of law, such Interest Period
shall have seven days or, if the last day of such Interest Period would fall on
or after the Maturity Date, such Interest Period shall end on the day preceding
the Maturity Date;
(iii) no Interest Period shall extend beyond the
fifth (5th) Business Day prior to the stated expiration date of the Series B
Letter of Credit or Substitute Series B Letter of Credit then in effect, unless
a Substitute Series B Letter of Credit, which will not result in a Credit
Modification has been timely delivered and accepted by the Trustee pursuant to
the terms of Section 5.03;
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(iv) if, pursuant to Section 5.03(a)(iii), the
Remarketing Agent has approved a Substitute Series B Letter of Credit which will
result in a Credit Modification, no Interest Period commencing prior to the
effective date of such Substitute Series B Letter of Credit shall extend beyond
the effective date of such Substitute Series B Letter of Credit; and
(v) in the event any Series B Note is purchased with
the proceeds from a draw under the Series B Letter of Credit, the Interest
Period for such Series B Note will be determined for successive one-day terms
until such Series B Note is remarketed and released by the Bank in accordance
with Section 3.08(d)(ii).
In determining the number of days in each Interest Period, the Remarketing Agent
shall take into account the following factors: (1) all other Interest Periods
for all of the Series B Notes, (2) general economic and market conditions
relevant to the Series B Notes, (3) optional redemption dates, the notice of
which it has been given, (4) the date and principal amount of any mandatory
sinking fund redemption pursuant to Section 3.01(b), notice of which has been
provided to the Remarketing Agent by the Trustee pursuant to Section
3.01(b)(ii), and (5) such other facts, circumstances and conditions as the
Remarketing Agent determines in its sole discretion to be relevant.
The Interest Rate for each Interest Period for each Series B
Note shall be the minimum rate of interest which, in the opinion of the
Remarketing Agent, would be necessary to sell the Series B Note on such date of
determination in a secondary market sale at the principal amount thereof. If the
Remarketing Agent shall not have determined an Interest Rate with respect to any
or all of the Series B Notes, the Interest Rate for such Series B Notes shall be
identical to the immediately preceding Interest Rate for such Series B Notes. If
for any reason an Interest Rate determined by the Remarketing Agent for any
Interest Period shall be held to be invalid or unenforceable by a court of law,
the Interest Rate for such Interest Period shall be a rate per annum equal to
125% of the rate published in the most recent edition of The Bond Buyer for
30-day prime commercial paper or, if The Bond Buyer no longer publishes such
information, such other publication or provider of such information as the
Remarketing Agent shall select.
(b) NOTIFICATION OF INTEREST PERIOD AND INTEREST RATE;
CALCULATION OF INTEREST. The Remarketing Agent will notify the Paying Agent in
writing (which may be in telecopy form) or by telephone promptly confirmed in
writing by 10:00 a.m. on the first Business Day of each Interest Period with
respect to any Series B Note, of the identity of such Series B Note, the length
of such Interest Period, the Interest Rate therefor and the principal amount of
such Series B Note, and, upon the request of the Borrower or the Bank, the
Paying Agent shall promptly (but in no event later than the end of such Business
Day) after its receipt of such information, forward such information to the
Borrower and the Bank. The failure by the Remarketing Agent or the Paying Agent,
as applicable, to give any such notice shall not affect the change in the
Interest Period and/or Interest Rate.
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Using the Interest Rates and Interest Periods supplied by the
Remarketing Agent, the Trustee will (i) calculate the amount of interest payable
on the Series B Notes and (ii) take action as set forth in Section 5.02 such
that timely payment of such interest is made under Section 4.02.
The establishment of the Interest Rates and the Interest
Periods as provided in this Agreement will be conclusive and binding on the
Borrower, the Bank, the Trustee, the Paying Agent, the Remarketing Agent and the
Noteholders. The calculation of interest payable on the Series B Notes as
provided in this Agreement will be conclusive and binding on the Borrower, the
Bank, the Trustee, the Paying Agent, the Remarketing Agent and the Noteholders,
absent manifest error.
(c) NO LIABILITY. Neither the Remarketing Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Trustee, the Paying Agent, the Placement Agent, the Bank or any Noteholder for
any action taken or not taken by the Remarketing Agent or any of its directors,
officers, agents or employees in connection with the determination of the
Interest Period and Interest Rate for each Series B Note pursuant to this
Section 2.02, in the absence of its own negligence or willful misconduct.
SECTION 2.03. EXECUTION AND AUTHENTICATION. The Series B Notes will be
signed on behalf of the Borrower by the manual or facsimile signatures of the
President, any Executive Vice President, any Senior Vice President, any Vice
President or Treasurer of the Borrower, attested by the manual or facsimile
signatures of the Borrower's Secretary or Assistant Secretary, and the seals of
the Borrower will be impressed or imprinted on the Series B Notes by facsimile
or otherwise. If an officer of the Borrower whose signature is on a Series B
Note no longer holds that office at the time the Trustee authenticates the
Series B Note, the Series B Note shall nevertheless be valid. If a person
signing a Series B Note is the proper officer on the actual date of execution,
the Series B Note shall be valid even if that person is not the proper officer
on the nominal date of action.
A Series B Note shall not be valid for any purpose under this Agreement
unless and until the Paying Agent manually signs the certificate of
authentication on the Series B Note, and such signature shall be conclusive
evidence that the Series B Note has been authenticated under this Agreement.
SECTION 2.04. SERIES B NOTE REGISTER. The Paying Agent shall keep a
register of Series B Notes and of their transfer and exchange. Except as
otherwise provided in Section 2.07, Series B Notes must be presented at the
principal corporate trust office of the Paying Agent for registration, transfer
and exchange, and Series B Notes may be presented at that office for payment.
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SECTION 2.05. REGISTRATION AND EXCHANGE OF SERIES B NOTES; PERSONS
TREATED AS OWNERS.
(a) Except as otherwise provided in Section 2.07, Series B
Notes may be transferred only on the register maintained by the Paying Agent.
Upon surrender for transfer of any Series B Note to the Paying Agent, duly
endorsed for transfer or accompanied by an assignment duly executed by the
holder or the holder's attorney duly authorized in writing and in either case,
with an appropriate guarantee of signature conforming to the requirements of
Exhibit A attached hereto, the Paying Agent will authenticate a new Series B
Note or Series B Notes in an equal total principal amount and registered in the
name or names of the transferee or transferees.
Series B Notes may be exchanged for an equal total principal
amount of Series B Notes of different Authorized Denominations. The Paying Agent
will authenticate and deliver Series B Notes that the Noteholder making the
exchange is entitled to receive, bearing numbers not then outstanding.
The Paying Agent will not be required to transfer or exchange
any Series B Note during the period beginning two (2) days before the mailing of
notice calling the Series B Note or any portion of the Series B Note for
redemption and ending on the redemption date. Series B Notes subject to
redemption or mandatory purchase may be transferred or exchanged only if the
Paying Agent provides the new holder thereof with a copy of the notice of
redemption or mandatory purchase, as the case may be.
The holder of a Series B Note as shown on the register of the
Paying Agent shall be the absolute owner of the Series B Note for all purposes,
and payment of principal, interest or Purchase Price shall be made only to or
upon the written order of such holder or the holder's legal representative;
provided that interest shall be paid to the Person shown on the register as a
holder of a Series B Note on the applicable Record Date.
(b) The Paying Agent may require the payment by a Noteholder
requesting exchange or registration of transfer of any tax or other governmental
charge required to be paid in respect of the exchange or registration of
transfer but will not impose any other charge.
SECTION 2.06. AUTHORIZATION OF SERIES B NOTES.
(a) AUTHORIZATION OF SERIES B FACILITY AMOUNT AND ISSUANCE OF
SERIES B NOTES. The Borrower hereby requests and authorizes the issuance,
authentication and delivery under this Agreement of Series B Notes in the
aggregate principal amount of $10,000,000, said Series B Notes to be dated April
27, 1995.
The Series B Notes shall be executed substantially in the form
and in the manner hereinabove set forth and shall be deposited with the Paying
Agent for authentication,
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but before the Series B Notes shall be delivered by the Paying Agent, there
shall be filed or deposited with the Trustee the following:
(1) a copy, certified by the secretary or assistant
secretary of the Borrower of a resolution of the board of directors or executive
committee of the board of directors of the Borrower, authorizing (I) the
execution and delivery of this Agreement, (II) the execution, delivery, issuance
and sale of Series B Notes in an aggregate principal amount not to exceed the
Series B Facility Amount, and (III) the use by the Placement Agent and the
Remarketing Agent of the Offering Memorandum;
(2) the Series B Letter of Credit, in an amount not
less than $10,145,833, representing the Series B Facility Amount plus 35 days'
interest on such amount computed at the Maximum Rate on the basis of actual
number of days elapsed in a year of 360 days;
(3) an original executed counterpart of this
Agreement;
(4) the written opinion of Whitman Breed Abbott &
Morgan, counsel to the Borrower, addressed to the Trustee, the Bank, the
Placement Agent and the Remarketing Agent, to the effect that (I) the issuance
of the Series B Notes has been duly authorized by the Borrower, (II) the Series
B Notes have been duly executed and delivered by the Borrower, (III) this
Agreement is enforceable and of binding effect against the Borrower in
accordance with its terms under State law, (IV) nothing has come to their
attention that would lead them to believe that the information concerning the
Borrower contained in the Offering Memorandum contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading, and (V) the Series B Notes are not subject to registration
under the Securities Act of 1933, as amended, and otherwise in form and
substance satisfactory to the Trustee and the Remarketing Agent;
(5) an Opinion of Counsel to the Bank addressed to
the Trustee, or upon which the Trustee may rely, to the effect that the Series B
Letter of Credit is a binding and valid obligation of the Bank and is not
subject to registration under the Securities Act of 1933, as amended;
(6) an authorization request from the Borrower to
authenticate and deliver $10,000,000 aggregate principal amount of the Series B
Notes in specified Authorized Denominations to the initial purchaser or
purchasers upon payment to the Placement Agent of the Purchase Price for such
principal amount of Series B Notes; and
(7) such other documentation, certificates and
assurances as may reasonably be required by the Bank, the Paying Agent, the
Remarketing Agent or the Placement Agent or their respective counsel.
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When the documents referred to in paragraphs (1) through (7), inclusive, of this
subsection (a) have been filed with the Trustee, the Paying Agent shall
authenticate the Series B Notes issued under this subsection (a) and the Trustee
shall deliver such executed and authenticated Series B Notes to the purchaser or
purchasers thereof as directed by the Borrower.
(b) LIMITATIONS ON THE ISSUANCE OF SERIES B NOTES.
Notwithstanding any other provision of this Article II, the Paying Agent shall
not authenticate and deliver Series B Notes (i) on any day on which the Trustee
is to receive payment from the Bank in respect of a drawing under the Series B
Letter of Credit until after the Trustee has received such payments in an amount
equal to the amount of such drawing; (ii) if the issuance of such Series B Notes
would, after giving effect to such issuance, cause the aggregate principal
amount of all Series B Notes issued and Outstanding pursuant to this Article II
to exceed the Series B Facility Amount; (iii) on or after a date which is five
(5) days prior to the Maturity Date; (iv) on or after any date on which the
Trustee has delivered a notice of mandatory redemption pursuant to Section
3.01(c) and until the Series B Letter of Credit is extended or a Substitute
Series B Letter of Credit has been provided; (v) on any date as of which an
Event of Default has occurred and is continuing and of which the Trustee has
received notice or is deemed to have received notice as provided in Section
8.05; (vi) on and after the date as of which the Trustee has been notified that
the Placement Agent has resigned or been removed (as provided in Section 8.12)
and until a successor Placement Agent has delivered its acceptance of its
appointment to the Trustee; and (vii) on and after the date as of which the
Trustee has been notified that the Remarketing Agent has resigned or been
removed (as provided in Section 8.10) and until a successor Remarketing Agent
has delivered its acceptance of its appointment to the Trustee. Notwithstanding
any other provision of this Agreement to the contrary, the Paying Agent shall
not authenticate and deliver Series B Notes if prior to any proposed issuance
date or by 10:00 on such date the Trustee receives a written notice from the
Bank that the conditions precedent to an issuance of additional Series B Notes,
as provided in Section 6.02 of the Reimbursement Agreement, have not been met.
(c) SERIES B NOTE PROCEEDS. All proceeds from the sale of
Series B Notes issued hereunder shall be paid on the Date of Issuance by the
Placement Agent to the Paying Agent and, upon receipt thereof, the Paying Agent
shall promptly pay such proceeds to or at the direction of the Borrower on such
date.
SECTION 2.07. BOOK-ENTRY SYSTEM; RECORDING AND TRANSFER OF OWNERSHIP OF
THE SERIES B NOTES.
(a) Initially, all of the Series B Notes shall be held by
means of a book-entry system administered by the Securities Depository. One
Series B Note certificate in registered form will be issued for the Series B
Notes in the aggregate principal amount of $10,000,000, and will be registered
in the name of the Securities Depository Nominee and will be deposited with the
Paying Agent. Thereafter, in the event that Series B Notes are issued to the
Beneficial Owners thereof in certificated (physical) form (and in each and every
case thereafter in which a change in the principal amount of Series B Notes held
pursuant to a
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book-entry system is made), the Paying Agent will take all actions necessary to
comply with the Balance Certificate Agreement.
(b) With respect to any Series B Notes that are held by means
of a book-entry system, such book-entry system will evidence beneficial
ownership of the Series B Notes so held in Authorized Denominations (or, as
applicable, positions held by the Participants, beneficial ownership being
evidenced in the records of such Participants). Registration and transfers of
ownership shall be effected on the records of the Securities Depository and the
Participants, as applicable, pursuant to rules and procedures established by the
Securities Depository and the Participants. Subject to the provisions of Section
7.09, the Borrower, the Trustee and the Paying Agent will recognize the
Securities Depository Nominee, while the registered owner of the Series B Notes
so held, as the owner of the Series B Notes for all purposes, including (i)
payments of principal and Purchase Price of, and interest on, the Series B
Notes, (ii) notices and (iii) voting. Transfer of principal, interest and
Purchase Price payments to beneficial owners of the Series B Notes so held will
be the responsibility of the Securities Depository and the Participants. The
Borrower, the Trustee, the Bank and the Paying Agent will not be responsible or
liable for such transfers of payments or for maintaining, supervising or
reviewing the records maintained by the Securities Depository, the Securities
Depository Nominee or the Participants. While the Securities Depository Nominee
is the owner of the Series B Notes so held, notwithstanding the provision
hereinabove contained, payments of principal and Purchase Price of and interest
on such Series B Notes shall be made in accordance with the terms of the Letter
of Representations dated as of April 27, 1995 (the "Letter of Representations")
among the Borrower, the Trustee, the Remarketing Agent and the Paying Agent (as
issuing agent and paying agent thereunder) and received and accepted by the
Securities Depository.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE OF OWNERSHIP IS MAINTAINED IN
ACCORDANCE HEREWITH FOR ANY SERIES B NOTES, (1) THE PROVISIONS OF THIS AGREEMENT
RELATING TO THE DELIVERY OF PHYSICAL SERIES B NOTES SHALL BE DEEMED INAPPLICABLE
OR BE OTHERWISE SO CONSTRUED WITH REGARD TO SUCH SERIES B NOTES AS TO GIVE FULL
EFFECT TO SUCH BOOK-ENTRY SYSTEM AND (2) THE PROVISIONS OF THIS AGREEMENT
RELATING TO ISSUANCE, PAYMENTS OF PRINCIPAL, PURCHASE PRICE AND INTEREST, AND
ESTABLISHMENT OF INTEREST RATES AND INTEREST PERIODS WITH RESPECT TO THE SERIES
B NOTES SHALL BE APPLICABLE TO BENEFICIAL OWNERSHIP INTERESTS IN THE SERIES B
NOTES IN AUTHORIZED DENOMINATIONS TO THE SAME EXTENT AS SUCH PROVISIONS ARE
APPLICABLE TO REGISTERED OWNERSHIP INTERESTS IN THE SERIES B NOTES.
SECTION 2.08. MUTILATED, LOST, STOLEN, DESTROYED OR UNDELIVERED SERIES
B NOTES.
(a) If any Series B Note is mutilated, lost, stolen or
destroyed, the Paying Agent will authenticate a new Series B Note of the same
denomination , provided that, with
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<PAGE> 23
respect to any mutilated Series B Note, such Series B Note shall first be
surrendered by the Noteholder to the Trustee at its principal corporate trust
office, and with respect to any lost, stolen or destroyed Series B Note, there
shall first be furnished to the Borrower, the Trustee, the Paying Agent and the
Bank, evidence of such loss, theft or destruction, together with an indemnity
from the Noteholder, satisfactory to them. If the Series B Note has matured and
if the evidence and indemnity described above have been provided by the
Noteholder, instead of issuing a duplicate Series B Note, the Paying Agent, with
the consent of the Borrower, shall pay the Series B Note without requiring
surrender of the Series B Note and make such requirements as the Paying Agent
deems fit for its protection, including a lost instrument bond. The Borrower and
the Paying Agent may charge the Noteholder their reasonable fees and expenses in
this connection.
(b) In the event that any Series B Note purchased pursuant to
a mandatory purchase is not delivered by the holder thereof on the date such
Series B Note is purchased, the Borrower shall execute (if necessary) and the
Paying Agent will authenticate and deliver a new Series B Note of like aggregate
principal amount as the Series B Note purchased, the Series B Note purchased
shall no longer be deemed outstanding and the owner thereof shall be entitled to
receive only those funds held on deposit with respect thereto, and the new
Series B Note shall, for all purposes of this Agreement, be deemed to evidence
the same debt as the Series B Note purchased and shall be remarketed, delivered
and registered in accordance with Section 3.08.
(c) Every new Series B Note issued pursuant to this Section
2.08 shall (i) constitute an additional contractual obligation of the Borrower
regardless of whether, in the case of (a) above, the mutilated, lost, stolen or
destroyed Series B Note and, in the case of (b) above, the Series B Note
purchased, shall be enforceable at any time by anyone, and (ii) be entitled to
all of the benefits of this Agreement equally and proportionately with any and
all other Series B Notes issued and outstanding hereunder.
(d) All Series B Notes shall be held and owned on the express
condition that the foregoing provisions of this Section are exclusive with
respect to the replacement or payment of mutilated, lost, stolen or destroyed
Series B Notes and the replacement of any Series B Note purchased pursuant to a
mandatory purchase and, to the extent permitted by law, shall preclude any and
all other rights and remedies with respect to the replacement or payment of
negotiable instruments or other investment securities without their surrender,
notwithstanding any law or statute to the contrary now existing or enacted
hereafter.
SECTION 2.09. CANCELLATION OF SERIES B NOTES. All Series B Notes paid,
redeemed or purchased by the Borrower, either at or before maturity, shall be
delivered to the Paying Agent when such payment, redemption or purchase is made,
and except as otherwise provided herein shall be cancelled. Whenever a Series B
Note is delivered to the Paying Agent for cancellation (upon payment, redemption
or purchase), or for transfer, exchange or replacement pursuant to Section 2.05,
2.07 or 2.08, the Paying Agent shall promptly cancel the Series B Note and
prepare a certificate of destruction therefor.
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END OF ARTICLE II
19
<PAGE> 25
ARTICLE III
REDEMPTION, PURCHASE AND REMARKETING
SECTION 3.01. REDEMPTION OF SERIES B NOTES.
(a) OPTIONAL REDEMPTION. (i) The Series B Notes are subject to
redemption at the option of the Borrower, in whole or in part, at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest
thereon to, but excluding, the redemption date; provided that any such
redemption in part shall be in a minimum principal amount of $100,000.
(ii) For any optional redemption, the Borrower will
provide written notice to the Trustee, the Paying Agent, the Bank and the
Remarketing Agent stating the redemption date (consistent with Section 3.02),
the principal amount of Series B Notes to be redeemed and other particulars with
respect thereto as the Trustee, the Paying Agent or the Remarketing Agent deem
necessary. The Borrower will give such notice not more than sixty (60) days and
not less than thirty (30) Business Days prior to the redemption date.
(b) MANDATORY SINKING FUND REDEMPTION.
(i) The Series B Notes are subject to mandatory
sinking fund redemption prior to the Maturity Date, in part, with the Series B
Notes to be redeemed being selected pursuant to Section 3.03, at a redemption
price equal to the principal amount thereof, on October 1, or if any such date
is not a Business Day, on the next succeeding Business Day with the same force
and effect, in the years and in the principal amounts indicated below:
<TABLE>
<CAPTION>
REDEMPTION DATE PRINCIPAL
(OCTOBER 1) AMOUNT
----------- ------
<S> <C>
1996 $500,000
1997 500,000
1998 500,000
1999 500,000
2000 800,000
2001 800,000
2002 800,000
2003 800,000
2004 800,000
2005 800,000
2006 800,000
2007 800,000
2008 800,000
2009 800,000
</TABLE>
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<PAGE> 26
(ii) Not more than two hundred five (205) days nor
less than one hundred ninety-five (195) days prior to any date on which the
Series B Notes are subject to mandatory sinking fund redemption, the Trustee
shall deliver to the Remarketing Agent written notice of such redemption date
and the principal amount of Series B Notes subject to redemption on such date,
which notice shall also state that (A) pursuant to Section 2.02(a), the
Remarketing Agent shall take into account the date and principal amount of any
sinking fund redemption in determining the number of days in each Interest
Period, and (B) pursuant to Section 3.03, the Remarketing Agent shall select the
Series B Notes for redemption on or before the sixtieth (60th) day prior to the
sinking fund redemption date and in making such selection shall take into
account the Interest Periods with respect to such Series B Notes. Not more than
eighty (80) days nor less than sixty-five (65) days prior to any date on which
the Series B Notes are subject to mandatory sinking fund redemption, the Trustee
shall deliver to the Remarketing Agent another written notice identical to the
notice described in the preceding sentence.
(iii) At its option, to be exercised on or before the
tenth (10th) Business Day next preceding any sinking fund redemption date, the
Borrower may:
(1) deliver to the Paying Agent for
cancellation Series B Notes in any aggregate principal amount desired to be
credited against the Borrower's sinking fund redemption obligations; or
(2) instruct the Paying Agent to credit
against the Borrower's sinking fund redemption obligations any Series B Notes
which prior to such date have been redeemed (otherwise than through the
operation of the sinking fund) and cancelled by the Paying Agent and not
theretofore applied as a credit against any sinking fund redemption obligation.
Each Series B Note so delivered or previously
redeemed shall be credited by the Paying Agent at 100% of the principal amount
thereof against the obligation of the Borrower on such sinking fund redemption
dates. Any excess over such obligation shall be credited against future sinking
fund redemption obligations in chronological order, and the principal amount of
the Series B Notes to be redeemed by operation of the sinking fund shall be
accordingly reduced.
(c) MANDATORY REDEMPTION ON EXPIRATION OR TERMINATION OF
SERIES B LETTER OF CREDIT WITHOUT EXTENSION OR PROVIDING A SUBSTITUTE SERIES B
LETTER OF CREDIT. (i) The Series B Notes are subject to mandatory redemption in
whole on the fifth (5th) Business Day prior to the stated date of expiration or
termination of the Series B Letter of Credit, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest thereon to, but
excluding, the redemption date, unless by the twentieth (20th) day prior to such
redemption date the Borrower provides to the Trustee, and the Trustee has
accepted, (1) evidence that such Series B Letter of Credit has been extended or
(2) a Substitute Series B Letter of Credit to be effective on or prior to such
redemption date.
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<PAGE> 27
(ii) Not more than two hundred five (205) days nor
less than one hundred ninety-five (195) days prior to the stated expiration date
of the Series B Letter of Credit then in effect, the Trustee shall deliver to
the Remarketing Agent written notice stating (A) the date on which such Series B
Letter of Credit is scheduled to expire, (B) that all of the Series B Notes are
subject to redemption on the fifth (5th) Business Day prior to such expiration
date, and (C) that pursuant to Section 2.02(a)(iii), no Interest Period shall
extend beyond the fifth (5th) Business Day prior to such expiration date, unless
by the twentieth (20th) day prior to such redemption date the Trustee has
received and accepted from the Borrower (1) evidence that such Series B Letter
of Credit has been extended or (2) a Substitute Series B Letter of Credit to be
effective on or prior to such redemption date. If the Trustee shall not have
received either of the items referenced in (1) and (2) of the preceding
sentence, then not more than eighty (80) days nor less than sixty-five (65) days
prior to the expiration date of the Series B Letter of Credit then in effect,
the Trustee shall deliver to the Remarketing Agent another written notice
identical to the notice described in the preceding sentence.
SECTION 3.02. REDEMPTION DATE. The redemption date for Series B Notes
to be redeemed pursuant to Section 3.01(a) must be an Interest Payment Date with
respect to the Series B Notes being redeemed. The redemption date for mandatory
redemptions will be as specified in Section 3.01(b) or (c), as the case may be,
or determined by the Trustee or the Remarketing Agent consistently with the
provisions thereof.
SECTION 3.03. SELECTION OF SERIES B NOTES TO BE REDEEMED. Except as
otherwise provided in this Section 3.03, if fewer than all the Series B Notes
are to be redeemed, the Remarketing Agent will select the Series B Notes to be
redeemed by lot or such other method as it deems in its sole discretion to be
fair and appropriate and shall notify the Paying Agent (which notice may be
provided by telephone, immediately confirmed in writing by legible facsimile
transmission, registered or certified mail, overnight express delivery, or other
secure means) of the holders and denominations of Series B Notes to be redeemed;
provided, however, that in selecting Series B Notes to be redeemed the
Remarketing Agent shall (i) select only Series B Notes not previously called for
redemption, (ii) select Bank Notes prior to any other Series B Notes, and (iii)
with respect to any mandatory sinking fund redemption pursuant to Section
3.01(b), select the Series B Notes to be redeemed on or before the sixtieth
(60th) day prior to the redemption date, and in making such selection take into
account the duration of the Interest Periods with respect to such Series B
Notes.
In the event the Remarketing Agent fails to notify the Paying Agent of
the Series B Notes to be redeemed on or before the ninth (9th) Business Day
prior to the redemption date, the Paying Agent shall proceed to select Series B
Notes for redemption from among the Outstanding Series B Notes in the
chronological order in which their Purchase Dates occur, beginning with the
earliest Purchase Date; provided, however, that in selecting Series B Notes to
be redeemed the Paying Agent shall (i) select only Series B Notes not previously
called for redemption and (ii) select Bank Notes prior to any other Series B
Notes. If fewer than all Series B Notes having the same Purchase Date (selected
for redemption as provided in the immediately preceding sentence) are to be
redeemed, the Paying Agent shall treat each owner
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<PAGE> 28
of Series B Notes as the owner of one Series B Note for purposes of selection
for redemption, and shall select Series B Notes for redemption by lot or such
other method as it deems fair and appropriate, (1) from among the holders of
less than $1,000,000 in aggregate principal amount, provided that if there are
no such holders, or if, after selection from among such holders such selection
has not resulted in redemption of a sufficient amount of Series B Notes, then
(2) from among the holders of $1,000,000 or more in aggregate principal amount
of Series B Notes. In the event the Paying Agent selects Series B Notes for
redemption, the Paying Agent shall, on or before the day on which notice of
redemption is mailed to the holders, give telephonic notice to the Remarketing
Agent of the Series B Notes selected for redemption and the name of the holder
or holders thereof.
No portion of a Series B Note may be redeemed that would result in a
Series B Note which is smaller than the then permitted minimum Authorized
Denomination. For this purpose, the Remarketing Agent or the Paying Agent will
consider each Series B Note in a denomination larger than the minimum
denomination permitted by the Series B Notes at the time to be separate Series B
Notes each in the minimum denomination. Provisions of this Agreement that apply
to Series B Notes called for redemption also apply to portions of Series B Notes
called for redemption.
Notwithstanding anything to the contrary in this Agreement, there shall
be no redemption of less than all of the Series B Notes if there shall have
occurred and be continuing an Event of Default.
SECTION 3.04. NOTICE OF REDEMPTION. The Trustee will prepare and cause
the Paying Agent to send notice of each redemption to each Noteholder whose
Series B Notes are being redeemed, the Borrower, the Remarketing Agent and the
Bank by first-class mail at least seven (7) Business Days but not more than
sixty (60) (or twenty (20), in the case of a mandatory redemption pursuant to
Section 3.01(c)) days before each redemption. The notice shall identify the
Series B Notes or portions thereof to be redeemed and will state (i) the type of
redemption and the redemption date, (ii) the redemption price, (iii) that the
Series B Notes called for redemption must be surrendered to collect the
redemption price, (iv) the address of the Paying Agent at which the Series B
Notes must be surrendered, (v) that interest on the Series B Notes called for
redemption ceases to accrue on the redemption date, (vi) the CUSIP number of the
Series B Notes called for redemption and (vii) any condition to the redemption.
With respect to any Series B Notes to be redeemed which have not been
presented for redemption within sixty (60) days after the redemption date, the
Trustee shall prepare and cause the Paying Agent, at the expense of the
Borrower, to give a second notice of redemption to the holder of any such Series
B Notes which have not been presented for redemption, by first-class mail,
within thirty (30) days of the end of such 60-day period.
Failure by the Trustee or the Paying Agent to give any notice of
redemption as to any particular Series B Notes will not affect the validity of
the call for redemption of any Series B Notes in respect of which no such
failure has occurred. Any notice mailed as provided in the
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<PAGE> 29
Series B Notes will be conclusively presumed to have been given whether or not
actually received by any holder or beneficial owner.
SECTION 3.05. PAYMENT OF SERIES B NOTES CALLED FOR REDEMPTION; EFFECT
OF REDEMPTION. Upon surrender to the Paying Agent, Series B Notes called for
redemption shall be paid as provided in this Article at the redemption price
provided for in this Article, to the extent that sufficient moneys have been
made available therefor to the Paying Agent by 1:45 p.m. on the redemption date
pursuant to Section 5.02(a). On the date fixed for redemption, notice having
been given in the manner and under the conditions hereinabove provided, the
Series B Notes or portions thereof called for redemption shall be due and
payable at the redemption price provided therefor, plus accrued interest to such
date. On such redemption date, if moneys sufficient to pay the redemption price
of the Series B Notes to be redeemed, plus accrued interest thereon to the date
fixed for redemption, are held by the Paying Agent, interest on the Series B
Notes called for redemption shall cease to accrue; such Series B Notes shall
cease to be entitled to any benefits or security under this Agreement or to be
deemed Outstanding; and the holders and beneficial owners of such Series B Notes
shall have no rights in respect thereof except to receive payment of the
redemption price thereof, plus accrued interest to, but excluding, the date of
redemption. Any Series B Note so redeemed shall be cancelled by the Paying Agent
and shall not be reissued or remarketed.
SECTION 3.06. SERIES B NOTES REDEEMED IN PART. Upon surrender of a
Series B Note redeemed in part, the Paying Agent will authenticate for the
holder a new Series B Note or Series B Notes equal in principal amount to the
unredeemed portion of the Series B Note surrendered.
SECTION 3.07. PURCHASE OF SERIES B NOTES.
(a) MANDATORY PURCHASE OF SERIES B NOTES; NOTICE. Except as
provided in Section 3.07(c), Series B Notes are subject to mandatory purchase at
the Purchase Price:
(i) on each Interest Payment Date applicable to such
Series B Note; and
(ii) on the effective date of any Substitute Series B
Letter of Credit delivered pursuant to Section 5.03, if, but only if, such
Substitute Series B Letter of Credit will result in a Credit Modification.
The Trustee will prepare and cause the Paying Agent to send
written notice of each mandatory purchase pursuant to Section 3.07(a)(ii) above
(a "Notice of Mandatory Purchase") to each Noteholder whose Series B Notes are
being purchased, the Remarketing Agent, the Bank and the Borrower at least 15
days but not more than 60 days before the Purchase Date. No Notice of Mandatory
Purchase will be given to holders or beneficial owners of Series B Notes if the
mandatory purchase is being made pursuant to Section 3.07(a)(i) above. Any
Notice of Mandatory Purchase will be given by first-class mail and will be
substantially in the form attached hereto as Exhibit B.
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<PAGE> 30
With respect to any Series B Notes to be purchased which have
not been presented for purchase within 60 days after the Purchase Date, the
Paying Agent, at the expense of the Borrower, shall prepare and give a second
notice of purchase pursuant to Section 3.07(a)(ii) to the holder of any such
Series B Notes which have not been presented for purchase, by first-class mail,
within 30 days of the end of such 60-day period.
(b) PAYMENT FOR PURCHASED SERIES B NOTES. The Purchase Price
of Series B Notes to be purchased on a Purchase Date shall be paid from
Remarketing Proceeds available to pay the Purchase Price of such Series B Notes
and, to the extent Remarketing Proceeds are not available to pay the Purchase
Price of such Series B Notes, from proceeds of a draw on the Series B Letter of
Credit pursuant to Section 5.02(a)(iv). To the extent that sufficient moneys
have been made available therefor to the Paying Agent or the Remarketing Agent,
as applicable, by 1:45 p.m. on the Purchase Date pursuant to Sections 3.08 and
5.02, upon surrender to the Paying Agent of Series B Notes called for mandatory
purchase as provided herein, the Purchase Price therefor shall be paid in
immediately available funds by the Paying Agent's close of business (or, if
applicable, the Remarketing Agent's close of business) on the Purchase Date.
From and after the Purchase Date or, if later, the date on which such moneys are
made available to the Paying Agent or the Remarketing Agent, as applicable,
interest accruing on such Series B Notes shall cease to be payable to the prior
holder thereof, such Series B Notes shall cease to be entitled to the benefits
of this Agreement and to such extent the prior holder shall have recourse solely
to the funds held by the Paying Agent or the Remarketing Agent, as applicable,
for the purchase of such Series B Notes as provided in Section 4.03.
Notwithstanding any provision to the contrary herein, for so long as the Series
B Notes are held pursuant to a book-entry system maintained by DTC, payments of
Purchase Price with respect to such Series B Notes shall be made pursuant to the
rules and procedures established by DTC and its Participants.
(c) LIMITATION ON TENDERS. The holders shall not be required
to tender any Series B Note for purchase on a Purchase Date if on such date,
following the occurrence of an Event of Default, the Trustee shall have declared
the principal of and interest on the Series B Notes immediately due and payable
pursuant to Section 7.02.
SECTION 3.08. REMARKETING OF PURCHASED SERIES B NOTES.
(a) SERIES B NOTES TO BE REMARKETED. Series B Notes purchased
as provided herein will be remarketed by the Remarketing Agent as provided in
this Section , except that:
(i) Series B Notes purchased pursuant to a mandatory
purchase and as to which the Remarketing Agent has received a notice of
redemption may be remarketed before the date fixed for redemption only if the
new purchaser receives, prior to purchasing such Series B Note, a notice that
such Series B Note is subject to redemption on the date fixed for redemption,
notwithstanding the fact that such notice of redemption may be sent to such
purchaser after the time period mentioned in Section 3.04;
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<PAGE> 31
(ii) the Remarketing Agent shall not be required to
remarket Series B Notes under this Section (A) during the continuance of an
Event of Default or (B) as otherwise provided in the Remarketing Agreement;
(iii) if the Remarketing Agent resigns or is removed
pursuant to the terms of this Agreement and the Borrower has failed to appoint a
successor in accordance with the terms of this Agreement, on and after the
effective date of such resignation or removal (as provided in Section 8.10) and
until a successor Remarketing Agent has delivered an acceptance of its
appointment to the Trustee, the Series B Notes shall not be remarketed; and
(iv) The Remarketing Agent shall not at any time
remarket the Series B Notes (other than Bank Notes) to the Borrower or any
Affiliate.
(b) REMARKETING EFFORT. Except as provided in Section 3.08(a)
above, the Remarketing Agent will use reasonable best efforts to remarket on the
Purchase Date all Series B Notes purchased pursuant to Section 3.07 and, to the
extent such purchased Series B Notes are not remarketed on the Purchase Date,
thereafter will continue to use reasonable best efforts to remarket such
purchased Series B Notes, upon the terms and subject to the conditions of the
Remarketing Agreement.
