<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE ECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 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
--- ---
14,064,639 shares of common stock were outstanding on July 31, 1999.
1
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 1999 (UNAUDITED) AND JANUARY 30, 1999
<TABLE>
<CAPTION>
JULY 31, JANUARY 30,
ASSETS 1999 1999
------ -------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,163,842 $ 3,679,115
Accounts receivable:
Trade, net 11,761,189 9,979,178
Other 4,142,367 2,768,651
----------- -----------
15,903,556 12,747,829
----------- -----------
Merchandise inventories 190,222,752 164,057,913
Prepaid expenses 7,722,797 3,595,858
Deferred income taxes, net 4,535,000 4,535,000
----------- -----------
Total current assets 220,547,947 188,615,715
----------- -----------
Property, plant and equipment, at cost:
Land and buildings 19,726,648 19,726,648
Furniture, fixtures and equipment 83,216,723 76,008,130
Leasehold improvements 27,966,322 26,869,958
----------- -----------
130,909,693 122,604,736
Less accumulated depreciation and amortization 60,716,281 54,109,006
----------- -----------
Net property, plant and equipment 70,193,412 68,495,730
----------- -----------
Deferred income taxes, net 53,230,254 55,404,641
Other assets, at cost, less accumulated amortization 14,212,076 11,518,573
----------- -----------
$358,183,689 $324,034,659
----------- ----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 10,692,782 $ 2,112,955
Accounts payable 52,006,289 55,830,124
Accrued expenses 16,101,922 8,772,148
Income taxes payable - 1,811,701
----------- -----------
Total current liabilities 78,800,993 68,526,928
----------- -----------
Other liabilities 2,652,118 2,741,591
Long-term debt, net of current portion 114,041,740 104,229,825
Senior subordinated debt 6,918,000 -
Convertible subordinated debt 70,353,000 70,353,000
Stockholders' equity 85,417,838 78,183,315
----------- -----------
$358,183,689 $324,034,659
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE QUARTERS ENDED JULY 31, 1999 AND AUGUST 1, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER QUARTER
ENDED ENDED
JULY 31, 1999 AUGUST 1, 1998
------------- --------------
<S> <C> <C>
Net sales $169,247,687 $146,496,325
Cost of sales 91,947,529 79,698,372
----------- -----------
Gross profit 77,300,158 66,797,953
Selling, administrative and general expenses 63,473,743 55,300,865
Depreciation and amortization 4,228,082 3,606,440
---------- ----------
Operating income 9,598,333 7,890,648
Net interest expense 4,326,305 3,637,483
---------- ----------
Earnings before income taxes 5,272,028 4,253,165
Income tax expense 1,898,000 1,659,000
---------- ----------
Net earnings $ 3,374,028 $ 2,594,165
---------- ----------
---------- ----------
Net earnings per common share:
Basic $ 0.24 $ 0.19
---------- ----------
---------- ----------
Diluted $ 0.23 $ 0.18
---------- ----------
---------- ----------
Number of shares used to compute net earnings per common share:
Basic 14,064,619 13,979,160
---------- ----------
---------- ----------
Diluted 14,617,942 14,371,746
---------- ----------
---------- ----------
Dividends declared per share $ 0.015 $ 0.015
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JULY 31, 1999 AND
AUGUST 1, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JULY 31, 1999 AUGUST 1, 1998
------------- --------------
<S> <C> <C>
Net sales $298,440,297 $273,132,889
Cost of sales 160,920,637 148,010,931
------------ -----------
Gross profit 137,519,660 125,121,958
Selling, administrative and general expenses 115,194,128 106,083,321
Depreciation and amortization 7,716,697 6,704,486
------------ ------------
Operating income 14,608,835 12,334,151
Net interest expense 7,804,817 7,234,643
------------ -----------
Earnings before income taxes 6,804,018 5,099,508
Income tax expense 2,450,000 1,989,000
------------ -----------
Net earnings $ 4,354,018 $ 3,110,508
------------ -----------
------------ -----------
Net earnings per common share:
Basic $ 0.31 $ 0.22
------------ -----------
------------ -----------
Diluted $ 0.30 $ 0.22
------------ -----------
------------ -----------
Number of shares used to compute net earnings per common share:
Basic 14,064,573 13,949,728
------------ -----------
------------ -----------
Diluted 14,303,692 14,205,567
------------ -----------
------------ -----------
Dividends declared per share $ 0.030 $ 0.030
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
J. BAKER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED JULY 31, 1999 AND AUGUST 1,
1998
(UNAUDITED)
<TABLE>
<CAPTION>
July 31, 1999 August 1, 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 4,354,018 $ 3,110,508
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization:
Fixed assets 6,607,275 5,760,015
Deferred charges, intangible assets and
deferred financing costs 1,329,400 948,427
Deferred income taxes, net 2,174,387 2,684,620
Grants of performance share awards - 255,563
Change in:
Accounts receivable (3,155,727) 2,744,172
Merchandise inventories (7,627,839) (18,661,351)
Prepaid expenses (3,234,164) (3,182,118)
Accounts payable (3,823,835) (7,655,544)
Accrued expenses 7,329,774 (1,026,297)
Income taxes payable/receivable (1,811,701) (84,288)
Other liabilities (31,619) (308,761)
------------ ------------
Net cash provided by (used in) operating activities 2,109,969 (15,415,054)
------------ ------------
Cash flows from investing activities: Capital expenditures for:
Property, plant and equipment (5,304,957) (5,472,057)
Other assets (989,648) (542,198)
Proceeds from sales of footwear businesses 887,903 2,902,335
Assets acquired of Repp Ltd. Big & Tall businesses (26,202,347) -
------------ ------------
Net cash used in investing activities (31,609,049) (3,111,920)
------------ ------------
Cash flows from financing activities:
Repayment of senior debt (1,500,000) (1,500,000)
Proceeds from long-term debt 20,191,350 17,935,497
Proceeds from senior subordinated debt 10,000,000 -
Repayment of mortgage payable (299,608) (279,847)
Payment of mortgage escrow, net 11,560 (21,281)
Proceeds from issuance of common stock, net of retirements 2,438 151,342
Payment of dividends (421,933) (419,675)
------------ ------------
Net cash provided by financing activities 27,983,807 15,866,036
------------ ------------
Net decrease in cash (1,515,273) (2,660,938)
Cash and cash equivalents at beginning of year 3,679,115 3,995,995
------------ ------------
Cash and cash equivalents at end of period $ 2,163,842 $ 1,335,057
------------ ------------
------------ ------------
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 7,667,243 $ 7,250,060
Income taxes 2,087,315 84,288
Income taxes refunded - (914,478)
------------ ------------
------------ ------------
Schedule of non-cash financing activity:
Warrants issued with senior subordinated debt 3,300,000 --
------------ ------------
------------ ------------
Common stock issued for performance share awards - 255,563
------------ ------------
------------ ------------
Stock issued for executive stock plans in exchange for notes receivable - 1,018,750
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<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 and six months ended July 31, 1999 and August 1, 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 and six months
ended July 31, 1999 and August 1, 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>
<CAPTION>
QUARTERS ENDED SIX MONTHS ENDED
--------------------------- -----------------------
JULY 31, AUGUST 1, JULY 31, AUGUST 1,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net earnings, basic and diluted $ 3,374,028 $ 2,594,165 $ 4,354,018 $ 3,110,508
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares:
Basic 14,064,619 13,979,160 14,064,573 13,949,728
Effect of dilutive securities:
Stock options and performance
share awards 553,323 392,586 239,119 255,839
---------- ---------- ---------- ----------
Diluted 14,617,942 14,371,746 14,303,692 14,205,567
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</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 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, 16 stores, to
Grafton-Fraser, Inc., a Canadian men's retailer, and commenced the closing of 31
stores in the United States. The Company operates 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, (both of which have been subsequently amended on August 30,
1999 through a refinancing - see Note 7), (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. The net purchase price
for the acquired assets, which primarily consisted of inventory and fixed assets
for the 128 retail stores in the United States and the Repp Ltd. By Mail
catalog, is $26.2 million, subject to adjustment. 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 sales of $18.4 million in both the quarter and six
months ended July 31, 1999.
6
<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>
<CAPTION>
Quarters Ended Six Months Ended
-------------- ----------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
---- ---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
APPAREL
Net sales $ 97,761 $ 75,556 $ 171,959 $ 147,556
Operating profit 8,965 6,545 15,978 12,427
FOOTWEAR
Net sales $ 71,486 $ 70,940 $ 126,481 $ 125,577
Operating profit 6,272 6,072 9,890 9,533
CONSOLIDATED
Net sales $169,247 $146,496 $298,440 $273,133
Operating profit before general
corporate expense 15,237 12,617 25,868 21,960
General corporate expense (5,639) (4,726) (11,259) (9,625)
Interest expense, net (4,326) (3,638) (7,805) (7,235)
Earnings before income taxes $ 5,272 $ 4,253 $ 6,804 $ 5,100
</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 151 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, was completed in July, 1999 and the remodeled stores reopened on July
19, 1999. The final stage, involving 47 stores, is scheduled to be completed in
September, 1999. During these three stages of store closings, the Company
participated in liquidation sales of its footwear inventory in each store. The
three stages of liquidation sales ended on February 22, 1999, May 21, 1999 and
July 26, 1999, respectively. The Company's sales in the combined Ames and Hills
chains for the quarter and six months ended July 31, 1999 were $38.7 million and
$68.7 million, respectively.
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
7
<PAGE>
became effective on February 2, 1999 (the "Effective Date"), the Company's
license agreement with Bradlees was 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 will 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 license 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 and six
months ended July 31, 1999 were $14.2 million and $23.8 million, respectively.
7] On August 30, 1999, the Company established a total of $184 million in
bank financing arrangements, comprised of a $150 million revolving credit
facility, a $25 million term loan and a $9 million chattel loan. These three
facilities, all of which mature in May 2002, amended or replaced $160 million in
previously existing bank credit facilities which would have otherwise expired in
May 2000 and May 2001.
The $150 million revolving line of credit (the "Revolver") was provided by
a group of lenders led by Bank Boston Retail Finance Inc. Aggregate borrowings
under the Revolver are limited to an amount determined by a formula based on
various percentages of eligible inventory and accounts receivable. Borrowings
under the Revolver bear interest at variable rates and can be in the form of
loans and letters of credit.
The $25 million term loan (the "Term Loan") was provided by Back Bay
Capital Funding LLC. If certain conditions are met, a principal payment of $5
million is due on April 30, 2000, and payments of $2.5 million are due on each
of July 31, 2000 and November 30, 2000. Borrowings under the Term Loan bear
interest at 16% per year.
The $9 million chattel loan (the "Chattel Loan") was provided by
BancBoston Leasing Inc. The Chattel Loan is payable in equal monthly
installments of principal and interest and bears interest at 10.35%.
Each of the Revolver, the Term Loan and the Chattel Loan is secured by
substantially all of the assets of the Company, and amended or replaced the
following previously existing credit facilities:
- - An $85 million revolving credit facility which was used to finance the
Company's Casual Male Big & Tall and Work `n Gear apparel businesses;
- - A $50 million revolving credit facility which was used to finance the
Company's footwear business;
- - A $20 million revolving line of credit and $5 million term loan facility
which were used to finance the Company's Repp Ltd. Big & Tall businesses.
8
<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 14 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 SIX MONTHS OF FISCAL 2000 VERSUS FIRST SIX MONTHS OF FISCAL 1999
The Company's net sales increased by $25.3 million to $298.4 in the first
six months of fiscal 2000 from $273.1 million in the first six months of fiscal
1999, primarily due to $18.4 million in sales generated by the Repp Ltd. Big &
Tall stores and the Repp Ltd. By Mail catalog, which were acquired by the
Company on May 23, 1999. Sales in the Company's apparel operations increased by
$24.4 million to $172.0 in the first six months of fiscal 2000 from $147.6
million in the first six months of fiscal 1999, primarily due to sales in the
newly acquired Repp businesses and a 4.7% 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 $905,000 to
$126.5 million in the first six months of fiscal 2000 from $125.6 million in the
first six months of fiscal 1999, primarily due to a 5.3% 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). The increase was partially offset by a $5.1 million
decrease in sales due to the temporary closing of the approximately 150 former
Hills stores for a portion of the first six months of fiscal 2000, prior to
their reopening as Ames stores.
The Company's cost of sales constituted 53.9% of sales in the first six
months of fiscal 2000, as compared to 54.2% of sales in the first six months of
fiscal 1999. Cost of sales in the Company's apparel operations was 51.2% of
sales in the first six months of fiscal 2000, which was comparable to the 51.1%
of sales in the first six months of fiscal 1999. Cost of sales in the Company's
footwear operations was 57.7% of sales in the first six months of fiscal 2000,
as compared to 57.9% of sales in the first six months 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 $9.1 million, or
8.6%, to $115.2 million in the first six months of fiscal 2000 from $106.1
million in the first six months of fiscal 1999, primarily due to the acquisition
of the Repp businesses. As a percentage of sales, selling, administrative and
general expenses were 38.6% of sales in the first six months of fiscal 2000, as
compared to 38.8% of sales in the first six months of fiscal 1999. Selling,
administrative and general expenses in the Company's apparel operations were
40.4% of sales in the first six months of fiscal 2000 as compared to 41.4% of
sales in the first six months 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 36.2% of sales in the
first six months of fiscal 2000, as compared to 35.9% of sales in the first six
months of fiscal 1999. This increase was primarily due to an increase in store
level expenses.
9
<PAGE>
Depreciation and amortization expense increased by $1.0 million to $7.7
million in the first six months of fiscal 2000 from $6.7 million in the first
six months 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 by $2.3
million to $14.6 million in the first six months of fiscal 2000 from $12.3
million in the first six months of fiscal 1999. As a percentage of sales,
operating income was 4.9% in the first six months of fiscal 2000 as compared to
4.5% in the first six months of fiscal 1999.
Net interest expense increased by $570,000 to $7.8 million in the first
six months of fiscal 2000 from $7.2 million in the first six months of fiscal
1999, primarily due to higher interest rates on bank borrowings and higher
average levels of bank borrowings in the first six months of fiscal 2000 versus
the first six months of fiscal 1999, both of which were primarily due to the
acquisition of the Repp Ltd. Big & Tall businesses.
Taxes on earnings for the first six months of fiscal 2000 were $2.5
million, yielding an effective tax rate of 36.0%, as compared to taxes on
earnings of $2.0 million for the first six months of fiscal 1999, yielding an
effective tax rate of 39.0%. The tax rate for the first six months of fiscal
2000 is consistent with that utilized for the entire fiscal year 1999.
Net earnings for the first six months of fiscal 2000 were $4.4 million, as
compared to net earnings of $3.1 million in the first six months of fiscal 1999,
an increase of 40.0%.
SECOND QUARTER OF FISCAL 2000 VERSUS SECOND QUARTER OF FISCAL 1999
The Company's net sales increased by $22.7 million to $169.2 million in
the second quarter of fiscal 2000 from $146.5 million in the second quarter of
fiscal 1999, primarily due to $18.4 million in sales generated by the Repp Ltd.
Big & Tall stores and the Repp Ltd. By Mail catalog acquired by the Company on
May 23, 1999. Sales in the Company's apparel operations increased by $22.2
million to $97.8 million in the second quarter of fiscal 2000 from $75.6 million
in the second quarter of fiscal 1999, primarily due to the aforementioned
acquisition of the Repp Ltd. Big & Tall stores and Repp Ltd. By Mail catalog
businesses in the second quarter of fiscal 2000, and a 5.6% increase in
comparable apparel store sales. Sales in the Company's footwear operations
increased by $547,000 to $71.5 million in the second quarter of fiscal 2000 from
$70.9 million in the second quarter of fiscal 1999, primarily due to a 5.9%
increase in comparable retail footwear store sales. The increase was partially
offset by a $3.1 million decrease in sales due to the temporary closing of
approximately 100 of the 150 former Hills stores for a portion of the second
quarter of fiscal 2000, prior to their reopening as Ames stores.
The Company's cost of sales constituted 54.3% of sales in the second
quarter of fiscal 2000, as compared to 54.4% of sales in the second quarter of
fiscal 1999. Cost of sales in the Company's apparel operations was 51.4% of
sales in the second quarter of fiscal 2000, as compared to 50.7% of sales in the
second quarter of fiscal 1999. The increase in such percentage was primarily
attributable to a lower initial markup on merchandise purchases. Cost of sales
in the Company's footwear operations was 58.3% of sales in the second quarter of
fiscal 2000, as compared to 58.3% of sales in the second quarter of fiscal 1999.
Selling, administrative and general expenses increased $8.2 million, or
14.8%, to $63.5 million in the second quarter of fiscal 2000 from $55.3 million
in the second quarter of fiscal 1999, primarily due to the acquisition of the
Repp businesses. As a percentage of sales, selling, administrative and general
expenses were 37.5% of sales in the second quarter of fiscal 2000, as compared
to 37.7% of sales in the second quarter of fiscal 1999. Selling, administrative
and general expenses in the Company's apparel operations were 39.8% of sales in
the second quarter of fiscal 2000, as compared to 41.1% of sales in the second
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 34.4% of sales in the second quarter of
fiscal 2000, as compared to 34.2% of sales in the second quarter of fiscal 1999.
This increase was primarily due to an increase in store level expenses.
Depreciation and amortization expense increased by $622,000 to $4.2
million in the second quarter of fiscal 2000 from $3.6 million in the second
quarter of fiscal 1999, primarily due to an increase in depreciable and
amortizable assets.
10
<PAGE>
As a result of the above, the Company's operating income increased by $1.7
million to $9.6 million in the second quarter of fiscal 2000 from $7.9 million
in the second quarter of fiscal 1999. As a percentage of sales, operating income
was 5.7% in the second quarter of fiscal 2000, as compared to 5.4% in the second
quarter of fiscal 1999.
Net interest expense increased by $689,000 to $4.3 million in the second
quarter of fiscal 2000 from $3.6 million in the second quarter of fiscal 1999,
primarily due to higher interest rates on bank borrowings and higher average
levels of bank borrowings in the second quarter of fiscal 2000 versus the second
quarter of fiscal 1999, both of which were primarily due to the acquisition of
the Repp Ltd. Big & Tall businesses.
Taxes on earnings for the second quarter of fiscal 2000 were $1.9 million,
yielding an effective tax rate of 36.0%, as compared to taxes on earnings of
$1.7 million for the second quarter of fiscal 1999, yielding an effective tax
rate of 39.0%. The tax rate for the second quarter of fiscal 2000 is consistent
with that utilized for the entire fiscal year 1999.
Net earnings for the second quarter of fiscal 2000 were $3.4 million, as
compared to net earnings of $2.6 million in the second quarter of fiscal 1999,
an increase of 30.1%.
FINANCIAL CONDITION
JULY 31, 1999 VERSUS JANUARY 30, 1999
The increase in accounts receivable at July 31, 1999 from January 30, 1999
was primarily due to an increase in trade receivables due to seasonal factors,
licensed footwear department sales in July being higher than licensed footwear
department sales in January.
The increase in merchandise inventories at July 31, 1999 from January 30,
1999 was primarily due to the acquisition of the Repp Ltd. Big & Tall stores and
the Repp Ltd. By Mail businesses, and a seasonal increase in the average
inventory level per location.
The increase in current portion of long-term debt at July 31, 1999 versus
January 30, 1999 is primarily due to current maturities of portions of the new
bank financing arrangements.
The decrease in accounts payable at July 31, 1999 from January 30, 1999
was primarily due to a decrease in in-transit inventory. The ratio of accounts
payable to merchandise inventory was 27.3% at July 31, 1999, as compared to
34.0% at January 30, 1999 and 25.0% at August 1, 1998.
The increase in accrued expenses at July 31, 1999 from January 30, 1999 is
primarily due to the Repp acquisition.
The increase in long-term debt, net of current portion, at July 31, 1999
from January 30, 1999 was primarily due to additional borrowings for the
acquisition of the Repp businesses, coupled with additional bank borrowings to
meet seasonal working capital needs.
LIQUIDITY AND CAPITAL RESOURCES
On August 30, 1999, the Company established a total of $184 million in
bank financing arrangements, comprised of a $150 million revolving credit
facility, a $25 million term loan and a $9 million chattel loan. These three
facilities, all of which mature in May 2002, amended or replaced $160 million in
previously existing bank credit facilities which would have otherwise expired in
May 2000 and May 2001.
The $150 million revolving line of credit (the "Revolver") was provided by
a group of lenders led by Bank Boston Retail Finance Inc. Aggregate borrowings
under the Revolver are limited to an amount determined by a formula based on
various percentages of eligible inventory and accounts receivable. Borrowings
under the Revolver
11
<PAGE>
bear interest at variable rates and can be in the form of loans and letters of
credit.
The $25 million term loan (the "Term Loan") was provided by Back Bay
Capital Funding LLC. If certain conditions are met, a principal payment of $5
million is due on April 30, 2000, and payments of $2.5 million are due on each
of July 31, 2000 and November 30, 2000. Borrowings under the Term Loan bear
interest at 16% per year.
The $9 million chattel loan (the "Chattel Loan") was provided by
BancBoston Leasing Inc. The Chattel Loan is payable in equal monthly
installments of principal and interest and bears interest at 10.35%.
Each of the Revolver, the Term Loan and the Chattel Loan is secured by
substantially all of the assets of the Company, and amended or replaced the
following previously existing credit facilities:
- - An $85 million revolving credit facility which was used to finance the
Company's Casual Male Big & Tall and Work `n Gear apparel businesses;
- - A $50 million revolving credit facility which was used to finance the
Company's footwear business;
- - A $20 million revolving line of credit and $5 million term loan facility
which were used to finance the Company's Repp Ltd. Big & Tall businesses.
As of July 31, 1999, the Company had aggregate borrowings outstanding
under its previously existing credit facilities totaling $116.0 million,
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 were 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 was amended by the Revolver and the Term Loan.
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 amount of the 13% Senior Subordinated Notes
at July 31, 1999 has been reduced by $3,082,000, the remaining balance of the
$3,300,000 value assigned to the detachable warrants. The value of the
detachable warrants is included in additional paid-in capital in stockholders'
equity, and is being amortized using the interest method. The 13% Senior
Subordinated Notes mature on December 31, 2001, and the warrants expire on May
21, 2004.
Net cash provided by operating activities for the first six months of
fiscal 2000 was $2.1 million, as compared to net cash used in operating
activities of $15.4 million in the first six months of fiscal 1999. The $17.5
million change was primarily due to a smaller increase in inventory in fiscal
2000 versus fiscal 1999, 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 six months of
fiscal 1999, and an increase in accrued expenses in fiscal 2000, primarily as a
result of the Repp acquisition, versus a decrease in accrued expenses in fiscal
1999.
Net cash used in investing activities for the first six months of fiscal
2000 was $31.6 million, as compared to net cash used in investing activities of
$3.1 million in the first six months of fiscal 1999. The $28.5 million change
was primarily due to the acquisition of Repp assets and the receipt of $888,000
in escrowed proceeds from the earlier sales of the footwear businesses in the
first six months of fiscal 2000 versus receipt of $2.9 million in escrowed
proceeds in the first six months of fiscal 1999.
12
<PAGE>
Net cash provided by financing activities for the first six months of
fiscal 2000 was $28.0 million, as compared to net cash provided by financing
activities of $15.9 million in the first six months of fiscal 1999. The $12.1
million change was primarily due to the incurrence of new senior subordinated
debt for the Repp acquisition, coupled with the borrowing of $20.2 million under
the Company's revolving lines of credit during the first six months of fiscal
2000 versus the borrowing of $17.9 million during the first six months of fiscal
1999.
Excluding furniture, fixtures, equipment and leasehold improvements
acquired with the Repp Ltd. Big & Tall businesses, the Company invested $5.3
million and $5.5 million in capital expenditures during the first six months 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.
Following is a table showing actual and planned store openings by
division for fiscal 2000:
<TABLE>
<CAPTION>
Actual Openings Planned Openings Total
First and Second Third and Fourth Actual/Planned
DIVISION QUARTERS FISCAL 2000 QUARTERS FISCAL 2000 OPENINGS
-------- -------------------- -------------------- --------
<S> <C> <C> <C>
Casual Male 3 2 5
Work 'n Gear - - -
JBI Footwear 3 24 27
Repp Ltd. Big &Tall 3 6 9
</TABLE>
Offsetting the above actual and planned store openings, the Company closed
4 Casual Male stores, 2 Work 'n Gear stores and 12 JBI Footwear departments
during the first six months of fiscal 2000. The Company has plans to close
approximately an additional 7 Casual Male stores, 6 JBI Footwear departments and
3 Repp stores during the third 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.
13
<PAGE>
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.
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 $3.9 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
14
<PAGE>
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.
15
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The registrant's annual meeting of stockholders was held on June 1, 1999
(the "Meeting").
(b) Messrs. Sherman N. Baker, Theodore M. Ronick and Melvin M. Rosenblatt were
elected Class I directors at the Meeting for a three-year term. The term
of office for the following directors continued after the Meeting: Ms.
Nancy Ryan, Messrs. J. Christopher Clifford, Douglas J. Kahn, Harold
Leppo, David Pulver and Alan I. Weinstein.
(c) The stockholders voted on the ratification of the selection of KPMG LLP as
independent auditors for the fiscal year ending January 29, 2000.
The following votes were cast at the Meeting with respect to each nominee
for Class I director:
<TABLE>
<CAPTION>
Total vote for Total vote withheld
Each Director From Each Director
------------- ------------------
<S> <C> <C>
Sherman N. Baker 12,844,993 85,406
Theodore M. Ronick 12,848,529 81,870
Melvin M. Rosenblatt 12,850,643 79,756
</TABLE>
The following votes were cast at the Meeting with respect to the
ratification of auditors:
<TABLE>
<S> <C>
For: 12,924,984
Against: 4,872
Abstain: 543
</TABLE>
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.
16
<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
September 14, 1999
By:/s/Philip Rosenberg
-------------------
Philip Rosenberg
Executive Vice President,
Chief Financial Officer
and Treasurer
Date: Canton, Massachusetts
September 14, 1999
17
<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 JULY 31, 1999
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit Page No.
- ------- --------
<S> <C>
10. Material Contracts
------------------
(.01) 1999 Loan and Security Agreement by and among J. Baker, Inc. *
(as Borrower's representative), Morse Shoe, Inc., JBI Inc., JBI
Apparel, Inc., The Casual Male, Inc., WGS Corp. and TCMB&T, Inc.
and BankBoston Retail Finance Inc., et.al. and Back Bay Capital
Funding LLC, dated August 30, 1999, attached.
(.02) Chattel Promissory Note made by Morse Shoe, Inc., JBI, Inc., The *
Casual Male, Inc., WGS Corp. and TCMB&T, Inc. in favor of
BancBoston Leasing Inc. dated August 26, 1999, attached.
(.03) Master Security Agreement by Morse Shoe, Inc., JBI, Inc., The Casual *
Male, Inc., WGS Corp. and TCMB&T, Inc. in favor of BancBoston Leasing, Inc.
dated August 26, 1999, attached.
(.04) Security Agreement by Morse Shoe, Inc., JBI, Inc., The Casual *
Male, Inc., WGS Corp. and TCMB&T, Inc. in favor of BancBoston Leasing, Inc.
dated August 26, 1999, attached.
11. Computation of Net Earnings Per Common Share, attached. *
--------------------------------------------
27. Financial Data Schedule *
-----------------------
</TABLE>
* Included herein
<PAGE>
-----------------------------------------------------------------------
1999 LOAN AND SECURITY AGREEMENT
-----------------------------------------------------------------------
BANKBOSTON RETAIL FINANCE INC.
ADMINISTRATIVE AGENT
COLLATERAL AGENT
-----------------------------------------------------------------------
BANKBOSTON RETAIL FINANCE INC.
DEBIS FINANCIAL SERVICES, INC.
HELLER FINANCIAL, INC.
ORIX BUSINESS CREDIT, INC.
FOOTHILL CAPITAL CORPORATION
NATIONAL CITY COMMERCIAL FINANCE, INC.
AMSOUTH BANK
LASALLE BUSINESS CREDIT
THE PROVIDENT BANK
FINOVA CAPITAL CORPORATION
IBJ WHITEHALL BUSINESS CREDIT CORP.
SOVEREIGN BANK
REVOLVING CREDIT LENDERS
-----------------------------------------------------------------------
BACK BAY CAPITAL FUNDING LLC
TERM LENDER
-----------------------------------------------------------------------
J. BAKER, INC.
BORROWERS' REPRESENTATIVE FOR
MORSE SHOE, INC.
JBI, INC.
JBI APPAREL, INC.
THE CASUAL MALE, INC.
WGS CORP.
TCMB&T, INC.
THE BORROWERS
-----------------------------------------------------------------------
August 30, 1999
<PAGE>
TABLE OF CONTENTS
-----------------------------------------------------------------------
-----------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
ARTICLE 1: - DEFINITIONS.
ARTICLE 2: - THE REVOLVING CREDIT
2-1. ESTABLISHMENT OF REVOLVING CREDIT........................................................... 33 .
2-2. ADVANCES IN EXCESS OF AVAILABILITIES........................................................ 34 .
2-3. INITIAL RESERVES. CHANGES TO RESERVES....................................................... 34 .
2-4. RISKS OF VALUE OF INVENTORY................................................................. 35 .
2-5. LOAN REQUESTS............................................................................... 35 .
2-6. MAKING OF LOANS UNDER REVOLVING CREDIT...................................................... 37 .
2-7. SWINGLINE LOANS............................................................................. 38 .
2-8. THE LOAN ACCOUNT............................................................................ 38 .
2-9. THE REVOLVING CREDIT NOTES.................................................................. 39 .
2-10. PAYMENT OF THE LOAN ACCOUNT................................................................. 39 .
2-11. INTEREST RATES ON REVOLVING CREDIT LOANS. .................................................. 40 .
2-12. REVOLVING CREDIT UNDERWRITING FEE........................................................... 41 .
2-13. ADMINISTRATIVE AGENT'S FEE.................................................................. 41 .
2-14. UNUSED LINE FEE............................................................................. 42 .
2-15. REVOLVING CREDIT EARLY TERMINATION FEE...................................................... 42 .
2-16 CONCERNING FEES............................................................................. 42 .
2-17. AGENT'S AND LENDERS' DISCRETION............................................................. 42 .
2-18. PROCEDURES FOR ISSUANCE OF L/C'S............................................................ 43 .
2-19. FEES FOR L/C'S.............................................................................. 44 .
2-20. CONCERNING L/C'S............................................................................ 44 .
2-21. CHANGED CIRCUMSTANCES....................................................................... 47 .
2-22. DESIGNATION OF BORROWERS' REPRESENTATIVE AS BORROWERS' AGENT............................... 48 .
2-23 REVOLVING CREDIT LENDERS' COMMITMENTS....................................................... 48 .
ARTICLE 3: - THE TERM LOAN:
3-1. COMMITMENT TO MAKE TERM LOAN................................................................ 49 .
3-2. THE TERM NOTE............................................................................... 50 .
3-3. PAYMENT OF PRINCIPAL OF THE TERM LOAN. .................................................... 50 .
3-4. INTEREST ON THE TERM LOAN. ................................................................. 51 .
3-5. TERM LOAN COMMITMENT FEE.................................................................... 52 .
3-6. PAYMENTS ON ACCOUNT OF TERM LOAN............................................................ 52 .
ARTICLE 4: - CONDITIONS PRECEDENT:
4-1. CORPORATE DUE DILIGENCE..................................................................... 53 .
4-2. OPINION..................................................................................... 53 .
4-3. ADDITIONAL DOCUMENTS........................................................................ 53 .
4-4. OFFICERS' CERTIFICATES...................................................................... 53 .
4-5. REPRESENTATIONS AND WARRANTIES.............................................................. 53 .
4-6. MINIMUM DAY ONE AVAILABILITY................................................................ 54 .
4-7. ALL FEES AND EXPENSES PAID.................................................................. 54 .
4-8. NO SUSPENSION EVENT......................................................................... 54 .
4-9. NO ADVERSE CHANGE........................................................................... 54 .
ARTICLE 5: - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
5-1. PAYMENT AND PERFORMANCE OF LIABILITIES...................................................... 54 .
5-2. DUE ORGANIZATION - CORPORATE AUTHORIZATION - NO CONFLICTS................................... 55 .
5-3. TRADE NAMES................................................................................. 56 .
5-4. LOCATIONS................................................................................... 56 .
5-5. INFRASTRUCTURE.............................................................................. 57 .
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C> <C>
5-6. YEAR 2000 COMPLIANCE........................................................................ 58 .
5-7. TITLE TO ASSETS............................................................................. 58 .
5-8. INDEBTEDNESS................................................................................ 59 .
5-9. INSURANCE POLICIES.......................................................................... 60 .
5-10. LICENSES.................................................................................... 61 .
5-11. LEASES...................................................................................... 61 .
5-12. REQUIREMENTS OF LAW......................................................................... 61 .
5-13. MAINTAIN PROPERTIES......................................................................... 61 .
5-14. PAY TAXES................................................................................... 62 .
5-15. NO MARGIN STOCK............................................................................. 63 .
5-16. ERISA....................................................................................... 63 .
5-17. HAZARDOUS MATERIALS......................................................................... 63 .
5-18. LITIGATION.................................................................................. 63 .
5-19. DIVIDENDS. INVESTMENTS. OTHER CORPORATE ACTIONS. ........................................... 63 .
5-20. REPLACEMENT OF CERTAIN OBLIGATIONS.......................................................... 64 .
5-21. LOANS....................................................................................... 65 .
5-22. LINE OF BUSINESS............................................................................ 65 .
5-23. PROTECTION OF ASSETS........................................................................ 65 .
5-24. AFFILIATE TRANSACTIONS...................................................................... 66 .
5-25. ADDITIONAL ASSURANCES....................................................................... 66 .
5-26. ADEQUACY OF DISCLOSURE...................................................................... 67 .
5-27. NO RESTRICTIONS ON LIABILITIES.............................................................. 67 .
5-28. OTHER COVENANTS............................................................................. 67 .
ARTICLE 6: - REPORTING REQUIREMENTS / FINANCIAL COVENANTS:
6-1. MAINTAIN RECORDS............................................................................ 68 .
6-2. IMMEDIATE NOTICE ........................................................................... 68 .
