SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from
__________ to __________
Commission file Number 0-14681
J. BAKER, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2866591
(State of Incorporation) (IRS Employer Identification Number)
555 Turnpike Street, Canton, Massachusetts 02021 (Address of
principal executive offices)
(781) 828-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such period that Registrant was required to file
such reports), and (2) has been subject to filing such reports for the past 90
days.
YES [ X ] NO [ ]
14,064,139 shares of common stock were outstanding on May 1, 1999.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
May 1, 1999 (unaudited) and January 30, 1999
<TABLE>
<S> <C> <C>
May 1, January 30,
Assets 1999 1999
------ ---- ----
Current assets:
Cash and cash equivalents $ 1,423,389 $ 3,679,115
Accounts receivable:
Trade, net 13,687,256 9,979,178
Other 2,640,249 2,768,651
--------- ---------
16,327,505 12,747,829
---------- ----------
Merchandise inventories 175,028,033 164,057,913
Prepaid expenses 5,984,121 3,595,858
Deferred income taxes, net 4,535,000 4,535,000
--------- ---------
Total current assets 203,298,048 188,615,715
----------- -----------
Property, plant and equipment, at cost:
Land and buildings 19,726,648 19,726,648
Furniture, fixtures and equipment 78,481,406 76,008,130
Leasehold improvements 27,359,568 26,869,958
---------- ----------
125,567,622 122,604,736
Less accumulated depreciation and amortization 57,040,151 54,109,006
---------- ----------
Net property, plant and equipment 68,527,471 68,495,730
---------- ----------
Deferred income taxes, net 55,019,631 55,404,641
Other assets, at cost, less accumulated amortization 9,949,062 11,518,573
--------- ----------
$336,794,212 $324,034,659
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,126,850 $ 2,112,955
Accounts payable 50,019,132 55,830,124
Accrued expenses 9,320,153 8,772,148
Income taxes payable - 1,811,701
---------- ---------
Total current liabilities 61,466,135 68,526,928
---------- ----------
Other liabilities 2,710,200 2,741,591
Long-term debt, net of current portion 123,312,534 104,229,825
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity 78,952,343 78,183,315
---------- ----------
$336,794,212 $324,034,659
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings For the quarters ended
May 1, 1999 and May 2, 1998
(Unaudited)
<TABLE>
<S> <C> <C>
Quarter Quarter
Ended Ended
May 1, 1999 May 2, 1998
----------- -----------
Net sales $129,192,610 $126,636,564
Cost of sales 68,973,108 68,312,559
---------- ----------
Gross profit 60,219,502 58,324,005
Selling, administrative and general expenses 51,720,385 50,782,456
Depreciation and amortization 3,488,615 3,098,046
--------- ---------
Operating income 5,010,502 4,443,503
Net interest expense 3,478,512 3,597,160
--------- ---------
Earnings before income taxes 1,531,990 846,343
Income tax expense 552,000 330,000
------- -------
Net earnings $ 979,990 $ 516,343
========= ==========
Net earnings per common share:
Basic $ 0.07 $ 0.04
========= =========
Diluted $ 0.07 $ 0.04
========= =========
Number of shares used to compute net earnings per common share:
Basic 14,064,526 13,920,294
========== ==========
Diluted 14,149,469 14,064,373
========== ==========
Dividends declared per share $ 0.015 $ 0.015
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows For the quarters
ended May 1, 1999 and May 2, 1998
(Unaudited)
<TABLE>
<S> <C> <C>
May 1, 1999 May 2, 1998
----------- -----------
Cash flows from operating activities:
Net earnings $ 979,990 $ 516,343
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization:
Fixed assets 2,931,145 2,670,162
Deferred charges, intangible assets and
deferred financing costs 559,448 429,853
Deferred income taxes, net 385,010 1,025,620
Grants of performance share awards - 255,563
Change in:
Accounts receivable (3,579,676) 2,337,747
Merchandise inventories (10,970,120) (12,786,580)
Prepaid expenses (2,388,263) (2,393,160)
Accounts payable (5,810,992) (3,553,649)
Accrued expenses 548,005 (635,758)
Income taxes payable/receivable (1,811,701) (50,195)
Other liabilities (3,453) (110,913)
------ --------
Net cash used in operating activities (19,160,607) (12,294,967)
----------- -----------
Cash flows from investing activities:
Capital expenditures for:
Property, plant and equipment (2,962,886) (3,512,446)
Other assets (18,767) (486,017)
Proceeds from sales of footwear businesses 887,903 2,902,335
------- ---------
Net cash used in investing activities (2,093,750) (1,096,128)
---------- ----------
Cash flows from financing activities:
Repayment of senior debt - (1,500,000)
Proceeds from other long-term debt 19,244,729 12,404,379
Repayment of mortgage payable (148,125) (135,422)
Payment of mortgage escrow, net 112,989 (78,912)
Payment of dividends (210,962) (208,789)
-------- --------
Net cash provided by financing activities 18,998,631 10,481,256
---------- ----------
Net decrease in cash (2,255,726) (2,909,839)
Cash and cash equivalents at beginning of year 3,679,115 3,995,995
--------- ---------
Cash and cash equivalents at end of period $ 1,423,389 $ 1,086,156
=========== ===========
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 2,493,430 $ 2,398,464
Income taxes 1,978,691 50,195
Income taxes refunded - (876,349)
======== ========
Schedule of non-cash financing activity:
Common stock issued for performance share awards - 255,563
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
NOTES
1] The accompanying unaudited consolidated financial statements, in the opinion
of management, include all adjustments necessary for a fair presentation of the
financial position and results of operations of J. Baker, Inc. (the "Company").
The results for the interim periods are not necessarily indicative of results
that may be expected for the entire fiscal year.
2] In February, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
Per Share" ("EPS"), which the Company adopted in fiscal 1998. Basic EPS is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding during the period. Diluted EPS is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding, after giving effect to all
potentially dilutive common shares outstanding during the period.
For the quarters ended May 1, 1999 and May 2, 1998, the calculation of
diluted earnings per common share includes the dilutive effect of outstanding
stock options and warrants. The common stock issuable under the 7% convertible
subordinated notes due 2002 and the convertible debentures was not included in
the calculation for the quarters ended May 1, 1999 and May 2, 1998 because its
effect would be antidilutive. All net earnings per common share amounts for all
periods presented have been restated to conform to SFAS No. 128 requirements.
Net earnings and shares used to compute net earnings per share, basic
and diluted, are reconciled below:
<TABLE>
<S> <C> <C>
May 1, 1999 May 2, 1998
----------- -----------
Net earnings, basic and diluted $ 979,990 $ 516,343
=========== ===========
Weighted average common shares:
Basic 14,064,526 13,920,294
Effect of dilutive securities:
Stock options and performance share awards 84,943 144,079
------ -------
Diluted 14,149,469 14,064,373
========== ==========
</TABLE>
3] On May 23, 1999, the Company acquired substantially all of the assets of the
Repp Ltd. Big & Tall and Repp Ltd. by Mail divisions of Edison Brothers Stores,
Inc. ("Edison"). Edison is currently operating as a debtor-in-possession under
Chapter 11 of the United States Bankruptcy Code, as amended. The all cash
purchase price of $31.7 million, subject to adjustment, was for the acquisition
of 175 United States and Canadian Repp Ltd. Big & Tall retail locations and the
Repp Ltd. by Mail catalog business. The Company immediately sold Repp's Canadian
operation to Grafton-Fraser, Inc., a Canadian men's retailer, and commenced the
closing of 31 stores. The Company will operate the remaining 128 retail stores
in the United States and the Repp Ltd. by Mail catalog through a new subsidiary,
JBI Apparel, Inc. The transaction was financed primarily through (a) a new $20
million credit facility and a $5 million term loan provided to JBI Apparel, Inc.
by BankBoston Retail Finance Inc. and Back Bay Capital Funding llc,
respectively, (b) the issuance by JBI Apparel, Inc. of $10 million of senior
subordinated notes to a group of investors, which included investment funds
affiliated with Donaldson, Lufkin & Jenrette, Inc. (the "Investor Group"), and
(c) the sale of the Canadian operations and the liquidation of the inventories
in the 31 closing stores. In connection with the $10 million financing provided
by the Investor Group, J. Baker issued 5-year warrants enabling holders to
purchase 1,200,000 shares of the Company's common stock at $5.00 per share. The
remaining 128 Repp Ltd. retail stores and the Repp Ltd. by Mail catalog, which
will continue to operate under the Repp Ltd. Big & Tall trade name, generated
approximately $100 million in sales for the fiscal year ended January 30, 1999.
<PAGE>
4] The Company is a specialty retailer conducting business through retail
stores in two business segments: apparel and footwear. The Company's chief
operating decision maker, the Chief Executive Officer, evaluates the performance
of the Company's segments based on operating profit and cash flow. Operating
profit includes all revenues and direct expenses attributable to the segment and
excludes certain expenses that are managed outside the segment, primarily
general corporate expenses. General corporate expenses are comprised primarily
of administrative functions, such as management, finance, information systems
and human resources.
Net sales and operating profits for each of the Company's business
segments are set forth below. There are no material inter-segment revenues.
<TABLE>
<S> <C> <C>
Quarter Ended
-----------------------------------
May 1, 1999 May 2, 1998
----------- -----------
($ in thousands)
Apparel
Net sales $ 74,198 $ 72,000
Operating profit 7,013 5,882
Footwear
Net sales $ 54,995 $ 54,637
Operating profit 3,618 3,461
Consolidated
Net sales $129,193 $126,637
Operating profit before general
corporate expense 10,631 9,343
General corporate expense (5,620) (4,900)
Interest expense, net (3,479) (3,597)
Earnings before income taxes $ 1,532 $ 846
</TABLE>
5] On November 12, 1998 Ames Department Stores, Inc. ("Ames") entered into an
agreement for the acquisition of Hills Stores Company ("Hills"). The Company has
operated licensed footwear departments in each of Ames' and Hills' stores
pursuant to license agreements with each such entity. On December 31, 1998, Ames
acquired control of Hills through its acquisition of substantially more than a
majority of Hills' outstanding common stock and convertible preferred stock and
notes. In March, 1999 Ames consummated the merger of Hills into a subsidiary of
Ames.
At the time of the acquisition, Hills operated 155 discount department
stores in twelve states. In February, 1999, Ames began a program to remodel and
convert 150 of the acquired Hills stores to Ames stores in three sequential
phases of approximately 50 stores each. Upon the completion of the remodeling
and conversion process, all such stores will be incorporated into the Company's
license agreement with Ames on the same terms and conditions as presently exist.
The first stage of remodeling, involving 50 stores, has been completed and the
remodeled stores opened on April 22, 1999. The second stage, involving 54
stores, is scheduled to be completed in July, 1999 and the final stage,
involving 46 stores, is scheduled to be completed in September, 1999. During
these three stages of store closings, the Company has participated in
liquidation sales of its footwear inventory in each store. The first and second
stages of liquidation sales ended on February 22, 1999 and May 21, 1999,
respectively, and the third stage is scheduled to be completed on July 26, 1999.
The Company's sales in the combined Ames and Hills chains for the quarter ended
May 1, 1999 were $30.0 million.
6] On June 23, 1995, Bradlees Stores, Inc. ("Bradlees"), a licensor of the
Company, filed for protection under Chapter 11 of the United States Bankruptcy
Code. At the time of the bankruptcy filing, the Company had outstanding accounts
receivable of approximately $1.8 million due from Bradlees. On April 13, 1998,
Bradlees filed its Joint Plan of Reorganization and Disclosure Statement (the
"Plan") with the United States Bankruptcy Court for the Southern District of New
York, which, as amended, was confirmed on November 18, 1998. The Plan became
effective on February 2, 1999 (the "Effective Date"), the Company's license
agreement with Bradlees was
<PAGE>
amended and assumed and the reorganized Bradlees emerged from bankruptcy.
Pursuant to the amended agreement, ten days after the Effective Date Bradlees
made a cash distribution to the Company in the amount of $360,000 and shall pay
the unpaid balance of the Company's pre-petition claim in thirty-six equal
monthly installments, which commenced on March 1, 1999, with interest payable on
the unpaid balance outstanding commencing with the seventh monthly payment. As
provided in the amended licensed agreement, upon the occurrence of certain
events, the entire unpaid balance of the Company's claim shall be paid within 30
days after such occurrence, without penalty or interest. The Company's sales in
the Bradlees chain for the quarter ended May 1, 1999 were $9.6 million.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
STATEMENTS MADE OR INCORPORATED INTO THIS QUARTERLY REPORT INCLUDE A NUMBER OF
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934.
FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS CONTAINING
THE WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE" AND WORDS OF
SIMILAR IMPORT, WHICH EXPRESS MANAGEMENT'S BELIEF, EXPECTATION OR INTENT
REGARDING THE COMPANY'S FUTURE PERFORMANCE. THE COMPANY'S ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MAY CAUSE SUCH DIFFERENCES ARE
DESCRIBED IN THE SECTION ENTITLED "CERTAIN FACTORS THAT MAY AFFECT FUTURE
RESULTS" FOUND ON PAGE 12 OF THIS QUARTERLY REPORT.
All references herein to fiscal 2000 and fiscal 1999 relate to the years ending
January 29, 2000 and January 30, 1999, respectively.
Results of Operations
First Quarter Fiscal 2000 versus First Quarter Fiscal 1999
The Company's net sales increased by $2.6 million to $129.2 million in
the first quarter of fiscal 2000 from $126.6 million in the first quarter of
fiscal 1999, primarily due to an increase in sales in the Company's apparel
businesses. Sales in the Company's apparel operations increased by $2.2 million
to $74.2 million primarily due to a 3.7% increase in comparable apparel store
sales (comparable apparel store sales increases/decreases are based upon
comparisons of weekly sales volume in Casual Male Big & Tall stores and Work 'n
Gear stores which were open in corresponding weeks of the two comparison
periods). Sales in the Company's footwear operations increased by $358,000 to
$55.0 million, primarily due to a 4.4% increase in comparable retail footwear
store sales (comparable retail footwear store sales increases/decreases are
based upon comparisons of weekly sales volume in licensed footwear departments
which were open in corresponding weeks of the two comparison periods). Such
increase was partially offset by a $2.0 million decrease in net sales due to the
closing of a group of former Hills locations for a portion of the first quarter
of fiscal 2000 for remodeling prior to their reopening as Ames stores. For
additional information on the closing, remodeling and conversion of the former
Hills stores to Ames stores, see Note 5 on page 6.
The Company's cost of sales constituted 53.4% of sales in the first
quarter of fiscal 2000 as compared to 53.9% of sales in the first quarter of
fiscal 1999. Cost of sales in the Company's apparel operations was 50.8% of
sales in the first quarter of fiscal 2000 as compared to 51.4% of sales in the
first quarter of fiscal 1999. The decrease in such percentage was primarily
attributable to lower markdowns as a percentage of sales and a higher initial
markup on merchandise purchases. Cost of sales in the Company's footwear
operations was 56.9% of sales in the first quarter of fiscal 2000, as compared
to 57.3% of sales in the first quarter of fiscal 1999. The decrease in such
percentage was primarily attributable to a higher initial markup on merchandise
purchases, partially offset by higher markdowns as a percentage of sales.
Selling, administrative and general expenses increased $938,000, or
1.8%, to $51.7 million in the first quarter of fiscal 2000 from $50.8 million in
the first quarter of fiscal 1999. As a percentage of sales, selling,
administrative and general expenses were 40.0% of sales in the first quarter of
fiscal 2000, as compared to 40.1% of sales in the first quarter of fiscal 1999.
Selling, administrative and general expenses in the Company's apparel operations
were 41.2% of sales in the first quarter of fiscal 2000 as compared to 41.7% of
sales in the first quarter of fiscal 1999. This decrease was primarily due to
the increase in comparable apparel store sales. Selling, administrative and
general expenses in the Company's footwear operations were 38.5% of sales in the
first quarter of fiscal 2000 as compared to 38.0% of sales in the first quarter
of fiscal 1999. This increase was primarily due to an increase in store level
expenses.
<PAGE>
Depreciation and amortization expense increased by $391,000 to $3.5
million in the first quarter of fiscal 2000 from $3.1 million in the first
quarter of fiscal 1999, primarily due to an increase in depreciable and
amortizable assets.
As a result of the above, the Company's operating income increased to
$5.0 million in the first quarter of fiscal 2000 from $4.4 million in the first
quarter of fiscal 1999. As a percentage of sales, operating income was 3.9% in
the first quarter of fiscal 2000 as compared to 3.5% in the first quarter of
fiscal 1999.
Net interest expense decreased by $119,000 to $3.5 million in the first
quarter of fiscal 2000 from $3.6 million in the first quarter of fiscal 1999,
primarily due to lower interest rates on bank borrowings and lower average
levels of bank borrowings in the first quarter of fiscal 2000 versus the first
quarter of fiscal 1999.
Taxes on earnings for the first quarter of fiscal 2000 were $552,000,
yielding an effective tax rate of 36.0%, as compared to taxes on earnings of
$330,000, yielding an effective tax rate of 39.0%, in the first quarter of
fiscal 1999. The tax rate for fiscal 2000 is consistent with that utilized for
the entire fiscal year 1999.
Net earnings for the first quarter of fiscal 2000 were $980,000, as
compared to net earnings of $516,000 in the first quarter of fiscal 1999, an
increase of 89.8%.
Financial Condition
May 1, 1999 versus January 30, 1999
The increase in accounts receivable at May 1, 1999 from January 30,
1999 was primarily due to an increase in trade receivables due to seasonal
factors, licensed footwear department sales in April being higher than licensed
footwear department sales in January.
The increase in merchandise inventories at May 1, 1999 from January 30,
1999 was primarily due to a seasonal increase in the average inventory level per
location.
The decrease in accounts payable at May 1, 1999 from January 30, 1999
was primarily due to a decrease in in-transit inventory. The ratio of accounts
payable to merchandise inventory was 28.6% at May 1, 1999, as compared to 34.0%
at January 30, 1999 and 28.2% at May 2, 1998.
The increase in long-term debt, net of current portion, at May 1, 1999
from January 30, 1999 was primarily due to additional bank borrowings to meet
seasonal working capital needs and to fund capital expenditures.
Liquidity and Capital Resources
The Company has separate revolving credit facilities, which are
guaranteed by J. Baker, Inc., to finance its combined Casual Male and Work 'n
Gear apparel business (the "Apparel Credit Facility") and its footwear business
(the "Footwear Credit Facility"). The Apparel Credit Facility is an $85 million
revolving credit facility with Fleet National Bank, BankBoston, N.A., The Chase
Manhattan Bank, Imperial Bank, USTrust, Wainwright Bank & Trust Company and Bank
Polska Kasa Opieki S.A. The Apparel Credit Facility is secured by all the
capital stock of The Casual Male, Inc. and four other subsidiaries of the
Company. The aggregate commitment under the Apparel Credit Facility will
automatically reduce by $10 million on December 31, 1999. Borrowings under the
Apparel Credit Facility bear interest at variable rates and can be in the form
of loans, bankers' acceptances and letters of credit. This facility expires May
31, 2000.
The Footwear Credit Facility is a $50 million revolving credit
facility, secured by substantially all the assets of JBI, Inc. and Morse Shoe,
Inc., with BankBoston Retail Finance Inc. and Fleet National Bank. Aggregate
borrowings available under the Footwear Credit Facility are limited to an amount
determined by a formula based on
<PAGE>
various percentages of eligible inventory and accounts receivable. Borrowings
under the Footwear Credit Facility bear interest at variable rates and can be in
the form of loans or letters of credit. This facility expires May 31, 2001.
As of May 1, 1999, the Company had aggregate borrowings outstanding
under its Apparel Credit Facility and its Footwear Credit Facility totaling
$68.0 million and $44.9 million, respectively, consisting of loans and
obligations under letters of credit.
In May, 1999, a new subsidiary of the Company, JBI Apparel, Inc.,
acquired the Repp Ltd. Big & Tall retail store business operated in the United
States and the Repp Ltd. by Mail catalog. The purchase price and working capital
needs of the Repp business are being financed primarily through (a) a new credit
facility provided to JBI Apparel, Inc. by BankBoston Retail Finance Inc.
("BBRF") and Back Bay Capital Funding llc, respectively, and (b) senior
subordinated notes and warrants issued to a group of investors, which included
investment funds affiliated with Donaldson, Lufkin and Jenrette, Inc. (the
"Investor Group").
Effective May 21, 1999, a combination $20 million revolving line of
credit and $5 million term loan facility (the "JBI Apparel Credit Facility") was
established with BBRF and Back Bay Capital llc, respectively. The JBI Apparel
Credit Facility is secured by substantially all of the assets of JBI Apparel,
Inc. and guaranteed by the Company's JBI, Inc. and Morse Shoe, Inc.
subsidiaries. These guarantees are secured by liens (which are junior to those
securing the Footwear Credit Facility) on substantially all the assets of JBI,
Inc. and Morse Shoe, Inc. Aggregate borrowings are limited to an amount
determined by a formula based on various percentages of eligible inventory and
accounts receivable. Borrowings under the $20 million revolving line of credit
bear interest at variable rates and may be in the form of loans or letters of
credit. Borrowings under the term loan bear interest at 19% per year. The JBI
Apparel Credit Facility expires on May 31, 2001.
Also effective on May 21, 1999, the Investor Group provided $10 million
to JBI Apparel, Inc. through the issuance of 13% Senior Subordinated Notes.
Detachable warrants were issued in connection with the 13% Senior Subordinated
Notes, which enable the holders to purchase 1,200,000 shares of J. Baker, Inc.
common stock at $5.00 per share. The 13% Senior Subordinated Notes mature on
December 31, 2001, and the warrants expire on May 21, 2004.
Net cash used in operating activities for the first quarter of fiscal
2000 was $19.2 million, as compared to net cash used in operating activities of
$12.3 million in the first quarter of fiscal 1999. The $6.9 million change was
primarily due to an increase in net accounts receivable in fiscal 2000 versus a
decrease in net accounts receivable in fiscal 1999, which was primarily due to
the receipt of litigation settlement proceeds in the first quarter of fiscal
1999.
Net cash used in investing activities for the first quarter of fiscal
2000 was $2.1 million, as compared to net cash used in investing activities of
$1.1 million in the first quarter of fiscal 1999. The $1.0 million change was
primarily due to the receipt of $888,000 in proceeds from the sales of the
footwear businesses in the first quarter of fiscal 2000 versus receipt of $2.9
million in sales proceeds in the first quarter of fiscal 1999. This decrease was
partially offset by lower capital expenditures in the first quarter of fiscal
2000 than the first quarter of fiscal 1999.
Net cash provided by financing activities for the first quarter of
fiscal 2000 was $19.0 million, as compared to net cash provided by financing
activities of $10.5 million in the first quarter of fiscal 1999. The $8.5
million change was primarily due to the net borrowing of $19.2 million under the
Company's revolving lines of credit during the first quarter of fiscal 2000
versus the net borrowing of $12.4 million during the first quarter of fiscal
1999.
The Company invested $3.0 million and $3.5 million in capital
expenditures during the first quarters of fiscal 2000 and fiscal 1999,
respectively. The Company's capital expenditures generally relate to new store
and licensed footwear department openings and remodeling of existing stores and
departments, coupled with expenditures for general corporate purposes.
<PAGE>
Following is a table showing actual and planned store openings by
division for fiscal 2000:
<TABLE>
<S> <C> <C> <C>
Actual Openings Planned Openings Total
First Quarter Second through Fourth Actual/Planned
Division Fiscal 2000 Quarters Fiscal 2000 Openings
-------- ----------- -------------------- --------
Casual Male 2 4 6
Work 'n Gear - - -
JBI Footwear 2 3 5
Repp Ltd. Big &Tall - 10 10
</TABLE>
Offsetting the above actual and planned store openings, the Company
closed 1 Casual Male store, 2 Work 'n Gear stores and 3 JBI Footwear departments
during the first quarter of fiscal 2000. The Company has plans to close
approximately an additional 8 Casual Male stores during the second through
fourth quarters of fiscal 2000. These numbers do not reflect the closing and
reopening of the approximately 150 Hills/Ames stores during fiscal 2000, nor do
they reflect the 128 stores which were acquired as a result of the Repp
acquisition.
The Company believes amounts available under its revolving credit
facilities, along with other potential sources of funds and cash flows from
operations, will be sufficient to meet its operating and capital requirements
for the foreseeable future. From time to time, the Company evaluates potential
acquisition candidates in pursuit of strategic initiatives and growth goals in
its niche apparel markets. Financing of potential acquisitions will be
determined based on the financial condition of the Company at the time of such
acquisitions, and may include borrowings under current or new commercial credit
facilities or the issuance of publicly issued or privately placed debt or equity
securities.
Year 2000 Compliance
The statements in this section include "Year 2000 Readiness Disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.
The Company is faced with "Year 2000" remediation issues. Many computer
programs were written with a two-digit date field, which, if not made Year 2000
compliant, will be unable to correctly process date information on or after
January 1, 2000.
The Company's State of Readiness
The Company established a Year 2000 committee comprised of senior
management of the Company and also engaged an independent consulting firm to
assist in remediation of the Company's Year 2000 issues. The Company evaluated
its internal computer systems and while the data processing systems were found
to be impacted to some extent, Year 2000 issues were found to be most
significant in connection with various mainframe computer programs. In fiscal
1997, the Company developed a plan to address Year 2000 issues as they related
to the mainframe computer programs and began the process of converting such
computer programs to be Year 2000 compliant. During fiscal 1999, the Company
completed the conversion of its three primary mainframe computer programs to be
Year 2000 compliant.
During fiscal 1999, the Company undertook an inventory of its
non-information technology systems. Such inventory is substantially complete
and, where appropriate, the Company has made contingency plans in order to
minimize any adverse effect Year 2000 issues may have on such non-information
technology systems.
During fiscal 1999, the Company communicated with and completed a
compilation of detailed information regarding its key business partners and
major suppliers to determine to what extent the Company may be vulnerable to
third party Year 2000 issues. Although the Company does not currently anticipate
it will experience any material business interruptions or shipment delays from
its key business partners and major suppliers due to Year 2000 issues, at this
time, the Company is unable to estimate the nature or extent of any potential
adverse impact resulting from the failure of its key business partners and major
suppliers to achieve Year 2000 compliance.
<PAGE>
The Company is not dependent on a single source for any products or
services. In the event a third party is unable to provide material products or
services to the Company due to a Year 2000 computer systems failure, the Company
believes it has adequate alternate sources for such products or services. If
alternate sources are used, there can be no guarantee that similar or identical
products or services would be available on the same terms and conditions or that
the Company would not experience some adverse effect as a result of switching to
such alternate sources.
Costs to Address the Year 2000
The Company's total Year 2000 expenditures are estimated to be
approximately $4.0 million, of which approximately $2.0 million are for
incremental costs, and are being funded through operating cash flows. Certain
other non-Year 2000 computer system projects were deferred in order to ensure
completion of the Company's Year 2000 compliance efforts. Although management
believes deferring such projects has not had a material adverse effect on the
Company's operations, it expects these projects, when implemented, will
positively impact future results. The Company is expensing all costs associated
with Year 2000 computer system changes as the costs are incurred. To date, the
Company has expended approximately $3.7 million on Year 2000 projects.
Risk Analysis
Similar to most large business enterprises, the Company is dependent
upon its own internal computer technology and relies upon timely performance by
its key business partners and major suppliers. Although the full consequences
are not known, the failure of either the Company's systems or those of material
third parties to conform to the Year 2000, as noted above, could impair the
Company's ability to deliver product to its stores in a timely fashion, which
could result in potential lost sales opportunities and additional expenses. The
Company's Year 2000 project seeks to identify and minimize this risk and
includes testing of internally generated systems and purchased hardware and
software to ensure, to the extent feasible, all such systems will function
before and after the year 2000.
Contingency Plans
The Company has developed contingency plans, which will attempt to
minimize disruption to the Company's operations in the event of Year 2000
computer systems failures. While no assurances can be given, because of the
Company's extensive efforts to formulate and carry out an effective Year 2000
program, the Company believes its program will be completed on a timely basis
and should effectively minimize disruption to the Company's operations due to
Year 2000 issues.
Certain Factors That May Affect Future Results
The Company cautions that any forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) contained in
this Form 10-Q or made by management of the Company involve risks and
uncertainties and are subject to change based on various important factors.
Company management may also make written or oral forward-looking statements in
other documents it files with the SEC, in its annual report to stockholders, in
press releases and other written materials, and in oral statements made by
officers, directors or employees of the Company. You should not rely on
forward-looking statements, because they involve known and unknown risks,
uncertainties and other factors, some of which are beyond the control of the
Company. The following factors, among others, in some cases have affected and in
the future could affect the Company's financial performance and actual results,
and could cause actual results, performance or achievements of the Company for
fiscal 2000 and beyond to differ materially from those expressed or implied in
any such forward-looking statements: changes in consumer spending patterns,
consumer preferences and overall economic conditions, availability of credit,
interest rates, the impact of competition and pricing, the weather, the
financial condition of the retailers in whose stores the Company operates
licensed footwear departments, changes in existing or potential duties, tariffs
or quotas, availability of suitable store locations on appropriate terms,
ability to hire and train associates and costs, timing and effectiveness of Year
2000 conversion. You should carefully review and consider all of these factors
and should be aware there may be other factors that could cause these
differences. These forward-looking statements were based on information, plans
and estimates at the date of this report, and the Company does not promise to
update any forward-looking statements to reflect changes in underlying
assumptions or factors, new information, future events or other changes.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The Exhibits in the Exhibit Index are filed as part of this report.
(b) No reports on Form 8-K were filed by the Registrant during the quarter
for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
J. BAKER, INC.
By:/s/Alan I. Weinstein
Alan I. Weinstein
President and Chief Executive
Officer
Date: Canton, Massachusetts
June 14, 1999
By:/s/Philip Rosenberg
Philip Rosenberg
Executive Vice President,
Chief Financial Officer
and Treasurer
Date: Canton, Massachusetts
June 14 1999
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------
EXHIBITS
Filed with
Quarterly Report on Form 10-Q
of
J. BAKER, INC.
555 Turnpike Street
Canton, MA 02021
For the Quarter ended May 1, 1999
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
Exhibit Page No.
04. Instruments Defining the Rights of Security Holders, Including Indentures
-------------------------------------------------------------------------
[.01] Securities Purchase Agreement by and among J. Baker, Inc., *
JBI, Inc, and JBI Apparel, Inc. as Guarantor, and DLJ Fund
Investment Partners II, L.P. and others (the "Investor Group"), as
Purchasers, dated as of May 19, 1999, attached.
[.02] Form of 13% Senior Subordinated Note dated as of May 21, 1999, *
attached.
[.03] Form of Warrant, dated as of May 21, 1999, attached. *
[.04] Guaranty by JBI, Inc. in favor of the Investor Group, *
dated as of May 21, 1999, attached.
[.05] Registration Rights Agreement by and among J. Baker, Inc., *
JBI, Inc. and JBI Apparel, Inc. and the Investor Group,
dated as of May 21, 1999, attached.
10. Material Contracts
[.01] Asset Purchase Agreement by and among J. Baker, Inc. as *
Purchaser and Edison Brothers, Stores, Inc., Edison Brothers
Apparel Stores, Inc. and Repp Ltd. Big & Tall as Sellers,
dated as of April 30, 1999, attached.
[.02] Loan and Security Agreement by and among JBI, Apparel, Inc. *
and BankBoston Retail Finance, Inc. and Back Bay Capital
Funding llc, dated as of May 21, 1999, attached.
[.03] Fourth Amendment to Loan and Security Agreement between *
JBI, Inc, Morse Shoe, Inc. and JBI Holding Company, Inc.,
and BankBoston Retail Finance Inc. and Fleet National Bank,
dated as of May 21, 1999, attached.
11. Computation of Net Earnings Per Common Share, attached. *
-------------------------------------------------------
27. Financial Data Schedule *
-----------------------
</TABLE>
* Included herein
EXHIBIT 04.01
SECURITIES PURCHASE AGREEMENT
Among
J. BAKER, INC.
JBI, INC.
JBI APPAREL, INC.
and
The Several Purchasers Named in Schedule I Hereto
Dated as of May 19, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
I. PURCHASE AND SALE OF SECURITIES 2
SECTION 1.01. Issuance and Sale to Purchasers. 2
SECTION 1.02. Asset Purchase by the Company 2
SECTION 1.03. Closing Date 2
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3
SECTION 2.01. Organization, Qualification and Power 3
SECTION 2.02. Subsidiaries 3
SECTION 2.03. Capitalization 4
SECTION 2.04. Authorization of Agreements, Etc. 5
SECTION 2.05. Validity 5
SECTION 2.06. Governmental Approvals 5
SECTION 2.07. Financial Statements, Etc. 6
SECTION 2.08. SEC Filings 7
SECTION 2.09. Absence of Certain Changes or Events 7
SECTION 2.10. Actions Pending 8
SECTION 2.11. Title to Properties 9
SECTION 2.12. Real Property Interests 9
SECTION 2.13. Intellectual Property Rights 10
SECTION 2.14. Labor Matters 10
SECTION 2.15. Severance Arrangements 11
SECTION 2.16. Taxes 11
SECTION 2.17. Compliance with Law; Permits 12
SECTION 2.18. Employee Benefit Plans 13
SECTION 2.19. Environmental Matters 15
SECTION 2.20. Contracts 17
SECTION 2.21. Insurance 17
SECTION 2.22. Offering of the Securities 18
SECTION 2.23. Related Party Transactions 18
SECTION 2.24. Brokers 18
III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 19
SECTION 3.01. Authorization 19
SECTION 3.02. Validity 19
SECTION 3.03. Investment Representations 19
SECTION 3.04. Governmental Approvals 20
IV. COVENANTS OF THE COMPANY, THE GUARANTOR AND APPAREL....................20
SECTION 4.01. Conduct of the Company's Business 20
SECTION 4.02. Access to Information 23
SECTION 4.03. Financial Statements 24
SECTION 4.04. Additional Guaranty 24
SECTION 4.05. Further Assurances 25
SECTION 4.06. Notification of Certain Matters 25
SECTION 4.07. Public Announcements 25
SECTION 4.08. Use of Proceeds 25
V. CONDITIONS PRECEDENT 26
SECTION 5.01. Conditions Precedent to the Obligations of the
Purchasers 26
SECTION 5.02. Conditions Precedent to the Obligations of the
Company 28
VI. SURVIVAL OF REPRESENTATIONS; INDEMNITY.................................29
SECTION 6.01. Survival of Representations 29
SECTION 6.02. General Indemnity 29
SECTION 6.03. Conditions of Indemnification 30
SECTION 6.04. Limitation on Certain Indemnities....................30
VII. TERMINATION 31
SECTION 7.01. Termination by the Parties 31
SECTION 7.02. Effect of Termination 31
VIII. MISCELLANEOUS 32
SECTION 8.01. Restrictive Legends 32
SECTION 8.02. Expenses, Etc. 32
SECTION 8.03. Survival of Agreements 32
SECTION 8.04. Parties in Interest 33
SECTION 8.05. Notices 33
SECTION 8.06. Entire Agreement; Assignment 34
SECTION 8.07. Counterparts 34
SECTION 8.08. Governing Law 34
</TABLE>
<PAGE>
INDEX TO EXHIBITS, SCHEDULES AND ANNEX
Exhibit Description
- ------- -----------
A Form of 13% Senior Subordinated Note
B Form of Warrant
C Form of Credit Agreement
D Form of Guaranty
E Form of Registration Rights Agreement
Schedule Description
- -------- -----------
I Purchasers and Securities
2.02 Subsidiaries
2.03 Capitalization
2.04 Authorization
2.06 Governmental Approvals
2.07 Financial Statements
2.09 Certain Changes or Events
2.10 Actions Pending
2.12 Real Property
2.13 Intellectual Property
2.15 Severance Arrangements
2.16 Taxes
2.17 Compliance with Law; Permits
2.18 Employee Benefit Plans
2.19 Environmental Matters
2.21 Insurance
Annex Description
- ----- -----------
I Form of Opinion of Counsel
<PAGE>
SECURITIES PURCHASE AGREEMENT dated as of May 19, 1999, among
J. BAKER, INC., a Massachusetts corporation (the "Company"), JBI, INC., a
Massachusetts corporation and a wholly-owned subsidiary of the Company
("Guarantor"), JBI APPAREL, INC., a Massachusetts corporation and a wholly-owned
subsidiary of the Guarantor ("Apparel"), and the several persons named in
Schedule I hereto (the "Purchasers").
WHEREAS, Apparel desires to sell to the Purchasers, and the
Purchasers desire to purchase from Apparel, on the terms and subject to the
conditions set forth herein, 13% Senior Subordinated Notes of the Company due
December 31, 2001, in the principal amount of $10,000,000 substantially in the
form attached as Exhibit A hereto (the "Notes"); and
WHEREAS, the Company desires to sell to the Purchasers, and
the Purchasers desire to purchase from the Company, on the terms and subject to
the conditions set forth herein, warrants substantially in the form attached as
Exhibit B hereto (the "Warrants" and together with the Notes, the "Securities")
to purchase up to 1,200,000 shares of common stock, par value $.50 per share, of
the Company ("Common Stock"); and
WHEREAS, Guarantor, desires to guaranty the performance of the
obligations of Apparel under the Notes substantially in the form attached as
Exhibit C hereto (the "Guaranty"); and
WHEREAS, the Company has agreed to purchase the assets (the
"Asset Purchase") of the REPP divisions (collectively, "REPP") of Edison
Brothers Stores, Inc., a Delaware corporation ("Edison Brothers"), for an
aggregate purchase price of approximately $33,000,000, on the terms and subject
to the conditions set forth in the Asset Purchase Agreement, by and between the
Company and Edison Brothers (the "Asset Purchase Agreement"); and
WHEREAS, the Company intends to assign its rights under the Asset Purchase
Agreement to Apparel; and
WHEREAS, in connection with the transactions contemplated by
the Asset Purchase Agreement, Apparel wishes to obtain a senior revolving credit
facility in an amount up to $25,000,000 from BankBoston Retail Finance Inc. and
certain other lenders pursuant to a loan and security agreement substantially in
the form of Exhibit D hereto (the "Credit Agreement") and to receive the
proceeds thereof; and
WHEREAS, in order to induce the Purchasers to consummate the
transactions contemplated by this Agreement, the Company has agreed to enter
into a registration rights agreement substantially in the form of Exhibit E
hereto (the "Registration Rights Agreement") with respect to the shares of
Common Stock that will be issuable upon the exercise of the Warrants purchased
hereunder (the "Warrant Shares");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I.
PURCHASE AND SALE OF SECURITIES
SECTION 1.01. Issuance and Sale to Purchasers.
(a) Subject to the terms and conditions set forth herein, on
the Closing Date (as hereinafter defined) Apparel shall issue, sell and deliver
to the Purchasers, and the Purchasers shall purchase from Apparel, Notes in the
principal amount set forth opposite the name of such Purchaser on Schedule I
hereto under the heading "Notes Purchased."
(b) Subject to the terms and conditions set forth herein, on
the Closing Date (as hereinafter defined) the Company shall issue, sell and
deliver to the Purchasers, and the Purchasers shall purchase from the Company,
Warrants to purchase the number of shares of Common Stock set forth opposite the
name of such Purchaser on Schedule I hereto under the heading "Warrants
Purchased."
(c) As payment in full for the Securities being purchased by
it hereunder, and against delivery of the certificate or certificates therefor
as aforesaid, on the Closing Date each Purchaser shall transfer immediately
available funds by wire transfer to the account or accounts designated by the
Company two business days prior to the Closing Date an amount set forth opposite
the name of such Purchaser on Schedule I hereto under the heading "Aggregate
Purchase Price" for an aggregate amount of $10,000,000.
SECTION 1.02. Asset Purchase by Apparel. Subject to the terms
and conditions set forth in the Asset Purchase Agreement, on the Closing Date
immediately prior to the issuance and sale of the Securities to the Purchasers
pursuant to Section 1.01 hereof and the receipt by Apparel of the requisite
proceeds from the Credit Agreement, Apparel shall consummate the Asset Purchase.
SECTION 1.03. Closing Date. The transfer, sale and delivery of
the Securities contemplated by Section 1.01 hereof (the "Closing") shall take
place at the offices of Reboul, MacMurray, Hewitt, Maynard & Kristol, 45
Rockefeller Plaza, New York, New York, as soon as practicable after the
satisfaction or waiver of each of the conditions to the obligations of the
parties set forth in Article VI hereof, or at such date and time as may be
mutually agreed upon among the parties hereto (such date and time of the Closing
being herein called the "Closing Date").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
For purposes of this Article II, the Company shall refer to the Company as
its exists on the date hereof, in giving pro forma effect to the transactions
contemplated by the Asset Purchase Agreement. The Company represents and
warrants, for itself and for each of Guarantor and Apparel, to the Purchasers as
follows:
SECTION 2.01. Organization, Qualification and Power. Each of
the Company, the Guarantor and Apparel is a corporation validly existing and in
good standing under the laws of the State of Massachusetts and has all requisite
corporate power and authority to own or lease and operate its properties and
assets and to carry on its business as it is now being conducted. Each of the
Company, the Guarantor and Apparel is duly qualified as a foreign corporation to
do business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where such failure would not
reasonably be expected to, individually or in the aggregate, have a material
adverse effect on the properties, assets, financial condition, prospects,
operating results or business of the Company and its subsidiaries, taken as a
whole, the Guarantor and its subsidiaries taken as a whole, or Apparel and its
subsidiaries, taken as a whole (a "Material Adverse Effect"). Each of the
Company, the Guarantor and Apparel, as applicable, has the corporate power and
authority to (i) execute, deliver and perform this Agreement and the Credit
Agreement, the Guaranty and the Registration Rights Agreement (collectively, the
"Ancillary Agreements"), (ii) issue, sell and deliver the Securities and the
Warrant Shares and (iii) consummate the Asset Purchase.
SECTION 2.02. Subsidiaries. (a) Except as set forth on
Schedule 2.02 hereto or in (i) the Annual Report of the Company on Form 10-K for
the year ended January 30, 1999, and (ii) all other reports, statements and
registration statements (including Current Reports on Form 8-K) filed by the
Company with the Securities and Exchange Commission (the "SEC") since January
30, 1996, in each case including all amendments, supplements and exhibits
thereto (collectively, the "Company SEC Filings"), neither the Company, the
Guarantor, Apparel nor any of their subsidiaries owns of record or beneficially,
directly or indirectly, (i) any shares of outstanding capital stock or
securities convertible into capital stock of any other corporation or (ii) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise. Each subsidiary of the Company, the Guarantor and Apparel
is a corporation validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own or lease and operate its properties and assets and to carry on
its business as it is now being conducted. Each subsidiary of the Company, the
Guarantor and Apparel is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction in which the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except where such failure would not reasonably be
expected to have a Material Adverse Effect. All the outstanding shares of
capital stock of the Company's, the Guarantor's and Apparel's subsidiaries are
duly authorized, validly issued, fully paid and nonassessable and, except as set
forth on Schedule 2.02, are owned by the Company or by a direct or indirect
wholly-owned subsidiary of the Company, in the case of subsidiaries of the
Company, by the Guarantor or a wholly-owned subsidiary of the Guarantor, in the
case of subsidiaries of the Guarantor, or by Apparel or a wholly-owned
subsidiary of Apparel, in the case of subsidiaries of Apparel, free and clear of
any liens, claims, charges, restrictions, rights of others, security interests,
prior assignments or other encumbrances (collectively, "Claims"), and there are
no proxies, voting or transfer agreements or understandings outstanding with
respect to any such shares.
(b) The Company SEC Filings include a complete and accurate
list of each subsidiary of the Company required to be disclosed therein by the
rules and regulations of the SEC.
(c) For purposes of this Agreement, the term "subsidiary",
when used with respect to the Company, the Guarantor or Apparel, shall mean any
corporation or other business entity, a majority of whose outstanding equity
securities is at the time owned, directly or indirectly, by the Company, the
Guarantor and/or Apparel, as the case may be, and/or one or more other
subsidiaries of the Company, the Guarantor and/or Apparel, as the case may be.
SECTION 2.03. Capitalization.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of Common Stock and 2,100,000 shares of preferred stock, $1.00
par value, of the Company ("Preferred Stock"). As of the date hereof, 14,064,526
shares of Common Stock are issued and outstanding, all of which were duly
authorized and validly issued and are fully paid and nonassessable, and 100,000
shares of Preferred Stock are issued and outstanding. The authorized capital
stock of the Guarantor consists of 300,000 shares of common stock, par value
$1.00 per share, of the Guarantor ("Guarantor Common Stock"). As of the date
hereof, 200 shares of Guarantor Common Stock are issued and outstanding, all of
which are owned by the Company and all of which were duly authorized and validly
issued and are fully paid and nonassessable. The authorized capital stock of
Apparel consists of 200,000 shares of common stock, par value $1.00 per share,
of Apparel ("Apparel Common Stock"). As of the date hereof, 1,000 shares of
Apparel Common Stock are issued and outstanding, all of which are owned by the
Guarantor and all of which were duly authorized and validly issued and are fully
paid and nonassessable.
(b) Except as set forth on Schedule 2.03, neither the Company,
the Guarantor, Apparel nor any of their subsidiaries has any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
SECTION 2.04. Authorization of Agreements, Etc. (a) Except as
set forth on Schedule 2.04 hereto, each of (i) the execution and delivery by the
Company of this Agreement, the Warrants, the Asset Purchase Agreement and the
other agreements related thereto, and the Ancillary Agreements, (ii) the
performance by the Company of its respective obligations hereunder and
thereunder, (iii) the execution and delivery by the Guarantor of this Agreement
and the Guaranty, (iv) the performance by the Guarantor of its respective
obligations hereunder and thereunder, (iv) the execution and delivery by Apparel
of this Agreement, the Notes and the Asset Purchase Agreement, (v) the
performance by Apparel of its respective obligations hereunder and thereunder,
and (vi) the issuance, sale and delivery by each of the Company and Apparel, as
the case may be, of the Securities and the Warrant Shares, and will not violate
any provision of law, any order of any court or other agency of government, the
Articles of Organization or By-laws of the Company, the Guarantor or Apparel, or
any provision of any indenture, agreement or other instrument to which the
Company, the Guarantor, Apparel or any of their properties or assets is bound,
or conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any Claim in favor of any
third person upon any of the assets of the Company, the Guarantor, Apparel or
any of their subsidiaries.
(b) The Securities have been duly authorized by the Company
and Apparel, as the case may be, and, when sold and paid for in accordance with
this Agreement, will be validly issued Notes or Warrants, as the case may be.
The Warrant Shares, when issued and delivered upon the exercise of the Warrants,
will be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock. Neither the issuance, sale and delivery of the Warrants, nor the
issuance and delivery of the Warrant Shares upon the exercise of the Warrants,
is subject to any preemptive rights of stockholders of the Company or to any
right of first refusal or other similar right in favor of any person.
SECTION 2.05. Validity. This Agreement has been duly executed
and delivered by each of the Company, the Guarantor and Apparel and constitutes
the legal, valid and binding obligation of each of the Company, the Guarantor
and Apparel, enforceable against each of the Company, the Guarantor and Apparel
in accordance with its terms. The Notes, the Warrants and the Ancillary
Agreements, when executed and delivered by the Company, the Guarantor and/or
Apparel, as the case may be, as provided in this Agreement, will constitute the
legal, valid and binding obligations of each of the Company, the Guarantor and
Apparel, as the case may by, enforceable against each of the Company, the
Guarantor and Apparel in accordance with their respective terms.
SECTION 2.06. Governmental Approvals. Subject to the accuracy
of the representations and warranties of the Purchasers set forth in Article III
hereof, except as set forth on Schedule 2.06 hereto, no registration or filing
with, or consent or approval of, or other action by, any Federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance of this Agreement or any of the Ancillary
Agreements, the issuance, sale and delivery of the Securities, the issuance and
delivery of the Warrant Shares upon the exercise of the Warrants, or the
consummation of the Asset Purchase, other than filings required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
or the Securities Exchange Act of 1934, as amended (the "Exchange Act").
SECTION 2.07. Financial Statements, Etc. (a) The Company has
furnished to the Purchasers the consolidated balance sheets of the Company and
its consolidated subsidiaries as of January 30, 1999, January 31 1998, and
February 1, 1997 and their related consolidated statements of income,
stockholders' equity and cash flows for the years then ended, audited by KPMG
Peat Marwick LLP, the independent public accountants retained by the Company.
Except as set forth on Schedule 2.07(a) or in the Company SEC Filings, all such
financial statements (including any related schedules and/or notes, if any) have
been prepared in all material respects in accordance with generally accepted
accounting principles consistently applied and consistent with prior periods
("GAAP"), except as reflected in the notes thereto. Except as set forth on
Schedule 2.07(a) hereto, such balance sheets fairly present, in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries as of their respective dates, and such statements of
operations, changes in stockholders' equity and cash flows fairly present, in
all material respects, the consolidated results of operations of the Company and
its consolidated subsidiaries (as the case may be) for the respective periods
then ended. Except (i) as set forth in the consolidated financial statements of
the Company and its consolidated subsidiaries as of January 30, 1999, or (ii) as
incurred in the ordinary course of business and consistent with past practice
since January 30, 1999, or (iii) as set forth on Schedule 2.07(a) hereto or
incurred in connection with the Asset Purchase or transactions related thereto,
neither the Company nor any of its subsidiaries has any material liabilities or
obligations of any kind or nature that would be required to be disclosed on a
consolidated balance sheet of the Company prepared in accordance with GAAP,
whether known or unknown (whether absolute, secured, contingent or otherwise)
and whether due or to become due.
(b) Guarantor has furnished to the Purchasers (i) the
consolidated balance sheets of the Guarantor and its consolidated subsidiaries
as of January 30, 1999 and 1998 and their related consolidated statements of
income, stockholders' equity and cash flows for the years then ended, in the
same form presented to the Guarantor's working capital lenders. Except as set
forth on Schedule 2.07(b), all such financial statements (including any related
schedules and/or notes, if any) have been prepared in all material respects in
accordance with GAAP, except that such statements do not have the footnotes
required under GAAP. Except as set forth on Schedule 2.07(b) hereto, such
balance sheets fairly present, in all material respects, the consolidated
financial position of the Guarantor and its consolidated subsidiaries as of
their respective dates, and such statements of operations, changes in
stockholders' equity and cash flows fairly present, in all material respects,
the consolidated results of operations of the Company and its consolidated
subsidiaries (as the case may be) for the respective periods then ended. Except
(i) as set forth in the consolidated financial statements of the Guarantor and
its consolidated subsidiaries as of January 30, 1999, or (ii) as incurred in the
ordinary course of business and consistent with past practice since January 30,
1999, neither the Guarantor nor any of its subsidiaries has any material
liabilities or obligations of any kind or nature that would be required to be
disclosed on a consolidated balance sheet of Guarantor prepared in accordance
with GAAP, whether known or unknown (whether absolute, secured, contingent or
otherwise) and whether due or to become due.
SECTION 2.08. SEC Filings. The Company has filed all forms,
reports and documents required to be filed with the SEC since January 30, 1996,
and the Company has made available to the Purchasers, as filed with the SEC,
complete and accurate copies of the Company SEC Filings. The Company SEC Filings
(including, without limitation, any financial statements or schedules included
therein) (i) were prepared in compliance with the requirements of the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act, and the
rules and regulations thereunder, as the case may be, and (ii) did not at the
time of filing (or if amended, supplemented or superseded by a filing prior to
the date hereof, on the date of that filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
SECTION 2.09. Absence of Certain Changes or Events. Except as
set forth on Schedule 2.09 hereto or as otherwise disclosed in (i) the Company
SEC Filings, or (ii) the financial statements referred to in Sections 2.07(a) or
(b), and except as otherwise expressly contemplated by this Agreement the Asset
Purchase Agreement and the transactions contemplated hereby and thereby, since
January 30, 1999, neither the Company, the Guarantor, Apparel nor any of their
subsidiaries has:
(a) incurred any material obligation or liability (fixed or
contingent), except in the ordinary course of business and consistent
with past practice;
(b) discharged or satisfied any lien, security interest,
charge or other encumbrance or paid any obligation or liability (fixed
or contingent), other than in the ordinary course of business and
consistent with past practice;
(c) mortgaged, pledged or subjected to any lien, security
interest, charge or other encumbrance any of its material assets or
properties (other than mechanic's, materialman's and similar statutory
liens arising in the ordinary course of business and purchase money
security interests arising as a matter of law between the date of
delivery and payment);
(d) transferred, leased or otherwise disposed of any of its
material assets or properties, or acquired any material assets or
properties (including without limitation any leases, licenses or
contract rights), in any case except in the ordinary course of business
and consistent with past practice;
(e) authorized, declared or paid any dividend (other than
regular quarterly dividends by the Company) or made any other
distribution on or in respect of any class of its capital stock or
established a record date for any of the foregoing;
(f) canceled or compromised any material debt or claim other
than in the ordinary course of business consistent with past practice;
(g) waived or released any rights of material value other
than in the ordinary course ofbusiness;
(h) transferred or granted any rights under any material
patents, trademarks, trade names, servicemarks or copyrights or with
respect to any know-how;
(i) entered into any transaction, contract or commitment other
than in the ordinary course of business that, individually or in the
aggregate, are material to the Company and its subsidiaries, taken as a
whole, or Apparel and its subsidiaries, taken as a whole, other than
(A) contracts listed, or which pursuant to the terms hereof are not
required to be listed, on Schedule 2.20 hereto and (B) this Agreement,
the Asset Purchase Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby;
(j) suffered any material casualty loss or damage (whether or
not such loss or damage shall have been covered by insurance) which
affects in any material respect its ability to conduct its business;
(k) suffered any material adverse change in the properties,
assets, condition (financial or other), prospects, operating results or
business of the Company and its subsidiaries, taken as a whole, or
Apparel and its subsidiaries, taken as a whole; or
.
(l) except in connection with this Agreement, the Asset
Purchase Agreement or the Ancillary Agreements and the transactions
contemplated hereby and thereby, entered into any agreement, letter of
intent or similar undertaking to take any of the actions listed in
clauses (a) through (l) above.
SECTION 2.10. Actions Pending. Except (i) for any actions,
suits, investigations or proceedings which individually do not involve claims
against the Company, the Guarantor, Apparel or any of their subsidiaries for
more than $250,000, (ii) as set forth on Schedule 2.10 hereto, or (iii) as set
forth in the Company SEC Filings there is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened in writing
against or affecting the Company or Apparel, or any of their properties or
rights, before any court or by or before any governmental body or arbitration
board or tribunal. Except as set forth on Schedule 2.10 hereto, there is no
unsatisfied judgment, decree, injunction or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company, the Guarantor or Apparel.
SECTION 2.11. Title to Properties. The Company, the Guarantor,
Apparel and their subsidiaries have good and marketable title to the properties
and assets reflected on the January 30, 1999 balance sheets (other than
non-material properties and assets and other properties and assets disposed of
in the ordinary course of business consistent with past practice since the date
of such balance sheet), and all such properties and assets are owned free and
clear of any Claims, except (i) as described on or referred to in the Company
SEC Filings and (ii) for the liens described in clauses (i) through (iv) of
Section 2.12 below. Such properties and assets constitute all of the assets
material to the business of the Company and its subsidiaries (the "Company
Business"), all of the assets material to the business of the Guarantor and its
subsidiaries (the "Guarantor Business") or all of the assets material to the
business of Apparel and its subsidiaries (the "Apparel Business" and together
with the Company Business and the Guarantor Business, the "Businesses") as the
same is currently being conducted.
SECTION 2.12. Real Property Interests. The Company SEC Filings
sets forth a complete and accurate list of the real properties (1) owned by the
Company, the Guarantor or Apparel required by the rules and regulations of the
SEC to be disclosed therein (the "Owned Properties") and (ii) leased by the
Company, the Guarantor, Apparel or any of their subsidiaries required by the
rules and regulations of the SEC to be disclosed therein (the "Leased
Properties"). Except as set forth on Schedule 2.12 hereto or in the Company SEC
Filings, the Company, the Guarantor or Apparel, as the case may be, has good and
marketable fee title to each Owned Property, including the buildings,
structures, and other improvements located thereon, free and clear of all
Claims, subject to (i) liens for current taxes not yet due, (ii) landlord's
liens, (iii) purchase money liens and (iv) workman's, materialman's,
warehouseman's and similar liens arising by law or statute, except, in the case
of (i), (ii), (iii) or (iv) above, for those liens which would not reasonably be
expected to have a Material Adverse Effect. Except as set forth on Schedule 2.12
hereto, there are no condemnations or eminent domain proceedings pending or, to
the knowledge of the Company threatened, against any Owned Property or any
material portion thereof except for those condemnations or proceedings which
would not reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 2.12 hereto, neither the Company, the Guarantor nor
Apparel has received any notice from any city, village or other governmental
authority of any zoning, ordinance, land use, building, fire or health code or
other legal violation in respect of any Owned Property, other than violations
which have been corrected or which could not reasonably be expected to have a
Material Adverse Effect. Each lease or other agreement relating to the Leased
Properties is in full force and effect, without any material default of the
Company, the Guarantor, Apparel or any such subsidiary thereunder and without
any material default thereunder of the other party thereto, except for those
defaults which would not reasonably be expected to have a Material Adverse
Effect, and such leases and agreements together with the Owned Properties give
the Company, the Guarantor, Apparel and their subsidiaries the right to use or
occupy, as the case may be, all real properties as are sufficient and adequate
to operate the Businesses as the same are currently being conducted.
SECTION 2.13. Intellectual Property Rights. The patents,
trademarks and trade names, trademark and trade name registrations, servicemark,
brandmark and brand name registrations and copyrights, the applications therefor
and the licenses with respect thereto (collectively, "Intellectual Property
Rights") listed on Schedule 2.13 hereto constitute all such material proprietary
rights to be acquired by Apparel pursuant to the Asset Purchase Agreement. The
Company, the Guarantor, Apparel and their subsidiaries conduct the Businesses
without any material claim of infringement of any Intellectual Property Right of
others, except for those claims which would not reasonably be expected to have a
Material Adverse Effect; (ii) the consummation of the Asset Purchase and the
transactions contemplated by this Agreement will not violate, terminate, impair
or compromise any Intellectual Property Right; (iii) none of the Intellectual
Property Rights listed on Schedule 2.13 is the subject of any outstanding order,
ruling, decree, judgment or stipulation, except for those orders, rulings,
decrees, judgements or stipulations which would not reasonably be expected to
have a Material Adverse Effect; (iv) none of the authorized activities of any
employee of the Company, the Guarantor, Apparel or any of their subsidiaries on
behalf thereof violates any obligations of such employee to third parties,
including, without limitation, confidentiality or non-competition obligations
under agreements with a former employer, except for those violations which would
not reasonably be expected to have a Material Adverse Effect; and (v) the
Company, the Guarantor, Apparel and their subsidiaries have taken and are taking
reasonable precautions to protect any material trade secrets and other
confidential information included in the Intellectual Property Rights.
SECTION 2.14. Labor Matters. Except as set forth in the
Company SEC Filings, neither the Company, the Guarantor, Apparel nor any of
their subsidiaries is or has been a party to any collective bargaining or union
agreement, and no such agreement is or has been applicable to any employees of
the Company, the Guarantor, Apparel or any of their subsidiaries. Except as set
forth in the Company SEC Filings, there are no pending controversies between the
Company, the Guarantor, Apparel or any of their subsidiaries and any of such
employees that might reasonably be expected to result in a Material Adverse
Effect, or any unresolved labor union grievances or unfair labor practice or
labor arbitration proceedings pending or threatened relating to the Businesses.
Except as set forth in the Company SEC Filings, there are no labor unions or
other organizations representing or purporting to represent any employees of the
Company, the Guarantor, Apparel or any of their subsidiaries and there are not
any organizational efforts currently being made or threatened involving any of
such employees. Except as set forth in the Company SEC Filings, the Company, the
Guarantor, Apparel and their subsidiaries are in compliance in all material
respects with all laws and regulations or other legal or contractual
requirements regarding the terms and conditions of employment of employees,
former employees or prospective employees or other labor related matters,
including without limitation laws, rules, regulations, orders, rulings,
conciliation agreements, decrees, judgments and awards relating to wages, hours,
the payment of social security and similar taxes, equal employment opportunity,
employment discrimination, fair labor standards, occupational health and safety,
wrongful discharge or violation of the personal rights of employees, former
employees or prospective employees. Neither the Company, the Guarantor, Apparel
nor any of their subsidiaries is liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing, except for those
liabilities which would not reasonably be expected to have a Material Adverse
Effect.
SECTION 2.15. Severance Arrangements. Except as set in the
Company SEC Filings, neither the Company, the Guarantor, Apparel nor any of
their subsidiaries is party to any agreement with any executive officer (i) the
benefits of which (including, without limitation, severance benefits) are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company, the Guarantor, Apparel or any of their
subsidiaries of the nature of any of the transactions contemplated by this
Agreement or in connection with the Asset Purchase.
SECTION 2.16. Taxes. (a) Except as set forth on Schedule 2.16
hereto, each of the Company, the Guarantor, Apparel, their subsidiaries and any
affiliated, combined or unitary group of which any such corporation is or was a
member has (A) timely filed (taking into account any extension) all Federal and
all material state, local and foreign returns, declarations, reports, estimates,
information returns and statements ("Returns") required to be filed by it in
respect of any Taxes (as hereinafter defined), (B) timely paid all material
Taxes that are due and payable with respect to the periods covered by the
Returns referred to in clause (A) without regard to whether such Taxes have been
assessed (except for audit adjustments not material in the aggregate or to the
extent that liability therefor is fully reserved for in the Company's, the
Guarantor's or Apparel's most recent audited financial statements), (C)
established reserves that are adequate for the payment of all Taxes not yet due
and payable with respect to the results of operations of the Company, the
Guarantor, Apparel and their subsidiaries through the date hereof and through
the Closing Date, and (D) complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes,
including without limitation required withholding from employee wages.
(b) Schedule 2.16 sets forth the last taxable period through
which the Federal income Tax Returns of the Company, the Guarantor, Apparel and
any of their subsidiaries (A) have been examined by the Internal Revenue Service
and closed or (B) with respect to which the applicable period for assessment
under applicable law, after giving effect to extensions or waivers, has expired.