As early as practicable but not later than 9:00 a.m. on the
Purchase Date and on each Business Day on which the Remarketing Agent has
successfully remarketed Series B Notes pursuant to this Section 3.08, the
Remarketing Agent will (i) notify the Trustee and the Paying Agent by telephone
(promptly confirmed in writing) of (A) the amount of Remarketing Proceeds which
the Remarketing Agent actually has on hand, and (B), if the Series B Notes are
not being held pursuant to a book-entry system, the information to enable the
Paying Agent to prepare new Series B Note certificates with respect to Series B
Notes which were remarketed and (ii) (A) if the Remarketing Agent has received
Remarketing Proceeds with respect to all of the Series B Notes to be remarketed
on such Purchase Date, transfer such Remarketing Proceeds to the holders
tendering such Series B Notes for purchase as provided in (c) below, or (B) if
the Remarketing Agent has not received Remarketing Proceeds with respect to all
of such Series B Notes, transfer to the Paying Agent the Remarketing Proceeds
which the Remarketing Agent has received as provided in (c) below. In the event
that any of the Series B Notes tendered for purchase have not been remarketed,
the Trustee shall immediately notify the Borrower and the Paying Agent of the
amount of such Series B Notes and shall take action as set forth in Section
5.02(a)(iv). If the Trustee shall fail to receive the notice described in the
first sentence of this paragraph from the Remarketing Agent by 9:00 a.m., the
Trustee shall contact the Remarketing Agent by telephone to confirm the
information required in such notice and, if required, the Trustee shall take
action as set forth in Section 5.02(a)(iv).
(c) REMARKETING PROCEEDS. To the extent the Remarketing Agent
has remarketed Series B Notes and has received Remarketing Proceeds from the
purchasers thereof, the Remarketing Agent will promptly forward the Remarketing
Proceeds by wire
26
<PAGE> 32
transfer (or in such other manner as is acceptable to the Remarketing Agent) to
the holders tendering such Series B Notes for purchase (or, if required pursuant
to Section 3.08(b), to the Paying Agent). Except as otherwise provided below
with respect to Bank Notes, until such transfer, all such Remarketing Proceeds
shall be deposited in a separate, segregated account of the Remarketing Agent
(or, if transferred to the Paying Agent, in a separate, segregated account of
the Paying Agent) for application in accordance with the provisions of this
Section 3.08, and until so applied shall be held for the benefit of the holders
tendering such Series B Notes for purchase. Upon the reasonable written request
of the Borrower, the Remarketing Agent (and the Paying Agent, if applicable)
shall provide to the Borrower evidence that all Remarketing Proceeds have been
maintained in a separate, segregated account. If within ten Business Days of the
aforementioned request by Borrower, the Paying Agent cannot provide evidence
that Remarketing Proceeds have been segregated, or if the Remarketing Proceeds
have been commingled with other moneys, the Borrower shall be entitled, in
either case, to remove the Paying Agent without obtaining the consent of the
Bank or any other party. Notwithstanding any provision to the contrary herein,
for so long as the Series B Notes are held pursuant to a book-entry system
maintained by DTC, payments of Remarketing Proceeds with respect to such Series
B Notes shall be made pursuant to the rules and procedures established by DTC
and its Participants.
(d) DELIVERY OF PURCHASED SERIES B NOTES. Series B Notes
purchased pursuant to Section 3.07 shall be delivered as follows:
(i) Series B Notes purchased with Remarketing
Proceeds (other than Bank Notes) shall be delivered to the purchasers thereof
upon receipt of payment therefor. Prior to such delivery the Paying Agent shall
provide for registration of transfer to the Holders, as provided in a written
notice from the Remarketing Agent;
(ii) All Bank Notes (other than Bank Notes purchased
with the Borrower's own funds and not with the proceeds of a draw on the Series
B Letter of Credit) will be registered in the name of the Trustee, as agent and
bailee of the Bank, subject to the pledge by the Borrower to the Bank, and shall
be held by the Trustee pursuant to the Reimbursement Agreement. Upon receipt of
Remarketing Proceeds in respect of Bank Notes, the Remarketing Agent shall
notify the Bank, the Trustee and the Borrower of such receipt. Upon its receipt
of such notice, the Bank shall, pursuant to the Reimbursement Agreement, notify
the Remarketing Agent and the Trustee by telephone, telecopy or telex, promptly
confirmed in writing, that the Series B Notes have ceased to be Bank Notes and
that the amount of the Letter of Credit has been automatically reinstated as
provided therein, whereupon the Remarketing Agent will remit such Remarketing
Proceeds as directed by the Bank. The Trustee shall not release the Bank Notes
until it receives from the Bank the notice referred to in the preceding
sentence. The Remarketing Agent shall hold such Remarketing Proceeds in a
segregated account of the Remarketing Agent for the benefit of the Bank, except
that if the Series B Letter of Credit is not reinstated by an amount equal to
the Remarketing Proceeds, then the Remarketing Agent shall hold such funds for
the benefit of the purchasers which provided such Remarketing Proceeds.
END OF ARTICLE III
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<PAGE> 33
ARTICLE IV
PAYMENT OF SERIES B NOTES AND CREATION OF SERIES B
LETTER OF CREDIT FUND
SECTION 4.01. PAYMENT OF SERIES B NOTES. The Paying Agent shall make
payments when due of principal of and interest on Series B Notes, and the Paying
Agent or the Remarketing Agent, if applicable, shall make payments when due of
the Purchase Price of Series B Notes purchased pursuant to a mandatory purchase:
(a) FIRST, (but only with respect to payments of Purchase Price) from
Remarketing Proceeds; and
(b) SECOND, (but only with respect to payments of interest on the
Series B Notes) from moneys (including moneys drawn under the Series B Letter of
Credit) on deposit in the Interest Reserve Account of the Series B Letter of
Credit Fund; and
(c) THIRD, (but only with respect to principal, or the portion of the
Purchase Price corresponding to principal, on the Series B Notes) from moneys
(including moneys drawn under the Series B Letter of Credit) on deposit in the
Principal Account of the Series B Letter of Credit Fund; and
(d) LAST, from any other moneys available to the Trustee, including,
without limitation, moneys paid by the Borrower pursuant to Section 6.01.
The Trustee shall transfer moneys to the Paying Agent at such times and in
sufficient amounts so as to permit the Paying Agent to make such payments when
due. Notwithstanding the foregoing, however, payments of Purchase Price,
principal and interest on Bank Notes will be paid only from the first and last
categories of moneys. The proceeds of investments of any moneys in any of these
categories may be used to the same extent as the moneys invested could be used.
SECTION 4.02. CREATION OF SERIES B LETTER OF CREDIT FUND. There is
hereby established the Hanover Direct, Inc. Flexible Term Notes Series B Letter
of Credit Fund, in which the Trustee shall establish and maintain a Series B
Principal Account and a Series B Interest Reserve Account.
Such fund and accounts shall be held and maintained by the Trustee and
the moneys and securities therein shall be applied as hereinbefore and
hereinafter provided. Except as otherwise provided in Sections 4.03(c) and 7.05,
the Borrower shall have no interest whatsoever in the moneys and securities
maintained by the Trustee in each said fund and accounts.
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SECTION 4.03. FUNDS RECEIVED; APPLICATION OF MONEY IN SERIES B LETTER
OF CREDIT FUND.
(a) There shall be deposited in the Series B Letter of Credit Fund all
proceeds of drawings under the Series B Letter of Credit received by the
Trustee. No other funds (other than investment proceeds from moneys deposited
therein) shall be deposited in or commingled with the Series B Letter of Credit
Fund. All amounts received by the Trustee as proceeds of draws on the Series B
Letter of Credit made pursuant to Section 5.02(a)(i) and (ii) or otherwise with
respect to accrued interest on, the Series B Notes shall be deposited in the
Interest Reserve Account of the Series B Letter of Credit Fund. All amounts
received by the Trustee as proceeds of draws on the Series B Letter of Credit
made pursuant to Section 5.02(a)(iii) and (iv) with respect to the principal
amount of, or the portion of the Purchase Price representing the principal
amount of, the Series B Notes shall be deposited in the Principal Account of the
Series B Letter of Credit Fund.
(b) To the extent that the remarketing proceeds are insufficient to pay
the principal amount of, or the portion of the Purchase Price representing the
principal amount of, the Series B Notes, the Borrower hereby authorizes and
directs the Trustee, and the Trustee hereby agrees, to withdraw and transfer to
the Paying Agent sufficient funds from (i) the Principal Account of the Series B
Letter of Credit Fund to pay the principal amount of, or the portion of the
Purchase Price representing the principal amount of, the Series B Notes (other
than Bank Notes) as the same become due and payable, and (ii) the Interest
Reserve Account of the Series B Letter of Credit Fund to pay the accrued
interest on the Series B Notes (other than Bank Notes) as the same become due
and payable. Except as otherwise provided in Section 4.03(c) and in Section
7.05, amounts on deposit in the Interest Reserve Account shall be used solely by
the Trustee and the Paying Agent for the payment of interest on the Series B
Notes and the portion of the Purchase Price representing interest on Series B
Notes subject to mandatory purchase.
(c) Any amounts remaining in the Series B Letter of Credit Fund and all
other amounts required to be paid under this Agreement shall be paid to the Bank
or, if the Bank shall certify to the Trustee in writing that no obligations
remain owing to the Bank under the Reimbursement Agreement at the time of
payment of the Series B Notes in full, to the Borrower. Prior to making any
payment under this Section 4.03(c), the Trustee shall request, in writing,
written certification from the Bank as to amounts owed by the Borrower to the
Bank. The Trustee shall be entitled to receive and rely upon such certificate
from the Bank as to amounts owed to the Bank and shall be entitled to retain all
amounts held hereunder until receipt of such certificate.
(d) All proceeds of draws on the Series B Letter of Credit received by
the Trustee for the payment of principal of or interest accrued on Series B
Notes that have been accelerated pursuant to Section 7.02 hereof will be
deposited in the appropriate account of the Series B Letter of Credit Fund in
accordance with the terms of this Section 4.03 and applied in accordance with
the terms of Section 7.03.
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(e) The proceeds of investments of any moneys in the Series B Letter of
Credit Fund may be used to the same extent as the moneys invested could be used.
No principal or Purchase Price of or interest on the Series B Notes will be paid
from funds provided directly or indirectly by the Borrower or any Affiliate,
except in the case of the failure by the Bank to honor a valid draw under the
Series B Letter of Credit.
(f) (1) Upon the reasonable written request of the Borrower, the
Trustee shall provide to the Borrower evidence that all moneys in the Series B
Letter of Credit Fund have been maintained in a separate and segregated account.
(2) If, within ten Business Days of the request made by Borrower
pursuant to Section 4.03 (f)(1) above, the Trustee cannot provide evidence that
moneys in the Series B Letter of Credit Fund have been segregated, or if the
moneys in the Series B Letter of Credit Fund have been commingled with other
moneys, the Borrower shall be entitled, in either case, to remove the Trustee
without obtaining the consent of the Bank or any other party.
SECTION 4.04. MONEYS TO BE HELD IN TRUST. All proceeds of a draw on the
Series B Letter of Credit received by the Trustee and all money that the Trustee
or the Paying Agent shall hold in, or shall have withdrawn from, the Series B
Letter of Credit Fund or shall have received from any other source and set aside
for the purpose of paying any of the Series B Notes, either on the Maturity Date
or by purchase (other than as provided in Section 3.08 hereof) or call for
redemption or for the purpose of paying any interest on the Series B Notes,
shall be held in trust for the respective holders or beneficial owners of the
Series B Notes. Moneys received by the Remarketing Agent, the Paying Agent or
the Trustee from the sale of a Series B Note under Section 3.08 or from the
purchase of any Series B Note will be held segregated from other funds held by
the Remarketing Agent, the Paying Agent or the Trustee for the benefit of the
Person from whom such Series B Note was purchased and will not be invested while
so held. Any money that is so set aside and that remains unclaimed by the
holders or beneficial owners for a period of five (5) years after the date on
which such Series B Notes have become payable shall be remitted to the Borrower
and thereafter the holders and beneficial owners shall look only to the Borrower
for payment and then only to the extent of the amounts so received, without any
interest thereon, and the Trustee, the Placement Agent, the Remarketing Agent,
the Paying Agent and the Bank shall have no responsibility with respect to such
money.
SECTION 4.05. INVESTMENT OF MONEYS. Except as otherwise provided
herein, money held for the credit of the Series B Letter of Credit Fund shall be
continuously invested and reinvested by the Trustee only in Permitted
Investments in accordance with the instructions of the Borrower Representative
as provided herein. Any such Permitted Investments shall mature not later than
the respective dates when the money held for the credit of such funds or
accounts will be required for the purposes intended. Unclaimed moneys held by
the Trustee, the Paying Agent or the Remarketing Agent under Section 4.04 shall
be held uninvested by the Trustee, the Paying Agent or the Remarketing Agent.
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The Borrower Representative shall give to the Trustee written
directions respecting the investment of any money required to be invested
hereunder, subject, however, to the provisions of this Article, and the Trustee
shall then invest such money under this Section as so directed by the Borrower
Representative.
The Trustee shall sell at the best price attainable or reduce to cash a
sufficient amount of such Permitted Investments whenever it shall be necessary
in order to provide money to make any payment or transfer of money from such
fund. The Trustee shall not be liable or responsible for any loss resulting from
any such investment.
END OF ARTICLE IV
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ARTICLE V
SERIES B LETTER OF CREDIT
SECTION 5.01. REQUIREMENTS FOR SERIES B LETTER OF CREDIT. In order to
support its obligations to make payments pursuant to Section 6.01, the Borrower
has agreed, upon the authentication and delivery of the Series B Notes to
deliver to the Trustee the Series B Letter of Credit. For so long as any Series
B Notes remain Outstanding, a Series B Letter of Credit (i) in an amount not
less than the aggregate principal amount of Series B Notes Outstanding plus 35
days' interest on such amount computed at the Maximum Rate on the basis of
actual number of days elapsed in a year of 360 days and (ii) otherwise with
terms substantially conforming to those of the original Series B Letter of
Credit, shall be in effect with respect to such Series B Notes. Any Series B
Letter of Credit securing the payment of principal and Purchase Price of and
interest on Series B Notes issued hereunder, shall provide for reductions in the
principal component and interest component thereof upon any partial redemption
of Series B Notes pursuant to this Agreement.
SECTION 5.02. DRAWS ON SERIES B LETTER OF CREDIT; EXTENSIONS.
(a) The Borrower hereby irrevocably authorizes and directs the Trustee
to make timely draws under the Series B Letter of Credit in accordance with the
terms thereof in amounts sufficient to make or provide for when due the payments
referred to in Section 6.01, except with respect to Bank Notes, which are not
entitled to any benefit of the Series B Letter of Credit. All moneys drawn under
the Series B Letter of Credit to pay the principal of and interest on, or the
Purchase Price of, the Series B Notes shall be credited immediately against the
obligation of the Borrower to make payments pursuant to Section 6.01. The
authorization and direction for the Trustee to draw under the Series B Letter of
Credit is irrevocable prior to payment in full of the Series B Notes. Without
intending to limit the foregoing, the Trustee shall:
(i) On the Date of Issuance of the Series B Notes,
for deposit by the Trustee in the Series B Interest Reserve Account, draw on the
Series B Letter of Credit in order to obtain an amount equal to 35 days'
interest on the Series B Notes being issued, calculated on the basis of actual
number of days elapsed in a year of 360 days at the Maximum Rate;
(ii) On the Business Day immediately preceding the
first Business Day of each month while Series B Notes are Outstanding, for
deposit by the Trustee in the Series B Interest Reserve Account, draw on the
Series B Letter of Credit in order to obtain an amount calculated by the Trustee
to be sufficient to make the moneys on deposit in the Series B Interest Reserve
Account of the Series B Letter of Credit Fund on such day equal the sum of (1)
the amount of accrued and unpaid interest on all Outstanding Series B Notes
(other than Bank Notes) and (2) 35 days' interest on all Outstanding Series B
Notes (including Bank Notes), calculated on the basis of actual number of days
elapsed in a year of 360 days at the Maximum Rate;
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(iii) on the Business Day immediately preceding each
date on which a principal amount of the Series B Notes is due and payable
(whether at maturity, by acceleration or call for redemption, but not with
respect to the purchase of Series B Notes provided for in (iv) below), for
deposit by the Trustee in the Series B Principal Account, draw on the Series B
Letter of Credit in order to obtain an amount necessary to make full and timely
payment of the principal then due; and
(iv) on each Purchase Date, with respect to any
Series B Notes to be purchased on such date and as to which the Trustee has
received from the Remarketing Agent the notice of remarketing provided for in
Section 3.08(b) (or has confirmed the information required in such notice as
provided in Section 3.08(b)) and such notice (or confirmation) states that less
than the aggregate amount of the Purchase Price of all Series B Notes to be
purchased on such date has been received in the form of Remarketing Proceeds,
draw on the Series B Letter of Credit in order to obtain an amount equal to the
portion of the Purchase Price representing the principal amount of Series B
Notes to be purchased on such date less the amount which has been received by
the Remarketing Agent in the form of Remarketing Proceeds. The proceeds of a
draw on the Series B Letter of Credit made pursuant to this paragraph (iv) shall
be transferred by the Trustee to the Paying Agent for payment pursuant to
Sections 3.07(b) and 4.01.
If any such draws are made on a Purchase Date in connection
with the delivery of a Substitute Series B Letter of Credit which results in a
Credit Modification, such draws shall be made under the existing Series B Letter
of Credit and not under the Substitute Series B Letter of Credit. The Trustee
agrees to make all such draws so as to be able to obtain the requested funds by
1:45 p.m. on the payment date or Purchase Date, as the case may be.
(b) The Trustee shall advise the Borrower by telecopy or telex
on the date of each draw on the Series B Letter of Credit of the amount and date
of such draw and of the reason for such draw.
(c) The Series B Letter of Credit may be amended or its
expiration date extended as provided therein or in this Section 5.02(c). For
amendments or for extensions of the term of the Series B Letter of Credit, the
Trustee shall, at the direction of the Borrower Representative, but only if
required by the Bank to evidence such an amendment or extension, surrender the
Series B Letter of Credit to the Bank in exchange for a new Series B Letter of
Credit of the Bank or the Series B Letter of Credit with notations thereon, as
the Bank may so elect, conforming in all material respects to the Series B
Letter of Credit except that the expiration date shall be extended. Any such
extension shall be for a period of at least one year, or if less, until the
fifteenth day following the maturity date of the Series B Notes. Any such
amendment or, except as otherwise provided in the Series B Letter of Credit,
extension shall be in a form acceptable to the Trustee and the Remarketing
Agent, and any of them may require delivery in connection therewith of such
other documents, certificates, and assurances as it deems reasonably necessary.
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SECTION 5.03. SUBSTITUTE SERIES B LETTER OF CREDIT.
(a) (i) At any time, upon at least sixty (60) days' prior
written notice to the Trustee, the Bank and the Remarketing Agent, the Borrower
may, subject to the provisions of Section 5.03(a)(iii), provide for the delivery
to the Trustee of a substitute letter of credit complying with the provisions of
this Agreement (the "Substitute Series B Letter of Credit"). Any notice
delivered pursuant to this Section 5.03(a) shall state (A) the identity of the
issuer of the Substitute Series B Letter of Credit, (B) the date the Substitute
Series B Letter of Credit will be effective, (C) whether the Substitute Series B
Letter of Credit is expected to result in a Credit Modification, and (D) if the
Substitute Series B Letter of Credit is expected to result in a Credit
Modification and become effective on any day preceding the fifth (5th) Business
Day prior to the stated expiration date of the Series B Letter of Credit then in
effect, that to the extent provided in Section 2.02(a)(iv) no Interest Period
commencing before the effective date of the Substitute Series B Letter of Credit
shall extend beyond the effective date of such Substitute Series B Letter of
Credit. If a Substitute Series B Letter of Credit is expected to result in a
Credit Modification the Trustee shall not accept such Substitute Series B Letter
of Credit without the prior written consent of the Bank. If a Series B Letter of
Credit is extended or renewed pursuant to the terms thereof, such Series B
Letter of Credit as extended or renewed shall not be deemed to be a Substitute
Series B Letter of Credit for purposes of this Agreement or the Series B Notes.
(ii) Any Substitute Series B Letter of Credit shall
have an effective date which is a Business Day occurring at least five (5)
Business Days prior to the stated expiration date of the Series B Letter of
Credit then in effect, and a stated expiration date which is at least one year
following the effective date thereof.
(iii) Any Substitute Series B Letter of Credit that
would result in a Credit Modification is subject to the approval of the
Remarketing Agent. The Remarketing Agent shall not approve any Substitute Series
B Letter of Credit that will result in a Credit Modification unless, in the sole
judgment of the Remarketing Agent, the effective date of such Substitute Series
B Letter of Credit will be an Interest Payment Date for all outstanding Series B
Notes.
(b) At least two Business Days prior to the effective date of
any Substitute Series B Letter of Credit (and as a condition to the acceptance
by the Trustee of such Substitute Letter of Credit) the Borrower shall deliver
to the Trustee the original executed Substitute Series B Letter of Credit,
together with:
(i) an Opinion of Counsel addressed to the Trustee to
the effect that (A) the Substitute Series B Letter of Credit is the valid and
binding obligation of the issuer thereof enforceable against such issuer in
accordance with its terms except insofar as its enforceability may be limited by
any insolvency or similar proceedings applicable to the issuer or by proceedings
affecting generally the rights of the issuer's creditors or by general equitable
principles; (B) payments of principal or Purchase Price of or interest on the
Series B
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Notes from the proceeds of a draw on the Substitute Series B Letter of Credit
will not, in the case of a bankruptcy of the Borrower or any Guarantor (as
defined in the Reimbursement Agreement), constitute avoidable preferences under
any applicable bankruptcy, reorganization, insolvency or other similar laws; and
(C) the Substitute Series B Letter of Credit does not constitute a separate
security requiring registration under any applicable federal or state securities
laws. In the case of a Substitute Series B Letter of Credit issued by a branch
or agency of a foreign commercial bank, there shall also be delivered an Opinion
of Counsel from a firm licensed to practice law in the jurisdiction in which the
head office of such bank is located, addressed to the Trustee to the effect that
the Substitute Series B Letter of Credit is the valid and binding obligation of
such bank, enforceable against such bank in accordance with its terms, subject
to the limitations referred to in Section 5.03(b)(i)(A) above;
(ii) written evidence satisfactory to the Trustee
that the issuer of the Substitute Series B Letter of Credit meets the
requirements for an issuer of a Series B Letter of Credit as set forth in
Article I;
(iii) evidence of written approval of the Remarketing
Agent; and
(iv) a letter from each Rating Agency then rating the
Series B Notes or, in the event the Series B Notes are not then rated, other
written evidence satisfactory to the Trustee, stating whether the acceptance of
the Substitute Series B Letter of Credit will result in a Credit Modification.
The Trustee shall accept any such Substitute Series B Letter of Credit only in
accordance with the terms, and upon satisfaction of the conditions, contained in
this Section and any other applicable provisions of this Agreement. In the event
that acceptance of the Substitute Series B Letter of Credit results in the
occurrence of a mandatory Purchase Date, the Trustee shall not terminate or
surrender the Series B Letter of Credit until the Trustee shall have made such
drawings thereunder, if any, as shall be required under this Agreement to
provide for payment of the Purchase Price of the Series B Notes, and shall have
received the proceeds of such drawing from the Bank.
(c) Not more than 60 days and not less than 15 days prior to
the effective date of the Substitute Series B Letter of Credit, the Trustee
shall prepare and cause the Paying Agent to send, in addition to the notice
required by Section 3.07(a), by registered or certified mail to each holder
(with a copy to the Bank) notice of the issuance of the Substitute Series B
Letter of Credit, which notice shall include (i) the identity of the issuer
thereof, (ii) the date the Substitute Series B Letter of Credit will be
effective, (iii) whether the Substitute Series B Letter of Credit will result in
a Credit Modification and (iv) if applicable, notice pursuant to Section 3.07(a)
that the Series B Notes are subject to mandatory purchase pursuant to Section
3.07.
SECTION 5.04. ENFORCEMENT OF THE SERIES B LETTER OF CREDIT. The Trustee
shall have the obligation to hold and maintain the Series B Letter of Credit for
the benefit of the Owners
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of the Series B Notes until the Series B Letter of Credit terminates or expires
in accordance with its terms.
When the Series B Letter of Credit terminates or expires in accordance
with its terms or a Substitute Series B Letter of Credit therefor is accepted
hereunder, the Trustee shall immediately surrender the Series B Letter of Credit
to the Bank. The Trustee hereby agrees that, except in the case of a redemption
in part pursuant to Article III hereof or any other reduction in the principal
amount of Series B Notes Outstanding, it will not under any circumstances
request that the Bank reduce the amount of the Series B Letter of Credit. If at
any time, all Series B Notes shall cease to be Outstanding, the Trustee shall
surrender the Series B Letter of Credit to the Bank, in accordance with the
terms thereof.
If at any time, the Bank shall fail to honor a draft presented under
the Series B Letter of Credit, in conformity with the terms thereof, the Trustee
shall give immediate telephonic notice thereof to the Remarketing Agent and the
Borrower.
END OF ARTICLE V
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ARTICLE VI
GENERAL COVENANTS AND REPRESENTATIONS
SECTION 6.01. PAYMENT OF PRINCIPAL, INTEREST AND PREMIUM. The Borrower
shall pay or cause to be paid, when due, the principal of (whether at maturity,
by acceleration, by call for redemption or otherwise), the Purchase Price of and
interest on the Series B Notes at the places, on the dates and in the manner
provided herein and in said Series B Notes according to the true intent and
meaning thereof. The obligation of the Borrower to make or cause to be made the
payments on the Series B Notes and under this Agreement is absolute and
unconditional.
SECTION 6.02. COVENANT TO PERFORM AND REPRESENTATIONS AND WARRANTIES OF
THE BORROWER AS TO AUTHORITY, ETC. (a) The Borrower shall faithfully perform at
all times all of its covenants, undertakings and agreements contained in this
Agreement and in any Series B Note executed, authenticated and delivered
hereunder.
(b) The Borrower represents and warrants that:
(i) it has full corporate power and authority to
execute and deliver this Agreement and to issue the Series B Notes authorized
hereby and to consummate the transactions contemplated hereby and thereby;
(ii) the execution and delivery of this Agreement and
the issuance of the Series B Notes authorized hereby and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
board of directors or executive committee of the board of directors of the
Borrower and no other action or proceeding on the part of the Borrower is
necessary to authorize this Agreement, to issue the Series B Notes or to
consummate the transactions contemplated hereby or thereby;
(iii) the execution, delivery and performance of this
Agreement by the Borrower, the issuance of the Series B Notes authorized hereby
and the consummation by the Borrower of the transactions contemplated hereby and
thereby will not (with or without the giving of notice or the lapse of time or
both)
(A) violate or result in any default under
any provision of the Certificate of Incorporation or bylaws of the Borrower;
(B) violate or require any consent or
approval under any provision of any law, order, injunction, rule or regulation
applicable to the Borrower;
(C) require any consent or approval under,
result in the breach of any provision of or constitute a default under, or
otherwise violate the terms of any material agreements, indentures or
instruments or obligations to which the Borrower is a party or by which the
Borrower may be bound or affected; or
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(D) require any consent or approval by,
notice to or registration with any governmental authority; and
(iv) this Agreement and the Series B Notes authorized
hereby have been duly and validly executed and delivered by the Borrower and
constitute legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.
SECTION 6.03. FURTHER INSTRUMENTS AND ACTIONS. At the request of the
Trustee, the Borrower shall execute and deliver such further instruments or take
such further actions as may be reasonably required to carry out the purposes of
this Agreement.
SECTION 6.04. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
THE BORROWER. (a) Each of the Borrower's representations and warranties
contained in the Reimbursement Agreement and the Placement Agreement are true
and correct in all material respects on and as of the date hereof and are hereby
made to the Trustee as if set forth herein.
(b) The Borrower shall at all times comply, in all material
respects, with the terms, conditions and covenants of the Reimbursement
Agreement and the other Series B Note Documents.
END OF ARTICLE VI
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ARTICLE VII
DEFAULTS AND REMEDIES
SECTION 7.01. EVENTS OF DEFAULT. Each of the following events shall be
an Event of Default:
(a) Default in the due and punctual payment of any interest on
any Series B Note;
(b) Default in the due and punctual payment of the principal
or Purchase Price of any Series B Note (whether at maturity, by acceleration or
redemption, upon the Purchase Date or otherwise);
(c) Default in the observance or performance of any other of
the covenants, conditions or agreements on the part of the Borrower under this
Agreement and such default shall continue for thirty (30) days (or such further
time as may be granted in writing by the Trustee, with the consent of the Bank)
after receipt by the Borrower Representative of a written notice from the
Trustee or the Bank specifying such default and requiring the same to be
remedied; or
(d) Receipt by the Trustee of notice from the Bank that an
Event of Default has occurred under the Reimbursement Agreement accompanied by a
demand by the Bank that the Trustee declare the Series B Notes to be immediately
due and payable.
SECTION 7.02. ACCELERATION AND DUTY TO DRAW ON SERIES B LETTER OF
CREDIT.
(a) Upon the occurrence of an Event of Default under Section
7.01(a), (b) or (d) hereof, the Trustee shall, by notice to the Borrower, the
Bank, the Paying Agent (who shall promptly give such notice to the holders) and
the Remarketing Agent, declare the entire unpaid principal of and interest on
the Series B Notes immediately due and payable and, thereupon, the entire unpaid
principal of and interest on the Series B Notes shall forthwith become
immediately due and payable.
(b) Upon the occurrence of any Event of Default specified in
Section 7.01(c), the Trustee shall notify the Bank of such Event of Default and
shall, by notice to the Borrower, the Paying Agent (who shall promptly give such
notice to the holders) and the Remarketing Agent declare the entire unpaid
principal of and interest on the Series B Notes immediately due and payable, but
only if directed to do so by the Bank, unless the Bank has dishonored a valid
draw under the Series B Letter of Credit, in which event the Trustee may declare
the entire unpaid principal of and interest on the Series B Notes immediately
due and payable and, thereupon, in either case, the entire unpaid principal of
and interest on the Series B Notes shall forthwith become due and payable.
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(c) In the event the Trustee fails to accelerate as required
by this Section 7.02(a), the owners of a majority in aggregate principal amount
of Series B Notes Outstanding shall have the right to take such action.
(d) Upon the acceleration of the maturity of the Series B
Notes, by declaration or otherwise, the Trustee shall immediately draw upon the
Series B Letter of Credit for the aggregate unpaid principal amount of the
Series B Notes and all interest accrued thereon which shall be applied
immediately as set forth in Section 7.03. Upon such acceleration, interest on
the Series B Notes shall cease to accrue as of the date of declaration of such
acceleration.
SECTION 7.03. DISPOSITION OF AMOUNTS DRAWN ON SERIES B LETTER OF
CREDIT. All amounts drawn on the Series B Letter of Credit by the Trustee in
accordance with Section 7.02(b) shall be held by the Trustee in the Series B
Letter of Credit Fund (and invested in accordance with Section 4.05), and,
together with moneys on deposit in the Interest Reserve Account of the Series B
Letter of Credit Fund which have been previously drawn on the Series B Letter of
Credit pursuant to Section 5.02(a)(i) and (ii), shall be applied immediately to
the payment of principal of and interest accrued on the Series B Notes unless,
prior to or with the proceeds of the draw on the Series B Letter of Credit, the
Trustee receives written instructions from the Bank to use such proceeds,
together with the moneys on deposit in the Interest Reserve Account of the
Series B Letter of Credit Fund, to purchase all Series B Notes. If such
instructions are received by the Trustee, such draw proceeds and, if necessary,
the moneys on deposit in the Interest Reserve Account, shall be immediately
applied to the purchase of the Series B Notes, the acceleration of the Series B
Notes shall be cancelled, the Series B Notes shall become Bank Notes and the
Series B Notes shall be registered in the name of the Trustee, as agent and
bailee of the Bank, and pledged under the Reimbursement Agreement as additional
security for repayment of the Borrower's reimbursement obligations under the
Reimbursement Agreement. Thereafter, such Series B Notes shall not be remarketed
by the Remarketing Agent unless the Series B Letter of Credit is reinstated or a
Substitute Series B Letter of Credit is delivered to the Trustee pursuant to
Section 5.03.
SECTION 7.04. NO REMEDY EXCLUSIVE. Subject to the limitations imposed
on the Trustee's ability to act without the consent of the Bank, no remedy
conferred by this Agreement upon or reserved to the Trustee or to the Bank is
intended to be exclusive of any other remedy, but each such remedy shall be
cumulative and shall be in addition to any other remedy given to the Trustee or
to the Bank hereunder or now or hereafter existing at law or in equity or by
statute.
No delay or omission to exercise any right or power accruing upon any
default or Event of Default shall impair any such right or power or shall be
construed to be a waiver of any such default or Event of Default or acquiescence
therein, and every such right and power may be exercised from time to time and
as often as may be deemed expedient.
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No waiver of any default or Event of Default hereunder, whether by the
Trustee pursuant to Section 7.06 or by the Noteholders, shall extend to or shall
affect any subsequent default or Event of Default or shall impair any rights or
remedies consequent thereon.
SECTION 7.05. APPLICATION OF MONEYS. All amounts received by the
Trustee from a draw upon the Series B Letter of Credit shall be applied
exclusively to the payment of principal of and interest on the Series B Notes or
the Purchase Price thereof as herein provided; provided, however, that whenever
all principal and Purchase Price of and interest on all Series B Notes have been
paid under the provisions of this Section and the Series B Note Facility has
been terminated and all expenses and charges of the Trustee have been paid, and
all obligations of the Borrower to the Bank pursuant to the Reimbursement
Agreement shall have been paid in full, the balance remaining in the Series B
Letter of Credit Fund shall be paid to the Borrower as provided in Section 4.03.
SECTION 7.06. WAIVERS OF EVENTS OF DEFAULT. The Trustee, with the
written consent of the Bank, may waive any Event of Default hereunder and its
consequences and rescind any declaration of maturity of principal of and
interest on the Series B Notes, and shall do so, with the consent of the Bank,
upon the written request of the holders of a majority in aggregate principal
amount of Series B Notes then Outstanding; provided, however, that:
(a) there shall not be waived without the consent of the
holders of all Series B Notes then outstanding:
(i) any default in the payment when due of the
principal or Purchase Price of any Outstanding Series B Notes (whether at
maturity or by mandatory or optional redemption), or
(ii) any default in the payment when due of the
interest on any such Series B Notes unless, prior to such waiver or rescission:
(1) there shall have been paid or provided
for all arrears of interest at the rate borne by the Series B Notes on overdue
installments of principal, all arrears of payments of principal and Purchase
Price when due and all expenses of the Trustee in connection with such default,
and
(2) in case of any such waiver or
rescission, or in case of the discontinuance, abandonment or adverse
determination of any proceeding taken by the Trustee on account of any such
default, the Trustee and the Noteholders shall be restored to their respective
former positions and rights hereunder; and
(b) unless the Series B Letter of Credit is reinstated in full
as evidenced in writing by the Bank as to principal and interest, there shall be
no waiver or rescission if the Series B Letter of Credit shall have been drawn
upon due to the occurrence of an Event of Default.
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No such waiver or rescission shall extend to any subsequent or other
default or Event of Default, or impair any right consequent thereon.
SECTION 7.07. UNCONDITIONAL RIGHT TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST. Except as otherwise provided in Section 7.09 nothing in this Agreement
shall, however, affect or impair the right of any Noteholder to enforce, by
action at law, payment of the principal or Purchase Price of or interest on any
Series B Note at and after the maturity thereof, or on the date fixed for
redemption or purchase or (subject to the provisions of Section 7.02) on the
same being declared due prior to maturity as herein provided, or the obligation
of the Borrower to pay the principal or Purchase Price of and interest on each
of the Series B Notes issued hereunder to the respective holders thereof at the
time, place and in the manner herein and in the Series B Notes expressed.
SECTION 7.08. [RESERVED.]