6-3. BORROWING BASE CERTIFICATE.................................................................. 69 .
6-4. COLLATERAL REPORTING REQUIREMENTS........................................................... 70 .
6-5. MONTHLY REPORT. ............................................................................ 70 .
6-6. QUARTERLY REPORTS........................................................................... 70 .
6-7. ANNUAL REPORTS.............................................................................. 70 .
6-8. OFFICERS' CERTIFICATES...................................................................... 71 .
6-9. ACCESS TO RECORDS........................................................................... 71 .
6-10. INVENTORIES, APPRAISALS, AND AUDITS......................................................... 72 .
6-11. ADDITIONAL FINANCIAL INFORMATION............................................................ 73 .
6-12. FINANCIAL PERFORMANCE COVENANTS............................................................. 74 .
ARTICLE 7: - USE AND COLLECTION OF COLLATERAL:
7-1. USE OF INVENTORY COLLATERAL................................................................. 75 .
7-2. INVENTORY QUALITY........................................................................... 75 .
7-3. ADJUSTMENTS AND ALLOWANCES.................................................................. 75 .
7-4. VALIDITY OF ACCOUNTS........................................................................ 75 .
7-5. NOTIFICATION TO ACCOUNT DEBTORS............................................................. 75 .
ARTICLE 8: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
8-1 DEPOSITORY ACCOUNTS......................................................................... 76 .
8-2. CREDIT CARD RECEIPTS........................................................................ 76 .
8-3. THE CONCENTRATION, BLOCKED AND OPERATING ACCOUNTS.......................................... 77 .
8-4. PROCEEDS AND COLLECTION OF ACCOUNTS......................................................... 77 .
8-5. HOST STORE, CORPORATE ACCOUNT AND OTHER RECEIPTS............................................ 78 .
8-6. PAYMENT OF LIABILITIES...................................................................... 78 .
ARTICLE 9: - GRANT OF SECURITY INTEREST:
ii
<PAGE>
9-1. GRANT OF SECURITY INTEREST.................................................................... 79 .
9-2. EXTENT AND DURATION OF SECURITY INTEREST...................................................... 80 .
ARTICLE 10: - ADMINISTRATIVE AGENT AS BORROWERS' ATTORNEY-IN-FACT:
10-1. APPOINTMENT AS ATTORNEY-IN-FACT............................................................. 80 .
10-2. NO OBLIGATION TO ACT........................................................................ 81 .
ARTICLE 11: - EVENTS OF DEFAULT:
11-1. FAILURE TO PAY REVOLVING CREDIT OR TERM LOAN................................................ 82 .
11-2. FAILURE TO MAKE OTHER PAYMENTS.............................................................. 82 .
11-3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD).................................. 82 .
11-4. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD)..................................... 82 .
11-5. MISREPRESENTATION........................................................................... 82 .
11-6. ACCELERATION OF OTHER DEBT.................................................................. 82 .
11-7. DEFAULT OF HOST STORE AGREEMENT ............................................................ 83 .
11-8. UNINSURED CASUALTY LOSS..................................................................... 83 .
11-9. JUDGMENT. RESTRAINT OF BUSINESS............................................................ 83 .
11-10. BUSINESS FAILURE............................................................................ 83 .
11-11. BANKRUPTCY.................................................................................. 84 .
11-12. DEFAULT BY GUARANTOR OR RELATED ENTITY...................................................... 84 .
11-13. INDICTMENT - FORFEITURE..................................................................... 84 .
11-14. TERMINATION OF GUARANTY..................................................................... 84 .
11-15. CHALLENGE TO LOAN DOCUMENTS................................................................. 84 .
11-16. CHANGE IN CONTROL........................................................................... 85 .
ARTICLE 12: - RIGHTS AND REMEDIES UPON DEFAULT:
12-1. RIGHTS OF ENFORCEMENT....................................................................... 85 .
12-2. SALE OF COLLATERAL.......................................................................... 86 .
12-3. OCCUPATION OF BUSINESS LOCATION............................................................. 87 .
12-4. GRANT OF NONEXCLUSIVE LICENSE............................................................... 87 .
12-5. ASSEMBLY OF COLLATERAL...................................................................... 87 .
12-6. RIGHTS AND REMEDIES......................................................................... 87 .
ARTICLE 13: REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:
13-1 REVOLVING CREDIT FUNDING PROCEDURES:........................................................ 88 .
13-2 SWINGLINE LOANS. ......................................................... 88 .
13-3. ADMINISTRATIVE AGENT'S COVERING OF FUNDINGS:................................................ 89 .
13-4. ORDINARY COURSE DISTRIBUTIONS: REVOLVING CREDIT............................................. 91 .
13-5. ORDINARY COURSE DISTRIBUTIONS : TERM LOAN................................................... 92 .
ARTICLE 14: ACCELERATION AND LIQUIDATION
14-1. ACCELERATION NOTICES........................................................................ 92 .
14-2. MANDATORY ACCELERATION RIGHT OF TERM LENDER:................................................ 93 .
14-3. ACCELERATION................................................................................ 93 .
14-4. INITIATION OF LIQUIDATION................................................................... 93 .
14-5. ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION......................................... 93 .
14-6. COLLATERAL AGENT'S CONDUCT OF LIQUIDATION................................................... 94 .
14-7. DISTRIBUTION OF LIQUIDATION PROCEEDS:....................................................... 94 .
14-8. RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION ............................................. 95 .
ARTICLE 15: THE AGENTS:
15-1. APPOINTMENT OF AGENTS .................................................................... 96 .
15-2. RESPONSIBILITIES OF AGENTS.................................................................. 96 .
15-3. CONCERNING DISTRIBUTIONS BY THE AGENTS...................................................... 97 .
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C> <C> <C>
15-4. DISPUTE RESOLUTION:......................................................................... 98 .
15-5. DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS................................................... 98 .
15-6. CONFIDENTIAL INFORMATION:................................................................... 98 .
15-7. RELIANCE BY AGENTS.......................................................................... 99 .
15-8. NON-RELIANCE ON AGENTS AND OTHER LENDERS.................................................... 99 .
15-9. INDEMNIFICATION............................................................................ 100 .
15-10. RESIGNATIONS OF AGENTS..................................................................... 100 .
ARTICLE 16: ACTION BY AGENTS - CONSENTS - AMENDMENTS - WAIVERS
16-1. ADMINISTRATION OF CREDIT FACILITIES........................................................ 101 .
16-2. ACTIONS REQUIRING OR ON DIRECTION OF MAJORITY LENDERS...................................... 101 .
16-3 ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS................................ 102 .
16-4. ACTION REQUIRING TWO THIRDS CONSENT ....................................................... 102 .
16-5 ACTIONS REQUIRING OR DIRECTED BY UNANIMOUS CONSENT......................................... 102 .
16-6. ACTIONS REQUIRING SWINGLINE LENDER CONSENT:................................................ 104 .
16-7. ACTIONS REQUIRING TERM LENDER CONSENT:..................................................... 104 .
16-8. ACTIONS REQUIRING AGENTS CONSENT:.......................................................... 104 .
16-9. MISCELLANEOUS ACTIONS:..................................................................... 104 .
16-10. NONCONSENTING REVOLVING CREDIT LENDER:..................................................... 105 .
ARTICLE 17: ASSIGNMENTS AND PARTICIPATIONS
17-1. ASSIGNMENTS AND ASSUMPTIONS:............................................................... 106 .
17-2. PARTICIPATIONS:............................................................................ 108 .
17-3. THE BUYOUT:................................................................................ 108 .
17-4. PLEDGES TO FEDERAL RESERVE BANKS: ......................................................... 109 .
ARTICLE 18: NOTICES:
18-1. NOTICE ADDRESSES........................................................................... 109 .
18-2. NOTICE GIVEN............................................................................... 110 .
ARTICLE 19: - TERM:
19-1. TERMINATION OF REVOLVING CREDIT............................................................ 110 .
19-2. EFFECT OF TERMINATION...................................................................... 111 .
ARTICLE 20: - GENERAL:
20-1. PROTECTION OF COLLATERAL................................................................... 111 .
20-2. SUCCESSORS AND ASSIGNS..................................................................... 111 .
20-3. SEVERABILITY............................................................................... 111 .
20-4. AMENDMENTS. COURSE OF DEALING............................................................. 111 .
20-5. POWER OF ATTORNEY.......................................................................... 112 .
20-6. APPLICATION OF PROCEEDS.................................................................... 112 .
20-7. INCREASED COSTS............................................................................ 112 .
20-8. COSTS AND EXPENSES OF AGENTS AND LENDERS................................................... 113 .
20-9. COPIES AND FACSIMILES...................................................................... 114 .
20-10. MASSACHUSETTS LAW.......................................................................... 114 .
20-11. CONSENT TO JURISDICTION.................................................................... 114 .
20-12. INDEMNIFICATION............................................................................ 115 .
20-13. RULES OF CONSTRUCTION...................................................................... 115 .
20-14. INTENT..................................................................................... 117 .
20-15. RIGHT OF SET-OFF........................................................................... 117 .
20-16. MAXIMUM INTEREST RATE...................................................................... 118 .
20-17. WAIVERS.................................................................................... 118 .
</TABLE>
iv
<PAGE>
EXHIBITS AND SCHEDULES
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<TABLE>
<S> <C> <C>
SCHEDULE
1 : Schedule of Revolving Credit Percentage Commitments and Revolving
Credit Dollar Commitments
- -----------------------------------------------------------------------
EXHIBITS
1:1-0 : Guarantors
2:2-7(c) : SwingLine Note
2:2-9 : Revolving Credit Note
3:3-2 : Term Note
5:5-2 : Related Entities
5:5-3 : Trade Names.
5:5-4 : Locations.
5:5-7(a) : Encumbrances
5:5-7(c) : Equipment Usage Agreement
5:5-8 : Indebtedness.
5:5-9 : Insurance Policies.
5:5-11 : Leases
5:5-18 : Litigation
6:6-3 : Borrowing Base Certificate
6:6-4 : Collateral Reporting Requirements
6:6-12 : Business Plan
8:8-1 : DDA's.
8:8-2 : Credit Card Arrangements
</TABLE>
v
<PAGE>
- --------------------------------------------------------------------------------
1999 LOAN AND SECURITY AGREEMENT BANKBOSTON RETAIL FINANCE INC.
ADMINISTRATIVE AGENT
AND COLLATERAL AGENT
- --------------------------------------------------------------------------------
August 30, 1999
THIS AGREEMENT is made between
BankBoston Retail Finance Inc. (in such capacity, the
"ADMINISTRATIVE AGENT") a Delaware corporation with its principal
executive offices at 40 Broad Street, Boston, Massachusetts, as
Administrative Agent for the ratable benefit of (i) the "REVOLVING
CREDIT LENDERS" (individually, a "REVOLVING CREDIT LENDER") who are,
at present identified on the signature pages (commencing on Page
119) of this Agreement) and any person who becomes a "Revolving
Credit Lender" in accordance with the provisions of this Agreement,
and (ii) the Term Lender;
and
BankBoston Retail Finance Inc. (in such capacity, the
"COLLATERAL AGENT"), as agent for the ratable benefit of the
Administrative Agent, the Revolving Credit Lenders, and the Term
Lender;
and
Back Bay Capital Funding LLC (in such capacity, with any
successor or assign, the "TERM LENDER"), a limited liability company
with offices at 40 Broad Street, Boston, Massachusetts 02109,
and
J. Baker, Inc., a Massachusetts corporation with its principal
executive offices at 555 Turnpike Street, Canton, Massachusetts
02021 (in such capacity, the "BORROWERS' REPRESENTATIVE") as agent
for the following borrowers (individually, a "BORROWER" and
collectively, the "BORROWERS"):
Morse Shoe, Inc. ( a Delaware corporation with its principal
executive offices at 555 Turnpike Street, Canton,
Massachusetts 02021);
JBI, Inc. ( a Massachusetts corporation with its principal
executive offices at 555 Turnpike Street, Canton,
Massachusetts 02021);
JBI Apparel, Inc.( a Massachusetts corporation with its
principal executive offices at 555 Turnpike Street, Canton,
Massachusetts 02021);
The Casual Male, Inc. ( a Massachusetts corporation with its
principal executive offices at 437 Turnpike Street, Canton,
Massachusetts 02021);
WGS Corp. ( a Massachusetts corporation with its principal
executive offices at 555 Turnpike Street, Canton,
Massachusetts 02021); and
. 1 .
<PAGE>
TCMB&T, Inc.( a Massachusetts corporation with its principal
executive offices at 437 Turnpike Street, Canton,
Massachusetts 02021);
WHEREAS, On or about May 30, 1997, said JBI, Inc., Morse Shoe, Inc.,
and JBI Holding Company, Inc. entered into a certain Loan and
Security Agreement dated May 30, 1997 with GBFC, Inc. (now
known as BankBoston Retail Finance Inc.) and Fleet National
Bank, as agents, pursuant to which a revolving credit facility
(the "1997 JBI / MORSE SHOE FACILITY") was established in
favor of said corporations; and
WHEREAS, On or about May 21, 1999, said JBI Apparel Inc. entered into a
certain Loan and Security Agreement dated May 21, 1999 with
BankBoston Retail Finance Inc. as agents, pursuant to which
revolving and term credit facilities (the "1999 JBI APPAREL
FACILITY") was established in favor of said corporation; and
WHEREAS, The Agents, acting on behalf of the Lenders, have acquired all
right, title, and interest of each lender under and in respect
to the 1997 JBI / Morse Shoe Facility and the 1999 JBI Apparel
Facility; and
WHEREAS, The corporations which are the "Borrowers" under the1997 JBI /
Morse Shoe Facility and the 1999 JBI Apparel Facility desire
to amend and restate said facilities in conjunction with
establishment of a credit facility in favor of those other
Borrowers (as defined herein) which are not party to the 1997
JBI / Morse Shoe Facility or the 1999 JBI Apparel Facility in
order to realize the benefits and economies of their acting in
concert; and
WHEREAS, the parties hereto desire to amend and restate the
documentation which governs and controls the 1997 JBI / Morse
Shoe Facility and the 1999 JBI Apparel Facility;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
benefits to be derived herefrom.
WITNESSETH:
ARTICLE 1: - DEFINITIONS.
As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:
"1997 JBI / MORSE SHOE FACILITY": Is defined in the Preamble.
"1999 JBI APPAREL FACILITY": Is defined in the Preamble.
"A/R RESERVES": Such Reserves as may be established from time to time by the
Administrative Agent in the Administrative Agent's discretion
with respect to the determination of the collectability in the
ordinary course and of the creditworthiness of the Eligible
Corporate Receivables. Without limiting the generality of the
foregoing, A/R Reserves shall include (but are not limited to)
reserves based on the following:
(i) The aggregate of all accounts receivables which are
more than 60 days
. 2 .
<PAGE>
past invoice.
(ii) The aggregate of all accounts receivable owed by any
Account Debtor 25% or more of whose accounts are
described in Subsection (i), above.
(iii) The aggregate of all accounts receivable which arise
out of the sale by the Borrower of goods consigned or
delivered to the Borrower or to the Account Debtor on
sale or return terms (whether or not compliance has
been made with the applicable provisions of Article 2
of the Uniform Commercial Code).
(iv) The aggregate of all accounts receivable which arise
out of any sale made on a basis other than upon terms
usual to the business of the Borrower.
(v) The aggregate of all accounts receivable which arise
out of any sale made on a "bill and hold," dating, or
delayed shipping basis.
(vi) The aggregate of all accounts receivable which are owed
by any Account Debtor whose principal place of business
is not within the continental United States or the
District of Columbia.
(vii) The aggregate of all accounts receivable which are owed
by any Related Entity. (viii) The aggregate of all
accounts receivable to the extent that the Account
Debtor holds or is entitled to any claim, counterclaim,
set off, or chargeback as determined by the
Administrative Agent in its discretion.
(ix) The aggregate of all accounts receivable which are
evidenced by a promissory note or other documentation
evidencing modified payment terms.
(x) The aggregate of all accounts receivable which are owed
by any person employed by, or a salesperson of, the
Borrower.
"ACCELERATION": The making of demand or declaration that any
indebtedness, not otherwise due and payable, is due and payable.
Derivations of the word "Acceleration" (such as "Accelerate") are used
with like meaning in this Agreement.
"ACCELERATION NOTICE": Written notice as follows:
(a) From the Administrative Agent to the Collateral Agent,
as provided in Section 14:14-1(a).
(b) From the SuperMajority Lenders, as provided in Section
14:14-1(b).
(c) From the Term Lender, as provided in Section
14:14-1(c).
. 3 .
<PAGE>
The Administrative Agent shall provide copies of any Acceleration notice
to each Revolving Credit Lender and to the Term Lender, as applicable.
"ACCOUNTS" and "ACCOUNTS RECEIVABLE" "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.
"ACCOUNT DEBTOR": Has the meaning given that term in the UCC.
"ACH": Automated clearing house.
"ADMINISTRATIVE AGENT": Is defined in the Preamble.
"ADMINISTRATIVE AGENT'S COVER": The amount which the Administrative Agent makes
available to the Borrower, as provided in Section 13:13-3, below, which
amount a Revolving Credit Lender was obligated to provide to the
Administrative Agent in accordance with Section 2:2-23(a), below.
"ADMINISTRATIVE AGENT'S FEE": Is defined in Section 2:2-13.
"AFFILIATE": With respect to any two Persons, a relationship in which (i) 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 (ii) one has, directly or indirectly,
control of the other; or (iii) not less than Twenty Five Percent (25%) of
their respective ownership is directly or indirectly held by the same
third Person.
"AGENT": When not preceded by "Administrative" or "Collateral", the term
"Agent" refers collectively and individually to the Administrative Agent
and the Collateral Agent.
"AGENTS' RIGHTS AND REMEDIES": Is defined in Section 12:12-6.
. 4 .
<PAGE>
"APPAREL DIVISION BORROWING BASE": The result of the following:
(a) The product of the Retail of Eligible Inventory (net of
Inventory Reserves) of the Apparel Division Borrowers
MULTIPLIED BY the Apparel Division Inventory Advance
Rate.
PLUS
(b) 85% of the face amount of Eligible Credit Card
Receivables of the Apparel Division Borrowers.
PLUS
(c) 75% of the face amount of Eligible Corporate
Receivables (net of A/R Reserves) of the Apparel
Division Borrowers.
PLUS
(d) 85% of the face amount of Eligible Host Store
Receivables of the Apparel Division Borrowers.
MINUS
(d) The then aggregate of the Availability Reserves
applicable to the Apparel Division Borrowers.
"APPAREL DIVISION BORROWERS": JBI Apparel, Inc.; The Casual Male, Inc.; WGS
Corp.; and TCMB&T, Inc.
"APPAREL DIVISION INVENTORY ADVANCE RATE": From the effective date of this
Agreement until
December 15, 1999: 29%
FOR PERIODS THEREAFTER:
From December 16 to August 31 : 27%
From September 1 to December 15 : 29%
"APPRAISED INVENTORY LIQUIDATION VALUE": The product of (a) the Retail of
Eligible Inventory (net of Inventory Reserves) MULTIPLIED by (b) that
percentage determined by the then most recent appraisal of the Borrowers'
Inventory undertaken at the request of the Administrative Agent as
reflecting that appraiser's estimate of the realization on the Retail of
the Borrowers' Inventory in a liquidation thereof.
"ASSIGNING REVOLVING CREDIT LENDER": Defined in Section 17:17-1(a).
"ASSIGNMENT AND ACCEPTANCE": Defined in Section 17:17-1(b).
. 5 .
<PAGE>
"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 , except where a
Landlord's Waiver, acceptable to the Collateral Agent ,
has been received by the Administrative 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 2:2-3.
"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.
"BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest at the
Base Margin Rate.
"BASE MARGIN RATE": That per annum rate which is the aggregate of Base PLUS 0.5%
per annum.
. 6 .
<PAGE>
"BASELINE COVENANT BREACH": For three (3) consecutive days,
(x) The aggregate of (i) the unpaid principal balance of
the Loan Account PLUS (ii) the Stated Amount of all
then outstanding L/C's, PLUS (iii) the then unpaid
principal balance of the Term Loan exceeds
(y) The aggregate of (i) all components of the Apparel
Division Borrowing Base and the Shoe Division Borrowing
Base (net of any Reserves applicable thereto) other
than any component based on Eligible Inventory PLUS
(ii) Appraised Inventory Liquidation Value multiplied
by the Loan to Collateral Percentage.
"BBL EQUIPMENT LOAN": The $9,000,000.00 term loan to be made by BancBoston
Leasing, Inc. to the Borrowers contemporaneous with the execution of this
Agreement.
"BBRF": BankBoston Retail Finance Inc.
"BLOCKED ACCOUNT": Any account (other than the Concentration Account) into
which the contents of any DDA is transferred.
"BORROWING BASE CERTIFICATE": Is defined in Section 6:6-3.
"BORROWERS": Is defined in the Preamble.
"BORROWERS' REPRESENTATIVE": Is defined in the Preamble.
"BUSINESS DAY": 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 Borrowers' business plan annexed hereto as EXHIBIT
6:6-12(b)., and any revision, amendment, or update of such business plan
to which the Administrative Agent has provided its written sign-off.
"BUYOUT": The consummation of a transaction described in Section 17:17-3.
"CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
liabilities on account of the
. 7 .
<PAGE>
acquisition of any interest in any fixed asset (other than by reason of
the acquisition of the Repp Limited Division of Edison Brothers by JBI
Apparel, Inc) which may be capitalized in accordance with GAAP.
"CAPITAL LEASE": Any lease which may be capitalized in accordance with GAAP.
"CHANGE IN CONTROL": (a) The failure of an Obligor to own, beneficially
and of record, 100% of the capital stock of all Obligors (other than J.
Baker) having the right, under ordinary circumstances, to vote for the
election of directors of those Obligors.
(b) The occurrence of any event or circumstance such
that the Borrowers' Representative does not have the power to elect all
directors of all other Borrowers.
(c) The acquisition, by any group of persons (within
the meaning of the Securities Exchange Act of 1934, as amended) or by any
Person, of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission) of 35% or more of the issued and
outstanding capital stock of the Borrowers' Representative having the
right, under ordinary circumstances, to vote for the election of
directors of the Borrower.
"CHATTEL PAPER": Has the meaning given that term in the UCC.
"COLLATERAL": Is defined in Section 9:9-1.
"COLLATERAL AGENT": Is defined in the Preamble.
"COLLATERAL INTERESTS": Any interest in property to secure an obligation,
including, without limitation, security interests, mortgages, and deeds
of trust.
"CONCENTRATION ACCOUNT": Is defined in Section 8:8-3.
"CONSENT": Actual consent given by the Lender from whom such consent is sought;
or the passage of Seven (7) Business Days from a Lender's receipt of
written notice from an Agent of a proposed course of action to be
followed by that Agent without such Lender's giving that Agent written
notice of that Lender's objection to such course of action, PROVIDED THAT
that Agent may rely on said passage of time as consent by a Lender only
if that Agent's notice specifically states that consent will be deemed
effective if no objection
. 8 .
<PAGE>
is received within such time period.
"CONSOLIDATED": When used to modify a financial term, test, statement, or
report, refers to the application or preparation of such term, test,
statement, or report (as appropriate) based upon the consolidation, in
accordance with GAAP, of the financial condition or operating results of
the Borrowers.
"CONSOLIDATED EBITDA": The Borrowers' Consolidated earnings before
interest, taxes, depreciation, and amortization, each as determined in
accordance with GAAP.
"COSTS OF COLLECTION": Includes, without limitation, all attorneys' reasonable
fees and reasonable out-of-pocket expenses incurred by any Agent's
attorneys and all reasonable costs incurred by any Agent 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, which costs and expenses are directly or
indirectly related to or in respect of any Agent'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 Agents' 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" shall also include the reasonable
fees and expenses of Lenders' Special Counsel. The Costs of Collection
are Liabilities, and at the Administrative Agent's option may bear
interest at the then effective rate of interest which the Administrative
Agent may then charge the Borrower hereunder for Base Margin Loans.
"CURRENT PAY INTEREST": Is defined in Section 3:3-4(a)(i)
"CUSTOMER CREDIT LIABILITY": Gift certificates, merchandise credits, and
similar liabilities of any Borrower to its retail customers and
prospective customers.
"DELINQUENT REVOLVING CREDIT LENDER": Defined in Section 13:13-3(c),
"DDA": Any checking or other demand daily depository account maintained by the
Borrowers.
"DEPOSIT ACCOUNT": Has the meaning given that term in the UCC.
. 9 .
<PAGE>
"DOCUMENTS": Has the meaning given that term in the UCC.
"DOCUMENTS OF TITLE": Has the meaning given that term in the UCC.
"ELIGIBLE ASSIGNEE": A bank, insurance company, or company engaged in the
business of making commercial loans having a combined capital and surplus
in excess of $300,000,000.00, or any Affiliate of any Revolving Credit
Lender, or any Person to whom a Revolving Credit Lender assigns its
rights and obligations under this Agreement as part of a programmed
assignment and transfer of such Revolving Credit Lender's rights of a
material portion of such Revolving Credit Lender's portfolio of asset
based credit facilities.
"ELIGIBLE CORPORATE RECEIVABLES": Such of a Borrower's accounts receivable
arising in the ordinary course of that Borrower's business for goods sold
and/or services rendered by the Borrower which Accounts and accounts
receivable have been determined by the Administrative Agent to be
satisfactory and have been earned by performance and are owed to that
Borrower by such of that Borrower's Account Debtors as the Administrative
Agent determines to be satisfactory, in that Agent's discretion in each
instance as to which Accounts, the Collateral Agent has a perfected
security interest which is prior and superior to all security interests,
claims, and all Encumbrances.
"ELIGIBLE CREDIT CARD RECEIVABLES": Under 4 business day accounts due on a
non-recourse basis from major credit card processors (which, if due on
account of a private label credit card program, is deemed in the
discretion of the Administrative Agent to be eligible).
"ELIGIBLE HOST STORE RECEIVABLES:" Amounts due from Host Stores which, if due
from a Key Host Store, is subject to a Host Store Consent.
"ELIGIBLE IN-TRANSIT INVENTORY": "Eligible In-Transit Inventory " will be
calculated at 75% of the retail value of such of the Borrowers' Inventory
(without duplication as to Eligible Inventory and Eligible L/C
Inventory), title to which has passed to a Borrower and which is then
being shipped from a foreign location for receipt, within 45 days, at a
warehouse of one of the Borrowers, 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 documents which relate to such shipment names the
. 10 .
<PAGE>
Collateral Agent as consignee of the subject Inventory and the
Collateral Agent has control over the documents which evidence
ownership of the subject Inventory (such as by the providing to
the Collateral Agent of a Customs Brokers Agreement in form
reasonably satisfactory to the Collateral Agent) .
"ELIGIBLE INVENTORY": "Eligible Inventory" will be calculated in a
manner consistent with current tracking practices, based on
stock ledger inventory at Retail and (to the extent not
reflected in the stock ledger) JBI Apparel catalogue and Work
N' Gear inventory shall be determined at Retail as tracked on
such non stock ledger inventory systems of a Borrower which
are deemed adequate for such purpose by the Administrative
Agent. "Eligible Inventory" will consist of the following:
(a) Such of the Borrowers' 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 Lender has a perfected security interest which is prior and
superior to all security interests, claims, and encumbrances,
which Inventory, if at a Key Host Store, is subject to a Host
Store Consent.
(b) Eligible L/C Inventory.
(c) Eligible In-Transit Inventory Without limiting the
foregoing, "Eligible Inventory" shall not include (i) [direct
shipment inventory]; (ii) any non-merchandise inventory (such as
labels, bags, and packaging materials); (iii) "dummy warehouse
inventory"; and (iv) damaged goods, return to vendor merchandise,
packaways, consigned inventory, and other similar categories.
"ELIGIBLE L/C INVENTORY": "Eligible L/C Inventory" will be calculated at 75% of
the retail value of such of the Borrowers' Inventory (without
duplication as to Eligible Inventory and 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 (such as by the providing to
the Collateral Agent of a Customs Brokers
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Agreement in form reasonably satisfactory to the Collateral
Agent).
"EMPLOYEE BENEFIT PLAN": As defined in ERISA.
"ENCUMBRANCE": 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.
"END DATE": The date upon which both (a) all Liabilities have been paid in full
and (b) all obligations of any Lender to make loans and advances
and to provide other financial accommodations to the Borrowers
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; and
(b) the common law relating to damage to Persons or
property from Hazardous Materials.
"EQUIPMENT": "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 Borrowers' business, and
any and all accessions or additions thereto, and substitutions
therefor.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended.
"ERISA AFFILIATE": Any Person which is under common control with the Borrowers
within the
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<PAGE>
meaning of Section 4001 of ERISA or is part of a group which
includes the Borrowers 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 requisite Lenders or by the Agents, as applicable (as to
which due waiver, SEE Section 20:20-4(b)). 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 for which the Borrowers are obligated to reimburse any
Agent or the Lenders, which reimbursement obligation is not
specifically duly waived).
"FEE LETTER": The letter dated July 29, 1999, amongst the Agents, BBRF, and the
Borrower.
"FIXED CHARGE RATIO": The decimal equivalent of that fraction in which the (a)
numerator is the result of Consolidated EBITDA, MINUS Capital
Expenditures and (b) the denominator is the aggregate of cash
payments of interest on Indebtedness, PLUS cash payments of
principal of Indebtedness (in each instance for the same period),
PLUS cash payments of taxes, PROVIDED, HOWEVER, the cash payments
of principal of Indebtedness shall not include principal payments
on account of the Term Loan Debt.
"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 Administrative Agent, (a) the Borrowers' compliance with
the financial performance covenants imposed pursuant to Section 6:6-12
shall be determined as if such Material Accounting Change had not taken
place and (b) the Borrowers shall include, with its monthly, quarterly,
and annual financial statements a schedule, certified by the Borrowers'
chief financial officer, on which the effect of such Material Accounting
Change to the statement with which provided shall be described.
"GENERAL INTANGIBLES": "General Intangibles" as defined in the UCC; and also
all: rights to payment for credit extended; deposits; amounts due to the
Borrowers; credit memoranda
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in favor of the Borrowers; 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 Borrowers 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 Borrowers 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
Borrowers or credit extended or services performed, by the Borrowers,
whether intended for an individual customer or the general business of
the Borrowers, or used or useful in connection with research by the
Borrowers.
"GOODS": Has the meaning given that term in the UCC.
"GUARANTOR": Each Person listed on EXHIBIT 1:1-0, annexed hereto.
"GUARANTOR AGREEMENT": Each instrument and document executed by any guarantor
of the Liabilities to evidence or secure that guarantor's guaranty
thereof.
"GUARANTOR DEFAULT": Default or breach or the occurrence of any event of
default under any Guarantor Agreement.
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<PAGE>
"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.
"HOST STORE": An entity which operates a retail store at which a Borrower
operates a retail shoe or apparel department as a so-called "licensed
department".
"HOST STORE AGREEMENT": Any lease, license, or similar agreement with any
Host Store pursuant to which a Borrower operates or is to operate a
retail shoe department as a so-called "licensed department".
"HOST STORE CONSENT": An agreement by a Key Host Store
(a) with the Agents' predecessors in interest under
the 1997 JBI / Morse Shoe Facility ; or
(b) which the Administrative Agent determines (in
the Administrative Agent's discretion) provides for reasonable safeguards
and protections concerning the interests of the Agents and the Lenders in
the assets and operations of that Borrower, which agreement shall be
similar in tenor to those provided to GBFC, Inc. and Fleet National Bank,
as agents, in connection with the 1997 JBI / Morse Shoe Facility.
"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.
. 15 .
<PAGE>
(e) As lessee under Capital Leases. "INDEBTEDNESS" of any
Person shall also include:
(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 20:20-12.
"INSTRUMENTS": Has the meaning given that term in the UCC.
"INTEREST PAYMENT DATE": With reference to:
Each Libor Loan: The last day of the Interest Period relating
thereto; the Termination Date; the End Date.
Each Base Margin Loan: the first day of each month; the
Termination Date; and the End Date.
"INTEREST PERIOD": (a) With respect to each Libor Loan: Subject to Subsection
(c), below, the period commencing on the date of the making or
continuation of, or conversion to, the subject Libor Loan and
ending one, two, or three months thereafter, (and with respect to
the period commencing with the execution of this Agreement and
ending on October 1, 1999, one, two, or three weeks) in each
instance as the Borrowers' Representative may elect by notice
(pursuant to Section 2:2-5(a)) to the Administrative Agent and
such other periods (no longer, in any event, than three months) to
which the Borrowers' Representative and the Administrative Agent
may agree.
(b) With respect to each Base Margin Loan: Subject to
Subsection (c), below, the period commencing on the date of the
making or continuation of or conversion to such Base Margin Loan
and ending on that date (i) as of which the subject Base Margin
Loan is converted to a Libor Loan, as the Borrowers'
Representative may elect by notice (pursuant to Section 2:2-5(a))
to the Agent, or (ii) on which the subject Base Margin Loan is
paid by the Borrower.
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<PAGE>
(c) The setting of Interest Periods is in all instances
subject to the following:
(i) Any Interest Period for a Base Margin Loan which would
otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day.
(ii) Any Interest Period for a Libor Loan which would
otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day, unless that
succeeding Business Day is in the next calendar month, in which
event such Interest Period shall end on the last Business Day of
the month during which the Interest Period ends.
(iii) Subject to Subsection (iv), below, any Interest Period
applicable to a Libor Loan, which Interest Period begins on a day
for which there is no numerically corresponding day in the
calendar month during which such Interest Period ends, shall end
on the last Business Day of the month during which that Interest
Period ends.
(iv) Any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(v) The number of Interest Periods in effect at any one
time is subject to Section 2:2-11(d) hereof.
"INVENTORY": "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
Borrowers, or used or consumed or to be used or consumed in the
Borrowers' 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 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 which reflect such other factors as
affect the market value of the Eligible Inventory. Without limiting the
generality of the foregoing, Inventory Reserves may include (but are not
limited to) reserves based on the following:
(i) Obsolescence (based on inventory on hand beyond a
. 17 .
<PAGE>
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.
(x) Consigned goods
At the execution of this Agreement, the only Inventory Reserves are
those described in Section 2:2-3.