All deficiencies asserted as a result of such examinations and any examination
by any applicable state, local or foreign taxing authority which have not been
or will not be appealed or contested in a timely manner have been paid, fully
settled or adequately provided for in the Company's or Apparel's most recent
audited financial statements. Except as set forth on Schedule 2.16, no Federal,
state, local or foreign Tax audits or other administrative proceedings or court
proceedings are currently pending with regard to any Federal or material state,
local or foreign Taxes for which the Company, the Guarantor, Apparel or any of
their subsidiaries would be liable, and no material deficiency for any such
Taxes has been proposed, asserted or assessed or, to the best knowledge of the
Company, threatened pursuant to such examination of the Company, the Guarantor,
Apparel or any of their subsidiaries by such Federal, state, local or foreign
taxing authority with respect to any period.
(c) Except as set forth on Schedule 2.16, neither the Company,
the Guarantor, Apparel nor any of their subsidiaries has executed or entered
into with the Internal Revenue Service or any taxing authority (A) any agreement
or other document extending or having the effect of extending the period for
assessments or collection of any Federal, state, local or foreign Taxes for
which the Company, the Guarantor, Apparel or any of their subsidiaries would be
liable or (B) a closing agreement pursuant to Section 7121 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), or any
predecessor provision thereof or any similar provision of state, local or
foreign income Tax law that relates to the assets or operations of the Company,
the Guarantor, Apparel or any of their subsidiaries.
(d) Except as set forth on Schedule 2.16 hereto, neither the
Company, the Guarantor, Apparel nor any of their subsidiaries is a party to any
agreement providing for the allocation or sharing of liability for any Taxes.
(e) The Company has made available to the Purchasers complete
and accurate copies of all income and franchise Tax Returns and all other
material Returns filed by or on behalf of the Company, Apparel or any of their
subsidiaries for the three taxable years ending on or prior to December 31,
1998, as well as for any taxable year which is under or still subject to
examination by any applicable taxing authority.
(f) Each of the Company, the Guarantor and Apparel is not and
has not been at any time over the last five years a "U.S. real property holding
corporation," as defined in section 897 (c)(2) of the Internal Revenue Code.
For purposes of this Agreement, "Taxes" shall mean all
Federal, state, local, foreign or other taxing authority income, franchise,
sales, use, ad valorem, property, payroll, social security, unemployment,
assets, value added, withholding, excise, severance, transfer, employment,
alternative or add-on minimum and other taxes, charges, fees, levies, imposts,
duties, licenses or other assessments, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority.
SECTION 2.17. Compliance with Law; Permits. Neither the
Company, the Guarantor, Apparel nor any of their subsidiaries is in default in
any respect under any order or decree of any court, governmental authority,
arbitrator or arbitration board or tribunal or under any laws, ordinances,
governmental rules or regulations to which the Company, the Guarantor, Apparel
or any of such subsidiaries or any of their respective properties or assets is
subject, except where such default would not have a Material Adverse Effect. The
Company, the Guarantor and/or Apparel possesses all material permits,
authorizations, approvals, registrations, variances and licenses ("Permits")
necessary for the Company, the Guarantor, Apparel or their subsidiaries to own,
use and maintain their properties and assets or required for the conduct of each
of the Businesses in substantially the same manner as it is currently conducted.
Each Permit is in full force and effect and no proceeding is pending or, to the
best knowledge of the Company, the Guarantor or Apparel, threatened in writing
to modify, suspend, revoke or otherwise limit any Permit and no administrative
or governmental actions have been taken or, to the best knowledge of the
Company, the Guarantor or Apparel, threatened in writing in connection with the
expiration or renewal of any Permit. Except as set forth on Schedule 2.17
hereto, neither the Company, the Guarantor, Apparel nor any of their
subsidiaries will be required, as a result of the consummation of the
transactions contemplated hereby or in connection with the Asset Purchase or the
transactions contemplated hereby or thereby, to obtain or renew any Permit,
except for such failure which would not reasonably be expected to have a
Material Adverse Effect.
SECTION 2.18. Employee Benefit Plans. (a) As used herein the
term "Plans" means any plan, program, arrangement, agreement, binding written
commitment or other material binding commitment that is an employment,
consulting or deferred compensation agreement, or an executive compensation,
incentive bonus or other bonus, employee pension, profit-sharing, savings,
retirement, stock option, stock purchase, severance pay, life, health,
disability or accident insurance plan, or vacation or other employee benefit
plan, program, arrangement, agreement, binding written commitment or other
material binding commitment, including, without limitation, each employee
benefit plan (as defined under Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) maintained by the Company, the
Guarantor, Apparel or any of their subsidiaries or any trade or business
(whether or not incorporated) which, together with such persons, would be
treated as a single employer under Title IV of ERISA or Section 414 of the
Internal Revenue Code (collectively, the "ERISA Affiliates") or to which any
ERISA Affiliate contributes or has any obligation to contribute to, or has or
may have any liability (including, without limitation, a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement).
(b) Each of the Company, the Guarantor, Apparel and each of their subsidiaries
have complied, and currently are in compliance, in all material respects with
all laws and regulations applicable to the Plans, including, without limitation,
ERISA and the Internal Revenue Code.
(c) No ERISA Affiliate has, within the last six years,
maintained, adopted or established, contributed to or been required to
contribute to, or otherwise participated in or been required to participate in,
any employee benefit plan or other program or arrangement subject to Title IV of
ERISA (including, without limitation, a "multi-employer plan" (as defined in
Section 3(37) of ERISA), a multiple employer plan (as defined in Section 210 of
ERISA) and a defined benefit plan (as defined in Section 3(35) of ERISA), and no
ERISA Affiliate has incurred or will incur any material liability as a result of
its maintenance, adoption or establishment of, contribution to, other
participation in, or its being required to contribute to or otherwise
participate in, any such plan, program or arrangement at any time prior to the
Closing Date.
(d) Except as set forth on Schedule 2.18, neither the Company,
the Guarantor, Apparel nor any of their subsidiaries provides or may be required
to provide and no Plan, other than a Plan that is an employee pension benefit
plan (within the meaning of Section 3(2)(A) of ERISA), provides or may be
required to provide benefits, including, without limitation, death, health or
medical benefits (whether or not insured), with respect to current or former
employees of the Company, the Guarantor, Apparel or any of their subsidiaries
beyond their retirement or other termination of service with the Company, the
Guarantor, Apparel or their subsidiaries (other than (A) coverage mandated by
applicable law, (B) deferred compensation benefits accrued as liabilities on the
books of the Company, the Guarantor, Apparel or their subsidiaries, or (C)
benefits the full cost of which is borne by the current or former employee (or
his or her beneficiary)). No ERISA Affiliate maintains any Plan under which any
employee or former employee of any of the ERISA Affiliates may receive medical
benefits which cannot be modified or terminated by the ERISA Affiliates at any
time without the consent of any person (except as provided by generally
applicable legislation).
(e) Neither the transactions contemplated hereby nor the Asset
Purchase will result in (i) any portion of any amount paid or payable by the
Company, the Guarantor or Apparel to a "disqualified individual" (within the
meaning of Section 280G(c) of the Internal Revenue Code and the regulations
promulgated thereunder), whether paid or payable in cash, securities of the
Company or Apparel or otherwise and whether considered alone or in conjunction
with any other amount paid or payable to such a "disqualified individual", being
an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Internal Revenue Code and the regulations promulgated thereunder, (ii) any
employee of the Company, the Guarantor, Apparel or any of their subsidiaries
being entitled to severance pay, unemployment compensation, or any other
payment, (iii) an acceleration of the time of payment or vesting, or an increase
in the amount of compensation due to any such employee or former employee or
(iv) any prohibited transaction described in Section 406 of ERISA or Section
4975 of the Internal Revenue Code for which an exemption is not available.
(f) No ERISA Affiliates have incurred any material liability
with respect to any Plan under ERISA (including, without limitation, Title I or
Title IV thereof, other than liability for premiums due to the Pension Benefit
Guaranty Corporation), the Internal Revenue Code or other applicable law, which
has not been satisfied in full or been accrued on the consolidated balance sheet
of the Company and its subsidiaries as of January 30, 1999 pending full
satisfaction, and no event has occurred, and there exists no condition or set of
circumstances which could result in the imposition of any material liability
under ERISA, the Internal Revenue Code or other applicable law with respect to
any Plan.
(g) With respect to each Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under such insurance policy have been paid, and, except as set forth on
Schedule 2.18, as of the Closing Date there will be no material liability of any
of the ERISA Affiliates under any such insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Closing Date.
(h) None of the ERISA Affiliates has made any contribution to
any Plan that may be subject to any material excise tax under Section 4972 of
the Internal Revenue Code.
SECTION 2.19. Environmental Matters.
(a) Except as set forth in Schedule 2.19 hereto:
(i) Neither the business or operations of the Company, the
Guarantor, Apparel and their subsidiaries, nor any of the Owned
Properties or Leased Properties (the "Real Property"), violates any
applicable Environmental Law (as defined below) in any material
respect.
(ii) Neither the Company, the Guarantor, Apparel nor any of
their subsidiaries has stored, used, treated, released, discharged,
spilled or disposed of any pollutants, contaminants, hazardous or toxic
wastes, substances or materials, or other wastes or materials, that are
subject to regulation under any applicable Environmental Law
(collectively, "Regulated Materials"), either on or at any Real
Property or at any other location, in violation in any material respect
of any Environmental Law.
(iii) Neither the Company, the Guarantor, Apparel nor any of
their subsidiaries has received any notice from any governmental
authority or any other person alleging that the Company, the Guarantor,
Apparel, their subsidiaries, or their respective business, operations,
or properties are in violation of any Environmental Law or any
applicable Governmental Approval (as defined below), or that any of
them are responsible or potentially responsible for the investigation,
removal, confinement, remediation or cleanup (collectively, "Response
Action") of any Regulated Material at, on or beneath (A) the Real
Property or any land adjacent thereto; (B) any property previously
owned, leased or operated by the Company, the Guarantor, Apparel, their
subsidiaries, or any of their predecessors; or (C) any other site.
(iv) Neither the Company, the Guarantor, Apparel nor any of
their subsidiaries is subject to any actual or threatened government or
private litigation or proceedings involving a claim for damages or
other potential liabilities arising under or pursuant to any
Environmental Law or Common Law Environmental Principles (as defined
below).
(v) There is no condition or circumstance at, on or beneath
(A) any premises owned, leased, or operated by the Company, the
Guarantor, Apparel or any of their subsidiaries, or previously owned,
leased or operated by the Company, the Guarantor, Apparel, their
subsidiaries or any of their predecessors, or (B) any property at which
Regulated Materials generated by the Company, the Guarantor, Apparel,
any of their subsidiaries or any of their respective predecessors have
been treated or disposed of, that could reasonably be expected to give
rise to any liability, loss or expense to the Company, the Guarantor or
Apparel under any Environmental Law or form the basis of any
requirement for a Response Action by the Company, the Guarantor or
Apparel under any Environmental Law or Common Law Environmental
Principles. Neither the Company, the Guarantor, Apparel, nor any of
their subsidiaries have arranged for the treatment or disposal of any
Regulated Material, or arranged for the transport of a Regulated
Material for treatment or disposal, at or to any facility listed or
proposed for listing on the National Priorities List established
pursuant to CERCLA (as defined below) or on any list established by
another governmental authority of sites requiring Response Action, or
to any other location that is the subject of enforcement action or
Response Action, or to the best knowledge of the Company, the Guarantor
or Apparel, an investigation by any Governmental Authority or other
party that could lead to claims against the Company, the Guarantor,
Apparel or their subsidiaries for any Response Action, property or
natural resource damages, or personal injury.
(vi) The Company, the Guarantor, Apparel and their
subsidiaries now hold, and the Company, the Guarantor, Apparel, and
their subsidiaries, and their respective predecessors in the past have
held, all Governmental Approvals required under any applicable
Environmental Laws with respect to their respective businesses,
operations, activities, properties and assets, except where such
failure would not reasonably be expected to have a Material Adverse
Effect. Each of the Company, the Guarantor, Apparel and their
subsidiaries has timely filed all material reports required to be filed
by it under applicable Environmental Laws with respect to the
properties, operations, and businesses of the Company, the Guarantor,
Apparel and their subsidiaries; and each of the Company, the Guarantor,
Apparel and their subsidiaries has generated and maintained, in all
material respects, all data, documentation and records required to be
generated or maintained by the Company, the Guarantor, Apparel and
their subsidiaries under any applicable Environmental Laws with respect
thereto.
(b) For the purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Common Law Environmental Principles" means any principles
of common law under which a person or entity may be held liable for the
release or discharge into the environment of any pollutants,
contaminants, hazardous or toxic wastes, substances or materials, or
other wastes or materials.
(ii) "Environmental Law" shall mean any federal, state,
provincial, foreign, or local statute, law, rule, regulation,
ordinance, code, order, consent decree, settlement agreement, or policy
having the force of law relating to protection of the environment,
natural resources, or public or employee health and safety, or relating
to the production, generation, use, storage, treatment, processing,
transportation or disposal of Regulated Materials, including, without
limitation: the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. ss. 9601 et seq. ("CERCLA"); the Superfund
Amendments and Reauthorization Act, Public Law 99-499, 100 Stat. 1613;
the Resource Conservation and Recovery Act, 42 U.S.C. ss.6901 et seq.;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.
ss.136, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
ss.1801; the Federal Water Pollution Control Act, 33 U.S.C. ss.1251 et
seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.2701 et seq.; the
Clean Air Act, 42 U.S.C. ss.7401 et seq.; the Occupational Safety and
Health Act, 29 U.S.C. ss.651 et seq.; and counterpart state and local
laws, and regulations adopted thereunder.
(iii) "Governmental Approval" means any permit, license,
authorization, consent, approval, waiver, exception, variance, order,
or exemption issued by any governmental authority in respect of any
Environmental Law.
SECTION 2.20. Contracts. Except as set forth the Company SEC
Filings or entered into in connection with this Agreement, the Asset Purchase
Agreement or the transactions contemplated hereby or thereby, there are no
contracts or agreements that are material to the conduct of the Businesses or to
the financial condition or results of operations of the Company and its
subsidiaries, taken as a whole. The Company has made available to the Purchasers
complete and accurate copies of said contracts and agreements. Such agreements
are valid and enforceable obligations of the Company, the Guarantor, Apparel or
their subsidiaries, as the case may be, and, to the best knowledge of the
Company, the Guarantor or Apparel, of the other par ties thereto. Neither the
Company, the Guarantor nor Apparel has been notified in writing of any claim
that any agreement referred to on such Schedule is not valid and enforceable in
accordance with its terms for the periods stated therein, or that there is under
any such contract any existing default or event of default or event which with
notice or lapse of time or both would constitute such a default.
SECTION 2.21. Insurance. All policies of fire, liability,
workers' compensation and other forms of insurance providing insurance coverage
to or for the Company, the Guarantor, Apparel or any of their subsidiaries for
events or occurrences arising or taking place in the case of occurrence type
insurance, and for claims made or suits commenced in the case of claims-made
type insurance, between the date of this Agreement and the Closing Date, are
listed on Schedule 2.21 hereto, and, except as set forth on Schedule 2.21, all
premiums with respect thereto covering all periods up to and including the date
hereof have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. All such policies are in full force
and effect, and, except as set forth on Schedule 2.21, provide insurance in such
amounts and against such risks as is customary for companies engaged in similar
businesses to protect the employees, properties, assets, business and operations
of the Company, the Guarantor, Apparel and their subsidiaries. All such policies
will remain in full force and effect and will not in any way be affected by, or
terminate or lapse by reason of, any of the transactions contemplated hereby or
the Asset Purchase.
SECTION 2.22. Offering of the Securities. Neither the Company,
Apparel nor any person authorized or employed by the Company or Apparel as
agent, broker, dealer or otherwise in connection with the offering or sale of
the Securities or any similar securities of the Company or Apparel has offered
any such securities for sale to, or solicited any offers to buy any such
securities from, or otherwise approached or negotiated with respect thereto
with, any person or persons, under circumstances that involved the use of any
form of general advertising or solicitation as such terms are defined in
Regulation D of the Securities Act; and, assuming the accuracy of the
representations and warranties of the Purchasers set forth in Article III
hereof, neither the Company, Apparel nor any person acting on the Company's or
Apparel's behalf has taken or will take any action (including, without
limitation, any offer, issuance or sale of any securities of the Company or
Apparel under circumstances which might require the integration of such
transactions with the sale of the Securities under the Securities Act or the
rules and regulations of the SEC thereunder) which would subject the offering,
issuance or sale of the Securities to the Purchasers to the registration
provisions of the Securities Act.
SECTION 2.23. Related Party Transactions. Except as set forth
in the Company SEC Documents or as contemplated hereby, there are no existing
material arrangements or proposed material transactions between the Company, the
Guarantor or Apparel and (i) any executive officer or director of the Company,
the Guarantor, Apparel or any member of the immediate family of any of the
foregoing persons (such officers, directors and family members being hereinafter
individually referred to as a "Related Party"), (ii) any business (corporate or
otherwise) which a Related Party owns, directly or indirectly, or in which a
Related Party has an ownership interest, or (iii) between any Related Party and
any business (corporate or otherwise) with which the Company, the Guarantor or
Apparel regularly does business.
SECTION 2.24. Brokers. All negotiations relative to this
Agreement and the transactions contemplated hereby have been carried on by the
Company, the Guarantor and Apparel directly with the Purchasers without the
intervention of any other person on behalf of the Company, the Guarantor or
Apparel in such manner as to give rise to any valid claim by any other person
against the Purchasers for a finder's fee, brokerage commission or similar
payment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally and not jointly, represents and
warrants to the Company as follows:
SECTION 3.01. Authorization. The execution, delivery and
performance by such Purchaser of this Agreement and the Ancillary Agreements,
and the purchase and receipt by such Purchaser of the Securities being acquired
by it hereunder, have been duly authorized by all requisite action on the part
of such Purchaser, and will not violate any provision of law, any order of any
court or other agency of government, the charter or other governing documents of
such Purchaser, or any provision of any indenture, agreement or other instrument
by which such Purchaser or any of such Purchaser's properties or assets are
bound, or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or other
instrument, or result in any Claim upon any of the properties or assets of such
Purchaser.
SECTION 3.02. Validity. This Agreement has been duly executed
and delivered by such Purchaser and constitutes the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms. Each of the Ancillary Agreements, when executed and delivered in
accordance with this Agreement, will constitute the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms.
SECTION 3.03. Investment Representations.
(a) Such Purchaser is acquiring the Securities being purchased
by such Purchaser hereunder for such Purchaser's own account, for investment,
and not with a view toward the resale or distribution thereof.
(b) Such Purchaser understands that he, she or it, as the case
may be, must bear the economic risk of such Purchaser's investment for an
indefinite period of time because the Securities are not registered under the
Securities Act or any applicable state securities laws, and may not be resold
unless subsequently registered under the Securities Act and such other laws or
unless an exemption from such registration is available. Such Purchaser also
understands that, except as provided in the Registration Rights Agreement, it is
not contemplated that any registration will be made under the Securities Act or
that the Company will take steps which will make the provisions of Rule 144
under the Securities Act available to permit resale of the Securities. Such
Purchaser agrees not to pledge, transfer, convey or otherwise dispose of any of
the Securities, except in a transaction that is the subject of either (i) an
effective registration statement under the Securities Act and any applicable
state securities laws, or (ii) an unqualified opinion of counsel to the effect
that such registration is not required (which opinion and counsel shall be
reasonably satisfactory to the Company, it being agreed that Reboul, MacMurray,
Hewitt, Maynard & Kristol shall be satisfactory, and may be relied on by the
Company in making such determination), it being intended that the agreements
with respect to the Securities contained in this sentence shall be construed
consistently with the provisions relating to the same subject matter contained
in the Registration Rights Agreement.
(c) Such Purchaser is able to fend for itself in the
transactions contemplated by this Agreement and such Purchaser has the ability
to bear the economic risks of the investment in the Securities being purchased
hereunder for an indefinite period of time. Without limiting or compromising the
rights of the Purchasers pursuant to Section 4.02 hereof, such Purchaser further
acknowledges that he, she or it, as the case may be, has received copies of the
documents that it deems relevant to the transactions contemplated hereby and has
had the opportunity to ask questions of, and receive answers from, officers of
the Company and Edison Stores with respect to the business and financial
condition of the Company and REPP and the terms and conditions of the offering
of the Securities and to obtain additional information necessary to verify such
information or can acquire it without unreasonable effort or expense.
(d) Such Purchaser has such knowledge and experience in
financial and business matters that such Purchaser is capable of evaluating the
merits and risks of its investment in the Securities. Except as set forth on
Schedule 3.03, such Purchaser further represents that he, she or it, as the case
may be, is an "accredited investor" as such term is defined in Rule 501 of
Regulation D of the SEC under the Securities Act with respect to its purchase of
the Securities, and that any such Purchaser that is a limited partnership has
not been formed for the purpose of purchasing the Securities.
(e) If such Purchaser is a limited partnership, such Purchaser
represents that it has been organized and is existing as a limited partnership
under the laws of the State of Delaware.
SECTION 3.04. Governmental Approvals. No registration or
filing with, or consent or approval of, or other action by, any Federal, state
or other governmental agency or instrumentality is or will be necessary by the
Purchasers for the valid execution, delivery and performance of this Agreement
and the Ancillary Agreements.
ARTICLE IV.
COVENANTS OF THE COMPANY, THE GUARANTOR AND APPAREL
SECTION 4.01. Conduct of the Company's, the Guarantor's and
Apparel's Business. Each of the Company, the Guarantor and Apparel, in the case
of the Guarantor and Apparel solely with respect to it and its subsidiaries,
covenants and agrees that, prior to the Closing Date (and not after the Closing
Date), unless the Purchasers shall otherwise consent in writing or as otherwise
expressly contemplated by this Agreement, the Asset Purchase Agreement or the
transactions contemplated hereby or thereby:
(a) the Businesses shall be conducted only in, and the
Company, the Guarantor, Apparel and its subsidiaries shall not take any action
except in, the ordinary course of business consistent with past practice and
each of the Company, the Guarantor, Apparel and their subsidiaries shall use its
best efforts to preserve intact its present business organization, keep
available the services of its current officers and employees, maintain its
assets (other than those permitted to be disposed of hereunder) in good repair
and condition, maintain its books of account and records in the usual, regular
and ordinary manner and preserve its goodwill and ongoing business;
(b) neither the Company, the Guarantor nor Apparel shall
directly or indirectly do any of the following: (i) issue, sell, pledge, dispose
of or encumber (or permit any of its subsidiaries to issue, sell, pledge,
dispose of or encumber) (A) any capital stock of any of its subsidiaries or (B)
any property or assets (including Intellectual Property Rights) of the Company,
the Guarantor, Apparel or any of their subsidiaries, except inventory and
immaterial assets in the ordinary course of business consistent with past
practice; (ii) amend or propose to amend its Articles of Organization or
By-Laws; (iii) split, combine or reclassify any outstanding shares of its
capital stock, or declare, set aside or pay any dividend payable in cash, stock,
property or otherwise with respect to such shares (except for any dividends paid
in the ordinary course to the Company or to any wholly-owned subsidiary of the
Company); (iv) redeem, purchase, acquire or offer to acquire (or permit any of
its subsidiaries to redeem, purchase, acquire or offer to acquire) any shares of
its capital stock; or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this paragraph (b);
(c) neither the Company, the Guarantor, Apparel nor any of their subsidiaries
shall (i) issue, sell, pledge or dispose of, or agree to issue, sell, pledge or
dispose of, any additional shares of, or securities convertible or exchangeable
for, or any options, warrants or rights of any kind to acquire any shares of,
its capital stock of any class or other property or assets whether pursuant to
the Company's stock option plan or otherwise or modify the terms or any
outstanding options, warrants or rights to acquire the Company's, the
Guarantor's or Apparel's capital stock; provided that the Company, the Guarantor
or Apparel may issue shares of Common Stock upon the exercise of currently
outstanding options, warrants or contractual rights referred to in Section
2.03(c) hereof or Schedule 2.03 hereof; (ii) acquire (by merger, consolidation
or acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof (except an existing wholly-owned
subsidiary) or any material amount of assets, except pursuant to the Asset
Purchase Agreement; (iii) incur or guarantee any indebtedness for borrowed money
or refinance any such indebtedness or issue or sell any debt securities, except
in the ordinary course of business consistent with past practice; (iv) enter
into or modify any material contract, lease, agreement or commitment, or permit
or perform any act that would cause a material breach of any such contract,
lease, agreement or commitment; (v) terminate, modify, assign, waive, release or
relinquish any material contract rights or amend any material rights or claims;
(vi) other than as disclosed on Schedule 2.09 hereof, discharge or satisfy any
material Claim or settle or compromise any material claim, action, suit or
proceeding pending or threatened against the Company, the Guarantor, Apparel or
any of their subsidiaries, or, if the Company, the Guarantor, Apparel or any of
their subsidiaries may be liable or obligated to provide indemnification,
against the Company's, the Guarantor's or Apparel's directors or officers,
before any court, governmental agency or arbitrator; (vii) make any loans,
advances or capital contributions to or investments in, any other person; (viii)
alter through merger, liquidation, reorganization, restructuring or in any other
manner the corporate structure or ownership of any subsidiary of the Company,
the Guarantor or of Apparel; (ix) violate or fail to perform, in any material
respect, any obligation imposed upon the Company, the Guarantor, Apparel or any
of their subsidiaries by any applicable laws, orders or decrees, ordinances,
government rules or regulations or conciliation agreements; or (x) to the extent
not described herein, take any action described in Section 2.09 hereof;
(d) neither the Company, the Guarantor, Apparel nor any of
their subsidiaries shall grant any increase in the salary or other compensation
of its directors, officers or employees, except reasonable salary increases, in
the case of employees who are not directors or executive officers of the
Company, the Guarantor, Apparel or any of their subsidiaries, in the ordinary
course of business consistent with past practice, or grant any bonus to any
employee or enter into any employment agreement or make any loan to or enter
into any material transaction of any other nature with any employee of the
Company, the Guarantor, Apparel or any of their subsidiaries;
(e) neither the Company, the Guarantor, Apparel nor any of
their subsidiaries shall take any action to institute any new severance or
termination pay practices with respect to any directors, officers or employees
of the Company, the Guarantor, Apparel or their subsidiaries or to increase the
benefits payable under its severance or termination pay practices;
(f) neither the Company, the Guarantor, Apparel nor any of
their subsidiaries shall (except for reasonable salary increases for employees
who are not directors or executive officers of the Company, the Guarantor,
Apparel or any of their subsidiaries in the ordinary course of business
consistent with past practice) adopt or amend, in any material respect, any Plan
for the benefit or welfare of any directors, officers or employees, except as
contemplated hereby or as may be required by applicable law or regulation;
(g) each of the Company, the Guarantor, Apparel and their
subsidiaries shall use its best efforts, to the extent not prohibited by the
foregoing provisions of this Section 4.01, to maintain its relationships with
its suppliers and customers, clients and others having business dealings with
it, and if and as requested by the Purchasers, (i) the Company shall use its
best efforts to make reasonable arrangements for representatives of the
Purchasers to meet with customers and suppliers of the Company, the Guarantor,
Apparel or any of their subsidiaries and (ii) the Company shall schedule, and
the management of the Company shall participate in, meetings of representatives
of the Purchasers with employees of the Company, the Guarantor, Apparel or any
of their subsidiaries;
(h) the Company shall provide to the Purchasers or their
representatives a draft of any Federal income Tax return or material state,
local or foreign Tax return (other than state or local sales and use taxes)
required to be filed on behalf of the Company, the Guarantor, Apparel or any of
their subsidiaries between the date of this Agreement and the Closing Date at
least 30 days prior to the date on which such return is due (or, if later, any
extensions of such date) and shall not file any such return without the consent
of the Purchasers or their representatives, unless required by applicable law;
(i) each of the Company, the Guarantor and Apparel shall not,
and shall not permit any subsidiary to, (A) utilize accounting principles
different from those used in the preparation of the financial statements
referred to in Section 2.07, (B) change in any manner its method of maintaining
its books of account and records from such methods as in effect on December 31,
1998, or (C) accelerate booking of revenues or the deferral of expenses, other
than as shall be consistent with past practice and in the ordinary course of
business, except to the extent that any such action is required by GAAP; and
(j) each of the Company, the Guarantor and Apparel shall not,
and shall not permit any subsidiary to, enter into any transaction or make any
agreement or commitment, or permit any event to occur, which would result in any
of the representations or warranties of the Company contained in this Agreement
not being true and correct in all material respects at and as of the time
immediately after the occurrence of such transaction or event.
SECTION 4.02. Access to Information. (a) Each of the Company,
the Guarantor and Apparel shall, and shall cause its subsidiaries, officers,
directors, employees, representatives, advisors and agents to, (1) afford, from
the date hereof through the Closing Date, the representatives, advisors and
agents of the Purchasers complete access at all reasonable times during normal
business hours to its officers, employees, agents, properties, books, records
and workpapers, and shall furnish the Purchasers all financial, operating and
other information and data as the Purchasers, through their representatives,
advisors or agents, may reasonably request and (b) shall promptly furnish to the
Purchasers a copy of (i) each report, schedule and other document filed or
received by it during such period pursuant to the requirements of the federal
securities laws or rules and regulations of any national securities exchange,
and (ii) all material written correspondence, filings, communications (or
memoranda setting forth the substance thereof) between the Company, the
Guarantor or Apparel or any of their officers, employees, representatives,
advisors or agents and any governmental entity with respect to the obtaining of
any waivers, consent or approvals and the making of any registrations or
filings, in each case that is necessary to the transactions contemplated by this
Agreement or the Asset Purchase Agreement.
(b) No investigation pursuant to this Section 4.02 shall
affect, add to or subtract from any representations or warranties of the parties
hereto or the conditions to the obligations of the parties hereto to effect the
transactions contemplated hereby or the Asset Purchase.
SECTION 4.03. Financial Statements. The Company shall
each deliver, or cause to be delivered to Purchaser, so long as such Purchaser
shall be a holder of any Notes:
(i) as soon as available but in any event within 45 days after
the end of each quarterly accounting period in each fiscal year,
unaudited consolidated statements of income and cash flows of each of
the Company and its subsidiaries, the Guarantor and its subsidiaries
and Apparel and its subsidiaries for such quarterly period and for the
period from the beginning of the fiscal year to the end of such
quarter, and consolidated balance sheets of each of the Company and its
subsidiaries, the Guarantor and its subsidiaries and Apparel and its
subsidiaries as of the end of such quarterly period, all prepared in
accordance with GAAP, subject to the absence of footnote disclosures
and to normal year-end adjustments;
(ii) within 120 days after the end of the each fiscal year,
consolidated statements of income and cash flows of each of the Company
and its subsidiaries, the Guarantor and its subsidiaries and Apparel
and its subsidiaries for such fiscal year, and consolidated balance
sheets of each of the Company and its subsidiaries, the Guarantor and
its subsidiaries and Apparel and its subsidiaries as of the end of such
fiscal year, setting forth in each case comparisons to the annual
budget and to the preceding fiscal year, all prepared in accordance
with GAAP, and accompanied by (a) with respect to the consolidated
portions of such statements (except with respect to budget data), an
opinion containing no exceptions or qualifications (except for
qualifications regarding specified contingent liabilities) of KPMG Peat
Marwick LLP independent public accountants retained by the Company or
another independent accounting firm of recognized national standing
acceptable to DLJ (as defined herein) (b) a copy of such firm's annual
management letter to the Company's board of directors;
(iii) accompanying the financial statements referred to in
paragraphs (i) and (ii), a certificate of the Company's Chief Financial
Officer stating that, as the case may be, neither the Guarantor,
Apparel nor any of their Subsidiaries is in default under any of its
other material agreements or, if any such default exists, specifying
the nature and period of existence thereof and what actions the
Company, the Guarantor, Apparel and their Subsidiaries have taken and
propose to take with respect thereto;
SECTION 4.04. Additional Guaranty. In the event the Company
replaces, renews, restructures or refinances all of the working capital lines of
credit extended to it or its subsidiaries, the Company shall use its reasonable
efforts to obtain from the new working capital lenders the right to have The
Casual Male, Inc., a Massachusetts corporation and a wholly-owned subsidiary of
the Company ("TCM"), to guarantee Apparel's obligations under the Notes by
executing a guaranty substantially similar to the Guaranty. In the event such
right is received, the Company shall promptly cause Casual Male to execute such
guaranty after the effectiveness of any such new or amended working capital
lines of credit; provided, however, that this Section 4.04 shall in no way be
construed as requiring the Company or its subsidiaries to enter into any working
capital arrangements that are in any way less favorable to the Company or its
subsidiaries as could be obtained from one or more lenders who do not permit TCM
to guarantee the Notes.
SECTION 4.05. Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and the Asset Purchase Agreement, including, without limitation, using
all reasonable efforts to obtain all necessary waivers, consents and approvals
and to effect all necessary registrations and filings.
SECTION 4.06. Notification of Certain Matters. The Company
shall give prompt notice to the Purchasers, and the Purchasers shall give prompt
notice to the Company, of (i) the occurrence, or failure to occur, of any event
that such party believes would be likely to cause (x) any of its representations
or warranties contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof through the Closing Date or
(y) any covenant, condition or agreement contained in this Agreement not to be
complied with or satisfied and (ii) any failure of the Company, the Guarantor,
Apparel or the Purchasers, as the case may be, or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that failure to give such notice shall not constitute a waiver of any defense
that may be validly asserted.
SECTION 4.07. Public Announcements. Prior to the Closing Date,
each of the Company, the Guarantor, Apparel and the Purchasers agrees that it
will not issue or release any press release or otherwise make any public
statement with respect to this Agreement (including the Exhibits and Schedules
hereto) or the transactions contemplated hereby without the prior consent of the
other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such prior
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with any national securities exchange and (ii)
the party making such disclosure has first used its reasonable efforts to
consult with the other party about the form and substance of such disclosure.
SECTION 4.08. Use of Proceeds. The Company shall apply the
proceeds from the sale of the Securities and the Credit Agreement first (i) for
the payment of the purchase price under the Asset Purchase Agreement and (ii)
for working capital and general corporate purposes.
ARTICLE V.
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to the Obligations of the
Purchasers. The obligations of the Purchasers hereunder are, at their option,
subject to the satisfaction, on or before the Closing Date, of the following
conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Company contained in this Agreement
(without regard to any qualifications as to materiality contained therein) shall
be true and correct in all material respects on the Closing Date, with the same
force and effect as though such representations and warranties had been made on
and as of such date, and the Company shall have so certified to the Purchasers
in writing.
(b) Performance. Each of the Company, the Guarantor and
Apparel shall have performed and complied in all material respects with all
agreements and conditions contained herein required to be performed or complied
with by it prior to or on the Closing Date, and the Company shall have so
certified to the Purchasers in writing.
(c) All Proceedings to Be Satisfactory. All corporate and
other proceedings to be taken by the Company, the Guarantor and Apparel and all
waivers and consents to be obtained by the Company, the Guarantor and Apparel in
connection with the transactions contemplated hereby shall have been taken or
obtained by the Company, the Guarantor or Apparel, as the case may be, and all
documents incident thereto shall be satisfactory in form and substance to the
Purchasers and their counsel.
(d) Supporting Documents. On or prior to the Closing Date the
Purchasers and their counsel shall have received copies of the following
supporting documents:
(i) copies of (1) the Articles of Organization of the Company,
the Guarantor and Apparel, including all amendments thereto, certified
as of a recent date by the Secretary of State or the appropriate
official of the relevant state of incorporation, and (2) certificates
of said Secretary or official, dated as of a recent date, as to the due
incorporation and good standing of the Company, the Guarantor, Apparel
and each such subsidiary, and listing all documents on file with said
official; and
(ii) a certificate of the Secretary or an Assistant Secretary
of the Company, of the Secretary or Assistant Secretary of the
Guarantor and of the Secretary or an Assistant Secretary of Apparel,
dated the Closing Date and certifying (1) that attached thereto is a
true and complete copy of the By-laws of the Company, the Guarantor or
Apparel, as the case may be, as in effect on the date of such
certification and at all times since the date hereof; (2) that attached
thereto is a true and complete copy of resolutions adopted by the Board
of Directors of the Company, the Guarantor or Apparel, as the case may
be, authorizing the execution, delivery and performance of this
Agreement, the Asset Purchase Agreement and the Ancillary Agreements,
the issuance, sale and delivery of the Securities, the reservation,
issuance and delivery of the Warrant Shares, and the performance of the
Asset Purchase and that all such resolutions are still in full force
and effect and are all the resolutions adopted in connection with the
transactions contemplated by this Agreement; (3) that the Articles of
Organization of the Company, the Guarantor or Apparel, as the case may
be, has not been amended since the date of the last amendment referred
to in the certificate delivered pursuant to clause (i)(2) above; and
(4) as to the incumbency and specimen signature of each officer of the
Company, the Guarantor or Apparel, as the case may be, executing this
Agreement, the Notes, the Warrants and the Ancillary Agreements and any
certificate or instrument furnished pursuant hereto, and a
certification by another officer of said corporation as to the
incumbency and signature of the officer signing the certificate
referred to in this paragraph (ii).
All such documents shall be satisfactory in form and substance to the
Purchasers and their counsel.
(e) Opinion of Counsel. The Purchasers shall have received
from Goodwin, Procter & Hoar LLP, counsel for the Company, an opinion dated the
Closing Date, substantially in the form of Annex I attached hereto.
(f) Consents; HSR Act Waiting Period. The Company shall have
obtained all consents required to be obtained pursuant to Section 4.06 hereof.
Without limiting the generality of the foregoing, all applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby or by the
Asset Purchase Agreement shall have expired or been terminated.
(g) Legal Proceedings. No preliminary or permanent injunction
or other order, decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated or enacted by
any governmental, regulatory or administrative agency or authority, or national
securities exchange shall be in effect that would prevent the consummation of
the transactions contemplated this Agreement or the Asset Purchase Agreement.
(h) Ancillary Agreements. Each party hereto shall have
executed and delivered the Ancillary Agreements and the Ancillary Agreements
shall be in full force and effect.
(i) Guaranty. The Guaranty shall be in full force and effect.
(j) Credit Agreement. The Company shall have entered into the
Credit Agreement on terms acceptable to the Purchasers and shall have received
proceeds therefrom sufficient in combination with the proceeds received pursuant
to the consummation of the transactions contemplated hereby to permit the
Company to effect transactions contemplated by the Asset Purchase Agreement.
(k) Asset Purchase. The Asset Purchase shall be consummated
simultaneously with the issuance and sale of the Note and Warrants and none of
the conditions set forth in Section 8.4 of the Asset Purchase Agreement shall
have been waived.
SECTION 5.02. Conditions Precedent to the Obligations of the
Company. The obligations of the Company and Apparel hereunder are, at its
option, subject to the satisfaction, on or before the Closing Date, of the
following conditions:
(a) Representations and Warranties to Be True and Correct. The
representations and warranties of the Purchasers contained in this Agreement
(without regard to any qualifications as to materiality contained therein) shall
be true and correct in all material respects on the Closing Date, with the same
effect as though such representations and warranties had been made on and as of
such date, and the Purchasers shall have so certified to the Company in writing.
(b) Performance. The Purchasers shall have performed and
complied in all material respects with all agreements and conditions contained
herein required to be performed or complied with by them prior to or on the
Closing Date, and the Purchasers shall have so certified to the Company in
writing.
(c) All Proceedings to Be Satisfactory. All proceedings to be
taken by the Purchasers and all waivers and consents to be obtained by the
Purchasers in connection with the transactions contemplated hereby shall have
been taken or obtained by the Purchasers and all documents incident thereto
shall be satisfactory in form and substance to the Company and its counsel.
(d) HSR Act Waiting Period. All applicable waiting periods
under the HSR Act with respect to the transactions contemplated hereby or by the
Asset Purchase Agreement shall have expired or been terminated.
(e) Legal Proceedings. No preliminary or permanent injunction
or other order, decree or ruling issued by any court of competent jurisdiction
nor any statute, rule, regulation or order entered, promulgated or enacted by
any governmental, regulatory or administrative agency or authority, or national
securities exchange shall be in effect that would prevent the consummation of
the transactions contemplated by this Agreement or the Asset Purchase Agreement.
(f) Ancillary Agreements. Each party hereto shall have
executed and delivered the Ancillary Agreements and the Ancillary Agreements
shall be in full force and effect.
(g) Credit Agreement. The Company shall have entered into the
Credit Agreement on terms acceptable to the Purchasers and shall have received
proceeds therefrom sufficient in combination with the proceeds received pursuant
to the consummation of the transactions contemplated hereby to permit the
Company to effect transactions contemplated by the Asset Purchase Agreement.
(h) Asset Purchase. The Asset Purchase shall be consummated
simultaneously with the issuance and sale of the Note and Warrants and none of
the conditions set forth in Section 8.4 of the Asset Purchase Agreement shall
have been waived.
ARTICLE VI.
SURVIVAL OF REPRESENTATIONS; INDEMNITY
SECTION 6.01. Survival of Representations. Subject as set
forth below, all representations and warranties (other than representations and
warranties as to Tax matters) made by any party hereto in this Agreement or
pursuant hereto shall survive for the period commencing on the date hereof and
ending on third anniversary of the date hereof, and (ii) the representations and
warranties as to Tax matters made by any party hereto in this Agreement or
pursuant hereto shall survive for the applicable Tax statute of limitation
period, including any extensions thereof. The sole recourse of any party hereto
as a result of any breach of any representations or warranties of any other
party shall be pursuant to, and subject to the limitations of, this Article VI.
SECTION 6.02. General Indemnity.
(a) Subject to the terms and conditions of this Article VI,
the Company hereby agrees to indemnify, defend and hold the Purchasers harmless
from and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including, without limitation,
interest, penalties and reasonable attorneys' fees and expenses (collectively,
"Damages"), asserted against, resulting to, imposed upon or incurred by the
Purchasers by reason of or resulting from a breach of any representation,
warranty or covenant of the Company, the Guarantor or Apparel contained in or
made pursuant to this Agreement.
(b) Subject to the terms and conditions of this Article VI,
each Purchaser hereby agrees to indemnify, defend and hold the Company, the
Guarantor and Apparel harmless from and against all Damages asserted against,
resulting to, imposed upon or incurred by the Company by reason of or resulting
from a breach of any representation, warranty or covenant of the Purchasers
contained in or made pursuant to this Agreement.
SECTION 6.03. Conditions of Indemnification. The respective
obligations and liabilities of the Purchasers, on the one hand, and the Company,
on the other hand (the "indemnifying party"), to the other (the "party to be
indemnified") under Section 6.02 hereof with respect to claims resulting from
the assertion of liability by third parties shall be subject to the following
terms and conditions:
(a) within 20 days after receipt of notice of commencement of
any action or the assertion in writing of any claim by a third party, the party
to be indemnified shall give the indemnifying party written notice thereof
together with a copy of such claim, process or other legal pleading, and the
indemnifying party shall have the right to undertake the defense thereof by
representatives of its own choosing;
(b) in the event that the indemnifying party, by the 30th day
after receipt of notice of any such claim (or, if earlier, by the tenth day
preceding the day on which an answer or other pleading must be served in order
to prevent judgment by default in favor of the person asserting such claim),
does not elect to defend against such claim, the party to be indemnified will
(upon further notice to the indemnifying party) have the right to undertake the
defense, compromise or settlement of such claim on behalf of and for the account
and risk of the indemnifying party, subject to the right of the indemnifying
party to assume the defense of such claim at any time prior to settlement,
compromise or final determination thereof, provided that the indemnifying party
shall be given at least 15 days prior written notice of the effectiveness of any
such proposed settlement or compromise and no settlement shall be entered into
without the written consent of the indemnifying party;
(c) anything in this Section 6.03 to the contrary
notwithstanding (i) if there is a reasonable probability that a claim may
materially and adversely affect the indemnifying party other than as a result of
money damages or other money payments, the indemnifying party shall have the
right, at its own cost and expense, to compromise or settle such claim, but (ii)
the indemnifying party shall not, without the prior written consent of the party
to be indemnified, settle or compromise any claim or consent to the entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the party to be indemnified a release from all
liability in respect of such claim; and
(d) in connection with any such indemnification, the
indemnified party will cooperate in all reasonable requests of the indemnifying
party.
SECTION 6.04. Limitation on Certain Indemnities.
Notwithstanding anything in this Article VI to the contrary:
(a) the Company shall not be obligated to indemnify, defend
and hold harmless the Purchasers pursuant to Section 6.02 hereof unless the
aggregate amount of such Damages exceeds $200,000; and
(b) the Company's aggregate liability and obligation to
indemnify, defend and hold harmless the Purchasers pursuant to said Section 6.02
shall in no event exceed the aggregate purchase price paid by the Purchasers for
the Securities pursuant to Section 1.01 hereof.
ARTICLE VII.
TERMINATION
SECTION 7.01. Termination by the Parties. This Agreement may
be terminated and the transactions contemplated hereby may be abandoned at any
time prior to the Closing Date:
(a) by mutual consent of the Purchasers and the Company;
(b) by either the Purchasers or the Company, if (i) the
transactions contemplated hereby have not been consummated before June 15, 1999
or (ii) any permanent injunction or action by any governmental entity of
competent jurisdiction preventing the consummation of the transactions
contemplated by this Agreement or the Asset Purchase Agreement shall have become
final and nonappealable; provided, however, that the party seeking to terminate
this Agreement pursuant to this clause (ii) shall have used all reasonable
efforts to remove such injunction or overturn such action;
(c) by the Purchasers, if (i) there has been a breach in any
material respect of any of the representations and warranties of the Company set
forth herein, (ii) there has been a breach in any material respect of any of the
covenants or agreements set forth in this Agreement on the part of the Company,
the Guarantor or Apparel, which breach is not curable or, if curable, is not
cured within 30 days after written notice thereof is given by the Purchasers to
the Company, or (iii) the Board of Directors of the Company, the Guarantor or
Apparel shall have withdrawn or modified in a manner adverse to the Purchasers
its approval or recommendation of this Agreement, the Asset Purchase Agreement
or the transactions contemplated hereby or thereby.
(d) by the Company if (i) there has been a breach in any
material respect of any of the representations and warranties of the Purchasers
set forth herein, or (ii) there has been a breach in any material respect of any
of the covenants or agreements set forth in this Agreement on the part of the
Purchasers which breach is not curable or, if curable, is not cured within 30
days after written notice thereof is given by the Purchasers to the Company.
SECTION 7.02. Effect of Termination. In the event of the
termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to this Article VII, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to any other party hereto, except as provided in this Section 7.02 and
Sections 4.06 and 8.02 hereof, and except that nothing shall relieve any party
from liability for any breach of this Agreement.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01. Restrictive Legends. (a) The certificate or
instrument representing the Securities shall bear a legend substantially in the
following form:
THIS [NOTE][WARRANT] HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT OR AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
(b) Each certificate representing the Warrant Shares, whether
by reason of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, and each certificate for any such securities issued to
subsequent transferees of any such certificate shall be stamped or otherwise
imprinted with the legend required to be borne by such shares by the
Registration Rights Agreement, except as expressly provided in the Registration
Rights Agreement.
SECTION 8.02. Expenses, Etc. Each party hereto shall pay its
own expenses in connection with the transactions contemplated hereby, except
that the Company shall reimburse DLJ or pay on its behalf any reasonable fees
and expenses incurred by DLJ Fund Investment Partners II, L.P. and its
affiliates ("DLJ") in connection with the negotiation and preparation of this
Agreement and the related documents and agreements contemplated hereby;
provided, however, that in the event that the transactions contemplated hereby
are not consummated, the Company shall only be obligated hereunder, if such
failure to consummate the transactions contemplated hereby results from the
termination of this Agreement by the Purchasers in accordance with the terms
hereof due to the breach in any material respect of representations, warranties,
covenants or agreements of the Company set forth herein. For purposes hereof,
the "fees and expenses incurred by DLJ" shall include, without limitation, the
fees, disbursements and expenses of counsel, accountants, financial advisors and
other experts retained by DLJ in connection with this Agreement and the
transactions contemplated hereby. Such Termination Fee and/or such fees and
expenses, as the case may be, shall be payable on the Closing Date or, in the
case of the proviso above, upon the termination of this Agreement.
SECTION 8.03. Survival of Agreements. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and the issuance, sale and delivery of
the Securities pursuant hereto, notwithstanding any investigation made at any
time by or on behalf of any party hereto. All statements contained in any
certificate or other instrument delivered by the Company hereunder shall be
deemed to constitute representations and warranties made by the Company.
SECTION 8.04. Parties in Interest. All covenants and
agreements contained in this Agreement by or on behalf of any party hereto shall
bind and inure to the benefit of the respective successors and assigns of such
party hereto whether so expressed or not.
SECTION 8.05. Notices. Any notice or other communications
required or permitted hereunder shall be deemed to be sufficient if contained in
a written instrument delivered in person or duly sent by first class certified
mail, postage prepaid, by nationally recognized overnight courier, or by
telecopy addressed to such party at the address or telecopy number set forth
below or such other address or telecopy number as may hereafter be designated in
writing by the addressee to the addressor listing all parties:
if to the Company, the Guarantor or Apparel, to:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Telecopy Number: (781) 828-9300
Attention: Chief Financial Officer
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Telecopy Number: (617) 523-1231
Attention: Raymond C. Zemlin, P.C.
if to any Purchaser at the address of such Purchaser appearing
on Schedule 1 hereto with a copyto:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: Othon A. Prounis
or, in any case, at such other address or addresses as shall have been furnished
in writing by such party to the other parties hereto. All such notices,
requests, consents and other communications shall be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of mailing, on the fifth business day following the date of such
mailing, (c) in the case of delivery by overnight courier, on the business day
following the date of delivery to such courier, and (d) in the case of telecopy,
when received.
SECTION 8.06. Entire Agreement; Assignment. This Agreement
(including the Schedules, Exhibits and Annexes thereto) constitutes the entire
agreement of the parties with respect to the subject matter hereof and may not
be amended or modified nor any provisions waived except in a writing signed by
the Company and the Purchasers. This Agreement shall not be assigned by
operation of law of otherwise without the consent of the other parties hereto.
SECTION 8.07. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 8.08. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchasers have
executed this Agreement as of the day and year first above written.
J. BAKER, INC.
By:/s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
JBI, INC.
By:/s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
JBI APPAREL, INC.
By:/s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO Plans Management Corporation
By:/s/Ivy Dodes
Name: Ivy Dodes
Title: Vice President
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO Plans Management Corporation
By:/s/Ivy Dodes
Name: Ivy Dodes
Title: Vice President
<PAGE>
DLJ PRIVATE EQUITY PARTNERS, L.P.
By: WSW Capital, Inc.
By:/s/Ivy Dodes
Name: Ivy Dodes
Title: Vice President
/s/Nicole Arnaboldi
Nicole Arnaboldi
/s/Christine Chen
Christine Chen
/s/Glen Dershowitz
Glen Dershowitz
/s/Steven G. Puccinelli
Steven G. Puccinelli
/s/Peter Schaeffer
Peter Schaeffer
/s/Shelley Wong
Shelley Wong
CORNERSTONE CAPITAL, INC.
By:/s/David Pulver
Name: David Pulver
Title: President
<PAGE>
GB INVESTMENT, LLC
By:/s/Alan R. Goldstein
Name: Alan R. Goldstein
Title: Manager and Chief Financial Officer
MJ WHITMAN PILOT FISH OPPORTUNITY
FUND, L.P.
By: MJ Whitman Pilot Fish Opportunity
Fund, Inc., general partner
By:/s/Ian M. Kirschner
Name: Ian M. Kirschner
Title: Secretary
<PAGE>
SCHEDULE I
Purchasers
----------
<TABLE>
<S> <C> <C> <C>
Name and Address Aggregate
of Purchaser Notes Purchased Warrants Purchased Purchase Price
- ------------ --------------- ------------------ --------------
DLJ Fund Investment Partners II, L.P.(1) 1,804,985 216,598 $1,804,985
DLJ Private Equity Employees Fund, L.P.(1) 165,201 19,824 $165,201
DLJ Private Equity Partners Fund, L.P.(1) 4,636,814 556,418 $4,636,814
Nicole Arnaboldi(1) 25,000 3,000 $25,000
Christine Chen(1) 4,000 480 $4,000
Glen Dershowitz(1) 4,000 480 $4,000
Steven G. Puccinelli(1) 100,000 12,000 $100,000
Peter Schaeffer(1) 50,000 6,000 $50,000
Shelley Wong(1) 10,000 1,200 $10,000
Cornerstone Capital, Inc.(2) 200,000 24,000 $200,000
GB Investment, LLC(3) 2,000,000 240,000 $2,000,000
MJ Whitman Pilot Fish Opportunity Fund L.P.(4) 1,000,000 120,000 $1,000,000
TOTAL: 10,000,000 1,200,000 $10,000,000
</TABLE>
- --------
(1) Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Telecopy Number: (212) 892-7272
Attention: Julio Garcia
(2) Cornerstone Capital, Inc.
16 Cobblefield Drive
Mendham, NJ 07945
Telecopy Number: (908) 221-1711
Attention: David Pulver
(3) GB Investment, LLC
40 Broad Street, 11th Floor
Boston, MA 02109
Telecopy Number: (617) 210-7141
Attention: Matthew Kahn
(4) MJ Whitman Pilot Fish Opportunity Fund, L.P.
767 Third Avenue, 5th Floor
New York, New York 10017
Telecopy Number: (212) 888-6704
Attention: Ian Kirschne
EXHIBIT 04.02
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
THIS NOTE IS ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID")
AS DEFINED BY SECTION 1273(a)(1) OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE FOLLOWING INFORMATION IS
PROVIDED PURSUANT TO THE INFORMATION REPORTING REQUIREMENTS
SET FORTH IN TREASURY REGULATION 1.1275-3.
THE ISSUE PRICE OF THIS DEBT INSTRUMENT IS $[________].
THE AMOUNT OF OID ON THIS DEBT INSTRUMENT IS $[________].
THE ISSUE DATE OF THIS DEBT INSTRUMENT IS [_______], 1999
THE PER ANNUM YIELD TO MATURITY OF THIS DEBT INSTRUMENT
IS [___]% COMPOUNDED SEMI-ANNUALLY.
JBI APPAREL, INC.
13% Senior Subordinated Note
Due December 31, 2001
$[__________] [_______], 1999
JBI APPAREL, INC. (hereinafter called the "Company"), a
Massachusetts corporation and an indirect wholly-owned subsidiary of J. Baker,
Inc., a Massachusetts corporation ("J. Baker"), for value received, hereby
promises to pay to [_________] ("Purchaser"), or registered assigns, the
principal sum of [AMOUNT IN WORDS] DOLLARS ($[________]), on December 31, 2001
and to pay interest (computed on the basis of a 360-day year consisting of
twelve 30-day months) from the date hereof on the unpaid principal amount hereof
at the rate of 13% per annum semi-annually in arrears on June 30 and December 31
of each year (each said day being an "Interest Payment Date"), commencing on
June 30, 1999, until the principal amount hereof shall have become due and
payable, whether at maturity or by acceleration or otherwise, and thereafter at
the rate of 15% per annum on any overdue principal amount and (to the extent
permitted by applicable law) on any overdue interest until paid.
All payments of principal and interest on this Note shall be
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for payment of public and private debts.
On any Interest Payment Date on or after June 29, 2001, the
Company shall pay any amount of accrued original issue discount on this Note as
shall be necessary to ensure that this Note shall not be considered an
"applicable high yield discount obligation" within the meaning of Section 163(i)
of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision. The amount of principal payable on this Note shall be reduced by the
amount of any accrued original issue discount that is paid pursuant to this
paragraph.
If any payment on this Note is due on a day which is not a
Business Day, it shall be due on the next succeeding Business Day. For purposes
of this Note, "Business Day" shall mean any day other than a Saturday, Sunday or
a legal holiday or day on which banks are authorized or required to be closed in
Boston or New York.
1. The Note. This Note is issued pursuant to and is subject to the terms
and provisions of the Securities Purchase Agreement dated as of May 19, 1999
(the "Purchase Agreement"), among J. Baker, the Company and the several
purchasers named on Schedule I thereto and the terms of this Note include those
stated in the Purchase Agreement. As used herein, the term "Note" or "Notes"
includes this 13% Senior Subordinated Note due December 31, 2001 of the Company
originally so issued and any 13% Senior Subordinated Note or Notes due December
31, 2001 subsequently issued upon exchange or transfer thereof.
2. Transfer, Etc. of Notes. The Company shall keep at its office or agency
maintained as provided in paragraph (a) of Section 7 a register in which the
Company shall provide for the registration of this Note and for the registration
of transfer and exchange of this Note. The holder of this Note may, at its
option, and either in person or by its duly authorized attorney, surrender the
same for registration of transfer or exchange at the office or agency of the
Company maintained as provided in Section 7 and, without expense to such holder
(except for taxes or governmental charges imposed in connection therewith),
receive in exchange therefor a Note or Notes each in such denomination or
denominations (in integral multiples of $100,000) as such holder may request,
dated as of the date to which interest has been paid on the Note or Notes so
surrendered for transfer or exchange, for the same aggregate principal amount as
the then unpaid principal amount of the Note or Notes so surrendered for
transfer or exchange, and registered in the name of such person or persons as
may be designated by such holder. Every Note presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or shall be
accompanied by a written instrument of transfer, satisfactory in form to the
Company, duly executed by the holder of such Note or its attorney duly
authorized in writing. Every Note so made and delivered in exchange for such
Note shall in all other respects be in the same form and have the same terms as
such Note. No transfer or exchange of any Note shall be valid (x) unless made in
the foregoing manner at such office or agency and (y) unless registered under
the Securities Act of 1933, as amended, or any applicable state securities laws
or unless an exemption from such registration is available.
3. Loss, Theft, Destruction or Mutilation of Note. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note, and, in the case of any such loss, theft or destruction, upon receipt
of an affidavit of loss and an indemnity reasonably acceptable in form and
substance to the Company from the holder thereof, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will make
and deliver, in lieu of this Note, a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on this Note.
4. Persons Deemed Owners; Holders. The Company may deem and treat the
person in whose name this Note is registered as the owner and holder of this
Note for the purpose of receiving payment of principal of and interest on this
Note and for all other purposes whatsoever, whether or not this Note shall be
overdue. With respect to any Note at any time outstanding, the term "holder", as
used herein, shall be deemed to mean the person in whose name such Note is
registered as aforesaid at such time.
5. Prepayments.
(a) Optional Prepayment. Subject to any applicable restrictions contained
in the Credit Agreement (as hereinafter defined), upon notice given as provided
in Section 5(b), the Company may, at its option, prepay this Note, without
premium or penalty, as a whole at any time or in part from time to time in
principal amounts which shall be $100,000 or integral multiples thereof,
together with any accrued and unpaid interest thereon through the date of such
prepayment.
(b) Notice of Prepayment. The Company shall give written notice of any
prepayment of this Note or any portion hereof pursuant to Section 5(a) not less
than 20 nor more than 60 days prior to the date fixed for such prepayment. Such
notice of prepayment and all other notices to be given to the holder of this
Note shall be given by registered or certified mail to the person in whose name
this Note is registered at its address designated on the register maintained by
the Company on the date of mailing such notice of prepayment or other notice.
Upon notice of prepayment being given as aforesaid, the Company covenants and
agrees that it will prepay, on the date therein fixed for prepayment, this Note
or the portion hereof, as the case may be, so called for prepayment, at the
prepayment price determined in accordance with Section 5(a) hereof. A prepayment
of less than all of the outstanding principal amount of this Note shall not
relieve the Company of its obligation to make scheduled payments of interest
payable in respect of the principal remaining outstanding on the Interest
Payment Dates.
(c) Allocation of All Payments. In the event of any partial payment of less
than all of the interest then due on the Notes then outstanding or any
prepayment, purchase, redemption or retirement of less than all of the
outstanding Notes, the Company will allocate the amount of interest so to be
paid and the principal amount so to be prepaid, purchased, redeemed or retired
to each Note in proportion, as nearly as may be, to the aggregate principal
amount of all Notes then outstanding.
(d) Interest After Date Fixed for Prepayment. If this Note or a portion
hereof is called for prepayment as herein provided, this Note or such portion
shall cease to bear interest on and after the date fixed for such prepayment
unless, upon presentation for such purpose, the Company shall fail to pay this
Note or such portion, as the case may be, in which event this Note or such
portion, as the case may be, and, so far as may be lawful, any overdue
installment of interest, shall bear interest on and after the date fixed for
such prepayment and until paid at the rate per annum provided herein for overdue
amounts.
(e) Surrender of Note; Notation Thereon. Upon any prepayment of a portion
of the principal amount of this Note, the holder hereof, at its option, may
require the Company to execute and deliver at the expense of the Company (other
than for transfer taxes, if any), upon surrender of this Note, a new Note
registered in the name of such person or persons as may be designated by such
holder for the principal amount of this Note then remaining unpaid, dated as of
the date to which the interest has been paid on the principal amount of this
Note then remaining unpaid, or may present this Note to the Company for notation
hereon of the payment of the portion of the principal amount of this Note so
prepaid.
6. Offer to Repurchase Upon a Change of Control. Subject to any applicable
restrictions in the Credit Agreement with respect to paragraph (a) below:
(a) Upon the occurrence of a Change of Control (as hereinafter defined),
the holder of this Note shall have the right, at such holder's option, to
require the Company to repurchase all or any part of such holder's Note in
amounts which shall be in integral multiples of $100,000 pursuant to the offer
described below, at a purchase price equal to 101% of the principal amount
thereof so to be repurchased, plus accrued and unpaid interest, if any, to the
date of purchase (a "Change of Control Payment"). Within 10 Business Days after
the Company knows, or reasonably should know, of the occurrence of any Change of
Control, the Company shall make an irrevocable, unconditional offer (except that
such offer may be conditioned upon the closing of the transaction constituting
the Change of Control) (a "Change of Control Offer") to all holders of the Notes
to purchase all of the Notes for cash in an amount equal to the Change of
Control Payment by sending written notice (the "Change of Control Notice") of
such Change of Control Offer to each holder by registered or certified mail to
the person in whose name the Note is registered at its address maintained by the
Company on the date of the mailing of such notice. The Change of Control Notice
shall contain all instructions and materials required by applicable law and
shall contain or make available to the holder other information material to such
holder's decision to tender this Note pursuant to the Change of Control Offer.