SECTION 7.09. BANK DEEMED HOLDER. For all purposes of this Article VII
(other than receipt of payments), the Bank shall, so long as the Series B Letter
of Credit shall not have been dishonored (other than for failure to receive a
drawing in strict compliance with the terms thereof or other reason permitted by
the Series B Letter of Credit), be deemed the holder and registered owner of all
Series B Notes. As such, the Bank may take all actions permitted by this Article
VII to be taken by the holders or registered owners of the Series B Notes, to
the exclusion of the actual beneficial owners and registered owners of the
Series B Notes. NOTWITHSTANDING ANY PROVISION TO THE CONTRARY HEREIN, ON OR
AFTER THE EFFECTIVE DATE OF A SUBSTITUTE SERIES B LETTER OF CREDIT WHICH RESULTS
IN A CREDIT MODIFICATION, THE BANK, AS ISSUER OF THE SERIES B LETTER OF CREDIT
REPLACED BY SUCH SUBSTITUTE SERIES B LETTER OF CREDIT, SHALL BE DEEMED TO BE THE
"BANK" HEREUNDER FOR PURPOSES OF GIVING NOTICE OF DEFAULT UNDER SECTION 7.01(d)
AND FOR PURPOSES OF EXERCISING REMEDIES HEREUNDER, BUT ONLY SO LONG AS (i)
OBLIGATIONS REMAIN OWING TO THE BANK UNDER THE REIMBURSEMENT AGREEMENT OR THE
LOAN DOCUMENTS (AS DEFINED IN THE REIMBURSEMENT AGREEMENT) OR (ii) THERE REMAIN
OUTSTANDING HEREUNDER ANY BANK NOTES PLEDGED TO THE BANK UNDER THE REIMBURSEMENT
AGREEMENT.
END OF ARTICLE VII
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ARTICLE VIII
TRUSTEE, REMARKETING AGENT, PLACEMENT AGENT
AND PAYING AGENT
SECTION 8.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise its rights and powers and use the same degree of care and
skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee need perform only those duties that
are specifically set forth in this Agreement and no others and no implied
covenants or obligations shall be read into this Agreement against the Trustee,
and
(ii) in the absence of bad faith, gross negligence or
willful misconduct on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement. However, the Trustee shall examine the
certificates and opinions to determine whether they conform to the requirements
of this Agreement.
(c) The Trustee may not be relieved from liability for its own
grossly negligent action, its own grossly negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of (b)
above; and
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is proved that
the Trustee was grossly negligent in ascertaining the pertinent facts.
(d) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity reasonably satisfactory to it
against any loss, liability or expense, but the Trustee may not require
indemnity as a condition to declaring the principal of and interest on the
Series B Notes to be due immediately under Section 7.02 or to drawing on the
Series B Letter of Credit or to taking action under the Series B Letter of
Credit or in making payment of the principal of, interest on and Purchase Price
of Series B Notes when due.
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(e) The Trustee shall not be liable for interest on any cash
held by it except as the Trustee may agree with the Borrower.
(f) The Trustee shall strictly comply with the terms of the
Series B Letter of Credit.
(g) The Trustee shall maintain adequate records pertaining to
the funds in the Series B Letter of Credit Fund, the investment thereof and the
disbursement therefrom; notwithstanding anything to the contrary in this
Agreement, the Trustee shall not be required to advance its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder.
(h) Every provision of this Agreement that in any way relates
to the Trustee is subject to all the foregoing paragraphs of this Section.
(i) The Trustee shall in no event be responsible for ensuring
that the rate of interest due and payable on the Series B Notes under this
Agreement does not exceed the highest legal rate of interest permissible under
federal or state law applicable thereto.
SECTION 8.02. RIGHTS OF TRUSTEE.
(a) Subject to the foregoing Section, including, but not
limited to, Section 8.01(b)(ii) and 8.01(c), the Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document. Any action taken by the Trustee pursuant to this Agreement upon
the request or authority or consent of any person, who at the time of making
such request or authority or consent is the owner of any Series B Note, shall be
conclusive and binding upon all future owners of any Series B Note issued in
replacement thereof.
(b) Before the Trustee acts or refrains from acting, it may
require a certificate of an appropriate officer or officers of the Borrower or
an Opinion of Counsel stating that (i) the person making such certificate or
opinion has read such covenant or condition; (ii) the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (iii) in the opinion of such person, he
has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (iv) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with. The Trustee
shall not be liable for any loss or damage or action it takes or omits to take
in good faith in reliance on the certificate or Opinion of Counsel.
(c) Subject to the consent of the Borrower, the Trustee may
execute any of its powers hereunder and perform any of its duties through
agents, attorneys or employees or
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co-Trustees and shall not be responsible for the misconduct or negligence of any
agent, attorney, employee or co-Trustee appointed with due care.
SECTION 8.03. INDIVIDUAL RIGHTS OF TRUSTEE, ETC. The Trustee in its
individual or any other capacity may become the owner, Trustee or pledgee of
Series B Notes and may otherwise deal with the Bank or with the Borrower or its
affiliates with the same rights it would have if it were not Trustee.
SECTION 8.04. TRUSTEE'S DISCLAIMER. Subject to Sections 8.01(b) and
8.01(c):
(a) the Trustee makes no representation as to the validity or
adequacy of this Agreement or the Series B Notes and it shall not be accountable
for the Borrower's use of the proceeds from the Series B Notes paid to the
Borrower;
(b) the Trustee shall not be responsible for the application
of any of the proceeds of the Series B Notes or any other moneys deposited with
it and paid out, withdrawn or transferred hereunder if such application,
payment, withdrawal or transfer shall be made in accordance with the provisions
of this Agreement.
SECTION 8.05. NOTICE OF DEFAULTS. The Trustee shall not be required to
take notice, or be deemed to have notice, of any default or Event of Default
under this Agreement, other than an Event of Default under Section 7.01(a), (b)
or (d), unless specifically notified in writing at such address as set forth in
Section 10.01 hereof of such default or Event of Default by Noteholders of at
least 25% in principal amount of the Series B Notes then Outstanding, by the
Bank, by the Remarketing Agent or by the Borrower. If an event occurs which with
the giving of notice or lapse of time or both would be an Event of Default, and
if the event is continuing and if the Trustee has actual notice or is deemed to
have notice thereof as herein provided, the Trustee shall cause the Paying Agent
to mail to each Noteholder, the Remarketing Agent and the Bank notice of the
event upon such occurrence.
SECTION 8.06. COMPENSATION AND INDEMNIFICATION OF TRUSTEE. For acting
under this Agreement, the Trustee shall be entitled to compensation by the
Borrower of reasonable fees for the Trustee's services and reimbursement of
advances, counsel fees and other expenses reasonably and necessarily made or
incurred by the Trustee in connection with its services under this Agreement.
The Trustee shall be indemnified by the Borrower for, and shall be held
harmless against, any loss, liability or expense incurred without negligence,
willful misconduct or bad faith on the Trustee's part, arising out of or in
connection with the acceptance or administration of the exercise or performance
of any of its powers or duties hereunder.
SECTION 8.07. ELIGIBILITY OF TRUSTEE. This Agreement shall always have
a Trustee that meets the qualifications set forth in this Section 8.07. The
Trustee shall: (i) be a corporation or national banking association duly
organized under the laws of the United States
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of America or any state or territory thereof, doing business and having an
office in such location as shall be approved by the Remarketing Agent, (ii) have
a combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition, (iii) either have senior long-term
debt securities rated "Baa3/P-3" or better by Moody's Investors Service, Inc. or
"BBB-/A3" by Standard & Poor's Ratings Group or be a direct or indirect
subsidiary of a bank or bank holding company which has senior long-term debt
securities rated Baa3/P-3 or better by Moody's Investors Service, Inc. or
BBB-/A3 by Standard & Poor's Ratings Group and (iv) be authorized by law to
perform all the duties imposed upon it by this Agreement.
SECTION 8.08. REPLACEMENT OF TRUSTEE. The Trustee may resign and be
discharged of the duties and obligations created by this Agreement by notifying
the Borrower, the Paying Agent, the Bank and the Remarketing Agent; provided,
however, that no such resignation shall become effective until the appointment
of a successor Trustee, as hereinafter provided. The holders of not less than a
majority in principal amount of the Series B Notes may remove the Trustee by
notifying the removed Trustee and may appoint a successor Trustee with the
Borrower's, the Bank's, the Paying Agent's and the Remarketing Agent's prior
written consent; provided, however, that no such removal shall become effective
until the appointment of a successor Trustee, as hereinafter provided. Except
upon the occurrence and during the continuance of an Event of Default hereunder,
the Borrower may remove the Trustee, but (except to the extent otherwise
provided herein) only after obtaining the prior written consent of the Bank and
giving written notice thereof to the Paying Agent, the Remarketing Agent and the
Bank by first-class mail, postage prepaid; provided, however, that no such
removal shall become effective until the appointment of a successor Trustee, as
hereinafter provided.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Borrower, with the prior written consent
of the Paying Agent, the Bank and the Remarketing Agent shall promptly appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Borrower, the Paying Agent, the
Bank and the Remarketing Agent. Immediately thereafter, the retiring Trustee
shall transfer all property held by it as Trustee to the successor Trustee, the
resignation or removal of the retiring Trustee shall then (but only then) become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Agreement. The successor Trustee shall notify
the holders of the Series B Notes of its acceptance of the duties and
obligations hereunder in writing by first-class mail promptly following such
acceptance.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Borrower, the
Paying Agent, the Bank or the holders of a majority in principal amount of the
Series B Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
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If the Trustee fails to comply with Section 8.07, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
SECTION 8.09. DUTIES OF REMARKETING AGENT.
(a) The Remarketing Agent will, in accordance with the
Remarketing Agreement, establish the Interest Periods and corresponding Interest
Rates for the Series B Notes and perform the other duties provided for to be
done by it in this Agreement and the Remarketing Agreement.
(b) Subject to the consent of the Borrower, the Remarketing
Agent may execute and perform any of its duties hereunder through agents,
attorneys, employees or co-remarketing agents and shall not be responsible for
the misconduct or negligence of any agent, attorney, employee or co-remarketing
agent appointed with due care.
SECTION 8.10. ELIGIBILITY OF REMARKETING AGENT; REPLACEMENT. The
Remarketing Agent will be (i) a member of the National Association of Securities
Dealers, Inc. having excess net capital (as defined in Rule 15c3-1 of the
Securities Exchange Act of 1934, as amended) of at least $25,000,000 or, in the
alternative, a national banking association having a combined capital stock,
surplus and undivided profits of at least $100,000,000, (ii) a participant of
the Securities Depository (but only if DTC is Securities Depository hereunder),
and (iii) if the Series B Notes are rated by a Rating Agency, rated at least
Baa3/P-3 or otherwise be acceptable to the Rating Agency.
NationsBank, N.A. (Carolinas) is hereby appointed as the initial
Remarketing Agent and is herein referred to as the "Remarketing Agent." Any
Remarketing Agent shall accept its appointment hereunder in writing. The
Remarketing Agent may resign by notifying the Borrower, the Trustee, the Paying
Agent and the Bank at least 45 days before the effective date of the
resignation. The Borrower may at any time remove the Remarketing Agent and
appoint a successor by notifying the Remarketing Agent, the Bank, the Paying
Agent and the Trustee at least 60 days prior to the effective date of such
removal. Upon the receipt or giving, as the case may be, of notice of the
resignation or the removal of the Remarketing Agent, the Borrower shall appoint
a successor by notifying the Remarketing Agent, the Bank, the Paying Agent and
the Trustee. If the Remarketing Agent gives notice of its resignation or notice
is given of its removal pursuant to the terms of this Agreement and, after 45
days in the case of notice of resignation or 60 days in the case of notice of
removal, the Borrower has failed to appoint a successor in accordance with the
terms of this Agreement, such resignation or removal shall take effect
immediately and, as provided in Section 3.08(a)(iii), the Series B Notes shall
not be remarketed until a successor Remarketing Agent has delivered an
acceptance of its appointment to the Trustee.
Notwithstanding the foregoing, with the consent of the Borrower and
with prior written notice to (but without the consent of) , the Trustee, the
Bank, the Paying Agent and
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the Noteholders, NationsBank, N.A. (Carolinas) may assign or transfer any or all
of its rights and obligations hereunder and under the Remarketing Agreement to
any other direct or indirect, wholly-owned subsidiary of NationsBank Corporation
so long as such subsidiary meets the qualifications for a Remarketing Agent set
forth herein and is otherwise permitted to perform such obligations under all
applicable federal and state banking and securities laws, rules and regulations.
SECTION 8.11. DUTIES OF PLACEMENT AGENT.
(a) The Placement Agent will, in accordance with the Placement
Agreement, arrange to place the Series B Notes with qualified investors and
perform the other duties provided for to be done by it in this Agreement and the
Placement Agreement.
(b) Subject to the consent of the Borrower, the Placement
Agent may execute and perform any of its duties hereunder through agents or
attorneys and shall not be responsible for the misconduct or negligence of any
agent or attorney appointed with due care.
(c) Upon the issuance of the Series B Notes hereunder, the
Placement Agent shall assist the Borrower in obtaining from Standard & Poor's
Ratings Group a long-term and a short-term rating on the Series B Notes, which
ratings shall be equivalent to the long-term and short-term ratings of the Bank.
The Borrower hereby agrees to pay (or, to the extent incurred directly by the
Placement Agent, reimburse the Placement Agent for) all fees, costs and expenses
incurred in connection with obtaining and maintaining such ratings.
SECTION 8.12. ELIGIBILITY OF PLACEMENT AGENT; REPLACEMENT. The
Placement Agent will be (i) a member of the National Association of Securities
Dealers, Inc. having a capitalization of at least $25,000,000 or, in the
alternative, a national banking association having a combined capital stock,
surplus and undivided profits of at least $100,000,000, (ii) if the Series B
Notes are rated by a Rating Agency, rated at least Baa3/P-3 or otherwise be
acceptable to the Rating Agency and (iii) otherwise satisfactory to the Bank,
the Remarketing Agent and the Trustee.
NationsBank, N.A. (Carolinas) is hereby appointed as the initial
Placement Agent. Any Placement Agent shall accept its appointment hereunder in
writing. The Placement Agent may resign by notifying the Borrower, the
Remarketing Agent, the Trustee, the Paying Agent and the Bank at least 45 days
before the effective date of the resignation. The Borrower may at any time
remove the Placement Agent and appoint a successor by notifying the Placement
Agent, the Remarketing Agent, the Bank, the Paying Agent and the Trustee at
least 60 days prior to the effective date of such removal. Upon the resignation
or removal of the Placement Agent, the Borrower shall appoint a successor by
notifying the Placement Agent, the Bank, the Remarketing Agent, the Paying Agent
and the Trustee. If the Placement agent resigns or is removed pursuant to the
terms of this Agreement and, after 45 days in the case of resignation or 60 days
in the case of removal, the Borrower has failed to appoint a
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successor in accordance with the terms of this Agreement, such resignation or
removal shall take effect immediately.
Notwithstanding the foregoing, with the consent of the Borrower and
with prior written notice to (but without the consent of) , the Trustee, the
Bank, the Remarketing Agent, the Paying Agent and the Noteholders, NationsBank,
N.A. (Carolinas) may assign or transfer any or all of its rights and obligations
hereunder and under the Placement Agreement to any other direct or indirect,
wholly-owned subsidiary of NationsBank Corporation so long as such subsidiary
meets the qualifications for a Placement Agent set forth herein and is otherwise
permitted to perform such obligations under all applicable federal and state
banking and securities laws, rules and regulations.
SECTION 8.13. APPOINTMENT OF AND DUTIES OF PAYING AGENT. Norwest Bank
Minnesota, N.A. is hereby appointed the Paying Agent under this Agreement. The
Paying Agent, by its execution hereof, hereby accepts all duties and obligations
imposed upon it under this Agreement. The Paying Agent shall designate to the
Trustee its principal office for purposes hereof, which shall be the office of
the Paying Agent at which all notices and other communications in connection
herewith may be delivered to it. Any successor Paying Agent, by written
instrument delivered to the Trustee, the Borrower, the Bank and the Remarketing
Agent, shall accept the duties and obligations imposed upon it under this
Agreement. The Paying Agent shall not be liable in connection with its duties
hereunder except for its own willful misconduct, negligence or bad faith. The
Paying Agent hereby agrees to make payments of principal and Purchase Price of
and interest on the Series B Notes and perform its other duties and obligations
all as more fully set forth herein and to keep such books and records as shall
be consistent with prudent industry practice and to make such books and records
available for inspection by the Borrower, the Bank, the Remarketing Agent and
the Trustee at all reasonable times.
SECTION 8.14. QUALIFICATIONS OF PAYING AGENT; REPLACEMENT OF PAYING
AGENT . Any successor Paying Agent shall be a banking association or corporation
duly organized under the laws of the United States of America or any state or
territory thereof and authorized by law to perform all the duties imposed upon
it by this Agreement.
The Paying Agent may resign and be discharged of the duties and
obligations created by this Agreement by notifying the Borrower, the Trustee,
the Bank and the Remarketing Agent; provided, however, that no such resignation
shall become effective until the appointment of a successor Paying Agent, as
hereinafter provided. The holders of not less than a majority in principal
amount of the Series B Notes may remove the Paying Agent by notifying the
removed Paying Agent and may appoint a successor Paying Agent with the
Borrower's, the Bank's, the Trustee's and the Remarketing Agent's prior written
consent; provided, however, that no such removal shall become effective until
the appointment of a successor Paying Agent, as hereinafter provided. Except
upon the occurrence and during the continuance of an Event of Default hereunder,
the Borrower may remove the Paying Agent, but (except to the extent otherwise
provided herein) only after obtaining the prior written consent of the Bank and
giving written notice thereof to the Trustee, the Remarketing Agent and the Bank
by first-class mail, postage prepaid; provided, however, that no such removal
shall become effective until the appointment of a successor Paying Agent, as
hereinafter provided.
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If the Paying Agent resigns or is removed or if a vacancy exists in the
office of Paying Agent for any reason, the Borrower, with the prior written
consent of the Trustee, the Bank and the Remarketing Agent shall promptly
appoint a successor Paying Agent.
A successor Paying Agent shall deliver a written acceptance of its
appointment to the retiring Paying Agent and to the Borrower, the Trustee, the
Bank and the Remarketing Agent. Immediately thereafter, the retiring Paying
Agent shall transfer all property held by it as Paying Agent to the successor
Paying Agent, the resignation or removal of the retiring Paying Agent shall then
(but only then) become effective, and the successor Paying Agent shall have all
the rights, powers and duties of the Paying Agent under this Agreement. The
successor Paying Agent shall notify the holders of the Series B Notes of its
acceptance of the duties and obligations hereunder in writing by first-class
mail promptly following such acceptance.
If a successor Paying Agent does not take office within 60 days after
the retiring Paying Agent resigns or is removed, the retiring Paying Agent, the
Borrower, the Trustee, the Bank or the holders of a majority in principal amount
of the Series B Notes may petition any court of competent jurisdiction for the
appointment of a successor Paying Agent.
If the Paying Agent fails to comply with this Section 8.14, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Paying Agent and the appointment of a successor Paying Agent.
SECTION 8.15. SUCCESSOR TRUSTEE, PAYING AGENT OR REMARKETING AGENT BY
MERGER. If the Trustee, Paying Agent or Remarketing Agent consolidates with,
merges or converts into, or transfers all or substantially all its assets (or,
in the case of a bank or trust company, its corporate trust assets) to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee, Paying Agent or Remarketing Agent, provided that
such corporation or national banking association shall otherwise be eligible to
serve in such capacity under this Agreement.
SECTION 8.16. TRUSTEE'S COVENANT AS TO BANK NOTES. The Trustee shall
register all Series B Notes (or beneficial interests in Series B Notes) which
constitute Bank Notes (other than Bank Notes purchased with the Borrower's own
funds and not with the proceeds of a draw on the Series B Letter of Credit) in
its name as provided in Section 3.08(d)(ii) and shall hold such Bank Notes as
agent and bailee of the Bank subject to and in accordance with the terms of this
Agreement and the Reimbursement Agreement.
SECTION 8.17. TRUSTEE AND PAYING AGENT AS ONE ENTITY. Notwithstanding
any provision to the contrary in this Agreement, including, without limitation,
Sections 8.08 and 8.14, except as otherwise provided in this Section 8.17, the
Trustee and the Paying Agent shall be and shall remain, at all times and for all
purposes hereunder, one and the same entity, and (a) in the event that the
Trustee shall resign or be removed pursuant to the terms of
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Section 8.08, the Paying Agent shall be deemed simultaneously to have resigned
or to have been removed, as applicable, pursuant to Section 8.14, and (b) in the
event that the Paying Agent shall resign or be removed pursuant to the terms of
Section 8.14, the Trustee shall be deemed simultaneously to have resigned or to
have been removed, as applicable, pursuant to Section 8.08; provided, however,
that more than one entity may serve as Trustee and Paying Agent hereunder if the
Borrower, the Remarketing Agent and each such entity shall expressly consent in
writing to such arrangement.
END OF ARTICLE VIII
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ARTICLE IX
AMENDMENTS OF AGREEMENT
SECTION 9.01. WITHOUT CONSENT OF NOTEHOLDERS. The Borrower ,the Trustee
and the Paying Agent may amend or supplement this Agreement or the Series B
Notes without prior notice to or consent of any Noteholder:
(a) to cure any ambiguity, inconsistency or formal defect or
omission;
(b) to grant to the Trustee for the benefit of the Noteholders
additional rights, remedies, powers or authority;
(c) to modify this Agreement or the Series B Notes to permit
qualification under the Trust Indenture Act of 1939, as amended, or any similar
federal statute at the time in effect; to permit the qualification of the Series
B Notes for sale under the securities laws of any state of the United States; or
to prevent the application of the Investment Company Act of 1940, as amended, to
any of the transactions contemplated by, or any of the parties to this Agreement
or the Series B Notes;
(d) to provide for uncertificated Series B Notes or to make
any change necessary to give effect to a book-entry system pursuant to Section
2.07;
(e) to evidence the succession of a new Trustee or the
appointment by the Trustee of a co-Trustee;
(f) to make any change not materially adversely affecting any
Noteholder's rights requested by each Rating Agency then rating the Series B
Notes in order (i) to obtain a rating from each such Rating Agency after the
initial issuance of the Series B Notes if the Series B Notes are initially
issued without a rating equivalent to the rating assigned to other securities
supported by a Series B Letter of Credit of the Bank or (ii) to maintain any
rating on the Series B Notes;
(g) to make any change not materially adversely affecting any
Noteholder's rights to provide for or to implement the provisions of a Series B
Letter of Credit or a Substitute Series B Letter of Credit;
(h) to make any change to provide for or to implement the
provisions of a Series B Letter of Credit or a Substitute Series B Letter of
Credit only if such Series B Letter of Credit or Substitute Series B Letter of
Credit and the changes to this Agreement become effective on a Purchase Date
applicable to all of the Series B Notes;
(i) to make any change that does not materially adversely
affect the rights of any Noteholder; or
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(j) to add to this Agreement the obligation of the Trustee or
the Borrower to disclose such information regarding the Series B Notes, the
Project, the Borrower or the Bank as shall be required or recommended to be
disclosed in accordance with applicable regulations or guidelines established
by, among others, the American Bankers Association Corporate Trust Committee.
SECTION 9.02. WITH CONSENT OF NOTEHOLDERS. If an amendment of either
this Agreement or the Series B Notes is permitted by the preceding Section , the
Borrower, the Trustee and the Paying Agent may enter into such amendment,
without prior notice to any Noteholders; provided, however, that if the Trustee
determines in its sole discretion that such amendment materially adversely
affects the Owners, then prior to entering into such an amendment, the Borrower
and the Trustee shall obtain the consent of the holders of at least a majority
in principal amount of the Series B Notes then Outstanding. Without the consent
of all Noteholders affected, however, no amendment or supplement may (a) extend
the final stated maturity of any Series B Note, (b) reduce the principal amount
of, or Interest Rate on (prior to its Purchase Date), any Series B Note or
change the terms of any redemption or mandatory purchase thereof, (c) effect a
privilege or priority of any Series B Note or Series B Notes over any other
Series B Note or Series B Notes (except as provided herein), (d) reduce the
percentage of the principal amount of the Series B Notes required for consent to
such amendment or (f) alter the obligation of the Bank under the Series B Letter
of Credit or of the Borrower under the Series B Note Documents such that the
Owners are materially adversely affected.
SECTION 9.03. EFFECT OF CONSENTS. After an amendment becomes effective,
it will bind every Noteholder unless it makes a change described in any of the
lettered clauses of the preceding Section. In such case, the amendment will bind
each Noteholder who consented to it and each subsequent holder of a Series B
Note or portion of a Series B Note evidencing the same debt as the consenting
holder's Series B Note.
SECTION 9.04. NOTATION ON OR EXCHANGE OF SERIES B NOTES. If an
amendment or supplement changes the terms of a Series B Note, the Trustee may
require the holder to deliver such Series B Note to the Paying Agent. The Paying
Agent may place an appropriate notation on the Series B Note regarding the
changed terms and return it to the holder. Alternatively, if the Trustee and the
Borrower determine, the Borrower in exchange for the Series B Note will issue
and the Paying Agent will authenticate a new Series B Note that reflects the
changed terms. In either event, the cost of placing such notation on the Series
B Note(s) shall be borne by the Borrower.
SECTION 9.05. SIGNING BY TRUSTEE OF AMENDMENTS. The Trustee and the
Paying Agent will sign any amendment to this Agreement or the Series B Notes
authorized by this Article if the amendment does not adversely affect the
rights, duties, liabilities or immunities of the Trustee or the Paying Agent. If
it does, the Trustee or the Paying Agent may, but need not, sign it. In signing
an amendment, the Trustee will be entitled to receive and (subject to
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Section 8.01) will be fully protected in relying on an Opinion of Counsel
stating that such amendment or supplement is authorized by this Agreement and is
duly authorized, executed and delivered and enforceable in accordance with its
terms.
SECTION 9.06. BANK AND REMARKETING AGENT CONSENT REQUIRED. Except to
the extent that the consent of the Remarketing Agent or the Bank is not required
for the action that is the subject of the amendment (e.g., removal of the
Remarketing Agent , the Trustee or the Paying Agent by the Borrower upon the
terms specified herein), an amendment to this Agreement or the Series B Notes
shall not become effective unless the Remarketing Agent (but only to the extent
that such amendment affects the rights, duties or obligations of the Remarketing
Agent hereunder) and the Bank deliver to the Trustee their written consents to
the amendment. In any event, no amendment hereto shall become effective until
the Remarketing Agent receives a copy of the amendment and acknowledges such
receipt; provided, however, that receipt and acknowledgement of a copy of any
such amendment by the Remarketing Agent shall be deemed to have occurred if the
copy of the amendment is accompanied by notice requesting acknowledgement within
three (3) Business Days, and the copy of the amendment is sent by facsimile to
the Remarketing Agent (confirmed immediately by a telephone conversation between
the sender of the facsimile and an authorized representative of the Remarketing
Agent) and the Remarketing Agent fails to acknowledge receipt within three (3)
Business Days. For purposes of this section, for so long as NationsBank, N.A.
(Carolinas) serves as Remarketing Agent hereunder, an "authorized
representative" of the Remarketing Agent shall mean a VRDN Product Manager. On
the Date of Issuance, the Remarketing Agent shall deliver to the Borrower a
certificate identifying each officer of the Remarketing Agent qualifying as a
VRDN Product Manager on such date, and each such officer's title, address and
telephone number.
SECTION 9.07. NOTICE TO NOTEHOLDERS. The Trustee shall cause the Paying
Agent to promptly mail notice of the execution of an amendment hereto to be
mailed promptly by first-class mail to each Noteholder at the holder's
registered address. The notice shall state briefly the nature of the amendment
and that copies thereof are on file with the Trustee for inspection by all
Noteholders.
END OF ARTICLE IX
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ARTICLE X
MISCELLANEOUS
SECTION 10.01. NOTICES.
(a) Any notice, request, direction, designation, consent,
acknowledgment, certification, appointment, waiver or other communication
required or permitted by this Agreement or the Series B Notes must be in writing
except as expressly provided otherwise in this Agreement or the Series B Notes.
(b) Except as otherwise provided herein, any notice or other
communication shall be sufficiently given and deemed given when delivered by
hand or overnight express delivery or mailed by first-class mail, postage
prepaid, addressed as follows or, if the communication may be given by telex or
telecopy under the provisions of this Agreement, when telexed or telecopied to
the following numbers (and, in the case of any telex or telecopy to the
Borrower, confirmed in writing within 24 hours by receipted hand delivery):
If to the Borrower: Hanover Direct, Inc.
1500 Harbor Boulevard, 1st Floor
Weehawken, New Jersey 07087
Attention: General Counsel
Telephone No.: (201) 319-3403
Fax No.: (201) 392-5005
If to the Trustee or the
Paying Agent: Norwest Bank Minnesota, N.A.
Norwest Center
Sixth & Marquette
Minneapolis, Minnesota 55479-0069
Attention: Corporate Trust Department
Telephone No.: (612) 667-8058
Fax No.: (612) 667-9825
If to the Remarketing NationsBank, N.A. (Carolinas)
Agent or Placement Agent: NationsBank Corporate Center
100 North Tryon Street
NC1-007-06-07
Charlotte, North Carolina 28255
Attention: Money Market Sales Department
Telephone No.: (704) 386-1752
Fax No.: (704) 386-6490
with a copy to: NationsBank, N.A. (Carolinas)
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NationsBank Corporate Center, 6th Floor
100 North Tryon Street
NC1-007-06-01
Charlotte, North Carolina 28255
Attention: VRDN Product Manager
Telephone No.: (704) 386-8783
Fax No.: (704) 388-9366
If to the Bank: NationsBank, N.A. (Carolinas)
767 5th Avenue, 5th Floor
New York, New York 10153
Attention: Christopher C. Browder
Telephone No.: (212) 407-5322
Fax No.: (212) 751-6909
Any addressee may designate by giving notice in accordance with the
foregoing additional or different addresses or telex or telecopy numbers for
purposes of this Section.
A copy of any notice to any party given hereunder (with the exception
of notices required for drawings under any Series B Letter of Credit) shall be
provided to the Remarketing Agent in the manner such notice is otherwise given.
Upon the reasonable request of the Borrower (and at the Borrower's
expense), (a) the Trustee and the Paying Agent will provide to the Borrower a
list of names and addresses of and principal amounts held by the registered
owners or Beneficial Owners of the Series B Notes for purposes of enabling the
Borrower to obtain any consents or amendments or waivers hereunder and (b) the
Remarketing Agent will cooperate in good faith with the Borrower in connection
with any solicitation by the Borrower of Beneficial Owners of the Series B Notes
relating to any consents or amendments or waivers hereunder; provided, however,
that the Borrower covenants that it will use any information obtained from the
Trustee, the Paying Agent or the Remarketing Agent regarding the Beneficial
Owners of the Series B Notes only for the purpose of obtaining consents,
amendments or waivers as required in the Series B Note Agreement; provided
further, that the Borrower will not disclose the identity of any of the
Beneficial Owners of the Series B Notes to any other Person except with the
prior written consent of the Remarketing Agent in each and every instance.
The beneficial owner of $1,000,000 or more of Series B Notes may, by
written notice to the Paying Agent, request that all notices given with respect
to such Series B Notes be given to the registered owner thereof and to a second
address provided in such written notice to the Trustee. Upon receipt of such
notice described in the preceding sentence, the Trustee shall send all notices
relating to the relevant Series B Notes to the registered owner and the second
address so designated.
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<PAGE> 62
SECTION 10.02. NOTEHOLDERS' CONSENTS. Any consent or other instrument
required by this Agreement to be signed by Noteholders may be in any number of
concurrent documents and may be signed by a Noteholder or by the holder's agent
appointed in writing. Proof of the execution of such instrument or of the
instrument appointing an agent and of the ownership of Series B Notes, if made
in the following manner, shall be conclusive for any purposes of this Agreement
with regard to any action taken by the Trustee under the instrument:
(a) The fact and date of a person's signing an instrument may
be proved by the certificate of any officer in any jurisdiction who by law has
power to take acknowledgments within that jurisdiction that the person signing
the writing acknowledged before the officer the execution of the writing, or by
an affidavit of any witness to the signing.
(b) The fact of ownership of Series B Notes, the amount or
amounts, numbers and other identification of such Series B Notes and the date of
holding shall be proved by the registration books kept by the Paying Agent
pursuant to this Agreement.
In determining whether the holders of the required principal amount of
Series B Notes Outstanding have taken any action under this Agreement, the
Trustee will disregard Bank Notes and Bank Notes will be deemed not to be
Outstanding for such purpose. In determining whether the Trustee shall be
protected in relying on any such action, only Series B Notes which the Trustee
knows to be so owned shall be disregarded.
SECTION 10.03. NOTICES TO RATING AGENCY. The Trustee shall notify the
Rating Agency in writing of the occurrence of any of the following events prior
to the proposed effective date thereof: (a) any change in the identity of the
Trustee or the Remarketing Agent; (b) any amendment or modification of or change
to this Agreement, the Reimbursement Agreement or the Series B Letter of Credit;
(c) the expiration or termination of the Series B Letter of Credit, or any
extension thereof, or the delivery of any Substitute Letter of Credit; (d) the
payment in full of the principal of and interest on the Series B Notes; and (e)
the delivery of any written opinion required to be delivered pursuant to Section
5.03(b)(i)(B).
SECTION 10.04. LIMITATION OF RIGHTS. Nothing expressed or implied in
this Agreement or the Series B Notes shall give any person other than the
Trustee, the Borrower, the Bank, the Remarketing Agent and the Noteholders any
right, remedy or claim under or with respect to this Agreement.
SECTION 10.05. SEVERABILITY. If any provision of this Agreement shall
be determined to be unenforceable by a court of law, that shall not affect any
other provision of this Agreement.
SECTION 10.06. PAYMENTS DUE ON NON-BUSINESS DAYS. If a payment date is
not a Business Day at the place of payment, then payment shall be made at that
place on the next
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succeeding Business Day, with the same force and effect as if made on the
payment date, and, in the case of any such payment, no interest shall accrue for
the intervening period.
SECTION 10.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State.
SECTION 10.08. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will be an original and all of which together will
constitute the same instrument.
SECTION 10.09. BINDING EFFECT. This Agreement shall be binding upon,
and inure to the benefit of, the parties hereto and their respective successors
and assigns, except that no party hereto may assign any of its rights or
obligations hereunder without the consent of the other parties, the Bank, the
Remarketing Agent and the Placement Agent, unless otherwise provided herein.
END OF ARTICLE X
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IN WITNESS WHEREOF, the Borrower and the Trustee and Paying Agent have
caused this Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of April 27, 1995.
HANOVER DIRECT, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
ATTEST
By:
-----------------------------------
Title:
---------------------------------
[CORPORATE SEAL]
NORWEST BANK MINNESOTA, N.A., AS
TRUSTEE AND PAYING AGENT
By:
--------------------------------
Name: Polly B. Berquist
Title: Corporate Trust Officer
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<PAGE> 65
THIS SERIES B NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE REGULATORY
AUTHORITY UNDER ANY STATE SECURITIES LAWS AND THEREFORE CANNOT BE RESOLD UNLESS
IT IS REGISTERED UNDER SUCH ACT OR APPLICABLE LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
PAYMENTS OF PRINCIPAL AND PURCHASE PRICE OF AND INTEREST ON THIS NOTE WILL BE
MADE FROM DRAWINGS UNDER THE LETTER OF CREDIT ISSUED BY NATIONSBANK, N.A.
(CAROLINAS) (THE "BANK") IF REMARKETING PROCEEDS ARE NOT AVAILABLE OR IF AN
EVENT OF DEFAULT HAS OCCURRED. ALTHOUGH THE LETTER OF CREDIT IS A BINDING
OBLIGATION OF THE BANK, THIS NOTE IS NOT A DEPOSIT OR OBLIGATION OF NATIONSBANK
CORPORATION OR ANY OF ITS AFFILIATED BANKS AND IS NOT GUARANTEED BY ANY OF THESE
ENTITIES. THIS NOTE IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
AND IS SUBJECT TO CERTAIN INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
EXHIBIT A
FORM OF SERIES B NOTE
REGISTERED REGISTERED
No. R-............... $......................
HANOVER DIRECT, INC.
FLEXIBLE TERM SERIES B NOTES,
SERIES B
<TABLE>
<CAPTION>
INTEREST RATE MATURITY DATE DATE OF ISSUANCE
- ------------- ------------- ----------------
<S> <C> <C>
As Described October 1, 2009 .................