"INVESTMENT PROPERTY": Has the meaning given that term in the UCC.
"ISSUER": Unless otherwise agreed between the Borrowers' Representative
and the Administrative Agent, "Issuer" refers to BankBoston, N.A., and
any successor to BankBoston, N.A.
"J. BAKER": J. Baker, Inc.
"KEY HOST STORE": Any Host Store at whose Stores more than five percent (5%)
of the Borrowers' Inventory (at Retail) is located.
"L/C": Any letter of credit, the issuance of which is procured by the
Administrative Agent for the account of the Borrowers and any acceptance
made on account of such letter of credit.
"L/C LANDING COSTS": To the extent not included in the Stated Amount of an L/C,
customs, duty, freight, and other out-of-pocket costs and expenses which
will be expended to "land" the Inventory, the purchase of which is
supported by such L/C.
"LEASE": Any lease or other agreement, no matter how styled or structured,
pursuant to which the
. 18 .
<PAGE>
Borrowers is entitled to the use or occupancy of any real property.
"LENDER": Collectively and each individually, each Revolving Credit Lender
and the Term Lender.
"LENDERS'SPECIAL COUNSEL": A single counsel, selected by the Majority Lenders
following the occurrence of an Event of Default to represent the
interests of the Lenders in connection with the enforcement, attempted
enforcement, or preservation of any rights and remedies under this, or
any other Loan Document, as well as in connection with any "workout",
forbearance, or restructuring of the credit facility contemplated hereby.
"LIABILITIES" (in the singular, "LIABILITY") includes, without limitation, the
following:
(a) All and each of the following, whether now existing or
hereafter arising under this Agreement or under any of the other Loan
Documents:
(i) Any and all direct and indirect liabilities, debts, and
obligations of each Borrower to any Lender and/or any Agent, each of
every kind, nature, and description owing on account of this Agreement or
any other Loan Document.
(ii) Each obligation to repay any loan, advance, indebtedness,
note, obligation, overdraft, or amount now or hereafter owing by each
Borrower to any Lender and/or any Agent (including all future advances
whether or not made pursuant to a commitment by the Revolving Credit
Lenders), whether or not any of such are liquidated, unliquidated,
primary, secondary, secured, unsecured, direct, indirect, absolute,
contingent, or of any other type, nature, or description, or by reason of
any cause of action which any Borrower to any Lender and/or any Agent may
hold against any of the Borrowers.
(iii) All notes and other obligations of each Borrower now or
hereafter assigned to or held by any Borrower to any Lender and/or any
Agent, each of every kind, nature, and description.
(iv) All interest, fees, and charges and other amounts which may
be charged by any Agent to any of the Borrowers and/or which may be due
from any of the Borrowers to any Agent from time to time.
(v) All costs and expenses incurred or paid by any Agent in
respect of any agreement between any of the Borrowers, any Agent, or any
Lender and/or any instrument furnished by any of the Borrowers to any
Agent (including, without limitation, Costs of Collection, attorneys'
reasonable fees, and all court and litigation costs and expenses).
. 19 .
<PAGE>
(vi) Any and all covenants of each of the
Borrowers to or with any Borrower to any Lender and/or any
Agent and any and all obligations of each of the Borrowers
to act or to refrain from acting in accordance with any
agreement between any of the Borrowers and the any Borrower
to any Lender and/or any Agent or instrument furnished by
any of the Borrowers to any Borrower to any Lender and/or
any Agent.
(vii) Each of the foregoing as if each reference
to "any Lender and/or any Agent " therein were to each
Affiliate of any Agent or any Lender.
(b) Any and all direct and indirect liabilities,
debts, and obligations of Borrower to any Agent or any
Affiliate of an Agent, each of every kind, nature, and
description owing on account of any service or accommodation
provided to, or for the account of any Borrower pursuant to
this Agreement or any other Loan Document, including cash
management services or the issuance of any L/C.
"LIBOR BUSINESS DAY": Any day which is both a Business Day and a
day on which the principal interbank market for Libor
deposits in London in which BankBoston, N.A. participates is
open for dealings in United States Dollar deposits.
"LIBOR LOAN": Any Revolving Credit Loan which bears interest at a
Libor Rate.
"LIBOR MARGIN": 225 Basis Points.
"LIBOR OFFER RATE": That rate of interest (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by the
Administrative Agent in good faith to be the highest
prevailing rate per annum at which deposits on U.S. Dollars
are offered to BankBoston, N.A., by first-class banks in the
London interbank market in which BankBoston, N.A.
participates at or about 10:00AM (Boston Time) Two (2) Libor
Business Days before the first day of the Interest Period
for the subject Libor Loan, for a deposit approximately in
the amount of the subject loan for a period of time
approximately equal to such Interest Period.
"LIBOR RATE": That per annum rate which is the aggregate of the
Libor Offer Rate PLUS the Libor Margin EXCEPT THAT, in the
event that it is determined by the Administrative Agent in
good faith that any Lender may be subject to the Reserve
Percentage, the "Libor Rate" shall mean, with respect to any
Libor Loans then outstanding (from the date on which that
Reserve Percentage first became applicable to such loans),
and with respect to all Libor Loans thereafter made, an
interest rate per annum equal the sum of (a) plus (b),
where:
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<PAGE>
(a) is the decimal equivalent of the following
fraction:
Libor Offer Rate
----------------
1 minus Reserve Percentage
(b) the applicable Libor Margin.
"LIQUIDATION": The exercise, by the Collateral Agent, of those rights
accorded to the Collateral Agent under the Loan Documents as
a creditor of the Borrower following and on account of the
occurrence of an Event of Default looking towards the
realization on the Collateral. Derivations of the word
"Liquidation" (such as "Liquidate") are used with like
meaning in this Agreement.
"LOAN ACCOUNT": Is defined in Section 2:2-8.
"LOAN COMMITMENT": With respect to each Revolving Credit Lender,
that respective Revolving Credit Lender's Revolving Credit
Dollar Commitment. With respect to the Term Lender, the then
unpaid principal balance of the Term Loan.
"LOAN DOCUMENTS": This Agreement and each instrument and document
executed and/or delivered as contemplated by Section 3:3-2
or Article 4: or hereafter, respectively which evidences any
obligation to repay or creates any Liability or any security
or collateral interest which secures any Liability, as each
may be amended from time to time.
"LOAN TO COLLATERAL PERCENTAGE": Subject to Section 5:5-20(c), the
following:
Closing to April 30, 2000: 105%
May 1, 2000 to July 31, 2000: 100%
August 1, 2000 to November 30, 2000: 95%
Thereafter: 90%
"LOAN TO COLLATERAL RESERVES": Reserves set so that
(a) The Amount made available under the Apparel
Division Borrowing Base and the Shoe Division Borrowing Base
on account of Eligible Inventory does not exceed in the
aggregate the Appraised Inventory Liquidation Value
multiplied by 85%.
(b) The aggregate of (i) the then unpaid
principal balance of the Term Loan PLUS (ii) amounts made
available under the Apparel Division Borrowing Base and the
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Shoe Division Borrowing Base on account of Eligible
Inventory does not exceed the Appraised Inventory
Liquidation Value multiplied by the Loan to Collateral
Percentage.
"LOCAL DDA": A depository account maintained by any 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.
"MAJORITY LENDERS": Lenders (other than Delinquent Revolving Credit
Lenders) holding 51% or more of the Loan Commitments (other
than Loan Commitments held by a Delinquent Revolving Credit
Lender).
"MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to
accounting periods subsequent to the Borrowers' fiscal year
most recently completed prior to the execution of this
Agreement, which change has a material effect on the
Borrowers' financial condition or operating results, as
reflected on financial statements and reports prepared by or
for the Borrowers, when compared with such condition or
results as if such change had not taken place or where
preparation of the Borrowers' statements and reports in
compliance with such change results in the breach of a
financial performance covenant imposed pursuant to Section
6:6-12 where such a breach would not have occurred if such
change had not taken place or VISA VERSA.
"MATURITY DATE": May 1, 2002.
"NOMINEE": A business entity (such as a corporation or limited
partnership) formed by the Collateral Agent to own or manage
any Post Foreclosure Asset.
"NONCONSENTING REVOLVING CREDIT LENDER": Defined in Section 16:16-10.
"OBLIGOR": Each Borrower and J. Baker.
"OPERATING ACCOUNT": Is defined in Section 8:8-3.
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<PAGE>
"OVERALL AVAILABILITY": The lesser of (a) or (b), where
(a) is The result of
(i) The Revolving Credit Loan Ceiling
MINUS
(ii) The aggregate unpaid balance of the Loan Account
Minus
(iii) The aggregate undrawn Stated Amount of all then
outstanding L/C's.
(b) is The result of
(i) Shoe Division Borrowing Base
PLUS
(ii) Apparel Division Borrowing Base
MINUS
(iii) The Loan to Collateral Reserves
MINUS
(iv) The aggregate unpaid balance of the Loan Account
MINUS
(v) The aggregate undrawn Stated Amount of all then
outstanding L/C's.
"PARTICIPANT": Is defined in Section 20:20-15, hereof.
"PERMISSIBLE OVERLOANS": Revolving Credit Loans which aggregate not
more than 5% of the aggregate of the Shoe Division Borrowing
Base PLUS the Apparel Division Borrowing Base, where such
loans are both (a) Protective Overadvances and (b) are made
at a time when there is no availability for loans, advances,
or financial accommodations under the Shoe Division
Borrowing Base or the Apparel Division Borrowing Base and/or
when Overall Availability equals zero.
"PERMITTED ASSET SALE": A sale of Inventory, other than in the
ordinary course of Inventory and which may include the trade
fixtures associated with the sale of such Inventory (such as
a store closing or strategic sale), where (a) the net
proceeds, to the relevant Borrower, of such sale are equal
to or greater than the inventory advance rate then
applicable to such Inventory and (b) the cumulative
aggregate of Inventory which is the subject to such sale(s),
in any fiscal year, is not in excess of ten percent (10%) of
the
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<PAGE>
Borrowers' average monthly balance inventory for the then
immediately prior fiscal year.
"PERMITTED DISTRIBUTIONS": The following payments:
(a) To J. Baker, in order to make regularly scheduled payments
of interest on J. Baker's 7% Convertible Subordinated Notes
due 2002.
(b) To J. Baker, in order to make regularly scheduled payments
of interest on J. Baker's Subordinated Convertible
Debentures due 2002, which Debentures are subject of a
certain First Supplemental Indenture dated as of January 28,
1993.
(c) Dividends, declared and made after the date of this
Agreement, not exceeding $1.5 Million in any one year, and
not otherwise described in this Definition.
(d) Dividends, which when combined with the dividends described
in Section (c) of this Definition, do not exceeded 25% of
the Borrowers' Consolidated cumulative net income for
periods after July 31, 1999, PROVIDED THAT each of the
following conditions is satisfied:
(ii) Overall Availability, during the fiscal quarter
immediately prior to that during which such payment is
to be made, is not less than $30,000,000.00.
(iii) Overall Availability, after giving effect to the
payment of such dividend, is not less than
$30,000,000.00.
(d) Permitted Overhead Contributions.
"PERMITTED ENCUMBRANCES": Those Encumbrances permitted as provided in
Section 5:5-7(a) hereof.
"PERMITTED INVESTMENTS": 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 (not to
exceed $100,000.00 at any one time) in common and preferred
stock traded on national securities exchanges; additional
investments in the capital stock of any other Borrower;
investments permitted pursuant to Section 5:5-19(c)(ii); and
loans permitted pursuant to Section 5:5-21(c).
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<PAGE>
"PERMITTED OVERHEAD CONTRIBUTIONS": Rent under the lease of the Canton
Warehouse.
"PERSON": Any natural person, and any corporation, limited liability
company, trust, partnership, joint venture, or other
enterprise or entity.
"PIK INTEREST": Defined in Section 3:3-4(a)(ii).
"POST FORECLOSURE ASSET": All or any part of the Collateral,
ownership of which is acquired by the Collateral Agent or a
Nominee on account of the "bidding in" at a disposition as
part of a Liquidation or by reason of a "deed in lieu" type
of transaction.
"PREPAYMENT PARAMETER": Defined in Section 3:3-3(b)(ii).
"PROCEEDS": "Proceeds" as defined in the UCC (defined below), and each
type of property described in Section 9:9-1 hereof.
"PRO-RATA": A proportional distribution based upon a Lender's
percentage claim to the overall aggregate amount being
distributed.
"PROTECTIVE ADVANCES": The aggregate of Revolving Credit Loans and
expenditures and incurrences of obligations by the Agents
respectively which are made or undertaken in the Agents'
reasonable discretion to: protect or preserve the Collateral
Interests which secure the Liabilities and the Agents'
rights upon default or otherwise or which the Agents
determine in their reasonable discretion, are appropriate to
facilitate a Liquidation, PROVIDED, HOWEVER, "Protective
Advances" shall not exceed $7.5 Million in the aggregate at
any one time outstanding.
"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 Borrowers' Accounts, Accounts Receivable,
contract rights, General Intangibles, Chattel Paper,
Instruments, Documents of Title, Documents, Securities,
letters of credit for the benefit of the Borrowers, and
bankers' acceptances held by the Borrowers, and any rights
to payment.
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<PAGE>
"REGISTER": Defined in Section 17:17-1(f).
"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 any Borrower; could have such enterprise's tax
returns or financial statements consolidated with any
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 any Borrower is a member;
controls or is controlled by any Borrower or by any
Affiliate of any Borrower.
(b) Any Affiliate.
"REQUIREMENT OF LAW": As to any Person:
(a)(i) 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.
"RESERVE PERCENTAGE": The decimal equivalent of that rate applicable
to a Lender under regulations issued from time to time by
the Board of Governors of the Federal Reserve System for
determining the maximum reserve requirement of that Lender
with respect to "Eurocurrency liabilities" as defined in
such regulations. The Reserve Percentage applicable to a
particular Libor Loan shall be based upon that in effect
during the subject Interest Period, with changes in the
Reserve Percentage which take effect during such Interest
Period to take effect (and to consequently change any
interest rate determined with reference to the Reserve
Percentage) if and when such change is applicable to such
loans.
"RETAIL": As reflected in a Borrowers' stock ledger, being the current
ticket price aggregated by SKU, except that to the extent
that Eligible Inventory is not reflected in the
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<PAGE>
stock ledger, "Retail" shall be determined as tracked on
such non stock ledger inventory systems of a Borrower which
are deemed adequate for such purpose by the Administrative
Agent in the exercise of the Administrative Agent's
discretion.
"REVOLVING CREDIT": Is defined in Section 2:2-1.
"REVOLVING CREDIT DEBT": At any time, the lesser of (a) or (b), where
(a) is: $150 Million (b) is: Indebtedness (including
principal and unpaid interest) of the Borrowers on account
of loans under the Revolving Credit advances made pursuant
to this Agreement which, when incurred or when Acceleration
takes place, is equal to or less than amounts which, as
reflected on the Borrowing Base Certificate provided to the
Administrative Agent for the date when incurred (or on the
then most recently provided such Borrowing Base Certificate
in the event that one had not been provided for the relevant
date), were within amounts available to be borrowed under
the Revolving Credit or constituted Permissible Overloans,
IT BEING UNDERSTOOD that, (i) in the absence of manifest
computational error by the Borrowers' Representative, the
Administrative Agent may rely on, and Term Lender shall be
bound by, the determination of such availability as
reflected on such Borrowing Base Certificate, and (ii) the
status of indebtedness as "Revolving Credit Debt" is
determined without regard to any subsequent declination in
the appraised value of the Inventory or other assets on
which such availability had been so determined, and (iii)
the occurrence of a BaseLine Covenant Breach, in and of
itself, shall not affect the status of indebtedness as
"Revolving Credit Debt". (For purposes of the determination
of whether a loan or advance to cover the honoring of a L/C
constitutes "Revolving Credit Debt", the date of issuance of
the subject L/C shall constitute the date on which the
subject indebtedness was incurred).
"REVOLVING CREDIT DOLLAR COMMITMENT": As set forth on SCHEDULE 1,
annexed hereto (as such amounts may change in accordance
with the provisions of this Agreement).
"REVOLVING CREDIT EARLY TERMINATION FEE": Is defined in Section
2:2-15.
"REVOLVING CREDIT FEES": The Unused Line Fee and Revolving Credit
Early Termination Fee and fees for L/C's which, under the
Loan Agreement, are specifically for the account of the
Revolving Credit Lenders and all other fees (such as a fee
(if any) on account of the execution of an amendment of a
Loan Document) payable by the Borrower in respect
. 27 .
<PAGE>
of the Revolving Credit other than any amount payable to an
Agent as reimbursement for any cost or expense incurred by
that Agent on account of the discharge of that Agent's
duties under the Loan Documents. . "REVOLVING CREDIT
LENDERS": Is defined in the Preamble to this Agreement.
"REVOLVING CREDIT LOAN": Loans made under the Revolving Credit, except
that where the term "Revolving Credit Loan" is used with
reference to available interest rates applicable to the
loans under the Revolving Credit, it refers to so much of
the unpaid principal balance of the Loan Account as bears
the same rate of interest for the same Interest Period. (SEE
Section 2:2-11(c)).
"REVOLVING CREDIT LOAN CEILING": $150 Million.
"REVOLVING CREDIT NOTE": Is defined in Section 2:2-9.
"REVOLVING CREDIT OBLIGATIONS: The aggregate of the Borrowers'
liabilities, obligations, and indebtedness, under or on
account of the Revolving Credit, Loan Agreement, of any
character to the Administrative Agent and to the Revolving
Credit Lenders.
"REVOLVING CREDIT PERCENTAGE COMMITMENT": As set forth on
SCHEDULE 1 annexed hereto (as such percentages may change in
accordance with the provisions of this Agreement).
"SHOE DIVISION BORROWING BASE": The result of the following:
(a) The product of the Retail of Eligible Inventory (net of
Inventory Reserves) of the Shoe Division Borrowers
MULTIPLIED BY the Shoe Division Inventory Advance Rate.
PLUS
(b) 85% of the face amount of Eligible Credit Card
Receivables of the Shoe Division Borrowers.
PLUS
(c) 85% of the face amount of Eligible Host Store
Receivables of the Shoe Division Borrowers.
MINUS
(d) The then aggregate of the Availability Reserves
applicable to the Shoe
. 28 .
<PAGE>
Division Borrowers.
"SHOE DIVISION BORROWERS": Morse Shoe, Inc. and JBI, Inc.
"SHOE DIVISION INVENTORY ADVANCE RATE": From the effective date of
this Agreement until
December 15, 1999: 30%
FOR PERIODS THEREAFTER:
From December 16 to August 31 : 28%
From September 1 to December 15 : 30%
"SIDE COLLATERAL ACCOUNT": An account established by the
Borrowers' Representative with BankBoston, N.A., the
contents of which shall be pledged to the Collateral Agent
to secure the Liabilities and which may consist of cash and
Permitted Investments.
"STANDSTILL PERIOD": A period of 15 consecutive days, initiated by
written notice by the Term Lender to the Administrative
Agent in accordance with Section 14:14-2(a).
"STATED AMOUNT": The maximum amount for which an L/C may be honored.
"STORE": Each Host Store and other location at which a Borrower
otherwise regularly offers Inventory for sale to the public.
"SUPERMAJORITY LENDERS": Lenders (other than Delinquent Revolving
Credit Lenders) holding 66-2/3% or more the Loan Commitments
(other than Loan Commitments held by a Delinquent Revolving
Credit Lender).
"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 or is
duly waived.
"SWINGLINE": The facility pursuant to which the SwingLine Lender may
advance Revolving Credit Loans aggregating up to the
SwingLine Loan Ceiling.
"SWINGLINE LENDER": BBRF.
. 29 .
<PAGE>
"SWINGLINE LOAN CEILING": $15,000,000.00, subject to increase with the
consent of the SwingLine Lender and the Majority Lenders.
"SWINGLINE LOANS": Defined in Section 2:2-7(a).
"TERM LOAN DEBT PAYMENT": Any payment of principal, interest
(whether payable in cash or otherwise), fees, premium, or
otherwise on account of Term Loan Debt.
"TERM LENDER": Defined in the Preamble.
"TERM LOAN": Defined in Section 3:3-1.
"TERM LOAN ACTION EVENT": The occurrence of a BaseLine Covenant
Breach or a Term Loan Payment Breach.
"TERM LOAN COMMITMENT FEE": Described in Section 3:3-5.
"TERM LOAN DEBT": The aggregate of the Borrower's liabilities,
obligations, and indebtedness of any character to Term
Lender under the Loan Documents, other than Term Loan Fees.
"TERM LOAN EARLY TERMINATION FEE": Defined in Section 3:3-3(d).
"TERM LOAN FEES": The Term Loan Commitment Fee, the Term Loan
Early Termination Fee, and all other fees (such as a fee (if
any) on account of the execution of an amendment of any Loan
Document) payable by the Borrower in respect of the Term
Loan other than any amount payable to an Agent as
reimbursement for any cost or expense incurred by that Agent
on account of the discharge of that Agent's duties under the
Loan Documents.
"TERM LOAN PAYMENT BREACH": The failure by the Borrowers to have
made any payment on account of the Term Loan Debt or Term
Loan Fees prior to expiry of any grace period applicable to
such payment.
"TERM NOTE": Defined in Section 3:3-2.
"TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the
occurrence of any event described in Section 11:11-11
hereof; or (c) date set by notice by the Agent to the
. 30 .
<PAGE>
Borrower, which notice sets the Termination Date on account
of the occurrence of any Event of Default other than as
described in Section 11:11-11 hereof.
"TRANSFER": Wire transfer pursuant to the wire transfer system
maintained by the Board of Governors of the Federal Reserve
Board, or as otherwise may be agreed to from time to time by
the Agent making such Transfer and the subject Lender.
Transfers to all Revolving Credit Lenders or to any
Person who becomes a Revolving Credit Lender pursuant to
Section 17:17-1, shall be effected pursuant to wire
instructions given by the subject Revolving Credit Lender or
by such Person to, and agreed to by, the Agent making such
Transfer or as otherwise agreed to between such Person and
such Agent.
Transfers to the Term Lender shall be effected pursuant
to wire instructions given by such Person to, and agreed to
by, the Agent making such Transfer or as otherwise agreed to
between Term Lender and such Agent
Wire transfers to any Agent shall be in accordance with
the following wire instructions:
BankBoston, N.A.
ABA No. 011000390
Acct Name: BankBoston Retail Finance Inc.
Acct No. : 530-39952
Reference: J. Baker
Wire instructions may be changed in the same manner
that Notice Addresses may be changed (Section 18:18-1),
except that no change of the wire instructions for Transfers
to any Lender shall be effective without the consent of the
Agent making such Transfer.
"UCC": The Uniform Commercial Code as presently in effect in
Massachusetts (Mass. Gen. Laws, Ch. 106).
"UNANIMOUS CONSENT": The Consent of all Lenders (other than Delinquent
Revolving Credit Lenders).
"UNUSED LINE FEE": Is defined in Section 2:2-14.
"YEAR 2000 COMPLIANT": Computer applications, imbedded microchips,
and other systems and subsystems which properly recognize
and perform their intended function without a material
adverse effect on account of their respective inability to
recognize certain dates
. 31 .
<PAGE>
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.
ARTICLE 2: - THE REVOLVING CREDIT:
2-1. ESTABLISHMENT OF REVOLVING CREDIT.
(a) The Revolving Credit Lenders hereby establish a revolving
line of credit (the "REVOLVING CREDIT") in the Borrowers' favor pursuant to
which each Revolving Credit 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 Apparel Division Borrowers and the Shoe Division Borrowers, as provided
herein. Except as provided in Section 2:2-2, such loans, advances, and financial
accommodations shall be made with reference to the Apparel Division Borrowing
Base (as to the Apparel Division Borrowers) and the Shoe Division Borrowing Base
(as to the Shoe Division Borrowers) and shall be subject to Overall
Availability. Apparel Division Borrowing Base, Shoe Division Borrowing Base, and
Overall Availability shall be determined by the Administrative Agent by
reference to Borrowing Base Certificates furnished as provided in Section 6:6-3,
below, and shall take into account those Reserves as the Administrative Agent
may determine as being applicable thereto, as provided in Section 2:2-3.
(b) The commitment of each Revolving Credit Lender to provide
such loans, advances, and financial accommodations is subject to Section 2:2-23.
(c) The proceeds of borrowings under the Revolving Credit
shall be used solely for the following:
(i) To retire the Borrowers' working capital facilities
in effect at the execution of this Agreement.
(ii) For on-going working capital and general corporate
requirements of the Borrowers.
No proceeds of a borrowing under the Revolving Credit may be used, nor shall any
be requested, with a view towards the accumulation of any general fund or funded
reserve of any of the Borrowers other than in the ordinary course of the
Borrowers' business and consistent with the provisions of this Agreement.
2-2. ADVANCES IN EXCESS OF AVAILABILITIES.
(a) No Revolving Credit Lender has any obligation to provide
credit to the Shoe Division Borrowers in excess of the Shoe Division Borrowing
Base; to the Apparel Division Borrowers to provide credit in excess of the
Apparel Division Borrowing Base; or to the Borrowers to provide credit under
circumstances where Overall Availability is equal to or less than zero.
(b) The Revolving Credit Lenders's obligations, amongst
themselves, is subject to
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<PAGE>
Section 13:13-3(a) (which relates to each Revolving Credit Lender's making
amounts available to the Administrative Agent) and to Sections 16:16-1(d) and
16:16-3(a) (which relate to Permissible Overloans).
(c) The Revolving Credit Lenders' providing of credit in
excess of their obligations under this Agreement on any one occasion does not
affect the obligations of the Borrowers hereunder nor obligate the Revolving
Credit Lenders to do so on any other occasion.
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 Customer Credit Liability.
(B) 2 months rent for locations in States,
as determined by the Administrative Agent in its
discretion, in which the landlord may have a
preferred position, where the subject landlord has
not provided a waiver or subordination in form
reasonably satisfactory to the Administrative Agent.
(C) The Loan to Collateral Reserves.
(ii) Inventory Reserves: A reserve for
shrinkage, subject to change (on seven (7) days
notice to the Borrowers' Representative) to align
with historic levels, and initially set as follows:
(A) Shoe Division Inventory: $1.0 Million at
Retail and.
(B) Apparel Division Inventory: $1.5 Million
at Retail.
(b) The Administrative Agent shall provide not less than seven
days prior notice to the Borrower of the establishment of any Reserve
(other than those established at the execution of this Agreement)
EXCEPT THAT the following may be undertaken without such prior notice:
(i) a change to the amount of a then existing Reserve
(as distinguished from a change by which such Reserve is
measured or determined), which change reflects changed
circumstances (e.g. the amount of the Reserve for Customer
Credit Liability will change based on the aggregate of
Customer Credit Liability at any one time); and
(ii) the creation of, or a change to an existing
Reserve on account of circumstances which the Administrative
Agent determines as having a material adverse effect on the
maintenance of loan to collateral values.
2-4. RISKS OF VALUE OF INVENTORY. The Administrative Agent's reference
to a given asset concerning the providing of credit to the Borrowers is not a
determination by the Administrative Agent of the value of such asset. All risks
concerning the saleability of the Collateral are the Borrowers'. All Collateral
secures all Liabilities whether relied upon by the Administrative Agent or the
Revolving Credit Lenders.
. 33 .
<PAGE>
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 Borrowers'
Representative shall be made pursuant hereto, PROVIDED THAT:
(i) The applicable borrowing base will not be exceeded; and
(ii) The Revolving Credit has not been suspended as provided
in Section 2:2-5(g).
(b) Requests for loans and advances under the Revolving Credit
may be made by the Borrowers' Representative in such manner as may from time to
time reasonably be acceptable to the Administrative Agent.
(c) Subject to the provisions of this Agreement, the Borrowers'
Representative may request a Revolving Credit Loan and elect an interest rate
and Interest Period to be applicable to that Revolving Credit Loan by giving the
Administrative Agent notice no later than the following:
(i) If such Revolving Credit Loan is or is to be converted to
a Base Margin Loan: By 1:00PM on the Business Day on which the subject Revolving
Credit Loan is to be made or is to be so converted. Base Margin Loans requested
by the Borrowers' Representative, other than those resulting from the conversion
of a Libor Loan, shall not be less than $10,000.00.
(ii) If such Revolving Credit Loan is, or is to be continued
as, or converted to, a Libor Loan: By 1:00PM Three (3) Libor Business Days
before the end of the then applicable Interest Period or commencement of the
newly requested Interest Period. Libor Loans and conversions to Libor Loans
shall each be not less than $1,000,000.00 and in increments of $100,000.00 in
excess of such minimum.
(iii) Any Libor Loan, the Interest Period for which expires
while a Suspension Event is extant shall be converted, at the option of the
Administrative Agent to a Base Margin Loan notwithstanding any notice from the
Borrowers' Representative that such Loan is to be continued as a Libor Loan.
(iv) Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is 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 or Libor Business Day, as
applicable. Each request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan shall be made in such manner as may from time to time be
acceptable to the Administrative Agent.
(d) The Borrowers' Representative may request that the
Administrative Agent cause the issuance of L/C's for the account of a Borrower
as provided in Section 2:2-18.
(e) The Administrative Agent may rely on any request for a loan
or advance, or other
. 34 .
<PAGE>
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 Borrowers' Representative 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 reasonably may be
satisfactory to the Administrative Agent.
(f) A request by the Borrowers' Representative for loan or
advance, or other financial accommodation under the Revolving Credit shall be
irrevocable and shall constitute certification by each 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
Borrowers' financial condition (taken as a whole) from the most recent
financial information furnished Administrative Agent or any Revolving
Credit Lender pursuant to this Agreement.
(ii) Each Borrower is in compliance with its
covenants contained in this Agreement.
(iii) Each representation, not relating to a specific
date, which is made herein or in any of the Loan Documents 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.
(g) At any time that any Suspension Event is extant:
(i) Neither the Administrative Agent nor any
Revolving Credit 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.
(ii) The Administrative Agent may suspend the right
of the Borrowers' Representative to request any Libor Loan or
to convert any Base Margin Loan to a Libor Loan.
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 Borrowers' Representative.
(b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrowers shall be indebted to the Administrative
Agent for the amount thereof immediately) at the following:
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<PAGE>
(i) The Administrative Agent's initiation of the
transfer of the proceeds of such loan or advance in accordance with the
Borrowers' Representative's instructions (if such loan or advance is of
funds requested by the Borrowers' Representative).
(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 any
Agent or any Revolving Credit Lender, on account of:
(i) Any delay, beyond the reasonable control of the
Agents or any Revolving Credit 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 Revolving Credit 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 Borrowers' Representative.
2-7. SWINGLINE LOANS
(a) For ease of administration, Base Margin Loans may be made
by the SwingLine Lender (in the aggregate, the "SWINGLINE LOANS") in accordance
with the procedures set forth in this Agreement for the making of loans and
advances under the Revolving Credit. The unpaid principal balance of the
SwingLine Loans shall not at any one time be in excess of the SwingLine Loan
Ceiling.
(b) The aggregate unpaid principal balance of SwingLine Loans
shall bear interest as if the same were loans and advances under the Revolving
Credit.
(c) The obligation to repay SwingLine Loans shall be evidenced
by a Note in the form of EXHIBIT 2:2-7(C), annexed hereto, executed by the
Borrower, and payable to the SwingLine Lender. Neither the original nor a copy
of that Note shall be required, HOWEVER, to establish or prove any Liability.
Upon the Borrowers' Representative's being provided with an affidavit, from the
Administrative Agent to the effect that said Note has been lost, mutilated, or
destroyed, the Borrowers shall execute a replacement thereof and deliver such
replacement to the SwingLine Lender.
(d) For all purposes of this Loan Agreement, the SwingLine
Loans and the Borrowers' obligations to the SwingLine Lender constitute and are
secured as "Liabilities".
(e) SwingLine Loans may be subject to periodic settlement with
the Revolving Credit Lenders as provided in this Loan Agreement.
2-8. THE LOAN ACCOUNT.
(a) An account ("LOAN ACCOUNT") shall be opened on the books
of the Administrative
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<PAGE>
Agent. A record may be kept in the Loan Account of all Revolving Credit Loans
made under or pursuant to this Loan Agreement and of all payments thereon and
sub-accounts may be established in the Loan Account to reflect loans made to the
Shoe Division Borrowers and to the Apparel Division Borrowers.
(b) The Administrative Agent shall 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 Revolving Credit 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 Revolving
Credit 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 Revolving Credit 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 Borrowers are obligated hereunder are
payable on demand. In the determination of Shoe Division Borrowing Base, Apparel
Division Borrowing Base, and Overall 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
Borrowers' Representative, may advance under the Revolving Credit any interest,
fee, service charge, or other payment to which the Administrative Agent or any
Revolving Credit Lender is entitled from any Borrower pursuant hereto and may
charge the same to the Loan Account notwithstanding that Overall Availability
may then be equal to or less than zero. Such action on the part of the
Administrative Agent shall not constitute a waiver of the Administrative Agent's
rights and the Borrowers' obligations under Section 2:2-10(b). Any amount which
is added to the principal balance of the Loan Account as provided in this
Section 2:2-8(e) shall bear interest at the rate then applicable to Base Margin
Loans.
(f) In the absence of manifest error, any statement rendered
by the Administrative Agent or any Revolving Credit Lender to the Borrowers'
Representative concerning the Liabilities shall be considered correct and
accepted by all Borrowers and shall be conclusively binding upon all Borrowers
unless the Borrowers' Representative 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.
. 37 .
<PAGE>
2-9. 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
2:2-9, annexed hereto, executed by the Borrowers, one payable to each Revolving
Credit Lender. Neither the original nor a copy of any Revolving Credit Note
shall be required, however, to establish or prove any Liability. Upon the
Borrowers' Representative's being provided with an affidavit, from the
Administrative Agent to the effect that any Revolving Credit Note has been lost,
mutilated, or destroyed, the Borrowers shall execute a replacement thereof and
deliver such replacement to the Administrative Agent.
2-10. PAYMENT OF THE LOAN ACCOUNT.
(a) The Borrowers may repay all or any portion of the
principal balance of the Loan Account from time to time until the Termination
Date. Unless the Borrowers' Representative otherwise advises the Administrative
Agent, such payments shall be applied first to Base Margin Loans and only then
to Libor Loans.