The Change of Control Notice, which shall govern the terms of the Change in
Control Offer, shall state:
(i) that the Change of Control Offer is being made pursuant to
this Section 6, and that all Notes validly tendered will
be accepted for payment;
(ii) the Change of Control Payment (including the amount of
accrued and unpaid interest) and the purchase date, which
will be no later than 30 days from the date such notice is
mailed (the "Change of Control Payment Date");
(iii) that any Note not validly tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Payment, any Note accepted for payment
pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date;
(v) that holders electing to have a Note, or portion thereof,
purchased pursuant to a Change of Control Offer will be
required to surrender the Note to the Company at the
address specified in the notice not later than the close
of business on the Business Day prior to the Change of
Control Payment Date;
(vi) that holders will be entitled to withdraw their election
if the Company receives, not later than the close of
business on the second Business Day prior to the Change of
Control Payment Date, a telegram, facsimile transmission
or letter setting forth the name of the holder, the
principal amount of the Note delivered for purchase and a
statement that such holder is withdrawing its election to
have such principal amount of Note purchased; and
(vii) that holders whose Notes are being purchased only in part
will be issued a new Note equal in principal amount to the
unpurchased portion of the Note surrendered, which
unpurchased portion must be equal to $100,000 in principal
amount or an integral multiple thereof.
On or before the Change of Control Payment Date, the Company
shall (i) accept for payment the Notes or portions thereof validly tendered
pursuant to the Change of Control Offer prior to the close of business on the
Change of Control Payment Date, (ii) promptly mail to the holders of Notes so
accepted payment in an amount equal to the Change of Control Payment (including
accrued and unpaid interest) for such Notes, and the Company shall promptly mail
or deliver to such holders a new Note equal in principal amount to any
unpurchased portion of the Note surrendered; provided, that each such new Note
will be in a principal amount of $100,000 or an integral multiple thereof. Any
Notes not so accepted shall be promptly mailed or delivered by the Company to
the holder thereof.
(b) In the event of a Change of Control, the Company will promptly, in good
faith, (i) seek to obtain any required consent of the holders of any Senior
Indebtedness (as defined herein) to permit the Change of Control Offer and the
Change of Control Payment contemplated by this Section 6, or (ii) repay some or
all of such Senior Indebtedness to the extent necessary (including, if
necessary, payment in full of such Senior Indebtedness and payment of any
prepayment premiums, fees, expenses or penalties) to permit the Change of
Control Offer and the Change of Control Payment contemplated hereby without such
consent. Failure to comply with the foregoing shall not relieve the Company from
its obligations pursuant to paragraph (a) above.
(c) For purposes of this Note "Change of Control" means (i) the sale, lease
or transfer, whether direct or indirect (other than by way of merger or
consolidation), of all or substantially all of the assets of (A) J. Baker and
its subsidiaries, taken as a whole or (B) the Company and its subsidiaries,
taken as a whole, in one transaction or a series of related transactions, to any
"person" or "group," (ii) the liquidation or dissolution of J. Baker or the
Company or the adoption of a plan of liquidation or dissolution of J. Baker or
the Company, (iii) the acquisition of "beneficial ownership" by any "person" or
"group" of securities of J. Baker or the Company representing more than 50% of
the combined voting power of all then outstanding securities entitled to vote
generally in elections of directors of J. Baker or the Company, as the case may
be, or any successor entity ("Voting Stock"), by way of sale, transfer or
issuance of or a series of sales, transfers and/or issuances of Voting Stock or
otherwise, (iv) any merger or consolidation to which J. Baker or the Company is
a party, except for a merger or consolidation in which the holders of J. Baker's
or the Company's outstanding Voting Stock, as the case may be, entitled to elect
a majority of the J. Baker's Company's Board of Directors, as the case may be,
immediately prior to the merger or consolidation shall continue to own directly
or beneficially the outstanding Voting Stock of the surviving corporation
entitled to elect a majority of the Board of Directors of the surviving
corporation after giving effect to the merger or consolidation, or (v) during
any period of two consecutive years, the failure of those individuals who at the
beginning of such period constituted J. Baker's or the Company's Board of
Directors, as the case may be (together with any new directors whose election or
appointment by such Board or whose nomination for election or appointment by the
shareholders of J. Baker or the Company, as the case may be, was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved), to constitute a majority of J. Baker's. or
the Company's Board of Directors, as the case may be, then in office; provided,
however, that in no event shall a foreclosure on any collateral pledged by J.
Baker or the Company in respect of obligations arising under or in connection
with the Credit Agreement constitute a Change of Control.
For purposes of this definition, (i) the terms "person" and
"group" shall have the meaning set forth in Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not
applicable, (ii) the term "beneficial owner" shall have the meaning set forth in
Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except
that a person shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time or upon the occurrence of certain
events, and (iii) any "person" or "group" will be deemed to beneficially own any
voting stock of J. Baker or the Company so long as such person or group
beneficially owns, directly or indirectly, in the aggregate a majority of the
voting stock of a registered holder of the voting stock of J. Baker or the
Company, as the case may be.
7. Covenants Relating to the Note. The Company covenants and agrees that so
long as the Note shall be outstanding and, in the case of paragraphs (k) through
(q) below, so long as one million dollars ($1,000,000) of aggregate principal
amount of the Notes is outstanding:
(a) Maintenance of Office. The Company will maintain an office or agency in
such place in the United States of America as the Company may designate in
writing to the registered holder of this Note, where this Note may be presented
for registration of transfer and for exchange as herein provided, where notices
and demands to or upon the Company in respect of this Note may be served and
where this Note may be presented for payment. Until the Company otherwise
notifies the holder hereof, said office shall be the principal office of the
Company located at 55 Turnpike Street, Canton, Massachusetts 02021.
(b) Payment of Taxes. The Company will promptly pay and discharge or cause
to be paid and discharged, before the same shall become in default, all material
lawful taxes and assessments imposed upon the Company or any of its subsidiaries
or upon the income and profits of the Company or any of its subsidiaries, or
upon any property, real, personal or mixed, belonging to the Company or any of
its subsidiaries, or upon any part thereof by the United States or any State
thereof, as well as all material lawful claims for labor, materials and supplies
which, if unpaid, would become a lien or charge upon such property or any part
thereof; provided, however, that neither the Company nor any of its subsidiaries
shall be required to pay and discharge or to cause to be paid and discharged any
such tax, assessment, charge, levy or claim so long as both (x) the Company has
established adequate reserves for such tax, assessment, charge, levy or claim
and (y)(i) the Company or a subsidiary shall be contesting the validity thereof
in good faith by appropriate proceedings or (ii) the Company shall, in its good
faith judgment, deem the validity thereof to be questionable and the party to
whom such tax, assessment, charge, levy or claim is allegedly owed shall not
have made written demand for the payment thereof.
(c) Corporate Existence. The Company will do or cause to be done all things
necessary and lawful to preserve and keep in full force and effect (i) its
corporate existence and the corporate existence of each of its subsidiaries and
(ii) the material rights and franchises of the Company and each of its
subsidiaries under the laws of the United States or any state thereof, or, in
the case of subsidiaries organized and existing outside the United States, under
the laws of the applicable jurisdiction; provided, however, that nothing in this
paragraph (c) shall prevent the abandonment or termination of any rights or
franchises of the Company, or the liquidation or dissolution of, or a sale,
transfer or disposition (whether through merger, consolidation, sale or
otherwise) of all or any substantial part of the property and assets of, any
subsidiary or the abandonment or termination of the corporate existence, rights
and franchises of any subsidiary if such abandonment, termination, liquidation,
dissolution, sale, transfer or disposition is, in the good faith business
judgment of the Company, in the best interests of the Company and not
disadvantageous to the holder of this Note.
(d) Maintenance of Property. The Company will at all times maintain and
keep, or cause to be maintained and kept, in good repair, working order and
condition (reasonable wear and tear excepted) all significant properties of the
Company and its subsidiaries used in the conduct of the Business, and will from
time to time make or cause to be made all needful and appropriate repairs,
renewals, replacements, betterments and improvements thereto, so that the
Business may be conducted at all times in the ordinary course consistent with
past practice.
(e) Insurance. The Company will, and will cause each of its subsidiaries
to, (i) keep adequately insured, by financially sound and reputable insurers,
all property of a character usually insured by corporations engaged in the same
or a similar business similarly situated against loss or damage of the kinds
customarily insured against by such corporations and (ii) carry, with
financially sound and reputable insurers, such other insurance (including
without limitation liability insurance) in such amounts as are available at
reasonable expense and to the extent believed advisable in the good faith
business judgment of the Company.
(f) Keeping of Books. The Company will at all times keep, and cause each of
its subsidiaries to keep, proper books of record and account in which proper
entries will be made of its transactions in accordance with generally accepted
accounting principles consistently applied.
(g) Transactions with Affiliates. The Company shall not enter into, or
permit any of its subsidiaries to enter into, any transaction with any of its or
any subsidiary's officers, directors, employees or any person related by blood
or marriage to any such person or any entity in which any such person owns any
beneficial interest, except for (i) normal employment arrangements, benefit
programs and employee incentive option programs on reasonable terms, (ii) any
transaction approved by the Board of Directors of the Company, (iii) customer
transactions in the ordinary course of business and on arm's length terms and
(iv) the transactions contemplated by the Purchase Agreement.
(h) Notice of Certain Events. The Company shall, immediately after it
becomes aware of the occurrence of (i) any Event of Default (as hereinafter
defined) or any event which, upon notice or lapse of time or both, would
constitute such an Event of Default, or (ii) any action, suit or proceeding at
law or in equity or by or before any governmental instrumentality or agency
which, if adversely determined, would materially impair the right of the Company
to carry on its business substantially as now or then conducted, or would have a
material adverse effect on the properties, assets, financial condition,
prospects, operating results or business of the Company and its subsidiaries
taken as a whole, give notice to the holder of this Note, specifying the nature
of such event.
(i) Payment of Principal and Interest on the Note. The Company will use its
best efforts, subject to the provisions of applicable credit arrangements
(including the Credit Agreement), contractual obligations of the Company and/or
its subsidiaries and any applicable law restricting the same, to provide funds
from its subsidiaries to the Company, by dividend, advance or otherwise,
sufficient to permit payment by the Company of the principal of and interest on
this Note in accordance with its terms. Subject to any applicable provisions in
the Credit Agreement and documents executed and delivered in connection
therewith, the Company will not, and will not permit any subsidiary to, directly
or indirectly create or otherwise cause to exist any encumbrance or restriction
on the ability of any subsidiary to pay dividends or make any other
distributions to the Company or any wholly-owned subsidiary of the Company in
respect of its capital stock.
(j) Consolidation, Merger and Sale. The Company will not consolidate or
merge with or into, or sell or otherwise dispose of all or substantially all of
its property in one or more related transactions to, any other corporation or
other entity, unless:
(i) the Company is the surviving corporation or the entity
formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale or other
disposition shall have been made is a corporation
organized or existing under the laws of the United States
of any state thereof or the District of Columbia;
(ii) the surviving corporation or other entity (if other than
the Company) shall expressly and effectively assume in
writing the due and punctual payment of the principal of
and interest on this Note, according to its tenor, and the
due and punctual performance and observance of all the
terms, covenants, agreements and conditions of this Note
to be performed or observed by the Company to the same
extent as if such surviving corporation had been the
original maker of this Note;
(iii) the Company or such other corporation or other entity
shall not otherwise be in default in the performance
observance of any covenant, agreement or condition of this
Note or the Purchase Agreement; and
(iv) the holder of this Note shall have received, in connection
therewith, an opinion of counsel of the Company (or other
counsel satisfactory to the holder), in form and substance
satisfactory to the holder, to the effect that any such
consolidation, merger, sale or conveyance and any such
assumption complies with the provisions of clauses (i) and
(ii) of this paragraph (j).
Notwithstanding anything to the contrary herein, in no event shall a
foreclosure on any collateral pledged by the Company in respect of
obligations arising under or in connection with the Credit Agreement be
deemed to constitute a violation of the Company's obligatons pursuant
to this paragraph (j).
(k) Limitation on Indebtedness and Disqualified Stock. The Company will
not, and will not permit any of its subsidiaries to, (i) incur or permit to
remain outstanding any indebtedness for money borrowed ("Indebtedness"), except
(A) Senior Indebtedness (as defined in Section 13), (B) Indebtedness existing on
the date of original issuance of this Note, (C) Indebtedness permitted to be
incurred under the Credit Agreement as in effect from time to time after the
original issuance of this Note (other than Indebtedness that is subordinate or
junior in right of payment (to any extent) to any Senior Indebtedness and senior
or pari passu in right of payment (to any extent) to the Notes), or (D) in the
event that the Credit Agreement has terminated, Indebtedness permitted to be
incurred under any successor credit agreement of the Company with respect to
Senior Indebtedness, of if there exists no such credit agreement, such
Indebtedness as may be mutually agreed upon by the Company and the holders of a
majority of the aggregate principal amount of the Notes then outstanding, or
(ii) issue any capital stock ("Disqualified Stock") of the Company or any of its
subsidiaries which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures, or is mandatorily redeemable, whether pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to March 31, 2002.
(l) Restricted Payments. The Company will not, and will not permit any of
its subsidiaries to: (i) declare or pay any dividends on, or make any other
distribution or payment on account of, or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of any in respect thereof, either
directly or indirectly, whether in cash, property or in obligations of the
Company or any of its subsidiaries, except for (X) distributions of shares of
the same class or of a different class of stock pro rata to all holders of
shares of a class of stock, or (Y) dividends, distributions or payment by any
subsidiary to the Company or to any wholly-owned subsidiary of the Company, or
(ii), except as permitted under the Credit Agreement, make any payments of
principal of, or retire, redeem, purchase or otherwise acquire any Indebtedness
other than any Senior Indebtedness of the Notes (such declarations, payments,
purchases, redemptions, retirements, acquisitions or distributions being herein
called "Restricted Payments").
(m) Limitation on Liens. The Company shall not, and shall not permit any of
its subsidiaries to, directly or indirectly, create, incur, assume or otherwise
cause or suffer to exist any lien, pledge , charge, security interest or
encumbrance (collectively, "Liens") on any asset now owned or hereafter
acquired, or on any income or profits therefrom or assign or convey any right to
receive income therefrom, except for (i) Liens permitted under the Credit
Agreement or securing any Senior Indebtedness, (ii) liens for current taxes not
yet due, (iii) landlord's liens, (iv) purchase money liens and (v) workman's,
materialman's, warehouseman's and similar liens arising by law or statute.
(n) Inspection of Property. The Company will permit the holder hereof to
visit and inspect any of the properties of the Company and any other
subsidiaries and their books and records and to discuss the affairs, finances
and accounts of any of such corporations with the principal officers of the
Company and such subsidiaries and their independent public accountants, all at
such reasonable times and as often as such holders may reasonably request.
(o) Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company shall not, and will not permit any of its subsidiaries
to, directly or indirectly, create, assume or suffer to exist any consensual
encumbrance or restriction on the ability of any subsidiary of the Company to
pay dividends or make other distributions on the capital stock of any subsidiary
of the Company or pay or satisfy any obligation to the Company or any of its
subsidiaries or otherwise transfer assets or make or pay loans or advances to
the Company or any of its subsidiaries, except encumbrances and restrictions
existing under (i) any applicable law or any governmental or administrative
regulation or order; (ii) restrictions with respect solely to a subsidiary of
the Company imposed pursuant to a binding agreement which has been entered into
for the sale or disposition of all or substantially all of the capital stock or
assets of such subsidiary, provided that such restrictions apply solely to the
capital stock or assets being sold of such subsidiary; (iii) restrictions
contained in any agreement relating to a person or real or tangible personal
property acquired after the date hereof which are not applicable to any person
or property, other than the person or property so acquired and which were not
put in place in connection with, or in contemplation of, such acquisition; (iv)
any agreement (other than those referred to in clause (iii)) of a person
acquired by the Company or a subsidiary of the Company, which restrictions
existed at the time of acquisition; (v) contractual encumbrances or restrictions
in effect on the date hereof and customary encumbrances and restrictions
contained in the security agreements related to the Credit Agreement and
encumbrances and restrictions contained in the Credit Agreement on the date
hereof as such encumbrances or restrictions may be amended, provided that such
encumbrances or restrictions as amended are not more restrictive in the
aggregate than those contained in the security agreements and the Credit
Agreement in effect on the date hereof; (vi) the Credit Agreement and the Notes;
(vii) indebtedness otherwise permitted to be incurred pursuant to Sections 7(k)
and 7(m) hereof; (viii) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business; or (ix) customary provisions restricting subletting or assignment of
any lease entered into the ordinary course of business.
(p) Limitation on Asset Sales and Issuance of Shares of Subsidiaries. The
Company shall not, and shall not permit any of its subsidiaries to, in one or a
series of related transactions, convey, sell, transfer, assign or otherwise
dispose of, directly or indirectly, any of its property, businesses or assets,
including by merger or consolidation or sale and leaseback transaction, and
including any sale or other transfer or issuance of any capital stock of any
subsidiary of the Company, whether the Company or its subsidiary (an "Asset
Sale"), unless (1)(a) within one year after the date of such Asset Sale, an
amount equal to the net cash proceeds therefrom (the "Asset Sale Offer Amount")
are applied to the optional redemption of the Notes in accordance with the terms
of Section 5(a) hereof to make an offer to purchase or to redeem the Notes with
the proceeds from asset sale, pro rate in proportion to the respective principal
amounts (or accreted values in the case of indebtedness issued with an original
issue discount) of the Notes or to the repurchase of the Notes pursuant to an
irrevocable, unconditional offer (an "Asset Sale Offer"), or (b)within one year
of such Asset Sale, the Asset Sale Offer Amount is used to permanently retire
Senior Indebtedness of the Company or indebtedness of any subsidiary of the
Company, and (2) the Board of Directors of the Company determines in good faith
that the Company or such subsidiary, as applicable, would receive fair market
value in consideration of such Asset Sale.
Notwithstanding the foregoing provisions of the prior
paragraph:
(i) The Company and its subsidiaries may, in the ordinary course of
business, convey, sell, lease, transfer, assign or otherwise dispose of
assets acquired and held for resale in the ordinary course of business;
(ii) The Company and its subsidiaries may convey, sell, lease, transfer,
assign or otherwise dispose of assets pursuant to and in accordance
with Section 7(j) hereof;
(iii) The Company and its subsidiaries may sell or dispose of damaged, worn
out or other obsolete property so long as such property is no longer
necessary for the proper conduct of the business of the Company or such
subsidiary, as applicable;
(iv) The Company may sell or dispose of slow-selling or other inventory in
bulk; and
(v) The Company and its subsidiaries may convey, sell, lease, transfer,
assign or otherwise dispose of assets to the Company or any of its
wholly-owned subsidiaries in accordance with the terms hereof.
Restricted Payments that are made in compliance with Section
7(1) hereof shall not be deemed to be Asset Sales.
Any Asset Sale Offer shall be made in compliance with all
applicable laws, rules, and regulations, including, if applicable, Regulation 14
E of the Exchange Act and the rules and regulations thereunder and all other
applicable Federal and state securities laws.
(q) Limitation on Subsidiary Guarantees. The Company shall not cause or permit
any of its subsidiaries, directly or indirectly, to guarantee, assume or in any
other manner become liable with respect to any indebtedness of the Company or
any of its subsidiaries (other than under the Credit Agreement).
8. Modification by Holders; Waiver. The Company may, with the written consent of
the holders of not less than a majority in principal amount of the Notes then
outstanding, modify the terms and provisions of this Note or the rights of the
holders of this Note or the obligations of the Company hereunder, and the
observance by the Company of any term or provision of this Note may be waived
with the written consent of the holders of not less than a majority in principal
amount of the Notes then outstanding; provided, however, that no such
modification or waiver shall:
(i) Change the maturity of any Note or reduce the principal amount thereof
or reduce the rate or extend the time of payment of interest thereon
without the consent of the holder of each Note so affected; or
(ii) give any Note any preference over any other Note, including, without
limitation, by amending the allocation provisions of Section 5(c)
hereof; or
(iii) reduce the percentage of principal amount outstanding under any Note,
the consent of the holder of which is required for any such
modification; or
(iv) amend the provisions of Section 13 hereof in any manner adverse to the
interests of the holder of this Note,
without the consent of the holder of each Note so affected.
Any such modification or waiver shall apply equally to each
holder of the Notes and shall be binding upon them, upon each future holder of
any Note and upon the Company, whether or not such Note shall have been marked
to indicate such modification or waiver, but any Note issued thereafter shall
bear a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to the holders of the Notes
at the time outstanding.
9. Events of Default. If any one or more of the following events, herein
called "Events of Default," shall occur (for any reason whatsoever, and whether
such occurrence shall, on the part of the Company or any of its subsidiaries, be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of a court of
competent jurisdiction or any order, rule or regulation of any administrative or
other governmental authority) and such Event of Default shall be continuing:
(i) default shall be made in the payment of the principal of this Note when
and as the same shall become due and payable, whether at maturity or at
a date fixed for prepayment or repurchase (including default of any
optional prepayment in accordance with the requirements of Section 5 or
any Change of Control Payment in accordance with the requirements of
Section 6, as the case may be) or by acceleration or otherwise; or
(ii) default shall be made in the payment of any installment of interest on
this Note according to its terms when and as the same shall become due
and payable; or
(iii) default shall be made in the due observance or performance of any
covenant, condition or agreement on the part of the Company contained
herein in Section 7(j); or
(iv) default shall be made in the due observance or performance of any other
covenant, condition or agreement on the part of the Company to be
observed or performed pursuant to the terms hereof or of the Purchase
Agreement, and such default shall continue for 20 days after written
notice thereof, specifying such default and requesting that the same be
remedied; or
(v) any representation or warranty made by or on behalf of the Company
herein or in the Purchase Agreement shall prove to have been false or
incorrect in any material respect on the date on or as of which made;
or
(vi) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company or any of its
subsidiaries in any involuntary case under the federal bankruptcy laws,
as now constituted or hereafter amended, or any other applicable
federal or state bankruptcy, insolvency or other similar laws, or
appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or any of its
subsidiaries for any substantial part of any of their property or
ordering the winding-up or liquidation of any of their affairs and the
continuance of any such decree or order unstayed and in effect for a
period of 45 consecutive days; or
(vii) the commencement by the Company or any of its subsidiaries of a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other applicable federal or state bankruptcy, insolvency or
other similar laws, or the consent by any of them to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of the Company or any of its
subsidiaries for any substantial part of any of their property, or the
making by any of them of any general assignment for the benefit of
creditors, or the failure of the Company or of any of its subsidiaries
generally to pay its debts as such debts become due, or the taking of
corporate action by the Company or any of its subsidiaries in furtherance
of or which might reasonably be expected to result in any of the foregoing;
or
(viii) a default or an event of default as defined in any instrument
evidencing or under which the Company or any of its subsidiaries has
outstanding at the time any Indebtedness in excess of $500,000 in
aggregate principal amount shall occur and as a result thereof the
maturity of any such Indebtedness shall have been accelerated so that
the same shall have become due and payable prior to the date on which
the same would otherwise have become due and payable and such
acceleration shall not have been rescinded or annulled within 20 days;
or
(ix) final judgment (not reimbursed by insurance policies of the Company or
any of its subsidiaries) for the payment of money in excess of $500,000
shall be rendered against the Company or any of its subsidiaries and
the same shall remain undischarged for a period of 30 days during which
execution shall not be effectively stayed;
then the holders of at least 33-1/3% in aggregate principal amount of the Notes
at the time outstanding may, at their option, by a notice in writing to the
Company declare this Note to be, and this Note shall thereupon be and become
immediately due and payable together with interest accrued thereon, without
diligence, presentment, demand, protest or further notice of any kind, all of
which are expressly waived by the Company to the extent permitted by law.
At any time after any declaration of acceleration has been
made as provided in this Section 9, the holders of a majority in principal
amount of the Notes then outstanding may, by notice to the Company, rescind such
declaration and its consequences, provided, however, that no such rescission
shall extend to or affect any subsequent default or Event of Default or impair
any right consequent thereon.
Without limiting the foregoing, the Company hereby waives any
right to trial by jury in any legal proceeding related in any way to this Note
and agrees that any such proceeding may, if the holder so elects, be brought and
enforced in the Superior Court of the Commonwealth of Massachusetts for Suffolk
County or the United States District Court for the District of Massachusetts and
the Company hereby waives any objection to jurisdiction or venue in any such
proceeding commenced in such court. The Company further agrees that any process
required to be served on it for purposes of any such proceeding may be served on
it, with the same effect as personal service on it within the State of New York,
by registered mail addressed to it at its office or agency set forth in
paragraph (a) of Section 7 for purposes of notices hereunder.
10. Suits for Enforcement. Subject to the provisions of Section 13 of this
Note, in case any one or more of the Events of Default specified in Section 9 of
this Note shall happen and be continuing (subject to any applicable cure period
expressly set forth herein), the holder of this Note may proceed to protect and
enforce its rights by suit in equity, action at law and/or by other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Note or in aid of the exercise of any power granted in this
Note, or may proceed to enforce the payment of this Note or to enforce any other
legal or equitable right of the holder of this Note.
In case of any default under this Note, the Company shall pay
to the holder hereof reasonable collection costs and reasonable attorneys' fees,
to the extent actually incurred.
11. Remedies Cumulative. No remedy herein conferred upon the holder of this
Note is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
12. Remedies Not Waived. No course of dealing between the Company and the
holder of this Note or any delay on the part of the holder hereof in exercising
any rights hereunder shall operate as a waiver of any right of the holder of
this Note.
13. Subordination. (a) Anything contained in this Note to the contrary
notwithstanding, the indebtedness evidenced by the Notes shall be subordinate
and junior, to the extent set forth in the following paragraphs (A), (B), (C)
and (D), to all Senior Indebtedness of the Company. "Senior Indebtedness" shall
mean the principal of, premium, if any, and interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the rate
provided for in the documentation with respect thereto, whether or not such
interest is an allowed claim under applicable law) on, and all reasonable fees,
reimbursement and indemnity obligations, and all other obligations arising in
connection with, any indebtedness for borrowed money of the Company, contingent
or otherwise, now outstanding or created, incurred, issued, assumed or
guaranteed in the future, for which, in the case of any particular indebtedness,
the instrument creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such indebtedness shall not be subordinate
in right of payment to any other indebtedness of the Company. Without limiting
the generality of the foregoing, Senior Indebtedness shall include all
Obligations (under and as defined in the Credit Agreement); notwithstanding the
foregoing, Senior Indebtedness shall include only such Obligations until such
time as the same are paid in full in cash and all obligations to provide
financial accommodations under the Credit Agreement have terminated. For
purposes of this Note, "Credit Agreement" shall mean the Loan and Security
Agreement, dated as of May 19, 1999, by and among BankBoston Retail Finance
Inc., as Administrative Agent and as Collateral Agent (collectively, the
"Agent"); BankBoston Retail Finance Inc., as "Working Capital Lender"; Back Bay
Capital Funding LLC and the Company, as the same may be amended, from time to
time thereafter, together with any agreement entered into in connection with the
restatement, renewal, extension, restructuring, refunding or refinancing of the
Liabilities (under and as defined in the Credit Agreement), together with any
agreement entered into with any person which provides revolving or term credit
to replace or supplement the "Revolving Credit" and the "Term Loan" within the
meaning of the Credit Agreement.
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the
Company or its creditors or its property, and in the event of any
proceedings for voluntary liquidation, dissolution or other winding up
of the Company, whether or not involving insolvency or bankruptcy
proceedings, then all Senior Indebtedness shall first be paid in full
in cash, before any payment, whether on account of principal, interest
or otherwise, is made upon the Notes.
(B) In any of the proceedings referred to in
paragraph (A) above, any payment or distribution of any kind or
character, whether in cash, property, stock or obligations which may be
payable or deliverable in respect of the Notes shall be paid or
delivered directly to the holders of Senior Indebtedness for
application in payment thereof, unless and until all Senior
Indebtedness shall have been paid in full in cash.
(C) No payment shall be made, directly or indirectly,
on account of the Notes (i) upon maturity of any Senior Indebtedness
obligation, by lapse of time, acceleration (unless waived), or
otherwise, unless and until all principal thereof and interest thereon
and all other obligations in respect thereof shall first be paid in
full in cash and all obligations to provide financial accommodations
under the Credit Agreement have terminated, or (ii) upon the happening
of any default in payment of any principal of, premium, if any, or
interest on or any other amounts payable in respect of Senior
Indebtedness when the same becomes due and payable whether at maturity
or at a date fixed for prepayment or by declaration or otherwise (a
"Senior Payment Default"), unless and until such Senior Payment Default
shall have been cured or waived or shall have ceased to exist.
(D) Upon the happening of an event of default or any event or
circumstance with respect to any Senior Indebtedness permitting (after
notice or lapse of time or both if required, otherwise immediately) one
or more holders of such Senior Indebtedness (or, in the case of the
Credit Agreement, the Agent or any other person having the power to do
so) to declare such Senior Indebtedness due and payable prior to the
date on which it is otherwise due and payable or to suspend the
providing of credit to the Company pursuant to the Credit Agreement (a
"Non-monetary Default"), upon the occurrence of (i) receipt by the
holders of the Notes of written notice from the holders of said Senior
Indebtedness (or, in the case of the Credit Agreement, the Agent) of a
Non-monetary Default (any such notice, a "Blockage Notice"), or (ii) if
such Non-monetary Default results from the acceleration of the Notes,
the date of such acceleration; then (x) the Company shall not make,
directly or indirectly, to the holder of the Notes any payment of any
kind of or on account of all or any part of the Notes; (y) the holders
of the Notes shall not accept from the Company any payment of any kind
of or on account of all or any part of the Notes and (z) the holders of
the Notes may not take, demand, receive, sue for, accelerate or
commence any remedial proceedings with respect to any amount payable
under the Notes, unless and until in each case described in clauses
(x), (y) and (z) all such Senior Indebtedness shall have been paid in
full in cash; provided, however, that if such Nonmonetary Default shall
have occurred and be continuing for a period (a "Blockage Period")
commencing on the earlier of the date of receipt of such Blockage
Notice or the date of the acceleration of the Notes and ending 179 days
thereafter (it being understood that not more than one Blockage Period
may be commenced with respect to the Notes during any period of 90
consecutive days), and during such Blockage Period (i) such
Non-monetary Default shall not have been cured or waived, (ii) the
holder of such Senior Indebtedness (or, in the case of the Credit
Agreement, the Agent) shall not have made a demand for payment and
commenced an action, suit or other proceeding against the Company and
(iii) none of the events described in subsection (A) above shall have
occurred, then (to the extent not otherwise prohibited by subsections
(A), (B) or (C) above) the Company may, not less than 10 days after
receipt by the holders of such Senior Indebtedness or the Agent, as the
case may be, of written notice to such effect from the holders of the
Notes, make and the holders of the Notes may accept from the Company
all past due and current payments of any kind of or on account of the
Notes, and such holder may demand, receive, retain, sue for or
otherwise seek enforcement or collection of all amounts payable on
account of principal of or interest on the Notes. Any such payments
made by the Company upon lifting of the Blockage Period shall cure any
payment default hereunder.
(b) Subject to the payment in full in cash of all Senior Indebtedness as
aforesaid, the holders of the Notes shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of any kind
or character, whether in cash, property, stock or obligations, which may be
payable or deliverable to the holders of Senior Indebtedness, until the
principal of, and interest on, the Notes shall be paid in full in cash, and, as
between the Company, its creditors other than the holders of Senior
Indebtedness, and the holders of the Notes, no such payment or distribution made
to the holders of Senior Indebtedness by virtue of this Section 13 which
otherwise would have been made to the holder of the Notes shall be deemed a
payment by the Company on account of the Senior Indebtedness, it being
understood that the provisions of this Section 13 are and are intended solely
for the purposes of defining the relative rights of the holders of the Notes, on
the one hand, and the holder of the Senior Indebtedness, on the other hand.
Subject to the rights, if any, under this Section 13 of holders of Senior
Indebtedness to receive cash, property, stock or obligations otherwise payable
or deliverable to the holders of the Notes, nothing herein shall either impair,
as between the Company and the holder of the Notes, the obligation of the
Company, which is unconditional and absolute, to pay to the holder thereof the
principal thereof and interest thereon in accordance with its terms or prevent
(except as otherwise specified therein) the holders of the Notes from exercising
all remedies otherwise permitted by applicable law or hereunder upon default
hereunder.
(c) If any payment or distribution of any character or any security,
whether in cash, securities or other property, shall be received by any holders
of the Notes in contravention of any of the terms hereof or before all the
Senior Indebtedness obligations have been paid in full in cash and all
obligations to provide financial accommodations under the Credit Agreement have
terminated, such payment or distribution or security shall be received in trust
for the benefit of, and shall be paid over or delivered and transferred to, the
holders of the Senior Indebtedness at the time outstanding in accordance with
the priorities then existing among such holders for application to the payment
of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all
such Senior Indebtedness in full in cash. In the event of the failure of any
such holder to endorse or assign any such payment, distribution or security,
each holder of any Senior Indebtedness is hereby irrevocably authorized to
endorse or assign the name.
(d) The rights under these subordination provisions of the holders of any
Senior Indebtedness as against any holders of the Notes shall remain in full
force and effect without regard to, and shall not be impaired or affected by:
(i) any act or failure to act on the part of the Company; or
(ii) any extension or indulgence in respect of any payment or prepayment of
any Senior Indebtedness or any part thereof or in respect of any other
amount payable to any holder of any Senior Indebtedness; or
(iii) any amendment, modification or waiver of, or addition or supplement to,
or deletion from, or compromise, release, consent or other action in
respect of, any of the terms of any Senior Indebtedness or any other
agreement which may be made relating to any Senior Indebtedness; or
(iv) any exercise or non-exercise by the holder of any Senior Indebtedness
of any right, power, privilege or remedy under or in respect of such
Senior Indebtedness or these subordination provisions or any waiver of
any such right, power, privilege or remedy or of any default in respect
of such Senior Indebtedness or these subordination provisions or any
receipt by the holder of any Senior Indebtedness of any security, or
any failure by such holder to perfect a security interest in, or any
release by such holder of, any security for the payment of such Senior
Indebtedness; or
(v) any merger or consolidation of the Company or any of its subsidiaries
into or with any other person, or any sale, lease or transfer of any or
all of the assets of the Company or any of its subsidiaries to any
other person; or
(vi) absence of any notice to, or knowledge by, any holder of any claim
hereunder of the existence or occurrence of any of the matters or
events set forth in the foregoing clauses (i) through (v); or
(vii) any other circumstance.
(e) The holders of the Notes unconditionally waive (i) notice of any of the
matters referred to in Section 13(d); (ii) all notices which may be required,
whether by statute, rule of law or otherwise, to preserve intact any rights of
any holder of any Senior Indebtedness, including, without limitation, any
demand, presentment and protest, proof of notice of nonpayment under any Senior
Indebtedness or the Credit Agreement, and notice of any failure on the part of
the Company to perform and comply with any covenant, agreement, term or
condition of any Senior Indebtedness, (iii) any right to the enforcement,
assertion or exercise by any holder of any Senior Indebtedness of any right,
power, privilege or remedy conferred in such Senior Indebtedness or otherwise,
(iv) any requirements of diligence on the part of any holder of any of the
Senior Indebtedness, (v) any requirement on the part of any holder of any Senior
Indebtedness to mitigate damages resulting from any default under such Senior
Indebtedness and (vi) any notice of any sale, transfer or other disposition of
any Senior Indebtedness by any holder thereof.
(f) The obligations of the holder under these subordination provisions
shall continue to be effective, or be reinstated, as the case may be, if at any
time any payment in respect of any Senior Indebtedness, or any other payment to
any holder of any Senior Indebtedness in its capacity as such, is rescinded or
must otherwise be restored or returned by the holder of such Senior Indebtedness
upon the occurrence of any proceeding referred to in paragraph 13(a)(A) or upon
or as a result of the appoint of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or any substantial part of its
property or otherwise, all as though such payment had not been made.
(g) Notwithstanding anything to the contrary herein, the Company shall not
at any time offer (and the holder hereof shall not at any time accept) (i) any
pledge of collateral or (ii) any guaranty by any parent or subsidiary of the
Company, in each case with respect to the obligations of the Company under this
Note.
14. Covenants Bind Successors and Assigns. All the covenants, stipulations,
promises and agreements in this Note contained by or on behalf of the Company
shall bind its successors and assigns, whether so expressed or not.
15. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York.
16. Headings. The headings of the sections and paragraphs of this Note are
inserted for convenience only and do not constitute a part of this Note.
17. Third Party Beneficiaries. The provisions of Section 13 are intended to
be for the benefit of, and shall be enforceable directly by each holder of, the
Senior Indebtedness.
IN WITNESS WHEREOF, JBI Apparel, Inc. has caused this Note to
be signed in its corporate name by one of its officers thereunto duly authorized
and to be dated as of the day and year first above written.
JBI APPAREL, INC.
By: /s/ Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
EXHIBIT 4.03
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES
EVIDENCED HEREBY, NOR ANY INTEREST THEREIN, MAY BE OFFERED, SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS EITHER (i) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND LAWS RELATING THERETO OR (ii) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE
TO THE COMPANY, STATING THAT SUCH REGISTRATION IS NOT REQUIRED.
THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY TO A PERSON THAT
IS AN "ACCREDITED INVESTOR" AS SUCH TERM IS DEFINED IN RULE 502 OF REGULATION
D OF THE SECURITIES ACT.
WARRANT
J. BAKER, INC.
Common Stock Subscription Warrant
Warrant to Subscribe [_______], 1999
for shares [________], 1999
Void After [ ], 2004
THIS CERTIFIES that, for value received, [__________], a
[________], or its registered assigns, is entitled to subscribe for and purchase
from J. Baker, Inc., a Massachusetts corporation (hereinafter called the
"Company"), at the price of $5.00 per share (such price as from time to time
adjusted as hereinafter provided being hereinafter called the "Warrant Price"),
at any time on or prior to [_____], 2004, up to [_______]1 (subject to
adjustment as hereinafter provided) fully paid and nonassessable shares of
common stock, par value $[__] per share, of the Company (hereinafter called the
"Common Stock"), subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. This Warrant and any warrant or warrants
subsequently issued upon exchange or transfer hereof and any warrant or warrants
subsequently issued upon exchange or transfer thereof, are hereinafter
collectively called the "Warrants".
Section 1. Exercise of Warrant.
(a) Method of Exercise. Subject to compliance with applicable
law, the rights represented by this Warrant may be exercised by the
holder hereof, at any time or from time to time, in whole or in part,
but not as to a fractional share of Common Stock, by the surrender of
this Warrant (properly endorsed) at the office of the Company as it may
designate by notice in writing to the registered holder hereof at the
address of such holder appearing on the books of the Company, and as
further provided below in this Section 1:
i) Cash Exercise. By payment to the Company of
the Warrant Price in cash or by certified or official bank
check, for each share being purchased;
ii) Net Issue Exercise. By an election to receive
shares of Common Stock the aggregate fair market value of
which as of the date of exercise is equal to the fair market
value of this Warrant (or the portion thereof being canceled)
on such date, in which event the Company, upon receipt of
notice of such election, shall issue to the holder hereof a
number of shares of Common Stock equal to (A) the number of
shares of Common Stock acquirable upon exercise of all or any
portion of this Warrant being canceled, as at such date,
multiplied by (B) the balance remaining after deducting (x)
the Warrant Price, as in effect on such date, from (y) the
fair market value of one share of Common Stock as at such
date, and divided by (C) such fair market value; or
iii) Combined Payment Method. By satisfaction of the
Warrant Price for each share being acquired in combination of
the methods described in clauses (i) and (ii) above.
(b) Definition of Fair Market Value. For the purposes of this
Warrant, "fair market value" shall mean, as to any security, as
follows: (i) if that security is listed or admitted to trading on one
or more national securities exchanges, the average of the last reported
sales prices per share regular way or, in case no such reported sales
take place on any such day, the average of the last reported bid and
asked prices per share regular way, in either case on the principal
national securities exchange on which that security is listed or
admitted to trading, for the 20 trading days immediately preceding the
date upon which the fair market value is determined (the "Determination
Date"); (ii) if that security is not listed or admitted to trading on a
national securities exchange but is quoted by the NASD Automated
Quotation System ("NASDAQ") or any other nationally recognized
quotation service, the average of the last reported sales prices per
share regular way or, in case no reported sale takes place on any such
day or the last reported sales prices are not then quoted by NASDAQ or
such other quotation service, the average for each such day of the last
reported bid and asked prices per share, for the 20 trading days
immediately preceding the Determination Date as furnished by the
National Quotation Bureau Incorporated or corresponding source or any
similar successor organization; or (iii) if that security is not listed
or admitted to trading on a national securities exchange or quoted by
NASDAQ or any other nationally recognized quotation service, the "fair
market value" shall be the fair value thereof determined jointly by the
Company and the registered holders of Warrants outstanding representing
a majority of the shares of Common Stock acquirable upon exercise of
the Warrants; provided, however, that if such parties are unable to
reach agreement within a reasonable time, the "fair market value" shall
be determined in good faith by an independent investment banking firm
selected jointly by the Company and the registered holders of Warrants
outstanding representing a majority of the shares of Common Stock
issuable upon exercise of the Warrants or, if that selection cannot be
made within 15 business days, by an independent investment banking firm
selected by the American Arbitration Association in accordance with its
rules. Anything in this paragraph (b) to the contrary notwithstanding,
the fair market value of this Warrant or any portion thereof as of any
Determination Date shall be equal to (i) the fair market value of the
shares of Common Stock issuable upon exercise of this Warrant (or such
portion thereof) (determined in accordance with the foregoing
provisions of this paragraph (b)); minus (ii) the aggregate Warrant
Price of this Warrant (or such portion thereof).
(c) Delivery of Certificates, Etc. In the event of any
exercise of the rights represented by this Warrant, including any
adjustment thereof pursuant to Section 2 hereof, a certificate or
certificates for the shares of Common Stock so purchased, registered in
the name of the holder, shall be delivered to the holder hereof within
a reasonable time, not exceeding five business days, after the rights
represented by this Warrant shall have been exercised in accordance
with this Section 1; and, unless this Warrant has expired, a new
Warrant representing the number of shares of Common Stock (except a
remaining fractional share), if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the holder
hereof within such time. The person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall
for all purposes be deemed to have become the holder of record of such
shares on the date on which the Warrant was surrendered and payment of
the Warrant Price and any applicable taxes was made, except that, if
the date of such surrender and payment is a date on which the stock
transfer books of the Company are closed, such person shall be deemed
to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open. No
fractional shares shall be issued upon exercise of this Warrant. If any
fractional interest in a share of Common Stock would, except for the
provisions of this Section 1, be delivered upon such exercise, the
Company, in lieu of delivery of a fractional share thereof, shall pay
to the holder hereof an amount in cash equal to the fair market value
of such fractional share as determined in good faith by the Board of
Directors of the Company.
Section 2. Adjustment of Number of Shares. Upon each
adjustment of the Warrant Price as provided in this Section 2, the holder of
this Warrant shall thereafter be entitled to purchase, at the Warrant Price
resulting from such adjustment, the number of shares (rounded to the nearest
whole share) obtained by multiplying the Warrant Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Price resulting from such adjustment.
(a) Subdivision or Combination of Stock; Dividends. In case
the Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares or shall declare a
dividend, or make any other distribution, upon its Common Stock payable
in Common Stock or options or other securities exercisable for or
convertible into Common Stock, the Warrant Price in effect immediately
prior to such subdivision or declaration shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock
of the Company shall be combined into a smaller number of shares, the
Warrant Price in effect immediately prior to such combination shall be
proportionately increased.
(b) Adjustment of Price Upon Issuance of Common Stock. If and
whenever the Company shall issue or sell after the date hereof any
shares of its Common Stock for a consideration per share less than the
Warrant Price in effect immediately prior to the time of such issue or
sale, then, upon such issue or sale, the Warrant Price shall be reduced
to the price determined by multiplying such Warrant Price by a
fraction, the numerator of which shall be equal to the sum of (a) the
number of shares of Common Stock outstanding immediately prior to such
issue or sale (including as outstanding all shares of Common Stock
issuable upon exercise of this Warrant) multiplied by the then fair
market value of a share of Common Stock and (b) the consideration, if
any, received by the Company upon such issue or sale, and the
denominator of which shall be equal to the total number of shares of
Common Stock outstanding immediately after such issue or sale
(including as outstanding all shares of Common Stock issuable upon
exercise of this Warrant without giving effect to any adjustment in the
number of shares so issuable by reason of such issue and sale)
multiplied by the then fair market value of a share of Common Stock.
(c) Issuance of Rights, Options or Convertible Securities. In
case at any time the Company shall in any manner grant (whether
directly or by assumption in a merger or otherwise) any rights to
subscribe for or to purchase, or any options for the purchase of (other
than options granted to employees or directors of the Company to
acquire in the aggregate up to 750,000 shares of Common Stock), Common
Stock or any stock or securities convertible into or exchangeable for
Common Stock (such rights or options being herein called "Options" and
such convertible or exchangeable stock or securities being herein
called "Convertible Securities") or issue or sell any Convertible
Securities, whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon conversion or exchange of such
Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such Options)
shall be less than the Warrant Price in effect immediately prior to the
time of the granting of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange or the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall
be deemed to have been issued for such price per share as of the date
of granting of such Options and thereafter shall be deemed to be
outstanding. Except as otherwise provided in paragraph (e) below, no
adjustment of the Warrant Price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(d) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in paragraph (c), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (c), or the rate at
which any Convertible Securities referred to in paragraph (c) are
convertible into or exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions designed to protect
against dilution), the Warrant Price in effect at the time of such
event shall forthwith be readjusted to the Warrant Price which would
have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold; and on the expiration of any
such Option or the termination of any such right to convert or exchange
such Convertible Securities, the Warrant Price then in effect hereunder
shall forthwith be increased to the Warrant Price which would have been
in effect at the time of such expiration or termination had such Option
or Convertible Securities, to the extent outstanding immediately prior
to such expiration or termination, never been issued, and the Common
Stock issuable thereunder shall no longer be deemed to be outstanding.
If the purchase price provided for in any such Option referred to in
paragraph (c) or the rate at which any Convertible Securities referred
to in paragraph (c) are convertible into or exchangeable for Common
Stock shall be reduced at any time under or by reason of provisions
with respect thereto designed to protect against dilution, then in case
of the delivery of Common Stock upon the exercise of any such Option or
upon conversion or exchange of any such Convertible Securities, the
Warrant Price then in effect hereunder shall forthwith be adjusted to
such respective amount as would have obtained had such Option or
Convertible Securities never been issued as to such Common Stock and
had adjustments been made upon the issuance of the shares of Common
Stock delivered as aforesaid, but only if as a result of such
adjustment the Warrant Price then in effect hereunder is thereby
reduced.
(e) Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification of the capital
stock of the Company or any consolidation or merger of the Company with
another entity, or the sale of all or substantially all of its assets
to another entity shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for Common Stock, then, as a condition
of such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provisions shall be made whereby each holder
of the Warrants shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock of the Company immediately theretofore
receivable upon the exercise of such Warrant or Warrants, such shares
of stock, securities or assets (including cash) as may be issued or
payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore so receivable had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in
any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions
hereof (including, without limitation, provisions for adjustments of
the Warrant Price) shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such exercise rights (including an
immediate adjustment, by reason of such reorganization or
reclassification, of the Warrant Price to the value for the Common
Stock reflected by the terms of such reorganization or reclassification
if the value so reflected is less than the Warrant Price in effect
immediately prior to such reorganization or reclassification). In the
event of a merger or consolidation of the Company as a result of which
a greater or lesser number of shares of common stock of the surviving
entity are issuable to holders of Common Stock of the Company
outstanding immediately prior to such merger or consolidation, the
Warrant Price in effect immediately prior to such merger or
consolidation shall be adjusted in the same manner as though there were
a subdivision or combination of the outstanding shares of Common Stock
of the Company. The holders of Warrants shall exercise such Warrants
immediately prior to the consummation of any such reorganization,
reclassification, consolidation, merger or sale in giving effect to any
adjustments required by this Section 2(e).
(f) Notice of Adjustment. Upon any adjustment of the Warrant
Price, then and in each such case, the Company shall give written
notice thereof, by first class mail, postage prepaid, addressed to each
registered holder of the Warrants at the address of such registered
holder as shown on the books of the Company, which notice shall state
the Warrant Price resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon which
such calculation is based.
(g) Stock to Be Reserved. The Company will at all times
reserve and keep available out of its authorized Common Stock or its
treasury shares, solely for the purpose of issuance upon the exercise
of this Warrant as herein provided, such number of shares of Common
Stock as shall then be issuable upon the exercise of this Warrant. The
Company covenants that all shares of Common Stock which shall be so
issued shall be duly and validly issued and fully paid and
nonassessable and free from all taxes, liens and charges with respect
to the issue thereof, and, without limiting the generality of the
foregoing, the Company covenants that it will not take any action that
would cause the par value per share of the Common Stock to be an amount
less than the then current Warrant Price. The Company will take all
such action as may be necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable law
or regulation, or of any requirements of any national securities
exchange upon which the Common Stock of the Company may be listed. The
Company will not take any action which results in any adjustment of the
Warrant Price if the total number of shares of Common Stock issued and
issuable after such action upon exercise of this Warrant would exceed
the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation. The Company has not granted and
will not grant any right of first refusal with respect to shares
issuable upon exercise of this Warrant, and there are no preemptive
rights associated with the issuance of such shares.
(h) Issue Tax. The issuance of certificates for shares of
Common Stock upon exercise of the Warrants shall be made without charge
to the registered holders of such Warrants for any issuance tax in
respect thereof; provided that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that of
any registered holder of the Warrants.
(i) Closing of Books. The Company will at no time close its
transfer books against the transfer of the shares of Common Stock
issued or issuable upon the exercise of this Warrant in any manner
which interferes with the timely exercise of this Warrant.
(j) Definition of Common Stock. As used herein the term
"Common Stock" shall mean and include the common stock, par value $.50
per share, of the Company as authorized by Articles of Organization of
the Company as in effect on the date hereof (the "Company Charter") and
also any capital stock of any class of the Company thereafter
authorized which shall not be limited to a fixed sum or percentage in
respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company;
provided, however, that the shares purchasable pursuant to this Warrant
shall include only shares designated as common stock, par value $.50
per share, of the Company as authorized for issuance under the Company
Charter, or shares of any class or classes resulting from any
reclassification or reclassifications thereof which are not limited to
any such fixed sum or percentage and are not subject to redemption by
the Company and, in case at any time there shall be more than one such
resulting class, the shares of each class then so issuable shall be
substantially in the proportion which the total number of shares of
such class resulting from all such reclassifications bears to the total
number of shares of all such classes resulting from all such
reclassifications.
No adjustment of the Warrant Price pursuant to this Section 2,
however, shall be made in an amount less than $.0001 per share, and any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to $.0001 per share or more.
Section 3. Notices of Record Dates. In the event of:
(1) the establishment by the Company of a record date of the
holders of Common Stock for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution
(other than cash dividends out of earned surplus), or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other
right, or
(2) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any transfer of all or substantially all the assets of the
Company or consolidation or merger of the Company, or
(3) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will give notice to the registered
holder of this Warrant specifying (i) the date on which any such record date is
to be established for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution or right, or
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock will be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding-up. Such notice shall be given at
least 20 days and not more than 90 days prior to the date therein specified, and
such notice shall state that the action in question or the record date is
subject to the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), or to a favorable vote of
shareholders, if either is required.
Section 4. Registration Rights. The rights of the holder
hereof with respect to the registration under the Securities Act of the shares
of Common Stock issuable upon the exercise of this Warrant are set forth in the
registration rights agreement, dated the date hereof, among the Company and the
several other persons named therein.
Section 5. No Shareholder Rights or Liabilities. This Warrant
shall not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision hereof, in the absence of affirmative
action by the registered holder hereof to purchase shares of Common Stock, and
no mere enumeration herein of the rights or privileges of the registered holder
hereof, shall give rise to any liability of such registered holder for the
Warrant Price or as a shareholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
Section 6. Investment Representation and Legend. The
registered holder, by acceptance of this Warrant, represents and warrants to the
Company that it is acquiring this Warrant and will be acquiring the shares of
Common Stock (or other securities) issuable upon the exercise hereof for
investment purposes only and not with a view towards the resale or other
distribution thereof and agrees that the Company may affix upon this Warrant
(and any warrant or warrants subsequently issued upon exchange or transfer of
this Warrant) the following legend:
"NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON THE
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NEITHER THE
SECURITIES EVIDENCED HEREBY, NOR ANY INTEREST THEREIN, MAY BE OFFERED,
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS EITHER (i) THERE IS
AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND LAWS RELATING
THERETO OR (ii) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE COMPANY, STATING
THAT SUCH REGISTRATION IS NOT REQUIRED."
The registered holder, by acceptance of this Warrant, further agrees that the
Company may affix the following legend to certificates for shares of Common
Stock issued upon exercise of this Warrant:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. NEITHER THE SECURITIES EVIDENCED HEREBY, NOR ANY
INTEREST THEREIN, MAY BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS EITHER (i) THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND LAWS RELATING THERETO OR (ii) THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL, REASONABLY SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY, STATING THAT SUCH REGISTRATION IS NOT
REQUIRED."
Section 7. Transfer Restrictions. Until there is an effective
registration statement under the Securities Act covering the sale, transfer or
other disposition of this Warrant or the shares of Common Stock issued upon
exercise of this Warrant, the registered holder of this Warrant, by acceptance
of this Warrant, agrees with the Company that such holder may sell, transfer or
otherwise dispose of this Warrant or the shares of Common Stock issued upon
exercise of this Warrant solely to a person that is an "accredited investor" as
such term is defined in Rule 501 of Regulation D of the Securities Act and that
makes the representations to and agreements with the Company with respect
thereto as may be reasonably specified by the Company.
The registered holder, by acceptance of this Warrant, further
agrees that the Company may affix the following legend to this Warrant and the
certificates for shares of Common Stock issued upon exercise of this Warrant:
"THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE
COMPANY THAT THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY TO A PERSON THAT IS AN "ACCREDITED INVESTOR" AS SUCH
TERM IS DEFINED IN RULE 502 OF REGULATION D OF THE SECURITIES ACT."
Section 8. Lost, Stolen, Mutilated or Destroyed Warrant. If
this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such
terms as to indemnity or otherwise as it may in its discretion reasonably impose
(which shall, in the case of a mutilated Warrant, include the surrender
thereof), issue a new Warrant of like denomination and tenor as the Warrant so
lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an
original contractual obligation of the Company, whether or not the lost, stolen,
mutilated or destroyed Warrant shall be at any time enforceable by anyone.
Section 9. Notices. All notices, requests and other
communications required or permitted to be given or delivered hereunder shall be
in writing, and shall be delivered, or shall be sent by certified or registered
mail, postage prepaid and addressed, (i) if to the Company, to it at 55 Turnpike
Street, Canton, Massachusetts 02021, attention: Chief Financial Officer with a
copy to Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109,
attention, Raymond C. Zemlin, P.C. or at such other address as shall have been
furnished to the registered holder by notice from the Company or (ii) if to the
registered holder, to such holder at the address specified on the books of the
Company or at such other address as shall have been furnished to the Company by
notice from the holder of this Warrant.
Section 10. Exchange and Transfer of Warrants. The Company
shall keep at its principal business office a register in which the Company
shall provide for the registration of Warrants and for the registration of
transfer and exchange of Warrants. The holder of this Warrant may, at its
option, and either in person or by duly authorized attorney, surrender the same
for registration of transfer or exchange at the principal business office of the
Company, and, at the expense of such holder, receive in exchange therefor a
Warrant or Warrants to purchase such number or numbers of shares of Common Stock
as such holder may request (up to the aggregate number of shares for which this
Warrant is exercisable), and registered in the name of such person or persons as
may be designated by such holder. Every Warrant presented or surrendered for
registration of transfer or exchange shall be duly endorsed, or shall be
accompanied by a written instrument of transfer, satisfactory in form to the
Company, duly executed by the holder of such Warrant or his attorney duly
authorized in writing. Every Warrant so made and delivered in exchange for this
Warrant pursuant to this Section 9 shall in all other respects be in the same
form and have the same terms as this Warrant. No transfer or exchange of any
Warrant shall be valid unless made in the foregoing manner at such office.
Section 11. Governing Law. This Warrant shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to its conflict of laws rules.
IN WITNESS WHEREOF, J. Baker, Inc. has executed this Warrant
on and as of the day and year first above written.
J. BAKER, INC.
By: /s/ Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
<PAGE>
SUBSCRIPTION AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
within Warrant, hereby agrees to subscribe for and purchase [ ] shares of Common
Stock covered by such Warrant, and makes payment herewith in full therefor at
the Warrant Price per share provided by such Warrant [in cash] [as provided in
Section 1(a)(ii) of such Warrant] [_____ shares in cash and ______ shares as
provided in Section 1(a)(ii) of such Warrant].
Signature ___________________
---------------------------
Address ____________________
---------------------------
(1) The Warrants in the aggregate will be exercisable for 1,200,000 shares of
Common Stock
EXHIBIT 04.04
GUARANTY
GUARANTY, dated as of May 21, 1999, by JBI, Inc., a
Massachusetts corporation (the "Guarantor"), in favor of the several persons
named in Schedule I hereto (the "Noteholders") rendered in connection with the
13% Senior Subordinated Notes due December 31, 2001, in principal amount of
$10,000,000 issued by JBI Apparel, Inc., a Massachusetts corporation and a
wholly-owned subsidiary of the Guarantor ("Apparel"), to the Noteholders (the
"Notes").
WHEREAS, pursuant to a Securities Purchase Agreement, dated as
of May 19, 1999, among J. Baker, Inc., a Massachusetts corporation ("J. Baker"),
Guarantor, Apparel and the Noteholders, Apparel is to sell to the Noteholders
and the Noteholders are to purchase from Apparel the Notes; and
WHEREAS, the proceeds from the Notes are to be used to
purchase the assets (the "Asset Purchase") of the REPP divisions of Edison
Brothers Stores, Inc., a Delaware corporation, for an aggregate purchase price
of approximately $33,000,000, on the terms and subject to the conditions set
forth in the Asset Purchase Agreement by and between the Company and Edison
Brothers (the "Asset Purchase Agreement"); and
WHEREAS, Apparel has indicated that it will not consummate the
Asset Purchase unless the Noteholders purchase the Notes; and
WHEREAS, it is a condition precedent to the Noteholders'
acceptance of the Notes under the Agreement that the Guarantor execute and
deliver to the Noteholders a guaranty substantially in the form hereof; and
WHEREAS, Guarantor expects to receive substantial direct and
indirect benefits from the consummation of the Asset Purchase pursuant to the
Asset Purchase Agreement which has been made possible by the purchase of the
Notes by the Noteholders.
NOW, THEREFORE, the Guarantor hereby agrees with the
Noteholders as follows:
1. Definitions. All capitalized terms used herein
respective without definition shall have the meanings provided therefor in the
Securities Purchase Agreement.
2. Guaranty of Payment and Performance. The Guarantor hereby
guarantees to the Noteholders the full and punctual payment when due (whether at
stated maturity, by required pre-payment, by acceleration or otherwise), as well
as the performance, of all of the obligations, agreements and covenants of
Apparel contained in the Note (collectively, the "Obligations") including all
such which would become due but for the operation of the automatic stay pursuant
to ss.362(a) of the Federal Bankruptcy Code and the operation of ss.ss.502(b)
and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute,
unconditional and continuing guaranty of the full and punctual payment and
performance of all of the Obligations and not of their collectibility only and
is in no way conditioned upon any requirement that the Noteholders first attempt
to collect any of the Obligations from Apparel or resort to any collateral
security or other means of obtaining payment. Should Apparel default in the
payment or performance of any of the Obligations, the obligations of the
Guarantor hereunder with respect to such Obligations in default shall, upon
demand by the appropriate Noteholder, become immediately due and payable to such
Noteholder, without demand or notice of any nature, all of which are expressly
waived by the Guarantor. Payments by the Guarantor hereunder may be required by
any Noteholder on any number of occasions. All payments by any Guarantor
hereunder shall be made to the appropriate Noteholder, in the manner and at the
place of payment specified therefor in the Agreement, for the account of such
Noteholder.
3. Guarantor's Agreement to Pay Enforcement Costs, Etc. The
Guarantor further agrees, as the principal obligor and not as a guarantor only,
to pay to the Noteholders, on demand, all reasonable costs and expenses
(including court costs and legal expenses) incurred or expended by the
Noteholders in connection with the Obligations, this Guaranty and the
enforcement thereof, together with interest on amounts recoverable under this
Section 3 from the time when such amounts become due until payment, whether
before or after judgment, at the rate of interest for overdue principal set
forth in the Agreement, provided that if such interest exceeds the maximum
amount permitted to be paid under applicable law, then such interest shall be
reduced to such maximum permitted amount.
4. Waivers by Guarantor. The Guarantor agrees that the
Obligations will be paid and performed strictly in accordance with their
respective terms, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Noteholders with respect thereto. The Guarantor waives promptness, diligences,
presentment, demand, protest, notice of acceptance, notice of any Obligations
incurred and all other notices of any kind, all defenses which may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshaling of assets of Apparel or
any other entity or other person primarily or secondarily liable with respect to
any of the Obligations, and all suretyship defenses generally. Without limiting
the generality of the foregoing, the Guarantor agrees to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and discharged, in whole or in part, or otherwise affected by (a) the
failure of the Noteholders to assert any claim or demand or to enforce any right
or remedy against Apparel or any other entity or other person primarily or
secondarily liable with respect to any of the Obligations; (b) any extensions,
compromise, refinancing, consolidation or renewals of any Obligation; (c) any
change in the time, place or manner of payment of any of the Obligations or any
rescissions, waivers, compromise, refinancing, consolidation or other amendments
or modifications of any of the terms of provisions of the Securities Purchase
Agreement, the Notes, or any other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations; (d) the addition,
substitution or release of any entity or other person primarily or secondarily
liable for any Obligation; (e) the adequacy of any rights which the Noteholders
may have against any collateral security or other means of obtaining repayment
of any of the Obligations; (f) the impairment of any collateral (other than
accounts receivable) securing any of the Obligations, including without
limitation the failure to perfect or preserve any rights which the Noteholders
might have in such collateral security or the substitution, exchange, surrender,
release, loss or destruction of any such collateral security; or (g) any other
act or omission which might in any manner or to any extent vary the risk of the
Guarantor or otherwise operate as a release or discharge of any Guarantor, all
of which may be done without notice to the Guarantor. To the fullest extent
permitted by law, the Guarantor hereby expressly waives any and all rights or
defenses arising by reason of (i) any "one action" or "anti-deficiency" law
which would otherwise prevent either Noteholder from bringing any action,
including any claim for a deficiency, or exercising any other right or remedy
(including any right of set-off), against the Guarantor before or after such
Noteholder's commencement or completion of any foreclosure action, whether
judicially, by exercise of power of sale or otherwise, or (ii) any other law
which in any other way would otherwise require any election of remedies by the
Noteholders.