</TABLE>
REGISTERED OWNER:
PRINCIPAL AMOUNT:
Hanover Direct, Inc., a Delaware corporation (the "Borrower"), for
value received, hereby promises to pay, solely from the sources and in the
manner hereinafter provided, to the registered owner, or registered assigns or
legal representative, upon presentation and surrender hereof at the principal
corporate trust office of Norwest Bank Minnesota, N.A., or its successor (in
such capacity, the "Paying Agent"), or by wire transfer, as provided in the
Series B Note Agreement, as hereinafter defined, the principal sum set forth
above on the Maturity Date set forth above, subject to the prior mandatory or
optional redemption of this Series B Note as hereinafter provided, and to pay
solely from such source interest hereon at the Interest
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Rate, as hereinafter defined, payable in arrears on the Interest Payment Date,
as hereinafter defined, until payment in full and, to the extent permitted by
law, interest on overdue installments of such interest, from the Interest
Payment Date applicable to this Series B Note next preceding the date on which
this Series B Note is authenticated, unless this Series B Note is (a)
authenticated before the first Interest Payment Date following the initial
delivery of the Series B Notes issued herein, in which case it shall bear
interest from the date of such initial delivery or (b) authenticated upon an
Interest Payment Date, in which case it shall bear interest from such Interest
Payment Date (unless interest on this Series B Note is in default at the time of
authentication, in which case this Series B Note shall bear interest from the
last date to which interest has been paid). Except as otherwise provided in the
Series B Note Agreement, interest hereon shall be paid to the person in whose
name this Series B Note is registered on the register of the Paying Agent at the
close of business on the Record Date next preceding each Interest Payment Date,
by check or draft mailed to such person at his address as it appears on the
register maintained by the Paying Agent, or by wire transfer for holders of an
aggregate principal amount of at least $500,000, at the request of such holders,
as provided in the Series B Note Agreement. Principal and Purchase Price, as
hereinafter defined, of and interest on this Series B Note are payable in lawful
currency of the United States of America. If any payment hereon is due on a day
which is not a Business Day, as hereinafter defined, payment shall be made on
the next succeeding Business Day with the same force and effect as if made on
the day such payment was due and, in the case of such payment, no interest shall
accrue for the intervening period.
This Series B Note is one of an issue not to exceed $10,000,000 Hanover
Direct, Inc. Flexible Term Notes, Series B (the "Series B Notes"), issued
pursuant to a Series B Note Agreement dated as of April 27, 1995 (the "Series B
Note Agreement"), between the Borrower and Norwest Bank Minnesota, N.A., as
trustee (in such capacity, the "Trustee") and Paying Agent, for the purpose of
refinancing and/or financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution facility of the
Borrower located in Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower located in San Francisco, California. Pursuant to the
Series B Note Agreement, the Borrower has caused NationsBank, N.A. (Carolinas)
(the "Bank") to issue its irrevocable Series B Letter of Credit dated the Date
of Issuance (as hereinafter defined and as set forth above) of the Series B
Notes (the "Series B Letter of Credit") in favor of the Trustee, in an amount
sufficient to pay the Series B Facility Amount and unpaid interest on or
Purchase Price of the Series B Notes, but not to exceed $10,145,833, pursuant to
a Credit Facilities and Reimbursement Agreement dated as of October 12, 1994
(the "Reimbursement Agreement") by and among the Borrower, the financial lenders
listed on the signature pages of the Reimbursement Agreement, including the
Bank, and the Bank, as agent, which Series B Letter of Credit initially expires
(subject to extension or earlier termination as provided in the Reimbursement
Agreement and the Series B Note Agreement) on April 27, 1998. Substitute letters
of credit may be delivered in accordance with the Series B Note Agreement. The
Trustee is authorized and directed pursuant to the Series B Note Agreement to
make timely draws under the Series B Letter of Credit in accordance with the
terms thereof, to the extent necessary to make when due the payments of
principal of (whether on
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the Maturity Date referenced above, by acceleration, or by call for redemption),
the Purchase Price of and interest on the Series B Notes, except as otherwise
provided in the Series B Note Agreement and the Series B Letter of Credit.
Reference is hereby made to the Series B Note Agreement, the Series B Letter of
Credit, the Reimbursement Agreement and to all amendments and supplements
thereto for a description of the provisions, among others, with respect to the
nature and extent of the security, the default provisions, the rights, duties
and obligations of the Borrower and the Trustee and the rights of the holders of
the Series B Notes and the terms upon which the Series B Notes are issued and
secured.
The Series B Notes are issuable in registered form without coupons in
denominations of $100,000 or any integral multiple of $100,000 in excess thereof
(the "Authorized Denominations"). This Series B Note, upon surrender hereof at
the principal corporate trust office of the Paying Agent with a written
instrument of transfer satisfactory to the Paying Agent duly endorsed for
transfer or accompanied by an assignment duly executed by the holder hereof or
his attorney duly authorized in writing and, in either case, with an appropriate
guarantee of signature conforming to the requirements of the assignment attached
hereto, may, at the option of the holder hereof, be exchanged for Series B Notes
of the same aggregate principal amount and tenor as the Series B Notes being
exchanged and of any Authorized Denomination. This Series B Note is transferable
as provided in the Series B Note Agreement, subject to certain limitations
therein contained, only upon the register of the Paying Agent, and only upon
surrender of this Series B Note for transfer to the Paying Agent duly endorsed
for transfer or accompanied by a written instrument of transfer (in
substantially the form of the assignment attached hereto) duly executed by the
holder hereof or his duly authorized attorney. Thereupon, one or more new Series
B Notes of any Authorized Denomination or Authorized Denominations and in the
same aggregate principal amount and tenor as the Series B Note surrendered will
be issued to the designated transferee or transferees.
The person in whose name this Series B Note is registered shall be
deemed and regarded as the absolute owner hereof for any purpose, as provided in
and as qualified by the Series B Note Agreement.
The Paying Agent or NationsBank, N.A. (Carolinas) (formerly NationsBank
of North Carolina, N.A.), as Remarketing Agent (the "Remarketing Agent"), may
make appropriate arrangements for some or all of the Series B Notes to be issued
or held by means of a book-entry system administered by a Securities Depository,
as hereinafter defined, with no physical distribution of Series B Notes made to
the public (other than those Series B Notes, if any, not held under such
book-entry system).
Initially, all of the Series B Notes will be held by means of a
book-entry system administered by the Securities Depository. One Series B Note
certificate in registered form will be issued for the Series B Notes in the
aggregate principal amount of $10,000,000, and will be registered in the name of
the Securities Depository Nominee and will be deposited with the Paying Agent.
Thereafter, in the event that Series B Notes are issued to the
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Beneficial Owners thereof in certificated (physical) form (and in each and every
case thereafter in which a change in the principal amount of Series B Notes held
pursuant to a book-entry system is made), the Paying Agent will take all actions
necessary to comply with the Balance Certificate Agreement dated as of the date
hereof between Norwest Bank Minnesota, N.A., as transfer agent, and the
Securities Depository, which agreement governs the mechanisms for the
registration of transfer of Series B Note certificates registered in the name of
the Securities Depository Nominee.
With respect to any Series B Notes that are held by means of a
book-entry system, such book-entry system will evidence beneficial ownership of
the Series B Notes so held in Authorized Denominations (or, as applicable,
positions held by the Participants, beneficial ownership being evidenced in the
records of such Participants). Registration and transfers of ownership shall be
effected on the records of the Securities Depository and the Participants, as
applicable, pursuant to rules and procedures established by the Securities
Depository and the Participants. Subject to the provisions of Section 7.09 of
the Series B Note Agreement relating to the Bank as holder of the Series B
Notes, the Borrower, the Trustee and the Paying Agent will recognize the
Securities Depository Nominee, as hereinafter defined, while the registered
owner of the Series B Notes so held, as the owner of the Series B Notes for all
purposes, including (i) payments of principal and Purchase Price of, and
interest on, the Series B Notes, (ii) notices and (iii) voting, subject to
certain qualifications as stated in the Series B Note Agreement. Transfer of
principal, interest and Purchase Price payments to beneficial owners of the
Series B Notes so held will be the responsibility of the Securities Depository
and the Participants. The Borrower, the Trustee, the Bank and the Paying Agent
will not be responsible or liable for such transfers of payments or for
maintaining, supervising or reviewing the records maintained by the Securities
Depository, the Securities Depository Nominee or the Participants.
While the Securities Depository Nominee is the owner of the Series B
Notes so held, notwithstanding the provision hereinabove contained, payments of
principal and Purchase Price of and interest on such Series B Notes shall be
made in accordance with the Letter of Representations dated as of April 27, 1995
among the Borrower, the Trustee, the Remarketing Agent and Paying Agent and
received and accepted by the Securities Depository.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE AND TRANSFER OF OWNERSHIP IS
MAINTAINED WITH RESPECT TO THIS SERIES B NOTE IN ACCORDANCE WITH THE TERMS OF
THE SERIES B NOTE AGREEMENT, (1) THE PROVISIONS OF THIS SERIES B NOTE RELATING
TO THE DELIVERY OF PHYSICAL SERIES B NOTES SHALL BE DEEMED INAPPLICABLE OR BE
OTHERWISE SO CONSTRUED WITH REGARD TO THIS SERIES B NOTE AS TO GIVE FULL EFFECT
TO SUCH BOOK-ENTRY SYSTEM AND (2) THE PROVISIONS OF THIS SERIES B NOTE RELATING
TO ISSUANCE, PAYMENTS OF PRINCIPAL, PURCHASE PRICE AND INTEREST, AND
ESTABLISHMENT OF INTEREST RATES AND INTEREST PERIODS WITH RESPECT TO THE SERIES
B NOTES SHALL BE APPLICABLE TO BENEFICIAL OWNERSHIP INTERESTS IN THE SERIES B
NOTES
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<PAGE> 69
IN AUTHORIZED DENOMINATIONS TO THE SAME EXTENT AS SUCH PROVISIONS
ARE APPLICABLE TO REGISTERED OWNERSHIP INTERESTS IN THE SERIES B
NOTES.
In the event that a book-entry system of evidence and transfer of
ownership of the Series B Notes is discontinued pursuant to the provisions of
the Series B Note Agreement, the Series B Notes shall be delivered solely in
registered form without coupons in the Authorized Denominations, shall be
lettered "R" and numbered separately from 1 upward, and shall be payable,
executed, authenticated, registered, exchanged and cancelled pursuant to the
provisions hereof and of the Series B Note Agreement.
All references herein to time shall be Charlotte, North Carolina time
unless otherwise expressly stated herein.
Except as otherwise specifically provided herein, all capitalized words
and terms shall have the same meaning when used herein as set forth in the
Series B Note Agreement.
1. CERTAIN DEFINITIONS.
"BENEFICIAL OWNER" or "BENEFICIAL OWNER" means the holder of
the beneficial ownership interest in each Series B Note as evidenced on (i) if
such Series B Note is held pursuant to a book-entry system, the books maintained
by the Securities Depository (and, as applicable, its participants or persons
acting through such participants), as more fully described in the Letter of
Representations, or (ii) if such Series B Note is not held pursuant to a
book-entry system, the register maintained by the Paying Agent.
"BUSINESS DAY" means any day other than (a) Saturday or
Sunday, (b) a day on which commercial banks in New York, New York, or in the
city or cities in which the corporate trust office of the Trustee or the Paying
Agent, the primary office of the Remarketing Agent or the Placement Agent or the
paying office of the Bank are authorized by law or executive order to close or
(c) a day on which the New York Stock Exchange is closed. For purposes of this
definition, "paying office of the Bank" means the Bank office responsible for
making payments under any Series B Letter of Credit.
"DATE OF ISSUANCE" means the date upon which the Series B
Notes are issued, authenticated and delivered in accordance with the terms and
conditions of Section 2.06 of the Series B Note Agreement.
"INTEREST PAYMENT DATE" means the first day after the last day
of each Interest Period.
"INTEREST PERIOD" means, with respect to any Series B Note,
each period of between one (1) and one hundred eighty (180) days established
from time to time by the
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Remarketing Agent in accordance with the Interest Period determination method
described in Section 2.02(a) of the Series B Note Agreement.
"INTEREST RATE" means, with respect to any Series B Note, the
interest rate on such Series B Note determined from time to time by the
Remarketing Agent in accordance with the Interest Rate determination method
described in Section 2.02(a) of the Series B Note Agreement. In no event shall
the Interest Rate exceed the lesser of fifteen percent (15%) per annum or the
highest interest rate which may be borne by the Series B Notes under applicable
law.
"PARTICIPANTS" means securities brokers and dealers, banks,
trust companies and clearing corporations which have access to the Securities
Depository's system.
"PURCHASE DATE" means, with respect to any Series B Notes, the
date on which such Series B Notes are required to be purchased pursuant to the
terms and conditions of Section 3.07(a) of the Series B Note Agreement.
"PURCHASE PRICE" means an amount equal to 100% of the
principal amount of any Series B Note tendered or deemed tendered to the Trustee
for purchase pursuant to the terms and conditions of Section 3.07 of the Series
B Note Agreement, plus accrued and unpaid interest thereon to, but excluding,
the Purchase Date.
"RECORD DATE" means, with respect to each Interest Payment
Date, the Trustee's close of business on the Business Day next preceding such
Interest Payment Date.
"SECURITIES DEPOSITORY" means, initially, The Depository Trust
Company, or any successor or substitute securities depository selected by the
Borrower (with the consent of the Trustee and the Remarketing Agent), which
shall maintain a book-entry system in respect of the Series B Notes.
"SECURITIES DEPOSITORY NOMINEE" means, as to any Securities
Depository, such Securities Depository or the nominee of such Securities
Depository in whose name there shall be registered on the register maintained by
the Paying Agent the Series B Note certificate to be delivered to and
immobilized with the Paying Agent during continuation with such Securities
Depository of participation in its book-entry system, and shall initially be
Cede & Co., nominee of The Depository Trust Company.
2. INTEREST ON THE SERIES B NOTES.
The Series B Notes will bear interest at the Interest Rate
from the Date of Issuance until paid in full. Interest accrued on each Series B
Note shall be paid on the applicable Interest Payment Date therefor. The amount
of interest payable on any Interest Payment Date shall be computed on the basis
of the actual number of days elapsed over a year of 360 days. The initial
Interest Period and corresponding Interest Rate for each Series
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B Note will be determined by the Remarketing Agent on the Date of Issuance.
After the initial determination of the Interest Period and corresponding
Interest Rate, the applicable Interest Period and corresponding Interest Rate
shall be determined by the Remarketing Agent at the time and in the manner
specified in Section 2.02 of the Series B Note Agreement. The Remarketing
Agent's determination of the Interest Periods and Interest Rates shall be
conclusive and binding on the Noteholders, the Paying Agent, the Remarketing
Agent, the Borrower, the Bank and the Trustee. The Remarketing Agent will notify
the Paying Agent in writing (which may be in telecopy form) or by telephone
promptly confirmed in writing by 10:00 a.m. on the first Business Day of each
Interest Period with respect to any Series B Note, of the identity of such
Series B Note, the length of such Interest Period, the Interest Rate therefor
and the principal amount of such Series B Note, and, upon the request of the
Borrower or the Bank, the Paying Agent shall promptly (but in no event later
than the end of such Business Day) after its receipt of such information,
forward such information to the Borrower and the Bank. The failure by the
Remarketing Agent or the Paying Agent, as applicable, to give any such notice
shall not affect the change in the Interest Period and/or Interest Rate.
The calculation of interest payable on the Series B Notes as
provided in this Agreement will be conclusive and binding on the Borrower, the
Bank, the Trustee, the Paying Agent, the Remarketing Agent and the Noteholders,
absent manifest error.
Neither the Remarketing Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Trustee, the
Paying Agent, the Bank or any Noteholder for any action taken or not taken by
the Remarketing Agent or any of its directors, officers, agents or employees in
connection with the determination of the Interest Period and Interest Rate for
each Series B Note pursuant to the Series B Note Agreement, in the absence of
its own negligence or willful misconduct.
3. REDEMPTION OF SERIES B NOTES.
(a) OPTIONAL REDEMPTION. The Series B Notes are subject to
redemption at the option of the Borrower, in whole or in part, at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest
thereon to, but excluding, the redemption date; provided that any such
redemption in part shall be in a minimum principal amount of $100,000.
(b) MANDATORY SINKING FUND REDEMPTION. The Series B Notes are
subject to mandatory sinking fund redemption prior to the Maturity Date, in
part, with the Series B Notes to be redeemed being selected pursuant to Section
3.03 of the Series B Note Agreement, at a redemption price equal to the
principal amount thereof, on October 1, or if any such date is not a Business
Day, on the next succeeding Business Day with the same force and effect, in the
years and in the principal amounts indicated below:
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<PAGE> 72
<TABLE>
<CAPTION>
REDEMPTION DATE PRINCIPAL
(OCTOBER 1) AMOUNT
----------- ------
<S> <C>
1996 $500,000
1997 500,000
1998 500,000
1999 500,000
2000 800,000
2001 800,000
2002 800,000
2003 800,000
2004 800,000
2005 800,000
2006 800,000
2007 800,000
2008 800,000
2009 800,000
</TABLE>
(c) MANDATORY REDEMPTION ON EXPIRATION OR TERMINATION OF
SERIES B LETTER OF CREDIT WITHOUT EXTENSION OR PROVIDING A SUBSTITUTE SERIES B
LETTER OF CREDIT. The Series B Notes are subject to mandatory redemption in
whole on the fifth (5th) Business Day prior to the stated date of expiration or
termination of the Series B Letter of Credit, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest thereon to, but
excluding, the redemption date, unless by the twentieth (20th) day prior to such
redemption date the Borrower provides to the Trustee, and the Trustee has
accepted, (1) evidence that such Series B Letter of Credit has been extended or
(2) a Substitute Series B Letter of Credit to be effective on or prior to such
redemption date.
(d) REDEMPTION DATE. The redemption date for Series B Notes to
be redeemed as described in paragraph 3(a) above must be an Interest Payment
Date with respect to the Series B Notes being redeemed. The redemption date for
mandatory redemptions will be as specified in paragraph 3(b) or (c) above, as
the case may be, or determined by the Trustee or the Remarketing Agent
consistently with the provisions thereof and of the Series B Note Agreement.
(e) SELECTION OF SERIES B NOTES TO BE REDEEMED. Except as
otherwise provided herein or in Section 3.03 of the Series B Note Agreement, if
fewer than all the Series B Notes are to be redeemed, the Remarketing Agent will
select the Series B Notes to be redeemed by lot or such other method as it deems
in its sole discretion to be fair and appropriate and shall notify the Paying
Agent (which notice may be provided by telephone, immediately confirmed in
writing by legible facsimile transmission, registered or certified mail,
overnight express delivery, or other secure means) of the holders and
denominations of Series B Notes to be redeemed; provided, however, that in
selecting Series B Notes to be redeemed the Remarketing Agent shall (i) select
only Series B Notes not previously called for redemption, (ii) select Bank Notes
prior to any other Series B Notes, and (iii) with respect to
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<PAGE> 73
any mandatory sinking fund redemption as described in paragraph 3(b) above,
select the Series B Notes to be redeemed on or before the sixtieth (60th) day
prior to the redemption date, and in making such selection take into account the
duration of the Interest Periods with respect to such Series B Notes.
In the event the Remarketing Agent fails to notify the Paying
Agent of the Series B Notes to be redeemed on or before the ninth (9th) Business
Day prior to the redemption date, the Paying Agent shall proceed to select
Series B Notes for redemption from among the Outstanding Series B Notes in the
chronological order in which their Purchase Dates occur, beginning with the
earliest Purchase Date; provided, however, that in selecting Series B Notes to
be redeemed the Paying Agent shall (i) select only Series B Notes not previously
called for redemption and (ii) select Bank Notes prior to any other Series B
Notes. If fewer than all Series B Notes having the same Purchase Date (selected
for redemption as provided in the immediately preceding sentence) are to be
redeemed, the Paying Agent shall treat each owner of Series B Notes as the owner
of one Series B Note for purposes of selection for redemption, and shall select
Series B Notes for redemption by lot or such other method as it deems fair and
appropriate, (1) from among the holders of less than $1,000,000 in aggregate
principal amount, provided that if there are no such holders, or if, after
selection from among such holders such selection has not resulted in redemption
of a sufficient amount of Series B Notes, then (2) from among the holders of
$1,000,000 or more in aggregate principal amount of Series B Notes.
No portion of a Series B Note may be redeemed that would
result in a Series B Note which is smaller than the then permitted minimum
Authorized Denomination. For this purpose, the Remarketing Agent or the Paying
Agent will consider each Series B Note in a denomination larger than the minimum
denomination permitted by the Series B Notes at the time to be separate Series B
Notes each in the minimum denomination.
(f) NOTICE OF REDEMPTION. The Trustee will prepare and cause
the Paying Agent to send notice of each redemption to each Noteholder whose
Series B Notes are being redeemed, the Borrower, the Remarketing Agent and the
Bank by first-class mail at least seven (7) Business Days but not more than
sixty (60) (or twenty (20), in the case of a mandatory redemption pursuant to
paragraph 3(c) above) days before each redemption. The notice shall identify the
Series B Notes or portions thereof to be redeemed and will state: (i) the type
of redemption and the redemption date, (ii) the redemption price, (iii) that the
Series B Notes called for redemption must be surrendered to collect the
redemption price, (iv) the address of the Paying Agent at which the Series B
Notes must be surrendered, (v) that interest on the Series B Notes called for
redemption ceases to accrue on the redemption date, (vi) the CUSIP number of the
Series B Notes called for redemption and (vii) any condition to the redemption.
Failure by the Trustee or the Paying Agent to give any notice of redemption as
to any particular Series B Notes will not affect the validity of the call for
redemption of any Series B Notes in respect of which no such failure has
occurred. Any notice mailed as provided in the Series B Notes will be
conclusively presumed to have been given whether or not actually received by any
holder or beneficial owner.
A-9
<PAGE> 74
(g) EFFECT OF REDEMPTION. On the date fixed for redemption,
notice having been given in the manner and under the conditions provided in the
Series B Note Agreement, the Series B Notes or portions thereof called for
redemption shall be due and payable at the redemption price provided therefor,
plus accrued interest to such date. On such redemption date, if moneys
sufficient to pay the redemption price of the Series B Notes to be redeemed,
plus accrued interest thereon to the date fixed for redemption, are held by the
Paying Agent, interest on the Series B Notes called for redemption shall cease
to accrue; such Series B Notes shall cease to be entitled to any benefits or
security under the Series B Note Agreement or to be deemed Outstanding; and the
holders and beneficial owners of such Series B Notes shall have no rights in
respect thereof except to receive payment of the redemption price thereof, plus
accrued interest to, but excluding, the date of redemption.
(h) SERIES B NOTES REDEEMED IN PART. Upon surrender of a
Series B Note redeemed in part, the Paying Agent will authenticate for the
holder a new Series B Note or Series B Notes equal in principal amount to the
unredeemed portion of the Series B Note surrendered.
4. PURCHASE OF SERIES B NOTES.
(a) MANDATORY PURCHASE OF SERIES B NOTES; NOTICE. Except as
provided in paragraph 4(c) below, Series B Notes are subject to mandatory
purchase at the Purchase Price:
(i) on each Interest Payment Date applicable to such
Series B Note; and
(ii) on the effective date of any Substitute Series B
Letter of Credit delivered in accordance with the terms and conditions of the
Series B Note Agreement, if, but only if, such Substitute Series B Letter of
Credit will result in a Credit Modification.
The Trustee will prepare and cause the Paying Agent to send
written notice of each mandatory purchase described in paragraph 4(a)(ii) above
(a "Notice of Mandatory Purchase") to each Noteholder whose Series B Notes are
being purchased, the Remarketing Agent, the Bank and the Borrower at least 15
days but not more than 60 days before the Purchase Date. No Notice of Mandatory
Purchase will be given to holders or beneficial owners of Series B Notes if the
mandatory purchase is being made as described in paragraph 4(a)(i) above.
(b) PAYMENT FOR PURCHASED SERIES B NOTES. The Purchase Price
of Series B Notes to be purchased on a Purchase Date shall be paid from
Remarketing Proceeds available to pay the Purchase Price of such Series B Notes
and, to the extent Remarketing Proceeds are not available to pay the Purchase
Price of such Series B Notes, from proceeds of a draw on the Series B Letter of
Credit pursuant to the applicable provisions of Section 5.02(a)(iv) of the
Series B Note Agreement. To the extent that sufficient moneys have been
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<PAGE> 75
made available therefor to the Paying Agent or the Remarketing Agent, as
applicable, by 1:45 p.m. on the Purchase Date pursuant to Sections 3.08 and 5.02
of the Series B Note Agreement, upon surrender to the Paying Agent of Series B
Notes called for mandatory purchase as provided in the Series B Note Agreement,
the Purchase Price therefor shall be paid in immediately available funds by the
Paying Agent's or the Remarketing Agent's, as applicable, close of business on
the Purchase Date. From and after the Purchase Date or, if later, the date on
which such moneys are made available to the Paying Agent or the Remarketing
Agent, as applicable, interest accruing on such Series B Notes shall cease to be
payable to the prior holder thereof, such Series B Notes shall cease to be
entitled to the benefits of the Series B Note Agreement and to such extent the
prior holder shall have recourse solely to the funds held by the Paying Agent or
the Remarketing Agent, as applicable, for the purchase of such Series B Notes as
provided in Section 4.03 of the Series B Note Agreement. Notwithstanding any
provision to the contrary herein or in the Series B Note Agreement, for so long
as the Series B Notes are held pursuant to a book-entry system maintained by
DTC, payments of Purchase Price with respect to such Series B Notes shall be
made pursuant to the rules and procedures established by DTC and its
Participants.
(c) LIMITATION ON TENDERS. The holders shall not be required
to tender any Series B Note for purchase on a Purchase Date if on such date,
following the occurrence of an Event of Default, the Trustee shall have declared
the principal of and interest on the Series B Notes immediately due and payable
pursuant to Section 7.02 of the Series B Note Agreement.
(d) In the event that any Series B Note purchased pursuant to
a mandatory purchase is not delivered by the holder thereof on the date such
Series B Note is purchased, the Borrower shall execute (if necessary) and the
Paying Agent will authenticate and deliver a new Series B Note of like aggregate
principal amount as the Series B Note purchased, the Series B Note purchased
shall no longer be deemed outstanding and the owner thereof shall be entitled to
receive only those funds held on deposit with respect thereto, and the new
Series B Note shall, for all purposes of the Series B Note Agreement, be deemed
to evidence the same debt as the Series B Note purchased and shall be
remarketed, delivered and registered in accordance with the terms of this Series
B Note and the Series B Note Agreement.
5. REMARKETING OF PURCHASED SERIES B NOTES.
(a) REMARKETING EFFORT. Except as otherwise provided in
Section 3.08(a) of the Series B Note Agreement, the Remarketing Agent will use
reasonable best efforts to remarket on the Purchase Date all Series B Notes
purchased in accordance with the terms of Section 3.07 of the Series B Note
Agreement and, to the extent such purchased Series B Notes are not remarketed on
the Purchase Date, thereafter will continue to use reasonable best efforts to
remarket such purchased Series B Notes, upon the terms and subject to the
conditions of the Remarketing Agreement.
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<PAGE> 76
(b) REMARKETING PROCEEDS. To the extent the Remarketing Agent
has remarketed Series B Notes and has received funds representing a payment for
such Series B Notes (the "Remarketing Proceeds") from the purchasers thereof,
the Remarketing Agent will promptly forward the Remarketing Proceeds by wire
transfer (or in such other manner as is acceptable to the Remarketing Agent) to
the holders tendering such Series B Notes for purchase (or, if required pursuant
to Section 3.08(b) of the Series B Note Agreement, to the Paying Agent). Except
as otherwise provided below with respect to Bank Notes, until such transfer, all
such Remarketing Proceeds shall be deposited in a separate, segregated account
of the Remarketing Agent (or, if transferred to the Paying Agent as provided in
the Series B Note Agreement, in a separate, segregated account of the Paying
Agent) for application in accordance with the applicable provisions of Section
3.08(b) of the Series B Note Agreement, and until so applied shall be held in
trust for the benefit of the holders tendering such Series B Notes for purchase.
Notwithstanding any provision to the contrary herein or in the Series B Note
Agreement, for so long as the Series B Notes are held pursuant to a book-entry
system maintained by DTC, payments of Remarketing Proceeds with respect to such
Series B Notes shall be made pursuant to the rules and procedures established by
DTC and its Participants.
(c) DELIVERY OF PURCHASED SERIES B NOTES. Series B Notes
purchased with Remarketing Proceeds (other than Bank Notes) shall be delivered
to the purchasers thereof upon receipt of payment therefor. Prior to such
delivery, the Paying Agent shall provide for registration of transfer to the
Holders, as provided in a written notice from the Remarketing Agent.
6. MONEYS TO BE HELD IN TRUST. All proceeds of a draw on the Series B
Letter of Credit received by the Trustee and all money that the Trustee or the
Paying Agent shall hold in, or shall have withdrawn from, the Series B Letter of
Credit Fund or shall have received from any other source and set aside for the
purpose of paying any of the Series B Notes, either on the Maturity Date set
forth above or by purchase (other than as provided in Section 3.08 of the Series
B Note Agreement regarding remarketing of Series B Notes) or call for redemption
or for the purpose of paying any interest on the Series B Notes, shall be held
in trust for the respective holders or beneficial owners of the Series B Notes.
Moneys received by the Remarketing Agent, the Paying Agent or the Trustee from
the sale of a Series B Note under Section 3.08 of the Series B Note Agreement
regarding remarketing of Series B Notes or from the purchase of any Series B
Note will be held segregated from other funds held by the Remarketing Agent, the
Paying Agent or the Trustee for the benefit of the Person from whom such Series
B Note was purchased and will not be invested while so held. Any money that is
so set aside and that remains unclaimed by the holders or beneficial owners for
a period of five (5) years after the date on which such Series B Notes have
become payable shall be remitted to the Borrower and thereafter the holders or
beneficial owners shall look only to the Borrower for payment and then only to
the extent of the amounts so received, without any interest thereon, and the
Trustee, the Remarketing Agent, the Paying Agent and the Bank shall have no
responsibility with respect to such money.
A-12
<PAGE> 77
7. DEFAULTS AND REMEDIES. Upon the occurrence of certain events, and on
the conditions, in the manner and with the effect set forth in Article VII of
the Series B Note Agreement, the principal of all Series B Notes then
outstanding under the Series B Note Agreement may become or may be declared due
and payable before the stated maturity thereof, together with interest accrued
thereon. The Series B Note Agreement directs the Trustee to declare an
acceleration upon notice by the Bank of the occurrence and continuance of an
event of default under the Reimbursement Agreement, and upon the occurrence of
certain other Events of Default under the Series B Note Agreement. The Trustee
has the right to accelerate the entire unpaid principal of and interest on the
Series B Notes in certain events only with the Bank's consent, all as provided
in more detail in Article VII of the Series B Note Agreement to which reference
is hereby made.
The owner of this Series B Note shall have no right to enforce the
provisions of the Series B Note Agreement or to institute action to enforce the
covenants therein, or to take any action with respect to any Event of Default
under the Series B Note Agreement, or to institute, appear in or defend any suit
or other proceeding with respect thereto, except as provided in the Series B
Note Agreement and except that any registered owner may institute action to
enforce the payment of the principal of or interest on his Series B Note.
8. MISCELLANEOUS. Modifications or alterations of the Series B Note
Agreement may be made only to the extent and in the circumstances permitted by
Article IX of the Series B Note Agreement.
Executed counterparts of the Series B Note Agreement are on file at the
principal corporate trust office of the Trustee. The holder of this Series B
Note, by acceptance hereof, consents to all of the terms and provisions of the
Series B Note Agreement.
It is hereby certified that all acts, conditions and things required to
happen, exist and be performed under the laws of the State of New York, and
under the Series B Note Agreement precedent to and in connection with the
issuance of this Series B Note have happened, exist and have been performed as
so required, and that the issuance, authentication and delivery of this Series B
Note have been duly authorized by the Borrower.
Unless the Certificate of Authentication hereto has been executed by
the Paying Agent by manual signature of one of its Responsible Officers, this
Series B Note shall not be entitled to any benefit under the Series B Note
Agreement, or be valid or obligatory for any purpose.
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<PAGE> 78
IN WITNESS WHEREOF, Hanover Direct, Inc. has caused this Series B Note
to be executed in its name and on its behalf by the manual or facsimile
signature of the President and Treasurer and attested by manual or facsimile
signature of the Secretary or Assistant Secretary and sealed with the corporate
seal of Hanover Direct, Inc., all as of the Date of Issuance set forth above.
HANOVER DIRECT, INC.
By: /s/ Jack Rosenfeld
------------------------------
Name: Jack Rosenfeld
Title: President and CEO
ATTEST:
By:
---------------------------------
Name:
-------------------------------
Title:
-------------------------------
[CORPORATE SEAL] By: /s/ Edward J. O'Brien
------------------------------
Name: Edward J. O'Brien
Title: Senior Vice President and
Treasurer
A-14
<PAGE> 79
CERTIFICATE OF AUTHENTICATION
This Series B Note is one of the Series B Notes issued under the
provisions of the within-mentioned Series B Note Agreement.
NORWEST BANK MINNESOTA, N.A.,
as Paying Agent
By:
-------------------------------
Responsible Officer
Dated:
---------------
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<PAGE> 80
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
(PLEASE PRINT OR TYPE THE NAME AND ADDRESS, INCLUDING THE ZIP CODE OF THE
TRANSFEREE, AND THE FEDERAL TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
the within Series B Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ________________ Attorney to transfer the within Series
B Note on the books kept for registration and transfer thereof, with full power
of substitution in the premises.
Dated:
------------
By:
--------------------------------------
NOTICE: The signature of the Registered
Owner above must correspond with
the name of the Registered Owner
as it appears on the registration
books maintained by the Paying
Agent.
Signature Guaranteed
By:
------------
NOTICE: Signature(s) must be guaranteed by a
member firm of the New York Stock
Exchange or a commercial bank or
trust company.
A-16
<PAGE> 81
EXHIBIT B
NOTICE OF MANDATORY REPURCHASE
TO THE OWNERS OF
$10,000,000 HANOVER DIRECT, INC.
FLEXIBLE TERM NOTES, SERIES B
NOTICE IS HEREBY GIVEN pursuant to Section 3.07 of the Series B Note
Agreement dated as of April 27, 1995 (the "Agreement") between Hanover Direct,
Inc. (the "Borrower") and Norwest Bank Minnesota, N.A., as trustee and paying
agent (the "Trustee" and the "Paying Agent", as applicable), that the
above-referenced Series B Notes are subject to mandatory purchase on [DATE] (the
"Purchase Date").
The Series B Letter of Credit currently in effect is [DESCRIPTION OF
Series B Letter of Credit]. Such Series B Letter of Credit will expire/be
terminated and replaced with [DESCRIPTION OF SUBSTITUTE Series B Letter of
Credit] on [EFFECTIVE DATE]. [DESCRIBE TERMS OF NEW Series B Letter of Credit].
[The existing rating or ratings assigned to the Series B Notes will be reduced
to [RATING/RATINGS]/withdrawn due to the termination/expiration and replacement
of the Series B Letter of Credit currently in effect.]
The Series B Notes are subject to mandatory purchase on the Purchase
Date at a Purchase Price of 100% of the principal amount of Series B Notes being
purchased plus interest accrued to, but excluding, the Purchase Date. The owners
are required to tender their Series B Notes, properly endorsed to the Paying
Agent by 10:00 a.m. on the Purchase Date. All purchases will be made in
immediately available funds on the Purchase Date. From and after the Purchase
Date, interest accruing on the Series B Notes shall cease to be payable to the
prior holder thereof, the Series B Notes shall cease to be entitled to the
benefits of the Agreement and the prior holder will have recourse solely to the
funds held by the Paying Agent or the Remarketing Agent, as applicable, for the
purchase of the Series B Notes.
All terms used herein which are not defined herein shall have the
meanings assigned to them in the Agreement.
Dated: NORWEST BANK MINNESOTA,
N.A., AS PAYING AGENT FOR HANOVER
DIRECT, INC.