(b) The Borrowers, without notice or demand from the
Administrative Agent or any Revolving Credit Lender, shall pay the
Administrative Agent the following (which payments shall be applied first to
Base Margin Loans and only then to Libor Loans):
(i) That amount, from time to time, which is
necessary so that Overall Availability is always equal to or greater
than zero.
(ii) That amount, from time to time, which is
necessary so that at least one dollar may be borrowed under the
Revolving Credit each by the Shoe Division Borrowers and the Apparel
Division Borrowers.
(c) The Administrative Agent shall endeavor to cause the
application of payments (if any), pursuant to Sections 2:2-10(a) and 2:2-10(b)
against Libor Loans then outstanding in such manner as results in the least cost
to the Borrowers, but shall not have any affirmative obligation to do so nor
liability on account of the Administrative Agent's failure to have done so. In
no event shall action or inaction taken by the Administrative Agent with respect
to such application excuse the Borrowers from any indemnification obligation
under Section 2:2-10(e).
(d) The Borrowers shall repay the then entire unpaid balance
of the Loan Account and all other Liabilities on the Termination Date.
(e) The Borrowers indemnifies each Revolving Credit Lender and
holds each Revolving Credit Lender harmless from and against any loss, cost or
expense (including loss of anticipated profits and "breakage fees" (so-called))
which such Revolving Credit Lender may sustain or incur (including, without
limitation, by virtue of acceleration after the occurrence of any Event of
Default) as a consequence of the following:
(i) Default by any Borrower in payment of the
principal amount of or any
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interest on any Libor Loan as and when due and payable, including any
such loss or expense arising from interest or fees payable by such
Revolving Credit Lender to Revolving Credit Lenders of funds obtained
by it in order to maintain its Libor Loans
(ii) Default by any Borrower in making a borrowing or
conversion after the Borrowers' Representative has given a request for
a Revolving Credit Loan or a request to convert a Revolving Credit Loan
from one applicable interest rate to another.
(iii) The making of any payment on a Libor Loan or
the making of any conversion of any such Loan to a Base Margin Loan on
a day that is not the last day of the applicable Interest Period with
respect thereto.
2-11. INTEREST RATES ON REVOLVING CREDIT LOANS.
(a) Each Revolving Credit Loan shall bear interest at the Base
Margin Rate unless timely notice is given (as provided in Section 2:2-5(a)) that
the subject Revolving Credit Loan (or a portion thereof) is, or is to be
converted to, a Libor Loan.
(b) Each Revolving Credit Loan which consists of a Libor Loan
shall bear interest at the applicable Libor Rate.
(c) Subject to the provisions hereof, the Borrowers'
Representative, by notice to the Administrative Agent, may cause all or a part
of the unpaid principal balance of the Loan Account to bear interest at the Base
Margin Rate or the Libor Rate as specified from time to time by the Borrowers'
Representative. For ease of reference and administration, each part of the Loan
Account which bears interest at the same interest and for the same Interest
Period is referred to herein as if it were a separate "Revolving Credit Loan".
The Borrowers' Representative may combine Revolving Credit Loans obtained on the
same day for the Shoe Division Borrowers and the Apparel Division Borrowers for
purposes of the selecting an interest rate applicable thereto.
(d) The Borrowers' Representative shall not select, renew, or
convert any interest rate for a Revolving Credit Loan such that, in addition to
interest at the Base Margin Rate, there are more than Eight (8) Libor Loans
outstanding at any one time.
(e) The Borrowers shall pay accrued and unpaid interest on
each Revolving Credit Loan in arrears as follows:
(i) On the applicable Interest Payment Date for that
Revolving Credit Loan.
(ii) On the Termination Date and on the End Date.
(iii) Following the occurrence of any Event of
Default, with such frequency as may be determined by the
Administrative Agent. (f) Following the occurrence of any
Event of Default (and whether or not the Administrative Agent
exercises the Administrative Agent's rights on account
thereof), each Revolving Credit Loan shall bear interest, at
the option of the Administrative Agent or at the direction of
the
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SuperMajority Lenders at rate which is the aggregate of the then applicable rate
for that loan PLUS Two Percent (2%) per annum.
2-12. REVOLVING CREDIT UNDERWRITING FEE. As compensation for the
commitment of BBRF included herein to make loans and advances to the Borrower
and as compensation for its maintenance of sufficient funds available for such
purpose, BBRF has earned the Underwriting Fee, which shall be paid at the times
and in the amounts as set forth the Fee Letter.
2-13. ADMINISTRATIVE AGENT'S FEE. In addition to any other fee or
expense paid by the Borrowers on account of the Revolving Credit, the Borrowers
shall pay the Administrative Agent an "ADMINISTRATIVE AGENT'S FEE" (so referred
to herein) at the times and in the amounts as set forth the Fee Letter.
2-14. UNUSED LINE FEE. In addition to any other fee by the Borrowers on
account of the Revolving Credit, the Borrowers' Representative shall pay the
Administrative Agent, for the Pro-Rata account of the Revolving Credit Lenders,
an "UNUSED LINE FEE" (so referred to herein) in arrears, on the first day of
each quarter (and on the Termination Date). The Unused Line Fee shall be equal
to 0.375% per annum of the average difference, during the quarter just ended (or
relevant period with respect to the payment being made on the Termination Date)
between the Revolving Credit Loan Ceiling and the aggregate of the unpaid
principal balance of the Loan Account plus the undrawn amount of all L/C's
outstanding during the quarter just ended (or such relevant period).
2-15. REVOLVING CREDIT EARLY TERMINATION FEE.
(a) In the event that the Termination Date occurs, for any
reason, prior to February 28, 2001, then except as provided in Section
2:2-15(b), the Borrowers shall pay the Administrative Agent, for the Pro-Rata
account of the Revolving Credit Lenders, the "REVOLVING CREDIT EARLY TERMINATION
FEE" (so referred to herein) consisting of one percent (1.0%) of the Revolving
Credit Loan Ceiling.
(b) No Revolving Credit Early Termination Fee shall be due and
payable in the event of the early termination of the Revolving Credit in
connection with a refinancing of the Revolving Credit agented or provided by
BBRF or any affiliate of BBRF, IT BEING UNDERSTOOD THAT neither BBRF nor any
affiliate of BBRF has agreed to provide any such refinancing.
2-16 CONCERNING FEES. Except as provided in Section 2:2-15(b) , the
Borrower shall not be entitled to any credit, rebate or repayment of any fee
previously earned by any Agent or any Lender pursuant to this Agreement
notwithstanding any termination of this Agreement or suspension or
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termination of the Administrative Agent's and any Lender's respective obligation
to make loans and advances hereunder.
2-17. 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
reasonable exercise of its judgement, 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, reasonably 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 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 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 any
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 judgement, each Agent and each
Lender also reasonably may take into account any of the following factors:
(i) Those included in, or tested by, the definitions
of "Eligible Credit Corporate Receivables", "Eligible Credit Card
Receivables", "Eligible Host Store Receivables", Eligible Inventory,"
"Eligible In-Transit Inventory", "Eligible L/C Inventory" and "Retail".
(ii) Material changes in or to the mix of a
Borrower's Inventory.
(iii)Seasonality with respect to a 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 Borrowers'.
2-18. PROCEDURES FOR ISSUANCE OF L/C'S.
(a) The Borrowers' Representative may request that the
Administrative Agent cause the issuance of L/C's for the account of a Borrower.
Each such request shall be in such manner as may from time to time reasonably be
acceptable to the Administrative Agent.
(b) The Administrative Agent will endeavor to cause the
issuance of any L/C so requested by the Borrowers' Representative, PROVIDED THAT
, at the time that the request is made, the Revolving Credit has not been
suspended as provided in Section 2:2-5(g) and if so issued:
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(i) The aggregate Stated Amount of all L/C's then
outstanding, does not exceed $40,000,000.00.
(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.
(iii) Borrowing Base would not be exceeded.
(c) Each 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 Revolving Credit Lender on account of
(i) Any delay or refusal by an Issuer to issue
an L/C;
(ii) 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 Borrowers 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 Borrowers'
Representative, 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
Borrowers, the Issuer, or the Revolving Credit 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 2:2-10(b) hereof.
2-19. FEES FOR L/C'S.
(a) The Borrowers shall pay to the Administrative Agent for
the Pro-Rata account of the Revolving Credit Lenders, quarterly in arrears, on
the Termination Date, and on the End Date, on account of L/C's, the issuance of
which had been procured by the Administrative Agent, a fee of 1.75%, per annum,
of the weighted average Stated Amount of all L/C's outstanding at any time since
the most recent payment of such fee, except that following the occurrence of any
Event of Default (and whether or not the Administrative Agent exercises the
Administrative Agent's rights on account thereof), the above fees, at the option
of the Administrative Agent or the direction of the SuperMajority Lenders shall
be 3.75% per annum.
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(b) In addition to the fee to be paid as provided in
Subsection 2:2-19(a), above, the Borrowers shall pay to the Administrative Agent
(or to the Issuer, if so requested by Administrative Agent), on demand, all
customary issuance, processing, negotiation, amendment, and administrative fees
and other amounts charged by the Issuer on account of, or in respect to, any
L/C.
2-20. 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 any 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 Borrowers. 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 any Agent, any Revolving
Credit Lender, or 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 Revolving Credit
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 Borrowers'
Representative, 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.
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<PAGE>
(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 any
obligation of any Revolving Credit Lender to lend or 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 2:2-20(g)(i) or
2:2-20(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
Borrowers' Representative of a certificate of an officer of the subject Issuer
describing, in reasonable detail, 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
Borrowers 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 2:2- 20(g)(i)
or 2:2-20(g)(ii), above, and the allocation, if any, of such costs among the
Borrowers 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 Borrowers.
(h) The obligations of the Borrowers 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 any amendment or
waiver of, or consent to the departure from, any L/C.
(iii) The existence of any claim, set-off, defense,
or other right which any 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
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and documents, shall be done in good faith and in compliance with foreign or
domestic laws.
(ii) That the Borrowers 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.
2-21. CHANGED CIRCUMSTANCES.
(a) The Administrative Agent may give the Borrowers'
Representative notice (with reasonable detail of the facts and circumstances) of
the occurrence of the following:
(i). The Administrative Agent shall have determined
in good faith (which determination, in the absence of manifest
error, shall be final and conclusive) on any day on which the
rate for a Libor Loan would otherwise be set, that adequate
and fair means do not exist for ascertaining such rate.
(ii). The Administrative Agent shall have determined
in good faith (which determination, in the absence of manifest
error, shall be final and conclusive) that:
(A) The continuation of or conversion of any
Revolving Credit Loan to a Libor Loan has been made
impracticable or unlawful by the occurrence of a
contingency that materially and adversely affects the
applicable market or compliance by the Administrative
Agent or any Revolving Credit Lender in good faith
with any applicable law or governmental regulation,
guideline or order or interpretation or change
thereof by any governmental authority charged with
the interpretation or administration thereof or with
any request or directive of any such governmental
authority (whether or not having the force of law).
(B) The indices on which the interest rates
for Libor Loans are based shall no longer represent
the effective cost to the Administrative Agent or any
Revolving Credit Lender for U.S. dollar deposits in
the interbank market for deposits in which it
regularly participates.
(b) In the event that the Administrative Agent gives the
Borrowers' Representative notice of an occurrence described in Section
2:2-21(a), then, until the Administrative Agent notifies the Borrowers'
Representative that the circumstances giving rise to such notice no
longer apply:
(i) The obligation of the Administrative Agent and of
each Revolving Credit Lender to make Libor Loans of the type
affected by such changed circumstances or to permit the
Borrowers' Representative to select the affected interest rate
as otherwise applicable to any
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Revolving Credit Loans shall be suspended. (ii) Any notice
which the Borrowers' Representative had given the
Administrative Agent with respect to any Libor Loan, the time
for action with respect to which has not occurred prior to the
Administrative Agent's having given notice pursuant to Section
2:2-21(a), shall be deemed at the option of the Administrative
Agent to not having been given.
2-22. DESIGNATION OF BORROWERS' REPRESENTATIVE AS BORROWERS' AGENT.
(a) Each Borrower hereby designates the Borrowers'
Representative as that Borrower's agent to obtain loans and advances under the
Revolving Credit, the proceeds of which shall be available to each Borrower for
those uses as those set forth in Section 2:2-1(c). As the disclosed principal
for its agent, each Borrower shall be obligated to the Administrative Agent, the
Collateral Agent, and the Revolving Credit Lenders on account of loans and
advances so made under the Revolving Credit as if made directly by the Revolving
Credit Lenders to that Borrower, notwithstanding the manner by which such loans
and advances are recorded on the books and records of the Borrowers'
Representative and of any Borrower.
(b) The Borrowers' Representative shall act as a conduit for
the Borrower on whose behalf the Borrowers' Representative has requested a
Revolving Credit Loan and shall not have any right to obtain any loans or
advances, in its own right, under the Revolving Credit. (c) The proceeds of each
loan and advance provided under the Revolving Credit which is requested by the
Borrowers' Representative shall be deposited into the Operating Account or as
otherwise indicated by the Borrowers' Representative, which shall cause the
transfer of the proceeds thereof to the (those) Borrower(s) on whose behalf such
loan and advance was obtained. No Agent nor any Lender shall have any obligation
to see to the application of such proceeds.
2-23 REVOLVING CREDIT LENDERS' COMMITMENTS.
(a) Subject to Section 17:17-1 (which Section 17:17-1 provides
for assignments and assumptions of Commitments), each Revolving Credit Lender's
"REVOLVING CREDIT PERCENTAGE COMMITMENT", and "REVOLVING CREDIT DOLLAR
COMMITMENT" is set forth on SCHEDULE 1, annexed hereto.
(b) The obligations of each Revolving Credit Lender are
several and not joint. No Revolving Credit Lender shall have any obligation to
the Borrowers to make any loan or advance under the Revolving Credit
(i) in excess of the lesser of that Revolving Credit
Lender's Revolving Credit Percentage Commitment of the subject loan or
advance; nor
(ii) such that that Revolving Credit Lender's
Revolving Credit Percentage
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Commitment of (x) the then unpaid principal balance of the Revolving
Credit Loans PLUS (y) the aggregate Stated Amount of all then
outstanding L/C's exceeds that Revolving Credit Lender's Revolving
Credit Dollar Commitment.
(c) No Revolving Credit Lender shall have any liability to any
Borrower on account of the failure of any other Revolving Credit 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.
(d) The Revolving Credit Dollar Commitments, Revolving Credit
Percentage Commitments, and identities of the Revolving Credit Lenders (but not
the Revolving Credit Loan Ceiling) may be changed, from time to time by the
reallocation or assignment of Revolving Credit Dollar Commitments and Revolving
Credit Percentage Commitments amongst the Revolving Credit Lenders or with other
Persons who determine to become "Revolving Credit Lenders"
(e) Upon written notice given the Borrowers' Representative
from time to time by the Administrative Agent, of any assignment or allocation
referenced in this Agreement:
(i) Each shall execute one or more replacement
Revolving Credit Notes to reflect such changed Revolving Credit Dollar
Commitments, Revolving Credit Percentage Commitments, and identities
and shall deliver such replacement Revolving Credit Notes to the
Administrative Agent (which promptly thereafter shall deliver to the
Borrowers' Representative 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 any Borrower, the
Administrative Agent, in lieu of causing the Borrowers to execute one
or more new Revolving Credit Notes, may issue the Administrative
Agent's Certificate confirming the resulting Commitments and Revolving
Credit Percentage Commitments.
(ii) Such change shall be effective from the
effective date specified in such written notice and any Person added as
a Revolving Credit Lender shall have all rights, privileges and
obligations of a Revolving Credit Lender hereunder thereafter as if
such Person had been a signatory to this Agreement and any other Loan
Document to which a Revolving Credit Lender is a signatory and any
person removed as a Revolving Credit Lender shall be relieved of any
obligations or responsibilities of a Revolving Credit Lender hereunder
thereafter.
ARTICLE 3: - THE TERM LOAN:
3-1. COMMITMENT TO MAKE TERM LOAN.
(a) Subject to satisfaction of the Conditions Precedent
(Article 4:) by on or prior to the date of this Agreement, the Borrower shall
borrow from the Term Lender and the Term Lender shall lend to the Borrower the
sum of $25,000,000.00 (the "TERM LOAN"), repayable with interest as provided
herein.
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(b) The proceeds of the Term Loan shall be used solely for the
following:
(i) To retire the Borrowers' working capital facilities in
effect at the execution of this Agreement.
(ii) For on-going working capital and general corporate
requirements of the Borrowers. No proceeds of the Term Loan may be
used, nor shall any be requested, with a view towards the accumulation
of any general fund or funded reserve of any of the Borrowers other
than in the ordinary course of the Borrowers' business and consistent
with the provisions of this Agreement
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 3:3-2, annexed hereto, executed by the Borrowers. Neither
the original nor a copy of the Term Note shall be required, HOWEVER, to
establish or prove any Liability. Upon the Borrowers' Representative's being
provided with an affidavit, from the Administrative Agent to the effect that
said Note has been lost, mutilated, or destroyed, the Borrowers shall execute a
replacement thereof and deliver such replacement to the Term Lender.
3-3. PAYMENT OF PRINCIPAL OF THE TERM LOAN.
(a) Except as provided in Sections 3:3-3(b) and 3:3-3(c), the
Borrowers 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 Revolving Credit Lender to make any loans or to
provide any financial accommodations pursuant to this Agreement.
(b) Prepayments shall be made towards the unpaid principal
balance of the Term Loan as provided in this Section 3:3-3(b).
(i) Subject to Section 3:3-3(b)(ii), the following
prepayments of the Term Loan shall be made on the date
indicated:
April 30, 2000: $5,000,000
July 31, 2000: $2,500,000
November 30, 2000: $2,500,000
(ii) The prepayments described in Section 3:3-3(b)(i)
shall be made, PROVIDED THAT there has been Overall
Availability of not less than $15 Million for 15 consecutive
days prior to, through one day after the day on which the
subject prepayment is made (the "PREPAYMENT PARAMETER"),
PROVIDED, HOWEVER, if, by reason of the Prepayment Parameter's
not then being satisfied, any such required prepayment is not
made on the date specified, then the subject required
prepayment shall be made to the extent that on or after the
date specified, the Prepayment Parameter is then met. (For
example, if the Prepayment Parameter for the $5 million
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prepayment due on April 30, 2000 is not met, but on that date, Overall
Availability has been equal to or greater than $15 Million for 15
consecutive days and is then equal to $16.5 Million, a $1.5 Million
partial payment shall be made towards the April 30, 2000 payment and
the Borrowers' obligation to make the balance of the April 30, 2000
payment shall remain "open" and subject to like satisfaction until paid
in full). The extension of the date on which a required prepayment is
to be made, as described herein, shall not constitute a Suspension
Event or Event of Default.
(c) No part of the Term Loan may be prepaid (other than as
provided in Section 3:3- 3(b)) unless either
(i) Overall Availability, for the period commencing
one month prior to and ending one day after the day on which the
subject prepayment is made has averaged $40 Million; or
(ii) such refinancing is with the proceeds of an
unsecured loan which is subordinated to the Liabilities and such
refinancing is of the then entire unpaid balance of the Term Loan.
(d) In the event of the prepayment of all or any part of the
Term Loan for any reason AFTER November 30, 2000 (other than for the mandatory
prepayments described in Section 3:3-3(b) ) or a payment of capitalized PIK
Interest, as provided in Section 3:3-4(a)(ii)), the Borrower shall pay the
Administrative Agent, for the account of the Term Lender, the "EARLY TERMINATION
FEE" (so referred to herein) equal to three percent (3%) of the amount of the
Term Loan which is so prepaid, except that no Term Loan Early Termination Fee
shall be due and payable in the event of a prepayment in connection with a
refinancing of the Term Loan agented or provided by BBRF or any affiliate of
BBRF, IT BEING UNDERSTOOD THAT neither BBRF nor any affiliate of BBRF has agreed
to provide or to entertain a request to provide any such refinancing.
(e) The Borrowers shall repay the then entire unpaid balance
of the Term Loan and all accrued and unpaid interest thereon on the Termination
Date.
3-4. INTEREST ON THE TERM LOAN.
(a) The unpaid principal balance of the Term Loan shall bear
interest, until repaid, fixed at 16.0% per annum, payable as follows:
(i) Interest on the unpaid principal balance of the
Term Loan, equal to 13.0% 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 quarterly,
on the first day of each of the Borrowers' fiscal quarters, commencing
with the first day of its fiscal quarter commencing on or about
November 1, 1999, except that such PIK
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Interest may be repaid without premium or penalty and whether or not
capitalized, PROVIDED THAT after giving effect to such payment, Overall
Availability shall not be less than $15 Million.
(b) Following the occurrence of any Event of Default (and
whether or not Acceleration has taken place), at the direction of the Term
Lender, Current Pay Interest shall be 15% per annum and PIK Interest shall
remain at 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, in the amount and payable as provided in the Fee Letter.
3-6. PAYMENTS ON ACCOUNT OF TERM LOAN. The Borrowers authorize the
Administrative Agent to determine and to pay over directly to the Term Loan
Lender any and all amounts due and payable from time to time under or on account
of the Term Loan as advances under the Revolving Credit IT BEING UNDERSTOOD,
HOWEVER, that the authorization of the Administrative Agent provided in this
Section 3:3-6 shall not excuse the Borrowers from fulfilling their obligations
to the Term Lender on account of the Term Loan nor place any obligation on the
Administrative Agent to do so. The Administrative Agent shall provide prompt
advice to the Borrowers' Representative of any amount which is so paid over by
the Administrative Agent to the Term Lender pursuant to this Section 3:3-6. The
Term Lender shall refund, to the Administrative Agent, any overpayment which may
have been pursuant to this Section 3:3-6.
ARTICLE 4: - CONDITIONS PRECEDENT:
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 4:4-1 through and including 4:4-4, (each in
form and substance reasonably satisfactory to the Administrative Agent) shall
have been delivered to the Administrative Agent, and the conditions respectively
described in Sections 4:4-5 through and including 4:4-9, shall have been
satisfied:
4-1. CORPORATE DUE DILIGENCE.
(a) Certificates of corporate good standing issued by the
respective Secretaries of State for the States under whose law the respective
Borrowers are organized.
(b) Certificates of due qualification, in good standing, by
the Secretaries of State of each State in which the nature of a Borrower's
business conducted or assets owned could require such qualification.
(c) Certificates of the Borrowers' respective Secretaries of
the due adoption,
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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. OPINION. An opinion of counsel to the Borrowers in form and
substance reasonably satisfactory to the Administrative Agent.
4-3. ADDITIONAL DOCUMENTS. Such additional instruments and documents as
the Administrative Agent or its counsel reasonably may require or request,
including the following:
(a) Those documents required to be provided pursuant to
Sections 8:8-1 (which relates to depository accounts) and 8:8-2 (which relates
to credit card accounts).
(b) Guaranties by each Guarantor, in each instance secured by
all assets of the subject guarantor (which, with respect to J. Baker, Inc. will
include all capital stock of each Borrower which is a direct subsidiary of J.
Baker, Inc.).
(c) Pledges, by each of the Borrowers, of the capital stock of
any other Borrower which the pledgor Borrower holds.
(d) Evidence of the simultaneous closing on the BBL Equipment
Loan.
4-4. OFFICERS' CERTIFICATES. Certificates executed by the respective
Presidents or Chief Executive Officer and the Chief Financial Officers of each
of the Borrowers and stating that the representations and warranties made by the
Borrowers in the Loan Documents are true and complete in all material respects
as of the date of such Certificate, and that, to such Person's knowledge, 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.
4-5. REPRESENTATIONS AND WARRANTIES. Each of the representations made
by or on behalf of the Borrowers in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by any
or on behalf of the Borrowers shall be true and complete in all material
respects as of the date as of which such representation or warranty was made.
4-6. MINIMUM DAY ONE AVAILABILITY. Overall Availability, after giving
effect to the Borrowers' receipt of the net proceeds of the BBL Equipment Loan;
the first loans and advances to be made 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, the establishment of such credit facility, is not less than $ 15
Million.
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4-7. 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 reasonable 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.
4-8. NO SUSPENSION EVENT. No Suspension Event shall then be extant.
4-9. 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 Borrower's financial condition when compared with such financial
condition at July 3, 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.
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, each Borrower, in addition to all
other representations, warranties, and covenants made by any of the Borrowers in
any other Loan Document, makes those representations, warranties, and covenants
included in this Agreement.
5-1. PAYMENT AND PERFORMANCE OF LIABILITIES. The Borrowers 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)
Each Borrower presently is in good standing as a corporation under the laws of
the state of its respective incorporation, and is duly qualified and in good
standing in every other State in which, by reason of the nature or location of
that Borrower's assets or operation of that 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 Borrowers. The
Borrowers' Representative shall provide the Administrative Agent with
Certificates of such qualification from the Secretaries of State of each State
in which each Borrower is so qualified.
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(b) Each Related Entity is listed on EXHIBIT 5:5-2, annexed
hereto. Each Related Entity is and shall hereafter remain in good standing in
the State in which incorporated and is 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, except where the failure to so
qualify would not have a material adverse effect on the business or assets of
that Related Entity. The Borrowers's Representative shall provide the
Administrative Agent with prior written notice of any entity's becoming or
ceasing to be a Related Entity.
(c) The Borrowers have all requisite corporate power and
authority to execute and deliver all Loan Documents to which the Borrowers are a
party and have and will hereafter retain all requisite corporate power to
perform all Liabilities.
(d) The execution and delivery by each Borrower of each Loan
Document to which it is a party; the Borrowers' consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of security interests by the Borrowers as contemplated in this Agreement); the
Borrowers' 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 Borrowers where such contravention would have a
material 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 Borrowers pursuant to any Requirement
of Law or obligation, except pursuant to or as permitted by
the Loan Documents.
(e) The Loan Documents have been duly executed and delivered by
Borrowers and are the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms,
except as such enforceability may be subject to limitations on the rights and
remedies of secured creditors generally imposed under bankruptcy or insolvency
law and that the availability of equitable relief is subject to the discretion
of the court from which such relief is sought.
5-3. TRADE NAMES.
(a) EXHIBIT 5:5-3, annexed hereto, is a listing of:
(i) All names under which the Borrowers have conducted their
business since June 1, 1998.
(ii) All entities and/or persons with whom any Borrower, since
June 1, 1998, consolidated or merged, or from whom any 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) No Borrower will change its name or conduct its business
under any name not
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listed on EXHIBIT 5:5-3, except (i) upon not less than twenty-one (21) days
prior written notice given (with reasonable particularity) to the Administrative
Agent and (ii) in compliance with all other provisions of this Agreement.
5-4. LOCATIONS.
(a) The Collateral, and the books, records, and papers of the
Borrowers pertaining thereto, are kept and maintained solely at the principal
executive offices of the Borrowers' Representative at 555 Turnpike Street,
Canton, Massachusetts 02021 and at those locations which are listed on EXHIBIT
5:5-4, annexed hereto, which EXHIBIT 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 a 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 Borrowers' landlords.
(b) The Borrowers shall not remove any of the Collateral from
said chief executive offices or those locations listed on EXHIBIT 5:5-4 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).
(iv) Open any Store as permitted by Section 5:5-4(c).
(c) Each 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) That Borrower is in compliance with Section
5:5-25 of this Agreement (which Section 5:5-25 provides, among
other things, that 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 Collateral Agent.
(ii) If the location is not at a Host Store and is in
a State in which the rights of the landlord may be superior to
those of the Collateral Agent, as reasonably determined by the
Administrative Agent, the subject Borrower has used reasonable
efforts to provide the Administrative Agent with a Landlord's
Waiver (in form reasonably satisfactory to the Administrative
Agent) duly executed by the landlord for that new location.
(iii) If the location is at a Host Store, the
Borrowers' Representative has provided the Administrative
Agent with a Host Store Consent.
(iv) No Event of Default has occurred; no Suspension
Event is extant; and no
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Suspension Event will occur by reason of the Borrower's so becoming
obligated.
(d) No Borrower shall cease the conduct of business from any
of its present or future Stores without first furnishing the Administrative
Agent with not less than thirty (30) days prior written notice thereof.
(e) No tangible personal property of any Borrower (beyond a DE
MINIMUS amount of such property) is in the care or custody of any third party or
stored or entrusted with a bailee or other third party other than at a Host
Store and none shall hereafter be placed under such care, custody, storage, or
entrustment other than at a Host Store.
5-5. INFRASTRUCTURE. (a) The Borrowers have and will maintain a
sufficient infrastructure to conduct their business as presently conducted and
as contemplated to be conducted as described in the Business Plan. (b) The
Borrowers own and possess, or have 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 Borrowers' conduct of
the Borrowers' business, except where the failure to own, possess, or have such
right of use will not have a material adverse effect on the Borrowers' ability
to conduct their businesses in the ordinary course. (c) The conduct by the
Borrowers of the Borrowers' business does not , in any material respect,
presently infringe (nor will any Borrower conduct its business in the future so
as to infringe) (i) the patents, industrial designs, trademarks, trade styles,
brand names, service marks, logos, copyrights, trade secrets, know-how,
confidential information, or other intellectual or proprietary property of any
third Person except where such infringement does not have a material adverse
effect on any Borrower; nor (ii) the trade names of any third Person.
5-6. YEAR 2000 COMPLIANCE. (a) Based upon a diligent inquiry undertaken
by the Borrowers, it appears that the Borrowers' operations are Year 2000
Compliant. (b) No Borrower will suffer or permit its operations thereafter to
cease to be Year 2000 Compliant in any manner which might have a material
adverse effect on its operations.
5-7. TITLE TO ASSETS. (a) The Borrowers are, and shall hereafter
remain, the owners of the Collateral free and clear of all Encumbrances with the
exceptions of the following (the "PERMITTED ENCUMBRANCES"):
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(i) The security interest created herein.
(ii) Purchase money security interests in Equipment to secure
indebtedness permitted under Section 5:5-8(a)(vi).
(iii) Those Encumbrances (if any) listed on EXHIBIT 5:5-7(A),
annexed hereto.
(iv) 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; and 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.
(b) The Borrowers do not have possession of any property on consignment
to the Borrowers and will not have possession of property on consignment
hereafter except on not less than fifteen (15) days prior written notice (with
reasonable particularity) from the Borrowers' Representative, which property on
such consignment shall not have a cost at any one time exceeding three percent
(3%) of the Borrowers' Inventory at Retail.
(c) No Borrower shall 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
that Borrower's business.
(ii) Equipment subject to an agreement, substantially in the
form of EXHIBIT 5:5-7(C), annexed hereto, with the third party which has an
interest in such Equipment.
(iii) Equipment which is subject to a sale and leaseback
transaction closed no later than 90 days after the acquisition of the subject
Equipment, the net proceeds of which are not less than 100% of the cost of the
subject Equipment to the subject Borrower, where the Administrative Agent has
received an agreement, substantially in the form of EXHIBIT 5:5-7(c), annexed
hereto, with the lessor of such Equipment.
(d) Guarantor (other than J. Baker) has, and none will hereafter
acquire, any assets other than of nominal value.
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(e) J. Baker (i) does have any assets which, in accordance
with GAAP, would be required to be reflected on its balance sheet other than the
capital stock which it holds as of the date of this Agreement and (ii) subject
to Section 5:5-19 (which permits the creation of new subsidiaries) shall not
have assets other than the assets which it has as of the date of this Agreement.
5-8. INDEBTEDNESS.
(a) The Borrowers do not and shall not hereafter have any
Indebtedness with the exceptions of:
(i) Any Indebtedness on account of the Revolving
Credit.
(ii) Any Indebtedness on account of the Term Loan.
(iii) The Indebtedness on account of the BBL
Equipment Loan.
(iv) The Indebtedness (if any) listed on EXHIBIT
5:5-8, annexed hereto.
(v) Indebtedness incurred as permitted by Section
3:3-3(c)(ii) (which relates to prepayment of the Term Loan) or
5:5-20(a) (which relates to the replacement of certain
subordinated Indebtedness).
(vi) Purchase money Indebtedness not otherwise
described in this Section 5:5-8 and capital leases for the
acquisition of Equipment, not exceeding $10 Million
outstanding at any one time.
(b) The Borrowers shall not permit more than twenty five percent of the
aggregate of their indebtedness for the purchase of goods or services to be more
than Thirty (30) days beyond then current trade terms provided to the subject
Borrower by the supplier of such goods.
5-9. INSURANCE POLICIES.
(a) EXHIBIT 5:5-9, annexed hereto, is a schedule of all
insurance policies owned by the Borrowers or under which any of the Borrowers
are the named insured. Each of such policies is in full force and effect.
Neither the issuer of any such policy nor any of the Borrowers is in default or
violation of any such policy.
(b) The Borrowers 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 5:5-9 presently
satisfies the foregoing requirements, it being recognized by the Borrowers,
HOWEVER, that such requirements may change hereafter in the Administrative
Agent's reasonable discretion to reflect changing circumstances. All insurance
carried by the Borrowers 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 Administrative Agent, which endorsement shall provide that the insurance, to
the extent of the Administrative Agent's interest therein, shall not be
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impaired or invalidated, in whole or in part, by reason of any act or neglect of
the Borrowers or by the failure of the Borrowers to comply with any warranty or
condition of the policy. In the event of the failure by the Borrowers 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 Borrowers' failure to have maintained such
insurance. The Borrowers' Representative shall furnish the Administrative Agent
with certificates or other evidence satisfactory to the Administrative Agent
regarding compliance by the Borrowers with the foregoing insurance provisions.
(c) The Borrowers' Representative shall advise the
Administrative Agent of each claim in excess of $250,000.00 made by the
Borrowers 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 Borrowers, to conduct the adjustment of each such claim (and of all
claims following the occurrence of any Suspension Event). The Borrowers hereby
appoint the Administrative Agent as the Borrowers' 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. This 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 as
if the same were Receipts deposited into the Concentration Account.
5-10. LICENSES. Each license, distributorship, franchise, and similar
agreement issued to, or to which any of the Borrowers is a party is in full
force and effect, except where the failure thereof to be in full force and
effect does not have a material adverse effect on the Borrowers. No party to any
such license or agreement is in default or violation thereof. The Borrowers have
not received any notice or threat of cancellation of any such license or
agreement.