5. Unenforceability of Obligations Against Apparel. If for any
reason Apparel has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from Apparel by reason of Apparel's insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason, this
Guaranty shall nevertheless be binding on the Guarantor to the same extent as if
the Guarantor at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment of any of
the Obligations is stayed upon the insolvency, bankruptcy or reorganization of
Apparel, or for any other reason, all such amounts otherwise subject to
acceleration under the terms of the Notes, or any other agreement evidencing,
securing or otherwise executed in connection with any Obligation shall be
immediately due and payable by the Guarantor.
6. Subrogation; Subordination.
6.1 Waiver of Rights Against Apparel. Until the final payment
and performance in full of all of the Obligations, the Guarantor shall
not exercise, and the Guarantor hereby waives, any rights against
Apparel arising as a result of payment by the Guarantor hereunder, by
way of subrogation, reimbursement, restitution, contribution or
otherwise, and will not prove any claim in competition with the
Noteholders in respect of any payment hereunder in any bankruptcy,
insolvency or reorganization case or proceedings of any nature; the
Guarantor will not claim any setoff, recoupment or counterclaim against
Apparel in respect of any liability of the Guarantor to Apparel; and
the Guarantor waives any benefit of and any right to participate in any
collateral security which may be held by the Noteholders.
6.2 Subordination with Respect to Apparel. The payment of any
amounts due with respect to any indebtedness of Apparel for money
borrowed or credit received now or hereafter owed to the Guarantor
(other than with respect to the sale of any accounts receivable or the
leasing of any equipment in the ordinary course of business) is hereby
subordinated to the prior payment in full of all of the Obligations.
The Guarantor agrees that, after the occurrence of any default in the
payment or performance of any of the Obligations, the Guarantor will
not demand, sue for or otherwise attempt to collect any such
indebtedness of Apparel to such Guarantor until all of the Obligations
shall have been paid in full if, notwithstanding the foregoing
sentence, the Guarantor shall collect, enforce or receive any amounts
in respect of such indebtedness while any Obligations are still
outstanding, such amounts shall be collected, enforced and received by
the Guarantor as trustee for the Noteholders and be paid over to the
Noteholders, on account of the Obligations without affecting in any
manner the liability of the Guarantor under the other provisions of
this Guaranty.
6.3 General Subordination. (a) Anything contained in this
Guaranty to the contrary notwithstanding, the obligations of the
Guarantor hereunder shall be subordinate and junior, to the extent set
forth in the following paragraphs (A), (B), (C) and (D), to all Senior
Indebtedness of the Guarantor. "Senior Indebtedness" shall mean the
principal of, premium, if any, and interest (including any interest
accruing subsequent to the filing of a petition of bankruptcy at the
rate provided for in the documentation with respect thereto, whether or
not such interest is an allowed claim under applicable law) on, and all
reasonable fees, reimbursement and indemnity obligations, and all other
obligations arising in connection with, any indebtedness for borrowed
money of the Guarantor, contingent or otherwise, now outstanding or
created, incurred, issued, assumed or guaranteed in the future, for
which, in the case of any particular indebtedness, the instrument
creating or evidencing the same or pursuant to which the same is
outstanding expressly provides that such indebtedness shall not be
subordinate in right of payment to any other indebtedness of the
Guarantor. Without limiting the generality of the foregoing, Senior
Indebtedness shall include all Obligations (under and as defined in the
Credit Agreement); notwithstanding the foregoing, Senior Indebtedness
shall include only such Obligations until such time as the same are
paid in full in cash and all obligations to provide financial
accommodations under the Credit Agreement have terminated. For purposes
of this Guaranty, "Credit Agreement" shall mean the Loan and Agreement,
dated as of May 30, 1997, as amended, by and among the Guarantor, JBI
Holding Company, Inc., Morse Shoe, Inc., GBFC, Inc., Fleet National
Bank and the financial institutions party thereto as Lenders, together
with any agreement entered into in connection with the restatement,
renewal, extension, restructuring, refunding or refinancing of the
Liabilities (under and as defined in the Credit Agreement) together
with any agreement entered into with any person which provides
revolving or term credit to replace or supplement the "Revolving
Credit" and the "Term Loan" within the meaning of the Credit
Agreement..
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or
any receivership proceedings in connection therewith, relative
to the Guarantor or its creditors or its property, and in the
event of any proceedings for voluntary liquidation,
dissolution or other winding up of the Guarantor, whether or
not involving insolvency or bankruptcy proceedings, then all
Senior Indebtedness shall first be paid in full in cash,
before any payment, whether on account of principal, interest
or otherwise with respect to the Notes, is made upon this
Guaranty.
(B) In any of the proceedings referred to in
paragraph (A) above, any payment or distribution of any kind
or character, whether in cash, property, stock or obligations
which may be payable or deliverable in respect of this
Guaranty shall be paid or delivered directly to the holders of
Senior Indebtedness for application in payment thereof, unless
and until all Senior Indebtedness shall have been paid in full
in cash.
(C) No payment shall be made, directly or indirectly,
on account of this Guaranty (i) upon maturity of any Senior
Indebtedness obligation, by lapse of time, acceleration
(unless waived), or otherwise, unless and until all principal
thereof and interest thereon and all other obligations in
respect thereof shall first be paid in full in cash and all
obligations to provide financial accommodations under the
Credit Agreement have terminated, or (ii) upon the happening
of any default in payment of any principal of, premium, if
any, or interest on or any other amounts payable in respect of
Senior Indebtedness when the same becomes due and payable
whether at maturity or at a date fixed for prepayment or by
declaration or otherwise (a "Senior Payment Default"), unless
and until such Senior Payment Default shall have been cured or
waived or shall have ceased to exist.
(D) Upon the happening of an event of default or any
event or circumstance with respect to any Senior Indebtedness
permitting (after notice or lapse of time or both if required,
otherwise immediately) one or more holders of such Senior
Indebtedness (or, in the case of the Credit Agreement, the
Agent or any other person having the power to do so) to
declare such Senior Indebtedness due and payable prior to the
date on which it is otherwise due and payable or to suspend
the providing of credit to the Company pursuant to the Credit
Agreement (a "Nonmonetary Default"), upon the occurrence of
(i) receipt by the Noteholders of written notice from the
holders of said Senior Indebtedness (or, in the case of the
Credit Agreement, the Agent) of a Nonmonetary Default (any
such notice, a "Blockage Notice"), or (ii) if such Nonmonetary
Default results from the acceleration of the Notes, the date
of such acceleration; then (x) the Guarantor shall not make,
directly or indirectly, to the Noteholders any payment of any
kind of or on account of all or any part of this Guaranty; (y)
the Noteholders shall not accept from the Guarantor any
payment of any kind of or on account of all or any
part of this Guaranty and (z) the Noteholders may not take,
demand, receive, sue for, accelerate or commence any remedial
proceedings with respect to any amount payable under this
Guaranty, unless and until in each case described in clauses
(x), (y) and (z) all such Senior Indebtedness shall have been
paid in full in cash; provided, however, that if such
Nonmonetary Default shall have occurred and be continuing for
a period (a "Blockage Period") commencing on the earlier of
the date of receipt of such Blockage Notice or the date of the
acceleration of the Notes and ending 179 days thereafter (it
being understood that not more than one Blockage Period may be
commenced with respect to the Notes during any period of 90
consecutive days), and during such Blockage Period (i) such
Nonmonetary Default shall not have been cured or waived, (ii)
the holder of such Senior Indebtedness (or, in the case of the
Credit Agreement, the Agent) shall not have made a demand for
payment and commenced an action, suit or other proceeding
against the Guarantor and (iii) none of the events described
in subsection (A) above shall have occurred, then (to the
extent not otherwise prohibited by subsections (A), (B) or (C)
above) the Guarantor may, not less than 10 days after receipt
by the holders of such Senior Indebtedness or the Agent, as
the case may be, of written notice to such effect from the
Noteholders, make and the Noteholders may accept from the
Guarantor all past due and current payments of any kind of or
on account of this Guaranty, and such holder may demand,
receive, retain, sue for or otherwise seek enforcement or
collection of all amounts payable on account of principal of
or interest on the Notes. Any such payments made by the
Company upon lifting of the Blockage Period shall cure any
payment default under the Notes.
(b) Subject to the payment in full in cash of all Senior
Indebtedness as aforesaid, the Noteholders shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of any kind or character, whether in cash, property,
stock or obligations, which may be payable or deliverable to the
holders of Senior Indebtedness, until the principal of, and interest
on, the Notes shall be paid in full in cash, and, as between the
Guarantor, its creditors other than the holders of Senior Indebtedness,
and the Noteholders, no such payment or distribution made to the
holders of Senior Indebtedness by virtue of this Section 6.3 which
otherwise would have been made to the Noteholder shall be deemed a
payment by the Guarantor on account of the Senior Indebtedness, it
being understood that the provisions of this Section 6.3 are and are
intended solely for the purposes of defining the relative rights of the
Noteholders, on the one hand, and the holder of the Senior
Indebtedness, on the other hand. Subject to the rights, if any, under
this Section 6.3 of holders of Senior Indebtedness to receive cash,
property, stock or obligations otherwise payable or deliverable to the
Noteholders, nothing herein shall either impair, as between the
Guarantor and the Noteholders, the obligation of the Guarantor, which
is unconditional and absolute, to pay to the holder thereof the
principal thereof and interest thereon in accordance with the terms
hereof or prevent (except as otherwise specified therein) the
Noteholders from exercising all remedies otherwise permitted by
applicable law or hereunder upon default hereunder.
(c) If any payment or distribution of any character or any
security, whether in cash, securities or other property, shall be
received by any Noteholders in contravention of any of the terms hereof
or before all the Senior Indebtedness obligations have been paid in
full in cash and all obligations to provide financial accommodations
under the Credit Agreement have terminated, such payment or
distribution or security shall be received in trust for the benefit of,
and shall be paid over or delivered and transferred to, the holders of
the Senior Indebtedness at the time outstanding in accordance with the
priorities then existing among such holders for application to the
payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all such Senior Indebtedness in full in cash. In the
event of the failure of any such holder to endorse or assign any such
payment, distribution or security, each holder of any Senior
Indebtedness is hereby irrevocably authorized to endorse or assign the
name.
(d) The rights under these subordination provisions of the
holders of any Senior Indebtedness as against any Noteholders shall
remain in full force and effect without regard to, and shall not be
impaired or affected by:
i) any act or failure to act on the part of the
Guarantor; or
ii) any extension or indulgence in respect of any
payment or prepayment of any Senior Indebtedness or any part
thereof or in respect of any other amount payable to any
holder of any Senior Indebtedness; or
iii) any amendment, modification or waiver of, or
addition or supplement to, or deletion from, or compromise,
release, consent or other action in respect of, any of the
terms of any Senior Indebtedness or any other agreement which
may be made relating to any Senior Indebtedness; or
iv) any exercise or non-exercise by the holder of any
Senior Indebtedness of any right, power, privilege or remedy
under or in respect of such Senior Indebtedness or these
subordination provisions or any waiver of any such right,
power, privilege or remedy or of any default in respect of
such Senior Indebtedness or these subordination provisions or
any receipt by the holder of any Senior Indebtedness of any
security, or any failure by such holder to perfect a security
interest in, or any release by such holder of, any security
for the payment of such Senior Indebtedness; or
v) any merger or consolidation of the Guarantor or
any of its subsidiaries into or with any other person, or any
sale, lease or transfer of any or all of the assets of the
Guarantor or any of its subsidiaries to any other person; or
vi) absence of any notice to, or knowledge by, any
holder of any claim hereunder of the existence or occurrence
of any of the matters or events set forth in the foregoing
clauses (i) through (v); or
vii) any other circumstance.
(e) The Noteholders unconditionally waive (i) notice of any of
the matters referred to in Section 6.3(d); (ii) all notices which may
be required, whether by statute, rule of law or otherwise, to preserve
intact any rights of any holder of any Senior Indebtedness, including,
without limitation, any demand, presentment and protest, proof of
notice of nonpayment under any Senior Indebtedness or the Credit
Agreement, and notice of any failure on the part of the Guarantor to
perform and comply with any covenant, agreement, term or condition of
any Senior Indebtedness, (iii) any right to the enforcement, assertion
or exercise by any holder of any Senior Indebtedness of any right,
power, privilege or remedy conferred in such Senior Indebtedness or
otherwise, (iv) any requirements of diligence on the part of any holder
of any of the Senior Indebtedness, (v) any requirement on the part of
any holder of any Senior Indebtedness to mitigate damages resulting
from any default under such Senior Indebtedness and (vi) any notice of
any sale, transfer or other disposition of any Senior Indebtedness by
any holder thereof.
(f) The obligations of the holder under these subordination
provisions shall continue to be effective, or be reinstated, as the
case may be, if at any time any payment in respect of any Senior
Indebtedness, or any other payment to any holder of any Senior
Indebtedness in its capacity as such, is rescinded or must otherwise be
restored or returned by the holder of such Senior Indebtedness upon the
occurrence of any proceeding referred to in paragraph 6.3(a)(A) or upon
or as a result of the appoint of a receiver, intervenor or conservator
of, or trustee or similar officer for, the Guarantor or any substantial
part of its property or otherwise, all as though such payment had not
been made.
(g) Notwithstanding anything to the contrary herein, the
Guarantor shall not at any time offer (and the holder hereof shall not
at any time accept) (i) any pledge of collateral or (ii) any guaranty
by any parent or subsidiary of the Guarantor, in each case with respect
to the obligations of the Guarantor under this Guaranty.
6.4 Provisions Supplemental. The provisions of this ss.6 shall
be supplemental to and not in derogation of any rights and remedies of
the Noteholders under any separate subordination agreement which the
any Noteholder may at any time and from time to time enter into with
the Guarantor for the benefit of the Noteholders.
7. Representations and Warranties of Guarantor. The
the Guarantor represents and warrants to Noteholders as follows:
(a) The execution, delivery and performance of this Agreement
by the Guarantor have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any
court or other agency of government, the Articles of Organization or
Bylaws of the Guarantor, or any provision of any indenture, agreement
or other instrument to which it or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of
the properties or assets of the Guarantor.
(b) This Agreement has been duly executed and delivered by the
Guarantor and constitutes the legal, valid and binding obligation of
the Guarantor, enforceable in accordance with its terms, subject to
considerations of public policy in the case of the indemnification
provisions hereof.
8. Covenants Relating to the Note. The Guarantor covenants and
agrees that so long as any of the Notes shall be outstanding and, in the case of
paragraphs (f) through (k) below, so long as one million dollars ($1,000,000) of
aggregate principal amount of the Notes is outstanding:
(a) Maintenance of Office. The Guarantor will maintain an
office or agency in such place in the United States of America as the Guarantor
may designate in writing to the registered holder of the Notes, where notices
and demands to or upon the Guarantor in respect of this Guaranty may be served
and where this Guaranty may be presented for payment. Until the Guarantor
otherwise notifies the holder hereof, said office shall be the principal office
of the Guarantor located at 55 Turnpike Street, Canton, Massachusetts 02021.
(b) Corporate Existence. The Guarantor will do or cause to be
done all things necessary and lawful to preserve and keep in full force and
effect (i) its corporate existence and the corporate existence of each of its
subsidiaries and (ii) the material rights and franchises of the Guarantor and
each of its subsidiaries under the laws of the United States or any state
thereof, or, in the case of subsidiaries organized and existing outside the
United States, under the laws of the applicable jurisdiction; provided, however,
that nothing in this paragraph (c) shall prevent the abandonment or termination
of any rights or franchises of the Guarantor, or the liquidation or dissolution
of, or a sale, transfer or disposition (whether through merger, consolidation,
sale or otherwise) of all or any substantial part of the property and assets of,
any subsidiary or the abandonment or termination of the corporate existence,
rights and franchises of any subsidiary if such abandonment, termination,
liquidation, dissolution, sale, transfer or disposition is, in the good faith
business judgment of the Guarantor, in the best interests of the Guarantor and
not disadvantageous to the Noteholders.
(c) Transactions with Affiliates. The Guarantor shall not
enter into, or permit any of its subsidiaries to enter into, any transaction
with any of its or any subsidiary's officers, directors, employees or any person
related by blood or marriage to any such person or any entity in which any such
person owns any beneficial interest, except for (i) normal employment
arrangements, benefit programs and employee incentive option programs on
reasonable terms, (ii) any transaction approved by the Board of Directors of the
Guarantor, (iii) customer transactions in the ordinary course of business and on
arm's length terms and (iv) the transactions contemplated by the Purchase
Agreement.
(d) Payment of Principal and Interest on the Note. The
Guarantor will use its best efforts, subject to the provisions of applicable
credit arrangements (including the Credit Agreement), contractual obligations of
the Guarantor and/or its subsidiaries and any applicable law restricting the
same, to provide funds from its subsidiaries to the Guarantor, by dividend,
advance or otherwise, sufficient to permit performance by the Guarantor of its
obligations hereunder. Subject to any applicable provisions in the Credit
Agreement and documents executed and delivered in connection therewith, the
Guarantor will not, and will not permit any subsidiary to, directly or
indirectly create or otherwise cause to exist any encumbrance or restriction on
the ability of any subsidiary to pay dividends or make any other distributions
to the Guarantor or any wholly-owned subsidiary of the Guarantor in respect of
its capital stock.
(e) Consolidation, Merger and Sale. The Guarantor will not
consolidate or merge with or into, or sell or otherwise dispose of all or
substantially all of its property in one or more related transactions to, any
other corporation or other entity, unless:
(i) the Guarantor is the surviving corporation or the entity
formed by or surviving any such consolidation or merger (if other than
the Guarantor) or to which such sale or other disposition shall have
been made is a corporation organized or existing under the laws of the
United States of any state thereof or the District of Columbia;
(ii) the surviving corporation or other entity (if other than
the Guarantor) shall expressly and effectively assume in writing the
obligations, covenants and agreements of the Guarantor hereunder to be
performed or observed by the Guarantor to the same extent as if such
surviving corporation had been the original maker of this Guaranty;
(iii) the Guarantor or such other corporation or other entity
shall not otherwise be in default in the performance or observance of
any covenant, agreement or condition of this Guaranty or the Purchase
Agreement; and
(iv) the Noteholders shall have received, in connection
therewith, an opinion of counsel for the Guarantor (or other counsel
satisfactory to the holder), in form and substance satisfactory to the
holder, to the effect that any such consolidation, merger, sale or
conveyance and any such assumption complies with the provisions of
clauses (i) and (ii) of this paragraph (e).
Notwithstanding anything to the contrary herein, in no event shall a foreclosure
on any collateral pledged by the Guarantor in respect of obligations arising
under or in connection with the Credit Agreement be deemed to constitute a
violation of the Guarantor's obligations pursuant to this paragraph (e).
(f) Limitation on Indebtedness and Disqualified Stock. The
Guarantor will not, and will not permit any of its subsidiaries to, (i) incur or
permit to remain outstanding any indebtedness for money borrowed
("Indebtedness"), except (A) Senior Indebtedness, (B) Indebtedness existing on
the date of original issuance of the Notes, (C) Indebtedness permitted to be
incurred under the Credit Agreement as in effect from time to time after the
original issuance of the Notes (other than Indebtedness that is subordinate or
junior in right of payment (to any extent) to any Senior Indebtedness and senior
or pari passu in right of payment (to any extent) to the Notes), or (D) in the
event that the Credit Agreement has terminated, Indebtedness permitted to be
incurred under any successor credit agreement of the Guarantor with respect to
Senior Indebtedness, or if there exists no such credit agreement, such
Indebtedness as may be mutually agreed upon by the Guarantor and the holders of
a majority of the aggregate principal amount of the Notes then outstanding, or
(ii) issue any capital stock ("Disqualified Stock") of the Guarantor or any of
its subsidiaries which by its terms (or by the terms of any security into which
it is convertible or for which it is exchangeable), or upon the happening of any
event, matures, or is mandatorily redeemable, whether pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to March 31, 2002.
(g) Restricted Payments. The Guarantor will not, and will not
permit any of its subsidiaries to: (i) declare or pay any dividends on, or make
any other distribution or payment on account of, or redeem, retire, purchase or
otherwise acquire, directly or indirectly, any shares of any class of stock of
the Guarantor, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash,
property or in obligations of the Guarantor or any of its subsidiaries, except
for (X) distributions of shares of the same class or of a different class of
stock pro rata to all holders of shares of a class of stock, or (Y) dividends,
distributions or payments by any subsidiary to the Guarantor or to any
wholly-owned subsidiary of the Guarantor, or (ii), except for payments and
distributions permitted under the Credit Agreement or any successor to such
Credit Agreement (such declarations, payments, purchases, redemptions,
retirements, acquisitions or distributions being herein called "Restricted
Payments").
(h) Limitation on Liens. The Guarantor shall not, and shall
not permit any of its subsidiaries to, directly or indirectly, create, incur,
assume or otherwise cause or suffer to exist any lien, pledge , charge, security
interest or encumbrance (collectively, "Liens") on any asset now owned or
hereafter acquired, or on any income or profits therefrom or assign or convey
any right to receive income therefrom, except for (i) Liens permitted under the
Credit Agreement or securing any Senior Indebtedness, (ii) liens for current
taxes not yet due, (iii) landlord's liens, (iv) purchase money liens and (v)
workman's, materialman's, warehouseman's and similar liens arising by law or
statute.
(i) Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries. The Guarantor shall not, and will not permit any of its
subsidiaries to, directly or indirectly, create, assume or suffer to exist any
consensual encumbrance or restriction on the ability of any subsidiary of the
Guarantor to pay dividends or make other distributions on the capital stock of
any subsidiary of the Guarantor or pay or satisfy any obligation to the
Guarantor or any of its subsidiaries or otherwise transfer assets or make or pay
loans or advances to the Guarantor or any of its subsidiaries, except
encumbrances and restrictions existing under (i) any applicable law or any
governmental or administrative regulation or order; (ii) restrictions with
respect solely to a subsidiary of the Guarantor imposed pursuant to a binding
agreement which has been entered into for the sale or disposition of all or
substantially all of the capital stock or assets of such subsidiary, provided
that such restrictions apply solely to the capital stock or assets being sold of
such subsidiary; (iii) restrictions contained in any agreement relating to a
person or real or tangible personal property acquired after the date hereof
which are not applicable to any person or property, other than the person or
property so acquired and which were not put in place in connection with, or in
contemplation of, such acquisition; (iv) any agreement (other than those
referred to in clause (iii)) of a person acquired by the Guarantor or a
subsidiary of the Guarantor, which restrictions existed at the time of
acquisition; (v) contractual encumbrances or restrictions in effect on the date
hereof and customary encumbrances and restrictions contained in the security
agreements related to the Credit Agreement and encumbrances and restrictions
contained in the Credit Agreement on the date hereof as such encumbrances or
restrictions may be amended, provided that such encumbrances or restrictions as
amended are no more restrictive in the aggregate than those contained in the
security agreements and the Credit Agreement in effect on the date hereof; (vi)
the Credit Agreement and the Notes; (vii) indebtedness otherwise permitted to be
incurred pursuant to Sections 8(k) and 8(m) hereof; (viii) restrictions on cash
or other deposits or net worth imposed by customers under contracts entered into
in the ordinary course of business; or (ix) customary provisions restricting
subletting or assignment of any lease entered into the ordinary course of
business.
(j) Limitation on Asset Sales and Issuance of Shares of
Subsidiaries. The Guarantor shall not, and shall not permit any of its
subsidiaries to, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, businesses or assets, including by merger or consolidation or sale and
leaseback transaction, and including any sale or other transfer or issuance of
any capital stock of any subsidiary of the Guarantor, whether by the Guarantor
or its subsidiary (an "Asset Sale"), unless (1)(a) within one year after the
date of such Asset Sale, an amount equal to the net cash proceeds therefrom (the
"Asset Sale Offer Amount") are applied to the optional redemption of the Notes
in accordance with the terms thereof to make an offer to purchase or to redeem
the Notes with the proceeds from asset sales, pro rata in proportion to the
respective principal amounts (or accreted values in the case of indebtedness
issued with an original issue discount) of the Notes or to the repurchase of the
Notes pursuant to an irrevocable, unconditional offer (an "Asset Sale Offer"),
or (b) within one year of such Asset Sale, the Asset Sale Offer Amount is used
to permanently retire Senior Indebtedness of the Guarantor or indebtedness of
any subsidiary of the Guarantor, and (2) the Board of Directors of the Guarantor
determines in good faith that the Guarantor or such subsidiary, as applicable,
would receive fair market value in consideration of such Asset Sale.
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Guarantor and its subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or otherwise
dispose of assets acquired and held for resale in the ordinary course
of business;
(ii) the Guarantor and its subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets pursuant to and
in accordance with Section 8(j) hereof;
(iii) the Guarantor and its subsidiaries may sell or dispose
of damaged, worn out or other obsolete property in the ordinary course
of business so long as such property is no longer necessary for the
proper conduct of the business of the Guarantor or such subsidiary, as
applicable; and
(iv) the Guarantor and its subsidiaries may convey, sell,
lease, transfer, assign or otherwise dispose of assets to the Guarantor
or any of its wholly-owned subsidiaries in accordance with the terms
hereof.
Restricted Payments that are made in compliance with Section 8(l)
hereof' shall not be deemed to be Asset Sales.
Any Asset Sale Offer shall be made in compliance with all applicable
laws, rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws.
(k) Limitation on Subsidiary Guarantees. The Guarantor shall
not cause or permit any of its subsidiaries, directly or indirectly, to
guarantee, assume or in any other manner become liable with respect to any
indebtedness of the Guarantor or any of its subsidiaries (other than under the
Credit Agreement).
9. Further Assurances. The Guarantor agrees that it will from
time to time, at the request of the Noteholders, do all such things and execute
all such documents as the Noteholders may consider reasonably necessary or
desirable to give full effect to this Guaranty and to perfect and preserve the
rights and powers of the Noteholders hereunder. The Guarantor acknowledges and
confirms that the Guarantor itself has established its own adequate means of
obtaining from Apparel on a continuing basis all information desired by the
Guarantor concerning the financial condition of Apparel and that the Guarantor
will look to Apparel and not to the Noteholders in order for the Guarantor to
keep adequately informed of changes in Apparel's financial condition.
10. Termination; Reinstatement. This Guaranty shall remain in
full force and effect against each individual Guarantor until all Obligations
have been paid in full to the Noteholders at which time this Guaranty shall,
subject to the following sentence, terminate. This Guaranty shall be reinstated,
if at any time any payment made or value received with respect to any obligation
is rescinded or must otherwise be returned by the Noteholders upon the
insolvency, bankruptcy or reorganization of Apparel or otherwise, all as though
such payment had not been made or value received.
11. Successors and Assigns. This Guaranty shall be binding
upon the Guarantor, any successors and assigns, and shall inure to the benefit
of the Noteholders, and their respective successors, transferees and assigns.
Without limiting the generality of the foregoing sentence, any Noteholder may
assign or otherwise transfer the Notes or any other agreement or note held by it
evidencing, securing or otherwise executed in connection with the Obligations,
or sell participations in any interest therein, to any other entity or other
person, and such other entity or other person shall thereupon become vested, to
the extent set forth in the agreement evidencing such assignment, transfer or
participation, with all the rights in respect thereof granted to such Noteholder
herein. The Guarantor may not assign any of its obligations hereunder.
12. Amendments and Waivers. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by the Guarantor
therefrom shall be effective unless the same shall be in writing and signed by
the Noteholders. No failure on the part of the Noteholders to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right.
13. Notices. All notices and other communications called for
hereunder shall be made in writing and, unless otherwise specifically provided
herein, shall be deemed to have been duly made or given when delivered by hand
or mailed first class, postage prepaid, or, in the case of telegraphic or
telexed notice, when transmitted, answer back received, addressed as follows:
if to the Guarantor:
JBI, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Telecopy Number: (781) 828-9300
Attention: Chief Financial Officer
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Telecopy Number: (617) 523-1231
Attention: Raymond C. Zemlin, P.C.
if to any Noteholder at the address of such Noteholder
appearing on Schedule 1 hereto with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: Othon A. Prounis
or at such other address as the parties may designate in writing.
14. Governing Law; Consent to Jurisdiction. THIS GUARANTY IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Guarantor
agrees that any suit for the enforcement of this Guaranty may be brought in the
courts of the State of New York or any federal court sitting therein and
consents to the nonexclusive jurisdiction of such court and to service of
process in any such suit being made upon the Guarantor by mail at the address
specified in Section 13. The Guarantor hereby waives any obligation that it may
now or hereafter have to the venue of any such suite or any such court or that
such suit was brought in an inconvenient court.
15. Waiver of Jury Trial. The Guarantor HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by
law, the Guarantor hereby waives any right which it may have to claim or recover
in any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Guarantor (a) certifies that neither the Noteholders nor any
representative, agent or attorney of the Noteholders has represented, expressly
or otherwise, that the Noteholders would not, in the event of litigation, seek
to enforce the foregoing waivers and (b) acknowledges that, in entering into the
Agreement to which the Noteholders are a party, the Noteholders are relying
upon, among other things, the waivers and certifications continued in this
Section 15.
16. Miscellaneous. This Guaranty constitutes the entire
agreement of the Guarantor with respect to the matters set forth herein. The
rights and remedies herein provided are cumulative and not exclusive of any
remedies provided by law or any other agreement, and this Guaranty shall be in
addition to any other guaranty of or collateral security for any of the
Obligations. The invalidity or unenforceability of any one or more sections of
this Guaranty shall not affect the validity or enforceability of its remaining
provisions. Captions are for the ease of reference only and shall not affect the
meaning of the relevant provisions. The meanings of all defined terms used in
this Guaranty shall be equally applicable to the singular and plural forms of
the terms defined.
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be executed and delivered as of the date first above written.
JBI, INC.
By:/s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
<PAGE>
SCHEDULE I
Noteholders
-----------
Name and Address
of Noteholder
-------------
DLJ Fund Investment Partners II, L.P.,
DLJ Private Equity Employees Fund, L.P. and
DLJ Private Equity Partners Fund, L.P.,
Nicole Arnaboldi,
Christine Chen,
Glen Dershowitz,
Steven G. Puccinelli,
Peter Schaeffer, and
Shelley Wong at
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Telecopy Number: (212)
Attention: Julio Garcia
Cornerstone Capital, Inc.
16 Cobblefield Drive
Mendham, NJ 07945
Telecopy Number: (908) 221-1711
Attention: David Pulver
GB Investment, LLC
40 Broad Street, 11th Floor
Boston, MA 02109
Telecopy Number: (617) 210-7141
Attention: Matthew Kahn
MJ Whitman Pilot Fish Opportunity Fund, L.P.
767 Third Avenue, 5th Floor
New York, New York 10017
Telecopy Number: (212) 888-6704
Attention: Ian Kirschner
EXHIBIT 04.05
REGISTRATION RIGHTS AGREEMENT
May 21, 1999
To the several persons named
at the foot hereof
Dear Sirs:
This will confirm that in consideration of the purchase by the
persons and entities listed in Schedule I of the Securities Purchase Agreement,
dated as of May 19, 1999 (the "Securities Purchase Agreement") among J. Baker,
Inc., a Massachusetts corporation (the "Company"), JBI, Inc., a Massachusetts
corporation, JBI Apparel, Inc., a Massachusetts corporation and the other
parties listed in Schedule I thereto (such persons and entities being
hereinafter collectively called the "Purchasers"), on the date hereof, of stock
purchase warrants (the "Warrants") to purchase up to an aggregate 1,200,000
shares of Common Stock, and as an inducement to the Purchasers to consummate the
transactions contemplated by the Securities Purchase Agreement, the Company
hereby covenants and agrees with each of you, and with each subsequent holder of
Restricted Stock (as such term is defined herein), as follows:
1. Certain Definitions. In addition to terms defined
elsewhere herein, as used herein, the following terms shall have the following
respective meanings:
"Closing Date" shall mean the closing of the transactions
contemplated by the Securities Purchase Agreement.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
"Common Stock" shall mean shares of the common stock, par
value $.50 per share, of the Company, as constituted as of the date of
this Agreement, subject to adjustment pursuant to the provisions of
Section 8 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Registration Expenses" shall mean the expenses so described
in Section 6 hereof.
"Securities Act" shall mean the Securities Act of 1933 or any
similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean the expenses so described in
Section 6 hereof.
"Warrant Shares" shall mean shares of Common Stock issued upon
exercise of the Warrants.
2. Restrictive Legend. Each certificate representing the
Warrants and upon exercise of the Warrants in accordance with the terms thereof,
the Warrant Shares, and each certificate issued upon exchange or transfer of the
Warrants or the Warrant Shares, as the case may be, other than in a public sale
or as otherwise permitted by the last paragraph of paragraph 3 hereof shall be
stamped or otherwise imprinted with a legend substantially in the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. NEITHER THE SECURITIES EVIDENCED
HEREBY, NOR ANY INTEREST THEREIN, MAY BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS EITHER (i) THERE
IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT AND LAWS
RELATING THERETO OR (ii) THE COMPANY HAS RECEIVED AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO
THE COMPANY, STATING THAT SUCH REGISTRATION IS NOT REQUIRED."
3. Notice of Proposed Transfer. Prior to any proposed transfer
of any Warrants or Warrant Shares, as the case may be, (other than under the
circumstances described in Section 4 hereof), the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and, if requested
by the Company, shall be accompanied by an opinion of counsel reasonably
satisfactory to the Company to the effect that the proposed transfer of the
Warrants or Warrant Shares, as the case may be, may be effected without
registration under the Securities Act, whereupon the holder of such Warrants or
Warrant Shares, as the case may be, shall be entitled to transfer such Warrants
or Warrant Shares, as the case may be, in accordance with the terms of its
notice; provided, however, that no such opinion or other documentation shall be
required if such notice shall cover a distribution by any Purchaser that is a
partnership to its partners. Each certificate for Warrants or Warrant Shares, as
the case may be, transferred as above provided shall bear the legend set forth
in Section 2, unless (i) such transfer is in accordance with the provisions of
Rule 144 (or any other rule permitting public sale without registration under
the Securities Act) or (ii) the opinion of counsel referred to above is to the
further effect that the transferee and any subsequent transferee (other than an
affiliate of the Company) would be entitled to transfer such securities in a
public sale without registration under the Securities Act.
The foregoing restrictions on transferability of the Warrants
and Warrant Shares shall terminate as to any particular Warrants or Warrant
Shares when such shares shall have been effectively registered under the
Securities Act and sold or otherwise disposed of in accordance with the intended
method of disposition by the seller or sellers thereof set forth in the
registration statement concerning such shares. Whenever a holder of a Warrant or
Warrant Shares is able to demonstrate to the Company (and its counsel) that the
provisions of Rule 144(k) of the Securities Act (or any successor rule) are
available to such holder without limitation, such holder of a Warrant or Warrant
Shares shall be entitled to receive from the Company, without expense, a new
certificate not bearing the restrictive legend set forth in Section 2.
4. Shelf Registration.
(a) As soon as practicable after the Closing Date, but in no
event later than 90 days after the Closing Date, the Company shall
cause to be filed a shelf registration statement pursuant to Rule 415
of the Securities Act (the "Shelf Registration Statement"). The Company
shall use its reasonable best efforts to cause the Shelf Registration
Statement become effective as soon as practicable after the date of
filing the Shelf Registration Statement, but in no event later than 180
days after the Closing Date. The Company shall use its reasonable best
efforts to keep such Shelf Registration Statement continuously
effective, supplemented and amended as required by the provisions of
Section 7 hereof to the extent necessary to ensure that it is available
for resales of the Warrant Shares by the holders thereof entitled to
benefit from this Section 4(a), and to ensure that it conforms to the
requirements of this Agreement, the Securities Act and the policies,
rules and regulations of the Commission as announced from time to time,
for a continuous period until all of the Warrant Shares held holders
entitled to benefit from this Section 4(a), following the date on which
such Shelf Registration Statement becomes effective under the
Securities Act.
(b) No Holder of Warrant Shares may include any of its Warrant
Shares in any Shelf Registration Statement pursuant to this Agreement
unless and until such holder furnishes to the Company in writing,
within 15 days after receipt of a request therefor, such information as
the Company may reasonably request for use in connection with any Shelf
Registration Statement. Each such Holder agrees to notify the Company
as promptly as practicable of any inaccuracy or change in information
previously furnished by such holder to the Company or of the occurrence
of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue
statement of a material fact regarding such holder or such holder's
intended method of distribution of such Warrant Share or omits to state
any material fact regarding such holder or such holder's intended
method of distribution of such Warrant Share required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and promptly to furnish to
the Company any additional information required so that such prospectus
shall not, with respect to such holder or such holder's intended method
of distribution of such Warrant Shares, contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing.
(c) Notwithstanding anything to the contrary contained herein,
the Board shall be entitled to postpone the filing period (or suspend
the effectiveness)of any registration of the Warrant Shares pursuant to
this Section 4 for a reasonable period of time not in excess of 90
calendar days on each occasion, if the Board determines, in its
reasonable business judgement, that such registration and offering
could materially interfere with bona fide financing, acquisition or
disposition plans of the Company and would require disclosure of
information, the premature disclosure of which could, in the Board's
reasonable business judgment, materially and adversely affect the
Company. If the Board postpones the filing of a registration statement
pursuant to this Section 4(c), it shall promptly notify, in writing,
the holders of Warrant Shares when the events or circumstances
permitting such postponement or suspension have ended.
5. Registration Procedures and Expenses. If and whenever the
Company is required by the provisions of Section 4 hereof to use its reasonable
best efforts to effect the registration of any of the Warrant Shares under the
Securities Act, the Company will, as promptly as possible:
(a) prepare (and afford one counsel for the selling holders
(as designated by a majority in interest of the selling holders)
reasonable opportunity to review and comment thereon) and file with the
Commission a registration statement (which shall be on an appropriate
form under the Securities Act, which form shall be available for sale
of the Warrant Shares in accordance with the intended method or methods
of distribution thereof) with respect to such securities and use its
best efforts to cause such registration statement to become and remain
effective for the period of the distribution contemplated thereby
(determined as hereinafter provided);
(b) prepare (and afford the selected counsel for the selling
holders reasonable opportunity to review and comment thereon) and file
with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for
the period specified in paragraph (a) above and as comply with the
provisions of the Securities Act with respect to the disposition of all
Warrant Shares covered by such registration statement in accordance
with the sellers' intended method of disposition set forth in such
registration statement for such period;
(c) furnish to each seller and to each underwriter such number
of copies of the registration statement and the prospectus included
therein (including each preliminary prospectus) as such persons may
reasonably request in order to facilitate the public sale or other
disposition of the Warrant Shares covered by such registration
statement;
(d) register or qualify the Warrant Shares covered by such
registration statement under the securities or blue sky laws of such
jurisdictions as the sellers of the Warrant Shares or, in the case of
an underwritten public offering, the managing underwriter, shall
reasonably request (provided that the Company will not be required to
(i) qualify generally to do business in any jurisdiction where it would
not otherwise be required to qualify but for this paragraph (d), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any jurisdiction);
(e) promptly notify each seller under such registration
statement and each underwriter, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus contained in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing;
(f) if the offering is underwritten, to furnish, at the
request of any seller, on the date that the Warrant Shares is delivered
to the underwriters for sale pursuant to such registration: (i) an
opinion dated such date of counsel representing the Company for the
purposes of such registration, addressed to the underwriters and to
such seller, stating that such registration statement has become
effective under the Securities Act and that (A) to the best knowledge
of such counsel, no stop order suspending the effectiveness thereof has
been issued and no proceedings for that purpose have been instituted or
are pending or contemplated under the Securities Act, (B) the
registration statement, the related prospectus, and each amendment or
supplement thereof, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder (except that such counsel need
express no opinion as to financial statements, the notes thereto, and
the financial schedules and other financial and statistical data
contained therein) and (C) to such other effects as may reasonably be
requested by counsel for the underwriters or by such seller or its
counsel, and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters,
stating that they are independent public accountants within the meaning
of the Securities Act and that, in the opinion of such accountants, the
financial statements of the Company included in the registration
statement or the prospectus, or any amendment or supplement thereof,
comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information
as to the period ending no more than five business days prior to the
date of such letter) with respect to the registration in respect of
which such letter is being given as such underwriters or seller may
reasonably request; and
(g) make available for inspection by each seller, any
underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent
retained by such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement and permit such seller, attorney, accountant or agent to
participate in the preparation of such registration statement.
For purposes of paragraphs (a) and (b) above, the period of distribution of
Warrant Shares in a firm commitment underwritten public offering shall be deemed
to extend until each underwriter has completed the distribution of all
securities purchased by it, and the period of distribution of Warrant Shares in
any other registration shall be deemed to extend until the earlier of the sale
of all Warrant Shares covered thereby or six months after the effective date
thereof.
In connection with each registration hereunder, the selling
holders of the Warrant Shares, if applicable, will furnish to the Company in
writing such information with respect to themselves and the proposed
distribution by them as shall be reasonably necessary in order to assure
compliance with federal and applicable state securities laws.
In connection with each registration pursuant to Section 4
hereof covering an underwritten public offering, the Company and any selling
holder of Warrant Shares agree to enter into a written agreement with the
managing underwriter selected in the manner herein provided in such form and
containing such provisions as are customary in the securities business for such
an arrangement between major underwriters and companies of the Company's size
and investment stature, provided, however, that such agreement shall not contain
any such provision applicable to the Company or such selling holders which is
inconsistent with the provisions hereof and provided, further, however, that the
time and place of the closing under said agreement shall be as mutually agreed
upon among the Company, such managing underwriter and the selling holders of
Warrants and Warrant Shares, if applicable.
Notwithstanding anything to the contrary set forth herein, the
Company is not required to participate in any fashion in any underwritten public
offering. If any holder of Warrant Shares seeks to dispose of such holder's
Warrant Shares pursuant to an underwritten public offering, it shall so notify
the Company and the Company may refuse, in its sole discretion, to authorize
such underwritten public offering.
6. Expenses. All expenses incurred by the Company in complying
with Section 4 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc., transfer taxes, fees of transfer agents and
registrars and fees and expenses of one counsel for the sellers of Warrant
Shares but excluding any Selling Expenses, are herein called "Registration
Expenses". All underwriting discounts and selling commissions applicable to the
sale of Warrant Shares are herein called "Selling Expenses".
The Company will pay all Registration Expenses in connection
with each registration statement filed pursuant to Section 4 hereof. All Selling
Expenses in connection with any registration statement filed pursuant to Section
4 hereof shall be borne by the participating sellers in proportion to the number
of shares sold by each, or by such persons other than the Company (except to the
extent the Company shall be a seller) as they may agree.
7. Indemnification. In the event of a registration of any of
the Warrant Shares under the Securities Act pursuant to Section 4 hereof, the
Company will indemnify and hold harmless each seller of such Warrant Shares
thereunder and each underwriter of Warrant Shares thereunder and each other
person, if any, who controls such seller or underwriter within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such seller or underwriter or controlling person may become
subject under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Warrant Shares was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or 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, and will reimburse each such seller, each
such underwriter and each such controlling person for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such seller, such underwriter
or such controlling person in writing specifically for use in such registration
statement or prospectus.
In the event of a registration of any of the Warrant Shares
under the Securities Act pursuant to Section 4 hereof, each seller of such
Warrant Shares thereunder, severally and not jointly, will indemnify and hold
harmless the Company and each person, if any, who controls the Company within
the meaning of the Securities Act, each officer of the Company who signs the
registration statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer or director or underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement under which such Warrant Shares was
registered under the Securities Act pursuant to Section 4, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or 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, and will reimburse the Company and each
such officer, director, underwriter and controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information pertaining to
such seller, as such, furnished in writing to the Company by such seller
specifically for use in such registration statement or prospectus; provided,
further, however, that the liability of each seller hereunder shall be limited
to the proportion of any such loss, claim, damage, liability or expense which is
equal to the proportion that the public offering price of shares sold by such
seller under such registration statement bears to the total public offering
price of all securities sold thereunder, but not to exceed the proceeds (net of
underwriting discounts and commissions) received by such seller from the sale of
Warrant Shares covered by such registration statement.
Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to any indemnified party other than under this Section 6. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party shall not be liable to such indemnified party under this Section 6 for any
legal expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation and of
liaison with counsel so selected; 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 that the interests of
the indemnified party reasonably may be deemed to conflict with the interests of
the indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred; provided, further, however, that in no event
shall the indemnified parties collectively be entitled to have the Company
indemnify them for the fees and expenses of more than one counsel.
Notwithstanding the foregoing, any indemnified party shall
have the right to retain its own counsel in any such action, but the fees and
disbursements of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party shall have failed to retain counsel for the
indemnified person as aforesaid or (ii) the indemnifying party and such
indemnified party shall have mutually agreed to the retention of such counsel.
It is understood that the indemnifying party shall not, in connection with any
action or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two
paragraphs of this Section 6 is unavailable or insufficient to hold harmless an
indemnified party under such paragraphs in respect of any losses, claims,
damages or liabilities or actions in respect thereof referred to therein, then
each indemnifying party shall in lieu of indemnifying such indemnified party
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities or actions in such proportion as
appropriate to reflect the relative fault of the Company, on the one hand, and
the underwriters and the sellers of such Warrant Shares on the other, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or actions as well as any other relevant equitable
considerations, including the failure to give any notice under the third
paragraph of this Section 6. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact relates to information supplied by the Company, on the one hand,
or the underwriters and the sellers of such Warrant Shares on the other, and to
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and each selling
holder of Warrant Shares agree that it would not be just and equitable if
contributions pursuant to this paragraph were determined by pro rata allocation
(even if all of the sellers of such Warrant Shares were treated as one entity
for such purpose) or by any other method of allocation which did not take
account of the equitable considerations referred to above in this paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or action in respect thereof, referred to above in
this paragraph, shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
paragraph, the sellers of such Warrant Shares shall not be required to
contribute any amount in excess of the amount, if any, by which the total price
at which the Common Stock sold by each of them was offered to the public exceeds
the amount of any damages which they would have otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission. No person
guilty of fraudulent misrepresentations (within the meaning of Section 11(f) of
the Securities Act), shall be entitled to contribution from any person who is
not guilty of such fraudulent misrepresentation.
The indemnification of underwriters provided for in this
Section 6 shall be on such other terms and conditions as are at the time
customary and reasonably required by such underwriters. In that event the
indemnification of the sellers of Warrant Shares in such underwriting shall at
the sellers' request be modified to conform to such terms and conditions.
8. Changes in Common Stock. If, and as often as, there are any
changes in the Common Stock by way of stock split, stock dividend, combination
or reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Common Stock as so changed.
9. Representations and Warranties of the Company. The Company
represents and warrants to you as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate
action and will not violate any provision of law, any order of any
court or other agency of government, the Certificate of Incorporation
or Bylaws of the Company, or any provision of any indenture, agreement
or other instrument to which it or any of its properties or assets is
bound, or conflict with, result in a breach of or constitute (with due
notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of
the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to
considerations of public policy in the case of the indemnification
provisions hereof.
10. Rule 144 Reporting. The Company agrees with you as
follows:
(a) The Company shall use its reasonable best efforts to make
and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times from and
after the date it is first required to do so.
(b) The Company shall use its reasonable best efforts to file
with the Commission in a timely manner all reports and other documents
as the Commission may prescribe under Section 13(a) or 15(d) of the
Exchange Act at any time after the Company has become subject to such
reporting requirements of the Exchange Act.
(c) The Company shall furnish to such holder of Warrants or
Warrant Shares forthwith upon request (i) a written statement by the
Company as to whether it is in compliance with the reporting
requirements of Rule 144 (at any time from and after the date it first
becomes subject to such reporting requirements, and of the Securities
Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or
quarterly report of the Company filed with the Commission, and (iii)
such other reports and documents so filed as a holder may reasonably
request to avail itself of any rule or regulation of the Commission
allowing a holder of Warrants or Warrant Shares to sell any such
securities without registration.
11. Miscellaneous.
(a) All covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. Without limiting the generality of
the foregoing, the registration rights conferred herein on the holders
of Warrants and Warrant Shares shall inure to the benefit of any and
all subsequent holders from time to time of the Warrants and Warrant
Shares for so long as the certificates representing the Warrants or
Warrant Shares, as the case may be, shall be required to bear the
legend specified in Section 2 hereof.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class
registered mail, postage prepaid, addressed as follows:
if to the Company, to it at:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Telecopy Number: (781) 828-9300
Attention: Chief Financial Officer
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Telecopy Number: (617) 523-1231
Attention: Raymond C. Zemlin, P.C.
if to any holder of Warrants or Warrant Shares, at their
addresses as set forth in Schedule I hereto with a copy to:
Reboul, MacMurray, Hewitt, Maynard & Kristol
45 Rockefeller Plaza
New York, New York 10111
Telecopy Number: (212) 841-5725
Attention: Othon A. Prounis
if to any subsequent holder of Warrants or Warrant Shares to
it at such address as may have been furnished to the Company in writing
by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of
Warrants or Warrant Shares) or to the holders of Warrants or Warrant
Shares (in the case of the Company).
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(d) This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and may not be
modified or amended except in writing with the consent of at least a
majority of the holders of Warrant Shares (treating the holders of the
Warrants as the holders of Warrant Shares for such purpose).
(e) This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
<PAGE>
Please indicate your acceptance of the foregoing by signing
and returning the enclosed counterpart of this letter, whereupon this letter
(herein sometimes called "this Agreement") shall be a binding agreement between
the Company and each of you.
Very truly yours,
J. BAKER, INC.
By:/s/Philip Rosenberg
Name: Philip Rosenberg
Title: Executive Vice President
AGREED TO AND ACCEPTED
as of the date first
above written.
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO Plans Management Corporation
By:/s/Ivy Dodes
Name: Ivy Dodes
Title: Vice President
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO Plans Management Corporation
By:/s/Ivy Dodes
Name: Ivy Dodes
Title: Vice President
DLJ PRIVATE EQUITY PARTNERS, L.P.
By: WSW Capital, Inc.
By:/s/Ivy Dodes
Name: Ivy Dodes
Title: Vice President
/s/Nicole Arnaboldi
Nicole Arnaboldi
/s/Christine Chen
Christine Chen
/s/Glen Dershowitz
Glen Dershowitz
/s/Steven G. Puccinelli
Steven G. Puccinelli
/s/Peter Schaeffer
Peter Schaeffer
/s/Shelley Wong
Shelley Wong
CORNERSTONE CAPITAL, INC.
By:/s/David Pulver
Name: David Pulver
Title: President
GB INVESTMENT, LLC
By:
By:/s/Alan R. Goldstein
Name: Alan R. Goldstein
Title: Manger and Chief Financial Officer
MJ WHITMAN PILOT FISH OPPORTUNITY FUND, L.P.
By: MJ Whitman Pilot Fish Opportunity Fund, Inc.,
general partner
By:/s/Ian M. Kirschner
Name: Ian M. Kirschner
Title: Secretary
<PAGE>
SCHEDULE I
Purchasers
Name and Address
of Purchaser
DLJ Fund Investment Partners II, L.P.,
DLJ Private Equity Employees Fund, L.P. and
DLJ Private Equity Partners Fund, L.P.,
Nicole Arnaboldi,
Christine Chen,
Glen Dershowitz,
Steven G. Puccinelli,
Peter Schaeffer, and
Shelley Wong at
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Telecopy Number: (212)
Attention: Julio Garcia
Cornerstone Capital, Inc.
16 Cobblefield Drive
Mendham, NJ 07945
Telecopy Number: (908) 221-1711
Attention: David Pulver
GB Investment, LLC
40 Broad Street, 11th Floor
Boston, MA 02109
Telecopy Number: (617) 210-7141
Attention: Matthew Kahn
EXHIBIT 10.01
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re: )
)
EDISON BROTHERS STORES, INC., et al., ) Chapter 11
) Case No. 99-529, et seq. (MFW)
)
Debtors. ) Jointly Administered
ASSET PURCHASE AGREEMENT
BY AND AMONG
J. BAKER, INC. (OR A PERMITTED DESIGNEE(S) THEREOF),
AS PURCHASER,
AND
EDISON BROTHERS STORES, INC.,
EDISON BROTHERS APPAREL STORES, INC., AND
REPP LTD. BIG & TALL,
AS SELLERS
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
J. BAKER, INC. (OR A PERMITTED DESIGNEE(S) THEREOF),
AS PURCHASER,
AND
EDISON BROTHERS STORES, INC.,
EDISON BROTHERS APPAREL STORES, INC.,
AND
REPP LTD. BIG & TALL,
AS SELLERS
Dated as of April 30, 1999
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is dated as of April 30, 1999, by and
among J. Baker, Inc., a corporation organized and existing under the laws of the
Commonwealth of Massachusetts ("J. Baker"), or such other entity or entities as
shall be designated by J. Baker as permitted hereunder (as more fully defined in
Section 1.1 below, "Purchaser"), and Edison Brothers Stores, Inc. and Edison
Brothers Apparel Stores, Inc., debtors and debtors-in-possession under Chapter
11 Case No. 99-529, et seq. (MFW), jointly administered, in the United States
Bankruptcy Court for the District of Delaware (jointly, "Edison"), and Repp Ltd.
Big & Tall, a Canadian corporation ("Repp Canada"), and together with Edison,
"Sellers"). In consideration of the mutual covenants, agreements and warranties
herein contained, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
1.1 Specific Definitions. Unless otherwise defined herein,
terms used herein shall have the meanings set forth below:
"Account" or "Accounts" shall have the meaning ascribed thereto in
Section 2.1(b) hereof.
"Accounts Amount" shall have the meaning ascribed thereto in Section
2.1(b) hereof.
"Acquired Assets" shall have the meaning ascribed thereto in Section
2.1 hereof.
"Additional Escrow Amount" shall have the meaning ascribed thereto in
Section 3.2(a) hereof.
"Affiliate Obligations" means Sellers' debt and other obligations and
liabilities to affiliates and stockholders of Sellers, and includes all
interest, fees, costs and similar amounts payable by Sellers in respect thereof.
"Aggregate Retail Price" shall mean the sum of: (i) the aggregate
Retail Price of the Merchandise Inventory on hand at the Closing Date as
calculated in accordance with the methods set forth in Section 3.1 hereof, and
as otherwise provided herein, and (ii) the Gross Rings amount, calculated in
accordance with the methods set forth in Section 3.3(b) hereof.
"Aggregate Retail Price Merchandise Inventory Target" shall mean, as
applicable, the "Aggregate Retail Price Merchandise Inventory Target" for the
respective Business Division identified in Schedule 3.1(a) hereof.
"Agreement" means this Asset Purchase Agreement, including all Exhibits
and Schedules hereto, as it may be amended from time to time in accordance with
its terms.
"Allowed Claim" shall mean (i) if the holder of such claim did not file
proof thereof with the Bankruptcy Court within the applicable period of time
fixed by the Bankruptcy Court pursuant to Rule 3003(c)(3) of the Bankruptcy
Rules, the amount of such claim as of the filing date of the Chapter 11 Cases as
listed in the Sellers' Chapter 11 schedules of assets and liabilities as neither
disputed, contingent or unliquidated; or (ii) if the holder of such claim has
filed proof thereof with the Bankruptcy Court within the applicable period of
time fixed by the Bankruptcy Court pursuant to Rule 3003(c)(3) of the Bankruptcy
Rules, (1) the amount stated in such proof as of the filing date of the Chapter
11 Cases if no objection to such proof of claim was interposed within the
applicable period of time fixed by the Bankruptcy Code, the Bankruptcy Rules, or
the Bankruptcy Court, or (2) the amount thereof as fixed by a final order of the
Bankruptcy Court if an objection to such proof was interposed within the
applicable period of time fixed by the Bankruptcy Code, the Bankruptcy Rules, or
the Bankruptcy Court.
"Ancillary Documents" shall have the meaning ascribed thereto in
Section 11.8 hereof.
"Assignment and Assumption" shall mean an Assignment and Assumption of
Leases, Contracts and other Assumed Obligations, in substantially the form
attached hereto as Exhibit 10.2(a), executed and delivered by Purchaser and
Sellers in accordance with Sections 10.2 and 10.3 hereof.
"Assumed Contracts" shall have the meaning ascribed thereto in Section
2.2(b) hereof.
"Assumed Leases" shall have the meaning ascribed thereto in Section
2.2(a) hereof.
"Assumed Lease/Contract Cap" means an amount not to exceed $200,000.00
in the aggregate in respect of amounts required to be paid by Sellers under
section 365(b) of the Bankruptcy Code or otherwise in order to cure any and all
existing defaults under a Store Lease or other Contract as a condition to the
assumption and assignment thereof to Purchaser under this Agreement.
"Assumed Obligations" shall have the meaning ascribed thereto in
Section 2.5 hereof.
"Avoidance Action" or "Avoidance Actions" shall have the meaning
ascribed thereto in Section 2.2(c) hereof.
"Bankruptcy Code" means Title 11, United States Code, sections
101-1330, as same shall be amended from time-to-time.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware, having jurisdiction over Edison and its assets in the
Chapter 11 Cases.
"Bankruptcy Rules" shall mean the Federal Rules of Bankruptcy Procedure
as shall be promulgated by the Supreme Court of the United States, as same shall
be applicable in the Chapter 11 Cases.
"Bill of Sale" shall have the meaning ascribed thereto in Section 10.2
hereof, and shall be in substantially the form attached hereto as Exhibit
10.2(b).
"Bulk Sales Act" shall have the meaning ascribed thereto in Section 3.8
hereof.
"Business" means the United States and Canadian businesses of Sellers
for the sale and distribution of men's big and tall apparel and related
accessories under the tradenames "Repp", "Mr. Big & Tall" and the other
Intellectual Property, and the "Repp By Mail, Ltd." catalogue business.
"Business Day" shall mean any day other than a Saturday, a Sunday, or a
day on which the banks in New York City or Toronto, Canada are authorized or
obligated by law or executive order to close.
"Business Division" shall mean, as applicable, the Repp Stores business
division or the Repp By Mail business division of the Business, as such terms
are used and reflected in Schedule 3.1(a) hereof.
"Business Records" shall have the meaning ascribed thereto in Section
2.1(g) hereof.
"Canadian Assignment Costs" shall have the meaning ascribed thereto in
Section 8.11 hereof.
"Chapter 11 Cases" means the pending cases commenced by Edison and certain
affiliates on March 9, 1999 under Chapter 11 of the Bankruptcy Code, pending in
the Bankruptcy Court under docket no. 99-529, et seq. (MFW), jointly
administered.
"Claim" means any claim, lawsuit, demand, suit, inquiry made, hearing,
investigation, notice of violation, litigation, proceeding, arbitration, or
other dispute, whether civil, criminal, administrative or otherwise.
"Closing" means the consummation of the transactions contemplated
herein in accordance with Article X hereof.
"Closing Date" means the date on which the Closing shall occur, as more
extensively discussed in Section 10.1 hereof.
"Closing Locations" shall have the meaning ascribed thereto in Section
8.4 hereof.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Competitive Business" shall have the meaning ascribed thereto in
Section 6.2(a) hereof.
"Confidential Information" shall have the meaning ascribed thereto in
Section 6.2(a) hereof.
"Contaminant" means any substance regulated under any Environmental Law
as a pollutant, hazardous substances, hazardous or toxic wastes, hazardous
materials, or "toxic substances" under any Environmental Law.
"Contract" means any agreement, contract, commitment, lease, or other
binding arrangement or understanding, whether written or oral arising under or
in connection with, or relating to, the conduct of the Business to which a
Seller is a party.
"Cure Amount" shall have the meaning ascribed thereto in Section 2.5(a)
hereof.
"Defective Merchandise" shall mean any item of merchandise that is not
saleable in the ordinary course because it is damaged, ripped, worn, faded,
scratched, broken, or affected by other similar defects, including, but not
limited to, such items of merchandise that have been segregated by Sellers and
marked "out of stock" in the Ordinary Course of Business.
"Deposit" shall have the meaning ascribed thereto in Section 8.5 hereof.
"Designated Leases" shall have the meaning ascribed thereto in Section
2.2(a) hereof.
"Disclosure Schedule" means the disclosure schedules hereto, if any.
"Disputed Status Property" shall have the meaning ascribed thereto in
Section 2.7 hereof.
"Dollars" or "$" means dollars of the United States of America, unless
specifically provided otherwise in this Agreement.
"Dollar Equivalent" means the U.S. noon spot exchange rate as
reported by the Bank of Canada on the applicable Business Day.
"Edison" shall have the meaning ascribed thereto in the opening
paragraph of this Agreement.
"Employees" shall have the meaning ascribed thereto in Section 7.2
hereof.
"Environmental Law" means any Regulation which is related to or
otherwise imposes liability or standards of conduct concerning discharges,
releases or threatened releases of Contaminants into ambient air, water or land,
or otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of
Contaminants.
"Environmental Liabilities and Costs" means all Losses from any claim,
by any Person, whether based on Contract, tort, or arising under or pursuant to
any Environmental Law or a Release of a Contaminant into the environment,
including any Remedial Action, any Lien in favor of any authority pursuant to
any Environmental Law or any Order or agreement with any authority.
"Escrow Agreement" shall mean that certain Escrow Agreement entered
into and executed by Sellers and Purchaser in conjunction with the Closing in
accordance with Section 3.2(a) hereof, which agreement shall be in form and
substance reasonably satisfactory to Sellers, Purchaser and the Escrow Agent.