By:
----------------------------
B-1
<PAGE> 1
Exhibit 10.55
FIRST AMENDMENT TO SERIES B NOTE
This FIRST AMENDMENT TO SERIES B NOTE dated as of December 29, 1995, is
made by HANOVER DIRECT, INC., a Delaware corporation (the "Borrower"), with the
consent of Norwest Bank Minnesota, N.A., as trustee and paying agent (the
"Trustee" or the "Paying Agent", as applicable);
W I T N E S S E T H:
WHEREAS, the Borrower and the Trustee entered into the Series
B Note Agreement dated as of April 27, 1995, as amended pursuant to that certain
First Supplemental Series B Note Agreement dated as of December 29, 1995 between
the Borrower and the Trustee (as further amended, restated, supplemented or
otherwise modified from time to time in accordance with its terms, the "Series B
Note Agreement") pursuant to which the Borrower issued and sold its interest
bearing Flexible Term Notes, Series B (the "Series B Notes") in the aggregate
principal amount of $10,000,000 and in the form of Series B Note R-1, registered
in the name of Cede & Co. (as defined in the Series B Note Agreement) and
deposited with the Paying Agent ("Series B Note R-1"); and
WHEREAS, the Borrower has this day delivered to the Trustee a
Substitute Series B Letter of Credit in substitution for the Series B Letter of
Credit (each as defined in the Series B Note Agreement); and
WHEREAS, in order to more fully evidence the delivery of the Substitute
Series B of Letter of Credit referenced above, the Borrower and the Trustee
desire to amend Series B Note R-1, subject to the terms and conditions set forth
herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this First
Amendment to Series B Note and not otherwise herein defined shall have the
meaning ascribed to them in the Series B Note Agreement.
SECTION 2. AMENDMENTS TO SERIES B NOTE R-1. Series B Note R-1 is hereby
amended as follows:
(a) The second boldface paragraph on the first page of Series B Note
R-1 (prior to the text thereof) is hereby deleted in its entirety and replaced
with the following:
PAYMENTS OF PRINCIPAL AND PURCHASE PRICE OF AND
INTEREST ON THIS SERIES B NOTE WILL BE MADE FROM
DRAWINGS UNDER THE SERIES B LETTER OF CREDIT
(HEREINAFTER DEFINED) IF REMARKETING PROCEEDS ARE NOT
<PAGE> 2
AVAILABLE OR IF AN EVENT OF DEFAULT HAS OCCURRED. ALTHOUGH THE
SERIES B LETTER OF CREDIT IS A BINDING OBLIGATION OF
CORESTATES BANK, N.A. (THE "L/C ISSUER"), THIS SERIES B NOTE
IS NOT A DEPOSIT OR OBLIGATION OF CORESTATES FINANCIAL CORP OR
ANY OF ITS AFFILIATES, INCLUDING THE L/C ISSUER AND CONGRESS
FINANCIAL CORPORATION, NOR IS THIS SERIES B NOTE A DEPOSIT OR
OBLIGATION OF NATIONSBANK CORPORATION OR ANY OF ITS AFFILIATED
BANKS, INCLUDING NATIONSBANK, N.A., AND THIS SERIES B NOTE IS
NOT GUARANTEED BY ANY OF THESE ENTITIES. THIS SERIES B NOTE IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND
IS SUBJECT TO CERTAIN INVESTMENT RISKS INCLUDING POSSIBLE LOSS
OF THE PRINCIPAL AMOUNT INVESTED.
(b) The second paragraph of the text of Series B Note R-1, beginning on
page 2 thereof, is amended by deleting the first two sentences thereof and
replacing them with the following:
This Series B Note is one of an issue not to exceed
$10,000,000 Hanover Direct, Inc. Flexible Term Notes, Series B
(the "Series B Notes"), issued pursuant to a Series B Note
Agreement dated as of November 9, 1994, between the Borrower,
and Norwest Bank Minnesota, N.A., as trustee (in such
capacity, the "Trustee") and Paying Agent, as amended by that
certain First Supplemental Series B Note Agreement dated as of
December 29, 1995 between the Borrower and the Trustee (as
further amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms, the "Series B
Note Agreement"), for the purpose of refinancing and/or
financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution
facility owned and used by certain subsidiaries of the
Borrower located in Roanoke, Virginia and a new retail store
of Gump's Corp., a subsidiary of the Borrower located in San
Francisco, California. Pursuant to the Series B Note
Agreement, the Borrower has arranged, through a credit
facility established with Lender for certain of Borrower's
subsidiaries, and as guarantor of such financing arrangements
with Lender, for L/C Issuer to issue for the account of such
subsidiaries its irrevocable Series B Letter of Credit dated
December 29, 1995 (the "Series B Letter of Credit") in favor
of the Trustee, in an amount sufficient to pay the Series B
Facility Amount and unpaid interest on or Purchase Price of
the Series B Notes, but not to exceed $10,145,833, pursuant to
(a) the Application for Irrevocable Standby Letter of Credit
dated as of December 22, 1995 executed and delivered to the
L/C Issuer by the Account Parties (as defined in the Series B
Note Agreement) and the Lender requesting the issuance by the
L/C Issuer of the Series B Letter of Credit (the
"Application"), (b) the Loan and Security Agreement dated as
of November 14, 1995 (the "Loan Agreement"), by and among the
Account
2
<PAGE> 3
Parties and certain other subsidiaries of the Borrower, and
the Lender, acknowledged and agreed to by the Borrower and
certain other subsidiaries of the Borrower, pursuant to which,
among other things, the Lender has executed the Application
pursuant to which the Series B Letter of Credit is issued by
the L/C Issuer and delivered to the Trustee, and any and all
modifications, alterations, amendments and supplements
thereto, (c) the other "Financing Agreements" as defined in
the Loan Agreement and (d) any similar agreements between or
among the Account Parties, the Borrower and the issuer of a
Substitute Series B Letter of Credit or lender providing
credit support to such issuer (individually and collectively,
the "Reimbursement Agreement").
(c) The seventh paragraph of the text of Series B Note R-1, beginning
on page 4 thereof, is amended by deleting the third sentence thereof in its
entirety and replacing it with the following:
The Borrower, the Trustee and the Paying Agent will recognize
the Securities Depository Nominee, as hereinafter defined,
while the registered owner of the Series B Notes so held, as
the owner of the Series B Notes for all purposes, including
(i) payments of principal and Purchase Price of, and interest
on, the Series B Notes, (ii) notices and (iii) voting.
(d) Section 1 of Series B Note R-1, beginning on page 5 thereof, is
amended by adding the following definition:
"BANK" means, individually and collectively, the Lender and
the L/C Issuer.
(e) Subsection (c) of Section 3 of Series B Note R-1, beginning on page
8 thereof, is amended by deleting the reference to the "Bank" in the eighth line
thereof and replacing it with a reference to the "L/C Issuer".
(f) Subsection (f) of Section 3 of Series B Note R-1, beginning on page
9 thereof, is amended by deleting the reference to the "Bank" in the third line
thereof and replacing it with a reference to the "Lender."
(g) Subsection (a) of Section 4 of Series B Note R-1, beginning on page
10 thereof, is amended by deleting the reference to the "Bank" in the fourth
line of the last paragraph thereof and replacing it with a reference to the
"Lender."
(h) Section 7 of Series B Note R-1, beginning on page 13 thereof, is
amended by deleting the second and third sentences of the first paragraph
thereof in their entirety and replacing them with the following:
The Series B Note Agreement directs the Trustee to declare an
acceleration upon written notice by the Lender of the
occurrence and continuance of an event of
3
<PAGE> 4
default under the Reimbursement Agreement and upon the
occurrence of certain other Events of Default under the Series
B Note Agreement.
SECTION 3. EFFECT OF FIRST AMENDMENT TO SERIES B NOTE; NO NOVATION.
Except as modified hereby, all of the terms and provisions of Series B Note R-1
shall remain in full force and effect. This First Amendment to Series B Note
amends Series B Note R-1 and shall not be construed to constitute a novation
thereof in any manner whatsoever.
SECTION 4. GOVERNING LAW. This First Amendment to Series B Note and
Series B Note R-1, as amended hereby, shall be deemed to be contracts made
under, and for all purposes shall be construed in accordance with, the laws of
the State of New York.
SECTION 5. SEVERABILITY. If any provision of this First Amendment to
Series B Note shall be determined to be unenforceable by a court of law, that
shall not affect any other provision of this First Amendment to Series B Note.
[Signatures on following page]
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<PAGE> 5
IN WITNESS WHEREOF, the Borrower has caused this First Amendment to
Series B Note to be duly executed as of the day and year first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
----------------------------
Name: Edward J. O'Brien
--------------------------
Title: Executive VP & Treasurer
--------------------------
[CORPORATE SEAL]
5
<PAGE> 6
CONSENT TO FIRST AMENDMENT TO SERIES B NOTE
Norwest Bank Minnesota, N.A., as Paying Agent, hereby consents to the
amendments to Series B Note R-1 provided for herein.
NORWEST BANK MINNESOTA, N.A.,
as Trustee and Paying Agent
By:
------------------------
Name:
----------------------
Title:
----------------------
6
<PAGE> 1
EXHIBIT 10.56
SECOND SUPPLEMENTAL SERIES B NOTE AGREEMENT
This SECOND SUPPLEMENTAL SERIES B NOTE AGREEMENT dated as of December
18, 1996, between HANOVER DIRECT, INC., a Delaware corporation (the "Borrower"),
and NORWEST BANK MINNESOTA, N.A., a national banking association organized under
the laws of the United States of America and having its principal office in
Minneapolis, Minnesota, as trustee and paying agent (the "Trustee" or the
"Paying Agent", as applicable);
W I T N E S S E T H :
WHEREAS, the Borrower and the Trustee entered into the Series B Note
Agreement dated as of April 27, 1995 (the "Series B Note Agreement") pursuant to
which the Borrower issued and sold its interest bearing Flexible Term Notes,
Series B (the "Series B Notes") in the aggregate principal amount of
$10,000,000; and
WHEREAS, the Series B Note Agreement was modified on December 29, 1995
by the First Supplemental Series B Note Agreement by and between Borrower and
Trustee (the "First Supplemental Series B Note Agreement") to reflect the
delivery of a substitute Letter of Credit;
WHEREAS, the Borrower has this day, delivered to the Trustee a
Substitute Series B Letter of Credit in substitution for the Series B Letter of
Credit (each as defined in the Series B Note Agreement); and
WHEREAS, in order to more fully evidence the delivery of the Substitute
Series B of Letter of Credit referenced above, the Borrower and the Trustee
desire to further amend the Series B Note Agreement, subject to the terms and
conditions set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this First
Supplemental Series B Note Agreement and not otherwise herein defined shall have
the meaning ascribed to them in the Series B Note Agreement.
SECTION 2. AMENDMENT TO SECOND RECITAL OF THE SERIES B NOTE AGREEMENT.
The second recital of the Series B Note Agreement on page 1 thereof is hereby
amended by deleting the reference to the "L/C Issuer" in the third line thereof
and replacing it with a reference to the "Bank".
<PAGE> 2
SECTION 3. AMENDMENTS TO SECTION 1.01 OF THE SERIES B NOTE AGREEMENT.
(a) The definition of "BANK" set forth in Section 1.01 of the
Series B Note Agreement is hereby deleted in its entirety and replaced with the
following:
"BANK" means the issuer of the Series B Letter of
Credit, initially NationsBank of North Carolina, N.A.
(predecessor to NationsBank, N.A.) and upon the issuance and
delivery of a Substitute Series B Letter of Credit, shall mean
the issuer of such Substitute Series B Letter of Credit.
(b) The definition of "BANK NOTES" set forth in Section 1.01 of
the Series B Note Agreement is hereby deleted in its entirety and replaced with
the following:
"BANK NOTES" means any Series B Notes purchased with
proceeds from a draw under the Series B Letter of Credit and
pledged to the Bank under the Reimbursement Agreement,
including, in the event a book-entry system with respect to
the Series B Notes is in effect, any beneficial ownership
interest therein; provided that in the event that the Bank
fails to honor a drawing under the Series B Letter of Credit
to fund such a purchase and the Borrower purchases such Series
B Notes with its own funds, "Bank Notes" shall include such
Series B Notes, except that such Series B Notes shall not be
pledged to the Bank under the Reimbursement Agreement.
(c) The definition of "BUSINESS DAY" set forth in Section 1.01 of
the Series B Note Agreement is amended by deleting the last sentence thereof in
its entirety and replacing it with the following:
For purposes of this definition, "paying office of the Bank"
means the Bank office responsible for making payments under
any Series B Letter of Credit.
(d) The definition of "OPINION OF COUNSEL" set forth in Section
1.01 of the Series B Note Agreement is hereby deleted in its entirety and
replaced with the following:
"OPINION OF COUNSEL" means a written opinion of
counsel who is reasonably acceptable to the Trustee, the Bank,
the Placement Agent and Remarketing Agent. The counsel may be
an employee of or counsel to the Borrower, the Placement
Agent, the Remarketing Agent, the Bank or the Trustee.
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<PAGE> 3
(e) The definition of "REIMBURSEMENT AGREEMENT" set forth in
Section 1.01 of the Series B Note Agreement is hereby deleted in its entirety
and replaced with the following:
"REIMBURSEMENT AGREEMENT" means, individually and
collectively, the Reimbursement Agreement dated as of December
18, 1996, by and among the Borrower and certain subsidiaries
of the Borrower, and the Bank, pursuant to which, among other
things, the Bank has issued the Series B Letter of Credit, and
any and all modifications, alterations, amendments and
supplements thereto, and any similar agreements between or
among the Borrower and the issuer of a Substitute Series B
Letter of Credit or Lender providing credit support to such
issuer.
(f) The definition of "SERIES B LETTER OF CREDIT" set forth in
Section 1.01 of the Series B Note Agreement is amended by (a) deleting the words
"Commonwealth of Pennsylvania" in the third line thereof and replacing them with
"State of New York" and (b) by deleting the word "L/C Issuer" in the fourteenth
line thereof and replacing it with "Bank".
(g) Section 1.01 of the Series B Note Agreement is hereby amended
by deleting the following definitions thereto:
"ACCOUNT PARTIES" means Hanover Direct Pennsylvania,
Inc., Hanover Direct Virginia Inc. and Gump's Corp., and their
successors and assigns.
"L/C ISSUER" means the issuer of the Series B Letter
of Credit, initially CoreStates Bank, N.A., and upon the
issuance and delivery of a Substitute Series B Letter of
Credit, shall mean the issuer of such Substitute Series B
Letter of Credit.
"LENDER" means Congress Financial Corporation, its
successors and assigns, or other lender that refinances the
obligations to Lender under the Reimbursement Agreement and
replaces all credit support given by Lender to the L/C Issuer
in respect of the Series B Letter of Credit or any Substitute
Series B Letter of Credit.
SECTION 4. AMENDMENT TO SECTION 2.07 OF THE SERIES B NOTE AGREEMENT.
Subsection (b) of Section 2.07 of the Series B Note Agreement is amended by
deleting the third sentence thereof in its entirety and replacing it with the
following:
Subject to the provisions of Section 7.09, the Borrower, the
Trustee and the Paying Agent will recognize the Securities
Depository Nominee, while the
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<PAGE> 4
registered owner of the Series B Notes so held, as the owner
of the Series B Notes for all purposes, including (i) payments
of principal and Purchase Price of, and interest on, the
Series B Notes, (ii) notices and (iii) voting.
SECTION 5. AMENDMENT TO SECTION 2.08 OF THE SERIES B NOTE AGREEMENT.
Subsection (a) of Section 2.08 of the Series B Note Agreement is amended by
deleting the reference to the "Lender" in the sixth line thereof and replacing
it with a reference to the "Bank".
SECTION 6. AMENDMENT TO SECTION 3.01 OF THE SERIES B NOTE AGREEMENT.
Subsection (a)(ii) of Section 3.01 of the Series B Note Agreement is amended by
deleting the reference to the "Lender" in the second line thereof and replacing
it with a reference to the "Bank". It is acknowledged that the purported
amendment to Subsection (c) of Section 3.10 of the Series B Note Agreement
pursuant to the First Supplemental Series B Note Agreement was a scrivener's
error and is of no force and effect.
SECTION 7. AMENDMENT TO SECTION 3.04 OF THE SERIES B NOTE AGREEMENT.
Section 3.04 of the Series B Note Agreement is amended by deleting the reference
to the "Lender" in the third line thereof and replacing it with a reference to
the "Bank".
SECTION 8. AMENDMENT TO SECTION 3.08 OF THE SERIES B NOTE AGREEMENT.
Subsection (d)(ii) of Section 3.08 of the Series B Note Agreement is hereby
deleted in its entirety and replaced with the following:
(ii) All Bank Notes (other than Bank Notes purchased
with the Borrower's own funds and not with the proceeds of a
draw on the Series B Letter of Credit) will be registered in
the name of the Trustee, as agent and bailee of the Bank and
subject to the pledge by the Borrower to the Bank, and shall
be held by the Trustee pursuant to this Agreement and the
Reimbursement Agreement. Upon receipt of Remarketing Proceeds
in respect of Bank Notes, the Remarketing Agent shall notify,
the Bank, the Trustee and the Borrower of such receipt. Upon
its receipt of such notice, the Bank shall, pursuant to the
Reimbursement Agreement, notify the Remarketing Agent and the
Trustee by telephone, telecopy or telex, promptly confirmed in
writing, that the Series B Notes have ceased to be Bank Notes
and that the amount of the Letter of Credit has been
automatically reinstated as provided therein, whereupon the
Remarketing Agent will remit such Remarketing Proceeds as
directed by the Bank. The Trustee shall not release the Bank
Notes until it receives from the Bank the notice referred to
in the
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<PAGE> 5
preceding sentence. The Remarketing Agent shall hold such
Remarketing Proceeds in a segregated account of the
Remarketing Agent for the benefit of the Bank, except that if
the Series B Letter of Credit is not reinstated by an amount
equal to the Remarketing Proceeds, then the Remarketing Agent
shall hold such funds for the benefit of the purchasers which
provided such Remarketing Proceeds.
SECTION 9. AMENDMENTS TO SECTION 4.03 OF THE SERIES B NOTE AGREEMENT.
(a) Subsection (c) of Section 4.03 of the Series B Note Agreement is
amended by deleting all references to the "Lender" therein and replacing them
with references to the "Bank".
(b) Subsection (e) of Section 4.03 of the Series B Note Agreement is
amended by deleting the reference to the "Lender" in the last line thereof and
replacing it with a reference to the "Bank".
SECTION 10. AMENDMENT TO SECTION 5.02 OF THE SERIES B NOTE AGREEMENT.
Subsection (c) of Section 5.02 of the Series B Note Agreement is amended by
deleting all references therein to the "Lender" and replacing them with
references to the "Bank".
SECTION 11. AMENDMENT TO SECTION 5.03 OF THE SERIES B NOTE AGREEMENT.
Subsection (b) of Section 5.03 of the Series B Note Agreement is amended by
deleting the reference to the "Lender" in the last line thereof and replacing it
with a reference to the "Bank".
SECTION 12. AMENDMENT TO SECTION 5.04 OF THE SERIES B NOTE AGREEMENT.
Section 5.04 of the Series B Note Agreement is amended by deleting the second
and third paragraphs thereof in their entirety and replacing them with the
following:
When the Series B Letter of Credit terminates or expires in
accordance with its terms or a Substitute Series B Letter of Credit
therefor is accepted hereunder, the Trustee shall immediately surrender
the Series B Letter of Credit to the Bank. The Trustee hereby agrees
that, except in the case of a redemption in part pursuant to Article
III hereof or any other reduction in the principal amount of Series B
Notes Outstanding, it will not under any circumstances request that the
Bank reduce the amount of the Series B Letter of Credit. If at any
time, all Series B Notes shall cease to be Outstanding, the Trustee
shall surrender the Series B Letter of Credit to the Bank, in
accordance with the terms thereof.
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<PAGE> 6
If at any time, the Bank shall fail to honor a draft presented
under the Series B Letter of Credit, in conformity with the terms
thereof, the Trustee shall give immediate telephonic notice thereof to
the Remarketing Agent and the Borrower.
SECTION 13. AMENDMENT TO SECTION 7.01 OF THE SERIES B NOTE AGREEMENT.
Subsection (d) of Section 7.01 of the Series B Note Agreement is hereby deleted
in its entirety and replaced with the following:
(d) Receipt by the Trustee of written notice from the Bank
that an Event of Default has occurred under the Reimbursement
Agreement accompanied by a demand by the Bank that the Trustee
declare the Series B Notes to be immediately due and payable.
SECTION 14. AMENDMENTS TO SECTION 7.02 OF THE SERIES B NOTE AGREEMENT.
(a) Subsection (a) of Section 7.02 of the Series B Note Agreement is
amended by deleting the reference to the "Lender" in the second line thereof and
replacing it with a reference to the "Bank".
(b) Subsection (b) of Section 7.02 of the Series B Note Agreement is
hereby deleted in its entirety and replaced with the following:
(b) Upon the occurrence of any Event of Default
specified in Section 7.01(c), the Trustee shall notify the
Bank of such Event of Default and shall, by notice to the
Borrower, the Paying Agent (who shall promptly give such
notice to the holders) and the Remarketing Agent declare the
entire unpaid principal of and interest on the Series B Notes
immediately due and payable, but only if directed to do so by
the Bank, unless the Bank has dishonored a valid draw under
the Series B Letter of Credit, in which event the Trustee may
declare the entire unpaid principal of and interest on the
Series B Notes immediately due and payable and, thereupon, in
either case, the entire unpaid principal of and interest on
the Series B Notes shall forthwith become due and payable.
SECTION 15. AMENDMENT TO SECTION 7.03 OF THE SERIES B NOTE AGREEMENT.
Section 7.03 of the Series B Note Agreement is amended (a) by deleting the
reference to the "Lender" in the first sentence thereof and replacing it with a
reference to the "Bank" and (b) by deleting the second sentence thereof in its
entirety and replacing it with the following:
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<PAGE> 7
If such instructions are received by, the Trustee, such draw
proceeds and, if necessary, the moneys on deposit in the
Interest Reserve Account, shall be immediately applied to the
purchase of the Series B Notes, the acceleration of the Series
B Notes shall be cancelled, the Series B Notes shall become
Bank Notes and the Series B Notes shall be registered in the
name of the Trustee, as agent and bailee of the Bank, and
pledged under the Reimbursement Agreement as additional
security for repayment of the Borrower's obligations under the
Reimbursement Agreement.
SECTION 16. AMENDMENT TO SECTION 7.05 OF THE SERIES B NOTE AGREEMENT.
Section 7.05 of the Series B Note Agreement is amended by deleting the phrase
"and the Account Parties" between the words "Borrower" and "to" in the seventh
line thereof.
SECTION 17. AMENDMENT TO SECTION 7.06 OF THE SERIES B NOTE AGREEMENT.
Section 7.06 of the Series B Note Agreement is amended (a) by deleting the
references to the "Lender" in the second and fourth lines thereof and replacing
therein with references to the "Bank" and (b) by deleting the reference to the
"Lender" in the second line of subsection (b) thereof and replacing it with a
reference to the "Bank".
SECTION 18. AMENDMENT TO SECTION 7.09 OF THE SERIES B NOTE AGREEMENT.
It is acknowledged that reference to Section 7.03 in the first line of Section
19 of the First Supplemental Series B Note Agreement entitled "Amendment to
Section 7.09 of the Series B Note Agreement" was a scrivener's error and that
the correct reference should have been to Section 7.09. Section 7.09 of the
Series B Note Agreement is deleted in its entirety and replaced with the
following:
SECTION 7.09 BANK DEEMED HOLDER. For all purposes of this
Article VII (other than receipt of payments), the Bank shall, so long
as the Series B Letter of Credit shall not have been dishonored (other
than for failure to receive a drawing in strict compliance with the
terms thereof or other reason permitted by the Series B Letter of
Credit), be deemed the holder and registered owner of all Series B
Notes. As such, the Bank may take all actions permitted by this Article
VII to be taken by the holders or registered owners of the Series B
Notes, to the exclusion of the actual beneficial owners and registered
owners of the Series B Notes. NOTWITHSTANDING ANY PROVISION TO THE
CONTRARY HEREIN, ON OR AFTER THE EFFECTIVE DATE OF A SUBSTITUTE SERIES
B LETTER OF CREDIT WHICH RESULTS IN A CREDIT MODIFICATION, THE BANK, AS
ISSUER OF THE SERIES B LETTER OF CREDIT REPLACED BY SUCH SUBSTITUTE
SERIES B LETTER OF CREDIT, SHALL BE DEEMED THE "BANK" HEREUNDER FOR
PURPOSES OF GIVING NOTICE OF DEFAULT UNDER SECTION 7.01(D) AND FOR
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<PAGE> 8
PURPOSES OF EXERCISING REMEDIES HEREUNDER, BUT ONLY SO LONG AS (I)
OBLIGATIONS REMAIN OWING TO THE BANK UNDER THE REIMBURSEMENT AGREEMENT
OR THE LOAN DOCUMENTS (AS DEFINED IN THE REIMBURSEMENT AGREEMENT) OR
(II) THERE REMAIN OUTSTANDING HEREUNDER ANY BANK NOTES PLEDGED TO THE
BANK UNDER THE REIMBURSEMENT AGREEMENT.
SECTION 19. AMENDMENT TO SECTION 8.05 OF THE SERIES B NOTE AGREEMENT.
Section 8.05 of the Series B Notes Agreement is amended by deleting the
references to the "Lender" in the sixth and tenth lines thereof and replacing
therein with references to the "Bank".
SECTION 20. AMENDMENT TO SECTION 8.08 OF THE SERIES B NOTE AGREEMENT.
Section 8.08 of the Series B Note Agreement is amended (a) by deleting all
references therein to the "Lender" or "Lenders" and replacing them with
references to the "Bank" or "Bank's", as applicable, and (b) by deleting the
following sentence after the last paragraph thereof:
No resignation or removal of the Trustee shall be binding upon
the L/C Issuer for purposes of the Series B Letter of Credit, and no
successor Trustee shall have any rights to draw, except upon compliance
with the transfer provisions therein set forth.
SECTION 21. AMENDMENT TO SECTION 8.10 OF THE SERIES B NOTE AGREEMENT.
Section 8.10 of the Series B Note Agreement is amended (a) by deleting all
references therein to the "Lender" and replacing them with references to the
"Bank" and (b) by deleting the following sentence after the last paragraph
thereof:
No such resignation or removal of the Remarketing
Agent or appointment of or assignment to a successor
Remarketing Agent shall be binding upon the L/C Issuer for
purposes of the Series B Letter of Credit, unless set forth in
an amendment to the Series B Letter of Credit issued by the
L/C Issuer.
SECTION 22. AMENDMENT TO SECTION 8.11 OF THE SERIES B NOTE AGREEMENT.
Subsection (c) of Section 8.11 of the Series B Note Agreement is amended by
deleting the reference to the "Lender" in the fourth line thereof and replacing
it with a reference to the "Bank".
SECTION 23. AMENDMENT TO SECTION 8.12 OF THE SERIES B NOTE AGREEMENT.
Section 8.12 of the Series B Note Agreement is amended by deleting all
references to the "Lender" therein and replacing them with references to the
"Bank".
SECTION 24. AMENDMENT TO SECTION 8.13 OF THE SERIES B NOTE AGREEMENT.
Section 8.13 of the Series B Note Agreement is
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<PAGE> 9
amended by deleting all references to the "Lender" therein and replacing them
with references to the "Bank".
SECTION 25. AMENDMENT TO SECTION 8.14 OF THE SERIES B NOTE AGREEMENT.
Section 8.14 of the Series B Note Agreement is amended by deleting all
references to the "Lender" or "Lender's" therein and replacing therein with
references to the "Bank" or "Bank's", as applicable.
SECTION 26. AMENDMENT TO SECTION 8.16 OF THE SERIES B NOTE AGREEMENT.
Section 8.16 of the Series B Note Agreement is amended (a) by deleting the
phrase ", to the extent provided in the Reimbursement Agreement," after the word
"shall" at the end of the fourth line thereof and (b) by deleting the reference
to the "Lender" in the fifth line thereof and replacing it with a reference to
the "Bank".
SECTION 27. AMENDMENT TO SECTION 9. 01 OF THE SERIES B NOTE AGREEMENT.
Subsection (f) of Section 9.01 of the Series B Note Agreement is amended by
deleting the reference to the "Lender" in the fifth line thereof and replacing
it with a reference to the "Bank".
SECTION 28. AMENDMENT TO SECTION 9.02 OF THE SERIES B NOTE AGREEMENT.
Section 9.02 of the Series B Note Agreement is amended by deleting the reference
to the "Lender" in the fourteenth line thereof and replacing it with a reference
to the "Bank".
SECTION 29. AMENDMENT TO SECTION 9.06 OF THE SERIES B NOTE AGREEMENT.
The heading and the first sentence of Section 9.06 of the Series B Note
Agreement are hereby deleted in their entirety and replaced with the following:
Section 9.06. BANK AND REMARKETING AGENT CONSENT
REQUIRED. Except to the extent that the consent of the
Remarketing Agent or the Bank is not required for the action
that is the subject of the amendment (e.g., removal of the
Remarketing Agent, the Trustee or the Paying Agent by the
Borrower upon the terms specified herein), an amendment to
this Agreement or the Series B Notes shall not become
effective unless the Remarketing Agent (but only to the extent
that such amendment affects the rights, duties or obligations
of the Remarketing Agent hereunder) and the Lender deliver to
the Trustee their written consents to the amendment.
SECTION 30. AMENDMENT TO SECTION 10.01 OF THE SERIES B NOTE AGREEMENT.
Subsection (b) of Section 10.01 of the Series B Note Agreement is amended by
deleting the reference to, and the address of, the "L/C Issuer" and the "Lender"
therein and replacing them with the following:
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If to the Bank: Swiss Bank Corporation
New York Branch
222 Broadway
New York, New York, 10038
Attention:
Telephone No.:
Fax No.:
SECTION 31. AMENDMENT TO SECTION 10.09 OF THE SERIES B NOTE AGREEMENT.
Section 10.09 of the Series B Note Agreement is amended by deleting the
reference to the "Lender" in the fourth line thereof and replacing it with a
reference to the "Bank".
SECTION 32. AMENDMENTS TO EXHIBIT A TO THE SERIES B NOTE AGREEMENT -
FORM OF SERIES B NOTE. Exhibit A to the Series B Note Agreement (the "Form of
Series B Note") is hereby amended as follows:
(a) The second boldface paragraph on the first page of the Form of
Series B Note (prior to the text thereof) is hereby deleted in its entirety and
replaced with the following:
THIS SERIES B NOTE IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED BY, SWISS BANK CORPORATION, NEW YORK BRANCH (THE
"BANK"), IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, AND IS SUBJECT TO INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED. ALTHOUGH NOT
GUARANTEED BY THE BANK, PAYMENTS OF PRINCIPAL AND INTEREST ON
THIS SERIES B NOTE AND, IF REMARKETING PROCEEDS ARE NOT
AVAILABLE, THE PURCHASE PRICE OF THIS SERIES B NOTE, WILL BE
MADE FROM DRAWINGS UNDER THE SERIES B LETTER OF CREDIT ISSUED
BY THE BANK. THE FAILURE OF THE BANK TO HONOR ANY DRAWING
UNDER THE SERIES B LETTER OF CREDIT WILL NOT GIVE RISE TO ANY
CLAIM OTHER THAN AGAINST THE BANK.
(b) The second paragraph of the text of the Form of Series B Note,
beginning on page A-2 thereof, is amended by deleting the first sentence thereof
and replacing it with the following:
This Series B Note is one of an issue not to exceed
$10,000,000 Hanover Direct, Inc. Flexible Term Notes, Series B
(the "Series B Notes"), issued pursuant to a Series B Note
Agreement dated as of April 27, 1995 (the "Series B Note
Agreement"), as amended by the First Supplemental Series B
Note Agreement dated December 29, 1995 and the Second
Supplemental Note Agreement dated December 18, 1996 between
the Borrower and Norwest Bank Minnesota, N.A., as trustee (in
such capacity, the "Trustee") and Paying Agent, for the
purpose of refinancing and/or financing certain construction,
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refurbishment and related costs of an approximately 530,000
square foot distribution facility of the Borrower located in
Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower located in San Francisco,
California. Pursuant to the Series B Note Agreement, the
Borrower has caused Swiss Bank Corporation, New York Branch
(the "Bank") to issue its irrevocable Series B Letter of
Credit dated the Date of Issuance (as hereinafter defined and
as set forth above) of the Series B Notes (the "Series B
Letter of Credit") in favor of the Trustee, in an amount
sufficient to pay the Series B Facility Amount and unpaid
interest on or Purchase Price of the Series B Notes, but not
to exceed $9,638,541, pursuant to a Reimbursement Agreement
dated as of December 18, 1996 (the "Reimbursement Agreement")
by and among the Borrower and the Bank, which Series B Letter
of Credit initially expires (subject to extension or earlier
termination as provided in the Reimbursement Agreement and the
Series B Note Agreement) on February 18, 1998. Substitute
letters of credit may be delivered in accordance with the
Series B Note Agreement.
(c) The seventh paragraph of the text of the Form of Series B
Note, beginning on page A-4 thereof, is amended by deleting the third sentence
thereof in its entirety and replacing it with the following:
Subject to the provisions of Section 7.09 of the Series B Note
Agreement relating to the Bank as holder of the Series B
Notes, the Borrower, the Trustee and the Paying Agent will
recognize the Securities Depository Nominee, as hereinafter
defined, while the registered owner of the Series B Notes so
held, as the owner of the Series B Notes for all purposes,
including (i) payments of principal and Purchase Price of, and
interest on, the Series B Notes, (ii) notices and (iii)
voting, subject to certain qualifications as stated in the
Series B Note Agreement.
(d) Section 1 of the Form of Series B Note, beginning on page A-5
thereof, is amended by deleting the following definition:
"BANK" means, individually and collectively, the Lender and
the L/C Issuer.
(e) Subsection (f) of Section 3 of the Form of Series B Note,
beginning on page A-9 thereof, is amended by deleting the reference to the
"Lender" in the third line thereof and replacing it with a reference to the
"Bank."
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(f) Subsection (a) of Section 4 of the Form of Series B Note,
beginning on page A-10 thereof, is amended by deleting the reference to the
"Lender" in the fourth line of the last paragraph thereof and replacing it with
a reference to the "Bank."
(g) Section 7 of the Form of Series B Note, beginning on page A-13
thereof, is amended by deleting the second sentence of the first paragraph
thereof in its entirety and replacing them with the following:
The Series B Note Agreement directs the Trustee to declare an
acceleration upon written notice by the Bank of the occurrence
and continuance of an event of default under the Reimbursement
Agreement and upon the occurrence of certain other Events of
Default under the Series B Note Agreement. The Trustee has the
right to accelerate the entire unpaid principal of and
interest on the Series B Notes in certain events only with the
Bank's consent, all as provided in more detail in Article VII
of the Series B Note Agreement to which reference is hereby
made.
SECTION 33. DELETION OF EXHIBIT C TO SERIES B NOTE AGREEMENT. The
Series B Note Agreement is amended by deleting Exhibit C thereto.
SECTION 34. EFFECT OF SECOND SUPPLEMENTAL SERIES B NOTE AGREEMENT.
Except as modified hereby, all of the terms and provisions of the Series B Note
Agreement shall remain in full force and effect.
SECTION 35. GOVERNING LAW. This Second Supplemental Series B Note
Agreement and the Series B Note Agreement, as amended hereby, shall be deemed to
be contracts made under, and for all purposes shall be construed in accordance
with, the laws of the State of New York.
SECTION 36. SEVERABILITY. If any provision of this Second Supplemental
Series B Note Agreement shall be determined to be unenforceable by a court of
law, that shall not affect any other provision of this Second Supplemental
Series B Note Agreement.
SECTION 38. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will be an original and all of which together will
constitute the same instrument.
[Signatures on following page.]