5-11. LEASES. EXHIBIT 5:5-11, annexed hereto, is a schedule of all
presently effective Capital Leases and EXHIBIT 5:5-4 includes a list of all
presently effective Leases. Each of such Leases and Capital Leases is in full
force and effect. No party to any such Lease or a Capital Lease is in default or
violation of any such Lease or Capital Lease and the Borrowers have not received
any notice or threat of cancellation of any such Lease or Capital Lease. The
Borrowers hereby authorize the Administrative Agent at any time and from time to
time to contact any of the Borrowers' landlords in order to confirm the
Borrowers' continued compliance with the terms and conditions of the Leases
between the Borrowers and
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that landlord and, with the consent of the Borrowers' Representative (and at any
time following the occurrence of an Event of Default) to discuss such issues,
concerning any Borrower's occupancy under such Leases, as the Administrative
Agent may determine.
5-12. REQUIREMENTS OF LAW. The Borrowers are in compliance with, and
shall hereafter comply with and use its assets in compliance with, all
Requirements of Law except where the failure to so comply does not have a
material adverse effect on the Borrowers None of the Borrowers has received any
notice of any violation of any Requirement of Law (whether or not such violation
is material), which violation has not been cured or otherwise remedied, which
violation, if not so cured or remedied, could have more than a DE MINIMUS
adverse effect on a Borrower.
5-13. MAINTAIN PROPERTIES. The Borrowers 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 as described below: (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 Borrowers.
(iii) The turning over to the Administrative Agent of
all Receipts as provided herein.
(iv) Permitted Asset Sales.
(v) In connection with a sale and leaseback
transaction permitted by Section 5:5-7(c)(iii).
5-14. PAY TAXES.
(a) The Borrowers have no knowledge of any material adverse
finding on account of any examination of or with respect to any Borrower
presently being conducted by any taxing authority.
(b) Each Borrower has and 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 that Borrower or the Collateral by
any person or entity whose claim could result in an Encumbrance upon any asset
of any Borrower or by any governmental authority; properly exercise any trust
responsibilities imposed upon any Borrower by reason of withholding from
employees' pay; timely
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make all contributions and other payments as may be required pursuant to any
Employee Benefit Plan now or hereafter established by that Borrower; and timely
file all tax and other returns and other reports with each governmental
authority to whom that Borrower is obligated to so file except where failure to
file would not have a material adverse effect PROVIDED HOWEVER, nothing included
in this Section 5:5-14(b) shall prevent the Borrowers from contesting, in good
faith and by appropriate proceedings, any tax liability claimed against any
Borrower, but only PROVIDED THAT and so long as no tax lien is filed with
respect thereto.
(c) At its option, with prior notice to the Borrower's
Representative, the Administrative Agent may pay any tax, charge levied,
assessed, or claimed upon any Borrower or the Collateral by any person or entity
or governmental authority, and make any payments on account of any Borrower's
Employee Benefit Plan as the Administrative Agent , in the Administrative
Agent's discretion, may deem necessary or desirable, to protect the Agents'
Rights and Remedies.
5-15. NO MARGIN STOCK. The Borrowers are 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 Borrowers are and shall hereafter remain in
compliance, in all material respects, with ERISA.
5-17. HAZARDOUS MATERIALS. To the Borrowers' knowledge, none of the
real property used or operated by any Borrower contains a material amount of
Hazardous Materials.
5-18. LITIGATION. Except as described in EXHIBIT 5:5-18, annexed
hereto, there is not presently pending or to its knowledge, threatened in
writing, by or against the Borrowers any suit, action, proceeding, or
investigation which, if determined adversely to the Borrowers, would have a
material adverse effect upon the Borrowers' financial condition or ability to
conduct their business as such business is presently conducted or is
contemplated to be conducted in the foreseeable future.
5-19. DIVIDENDS. INVESTMENTS. OTHER CORPORATE ACTIONS. No Obligor shall
(a) Pay any cash dividend or make any other distribution in
respect of any class of their respective capital stock except for, and subject
to such conditions as apply to, the making of Permitted Distributions.
(b) Own, redeem, retire, purchase, or acquire any of that
Person's capital stock.
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(c) Except for (x) Permitted Investments and (y) capital stock of
Related Entities otherwise permitted by this Agreement to be held by the subject
Borrower, invest in or purchase any stock or securities or rights to purchase
any such stock or securities, of any corporation or other entity, including
without limitation, any capital stock of the J. Baker, PROVIDED, HOWEVER:
(i) Any Borrower may maintain Permitted Investments in the
Side Collateral Account at any time that there has not been an
outstanding principal balance in the Loan Account for not less than
Seven (7) consecutive days and no L/C's are then outstanding.
(ii) Any Obligor may create a wholly owned subsidiary,
PROVIDED THAT
(A) The Borrowers' Representative shall have provided
the Administrative Agent with not less than Thirty (30) days
prior written notice of such creation (with reasonable detail
concerning the facts and circumstances relating to such
subsidiary).
(B) No Event of Default is extant on the date on
which the subsidiary is so created and none will occur by
reason of such creation.
(C) Each of the following conditions is satisfied
prior to the date on which any asset (other than of nominal
value) is transferred to such entity:
(I) Such entity shall have executed such
documentation as the Administrative Agent reasonably
may request in order for such entity to become a
"Borrower" or "Guarantor" hereunder.
(II) The holder of all capital stock of such
entity shall have created a security interest therein
to secure the Liabilities.
(d) Merge or consolidate or be merged or consolidated with or
into any other corporation or other entity; provided that nothing in this
Agreement shall prevent any Borrower from merging into any other Borrower.
(e) Consolidate any of that Obligor's operations with those of
any other corporation or other entity.
(f) Except as provided in Section 5:5-19(c)(ii), organize or
create any Related Entity.
(g) Subordinate any debts or obligations owed to that Obligor
by any third party to any other debts owed by such third party to any other
Person.
(h) Engage in any interest rate swaps, caps, or similar
activities, or any hedging activities other than in the ordinary course and
conduct of that Obligor's business, and then only with a Lender or any affiliate
of a Lender.
5-20. REPLACEMENT OF CERTAIN OBLIGATIONS. No Obligor shall replace,
refinance, or retire that Obligor's convertible preferred or subordinated
Indebtedness unless no part of the security which is being replaced or
refinanced is outstanding following the taking of such action and the following
conditions (as
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applicable) are satisfied:
(a) Except as provided in Sections 5:5-20(c) or 5:5-20(d), if
the security being replaced, refinanced or retired is J. Baker's 7% Convertible
Subordinated Notes due 2002.:
(i) The replacement security is junior to the
Liabilities.
(ii) The maturity of the replacement security is no
earlier than one year following the Maturity Date.
(iii) The terms and conditions of the replacement
security are reasonably satisfactory to the Administrative
Agent.
(iv) The Term Loan has been retired.
(b) Except as provided in Sections 5:5-20(c) or 5:5-20(d), if
the security being replaced, refinanced, or retired is the 13% Senior
Subordinated Notes dated May 19, 1999 of JBI Apparel, Inc.:
(i) The replacement security is junior to the
Liabilities.
(ii) The maturity of the replacement security is no
earlier than one year following the Maturity Date.
(iii) The terms and conditions of the replacement
security are reasonably satisfactory to the Administrative
Agent.
(c) If the relevant security is being replaced, retired or
refinanced with the proceeds of an issue of capital stock, then, immediately
prior to such replacement, and at all times thereafter, the Loan to Collateral
Percentage shall be and shall remain 90%.
(d) If the relevant security is being retired on account of
the exercise of a conversion feature applicable to such security, then no
conditions shall apply thereto other than as stated in the preamble of this
Section 5:5-20.
5-21. LOANS. The Borrowers 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) Subject to such conditions respectively as apply thereto,
the making of Permitted Distributions and Permitted Investments.
(b) Advances to employees of a Borrower for travel and other
business expenses to be incurred by such employees in the ordinary course of the
business of one or more of the Borrowers.
(c) Cash loans to employees of a Borrower not exceeding
$100,000.00 outstanding at any time to any employee nor exceeding $1,000,000 in
the aggregate outstanding at any time.
(d) Intercompany advances permitted pursuant to Section
5:5-24.
(e) Advance payments made to the Borrowers' suppliers in the
ordinary course.
5-22. LINE OF BUSINESS. The Borrowers shall not engage in any
businesses other than the
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businesses in which, at the execution of this Agreement, they are engaged or a
business reasonably related thereto (the conduct of which reasonably related
business is reflected in the Business Plan).
5-23. 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 Borrowers 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 Borrowers to pay such
amounts is a Liability.
5-24. AFFILIATE TRANSACTIONS.
(a) No Borrower shall give any value to any Related Entity
except for:
(i) Goods and services actually purchased by that
Borrower from, or sold by that Borrower to, such Related
Entity for a price which is not materially less favorable than
would have been charged in an arms length transaction.
(ii) Permitted Overhead Contributions.
(iii) Permitted Distributions.
(iv) As permitted by Section 5:5-19 .
(b) The net aggregate of intercompany cash advances between the Shoe
Division Borrowers, on the one hand, and the Apparel Division Borrowers on the
other (determined without regard to intercompany accounts outstanding on August
1, 1999), shall not exceed $17.5 Million at any one time outstanding.
5-25. ADDITIONAL ASSURANCES.
(a) The Borrowers are not the owners of, nor has any had 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 Collateral Agent
(subject only to Permitted Encumbrances) to secure the Liabilities.
(b) The Borrowers will not hereafter acquire any asset or any
interest in property which is not, immediately upon such acquisition, subject to
such a perfected security interest in favor of
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the Collateral Agent to secure the Liabilities (subject only to Encumbrances (if
any) permitted pursuant to Section 5:5-7(a), above).
(c) The Borrowers 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 Collateral Agent reasonably may
request to carry into effect the provisions and intent of this Loan 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.
(d) Each Borrower hereby designates the Collateral Agent as
and for that 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 Loan
Agreement or of any financing statement or other instrument executed pursuant to
this Section 5:5-25 shall be sufficient for filing to perfect the security
interests granted herein.
5-26. ADEQUACY OF DISCLOSURE.
(a) All financial statements furnished to the Administrative
Agent and each Lender by the Borrowers have been prepared in accordance with
GAAP consistently applied and present fairly the condition of the Borrowers 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 Borrowers 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 Borrowers do not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the Borrowers'
financial statements furnished to the Administrative Agent and the Lenders prior
to the execution of this Agreement.
(c) No document, instrument, agreement, or paper now or
hereafter given to the Administrative Agent or any Lender by or on behalf of the
Borrowers or any guarantor of the Liabilities in connection with the execution
of this Agreement by the Lenders (except any projections provided by or on
behalf of any Borrower) 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 or any of
the Borrowers, on the date on which this Agreement was executed, which has, or
which, in the foreseeable future reasonably could be expected to have, a
material adverse effect on the financial condition of the Borrowers which has
not been disclosed in writing to the Administrative Agent and each Lender.
5-27. NO RESTRICTIONS ON LIABILITIES. No Borrower shall enter into or
directly or indirectly become subject to any agreement which prohibits or
restricts, in any manner, that Borrower's:
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(a) Creation and granting of security and other collateral
interests in favor of the Collateral Agent.
(b) Incurrence of Liabilities.
5-28. OTHER COVENANTS. The Borrowers shall not indirectly do or cause
to be done any act which, if done directly by the Borrowers, would breach any
covenant contained in this Agreement.
ARTICLE 6: - REPORTING REQUIREMENTS / FINANCIAL COVENANTS:
6-1. MAINTAIN RECORDS. The Borrowers shall:
(a) At all times, keep proper books of account, in which full,
true, and accurate entries shall be made of all of the Borrowers' transactions,
all in accordance with GAAP applied consistently with prior periods to fairly
reflect the financial condition of the Borrowers 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 Borrowers 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 to discuss the Borrowers' 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. Unless an Event of Default has occurred (in which event the following
limit shall not be applicable), the Administrative Agent shall not exercise its
rights under this Section 6:6-1(d) more than three times in a 12 month period.
(e) Not change the Borrowers' fiscal year.
(f) Not change the Borrowers' taxpayer identification number
or state of incorporation other than in consequence of a merger permitted by
Section 5:5-19(d).
6-2. IMMEDIATE NOTICE .
(a) The Borrowers' Representative shall provide the
Administrative Agent with
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written notice immediately upon its becoming aware of 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: material adverse change in the business affairs of
any Borrower, including, by way of examples, any change in a Borrower's
executive officers; event, with respect to any Key Host Store, which
might have a material adverse effect on the financial condition of that
Key Host Store or ability of that Key Host Store to discharge its
obligations under the Host Store Agreement between that Key Host Store
and that Borrower; event which might have a material adverse effect to
any material contract with any supplier of Inventory to a Borrower.
(ii) Any notice from any Key Host Store of a breach or default
of the Host Store Agreement with that Key Host Store.
(iii) Any ceasing of the Borrowers' 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.
(iv) Except where the same has arisen out of a bona fide
dispute, any failure by the Borrowers to pay rent when due at 10% or
more of the Borrowers' stores, which failure continues for more than
Five (5) Business Days following the day on which such rent first came
due.
(v) The occurrence of any Suspension Event.
(vi) Any intention on the part of a Borrower to discharge that
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 6:6-1(d)).
(vii) Any litigation which, if determined adversely to a
Borrower, would have a material adverse effect on the financial
condition of that Borrower.
(b) The Borrowers' Representative shall:
(i) Add the Administrative Agent as an addressee on all
mailing lists maintained by or for any Borrower.
(ii) At the request of the Administrative Agent provide the
Administrative Agent with a copy of the results of any physical or
cycle count of a Borrower's Inventory.
(iii) Provide the Administrative Agent , when received by any
Borrower, with a copy of any management letter or similar
communications from any accountant of that Borrower.
(iv) Provide the Administrative Agent with copies of all
filings, by J. Baker, with the Securities and Exchange Commission, when
so filed by J. Baker.
6-3. BORROWING BASE CERTIFICATE. The Borrowers' Representative shall
provide the Administrative Agent, daily, with a "BORROWING BASE CERTIFICATE"(so
referred to herein) in the form of
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<PAGE>
EXHIBIT 6:6-3 annexed hereto, as such form may be revised from time to time by
the Revolving Credit Lenders ). 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.
6-4. COLLATERAL REPORTING REQUIREMENTS. The Borrowers' Representative
shall provide the Administrative Agent with those collateral reports described
and within the time frames provided for by EXHIBIT 6:6-4, annexed hereto
6-5. MONTHLY REPORT. Within Thirty-Five (35) days of the end of the
previous month, the Borrowers' Representative shall provide the Administrative
Agent with an internally prepared Consolidated financial statement of the
Borrowers' 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 a schedule of
consolidation , as well as comparisons of same store sales and operating results
for the corresponding month of the then immediately previous year and to the
year-to-date period and to the Business Plan. Said balance sheet and income
statement shall show amortization, depreciation, and capital expenditures.
6-6. QUARTERLY REPORTS. Quarterly, within Forty Five (45) days
following the end of each of the Borrower's first three fiscal quarters, the
Borrowers Representative shall provide the Administrative Agent with an original
counterpart of a management prepared Consolidated financial statement of the
Borrowers for the period from the beginning of the Borrowers' 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, cash flows and a schedule of
consolidation, as well as a comparison of same store sales and operating results
for the corresponding quarter of the then immediately previous year and to the
year-to-date period and to the Business Plan.
6-7. ANNUAL REPORTS. Annually, within ninety (90) days following the
end of the Borrower's fiscal year, the Borrowers Representative shall furnish
the Administrative Agent with the following:
(a) An original signed counterpart of the J. Baker's annual
consolidated financial statement (with consolidating schedules), which statement
shall have been prepared by, and bearing the unqualified opinion of, the
Borrowers' independent certified public accountants (i.e. said statement shall
be "certified" by such accountants). Such annual statement shall include, at a
minimum (with comparative information for the then prior fiscal year) a balance
sheet, income statement, statement of changes in shareholders' equity, and cash
flows.
(b) The following Consolidated financial statements for the Borrowers
for the prior
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fiscal year (each prepared by the Borrowers' independent accountants): Balance
sheet, income statement, statement of changes in stockholders' equity and cash
flow.
(c) A certificate of the Borrowers' 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 by reason
of a breach of any financial covenant included in Section 6:6-12.
6-8. OFFICERS' CERTIFICATES. The Borrowers' Representative shall cause
any of the President, Chief Executive Officer, or Chief Financial Officer of the
Borrowers' Representative 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 Borrowers at the close of, and the results of the Borrowers'
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 6:6-12.
(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 Borrowers' compliance
(or failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 6:6-12 hereof.
6-9. ACCESS TO RECORDS.
(a) The Borrowers shall accord the Administrative Agent and
its representatives with reasonable access from time to time as the
Administrative Agent and such representatives reasonably may require to all
properties owned by or over which the Borrowers has control. The Administrative
Agent and its representatives shall have the right, and the Borrowers will
permit the Administrative Agent and its representatives from time to time as the
Administrative Agent and its representatives may request, to examine, inspect,
copy, and make extracts from any and all of the Borrowers' books, records,
electronically stored data, papers, and files. The Borrowers shall make all of
the Borrowers' copying
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facilities available to the Administrative Agent.
(b) The Borrowers hereby authorizes the Administrative Agent
and its 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 Borrowers, 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 Revolving Credit Lenders and
the Revolving Credit Lenders' representatives with respect thereto.
(ii) Verify at any time the Collateral or any portion
thereof, including verification with Account Debtors, and/or with the
Borrowers' computer billing companies, collection agencies, and
accountants and to sign the name of the Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Collateral.
(c) The Administrative Agent shall exercise its rights under
this Section 6:6-9 on reasonable notice and at reasonable times during the
Borrowers' customary business hours, with a view towards minimal adverse effect
on the Borrowers' conduct of their business.
6-10. INVENTORIES, APPRAISALS, AND AUDITS.
(a) The Administrative Agent may observe each inventory any
cycle count of the Collateral which is undertaken on behalf of any Borrower. No
Borrower may change the methodology to be followed in connection with the
conduct of and reporting on the results of such inventory from the methodology
in effect on August 1, 1999. The Administrative Agent does not contemplate
undertaking or requiring any physical inventories, PROVIDED, HOWEVER, the
Administrative Agent, following the occurrence of any Suspension Event, may do
so.
(i) On the Administrative Agent's request, the
Borrowers' Representative 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 any Borrower) within ten
(10) days following the completion of such inventory.
(ii) On the Administrative Agent's request, the
Borrowers' Representative 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 any Borrower) to that 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 Borrowers)
(b) The Administrative Agent contemplates conducting Four (4)
commercial finance
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audits (in each event, at the Borrowers' expense) of the Borrowers' books and
records during any Twelve (12) month period during which this Agreement is in
effect, but following the occurrence of an Event of Default, may cause
additional such audits to be undertaken (in each event, at the Borrowers'
expense).
(c) The Administrative Agent contemplates obtaining of Three
(3) appraisals (in all events, at the Borrowers' expense) of the Borrowers'
Inventory during any Twelve (12) month period during which this Agreement is in
effect, each conducted by such appraisers as are satisfactory to the
Administrative Agent , but following the occurrence of an Event of Default, may
cause additional such audits to be undertaken (in each event, at the Borrowers'
expense).
(d) The Administrative Agent contemplates causing not more
than Three (3) "mystery shopping" (so-called) visits (at the Borrowers' expense)
to be undertaken during any Twelve (12) month period during which this Agreement
is in effect, but following the occurrence of an Event of Default, may cause
additional such visits to be undertaken (in each event, at the Borrowers'
expense). The Administrative Agent shall provide the Borrower's Representative
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 Borrowers' Representative promptly
shall provide the Administrative Agent with such other and additional
information concerning the Borrowers, the Collateral, the operation of the
Borrowers' business, and the Borrowers' financial condition, including original
counterparts of financial reports and statements, as the Administrative Agent
reasonably may from time to time request from the Borrowers.
(b) The Borrowers' Representative may provide the
Administrative Agent, from time to time hereafter, with updated projections of
the Borrowers' anticipated performance and operating results.
(c) In all events, the Borrowers' Representative, by no later
than 30 days after the end of the Borrowers' fiscal year, shall furnish the
Administrative Agent with an updated and extended forecast (which shall include,
on a monthly basis, balance sheets, income statements, and cash flow, as well as
of all components of each borrowing base) which shall go out at least through
the end of the then next fiscal year. Such updated and extended forecast shall
be prepared pursuant to a methodology and shall include such assumptions as are
reasonably satisfactory to the Administrative Agent, IT BEING UNDERSTOOD THAT
such forecasts are estimates and not guarantees of actual results.
(d) The Borrowers recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Administrative
Agent may obtain, develop, or receive with respect to the Borrowers are
confidential to the Administrative Agent and the Lenders and that, except as
otherwise provided herein, the Borrowers are not entitled to receipt of any of
such appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.
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6-12. FINANCIAL PERFORMANCE COVENANTS.
(a) The Borrowers shall observe and comply with the following
financial performance covenants, which compliance shall be determined 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 Borrowers' compliance with such covenants
based upon financial reports and statements provided by the Borrowers to the
Administrative Agent (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:
(i) The Borrowers shall not suffer or permit their
cumulative Consolidated EBIDTA, tested quarterly on a rolling four
quarter basis (three quarter basis for application of test as of
October 31, 1999) to be less than the following:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
FISCAL QUARTERS ENDING ON OR MINIMUM CUMULATIVE
ABOUT CONSOLIDATED EBITDA
- --------------------------------------------------------------------
<S> <C>
October 31, 1999 $27,000,000
- --------------------------------------------------------------------
January 31, 2000 40,000,000
- --------------------------------------------------------------------
April 30, 2000 40,000,000
- --------------------------------------------------------------------
July 31, 2000 40,000,000
- --------------------------------------------------------------------
October 31, 2000 41,500,000
- --------------------------------------------------------------------
January 31, 2000 43,000,000
- --------------------------------------------------------------------
Thereafter 43,000,000
- --------------------------------------------------------------------
</TABLE>
(ii) The Borrowers shall maintain a Fixed Charge
Ratio equal to or greater than 1.4, tested quarterly, on a rolling four quarter
basis, commencing with their four quarters ending on or about January 31, 2000.
(iii) The Borrowers shall maintain Overall
Availability of not less than $40 Million for the period commencing
with December 10, 2001 and ending on December 30, 2001.
(b) The Borrowers' Business Plan is annexed hereto as
EXHIBIT 6:6-12.
ARTICLE 7: - USE AND COLLECTION OF COLLATERAL:
7-1. USE OF INVENTORY COLLATERAL.
(a) The Borrowers shall not, engage in any sale of the
Inventory other than for fair
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consideration in the conduct of the Borrowers' business in the ordinary course
and, except for Permitted Asset Sales, shall not engage in sales or other
dispositions to creditors; sales or other dispositions in bulk (other than in
the ordinary course); and use 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 a Borrower's
customary return policy applicable to the return of inventory purchased by that
Borrower's retail customers in the ordinary course, such Inventory may be
returned to the Borrowers without the consent of the Administrative Agent
7-2. INVENTORY QUALITY. All Inventory now owned or hereafter acquired
by the Borrowers 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 Borrowers may grant such
allowances or other adjustments to the Borrowers' Account Debtors (exclusive of
extending the time for payment of any material Account or Account Receivable,
which shall not be done without first obtaining the Administrative Agent's prior
written consent in each instance) as the Borrowers may reasonably deem to accord
with sound business practice, PROVIDED, HOWEVER, following the occurrence of any
Suspension Event, the authority granted the Borrowers pursuant to this Section
7:7-3 may be limited or terminated by the Administrative Agent at any time in
the Administrative Agent's discretion.
7-4. VALIDITY OF ACCOUNTS.
(a) The amount of each Account shown on the books, records,
and invoices of the Borrowers 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 Borrowers.
(b) The Borrowers have no knowledge of any impairment of the
validity or collectability of any of the Accounts and shall notify the
Administrative Agent of any such fact immediately after the Borrowers become
aware of any such impairment.
7-5. NOTIFICATION TO ACCOUNT DEBTORS. The Administrative Agent shall
have the right at any time that an Event of Default has occurred to notify any
of the Borrowers' Account Debtors to make payment directly to the Administrative
Agent and to collect all amounts due on account of the Collateral.
ARTICLE 8: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
8-1 DEPOSITORY ACCOUNTS.
(a) Annexed hereto as EXHIBIT 8:8-1 is a Schedule of all
present DDA's, which
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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 Borrowers' Representative shall deliver to the
Administrative Agent, as a condition to the effectiveness of this Agreement:
(i) Notification, executed on behalf of the relevant
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 each depository institution at which a
Blocked Account Agreement is maintained.
(c) No Borrower will establish any DDA hereafter (other than a
Local DDA) unless, contemporaneous with such establishment, the Borrowers'
Representative provides a notification of the Collateral Agent's interest in
such DDA and will not establish any Blocked Account unless the Borrowers'
Representative provides the Administrative Agent with such a Blocked Account
Agreement.
8-2. CREDIT CARD RECEIPTS.
(a) Annexed hereto as EXHIBIT 8:8-2, 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 Borrowers' Representative shall deliver to the
Administrative Agent, as a condition to the effectiveness of this Agreement,
notification, executed on behalf of the relevant 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 any Borrower to that clearinghouse or
other processor and any other amount payable to any 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. No
Borrower shall 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 established (and
are so referred to herein):
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(i) The CONCENTRATION ACCOUNT(S): Established by the
Administrative Agent with BankBoston, N. A.
(ii) The BLOCKED ACCOUNT(S): Established by the
Borrowers with Fleet National Bank.
(iii) The OPERATING ACCOUNT(S): Established by the
Borrowers' Representative with BankBoston, N. A.
(b) The contents of each DDA, Concentration Account(s) and the
Blocked Account(s) constitute Collateral and Proceeds of Collateral.
(c) The Borrowers shall pay all fees and charges of, and
maintain such impressed balances as may be required by the Revolving Credit
Lender or by any bank in which any account is opened as required hereby (even if
such account is opened by 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 Borrowers for the Administrative
Agent and the Lenders; shall not be commingled with any of any Borrower's other
funds; and shall be deposited and/or transferred only to the Concentration
Account.
(b) The Borrowers' Representative shall cause the ACH or wire
transfer to the Blocked Account or to the Concentration Account, no less
frequently than daily (and whether or not there is then an outstanding balance
in the Loan Account) of the following:
(i) The then contents of each DDA (other than (A) any
Local DDA and (B) the Operating Account). Each such transfer shall be
net of any minimum balance, not to exceed the lesser of $2,500.00 or
that amount which the Borrowers' Representative, in its best business
judgement, determines as being required to be maintained in the subject
DDA by the bank at which such DDA is maintained).
(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
Borrowers' Representative shall cause the ACH or wire transfer to the
Concentration Account, no less frequently than daily, of then entire ledger
balance of each Blocked Account. Such transfer shall be net of such minimum
balance, not to exceed the lesser of $2,500.00 or that amount which the
Borrowers' Representative, in its best business judgement, determines as being
required to be maintained in that Blocked Account by the bank at which that
Blocked Account is maintained.
8-5. HOST STORE, CORPORATE ACCOUNT AND OTHER RECEIPTS.
(a) The Borrowers' Representative shall cause each Borrower to
cause all Receipts,
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other than those subject to Section 8:8-4, to be forwarded directly to the
Concentration Account or to such other account as the Administrative Agent from
time to time may specify.
(b) In the event that, notwithstanding the provisions of
Sections 8:8-4 and 8:8-5(a), any 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 that Borrower for
the Administrative Agent and shall not be commingled with any of that or any
other Borrower's other funds or deposited in any account of the Borrower other
than as instructed by the Administrative Agent.
8-6. PAYMENT OF LIABILITIES.
(a) On each Business Day, the Administrative Agent shall
apply, towards the SwingLine Loans and the Revolving Credit Loans, 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, all payments other
than by wire transfer 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 8:8-6(b)(i)) or payment (Section
8:8-6(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 Lenders are subject to clearance 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 8:8- 6(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 is
continuing; and
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(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) the aggregate of
amounts unpaid on account of the Term Loan . Such funded reserve shall either be
(I) returned to the Borrowers' Representative in the event that no Suspension
Event is then continuing or (II) turned over to the Collateral Agent following
the occurrence of any Event of Default described in Section 11:11-11 and
Acceleration on account of the occurrence of any other Event of Default.
ARTICLE 9: - GRANT OF SECURITY INTEREST:
9-1. GRANT OF SECURITY INTEREST. To secure the prompt, punctual, and
faithful performance of all and each of the Borrowers' Liabilities, the
Borrowers, and each of them, hereby grant 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 benefit of the Lenders, and to the
Lenders, the following, and each item thereof, whether now owned or now due, or
in which any of the Borrowers has an interest, or hereafter acquired, arising,
or to become due, or in which any of the Borrowers 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 Borrowers'
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
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limitation, proceeds of fire and credit insurance,
whether any of such proceeds, refunds, and premium
rebates arise out of any of the foregoing.(9:9-1(a)
through 9:9-1(i)) or otherwise.
(k) All liens, guaranties, rights, remedies, and
privileges pertaining to any of the foregoing
(9:9-1(a) through 9:9-1(i)), including the right of
stoppage in transit.
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 Borrowers to the Collateral Agent to secure
the Liabilities 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 .
ARTICLE 10: - ADMINISTRATIVE AGENT AS BORROWERS' ATTORNEY-IN-FACT:
10-1. APPOINTMENT AS ATTORNEY-IN-FACT. Each Borrower hereby irrevocably
constitutes and appoints the Collateral Agent, effective upon the occurrence of
an Event of Default, as that Borrower's true and lawful attorney, with full
power of substitution, to convert the Collateral into cash at the sole risk,
cost, and expense of the Borrowers, but for the sole benefit of the Collateral
Agent and the Lenders. The rights and powers granted to of the Collateral Agent
by this 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 Borrowers' mail is to be sent to such address as the Collateral Agent
shall designate; receive and open the Borrowers' mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Borrowers or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of the Borrowers, or other legal
representative of the Borrowers whom the Collateral Agent determines to be the
appropriate person to whom to so turn over such mail.
(c) Endorse the name of the Borrowers in favor of an Agent
upon any and all checks, drafts, notes, acceptances, or other items or
instruments; sign and endorse the name of the Borrowers 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 Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
the Borrowers' 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.
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(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
Borrowers 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 Borrowers.
(g) Use, license or transfer any or all General Intangibles of
the Borrowers.
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
10:10-1, 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 Borrowers' Representative or any Borrower 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 wilful
misconduct.
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 11:11-11, any and all Liabilities shall become
due and payable without further action the part of any Agent or any Lender. Upon
the occurrence of any other Event of Default, the Administrative Agent may, and
upon instruction for the SuperMajority Lenders shall, declare any and all
Liabilities to be immediately due and payable. The occurrence of any such Event
of Default shall also constitute, without notice or demand, a default under all
other Loan Documents.
11-1. FAILURE TO PAY REVOLVING CREDIT OR TERM LOAN. The failure by the
Borrowers to pay any amount when due under the Revolving Credit or the Term
Loan.
11-2. FAILURE TO MAKE OTHER PAYMENTS. The failure by any Borrower, on
three days notice by the Administrative Agent to the Borrowers' Representative,
to discharge any payment Liability then due, other than under the Revolving
Credit or the Term Loan.
11-3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The
failure by any Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
Section 11:11-1 or Section 11:11-2 hereof, and included in any of the following
provisions hereof:
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SECTION RELATES TO :
--------------------------------------------------------
5:5-3(b) Notice of Name Change
5:5-4 Location of Collateral
5:5-7(a) Title to Assets
5:5-8 Indebtedness
5:5-9 Insurance Policies
5:5-14 Pay taxes
5:5-19 Dividends, Investments and Other Corporate
Actions
5:5-20 Replacement of Certain Obligations
5:5-24 Affiliate Transactions
5:5-25 Additional Assurances
6:6-1(f) Taxpayer Identification and State of
Incorporation
7:7-1 Use of Collateral
Article 6: Reporting Requirements (Except two Business
Days grace for all financial reports other
than the Borrower's daily Borrowing Base
Certificate required pursuant to Section
6:6-3) and Financial Performance Covenants
Article 8: Cash Management
11-4. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The
failure by any Borrower, within Thirty (30) days of the sooner of (i) the
Borrower's knowledge of the subject failure or (ii) the Administrative Agent's
written notice to the Borrowers' Representative, to cure that Borrower's failure
to promptly, punctually and faithfully perform, discharge, or comply with any
covenant or Liability not described in any of Sections 11:11-1, 11:11-2, or
11:11-3 hereof.
11-5. MISREPRESENTATION. The determination by the Administrative Agent
that any representation or warranty at any time made by any 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 any 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. DEFAULT OF HOST STORE AGREEMENT The occurrence of any event such
that
(a) without the consent of that Borrower, any Host Store
Agreement with a Key Host Store could be terminated , unless either (i) such
occurrence is immaterial or (ii) prior to the acceleration of the Liabilities on
account of such occurrence, the subject Key Host Store duly waives such default
and evidence of such written waiver is provided to the Administrative Agent;
and/or
(b) without the consent of that Borrower, any Host Store
Agreement with a Key Host Store is terminated.
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11-8. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any material portion of the Collateral.
11-9. 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
Borrower's funds on deposit with, or assets of that Borrower in the possession
of, any Agent or any Lender or such Participant.
(b) The entry of judgments against any Borrower, not fully
covered by insurance (subject to a reasonable deductible) aggregating more than
$1,000,000.00, which judgments are not satisfied (if a money judgment) or
appealed from (with execution or similar process stayed) within thirty (30) 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 any Borrower of its business in the ordinary course.
11-10. BUSINESS FAILURE. Any act by, against, or relating to any
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
that Borrower's property; or execution of an assignment for the benefit of the
creditors of any Borrower, or the occurrence of any other voluntary or
involuntary liquidation of any Borrower; the offering by or entering into by any
Borrower of any composition, extension, or any other arrangement seeking relief
from or extension of the debts of that Borrower; or the initiation of any
judicial or non-judicial proceeding or agreement by, against, or including any
Borrower which seeks or intends to accomplish a reorganization or arrangement
with creditors; and/or the initiation by or on behalf of any Borrower of the
liquidation or winding up of all or any part of that Borrower's business or
operations.