"Escrow Agent" means Mercantile Bank, N.A. (St. Louis, MO), or
such other party as shall be mutually acceptable to Purchaser and Sellers.
"Escrow Amount" shall have the meaning ascribed thereto in Section
3.2(a) hereof.
"ETA" shall have the meaning ascribed thereto in Section 11.11 hereof.
"Excluded Assets" shall have the meaning ascribed thereto in Section
2.3 hereof.
"Excluded Records" shall have the meaning ascribed thereto in Section
2.1(g) hereof.
"Gross Rings" shall have the meaning ascribed thereto in Section 3.3(b)
hereof.
"Guarantee" means any guarantee or other contingent liability (other
than any endorsement for collection or deposit in the ordinary course of
business), direct or indirect, with respect to any Indebtedness or obligations
of another Person, through a Contract or otherwise.
"H-S-R Approvals" shall have the meaning ascribed thereto in Section
5.1(c) hereof.
"H-S-R Approvals Amount" shall have the meaning ascribed thereto in
Section 6.1(b) hereof.
"Indebtedness" with respect to any Person means any obligation of such
Person for borrowed money, and in any event shall include (i) any obligation
incurred for all or any part of the purchase price of property or other assets
or for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current liabilities and
incurred in respect of property purchased in the ordinary course of business,
(ii) the face amount of all letters of credit issued for the account of such
Person, (iii) obligations (whether or not such Person has assumed or become
liable for the payment of such obligation) secured by Liens, (iv) capitalized
lease obligations, (v) all Guarantees of such Person, (vi) all accrued interest,
fees and charges in respect of any Indebtedness, and (vii) all prepayment
premiums and penalties, and any other fees, expenses, indemnities and other
amounts payable as a result of the prepayment and/or discharge of any
Indebtedness.
"Intellectual Property" shall have the meaning ascribed thereto in
Section 2.1(f) hereof.
"In-Transit Goods" shall mean such items of merchandise inventory that
have been or will be paid for by Sellers but which are in-transit between (i)
one or more Stores, (ii) any Store and any warehouse or distribution center,
(iii) any Store(s), warehouse and/or distribution center and any merchandise
vendor or shipper, or (iv) otherwise in- transit or not located in the Sellers'
Stores, warehouse(s) or distribution center(s), on the Closing Date and which
items are received either in the Repp Stores or Repp By Mail after the
completion of the Physical Inventory thereat; provided, however, upon receipt of
such goods by Sellers or Purchaser, as the case may be, such goods shall become
Merchandise Inventory hereunder, with a physical count thereof being conducted
upon receipt in accordance with Section 3.3(a) hereof, and with payment of any
portion of the Purchase Price with respect thereto being calculated and made in
accordance with Sections 3.1(b) and 3.2(b) hereof.
"In-Transit Physical Inventory" shall have the meaning ascribed thereto
in Section 3.3(a) hereof.
"Inventory Procedures" shall have the meaning ascribed thereto in
Section 3.3(a) hereof, and as contained in Exhibit 3.3 hereof.
"Inventory Service" shall have the meaning ascribed thereto in Section
3.3(a) hereof.
"J. Baker" means J. Baker, Inc., a corporation organized and existing
under the laws of the Commonwealth of Massachusetts.
"Lease" shall have the meaning ascribed thereto in Section 2.2(a)
hereof.
"License"shall have the meaning ascribed thereto in Section 8.4 hereof.
"Lien" means any security interest, lien, charge, mortgage, deed,
assignment, pledge, hypothecation, encumbrance, easement, restriction or
interest of another Person of any kind or nature.
"Losses" mean all liabilities of every kind, losses, costs, claims,
judgments, awards, damages (including punitive, consequential and treble
damages), penalties or expenses (including, without limitation, reasonable
attorneys' fees and expenses and costs of investigation and litigation), and
also including any expenditures or expenses incurred to cover, remedy or rectify
any such Losses.
"Merchandise Inventory" shall mean for purposes of this Agreement all
of Sellers' merchandise inventory as at the Closing Date designated and/or
allocated for the Business, whether located in the Stores, any Seller
distribution center or warehouse (including, but not limited to, the Repp
Catalogue Warehouse), any third party location, or any other place or location
otherwise under the custody and control of Sellers, including layaway, repair
and special order merchandise; provided, however, Merchandise Inventory shall
not include: (i) Defective Merchandise, (ii) goods which belong to sublessees,
licensees or concessionaires of Sellers, and (iii) goods held by Sellers on
memo, on consignment, or as bailee; provided, further, In-Transit Goods shall
not become Merchandise Inventory until such time as such goods are received by
Sellers or Purchaser, as the case may be.
"On Order Goods" shall have the meaning ascribed thereto in Section 2.4
hereof.
"Order" means any decree, order, injunction, rule, judgment, consent of
or by any governmental authority.
"Ordinary Course of Business" means the operation of the Business by
Sellers in the usual and ordinary course in a manner substantially similar to
the manner in which Sellers have operated the Business both prior to and since
the commencement of the Chapter 11 Cases.
"Overbid Auction" shall have the meaning ascribed thereto in Section
8.5 hereof.
"Permits" shall have the meaning ascribed thereto in Section 2.1(e)
hereof.
"Person" means any corporation, partnership, joint venture, limited
liability company, organization, entity, authority or natural person.
"Permitted Designee" shall have the meaning ascribed thereto in Section
11.9 hereof.
"Physical Inventory" shall have the meaning ascribed thereto in Section
3.3(a) hereof.
"Purchase Price" shall have the meaning ascribed thereto in Section 3.1
hereof.
"Projected Closing Aggregate Retail Price" shall have the meaning
ascribed thereto in Section 3.2(a) hereof.
"Purchaser" means J. Baker or any Permitted Designee thereof as
permitted under this Agreement.
"Regulation" means any law, statute, regulation, ruling, rule or Order
of, administered or enforced by or on behalf of any governmental authority.
"Rejection Claim Reimbursement" shall have the meaning ascribed thereto
in Section 3.1(d) hereof.
"Release" means any release, spill, emission, leaking, pumping,
disposal, discharge, dispersal or migration into the indoor or outdoor
environment or into or out of any property or assets (including the Acquired
Assets) owned or leased by Sellers as at the Closing Date, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.
"Remedial Action" means all actions required under any applicable
Environmental Law to (1) clean up, remove, treat or in any other way address
Contaminants in the environment; (2) prevent the Release or threat of Release or
minimize the further Release of Contaminants so they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment; or (3) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Repp By Mail" shall mean the operations, business and assets of
Sellers' "Repp By Mail, Ltd." and related catalogue operations and businesses in
the United States of America and Canada, respectively.
"Repp By Mail Lease" means, individually, any lease of non-residential
real property from which Sellers conduct the Business of Repp By Mail and,
collectively, all of Sellers' leases of non-residential real property from which
Sellers conduct the Business of Repp By Mail, including, but not limited to, the
Repp Catalogue Warehouse.
"Repp Canada" shall have the meaning ascribed thereto in the opening
paragraph of this Agreement.
"Repp Canada Assets" shall mean any and all Acquired Assets relating to
the Business located in or designated for the Business operations in Canada,
including, but not limited to, any Inventory, Leases, Contracts and Intellectual
Property relating exclusively to the Business operations in Canada, but
specifically excluding any Acquired Assets relating to or associated with the
Repp By Mail Business, wherever located.
"Repp Canada Store Lease" shall mean the non-residential real property
lease or leases under which Sellers occupy each of the Repp Stores in Canada.
"Repp Catalogue Warehouse" means that certain
warehouse/distribution/office facility located at Alpharetta, GA leased by
Edison in the conduct of the Business of Repp By Mail.
"Repp Stores" shall mean the operations, businesses and related assets
of Sellers' men's big and tall division retail store operations maintained under
the tradenames "Repp" and "Mr. Big & Tall" or other Intellectual Property in the
United States of America and Canada, respectively.
"Representative" shall have the meaning ascribed thereto in Section 3.8
hereof.
"Retail Price" shall mean with respect to each item of Merchandise
Inventory, the PLU or "scan" price of such item on the Closing Date (which shall
be determined based upon reference to the Sellers' price files as of the date
immediately preceding the date of execution of this Agreement, which price files
shall be attached hereto and incorporated herein as Exhibit 3.1(a) hereof), or
as to items of Merchandise Inventory that are subject to Gross Rings under
Section 3.3(b) hereof, the applicable Gross Rings amount. The Retail Price of
any item of Merchandise Inventory shall be determined as provided for in this
Agreement and in accordance with the Inventory Procedures. In the event of a
conflict between this Agreement and the Inventory Procedures, the terms of this
Agreement shall control. The Retail Price of any item of Merchandise Inventory
shall exclude all sales Taxes and point-of-sale discounts, and Sellers represent
that the scan prices of items of Merchandise Inventory do not and shall not
include sales Taxes and point-of-sale discounts. If an item of Merchandise
Inventory has more than one scan price, or if multiple items of the same SKU are
scanned at different prices, the lowest scan price on any such item shall
prevail for such item or for all such items within the same SKU, as the case may
be, unless it is reasonably determined by Sellers and Purchaser that the lowest
scan price was incorrect and infrequent, in which case the higher scan price
shall control. In the event an item of Merchandise Inventory cannot be scanned,
then such item shall have a Retail Price equal to the lowest ticketed price
thereof, unless it is reasonably determined by Sellers and Purchaser that the
lowest ticketed price was incorrect and infrequent, in which case the higher
ticketed price shall control.
"Sale Order" means that certain order(s) to be entered by the
Bankruptcy Court in the Chapter 11 Cases, in substantially the form attached as
Exhibit 8.6 to this Agreement, inter alia, approving the transactions
contemplated by this Agreement.
"Sale Procedures" shall have the meaning ascribed thereto in Section
8.5 hereof.
"Sale Procedures Order" shall have the meaning ascribed thereto in
Section 8.5 hereof.
"Sellers" shall have the meaning ascribed thereto in the opening
paragraph of this Agreement.
"Sellers' Purchase Orders" shall have the meaning ascribed thereto in
Section 2.2(b) hereof.
"Store" or "Stores" means the premises from which Sellers operate the
Business of the Repp Stores.
"Store Cash Amount" shall have the meaning ascribed thereto in Section
2.1(a) hereof.
"Store Cash Adjustment Amount" shall have the meaning ascribed thereto
in Section 2.1(a) hereof.
"Store Closing Sales" shall have the meaning ascribed thereto in
Section 8.4 hereof.
"Store Lease" means, individually, any lease of non-residential real
property from which Sellers conduct the Business of the Repp Stores and,
collectively, all of Sellers' leases of non-residential real property from which
Sellers conducts the Business of the Repp Stores, including, but not limited to,
as same relate to a Store(s).
"Taxes" means all taxes, charges, fees, duties, levies or other
assessments, including, without limitation, income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales (including Canadian federal goods and services taxes), use,
franchise, excise, value added, capital, license, payroll, unemployment,
environmental, customs duties, capital stock, disability, stamp, leasing, lease,
user, transfer, fuel, excess profits, occupational and interest equalization,
windfall profits, severance and employees' income withholding and Social
Security taxes imposed by the United States or any other country or by any
state, province, municipality, subdivision or instrumentality of the United
States or of any other country or by any other tax authority, Canadian pension
plan contributions and unemployment insurance contributions, including all
applicable penalties and interest, and such term shall include any interest,
penalties or additions to tax attributable to such Taxes.
"Tax Return" means any report, return or other information required to
be supplied to a taxing authority in connection with Taxes.
A "third party" means any Person other than Sellers, Purchaser or any
of their respective affiliates.
"Topping Fee" shall have the meaning ascribed thereto in Section 8.5
hereof.
"Transferred Employees" shall have the meaning ascribed thereto in
Section 7.2 hereof.
"Unassumed Liabilities" shall have the meaning ascribed thereto in
Section 2.6 hereof.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
this Agreement and, unless otherwise indicated, shall have such meaning through
this Agreement.
1.3 Other Definitional Provisions
(a) The words "hereof", "herein", and "hereunder and words of
similar import, when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(b) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(c) References herein to a specific Section, Subsection,
Exhibit or Schedule shall refer, respectively, to Sections, Subsections, Exhibit
or Schedules of this Agreement, unless the express context otherwise requires.
(d) Wherever the word "include", or "includes", or "including"
is used in this Agreement, it shall be deemed to be followed by the words
"without limitation".
ARTICLE II
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES
----------------------------------------------------
2.1 Acquired Assets. Subject to the terms and conditions set forth in
this Agreement, at the Closing, Sellers shall sell, assign, transfer and deliver
to Purchaser, and Purchaser shall purchase, acquire and take assignment and
delivery of, the following assets owned by Sellers on the Closing Date (wherever
located) related exclusively to, or used exclusively in conjunction with, the
Business, and all of Sellers' right, title and interest therein and thereto on
the Closing Date, but not including those assets specifically excluded in
Section 2.3 hereof (all of the assets to be sold, assigned, transferred and
delivered to Purchaser hereunder shall be deemed included in the term "Acquired
Assets" as used herein):
(a) cash in an amount equal to $400.00 (or the Dollar
Equivalent of $400.00 for Repp Stores located in Canada) per Repp Store location
(including for purposes hereof each U.S. and Canadian Repp Store and each
Designated Lease location, without duplication) ("Store Cash Amount"). Sellers
shall implement steps to ensure that the Store Cash Amount shall be on hand at
each Repp Store location upon the commencement of business on the Closing Date;
provided, however, in the event the aggregate dollar amount of cash on hand in
the Repp Store locations at the Closing Date is greater than the Store Cash
Amount, then the Purchase Price shall be increased by an amount equal to the
difference between the aggregate actual dollar amount of cash on hand in the
Repp Store locations at the Closing Date and the Store Cash Amount; provided,
further, in the event the aggregate dollar amount of cash on hand in the Repp
Store locations at the Closing Date is less than the Store Cash Amount, then the
Purchase Price shall be decreased by an amount equal to the difference between
the aggregate actual dollar amount of cash on hand in the Repp Store locations
at the Closing Date and the Store Cash Amount (as adjusted in accordance with
this Section 2.1(a), if appropriate, the "Store Cash Adjustment Amount");
provided, further, Sellers and Purchaser agree that they shall each use their
respective good faith best efforts to reconcile and determine the amount of cash
on hand in each Repp Store location as of the Closing Date within the time
periods stated in Section 3.7 hereof;
(b) all prepaid and unamortized costs for marketing
expenditures and co-op advertising allowances (each an "Account" and
collectively the "Accounts") arising exclusively from or relating exclusively to
the operation or conduct of the Business; provided, however, in the event the
aggregate dollar amount of the Accounts at Closing is less than $750,000.00,
then the Purchase Price shall be reduced by an amount equal to the difference
between the actual aggregate dollar amount of Accounts and $750,000.00;
provided, further, in the event the aggregate dollar amount of Accounts at
Closing is greater than $750,000.00, then the Purchase Price shall be increased
by an amount equal to the difference between the actual aggregate dollar amount
of Accounts and $750,000.00 (as adjusted in accordance with this Section 2.1(b),
if appropriate, the "Accounts Amount"); provided, further, Sellers and Purchaser
agree that they shall each use their respective good faith best efforts to
reconcile the amount of Accounts and determine the Accounts Amount within the
time periods stated in Section 3.7 hereof;
(c) all supplies, materials and merchandise (including, but
not limited to, Merchandise Inventory) or other inventories relating exclusively
to the Business, including, without limitation, any such assets which (i) are
actually located at any location of Sellers, or any other third party location
to the extent such assets are designated for or allocated to the Business, (ii)
have been paid for by Sellers prior the Closing, or (iii) have been shipped to
Sellers, but not received by Sellers as of the Closing (collectively, the
"Inventory");
(d) all machinery, equipment, tools, vehicles, furniture,
furnishings, leasehold improvements, goods, and other tangible personal property
owned by Sellers which relate exclusively to the day-to-day operation or
maintenance of the Business which are actually located at the Repp Catalogue
Warehouse or any Store;
(e) all licenses, permits, approvals, certificates of
occupancy, authorizations, operating permits, registrations, plans and the like
applicable exclusively to the Business to the extent the same are transferable
by the Sellers to the Purchaser (collectively, the "Permits");
(f) all patents, patent applications, licenses, service names,
service marks, trade names, trademarks, trade name and trademark registrations
(and applications therefor), copyrights and copyright registrations (and
applications therefor), inventions and designs, including, without limitation,
any and all of Sellers' rights in and to the names "Repp", "Repp Big & Tall",
"Repp By Mail", and "Mr. Big & Tall" and any of their derivatives as used (or is
otherwise subject to a right by Sellers to use, but is not currently in use)
exclusively in connection with the conduct of the Business, or that appears on
products related to the Business, and any and all goodwill, trade secrets,
processes and know-how which relate exclusively to the Business, including, but
not limited to, any and all toll free or A800@ telephone numbers, domain rights
and Internet website(s) (collectively, the "Intellectual Property");
(g) all information, files, records, data, plans, and recorded
knowledge, including customer and supplier lists, related exclusively to or used
exclusively in connection with the Business (collectively, "Business Records"),
except to the extent that any of the foregoing are privileged or otherwise
subject to third party privacy rights (the items excluded from this Section
2.1(g) are collectively referred to herein as "Excluded Records"). The Business
Records shall be delivered at Closing to Purchaser by Sellers in their then
existing state and form; and
(h) any and all other assets and rights that are not of the
type or character referenced in Section 2.1(a) - (g) and which relate
exclusively to the Business.
2.2 Assignment of Leases, Contracts, Purchase Orders and Certain
Claims. Subject to the terms and conditions set forth in this Agreement,
including, but not limited to Section 2.2(a) hereof, Sellers will assign and
transfer to Purchaser, effective as of the Closing Date, all of Sellers' right,
title and interest in and to, and Purchaser will take assignment of, the
following rights and interests that are exclusively used in connection with, or
relate exclusively to, the Business (and the right, title and interest of
Sellers under all of the following shall be deemed included in the term
"Acquired Assets" as used herein):
(a) All Store Leases, other than Designated Leases
(collectively, the "Assumed Leases"); provided, however, Purchaser shall have
the right to terminate this Agreement (as provided in Section 8.4 hereof) in the
event the Bankruptcy Court does not authorize Sellers' assumption and assignment
to Purchaser under the Sale Order of at least 130 Store Leases; provided,
further, notwithstanding anything in this Agreement to the contrary, Purchaser
may designate such Store Leases as Purchaser shall, in its sole discretion,
determine not to have Sellers assign to Purchaser (each a "Designated Lease",
and collectively the "Designated Leases"), none of which Designated Leases may
be Repp Canada Store Leases; provided, however, Purchaser may not designate more
than thirty (30) Store Leases as Designated Leases hereunder; provided, further,
Purchaser shall be obligated to identify those Store Leases that shall be
designated as Designated Leases on or before the Closing (upon such designation
the listing of Designated Leases shall be made a part hereof as Exhibit 2.2(a).
(b) Such Contracts or other arrangements entered into by the
Sellers in the Ordinary Course of Business, including, but not limited to, any
Repp By Mail Lease and Contracts where Sellers are the customer/purchaser and
the goods, supplies or materials purchased thereunder are not included in
Inventory (collectively, the "Sellers' Purchase Orders") (collectively, the
"Assumed Contracts"), each as shall be identified in Schedules 2.2(b)
respectively to be delivered by Sellers to Purchaser within five (5) Business
Days of the execution and delivery of this Agreement, and upon acceptance
thereof by Purchaser shall be made a part hereof; within five (5) Business Days
of Purchaser's receipt of Schedule 2.2(b), Purchaser shall notify Sellers of
those Contracts that it shall not accept.
(c) All Claims and rights of action against vendors and
lessors of the Assumed Contracts and Assumed Leases, respectively, to the
Business relating exclusively to the Acquired Assets, the Repp Stores, the Repp
Catalogue Warehouse, or the Business, including, but not limited to, all rights
and avoidance claims of Sellers under sections 544, 547, 548, 549 and 550 of the
Bankruptcy Code (each an "Avoidance Action" and collectively the "Avoidance
Actions"); provided, however, effective as of the Closing the Purchaser shall be
deemed to have released each such claim that constitutes an Avoidance Action.
2.3 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, the following assets of Sellers, as well as any other assets not
defined as Acquired Assets, shall be retained by Sellers and are not being sold
or assigned to Purchaser hereunder (all of the following are referred to
collectively as the "Excluded Assets"):
(a) any capital stock held by Sellers or any other
affiliates of Sellers;
(b) cash and cash equivalents not required to be transferred
to Purchaser pursuant to Section 2.1(a) hereof; provided that Purchaser and
Sellers agree that in the event either of them receive any cash or cash
equivalents that properly constitute the property of the other in accordance
with the terms of this Agreement, such cash or cash equivalents as shall be the
property of the other party to this Agreement shall be held by its recipient in
trust for the other, and further shall be accounted for and paid over to the
other party promptly after its receipt;
(c) any and all Excluded Records (and any and all of Sellers'
books of account (except as same relate to the Accounts), corporate seal(s),
charter, by-laws, minute books and other corporate governance documents);
(d) any Designated Leases;
(e) any Contracts not identified in Schedule 2.2(b)
hereof, and any Contracts identified in Schedule
2.2(b) hereof not accepted by Purchaser in the time
period provided in Section 2.2(b) hereof;
(f) any income and corporate Taxes recoverable or
refundable;
(g) any life insurance policies and proceeds thereof;
provided; however, any such policies or proceeds
which relate to Transferred Employees post-Closing
shall constitute an Acquired Asset(s) hereunder;
(h) all sums owing to either of the Sellers by any
affiliate or stockholder of any of the Sellers; and
(i) any governmental rebates or refunds due or which may
become due to either of the Sellers pursuant to any
federal or provincial sales, customs or excise tax
legislation.
2.4 Assumption/Payment of Certain Obligations. At Closing, Purchaser
will assume all of Sellers' rights and obligations in respect of Sellers'
purchase orders for goods and other merchandise ordered prior to Closing, but
not paid for or delivered prior to the Closing Date ("On Order Goods"), solely
to the extent such On Order Goods are identified in Schedule 2.4 hereof to be
made a part of this Agreement at Closing; provided, however, no component of the
On Order Goods shall be duplicative of any component of the In-Transit Goods.
2.5 Additional Assumed Obligations. At the Closing, except as provided
in Section 2.4, Section 2.5 and/or in Section 2.6 hereof, Purchaser shall
assume, and agree to pay, perform, fulfill and discharge the following
additional obligations of the Sellers:
(a) those obligations which are required to be performed after
the Closing Date under the following: (i)the Assumed Leases; and (ii) the
Assumed Contracts; provided, however, Purchaser shall pay any amounts due to any
and all non-Seller parties to any Assumed Contract or Assumed Lease in respect
of any cure amount ("Cure Amount") under section 365(b) of the Bankruptcy Code
or otherwise; provided, however, Purchaser's obligation to pay any amount in
respect of the Cure Amount shall be limited in all respects by the Assumed
Lease/Contract Cap;
(b) those obligations relating to accrued but unused vacation
of Transferred Employees of Sellers (or any of them) hired by Purchaser at
Closing; provided, however, following the Closing, subject to Section 7.2
hereof, Purchaser may establish such policies and procedures in respect of
Transferred Employees' vacation and other employee-related policies post-Closing
as Purchaser shall deem appropriate, in its discretion; and
(c) those obligations which are required to be performed after
the Closing Date in respect of the On Order Goods.
The amounts set forth in this Section 2.5(a) - (c) are collectively
defined herein as the "Assumed Obligations").
2.6 No Other Liabilities Assumed. Sellers acknowledge and agree that
pursuant to the terms and provisions of this Agreement and under any Lease or
Contract, Purchaser will not assume any obligation of Sellers, other than the
Assumed Obligations. In furtherance and not in limitation of the foregoing,
neither Purchaser nor any of its affiliates shall assume, and shall not be
deemed to have assumed, other than as specifically set forth in Article II
hereof, any debt, claim, obligation or other liability of Sellers or any of its
affiliates whatsoever, including, but not limited to, (i) any Environmental
Costs and Liabilities for any act, omission, condition or event caused by or
attributable to Sellers to the extent occurring or existing prior to the Closing
Date, including without limitation all Environmental Costs and Liabilities
relating in any manner to Sellers' direct or indirect handling, transportation
or disposal of any Contaminants, (ii) any of Sellers' liabilities in respect of
Taxes, except as expressly provided in Section 11.11(b) hereof, (iii) any
investment banking, financial advisory, brokers' or finders' fees arising by
reason of Sellers' dealings with brokers or other third parties, or other
liability of Sellers for costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement, (iv) any Indebtedness, except for
the Assumed Obligations, (v) any obligations or liabilities for Sellers'
Employees, including severance, termination pay, pension, profit sharing or any
other employee benefit plans, compensation or retiree medical and other benefits
and obligations, except to the extent otherwise provided in Sections 2.5(b) and
7.2 hereof, or any obligation, claim or amount under the Workers Adjustment and
Retraining Notification Act ("WARN Act"), (vi) any obligation or liability
arising as a result of or whose existence is a breach of Sellers'
representations, warranties, agreements or covenants contained in this Agreement
or otherwise, (vii) any Excluded Assets, (viii) any Affiliate Obligations, (ix)
any liability subject to compromise, except to the extent same constitutes an
Assumed Obligation, and (x) rebates, allowances, deductions and/or price
discrepancies relating in any manner to products sold in pursuit of the Business
prior to the Closing Date (collectively, "Unassumed Liabilities"). Disclosure of
any obligation or liability on any schedule to this Agreement shall not create
an Assumed Obligation or other liability of Purchaser, except where such
disclosed obligation has been expressly assumed by Purchaser as an Assumed
Obligation in accordance with the provisions of Article II hereof.
2.7 Certain Limitations on Purchaser's Right to Acquire. Sellers and
Purchaser acknowledge that Sellers are currently in possession of certain
property under one or more Leases or Contracts, of which Sellers may actually be
the owner, as distinguished from lessee, under certain principles of law or
equity, and which property Purchaser may wish to have Sellers treat as Acquired
Assets (such property is hereinafter referred to as "Disputed Status Property").
Purchaser may elect to have Sellers sell, transfer, and assign to Purchaser all
of Sellers' right, title and interest in and to such Disputed Status Property;
provided, that Purchaser shall make such election in writing delivered to
Sellers prior to the Closing; provided, further, notwithstanding any contrary
provision of this Agreement or any document executed pursuant hereto, Purchaser
shall not have the right, to the extent the same are held by Sellers (or either
of them) under any Lease, Store Lease or Contract not assumed by Purchaser
pursuant to Section 2.5 above, to acquire (i) any furniture, fixture, machinery,
equipment or other item of tangible personal property which constitutes Disputed
Status Property, or (ii) any furniture, fixture, machinery, equipment or other
item of tangible personal property which does not constitute Disputed Status
Property, unless in each case (and only if) Purchaser arranges to acquire such
property in a manner which results in the Sellers being released and discharged
(in a manner reasonably satisfactory to Sellers) from any and all further cost,
expense or liability relating to such item (whether such costs, expenses and
liability relate to or arise during the period prior to the Closing or after the
Closing).
ARTICLE III
PURCHASE PRICE AND PAYMENT
--------------------------
3.1 Purchase Price. The aggregate purchase price for the Acquired
Assets (the "Purchase Price") shall be comprised of the items set forth in
subsections (a) - (d) below:
(a) Purchaser shall pay Sellers (or their designee), upon such
schedule and such terms as are set forth in Section 3.2 hereof, the sum of
$31,700,000.00; provided, however, in the event that the Aggregate Retail Price
of the Merchandise Inventory for a Business Division at Closing is less than the
Aggregate Retail Price Merchandise Inventory Target for the relevant Business
Division set forth in Schedule 3.1(a) hereof, Purchaser shall be entitled to a
reduction in the Purchase Price equal to the product of (i) the difference
between the applicable Aggregate Retail Price Merchandise Inventory Target for
such Business Division and the Aggregate Retail Price of the Merchandise
Inventory for such Business Division, multiplied by (ii) the following
cost-to-retail adjustment factor, as applicable: (a) Repp Stores -- 37%, and (b)
Repp By Mail -- 45%; provided, further, in the event that the Aggregate Retail
Price of the Merchandise Inventory for a Business Division at Closing is greater
than the Aggregate Retail Price Merchandise Inventory Target for such Business
Division set forth in Schedule 3.1(a) hereof, the Sellers shall be entitled to
an enhancement in the Purchase Price equal to the product of (i) the difference
between the applicable Aggregate Retail Price Merchandise Inventory Target for
such Business Division and the Aggregate Retail Price of the Merchandise
Inventory for such Business Division, multiplied by (ii) the following
cost-to-retail adjustment factor, as applicable: (a) Repp Stores -- 37%, and (b)
Repp By Mail -- 45%. For purposes of this Agreement, the Merchandise Inventory
at Closing of the Repp Stores and Repp By Mail components of the Business shall
(i) include, but not be limited to, any Merchandise Inventory in any Stores,
distribution center, warehouse, or under the custody and control of any third
party (including, but not limited to, warehousemen, customs warehouse or broker)
allocable or otherwise attributable to the Business, and (ii) be calculated
based upon the Aggregate Retail Price of any and all Merchandise Inventory of
the Repp Stores or Repp By Mail, as the case may be, on hand as at the Closing
Date, calculated in accordance with the Inventory Procedures set forth in
Section 3.3(a) hereof; provided, however, Purchaser and Sellers agree that for
purposes of calculating the Aggregate Retail Price of the Merchandise Inventory,
the Retail Price of any Merchandise Inventory which constitutes Repp Canada
Assets shall be converted into Dollars following the conduct of the Physical
Inventory contemplated by Section 3.3(a) hereof;
(b) An amount equal to the lower of (i) the product of (x) the
Retail Price of any In-Transit Goods multiplied by (y) the relevant
cost-to-retail adjustment factors for the relevant Business Division as set
forth in Section 3.1(a) above, as applicable or (ii) the actual landed invoice
cost (inclusive of any freight charges and customs duties) of such merchandise
inventory; provided, however, Sellers and Purchaser shall at the Closing agree
on the amount and identity of all In-Transit Goods as at the Closing Date;
provided, further, no component of the In-Transit Goods shall be duplicative of
any component of the On Order Goods; provided, further, that Sellers shall not
be entitled to any increase in the Purchase Price in respect of In-Transit Goods
to the extent such items comprise a component of and are included in the
Projected Aggregate Retail Price of the Merchandise Inventory upon which
Purchaser and Sellers shall determine the amount of the Purchase Price payable
by Purchaser at Closing;
(c) In accordance with Section 2.5 hereof, Purchaser's
assumption of the Assumed Obligations; and
(d) An amount equal to the aggregate distribution to be paid
on the Allowed Claim of any lessor under a Designated Lease under a plan of
reorganization or liquidation confirmed by the Bankruptcy Court in the Chapter
11 Cases in respect of any rejection damage claim arising under sections 365(a)
and 502(b)(6) of the Bankruptcy Code following the rejection of any such
Designated Lease by Edison pursuant to order of the Bankruptcy Court (the
"Rejection Claim Reimbursement"). Purchaser shall pay such amounts as may become
due in respect of the Rejection Claim Reimbursement at such distribution date(s)
as shall be designated in any confirmed plan in the Chapter 11 Cases; provided,
however, in the event Purchaser (or any Permitted Designee thereof, as
applicable) is able to secure the agreement of any non-Seller party to a
Contract or Lease to accept an amount less than the amount required to be paid
by Purchaser under this Section 3.1(d), Purchaser shall pay the amount required
under this Section 3.1(d) or such lesser amount as it shall negotiate with the
non-Seller party, at its sole election; provided, further, the Sale Order shall
provide that (i) Purchaser (or any Permitted Designee thereof, as the case may
be) shall have standing from and after the Closing to object to the allowance of
any rejection damage claim filed or asserted by any lessor under a Designated
Lease and (ii) Sellers may not compromise or settle any rejection damage claim
post-Closing without the prior written consent of Purchaser (or the relevant
Permitted Designees thereof); however, if Sellers propose in good faith a
compromise or settlement of any such rejection damage claim and Purchaser
declines to provide its consent thereto, Sellers shall have no further
obligation to prosecute any objection to the allowance of such claim, and
Purchaser shall thereafter bear all costs and responsibilities associated with
any objection to such claim.
3.2 Payment of Purchase Price; Escrow. (a) At Closing, Purchaser shall
pay Sellers by wire transfer of immediately available funds an amount in respect
of the Purchase Price equal to (i) $31,700,000; provided, however, (a) in the
event the projected Closing Aggregate Retail Price of the Merchandise Inventory
("Projected Closing Aggregate Retail Price") for the Repp Stores Business
Division on the Closing Date, as same is reflected in Sellers' books and records
(exclusive of In-Transit Goods (which shall be counted and paid for by Purchaser
as otherwise provided in this Agreement) and any shrink reserves), is either
greater than or less than, as the case may be, the Aggregate Retail Price
Merchandise Inventory Target as set forth in Schedule 3.1(a) hereto applicable
to such Business Division, the amount payable by Purchaser at Closing in respect
of the Purchase Price shall either be increased or reduced, as the case may be,
by an amount equal to the differential between (x) the Projected Closing
Aggregate Retail Price of the Merchandise Inventory for such Business Division
and the relevant Aggregate Retail Price Merchandise Inventory Target for such
Business Division, multiplied by 0.37, and (b) in the event the Projected
Closing Aggregate Retail Price of the Merchandise Inventory for the Repp by Mail
Business Division is either greater than or less than, as the case may be, the
Aggregate Retail Price Merchandise Inventory Target as set forth in Schedule
3.1(a) hereto applicable to such Business Division, the amount payable by
Purchaser at Closing in respect of the Purchase Price shall either be increased
or decreased, as the case may be, by an amount equal to the differential between
(x) the Projected Closing Aggregate Retail Price of the Merchandise Inventory
for such Business Division and (y) the relevant Aggregate Retail Price
Merchandise Inventory Target for such Business Division, multiplied by 0.45;
less (ii) the sum of (x) the H-S-R Approvals Amount and (y) the aggregate amount
of any deposits or other monies received by Sellers prior to the Closing Date in
respect of any layaway, repair and/or special order merchandise that is included
in Merchandise Inventory subject to this Agreement. The Purchase Price shall be
further adjusted at Closing in respect of the Accounts Amount, the Store Cash
Adjustment Amount, and the Deposit (together with any interest earned thereon),
as shall be applicable hereunder. Sellers and Purchaser agree that they shall
jointly direct the holder of the Deposit to deliver same to the Sellers (or as
otherwise agreed by Purchaser and Sellers) at Closing. Sellers shall deliver to
Purchaser a good faith estimate of the Projected Closing Aggregate Retail Price
of the Merchandise Inventory both of the Repp Stores and Repp By Mail Business
Divisions not later than two (2) Business Days prior to the Closing Date.
Sellers and Purchaser agree that on the Closing Date $5,000,000.00 of the
Purchase Price shall be deposited into escrow with the Escrow Agent under the
terms of the Escrow Agreement (the "Escrow Amount"). The Escrow Agreement shall
provide, among other things, that the Escrow Amount shall be made available to
satisfy such claims as may be asserted by Purchaser as provided for herein and
in the Escrow Agreement with regard to (a) any adjustment(s) to the Purchase
Price in accordance with the terms of this Agreement and (b) any final and
binding judgments against Purchaser post-Closing for any matter or claim for
which Purchaser is entitled to indemnification under Section 3.8 hereof.
Purchaser and Sellers agree that the escrow arrangement created by the Escrow
Agreement shall have a term of nine (9) months from the Closing Date, unless a
shorter time is hereafter agreed upon in writing by Sellers and Purchasers. The
Escrow Agreement shall further provide that in the event there is any claim(s)
threatened or asserted (with proof thereof reasonably satisfactory to Sellers
having been delivered to Sellers) by any person against Purchaser at the
expiration of the term of the Escrow Agreement, which claim(s) has not yet
matured into a final binding judgment against Purchaser at such time, the escrow
created by the Escrow Agreement and this Agreement shall be extended for a
period of time and in such amount as shall be agreed by Sellers and Purchaser;
provided, however, in the event Purchaser and Sellers are unable to agree on
either the amount or duration of the extension of the escrow created hereby and
the Escrow Agreement, such dispute shall be resolved by the Bankruptcy Court (or
if said court is without jurisdiction, through binding arbitration in the manner
provided in this Agreement). The Escrow Agreement shall further provide that the
Escrow Agent shall disburse some or all of the Escrow Amount to Sellers and/or
Purchaser, as their interests therein may appear, and as may be agreed by them,
after the Purchase Price adjustment for the reconciliation of the Aggregate
Retail Price of the Merchandise Inventory has been made and agreed upon, such
that the amount of the Escrow Amount then remaining on deposit with the Escrow
Agent shall be fixed at the amount of $1,000,000.00 (with any excess being paid
to Sellers and any shortage being paid by Sellers); provided, however, Purchaser
and Sellers shall use their reasonable good faith efforts to reconcile and agree
on the Aggregate Retail Price of the Merchandise Inventory, as well as any
adjustments to the Purchase Price required as a result thereof, within
forty-five (45) days of the completion of the last Physical Inventory conducted
hereunder; provided, further, that Sellers shall not be obligated to replenish
the Escrow Amount to the $1,000,000.00 threshold for any payments made to
Purchaser from the Escrow Amount as a result of claims other than those made
pursuant to the reconciliation of the Aggregate Retail Price of the Merchandise
Inventory made there against by Purchaser in accordance with this Agreement and
the Escrow Agreement. In addition to the Escrow Amount described above, at
Closing Purchaser shall deposit with the Escrow Agent the additional sum of
$200,000 in respect of the Assumed Lease/Contract Cap ("Additional Escrow
Amount"); provided, Purchaser shall cooperate with Sellers in giving such
instructions as may be required to cause the Escrow Agent to disburse from and
out of the Additional Escrow Amount such amounts as are necessary to enable
Sellers timely to pay any Cure Amount in accordance with the terms and
provisions of the Sale Order.
(b) On or before the date that is fifteen (15) days after
Purchaser delivers to Sellers the written reconciliation of the In-Transit
Physical Inventory required under Section 3.3 hereof, Purchaser shall pay
Sellers the amount required under Section 3.1(b) hereof.
3.3 Physical Count and Valuation. (a) On or before Closing, Sellers
shall furnish Purchaser with a schedule identifying the location of all Acquired
Assets, including, but not limited to, Merchandise Inventory (inclusive of
In-Transit Goods, if any). On or before the Closing Date, Purchaser and Sellers
shall have jointly engaged and retained RGIS ("Inventory Service") to conduct
and complete a physical count and inspection of the Merchandise Inventory
located in (i) the Repp Stores and any Repp Stores warehouse or distribution
center, and (ii) Repp By Mail, including, but not limited to the Repp Catalogue
Warehouse, on or before seven (7) days after the Closing Date (excluding the
Closing Date for purposes hereof) (the "Physical Inventory"). The instructions
and guidelines to be abided by Purchaser, Sellers and the Inventory Service in
the conduct of the Physical Inventory ("Inventory Procedures") shall be agreed
upon Sellers and Purchaser prior to Closing, and upon such agreement shall be
attached as Exhibit 3.3 hereto. Purchaser and Sellers shall each be permitted,
at their own expense, to have representatives present for the taking of such
Physical Inventory. Based on such Physical Inventory, and as otherwise provided
in Section 3.3(b) hereof, Purchaser shall reasonably determine the amount of the
Aggregate Retail Price of the Merchandise Inventory as of the Closing Date,
subject to Seller s' reasonable approval and taking into account the results of
such Physical Inventory. The parties hereto agree that Sellers and Purchaser
shall each be responsible for one-half of the Inventory Service s' invoice(s)
for conducting the Physical Inventory and the calculation of the Aggregate
Retail Price of the Merchandise Inventory. Post-Closing, Purchaser shall, at
Purchaser's expense, perform a physical count and inspection of any In-Transit
Goods upon their arrival at either the Repp Stores or Repp By Mail Business
Division, as the case may be, utilizing the Inventory Procedures set forth in
Exhibit 3.3 hereof (the "In-Transit Physical Inventory"); provided, however, the
In-Transit Physical Inventory shall be completed by Purchaser within five (5)
Business Days following the receipt of any such In-Transit Goods. Within ten
(10) days of the completion of the In-Transit Physical Inventory by Purchaser,
Purchaser shall furnish Sellers with a written reconciliation of the results of
the In-Transit Physical Inventory. Purchaser agrees that it shall not sell any
of the In-Transit Goods until after the In-Transit Physical Inventory with
respect thereto has been completed.
(b) In the event the Physical Inventory is conducted at any
Repp Store or Repp By Mail location on a date that is after the Closing Date,
then for the period from the Closing Date until the completion of the Physical
Inventory at the relevant location, Purchaser shall keep (i) a strict count of
gross register receipts less applicable sales Taxes plus 1.75% ("Gross Rings")
and (ii) cash reports of all sales of Merchandise Inventory prior to the
completion of the Physical Inventory applicable thereto. Register receipts shall
show for each item of Merchandise Inventory sold the Retail Price for such item
and the markdown or discount, if any, specifically granted by Purchaser in
connection with such sale. All such reports shall be made available by Purchaser
to Sellers during Purchaser's regular business hours upon reasonable written
notice from Sellers to Purchaser.
3.4 Post-Closing Purchase Price Adjustment. Upon determination of the
Aggregate Retail Price of the Merchandise Inventory in accordance with Section
3.3 hereof (in addition to the adjustments provided for in Section 3.5 below),
the Purchase Price (as adjusted at the Closing) shall be further adjusted (i) as
set forth in Section 3.1 hereof, and (ii) to the extent necessary to reimburse
Purchaser for the differential cost to Purchaser of its having honored within
ninety (90) days after the Closing Date any store merchandise credit or gift
certificate issued by Sellers to any customer of the Business pre-Closing.
Purchaser and Sellers shall prepare a mutually acceptable written statement as
soon as practicable after the Closing setting forth the calculation of any such
Purchase Price adjustments. If an increase in the Purchase Price is required
hereunder, the amount of such increase shall promptly be paid by Purchaser to
Sellers by wire transfer in immediately available good funds. In the event there
is required a decrease in the Purchase Price, Purchaser and Sellers shall direct
the Escrow Agent to pay the amount of such decrease to Purchaser from the Escrow
Amount. In the event such decrease in the Purchase Price exceeds the Escrow
Amount, Sellers shall promptly pay to Purchaser by wire transfer in immediately
available, funds an amount equal to the amount of such excess.
3.5 Prorations. To the extent that any of the items listed below in
this Section 3.5 are paid by Sellers prior to the Closing or are payable by
Purchaser or the Sellers after the Closing Date, such items shall be apportioned
as of the Closing Date such that Sellers shall be liable for (and shall
reimburse Purchaser to the extent that Purchaser shall pay) that portion of such
of the foregoing relating or attributable to periods prior to the Closing Date
and Purchaser shall be liable (and shall reimburse Sellers to the extent Sellers
shall have paid) that portion of the foregoing relating or attributable to,
periods on or after the Closing Date. Should any amounts to be prorated not have
been finally determined on the Closing Date, a mutually satisfactory estimate of
such amounts made on the basis of Sellers' records shall be used as a basis for
settlement at Closing, and the amount finally determined will be prorated as of
the Closing Date and appropriate settlement made as soon as practicable after
such final determination. If as a result of any such settlement in accordance
with the preceding sentence Purchaser is owed an amount from Sellers, Purchaser
shall have the right in its sole discretion to be reimbursed for such amount out
of the Escrow Amount. Such prorated items shall include: (a) personal property,
real estate, retail sales, occupancy and water Taxes, if any, on or with respect
to the Business, the Acquired Assets and/or the Assumed Obligations; (b) Taxes,
rent and other items payable by Sellers under any Assumed Lease, Assumed
Contract or other contractual obligation to be assigned to or assumed by
Purchaser hereunder, except as provided in Section 2.5 hereof; (c) the amount of
sewer rents and charges for water, telephone, electricity and other utilities
and fuel; (d) payroll expenses related to employees of Sellers hired by
Purchaser at Closing; and (e) insurance premiums of any policies acquired by
Purchaser at Closing. Sellers and Purchaser agree to furnish each other with
such documents and other records as each party reasonably requests in order to
confirm all adjustment and proration calculations made pursuant to this Section
3.5. The proration and adjustment process provided in this Section 3.5 shall
also include an adjustment of cash received by Purchaser or Sellers (as the case
may be) to which the other is entitled pursuant to the provisions of Sections
2.1 and 2.3 above, but shall not include an adjustment for security and other
deposits heretofore paid by Sellers to third parties.
3.6 Further Assurances From time to time after the Closing and without
further consideration, (a) Sellers, upon the request of Purchaser and at
Sellers' expense, shall execute and deliver such documents and instruments of
conveyance and transfer as Purchaser may reasonably request in order to
consummate more effectively the purchase and sale of the Acquired Assets as
contemplated hereby and to vest in Purchaser title to the Acquired Assets
transferred hereunder, provided that (i) Sellers shall not be required to
execute or deliver any document or instrument pursuant to this Section 3.6 which
includes any provision(s) which impose financial obligations upon the Sellers
which are greater than those imposed upon Sellers under the other provisions of
this Agreement or the documents executed pursuant hereto and (ii) in no event
shall Sellers be required to incur any material cost or expense in the
performance of its obligations under this Section 3.6 (it being understood that
Purchaser shall in any event be entitled to require Sellers to take such action
as Sellers would otherwise be required to take pursuant to this Section 3.6 but
for the cost thereof by advancing to Sellers the amount Sellers reasonably
anticipate incurring in excess of immaterial costs and expenses of taking such
action), and (b) Purchaser, upon the request of Sellers and at Purchaser's
expense, shall execute and deliver such documents and instruments of assumption
as Sellers may reasonably request in order to confirm Purchaser's liability for
the obligations under the Assumed Obligations or otherwise more fully consummate
the transactions contemplated by this Agreement; provided that (i) Purchaser
shall not be required to execute or deliver any document or instrument pursuant
to this Section 3.6 which includes any provision(s) which impose obligations
upon the Purchaser which are greater than those imposed upon Purchaser under the
other provisions of this Agreement or the documents executed pursuant hereto,
and (ii) in no event shall Purchaser be required to incur any material cost or
expense in the performance of its obligations under this Section 3.6 (it being
understood that notwithstanding the foregoing, Sellers shall in any event be
entitled to require Purchaser to take such action as Purchaser would otherwise
be required to take pursuant to this Section 3.6 but for the cost thereof by
advancing to Purchaser the amounts Purchaser reasonably anticipates incurring in
excess of immaterial costs and expenses in taking the action).
3.7 Diligent Efforts to Finalize All Adjustments. Sellers and Purchaser
hereby agree to use their diligent, good faith efforts to effectuate and
finalize all Purchase Price and other adjustments contemplated by this Article
III within ninety (90) days following the Closing Date. In the event that all
such adjustments have not been finalized and effectuated by the expiration of
such ninety (90) day period, either party shall have the right, upon written
notice to the other(s), to submit the determination of the remaining adjustments
to the Bankruptcy Court for determination (on shortened time if the Bankruptcy
Court will hear the matter on such basis); provided, however, in the event it is
determined that the Bankruptcy Court lacks jurisdiction to resolve disputes
relating to the Repp Canada Assets, then the parties agree that any such dispute
shall be submitted to binding arbitration by an arbitrator to be mutually
acceptable to Purchaser and Sellers or, if an arbitrator cannot be agreed upon,
an arbitrator appointed by a court with jurisdiction over the matter.
3.8 Indemnification. Sellers jointly and severally hereby indemnify and
hold Purchaser (and any Permitted Designee thereof), its officers, directors,
shareholders, affiliates and employees (collectively, "Representatives")
harmless from, against and in respect of (and shall on demand, following
submission of reasonable evidence thereof, reimburse Purchaser or its
Representatives for) any and all loss, liability, cost, expense or damage
suffered or incurred by Purchaser in respect of or in connection with (i) any
liabilities or obligations of Sellers not expressly assumed by Purchaser under
this Agreement, and (ii) any breach by Sellers of the representations,
warranties or agreements contained herein. The Purchaser hereby waives
compliance by the Sellers with the provisions of the Bulk Sales Act (Ontario) or
similar applicable legislation of any other province of Canada (the "Bulk Sales
Act"), and in consideration hereof, the Sellers agree to indemnify the Purchaser
from any claims that may be asserted against it by any creditor of the Sellers,
or any other person, firm or corporation, by reason of the Purchaser not having
required the Sellers to comply with the Bulk Sales Act or by reason of the
waiver aforesaid, provided that the Sellers shall have no liability pursuant to
this Section 3.8 for any claims with respect to any debts or obligations which
were agreed to be assumed by the Purchaser pursuant to this Agreement or any
Ancillary Documents delivered pursuant hereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Sellers represent and warrant to Purchaser as of the date of this
Agreement and the Closing Date, as follows:
4.1 Due Incorporation; Good Standing Sellers are corporations duly
incorporated under the laws of the states or provinces of their respective
incorporation, and are in good standing thereunder as of the date hereof and as
of the Closing.
4.2 Consents. To Sellers' actual knowledge, except for consents,
approvals or authorizations of, or filings with, the Bankruptcy Court, the H-S-R
Approvals, and any notices or approvals required in connection with the transfer
of the Repp Canada Assets, no notice to, filing with, authorization of,
exemption by, or consent of any governmental authority is required in order for
Sellers to consummate the transactions contemplated hereby.
4.3 Title to and Condition of Properties. At and as of the Closing
Date, Sellers will have good and marketable title to, and will have the right to
sell, convey, transfer, assign and deliver to Purchaser the Acquired Assets,
including, but not limited to, the Leases, the Assumed Contracts and the
Inventory on hand at each of the locations from and at which the Business is
conducted and operated. Subject to any consents required with respect to the
transfer of the Repp Canada Assets, at and as of the Closing Date, the Bill of
Sale and the Assignment and Assumption will be effective to vest in Purchaser
good and valid record and marketable title to the Acquired Assets, including,
but not limited to, the Leases, the Assumed Contracts and all of the Inventory
on hand at each of the locations from and at which the Business is conducted and
operated. To Sellers' actual knowledge, at and as of the Closing Date, Sellers
will have good and marketable title to, and will have the right to sell, convey,
transfer, assign and deliver to Purchaser its interest in the Intellectual
Property.
4.4 Contracts. To Seller's actual knowledge, incorporated into Schedule
2.2(b) hereof is a true and complete list of all material Contracts (i.e.,
contracts under which Sellers would be required to pay $10,000 or more annually
to another party) as of the date hereof to which a Seller is party and which
relates exclusively to the Business, or to which any of the Acquired Assets or
Assumed Obligations are subject.
4.5 Brokers. Sellers have incurred no liability to any broker, finder
or agent with respect to the payment of any commission regarding the
consummation of the transactions contemplated hereby, except for certain fees
and commissions payable to Gruppo, Levey & Co., Sellers' financial advisor, the
payment of which shall be the sole responsibility of Sellers.
4.6 Accounts. To Sellers' actual knowledge, all of Sellers' Accounts
have been made in the Ordinary Course of Business.
4.7 Additional Representations and Warranties of Sellers. (a) Sellers
have maintained their pricing files relating exclusively to the Business in the
Ordinary Course of Business, and prices charged to the public for goods (whether
in-Stores, by advertisement or otherwise) are the same in all material respects
as set forth in such pricing files for the periods indicated therein. All
pricing files and records requested by Purchaser relative to the Merchandise
Inventory have been and will continue to be made available to Purchaser. All
such pricing files and records requested by Purchaser and agreed to be supplied
by Sellers are and shall continue to be true and accurate in all material
respects as to the actual cost to Sellers for purchasing the goods referred to
therein and as to the selling price to the public for such goods as of the dates
and for the periods indicated therein.
(b) Sellers have not since March 31, 1999, and shall not up to
the Closing Date, (i) marked up or raised the price of any items of Merchandise
Inventory (except for price/cost adjustments or chain wide price adjustments in
the Ordinary Course of Business), or removed or altered any tickets or any
indicia of clearance or reduced price merchandise or (ii) conducted any
non-ordinary course promotional activity.
(c) Sellers shall ticket or mark all items of Merchandise
Inventory received at the Repp Stores or at Repp By Mail after the date hereof
but prior to the Closing Date in a manner consistent with similar inventory
located at the Repp Stores or at Repp By Mail and in accordance with Sellers'
historic practices and policies relative to pricing and marking of inventory.
(d) All point of sale activity at the Repp Stores or at Repp
By Mail has occurred and will occur up to the Closing Date in the Ordinary
Course of Business.
(e) To the best of Sellers' knowledge, all Merchandise
Inventory is in compliance in all material respects with all applicable U.S. and
Canadian federal, state, province, or local product safety laws, rules and
standards.
(f) Sellers have paid and will continue to pay through the
Closing Date, (i) all self-insured or Sellers funded employee benefit programs
for Employees of the Business, including health and medical benefits and
insurance and all proper claims made in accordance with such programs, (ii) all
casualty, liability, workers' compensation and other insurance premiums, and
(iii) all applicable Taxes.
(g) Sellers have not and shall not through and including the
Closing Date intentionally take any actions to increase the cost of operating
the Business, including, without limitation, increasing salaries or other
amounts payable to Employees, except to the extent such action is in the
Ordinary Course of Business.
(h) Sellers have and shall continue through and including the
Closing Date to operate the Business in the Ordinary Course of Business.
(i) Sellers are not a party(ies) to any collective bargaining
agreement covering any of the Employees of the Business and no labor union
represents any such Employees.
(j) Repp Canada is not a non-resident of Canada within the
meaning of the Income Tax Act (Canada).
4.8 As of the date of the execution and delivery hereof and as at the
Closing, Sellers' books and records fairly and accurately reflect and represent
(i) the Retail Price of the Merchandise Inventory in the Repp Stores and in Repp
By Mail, and (ii) the sales of Merchandise Inventory in the Repp Stores and Repp
By Mail.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
5.1 Purchaser represents and warrants to Sellers as follows:
(a) Organization, Standing and Power. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of its organization. Purchaser has all requisite corporate power
and authority to own, lease and operate its properties, to carry on its business
as now being conducted and to execute, deliver and perform this Agreement and
all writings relating hereto, and Purchaser's execution and delivery of this
Agreement has been duly authorized by all requisite corporate action. This
Agreement has been validly executed by Purchaser and constitutes the valid and
binding obligation of Purchaser enforceable in accordance with its terms,
subject to the satisfaction of the conditions contained in Articles VI and VIII
hereof.
(b) No Conflicts or Violations. The execution and delivery of
this Agreement, the consummation of the transactions herein contemplated, and
the performance of, fulfillment of an compliance with the terms and conditions
hereof by Purchaser do not and will not: (i) conflict with or result in a breach
of the articles of incorporation or by-laws of Purchaser; (ii) violate any
statute, law, rule or regulation, or any order, writ, injunction or decree of
any court or governmental authority; or (iii) violate or conflict with or
constitute a default under any agreement, instrument or writing of any nature to
which Purchaser is a party or by which Purchaser or its assets or properties may
be bound.
(c) Consents. Except as concerns such filings and approvals as
may be required under the Hart-Scott-Rodino Antitrust Improvements Act ("H-S-R
Approvals"), as applicable, no notice to, filing with, authorization of,
exemption by, or consent of any authority is required in order for Purchaser to
consummate the transactions contemplated hereby.
(d) Brokers. Purchaser has incurred no liability to any
broker, finder or agent with respect to the payment of any commission regarding
the consummation of the transactions contemplated hereby.
5.2 "AS IS" Purchase. Purchaser hereby acknowledges and agrees that,
except as otherwise expressly provided in Article IV above, (i) Sellers make no
representation or warranties whatsoever, express or implied, with respect to any
matter relating to the Acquired Assets, and (ii) Purchaser accepts the Acquired
Assets "AS IS," "WHERE IS," and "WITH ALL FAULTS."
ARTICLE VI
COVENANTS OF SELLERS AND/OR PURCHASER
-------------------------------------
6.1 Consents and Approvals. (a) Subject to the provisions of Section
3.6 above and subsection (b) below, Sellers and Purchaser shall each use their
commercially reasonable best efforts (i) to obtain all consents and approvals,
as reasonably requested by Purchaser, to more effectively consummate the
purchase and sale of the Acquired Assets and the assumption and assignment of
the Assumed Contracts, Assumed Leases, and Assumed Obligations, as applicable,
together with any other necessary consents and approvals to consummate the
transactions contemplated hereby, (ii) to make, as reasonably requested by
Purchaser, all filings, applications, statements and reports to all authorities
which are required to be made prior to the Closing Date by or on behalf of
Sellers or any of their affiliates pursuant to any applicable Regulation in
connection with this Agreement and the transactions contemplated hereby, (iii)
to obtain, as reasonably requested by Purchaser, all required consents and
approvals (if any) to assign and transfer the Permits to Purchaser at Closing
and, to the extent that one or more of the Permits are not transferable, to
obtain replacements therefor; (iv) to obtain, to the extent required, all
consents to the sale, transfer and/or assignment of the Repp Canada Assets to
Purchaser (or any designee thereof), including, but not limited to any Repp
Store Lease associated with the conduct of the Business in Canada; and (v) to
obtain, with respect to the Repp Canada Assets, from the lessors of the Repp
Store Leases to be assigned to the Purchaser (or any Permitted Designee thereof)
and from the other parties to the Contracts associated with the conduct of the
Business in Canada, an estoppel certificate stating that such Repp Store Lease
or Contract is in good standing, unmodified, and in full force and effect, that
all rent and other amounts due thereunder are current and that no default of the
Sellers exists thereunder at the Closing Date; provided that Sellers shall not
be required to make any filing in connection with the transfer of a Permit or
take any other action required by this sentence unless Purchaser advances any
and all fees and other charges imposed by any applicable authority or other
Person in connection with such filing, transfer or other requested action.
Subject to the provisions of Section 3.6 and subsection (b) below, in the event
that certain Permits are not transferable or replacements therefor are not
obtainable on or before the Closing, but such Permits are transferable or
replacements therefor are obtainable after the Closing, Sellers shall continue
to use such reasonable efforts in cooperation with Purchaser after the Closing
as may be required to obtain all required consents and approvals to transfer, or
obtain replacements for, such Permits after Closing and shall do all things
reasonably necessary to give Purchaser the benefits which would be obtained
under such Permits.
(b) Purchaser and Sellers shall each pay one-half of the
filing fees associated with obtaining the H-S-R Approvals, to the extent such
approvals and/or consents are required under Section 4.2 and Section 5.1(c)
hereof. Sellers' one-half share of the filing fees associated with the H-S-R
Approvals, and deducted from the Purchase Price at Closing pursuant to Section
3.2 hereof, shall be referred to herein as the "H-S-R- Approvals Amounts."
6.2 Noncompetition and Confidentiality.
(a) Sellers acknowledge they have a special knowledge of the
Business and the proprietary and confidential information included in the
Acquired Assets, and that Purchaser is making a considerable investment in the
Acquired Assets from which investment Sellers have benefited. In consideration
of this Agreement and such investment and benefit, and as an inducement to
Purchaser to enter into this Agreement and consummate the transactions
contemplated herein, Sellers agree that, for a period of three (3) years after
the Closing Date, (i) they will not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management, operation or
control of, otherwise engage in the Business; or have any financial interest in,
or aid or assist anyone else in the conduct of, any business that competes with
the Business as conducted on the date hereof (a "Competitive Business");
provided, however, that Sellers may own less than 5% of any outstanding class of
publicly traded securities of an issuer that is a Competitive Business, and (ii)
they will not, directly or indirectly in one or a series of transactions,
disclose in violation of this Agreement to any person (other than any of
Sellers' officers, directors, employees, advisors or affiliates), or use or
otherwise exploit for their own benefit or for the benefit of anyone other than
Purchaser, Confidential Information (as defined below) and Sellers shall use
their reasonable efforts to direct all persons or entities to whom any
Confidential Information has been disclosed without violation hereunder to
observe the terms and conditions set forth herein as though each such person or
entity was bound hereby. "Confidential Information" means any trade secret,
confidential study, data, calculations, software storage media or other
compilation of information, patent, patent application, copyright, trademark,
trade name, service mark, service name, "know-how", trade secrets, customer
lists, details of client or consultant contracts, pricing policies, sales
techniques, confidential information relating to suppliers, marketing plans or
strategies, products and formulae, product development techniques or plans,
business acquisition plans or any portion or phrase of any scientific or
technical information, ideas, discoveries, designs, computer programs (including
source of object codes), processes, procedures, research or technical data,
improvements or other proprietary or intellectual property of Sellers
specifically relating to the Business, whether or not in written or tangible
form, and whether or not registered, and including all files, records, manuals,
books, catalogues, memoranda, notes, summaries, plans, reports, records,
documents and other evidence thereof. The term "Confidential Information" does
not include, and there shall be no obligation hereunder with respect to,
information that is or becomes generally available to the public other than as a
result of a disclosure by Sellers in breach of this Paragraph. Sellers shall
have no obligation hereunder to keep confidential any Confidential Information
if and to the extent disclosure of any therefor is specifically required by law;
provided, however, that in the event disclosure is required by applicable law,
Sellers shall provide Purchaser with prompt notice of such requirement, prior to
making any disclosure, so that Purchaser may seek an appropriate protective
order, and shall cooperate with Purchaser, at Purchaser's expense, in connection
therewith. Notwithstanding anything to the contrary in this Agreement, Sellers
shall not be deemed to be in default under this Section 6.2 or any other
provision of this Agreement by reason of any information which Sellers may
reasonably deem appropriate to disclose in the continuing administration of the
Chapter 11 Cases.
(b) For a period of two (2) years following the Closing Date,
Sellers agree that they will not, without the express prior written approval of
Purchaser (i) directly or indirectly recruit, solicit or otherwise induce or
influence any Transferred Employee, sales agent, joint venturer, lessor,
supplier, agent, representative or any other person that has or had during the
one (1) year period immediately preceding the Closing Date a business
relationship with Sellers relating to the Business, to discontinue, reduce or
adversely modify such employment, agency or business relationship with Purchaser
as it relates solely to the Business, or (ii) only to the extent competitive
with the Business as conducted on the Closing Date, employ or seek to employ or
cause any Competitive Business to employ or seek to employ any person or agent
who is employed or retained by Purchaser. Notwithstanding the foregoing, nothing
herein shall prevent an officer of Sellers from providing a letter of
recommendation to an employee with respect to a future employment opportunity.