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Series B Note Agreement to be duly executed as of the day and year
first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
--------------------------------
Name: Edward J. O'Brien
------------------------------
Title: Senior Vice President
-----------------------------
[CORPORATE SEAL]
NORWEST BANK MINNESOTA, N.A.
as Trustee and Paying Agent
By: /s/ Marianna C. Sterson
--------------------------------
Name: Marianna C. Sterson
------------------------------
Title: Corporate Trust Officer
-----------------------------
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Exhibit 10.62
FIRST AMENDMENT TO SERIES A NOTE
This FIRST AMENDMENT TO SERIES A NOTE dated as of December 29, 1995, is
made by HANOVER DIRECT, INC., a Delaware corporation (the "Borrower"), with the
consent of Norwest Bank Minnesota, N.A., as trustee and paying agent (the
"Trustee" or the "Paying Agent", as applicable);
W I T N E S S E T H:
WHEREAS, the Borrower and the Trustee entered into the Series
A Note Agreement dated as of November 9, 1994, as amended pursuant to that
certain First Supplemental Series A Note Agreement dated as of December 29, 1995
between the Borrower and the Trustee (as further amended, restated, supplemented
or otherwise modified from time to time in accordance with its terms, the
"Series A Note Agreement") pursuant to which the Borrower issued and sold its
interest bearing Flexible Term Notes, Series A (the "Series A Notes") in the
aggregate principal amount of $10,000,000 and in the form of Series A Note R-1,
registered in the name of Cede & Co. (as defined in the Series A Note Agreement)
and deposited with the Paying Agent ("Series A Note R-1"); and
WHEREAS, the Borrower has this day delivered to the Trustee a
Substitute Series A Letter of Credit in substitution for the Series A Letter of
Credit (each as defined in the Series A Note Agreement); and
WHEREAS, in order to more fully evidence the delivery of the Substitute
Series A of Letter of Credit referenced above, the Borrower and the Trustee
desire to amend Series A Note R-1, subject to the terms and conditions set forth
herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this First
Amendment to Series A Note and not otherwise herein defined shall have the
meaning ascribed to them in the Series A Note Agreement.
SECTION 2. AMENDMENTS TO SERIES A NOTE R-1. Series A Note R-1 is hereby
amended as follows:
(a) The second boldface paragraph on the first page of Series A Note
R-1 (prior to the text thereof) is hereby deleted in its entirety and replaced
with the following:
PAYMENTS OF PRINCIPAL AND PURCHASE PRICE OF AND
INTEREST ON THIS SERIES A NOTE WILL BE MADE FROM
DRAWINGS UNDER THE SERIES A LETTER OF CREDIT
<PAGE> 2
(HEREINAFTER DEFINED) IF REMARKETING PROCEEDS ARE NOT
AVAILABLE OR IF AN EVENT OF DEFAULT HAS OCCURRED. ALTHOUGH THE
SERIES A LETTER OF CREDIT IS A BINDING OBLIGATION OF
CORESTATES BANK, N.A. (THE "L/C ISSUER"), THIS SERIES A NOTE
IS NOT A DEPOSIT OR OBLIGATION OF CORESTATES FINANCIAL CORP OR
ANY OF ITS AFFILIATES, INCLUDING THE L/C ISSUER AND CONGRESS
FINANCIAL CORPORATION, NOR IS THIS SERIES A NOTE A DEPOSIT OR
OBLIGATION OF NATIONSBANK CORPORATION OR ANY OF ITS AFFILIATED
BANKS, INCLUDING NATIONSBANK, N.A., AND THIS SERIES A NOTE IS
NOT GUARANTEED BY ANY OF THESE ENTITIES. THIS SERIES A NOTE IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION AND
IS SUBJECT TO CERTAIN INVESTMENT RISKS INCLUDING POSSIBLE LOSS
OF THE PRINCIPAL AMOUNT INVESTED.
(b) The second paragraph of the text of Series A Note R-1, beginning on
page 2 thereof, is amended by deleting the first two sentences thereof and
replacing them with the following:
This Series A Note is one of an issue not to exceed
$10,000,000 Hanover Direct, Inc. Flexible Term Notes, Series A
(the "Series A Notes"), issued pursuant to a Series A Note
Agreement dated as of November 9, 1994, between the Borrower,
and Norwest Bank Minnesota, N.A., as trustee (in such
capacity, the "Trustee") and Paying Agent, as amended by that
certain First Supplemental Series A Note Agreement dated as of
December 29, 1995 between the Borrower and the Trustee (as
further amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms, the "Series A
Note Agreement"), for the purpose of refinancing and/or
financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution
facility owned and used by certain subsidiaries of the
Borrower located in Roanoke, Virginia and a new retail store
of Gump's Corp., a subsidiary of the Borrower located in San
Francisco, California. Pursuant to the Series A Note
Agreement, the Borrower has arranged, through a credit
facility established with Lender for certain of Borrower's
subsidiaries, and as guarantor of such financing arrangements
with Lender, for L/C Issuer to issue for the account of such
subsidiaries its irrevocable Series A Letter of Credit dated
December 29, 1995 (the "Series A Letter of Credit") in favor
of the Trustee, in an amount sufficient to pay the Series A
Facility Amount and unpaid interest on or Purchase Price of
the Series A Notes, but not to exceed $10,145,833, pursuant to
(a) the Application for Irrevocable Standby Letter of Credit
dated as of December 22, 1995 executed and delivered to the
L/C Issuer by the Account Parties (as defined in the Series A
Note Agreement) and the Lender requesting the issuance by the
L/C Issuer of the Series A Letter of Credit (the
"Application"), (b) the Loan and Security Agreement dated
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as of November 14, 1995 (the "Loan Agreement"), by and among
the Account Parties and certain other subsidiaries of the
Borrower, and the Lender, acknowledged and agreed to by the
Borrower and certain other subsidiaries of the Borrower,
pursuant to which, among other things, the Lender has executed
the Application pursuant to which the Series A Letter of
Credit is issued by the L/C Issuer and delivered to the
Trustee, and any and all modifications, alterations,
amendments and supplements thereto, (c) the other "Financing
Agreements" as defined in the Loan Agreement and (d) any
similar agreements between or among the Account Parties, the
Borrower and the issuer of a Substitute Series A Letter of
Credit or lender providing credit support to such issuer
(individually and collectively, the "Reimbursement
Agreement").
(c) The seventh paragraph of the text of Series A Note R-1, beginning
on page 4 thereof, is amended by deleting the third sentence thereof in its
entirety and replacing it with the following:
The Borrower, the Trustee and the Paying Agent will recognize
the Securities Depository Nominee, as hereinafter defined,
while the registered owner of the Series A Notes so held, as
the owner of the Series A Notes for all purposes, including
(i) payments of principal and Purchase Price of, and interest
on, the Series A Notes, (ii) notices and (iii) voting.
(d) Section 1 of Series A Note R-1, beginning on page 5 thereof, is
amended by adding the following definition:
"BANK" means, individually and collectively, the Lender and
the L/C Issuer.
(e) Subsection (f) of Section 3 of Series A Note R-1, beginning on page
9 thereof, is amended by deleting the reference to the "Bank" in the third line
thereof and replacing it with a reference to the "Lender."
(f) Subsection (a) of Section 4 of Series A Note R-1, beginning on page
10 thereof, is amended by deleting the reference to the "Bank" in the fourth
line of the last paragraph thereof and replacing it with a reference to the
"Lender."
(g) Section 7 of Series A Note R-1, beginning on page 13 thereof, is
amended by deleting the second and third sentences of the first paragraph
thereof in their entirety and replacing them with the following:
The Series A Note Agreement directs the Trustee to declare an
acceleration upon written notice by the Lender of the
occurrence and continuance of an event of default under the
Reimbursement Agreement and upon the occurrence of certain
other Events of Default under the Series A Note Agreement.
SECTION 3. EFFECT OF FIRST AMENDMENT TO SERIES A NOTE; NO NOVATION.
Except as modified hereby, all of the terms and provisions of Series A Note R-1
shall remain in full force
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and effect. This First Amendment to Series A Note amends Series A Note R-1 and
shall not be construed to constitute a novation thereof in any manner
whatsoever.
SECTION 4. GOVERNING LAW. This First Amendment to Series A Note and
Series A Note R-1, as amended hereby, shall be deemed to be contracts made
under, and for all purposes shall be construed in accordance with, the laws of
the State of New York.
SECTION 5. SEVERABILITY. If any provision of this First Amendment to
Series A Note shall be determined to be unenforceable by a court of law, that
shall not affect any other provision of this First Amendment to Series A Note.
[Signatures on following page]
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IN WITNESS WHEREOF, the Borrower has caused this First Amendment to
Series A Note to be duly executed as of the day and year first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
_______________________________
Name: Edward J. O'Brien
_____________________________
Title: Executive Vice President
____________________________
& Treasurer
____________________________
[CORPORATE SEAL]
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CONSENT TO FIRST AMENDMENT TO SERIES A NOTE
Norwest Bank Minnesota, N.A., as Paying Agent, hereby consents to the
amendments to Series A Note R-1 provided for herein.
NORWEST BANK MINNESOTA, N.A.,
as Trustee and Paying Agent
By: _______________________________
Name: _____________________________
Title: ____________________________
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<PAGE> 1
THIS SERIES B NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE REGULATORY
AUTHORITY UNDER ANY STATE SECURITIES LAWS AND THEREFORE CANNOT BE RESOLD UNLESS
IT IS REGISTERED UNDER SUCH ACT OR APPLICABLE LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
PAYMENTS OF PRINCIPAL AND PURCHASE PRICE OF AND INTEREST ON THIS NOTE WILL BE
MADE FROM DRAWINGS UNDER THE LETTER OF CREDIT ISSUED BY NATIONSBANK, N.A.
(CAROLINAS) (THE "BANK") IF REMARKETING PROCEEDS ARE NOT AVAILABLE OR IF AN
EVENT OF DEFAULT HAS OCCURRED. ALTHOUGH THE LETTER OF CREDIT IS A BINDING
OBLIGATION OF THE BANK, THIS NOTE IS NOT A DEPOSIT OR OBLIGATION OF NATIONSBANK
CORPORATION OR ANY OF ITS AFFILIATED BANKS AND IS NOT GUARANTEED BY ANY OF THESE
ENTITIES. THIS NOTE IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
AND IS SUBJECT TO CERTAIN INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
REGISTERED REGISTERED
No. R-1 $10,000,000.00
HANOVER DIRECT, INC.
FLEXIBLE TERM NOTES,
SERIES B
INTEREST RATE MATURITY DATE DATE OF ISSUANCE
As Described October 1, 2009 April 27, 1995
REGISTERED OWNER: Cede & Co.
PRINCIPAL AMOUNT: Ten Million Dollars ($10,000,000.00)
Hanover Direct, Inc., a Delaware corporation (the "Borrower"), for
value received, hereby promises to pay, solely from the sources and in the
manner hereinafter provided, to the registered owner, or registered assigns or
legal representative, upon presentation and surrender hereof at the principal
corporate trust office of Norwest Bank Minnesota, N.A., or its successor (in
such capacity, the "Paying Agent"), or by wire transfer, as provided in the
Series B Note Agreement, as hereinafter defined, the principal sum set forth
above on the Maturity Date set forth above, subject to the prior mandatory or
optional redemption of this Series B Note as hereinafter provided, and to pay
solely from such source interest hereon at the Interest Rate, as hereinafter
defined, payable in arrears on the Interest Payment Date, as hereinafter
defined, until payment in full and, to the extent permitted by law, interest on
overdue installments of such interest, from the Interest Payment Date applicable
to this Series B Note next preceding the date on which this Series B Note is
authenticated, unless this Series B Note is (a) authenticated before the first
Interest Payment Date following the initial delivery
<PAGE> 2
of the Series B Notes issued herein, in which case it shall bear interest from
the date of such initial delivery or (b) authenticated upon an Interest Payment
Date, in which case it shall bear interest from such Interest Payment Date
(unless interest on this Series B Note is in default at the time of
authentication, in which case this Series B Note shall bear interest from the
last date to which interest has been paid). Except as otherwise provided in the
Series B Note Agreement, interest hereon shall be paid to the person in whose
name this Series B Note is registered on the register of the Paying Agent at the
close of business on the Record Date next preceding each Interest Payment Date,
by check or draft mailed to such person at his address as it appears on the
register maintained by the Paying Agent, or by wire transfer for holders of an
aggregate principal amount of at least $500,000, at the request of such holders,
as provided in the Series B Note Agreement. Principal and Purchase Price, as
hereinafter defined, of and interest on this Series B Note are payable in lawful
currency of the United States of America. If any payment hereon is due on a day
which is not a Business Day, as hereinafter defined, payment shall be made on
the next succeeding Business Day with the same force and effect as if made on
the day such payment was due and, in the case of such payment, no interest shall
accrue for the intervening period.
This Series B Note is one of an issue not to exceed $10,000,000 Hanover
Direct, Inc. Flexible Term Notes, Series B (the "Series B Notes"), issued
pursuant to a Series B Note Agreement dated as of April 27, 1995 (the "Series B
Note Agreement"), between the Borrower and Norwest Bank Minnesota, N.A., as
trustee (in such capacity, the "Trustee") and Paying Agent, for the purpose of
refinancing and/or financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution facility of the
Borrower located in Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower located in San Francisco, California. Pursuant to the
Series B Note Agreement, the Borrower has caused NationsBank, N.A. (Carolinas)
(the "Bank") to issue its irrevocable Series B Letter of Credit dated the Date
of Issuance (as hereinafter defined and as set forth above) of the Series B
Notes (the "Series B Letter of Credit") in favor of the Trustee, in an amount
sufficient to pay the Series B Facility Amount and unpaid interest on or
Purchase Price of the Series B Notes, but not to exceed $10,145,833, pursuant to
a Credit Facilities and Reimbursement Agreement dated as of October 12, 1994
(the "Reimbursement Agreement") by and among the Borrower, the financial lenders
listed on the signature pages of the Reimbursement Agreement, including the
Bank, and the Bank, as agent, which Series B Letter of Credit initially expires
(subject to extension or earlier termination as provided in the Reimbursement
Agreement and the Series B Note Agreement) on April 27, 1998. Substitute letters
of credit may be delivered in accordance with the Series B Note Agreement. The
Trustee is authorized and directed pursuant to the Series B Note Agreement to
make timely draws under the Series B Letter of Credit in accordance with the
terms thereof, to the extent necessary to make when due the payments of
principal of (whether on the Maturity Date referenced above, by acceleration, or
by call for redemption), the Purchase Price of and interest on the Series B
Notes, except as otherwise provided in the Series B Note Agreement and the
Series B Letter of Credit. Reference is hereby made to the Series B Note
Agreement, the Series B Letter of Credit, the Reimbursement Agreement and to all
amendments and supplements thereto for a description of the provisions, among
others, with
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respect to the nature and extent of the security, the default provisions, the
rights, duties and obligations of the Borrower and the Trustee and the rights of
the holders of the Series B Notes and the terms upon which the Series B Notes
are issued and secured.
The Series B Notes are issuable in registered form without coupons in
denominations of $100,000 or any integral multiple of $100,000 in excess thereof
(the "Authorized Denominations"). This Series B Note, upon surrender hereof at
the principal corporate trust office of the Paying Agent with a written
instrument of transfer satisfactory to the Paying Agent duly endorsed for
transfer or accompanied by an assignment duly executed by the holder hereof or
his attorney duly authorized in writing and, in either case, with an appropriate
guarantee of signature conforming to the requirements of the assignment attached
hereto, may, at the option of the holder hereof, be exchanged for Series B Notes
of the same aggregate principal amount and tenor as the Series B Notes being
exchanged and of any Authorized Denomination. This Series B Note is transferable
as provided in the Series B Note Agreement, subject to certain limitations
therein contained, only upon the register of the Paying Agent, and only upon
surrender of this Series B Note for transfer to the Paying Agent duly endorsed
for transfer or accompanied by a written instrument of transfer (in
substantially the form of the assignment attached hereto) duly executed by the
holder hereof or his duly authorized attorney. Thereupon, one or more new Series
B Notes of any Authorized Denomination or Authorized Denominations and in the
same aggregate principal amount and tenor as the Series B Note surrendered will
be issued to the designated transferee or transferees.
The person in whose name this Series B Note is registered shall be
deemed and regarded as the absolute owner hereof for any purpose, as provided in
and as qualified by the Series B Note Agreement.
The Paying Agent or NationsBank, N.A. (Carolinas) (formerly NationsBank
of North Carolina, N.A.), as Remarketing Agent (the "Remarketing Agent"), may
make appropriate arrangements for some or all of the Series B Notes to be issued
or held by means of a book-entry system administered by a Securities Depository,
as hereinafter defined, with no physical distribution of Series B Notes made to
the public (other than those Series B Notes, if any, not held under such
book-entry system).
Initially, all of the Series B Notes will be held by means of a
book-entry system administered by the Securities Depository. One Series B Note
certificate in registered form will be issued for the Series B Notes in the
aggregate principal amount of $10,000,000, and will be registered in the name of
the Securities Depository Nominee and will be deposited with the Paying Agent.
Thereafter, in the event that Series B Notes are issued to the Beneficial Owners
thereof in certificated (physical) form (and in each and every case thereafter
in which a change in the principal amount of Series B Notes held pursuant to a
book-entry system is made), the Paying Agent will take all actions necessary to
comply with the Balance Certificate Agreement dated as of the date hereof
between Norwest Bank Minnesota, N.A., as transfer agent, and the Securities
Depository, which agreement governs
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the mechanisms for the registration of transfer of Series B Note certificates
registered in the name of the Securities Depository Nominee.
With respect to any Series B Notes that are held by means of a
book-entry system, such book-entry system will evidence beneficial ownership of
the Series B Notes so held in Authorized Denominations (or, as applicable,
positions held by the Participants, beneficial ownership being evidenced in the
records of such Participants). Registration and transfers of ownership shall be
effected on the records of the Securities Depository and the Participants, as
applicable, pursuant to rules and procedures established by the Securities
Depository and the Participants. Subject to the provisions of Section 7.09 of
the Series B Note Agreement relating to the Bank as holder of the Series B
Notes, the Borrower, the Trustee and the Paying Agent will recognize the
Securities Depository Nominee, as hereinafter defined, while the registered
owner of the Series B Notes so held, as the owner of the Series B Notes for all
purposes, including (i) payments of principal and Purchase Price of, and
interest on, the Series B Notes, (ii) notices and (iii) voting, subject to
certain qualifications as stated in the Series B Note Agreement. Transfer of
principal, interest and Purchase Price payments to beneficial owners of the
Series B Notes so held will be the responsibility of the Securities Depository
and the Participants. The Borrower, the Trustee, the Bank and the Paying Agent
will not be responsible or liable for such transfers of payments or for
maintaining, supervising or reviewing the records maintained by the Securities
Depository, the Securities Depository Nominee or the Participants.
While the Securities Depository Nominee is the owner of the Series B
Notes so held, notwithstanding the provision hereinabove contained, payments of
principal and Purchase Price of and interest on such Series B Notes shall be
made in accordance with the Letter of Representations dated as of April 27, 1995
among the Borrower, the Trustee, the Remarketing Agent and Paying Agent and
received and accepted by the Securities Depository.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE AND TRANSFER OF OWNERSHIP IS
MAINTAINED WITH RESPECT TO THIS SERIES B NOTE IN ACCORDANCE WITH THE TERMS OF
THE SERIES B NOTE AGREEMENT, (1) THE PROVISIONS OF THIS SERIES B NOTE RELATING
TO THE DELIVERY OF PHYSICAL SERIES B NOTES SHALL BE DEEMED INAPPLICABLE OR BE
OTHERWISE SO CONSTRUED WITH REGARD TO THIS SERIES B NOTE AS TO GIVE FULL EFFECT
TO SUCH BOOK-ENTRY SYSTEM AND (2) THE PROVISIONS OF THIS SERIES B NOTE RELATING
TO ISSUANCE, PAYMENTS OF PRINCIPAL, PURCHASE PRICE AND INTEREST, AND
ESTABLISHMENT OF INTEREST RATES AND INTEREST PERIODS WITH RESPECT TO THE SERIES
B NOTES SHALL BE APPLICABLE TO BENEFICIAL OWNERSHIP INTERESTS IN THE SERIES B
NOTES IN AUTHORIZED DENOMINATIONS TO THE SAME EXTENT AS SUCH PROVISIONS ARE
APPLICABLE TO REGISTERED OWNERSHIP INTERESTS IN THE SERIES B NOTES.
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In the event that a book-entry system of evidence and transfer of
ownership of the Series B Notes is discontinued pursuant to the provisions of
the Series B Note Agreement, the Series B Notes shall be delivered solely in
registered form without coupons in the Authorized Denominations, shall be
lettered "R" and numbered separately from 1 upward, and shall be payable,
executed, authenticated, registered, exchanged and cancelled pursuant to the
provisions hereof and of the Series B Note Agreement.
All references herein to time shall be Charlotte, North Carolina time
unless otherwise expressly stated herein.
Except as otherwise specifically provided herein, all capitalized words
and terms shall have the same meaning when used herein as set forth in the
Series B Note Agreement.
1. CERTAIN DEFINITIONS.
"BENEFICIAL OWNER" or "BENEFICIAL OWNER" means the holder of
the beneficial ownership interest in each Series B Note as evidenced on (i) if
such Series B Note is held pursuant to a book-entry system, the books maintained
by the Securities Depository (and, as applicable, its participants or persons
acting through such participants), as more fully described in the Letter of
Representations, or (ii) if such Series B Note is not held pursuant to a
book-entry system, the register maintained by the Paying Agent.
"BUSINESS DAY" means any day other than (a) Saturday or
Sunday, (b) a day on which commercial banks in New York, New York, or in the
city or cities in which the corporate trust office of the Trustee or the Paying
Agent, the primary office of the Remarketing Agent or the Placement Agent or the
paying office of the Bank are authorized by law or executive order to close or
(c) a day on which the New York Stock Exchange is closed. For purposes of this
definition, "paying office of the Bank" means the Bank office responsible for
making payments under any Series B Letter of Credit.
"DATE OF ISSUANCE" means the date upon which the Series B
Notes are issued, authenticated and delivered in accordance with the terms and
conditions of Section 2.06 of the Series B Note Agreement.
"INTEREST PAYMENT DATE" means the first day after the last day
of each Interest Period.
"INTEREST PERIOD" means, with respect to any Series B Note,
each period of between one (1) and one hundred eighty (180) days established
from time to time by the Remarketing Agent in accordance with the Interest
Period determination method described in Section 2.02(a) of the Series B Note
Agreement.
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"INTEREST RATE" means, with respect to any Series B Note, the
interest rate on such Series B Note determined from time to time by the
Remarketing Agent in accordance with the Interest Rate determination method
described in Section 2.02(a) of the Series B Note Agreement. In no event shall
the Interest Rate exceed the lesser of fifteen percent (15%) per annum or the
highest interest rate which may be borne by the Series B Notes under applicable
law.
"PARTICIPANTS" means securities brokers and dealers, banks,
trust companies and clearing corporations which have access to the Securities
Depository's system.
"PURCHASE DATE" means, with respect to any Series B Notes, the
date on which such Series B Notes are required to be purchased pursuant to the
terms and conditions of Section 3.07(a) of the Series B Note Agreement.
"PURCHASE PRICE" means an amount equal to 100% of the
principal amount of any Series B Note tendered or deemed tendered to the Trustee
for purchase pursuant to the terms and conditions of Section 3.07 of the Series
B Note Agreement, plus accrued and unpaid interest thereon to, but excluding,
the Purchase Date.
"RECORD DATE" means, with respect to each Interest Payment
Date, the Trustee's close of business on the Business Day next preceding such
Interest Payment Date.
"SECURITIES DEPOSITORY" means, initially, The Depository Trust
Company, or any successor or substitute securities depository selected by the
Borrower (with the consent of the Trustee and the Remarketing Agent), which
shall maintain a book-entry system in respect of the Series B Notes.
"SECURITIES DEPOSITORY NOMINEE" means, as to any Securities
Depository, such Securities Depository or the nominee of such Securities
Depository in whose name there shall be registered on the register maintained by
the Paying Agent the Series B Note certificate to be delivered to and
immobilized with the Paying Agent during continuation with such Securities
Depository of participation in its book-entry system, and shall initially be
Cede & Co., nominee of The Depository Trust Company.
2. INTEREST ON THE SERIES B NOTES.
The Series B Notes will bear interest at the Interest Rate
from the Date of Issuance until paid in full. Interest accrued on each Series B
Note shall be paid on the applicable Interest Payment Date therefor. The amount
of interest payable on any Interest Payment Date shall be computed on the basis
of the actual number of days elapsed over a year of 360 days. The initial
Interest Period and corresponding Interest Rate for each Series B Note will be
determined by the Remarketing Agent on the Date of Issuance. After the initial
determination of the Interest Period and corresponding Interest Rate, the
applicable Interest Period and corresponding Interest Rate shall be determined
by the Remarketing Agent
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at the time and in the manner specified in Section 2.02 of the Series B Note
Agreement. The Remarketing Agent's determination of the Interest Periods and
Interest Rates shall be conclusive and binding on the Noteholders, the Paying
Agent, the Remarketing Agent, the Borrower, the Bank and the Trustee. The
Remarketing Agent will notify the Paying Agent in writing (which may be in
telecopy form) or by telephone promptly confirmed in writing by 10:00 a.m. on
the first Business Day of each Interest Period with respect to any Series B
Note, of the identity of such Series B Note, the length of such Interest Period,
the Interest Rate therefor and the principal amount of such Series B Note, and,
upon the request of the Borrower or the Bank, the Paying Agent shall promptly
(but in no event later than the end of such Business Day) after its receipt of
such information, forward such information to the Borrower and the Bank. The
failure by the Remarketing Agent or the Paying Agent, as applicable, to give any
such notice shall not affect the change in the Interest Period and/or Interest
Rate.
The calculation of interest payable on the Series B Notes as
provided in this Agreement will be conclusive and binding on the Borrower, the
Bank, the Trustee, the Paying Agent, the Remarketing Agent and the Noteholders,
absent manifest error.
Neither the Remarketing Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Trustee, the
Paying Agent, the Bank or any Noteholder for any action taken or not taken by
the Remarketing Agent or any of its directors, officers, agents or employees in
connection with the determination of the Interest Period and Interest Rate for
each Series B Note pursuant to the Series B Note Agreement, in the absence of
its own negligence or willful misconduct.
3. REDEMPTION OF SERIES B NOTES.
(a) OPTIONAL REDEMPTION. The Series B Notes are subject to
redemption at the option of the Borrower, in whole or in part, at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest
thereon to, but excluding, the redemption date; provided that any such
redemption in part shall be in a minimum principal amount of $100,000.
(b) MANDATORY SINKING FUND REDEMPTION. The Series B Notes are
subject to mandatory sinking fund redemption prior to the Maturity Date, in
part, with the Series B Notes to be redeemed being selected pursuant to Section
3.03 of the Series B Note Agreement, at a redemption price equal to the
principal amount thereof, on October 1, or if any such date is not a Business
Day, on the next succeeding Business Day with the same force and effect, in the
years and in the principal amounts indicated below:
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<TABLE>
<CAPTION>
REDEMPTION DATE PRINCIPAL
(OCTOBER 1) AMOUNT
----------- ------
<S> <C>
1996 $500,000
1997 500,000
1998 500,000
1999 500,000
2000 800,000
2001 800,000
2002 800,000
2003 800,000
2004 800,000
2005 800,000
2006 800,000
2007 800,000
2008 800,000
2009 800,000
</TABLE>
(c) MANDATORY REDEMPTION ON EXPIRATION OR TERMINATION OF
SERIES B LETTER OF CREDIT WITHOUT EXTENSION OR PROVIDING A SUBSTITUTE SERIES B
LETTER OF CREDIT. The Series B Notes are subject to mandatory redemption in
whole on the fifth (5th) Business Day prior to the stated date of expiration or
termination of the Series B Letter of Credit, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest thereon to, but
excluding, the redemption date, unless by the twentieth (20th) day prior to such
redemption date the Borrower provides to the Trustee, and the Trustee has
accepted, (1) evidence that such Series B Letter of Credit has been extended or
(2) a Substitute Series B Letter of Credit to be effective on or prior to such
redemption date.
(d) REDEMPTION DATE. The redemption date for Series B Notes to
be redeemed as described in paragraph 3(a) above must be an Interest Payment
Date with respect to the Series B Notes being redeemed. The redemption date for
mandatory redemptions will be as specified in paragraph 3(b) or (c) above, as
the case may be, or determined by the Trustee or the Remarketing Agent
consistently with the provisions thereof and of the Series B Note Agreement.
(e) SELECTION OF SERIES B NOTES TO BE REDEEMED. Except as
otherwise provided herein or in Section 3.03 of the Series B Note Agreement, if
fewer than all the Series B Notes are to be redeemed, the Remarketing Agent will
select the Series B Notes to be redeemed by lot or such other method as it deems
in its sole discretion to be fair and appropriate and shall notify the Paying
Agent (which notice may be provided by telephone, immediately confirmed in
writing by legible facsimile transmission, registered or certified mail,
overnight express delivery, or other secure means) of the holders and
denominations of Series B Notes to be redeemed; provided, however, that in
selecting Series B Notes to be redeemed the Remarketing Agent shall (i) select
only Series B Notes not previously called for
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<PAGE> 9
redemption, (ii) select Bank Notes prior to any other Series B Notes, and (iii)
with respect to any mandatory sinking fund redemption as described in paragraph
3(b) above, select the Series B Notes to be redeemed on or before the sixtieth
(60th) day prior to the redemption date, and in making such selection take into
account the duration of the Interest Periods with respect to such Series B
Notes.
In the event the Remarketing Agent fails to notify the Paying
Agent of the Series B Notes to be redeemed on or before the ninth (9th) Business
Day prior to the redemption date, the Paying Agent shall proceed to select
Series B Notes for redemption from among the Outstanding Series B Notes in the
chronological order in which their Purchase Dates occur, beginning with the
earliest Purchase Date; provided, however, that in selecting Series B Notes to
be redeemed the Paying Agent shall (i) select only Series B Notes not previously
called for redemption and (ii) select Bank Notes prior to any other Series B
Notes. If fewer than all Series B Notes having the same Purchase Date (selected
for redemption as provided in the immediately preceding sentence) are to be
redeemed, the Paying Agent shall treat each owner of Series B Notes as the owner
of one Series B Note for purposes of selection for redemption, and shall select
Series B Notes for redemption by lot or such other method as it deems fair and
appropriate, (1) from among the holders of less than $1,000,000 in aggregate
principal amount, provided that if there are no such holders, or if, after
selection from among such holders such selection has not resulted in redemption
of a sufficient amount of Series B Notes, then (2) from among the holders of
$1,000,000 or more in aggregate principal amount of Series B Notes.
No portion of a Series B Note may be redeemed that would
result in a Series B Note which is smaller than the then permitted minimum
Authorized Denomination. For this purpose, the Remarketing Agent or the Paying
Agent will consider each Series B Note in a denomination larger than the minimum
denomination permitted by the Series B Notes at the time to be separate Series B
Notes each in the minimum denomination.
(f) NOTICE OF REDEMPTION. The Trustee will prepare and cause
the Paying Agent to send notice of each redemption to each Noteholder whose
Series B Notes are being redeemed, the Borrower, the Remarketing Agent and the
Bank by first-class mail at least seven (7) Business Days but not more than
sixty (60) (or twenty (20), in the case of a mandatory redemption pursuant to
paragraph 3(c) above) days before each redemption. The notice shall identify the
Series B Notes or portions thereof to be redeemed and will state: (i) the type
of redemption and the redemption date, (ii) the redemption price, (iii) that the
Series B Notes called for redemption must be surrendered to collect the
redemption price, (iv) the address of the Paying Agent at which the Series B
Notes must be surrendered, (v) that interest on the Series B Notes called for
redemption ceases to accrue on the redemption date, (vi) the CUSIP number of the
Series B Notes called for redemption and (vii) any condition to the redemption.
Failure by the Trustee or the Paying Agent to give any notice of redemption as
to any particular Series B Notes will not affect the validity of the call for
redemption of any Series B Notes in respect of which no such failure has
occurred. Any notice mailed as provided in the Series B Notes will be
conclusively presumed to have been given whether or
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<PAGE> 10
not actually received by any holder or beneficial owner.
(g) EFFECT OF REDEMPTION. On the date fixed for redemption,
notice having been given in the manner and under the conditions provided in the
Series B Note Agreement, the Series B Notes or portions thereof called for
redemption shall be due and payable at the redemption price provided therefor,
plus accrued interest to such date. On such redemption date, if moneys
sufficient to pay the redemption price of the Series B Notes to be redeemed,
plus accrued interest thereon to the date fixed for redemption, are held by the
Paying Agent, interest on the Series B Notes called for redemption shall cease
to accrue; such Series B Notes shall cease to be entitled to any benefits or
security under the Series B Note Agreement or to be deemed Outstanding; and the
holders and beneficial owners of such Series B Notes shall have no rights in
respect thereof except to receive payment of the redemption price thereof, plus
accrued interest to, but excluding, the date of redemption.
(h) SERIES B NOTES REDEEMED IN PART. Upon surrender of a
Series B Note redeemed in part, the Paying Agent will authenticate for the
holder a new Series B Note or Series B Notes equal in principal amount to the
unredeemed portion of the Series B Note surrendered.
4. PURCHASE OF SERIES B NOTES.
(a) MANDATORY PURCHASE OF SERIES B NOTES; NOTICE. Except as
provided in paragraph 4(c) below, Series B Notes are subject to mandatory
purchase at the Purchase Price:
(i) on each Interest Payment Date applicable to such
Series B Note; and
(ii) on the effective date of any Substitute Series B
Letter of Credit delivered in accordance with the terms and conditions of the
Series B Note Agreement, if, but only if, such Substitute Series B Letter of
Credit will result in a Credit Modification.
The Trustee will prepare and cause the Paying Agent to send
written notice of each mandatory purchase described in paragraph 4(a)(ii) above
(a "Notice of Mandatory Purchase") to each Noteholder whose Series B Notes are
being purchased, the Remarketing Agent, the Bank and the Borrower at least 15
days but not more than 60 days before the Purchase Date. No Notice of Mandatory
Purchase will be given to holders or beneficial owners of Series B Notes if the
mandatory purchase is being made as described in paragraph 4(a)(i) above.
(b) PAYMENT FOR PURCHASED SERIES B NOTES. The Purchase Price
of Series B Notes to be purchased on a Purchase Date shall be paid from
Remarketing Proceeds available to pay the Purchase Price of such Series B Notes
and, to the extent Remarketing Proceeds are not available to pay the Purchase
Price of such Series B Notes, from proceeds of
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a draw on the Series B Letter of Credit pursuant to the applicable provisions of
Section 5.02(a)(iv) of the Series B Note Agreement. To the extent that
sufficient moneys have been made available therefor to the Paying Agent or the
Remarketing Agent, as applicable, by 1:45 p.m. on the Purchase Date pursuant to
Sections 3.08 and 5.02 of the Series B Note Agreement, upon surrender to the
Paying Agent of Series B Notes called for mandatory purchase as provided in the
Series B Note Agreement, the Purchase Price therefor shall be paid in
immediately available funds by the Paying Agent's or the Remarketing Agent's, as
applicable, close of business on the Purchase Date. From and after the Purchase
Date or, if later, the date on which such moneys are made available to the
Paying Agent or the Remarketing Agent, as applicable, interest accruing on such
Series B Notes shall cease to be payable to the prior holder thereof, such
Series B Notes shall cease to be entitled to the benefits of the Series B Note
Agreement and to such extent the prior holder shall have recourse solely to the
funds held by the Paying Agent or the Remarketing Agent, as applicable, for the
purchase of such Series B Notes as provided in Section 4.03 of the Series B Note
Agreement. Notwithstanding any provision to the contrary herein or in the Series
B Note Agreement, for so long as the Series B Notes are held pursuant to a
book-entry system maintained by DTC, payments of Purchase Price with respect to
such Series B Notes shall be made pursuant to the rules and procedures
established by DTC and its Participants.
(c) LIMITATION ON TENDERS. The holders shall not be required
to tender any Series B Note for purchase on a Purchase Date if on such date,
following the occurrence of an Event of Default, the Trustee shall have declared
the principal of and interest on the Series B Notes immediately due and payable
pursuant to Section 7.02 of the Series B Note Agreement.