11-11. BANKRUPTCY. The adjudication of bankruptcy or insolvency
relative to any Borrower; the entry of an order for relief or similar order with
respect to any Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by any Borrower initiating any matter in which that Borrower is or may
be granted any relief from the debts of that Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against that Borrower initiating any matter in which
that Borrower is or may be granted any relief from the debts of that 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 that Borrower by appropriate proceedings or, if so contested, is not
dismissed within sixty (60)
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days of when filed.
11-12. DEFAULT BY GUARANTOR OR RELATED ENTITY.
(a) The occurrence of any Guarantor Default.
(b) The occurrence of any event such that any Indebtedness of
JBAK Holdings, Inc. or JBAK Realty, Inc in excess of $1,000,000.00 or which is
secured by the Canton Warehouse could be accelerated.
11-13. INDICTMENT - FORFEITURE. The indictment of, or institution of
any legal process or proceeding against, Revolving Credit Loans, 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 that 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 Revolving Credit Loans of its business in the
ordinary course.
11-14. TERMINATION OF GUARANTY. The termination or attempted
termination of any guaranty by any Guarantor.
11-15. CHALLENGE TO LOAN DOCUMENTS.
(a) Any challenge by or on behalf of the Borrowers'
Representative, any Borrower, or any Guarantor 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.
11-16. CHANGE IN CONTROL. Any Change in Control.
ARTICLE 12: - RIGHTS AND REMEDIES UPON DEFAULT:
Upon the occurrence of any Event of Default described in Section
11:11-11 and upon Acceleration and at any time thereafter, the Collateral Agent
shall have the following rights and remedies in addition to all rights,
remedies, powers, privileges, and discretions available to the Collateral Agent
prior to such
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occurrence.
12-1. RIGHTS OF ENFORCEMENT. The Collateral Agent shall have all of
the rights and remedies of a secured party upon that Part of Article 9 of the
UCC entitled "Default" (at the execution of this Agreement, Part 5 of Article 9
of the UCC and in the event of the adoption and effectiveness of the 1998
Revisions to Article 9 of the UCC, Part 6 thereof), in addition to which the
Collateral Agent shall have all and each of the following rights and remedies:
(a) To give notice to any bank at which any DDA is maintained
and in which proceeds of collateral are deposited to turn over such proceeds
directly to the Collateral Agent.
(b) To give notice to any customs broker to follow the
instructions of the Collateral Agent, as provided in any written agreement or
undertaking of such broker in favor of the Collateral Agent.
(c) To collect the Receivables Collateral with or without the
taking of possession of any of the Collateral.
(d) To take possession of all or any portion of the
Collateral.
(e) 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.
(f) To conduct one or more going out of business sales which
include the sale or other disposition of the Collateral.
(g) To apply the Receivables Collateral or the proceeds of the
Collateral towards (but not necessarily in complete satisfaction of) the
Liabilities.
(h) 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 Agents'
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 Collateral Agents
and contractors. Such sale(s) may be conducted upon any premises owned, leased,
or occupied by any Borrower. The Collateral Agent and any such Collateral 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 Collateral Agent or contractor). Any amounts realized
from the sale of such goods which constitute augmentations to the Inventory (net
of an allocable
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share of the costs and reasonable expense incurred in their disposition) shall
be the sole property of the Collateral Agent and/or the Revolving Credit Lenders
or such Collateral Agent or contractor and neither any Borrower nor any Person
claiming under or in right of any 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 Borrowers'
Representative with such notice as may be practicable under the circumstances),
the Collateral Agent shall give the Borrowers' Representative at least ten (10)
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. Each Borrower agrees that such written notice shall
satisfy all requirements for notice to that Borrower which are imposed under the
UCC or other applicable law with respect to the exercise of the Agents' Rights
and Remedies upon default.
(d) Any Agent and any Lender may purchase the Collateral or
any portion thereof at any sale held under this Article 12:.
(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 by the Collateral Agent of its rights and
remedies under this Article 12:. The Administrative Agent shall apply such
proceeds towards the Liabilities in accordance with Sections 14:14-7 and
14:14-8.
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 each Borrower, and may exclude each 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 all Borrowers. In
no event shall the Collateral Agent be liable to any 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 a Borrower's employees and utilities)
incurred in connection with the Collateral Agent's exercise of the Agents'
Rights and Remedies.
12-4. GRANT OF NONEXCLUSIVE LICENSE. Each Borrower hereby grants to the
Collateral Agent a royalty free nonexclusive irrevocable license to use, apply,
and affix any trademark, tradename, logo, or the like in which that Borrower now
or hereafter has rights, such license being with respect to the Collateral
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.
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12-5. ASSEMBLY OF COLLATERAL. Following Acceleration, the Collateral
Agent may require the Borrowers to assemble the Collateral and make it available
to the Collateral Agent at the Borrowers' sole risk and expense at a place or
places which are reasonably convenient to both the Collateral Agent and
Borrowers.
12-6. RIGHTS AND REMEDIES. The rights, remedies, powers, privileges,
and discretions of each Agent hereunder (herein, the " AGENTS' RIGHTS AND
REMEDIES") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by that Agent in exercising or
enforcing any of the Agents' Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by that 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 the Agents' Rights and
Remedies. No waiver by any Agent of any of the 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 Agents' Rights and Remedies and all
of the rights, remedies, powers, privileges, and discretions of each Agent under
any other agreement or transaction are cumulative, and not alternative or
exclusive, and may be exercised by the Agents at such time or times and in such
order of preference as the Agents may determine. The Agents' Rights and Remedies
may be exercised without resort or regard to any other source of satisfaction of
the Liabilities.
ARTICLE 13: REVOLVING CREDIT FUNDINGS AND DISTRIBUTIONS:
13-1 REVOLVING CREDIT FUNDING PROCEDURES: Subject to Section 13:13-2:
(a) The Administrative Agent shall advise each of the
Revolving Credit Lenders by no later than 2:00PM (Boston Time) on any day on
which any Revolving Credit Loan other than a SwingLine Loan is to be made. Such
advice, in each instance, may be by telephone, provided that any such telephonic
advice shall be confirmed in writing and shall include reference (as applicable)
to the interest rate applicable to the proposed Revolving Credit Loan.
(b) Each Revolving Credit Lender, by no later than the end of
business on the day on which the subject Revolving Credit Loan is to be made,
subject to that Revolving Credit Lender's Revolving Credit Dollar Commitment,
shall Transfer that Lender's Revolving Credit Percentage Commitment of the
subject Revolving Credit Loan to the Administrative Agent.
13-2 SWINGLINE LOANS.
(a) In the event that, when a Revolving Credit Loan is
requested, the aggregate unpaid balance of the SwingLine Loan is less than the
SwingLine Loan Ceiling, then the SwingLine Lender
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may advise the Administrative Agent that the SwingLine Lender has determined to
include up to the amount of the requested Revolving Credit Loan as part of the
SwingLine Loan. In such event, the SwingLine Lender shall Transfer the amount of
the requested Revolving Credit Loan to the Administrative Agent.
(b) The SwingLine Loan shall be converted to a Revolving
Credit Loan in which all Revolving Credit Lenders participate as follows:
(i) At any time and from time to time, the SwingLine
Lender may advise the Administrative Agent that all, or any part of the
SwingLine Loan is to be converted to a Revolving Credit Loan in which
all Revolving Credit Lenders participate.
(ii) At the initiation of a Liquidation, the then
entire unpaid principal balance of the SwingLine Loan shall be
converted to a Revolving Credit Loan in which all Revolving Credit
Lenders participate.
In either such event, the Administrative Agent shall advise each Revolving
Credit Lender of such conversion as if, and with the same effect as if such
conversion were the making of a Revolving Credit Loan as provided in Section
13:13-1.
(c) The SwingLine Lender, in separate capacities, may also be
one or more Agents and one or more Lenders.
(d) The SwingLine Lender, in its capacity as SwingLine Lender,
is not a "Revolving Credit Lender" for any of the following purposes:
(i) Except as otherwise specifically provided in the
relevant Section, any distribution pursuant to Section 14:14-7.
(ii) Determination of whether the requisite Revolving
Credit Percentage Commitment has Consented to action requiring such
Consent.
13-3. ADMINISTRATIVE AGENT'S COVERING OF FUNDINGS:
(a) Each Revolving Credit Lender shall make available to the
Administrative Agent, as provided herein, that Revolving Credit Lender's
Revolving Credit Percentage Commitment of the following:
(i) Each Revolving Credit Loan, up to the maximum
amount of that Revolving Credit Lender's Revolving Credit Dollar
Commitment of the Revolving Credit Loans.
(ii) Up to the maximum amount of that Revolving
Credit Lender's Revolving Credit Dollar Commitment of each L/C Drawing
(to the extent that such L/C Drawing is not "covered" by a Revolving
Credit Loan as provided herein).
(b) In all circumstances, the Administrative Agent may:
(i) Assume that each Revolving Credit Lender, subject
to Section 13:13-3(a), timely shall make available to the
Administrative Agent that Revolving Credit Lender's Revolving
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Credit Percentage Commitment of each Revolving Credit Loan, notice of
which is provided pursuant to Section 13:13-1 and shall make available,
to the extent not "covered" by a Revolving Credit Loan, of each L/C
Drawing.
(ii) In reliance upon such assumption, make available
the corresponding amount to the Borrower.
(iii) Assume that each Revolving Credit Lender timely
shall pay, and shall make available, to the Administrative Agent all
other amounts which that Revolving Credit Lender is obligated to so pay
and/or make available hereunder or under any of the Loan Documents.
(c) In the event that, in reliance upon any of such
assumptions, the Administrative Agent makes available, advances, or pays a
Revolving Credit Lender's Revolving Credit Percentage Commitment of one or more
Revolving Credit Loans, L/C Drawings, or any other amount to be made available
hereunder or under any of the Loan Documents, which amount a Revolving Credit
Lender (a "DELINQUENT REVOLVING CREDIT LENDER") fails to provide to the
Administrative Agent within One (1) Business Day of written notice of such
failure, then:
(i) The amount which had been made available by the
Administrative Agent is an "Administrative Agent's Cover".
(ii) All interest paid by the Borrower on account of
the Revolving Credit Loan or coverage of the subject L/C Drawing which
consist of the Administrative Agent's Cover shall be retained by the
Administrative Agent until the Administrative Agent's Cover with
interest has been paid.
(iii) The Delinquent Revolving Credit Lender shall
pay to the Administrative Agent, on demand, interest (based upon a 360
day year and actual days elapsed) at a rate equal to the weighted
average interest rate paid by the Administrative Agent for federal
funds during the period during which such amount remains unpaid, on the
principal balance of the Administrative Agent's Cover, from the date of
the making of such Administrative Agent's Cover until repaid.
(iv) The Administrative Agent shall have succeeded to
all rights to payment to which the Delinquent Revolving Credit Lender
otherwise would have been entitled hereunder in respect of those
amounts paid by or in respect of the Borrower on account of the
Administrative Agent's Cover together with interest until it is repaid.
Such payments shall be deemed made first towards the amounts in respect
of which the Administrative Agent's Cover was provided and only then
towards amounts in which the Delinquent Revolving Credit Lender is then
participating. For purposes of distributions to be made pursuant to
Section 13:13-4(a) (which relates to ordinary course distributions) or
Section 14:14-7 (which relates to distributions of proceeds of a
Liquidation) below, amounts shall be deemed distributable to a
Delinquent Revolving Credit Lender (and consequently, to the
Administrative Agent to the extent to which the Administrative Agent is
then entitled) at the highest level of distribution (if applicable) at
which the Delinquent Revolving Credit
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Lender would otherwise have been entitled to a distribution.
(v) Subject to Subsection 13:13-3(c)(iv), the
Delinquent Revolving Credit Lender shall be entitled to receive any
payments from the Borrower to which the Delinquent Revolving Credit
Lender is then entitled, PROVIDED HOWEVER there shall be deducted from
such amount and retained by the Administrative Agent any interest to
which the Administrative Agent is then entitled on account of Section
13:13-3(c)(ii), above.
(d) A Delinquent Revolving Credit Lender shall not be relieved
of any obligation of such Delinquent Revolving Credit Lender hereunder (all and
each of which shall constitute continuing obligations on the part of any
Delinquent Revolving Credit Lender).
(e) A Delinquent Revolving Credit Lender may cure its status
as a Delinquent Revolving Credit Lender by paying the Administrative Agent the
aggregate of the following:
(i) The Administrative Agent's Cover (to the extent
not previously repaid by the Borrower and retained by the
Administrative Agent in accordance with Subsection 13:13- 3(c)(iv),
above) with respect to that Delinquent Revolving Credit Lender.
PLUS
(ii) The aggregate of the amount payable under
Subsection 13:13-3(c)(iii), above.
PLUS
(iii) All such costs and expenses as may be incurred
by the Administrative Agent in the enforcement of the Administrative
Agent's rights against such Delinquent Revolving Credit Lender.
13-4. ORDINARY COURSE DISTRIBUTIONS: REVOLVING CREDIT. This Section
13:13-4 applies unless the provisions of Section 14:14-7 (which relates to
distributions in the event of a Liquidation) becomes operative.
(a) Weekly, on such day as may be set from time to time by the
Administrative Agent (or more frequently at the Administrative Agent's option)
the Administrative Agent and each Revolving Credit Lender shall settle up on
amounts advanced under the Revolving Credit and collected funds received in the
Concentration Account.
(b) The Administrative Agent shall distribute to the SwingLine
Lender and to each Revolving Credit Lender, such Person's respective Pro-Rata
share of interest payments on the Revolving Credit Loans when actually received
and collected by the Administrative Agent (excluding the One (1) Business Day
settlement delay to the extent provided for in Section 8:8-6(a), which shall be
for the account of the Administrative Agent only). For purposes of calculating
interest due to a Revolving Credit Lender, that Revolving Credit Lender shall be
entitled to receive interest on the actual amount contributed by that Revolving
Credit Lender towards the principal balance of the Revolving Credit Loans
outstanding during the
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applicable period covered by the interest payment made by the Borrower. Any net
principal reductions to the Revolving Credit Loans received by the
Administrative Agent in accordance with the Loan Documents during such period
shall not reduce such actual amount so contributed, for purposes of calculation
of interest due to that Revolving Credit Lender, until the Administrative Agent
has distributed to that Revolving Credit Lender its Pro-Rata share thereof.
(c) The Administrative Agent shall distribute fees paid on
account of the Revolving Credit, as follows:
(i) L/C Fronting Fee: Pro-Rata to the Revolving
Credit Lenders.
(ii) Unused (Line) Fee: Pro-Rata to the Revolving
Credit Lenders.
(iii) Revolving Credit Early Termination Fee:
Pro-Rata to the Revolving Credit Lenders.
(iv) Underwriting Fee: As provided in separate
letter agreements with the respective Revolving Credit Lenders.
(d) No Revolving Credit Lender shall have any interest in, or
right to receive any part of, the Administrative Agent's Fee to be paid by the
Borrower to the Administrative Agent pursuant to the Loan Agreement or in any
Term Loan Fees.
(e) Any amount received by the Administrative Agent or the
Collateral Agent as reimbursement for any cost or expense (including without
limitation, attorneys' reasonable fee) shall be distributed by the
Administrative Agent to that Person which is entitled to such reimbursement as
provided in this Agreement.
(f) Each distribution pursuant to this Section 13:13-4 is
subject to Section 13:13-3(c), above (which relates to the effect of the failure
of any Revolving Credit Lender to have Transferred to the Administrative Agent
any amount which that Revolving Credit Lender is then obligated to so Transfer
pursuant to the within Agreement).
13-5. ORDINARY COURSE DISTRIBUTIONS : TERM LOAN This Section 13:13-5
applies unless the provisions of Section 14:14-7 (which relates to distributions
in the event of a Liquidation) becomes operative..
(a) The Administrative Agent shall distribute to the Term
Lender payments on account of principal of, and interest on, the Term Loan and
Term Loan Fees as received and collected by the Administrative Agent from the
Borrower in accordance with the provisions of this Agreement or as made
available by the Administrative Agent as the proceeds of advances under the
Revolving Credit.
ARTICLE 14: ACCELERATION AND LIQUIDATION
14-1. ACCELERATION NOTICES
(a) The Administrative Agent may give the Collateral Agent an
Acceleration Notice at
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any time following the occurrence of an Event of Default.
(b) The SuperMajority Lenders may give the Administrative
Agent and the Collateral Agent an Acceleration Notice at any time following the
occurrence of an Event of Default. Such notice may be by multiple counterparts,
PROVIDED THAT counterparts executed by the requisite Revolving Credit Lenders
are received by the Agents within a period of five (5) consecutive Business
Days.
(c) The Term Lender may give the Administrative Agent and the
Collateral Agent an Acceleration Notice as follows:
(i) At any time following the occurrence of an Event
of Default which occurs after a BuyOut.
(ii) At any time following the occurrence of an Event
of Default which occurs after the Revolving Credit Loan Termination.
(iii) At any time following the entry of an order for
relief, under than Bankruptcy Code, with respect to any Borrower.
(iv) At any time as permitted pursuant to
Section 14:14-2.
14-2. MANDATORY ACCELERATION RIGHT OF TERM LENDER:
(a) The Term Lender may initiate a Standstill Period by
written notice to the Administrative Agent at any time after the occurrence of
any Term Loan Action Event.
(b) Upon the expiry of the relevant Standstill Period, the
Term Lender may give the Administrative Agent and the Collateral Agent an
Acceleration Notice unless either Acceleration has been stayed by judicial or
statutory process or either:
(i) If the relevant Term Loan Action Event had been a
BaseLine Covenant Breach: no Baseline Covenant Breach occurs at any
time during the relevant Standstill Period.
(ii) If the relevant Term Loan Action Event is a Term
Loan Payment Breach: all then due Term Loan Payments (other than those
which would be due only if the Term Loan were accelerated) are paid
prior to the expiry of the relevant Standstill Period.
14-3. ACCELERATION Unless stayed by judicial or statutory process, the
Administrative Agent shall Accelerate the Revolving Credit Obligations and the
Term Loan Debt within a commercially reasonable time following:
(a) The Administrative Agent's giving of an Acceleration
Notice to the Collateral Agent as described in Section 14:14-1(a).
(b) The Administrative Agent's receipt of an Acceleration
Notice from the SuperMajority Lenders, in compliance with Section 14:14-1(b) .
(c) The Administrative Agent's receipt of an Acceleration
Notice from the Term Lender, in compliance with Section 14:14-1(c).
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14-4. INITIATION OF LIQUIDATION Unless stayed by judicial or statutory
process, a Liquidation shall be initiated by the Collateral Agent within a
commercially reasonable time following Acceleration of the Revolving Credit
Obligations and the Term Loan Debt.
14-5. ACTIONS AT AND FOLLOWING INITIATION OF LIQUIDATION
(a) At the initiation of a Liquidation:
(i) The unpaid principal balance of the SwingLine
Loan (if any) shall be converted, pursuant to Section 13:13-2, to a
Revolving Credit Loan in which all Revolving Credit Lenders
participate.
(ii) The Administrative Agent and the Revolving
Credit Lenders shall "net out" each Revolving Credit Lender's
respective contributions towards the Revolving Credit Loans, so that
each Revolving Credit Lender holds that Revolving Credit Lender's
Revolving Credit Percentage Commitment of the Revolving Credit Loans
and advances.
(b) Following the initiation of a Liquidation, each Revolving
Credit Lender shall contribute, towards any L/C thereafter honored and not
immediately reimbursed by the Borrower, that Revolving Credit Lender's Revolving
Credit Percentage Commitment of such honoring.
14-6. COLLATERAL AGENT'S CONDUCT OF LIQUIDATION
(a) Any Liquidation shall be conducted by the Collateral
Agent, with the advice and assistance of the Administrative Agent and the
Lenders.
(b) The Collateral Agent may establish one or more Nominees to
"bid in" or otherwise acquire ownership to any Post Foreclosure Asset.
(c) The Collateral Agent shall manage the Nominee and manage
and dispose of any Post Foreclosure Assets with a view towards the realization
of the economic benefits of the ownership of the Post Foreclosure Assets and in
such regard, the Collateral Agent and/or the Nominee may operate, repair,
manage, maintain, develop, and dispose of any Post Foreclosure Asset in such
manner as the Collateral Agent determines as appropriate under the
circumstances.
(d) The Collateral Agent may decline to undertake or to
continue taking a course of action or to execute an action plan (whether
proposed by the Collateral Agent or by any Lender) unless indemnified to the
Collateral Agent's satisfaction by the Lenders against any and all liability and
expense which may be incurred by the Collateral Agent by reason of taking or
continuing to take that course of action or action plan.
(e) The Administrative Agent and each Lender shall execute all
such instruments and documents not inconsistent with the provisions of this
Agreement as the Collateral Agent and/or the Nominee reasonably may request with
respect to the creation and governance of any Nominee, the conduct of the
Liquidation, and the management and disposition of any Post Foreclosure Asset.
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14-7. DISTRIBUTION OF LIQUIDATION PROCEEDS:
(a) The Collateral Agent may establish one or more reasonably
funded reserve accounts into which proceeds of the conduct of any Liquidation
may be deposited in anticipation of future expenses which may be incurred by the
Collateral Agent in the exercise of rights as a secured creditor of the Borrower
and prior claims which the Collateral Agent anticipates may need to be paid.
(b) The Collateral Agent shall distribute the proceeds of any
Liquidation to the Administrative Agent.
(c) The Administrative Agent shall distribute the net proceeds
of Liquidation, as distributed to the Administrative Agent by the Collateral
Agent pursuant to Section 14:14-7(b) in accordance with the relative priorities
set forth in Section 14:14-8.
(d) Each Lender, on the written request of the Collateral
Agent and/or any Nominee, not more frequently than once each month, shall
reimburse the Collateral Agent and/or any Nominee, Pro- Rata, for any cost or
expense reasonably incurred by the Collateral Agent and/or the Nominee in the
conduct of a Liquidation, which amount is not covered out of current proceeds of
the Liquidation.
14-8. RELATIVE PRIORITIES TO PROCEEDS OF LIQUIDATION The relative
priorities to the proceeds of a Liquidation are as follows:
(a) FIRST: To the Agents as reimbursement for all
reasonable third party costs and expenses
incurred by the Agents and to any funded
reserve established pursuant to Section
14:14-7(a).
(b) SECOND: The SwingLine Lender, on account of any
SwingLine loans not converted to Revolving
Credit Loans pursuant to Section 14:14-
5(a)(i).
(c) THIRD: The Revolving Credit Lenders, Pro-Rata, to
the principal balance of Revolving Credit
Debt.
(d) FOURTH: The Revolving Credit Lenders, Pro-Rata, to
accrued interest which constitutes Revolving
Credit Debt.
(e) FIFTH: The Revolving Credit Lenders, Pro-Rata, to
the extent of the aggregate of all Revolving
Credit Fees, other than the Revolving Credit
Early Termination Fee.
(f) SIXTH: The Term Lender, to the principal balance of
the Term Loan Debt.
(g) SEVENTH: The Term Lender, to accrued interest which
constitutes Term Loan Debt.
(h) EIGHTH: The Revolving Credit Lenders, Pro-Rata, to
the extent of the Revolving Credit Early
Termination Fee.
(i) NINTH: The Term Lender, to any remaining Term Loan
Debt, including the
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Term Loan Debt Early Termination Fee.
(j) TENTH: To any other Liabilities.
ARTICLE 15: THE AGENTS:
15-1. APPOINTMENT OF AGENTS
(a) Each Lender appoints and designates BankBoston Retail
Finance Inc. as the "Administrative Agent" hereunder and under the Loan
Documents.
(b) Each Lender appoints and designates BankBoston Retail
Finance Inc. as the "Collateral Agent" hereunder and under the Loan Documents.
(c) Each Lender authorizes each Agent:
(i) To execute those of the Loan Documents and all
other instruments relating thereto to which that Agent is a party.
(ii) To take such action on behalf of the Lenders and
to exercise all such powers as are expressly delegated to that Person
hereunder and in the Loan Documents and all related documents, together
with such other powers as are reasonably incident thereto.
15-2. RESPONSIBILITIES OF AGENTS
(a) The Administrative Agent shall have principal
responsibilities for and primary authority for the administration of the credit
facilities contemplated by the Loan Documents and for all matters for which the
Collateral Agent is not responsible. In all instances where the allocation of
responsibility and authority, as between the Collateral Agent and the
Administrative Agent are in doubt, the Administrative Agent shall be vested with
such responsibility and authority.
(b) The Collateral Agent shall have principal responsibilities
for and primary authority for the conduct of the Liquidation and the
distribution of the proceeds of such Liquidation.
(c) Neither Agent shall have any duties or responsibilities
to, or any fiduciary relationship with, any Lender except for those expressly
set forth in this Agreement.
(d) Neither Agent nor any of its affiliates shall be
responsible to any Lender for any of the following:
(i) Any recitals, statements, representations or
warranties made by the Borrower, or any other person.
(ii) Any appraisals or other assessments of the
assets of the Borrower or of anyone else responsible for or on account
of the Liabilities.
(iii) The value, validity, effectiveness,
genuineness, enforceability, or sufficiency of the Loan Agreement, the
Loan Documents or any other document referred to or provided for
therein.
(iv) Any failure by the Borrower, or any other person
(other than the subject
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Agent ) to perform its obligations under the Loan Documents.
(e) Each Agent may employ attorneys, accountants, and other
professionals and agents and attorneys-in-fact and shall not be responsible for
the negligence or misconduct of any such attorneys, accountants, and other
professionals or agents or attorneys-in-fact selected by the subject Agent with
reasonable care. No such attorney, accountant, other professional, agent, or
attorney in fact shall be responsible for any action taken or omitted to be
taken by any other such Person.
(f) Neither Agent, nor any of its directors, officers, or
employees shall be responsible for any action taken or omitted to be taken by
any other of them nor for any action taken or omitted to be taken in connection
herewith, or with respect to the credit facility contemplated by the Loan
Agreement, except for any action taken or omitted to be taken as to which a
final judicial determination has been or is made (in a proceeding in which such
person has had an opportunity to be heard) that such Person had acted in a
grossly negligent manner, in actual bad faith, or in willful misconduct.
(g) Neither Agent shall have any responsibility in any event
for more funds than that Agent actually receives and collects.
(h) The Agents, in their separate capacities as Lenders, shall
have the same rights and powers hereunder as any other Lender.
15-3. CONCERNING DISTRIBUTIONS BY THE AGENTS
(a) Each Agent, in that Agent's reasonable discretion based
upon that Agent's determination of the likelihood that additional payments will
be received, expenses incurred, and/or claims made by third parties to all or a
portion of such proceeds, may delay the distribution of any payment received on
account of the Liabilities.
(b) Each Agent may disburse funds prior to determining that
the sums which that Agent expects to receive have been finally and
unconditionally paid to that Agent. If and to the extent that an Agent does
disburse funds and it later becomes apparent that the Agent did not then receive
a payment in an amount equal to the sum paid out, then any Lender to whom the
Agent made the funds available, on demand from the Agent, shall refund to the
Agent the sum paid to that person.
(c) If, in the opinion of an Agent, the distribution of any
amount received by that Agent might involve that Agent in liability, or might be
prohibited hereby, or might be questioned by any Person, then that Agent may
refrain from making distribution until that Agent's right to make distribution
has been adjudicated by a court of competent jurisdiction.
(d) The proceeds of any Lender's exercise of any right of, or
in the nature of, set-off shall be deemed, FIRST, to the extent that a Lender is
entitled to any distribution hereunder, to constitute such distribution and
SECOND, shall be shared with the other Lenders Pro-Rata based upon their
respective contributions to the then principal balance of the Revolving Credit
(and shall be deemed distributions by the Agents hereunder).
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(e) Each Lender recognizes that the crediting of the Borrower
with the "proceeds" of any transaction in which a Post Foreclosure Asset is
acquired is a non-cash transaction and that, in consequence, no distribution of
such "proceeds" will be made by an Agent to any Lender.
(f) In the event that (x) a court of competent jurisdiction
shall adjudge that any amount received and distributed by an Agent is to be
repaid or disgorged, or (y) the Lenders, acting by Consent of the SuperMajority
Lenders, determine to effect such repayment or disgorgement, then each Lender to
which any such distribution shall have been made shall repay, to the Agent which
had made such distribution, that Lender's Pro-Rata share of the amount so
adjudged or determined to be repaid or disgorged.
15-4. DISPUTE RESOLUTION: Any dispute amongst the Lenders and/or the
Agent hereunder, under any of the other Loan Documents, or concerning the
interpretation, administration, or enforcement of the credit facilities
contemplated by this Agreement or the interpretation or administration of any
Loan Document which cannot be resolved amicably shall be resolved in the United
States District Court for the District of Massachusetts, sitting in Boston or in
the Superior Court of Suffolk County, Massachusetts, to the jurisdiction of
which courts all parties hereto hereby submit.
15-5. DISTRIBUTIONS OF NOTICES AND OF DOCUMENTS The Administrative
Agent will forward to each Lender, promptly after the Administrative Agent's
receipt thereof, a copy of each notice or other document furnished to the
Administrative Agent pursuant to the Loan Documents, including monthly,
quarterly, and annual financial statements received from the Borrower pursuant
to Article 6 of this Agreement, other than any of the following:
(a) Routine communications associated with requests for
Revolving Credit Loans and/or the issuance of L/C's.
(b) Routine and nonmaterial communications.
(c) Any notice or document required by any of the Loan
Documents to be furnished to the Lenders by the Borrower.
(d) Any notice or document of which the Administrative Agent
has knowledge that such notice or document had been forwarded to the Lenders
other than by the Administrative Agent.
15-6. CONFIDENTIAL INFORMATION:
Each Lender will maintain, as confidential, all of the
following:
(a) Proprietary approaches, techniques, and methods of
analysis which are applied by the Administrative Agent in the administration of
the credit facility contemplated by the Loan Agreement.
(b) Proprietary forms and formats utilized by the
Administrative Agent in providing
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reports to the Lenders pursuant hereto, which forms or formats are not of
general currency.
(c) Confidential information provided by any Borrower
pursuant to the Loan Documents, other than any information which becomes known
to the general public through sources other than that Lender.
Nothing included herein shall prohibit the disclosure of
any such information as may be required to be provided by judicial process or
by regulatory authorities having jurisdiction over any party to this
Agreement.
15-7. RELIANCE BY AGENTS Each Agent shall be entitled to rely upon
any certificate, notice or other document (including any cable, telegram, telex,
or facsimile) reasonably believed by that Agent to be genuine and correct and to
have been signed or sent by or on behalf of the proper person or persons, and
upon advice and statements of attorneys, accountants and other experts selected
by that Agent. As to any matters not expressly provided for in this Agreement,
any Loan Document, or in any other document referred to therein, each Agent
shall in all events be fully protected in acting, or in refraining from acting,
in accordance with the applicable Consent required by this Agreement.
Instructions given with the requisite Consent shall be binding on all Lenders.
15-8. NON-RELIANCE ON AGENTS AND OTHER LENDERS
(a) Each Lender represents to all other Lenders and to
the Agents that such Lender:
(i) Independently and without reliance on any
representation or act by any Agent or by any other Lender, and based on
such documents and information as that Lender has deemed appropriate,
has made such Lender's own appraisal of the financial condition and
affairs of the Borrower and decision to enter into this Agreement and
the Loan Documents.
(ii) Has relied upon that Lender's review of the Loan
Documents and such review of the Loan Documents by counsel to that
Lender as that Lender deemed appropriate under the circumstances.
(b) Each Lender agrees that such Lender, independently and
without reliance upon any Agent or any other Lender, and based upon such
documents and information as such Lender shall deem appropriate at the time,
will continue to make such Lender's own appraisals of the financial condition
and affairs of the Borrower when determining whether to take or not to take any
discretionary action under this Agreement or any other Loan Document.
(c) Neither Agent, in the discharge of that Agent's duties
hereunder, shall be required to make inquiry of, or to inspect the properties or
books of, any Person.
(d) Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by an Agent
hereunder (as to which, SEE Section 15:15-5), neither Agent shall have any
affirmative duty or responsibility to provide any Lender with any credit or
other infor-
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mation concerning any Person, which information may come into the possession of
that Agent or any of its affiliates.
(e) Each Lender shall have reasonable access to all documents
relating to each Agent's performance of that Agent's duties hereunder at such
Lender's request.
15-9. INDEMNIFICATION Without limiting the liabilities of the
Borrowers under any of the Loan Documents, each Lender shall indemnify each
Agent, Pro-Rata , for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (including attorneys' reasonable fees and expenses and
other out-of-pocket expenditures) which may at any time be imposed on, incurred
by, or asserted against that Agent and in any way relating to or arising out of
this Agreement or any Loan Document or any documents contemplated by or referred
to therein or the transactions contemplated thereby or the enforcement of any of
terms hereof or thereof or of any such other documents, PROVIDED, HOWEVER, no
Lender shall be liable for any of the foregoing to the extent that any of the
foregoing arises from any action taken or omitted to be taken by the subject
Agent as to which a final judicial determination has been or is made (in a
proceeding in which the subject Agent has had an opportunity to be heard) that
the subject Agent had acted in a grossly negligent manner, in actual bad faith,
or in willful misconduct.
15-10. RESIGNATIONS OF AGENTS
(a) An Agent may resign at any time by giving 60 days prior
written notice thereof to the Lenders , the Borrowers' Representative, and to
the other Agent. Upon receipt of any such notice of resignation, the Majority
Lenders shall have the right to appoint a successor Agent. If no Event of
Default has occurred, such appointment shall be subject to the consent of the
Borrowers' Representative, not to be unreasonably withheld or delayed and which
consent shall be deemed given if no written objection is received within seven
days of the Borrowers' Representative's receipt of notice of such successor. If
no successor Agent shall have been so appointed and shall have accepted such
appointment within 30 days after the giving of notice by the resigning Agent,
then the resigning Agent may appoint a successor Agent, which shall be a
financial institution having a combined capital and surplus in excess of
$500,000,000.00. The consent of the Borrower otherwise required by this Section
15:15-10(a) shall not be required if an Event of Default has occurred.
(b) Upon the acceptance of any appointment as an Agent
hereunder by a successor Agent, such successor shall thereupon succeed to, and
become vested with, all the rights, powers, privileges, and duties of the
(resigning) Agent so replaced, and the (resigning) Agent shall be discharged
from the (resigning) Agent's duties and obligations hereunder, other than on
account of any responsibility for any action taken or omitted to be taken by the
(resigning) as to which a final judicial determination has been or is made (in a
proceeding in which the (resigning) Person has had an opportunity to be heard)
that
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such Person had acted in a grossly negligent manner or in bad faith.