(c) For a period of three (3) years following the Closing
Date, Sellers agree that they will not without the express prior written
approval of Purchaser, directly or indirectly, recruit, solicit or otherwise
induce or influence any customer of Purchaser to discontinue, reduce or modify
such business relationship with Purchaser to the extent such business
relationship pertains to the Business.
(d) Sellers agree that the violation or threatened violation
of any of the provisions of this Section 6.2 by them shall cause immediate and
irreparable harm to Purchaser and that the damage to Purchaser will be difficult
or impossible to calculate with precision. Therefore, in the event that Sellers,
or any employee, agent, or representative thereof violates this Section 6.2, an
injunction restraining Sellers or such employee, agent, or representative of
Sellers, as the case may be, from such violation may be entered (upon proper
proof) against the Sellers or such employee, agent, or representative of
Sellers, as the case may be, in addition to any other relief available to
Purchaser.
(e) If, at the time of enforcement of any provision of this
Section 6.2, a court shall hold that the duration, scope or other restrictions
stated herein are unreasonable under circumstances then existing, the parties
agree that the maximum duration, scope or other restrictions reasonable under
such circumstances shall be substituted for the stated duration, scope or other
restrictions and that the court shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and other restrictions
permitted by law.
6.3 Referral of Business Opportunities. From and after the Closing
Date, Sellers shall use reasonable efforts to refer to Purchaser all incoming
business inquiries, customer orders and other matters related to the Business,
the Acquired Assets and the Assumed Obligations including, without limitation,
all customer orders received by Sellers via computer or other automated
inventory control systems. To the extent customer orders are delivered to third
party electronic data interchange providers, such providers will be instructed
to transmit such orders to Purchaser or Purchaser's providers. Electronic
delivery, if used, shall be by such method as shall be mutually agreed.
6.4 Sellers' Employees. Sellers shall use commercially reasonable
efforts to facilitate Purchaser's hire of such of Sellers' Employees as shall be
designated by Purchaser at or prior to the Closing, consistent with Section 7.2
hereof.
6.5 Purchaser's Access To Sellers' Records. From and after Seller's
execution and delivery of this Agreement, Sellers shall continue to provide
Purchaser (or its designated representatives) full and complete access, upon
reasonable advance notice to Sellers, to Sellers' employees, books and records,
corporate offices and other facilities for the purpose of conducting such
additional due diligence as Purchaser deems appropriate or necessary, in its
discretion, in order to facilitate Purchaser's efforts to consummate the
transaction provided for herein. Sellers hereby covenant and agree to reasonably
cooperate with Purchaser in this regard.
Other than the covenants set forth in the last sentence of Section 6.1(a) and
the covenants set forth in Sections 6.2, 6.3 and 6.4 (which shall survive the
Closing), all covenants of Sellers set forth in this Agreement shall lapse at,
and be of no further force or effect following, the Closing.
ARTICLE VII
COVENANTS OF PURCHASER
----------------------
7.1 Assumed Obligations. Subsequent to the Closing, Purchaser agrees to
assume and perform the Assumed Obligations.
7.2 Employees. All the employees with respect to the Business
("Employees") shall be listed in Schedule 7.2 to be made a part hereof;
provided, that Sellers shall deliver the list to comprise Schedule 7.2 hereto
not later than ten (10) days prior to the commencement of the Overbid Auction.
Upon the occurrence of the Closing, Purchaser shall offer substantially all such
Employees continued employment by Purchaser in connection with the business
operations related to the Acquired Assets (including interim employment to those
Employees employed at the Designated Lease locations for a period not longer
than the term of the License thereat, in Purchaser's discretion), at
compensation and benefit levels substantially equivalent to their present
levels, unless Purchaser and such Employee(s) agree otherwise. Employees who
accept offers of employment made by Purchaser pursuant to this Section 7.2 shall
be referred to hereinafter as the "Transferred Employees." Sellers shall assist
Purchaser in effecting the change of employment of the Transferred Employees as
of the Closing in an orderly fashion. Nothing herein expressed or implied shall
confer upon any Employee of Sellers, any Transferred Employee, any other
employee or any legal representative thereof any additional rights or remedies,
including any additional right to employment or continued employment for any
specified period, of any nature or kind whatsoever, under or by reason of this
Agreement.
7.3 Reasonable Access to Records and Certain Personnel. Following
consummation of the Closing, so long as such access does not unreasonably
interfere with Purchaser's business operations, Purchaser shall permit Sellers'
counsel and other professionals employed in the Chapter 11 Cases or otherwise
retained by Sellers reasonable access to the financial and other books and
records relating to the Acquired Assets or the Business (whether in documentary
or data form) for the purposes of facilitating the continuing administration of
the Chapter 11 Cases, preparing Tax Returns or responding to Tax related
inquiries, and other such administrative activities, which access shall include
the right of such professionals to copy, at the Sellers' expense, such documents
and records as they may request in furtherance of the purposes described above,
subject in all respects to the provisions of Section 6.2 hereof. If Purchaser
moves any such documents or records from their present location, Sellers have
the right to require Purchaser to copy and deliver to Sellers or their
professionals such documents and records as they may request, but only to the
extent Sellers or any such professional (i) furnish Purchaser with reasonably
detailed written descriptions of the materials to be so copied and (ii) Sellers
reimburse Purchaser for the costs and expenses thereof. The parties acknowledge
that Sellers shall have the right to retain any documents and records provided
to them by Purchaser, subject in all respects to the provisions of Section 6.2
hereof. Following the Closing, Purchaser shall provide Sellers and such of
Sellers' professionals as Sellers shall have from time-to-time designated, with
reasonable access to former management of the Business during regular business
hours to assist Sellers as set forth in this Section 7.3, provided again that
such access does not unreasonably interfere with Purchaser's business
operations. Purchaser shall not dispose of any such documents and records except
as shall be consistent with applicable law; provided, further, Purchaser shall
provide Sellers with reasonable advance notice prior to the disposal of any such
documents or records, together with the opportunity for Sellers to preserve such
documents or records at Sellers' cost.
Except for the covenant set forth in Section 7.2 above (to the extent that it is
fully performed by Purchaser concurrently with or prior to the Closing), all of
Purchaser's covenants set forth in this Agreement shall survive the Closing.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
------------------------------------------------
The obligations of Purchaser under this Agreement are, at the option of
Purchaser, subject to satisfaction of the following conditions precedent on or
before the Closing Date.
8.1 Representations and Warranties True as of Both Present Date and
Closing Date Each of the representations and warranties of Sellers contained
herein shall be true and correct in all material respects on and as of the date
of this Agreement, (except for such changes as are contemplated by the terms of
this Agreement and except for representations and warranties which specifically
relate to an earlier date) on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date. Sellers shall also have
complied with all of their respective covenants and obligations hereunder which
are to be completed or complied with at or prior to Closing.
8.2 Bankruptcy Condition. The Sale Order (i) shall have been entered by
the Bankruptcy Court, and (ii) shall not have been appealed or be subject to any
pending appeal as of the Closing Date, and no stay with respect thereto shall be
in effect as of the Closing Date.
8.3 No Material Adverse Change. The Purchaser being satisfied that
there has been no material adverse change in the Acquired Assets between the
date hereof and Closing.
8.4 Bankruptcy Court Approval of Certain Store Closing Sales. The
Bankruptcy Court must approve, simultaneous with the approval of the transaction
contemplated hereby, Sellers' grant to Purchaser of a license (the "License") to
use certain of Sellers' Stores for the purpose of conducting
"going-out-of-business," "store closing" or similar theme inventory liquidation
sales ("Store Closing Sales") in the Designated Lease locations (collectively,
the "Closing Locations", with such Store Closing Sales to be (a) for the sole
account and benefit of the Purchaser, (b) completed by Purchaser no later than
90 days after the Closing Date, and (c) conducted in accordance with procedures
reasonably satisfactory to Purchaser, and further consistent with such
procedures as are customarily approved by the Bankruptcy Court in similar such
situations. The Sale Order shall contain provisions satisfactory to Purchaser
which grants Purchaser the License to use the Closing Locations for the duration
of the Store Closing Sales thereat, with Purchaser being obligated to pay all
associated costs of the use and occupancy of the Closing Locations during the
conduct of the Store Closing Sales therefrom.
8.5 Overbid Protection; Expense Reimbursement. Purchaser acknowledges
that its offer may be subject to the Sellers' receipt of higher and/or better
offers in the course of the Bankruptcy Court approval process. In the event
Sellers solicit higher and/or better offers in connection with the Bankruptcy
Court approval process at an overbid auction to be held at a date, time and
place satisfactory to Purchaser, and conducted in accordance with procedures
deemed reasonably satisfactory to Purchaser ("Overbid Auction"), any competing
offer from a third party must be in an amount that is not less than
$1,000,000.00 higher than the Purchase Price herein, with any successive offers
being made in additional increments of not less than $250,000 of the next
highest offer received (collectively, the "Sale Procedures"); provided further,
if Purchaser is not the successful purchaser of the Acquired Assets, Sellers
shall (i) pay Purchaser a topping fee of $660,000, and (ii) reimburse Purchaser
for its actual, documented out-of-pocket expenses, including reasonable
attorneys' fees, in an amount not to exceed $150,000 plus an amount equal to the
H-S-R Approvals Amount (the amounts provided for in this Section 8.5(i) and (ii)
are collectively defined as the "Topping Fee"). Within two (2) business days of
the execution and delivery of this Agreement, or such other date(s) as Purchaser
and Sellers shall agree, Edison shall file a motion with the Bankruptcy Court,
seeking relief on an expedited basis, for entry of an order (a) approving the
Sale Procedures to be employed at the Overbid Auction, if any, and the Sellers'
payment of the Topping Fee, and (b) scheduling a hearing for approval of the
transaction provided for herein (the "Sale Procedures Order"). Purchaser shall
furnish Sellers with a earnest money good faith deposit in an amount equal to
$3,170,000 (the "Deposit") at the commencement of the Overbid Auction. The
Deposit shall be held and segregated by Sellers in an interest bearing account;
provided, however, the Sale Procedures Order shall contain such terms and
provisions or shall be satisfactory to Purchaser with respect to the governance
of the Deposit and the parties' relative rights and interests therein. The
Deposit (together with any interest earned thereon) shall be applied toward the
payment of the Purchase Price at Closing as provided in Section 3.2(a) hereof;
provided, however, in the event Purchaser elects to terminate this Agreement in
accordance with the terms hereof, Sellers shall, within two (2) Business Days of
delivery of written notice to Sellers of such termination by Purchaser, return
the Deposit to Purchaser, together with all interest earned thereon.
8.6 Bankruptcy Court Approval. Entry of one or more orders of the
Bankruptcy Court, inter ail, approving (i) the Sale Procedures, (ii) the sale,
assignment, transfer and conveyance of the Acquired Assets to Purchaser,
pursuant to the terms of this Agreement, and (iii) the Sellers' grant to the
Purchaser of the License at Closing. The Sale Order must be in form and content
reasonably satisfactory to the Purchaser and at a minimum contain the following:
(i) a finding that the Acquired Assets shall be sold to Purchaser free and clear
of all liens, claims and encumbrances pursuant to section 363(f) of the
Bankruptcy Code, (ii) provision that the Purchaser is a good faith purchaser
entitled to the protection of section 363(m) of the Bankruptcy Code, (iii)
authorization for Purchaser's conduct of the Store Closing Sales at the Closing
Locations upon terms and conditions reasonably satisfactory to Purchaser, (iv)
authorization for Sellers' assumption and assignment to Purchaser of at least
130 Store Leases, (v) the exemption of the transactions contemplated herein from
certain taxes under section 1146(c) of the Bankruptcy Code, and (vi) the
retention of jurisdiction by the Bankruptcy Court to resolve any and all
disputes that may arise under this Agreement as between Sellers and Purchaser,
and further to hear and determine any and all disputes between Sellers and/or
Purchaser, as the case may be, and any non-Seller party to, among other things,
any Assumed Contract or Assumed Lease, as applicable, concerning, inter ail,
Sellers' assumption and assignment thereof to Purchaser under this Agreement.
8.7 Lease/Contract Assumption and Assignment. The Sale Order shall
approve and authorize the assumption and assignment of the Assumed Leases and
Assumed Contracts over which the Bankruptcy Court has jurisdiction. The Sale
Order shall also provide that Purchaser's obligation to pay Sellers' lessors
under any Assumed Leases over which the Bankruptcy Court has jurisdiction any
amount in respect of a Cure Amount shall be limited in all respects to the
aggregate amount of the Assumed Lease/Contract Cap.
8.8 Sale Order Deadline. Except as otherwise provided in Section 10.1
hereof, the Sale Order shall be entered on or before May 19, 1999.
8.9 Closing Deadline. Except as otherwise provided in Section 10.1
hereof, the Closing must occur on or before May 25, 1999.
8.10 Intentionally Omitted.
8.11 Assignment of Repp Canada Store Leases. Sellers shall have
obtained (in form reasonably satisfactory to Purchaser (or any Permitted
Designee thereof)) the written consent of (i) each landlord under each Repp
Canada Store Lease(s) to the assumption and assignment thereof to Purchaser (or
any designee thereof), and (ii) each holder of a Lien as against any Repp Canada
Asset to the release of such Lien, unless Purchaser (or any Permitted Designee
thereof, as applicable) provides Sellers with written notice of its waiver of
the requirements of this Section 8.11, whether whole or in part, at Purchaser's
(or any designee thereof, as applicable) sole discretion, together with the
Estelle certificates described in Section 6.1(a) hereof; provided, however, in
the event Sellers are unable to obtain one or more landlord consents, and
Purchaser does not waive the requirement for such consents, then the subject
Lease(s) shall not be assigned to Purchaser, Sellers shall remain obligated in
respect of such Lease(s), and Purchaser and Sellers shall nevertheless proceed
with the Closing (subject to the satisfaction of all other conditions precedent
thereto) and shall agree on a mutually acceptable adjustment of the Purchase
Price; provided, however, in the event Purchaser and Sellers are unable to agree
on the amount of any such adjustment to the Purchase Price, such dispute shall
be submitted to binding arbitration in the manner provided in Section 3.7
hereof. Sellers agree that they shall fund up to $200,000 (CDN) towards the
expenses, if any, of obtaining the required consents to the assignment of Repp
Canada Store Leases and other Contracts associated with the conduct of the
Business in Canada ("Canadian Assignment Costs"), it being the further agreement
of the parties that Sellers and Purchaser shall each be entitled to direct the
disposition of one-half of the Canadian Assignment Costs, in their respective
discretion.
8.12 H-S-R Approvals Obtained. The Purchaser shall have obtained all
requisite clearances in connection with the H-S-R Approvals.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
----------------------------------------------
The obligations of Sellers under this Agreement are, at the option of
Sellers, subject to the satisfaction of the following conditions precedent on or
before the Closing Date:
9.1 Representations and Warranties True as of Both Present Date and
Closing Date. The representations and warranties of Purchaser contained herein
shall be true and correct in all material respects on and as of the date of this
Agreement, and shall also be true in all material respects (except for such
changes as are contemplated by the terms of this Agreement, and except for
representations and warranties which specifically relate to an earlier date) on
and as of the Closing Date with the same force and effect as though made by
Purchaser on and as of the Closing Date. Purchaser shall also have complied with
all of its covenants and obligations hereunder which are to be completed or
complied with at or prior to Closing.
9.2 Bankruptcy Condition. The Sale Order (i) shall have been entered by
the Bankruptcy Court, and (ii) shall not have been appealed or be subject to any
pending appeal as of the Closing Date, and no stay with respect thereto shall be
in effect as of the Closing Date.
9.3 Intentionally Omitted.
9.4 Sale Order Deadline. Except as otherwise provided in Section 10.1
hereof, the Sale Order shall be entered on or before May 19, 1999.
9.5 Closing Deadline. Except as otherwise provided in Section
10.1 hereof, the Closing must occur on or before May 25, 1999.
9.6 H-S-R Approvals Obtained. The Purchaser shall have obtained all
requisite clearances in connection with the H-S-R Approvals.
ARTICLE X
CLOSING
-------
10.1 Closing. Provided that the Sale Order shall not have been appealed
or otherwise be subject to a stay or other injunction, and unless otherwise
agreed by Purchaser and Sellers, the Closing shall take place within three (3)
Business Days after the entry of the Sale Order, but in no event later then May
25, 1999; provided, however, in the event the Closing is delayed beyond May 25,
1999 due to delays associated with the H-S-R Approvals process, then the Closing
deadline shall be extended until the second Business Day after the H-S-R
Approvals shall have been obtained and all other closing conditions shall have
been satisfied; provided, however, in no event shall the Closing be extended
beyond June 14, 1999, unless otherwise mutually agreed by Purchaser and Sellers,
in which case the Closing shall take place at such other date, time and place as
Sellers and Purchaser shall mutually agree.
10.2 Deliveries by Sellers. At the Closing, Sellers will deliver, in
addition to the other documents contemplated by this Agreement, the following to
Purchaser: (a) a Bill of Sale ("Bill of Sale") in form and content mutually
satisfactory to Purchaser and Sellers; (b) the Assignment and Assumption; (c) a
Trademark Assignment in form and content mutually satisfactory to Purchaser and
Sellers; (d) the Escrow Agreement; (e) with respect to each vehicle comprising
part of the Acquired Assets, an original Certificate of Title (or, if
unavailable, a mutually satisfactory substitution therefor), with the assignment
portion completed and signed by Sellers; and (f) such other and additional
documents of transfer that may be reasonably requested by Purchaser (and/or any
Permitted Designee thereof).
10.3 Deliveries by Purchaser. At the Closing, Purchaser will deliver
the following: (a) the Purchase Price payable pursuant to and in accordance with
Section 3.1 and Section 3.2; and (b) duly-executed originals of the Assignment
and Assumption, and the Escrow Agreement.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Expenses. Subject to (i) Section 3.3 hereof (with respect to the
sharing of the cost of the Physical Inventory), (ii) Section 6.1(b) hereof (with
respect to the sharing of the cost of obtaining the H-S-R Approvals), and (iii)
Section 8.5 (with respect to the Topping Fee) each party hereto shall bear its
own expenses with respect to the transactions contemplated hereby.
Notwithstanding the foregoing, in the event of any action or proceeding to
interpret or enforce this Agreement, the prevailing party in such action or
proceeding (i.e., the party who, in light of the issues contested or determined
in the action or proceeding, was more successful) shall be entitled to have and
recover from the non-prevailing party such costs and expenses (including,
without limitation, all court costs and reasonable attorneys' fees) as the
prevailing party may incur in the pursuit or defense thereof.
11.2 Amendment. This Agreement may be amended, modified or supplemented
but only in a writing signed by all of the parties hereto.
11.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (i) when received if given in person, (ii) on the date of
transmission if sent by telex, telecopy or other wire transmission (provided
that a copy of such transmission is simultaneously deposited in the manner
provided in clause (iv) below), (iii) one business day after being delivered to
a nationally known commercial courier service providing next day delivery
service (such as Fed Ex), or (iv) three business days after being deposited in
the U.S. mail, certified or registered mail, postage prepaid:
(A) If to Sellers, addressed as follows:
Edison Brothers Stores, Inc.
501 N. Broadway
St. Louis, MO 63102
Attn: Alan A. Sachs,
Sr. Vice President, General Counsel, Secretary
Tel: (314) 331-6565
Fax: (314) 331-6554
With copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, TX 75201
Attn: Martin A. Sosland, Esq.
Tel: (214) 746-7700
Fax: (214) 746-7777
-and-
Goodman and Carr
Suite 2300
King Street West
Toronto, Ontario M5H 3W5
Attn: Martin R. Wasserman
Tel: (416) 595-2300
Fax: (416) 595-0567
(B) If to Purchaser, addressed as follows:
J. Baker, Inc.
555 Turnpike Street
Canton, MA 02021
Attn: Philip G. Rosenberg
Executive Vice President,
Chief Financial Officer, Treasurer
Tel: (781) 828-9300
Fax: (781) 821-0614
with copies to:
Traub, Bonacquist & Fox LLP
655 Third Avenue
New York, NY 10017
Attn: Paul Traub, Esq.
Tel: (212) 476-4770
Fax: (212) 476-4787
- and -
Fasken Campbell Godfrey
Box 20
Toronto Dominion Centre
Toronto, Canada M5K1N6
Attn: Mark Stinson, Esq.
Tel: (416) 366-8381
Fax: (416) 364-7813
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.4 Effect of Investigations. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties and
covenants of, and indemnities by, Sellers made or undertaken pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Purchaser.
11.5 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
11.6 Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 Headings The headings preceding the text of Articles and Sections
of this Agreement and the Schedules thereto are for convenience only and shall
not be deemed part of this Agreement.
11.8 Applicable Law and Jurisdiction. SUBJECT TO ANY PROVISION IN THIS
AGREEMET AND ANY ANCILLARY DOCUMENT, TO THE CONTRARY, THIS AGREEMENT (AND ALL
DOCUMENTS, INSTRUMENTS, AND AGREEMENTS EXECUTED AND DELIVERED PURSUANT TO THE
TERMS AND PROVISIONS HEREOF (COLLECTIVELY, AANCILLARY DOCUMENTS@)) SHALL BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH
JURISDICTION. PURCHASER AND SELLERS FURTHER AGREE THAT THE BANKRUPTCY COURT
SHALL HAVE JURISDICTION OVER ALL DISPUTES AND OTHER MATTERS RELATING TO (i) THE
INTERPRETATION AND ENFORCEMENT OF THIS AGREEMENT OR ANY ANCILLARY DOCUMENT;
AND/OR (ii) THE ACQUIRED ASSETS AND/OR ASSUMED OBLIGATIONS (INCLUDING, WITHOUT
LIMITATION ANY DISPUTES REGARDING ANY ADJUSTMENTS CONTEMPLATED BY ARTICLE III
HEREOF WHICH ARE NOT RESOLVED BY MUTUAL AGREEMENT WITHIN ONE HUNDRED TWENTY
(120) DAYS FOLLOWING THE CLOSING DATE) AND PURCHASER EXPRESSLY CONSENTS TO AND
AGREES NOT TO CONTEST SUCH JURISDICTION.
11.9 Binding Nature; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns, but neither this Agreement nor any of the rights,
interest or obligations hereunder shall be assigned by any of the parties hereto
without prior written consent of the other parties; except, that (i) J. Baker
may assign any of its rights hereunder to any affiliate, wholly-owned subsidiary
or designated participant therewith (a "Permitted Designee"), including with
regard to the acquisition of the Repp Canada Assets (and upon such designation
as a Permitted Designee hereunder, such Permitted Designee shall become
obligated to perform any and all obligations arising hereunder in respect of
that portion of the Acquired Assets and Assumed Obligations allocable thereto,
including, but not limited to, as concerns any obligations in respect of any
portion of the On-Order Goods or In-Transit Goods that may be attributable to
such Permitted Designee); provided, that, J. Baker shall remain obligated to
cause any such Permitted Designee to perform the obligations of Purchaser
hereunder allocable and attributable solely to the portion of the Acquired
Assets acquired by such Permitted Designee, (ii) Purchaser may grant a security
interest in its rights and interests hereunder to its third-party lender(s).
Nothing contained herein, express or implied, is intended to confer on any
Person other than the parties hereto or their successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
11.10 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective affiliates and no provision
of this Agreement shall be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
11.11 Tax Matters.
(a) Purchaser shall make available to Sellers, and Sellers
shall make available to Purchaser, (i) such records as any such party may
require for the preparation of any Tax Returns required to be filed by Sellers
or Purchaser, as the case may be, and (ii) such records as Sellers or Purchaser
may require for the defense of any audit, examination, administrative appeal, or
litigation of any Tax Return in which Sellers or Purchaser was included.
(b) Purchaser shall be responsible for the timely payment of
all sales, use, transfer (including, without limitation, documentary transfer,
stamp and like taxes) and similar taxes payable in connection with the
consummation of the transactions contemplated by this Agreement; provided,
however, the Sale Order shall contain provision that the Sellers' sale,
transfer, assignment and conveyance of the Acquired Assets (other than the Repp
Canada Assets) to Purchaser hereunder shall be entitled to the protections
afforded under section 1146(c) of the Bankruptcy Code. To the extent required
under applicable law, Repp Canada will collect any such taxes from Purchaser,
and Purchaser will pay the same to Sellers at the Closing, in which case Sellers
shall remit same to the appropriate Canadian taxing authority.
(c) Notwithstanding anything herein to the contrary, as soon
as practicable following the Closing, Purchaser and Sellers shall for United
States and Canadian (including provincial) income tax purposes agree to an
allocation of the Purchase Price (and other capitalized costs) among the
Acquired Assets, subject to the provisions of Section 1060 of the Code, and such
other laws as may be applicable with respect to the Repp Canada Assets. The
parties hereto represent and warrant that they are both, or will be prior to the
Closing Date, registrants under Part X of the Excise Tax Act (the "ETA") and
covenant and agree to make the joint election contemplated by Subsection 167(1)
of the ETA, and prescribed for, and the Purchaser hereby covenants and agrees to
file the joint election with the Minister of National Revenue with its GST
return for its reporting period in which the transactions contemplated by this
Agreement take place. If it is determined that Goods and Services Tax is payable
by the Purchaser in respect of the supply of property contemplated by this
Agreement, then the Purchaser agrees to remit all such tax payable, and the
Purchaser agrees to indemnify the Sellers with respect thereto and all costs and
expenses relating thereto.
11.12 Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to this Agreement to express their
mutual intent, and no rule of strict construction shall be applied against any
party. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Nothing in the Disclosure
Schedule will be deemed adequate to disclose an exception to a representation or
warranty made herein unless the substance and applicability of such exception is
reasonably apparent from the disclosure contained in the Disclosure Schedule.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
items itself). The parties hereto intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party
hereto has breached any representation, warranty, or covenant contained herein
in any respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which such party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant.
11.13 Entire Understanding. This Agreement and the Ancillary Documents
hereto set forth the entire agreement and understanding of the parties hereto in
respect to the transactions contemplated hereby, and this Agreement and such
Ancillary Documents hereto supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof. There have been no
representations or statements, oral or written, that have been relied on by any
party hereto, except those expressly set forth in this Agreement or in any
Ancillary Document hereto.
11.14 Broker Commission Indemnity. Purchaser and Sellers agree that if
any claims for commissions, fees, or other compensation, including, without
limitation, brokerage fees, finder's fees, or commissions are ever asserted
against Purchaser or the Sellers in connection with the transaction, all such
claims shall be handled and paid by the party whose actions form the basis of
such claim and such party shall indemnify, defend (with counsel reasonably
satisfactory to the party(ies) entitled to indemnification), protect and save
and hold the other harmless from and against any and all such claims or demands
asserted by any person, firm or corporation in connection with the transaction
contemplated hereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on the date first above written.
PURCHASER:
J. BAKER, INC.,
By: /s/ Philip Rosenberg
Name: Philip Rosenberg
Its: Executive V.P. & C.F.O.
SELLERS:
EDISON BROTHERS STORES, INC.,
Debtor and Debtor-in-Possession
By: /s/ Alan A. Sachs
Name: Alan A. Sachs
Title: Senior Vice President
EDISON BROTHERS APPAREL STORES, INC.,
Debtor and Debtor-in-Possession
By: /s/ Alan A. Sachs
Name: Alan A. Sachs
Title: Senior Vice President
REPP LTD. BIG & TALL,
By: /s/ Alan A. Sachs
Name: Alan A. Sachs
Title: Senior Vice President
May 19, 1999
EXHIBIT 10.02
LOAN AND SECURITY AGREEMENT
BANKBOSTON RETAIL FINANCE INC.
Administrative Agent
Collateral Agent
BACK BAY CAPITAL FUNDING LLC
Term Lender
JBI APPAREL, INC.
The Borrower
May 21, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1 - Definitions:
Article 2 - The Revolving Credit:
2-1. Establishment of Revolving Credit .. 19 ..
2-2. Advances in Excess of Borrowing Base. .. 20 ..
2-3. Initial Reserves. Changes to Reserves. .. 21 ..
2-4. Risks of Value of Collateral .. 21 ..
2-5. Loan Requests .. 22 ..
2-6. Making of Loans Under Revolving Credit .. 23 ..
2-7. The Loan Account .. 24 ..
2-8. The Revolving Credit Notes .. 25 ..
2-9. Payment of The Loan Account .. 25 ..
2-10. Interest. .. 25 ..
2-11. Commitment Fee .. 25 ..
2-12. Administrative Agent's Fee .. 26 ..
2-13. Line (Unused) Fee. .. 26 ..
2-14 Concerning Fees. .. 26 ..
2-15. Agent's and Lenders' Discretion .. 26 ..
2-16. Procedures For Issuance of L/C's .. 27 ..
2-17. Fees For L/C's .. 28 ..
2-18. Concerning L/C's .. 28 ..
2-19. Lenders' Commitments .. 31 ..
Article 3 - The Term Loan:
3-1. Commitment To Make Term Loan .. 32 ..
3-2. The Term Note .. 32 ..
3-3. Payment of Principal of the Term Loan. .. 32 ..
3-4. Interest. .. 33 ..
3-5. Term Loan Commitment Fee .. 33 ..
3-6. Term Loan Monitoring Fee .. 33 ..
3-7. Payments .. 33 ..
Article 4 - Conditions Precedent:
4-1. Corporate Due Diligence. .. 34 ..
4-2. Receipt of Proceeds of Permitted SubDebt .. 34 ..
4-3. Acquisition of Repp Division. .. 34 ..
4-4. Opinion. .. 35 ..
4-5. Additional Documents. .. 35 ..
4-6. Officers' Certificates. .. 35 ..
4-7. Representations and Warranties. .. 35 ..
4-8. Minimum Excess Availability. .. 35 ..
4-9. All Fees and Expenses Paid. .. 35 ..
4-10. No Suspension Event. .. 36 ..
4-11. No Adverse Change. .. 36 ..
Article 5 - General Representations, Covenants and Warranties:
5-1. Payment and Performance of Liabilities. .. 36 ..
5-2. Due Organization - Corporate Authorization - No Conflicts. .. 36 ..
5-3. Trade Names. .. 37 ..
5-4. Infrastructure. .. 38 ..
5-5. Year 2000 Compliance. .. 38 ..
5-6. Locations. .. 38 ..
5-7. Title to Assets. .. 40 ..
5-8. Indebtedness .. 40 ..
5-9. Insurance Policies. .. 41 ..
5-10. Licenses .. 42 ..
5-11. Leases. .. 42 ..
5-12. Requirements of Law .. 42 ..
5-13. Maintain Properties .. 42 ..
5-14. Pay Taxes. .. 43 ..
5-15. No Margin Stock. .. 43 ..
5-16. ERISA .. 43 ..
5-17. Hazardous Materials .. 43 ..
5-18. Litigation .. 44 ..
5-19. Dividends or Investments .. 44 ..
5-20. Loans .. 44 ..
5-21. Protection of Assets .. 45 ..
5-22. Line of Business .. 45 ..
5-23. Affiliate Transactions .. 45 ..
5-24. Additional Assurances .. 45 ..
5-25. Adequacy of Disclosure .. 46 ..
5-26. No Restrictions on Liabilities .. 47 ..
5-27. Other Covenants .. 47 ..
Article 6 - Financial Reporting and Performance Covenants:
6-1. Maintain Records .. 47 ..
6-2. Access to Records .. 48 ..
6-3. Immediate Notice to Administrative Agent .. 48 ..
6-4. Borrowing Base Certificate .. 49 ..
6-5. Weekly Reports .. 49 ..
6-7. Quarterly Reports .. 51 ..
6-8. Annual Reports .. 51 ..
6-9. Officers' Certificates .. 51 ..
6-10. Inventories, Appraisals, and Audits .. 52 ..
6-11. Additional Financial Information .. 53 ..
6-12. Financial Performance Covenants .. 53 ..
Article 7 - Use and Collection of Collateral:
7-1. Use of Inventory Collateral .. 54 ..
7-2. Inventory Quality .. 54 ..
7-3. Adjustments and Allowances .. 54 ..
7-4. Validity of Accounts .. 54 ..
7-5. Notification to Account Debtors .. 55 ..
Article 8 - Cash Management. Payment of Liabilities:
8-1 Depository Accounts .. 55 ..
8-2. Credit Card Receipts .. 56 ..
8-3. The Concentration, Blocked, and Operating Accounts .. 56 ..
8-4. Proceeds and Collection of Accounts .. 57 ..
8-5. Payment of Liabilities .. 57 ..
8-6. The Operating Account .. 58 ..
Article 9 - Grant of Security Interest:
9-1. Grant of Security Interest .. 59 ..
9-2. Extent and Duration of Security Interest .. 60 ..
Article 10 - Collateral Agent As Borrower's Attorney-In-Fact:
10-1. Appointment as Attorney-In-Fact .. 60 ..
10-2. No Obligation to Act .. 61 ..
Article 11 - Events of Default:
11-1. Failure to Pay Revolving Credit or Term Loan .. 61 ..
11-2. Failure To Make Other Payments .. 61 ..
11-3. Failure to Perform Covenant or Liability (No Grace Period) .. 61 ..
11-4. Failure to Perform Covenant or Liability (Grace Period) .. 62 ..
11-5. Misrepresentation .. 62 ..
11-6. Acceleration of Other Debt. .. 62 ..
11-7. Related Party Defaults .. 62 ..
11-8. Default Under Other Agreements .. 62 ..
11-9. Uninsured Casualty Loss .. 63 ..
11-10. Judgment. Restraint of Business .. 63 ..
11-11. Business Failure .. 63 ..
11-12. Bankruptcy .. 63 ..
11-13. Default by Guarantor or Related Entity .. 64 ..
11-14. Indictment - Forfeiture .. 64 ..
11-15. Termination of Guaranty .. 64 ..
11-16. Challenge to Loan Documents .. 64 ..
11-17. Change in Control. .. 64 ..
Article 12 - Rights and Remedies Upon Default:
12-1. Rights of Enforcement .. 65 ..
12-2. Sale of Collateral .. 65 ..
12-3. Occupation of Business Location .. 66 ..
12-4. Grant of Nonexclusive License. .. 66 ..
12-5. Assembly of Collateral .. 67 ..
12-6. Rights and Remedies .. 67 ..
Article 13 - Notices:
13-1. Notice Addresses .. 67 ..
13-2. Notice Given .. 68 ..
Article 14 - Term:
14-1. Termination of Revolving Credit .. 69 ..
14-2. Effect of Termination .. 69 ..
Article 15 - General:
15-1. Protection of Collateral .. 69 ..
15-2. Successors and Assigns. .. 70 ..
15-3. Severability .. 70 ..
15-4. Amendments. Course of Dealing .. 70 ..
15-5. Power of Attorney .. 71 ..
15-6. Application of Proceeds .. 71 ..
15-7. Increased Costs .. 71 ..
15-8. Costs and Expenses of Agents and Of Lenders .. 72 ..
15-9. Copies and Facsimiles .. 72 ..
15-10. Massachusetts Law .. 72 ..
15-11. Consent to Jurisdiction .. 73 ..
15-12. Indemnification .. 73 ..
15-13. Rules of Construction. .. 74 ..
15-14. Intent .. 75 ..
15-15. .. 75 ..
15-16. Right of Set-Off .. 76 ..
15-17. Maximum Interest Rate. .. 76 ..
15-18. Waivers. .. 76 ..
</TABLE>
<PAGE>
<TABLE>
<S> <C>
EXHIBITS
2-8 Revolving Credit Note
3-2 Term Note
5-2 Related Entities
5-3 Trade Names
5-5 Year 2000 Compliance
5-6 Locations, Leases, and Landlords
5-7 Encumbrances
5-8 Indebtedness
5-9 Insurance Policies
5-11 Capital Leases
5-18 Litigation
6-4 Borrowing Base Certificate
6-12(a) Financial Performance Covenants
6-12(b) Business Plan
8-1 DDA's.
8-2 Credit Card Arrangements
</TABLE>
<PAGE>
LOAN AND SECURITY AGREEMENT BankBoston Retail Finance Inc.
Agent
May 21 1999
THIS AGREEMENT is made between
BankBoston Retail Finance Inc. (in such capacity, the
"Administrative Agent"), a Delaware corporation with offices at 40
Broad Street, Boston, Massachusetts 02109, as agent for the ratable
benefit of the "Working Capital Lenders", who are, at present, those
financial institutions identified on the signature pages of this
Agreement and who in the future are those Persons (if any) who become
"Working Capital Lenders" in accordance with the provisions of Section
2-19, below,
and
BankBoston Retail Finance Inc. (in such capacity, the
"Collateral Agent"), as agent for the ratable benefit of the
Administrative Agent and the Term Lender;
and
Back Bay Capital Funding LLC (in such capacity, the "Term
Lender"), a limited liability company with offices at 40 Broad Street,
Boston, Massachusetts 02109,
and
JBI Apparel, Inc. (hereinafter, the "Borrower"), a
Massachusetts corporation with its principal executive offices at 555
Turnpike Street, Canton, Massachusetts 02021
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
I. Article 1-Definitions:
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"Accounts" and "Accounts Receivable" include, without limitation,
"accounts" as defined in the UCC, and also all: accounts, accounts
receivable, credit card receivables, notes, drafts, acceptances, and
other forms of obligations and receivables and rights to payment for
credit extended and for goods sold or leased, or services rendered,
whether or not yet earned by performance; all "contract rights" as
formerly defined in the UCC; all Inventory which gave rise thereto,
and all rights associated with such Inventory, including the right of
stoppage in transit; all reclaimed, returned, rejected or repossessed
Inventory (if any) the sale of which gave rise to any Account.
"ACH": Automated clearing house.
"Account Debtor": Has the meaning given that term in the UCC.
"Administrative Agent": Is defined in the Preamble.
"Administrative Agent's Fee": As defined in the Fee Letter.
"Affiliate" With respect to any two Persons, a relationship in which (a)
one holds, directly or indirectly, not less than Twenty Five Percent
(25%) of the capital stock, beneficial interests, partnership
interests, or other equity interests of the other; or (b) one has,
directly or indirectly, the right, under ordinary circumstances, to
vote for the election of a majority of the directors (or other body or
Person who has those powers customarily vested in a board of directors
of a corporation); or (c) not less than Twenty Five Percent (25%) of
their respective ownership is directly or indirectly held by the same
third Person.
"Agent": Collectively and each individually, the Administrative Agent
and the Collateral Agent.
"Agent's Rights and Remedies": Is defined in Section .12-6
"Availability": Is defined in Section .2-1(b)(i)
"Availability Block": Is defined in Section 2-1(e).
"Availability Reserves": Such reserves as the Administrative Agent from
time to time determines in the Administrative Agent's reasonable
discretion as being appropriate to reflect the impediments to the
Administrative Agent's ability to realize upon the Collateral. Without
limiting the generality of the foregoing, Availability Reserves may
include (but are not limited to) reserves based on the following:
(i) Rent (based upon past due rent and/or
whether or not Landlord's Waiver, acceptable
to the Collateral Agent , has been received
by the Agent ).
(ii) In store customer credits.
(iii) Gift Certificates.
(iv) Frequent Shopper Programs.
(v) Layaways and Customer Deposits
(vi) Taxes and other governmental charges,
including, ad valorem, personal property,
and other taxes which might have priority
over the security interests of the
Collateral Agent in the Collateral.
(viii) L/C Landing Costs.
(ix) Year 2000 compliance.
At the execution of this Agreement, the only
Availability Reserves are those described in Section 2-3.
"Bankruptcy Code": Title 11, U.S.C., as amended from time to time.
"Base": The Base Rate announced from time to time by BankBoston, N.A. (or
any successor in interest to BankBoston, N.A.). In the event that said
bank (or any such successor) ceases to announce such a rate, "Base"
shall refer to that rate or index announced or published from time to
time as the Administrative Agent, in good faith, designates as the
functional equivalent to said Base Rate. Any change in "Base" shall be
effective, for purposes of the calculation of interest due hereunder,
when such change is made effective generally by the bank on whose rate
or index "Base" is being set. In all events, interest which is
determined by reference to Base (or any successor to Base) shall be
calculated on a 360 day year and actual days elapsed.
"BaseLine Amount": An amount equal to the following:
(a) The following percentage of the appraised value of
Eligible Inventory:
Until and including August 28, 1999: 95%
Commencing August 29, 1999: 90%
Minus
(b) The aggregate of the unpaid principal balance of the Term
Loan plus accrued and unpaid PIK Interest
"Blocked Account": Is defined in Section 8-3
"Borrower": Is defined in the Preamble.
"Borrowing Base": Is defined in Section 2-1(b)(i)
"BusinessDay": Any day other than (a) a Saturday or Sunday; (b) any day on
which banks in Boston, Massachusetts generally are not open to the
general public for the purpose of conducting commercial banking
business; or (c) a day on which the Administrative Agent is not open
to the general public to conduct business.
"Business Plan": The Borrower's business plan annexed hereto as EXHIBIT
6-12(b) and any revision, amendment, or update of such business plan
to which the Administrative Agent has provided its written sign-off.
"Capital Expenditures": The expenditure of funds or the incurence of
liabilities which may be capitalized in accordance with GAAP.
"Capital Lease": Any lease which may be capitalized in accordance with
GAAP.
"Casual Male": The Casual Male, Inc., a Massachusetts corporation.
"Casual Male Credit Facility": The credit facility established on or about
May 30, 1997 among The Casual Male and others, on the one hand and
Fleet National Bank as Administrative Agent and others, on the other,
as such credit facility may be amended from time to time hereafter.
"Change in Control": (a) The failure of JBI to own, beneficially and of
record, 100% of the capital stock of the Borrower having the right,
under ordinary circumstances, to vote for the election of directors of
the Borrower.
(b) The occurrence of any event or
circumstance such that JBI does not have the power to elect a
majority of the directors of the Borrower.
"Chattel Paper": Has the meaning given that term in the UCC.
"Collateral": Is defined in Section 9-1.
"Collateral Agent": Is defined in the Preamble
"Commitment Fee": As defined in the Fee Letter
"Commitment": Subject to 2-19, as follows:
<TABLE>
<S> <C> <C>
DOLLAR COMMITMENT
LENDER COMMITMENT PERCENTAGE
------ ---------- ----------
BankBoston Retail Finance Inc. $20,000,000.00 100%
</TABLE>
"Concentration Account": Is defined in Section 8-3.
"Cost": The product of (a) one minus that percentage which is derived from
the cumulative purchase markup multiplied by (b) the retail value of
Inventory, as reflected on the Borrower's stock ledger.
("Cost" does not include inventory capitalization
costs or other non-purchase price charges (such as freight
out) used in the Borrower's calculation of cost of goods
sold).
"Costs of Collection": Includes, without limitation, all attorneys'
reasonable fees and reasonable out-of-pocket expenses incurred by any
Administrative Agent's attorneys or any Lender's and all reasonable
costs incurred by any Agent or any Lender in the administration of the
Liabilities and/or the Loan Documents, including, without limitation,
reasonable costs and expenses associated with travel on behalf of any
Agent or any Lender, which costs and expenses are directly or
indirectly related to or in respect of any Administrative Agent's and
any Lender's: administration and management of the Liabilities;
negotiation, documentation, and amendment of any Loan Document; or
efforts to preserve, protect, collect, or enforce the Collateral, the
Liabilities, and/or the Administrative Agent's Rights and Remedies
and/or any of the rights and remedies of any Agent against or in
respect of any guarantor or other person liable in respect of the
Liabilities (whether or not suit is instituted in connection with such
efforts). The Costs of Collection are Liabilities, and at the
Administrative Agent's option may bear interest at the highest
post-default rate which the Administrative Agent may charge the
Borrower hereunder as if such had been lent, advanced, and credited by
the Administrative Agent to, or for the benefit of, the Borrower.
"Credit Card Advance Rate": 75%.
"Customer Credit Liability": Gift certificates, merchandise credits, and
similar liabilities of the Borrower to its retail customers and
prospective customers.
"Current Pay Interest": Is defined in Section 3-4(a)(i).
"DDA": Any checking or other demand daily depository account maintained by
the Borrower.
"Deposit Account": Has the meaning given that term in the UCC.
"Documents": Has the meaning given that term in the UCC.
"Documents of Title": Has the meaning given that term in the UCC.
"Dollar Commitment": As provided in the Definition of "Commitment", above.
"EBITDA": The Borrower's earnings before interest, taxes, depreciation, and
amortization, each as determined in accordance with GAAP.
"Eligible Credit Card Receivables": Those amounts which from time to time
are due and owing to the Borrowers by its credit card processors as
the Agent, in the Agent's discretion, determines to be acceptable for
borrowing purposes.
"Eligible Inventory": Such of the Borrower's Inventory, at such locations,
and of such types, character, qualities and quantities, as the
Administrative Agent, in its sole discretion from time to time
determines to be acceptable for borrowing, as to which Inventory, the
Collateral Agent has a perfected security interest which is prior and
superior to all security interests, claims, and encumbrances. Without
limiting the foregoing, "Eligible Inventory" shall not include (i) any
non-merchandise inventory (such as labels, bags, and packaging
materials); (ii) damaged goods, return to vendor merchandise,
packaways, consigned inventory, and other similar categories which
will be determined following completion of due diligence.
"Eligible In-Transit Inventory": Such of the Borrower's Inventory (without
duplication as to Eligible Inventory or Eligible L/C Inventory) which
the Administrative Agent determines, in the exercise of the
Administrative Agent's reasonable discretion to be acceptable for
borrowing, which Inventory is then in transit (other than between any
of the Borrower's locations), as to which Inventory, the Collateral
Agent either (a) has a perfected security interest which is prior and
superior to all security interests, claims, and Encumbrances or (b) is
otherwise reasonably satisfied that the interests of the Collateral
Agent therein are sufficiently protected (such as by being named in a
letter from the Borrowers to the Administrative Agent as consignee on,
or having possession or control of the documents of title applicable
to, such Inventory or such inventory's being en route to a customs
broker which is party to an agreement with the Collateral Agent which
is reasonably satisfactory to the Administrative Agent ) so as to
include such Inventory in the calculation of "Availability".
"Eligible L/C Inventory": Such of the Borrower's Inventory (without
duplication as to Eligible Inventory or Eligible In Transit
Inventory), the purchase of which is supported by a documentary L/C
then having an initial expiry of seventy five or less days, provided
that
(a) Such Inventory is of such types, character,
qualities and quantities (net of Inventory Reserves) as the
Administrative Agent in its discretion from time to time
determines to be eligible for borrowing; and
(b) The documentary L/C supporting such purchase
names the Collateral Agent as consignee of the subject
Inventory and the Collateral Agent has control over the
documents which evidence ownership of the subject Inventory.
"Employee Benefit Plan": As defined in ERISA.
"Encumbrance": Each of the following:
(a) Any security interest, mortgage, pledge,
hypothecation, lien, attachment, or charge of any kind
(including any agreement to give any of the foregoing); the
interest of a lessor under a Capital Lease; conditional sale
or other title retention agreement; sale of accounts
receivable or chattel paper; or other arrangement pursuant to
which any Person is entitled to any preference or priority
with respect to the property or assets of another Person or
the income or profits of such other Person or which
constitutes an interest in property to secure an obligation;
each of the foregoing whether consensual or non-consensual and
whether arising by way of agreement, operation of law, legal
process or otherwise.
(b) The filing of any financing statement under the
UCC or comparable law of any jurisdiction.
"End Date": The date upon which both (a) all Liabilities have been paid in
full and (b) all obligations of any Working Capital Lender and the
Term Lender to make loans and advances and to provide other financial
accommodations to the Borrower hereunder shall have been irrevocably
terminated.
"Environmental Laws": All of the following:
(a) Any and all federal, state, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements which regulate or relate to, or impose
any standard of conduct or liability on account of or in
respect to environmental protection matters, including,
without limitation, Hazardous Materials, as are now or
hereafter in effect.
(b) The common law relating to damage to Persons or
property from Hazardous Materials.
"Equipment": Includes, without limitation, "equipment" as defined in the
UCC, and also all motor vehicles, rolling stock, machinery, office
equipment, plant equipment, tools, dies, molds, store fixtures,
furniture, and other goods, property, and assets which are used and/or
were purchased for use in the operation or furtherance of the
Borrower's business, and any and all accessions or additions thereto,
and substitutions therefor.
"ERISA": The Employee Retirement Security Act of 1974, as amended.
"ERISA Affiliate": Any Person which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is part of a
group which includes the Borrower and which would be treated as a
single employer under Section 414 of the Internal Revenue Code of
1986, as amended.
"Events of Default": Is defined in Article 11. Each reference herein to an
"Event of Default" is to an Event of Default not then duly waived by
the Lender (as to which due waiver, see Section 15-4, 15-4(a)). In the
event of such due waiver, the so-waived Event of Default shall be
deemed never to have occurred (other than with respect to any Costs of
Collection incurred by any Lender prior to such waiver).
"Fee Letter": The Commitment Letter (including Exhibit A thereto) dated
April 26, 1999 between BankBoston Retail Finance Inc. and the
Borrower.
"Fixtures": Has the meaning given that term in the UCC.
"GAAP": Principles which are consistent with those promulgated or adopted
by the Financial Accounting Standards Board and its predecessors (or
successors) in effect and applicable to that accounting period in
respect of which reference to GAAP is being made, provided, however,
in the event of a Material Accounting Change, then unless otherwise
specifically agreed to by the Agent, (a) the Borrower's compliance
with the financial performance covenants imposed pursuant to Section
6-12 shall be determined as if such Material Accounting Change had not
taken place and (b) the Borrower shall include, with its monthly,
quarterly, and annual financial statements a schedule, certified by
the Borrower's chief financial officer, on which the effect of such
Material Accounting Change to the statement with which provided shall
be described.
"General Intangibles": Includes, without limitation, "general intangibles"
as defined in the UCC; and also all: rights to payment for credit
extended; deposits; amounts due to the Borrower; credit memoranda in
favor of the Borrower; warranty claims; tax refunds and abatements;
insurance refunds and premium rebates; all means and vehicles of
investment or hedging, including, without limitation, options,
warrants, and futures contracts; records; customer lists; telephone
numbers; goodwill; causes of action; judgments; payments under any
settlement or other agreement; literary rights; rights to performance;
royalties; license and/or franchise fees; rights of admission;
licenses; franchises; license agreements, including all rights of the
Borrower to enforce same; permits, certificates of convenience and
necessity, and similar rights granted by any governmental authority;
patents, patent applications, patents pending, and other intellectual
property; Internet addresses and domain names; developmental ideas and
concepts; proprietary processes; blueprints, drawings, designs,
diagrams, plans, reports, and charts; catalogs; manuals; technical
data; computer software programs (including the source and object
codes therefor), computer records, computer software, rights of access
to computer record service bureaus, service bureau computer contracts,
and computer data; tapes, disks, semi-conductors chips and printouts;
trade secrets rights, copyrights, mask work rights and interests, and
derivative works and interests; user, technical reference, and other
manuals and materials; trade names, trademarks, service marks, and all
goodwill relating thereto; applications for registration of the
foregoing; and all other general intangible property of the Borrower
in the nature of intellectual property; proposals; cost estimates, and
reproductions on paper, or otherwise, of any and all concepts or
ideas, and any matter related to, or connected with, the design,
development, manufacture, sale, marketing, leasing, or use of any or
all property produced, sold or leased, by the Borrower or credit
extended or services performed, by the Borrower, whether intended for
an individual customer or the general business of the Borrower, or
used or useful in connection with research by the Borrower.
"Goods": Has the meaning given that term in the UCC.
"Guarantor": Collectively, JBI and Morse Shoe, Inc. (a Delaware corporation
with its principal executive offices at 555 Turnpike Street, Canton,
Massachusetts, 02021).
"Hazardous Materials": Any (a) hazardous materials, hazardous waste,
hazardous or toxic substances, petroleum products, which (as to any of
the foregoing) are defined or regulated as a hazardous material in or
under any Environmental Law and (b) oil in any physical state.
"Indebtedness": All indebtedness and obligations of or assumed by any
Person on account of or in respect to any of the following:
(a) In respect of money borrowed (including any
indebtedness which is non-recourse to the credit of such
Person but which is secured by an Encumbrance on any asset of
such Person) whether or not evidenced by a promissory note,
bond, debenture or other written obligation to pay money.
(b) In connection with any letter of credit or
acceptance transaction (including, without limitation, the
face amount of all letters of credit and acceptances issued
for the account of such Person or reimbursement on account of
which such Person would be obligated).
(c) In connection with the sale or discount of
accounts receivable or chattel paper of such Person.
(d) On account of deposits or advances.
(e) As lessee under Capital Leases.
(f) In connection with any sale and leaseback
transaction.
"Indebtedness" also includes:
(x) Indebtedness of others secured by an
Encumbrance on any asset of such Person, whether or
not such Indebtedness is assumed by such Person.
(y) Any guaranty, endorsement, suretyship or
other undertaking pursuant to which that Person may
be liable on account of any obligation of any third
party, other than on account of the endorsement of
checks and other items in the ordinary course.
(z) The Indebtedness of a partnership or
joint venture in which such Person is a general
partner or joint venturer.
"Indemnified Person": Is defined in Section 15-12.
"Instruments": Has the meaning given that term in the UCC.
"Inventory": Includes, without limitation, "inventory" as defined in the
UCC and also all: packaging, advertising, and shipping materials
related to any of the foregoing, and all names or marks affixed or to
be affixed thereto for identifying or selling the same; Goods held for
sale or lease or furnished or to be furnished under a contract or
contracts of sale or service by the Borrower, or used or consumed or
to be used or consumed in the Borrower's business; Goods of said
description in transit: returned, repossessed and rejected Goods of
said description; and all documents (whether or not negotiable) which
represent any of the foregoing.
"Inventory Advance Rate": 65%.
"Inventory Appraisal Cap": 80%.
"Inventory Reserves": Such Reserves as may be established from time to time
by the Administrative Agent in the Administrative Agent's reasonable
discretion with respect to the determination of the saleability, at
retail, of the Eligible Inventory or the Eligible L/C Inventory or
which reflect such other factors as affect the market value of the
Eligible Inventory or the Eligible L/C Inventory. Without limiting the
generality of the foregoing, Inventory Reserves may include (but are
not limited to) reserves based on the following:
(i) Obsolescence (determined based upon
Inventory on hand beyond a given
number of days).
(ii) Seasonality.
(iii) Shrinkage.
(iv) Imbalance.
(v) Change in Inventory character.
(vi) Change in Inventory composition
(vii) Change in Inventory mix.
(viii) Markdowns (both permanent and point
of sale)
(ix) Retail markons and markups
inconsistent with prior period
practice and performance; industry
standards; current business plans;
or advertising calendar and planned
advertising events.
At the execution of this Agreement, the only
Inventory Reserves are as those described in Section 2-3
"Investment Property": Has the meaning given that term in the UCC.
"Issuer": The issuer of any L/C.
"JBI": JBI, Inc. a Massachusetts corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts, 02021.
"L/C": Any letter of credit, the issuance of which is procured by the Agent
for the account of the Borrower and any acceptance made on account of
such letter of credit.
"Landlord Lien States": Those states under whose law, as has been
reasonably determined by the Agent, a landlord may have a claim
against Collateral located on the premises of that landlord for unpaid
rent which may be senior to the security interests created herein.
"Lease": Any lease or other agreement, no matter how styled or structured,
pursuant to which the Borrower is entitled to the use or occupancy of
any space or asset.
"Leasehold Interest": Any interest of the Borrower as lessee under any
Lease.
"Lender ": Collectively and each individually, each Working Capital Lender,
and the Term Lender.
"Liabilities" (in the singular, "Liability"): Includes, without limitation,
all and each of the following, whether now existing or hereafter
arising:
(a) Any and all direct and indirect liabilities,
debts, and obligations of the Borrower to any Agent or any
Lender, each of every kind, nature, and description owing on
account of this Agreement or any other Loan Document or any
service or accommodation provided to, or for the account of
the Borrower pursuant to this Agreement or any other Loan
Document, including cash management services or the issuance
of any L/C.
(b) Each obligation to repay any loan, advance,
indebtedness, note, obligation, overdraft, or amount now or
hereafter owing by the Borrower to any Agent or any Lender
(including all future advances whether or not made pursuant to
a commitment by any Agent or any Lender), whether or not any
of such are liquidated, unliquidated, primary, secondary,
secured, unsecured, direct, indirect, absolute, or contingent.
(c) All notes and other obligations of the Borrower
now or hereafter assigned to or held by any Agent or any
Lender, each of every kind, nature, and description, other
than notes or other obligations which constitute Permitted
SubDebt.
(d) All interest, fees, and charges and other amounts
which may be charged by any Agent or any Lender to the
Borrower and/or which may be due from the Borrower to any
Agent or any Lender from time to time.
(e) All costs and expenses incurred or paid by any
Agent or any Lender in respect of any agreement between the
Borrower and Agent or any the Lender or instrument furnished
by the Borrower to any Agent or any Lender (including, without
limitation, Costs of Collection, attorneys' reasonable fees,
and all court and litigation costs and expenses).
(f) Any and all covenants of the Borrower to or with
any Agent or any Lender and any and all obligations of the
Borrower to act or to refrain from acting in accordance with
any agreement between the Borrower and any Agent or any Lender
or instrument furnished by the Borrower to any Agent or any
Lender.
(g) Each of the foregoing as if each reference to the
" any Agent and any Lender " therein were to each Affiliate of
any Agent or any Lender.
"Line (Unused) Fee": Is defined in Section 2-13.
"Loan Account": Is defined in Section 2-7.
"LoanDocuments": This Agreement, each instrument and document executed
and/or delivered as contemplated by Section 3.2 or Article 4, below,
and each other instrument or document from time to time delivered in
connection with the arrangements contemplated by this Agreement.
"Local DDA": A depository account maintained by the Borrower, the only
contents of which may be transfers from the Operating Account and
actually used solely (i) for petty cash purposes; or (ii) for payroll.
"Material Accounting Change": Any change in GAAP applicable to accounting
periods subsequent to the Borrower's fiscal year most recently
completed prior to the execution of this Agreement, which change has a
material effect on the Borrower's financial condition or operating
results, as reflected on financial statements and reports prepared by
or for the Borrower, when compared with such condition or results as
if such change had not taken place or where preparation of the
Borrower's statements and reports in compliance with such change
results in the breach of a financial performance covenant imposed
pursuant to Section 6-12 where such a breach would not have occurred
if such change had not taken place or visa versa.
"Maturity Date": May 31, 2001.
"Operating Account": Is defined in Section 8-3.
"Participant": Is defined in Section 15-16, hereof.
"Permitted Investments": Any of the following:
(a) Marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the
date of purchase by a Borrower; demand deposits, certificates
of deposit, bankers acceptances and time deposits of United
States banks having total assets in excess of
$1,000,000,000.00; securities commonly known as "commercial
paper" issued by a corporation organized and existing under
the laws of the United States of America or any state thereof
that at the time of purchase have been rated and the ratings
for which are not less than "P 1" if rated by Moody's
Investors Services, Inc., and not less than "A 1" if rated by
Standard and Poor's; investments in common and preferred stock
traded on national securities exchanges, provided that the
aggregate amount at any one time invested does not exceed
$50,000.00.
(b) Loans permitted pursuant to Section 5-20(c).
"Permitted Encumbrances": Encumbrances on properties to secure taxes,
assessments and other government charges or claims for labor, material
or supplies in respect of obligations not then overdue; deposits or
pledges made in connection with, or to secure payment of, workmen's
compensation, unemployment insurance, old age pensions or other social
security obligations; Encumbrances of carriers, warehousemen,
mechanics and materialmen, and other like Encumbrances on properties
in existence less than 40 days from the date of creation thereof in
respect of obligations not overdue; Encumbrances on properties
consisting of easements, rights of way, zoning restrictions,
restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's
Encumbrances under leases to which the Borrower is a party, and other
minor Encumbrances or encumbrances none of which interferes materially
with the use of the property affected in the ordinary conduct of the
business of the Borrower, which defects do not individually or in the
aggregate have a materially adverse effect on the business of any
Borrower individually or of the Borrowers as a whole; Encumbrances in
favor of the Administrative Agent under the Loan Documents.
"Permitted Overhead Contributions": Payments to JBI towards corporate
overhead, not to exceed the greater of the following (measured on a
fiscal quarterly basis):
(a) Those amounts agreed to by the Borrower and
JBI (subject to those limitations as are
included in the overhead expense allocation
protocol between the Borrower and JBI
or
(b) 110% of such corporate overhead payments, as
reflected on the Business Plan.
"Permitted SubDebt": The Indebtedness evidenced by the Borrower's 13%
Senior Subordinated Notes issued on or about the date of this
Agreement and due December 31, 2001.
"Person": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other enterprise or
entity.
"PIK Interest": Defined in Section 3-4(a)(ii).
"Proceeds": Includes, without limitation, "Proceeds" as defined in the UCC
(defined below), and each type of property described in Section 9-1
hereof.
"Receipts": All cash, cash equivalents, checks, and credit card slips and
receipts as arise out of the sale of the Collateral.
"Receivables Collateral": That portion of the Collateral which consists of
the Borrower's Accounts, Accounts Receivable, General Intangibles,
Chattel Paper, Instruments, Documents of Title, Documents, Investment
Property, letters of credit for the benefit of the Borrower, and
bankers' acceptances held by the Borrower, and any rights to payment.
"Related Entity": (a) Any corporation, limited liability company, trust,
partnership, joint venture, or other enterprise which: is a parent,
brother-sister, subsidiary, or affiliate, of the Borrower; could have
such enterprise's tax returns or financial statements consolidated
with the Borrower's; could be a member of the same controlled group of
corporations (within the meaning of Section 1563(a)(1), (2) and (3) of
the Internal Revenue Code of 1986, as amended from time to time) of
which the Borrower is a member; controls or is controlled by the
Borrower or by any Affiliate of the Borrower.
(b) Any Affiliate.
"Repp Purchase Agreement": The Asset Purchase Agreement, dated as of April
30, 1999 between J. Baker, Inc. and Edison Brothers Stores, Inc. and
Edison Brothers Apparel Stores, Inc., the rights of J. Baker, Inc.
under which have been assigned to the Borrower.