(d) In the event that any Series B Note purchased pursuant to
a mandatory purchase is not delivered by the holder thereof on the date such
Series B Note is purchased, the Borrower shall execute (if necessary) and the
Paying Agent will authenticate and deliver a new Series B Note of like aggregate
principal amount as the Series B Note purchased, the Series B Note purchased
shall no longer be deemed outstanding and the owner thereof shall be entitled to
receive only those funds held on deposit with respect thereto, and the new
Series B Note shall, for all purposes of the Series B Note Agreement, be deemed
to evidence the same debt as the Series B Note purchased and shall be
remarketed, delivered and registered in accordance with the terms of this Series
B Note and the Series B Note Agreement.
5. REMARKETING OF PURCHASED SERIES B NOTES.
(a) REMARKETING EFFORT. Except as otherwise provided in
Section 3.08(a) of the Series B Note Agreement, the Remarketing Agent will use
reasonable best efforts to remarket on the Purchase Date all Series B Notes
purchased in accordance with the terms of Section 3.07 of the Series B Note
Agreement and, to the extent such purchased Series B Notes are not remarketed on
the Purchase Date, thereafter will continue to use reasonable best efforts to
remarket such purchased Series B Notes, upon the terms and subject to the
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<PAGE> 12
conditions of the Remarketing Agreement.
(b) REMARKETING PROCEEDS. To the extent the Remarketing Agent
has remarketed Series B Notes and has received funds representing a payment for
such Series B Notes (the "Remarketing Proceeds") from the purchasers thereof,
the Remarketing Agent will promptly forward the Remarketing Proceeds by wire
transfer (or in such other manner as is acceptable to the Remarketing Agent) to
the holders tendering such Series B Notes for purchase (or, if required pursuant
to Section 3.08(b) of the Series B Note Agreement, to the Paying Agent). Except
as otherwise provided below with respect to Bank Notes, until such transfer, all
such Remarketing Proceeds shall be deposited in a separate, segregated account
of the Remarketing Agent (or, if transferred to the Paying Agent as provided in
the Series B Note Agreement, in a separate, segregated account of the Paying
Agent) for application in accordance with the applicable provisions of Section
3.08(b) of the Series B Note Agreement, and until so applied shall be held in
trust for the benefit of the holders tendering such Series B Notes for purchase.
Notwithstanding any provision to the contrary herein or in the Series B Note
Agreement, for so long as the Series B Notes are held pursuant to a book-entry
system maintained by DTC, payments of Remarketing Proceeds with respect to such
Series B Notes shall be made pursuant to the rules and procedures established by
DTC and its Participants.
(c) DELIVERY OF PURCHASED SERIES B NOTES. Series B Notes
purchased with Remarketing Proceeds (other than Bank Notes) shall be delivered
to the purchasers thereof upon receipt of payment therefor. Prior to such
delivery, the Paying Agent shall provide for registration of transfer to the
Holders, as provided in a written notice from the Remarketing Agent.
6. MONEYS TO BE HELD IN TRUST. All proceeds of a draw on the Series B
Letter of Credit received by the Trustee and all money that the Trustee or the
Paying Agent shall hold in, or shall have withdrawn from, the Series B Letter of
Credit Fund or shall have received from any other source and set aside for the
purpose of paying any of the Series B Notes, either on the Maturity Date set
forth above or by purchase (other than as provided in Section 3.08 of the Series
B Note Agreement regarding remarketing of Series B Notes) or call for redemption
or for the purpose of paying any interest on the Series B Notes, shall be held
in trust for the respective holders or beneficial owners of the Series B Notes.
Moneys received by the Remarketing Agent, the Paying Agent or the Trustee from
the sale of a Series B Note under Section 3.08 of the Series B Note Agreement
regarding remarketing of Series B Notes or from the purchase of any Series B
Note will be held segregated from other funds held by the Remarketing Agent, the
Paying Agent or the Trustee for the benefit of the Person from whom such Series
B Note was purchased and will not be invested while so held. Any money that is
so set aside and that remains unclaimed by the holders or beneficial owners for
a period of five (5) years after the date on which such Series B Notes have
become payable shall be remitted to the Borrower and thereafter the holders or
beneficial owners shall look only to the Borrower for payment and then only to
the extent of the amounts so received, without any interest thereon, and the
Trustee, the Remarketing Agent, the Paying Agent and the Bank shall have no
responsibility with respect to such money.
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7. DEFAULTS AND REMEDIES. Upon the occurrence of certain events, and on
the conditions, in the manner and with the effect set forth in Article VII of
the Series B Note Agreement, the principal of all Series B Notes then
outstanding under the Series B Note Agreement may become or may be declared due
and payable before the stated maturity thereof, together with interest accrued
thereon. The Series B Note Agreement directs the Trustee to declare an
acceleration upon notice by the Bank of the occurrence and continuance of an
event of default under the Reimbursement Agreement, and upon the occurrence of
certain other Events of Default under the Series B Note Agreement. The Trustee
has the right to accelerate the entire unpaid principal of and interest on the
Series B Notes in certain events only with the Bank's consent, all as provided
in more detail in Article VII of the Series B Note Agreement to which reference
is hereby made.
The owner of this Series B Note shall have no right to enforce the
provisions of the Series B Note Agreement or to institute action to enforce the
covenants therein, or to take any action with respect to any Event of Default
under the Series B Note Agreement, or to institute, appear in or defend any suit
or other proceeding with respect thereto, except as provided in the Series B
Note Agreement and except that any registered owner may institute action to
enforce the payment of the principal of or interest on his Series B Note.
8. MISCELLANEOUS. Modifications or alterations of the Series B Note
Agreement may be made only to the extent and in the circumstances permitted by
Article IX of the Series B Note Agreement.
Executed counterparts of the Series B Note Agreement are on file at the
principal corporate trust office of the Trustee. The holder of this Series B
Note, by acceptance hereof, consents to all of the terms and provisions of the
Series B Note Agreement.
It is hereby certified that all acts, conditions and things required to
happen, exist and be performed under the laws of the State of New York, and
under the Series B Note Agreement precedent to and in connection with the
issuance of this Series B Note have happened, exist and have been performed as
so required, and that the issuance, authentication and delivery of this Series B
Note have been duly authorized by the Borrower.
Unless the Certificate of Authentication hereto has been executed by
the Paying Agent by manual signature of one of its Responsible Officers, this
Series B Note shall not be entitled to any benefit under the Series B Note
Agreement, or be valid or obligatory for any purpose.
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<PAGE> 14
IN WITNESS WHEREOF, Hanover Direct, Inc. has caused this Series B Note
to be executed in its name and on its behalf by the manual or facsimile
signature of the President and Treasurer and attested by manual or facsimile
signature of the Secretary or Assistant Secretary and sealed with the corporate
seal of Hanover Direct, Inc., all as of the Date of Issuance set forth above.
HANOVER DIRECT, INC.
By:_____________________________
Name: Jack Rosenfeld
Title: President and CEO
ATTEST:
By: __________________________
Name: ________________________
Title: _______________________
[CORPORATE SEAL] By: ____________________________
Name: Edward J. O'Brien
Title: Senior Vice President and
Treasurer
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<PAGE> 15
CERTIFICATE OF AUTHENTICATION
This Series B Note is one of the Series B Notes issued under the
provisions of the within-mentioned Series B Note Agreement.
NORWEST BANK MINNESOTA, N.A.,
as Paying Agent
By: ______________________________
Responsible Officer
Dated: _________________
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ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________________________________________________________
(PLEASE PRINT OR TYPE THE NAME AND ADDRESS, INCLUDING THE ZIP CODE OF THE
TRANSFEREE, AND THE FEDERAL TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
the within Series B Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ___________________ Attorney to transfer the within
Series B Note on the books kept for registration and transfer thereof, with full
power of substitution in the premises.
Dated: _____________________
By: _____________________________________
NOTICE The signature of the
Registered Owner above must
correspond with the name of
the Registered Owner as it
appears on the registration
books maintained by the Paying
Agent.
Signature Guaranteed
By: ______________________________
NOTICE: Signature(s) must be guaranteed by a member firm of the New York Stock
Exchange or a commercial bank or trust company.
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<PAGE> 1
Exhibit 10.64
FIRST SUPPLEMENTAL SERIES B NOTE AGREEMENT
This FIRST SUPPLEMENTAL SERIES B NOTE AGREEMENT dated as of December
29, 1995, between HANOVER DIRECT, INC., a Delaware corporation (the "Borrower"),
and NORWEST BANK MINNESOTA, N.A., a national banking association organized under
the laws of the United States of America and having its principal office in
Minneapolis, Minnesota, as trustee and paying agent (the "Trustee" or the
"Paying Agent", as applicable);
W I T N E S S E T H:
WHEREAS, the Borrower and the Trustee entered into the Series
B Note Agreement dated as of April 27, 1995 (the "Series B Note Agreement")
pursuant to which the Borrower issued and sold its interest bearing Flexible
Term Notes, Series B (the "Series B Notes") in the aggregate principal amount of
$10,000,000; and
WHEREAS, the Borrower has this day delivered to the Trustee a
Substitute Series B Letter of Credit in substitution for the Series B Letter of
Credit (each as defined in the Series B Note Agreement); and
WHEREAS, in order to more fully evidence the delivery of the Substitute
Series B of Letter of Credit referenced above, the Borrower and the Trustee
desire to amend the Series B Note Agreement, subject to the terms and conditions
set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used in this First
Supplemental Series B Note Agreement and not otherwise herein defined shall have
the meaning ascribed to them in the Series B Note Agreement.
SECTION 2. AMENDMENT TO SECOND RECITAL OF THE SERIES B NOTE AGREEMENT.
The second recital of the Series B Note Agreement on page 1 thereof is hereby
amended by deleting the reference to the "Bank" in the third line thereof and
replacing it with a reference to the "L/C Issuer".
SECTION 3. AMENDMENTS TO SECTION 1.01 OF THE SERIES B NOTE AGREEMENT.
(a) The definition of "BANK" set forth in Section 1.01 of the Series B
Note Agreement is hereby deleted in its entirety and replaced with the
following:
"BANK" means, individually and collectively, the Lender and
the L/C Issuer.
(b) The definition of "BANK NOTES" set forth in Section 1.01 of the
Series B Note Agreement is hereby deleted in its entirety and replaced with the
following:
<PAGE> 2
"BANK NOTES" means any Series B Notes purchased from
proceeds from a draw under the Series B Letter of Credit and
pledged to the Lender under the Reimbursement Agreement, to
the extent provided therein, including, in the event a
book-entry system with respect to the Series B Notes is in
effect, any beneficial ownership interest therein; provided
that in the event that the L/C Issuer fails to honor a drawing
under the Series B Letter of Credit to fund such a purchase
and the Borrower purchases such Series B Notes with its own
funds, "Bank Notes" shall include such Series B Notes, except
that such Series B Notes shall not be pledged to the Lender
under the Reimbursement Agreement.
(c) The definition of "BUSINESS DAY" set forth in Section 1.01 of the
Series B Note Agreement is amended by deleting the last sentence thereof in its
entirety and replacing it with the following:
For purposes of this definition, "paying office of the Bank"
means the office of the L/C Issuer responsible for making
payments under any Series B Letter of Credit.
(d) The definition of "OPINION OF COUNSEL" set forth in Section 1.01 of
the Series B Note Agreement is hereby deleted in its entirety and replaced with
the following:
"OPINION OF COUNSEL" means a written opinion of
counsel who is reasonably acceptable to the Trustee, the
Placement Agent and Remarketing Agent. The counsel may be an
employee of or counsel to the Borrower, the Placement Agent,
the Remarketing Agent, the L/C Issuer or the Trustee.
(e) The definition of "REIMBURSEMENT AGREEMENT" set forth in Section
1.01 of the Series B Note Agreement is hereby deleted in its entirety and
replaced with the following:
"REIMBURSEMENT AGREEMENT" means, individually and
collectively, (a) the Application for Irrevocable Standby
Letter of Credit dated as of December 22, 1995 executed and
delivered to the L/C Issuer by the Account Parties and the
Lender requesting the issuance by the L/C Issuer of the Series
B Letter of Credit (the "Application"), (b) the Loan and
Security Agreement dated as of November 14, 1995 (the "Loan
Agreement"), by and among the Account Parties and certain
other subsidiaries of the Borrower, and the Lender,
acknowledged and agreed to by the Borrower and certain other
subsidiaries of the Borrower, pursuant to which, among other
things, the Lender has executed the Application pursuant to
which the Series B Letter of Credit is issued by the L/C
Issuer and delivered to the Trustee, and any and all
modifications, alterations, amendments and supplements
thereto, (c) the other "Financing Agreements" as defined in
the Loan Agreement and (d) any similar agreements between or
among the Account Parties, the Borrower and the issuer of a
Substitute Series B Letter of Credit or lender providing
credit support to such issuer.
(f) The definition of "SERIES B LETTER OF CREDIT" set forth in Section
1.01 of the Series B Note Agreement is amended by (a) deleting the words "State
of North Carolina" in the
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<PAGE> 3
third line thereof and replacing them with "Commonwealth of Pennsylvania" and
(b) by deleting the word "Bank" in the fourteenth line thereof and replacing it
with "L/C Issuer".
(g) Section 1.01 of the Series B Note Agreement is hereby amended by
adding the following new definitions thereto:
"ACCOUNT PARTIES" means Hanover Direct Pennsylvania,
Inc., Hanover Direct Virginia Inc. and Gump's Corp., and their
successors and assigns.
"L/C ISSUER" means the issuer of the Series B Letter
of Credit, initially CoreStates Bank, N.A., and upon the
issuance and delivery of a Substitute Series B Letter of
Credit, shall mean the issuer of such Substitute Series B
Letter of Credit.
"LENDER" means Congress Financial Corporation, its
successors and assigns, or other lender that refinances the
obligations to Lender under the Reimbursement Agreement and
replaces all credit support given by Lender to the L/C Issuer
in respect of the Series B Letter of Credit or any Substitute
Series B Letter of Credit.
SECTION 4. AMENDMENT TO SECTION 1.02 OF THE SERIES B NOTE AGREEMENT.
Subsection (g) of Section 1.02 of the Series B Note Agreement is hereby deleted
in its entirety and replaced with the following:
(g) All references herein to time shall be Eastern Time unless
otherwise expressly stated.
SECTION 5. AMENDMENT TO SECTION 2.07 OF THE SERIES B NOTE AGREEMENT.
Subsection (b) of Section 2.07 of the Series B Note Agreement is amended by
deleting the third sentence thereof in its entirety and replacing it with the
following:
The Borrower, the Trustee and the Paying Agent will recognize
the Securities Depository Nominee, while the registered owner
of the Series B Notes so held, as the owner of the Series B
Notes for all purposes, including (i) payments of principal
and Purchase Price of, and interest on, the Series B Notes,
(ii) notices and (iii) voting.
SECTION 6. AMENDMENT TO SECTION 2.08 OF THE SERIES B NOTE AGREEMENT.
Subsection (a) of Section 2.08 of the Series B Note Agreement is amended by
deleting the reference to the "Bank" in the sixth line thereof and replacing it
with a reference to the "Lender".
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<PAGE> 4
SECTION 7. AMENDMENTS TO SECTION 3.01 OF THE SERIES B NOTE AGREEMENT.
(a) Subsection (a)(ii) of Section 3.01 of the Series B Note Agreement
is amended by deleting the reference to the "Bank" in the second line thereof
and replacing it with a reference to the "Lender".
(b) Subsection (c) of Section 3.01 of the Series B Note Agreement is
amended by deleting the reference to the "Bank" in the eighth line thereof and
replacing it with a reference to the "L/C Issuer".
SECTION 8. AMENDMENT TO SECTION 3.04 OF THE SERIES B NOTE AGREEMENT.
Section 3.04 of the Series B Note Agreement is amended by deleting the reference
to the "Bank" in the third line thereof and replacing it with a reference to the
"Lender".
SECTION 9. AMENDMENT TO SECTION 3.08 OF THE SERIES B NOTE AGREEMENT.
Subsection (d)(ii) of Section 3.08 of the Series B Note Agreement is hereby
deleted in its entirety and replaced with the following:
(ii) All Bank Notes (other than Bank Notes purchased
with the Borrower's own funds and not with the proceeds of a
draw on the Series B Letter of Credit) will be registered in
the name of the Trustee, and, to the extent so provided under
the Reimbursement Agreement, held by the Trustee as agent and
bailee of the Lender and subject to the pledge by the Borrower
to the Lender and shall be held by the Trustee pursuant to
this Agreement and the Reimbursement Agreement. Upon receipt
of Remarketing Proceeds in respect of Bank Notes, the
Remarketing Agent shall notify the Lender, the Trustee and the
Borrower of such receipt, and the Remarketing Agent shall
execute and deliver to the L/C Issuer, a certificate in the
form of Exhibit C attached hereto requesting reinstatement of
the Series B Letter of Credit as provided therein. Thereafter,
upon the Trustee's receipt of notice from the L/C Issuer, as
provided in the Series B Letter of Credit, that the Available
Amount of the Series B Letter of Credit has been automatically
reinstated as provided therein, the Trustee shall so notify
the Remarketing Agent and the Lender, whereupon the
Remarketing Agent will remit such Remarketing Proceeds as
directed by the Lender. The Trustee shall not release the Bank
Notes until it receives from the L/C Issuer the notice
referred to in the preceding sentence. The Remarketing Agent
shall hold such Remarketing Proceeds in a segregated account
of the Remarketing Agent for the benefit of the Borrower,
subject to the security interest of the Lender therein
pursuant to the Reimbursement Agreement, except that if the
Series B Letter of Credit is not reinstated by an amount equal
to the Remarketing Proceeds, then the Remarketing Agent shall
hold such funds for the benefit of the purchasers which
provided such Remarketing Proceeds.
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<PAGE> 5
SECTION 10. AMENDMENTS TO SECTION 4.03 OF THE SERIES B NOTE AGREEMENT.
(a) Subsection (c) of Section 4.03 of the Series B Note Agreement is
amended by deleting all references to the "Bank" therein and replacing them with
references to the "Lender".
(b) Subsection (e) of Section 4.03 of the Series B Note Agreement is
amended by deleting the reference to the "Bank" in the last line thereof and
replacing it with a reference to the "L/C Issuer".
SECTION 11. AMENDMENT TO SECTION 5.02 OF THE SERIES B NOTE AGREEMENT.
Subsection (c) of Section 5.02 of the Series B Note Agreement is amended by
deleting all references therein to the "Bank" and replacing them with references
to the "L/C Issuer".
SECTION 12. AMENDMENT TO SECTION 5.03 OF THE SERIES B NOTE AGREEMENT.
Subsection (b) of Section 5.03 of the Series B Note Agreement is amended by
deleting the reference to the "Bank" in the last line thereof and replacing it
with a reference to the "L/C Issuer".
SECTION 13. AMENDMENT TO SECTION 5.04 OF THE SERIES B NOTE AGREEMENT.
Section 5.04 of the Series B Note Agreement is amended by deleting the second
and third paragraphs thereof in their entirety and replacing them with the
following:
When the Series B Letter of Credit terminates or expires in
accordance with its terms or a Substitute Series B Letter of Credit
therefor is accepted hereunder, the Trustee shall immediately surrender
the Series B Letter of Credit to the L/C Issuer. The Trustee hereby
agrees that, except in the case of a redemption in part pursuant to
Article III hereof or any other reduction in the principal amount of
Series B Notes Outstanding, it will not under any circumstances request
that the L/C Issuer reduce the amount of the Series B Letter of Credit.
If at any time, all Series B Notes shall cease to be Outstanding, the
Trustee shall execute and deliver to the L/C Issuer the certificate in
the form of Annex E to the Series B Letter of Credit and shall
surrender the Series B Letter of Credit to the L/C Issuer for
cancellation.
If at any time, the L/C Issuer shall fail to honor a draft
presented under the Series B Letter of Credit, in conformity with the
terms thereof, the Trustee shall give immediate telephonic notice
thereof to the Remarketing Agent, the Lender and the Borrower.
SECTION 14. AMENDMENT TO SECTION 7.01 OF THE SERIES B NOTE AGREEMENT.
Subsection (d) of Section 7.01 of the Series B Note Agreement is hereby deleted
in its entirety and replaced with the following:
(d) Receipt by the Trustee of written notice from the Lender
that an Event of Default has occurred under the Reimbursement
Agreement.
SECTION 15. AMENDMENTS TO SECTION 7.02 OF THE SERIES B NOTE AGREEMENT.
5
<PAGE> 6
(a) Subsection (a) of Section 7.02 of the Series B Note Agreement is
amended by deleting the reference to the "Bank" in the second line thereof and
replacing it with a reference to the "Lender".
(b) Subsection (b) of Section 7.02 of the Series B Note Agreement is
hereby deleted in its entirety and replaced with the following:
(b) Upon the occurrence of any Event of Default
specified in Section 7.01(c), the Trustee shall notify the
Lender of such Event of Default and shall, by notice to the
Borrower, the Paying Agent (who shall promptly give such
notice to the holders) and the Remarketing Agent declare the
entire unpaid principal of and interest on the Series B Notes
immediately due and payable, and, thereupon, the entire unpaid
principal of and interest on the Series B Notes shall
forthwith become due and payable.
SECTION 16. AMENDMENT TO SECTION 7.03 OF THE SERIES B NOTE AGREEMENT.
Section 7.03 of the Series B Note Agreement is amended (a) by deleting the
reference to the "Bank" in the first sentence thereof and replacing it with a
reference to the "Lender" and (b) by deleting the second sentence thereof in its
entirety and replacing it with the following:
If such instructions are received by the Trustee, such draw proceeds
and, if necessary, the moneys on deposit in the Interest Reserve
Account, shall be immediately applied to the purchase of the Series B
Notes, the acceleration of the Series B Notes shall be cancelled, the
Series B Notes shall become Bank Notes and the Series B Notes shall be
registered in the name of the Trustee, and, to the extent so provided
under the Reimbursement Agreement, held by the Trustee as agent and
bailee of the Lender, and pledged under the Reimbursement Agreement as
additional security for repayment of the Borrower's obligations under
the Reimbursement Agreement.
SECTION 17. AMENDMENT TO SECTION 7.05 OF THE SERIES B NOTE AGREEMENT.
Section 7.05 of the Series B Note Agreement is amended by adding the phrase "and
the Account Parties" between the words "Borrower" and "to" in the seventh line
thereof.
SECTION 18. AMENDMENT TO SECTION 7.06 OF THE SERIES B NOTE AGREEMENT.
Section 7.06 of the Series B Note Agreement is amended (a) by deleting the
references to the "Bank" in the second and fourth lines thereof and replacing
them with references to the "Lender" and (b) by deleting the reference to the
"Bank" in the second line of subsection (b) thereof and replacing it with a
reference to the "L/C Issuer".
6
<PAGE> 7
SECTION 19. AMENDMENT TO SECTION 7.09 OF THE SERIES B NOTE AGREEMENT.
Section 7.03 of the Series B Note Agreement is deleted in its entirety and
replaced with the following:
SECTION 7.09 [RESERVED].
SECTION 20. AMENDMENT TO SECTION 8.05 OF THE SERIES B NOTE AGREEMENT.
Section 8.05 of the Series B Notes Agreement is amended by deleting the
references to the "Bank" in the sixth and tenth lines thereof and replacing them
with references to the "Lender".
SECTION 21. AMENDMENT TO SECTION 8.08 OF THE SERIES B NOTE AGREEMENT.
Section 8.08 of the Series B Note Agreement is amended (a) by deleting all
references therein to the "Bank" or "Banks" and replacing them with references
to the "Lender" or "Lender's", as applicable, and (b) by adding the following
sentence after the last paragraph thereof:
No resignation or removal of the Trustee shall be binding upon
the L/C Issuer for purposes of the Series B Letter of Credit, and no
successor Trustee shall have any rights to draw, except upon compliance
with the transfer provisions therein set forth.
SECTION 22. AMENDMENT TO SECTION 8.10 OF THE SERIES B NOTE AGREEMENT.
Section 8.10 of the Series B Note Agreement is amended (a) by deleting all
references therein to the "Bank" and replacing them with references to the
"Lender" and (b) by adding the following sentence after the last paragraph
thereof:
No such resignation or removal of the Remarketing Agent or
appointment of or assignment to a successor Remarketing Agent shall be
binding upon the L/C Issuer for purposes of the Series B Letter of
Credit, unless set forth in an amendment to the Series B Letter of
Credit issued by the L/C Issuer.
SECTION 23. AMENDMENT TO SECTION 8.11 OF THE SERIES B NOTE AGREEMENT.
Subsection (c) of Section 8.11 of the Series B Note Agreement is amended by
deleting the reference to the "Bank" in the fourth line thereof and replacing it
with a reference to the "L/C Issuer".
SECTION 24. AMENDMENT TO SECTION 8.12 OF THE SERIES B NOTE AGREEMENT.
Section 8.12 of the Series B Note Agreement is amended by deleting all
references to the "Bank" therein and replacing them with references to the
"Lender".
SECTION 25. AMENDMENT TO SECTION 8.13 OF THE SERIES B NOTE AGREEMENT.
Section 8.13 of the Series B Note Agreement is amended by deleting all
references to the "Bank" therein and replacing them with references to the
"Lender".
SECTION 26. AMENDMENT TO SECTION 8.14 OF THE SERIES B NOTE AGREEMENT.
Section 8.14 of the Series B Note Agreement is amended by deleting all
references to the "Bank" or "Bank's" therein and replacing them with references
to the "Lender" or "Lender's", as applicable.
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<PAGE> 8
SECTION 27. AMENDMENT TO SECTION 8.16 OF THE SERIES B NOTE AGREEMENT.
Section 8.16 of the Series B Note Agreement is amended (a) by adding the phrase
", to the extent provided in the Reimbursement Agreement," after the word
"shall" at the end of the fourth line thereof and (b) by deleting the reference
to the "Bank" in the fifth line thereof and replacing it with a reference to the
"Lender".
SECTION 28. AMENDMENT TO SECTION 9.01 OF THE SERIES B NOTE AGREEMENT.
Subsection (f) of Section 9.01 of the Series B Note Agreement is amended by
deleting the reference to the "Bank" in the fifth line thereof and replacing it
with a reference to the "L/C Issuer".
SECTION 29. AMENDMENT TO SECTION 9.02 OF THE SERIES B NOTE AGREEMENT.
Section 9.02 of the Series B Note Agreement is amended by deleting the reference
to the "Bank" in the fourteenth line thereof and replacing it with a reference
to the "L/C Issuer".
SECTION 30. AMENDMENT TO SECTION 9.06 OF THE SERIES B NOTE AGREEMENT.
The heading and the first sentence of Section 9.06 of the Series B Note
Agreement are hereby deleted in their entirety and replaced with the following:
Section 9.06. LENDER AND REMARKETING AGENT CONSENT REQUIRED.
Except to the extent that the consent of the Remarketing Agent or the
Lender is not required for the action that is the subject of the
amendment (e.g., removal of the Remarketing Agent, the Trustee or the
Paying Agent by the Borrower upon the terms specified herein), an
amendment to this Agreement or the Series B Notes shall not become
effective unless the Remarketing Agent (but only to the extent that
such amendment affects the rights, duties or obligations of the
Remarketing Agent hereunder) and the Lender deliver to the Trustee
their written consents to the amendment.
SECTION 31. AMENDMENT TO SECTION 10.01 OF THE SERIES B NOTE AGREEMENT.
Subsection (b) of Section 10.01 of the Series B Note Agreement is amended by
deleting the reference to, and the address of, the "Bank" therein and replacing
them with the following:
If to the L/C Issuer: CoreStates Bank, N.A.
530 Walnut Street
Philadelphia, Pennsylvania 19106
Attention: Ms. Cheryl Morton, Letter of Credit
Department, 7th Floor
Telephone No.: (215) 973-8157
Fax No.: (215) 973-6352
If to the Lender: Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Attention: Mr. Mark Fagnani
Telephone No.: (212) 840-2000
Fax No.: (212) 545-4283
8
<PAGE> 9
SECTION 32. AMENDMENT TO SECTION 10.09 OF THE SERIES B NOTE AGREEMENT.
Section 10.09 of the Series B Note Agreement is amended by deleting the
reference to the "Bank" in the fourth line thereof and replacing it with a
reference to the "Lender".
SECTION 33. AMENDMENTS TO EXHIBIT A TO THE SERIES B NOTE AGREEMENT -
FORM OF SERIES B NOTE. Exhibit A to the Series B Note Agreement (the "Form of
Series B Note") is hereby amended as follows:
(a) The second boldface paragraph on the first page of the Form of
Series B Note (prior to the text thereof) is hereby deleted in its entirety and
replaced with the following:
PAYMENTS OF PRINCIPAL AND PURCHASE PRICE OF AND INTEREST ON
THIS SERIES B NOTE WILL BE MADE FROM DRAWINGS UNDER THE SERIES
B LETTER OF CREDIT (HEREINAFTER DEFINED) IF REMARKETING
PROCEEDS ARE NOT AVAILABLE OR IF AN EVENT OF DEFAULT HAS
OCCURRED. ALTHOUGH THE SERIES B LETTER OF CREDIT IS A BINDING
OBLIGATION OF CORESTATES BANK, N.A. (THE "L/C ISSUER"), THIS
SERIES B NOTE IS NOT A DEPOSIT OR OBLIGATION OF CORESTATES
FINANCIAL CORP OR ANY OF ITS AFFILIATES, INCLUDING THE L/C
ISSUER AND CONGRESS FINANCIAL CORPORATION, NOR IS THIS SERIES
B NOTE A DEPOSIT OR OBLIGATION OF NATIONSBANK CORPORATION OR
ANY OF ITS AFFILIATED BANKS, INCLUDING NATIONSBANK, N.A., AND
THIS SERIES B NOTE IS NOT GUARANTEED BY ANY OF THESE ENTITIES.
THIS SERIES B NOTE IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION AND IS SUBJECT TO CERTAIN INVESTMENT
RISKS INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
(b) The second paragraph of the text of the Form of Series B Note,
beginning on page A-2 thereof, is amended by deleting the first two sentences
thereof and replacing them with the following:
This Series B Note is one of an issue not to exceed
$10,000,000 Hanover Direct, Inc. Flexible Term Notes, Series B
(the "Series B Notes"), issued pursuant to a Series B Note
Agreement dated as of April 27, 1995, between the Borrower,
and Norwest Bank Minnesota, N.A., as trustee (in such
capacity, the "Trustee") and Paying Agent, as amended by that
certain First Supplemental Series B Note Agreement dated as of
December 29, 1995 between the Borrower and the Trustee (as
further amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms, the "Series B
Note Agreement"), for the purpose of refinancing and/or
financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution
facility owned and used
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<PAGE> 10
by certain subsidiaries of the Borrower located in Roanoke,
Virginia and a new retail store of Gump's Corp., a subsidiary
of the Borrower located in San Francisco, California. Pursuant
to the Series B Note Agreement, the Borrower has arranged,
through a credit facility established with Lender for certain
of Borrower's subsidiaries, and as guarantor of such financing
arrangements with Lender, for L/C Issuer to issue for the
account of such subsidiaries its irrevocable Series B Letter
of Credit dated December 29, 1995 (the "Series B Letter of
Credit") in favor of the Trustee, in an amount sufficient to
pay the Series B Facility Amount and unpaid interest on or
Purchase Price of the Series B Notes, but not to exceed
$10,145,833, pursuant to (a) the Application for Irrevocable
Standby Letter of Credit dated as of December 22, 1995
executed and delivered to the L/C Issuer by the Account
Parties (as defined in the Series B Note Agreement) and the
Lender requesting the issuance by the L/C Issuer of the Series
B Letter of Credit (the "Application"), (b) the Loan and
Security Agreement dated as of November 14, 1995 (the "Loan
Agreement"), by and among the Account Parties and certain
other subsidiaries of the Borrower, and the Lender,
acknowledged and agreed to by the Borrower and certain other
subsidiaries of the Borrower, pursuant to which, among other
things, the Lender has executed the Application pursuant to
which the Series B Letter of Credit is issued by the L/C
Issuer and delivered to the Trustee, and any and all
modifications, alterations, amendments and supplements
thereto, (c) the other "Financing Agreements" as defined in
the Loan Agreement and (d) any similar agreements between or
among the Account Parties, the Borrower and the issuer of a
Substitute Series B Letter of Credit or lender providing
credit support to such issuer (individually and collectively,
the "Reimbursement Agreement").
(c) The seventh paragraph of the text of the Form of Series B Note,
beginning on page A-4 thereof, is amended by deleting the third sentence thereof
in its entirety and replacing it with the following:
The Borrower, the Trustee and the Paying Agent will recognize
the Securities Depository Nominee, as hereinafter defined,
while the registered owner of the Series B Notes so held, as
the owner of the Series B Notes for all purposes, including
(i) payments of principal and Purchase Price of, and interest
on, the Series B Notes, (ii) notices and (iii) voting.
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<PAGE> 11
(d) Section 1 of the Form of Series B Note, beginning on page A-5
thereof, is amended by adding the following definition:
"BANK" means, individually and collectively, the Lender and
the L/C Issuer.
(e) Subsection (f) of Section 3 of the Form of Series B Note, beginning
on page A-9 thereof, is amended by deleting the reference to the "Bank" in the
third line thereof and replacing it with a reference to the "Lender."
(f) Subsection (a) of Section 4 of the Form of Series B Note, beginning
on page A-10 thereof, is amended by deleting the reference to the "Bank" in the
fourth line of the last paragraph thereof and replacing it with a reference to
the "Lender."
(g) Section 7 of the Form of Series B Note, beginning on page A-13
thereof, is amended by deleting the second and third sentences of the first
paragraph thereof in their entirety and replacing them with the following:
The Series B Note Agreement directs the Trustee to declare an
acceleration upon written notice by the Lender of the
occurrence and continuance of an event of default under the
Reimbursement Agreement and upon the occurrence of certain
other Events of Default under the Series B Note Agreement.
SECTION 34. ADDITION OF EXHIBIT C TO SERIES B NOTE AGREEMENT. The
Series B Note Agreement is amended by adding Exhibit C thereto, a copy of which
is attached hereto and incorporated herein and in the Series B Note Agreement by
this reference.
SECTION 35. EFFECT OF FIRST SUPPLEMENTAL SERIES B NOTE AGREEMENT.
Except as modified hereby, all of the terms and provisions of the Series B Note
Agreement shall remain in full force and effect.
SECTION 36. GOVERNING LAW. This First Supplemental Series B Note
Agreement and the Series B Note Agreement, as amended hereby, shall be deemed to
be contracts made under, and for all purposes shall be construed in accordance
with, the laws of the State of New York.
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<PAGE> 12
SECTION 37. SEVERABILITY. If any provision of this First Supplemental
Series B Note Agreement shall be determined to be unenforceable by a court of
law, that shall not affect any other provision of this First Supplemental Series
B Note Agreement.
SECTION 38. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will be an original and all of which together will
constitute the same instrument.
[Signatures on following page.]
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<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have cause this First
Supplemental Series B Note Agreement to be duly executed as of the day and year
first above written.
HANOVER DIRECT, INC.
By: /s/ Edward J. O'Brien
______________________________________
Name: Edward J. O'Brien
____________________________________
Title: Executive Vice President
& Treasurer
___________________________________
[CORPORATE SEAL]
NORWEST BANK MINNESOTA, N.A. as
Trustee and Paying Agent
By: /s/ Polly B. Berquist
______________________________________
Name: Polly B. Berquist
____________________________________
Title: Assistant Vice President
___________________________________
13
<PAGE> 14
EXHIBIT C
CERTIFICATE OF REMARKETING OF NOTES TO EFFECT
REINSTATEMENT OF PURCHASE DRAWING
[DATE]
CoreStates Bank, N.A.
530 Walnut Street
Philadelphia, Pennsylvania 19106
Attention: Ms. Cheryl Morton
Letter of Credit Department, 7th Floor
RE: IRREVOCABLE LETTER OF CREDIT REF. NO. ___________
FOR THE ACCOUNT OF HANOVER DIRECT PENNSYLVANIA, INC., HANOVER
DIRECT VIRGINIA INC. AND GUMP'S CORP. (THE LETTER OF CREDIT")
Ladies and Gentlemen:
The undersigned, being the Remarketing Agent, as defined in the
above-referenced Letter of Credit, hereby certifies that Bank Notes in the
principal amount of $_______ (the "Remarketed Notes") for which a Purchase
Drawing was made by the Trustee and previously paid by you, have been remarketed
by us and we are holding the remarketing proceeds pursuant to Section
3.08(d)(ii) of the Note Agreement.