(c) After any retiring Agent's resignation, the provisions of
this Agreement shall continue in effect for the retiring Person's benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
an Agent.
ARTICLE 16: ACTION BY AGENTS - CONSENTS - AMENDMENTS - WAIVERS
16-1. ADMINISTRATION OF CREDIT FACILITIES
(a) Except as otherwise specifically provided in this
Agreement, each Agent may take any action with respect to the credit facility
contemplated by the Loan Documents as that Agent determines to be appropriate
within their respective areas of responsibility and authority, as set forth in
Sections 15:15-2(b) and 15:15-2(a), PROVIDED, HOWEVER, neither Agent is under
any affirmative obligation to take any action which it is not required by this
Agreement or the Loan Documents specifically to so take.
(b) Except as specifically provided in the following Sections
of this Agreement, whenever a Loan Document or this Agreement provides that
action may be taken or omitted to be taken in an Agent's discretion, that Agent
shall have the sole right to take, or refrain from taking, such action without,
and notwithstanding, any vote of the Lenders:
<TABLE>
<CAPTION>
ACTIONS DESCRIBED IN SECTION TYPE OF CONSENT REQUIRED
---------------------------- ------------------------
<S> <C>
16:16-2 Majority Lenders
16:16-3 SuperMajority Lenders
16:16-4 Two Thirds of Revolving Credit Lenders and the Term
Lender
16:16-5 Unanimous Consent
16:16-6 Consent of SwingLine Lender
16:16-7 Consent of Term Lender
</TABLE>
(c) The rights granted to the Lenders in those sections
referenced in Section 16:16- 1(b) shall not otherwise limit or impair any
Agent's exercise of that Agent's discretion under the Loan Documents.
(d) The Revolving Credit Lenders agree that, subject to
Section 16:16-3(a) any advance under the Revolving Credit which results in a
Permissible Overloan may be made by the Administrative Agent in its discretion
without the Consent of the Revolving Credit Lenders and that each Revolving
Credit Lender shall be bound thereby.
16-2. ACTIONS REQUIRING OR ON DIRECTION OF MAJORITY LENDERS Except
as otherwise provided in this Agreement, the Consent or direction of the
Majority Lenders is required for any amendment, waiver, or modification of any
Loan Document.
16-3 ACTIONS REQUIRING OR ON DIRECTION OF SUPERMAJORITY LENDERS
The Consent or direction
. 97 .
<PAGE>
of the SuperMajority Lenders is required as follows:
(a) To permit a Permissible Overloan to be outstanding for
more than 45 consecutive Business Days or more than twice in any twelve month
period.
(b) If a Suspension Event shall have occurred and be
continuing, the SuperMajority Lenders may direct the Administrative Agent to
suspend the Revolving Credit (including the making of any Permissible
Overloans), whereupon, as long as such Suspension Event exists and is
continuing, Revolving Credit Loans shall be made and L/C's shall be issued,
amended, or renewed only with Consent of the SuperMajority Lenders.
(c) If an Event of Default has occurred and not been duly
waived, the SuperMajority Lenders may direct the Administrative Agent to:
(i) Give the Collateral Agent an
Acceleration Notice in accordance with Section 14:14-1(b).
(ii) Increase the rate of interest to the
default rate of interest as provided in, and to the extent permitted
by, the Loan Agreement.
16-4. ACTION REQUIRING TWO THIRDS CONSENT The Consent of Revolving
Credit Lenders (other than Delinquent Revolving Credit Lenders) holding 66-2/3%
or more the Loan Commitments to make Revolving Credit Loans (other than Loan
Commitments held by a Delinquent Revolving Credit Lender) and of the Term Lender
shall be required for any change to the dates on which any payment of principal
shall be due and payable or the amount of any such payment.
16-5 ACTIONS REQUIRING OR DIRECTED BY UNANIMOUS CONSENT None of
the following may take place except with the written consent of each Lender
adversely affected thereby or with Unanimous Consent:
(a) Any increase in any Revolving Credit Lender's Revolving
Credit Dollar Commitment or Revolving Credit Percentage Commitment (other than
by reason of the application of Section 16:16-10 (which deals with Nonconsenting
Revolving Credit Lenders) or Section 17:17-1 (which deals with assignments and
participations)).
(b) Any decrease in any interest rate or fee payable to the
Revolving Credit Lenders on account of the Revolving Credit Loans.
(c) Any extension of the Maturity Date.
(d) Any forgiveness of all or any portion of any payment
Liability.
(e) Any increase in any interest rate or fee payable under any
of the Loan Documents (other than any Agent's Fee (for which the consent of the
relevant Agent shall also be required)) and any fee provided for by the Fee
Letter (which may be amended by written agreement between the Borrower's
Representative, on the one hand, and the Administrative Agent and the Term
Lender on the other).
. 98 .
<PAGE>
(f) Any release of a material portion of the Collateral not
otherwise required or provided for in the Loan Documents.
(g) Any amendment of the definition of the terms "Shoe
Division Borrowing Base", "Apparel Division Borrowing Base," or the "Overall
Availability" or of any Definition of any component thereof, such that more
credit would be available to any Borrower, based on the same assets, as would
have been available to that Borrower immediately prior to such amendment , IT
BEING UNDERSTOOD, HOWEVER, that:
(i) The foregoing shall not limit the adjustment by
the Administrative Agent of any Reserve in the Administrative Agent's
administration of the Revolving Credit as otherwise permitted by this
Agreement.
(ii) The foregoing shall not prevent the
Administrative Agent, in its administration of the Revolving Credit,
from restoring any component of Borrowing Base which had been lowered
by the Administrative Agent back to the value of such component, as
stated in this Agreement or to an intermediate value.
(h) Any release of any Person obligated on account of the
Liabilities. (i) The making of any Revolving Credit Loan
which, when made, exceeds Overall
Availability and is not either a Permissible Overloan, PROVIDED, HOWEVER,
(i) no Consent shall be required in connection with
the making of any Revolving Credit Loan to "cover" any honoring of a
drawing under any L/C; and
(ii) each Lender recognizes that subsequent to the
making of a Revolving Credit Loan which does not constitute a
Permissible Overloan, the unpaid principal balance of the Loan Account
may exceed Overall Borrowing Base on account of changed circumstances
beyond the control of the Agent (such as a drop in collateral value).
(j) The waiver of the obligation of the Borrower to reduce the
unpaid principal balance of loans under the Revolving Credit to an amount which
does not exceed a Permissible Overloan or, subject to the time limits included
in Section 16:16-3(a) (which relates to the outside limit on the number of
consecutive Business Days that a Permissible Overloan may be outstanding), to
reduce the unpaid principal balance of Loans under the Revolving Credit to an
amount such that at least one dollar may be borrowed under the Revolving Credit
each by the Shoe Division and the Apparel Division and that Overall Availability
is equal to or greater than zero.
(k) Any amendment of this Article 16:.
(l) Amendment of the Definitions of the following terms:
"Loan to Collateral Reserve"
"Majority Lender"
"Permissible Overloan"
"SuperMajority Lenders"
. 99 .
<PAGE>
"Unanimous Consent"
16-6. ACTIONS REQUIRING SWINGLINE LENDER CONSENT: No action,
amendment, or waiver of compliance with, any provision of the Loan Documents or
of this Agreement which affects the SwingLine Lender may be undertaken without
the Consent of the SwingLine Lender.
16-7. ACTIONS REQUIRING TERM LENDER CONSENT: None of the
following may take place without the Consent of the Term Lender:
(a) Amendment or waiver or any provision of Article 3:
(entitled "The Term Loan").
16-8. ACTIONS REQUIRING AGENTS CONSENT:
(a) No action, amendment, or waiver of compliance with, any
provision of the Loan Documents or of this Agreement which affects an Agent in
its capacity as an Agent may be undertaken without the consent of both Agents
and
(b) No action referenced herein which affects the rights,
duties, obligations, or liabilities of an Agent shall be effective without the
written consent of that Agent.
16-9. MISCELLANEOUS ACTIONS:
(a) Notwithstanding any other provision of the within
Agreement, no single Lender independently shall exercise any right of action or
enforcement against or with respect to the Borrower.
(b) Each Agent shall be fully justified in failing or refusing
to take action under this Agreement or any Loan Document on behalf of any Lender
unless that Agent shall first
(i) receive such clear, unambiguous, written
instructions as that Agent deems appropriate; and
(ii) be indemnified to that Agent's satisfaction by
the Lenders against any and all liability and expense which may be
incurred by that Agent by reason of taking or continuing to take any
such action, unless such action had been grossly negligent, in willful
misconduct, or in bad faith.
(c) Each Agent may establish reasonable procedures for the
providing of direction and instructions from the Lenders to that Agent,
including that Agent's reliance on multiple counterparts, facsimile
transmissions, and time limits within which such direction and instructions must
be received in order to be included in a determination of whether the requisite
Loan Commitment of Lenders has provided its direction or instructions.
16-10. NONCONSENTING REVOLVING CREDIT LENDER:
(a) In the event that a Revolving Credit Lender (in this
Section 16:16-10, a
. 100 .
<PAGE>
"NONCONSENTING REVOLVING CREDIT LENDER") does not provide its Consent to a
proposal by the Administrative Agent to take action which requires consent under
this Article 16:, then one or more Revolving Credit Lenders who provided Consent
to such action may require the assignment, without recourse and in accordance
with the procedures outlined in Section 17:17-1, below, of the NonConsenting
Revolving Credit Lender's commitment hereunder on fifteen (15) days written
notice to the Administrative Agent and to the objecting Revolving Credit Lender.
(b) At the end of such fifteen (15) days, the Revolving Credit
Lenders who have given such written notice shall Transfer the following to the
NonConsenting Revolving Credit Lender, but only if the NonConsenting Revolving
Credit Lender delivers to the Administrative Agent the Revolving Credit Note
held by the NonConsenting Revolving Credit Lender:
(i) Such NonConsenting Revolving Credit Lender's
Pro-Rata share of the principal and interest of the Revolving Credit
Loans.
(ii) All Fees due to the NonConsenting Revolving
Credit Lender to the date of such assignment.
(iii) Any out-of-pocket costs and expenses for which
the NonConsenting Revolving Credit Lender is entitled to reimbursement
from the Borrower.
(c) In the event that the NonConsenting Revolving Credit
Lender fails to deliver to the Administrative Agent the Revolving Credit Note
held by the NonConsenting Revolving Credit Lender as provided in Section
16:16-10(b), then:
(i) The amount otherwise to be Transferred to the
NonConsenting Revolving Credit Lender shall be Transferred to the
Administrative Agent and held by the Administrative Agent, without
interest, to be turned over to the NonConsenting Revolving Credit
Lender upon delivery of the Revolving Credit Note held by that
NonConsenting Revolving Credit Lender.
(ii) The Revolving Credit Note held by the
NonConsenting Revolving Credit Lender shall have no force or effect
whatsoever.
(iii)The NonConsenting Revolving Credit Lender shall
cease to be a "Revolving Credit Lender".
(iv) The Revolving Credit Lender(s) which have
Transferred the amount to the Administrative Agent as described above
shall have succeeded to all rights and become subject to all of the
obligations of the NonConsenting Revolving Credit Lender as "Revolving
Credit Lender".
(d) In the event that more than One (1) Revolving Credit
Lender wishes to require such assignment, the NonConsenting Revolving Credit
Lender's commitment hereunder shall be divided amongst such Revolving Credit
Lenders, Pro-Rata based upon their respective Commitments, with the
Administrative Agent coordinating such transaction.
(e) The Administrative Agent shall coordinate the retirement
of the Revolving Credit Note held by the NonConsenting Revolving Credit Lender
and the issuance of Revolving Credit Notes to
. 101 .
<PAGE>
those Revolving Credit Lenders which "take-out" such NonConsenting Revolving
Credit Lender, PROVIDED, HOWEVER, no processing fee otherwise to be paid as
provided in Section 17:17-1(c) shall be due under such circumstances.
ARTICLE 17: ASSIGNMENTS AND PARTICIPATIONS
17-1. ASSIGNMENTS AND ASSUMPTIONS:
(a) Except as provided herein, each Revolving Credit Lender
(in this Section 17:17-1(a), an "ASSIGNING REVOLVING CREDIT LENDER") may assign
to one or more Eligible Assignees (in this Section 17:17-1(a), each an "ASSIGNEE
REVOLVING CREDIT LENDER") all or a portion of that Revolving Credit Lender's
interests, rights and obligations under this Agreement and the Loan Documents
(including all or a portion of its Revolving Credit Percentage Commitment and
Revolving Credit Dollar Commitment) and the same portion of the Revolving Credit
Loans at the time owing to it, and of the Revolving Credit Note held by the
Assigning Revolving Credit Lender, PROVIDED THAT:
(i) The Administrative Agent shall have given its
prior written consent to such assignment, which consent shall not be
unreasonably withheld, but need not be given if the proposed assignment
would result in any resulting Revolving Credit Lender's having a
Revolving Credit Dollar Commitment of less than the "minimum hold"
amount specified in Section 17:17-1(a)(iv).
(ii) If no Event of Default has occurred, such
assignment shall be subject to the consent of the Borrowers'
Representative, not to be unreasonably withheld or delayed and which
consent shall be deemed given if no written objection is received
within seven (7) days of the Borrowers' Representative's receipt of
notice of such proposed assignment.
(iii) Each such assignment shall be of a constant,
and not a varying, percentage of all the Assigning Revolving Credit
Lender's rights and obligations under this Agreement.
(iv) Following the effectiveness of such assignment,
the Assigning Revolving Credit Lender's Revolving Credit Dollar
Commitment (if not an assignment of all of the Assigning Revolving
Credit Lender's Revolving Credit Dollar Commitment) shall not be less
than $10 Million.
(b) The parties to such assignment shall execute and deliver
to the Administrative Agent, for recording in the Register, an Assignment and
Acceptance substantially in the form of EXHIBIT 17:17-1, annexed hereto;
(c) The Assigning Revolving Credit Lender shall deliver to the
Administrative Agent, with such Assignment and Acceptance, the Revolving Credit
Note held by the subject Assigning Revolving Credit Lender and the
Administrative Agent's processing fee of $3 Thousand PROVIDED, HOWEVER, no such
processing fee shall be due where the Assigning Revolving Credit Lender is one
of the Revolving Credit Lenders at the initial execution of this Agreement.
. 102 .
<PAGE>
(d) From and after the effective date specified in an
Assignment and Acceptance which has been executed, delivered, and recorded
(which effective date the Administrative Agent may delay by up to Five (5)
Business Days after the delivery of such Assignment and Acceptance):
(i) The Assignee Revolving Credit Lender:
(A) Shall be a party to the within Agreement
and the Loan Documents (and to any amendments of the Loan
Documents and of the within Agreement) as fully as if the
Assignee Revolving Credit Lender had executed each.
(B) To the extent of the commitment
hereunder assigned by such Assignment and Acceptance, have the
rights and obligations of a Revolving Credit Lender hereunder.
(ii) The Assigning Revolving Credit Lender shall be
released from the Assigning Revolving Credit Lender's obligations under
this Agreement and the Loan Documents to the extent of the commitment
hereunder assigned by such Assignment and Acceptance.
(iii) The Administrative Agent shall undertake to
obtain and distribute replacement Revolving Credit Notes to the subject
Assigning Revolving Credit Lender and Assignee Revolving Credit Lender.
(e) Each party to an Assignment and Acceptance confirms to and
agrees with all parties to this Agreement as to those matters which are set
forth in the subject Assignment and Acceptance.
(f) The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register or similar list (the
"REGISTER") for the recordation of the names and addresses of the Revolving
Credit Lenders and the Revolving Credit Percentage Commitment and Revolving
Credit Dollar Commitment of, and principal amount of the Revolving Credit Loans
owing to, the Revolving Credit Lenders from time to time. The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Administrative Agent and the Revolving Credit Lenders may treat each Person
whose name is recorded in the Register as a "Revolving Credit Lender" hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Revolving Credit Lenders at any reasonable time and from time
to time upon reasonable prior notice.
(g) The Assigning Revolving Credit Lender and Assignee
Revolving Credit Lender, directly between themselves, shall make all appropriate
adjustments in payments for periods prior to the effective date of an Assignment
and Assumption.
17-2. PARTICIPATIONS: Each Lender may sell participations to one or
more financial institutions in all or a portion of such Lender's rights and
obligations under the Loan Agreement, PROVIDED THAT no such participation shall
include any provision which accords the Person purchasing such participation
with the right to consent to any action, amendment, or waiver which is subject
to any requirement herein for
. 103 .
<PAGE>
approval by all or a requisite number or proportion of the Lenders. No such sale
of a participation shall relieve a Lender from that Lender's obligations
hereunder nor obligate the Administrative Agent to any Person other than a
Lender.
17-3. THE BUYOUT:
(a) The Term Lender may (but shall not be obligated to) cause
the assignment to the Term Lender or the Term Lender's designee, by the
Revolving Credit Lenders, of all right, title and interest in, to, arising
under, or in respect of the Revolving Credit Obligations upon five (5) Business
Days prior written notice given at any time after
(i) the Term Lender has the right, under Section
14:14-1(c), to give an Acceleration Notice; or
(ii) the Administrative Agent has declined to
implement or adjust any Availability Reserve or Inventory Reserve as
contemplated in the Loan Agreement to maintain and preserve the
Lenders' security and other collateral interests with respect to the
potential impairment of valuation or priority, as requested by the Term
Lender.
(b) Such assignments shall be effected on the Business Day
next following the expiry of such five (5) Business Days by the execution, by
the Revolving Credit Lenders, of an Assignment and Assumption (in the form of
EXHIBIT 17:17-1, annexed hereto) in exchange for the payment, in immediately
available funds, of the amount of Revolving Credit Obligations (other than the
Revolving Credit Early Termination Fee) as of the date on which such assignment
is made.
(c) In the event that, following the consummation of a BuyOut,
the Term Lender actually receives any Revolving Credit Early Termination Fee
which had been provided for in the Loan Agreement (which receipt, if in
connection with a Liquidation, shall be determined on a last dollar out basis),
then the Term Lender shall pay over such Revolving Credit Early Termination Fee
to the Administrative Agent for distribution to those Persons who were Revolving
Credit Lenders immediately prior to such BuyOut, IT BEING UNDERSTOOD THAT the
Term Lender, in its sole discretion, may waive the entitlement to, or the amount
of, such fee; shall not be under any obligation to prosecute the recovery of
such fee; and may condition its payment over to the Administrative Agent on the
Administrative Agent's providing of such indemnification as is reasonably mutual
satisfactory of the Administrative Agent and the Term Lender.
17-4. PLEDGES TO FEDERAL RESERVE BANKS: Nothing included in this
Agreement shall prevent or limit any Lender, to the extent that such Lender
is subject to any of the twelve Federal Reserve Banks organized under ss.4 of
the Federal Reserve Act (12 U.S.C. Section 341) from pledging all or any
portion of that Lender's interest and rights under this Agreement, PROVIDED,
HOWEVER, neither such pledge nor the enforcement thereof shall release the
pledging Lender from its obligations hereunder or under any of the Loan
Documents.
. 104 .
<PAGE>
ARTICLE 18: NOTICES:
18-1. 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 : Mr. Mark Forti
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:
J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention : Philip Rosenberg
Fax : 781 821 4867
With copies to: J. Baker, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Attention : William Friend, Esquire
Fax : 781 821 0614
Goodwin, Procter & Hoar LP
Exchange Place
Boston, Massachusetts 02109-2881
Attention : Raymond C. Zemlin, P.C.
Fax: : 617 523 1231
18-2. 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
. 105 .
<PAGE>
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 time sent and party sending such transmission are
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.
ARTICLE 19: - TERM:
19-1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall
remain in effect (subject to suspension as provided in Section 2:2-5(g) hereof)
until the Termination Date.
19-2. EFFECT OF TERMINATION. Upon the Termination Date, the
Borrowers 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 and of any SwingLine Loans); any remaining balance of the
Administrative Agent's Fee; any accrued and unpaid Underwriting and Commitment
Fees; and all unreimbursed costs and expenses of each Agent and of each Lender
for which the Borrowers are 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.
ARTICLE 20: - GENERAL:
20-1. PROTECTION OF COLLATERAL. No Agent has any 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 Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agents may include reference to all or any of the
Borrowers (and may utilize any logo or other distinctive symbol associated with
any of the Borrowers) in connection with any advertising, promotion, or
marketing undertaken by the Agents.
. 106 .
<PAGE>
20-2. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Borrowers' Representative, each Borrower, and their respective
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
any Borrower shall have any rights hereunder. In the event that an 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.
20-3. 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.
20-4. AMENDMENTS. COURSE OF DEALING.
(a) The Loan Documents incorporate all discussions and
negotiations between the parties concerning the matters included therein. No
such discussions and negotiations, nor any custom, usage, or course of dealings
shall limit, modify, or otherwise affect the provisions thereof. No failure to
give notice to the Borrowers' Representative or any Borrower of that Person'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.
(b) The Borrowers' Representative and any Borrower may
undertake any action otherwise prohibited hereby, and may omit to take any
action otherwise required hereby, 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 Borrowers (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.
(c) The following provisions of this Agreement may be amended
without the consent of the Borrowers' Representative or any Borrower (a copy of
each of which amendments shall be provided by the Administrative Agent to the
Borrowers' Representative):
<TABLE>
<CAPTION>
ARTICLE RELATES TO
<S> <C>
13: Revolving Credit Fundings and Distributions
15: The Agents
</TABLE>
. 107 .
<PAGE>
17: Assignments and Participations
20-5. POWER OF ATTORNEY. In connection with all powers of attorney
included in this Agreement, each 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 that Borrower might or could
do, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement.
20-6. APPLICATION OF PROCEEDS. The proceeds of any disposition of
the Collateral and of any other payments received on account of the Liabilities
shall be applied toward the Liabilities in such order and manner as the
Administrative Agent determines in its reasonable discretion, consistent with
the provisions of this Agreement. Each Borrower shall remain liable for any
deficiency remaining following such application.
20-7. INCREASED COSTS. If, as a result of 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 any 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 Revolving Credit
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 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 Borrowers' Representative
(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 Borrowers,
in the absence of manifest error, 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.
. 108 .
<PAGE>
20-8. COSTS AND EXPENSES OF AGENTS AND LENDERS.
(a) The Borrowers 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 Borrowers shall pay on demand all reasonable costs
and expenses (including attorneys' reasonable fees and expenses) incurred,
following the occurrence of any Event of Default, by the Lenders to Lenders'
Special Counsel.
(c) Each 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 undertakings on the part of the Borrowers in this
Section 20:20-8 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 20:20-8.
20-9. COPIES AND FACSIMILES. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished any Agent, or
any Lender may be reproduced by that Person or by the Administrative 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.
20-10. MASSACHUSETTS LAW. This Agreement and all rights and
obligations hereunder, including matters of construction, validity, and
performance, shall be governed by the law of The Commonwealth of Massachusetts.
20-11. CONSENT TO JURISDICTION.
(a) Each Borrower agrees that any legal action, proceeding,
case, or controversy against any 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,
. 109 .
<PAGE>
Massachusetts, as the Administrative Agent may elect in the Administrative
Agent's sole discretion. By execution and delivery of this Agreement, each
Borrower, for itself and in respect of its property, accepts, submits, and
consents generally and unconditionally, to the jurisdiction of the aforesaid
courts.
(b) Each 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's
Representative at the Borrowers' Representative's address for notices as
specified herein (with a copy forwarded by recognized overnight delivery
service), such service to become effective five (5) Business Days after such
mailing.
(c) Each 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) Each Borrower agrees that any action commenced by any
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.
20-12. INDEMNIFICATION. The Borrowers' Representative and each
Borrower respectively, jointly and severally, shall indemnify, defend, and hold
each Agent and each Lender and any employee, officer, or 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 Borrowers' Representative,
any 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 Borrowers' Representative, the
Borrowers, and the Guarantors, with any Agent or any Lender as contemplated by
the Loan Documents (each of claims which may be defended, compromised, settled,
or pursued by the Indemnified Person with counsel of the Administrative Agent's
selection, but at the expense of the Borrowers) 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 any of the Borrowers, other than a
termination, release, or discharge which makes specific reference to this
Section 20:20-12.
. 110 .
<PAGE>
20-13. 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) Unless otherwise specifically provided herein, interest
and any other fee or charge which is stated as per annum percentage shall be
calculated on a 360 day year and actual days elapsed.
(b) Words in the singular include the plural and words in the
plural include the singular.
(c) Cross references to Sections of this Agreement include the
Article in which that Section appears, followed by a colon, and the Section to
which reference is being made.
(d) 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.
(e) The words "includes" and "including" are not limiting.
(f) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.
(g) 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.
(h) 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.
(i) The words "may not" are prohibitive and not permissive.
(j) The word "or" is not exclusive.
(k) 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).
(l) Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.
(m) The symbol "$" refers to United States Dollars.
(n) 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.
(o) 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.
(p) Except as otherwise specifically provided, all references
to time are to Boston
. 111 .
<PAGE>
time.
(q) 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".
(r) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section
20:20-14, 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.
20-14. 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 provided in Section 20:20-8 each Lender, in connection with
such Person's relationship(s) with the Borrowers shall be borne by the
Borrowers.
(e) Unless otherwise explicitly provided herein, any Agent's
consent to any action of any Borrower which is prohibited unless such consent is
given may be given or refused by that Agent in its sole discretion and without
reference to Section 2:2-17 hereof.
20-15. RIGHT OF SET-OFF. Any and all deposits or other sums at any
time credited by or due to any 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 any 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 Borrowers to the
Agents and each Lender or any Participant
. 112 .
<PAGE>
or any such Affiliate and, following the occurrence of an Event of Default, may
be applied or set off against the Liabilities and against such obligations at
any time, whether or not other collateral is then available to any Agent, any
Lender, or any Participant or any such Affiliate.
20-16. 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."
20-17. WAIVERS.
(a) The Borrowers' Representative and each Borrower (and all
guarantors, endorsers, and sureties of the Liabilities) make each of the waivers
included in Subsection 20:20-17(b), below, knowingly, voluntarily, and
intentionally, and understands that the each Agent and each Lender is entering
into the financial arrangements contemplated hereby and in providing loans and
other financial accommodations to or for the account of the Borrowers as
provided herein, whether not or in the future, is relying on such waivers.
(b) THE BORROWERS' REPRESENTATIVE AND EACH BORROWER, AND EACH
SUCH GUARANTOR, ENDORSER, AND SURETY RESPECTIVELY WAIVES THE FOLLOWING:
(i) 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 ANY 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).
(ii) Except for manifest error, 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.
(iii) Any claim to consequential, special, or
punitive damages.
. 113 .
<PAGE>
THE BORROWERS' REPRESENTATIVE:
J. BAKER, INC.
By /s/ Philip G. Rosenberg .
-------------------------------
THE BORROWERS:
MORSE SHOE, INC.
JBI, INC.
JBI APPAREL, INC.
THE CASUAL MALE, INC.
WGS CORP.
TCMB&T, INC.
By /s/ Philip G. Rosenberg .
-------------------------------
. 114 .
<PAGE>
THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT:
BANKBOSTON RETAIL FINANCE INC.
By /s/ Elizabeth A. Ratto .
----------------------------
Elizabeth A. Ratto
Managing Director
THE REVOLVING CREDIT LENDERS:
BANKBOSTON RETAIL FINANCE INC.
By /s/ Elizabeth A. Ratto .
----------------------------
Elizabeth A. Ratto
Managing Director
DEBIS FINANCIAL SERVICES, INC.
By /s/ James M. Yandervalk .
----------------------------
James M. Vandervalk
Group Leader
HELLER FINANCIAL, INC.
By Thomas W. Bukowski
---------------------------
Thomas W. Bukowski
Senior Vice President
ORIX BUSINESS CREDIT, INC.
By /s/ Michael J. Cox
----------------------------
Michael J. Cox
Senior Vice President
FOOTHILL CAPITAL CORPORATION
By /s/ M.P. Sadilek
----------------------------
M.P. Sadilek
Senior Vice President
NATIONAL CITY COMMERCIAL FINANCE, INC.
By /s/ Elizabeth M. Lynch
----------------------------
Elizabeth M. Lynch
Senior Vice President
. 115 .
<PAGE>
AMSOUTH BANK
By /s/ Wendy Berney
-------------------------------
Wendy Berney
Attorney-in-Fact
LASALLE BUSINESS CREDIT
By /s/ Joseph Costanza
-------------------------------
Joseph Costanza
Senior Vice President
THE PROVIDENT BANK
By /s/ Jose V. Garde
-------------------------------
Jose V. Garde
Vice President
FINOVA CAPITAL CORPORATION
By /s/ Evan G. Jones
-------------------------------
Evan G. Jones
Senior Underwriter
IBJ WHITEHALL BUSINESS CREDIT CORP.
By /s/ Adam Moskowitz
-------------------------------
Adam Moskowitz
Vice President
SOVEREIGN BANK
By /s/ Patrick J. Norton
-------------------------------
Patrick J. Norton
Assistant Vice President
THE TERM LENDER:
BACK BAY CAPITAL LLC
By /s/ Mark J. Forti
-------------------------------
Mark J. Forti
Director
508607.7
. 116 .
<PAGE>
FIXED
[LOGO]
BANKBOSTON.
BancBoston Leasing Inc.
CHATTEL PROMISSORY NOTE
$9,000,000.00 Boston, Massachusetts
August 26, 1999
FOR VALUE RECEIVED, the undersigned promise(s) to pay to the order
of BancBoston Leasing Inc. (together with any successors or assigns,
"BancBoston"), a Massachusetts corporation with its principal place of
business at 100 Federal Street, Boston, Massachusetts 02110, the principal
amount of Nine Million Dollars and Zero Cents ($9,000,000.00) with interest
thereon at the fixed rate of Ten and 35/100 percent (10.35%) per annum,
payable as follows: (i) interest on the principal amount advanced hereunder,
from the date of such advance through the last day of the month in which such
advance is made, which is payable on October 1, 1999, and thereafter (ii) in
32 equal installments of principal and interest of $323,049.15 each beginning
on October 1, 1999 and on the same day of each month thereafter. Interest
shall be calculated on the basis of a 360-day year for the actual number of
days elapsed including holidays and days on which BancBoston is not open for
the conduct of business.
SECTION 1. PAYMENT TERMS.
1.1 PAYMENTS. All payments under this Chattel Promissory Note
("Note") shall be made by the undersigned to BancBoston in United States
currency at BancBoston's address specified above (or at such other address as
BancBoston may specify), in immediately available funds, on or before 2:00
p.m. Boston, Massachusetts time, on the due date thereof. Payments received
by BancBoston prior to the occurrence of an Event of Default (as defined in
Section 3) will be applied FIRST to fees, expenses and other amounts due
hereunder (excluding principal and interest); SECOND, to accrued interest;
and THIRD to outstanding principal. After the occurrence of an Event of
Default, payments will be applied to the Obligations under this Note as
BancBoston determines in its sole discretion. Whenever payment hereunder is
to be made on a day other than BancBoston's business day, such payment shall
be due and payable on the immediately following business day for BancBoston.
1.2 PREPAYMENT; PREPAYMENT CHARGE. The undersigned may, at its
option, prepay all, but not less than all, of the principal of this Note
before maturity, which payments shall be applied in the inverse order of the
maturity of installments of principal hereunder provided, however, that if
any portion of the principal amount of this Note is prepaid for any reason,
whether voluntarily or as a result of acceleration of the indebtedness
evidenced hereby or otherwise, the undersigned shall pay to BancBoston
simultaneously with such prepayment, the following additional amounts:
A. a prepayment fee (the "Prepayment Fee") in an amount
equal to five percent (5%) of the principal amount outstanding under this
Note at the time of such prepayment if such prepayment should occur in months
1 through 12 of this Note, an amount equal to three percent (3%) of the
principal amount outstanding under this Note at the time of such prepayment
if such prepayment should occur in months 13 through 24 of this Note, an
amount equal to one and one-half percent (1.5%) of the principal amount
outstanding under this Note at the time of such prepayment if such prepayment
should occur in months 25 through 32 of this Note; and
B. a make-whole fee (the "Make-Whole Fee") equal to (i) the
present value as of the date of prepayment (the "Prepayment Date") of the
remaining principal and interest payments due under the Note discounted at
the Reinvestment Rate (defined below) plus 350 basis points from the
respective dates on which such installments would have been payable, less
(ii) the amount of principal prepaid on the Prepayment Date. Notwithstanding
the foregoing, in no event shall such Make-Whole Fee equal an amount less
than zero. As used herein, "Reinvestment Rate" shall mean the yield to
maturity as of the close of business three (3) business days prior to the
Prepayment Date on United States Treasury securities with a term equal to (or
a date that is nearest to) the scheduled maturity date of this Note 4/30/02.
All funds advanced hereunder which have been repaid may not be reborrowed,
except with the consent of BancBoston.
<PAGE>
1.3 DEFAULT RATE. To the extent permitted by applicable law, upon
and after the occurrence of an Event of Default (whether or not BancBoston
has accelerated payment of this Note), interest on principal and overdue
interest shall, at the option of BancBoston, be payable on demand at a rate
per annum equal to two percent (2%) above the rate of interest otherwise
payable hereunder. If such default rate violates applicable law, the default
rate shall be at the maximum rate of interest per annum allowed by such law.
1.4 LATE PAYMENT CHARGE. If a payment of principal or interest
hereunder is not made within ten (10) days of its due date, the undersigned
will pay, on demand, a late payment charge equal to two percent (2%) above
the rate of interest otherwise payable on the amount of such payment. If the
late payment charge violates applicable law, the late payment charge shall be
at the maximum rate of interest per annum allowed by such law. Nothing in the
preceding sentence shall affect BancBoston's right to accelerate the maturity
of this Note in the event of any default in the payment of this Note.
SECTION 2. SECURITY AGREEMENT; COLLATERAL.