"Repp Purchase Documents": Repp Purchase Agreement and all documents to be
executed or delivered in connection with the purchase and sale
contemplated by the Repp Purchase Agreement.
"Repp Division": The Repp, LTD and Repp by Mail divisions of Edison
Brothers Stores, Inc. and Edison Brothers Apparel Stores, Inc.
"Requirement of Law": As to any Person:
(a) All statutes, rules, regulations, orders, or
other requirements having the force of law and (ii) all court
orders and injunctions, arbitrator's decisions, and/or similar
rulings, in each instance ((i) and (ii)) of or by any federal,
state, municipal, and other governmental authority, or court,
tribunal, panel, or other body which has or claims
jurisdiction over such Person, or any property of such Person,
or of any other Person for whose conduct such Person would be
responsible.
(b) That Person's charter, certificate of
incorporation, articles of organization, and/or other
organizational documents, as applicable; and (c) that Person's
by-laws and/or other instruments which deal with corporate or
similar governance, as applicable.
"Reserves": All (if any) Availability Reserves and Inventory Reserves.
"Revolving Credit": Is defined in Section 2-1.
"Revolving Credit Notes": Is defined in Section 2-8.
"Revolving Loan Ceiling":
The lesser of
(a) $20,000,000.00; or
(b) the result of:
(i) the BaseLine Amount;
plus
(ii) The lesser of the following:
(A) The Credit Card Advance Rate of the
aggregate face amount of under 5 day Eligible Credit
Card Receivables .
(B) $400,000.00
Plus
(iii) The Special Inventory Advance Rate of
the Cost of Eligible L/C Inventory (net of
Inventory Reserves).
Plus
(iv) The Special Inventory Advance Rate of
the Cost of Eligible In Transit Inventory
(net of Inventory Reserves)
"Sale Order": An order of the Bankruptcy Court entered in the Edison
Brothers Chapter 11 Case, in form satisfactory to the Agent and the
Term Lender, approving the consummation of the transaction
contemplated by the Repp Purchase Documents.
" Special Inventory Advance Rate": 55%.
"Stated Amount": The maximum amount for which an L/C may be honored.
"Store": A location at which the Borrower regularly offers Inventory for
sale to the public.
"Suspension Event": Any occurrence, circumstance, or state of facts which
(a) is an Event of Default; or (b) would become an Event of Default if
any requisite notice were given and/or any requisite period of time
were to run and such occurrence, circumstance, or state of facts were
not absolutely cured within any applicable grace period.
"Term Lender": Defined in the Preamble to this Agreement.
"Term Loan": Defined in Section 3-1(a).
"Term Loan Commitment Fee": As defined in the Fee Letter.
"Term Loan Monitoring Fee": As defined in the Fee Letter.
"Term Note": Defined in Section 3-2.
"Termination Date": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 11-12 hereof; or (c) date
set by notice by the Agent to the Borrower, which notice sets the
Termination Date on account of the occurrence of any Event of Default
other than as described in Section 11-12 hereof.
"UCC": The Uniform Commercial Code as presently in effect in Massachusetts
(Mass. Gen. Laws, Ch.106).
"Working Capital Lenders": Defined in the Preamble to this Agreement
"Year 2000 Compliant": Computer applications, imbedded microchips, and
other systems and subsystems which properly recognize and perform
their intended function without any adverse effect on account of their
respective inability to recognize certain dates prior to, on, and
after December 31, 1999 or on account of their treating any date prior
to, on, or after December 31, 1999 other than as the specific date in
question.
II. Article 2-The Revolving Credit:
2-1. Establishment of Revolving Credit
(a) The Working Capital Lenders hereby establish a revolving
line of credit (the "Revolving Credit") in the Borrower's favor pursuant to
which each Working Capital Lender, subject to, and in accordance with, this
Agreement, acting through the Administrative Agent, shall make loans and
advances and otherwise provide financial accommodations to and for the account
of the Borrower as provided herein, in each instance equal to that Working
Capital Lender's Commitment Percentage of Availability, up to the maximum amount
of that Working Capital Lender's Dollar Commitment. Subject to the Availability
Block (as to which, see Section 2-1(e)) the amount available for borrowing under
the Revolving Credit shall be determined by the Administrative Agent by
reference to Availability, as determined by the Administrative Agent from time
to time.
(b) As used herein, the following terms have the
following meanings:
(i) "Availability" refers at any time to the
result of the following:
(A) Borrowing Base.
Minus
(B) The then unpaid principal balance of the Loan
Account. Minus (C) The then Stated Amount of all
L/C's.
(ii) "Borrowing Base" refers at any time to the
lesser of 2-1(b)(ii)(A) or 2-1(b)(ii)(B),
where:
(A) is the Revolving Loan Ceiling. (B) is the result
of the following:
(I) The lesser of the following: (1) The
Credit Card Advance Rate of the aggregate
face amount of under 5 day Eligible Credit
Card Receivables .
(2) $400,000.00
Plus
(II) lesser of the following: (1) The
Inventory Advance Rate of the Cost of
Eligible Inventory (net of Inventory
Reserves). (2) The Inventory Appraisal Cap
of the appraised liquidation value of
Eligible Inventory (net of Inventory
Reserves).
Plus
(III) The Special Inventory Advance Rate of
the Cost of Eligible L/C Inventory
(net of Inventory Reserves).
Plus
(IV) The Special Inventory Advance Rate
of the Cost of Eligible In-Transit
Inventory (net of Inventory Reserves).
Minus
(V) The then aggregate of the Availability
Reserves.
(c) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 6-4 hereof.
(d) The proceeds of the initial borrowings under the Revolving
Credit shall be used solely to acquire the assets of the Repp Division in
accordance with the Repp Purchase Documents and for the costs of the
establishment of the credit facilities contemplated by the Loan Documents and
thereafter shall be used in accordance with the Business Plan for working
capital purposes of the Borrower and for its Capital Expenditures, in all events
solely to the extent permitted by this Agreement.
(e) At the execution of this Agreement, there shall be an
Availability Block (so referred to herein) of $500,000.00. The Availability
Block shall remain in effect until the validation of the Borrower's Inventory
following the completion of a physical count thereof, as contemplated by the
Repp Purchase Agreement and the release by the Escrow Agent (as defined therein)
of any funds being held by the Escrow Agent pending completion of such physical
count and validation.
2-2. Advances in Excess of Borrowing Base. No Lender has any obligation
to make any loan or advance, or otherwise to provide any credit for the benefit
of the Borrower such that the aggregate of the balance of the Loan Account plus
the then Stated Amount of all L/C's exceeds the Borrowing Base. The making of
loans, advances, and credits and the providing of financial accommodations in
excess of the Borrowing Base is for the benefit of the Borrower and does not
affect the obligations of the Borrower hereunder; such loans, advances, credits,
and financial accommodations constitute Liabilities. The making of any such
loans, advances, and credits and the providing of financial accommodations, on
any one occasion such that the Borrowing Base is exceeded shall not obligate any
Lender to make any such loans, credits, or advances or to provide any financial
accommodation on any other occasion or to permit such loans, credits, or
advances to remain outstanding.
2-3. Initial Reserves. Changes to Reserves.
(a) At the execution of this Agreement, the only Reserves
are as follows:
(i) Availability Reserves:
(A) 50% of the aggregate of Customer Credit
Liabilities.
(B) Three months rent for all locations in Landlord
Lien States for which the Borrower has not
provided the Agent with a landlord lien or
subordination in form reasonably satisfactory
to the Agent.
(ii) Inventory Reserves: A reserve for shrinkage,
initially set at $100,000.00 and increased, on the first day of
each month, by 0.8% of the year to date sales until the Borrower's
inventory is relieved to reflect the results of a physical inventory
(at which time, the Reserve shall be relieved and likewise begin to
accrete).
(b) The Administrative Agent shall provide not less than five
days prior notice to the Borrower of the establishment of any Reserve (other
than those established at the execution of this Agreement) except that a change
to a then existing Reserve, which change reflects changed circumstances (such as
a change to the Inventory Reserve for shrinkage), may be made without such
notice.
2-4. Risks of Value of Collateral. The Administrative Agent's reference
to a given asset in connection with the making of loans, credits, and advances
and the providing of financial accommodations under the Revolving Credit and/or
the monitoring of compliance with the provisions hereof shall not be deemed a
determination by the Administrative Agent or any Working Capital Lender relative
to the actual value of the asset in question. All risks concerning the
saleability of the Borrower's Inventory are and remain upon the Borrower. All
Collateral secures the prompt, punctual, and faithful performance of the
Liabilities whether or not relied upon by the Administrative Agent or by any
Working Capital Lender in connection with the making of loans, credits, and
advances and the providing of financial accommodations under the Revolving
Credit.
2-5. Loan Requests.
(a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Borrower
shall be made pursuant hereto, provided that:
(i) Borrowing Base will not be exceeded; and
(ii) The Revolving Credit has not been suspended
as provided in Section 2-5(h).
(b) Requests for loans and advances under the Revolving
Credit may be requested by the Borrower in such manner as may from time
to time be acceptable to the Administrative Agent.
(c) Subject to provisions of this Agreement, a request for a
loan or advance (in each instance in an amount which is not less than
$10,000.00) shall be made by 1:00 PM on a Business Day will be made by the end
of business on that Business Day; otherwise, by the end of the then next
Business Day.
(d) Any request for a Revolving Credit Loan made after the
applicable deadline therefor, as set forth above, shall be deemed to have been
made at the opening of business on the then next Business Day, as applicable.
Each request for a Revolving Credit Loan shall be made in such manner as may
from time to time be acceptable to the Administrative Agent
(e) The Borrower may request that the Administrative Agent
cause the issuance of L/C's for the account of the Borrower as provided in
Section 2-16.
(f) The Administrative Agent may rely on any request for a
loan or advance, or other financial accommodation under the Revolving Credit
which the Administrative Agent, in good faith, believes to have been made by a
Person duly authorized to act on behalf of the Borrower and may decline to make
any such requested loan or advance, or issuance, or to provide any such
financial accommodation pending the Administrative Agent's being furnished with
such documentation concerning that Person's authority to act as may be
satisfactory to the Administrative Agent.
(g) A request by the Borrower for loan or advance, or other
financial accommodation under the Revolving Credit shall be irrevocable and
shall constitute certification by the Borrower that as of the date of such
request, each of the following is true and correct:
(i) There has been no material adverse change in the
Borrower's financial condition from the most recent financial
information furnished Administrative Agent or any Lender pursuant to
this Agreement.
(ii) The Borrower is in compliance with, and has not
breached any of, its covenants contained in this Agreement.
(iii) Each representation, not relating to a specific
date, made herein or in any of the Loan Documents (defined below) is
then true and correct in all material respects as of and as if made on
the date of such request (except (A) to the extent of changes resulting
from transactions contemplated or permitted by this Agreement or the
other Loan Documents and changes occurring in the ordinary course of
business which singly or in the aggregate are not materially adverse
and (B) to the extent that such representations and warranties
expressly relate to a then earlier date).
(iv) No Suspension Event is then extant.
(h) Upon the occurrence from time to time of any Suspension
Event:
(i) The Administrative Agent may suspend the
Revolving Credit immediately.
(ii) Neither the Administrative Agent nor any
Lender shall be obligated, during
such suspension, to make any loans or advance, or to provide any
financial accommodation hereunder or to seek the issuance of any L/C.
2-6. Making of Loans Under Revolving Credit.
(a) A loan or advance under the Revolving Credit shall be made
by the transfer of the proceeds of such loan or advance to the Operating Account
or as otherwise instructed by the Borrower.
(b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrower shall be indebted to the Administrative
Agent and the Working Capital Lenders for the amount thereof immediately) at the
following:
(i) The Administrative Agent's initiation of the
transfer of the proceeds of such loan or advance in accordance with the
Borrower's instructions (if such loan or advance is of funds requested
by the Borrower).
(ii) The charging of the amount of such loan to the
Loan Account (in all other circumstances).
(c) There shall not be any recourse to or liability of the
Administrative Agent or any Working Capital Lender, on account of:
(i) Any delay, beyond the reasonable control of the
Agents or any Working Capital Lender, in the making of any loan or
advance requested under the Revolving Credit.
(ii) Any delay, beyond the reasonable control of the
Agents or any Working Capital Lender, in the proceeds of any such loan
or advance constituting collected funds.
(iii) Any delay in the receipt, and/or any loss, of
funds which constitute a loan or advance under the Revolving Credit,
the wire transfer of which was properly initiated by the Administrative
Agent in accordance with wire instructions provided to the
Administrative Agent by the Borrower.
2-7. The Loan Account.
(a) An account ("Loan Account") shall be opened on the books
of the Administrative Agent. A record may be kept in the Loan Account of all
loans made under or pursuant to the Revolving Credit and of all payments
thereon.
(b) The Administrative Agent may also keep a record (either in
the Loan Account or elsewhere, as the Administrative Agent may from time to time
elect) of all interest, fees, service charges, costs, expenses, and other debits
owed the Administrative Agent and each Lender on account of the Liabilities and
of all credits against such amounts so owed.
(c) All credits against the Liabilities shall be conditional
upon final payment to the Administrative Agent for the account of each Lender of
the items giving rise to such credits. The amount of any item credited against
the Liabilities which is charged back against Administrative Agent or any Lender
for any reason or is not so paid shall be a Liability and shall be added to the
Loan Account, whether or not the item so charged back or not so paid is
returned.
(d) Except as otherwise provided herein, all fees, service
charges, costs, and expenses for which the Borrower is obligated hereunder are
payable on demand. In the determination of Availability, the Administrative
Agent may deem fees, service charges, accrued interest, and other payments which
will be due and payable between the date of such determination and the first day
of the then next succeeding month as having been advanced under the Revolving
Credit whether or not such amounts are then due and payable.
(e) The Administrative Agent, without the request of the
Borrower, may advance under the Revolving Credit any interest, fee, service
charge, or other payment to which the Administrative Agent or any Lender is
entitled from the Borrower pursuant hereto and may charge the same to the Loan
Account notwithstanding that such amount so advanced may result in Borrowing
Base's being exceeded. Such action on the part of the Administrative Agent shall
not constitute a waiver of the Administrative Agent's rights and Borrower's
obligations under Section 2-9(b). Any amount which is added to the principal
balance of the Loan Account as provided in this Section 2-7(e) shall bear
interest as provided at the then applicable rate for loans under the Revolving
Credit.
(f) In the absence of manifest error, any statement rendered
by the Administrative Agent or any Working Capital Lender to the Borrower
concerning the Liabilities shall be considered correct and accepted by the
Borrower and shall be conclusively binding upon the Borrower unless the Borrower
provides the Administrative Agent with written objection thereto within Thirty
(30) days from the mailing of such statement, which written objection shall
indicate, with particularity, the reason for such objection. In the absence of
manifest error, the Loan Account and the Administrative Agent's books and
records concerning the loan arrangement contemplated herein and the Liabilities
shall be prima facie evidence and proof of the items described therein.
2-8. The Revolving Credit Notes. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein, shall be
evidenced by Notes (each, a "Revolving Credit Note") in the form of EXHIBIT 2-8,
annexed hereto, executed by the Borrower, one payable to each Working Capital
Lender. Neither the original nor a copy of any Revolving Credit Note shall be
required, however, to establish or prove any Liability. In the event that any
Revolving Credit Note is ever lost, mutilated, or destroyed, the Borrower shall
execute a replacement thereof and deliver such replacement to the Administrative
Agent.
2-9. Payment of The Loan Account.
(a) The Borrower may repay all or any portion of the principal
balance of the Loan Account from time to time until the Termination Date.
(b) The Borrower, without notice or demand from the
Administrative Agent or any Working Capital Lender, shall pay the Administrative
Agent that amount, from time to time, which is necessary so that the unpaid
balance of the Loan Account does not exceed the Borrowing Base.
(c) The Borrower shall repay the then entire unpaid balance of
the Loan Account and all other Liabilities on the Termination Date.
2-10. Interest.
(a) The unpaid principal balance of the Loan Account shall
bear interest, until repaid (calculated based upon a 360-day year and actual
days elapsed), at the aggregate of Base plus 1% per annum.
(b) Following the occurrence of any Event of Default (and
whether or not the Administrative Agent exercises any of the Administrative
Agent's rights on account of such Event of Default), all loans and advances made
under the Revolving Credit shall bear interest, at the option of the
Administrative Agent at a rate which is the aggregate of the rate provided for
in Section 2-10(a), above, plus Two Percent (2%) per annum.
(c) Accrued interest shall be payable:
(i) Monthly in arrears on the first day of the month
next following that during which such interest accrued.
(ii) On the Termination Date.
(iii) On the End Date.
2-11. Commitment Fee As compensation for the respective commitments of
those Persons who are Working Capital Lenders at the execution of this Agreement
to make loans and advances to the Borrower and as compensation for the such
Lenders' respective maintenance of sufficient funds available for such purpose,
the such Lenders have earned the Commitment Fee (so referred to herein) in the
amount and payable as provided in the Fee Letter.
2-12. Administrative Agent's Fee.
(a) In addition to any other fee or expense paid by the
Borrower on account of the Revolving Credit, the Borrower shall pay the
Administrative Agent the Administrative Agent's Fee (so referred to herein) in
the amount and payable as provided in the Fee Letter.
(b) Except as provided in Section 2-12(c), upon the
termination of the Revolving Credit and, at the Administrative Agent's option,
upon the occurrence of any Event of Default described in Section 11-12, any
remaining installments of the Administrative Agent's Fee shall be immediately
due and payable.
(c) In the event of a refinancing of the Revolving Credit in a
credit facility which is agented or fully funded by the Administrative Agent or
any affiliate of the Administrative Agent, the Administrative Agent shall waive
any remaining installments of the Administrative Agent's Fee which would
otherwise be due pursuant to Section 2-12(b).
2-13. Line (Unused) Fee. In addition to any other fee by the Borrower
on account of the Revolving Credit, the Borrower shall pay the Administrative
Agent, for the account of the Working Capital Lenders, a Line (Unused) Fee (so
referred to herein) in arrears, on the first day of each month (and on the
Termination Date). The Line (Unused) Fee shall be equal to 0.5% per annum of the
average difference, during the month just ended (or relevant period with respect
to the payment being made on the Termination Date) between the Revolving Loan
Ceiling and the aggregate of the unpaid principal balance of the Loan Account
plus the Stated Amount of all then outstanding L/C's.
2-14 Concerning Fees. Except as provided in Section 2-12(c), the
Borrower shall not be entitled to any credit, rebate or repayment of the
Commitment Fee, Administrative Agent's Fee, Line (Unused) Fee (but only through
the effective date of such termination), Collateral Monitoring Fee or other fee
previously earned by any Agent or any Lender pursuant to this Agreement
notwithstanding any termination of this Agreement or suspension or termination
of the Administrative Agent's and any Lender's respective obligation to make
loans and advances hereunder.
2-15. Agent's and Lenders' Discretion.
(a) Each reference in the Loan Documents to the exercise of
discretion or the like by any Agent or any Lender shall be to that Person's
exercise of its judgment, in good faith (which shall be presumed), based upon
that Person's consideration of any such factor as that Agent or that Lender,
taking into account information of which that Person then has actual knowledge,
believes:
(i) Will or reasonably could be expected to affect,
in more than a de minimus manner, the value of the Collateral, the
enforceability of the Collateral Administrative Agent's security and
collateral interests therein, or the amount which the Collateral Agent
would likely realize therefrom (taking into account delays which may
possibly be encountered in the Collateral Administrative Agent's
realizing upon the Collateral and likely Costs of Collection).
(ii) Indicates that any report or financial
information delivered to any Agent or any Lender by or on behalf of the
Borrower is incomplete, inaccurate, or misleading in any material
manner or was not prepared in accordance with the requirements of this
Agreement.
(iii) Constitutes a Suspension Event.
(b) In the exercise of such judgment, each Agent and each
Lender also may take into account any of the following factors:
(i) Those included in, or tested by, the
definitions of "Eligible Inventory," "Retail," and "Cost".
(ii) Material changes in or to the mix of the
Borrower's Inventory.
(iii) Seasonality with respect to Borrower's
Inventory and patterns of retail sales.
(c) The burden of establishing the failure of any Agent or any
Lender to have acted in a reasonable manner in such Person's exercise of
discretion shall be the Borrower's.
2-16. Procedures For Issuance of L/C's.
(a) The Borrower may request that the Administrative Agent
cause the issuance of L/C's for the account of the Borrower. Each such request
shall be in such manner as may from time to time be acceptable to the
Administrative Agent.
(b) The Administrative Agent will endeavor to cause the
issuance of any L/C so requested by the Borrower, provided that, at the time
that the request is made, the Revolving Credit has not been suspended as
provided in Section 2-5(h) and if so issued:
(i) The aggregate Stated Amount of all L/C's then
outstanding, does not exceed Seven Million Dollars ($7,000,000.00).
(ii) The expiry of the L/C is not later than the
earlier of Thirty (30) days prior to the Maturity Date or the
following:
(A) Standby's: One (1) year from initial
issuance. (B) Documentary's: One Hundred
Eighty (180) days from issuance. Borrowing
Base would not be exceeded.
(c) The Borrower shall execute such documentation to apply for
and support the issuance of an L/C as may be required by the Issuer.
(d) There shall not be any recourse to, nor liability of, the
Administrative Agent or any Lender on account of any delay or refusal by an
Issuer to issue an L/C or any action or inaction of an Issuer on account of or
in respect to, any L/C, except where there is a specific finding in a judicial
proceeding (in which the Administrative Agent has had an opportunity to be
heard), from which finding no further appeal is available, that the subject
action or omission to act had been in actual bad faith or grossly negligent or
constituted willful misconduct.
(e) The Borrower shall reimburse the Issuer for the amount of
any honoring of a drawing under an L/C on the same day on which such honoring
takes place. The Administrative Agent, without the request of the Borrower, may
advance under the Revolving Credit (and charge to the Loan Account) the amount
of any honoring of any L/C and other amount for which the Borrower, the Issuer,
or the Lenders become obligated on account of, or in respect to, any L/C. Such
advance shall be made whether or not a Suspension Event is then extant or such
advance would result in Borrowing Base's being exceeded. Such action shall not
constitute a waiver of the Administrative Agent's rights under Section hereof.
2-17. Fees For L/C's.
(a) The Borrower shall pay to the Administrative Agent a fee,
on account of L/C's, the issuance of which had been procured by the
Administrative Agent, monthly in arrears, and on the Termination Date and on the
End Date, equal to 2.0 % per annum of the weighted average Stated Amount of all
L/C's outstanding during the period in respect of which such fee is being paid.
(b) In addition to the fee to be paid as provided in
Subsection 2-17(a), above, the Borrower shall pay to the Administrative Agent
(or to the Issuer, if so requested by Administrative Agent), on demand, all
issuance, processing, negotiation, amendment, and administrative fees and other
amounts charged by the Issuer on account of, or in respect to, any L/C.
2-18. Concerning L/C's.
(a) None of the Issuer, the Issuer's correspondents, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:
(i) The performance by any beneficiary under any L/C
of that beneficiary's obligations to the Borrower.
(ii) The form, sufficiency, correctness, genuineness,
authority of any person signing; falsification; or the legal effect of;
any documents called for under any L/C if (with respect to the
foregoing) such documents on their face appear to be in order.
(b) The Issuer may honor, as complying with the terms of any
L/C and of any drawing thereunder, any drafts or other documents otherwise in
order, but signed or issued by an administrator, executor, conservator, trustee
in bankruptcy, debtor in possession, assignee for the benefit of creditors,
liquidator, receiver, or other legal representative of the party authorized
under such L/C to draw or issue such drafts or other documents.
(c) The Borrower may instruct the Issuer concerning the
designation of any advising bank, paying bank, and negotiating bank, it being
understood that the Issuer shall honor such designation to the extent then
practicable.
(d) All directions, correspondence, and funds transfers
relating to any L/C are at the risk of the Borrower. The Issuer shall have
discharged the Issuer's obligations under any L/C which, or the drawing under
which, includes payment instructions, by the initiation of the method of payment
called for in, and in accordance with, such instructions (or by any other
commercially reasonable and comparable method). None of the Administrative
Agent, any Lender, nor the Issuer shall have any responsibility for any
inaccuracy, interruption, error, or delay in transmission or delivery by post,
telegraph or cable, or for any inaccuracy of translation.
(e) The Administrative Agent's, each Working Capital Lender's,
and the Issuer's rights, powers, privileges and immunities specified in or
arising under this Agreement are in addition to any heretofore or at any time
hereafter otherwise created or arising, whether by statute or rule of law or
contract.
(f) Except to the extent otherwise expressly provided
hereunder or agreed to in writing by the Issuer and the Borrower, the L/C will
be governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 500, and any subsequent
revisions thereof.
(g) If any change in any law, executive order or regulation,
or any directive of any administrative or governmental authority (whether or not
having the force of law), or in the interpretation thereof by any court or
administrative or governmental authority charged with the administration
thereof, shall either:
(i) impose, modify or deem applicable any reserve,
special deposit or similar requirements against letters of credit
heretofore or hereafter issued by any Issuer or with respect to which
the Administrative Agent, any or any Issuer has an obligation to lend
to fund drawings under any L/C; or
(ii) impose on any Issuer any other condition or
requirements relating to any such letters of credit;
and the result of any event referred to in Section 2-18(g)(i) or 2-18(g)(ii),
above, shall be to increase the cost to any Issuer of issuing or maintaining any
L/C (which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the aggregate of
such cost increases resulting from such events), then, upon demand by the
Administrative Agent and delivery by the Administrative Agent to the Borrower of
a certificate of an officer of the subject Issuer describing such change in law,
executive order, regulation, directive, or interpretation thereof, its effect on
such Issuer, and the basis for determining such increased costs and their
allocation, the Borrower shall immediately pay to the Administrative Agent, from
time to time as specified by the Administrative Agent, such amounts as shall be
sufficient to compensate such Issuer for such increased cost. In the absence of
manifest error, any Issuer's determination of costs incurred under Section
2-18(g)(i) or 2-18(g)(ii), above, and the allocation, if any, of such costs
among the Borrower and other letter of credit customers of such Issuer, if done
in good faith and made on an equitable basis and in accordance with such
officer's certificate, shall be conclusive and binding on the Borrower.
(h) The obligations of the Borrower under this Agreement with
respect to L/C's are absolute, unconditional, and irrevocable and shall be
performed strictly in accordance with the terms hereof under all circumstances,
whatsoever including, without limitation, the following:
(i) Any lack of validity or enforceability or
restriction, restraint, or stay in the enforcement of this Agreement,
any L/C, or any other agreement or instrument relating thereto.
(ii) The Borrower's consent to the amendment or
waiver of or any departure from, any L/C.
(iii) The existence of any claim, set-off, defense,
or other right which the Borrower may have at any time against the
beneficiary of any L/C.
(iv) Any good faith honoring of a drawing under any
L/C, which drawing possibly could have been dishonored based upon a
strict construction of the terms of the L/C.
(i) Each Issuer shall be deemed to have agreed as follows:
(i) That any action taken or omitted by that Issuer,
that Issuer's correspondents, or any advising, negotiating or paying bank with
respect to any L/C and the related drafts and documents, shall be done in good
faith and in compliance with foreign or domestic laws.
(ii) That the Borrower shall not be required to
indemnify the Issuer, the Issuer's correspondents, or any advising, negotiating
or paying bank with respect to any L/C for any claims, damages, losses,
liabilities, costs or expenses to the extent, caused by (x) the willful
misconduct or gross negligence of the Issuer, the Issuer's correspondents, or
any advising, negotiating or paying bank with respect to any L/C in determining
whether a request presented under any Letter of Credit complied with the terms
of such Letter of Credit or (y) the Issuer's failure to pay under any Letter of
Credit after the presentation to it of a request strictly complying with the
terms and conditions of such Letter of Credit.
2-19 Lenders' Commitments.
(a) The obligations of each Working Capital Lender are several
and not joint. No Working Capital Lender shall have any obligation to make any
loan or advance under the Revolving Credit in excess of the lesser of
(i) that Working Capital Lender's Commitment
Percentage of the subject loan or advance or of Availability; or
(ii) that Working Capital Lender's Dollar Commitment,
(b) No Working Capital Lender shall have any liability to the
Borrower on account of the failure of any other Working Capital Lender to
provide any loan or advance under the Revolving Credit nor any obligation to
make up any shortfall which may be created by such failure.
(c) The Dollar Commitments, Commitment Percentages, and
identities of the Working Capital Lenders (but not the overall Commitment) may
be changed, from time to time by the reallocation or assignment of Dollar
Commitments and Commitment Percentages amongst the Lenders or with other Persons
who determine to become "Lenders", provided, however, any such assignment or
reallocation shall be on a pro-rata basis such that each reallocated or assigned
Dollar Commitment to any Person remains the same percentage of the overall
Commitment (in terms of dollars) as the reallocated Commitment Percentage is to
such Person.
(d) Upon written notice given the Borrower from time to time
by the Administrative Agent, of any assignment or allocation referenced in
Section 2-19(c):
(i) The Borrower shall execute one or more
replacement Revolving Credit Notes to reflect such changed Dollar
Commitments, Commitment Percentages, and identities and shall deliver
such replacement Revolving Credit Notes to the Administrative Agent
(which promptly thereafter shall deliver to the Borrower the Revolving
Credit Notes so replaced) provided however, in the event that a
Revolving Credit Note is to be exchanged following its acceleration or
the entry of an order for relief under the Bankruptcy Code with respect
to the Borrower, the Administrative Agent, in lieu of causing the
Borrower to execute one or more new Revolving Credit Notes, may issue
the Administrative Agent's Certificate confirming the resulting
Commitments and Commitment Percentages.
(ii) Such change shall be effective from the
effective date specified in such written notice and any Person added as
a Working Capital Lender shall have all rights and privileges of a
Lender hereunder thereafter as if such Person had been a signatory to
this Agreement and any other Loan Document to which a Working Capital
Lender is a signatory and any person removed as a Lender shall be
relieved of any obligations or responsibilities of a Working Capital
Lender hereunder thereafter.
(e) The Borrower recognizes that the Administrative Agent's
exercise of any discretion accorded to the Administrative Agent herein and of
its rights, remedies, powers, privileges, and discretions with respect to the
Borrower is subject to a certain Agency Agreement amongst the Administrative
Agent and the Working Capital Lenders. The "voting rights" which are included in
that Agency Agreement shall include the following:
(i) Except for those matters as to which Section
2-19(e)(ii), applies, the consent of 51% of the Dollar Commitments of
non-delinquent Lenders for amendment of or waiver of compliance with,
provisions of the Loan Documents or the Agency Agreement.
(ii) The following provisions of the Loan Documents
and the Agency Agreement shall require the consent of 100% of the
Dollar Commitment of non-delinquent Working Capital Lenders:
(A) Increase in any Working Capital
Lender's Commitment.
(B) Decrease in any interest rate or
fee payable hereunder (other than
the Administrative Agent's Fee, for
which consent of the Administrative
Agent shall also be required).
(C) Extension of the Maturity Date.
(D) Release of a substantial portion of
the Collateral.
(E) Increase in the Inventory Advance
Rate or in the Inventory Appraisal
Cap.
III. Article 3-The Term Loan.
3-1. Commitment To Make Term Loan.
(a) Subject to satisfaction of the Conditions Precedent
(Article 4) on or before May 24, 1999, the Borrower shall borrow from the Term
Lender and the Term Lender shall lend to the Borrower the sum of $5,000,000.00
(the "Term Loan"), repayable with interest as provided herein.
(b) The proceeds of the Term Loan shall be used solely to
acquire the assets of the Repp Division in accordance with the Repp Purchase
Documents.
3-2.The Term Note. The obligation to repay the Term Loan, with interest
as provided herein, shall be evidenced by a Note (the "Term Note") in the form
of EXHIBIT 3-2, annexed hereto, executed by the Borrower. Neither the original
nor a copy of the Term Note shall be required, however, to establish or prove
any Liability. In the event that the Term Note is ever lost, mutilated, or
destroyed, the Borrower shall execute a replacement thereof and deliver such
replacement to the Lender.
3-3. Payment of Principal of the Term Loan. The Borrower may not repay
all or any portion of the principal balance of the Term Loan prior to the
repayment in full of all Liabilities under the Revolving Credit and the
termination of any obligation, under the Revolving Credit, of the Administrative
Agent, or any Working Capital Lender to make any loans or to provide any
financial accommodations.
(a) On the Maturity Date, the Borrower shall repay the then
entire unpaid balance of the Term Loan and all other Liabilities.
(b) The Borrower shall pay an early termination fee of 2% of
any principal of the Term Loan which is prepaid for any reason prior to the
first anniversary of this Agreement.
3-4. Interest.
(a) The unpaid principal balance of the Term Loan shall bear
interest, until repaid (calculated based upon a 360-day year and actual days
elapsed), fixed at 19.0% per annum, payable as follows:
(i) Interest on the unpaid principal balance of the
Term Loan, equal to 16.0% per annum ("Current Pay Interest") shall be
payable monthly in arrears, on the first day of each month, and on the
Maturity Date.
(ii) Accrued Interest on the unpaid principal balance
of the Term Loan, equal to 3.0% per annum ("PIK Interest") , shall be
added to the then unpaid principal balance of the Term Note monthly, on
the first day of each month, commencing with June 1, 1999 or may be
paid by the Borrower on the first day of each month. The aggregate
balance of PIK Interest so added to the Term Note shall bear interest
(determined based on a 360 day year and actual days elapsed) at 16% per
annum.
(b) Following the occurrence of any Event of Default (and
whether or not the Lender exercises any of the Lender's rights on account of
such Event of Default), Current Pay Interest shall be 18% per annum and PIK
Interest shall remain equal to 3% per annum.
3-5. Term Loan Commitment Fee. As compensation for the Lender's having
committed to make the Term Loan, the Term Lender has earned the "Term Loan
Commitment Fee" (so referred to herein) in the amount and payable as provided in
the Fee Letter.
3-6. Term Loan Monitoring Fee. As compensation for its monitoring the
Borrower's compliance with this Agreement, the Term Lender shall be paid a "Term
Loan Monitoring Fee" (so referred to herein) in the amount and payable as
provided in the Fee Letter.
3-7. Payments. The Borrower authorizes the Term Loan Lender to request
that the Administrative Agent pay over directly to the Term Loan Lender any and
all amounts due from time to time under this Agreement as advances under the
Revolving Credit and hereby instructs the Administrative Agent to honor such
request. The Term Loan Lender shall provide the Borrower with prompt written
notice of any amount the Lender receives from the Administrative Agent pursuant
to a request made under this Section 3-7.
IV. Article 4-Conditions. Precedent:
I. As a condition to the effectiveness of this Agreement, the establishment of
the Revolving Credit, the making of the first loan under the Revolving Credit,
and the making of the Term Loan, each of the documents respectively described in
Sections 4-1 through and including 4-6, (each in form and substance satisfactory
to the Administrative Agent) shall have been delivered to the Administrative
Agent, and the conditions respectively described in Sections 4-7 through and
including 4-11, shall have been satisfied:
4-1. Corporate Due Diligence.
(a) A Certificate of corporate good standing issued by the
Secretary of State of The Commonwealth of Massachusetts.
(b) A Certificate of the Borrower's Secretary of the due
adoption, continued effectiveness, and setting forth the texts of, each
corporate resolution adopted in connection with the establishment of the loan
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.
4-2. Receipt of Proceeds of Permitted SubDebt. The Borrower shall have
received not less than $10 Million on account of the Permitted SubDebt.
4-3. Acquisition of Repp Division.
(a) The Repp Purchase Documents, each in form satisfactory to
the Administrative Agent and the Term Lender, shall have been executed.
(b) Written evidence, in form satisfactory to the
Administrative Agent and the Term Lender,. that the Sale Order has been entered
and that, at the execution of this Agreement, the Sale Order was effective; had
not been modified or its effect limited; and that no notice of appeal or motion
seeking the stay, delay, or modification of the Sale Order had been filed in the
Edison Brothers Chapter 11 Case.
(c) All conditions to the Borrower's acquisition of the Repp
Division, in accordance with the Repp Purchase Documents (with the exception of
the purchase price therefor), shall have been satisfied.
(d) The Borrower shall have consummated (or shall consummate
contemporaneous with the closing on the Revolving Credit and the Term Loan) the
sale, which is contemplated by an agreement (in form satisfactory to the
Administrative Agent and the Term Lender) of the Canadian operation of the Repp
Division for a cash purchase price which nets the Borrower not less than US$2.2
Million.
(e) The Agents shall have entered into such agreement with the
Escrow Agent under the Repp Purchase Agreement as is satisfactory to the
Agents).
4-4. Opinion. An opinion of counsel to the Borrower in form and
substance satisfactory to the Administrative Agent.
4-5. Additional Documents. Such additional instruments and
documents as the Administrative Agent or its counsel reasonably may require or
request.
4-6. Officers' Certificates. Certificates executed by the President and
the Chief Financial Officer of the Borrower and stating that the representations
and warranties made by the Borrower to the Administrative Agent and the Lenders
in the Loan Documents are true and complete in all material respects as of the
date of such Certificate, and that no event has occurred which is or which,
solely with the giving of notice or passage of time (or both) would be an Event
of Default.
4-7. Representations and Warranties. Each of the representations made
by or on behalf of the Borrower in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by or
on behalf of the Borrower shall be true and complete in all material respects as
of the date as of which such representation or warranty was made.
4-8. Minimum Excess Availability. The Borrowing Base, after giving
effect to the first funding under the Revolving Credit; any charges to the Loan
Account made in connection with the establishment of the credit facility
contemplated hereby; and L/C's to be issued at, or immediately subsequent to,
such establishment, is not less than $2,000,000.00.
4-9, All Fees and Expenses Paid. All fees due at or immediately after
the first funding under the Revolving Credit and all costs and expenses incurred
by the Administrative Agent, the Collateral Agent, and the Term Lender in
connection with the establishment of the credit facility contemplated hereby
(including the fees and expenses of counsel to the Administrative Agent, the
Collateral Agent, and the Term Lender and fees then due as provided in the Fee
Letter) shall have been paid.
4-10. No Suspension Event. No Suspension Event shall then exist.
4-11. No Adverse Change. No event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon any Guarantor's financial condition when compared with such financial
condition at January 31, 1999.
No document shall be deemed delivered to any Agent or any Lender until received
and accepted by the Administrative Agent at its head offices in Boston,
Massachusetts. Under no circumstances will this Agreement take effect until
executed and accepted by the Agents at said head office.
V. Article 5-General Representations, Covenants and Warranties.
To induce each Lender to establish the loan arrangement contemplated
herein and to make loans and advances and to provide financial accommodations
under the Revolving Credit (each of which loans shall be deemed to have been
made in reliance thereupon) and the Term Loan, the Borrower, in addition to all
other representations, warranties, and covenants made by the Borrower in any
other Loan Document, makes those representations, warranties, and covenants
included in this Agreement.
5-1. Payment and Performance of Liabilities. The Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.
5-2. Due Organization - Corporate Authorization - No Conflicts
(a) The Borrower
(i) Presently is and shall hereafter remain in good
standing as a Massachusetts corporation.
(ii) On or before August 2, 1999, the Borrower shall
duly qualify in every State in which, by reason of the nature or
location of the Borrower's assets or operation of the Borrower's
business, such qualification may be necessary, except where the failure
to so qualify would not have a material adverse effect on the business
or assets of that Borrower and shall provide the Administrative Agent
with Certificates of such qualification from the Secretaries of State
of each State in which the Borrower so qualified.
(iii) Remain in good standing as a Massachusetts
corporation and after August 2, 1999, duly qualify in every State in
which, by reason of the nature or location of the Borrower's assets or
operation of the Borrower's business, such qualification may be
necessary, except where the failure to so qualify would not have a
Material Adverse Effect on the business or assets of that Borrower.
(b) Each Related Entity is listed on EXHIBIT 5-2, annexed
hereto. Each Related Entity is and shall hereafter remain in good standing in
the State in which incorporated and is and shall hereafter remain duly qualified
in which other State in which, by reason of that entity's assets or the
operation of such entity's business, such qualification may be necessary. The
Borrower shall provide the Administrative Agent with prior written notice of any
entity's becoming or ceasing to be a Related Entity.
(c) The Borrower shall not change its State of incorporation
nor its taxpayer identification number.
(d) The Borrower has all requisite corporate power and
authority to execute and deliver all Loan Documents to which the Borrower is a
party and has and will hereafter retain all requisite corporate power to perform
all Liabilities.
(e) The execution and delivery by the Borrower of each Loan
Document to which it is a party; the Borrower's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Borrower as contemplated hereby); the Borrower's
performance under those of the Loan Documents to which it is a party; the
borrowings hereunder; and the use of the proceeds thereof:
(i) Have been duly authorized by all necessary
corporate action.
(ii) Do not, and will not, contravene in any
material respect any provision of any Requirement of Law or obligation
of the Borrower where such contravention would have more than a de
minimus adverse effect on the Borrower.
(iii) Will not result in the creation or imposition
of, or the obligation to create or impose, any Encumbrance upon any
assets of the Borrower pursuant to any Requirement of Law or
obligation, except pursuant to the Loan Documents.
(f) The Loan Documents have been duly executed and delivered
by Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.
5-3. Trade Names.
(a) EXHIBIT 5-3, annexed hereto, is a listing of:
(i) All names under which the Borrower ever
conducted its business.
(ii) All entities and/or persons with whom
the Borrower ever consolidated or merged, or from whom the Borrower
ever acquired in a single transaction or in a series of related
transactions substantially all of such entity's or person's assets.
(b) The Borrower will not change its name or conduct its
business under any name not listed on EXHIBIT 5-3 except (i) upon not less than
twenty-one (21) days prior written notice (with reasonable particularity) to the
Administrative Agent and (ii) in compliance with all other provisions of this
Agreement.
5-4. Infrastructure.
(a) The Borrower has and will maintain a sufficient
infrastructure to conduct its business as presently conducted and as
contemplated to be conducted as described in the Business Plan.
(b) The Borrower owns and possesses, or has the right to use
(and will hereafter own, possess, or have such right to use) all patents,
industrial designs, trademarks, trade names, trade styles, brand names, service
marks, logos, copyrights, trade secrets, know-how, confidential information, and
other intellectual or proprietary property of any third Person necessary for the
Borrower's conduct of the Borrower's business.
(c) The conduct by the Borrower of the Borrower's business
does not , in any material respect, presently infringe (nor will the Borrower
conduct its business in the future so as to infringe) the patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, or other
intellectual or proprietary property of any third Person.
5-5. Year 2000 Compliance
(a) Based upon a diligent inquiry undertaken by the Borrower,
it appears that, except as set forth on EXHIBIT 5-5, annexed hereto, the
Borrower's operations are Year 2000 Compliant.
(b) The Borrower has developed a detailed plan and timetable
with respect to the Borrower's operations becoming fully Year 2000 Compliant as
set forth on EXHIBIT 5-5 and has committed adequate resources to execute that
plan and to meet such timetable.
(c) Following the Borrower's operations becoming Year 2000
Compliant, the Borrower will not suffer or permit its operations thereafter to
cease to be Year 2000 Compliant in any manner which might have more than a de
minimus effect on its operations.
5-6. Locations.
(a) The Collateral, and the books, records, and papers of
Borrower pertaining thereto, are kept and maintained solely at the Borrower's
chief executive offices at
(i) 555 Turnpike Street, Canton, Massachusetts 02021;
and
(ii) those locations listed on EXHIBIT 5-6,
annexed hereto, which EXHIBIT 5-6 includes, with
respect to each such location, the name and address
of the landlord on the Lease which covers such
location (or an indication that the Borrower owns the
subject location)and of all service bureaus with
which any such records are maintained and the names
and addresses of each of the Borrower's landlords.
(b) The Borrower shall not remove any of the Collateral from
said chief executive office or those locations listed on EXHIBIT 5-6 except to:
(i) accomplish sales of Inventory in the ordinary
course of business; or (ii) move Inventory from one
such location to another such location; or (iii)
utilize such of the Collateral as is removed from
such locations in the ordinary course of business
(such as motor vehicles).
(c) The Borrower will not:
(i) Alter, modify, or amend any Lease other than in
the ordinary course and conduct of the Borrower's
business.
(ii) Close more than the following number of Stores:
(A) Thirty-One (31) Stores at which Gordon
Brothers is to conduct going out of
business sales promptly after Borrower's
acquisition of the Repp Division.
(B) Not more than 5% of the Borrower's
Stores (other than those described in
Section 5-6(c)(ii)(A)) in any twelve (12)
month period.
(iii) Commit to or open any retail location other
than as permitted by Section 5-6(d).
(d) The Borrower may commit to or become legally obligated to
open additional Stores, provided that, with respect to each additional Store,
each of the following conditions has been or is then satisfied:
(i) The aggregate of all other additional Stores for
which Borrower has committed or become legally
obligated, during the then current fiscal year is not
more than the greater of
(A) 10% of the number of Stores on the first
day of such fiscal year; or
(B) The number of additional Stores to be
committed to for such fiscal year, as
contemplated by the Business Plan.
(ii) The Borrower is in compliance with Section 5-24
of this Agreement (which Section provides, among other things, that
Borrower shall not be the owner of, nor have any interest in, any
property or asset which is not, immediately upon such acquisition,
subject to a perfected security interest in favor of the Lender,
subject only to Permitted Encumbrances) and shall have executed such
additional financing statements, on account of the subject new
location, as may then be required by the Lender.
(iii) If the Store is located in a Landlord Lien
State, the Borrower has used reasonable efforts to provide the Lender
with a Landlord's Waiver (in form reasonably satisfactory to the
Administrative Agent) duly executed by the landlord for that new Store.
(iv) No Event of Default has occurred; no Suspension
Event is extant; and no Suspension Event will occur by reason of the
Borrower's so becoming obligated.
(e) Except as otherwise disclosed pursuant to, or permitted
by, this Section , no tangible personal property of the Borrower is in the care
or custody of any third party or stored or entrusted with a bailee or other
third party and none shall hereafter be placed under such care, custody,
storage, or entrustment.
5-7. Title to Assets.
(a) The Borrower is, and shall hereafter remain, the owner of
the Collateral free and clear of all Encumbrances with the exceptions of the
following:
(i) Encumbrances in favor of the Collateral Agent.
(ii) Permitted Encumbrances.
(iii) Those Encumbrances (if any) listed on
EXHIBIT 5-7, annexed hereto.
(b) The Borrower does not and shall not have possession of any
property on consignment to the Borrower.
(c) The Borrower shall not acquire or obtain the right to use
any Equipment, the acquisition or right to use of which Equipment is otherwise
permitted by this Agreement, in which Equipment any third party has an interest,
except for:
(i) Equipment which is merely incidental to the
conduct of the Borrower's business.
(ii) Equipment, the acquisition or right to
use of which has been consented to by the Administrative Agent,
which consent may be conditioned upon the Administrative Agent's
receipt of such agreement with the third party which has an interest
in such Equipment as is satisfactory to the Administrative Agent.
5-8. Indebtedness. The Borrower does not and shall not hereafter
have any Indebtedness with the exceptions of:
(a) Any Indebtedness to the Lenders .
(b) Indebtedness consisting of Permitted SubDebt. The Borrower
may not make any prepayment of any Permitted SubDebt.
(C) The Indebtedness (if any) listed on EXHIBIT 5-8, annexed
hereto.
5-9. Insurance Policies.
(a) EXHIBIT 5-9, annexed hereto, is a schedule of all
insurance policies owned by the Borrower or under which the Borrower is the
named insured. Each of such policies is in full force and effect. Neither the
issuer of any such policy nor the Borrower is in default or violation of any
such policy.
(b) The Borrower shall have and maintain at all times
insurance covering such risks, in such amounts, containing such terms, in such
form, for such periods, and written by such companies as may be satisfactory to
the Administrative Agent. The coverage reflected on EXHIBIT 5-9 presently
satisfies the foregoing requirements, it being recognized by the Borrower,
however, that such requirements may change hereafter in the Administrative
Agent's reasonable discretion, to reflect changing circumstances. All insurance
carried by the Borrower shall provide for a minimum of Twenty (20) days' written
notice of cancellation to the Administrative Agent and all such insurance which
covers the Collateral shall include an endorsement in favor of the Collateral
Agent, which endorsement shall provide that the insurance, to the extent of the
Collateral Agent's interest therein, shall not be impaired or invalidated, in
whole or in part, by reason of any act or neglect of the Borrower or by the
failure of the Borrower to comply with any warranty or condition of the policy.
In the event of the failure by the Borrower to maintain insurance as required
herein, the Administrative Agent, at its option, may obtain such insurance,
provided, however, the Administrative Agent's obtaining of such insurance shall
not constitute a cure or waiver of any Event of Default occasioned by the
Borrower's failure to have maintained such insurance. The Borrower shall furnish
to the Administrative Agent certificates or other evidence satisfactory to the
Administrative Agent regarding compliance by the Borrower with the foregoing
insurance provisions.
(c) The Borrower shall advise the Administrative Agent of each
claim in excess of $250,000.00 made by the Borrower under any policy of
insurance which covers the Collateral and following the occurrence of an Event
of Default, will permit the Administrative Agent , at the Administrative Agent's
option in each instance, to the exclusion of the Borrower, to conduct the
adjustment of each such claim (and of all claims following the occurrence of any
Suspension Event). The Borrower hereby appoints the Administrative Agent as the
Borrower's attorney in fact, effective upon the occurrence of an Event of
Default, to obtain, adjust, settle, and cancel any insurance described in this
section and to endorse in favor of the Administrative Agent any and all drafts
and other instruments with respect to such insurance. The within appointment,
being coupled with an interest, is irrevocable until this Agreement is
terminated by a written instrument executed by a duly authorized officer of the
Administrative Agent . The Administrative Agent shall not be liable on account
of any exercise pursuant to said power except for any exercise in bad faith or
in a grossly negligent manner or for willful misconduct. The Administrative
Agent may apply any proceeds of such insurance against the Liabilities, whether
or not such have matured, in such order of application as the Administrative
Agent may determine.
5-10. Licenses. Each license, distributorship, franchise, and similar
agreement issued to, or to which the Borrower is a party is in full force and
effect. No party to any such license or agreement is in default or violation
thereof. The Borrower has not received any notice or threat of cancellation of
any such license or agreement.
5-11. Leases. EXHIBIT 5-11, annexed hereto, is a schedule of all
presently effective Capital Leases. Exhibit 5-11includes a list of all other
presently effective Leases. Each of such Leases and Capital Leases is in full
force and effect. No party to any such Lease or Capital Lease is in default or
violation of any such Lease or Capital Lease and the Borrower has not received
any notice or threat of cancellation of any such Lease or Capital Lease. The
Borrower hereby authorizes the Administrative Agent at any time and from time to
time to contact any of the Borrower's landlords in order to confirm the
Borrower's continued compliance with the terms and conditions of the Lease(s)
between the Borrower and that landlord and, with the consent of the Borrower and
at any time after the occurrence of an Event of Default, to discuss such issues,
concerning the Borrower's occupancy under such Lease(s), as the Administrative
Agent may determine.
5-12. Requirements of Law. Borrower is in compliance with, and shall
hereafter comply with and use its assets in compliance with, all Requirements of
Law. The Borrower has not received any notice of any violation of any
Requirement of Law which violation has not been cured or otherwise remedied,
which violation, if not so cured or remedied, could have a material adverse
effect on the Borrower.
5-13. Maintain Properties. The Borrower shall:
(a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured casualty excepted).
(b) Not suffer or cause the waste or destruction of any
material part of the Collateral.
(c) Not use any of the Collateral in violation of any
policy of insurance thereon.
(d) Not sell, lease, or otherwise dispose of any of the
Collateral, other than the following:
(i) The sale of Inventory in compliance with
this Agreement.
(ii) The disposal of Equipment which is obsolete,
worn out, or damaged beyond repair, which Equipment
is replaced to the extent necessary to preserve or
improve the operating efficiency of the Borrower.
(iii) The turning over to the Administrative Agent
of all Receipts as provided herein.
5-14. Pay Taxes.
(a) The Borrower has not commenced operations and, at the date
of this Agreement, does not have any state or federal tax liabilities.
(b) The Borrower shall pay, as they become due and payable,
all taxes and unemployment contributions and other charges of any kind or nature
levied, assessed or claimed against the Borrower or the Collateral by any person
or entity whose claim could result in an Encumbrance upon any asset of the
Borrower or by any governmental authority; properly exercise any trust
responsibilities imposed upon the Borrower by reason of withholding from
employees' pay or by reason of the Borrower's receipt of sales tax or other
funds for the account of any third party; timely make all contributions and
other payments as may be required pursuant to any Employee Benefit Plan now or
hereafter established by the Borrower; and timely file all tax and other returns
and other reports with each governmental authority to whom the Borrower is
obligated to so file, except where the failure to file could have a material
adverse effect on the Borrower.
(c) At its option, the Administrative Agent may, but shall not
be obligated to, pay any taxes, unemployment contributions, and any and all
other charges levied or assessed upon the Borrower or the Collateral by any
person or entity or governmental authority, and make any contributions or other
payments on account of the Borrower's Employee Benefit Plan as the
Administrative Agent , in the Administrative Agent's discretion, may deem
necessary or desirable, to protect, maintain, preserve, collect, or realize upon
any or all of the Collateral or the value thereof or any right or remedy
pertaining thereto, provided, however, the Administrative Agent's making of any
such payment shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrower's failure to have made such payment.
5-15. No Margin Stock. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
5-16. ERISA. The Borrower is and shall hereafter remain in
compliance, in all material respects, with ERISA.
5-17. Hazardous Materials. To the Borrower's knowledge, none
of the real property used or operated by any Borrower contains any material
amount of Hazardous Materials.
5-18. Litigation. Except as described in EXHIBIT 5-18 annexed hereto,
there is not presently pending or threatened in writing by or against the
Borrower any suit, action, proceeding, or investigation which, if determined
adversely to the Borrower, would have a material adverse effect upon the
Borrower's financial condition or ability to conduct its business as such
business is presently conducted or is contemplated to be conducted in the
foreseeable future.
5-19. Dividends or Investments. The Borrower shall not:
(a) Pay any cash dividend or make any other distribution in
respect of any class of the Borrower's capital stock other than Permitted
Overhead Contributions.
(b) Own, redeem, retire, purchase, or acquire any of the
Borrower's capital stock.
(c) Invest in or purchase any stock or securities or
rights to purchase any such stock or securities, of any corporation or other
entity, other than Permitted Investments, provided that Permitted Investments
may be held by the Borrower
(i) only at a time when the unpaid principal
balance of the Loan Account is zero;
and
(ii) only if the Collateral Agent has a first
perfected security interest therein. Merge or
consolidate or be merged or consolidated with or into
any other corporation other entity.
(d) Consolidate any of the Borrower's operations with those of
any other corporation or other entity.
(e) Organize or create any Related Entity.
(f) Subordinate any debts or obligations owed to the Borrower
by any third party to any other debts owed by such third party to any other
Person.
(g) Acquire any assets other than in consummation of the Repp
Purchase Documents and in the ordinary course and conduct of the Borrower's
business.
5-20. Loans. The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:
(a) Advance payments made to the Borrower's suppliers in
the ordinary course.
(b) Advances to the Borrower's officers, employees,
and salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrower, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrower.
(c) Loans to employees not exceeding $75,000.00 outstanding at
any time to any employee nor exceeding $300,000.00 in the aggregate outstanding
at any time.
(d) Permitted Investments.
5-21. Protection of Assets. The Administrative Agent, in the
Administrative Agent's discretion, and from time to time, may discharge any tax
or Encumbrance on any of the Collateral, or take any other action that the
Administrative Agent may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The
Administrative Agent shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Administrative Agent has had an opportunity to be heard), from which finding no
further appeal is available, that the Administrative Agent had acted in actual
bad faith or in a grossly negligent manner. The Borrower shall pay to the
Administrative Agent, on demand, or the Administrative Agent, in its discretion,
may add to the Loan Account, all amounts paid or incurred by the Administrative
Agent pursuant to this section. The obligation of the Borrower to pay such
amounts is a Liability.
5-22. Line of Business. The Borrower shall not engage in any business
other than the business in which the Repp Division had been engaged or a
business reasonably related thereto (the conduct of which reasonably related
business is reflected in the Business Plan).
5-23. Affiliate Transactions. With the exception of Permitted Overhead
Contributions, the Borrower shall not make any payment, nor give any value to
any Related Entity except for goods and services actually purchased by the
Borrower from, or sold by the Borrower to, such Related Entity for a price and
on terms which shall
(a) be competitive and fully deductible as an "ordinary and
necessary business expense" and/or fully depreciable under the Internal Revenue
Code of 1986 and the Treasury Regulations, each as amended; and
(b) not be less favorable from those which would have been
charged in an arms length transaction.
5-24. Additional Assurances.
(a) The Borrower is not the owner of, nor has it any interest
in, any property or asset (other than any Lease) which, immediately upon the
satisfaction of the conditions precedent to the effectiveness of the credit
facility contemplated hereby (Article 4) will not be subject to a perfected
security or other collateral interest in favor of the Administrative Agent
(subject only to Permitted Encumbrances) to secure the Liabilities.
(b) The Borrower will not hereafter acquire any asset or any
interest in property which is not, immediately upon such acquisition, subject to
such a perfected security or other collateral interest in favor of the
Collateral Agent to secure the Liabilities (subject only to Permitted
Encumbrances).
(c) The Borrower shall execute and deliver to the
Administrative Agent such instruments, documents, and papers, and shall do all
such things from time to time hereafter as the Administrative Agent may request
to carry into effect the provisions and intent of this Agreement; to protect and
perfect the Collateral Agent's security interests in the Collateral; and to
comply with all applicable statutes and laws, and facilitate the collection of
the Receivables Collateral. The Borrower shall execute all such instruments as
may be required by the Collateral Agent with respect to the recordation and/or
perfection of the security interests created herein.
(d) The Borrower hereby designates the Collateral Agent as and
for the Borrower's true and lawful attorney, with full power of substitution, to
sign and file any financing statements in order to perfect or protect the
Collateral Agent's security and other collateral interests in the Collateral.
(e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 5-24 shall be sufficient for filing to perfect the security
interests granted herein.
5-25. Adequacy of Disclosure.
(a) All financial statements furnished to the Administrative
Agent and each Lender by the Borrower have been prepared in accordance with GAAP
consistently applied and present fairly the condition of the Borrower at the
date(s) thereof and the results of operations and cash flows for the period(s)
covered. There has been no change in the financial condition, results of
operations, or cash flows of the Borrower since the date(s) of such financial
statements, other than changes in the ordinary course of business, which changes
have not been materially adverse, either singularly or in the aggregate.
(b) The Borrower does not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the Borrower's
financial statements furnished to the Administrative Agent and each Lender prior
to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given the Administrative Agent or any Lender by or on behalf of the
Borrower or any guarantor of the Liabilities in connection with the execution of
this Agreement by the Administrative Agent and each Lender contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements therein not misleading.
With the exception of general market and economic conditions, there is no fact
known to any officer of the Borrower, on the date on which this Agreement was
executed, which has, or which, in the foreseeable future could reasonably be
expected to have, a material adverse effect on the financial condition of the
Borrower or any guarantor of the Liabilities which has not been disclosed in
writing to the Administrative Agent and each Lender.
5-26. No Restrictions on Liabilities. The Borrower shall not enter into
or directly or indirectly become subject to any agreement which prohibits or
restricts, in any manner, the Borrower's:
(a) Creation of, and granting of security and other collateral
interests in favor of the Collateral Agent.
(b) Incurrence of Liabilities.
5-27. Other Covenants. The Borrower shall not indirectly do or cause to
be done any act which, if done directly by the Borrower, would breach any
covenant contained in this Agreement.
VI. Article 6-Financial Reporting and Performance Covenants
6-1. Maintain Records. The Borrower shall:
(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Borrower's transactions,
all in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrower at the close of, and its results
of operations for, the periods in question.
(b) Timely provide the Administrative Agent with those
financial reports, statements, and schedules required by this Article 6 or
otherwise, each of which reports, statements and schedules shall be prepared, to
the extent applicable, in accordance with GAAP applied consistently with prior
periods to fairly reflect the financial condition of the Borrower at the close
of, and its results of operations for, the period(s) covered therein.
(c) At all times, keep accurate current records of the
Collateral including, without limitation, accurate current stock, cost, and
sales records of its Inventory, accurately and sufficiently itemizing and
describing the kinds, types, and quantities of Inventory and the cost and
selling prices thereof.
(d) At all times, retain independent certified public
accountants who are reasonably satisfactory to the Administrative Agent and
instruct such accountants to fully cooperate with, and be available to, the
Administrative Agent and each Lender to discuss the Borrower's financial
performance, financial condition, operating results, controls, and such other
matters, within the scope of the retention of such accountants, as may be raised
by the Administrative Agent or that Lender.
(e) Not change the Borrower's fiscal year.
6-2. Access to Records.
(a) The Borrower shall accord the Administrative Agent and the
Administrative Agent's representatives with access from time to time as the
Administrative Agent and such representatives may require to all properties
owned by or over which the Borrower has control. The Administrative Agent and
the Administrative Agent's representatives shall have the right, and the
Borrower will permit the Administrative Agent and such representatives from time
to time as the Administrative Agent and such representatives may request, to
examine, inspect, copy, and make extracts from any and all of the Borrower's
books, records, electronically stored data, papers, and files. The Borrower
shall make all of the Borrower's copying facilities available to the
Administrative Agent.
(b) The Borrower hereby authorizes the Administrative Agent
and the Administrative Agent's representatives to:
(i) Inspect, copy, duplicate, review, cause to be
reduced to hard copy, run off, draw off, and otherwise use any and all
computer or electronically stored information or data which relates to
the Borrower, or any service bureau, contractor, accountant, or other
person, and directs any such service bureau, contractor, accountant, or
other person fully to cooperate with the Administrative Agent and the
Administrative Agent's representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrower's computer billing companies, collection agencies, and
accountants and to sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Collateral.
6-3. Immediate Notice to Administrative Agent
(a) The Borrower shall provide the Administrative Agent with
written notice immediately upon the occurrence of any of the following events,
which written notice shall be with reasonable particularity as to the facts and
circumstances in respect of which such notice is being given:
(i) Any change in the Borrower's officers.