Please confirm to the Trustee that the Principal Component has been
reinstated automatically by an amount equal to the said principal amount of the
Remarketed Notes and that the Interest Component has been reinstated
automatically by an amount equal to thirty-five (35) days' interest on the
Principal Component so reinstated computed at the Maximum Rate.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed to such terms in the above-referenced Letter of
Credit.
IN WITNESS WHEREOF, the Remarketing Agent has executed and delivered
this Certificate as of ___ of ____, ___.
NATIONSBANK, NATIONAL ASSOCIATION,
as Remarketing Agent
By:_____________________________________
[Name and Title]
<PAGE> 1
EXHIBIT 10.65
THIS SERIES A NOTE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE REGULATORY
AUTHORITY UNDER ANY STATE SECURITIES LAWS AND THEREFORE CANNOT BE RESOLD UNLESS
IT IS REGISTERED UNDER SUCH ACT OR APPLICABLE LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
THIS SERIES A NOTE IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED BY,
NATIONSBANK CORPORATION OR ANY OF ITS AFFILIATED BANKS, INCLUDING NATIONSBANK OF
NORTH CAROLINA, N.A. (THE "BANK'), IS NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, AND IS SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED. ALTHOUGH NOT GUARANTEED BY THE BANK,
PAYMENTS OF PRINCIPAL AND INTEREST ON THIS SERIES A NOTE AND, IF REMARKETING
PROCEEDS ARE NOT AVAILABLE, THE PURCHASE PRICE OF THIS SERIES A NOTE, WILL BE
MADE FROM DRAWINGS UNDER THE SERIES A LETTER OF CREDIT ISSUED BY THE BANK. THE
FAILURE OF THE BANK TO HONOR ANY DRAWING UNDER THE SERIES A LETTER OF CREDIT
WILL NOT GIVE RISE TO ANY CLAIM OTHER THAN AGAINST THE BANK.
SERIES A NOTE
REGISTERED REGISTERED
No. R-1 $10,000,000.00
HANOVER DIRECT, INC.
FLEXIBLE TERM SERIES A NOTES,
SERIES A
INTEREST RATE MATURITY DATE DATE OF ISSUANCE
As Described October 1, 2009 November 9, 1994
REGISTERED OWNER: CEDE AND CO.
PRINCIPAL AMOUNT: TEN MILLION DOLLARS ($10,000,000.00)
Hanover Direct, Inc., a Delaware corporation (the "Borrower"), for
value received, hereby promises to pay, solely from the sources and in the
manner hereinafter provided, to the registered owner, or registered assigns or
legal representative, upon presentation and surrender hereof at the principal
corporate trust office of Norwest Bank Minnesota, N.A., or its successor (in
such capacity, the "Paying Agent"), or by wire transfer, as
<PAGE> 2
provided in the Series A Note Agreement, as hereinafter defined, the principal
sum set forth above on the Maturity Date set forth above, subject to the prior
mandatory or optional redemption of this Series A Note as hereinafter provided,
and to pay solely from such source interest hereon at the Interest Rate, as
hereinafter defined, payable in arrears on the Interest Payment Date, as
hereinafter defined, until payment in full and, to the extent permitted by law,
interest on overdue installments of such interest, from the Interest Payment
Date applicable to this Series A Note next preceding the date on which this
Series A Note is authenticated, unless this Series A Note is (a) authenticated
before the first Interest Payment Date following the initial delivery of the
Series A Notes issued herein, in which case it shall bear interest from the date
of such initial delivery or (b) authenticated upon an Interest Payment Date, in
which case it shall bear interest from such Interest Payment Date (unless
interest on this Series A Note is in default at the time of authentication, in
which case this Series A Note shall bear interest from the last date to which
interest has been paid). Except as otherwise provided in the Series A Note
Agreement, interest hereon shall be paid to the person in whose name this Series
A Note is registered on the register of the Paying Agent at the close of
business on the Record Date next preceding each Interest Payment Date, by check
or draft mailed to such person at his address as it appears on the register
maintained by the Paying Agent, or by wire transfer for holders of an aggregate
principal amount of at least $500,000, at the request of such holders, as
provided in the Series A Note Agreement. Principal and Purchase Price, as
hereinafter defined, of and interest on this Series A Note are payable in lawful
currency of the United States of America. If any payment hereon is due on a day
which is not a Business Day, as hereinafter defined, payment shall be made on
the next succeeding Business Day with the same force and effect as if made on
the day such payment was due and, in the case of such payment, no interest shall
accrue for the intervening period.
This Series A Note is one of an issue not to exceed $10,000,000 Hanover
Direct, Inc. Flexible Term Notes, Series A (the "Series A Notes"), issued
pursuant to a Series A Note Agreement dated as of November 9, 1994 (the "Series
A Note Agreement"), between the Borrower and Norwest Bank Minnesota, N.A., as
trustee (in such capacity, the "Trustee") and Paying Agent, for the purpose of
refinancing and/or financing certain construction, refurbishment and related
costs of an approximately 530,000 square foot distribution facility of the
Borrower located in Roanoke, Virginia and a new retail store of Gump's, Inc., a
subsidiary of the Borrower located in San Francisco, California. Pursuant to the
Series A Note Agreement, the Borrower has caused NationsBank of North Carolina,
N.A. (the "Bank") to issue its irrevocable Series A Letter of Credit dated the
Date of Issuance (as hereinafter defined and as set forth above) of the Series A
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<PAGE> 3
Notes (the "Series A Letter of Credit") in favor of the Trustee, in an amount
sufficient to pay the Series A Facility Amount and unpaid interest on or
Purchase Price of the Series A Notes, but not to exceed $10,145,833, pursuant to
a Credit Facilities and Reimbursement Agreement dated as of October 12, 1994
(the "Reimbursement Agreement") by and among the Borrower, the financial lenders
listed on the signature pages of the Reimbursement Agreement including the Bank,
and the Bank, as agent, which Series A Letter of Credit initially expires
(subject to extension or earlier termination as provided in the Reimbursement
Agreement and the Series A Note Agreement) on November 9, 1997. Substitute
letters of credit may be delivered in accordance with the Series A Note
Agreement. The Trustee is authorized and directed pursuant to the Series A Note
Agreement to make timely draws under the Series A Letter of Credit in accordance
with the terms thereof, to the extent necessary to make when due the payments of
principal of (whether on the Maturity Date referenced above, by acceleration, or
by call for redemption), the Purchase Price of and interest on the Series A
Notes, except as otherwise provided in the Series A Note Agreement and the
Series A Letter of Credit. Reference is hereby made to the Series A Note
Agreement, the Series A Letter of Credit, the Reimbursement Agreement and to all
amendments and supplements thereto for a description of the provisions, among
others, with respect to the nature and extent of the security, the default
provisions, the rights, duties and obligations of the Borrower and the Trustee
and the rights of the holders of the Series A Notes and the terms upon which the
Series A Notes are issued and secured.
The Series A Notes are issuable in registered form without coupons in
denominations of $100,000 or any integral multiple of $100,000 in excess thereof
(the "Authorized Denominations"). This Series A Note, upon surrender hereof at
the principal corporate trust office of the Paying Agent with a written
instrument of transfer satisfactory to the Paying Agent duly endorsed for
transfer or accompanied by an assignment duly executed by the holder hereof or
his attorney duly authorized in writing and, in either case, with an appropriate
guarantee of signature conforming to the requirements of the assignment attached
hereto, may, at the option of the holder hereof, be exchanged for Series A Notes
of the same aggregate principal amount and tenor as the Series A Notes being
exchanged and of any Authorized Denomination. This Series A Note is transferable
as provided in the Series A Note Agreement, subject to certain limitations
therein contained, only upon the register of the Paying Agent, and only upon
surrender of this Series A Note for transfer to the Paying Agent duly endorsed
for transfer or accompanied by a written instrument of transfer (in
substantially the form of the assignment attached hereto) duly executed by the
holder hereof or his duly authorized attorney. Thereupon, one or more new Series
A Notes of any Authorized Denomination or
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<PAGE> 4
Authorized Denominations and in the same aggregate principal amount and tenor as
the Series A Note surrendered will be issued to the designated transferee or
transferees.
The person in whose name this Series A Note is registered shall be
deemed and regarded as the absolute owner hereof for any purpose, as provided in
and as qualified by the Series A Note Agreement.
The Paying Agent or NationsBank of North Carolina, N.A. as Remarketing
Agent (the "Remarketing Agent"), may make appropriate arrangements for some or
all of the Series A Notes to be issued or held by means of a book-entry system
administered by a Securities Depository, as hereinafter defined, with no
physical distribution of Series A Notes made to the public (other than those
Series A Notes, if any, not held under such book-entry system).
Initially, all of the Series A Notes will be held by means of a
book-entry system administered by the Securities Depository. One Series A Note
certificate in registered form will be issued for the Series A Notes in the
aggregate principal amount of $10,000,000, and will be registered in the name of
the Securities Depository Nominee and will be deposited with the Paying Agent.
Thereafter, in the event that Series A Notes are issued to the Beneficial Owners
thereof in certificated (physical) form (and in each and every case thereafter
in which a change in the principal amount of Series A Notes held pursuant to a
book-entry system is made), the Paying Agent will take all actions necessary to
comply with the Balance Certificate Agreement dated as of the date hereof
between Norwest Bank Minnesota, N.A., as transfer agent, and the Securities
Depository, which agreement governs the mechanisms for the registration of
transfer of Series A Note certificates registered in the name of the Securities
Depository Nominee.
With respect to any Series A Notes that are held by means of a
book-entry system, such book-entry system will evidence beneficial ownership of
the Series A Notes so held in Authorized Denominations (or, as applicable,
positions held by the Participants, beneficial ownership being evidenced in the
records of such Participants). Registration and transfers of ownership shall be
effected on the records of the Securities Depository and the Participants, as
applicable, pursuant to rules and procedures established by the Securities
Depository and the Participants. Subject to the provisions of Section 7.09 of
the Series A Note Agreement relating to the Bank as holder of the Series A
Notes, the Borrower, the Trustee and the Paying Agent will recognize the
Securities Depository Nominee, as hereinafter defined, while the registered
owner of the Series A Notes so held, as the owner of the Series A Notes for all
purposes, including (i) payments of principal and Purchase Price of, and
interest on, the Series A
4
<PAGE> 5
Notes, (ii) notices and (iii) voting, subject to certain qualifications as
stated in the Series A Note Agreement. Transfer of principal, interest and
Purchase Price payments to beneficial owners of the Series A Notes so held will
be the responsibility of the Securities Depository and the Participants. The
Borrower, the Trustee, the Bank and the Paying Agent will not be responsible or
liable for such transfers of payments or for maintaining, supervising or
reviewing the records maintained by the Securities Depository, the Securities
Depository Nominee or the Participants.
While the Securities Depository Nominee is the owner of the Series A
Notes so held, notwithstanding the provision hereinabove contained, payments of
principal and Purchase Price of and interest on such Series A Notes shall be
made in accordance with the Letter of Representations dated as of November 9,
1994 among the Borrower, the Trustee, the Remarketing Agent and Paying Agent and
received and accepted by the Securities Depository.
SO LONG AS A BOOK-ENTRY SYSTEM OF EVIDENCE AND TRANSFER OF
OWNERSHIP IS MAINTAINED WITH RESPECT TO THIS SERIES A NOTE IN ACCORDANCE WITH
THE TERMS OF THE SERIES A NOTE AGREEMENT, (1) THE PROVISIONS OF THIS SERIES A
NOTE RELATING TO THE DELIVERY OF PHYSICAL SERIES A NOTES SHALL BE DEEMED
INAPPLICABLE OR BE OTHERWISE SO CONSTRUED WITH REGARD TO THIS SERIES A NOTE AS
TO GIVE FULL EFFECT TO SUCH BOOK-ENTRY SYSTEM AND (2) THE PROVISIONS OF THIS
SERIES A NOTE RELATING TO ISSUANCE, PAYMENTS OF PRINCIPAL, PURCHASE PRICE AND
INTEREST, AND ESTABLISHMENT OF REST RATES AND INTEREST PERIODS WITH RESPECT TO
THE SERIES A NOTES SHALL BE APPLICABLE TO BENEFICIAL OWNERSHIP INTERESTS IN THE
SERIES A NOTES IN AUTHORIZED DENOMINATIONS TO THE SAME EXTENT AS SUCH PROVISIONS
ARE APPLICABLE TO REGISTERED OWNERSHIP INTERESTS IN THE SERIES A NOTES.
In the event that a book-entry system of evidence and transfer
of ownership of the Series A Notes is discontinued pursuant to the provisions of
the Series A Note Agreement, the Series A Notes shall be delivered solely in
registered form without coupons in the Authorized Denominations, shall be
lettered "R" and numbered separately from 1 upward, and shall be payable,
executed, authenticated, registered, exchanged and cancelled pursuant to the
provisions hereof and of the Series A Note Agreement.
All references herein to time shall be Charlotte, North
Carolina time unless otherwise expressly stated herein.
Except as otherwise specifically provided herein, all
capitalized words and terms shall have the same meaning when used herein as set
forth in the Series A Note Agreement.
5
<PAGE> 6
1. CERTAIN DEFINITIONS.
"BUSINESS DAY" means any day other than (a) Saturday or
Sunday, (b) a day on which commercial banks in New York, New York, or in the
city or cities in which the corporate trust office of the Trustee or the Paying
Agent, the primary office of the Remarketing Agent or the Placement Agent or the
paying office of the Bank are authorized by law or executive order to close or
(c) a day on which the New York Stock Exchange is closed. For purposes of this
definition, "paying office of the Bank" means the Bank office responsible for
making payments under any Series A Letter of Credit.
"DATE OF ISSUANCE" means the date upon which the Series A
Notes are issued, authenticated and delivered in accordance with the terms and
conditions of Section 2.06 of the Series A Note Agreement.
"INTEREST PAYMENT DATE" means the first day after the last day
of each Interest Period.
"INTEREST PERIOD" means, with respect to any Series A Note,
each period of between one (1) and one hundred eighty (180) days established
from time to time by the Remarketing Agent in accordance with the Interest
Period determination method described in Section 2.02(a) of the Series A Note
Agreement.
"INTEREST RATE" means, with respect to any Series A Note, the
interest rate on such Series A Note determined from time to time by the
Remarketing Agent in accordance with the Interest Rate determination method
described in Section 2.02(a) of the Series A Note Agreement. In no event shall
the Interest Rate exceed the lesser of fifteen percent (15%) per annum or the
highest interest rate which may be borne by the Series A Notes under applicable
law.
"PARTICIPANTS" means securities brokers and dealers, banks,
trust companies and clearing corporations which have access to the Securities
Depository's system.
"PURCHASE DATE" means, with respect to any Series A Notes, the
date on which such Series A Notes are required to be purchased pursuant to the
terms and conditions of Section 3.07(a) of the Series A Note Agreement.
"PURCHASE PRICE" means an amount equal to 100% of the
principal amount of any Series A Note tendered or deemed tendered to the Trustee
for purchase pursuant to the terms and conditions of Section 3.07 of the Series
A Note Agreement, plus accrued and unpaid interest thereon to, but excluding,
the Purchase Date.
"RECORD DATE" means, with respect to each Interest
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<PAGE> 7
Payment Date, the Trustee's close of business on the Business Day next preceding
such Interest Payment Date.
"SECURITIES DEPOSITORY" means, initially, The Depository Trust
Company, or any successor or substitute securities depository selected by the
Borrower (with the consent of the Trustee and the Remarketing Agent), which
shall maintain a book-entry system in respect of the Series A Notes.
"SECURITIES DEPOSITORY NOMINEE" means, as to any Securities
Depository, such Securities Depository or the nominee of such Securities
Depository in whose name there shall be registered on the register maintained by
the Paying Agent the Series A Note certificate to be delivered to and
immobilized with the Paying Agent during continuation with such Securities
Depository of participation in its book-entry system, and shall initially be
Cede & Co., nominee of The Depository Trust Company.
2. INTEREST ON THE SERIES A NOTES.
The Series A Notes will bear interest at the Interest Rate
from the Date of Issuance until paid in full. Interest accrued on each Series A
Note shall be paid on the applicable Interest Payment Date therefor. The amount
of interest payable on any Interest Payment Date shall be computed on the basis
of the actual number of days elapsed over a year of 360 days. The initial
Interest Period and corresponding Interest Rate for each Series A Note will be
determined by the Remarketing Agent on the Date of Issuance. After the initial
determination of the Interest Period and corresponding Interest Rate, the
applicable Interest Period and corresponding Interest Rate shall be determined
by the Remarketing Agent at the time and in the manner specified in Section 2.02
of the Series A Note Agreement. The Remarketing Agent's determination of the
Interest Periods and Interest Rates shall be conclusive and binding on the
Noteholders, the Paying Agent, the Remarketing Agent, the Borrower, the Bank and
the Trustee. The Remarketing Agent will notify the Paying Agent in writing
(which may be in telecopy form) or by telephone promptly confirmed in writing by
10:00 a.m. on the first Business Day of each Interest Period with respect to any
Series A note, of the identity of such Series A Note, the length of such
Interest Period, the Interest Rate therefor and the principal amount of such
Series A Note, and, upon the request of the Borrower or the Bank, the Paying
Agent shall promptly (but in no event later than the end of such Business Day)
after its receipt of such information, forward such information to the Borrower
and the Bank. The failure by the Remarketing Agent or the Paying Agent, as
applicable, to give any such notice shall not affect the change in the Interest
Period and/or Interest Rate.
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<PAGE> 8
The calculation of interest payable on the Series A Notes as
provided in this Agreement will be conclusive and binding on the Borrower, the
Bank, the Trustee, the Paying Agent, the Remarketing Agent and the Noteholders,
absent manifest error.
Neither the Remarketing Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Trustee, the
Paying Agent, the Bank or any Noteholder for any action taken or not taken by
the Remarketing Agent or any of its directors, officers, agents or employees in
connection with the determination of the Interest Period and Interest Rate for
each Series A Note pursuant to the Series A Note Agreement, in the absence of
its own negligence or willful misconduct.
3. REDEMPTION OF SERIES A NOTES.
(a) OPTIONAL REDEMPTION. The Series A Notes are subject to
redemption at the option of the Borrower, in whole or in part, at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest
thereon to, but excluding, the redemption date; provided that any such
redemption in part shall be in a minimum principal amount of $100,000.
(b) MANDATORY SINKING FUND REDEMPTION. The Series A Notes are
subject to mandatory sinking fund redemption prior to the Maturity Date, in
part, with the Series A Notes to be redeemed being selected pursuant to Section
3.03, at a redemption price equal to the principal amount thereof, on October 1,
or if any such date is not a Business Day, on the next succeeding Business Day
with the same force and effect, in the years and in the principal amounts
indicated below:
<TABLE>
<CAPTION>
REDEMPTION DATE PRINCIPAL
(OCTOBER 1) AMOUNT
----------------------------------
<S> <C>
1996 $500,000
1997 500,000
1998 500,000
1999 500,000
2000 500,000
2001 800,000
2002 800,000
2003 800,000
2004 800,000
2005 800,000
2006 800,000
2007 800,000
2008 800,000
2009 800,000
</TABLE>
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<PAGE> 9
(c) MANDATORY REDEMPTION ON EXPIRATION OR TERMINATION OF
SERIES A LETTER OF CREDIT WITHOUT EXTENSION OR PROVIDING A SUBSTITUTE SERIES A
LETTER OF CREDIT. The Series A Notes are subject to mandatory redemption in
whole on the fifth (5th) Business Day prior to the stated date of expiration or
termination of the Series A Letter of Credit, at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest thereon to, but
excluding, the redemption date, unless by the twentieth (20th) day prior to such
redemption date the Borrower provides to the Trustee, and the Trustee has
accepted, (1) evidence that such Series A Letter of Credit has been extended or
(2) a Substitute Series A Letter of Credit to be effective on or prior to such
redemption date.
(d) REDEMPTION DATE. The redemption date for Series A Notes to
be redeemed as described in paragraph 3(a) above must be an Interest Payment
Date with respect to the Series A Notes being redeemed. The redemption date for
mandatory redemptions will be as specified in paragraph 3(b) or (c) above, as
the case may be, or determined by the Trustee or the Remarketing Agent
consistently with the provisions thereof and of the Series A Note Agreement.
(e) SELECTION OF SERIES A NOTES TO BE REDEEMED. Except as
otherwise provided herein or in Section 3.03 of the Series A Note Agreement, if
fewer than all the Series A Notes are to be redeemed, the Remarketing Agent will
select the Series A Notes to be redeemed by lot or such other method as it deems
in its sole discretion to be fair and appropriate and shall notify the Paying
Agent (which notice may be provided by telephone, immediately confirmed in
writing by legible facsimile transmission, registered or certified mail,
overnight express delivery, or other secure means) of the holders and
denominations of Series A Notes to be redeemed; provided, however, that in
selecting Series A Notes to be redeemed the Remarketing Agent shall (i) select
only Series A Notes not previously called for redemption, (ii) select Bank Notes
prior to any other Series A Notes, and (iii) with respect to any mandatory
sinking fund redemption as described in paragraph 3(b) above, select the Series
A Notes to be redeemed on or before the sixtieth (60th) day prior to the
redemption date, and in making such selection take into account the duration of
the Interest Periods with respect to such Series A Notes.
In the event the Remarketing Agent fails to notify the Paying
Agent of the Series A Notes to be redeemed on or before the ninth (9th) Business
Day prior to the redemption date, the Paying Agent shall proceed to select
Series A Notes for redemption from among the Outstanding Series A Notes in the
chronological order in which their Purchase Dates occur, beginning with the
earliest Purchase Date; provided, however, that in selecting Series A Notes to
be redeemed the Paying Agent
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<PAGE> 10
shall (i) select only Series A Notes not previously called for redemption and
(ii) select Bank Notes prior to any other Series A Notes. If fewer than all
Series A Notes having the same Purchase Date (selected for redemption as
provided in the immediately preceding sentence) are to be redeemed, the Paying
Agent shall treat each owner of Series A Notes as the owner of one Series A Note
for purposes of selection for redemption, and shall select Series A Notes for
redemption by lot or such other method as it deems fair and appropriate, (1)
from among the holders of less than $1,000,000 in aggregate principal amount,
provided that if there are no such holders, or if, after selection from among
such holders such selection has not resulted in redemption of a sufficient
amount of Series A Notes, then (2) from among the holders of $1,000,000 or more
in aggregate principal amount of Series A Notes.
No portion of a Series A Note may be redeemed that would
result in a Series A Note which is smaller than the then permitted minimum
Authorized Denomination. For this purpose, the Remarketing Agent or the Paying
Agent will consider each Series A Note in a denomination larger than the minimum
denomination permitted by the Series A Notes at the time to be separate Series A
Notes each in the minimum denomination.
(f) NOTICE OF REDEMPTION. The Trustee will prepare and cause
the Paying Agent to send notice of each redemption to each Noteholder whose
Series A Notes are being redeemed, the Borrower, the Remarketing Agent and the
Bank by first-class mail at least seven (7) Business Days but not more than
sixty (60) (or twenty (20), in the case of a mandatory redemption pursuant to
paragraph 3(c) above) days before each redemption. The notice shall identify the
Series A Notes or portions thereof to be redeemed and will state: (i) the type
of redemption and the redemption date, (ii) the redemption price, (iii) that the
Series A Notes called for redemption must be surrendered to collect the
redemption price, (iv) the address of the Paying Agent at which the Series A
Notes must be surrendered, (v) that interest on the Series A Notes called for
redemption ceases to accrue on the redemption date, (vi) the CUSIP number of the
Series A Notes called for redemption and (vii) any condition to the redemption.
Failure by the Trustee or the Paying Agent to give any notice of redemption as
to any particular Series A Notes will not affect the validity of the call for
redemption of any Series A Notes in respect of which no such failure has
occurred. Any notice mailed as provided in the Series A Notes will be
conclusively presumed to have been given whether or not actually received by any
holder or beneficial owner.
(g) EFFECT OF REDEMPTION. On the date fixed for redemption,
notice having been given in the manner and under the conditions provided in the
Series A Note Agreement, the Series A Notes or portions thereof called for
redemption shall be due and
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<PAGE> 11
payable at the redemption price provided therefor, plus accrued interest to such
date. On such redemption date, if moneys sufficient to pay the redemption price
of the Series A Notes to be redeemed, plus accrued interest thereon to the date
fixed for redemption, are held by the Paying Agent, interest on the Series A
Notes called for redemption shall cease to accrue; such Series A Notes shall
cease to be entitled to any benefits or security under the Series A Note
Agreement or to be deemed Outstanding; and the holders and beneficial owners of
such Series A Notes shall have no rights in respect thereof except to receive
payment of the redemption price thereof, plus accrued interest to, but
excluding, the date of redemption.
(h) SERIES A NOTES REDEEMED IN PART. Upon surrender of a
Series A Note redeemed in part, the Paying Agent will authenticate for the
holder a new Series A Note or Series A Notes equal in principal amount to the
unredeemed portion of the Series A Note surrendered.
4. PURCHASE OF SERIES A NOTES.
(a) MANDATORY PURCHASE OF SERIES A NOTES; NOTICE. Except as
provided in paragraph 4(c) below, Series A Notes are subject to mandatory
purchase at the Purchase Price:
(i) on each Interest Payment Date applicable to such Series A
Note;
and
(ii) on the effective date of any Substitute Series A Letter
of Credit delivered in accordance with the terms and conditions of the Series A
Note Agreement, if, but only if, such Substitute Series A Letter of Credit will
result in a Credit Modification.
The Trustee will prepare and cause the Paying Agent to send written
notice of each mandatory purchase described in paragraph 4(a)(ii) above (a
"Notice of Mandatory Purchase") to each Noteholder whose Series A Notes are
being purchased, the Remarketing Agent, the Bank and the Borrower at least 15
days but not more than 60 days before the Purchase Date. No Notice of Mandatory
Purchase will be given to holders or beneficial owners of Series A Notes if the
mandatory purchase is being made as described in paragraph 4(a)(i) above.
(b) PAYMENT FOR PURCHASED SERIES A NOTES. The Purchase Price
of Series A Notes to be purchased on a Purchase Date shall be paid from
Remarketing Proceeds available to pay the Purchase Price of such Series A Notes
and, to the extent
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<PAGE> 12
Remarketing Proceeds are not available to pay the Purchase Price of such Series
A Notes, from proceeds of a draw on the Series A Letter of Credit pursuant to
the applicable provisions of Section 5.02(a)(iv) of the Series A Note Agreement.
To the extent that sufficient moneys have been made available therefor to the
Paying Agent or the Remarketing Agent, as applicable, by 3:45 p.m. on the
Purchase Date pursuant to Sections 3.08 and 5.02 of the Series A Note Agreement,
upon surrender to the Paying Agent of Series A Notes called for mandatory
purchase as provided in the Series A Note Agreement, the Purchase Price therefor
shall be paid in immediately available funds by the Paying Agent's or the
Remarketing Agent's, as applicable, close of business on the Purchase Date. From
and after the Purchase Date or, if later, the date on which such moneys are made
available to the Paying Agent or the Remarketing Agent, as applicable, interest
accruing on such Series A Notes shall cease to be payable to the prior holder
thereof, such Series A Notes shall cease to be entitled to the benefits of the
Series A Note Agreement and to such extent the prior holder shall have recourse
solely to the funds held by the Paying Agent or the Remarketing Agent, as
applicable, for the purchase of such Series A Notes as provided in Section 4.03
of the Series A Note Agreement. Notwithstanding any provision to the contrary
herein or in the Series A Note Agreement, for so long as the Series A Notes are
held pursuant to a book-entry system maintained by DTC, payments of Purchase
Price with respect to such Series A Notes shall be made pursuant to the rules
and procedures established by DTC and its Participants.
(c) LIMITATION ON TENDERS. The holders shall not be required
to tender any Series A Note for purchase on a Purchase Date if on such date,
following the occurrence of an Event of Default, the Trustee shall have declared
the principal of and interest on the Series A Notes immediately due and payable
pursuant to Section 7.02 of the Series A Note Agreement.
(d) In the event that any Series A Note purchased pursuant to
a mandatory purchase is not delivered by the holder thereof on the date such
Series A Note is purchased, the Borrower shall execute (if necessary) and the
Paying Agent will authenticate and deliver a new Series A Note of like aggregate
principal amount as the Series A Note purchased, the Series A Note purchased
shall no longer be deemed outstanding and the owner thereof shall be entitled to
receive only those funds held on deposit with respect thereto, and the new
Series A Note shall, for all purposes of the Series A Note Agreement, be deemed
to evidence the same debt as the Series A Note purchased and shall be
remarketed, delivered and registered in accordance with the terms of this Series
A Note and the Series A Note Agreement.
5. REMARKETING OF PURCHASED SERIES A NOTES.
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<PAGE> 13
(a) REMARKETING EFFORT. Except as otherwise provided in
Section 3.08(a) of the Series A Note Agreement, the Remarketing Agent will use
reasonable best efforts to remarket on the Purchase Date all Series A Notes
purchased in accordance with the terms of Section 3.07 of the Series A Note
Agreement and, to the extent such purchased Series A Notes are not remarketed on
the Purchase Date, thereafter will continue to use reasonable best efforts to
remarket such purchased Series A Notes, upon the terms and subject to the
conditions of the Remarketing Agreement.
(b) REMARKETING PROCEEDS. To the extent the Remarketing Agent
has remarketed Series A Notes and has received funds representing a payment for
such Series A Notes (the "Remarketing Proceeds") from the purchasers thereof,
the Remarketing Agent will promptly forward the Remarketing Proceeds by wire
transfer (or in such other manner as is acceptable to the Remarketing Agent) to
the holders tendering such Series A Notes for purchase (or, if required pursuant
to Section 3.08(b) of the Series A Note Agreement, to the Paying Agent). Except
as otherwise provided below with respect to Bank Notes, until such transfer, all
such Remarketing Proceeds shall be deposited in a separate, segregated account
of the Remarketing Agent (or, if transferred to the Paying Agent as provided in
the Series A Note Agreement, in a separate, segregated account of the Paying
Agent) for application in accordance with the applicable provisions of Section
3.08(b) of the Series A Note Agreement, and until so applied shall be held in
trust for the benefit of the holders tendering such Series A Notes for purchase.
Notwithstanding any provision to the contrary herein or in the Series A Note
Agreement, for so long as the Series A Notes are held pursuant to a book-entry
system maintained by DTC, payments of Remarketing Proceeds with respect to such
Series A Notes shall be made pursuant to the rules and procedures established by
DTC and its Participants.
(c) DELIVERY OF PURCHASED SERIES A NOTES. Series A Notes
purchased with Remarketing Proceeds (other than Bank Notes) shall be delivered
to the purchasers thereof upon receipt of payment therefor. Prior to such
delivery, the Paying Agent shall provide for registration of transfer to the
Holders, as provided in a written notice from the Remarketing Agent.
6. MONEYS TO BE HELD IN TRUST. All proceeds of a draw on the
Series A Letter of Credit received by the Trustee and all money that the Trustee
or the Paying Agent shall hold in, or shall have withdrawn from, the Series A
Letter of Credit Fund or shall have received from any other source and set aside
for the purpose of paying any of the Series A Notes, either on the Maturity Date
set forth above or by purchase (other than as provided in Section 3.08 of the
Series A Note Agreement regarding remarketing of Series A Notes) or call for
redemption or for the
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<PAGE> 14
purpose of paying any interest on the Series A Notes, shall be held in trust for
the respective holders or beneficial owners of the Series A Notes. Moneys
received by the Remarketing Agent, the Paying Agent or the Trustee from the sale
of a Series A Note under Section 3.08 of the Series A Note Agreement regarding
remarketing of Series A Notes or from the purchase of any Series A Note will be
held segregated from other funds held by the Remarketing Agent, the Paying Agent
or the Trustee for the benefit of the Person from whom such Series A Note was
purchased and will not be invested while so held. Any money that is so set aside
and that remains unclaimed by the holders or beneficial owners for a period of
five (5) years after the date on which such Series A Notes have become payable
shall be remitted to the Borrower and thereafter the holders or beneficial
owners shall look only to the Borrower for payment and then only to the extent
of the amounts so received, without any interest thereon, and the Trustee, the
Remarketing Agent, the Paying Agent and the Bank shall have no responsibility
with respect to such money.
7. DEFAULTS AND REMEDIES. Upon the occurrence of certain events,
and on the conditions, in the manner and with the effect set forth in Article
VII of the Series A Note Agreement, the principal of all Series A Notes then
outstanding under the Series A Note Agreement may become or may be declared due
and payable before the stated maturity thereof, together with interest accrued
thereon. The Series A Note Agreement directs the Trustee to declare an
acceleration upon notice by the Bank of the occurrence and continuance of an
event of default under the Reimbursement Agreement, and upon the occurrence of
certain other Events of Default under the Series A Note Agreement. The Trustee
has the right to accelerate the entire unpaid principal of and interest on the
Series A Notes in certain events only with the Bank's consent, all as provided
in more detail in Article VII of the Series A Note Agreement to which reference
is hereby made.
The owner of this Series A Note shall have no right to enforce
the provisions of the Series A Note Agreement or to institute action to enforce
the covenants therein, or to take any action with respect to any Event of
Default under the Series A Note Agreement, or to institute, appear in or defend
any suit or other proceeding with respect thereto, except as provided in the
Series A Note Agreement and except that any registered owner may institute
action to enforce the payment of the principal of or interest on his Series A
Note.
8. MISCELLANEOUS. Modifications or alterations of the Series A
Note Agreement may be made only to the extent and in the circumstances permitted
by Article IX of the Series A Note Agreement.
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<PAGE> 15
Executed counterparts of the Series A Note Agreement are on file at the
principal corporate trust office of the Trustee. The holder of this Series A
Note, by acceptance hereof, consents to all of the terms and provisions of the
Series A Note Agreement.
It is hereby certified that all acts, conditions and things required to
happen, exist and be performed under the laws of the State of New York, and
under the Series A Note Agreement precedent to and in connection with the
issuance of this Series A Note have happened, exist and have been performed as
so required, and that the issuance, authentication and delivery of this Series A
Note have been duly authorized by the Borrower.
Unless the Certificate of Authentication hereto has been executed by
the Paying Agent by manual signature of one of its Responsible Officers, this
Series A Note shall not be entitled to any benefit under the Series A Note
Agreement, or be valid or obligatory for any purpose.
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<PAGE> 16
IN WITNESS WHEREOF, Hanover Direct, Inc. has caused this
Series A Note to be executed in its name and on its behalf by the manual or
facsimile signature of the President and Treasurer and attested by manual or
facsimile signature of the Secretary of Assistant Secretary and sealed with the
corporate seal of Hanover Direct, Inc., all as of the Date of Issuance set forth
above.
HANOVER DIRECT, INC.
By: /s/ Jack Rosenfeld
___________________________
Name: Jack Rosenfeld
Title: President and CEO
ATTEST:
By:__________________________
Name:________________________
Title:_______________________
[CORPORATE SEAL]
By: /s/ Edward J. O'Brien
___________________________
Name: Edward J. O'Brien
Title: Senior Vice President
and Treasurer
16
<PAGE> 17
CERTIFICATE OF AUTHENTICATION
This Series A Note is one of the Series A Notes issued under
the provisions of the within-mentioned Series A Note Agreement.
NORWEST BANK MINNESOTA, N.A.,
AS PAYING AGENT
By:___________________________
Responsible Officer
Dated: __________________
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<PAGE> 18
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPE THE NAME AND ADDRESS, INCLUDING THE ZIP CODE OF THE
TRANSFEREE, AND THE FEDERAL TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
the within Series A Note and all rights thereunder, and hereby irrevocably
constitutes and appoints ______________ Attorney to transfer the within Series A
Note on the books kept for registration and transfer thereof, with full power of
substitution in the premises.
Dated:_______________
By:______________________________________
NOTICE: The signature of the
Registered Owner
above must
correspond with the
name of the
Registered Owner as
it appears on the
registration books
maintained by the
Paying Agent.
Signature Guaranteed
By:_________________________
NOTICE: signature(s) must be guaranteed by
a member firm of the New York Stock
Exchange or a commercial bank or
trust company.
18