(ii) Any ceasing of the Borrower's making of payment,
in the ordinary course, to a material number of its creditors or,
except where there is a bona fide dispute with the relevant creditor, a
creditor to which a material amount is owed.
(iii) Except where the same has arisen out of a bona
fide dispute, any failure by the Borrower to pay rent at more than ten
percent (10%) of the Borrower's stores, which failure continues for
more than five (5) Business Days following the day on which such rent
first came due.
(iv) Any material change in the business, operations,
or financial affairs of the Borrower.
(v) The occurrence of any Suspension Event.
(vi) Any intention on the part of the Borrower to
discharge the Borrower's present independent accountants or any
withdrawal or resignation by such independent accountants from their
acting in such capacity (as to which, see Subsection 6-1(d)).
(vii) Any litigation which, if determined adversely
to the Borrower, might have a material adverse effect on the financial
condition of the Borrower.
(viii) Any delay in the Borrower's meeting the
timetable for its operations becoming Year 2000 Compliant as described
on EXHIBIT 5-5 or maintaining such operations as Year 2000 Compliant,
except where such delay or failure to so maintain will have no more
than a de minimus effect on the Borrower's operations.
(b) The Borrower shall:
(i) At the request of the Administrative Agent,
provide the Administrative Agent with a copy of the results of any
physical count of the Borrower's Inventory.
(ii) Provide the Administrative Agent, when so
distributed, with copies of any materials distributed to the
shareholders of the Borrower (qua such shareholders).
(iii) Add the Administrative Agent as an addressee on
all mailing lists maintained by or for the Borrower.
(iv) At the request of the Administrative Agent, from
time to time, provide the Administrative Agent with copies of all
advertising (including copies of all print advertising and duplicate
tapes of all video and radio advertising).
(v) Provide the Administrative Agent, when received
by the Borrower, with a copy of any management letter or similar
communications from any accountant of the Borrower.
6-4. Borrowing Base Certificate. The Borrower shall provide the
Administrative Agent by 1:00PM daily, with a Borrowing Base Certificate (in the
form of EXHIBIT 6-4 annexed hereto, as such form may be revised from time to
time by the Administrative Agent), on which Borrowing Base Certificate,
collateral values shall be rolled forward weekly. Such Certificate may be sent
to the Administrative Agent by facsimile transmission, provided that the
original thereof is forwarded to the Administrative Agent on the date of such
transmission.
6-5. Weekly Reports. Weekly, on Wednesday of each week (as of the then
immediately preceding Saturday) the Borrower shall provide the Administrative
Agent with the following (each in such form as may be specified from time to
time by the Administrative Agent):
(a) A Report of In transit Inventory at Cost (Summary
Page Only).
(b) A Credit Card Receivable Summary.
(c) A Repp by Mail Inventory Report
Each of such reports shall be sent to the Administrative Agent by facsimile
transmission, provided that the original thereof is forwarded to the
Administrative Agent on the date of such transmission.
6-6. Monthly Reports.
(a) Monthly, the Borrower shall provide the Administrative
Agent with original counterparts of the following (each in such form as the
Administrative Agent from time to time may specify):
(i) Within Fifteen (15)days of the end of the
previous month, for both Repp Retail and Repp By Mail:
(A) Inventory Certificate for Repp Retail
(signed by the Borrower's President or Chief
Financial Officer).
(B) Inventory Certificate for Repp by Mail
(signed by the Borrower's President or Chief
Financial Officer) which shall provide year to date
sales, cost of goods sold and ending inventory at
cost and retail by department.
(C) An aging of the Borrower's Inventory.
(D) An Open to Buy Report on which is
shown whether inventory levels are
adequate to meet sales projections.
(E) An Inventory Position Report.
(F) A Merchandise Analysis Summary by
Hierarchy (for Repp Retail, only).
(G) A Report of Year to Date Sales and
Markdowns by Department (for Repp
Retail, only).
(H) A Report of Year to Date Damages by
Department in Total (for Repp Retail, only).
(ii) Within Thirty (30) days of the end of the
previous month:
(A) Reconciliations of the above described
Inventory Reports and inventory Certificate (Section
6-6(a)(i)(A), 606(a)(i)(B)) to Availability and to
the general ledger as of the end of the subject
month.
(B) A Gross Margin Reconciliation and
Inventory/Gross Margin Report.
(C) A schedule of purchases from the
Borrower's ten largest vendors (in
terms of year to date purchases), which schedule
shall be in such form as may be satisfactory to the
Administrative Agent and shall include year to date
cumulative purchases and an aging of payables to each
such vendor.
(D) An aging of the Borrower's accounts
payable.
(E) A Store Activity Report.
(iii) Within thirty-five (35) days of the end of the
previous month, an internally prepared financial statement of
the Borrower's financial condition and the results of its
operations for, the period ending with the end of the subject
month, which financial statement shall include, at a minimum,
a balance sheet, income statement, and after the completion
of one year's operations, a of same store sales for the
corresponding month of the then immediately previous year,
as well as to the Business Plan, with said balance sheet and
income statement to show amortization, depreciation, and
capital expenditures.
(b) For purposes of Section 6-6(a), above, the first "previous
month" in respect of which the items required by that Section shall be provided
shall be June, 1999.
6-7. Quarterly Reports. Quarterly, within Forty Five (45) days
following the end of each of the Borrower's first three fiscal quarters, the
Borrower shall provide the Administrative Agent with an original counterpart of
a management prepared consolidated financial statement of the Borrower for the
period from the beginning of the Borrower's then current fiscal year through the
end of the subject quarter, with comparative information for the same period of
the previous fiscal year, which statement shall include, at a minimum, a balance
sheet, income statement, and cash flows and after the completion of one year's
operations, a comparison of same store sales for the corresponding month of the
then immediately previous year, as well as to the Business Plan.
6-8. Annual Reports. Annually, within ninety (90) days following the
end of the Borrower's fiscal year, the Borrower shall furnish the Administrative
Agent with the following:
(a) The following financial statements for the Borrower for
the prior fiscal year (each prepared by the Borrower's independent accountants:
Balance sheet, income statement, statement of changes in stockholders' equity
and cash flow.
(b) A certificate of the Borrower's independent accountant
which states that in connection with their preparation of such annual financial
statements, such accountants did not note or encounter any fact or circumstance
which would lead them to believe that an Event of Default has occurred.
6-9. Officers' Certificates. The Borrower shall cause the Borrower's
President and Chief Financial Officer respectively to provide such Person's
Certificate with those monthly, quarterly, and annual statements to be furnished
pursuant to this Agreement, which Certificate shall:
(a) Indicate that the subject statement was prepared in
accordance with GAAP consistently applied and presents fairly the financial
condition of the Borrower at the close of, and the results of the Borrower's
operations and cash flows for, the period(s) covered, subject, however to the
following:
(i) usual year end adjustments (this exception shall
not be included in the Certificate which accompanies such annual
statement).
(ii) Material Accounting Changes (in which event,
such Certificate shall include a schedule (in reasonable detail) of the
effect of each such Material Accounting Change) not previously
specifically taken into account in the determination of the financial
performance covenant imposed pursuant to Section 6-12.
(b) Indicate either that (i) no Suspension Event has occurred
or (ii) if such an event has occurred, its nature (in reasonable detail) and the
steps (if any) being taken or contemplated by the Borrower to be taken on
account thereof.
(c) Include calculations concerning the Borrower's compliance
(or failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section hereof.
6-10. Inventories, Appraisals, and Audits.
(a) The Administrative Agent and each Lender, at the expense
of the Borrower, may participate in and/or observe each physical count and/or
inventory of so much of the Collateral as consists of Inventory which is
undertaken on behalf of the Borrower.
(b) The Borrower, at its own expense, shall cause at least one
(1), and on average, two (2) physical inventories to be undertaken on a cycle
count basis in each twelve (12) month period during which this Agreement is in
effect (the spacing of the scheduling of which inventories shall be subject to
the Administrative Agent's discretion) conducted by such inventory takers as are
satisfactory to the Administrative Agent and following such methodology as may
be satisfactory to the Administrative Agent.
(i) On the Administrative Agent's request, the
Borrower shall provide the Administrative Agent with a copy of the
preliminary results of each such inventory (as well as of any other
physical inventory undertaken by the Borrower) within ten (10) days
following the completion of such inventory.
(ii) On the Administrative Agent's request, the
Borrower shall provide the Administrative Agent with a reconciliation
of the results of each such inventory (as well as of any other physical
inventory undertaken by the Borrower) to the Borrower's books and
records within thirty (30) days following the completion of such
inventory.
(iii) The Administrative Agent, in its discretion,
following the occurrence of a Suspension Event, may cause such
additional inventories to be taken as the Administrative Agent
determines (each, at the expense of the Borrower).
(c) Upon the Administrative Agent's request from time to time,
the Borrower shall permit the Administrative Agent to obtain appraisals (in all
events, at the Borrower's expense) conducted by such appraisers as are
satisfactory to the Administrative Agent .
(d) The Administrative Agent contemplates conducting Four (4)
commercial finance audits (in each event, at the Borrower's expense) of the
Borrower's books and records during any Twelve (12) month period during which
this Agreement is in effect, but in its discretion, may undertake additional
such audits during such period.
(e) The Administrative Agent from time to time (in all events,
at the Borrower's expense) may undertake "mystery shopping" (so-called) visits
to all or any of the Borrower's business premises. The Administrative Agent
shall provide the Borrower with a copy of any non-company confidential results
of such mystery shopping.
6-11. Additional Financial Information.
(a) In addition to all other information required to be
provided pursuant to this Article 6, the Borrower promptly shall provide the
Administrative Agent (and any guarantor of the Liabilities), with such other and
additional information concerning the Borrower, the Collateral, the operation of
the Borrower's business, and the Borrower's financial condition, including
original counterparts of financial reports and statements, as the Administrative
Agent may from time to time request from the Borrower.
(b) The Borrower may provide the Administrative Agent, from
time to time hereafter, with updated projections of the Borrower's anticipated
performance and operating results.
(c) In all events, the Borrower, no sooner than Ninety (90)
nor later than Sixty (60) days prior to the end of each of the Borrower's fiscal
years, shall furnish the Administrative Agent with an updated and extended
projection which shall go out at least through the end of the then next fiscal
year.
(d) Such updated and extended projections shall be prepared
pursuant to a methodology and shall include such assumptions as are satisfactory
to the Administrative Agent.
(e) The Borrower recognizes that all appraisals, inventories,
analysis, financial information, and other materials which the Administrative
Agent or any Lender may obtain, develop, or receive with respect to the Borrower
is confidential to the Administrative Agent and the Lenders and that, except as
otherwise provided herein, the Borrower is not entitled to receipt of any of
such appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.
6-12. Financial Performance Covenants. The Borrower shall observe and
comply with those financial performance covenants set forth on EXHIBIT 6-12(a),
annexed hereto, certain of which covenants are based on the Business Plan set
forth on EXHIBIT6-12 (b), annexed hereto. Such financial performance covenants
are subject to change, revision, roll over, and extension as provided in Section
hereof. Compliance with such financial performance covenants shall be made as if
no Material Accounting Changes had been made (other than any Material Accounting
Changes specifically taken into account in the setting of such covenants). The
Administrative Agent may determine the Borrower's compliance with such covenants
based upon financial reports and statements provided by the Borrower to the
Administrative Agent or any Lender (whether or not such financial reports and
statements are required to be furnished pursuant to this Agreement) as well as
by reference to interim financial information provided to, or developed by, the
Administrative Agent.
VII. Article 7-Use and Collection of Collateral.
7-1. Use of Inventory Collateral.
(a) The Borrower shall not engage in any sale of the Inventory
other than for fair consideration in the conduct of the Borrower's business in
the ordinary course and shall not engage in sales or other dispositions to
creditors; sales or other dispositions in bulk (other than in the ordinary
course); and any use of any of the Inventory in breach of any provision of this
Agreement.
(b) No sale of Inventory shall be on consignment, approval, or
under any other circumstances such that, with the exception of the Borrower's
customary return policy applicable to the return of inventory purchased by the
Borrower's retail customers in the ordinary course, such Inventory may be
returned to the Borrower without the consent of the Administrative Agent .
7-2. Inventory Quality. All Inventory now owned or hereafter acquired
by the Borrower is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).
7-3. Adjustments and Allowances. The Borrower may grant such allowances
or other adjustments to the Borrower's Account Debtors (exclusive of extending
the time for payment of any Account or Account Receivable, which shall not be
done without first obtaining the Administrative Agent's prior written consent in
each instance) as the Borrower may reasonably deem to accord with sound business
practice, provided, however, the authority granted the Borrower pursuant to this
Section may be limited or terminated by the Administrative Agent at any time in
the Administrative Agent's discretion while any Suspension Event is extant.
7-4. Validity of Accounts.
(a) The amount of each Account shown on the books, records,
and invoices of the Borrower represented as owing by each Account Debtor is and
will be the correct amount actually owing by such Account Debtor and shall have
been fully earned by performance by the Borrower.
(b) The Borrower has no knowledge of any impairment of the
validity or collectibility of any of the Accounts and shall notify the
Administrative Agent of any such fact immediately after Borrower becomes aware
of any such impairment.
(c) The Borrower shall not post any bond to secure the
Borrower's performance under any agreement to which the Borrower is a party nor
cause any surety, guarantor, or other third party obligee to become liable to
perform any obligation of the Borrower (other than to the Administrative Agent )
in the event of the Borrower's failure so to perform.
7-5. Notification to Account Debtors. The Collateral Agent shall have
the right at any time that a Suspension Event has occurred, to notify any of the
Borrower's Account Debtors to make payment directly to the Administrative Agent
and to collect all amounts due on account of the Collateral.
VIII. Article 8-Cash Management. Payment of Liabilities:
8-1 Depository Accounts.
(a) Annexed hereto as EXHIBIT 8-1 is a Schedule of all present
DDA's, which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such depository.
(b) The Borrower shall deliver to the Administrative Agent, as
a condition to the effectiveness of this Agreement:
(i) Notification, executed on behalf of the Borrower,
to each depository institution with which any DDA is maintained (other
than the Operating Account or any Local DDA), in form satisfactory to
the Administrative Agent, of the Collateral Agent's interest in such
DDA.
(ii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the
Administrative Agent with any depository institution at which both any
DDA (other than the Operating Account) and the Operating Account is
maintained.
(iii) An agreement (generally referred to as a
"Blocked Account Agreement"), in form satisfactory to the
Administrative Agent, with any depository institution at which a
Blocked Account is maintained
(c) The Borrower will not establish any DDA hereafter (other
than a Local DDA) unless, contemporaneous with such establishment, the Borrower
delivers to the Administrative Agent an agreement (in form satisfactory to the
Administrative Agent) executed on behalf of the depository with which such DDA
is being established.
8-2. Credit Card Receipts.
(a) Annexed hereto as EXHIBIT 8-2, is a Schedule, which
describes all arrangements to which the Borrower is a party with respect to the
payment to the Borrower of the proceeds of all credit card charges for sales by
the Borrower.
(b) The Borrower shall deliver to the Administrative Agent, as
a condition to the effectiveness of this Agreement, notification, executed on
behalf of the Borrower, to each of the Borrower's credit card clearinghouses and
processors of notice (in form satisfactory to the Administrative Agent ), which
notice provides that payment of all credit card charges submitted by the
Borrower to that clearinghouse or other processor and any other amount payable
to the Borrower by such clearinghouse or other processor shall be directed to
the Concentration Account or as otherwise designated from time to time by the
Administrative Agent. The Borrower shall not change such direction or
designation except upon and with the prior written consent of the Administrative
Agent.
8-3. The Concentration, Blocked, and Operating Accounts.
(a) The following checking accounts have been or will be
established (and are so referred to herein):
(i) The Concentration Account: Established
by the Administrative Agent with BankBoston, N.A.
(ii) The Blocked Account: Established by the
Borrower with Fleet National Bank.
(iii) The Operating Account: Established by the
Borrower with BankBoston, N.A..
(b) The contents of each DDA (other than the Operating
Account) and of the Blocked Account constitutes Collateral and Proceeds of
Collateral. The contents of the Concentration Account constitutes the Collateral
Agent's property.
(c) The Borrower:
(i) Contemporaneous with the execution of this
Agreement, shall provide the Administrative Agent with such agreement
(generally referred to as a "Blocked Account Agreement") of the
depository with which the Blocked Account is maintained as may be
satisfactory to the Administrative Agent; and
(ii) Shall not establish any Blocked Account
hereafter except upon not less than Thirty (30) days prior written
notice to the Administrative Agent and the delivery to the
Administrative Agent of a similar such agreement.
(d) The Borrower shall pay all fees and charges of, and
maintain such impressed balances as may be required by the Administrative Agent
or by any bank in which any account is opened as required hereby (even if such
account is opened by and/or is the property of the Administrative Agent).
8-4. Proceeds and Collection of Accounts.
(a) All Receipts constitute Collateral and proceeds of
Collateral and shall be held in trust by the Borrower for the Collateral Agent;
shall not be commingled with any of the Borrower's other funds; and shall be
deposited and/or transferred only to the Blocked Account.
(b) The Borrower shall cause the ACH or wire transfer to the
Blocked Account, no less frequently than daily (and whether or not there is then
an outstanding balance in the Loan Account) of
(i) the then contents of each DDA (other than (A) any
Local DDA and (B) the Operating Account), each such transfer to be net
of any minimum balance, not to exceed that amount (not to exceed
$2,500.00), as the Borrower, in its best business judgment, determines
as being required to be maintained in the subject DDA by the bank at
which such DDA is maintained); and
(ii) the proceeds of all credit card charges not
otherwise provided for pursuant hereto.
Telephone advice (confirmed by written notice) shall be provided to the
Administrative Agent on each Business Day on which any such transfer is made.
(c) Whether or not any Liabilities are then outstanding, the
Borrower shall cause the ACH or wire transfer to the Concentration Account, no
less frequently than daily, of then entire ledger balance of the Blocked
Account, net of such minimum balance, not to exceed that amount (not to exceed
$2,500.00), as the Borrower, in its best business judgment, determines as being
required to be maintained in the subject DDA by the bank at which such DDA is
maintained
(d) In the event that, notwithstanding the provisions of this
Section 8-4, the Borrower receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrower for the
Administrative Agent and shall not be commingled with any of the Borrower's
other funds or deposited in any account of the Borrower other than as instructed
by the Administrative Agent.
8-5. Payment of Liabilities.
(a) On each Business Day, the Administrative Agent shall
apply, towards the Revolving Credit, the then collected balance of the
Concentration Account (net of fees charged, and of such impressed balances as
may be required by the bank at which the Concentration Account is maintained),
provided, however, for purposes of the calculation of interest on the unpaid
principal balance of the Loan Account, such payment shall be deemed to have been
made One (1) Business Day after such transfer.
(b) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:
(i) Funds shall be deemed to have been deposited to
the Concentration Account on the Business Day on which
deposited, provided that notice of such deposit is available
to the Administrative Agent by 2:00PM on that Business Day.
(ii) Funds paid to the Administrative Agent, other
than by deposit to the Concentration Account, shall be deemed
to have been received on the Business Day when they are good
and collected funds, provided that notice of such payment is
available to the Administrative Agent by 2:00PM on that
Business Day.
(iii) If notice of a deposit to the Concentration
Account (Section 8-5(b)(I)) or payment (Section 8-5(b)(ii)) is
not available to the Administrative Agent until after 2:00PM
on a Business Day, such deposit or payment shall be deemed to
have been made at 9:00AM on the then next Business Day.
(iv) All deposits to the Concentration
Account and other payments to the Administrative Agent
are subject to and collection.
(c) The Administrative Agent shall transfer to the
Operating Account any surplus in the Concentration Account remaining after
the application towards the Liabilities referred to in Section 8-5(a), above
(less those amount which are to be netted out, as provided therein) provided,
however, in the event that
(i) a Suspension Event has occurred; and
(ii) either
(A) one or more L/C's are then outstanding; or
(B) there is any amount unpaid on account of the
Term Loan,
the Administrative Agent may establish a funded reserve of up to 110% of (x) the
aggregate Stated Amounts of such L/C's and (y) such amount unpaid on account of
the Term Loan (which amount, the Administrative Agent shall turn over to the
Collateral Agent following the occurrence of any Event of Default described in
Section 11-12 and following the acceleration of the Liabilities on account of
the occurrence of any other Event of Default.
8-6. The Operating Account. Except as otherwise specifically provided
in or permitted by this Agreement, all checks shall be drawn by the Borrower
upon, and other disbursements shall be made by the Borrower solely from, the
Operating Account.
IX. Article 9-Grant of Security Interest:
9-1. Grant of Security Interest. To secure the Borrower's prompt,
punctual, and faithful performance of all and each of the Liabilities, the
Borrower hereby grants to the Collateral Agent, for the ratable benefit of the
Lenders, a continuing security interest in and to, and assigns to the Collateral
Agent, for the ratable benefit of the Lenders, the following, and each item
thereof, whether now owned or now due, or in which the Borrower has an interest,
or hereafter acquired, arising, or to become due, or in which the Borrower
obtains an interest, and all products, Proceeds, substitutions, and accessions
of or to any of the following (all of which, together with any other property in
which the Collateral Agent may in the future be granted a security interest, is
referred to herein as the "Collateral"):
(a) All Accounts and Accounts Receivable.
(b) All Inventory.
(c) All General Intangibles.
(d) All Equipment.
(e) All Goods.
(f) All Fixtures.
(g) All Chattel Paper.
(h) All books, records, and information relating to the Collateral and/or
to the operation of the Borrower's business, and all rights of access
to such books, records, and information, and all property in which
such books, records, and information are stored, recorded, and
maintained.
(i) All Investment Property, Instruments, Documents, Deposit Accounts,
policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.
(j) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any
of such proceeds, refunds, and premium rebates arise out of any of the
foregoing.( through ) or otherwise.
(k) All liens, guaranties, rights, remedies, and privileges pertaining to
any of the foregoing ( through ), including the right of stoppage in
transit.
(l) All Leasehold Interests.
9-2. Extent and Duration of Security Interest. The security interest
created and granted herein is in addition to, and supplemental of, any security
interest previously granted by the Borrower to the Collateral Agent and shall
continue in full force and effect applicable to all Liabilities until all
Liabilities have been paid and/or satisfied in full and the security interest
granted herein is specifically terminated in writing by a duly authorized
officer of the Collateral Agent .
X. Article 10-Collateral Agent As Borrower's Attorney-In-Fact:
10-1. Appointment as Attorney-In-Fact. The Borrower hereby irrevocably
constitutes and appoints the Collateral Agent as the Borrower's true and lawful
attorney, effective upon the occurrence of an Event of Default, with full power
of substitution, to convert the Collateral into cash at the sole risk, cost, and
expense of the Borrower, but for the sole benefit of the Collateral Agent. The
rights and powers granted the Collateral Agent by the within appointment include
but are not limited to the right and power to:
(a) Prosecute, defend, compromise, or release any action
relating to the Collateral.
(b) Sign change of address forms to change the address
to which the Borrower's mail is to be sent to such address as the Collateral
Agent shall designate; receive and open the Borrower's mail; remove any
Receivables Collateral and Proceeds of Collateral therefrom and turn over the
balance of such mail either to the Borrower or to any trustee in bankruptcy,
receiver, assignee for the benefit of creditors of the Borrower, or other legal
representative of the Borrower whom the Collateral Agent determines to be the
appropriate person to whom to so turn over such mail.
(c) Endorse the name of the Borrower in favor of the
Collateral Agent upon any and all checks, drafts, notes, acceptances, or other
items or instruments; sign and endorse the name of the Borrower on, and receive
as secured party, any of the Collateral, any invoices, schedules of Collateral,
freight or express receipts, or bills of lading, storage receipts, warehouse
receipts, or other documents of title respectively relating to the Collateral.
(d) Sign the name of the Borrower on any notice to the
Borrower's Account Debtors or verification of the Receivables Collateral; sign
the Borrower's name on any Proof of Claim in Bankruptcy against Account Debtors,
and on notices of lien, claims of mechanic's liens, or assignments or releases
of mechanic's liens securing the Accounts.
(e) Take all such action as may be necessary to obtain the
payment of any letter of credit and/or banker's acceptance of which the Borrower
is a beneficiary.
(f) Repair, manufacture, assemble, complete, package, deliver,
alter or supply goods, if any, necessary to fulfill in whole or in part the
purchase order of any customer of the Borrower.
(g) Use, license or transfer any or all General
Intangibles of the Borrower.
10-2. No Obligation to Act. The Collateral Agent shall not be obligated
to do any of the acts or to exercise any of the powers authorized by Section
herein, but if the Collateral Agent elects to do any such act or to exercise any
of such powers, it shall not be accountable for more than it actually receives
as a result of such exercise of power, and shall not be responsible to the
Borrower for any act or omission to act except for any act or omission to act as
to which there is a final determination made in a judicial proceeding (in which
proceeding the Collateral Agent has had an opportunity to be heard) which
determination includes a specific finding that the subject act or omission to
act had been grossly negligent or in actual bad faith, or constituted willful
misconduct.
XI. Article 11-Events of Default:
The occurrence of any event described in this Article 11 respectively
shall constitute an "Event of Default" herein. Upon the occurrence of any Event
of Default described in Section 11-12, any and all Liabilities shall become due
and payable without any further act on the part of any Agent or any Lender. Upon
the occurrence of any other Event of Default, any and all Liabilities shall
become immediately due and payable, at the option of the Administrative Agent
and without notice or demand. The occurrence of any Event of Default shall also
constitute, without notice or demand, a default under all other agreements
between the any Agent or any Lender and the Borrower and instruments and papers
given any Administrative Agent or any Lender by the Borrower, whether such
agreements, instruments, or papers now exist or hereafter arise.
11-1. Failure to Pay Revolving Credit or Term Loan. The failure by the
Borrower to pay any amount when due under the Revolving Credit or the Term Loan.
11-2. Failure To Make Other Payments. The failure by the Borrower,
within three (3) days of when due, to pay any payment Liability other than under
the Revolving Credit or the Term Loan.
11-3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by the Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
Section 11-1 or Section 11-2 hereof, and included in any of the following
provisions hereof:
<TABLE>
<S> <C>
Section Relates to:
5-2(c) Taxpayer Identification and State of Incorporation
5-3(b) Notice of Name Change
5-6 Location of Collateral
5-7 Title to Assets
5-8 Indebtedness
5-9 Insurance Policies
5-14 Pay taxes
5-23 Affiliate Transactions
5-24 Additional Assurances
7-1 Use of Collateral
Article 6 Reporting Requirements* and Financial Covenants
Article 8 Cash Management
</TABLE>
(*) Two days grace for all financial reports other than the Borrower's
daily borrowing base certificate required pursuant to Section 6-4.
11-4. Failure to Perform Covenant or Liability (Grace Period). The
failure by the Borrower, , within Twenty (20) days of the sooner of (i) the
Borrower's knowledge of the subject failure or (ii) the Administrative Agent's
written notice to the Borrower, to cure the Borrower's failure to promptly,
punctually and faithfully perform, discharge, or comply with any covenant or
Liability not described in any of Sections 11-1, 11-2 or 11-3 hereof.
11-5. Misrepresentation. The determination by the Administrative Agent
that any representation or warranty at any time made by the Borrower to any
Agent or any Lender was not true or complete in all material respects when
given.
11-6. Acceleration of Other Debt. The occurrence of any event such that
Indebtedness of the Borrower in excess of $1,000,000.00 to any creditor other
than any Agent or any Lender could be accelerated unless, prior to the
acceleration of the Liabilities on account of such occurrence, the other
creditor duly waives such default and evidence of such written waiver is
provided to the Administrative Agent.
11-7. Related Party Defaults.
(a) The occurrence of any event such that the indebtedness of
Casual Male under the Casual Male Credit Facility could be accelerated.
(b) The entry of an order for relief under the Bankruptcy
Code with respect to The Casual Male.
11-8. Default Under Other Agreements. The occurrence of any breach or
default under any agreement between any Agent or any Lender and the Borrower or
instrument or paper given any Agent or any Lender by the Borrower (and not
constituting a Loan Document), whether such agreement, instrument, or paper now
exists or hereafter arises (notwithstanding that any Agent or the subject Lender
may not have exercised its rights upon default under any such other agreement,
instrument or paper).
11-9. Uninsured Casualty Loss. The occurrence of any uninsured
loss, theft, damage, or destruction of or to any material portion of the
Collateral.
11-10. Judgment. Restraint of Business.
(a) The service of process upon any Agent or any Lender or any
Participant seeking to attach, by trustee, mesne, or other process, any of the
Borrower's funds on deposit with, or assets of the Borrower in the possession
of, any Agent or any Lender or such Participant.
(b) The entry of judgments against the Borrower, not fully
covered by insurance (subject to a reasonable deductible) aggregating more than
$500,000.00, which judgments are not satisfied (if a money judgment) or appealed
from (with execution or similar process stayed) within fifteen (15) days of its
entry.
(c) The entry of any order or the imposition of any other
process having the force of law, the effect of which is to restrain in any
material way the conduct by the Borrower of its business in the ordinary course.
11-11. Business Failure. Any act by, against, or relating to the
Borrower, or its property or assets, which act constitutes the application for,
consent to, or sufferance of the appointment of a receiver, trustee, or other
person, pursuant to court action or otherwise, over all, or any material part of
the Borrower's property; or execution of an assignment for the benefit of the
creditors of the Borrower, or the occurrence of any other voluntary or
involuntary liquidation of the Borrower; the offering by or entering into by the
Borrower of any composition, extension, or any other arrangement seeking relief
from or extension of the debts of the Borrower; or the initiation of any
judicial or non-judicial proceeding or agreement by, against, or including the
Borrower which seeks or intends to accomplish a reorganization or arrangement
with creditors; and/or the initiation by or on behalf of the Borrower of the
liquidation or winding up of all or any part of the Borrower's business or
operations.
11-12. Bankruptcy. The adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower initiating any matter in which the
Borrower is or may be granted any relief from the debts of the Borrower pursuant
to the Bankruptcy Code or any other insolvency statute or procedure, which
complaint, application, or petition is not timely contested in good faith by the
Borrower by appropriate proceedings or, if so contested, is not dismissed within
thirty (30) days of when filed.
11-13. Default by Guarantor or Related Entity. The occurrence of any of
the foregoing events described in Sections 11-11 or 11-12 with respect to any
guarantor of the Liabilities, or the occurrence of any of the foregoing Events
of Default with respect to any parent (if the Borrower is a corporation),
subsidiary, or Related Entity, as if such guarantor, parent, or Related Entity
were the "Borrower" described therein.
11-14. Indictment - Forfeiture. The indictment of, or institution of
any legal process or proceeding against, the Borrower, under any federal, state,
municipal, and other civil or criminal statute, rule, regulation, order, or
other requirement having the force of law where the relief, penalties, or
remedies sought or available include the forfeiture of more than a de minimus
part of the property of the Borrower and/or the imposition of any stay or other
order, the effect of which could be to restrain in any material way the conduct
by the Borrower of its business in the ordinary course.
11-15. Termination of Guaranty. The termination or attempted
termination of any guaranty by any guarantor of the Liabilities.
11-16. Challenge to Loan Documents.
(a) Any challenge by or on behalf of the Borrower or any
guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document strictly in accordance with
the subject Loan Document's terms or which seeks to void, avoid, limit, or
otherwise adversely affect any security interest created by or in any Loan
Document or any payment made pursuant thereto.
(b) Any determination by any court or any other judicial or
government authority that any Loan Document is not enforceable strictly in
accordance with the subject Loan Document's terms or which voids, avoids,
limits, or otherwise adversely affects any security interest created by any Loan
Document or any payment made pursuant thereto.
11-17. Change in Control Any Change in Control.
XII. Article 12-Rights and Remedies Upon Default:
In addition to all of the rights, remedies, powers, privileges, and
discretions which the Administrative Agent is provided prior to the occurrence
of an Event of Default, the Collateral Agent shall have the following rights and
remedies upon the occurrence of any Event of Default and at any time thereafter.
12-1 . Rights of Enforcement. The Collateral Agent shall have all of
the rights and remedies of a secured party upon default under the UCC, in
addition to which the Collateral Agent shall have all and each of the following
rights and remedies:
(a) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(b) To take possession of all or any portion of the
Collateral.
(c) To sell, lease, or otherwise dispose of any or all of the
Collateral, in its then condition or following such preparation or processing as
the Collateral Agent deems advisable and with or without the taking of
possession of any of the Collateral.
(d) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(e) To apply the Receivables Collateral or the Proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(f) To exercise all or any of the rights, remedies, powers,
privileges, and discretions under all or any of the Loan Documents.
12-2. Sale of Collateral.
(a) Any sale or other disposition of the Collateral may be at
public or private sale upon such terms and in such manner as the Collateral
Agent deems advisable, having due regard to compliance with any statute or
regulation which might affect, limit, or apply to the Collateral Agent's
disposition of the Collateral.
(b) The Collateral Agent, in the exercise of the Collateral
Agent's rights and remedies upon default, may conduct one or more going out of
business sales, in the Collateral Agent's own right or by one or more agents and
contractors. Such sale(s) may be conducted upon any premises owned, leased, or
occupied by the Borrower. The Collateral Agent and any such Agent or contractor,
in conjunction with any such sale, may augment the Inventory with other goods
(all of which other goods shall remain the sole property of the Collateral Agent
or such Agent or contractor). Any amounts realized from the sale of such goods
which constitute augmentations to the Inventory (net of an allocable share of
the costs and expenses incurred in their disposition) shall be the sole property
of the Collateral Agent or such Agent or contractor and neither the Borrower nor
any Person claiming under or in right of the Borrower shall have any interest
therein.
(c) Unless the Collateral is perishable or threatens to
decline speedily in value, or is of a type customarily sold on a recognized
market (in which event the Collateral Agent shall provide the Borrower with such
notice as may be practicable under the circumstances), the Collateral Agent
shall give the Borrower at least seven (7) days prior written notice of the
date, time, and place of any proposed public sale, and of the date after which
any private sale or other disposition of the Collateral may be made. The
Borrower agrees that such written notice shall satisfy all requirements for
notice to the Borrower which are imposed under the UCC or other applicable law
with respect to the exercise of the Collateral Agent's rights and remedies upon
default.
(d) Any Agent and any Lender may purchase the Collateral, or
any portion of it at any sale held under this Article.
(e) If any of the Collateral is sold, leased, or otherwise
disposed of by the Collateral Agent on credit, the Liabilities shall not be
deemed to have been reduced as a result thereof unless and until payment is
finally received thereon by the Collateral Agent.
(f) The Collateral Agent shall turn over to the Administrative
Agent the proceeds of any exercise of the Collateral Agent's Rights and Remedies
under this Article 12. The Administrative Agent shall apply such proceeds
towards the Liabilities in such manner, and with such frequency, as the
Administrative Agent determines.
12-3. Occupation of Business Location. In connection with the
Collateral Agent's exercise of the Collateral Agent's rights under this Article
12, the Collateral Agent may enter upon, occupy, and use any premises owned or
occupied by the Borrower, and may exclude the Borrower from such premises or
portion thereof as may have been so entered upon, occupied, or used by the
Collateral Agent. The Collateral Agent shall not be required to remove any of
the Collateral from any such premises upon the Collateral Agent's taking
possession thereof, and may render any Collateral unusable to the Borrower. In
no event shall the any Agent be liable to the Borrower for use or occupancy by
the Collateral Agent of any premises pursuant to this Article 12, nor for any
charge (such as wages for the Borrower's employees and utilities) incurred in
connection with the Collateral Agent's exercise of the Collateral Agent's Rights
and Remedies.
12-4. Grant of Nonexclusive License. The Borrower hereby grants to the
Collateral Agent a royalty free nonexclusive irrevocable license to use, apply,
and affix any trademark, trade name, logo, or the like in which the Borrower now
or hereafter has rights, such license being with respect to the Administrative
Agent's exercise of the rights hereunder including, without limitation, in
connection with any completion of the manufacture of Inventory or sale or other
disposition of Inventory.
12-5. Assembly of Collateral. The Administrative Agent may require the
Borrower to assemble the Collateral and make it available to the Administrative
Agent at the Borrower's sole risk and expense at a place or places which are
reasonably convenient to both the Administrative Agent and Borrower.
12-6. Rights and Remedies. The rights, remedies, powers, privileges,
and discretions of the Agents hereunder (herein, the " Agent's Rights and
Remedies") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by any Agent in exercising or
enforcing any of that Agent's Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by the Administrative Agent of any Event
of Default or of any default under any other agreement shall operate as a waiver
of any other default hereunder or under any other agreement. No single or
partial exercise of any of the Agent's Rights or Remedies, and no express or
implied agreement or transaction of whatever nature entered into between any
Agent and any person, at any time, shall preclude the other or further exercise
of any of the Agent's Rights and Remedies. No waiver any Agent of any of that
Agent's Rights and Remedies on any one occasion shall be deemed a waiver on any
subsequent occasion, nor shall it be deemed a continuing waiver. All of the
Agent's Rights and Remedies and all of each Agent's rights, remedies, powers,
privileges, and discretions under any other agreement or transaction are
cumulative, and not alternative or exclusive, and may be exercised by any Agent
at such time or times and in such order of preference as that Agent in its sole
discretion may determine. The Agent's Rights and Remedies may be exercised
without resort or regard to any other source of satisfaction of the Liabilities.
XIII. Article 13- Notices:
13-1. Notice Addresses. All notices, demands, and other communications
made in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation under the Revolving Credit) shall be made to the
following addresses, each of which may be changed upon seven (7) days written
notice to all others given by certified mail, return receipt requested:
If to the Administrative Agent
or the Collateral Agent:
BankBoston Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109
Attention : Ms. Betsy Ratto
Managing Director
Fax : 617 434-4339
With a copy to:
Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Attention : Richard B. Jacobs, Esquire
Fax : 617 880 3456
If to the Borrower:
JBI Apparel, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention : Philip Rosenberg
Fax : 781 821 0614
With a copy to:
Goodwin, Procter & Hoar LP
Exchange Place
Boston, Massachusetts 02109-2881
Attention : Raymond C. Zemlin, P.C.
Fax: : 617 523 1231
13-2. Notice Given.
(a) Except as otherwise specifically provided herein, notices
shall be deemed made and correspondence received, as follows (all times being
local to the place of delivery or receipt):
(i) By mail: the sooner of when actually received or
Three (3) days following deposit in the United States mail, postage
prepaid.
(ii) By recognized overnight express delivery:
the Business Day following the day when sent.
(iii) By Hand: If delivered on a Business Day after
9:00 AM and no later than Three (3) hours prior to the close of
customary business hours of the recipient, when delivered. Otherwise,
at the opening of the then next Business Day.
(iv) By Facsimile transmission (which must include a
header on which the party sending such transmission is indicated): If
sent on a Business Day after 9:00 AM and no later than Three (3) hours
prior to the close of customary business hours of the recipient, one
(1) hour after being sent. Otherwise, at the opening of the then next
Business Day.
(b) Rejection or refusal to accept delivery and inability to
deliver because of a changed address or Facsimile Number for which no due notice
was given shall each be deemed receipt of the notice sent.
XIV. Article 14-Term:
14-1. Termination of Revolving Credit. The Revolving Credit
shall remain in effect (subject to suspension as provided in Section 2-5(h)
hereof) until the Termination Date.
14-2. Effect of Termination. On the Termination Date, the Borrower
shall pay the Administrative Agent (whether or not then due), in immediately
available funds, all then Liabilities including, without limitation: the entire
balance of the Loan Account (including the unpaid balance of the Revolving
Credit); any remaining balance of the Administrative Agent's Fee; any accrued
and unpaid Line Fee; any then remaining installments of the Term Loan Commitment
Fee; any then remaining installments of the Term Loan Monitoring Fee; and all
unreimbursed costs and expenses of each Agent and of each Lender for which the
Borrower is responsible; and shall make such arrangements concerning any L/C's
then outstanding are reasonably satisfactory to the Administrative Agent . Until
such payment, all provisions of this Agreement, other than those contained in
Article 2 which place an obligation on the Administrative Agent and any Lender
to make any loans or advances or to provide financial accommodations under the
Revolving Credit or otherwise, shall remain in full force and effect until all
Liabilities shall have been paid in full.
XV. Article 15-General:
15-1. Protection of Collateral. No Agent has a duty as to the
collection or protection of the Collateral beyond the safe custody of such
of the Collateral as may come into the possession of that nor any duty as
to the preservation of rights against prior parties or any other rights
pertaining thereto. Each Agent and each Lender may include reference to the
Borrower (and may utilize any logo or other distinctive symbol associated
with the Borrower) in connection with any advertising, promotion, or
marketing undertaken by that Agent.
15-2. Successors and Assigns. This Agreement shall be binding upon the
Borrower and the Borrower's representatives, successors, and assigns and shall
enure to the benefit of each Agent and each Lender and the respective successors
and assigns of each provided, however, no trustee or other fiduciary appointed
with respect to the Borrower shall have any rights hereunder. In the event that
any Agent or any Lender assigns or transfers its rights under this Agreement,
the assignee shall thereupon succeed to and become vested with all rights,
powers, privileges, and duties of such assignor hereunder and such assignor
shall thereupon be discharged and relieved from its duties and obligations
hereunder.
15-3. Severability. Any determination that any provision of this
Agreement or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality, or
enforceability of such provision in any other instance, or the validity,
legality, or enforceability of any other provision of this Agreement.
15-4. Amendments. Course of Dealing.
(a) This Agreement and the other Loan Documents incorporate
all discussions and negotiations between the Borrower and each Agent and each
Lender, either express or implied, concerning the matters included herein and in
such other instruments, any custom, usage, or course of dealings to the contrary
notwithstanding. No such discussions, negotiations, custom, usage, or course of
dealings shall limit, modify, or otherwise affect the provisions thereof. No
failure by any Agent or any Lender to give notice to the Borrower of the
Borrower's having failed to observe and comply with any warranty or covenant
included in any Loan Document shall constitute a waiver of such warranty or
covenant or the amendment of the subject Loan Document. No change made by the
Administrative Agent in the manner by which Availability is determined shall
obligate the Administrative Agent to continue to determine Availability in that
manner.
(b) The Borrower may undertake any action otherwise prohibited
hereby, and may omit to take any action otherwise required hereby, upon and with
the express prior written consent of the Administrative Agent. No consent,
modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is an
Agent, then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by any Agent shall be in reliance upon all representations
and warranties theretofore made to that Agent by or on behalf of the Borrower
(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.
15-5. Power of Attorney. In connection with all powers of attorney
included in this Agreement, the Borrower hereby grants unto each Agent full
power to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as the Borrower might or could
do, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement.
15-6. Application of Proceeds. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the
Administrative Agent determines in its sole discretion. The Borrower shall
remain liable for any deficiency remaining following such application.
15-7. Increased Costs. If, as a result of any change to any requirement
of law, or of the interpretation or application thereof by any court or by any
governmental or other authority or entity charged with the administration
thereof, whether or not having the force of law, which:
(a) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal,
interest or other amounts payable by the Borrower to the Administrative
Agent or any Lender under this Agreement (except for taxes on the
Administrative Agent or any Lender's overall net income or capital
imposed by the jurisdiction in which the Administrative Agent or that
Lender's principal or lending offices are located);
(b) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements against assets held by,
or deposits in or for the account of or loans by or any other
acquisition of funds by the relevant funding office of any Lender;
(c) imposes on any Lender any other condition with
respect to any Loan Document; or
(d) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities;
and the result of any of the foregoing, in the such Lender's reasonable opinion,
is to increase the cost to that Lender of making or maintaining any loan,
advance or financial accommodation or to reduce the income receivable by such
Lender in respect of any loan, advance or financial accommodation by an amount
which the such Lender deems to be material, then upon the Administrative Agent's
giving written notice thereof, from time to time, to the Borrower (such notice
to set out in reasonable detail the facts giving rise to and a summary
calculation of such increased cost or reduced income), the Borrower shall
forthwith pay to the Administrative Agent, for the benefit of the subject
Lender, upon receipt of such notice, that amount which shall compensate the
subject Lender for such additional cost or reduction in income.
15-8. Costs and Expenses of Agents and Of Lenders.
(a) The Borrower shall pay on demand all Costs of Collection
and all reasonable expenses of each Agent in connection with the preparation,
execution, and delivery of this Agreement and of any other Loan Documents,
whether now existing or hereafter arising, and all other reasonable expenses
which may be incurred by each Agent in preparing or amending this Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
incurred with respect to the Liabilities, and all costs and expenses of each
Agent which relate to the credit facility contemplated hereby.
(b) The Borrower shall pay on demand all reasonable costs and
expenses (including attorneys' reasonable fees) incurred, following the
occurrence of any Event of Default, by each Lender in connection with the
enforcement, attempted enforcement, or preservation of any rights and remedies
under this, or any other Loan Document, as well as any such reasonable costs and
expenses in connection with any "workout", forbearance, or restructuring of the
credit facility contemplated hereby.
(c) The Borrower authorizes the Administrative Agent to pay
all such fees and expenses and in the Administrative Agent's discretion, to add
such fees and expenses to the Loan Account.
(d) The undertaking on the part of the Borrower in this
Section 15-8 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by any Agent in favor of the Borrower, other than
a termination, release, or discharge which makes specific reference to this
Section 15-8.
15-9. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished each Agent or
any Lender may be reproduced by that Person or by each Agent by any
photographic, microfilm, xerographic, digital imaging, or other process, and
that Person may destroy any document so reproduced. Any such reproduction shall
be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and
whether or not such reproduction was made in the regular course of business).
Any facsimile which bears proof of transmission shall be binding on the party
which or on whose behalf such transmission was initiated and likewise shall be
so admissible in evidence as if the original of such facsimile had been
delivered to the party which or on whose behalf such transmission was received.
15-10. Massachusetts Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the laws of The Commonwealth of Massachusetts.
15-11. Consent to Jurisdiction.
(a) The Borrower agrees that any legal action, proceeding,
case, or controversy against the Borrower with respect to any Loan Document may
be brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Administrative Agent may elect in the Administrative
Agent's sole discretion. By execution and delivery of this Agreement, the
Borrower, for itself and in respect of its property, accepts, submits, and
consents generally and unconditionally, to the jurisdiction of the aforesaid
courts.
(b) The Borrower WAIVES personal service of any and all
process upon it, and irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to the Borrower at the
Borrower's address for notices as specified herein, such service to become
effective five (5) Business Days after such mailing.
(c) The Borrower WAIVES any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.
(d) Nothing herein shall affect the right of any Agent to
bring legal actions or proceedings in any other competent jurisdiction.
(e) The Borrower agrees that any action commenced by the
Borrower asserting any claim or counterclaim arising under or in connection with
this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.
15-12. Indemnification. The Borrower shall indemnify, defend, and hold
each Agent and each Lender and any employee, officer, or Administrative Agent of
any of the foregoing (each, an "Indemnified Person") harmless of and from any
claim brought or threatened against any Indemnified Person by the Borrower, any
guarantor or endorser of the Liabilities, or any other Person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of
the relationship of the Borrower or of any other guarantor or endorser of the
Liabilities with any Agent or any Lender (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person with single counsel
of the Administrative Agent's selection, but at the expense of the Borrower)
other than any claim as to which a final determination is made in a judicial
proceeding (in which the Administrative Agent and any other Indemnified Person
has had an opportunity to be heard), which determination includes a specific
finding that the Indemnified Person seeking indemnification had acted in a
grossly negligent manner or in actual bad faith or willful misconduct. This
indemnification shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by any Agent in favor of the Borrower, other than
a termination, release, or discharge which makes specific reference to this
Section 15-12.
15-13. Rules of Construction. The following rules of construction shall
be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:
(a) Words in the singular include the plural and
words in the plural include the singular.
(b) Titles, headings (indicated by being underlined or shown
in Small Capitals) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.
(c) The words "includes" and "including" are not limiting.
(d) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(e) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.
(f) Text which is shown in italics, shown in bold, shown IN
ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to
be conspicuous.
(g) The words "may not" are prohibitive and not permissive.
(h) The word "or" is not exclusive.
(i) Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person has
undertaken reasonable and diligent investigation with respect to the subject of
such "knowledge" (whether or not such investigation has actually been
undertaken).
(j) Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.
(k) The symbol "$" refers to United States Dollars.
(l) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.
(m) References to "this Agreement" or to any other Loan
Document is to the subject instrument as amended to the date on which
application of such reference is being made.
(n) Except as otherwise specifically provided, all
references to time are to Boston time.
(o) In the determination of any notice, grace, or
other period of time prescribed or allowed hereunder:
(i) Unless otherwise provided (I) the day of the act,
event, or default from which the designated period of time begins to
run shall not be included and the last day of the period so computed
shall be included unless such last day is not a Business Day, in which
event the last day of the relevant period shall be the then next
Business Day and (II) the period so computed shall end at 5:00 PM on
the relevant Business Day.
(ii) The word "from" means "from and including".
(iii) The words "to" and "until" each mean "to,
but excluding".
(iv) The word "through" means "to and including".
(p) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 15-14,
15-15 hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.
15-14. Intent. It is intended that:
(a) This Agreement take effect as a sealed instrument.
(b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Collateral Agent.
(c) The security interests created by this Agreement secure
all Liabilities, whether now existing or hereafter arising.
(d) All reasonable costs and expenses incurred by each Agent
and, to the extent provide in Section 15-18 each Lender in connection with such
Person's relationship(s) with the Borrower shall be borne by the Borrower.
(e) Unless otherwise explicitly provided herein, any Agent's
consent to any action of the Borrower which is prohibited unless such consent is
given may be given or refused by the Administrative Agent in its sole discretion
and without reference to Section 2-15 hereof.
15-15. Liabilities Are Senior Indebtedness. No principal, premium (if
any), and interest (including any interest accruing subsequent to the entry of
an order for relief under the Bankruptcy Code, with respect to the Borrower, at
the rate provided for in the Loan Documents, whether or not such interest is an
allowed claim under applicable law) on, and all reasonable fees, reimbursement
and indemnity obligations, and all other obligations arising in connection with,
any indebtedness hereunder or under any of the Loan Documents is subordinated in
right of payment to any other Indebtedness of the Borrower. Without limiting the
generality of the foregoing, no Liability is subordinate to any liability,
obligation, or indebtedness of the Borrower under or on account of its 13%
Senior Subordinated Notes issued on or about the date of the Loan Agreement and
due December 31, 2001.
15-16. Right of Set-Off. Any and all deposits or other sums at any time
credited by or due to the Borrower from any Agent, any Lender, or any
participant (a "Participant") in the credit facility contemplated hereby or any
from any Affiliate of any Agent, any Lender, or any Participant and any cash,
securities, instruments or other property of the Borrower in the possession of
any Agent, any Lender, any Participant or any such Affiliate, whether for
safekeeping or otherwise (regardless of the reason such Person had received the
same), to the extent permitted by law, shall at all times constitute security
for all Liabilities and for any and all obligations of the Borrower to the
Agents and each Lender or any Participant or any such Affiliate and may be
applied or set off against the Liabilities and against such obligations at any
time, whether or not such are then due and whether or not other collateral is
then available to any Agent, any Lender, or any Participant or any such
Affiliate.
15-17. Maximum Interest Rate. Regardless of any provision of any Loan
Document, no Agent and no Lender shall be entitled to contract for, charge,
receive, collect, or apply as interest on any Liability, any amount in excess of
the maximum rate imposed by applicable law. Any payment which is made which, if
treated as interest on a Liability would result in such interest's exceeding
such maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were "Collateral."
15-18. Waivers.
(a) The Borrower (and all guarantors, endorsers, and sureties
of the Liabilities) make each of the waivers included in Section 15-18(b),
below, knowingly, voluntarily, and intentionally, and understands that each
Agent and each Lender, in entering into the financial arrangements contemplated
hereby and in providing loans and other financial accommodations to or for the
account of the Borrower as provided herein, whether not or in the future, is
relying on such waivers.
(b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND
SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) Except as otherwise specifically required hereby,
notice of non-payment, demand, presentment, protest and all forms of
demand and notice, both with respect to the Liabilities and the
Collateral.
(ii) Except as otherwise specifically required
hereby, the right to notice and/or hearing prior to any Agent's
exercising of that Agent's rights upon default.
(iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR
CONTROVERSY IN WHICH ANY AGENT OR ANY LENDER IS OR BECOMES A PARTY
(WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST ANY AGENT
OR ANY LENDER OR IN WHICH ANY AGENT OR ANY LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF,
ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON
AND ANY AGENT OR ANY LENDER (AND ANY AGENT AND EACH LENDER LIKEWISE
WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR
CONTROVERSY).
(iv) Any defense, counterclaim, set-off, recoupment,
or other basis on which the amount of any Liability, as stated on the
books and records of the Administrative Agent or any Lender, could be
reduced or claimed to be paid otherwise than in accordance with the
tenor of and written terms of such Liability.
(v) Any claim to consequential, special, or punitive
damages.
JBI APPAREL, INC.
Borrower
By /s/ Philip Rosenberg
Print Name: Philip Rosenberg
Title: Executive Vice President
BANKBOSTON RETAIL FINANCE INC.
Administrative Agent
Collateral Agent
By /s/Betsy Ratto
Print Name: Betsy Ratto
Title: Vice President
BACK BAY CAPITAL FUNDING LLC.
Term Lender
By /s/Betsy Ratto
Print Name: Betsy Ratto
Title: Vice President
BANKBOSTON RETAIL FINANCE INC.
Working Capital Lender
By /s/Betsy Ratto
Print Name: Betsy Ratto
Title: Vice President
<PAGE>
EXHIBIT 6-12 (a)
FINANCIAL PERFORMANCE COVENANTS
1. EBITDA: The Borrower shall not permit or suffer its EBITDA, tested
monthly, on a cumulative year to date basis, to be less than one of the
following, nor less than such minima as may be set by the Administrative
Agent for subsequent fiscal periods based upon the Administrative
Agent's review of the Business Plan and annual forecast for such
subsequent fiscal periods:
MINIMUM EBITDA: $ Million
-------------------------
<TABLE>
<S> <C> <C>
Fiscal Month Minimum EBITDA
1999 June 1.0
July 1.0
August 1.0
September 1.5
October 2.0
November 3.0
December 6.0
2000 January 5.5
</TABLE>
2. Trade Support: The Borrower will not suffer or permit the aggregate of
its accounts payable, at the end of any month beginning with June, 1999,
to be less than 15% of its cost inventory.
EXHIBIT 10.03
FOURTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT
As of May 21, 1999
THIS FOURTH AMENDMENT is made to the May 30, 1997 Loan and Security
Agreement, as amended (the "Loan Agreement") between
BankBoston Retail Finance Inc. (formerly known as "GBFC, Inc."), a Delaware
corporation with its principal executive offices at 40 Broad Street, Boston,
Massachusetts, as Administrative Agent for the ratable benefit of the "Lenders"
and as a "Lender;
Fleet National Bank, a national banking association with offices at One
Federal Street, Boston, Massachusetts, as Co-Agent for the ratable benefit of
the Lenders and as a "Lender;
and
JBI, Inc. a Massachusetts corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts 02012, as "Lead Borrower"
and as agent for the "Borrowers", being the following:
JBI, Inc.;
Morse Shoe, Inc. (a Delaware corporation with its principal executive
offices at 555 Turnpike Street, Canton, Massachusetts, 02012); and
JBI Holding Company, Inc. (a Delaware corporation with its principal
executive offices at 900 Market Street, Wilmington, DE, 19801),
in consideration of the mutual covenants contained herein and benefits to be
derived herefrom,
WITNESSETH:
The Loan Agreement is amended as follows:
Article 10 of the Loan Agreement is amended by the addition of the
following Section:
10-14. Payment of Guaranty The payment, by JBI, Inc. or by Morse Shoe, Inc., of
any amount due under that corporation's May 21, 1999 Guaranty of Collection of
the Liabilities of JBI Apparel, Inc. (as such Guaranty may be amended, revised,
or replaced) unless (a) no Event of Default has occurred; and (b) no Suspension
Event will occur by reason of the making of such payment; and (c) immediately
after such payment, Availability is not less than Five Million Dollars
($5,000,000.00).
EXHIBIT 9-11(a) of the Loan Agreement (Financial Performance Covenants) is
amended by its replacement with EXHIBIT 9-11(a) annexed to this Fourth
Amendment.
<PAGE>
The Agents and Lenders
BANKBOSTON RETAIL FINANCE INC. FLEET NATIONAL BANK
(Formerly "GBFC, Inc.")
By /s/ Betsy Ratto By /s/ Gregory Kress
Print Name: Betsy Ratto Print Name: Gregory Kress
Title: Vice President Title: AVP
The Lead Borrower
JBI, INC.
By /s/ Philip Rosenberg
Print Name: Philip Rosenberg
Title: Executive Vice President
The Borrowers
JBI, INC. MORSE SHOE, INC.
By /s/ Philip Rosenberg By /s/ Philip Rosenberg
Print Name: Philip Rosenberg Print Name: Philip Rosenberg
Title: Executive Vice President Title: Executive Vice President
JBI HOLDING COMPANY, INC.
By /s/ Philip Rosenberg
Print Name: Philip Rosenberg
Title: Executive Vice President
<PAGE>
EXHIBIT 9-11(a)
FINANCIAL PERFORMANCE COVENANTS
1. EBITDA: The Borrowers shall not permit or suffer their Consolidated
EBITDA, tested monthly, on an accruing monthly basis, at the end of
each of the Borrowers' fiscal months (with the first test period of
March 31, 1999), to be less than one of the following, nor less than
such minima as may be set by the Administrative Agent pursuant to the
Loan Documents for subsequent fiscal periods based upon the Lender's
review of the Borrowers' Business Plan and annual forecast for such
subsequent fiscal periods as required by such documentation:
MINIMUM CONSOLIDATED EBITDA: $ Thousands
("< >" denotes Negative Number)
<TABLE>
<S> <C> <C>
Fiscal Month Min. Consolidated EBITDA
------------ ------------------------
March 300
April 1,800
May 4,350
June 6,207
July 6,529
August 7,527
September 8,691
October 10,103
November 11,575
December 14,348
2000 January 10,628
</TABLE>
2. Minimum Excess Availability: The Borrower shall not suffer or permit
Availability to be less than $7,000,000.00 for the period commencing
December 15, 1999 through and including January 31, 2000.
3. Per Store Minimum and Maximum Inventory: The Borrowers shall not suffer
or permit the Retail of their Inventory, divided by the number of the
Borrowers' retail locations, to be less than or greater than the
following (nor less than or greater than such minima and maxima as may
be set by the Administrative Agent pursuant to the Loan Documents for
subsequent fiscal periods based upon the Lender's review of the
Borrowers' Business Plan and annual forecast for such subsequent fiscal
periods as required by such documentation), to be tested monthly:
<PAGE>
PER STORE
MINIMUM / MAXIMUM INVENTORY($ Thousands)
<TABLE>
<S> <C> <C> <C>
Fiscal Month Minimum Maximum
------------ ------- -------
1999 February 140.3 171.5
March 149.9 183.2
April 139.2 170.1
May 134.2 164.0
June 124.3 152.0
July 135.8 166.0
August 114.0 139.3
September 121.5 148.5
October 119.3 145.8
November 108.3 132.3
December 89.9 109.8
2000 January 99.4 121.5
</TABLE>
4. Gross Margin: The Borrowers will not suffer or permit their
Consolidated Gross Margin, tested monthly, on a two month rolling
average basis, at the end of each of the Borrowers' fiscal months (with
the first test period of March 31, 1999) to be less than the following
(nor less than such minima as may be set by the Administrative Agent
pursuant to the Loan Documents for subsequent fiscal periods based upon
the Lender's review of the Borrowers' Business Plan and annual forecast
for such subsequent fiscal periods as required by such documentation):
MINIMUM GROSS MARGIN - TWO MONTH ROLLING AVERAGE BASIS
<TABLE>
<S> <C> <C>
Fiscal Month Minimum Gross Margin %
------------ ----------------------
March 43.5
April 43.4
May 43.1
June 41.9
July 41.8
August 42.1
September 43.1
October 44.2
November 42.9
December 41.6
2000 January 41.4
</TABLE>
5. Capital Expenditures: The Borrowers will not suffer or permit their
Consolidated Capital Expenditures to exceed $3,000,000.00 for any
fiscal year, commencing with the Borrowers fiscal year ending in
January, 2000.
EXHIBIT 11
J. BAKER, INC. AND SUBSIDIARIES
Computation of Net Earnings Per Common Share*
(Unaudited)
<TABLE>
<S> <C> <C>
Quarter Ended
May 1, May 2,
1999 1998
---- ----
Net Earnings Per Common Share:
- ------------------------------
Net earnings, basic and diluted $ 979,990 $ 516,343
=========== ===========
Weighted average common
shares outstanding, basic 14,064,526 13,920,294
---------- ----------
Effect of dilutive securities:
Stock options and performance share awards 84,943 144,079
------ -------
Weighted average common
shares outstanding, diluted 14,149,469 14,064,373
========== ==========
Net earnings per common share, basic $0.070 $0.037
====== ======
Net earnings per common share, diluted $0.069 $0.037
====== ======
</TABLE>
* This calculation is submitted in accordance with Item 601(b)(11) of Regulation
S-K.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF J. BAKER, INC. FOR THE QUARTER ENDED MAY 1, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> MAY-01-1999
<CASH> 1,423,389
<SECURITIES> 0
<RECEIVABLES> 16,547,505
<ALLOWANCES> 220,000
<INVENTORY> 175,028,033
<CURRENT-ASSETS> 203,298,048
<PP&E> 125,567,622
<DEPRECIATION> 57,040,151
<TOTAL-ASSETS> 336,794,212
<CURRENT-LIABILITIES> 61,466,135
<BONDS> 193,665,534
0
0
<COMMON> 7,032,263
<OTHER-SE> 71,920,080
<TOTAL-LIABILITY-AND-EQUITY> 336,794,212
<SALES> 129,192,610
<TOTAL-REVENUES> 129,192,610
<CGS> 68,973,108
<TOTAL-COSTS> 68,973,108
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,478,512
<INCOME-PRETAX> 1,531,990
<INCOME-TAX> 552,000
<INCOME-CONTINUING> 979,990
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 979,990
<EPS-BASIC> 0.07
<EPS-DILUTED> 0.07
</TABLE>