2.1 SECURITY AGREEMENT. This Note is issued pursuant to, and
entitled to the benefits of, and is subject to, the provisions of a certain
Master Security Agreement dated as of August 26, 1999 executed by the
undersigned (together with any amendments and riders thereto, the "Security
Agreement"), the terms and conditions of which are incorporated herein by
reference. The undersigned hereby ratifies and confirms the representations,
warranties, covenants and agreements set forth in the Security Agreement as
if made on the date of this Note. Neither this reference to the Security
Agreement, nor any provision thereof, shall affect or impair the absolute and
unconditional obligation of the undersigned to pay the principal of, and
interest on, this Note as provided herein.
2.2 COLLATERAL. The undersigned grants to BancBoston, as security
for the full and punctual payment and performance of the Obligations
including, without limitations, the Obligations under this Note, a continuing
lien, claim and encumbrance on, and security interest in, all equipment
("Equipment") set forth on Schedule 1 attached hereto and in all Collateral
as defined in the Security Agreement in accordance with the terms and
conditions as set forth therein. The Equipment shall constitute a portion of
the Collateral as defined in the Security Agreement for all purposes
thereunder.
SECTION 3. DEFAULTS AND REMEDIES. The occurrence of (i) a default in
the payment when five (5) consecutive days have elapsed since the date on
which the principal of, or interest on, this Note is due or (ii) any other
default in the payment or performance of this Note or of any other
Obligation, with any applicable grace or notice period which may be granted
in the Security Agreement having elapsed, or (iii) any Event of Default under
the Security Agreement shall constitute an "Event of Default" hereunder
thereby entitling BancBoston to exercise any and all remedies available at
law or under the Security Agreement, in any case, after the giving of any
required notice and the elapse of any cure period. All rights and remedies of
BancBoston are cumulative and are exclusive of any rights or remedies
provided by law or in equity or by agreement, and may be exercised separately
or concurrently. As used herein, "Obligation" means any obligation of the
undersigned hereunder or under the Security Agreement to BancBoston or to any
of its affiliates, whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising; and any obligation of any
guarantor with respect to this Note or the Security Agreement, including any
person or entity who has pledged or granted to BancBoston a security interest
in, or other lien on, property on behalf of the undersigned as collateral for
the Obligations.
SECTION 4. MISCELLANEOUS.
4.1 WAIVER; AMENDMENT. No delay or omission on the part of
BancBoston in exercising any right hereunder shall operate as a waiver of
such right or of any other right under this Note. No waiver of any right or
any amendment hereto shall be effective unless in writing and signed by
BancBoston nor shall a waiver on one occasion bar or waive the exercise of
any such right on any future occasion. Without limiting the generality of the
foregoing, the acceptance by BancBoston of any late payment shall not be
deemed to be a waiver of the Event of Default arising as a consequence
thereof. Each Obligor waives presentment, demand, notice, protest, and all
other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note or of any collateral for the
Obligations, and assents to any extensions or postponements of the time of
payment and to any other indulgences under this Note or with respect to any
such collateral, to any substitutions, exchanges or releases of any such
collateral, and to
-2-
<PAGE>
any additions or releases of any other parties or persons primarily or
secondarily liable hereunder, that, from time to time, may be granted by
BancBoston in connection herewith.
4.2 TAXES. The undersigned agrees to indemnify BancBoston and hold
it harmless from and against any transfer taxes, documentary taxes,
assessments or charges made by any governmental authority by reason of the
execution, delivery, and performance of this Note or the pledge or grant of
any Collateral for the Obligations.
4.3 TERMS AND DEFINITIONS. The terms and conditions of this Note
shall prevail where there may be conflicts or inconsistencies with the terms
and conditions of the Security Agreement. All capitalized terms used in this
Note, unless otherwise defined, have the meanings set forth in the Security
Agreement.
4.4 LENDER RECORDS. The entries on the records of BancBoston
(including any appearing on this Note) shall be PRIMA FACIE evidence of the
aggregate principal amount outstanding under this Note and interest accrued
thereon.
4.5 GOVERNING LAW; CONSENT TO JURISDICTION. This Note is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts, without
giving effect to the conflict-of-laws provisions thereof. The undersigned
agrees that any suit for the enforcement of this Note may be brought in the
courts of such state or any Federal court sitting in such state and consents
to the non-exclusive jurisdiction of each such court and to service of
process in any such suit being made upon the undersigned by mail at the
address specified below. The undersigned hereby waives any objection that it
may now or hereafter have to the venue of any such suit or any such court or
that such suit was brought in an inconvenient forum.
4.6 SEVERABILITY; AUTHORIZATION TO COMPLETE; PARAGRAPH HEADINGS. If
any provision of this Note shall be invalid, illegal or unenforceable, such
provision shall be severable from the remainder of this Note and the
validity, legality and enforceability of the remaining provisions of this
Note shall not in any way be affected or impaired thereby. BancBoston is
hereby authorized, without further notice, to fill in blank spaces on this
Note pertaining to dates only, and to date this Note as of the date funds are
first advanced hereunder. Paragraph headings are for the convenience of
reference only and are not a part of this Note and shall not affect its
interpretation.
4.7 JURY WAIVER. BANCBOSTON (BY ITS ACCEPTANCE OF THIS NOTE) AND THE
UNDERSIGNED AGREE THAT NEITHER OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL
(A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER
ACTION BASED UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM,
OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER BANCBOSTON NOR THE UNDERSIGNED HAS
AGREED WITH OR REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
-3-
<PAGE>
FIXED
[LOGO]
BANKBOSTON.
BancBoston Leasing Inc.
IN WITNESS WHEREOF, the undersigned, by its duly authorized officer or
agent, has duly executed this Note, which is intended to take effect as a sealed
instrument, on the day and year first written above.
MORSE SHOE, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
-----------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
JBI, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
-----------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
THE CASUAL MALE, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
-----------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
WGS CORP.
(DEBTOR)
By: /s/ Philip G. Rosenberg
-----------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
<PAGE>
TCMB&T, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
-----------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
-2-
<PAGE>
FIXED
[LOGO]
BANKBOSTON.
BancBoston Leasing Inc.
SCHEDULE 1
TO
CHATTEL PROMISSORY NOTE
dated August 26, 1999
of
Morse Shoe, Inc., JBI, Inc., The Casual Male, Inc., WGS Corp., TCMB&T, Inc.
All equipment, includes, without limitation, "equipment" as defined
in the UCC, and including all of the Debtor's equipment, machinery, and store
fixtures now owned or hereafter acquired, including but not limited to all
store fixtures, racking, shelving, displays, and computer equipment, office
machines, together with all parts, accessories, attachments, substitutions,
all accounts, contract rights, general intangibles, instruments, rents,
monies, payments and all other rights arising out of the use, sale or lease
or other disposition of the Equipment, all records or data relating to the
Equipment, and repairs and any and all proceeds thereof, including without
limitation insurance proceeds.
See EXHIBIT A to Schedule 1 of this Chattel Promissory Note for Equipment
Locations.
Check if the Equipment is classified fixtures:
[ ] fixtures _____________
[ ] non-fixtures ___________
MORSE SHOE, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
-3-
<PAGE>
JBI, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
THE CASUAL MALE, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
WGS CORP.
(DEBTOR)
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
TCMB&T, INC.
(DEBTOR)
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
Address: 555 Turnpike Street
Canton, MA 02021
-4-
<PAGE>
[LOGO]
BANKBOSTON.
BancBoston Leasing Inc.
BANCBOSTON LEASING INC.
MASTER SECURITY AGREEMENT
This MASTER SECURITY AGREEMENT (the "Agreement") is made as of this
26th day of August, 1999 by MORSE SHOE, INC., a Delaware corporation, with
its principal place of business at 555 Turnpike Street, Canton, MA 02021,
JBI, INC., a Massachusetts corporation, with its principal place of business
at 555 Turnpike Street, Canton, MA 02021, THE CASUAL MALE, INC., a
Massachusetts corporation, with its principal place of business at 555
Turnpike Street, Canton, MA 02021, WGS CORPORATION, a Massachusetts
corporation, with its principal place of business at 555 Turnpike Street,
Canton, MA 02021, TCMB&T, INC., a Massachusetts corporation, with its
principal place of business at 555 Turnpike Street, Canton, MA 02021,
(collectively, the "Debtor" or "Debtors"), in favor of BANCBOSTON LEASING
INC., a Massachusetts corporation, with its head office at 100 Federal
Street, Boston, Massachusetts 02110 (the "Secured Party").
RECITALS
WHEREAS, each Debtor has requested and, from time to time, will
request certain credit and financial accommodations from the Secured Party in
order to acquire or finance certain capital equipment and for other purposes
as well;
WHEREAS, the obligations of each Debtor under credit and financial
accommodations are, and will be, represented by one or more Chattel
Promissory Notes executed by each Debtor in favor of the Secured Party; and
WHEREAS, the Secured Party has made and will make credit and
financial accommodations available to each Debtor provided the Secured Party
is granted the rights and remedies as set forth in this Agreement;
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and the mutual
promises as hereinafter set forth, each Debtor and the Secured Party agree as
follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein shall have
the meanings assigned to them below. Terms which are defined in the Uniform
Commercial Code shall have the meanings as set forth in the Uniform
Commercial Code unless they are otherwise defined in this Agreement.
1.1 COLLATERAL. See Section 2.
1.2 DEBTOR. The term "Debtor" shall refer to each Debtor
individually and collectively to all Debtors herein.
1.2 ENCUMBRANCE. Any lien, claim, encumbrance, security interest,
pledge, mortgage or other charge of any kind or nature upon or with respect
to any Collateral.
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1.3 EQUIPMENT. All equipment including any and all equipment which
may be deemed to be Fixtures by a court of competent jurisdiction, any and
all furniture and any and all machinery and store fixtures now owned or
hereafter acquired by each Debtor, including but not limited to, racking,
shelving, displays, computer equipment, and office machines, together with
all parts, accessories, attachments, substitutions, and repairs thereto set
forth on Schedule 1 to any and a Notes executed by each Debtor in favor of
the Secured Party, together with each Debtor's interest in, and right to, any
and all manuals, computer programs, data bases and other materials relating
to the use, operation or structure of any of such equipment. "Fixture" shall
mean goods so related to particular real estate that an interest in them
arises under real estate law.
1.4 EVENT OF DEFAULT. See Section 10.
1.5 NOTE OR NOTE(S). Any and all Chattel Promissory Note(s) executed
by each Debtor in favor of the Secured Party.
1.6 OBLIGATIONS. All obligations of the Debtor to the Secured Party
of every kind and description, whether direct or indirect, absolute or
contingent, primary or secondary, joint or several, due or to become due, or
now existing or hereafter arising or acquired and whether by way of loan,
discount, letter of credit, lease, or otherwise including, without
limitation, the obligations arising under the Note, Security Agreement and
this Agreement.
1.7 UNIFORM COMMERCIAL CODE. The Uniform Commercial Code as in
effect in The Commonwealth of Massachusetts.
SECTION 2. GRANT OF SECURITY INTEREST. To secure the payment and
performance of the Obligations, each Debtor hereby assigns and pledges to the
Secured Party all of its right, title and interest in, and grants to the
Secured Party a continuing lien, claim, encumbrance and security interest in,
any and all (a) Equipment set forth on Schedule 1 to any and all Notes
executed by any Debtor, whether such Equipment is now owned or existing, or
hereafter arising or acquired, and which is owned by any Debtor or in which
any Debtor has an interest, together with (i) all, policies and certificates
of insurance pertaining to such Equipment, (ii) all attachments, accessions,
accessories, tools, parts, supplies, increases and additions to, and all
replacements of, and substitutions for, such Equipment, (iii) all accounts,
contract rights, general intangibles, instruments, rents, monies, payments,
and all other rights arising out of a sale, lease, or other disposition of
any of the Equipment, (iv) all proceeds (including insurance proceeds) from
the sale, destruction, loss, or other disposition of any of the Equipment,
and (v) all records and data relating to any of the Equipment, whether in the
form of a writing, photograph, microfilm, microfiche, or electronic media;
all of the above property whether now owned, now due, in which any Debtor has
an interest, or hereafter, at any time in the future, acquired, arising, to
become due, or in which any Debtor obtains an interest. All products,
proceeds and accessions of all of the above described property. The proceeds
in which the Secured Party has been granted a security interest hereunder
include, without limitation, insurance proceeds in each type of property
described in this Section 2 (collectively, the "Collateral").
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO
EACH DEBTOR. Each Debtor makes the following representations and warranties,
and agrees to the following covenants, each of which representations,
warranties and covenants shall be continuing and in force so long as any of
the Obligations remain outstanding.
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3.1 NAME; DEBTOR LOCATION; CHANGES. Each Debtor represents the
following: (i) the name of each Debtor set forth in this Agreement is the
true and correct legal name of each Debtor and the list attached as Exhibit A
hereto sets forth a complete and accurate statement of any trade name used
within the past year for the Debtors set forth therein and no Debtor has done
business under any other trade, assumed, fictitious or any other name during
such one year period; and (ii) the address of each Debtor set forth in this
Agreement is each Debtor's chief executive office and the place where its
business records are kept. Each Debtor will not (a) change its name, identity
or organizational structure or (b) change its chief executive office, or
place where its business records are kept, unless such Debtor shall have
given the Secured Party at least 30 days prior written notice and shall have
delivered to the Secured Party such new Uniform Commercial Code financing
statements or other documentation as may be necessary or required by the
Secured Party to ensure the continued perfection and priority of the security
interests granted by this Agreement.
3.2 ORGANIZATION; GOOD STANDING. Each Debtor is duly organized,
validly existing and in good standing under the laws of the state of its
organization and is duly qualified and in good standing in every other state
in which the nature of its business or properties requires such
qualification, except where the failure to so qualify would not have a
material adverse impact on the assets or operations of the affected Debtor.
3.3 AUTHORIZATION OF AGREEMENT; NO CONSENTS; NO CONFLICTS. The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action, corporate or otherwise, and do not and
will not (i) require any consent or approval of the stockholders of any
Debtor, if any, (ii) contravene the terms of the charter, by-laws or other
organizational papers of any Debtor, (iii) violate any applicable law, rule
or regulation of any governmental agency in any material respect, (iv)
contravene any provision of any agreement, instrument, order or undertaking
binding on any Debtor or by which any of its properties are bound or
affected, in any material respect, (v) other than as contemplated hereby,
result in or require the imposition of any Encumbrance on any of the
properties of any Debtor, or (vi) other than filings required by the Uniform
Commercial Code, require the approval or consent of, or filing or
registration with, any governmental or other agency or authority or any other
party, or, with respect to subsections (ii), (iii), (iv) and (v) above, to
the extent any Debtor has failed to make such filing, it does not and would
not have a material adverse impact on any Debtor.
3.4 LITIGATION; FINANCIAL CONDITIONS; Y2K PROBLEM. Each Debtor
represents and warrants that (i) there are no pending actions or proceedings
to which each Debtor is a party, and there are no threatened actions or
proceedings of which each Debtor has knowledge, before any court, arbitrator
or administrative agency which, either individually or in the aggregate,
would have a Material Adverse Effect on each Debtor except as set forth on
Exhibit B attached hereto, (ii) each Debtor is not in default under any
obligation for borrowed money, for the deferred purchase price of property or
any Agreement which, either individually or in the aggregate, would have a
Material Adverse Effect on each Debtor, (iii) the financial statements of
each Debtor (copies of which have been furnished to the Secured Party) have
been prepared in accordance with generally accepted accounting principles,
consistently applied, and fairly present the financial condition of each
Debtor and the results of its operations as of the date of, and for the
period covered by, such statements, and, since the date of such statements,
there has been no material adverse change in such conditions or operations,
(iv) each Debtor has reviewed the areas within its business and operations
which could be adversely affected by, and has developed or is developing a
program to address on a timely basis, the "Year 2000 Problem," that is, the
risk that computer applications used by each Debtor may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to, and any date on or after, December 31, 1999, and have made
related appropriate inquiry of material suppliers and vendors and, based on
such review and program, each Debtor believes that the "Year 2000 Problem"
will not have a Material Adverse Effect on each Debtor, and (v) from time to
time, at the request of the Secured Party, each Debtor shall provide to the
Secured Party such updated information or documentation as is requested
regarding the status of its efforts to address the Year 2000 Problem. For
purposes of this Section 3.4, "Material Adverse Effect"
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shall mean (1) a materially adverse effect on the business, condition
(financial or otherwise), operations, performance or properties of each
Debtor, or (2) a material impairment of the ability of each Debtor to perform
its obligations under, or to remain in compliance with, this Agreement.
3.5 FINANCIAL PERFORMANCE COVENANTS. Each Debtor shall observe and
comply with the following financial performance covenants, which compliance
shall be determined as if no Material Accounting Change had occurred (other
than any Material Accounting Change specifically taken into account in the
setting of such covenants). Secured Party may determine Debtor's compliance
with such covenants based upon financial reports and statements provided to
Secured Party by Debtor, by BankBoston, N.A. or by BankBoston Retail Finance,
Inc. (whether or not such financial reports or statements are required to be
furnished pursuant to this Security Agreement) as well as by reference to
interim financial information provided to, or developed by, Secured Party.
For purposes hereof, any capitalized terms not otherwise defined in this
Security Agreement shall have the meanings assigned to them in that certain
Loan and Security Agreement dated as of August ____, 1999 ("Loan Agreement")
among BankBoston Retail Finance Inc. as administrative Agent and Collateral
Agent, certain other financial institutions as revolving credit lenders, Back
Bay Capital Funding LLC as term lender, and Debtor as lead borrower for
certain other borrowers, as the Loan Agreement existed as of the date of this
Security Agreement.
(i) Each Debtor shall not permit its cumulative Consolidated EBITDA,
tested quarterly on a rolling four-quarters basis (three-quarters basis for
the test as of October 31, 1999) to be less than the following:
------------------------------------------------------------------------
FISCAL QUARTERS ENDING MINIMUM CUMULATIVE
ON OR ABOUT CONSOLIDATED EBITDA
------------------------------------------------------------------------
------------------------------------------------------------------------
October 31, 1999 $27,000,000
------------------------------------------------------------------------
January 31, 2000 40,000,000
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April 30, 2000 40,000,000
------------------------------------------------------------------------
July 31, 2000 40,000,000
------------------------------------------------------------------------
October 31, 2000 41,500,000
------------------------------------------------------------------------
January 31, 2001 43,000,000
------------------------------------------------------------------------
Thereafter 43,000,000
------------------------------------------------------------------------
(ii) Each Debtor shall maintain a Fixed Charge Ratio equal to or
greater than 1.4 tested quarterly on a rolling four-quarters basis,
commencing with the four quarters ending on or about January 31, 2000;
(iii) Each Debtor shall maintain Overall Availability of not less
than $40 million for the period commencing December 10, 2001 and ending
December 30, 2001.
SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO THE
COLLATERAL. Each Debtor makes the following representations and warranties,
and agrees to the following covenants, each of which representations,
warranties and covenants shall be continuing and in force so long as any of
the Obligations remain outstanding.
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4.1 LOCATION OF COLLATERAL; CHANGES. Each Debtor represents that all
Collateral is located at the respective places as set forth on Schedule 1 of
the applicable Note. Each Debtor will not move any Collateral unless each
Debtor shall have given the Secured Party at least 30 days prior written
notice and shall have delivered to the Secured Party such new Uniform
Commercial Code financing statements as may be necessary or required by the
Secured Party to insure the continued perfection and priority of the security
interests granted by this Agreement.
4.2 PERSONAL PROPERTY. Under the laws of any state in which the
Equipment may be located, the Equipment consists solely of personal property
and, to the best of each Debtor's knowledge is removable without the consent
of any applicable landlord, unless otherwise indicated on Schedule 1 of the
applicable Note. In the event the Equipment constitutes fixtures under such
applicable laws and upon request of Secured Party, debtor will make
commercially reasonable efforts to make appropriate filings in such state to
perfect the security interest of the Secured Party; and to deliver to the
Secured Party such disclaimer, waiver, or other document as the Secured Party
may request, executed by each person having an interest in such real estate.
4.3 OWNERSHIP OF COLLATERAL; ABSENCE OF LIENS AND RESTRICTIONS. Each
Debtor is and, in the case of Collateral acquired after the date hereof, will
be the sole legal and equitable owner of the Collateral, holding good and
marketable title to the same, free and clear of all Encumbrances, and has
good right and legal authority to assign, deliver, and create a security
interest in the Collateral in the manner as contemplated by this Agreement.
The Collateral is genuine and is what it is purported to be. The Collateral
is not subject to any restriction that would prohibit or restrict the
assignment, delivery or creation of the security interests contemplated
hereunder.
4.4 FIRST PRIORITY SECURITY INTEREST. This Security Agreement, the
Agreement and the Note, together with the filing of Uniform Commercial Code
financing statements in the appropriate offices for the location of
Collateral, create a valid and continuing lien on and perfected security
interest in the Collateral subject only to the BBRF Interest (except for
property located in the United States in which a security interest may not be
perfected by filing under the Uniform Commercial Code), prior to all other
Encumbrances except the BBRF Interest, and is enforceable as such against
creditors of the Debtor. Other than in favor of BBRF, no financing statement
under the Uniform Commercial Code of any state or other instrument evidencing
a lien on the Collateral that names the Debtor as debtor is on file in any
jurisdiction and the Debtor has not signed any such document or any agreement
authorizing the filing of any such financing statement or instrument.
4.5 SALES AND FURTHER ENCUMBRANCES. EACH DEBTOR AGREES IT WILL NOT
SELL, GRANT, ASSIGN OR TRANSFER ANY INTEREST IN, OR PERMIT TO EXIST ANY
ENCUMBRANCE ON, ANY OF THE COLLATERAL OTHER THAN IN FAVOR OF THE SECURED
PARTY AND THE BBRF INTEREST EXCEPT AS PERMITTED BY THE SECURED PARTY IN
WRITING. EACH DEBTOR SHALL DEFEND ITS TITLE TO, AND THE INTEREST OF THE
SECURED PARTY IN, THE COLLATERAL AGAINST ALL CLAIMS AND TAKE ANY ACTION
NECESSARY TO REMOVE ANY ENCUMBRANCES OTHER THAN THOSE PERMITTED UNDER THIS
AGREEMENT. EACH DEBTOR WILL DEFEND THE RIGHT, TITLE AND INTEREST OF THE
SECURED PARTY IN AND TO ANY RIGHTS OF EACH DEBTOR IN THE COLLATERAL.
4.6 FIXTURE CONFLICTS; REQUIRED WAIVERS. INTENTIONALLY LEFT BLANK
4.7 MAINTENANCE AND INSPECTION OF COLLATERAL. Each Debtor shall
maintain all tangible Collateral in good condition and repair. Each Debtor
will not commit or permit damage to, or destruction of, the Collateral or any
part of the Collateral. The Secured Party and its designated representatives
and agents shall have the right at all reasonable times to examine, inspect,
and audit the Collateral wherever located. Each Debtor shall immediately
notify the Secured Party (i) of all cases involving the return, rejection,
repossession, loss or damage of or to any Collateral, (ii) of any request for
credit or adjustment
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or of any other dispute arising with respect to the Collateral, and (iii)
generally of all happenings and events affecting the Collateral or the value
or the amount of the Collateral.
4.8 TAXES, ASSESSMENTS AND LIENS. Each Debtor will pay, when due,
all taxes, assessments and liens upon the Collateral, its use or operation,
upon this Agreement, upon any Notes evidencing the Obligations, or upon any
of the other related documents. Each Debtor may withhold any such payment or
may elect to contest any lien if each Debtor is in good faith conducting an
appropriate proceeding to contest the obligation to pay provided that the
interest of the Secured Party in the Collateral is not jeopardized in the
sole opinion of the Secured Party. If the Collateral is subjected to a lien
which is not discharged within fifteen (15) days, each Debtor shall deposit
with the Secured Party cash, a sufficient corporate surety bond or other
security satisfactory to the Secured Party in an amount adequate to provide
for the discharge of the lien plus any interest, costs, attorneys' fees or
other charges that could accrue as a result of foreclosure or sale of the
Collateral. In any contest, each Debtor shall defend itself and the Secured
Party and shall satisfy any final adverse judgement before enforcement
against the Collateral. Each Debtor shall name the Secured Party as an
additional obligee under any surety bond furnished in the contest proceedings.
4.9 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Each Debtor shall
comply promptly with all laws, ordinances and regulations of all governmental
authorities applicable to the production, disposition, or use of the
Collateral. Each Debtor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including
appropriate appeals, provided that the interest of the Secured Party in the
Collateral, in the opinion of the Secured Party, is not jeopardized.
4.10 HAZARDOUS SUBSTANCES. Each Debtor represents and warrants that,
to the best of its knowledge, the Collateral never has been, and never will
be so long as any of the Obligations remain outstanding, used for the
generation, manufacture, storage, transportation, treatment, disposal,
release or threatened release of any hazardous waste or substance, as those
terms are defined in the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, ET SEQ.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, Pub. L.
No. 99-499 ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, ET SEQ., the Resource Conservation and Recovery Act, 49 U.S.C.
Section 6901, ET SEQ., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. The terms "hazardous
waste" and "hazardous substance" shall also include, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos. The
representations and warranties contained herein are based on each Debtor's
due diligence in investigating the Collateral for hazardous wastes and
substances. Each Debtor hereby (a) releases and waives any future claims
against the Secured Party for indemnity or contribution in the event each
Debtor becomes liable for cleanup or other costs under any such laws, and (b)
agrees to indemnify and hold harmless the Secured Party against any and all
claims and losses resulting from a breach of this provision of this
Agreement. This obligation to indemnify shall survive the payment of the
Obligations and the satisfaction of this Agreement.
4.11 FURTHER ASSURANCES. Upon the written request of the Secured
Party, and at the sole expense of each Debtor, each Debtor will promptly
execute and deliver such further instruments and documents and take such
further actions as the Secured Party may reasonably deem desirable to obtain
the full benefits of this Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing statement
under the Uniform Commercial Code. Each Debtor authorizes the Secured Party
to file any such financing statement without the signature of each Debtor to
the extent permitted by applicable law and to file a copy of this Agreement
in lieu of a financing statement. If any amount payable under, or in
connection with, any of the Collateral shall be or become evidenced by any
promissory note or other instrument, such note or instrument shall be
immediately delivered to the Secured Party, duly endorsed in a manner
satisfactory to it.
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SECTION 5. INSURANCE.
5.1 RISKS COVERED. Each Debtor shall maintain a standard all risks
of loss insurance policy keeping the Equipment insured against loss or damage
occurring while any of the Obligations remain outstanding for an amount not
less than the full replacement value of the Collateral. Each Debtor shall be
liable for any deductible portions of all required insurance.
5.2 FORM OF INSURANCE. All insurance required under this Section 5
shall be primary and shall name the Secured Party as loss payee. Such
insurance shall also be with such insurers and shall be in such form
reasonably satisfactory to the Secured Party and in such amounts as are
satisfactory to the Secured Party. All applicable policies shall provide that
no act, omission or breach of warranty by each Debtor shall give rise to any
defense against payment of the insurance proceeds to the Secured Party. Each
Debtor shall pay the premiums for such insurance and, at the request of the
Secured Party, deliver to the Secured Party duplicates of such policies or
other evidence satisfactory to the Secured Party of such insurance coverage.
In any event, each Debtor shall provide the Secured Party with certificates
of insurance or such other evidence of coverage, to include endorsements upon
the policies issued by the insurers which evidence the existence of insurance
coverage required by this Section 5 and by which the insurers agree to give
the Secured Party written notice at least thirty (30) days prior to the
effective date of any expiration, modification, reduction, termination,
refusal to renew or cancellation of any such policies. Each Debtor shall
cause to be provided to the Secured Party, not less than fifteen (15) days
prior to the scheduled expiration or lapse of such insurance coverage,
evidence satisfactory to the Secured Party of renewal or replacement coverage.
5.3 INSURANCE PROCEEDS. Provided no Event of Default, as defined in
Section 10 below, has occurred and is continuing, the proceeds of insurance
required under this Section 5 and payable as a result of loss or damage to
the Collateral shall be applied to the repair or replacement of the
Collateral. Upon the occurrence of an Event of Default as defined in Section
10 below, each Debtor hereby irrevocably appoints the Secured Party as its
attorney-in-fact, which power shall be deemed coupled with an interest, to
make claim for, receive payment of, execute and endorse all documents, checks
or drafts received in payment for loss or damage under any insurance policies
required by this Section 5.
5.4 EXAMINATION OF INSURANCE. Notwithstanding anything herein, the
Secured Party shall not be under any duty to examine any evidence of
insurance furnished hereunder, or to ascertain the existence of any policy or
coverage, or to advise each Debtor of any failure to comply with the
provisions of this Section 5.
SECTION 6. NOTICES AND REPORTS PERTAINING TO COLLATERAL. Each Debtor
will, with respect to the Collateral, promptly notify the Secured Party of
any Encumbrance asserted against the Collateral, including any attachment,
levy, execution or other legal process levied against any of the Collateral.
Each Debtor shall also provide the Secured Party with any information
received by each Debtor relating to the Collateral that may, in any way,
adversely affect the value of ten percent (10%) or more of the Collateral or
the rights and remedies of the Secured Party with respect thereto.
SECTION 7. SECURED PARTY'S RIGHTS WITH RESPECT TO COLLATERAL. The
Secured Party may, at its option and at any time after an Event of Default
has occurred, whether or not the Obligations are due, without notice or
demand on each Debtor, take the following actions with respect to the
Collateral: (i) subject to the provisions of Section 5, make, adjust and
settle claims under any insurance policy related thereto and place and pay
for appropriate insurance thereon; (ii) discharge taxes and other
Encumbrances at any time levied or placed thereon; (iii) make repairs or
provide
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maintenance with respect thereto; and (iv) pay any necessary filing fees and
any taxes arising as a consequence of any such filing. The Secured Party
shall have no obligation to make any such expenditures nor shall the making
thereof relieve each Debtor of its obligation to make such expenditures.
Except as otherwise provided herein, the Secured Party shall have no duty as
to the collection or protection of the Collateral nor as to the preservation
of any rights pertaining thereto.
SECTION 8. SET-OFF RIGHTS. Regardless of the adequacy of any
Collateral or any other means of obtaining repayment for any Obligations, the
Secured Party may, at any time after an Event of Default has occurred and
from time to time, without notice to each Debtor (any such notice being
expressly waived by each Debtor) and to the fullest extent permitted by law,
set off and apply any and all deposits (general or special, time or demand,
provisional or final) and other sums credited by or due from the Secured
Party to each Debtor or subject to withdrawal by each Debtor and any other
property and securities at any time in the possession or control of the
Secured Party (except for any IRA, Keogh, payroll or trust accounts) against
any Obligations, whether or not the Secured Party shall have made any demand
for such Obligations and although such Obligations may be contingent or
unmatured.
SECTION 9. FINANCIAL STATEMENTS. Each Debtor shall annually, within
ninety-five (95) days after the close of the fiscal year for each Debtor,
furnish to the Secured Party financial statements of each Debtor, including a
balance sheet as of the close of such year and statements of income and
retained earnings for such year, prepared in accordance with generally
accepted accounting principles, consistently applied from year to year, and
certified by independent public accountants for each Debtor reasonably
acceptable to the Secured Party. If requested by the Secured Party, each
Debtor shall also provide quarterly financial statements of each Debtor,
similarly prepared for each of the first three quarters of each fiscal year,
certified (subject to normal year-end audit adjustments) by the chief
financial officer of each Debtor and furnished to the Secured Party within
fifty (50) days following the end of the quarter, and such other financial
information as may be reasonably requested by the Secured Party.
SECTION 10. DEFAULTS. The occurrence of any of the following events
which occurs as to any one of the Debtors shall constitute an event of
default as to each and every Debtor ("Event of Default") under this Agreement.
(a) Any Debtor fails to pay principal or interest under any Note when
due and such failure to pay continues for five (5) consecutive
days.
(b) Any Debtor fails to pay any other Obligation when due and such
failure to pay continues for ten (10) consecutive days following
written notice from the Secured Party.
(c) Any Debtor fails to maintain insurance as required by Section 5
above. Any Debtor fails to perform any other covenant, agreement
or obligation contained herein or in any agreement, instrument or
other document evidencing, securing or otherwise delivered in
connection with the Obligations and such failure continues for
thirty (30) consecutive days following written notice from Secured
Party.
(d) There is a loss, theft or substantial damage of or to the
Collateral, which is uninsured and which, in the aggregate exceeds
$500,000 of Secured Party's cost of Collateral, or the issuance of
an injunction against any Debtor affecting any of the Collateral.
(e) There is a default under any agreement relating to any Collateral,
having a material adverse effect on the Collateral.
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(f) Any Debtor ceases to exist or terminates its independent
operations by reason of any discontinuance, dissolution,
liquidation, or sale of substantially all of its assets in one
transaction or a series of related transactions, or otherwise
ceases doing business as a going concern.
(g) Any Debtor merges into or with any corporation or other legal
entity, other than another Debtor, and a Debtor is not the
surviving corporation or the surviving legal entity.
(h) Any Debtor (i) applies for, or consents to, the appointment of,
or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar official for itself or for all or a
substantial part of its property, (ii) makes a general assignment
for the benefit of its creditors, (iii) commences a voluntary
case under the United States Bankruptcy Code, as now or hereafter
in effect, seeking liquidation, reorganization or other relief
with respect to itself or its debts, (iv) files a petition
seeking to take advantage of any other law providing for the
relief of debtors, (v) takes any action under the laws of its
jurisdiction of incorporation or organization similar to any of
the foregoing, (vi) convenes a meeting of its creditors or
(vii) takes any corporate action for the purpose of effecting any
of the foregoing.
(i) A proceeding or case is commenced, without the application or
consent of the applicable Debtor, in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding up of any Debtor or composition or
readjustment of the debts of any Debtor, (ii) the appointment
of a trustee, receiver, custodian, liquidator or similar
official for any Debtor or for all or any substantial part of
its assets, or (iii) similar relief with respect to any Debtor
under any law providing for the relief of debtors and such
proceeding or case under any of the foregoing subsections
shall continue undismissed, or unstayed and in effect, for a
period of sixty (60) days; or an order for relief is entered
with respect to any Debtor in an involuntary case under the
United States Bankruptcy Code, as now or hereafter in effect,
or an action under the laws of the jurisdiction of
incorporation or organization of any Debtor, similar to any of
the foregoing, is taken with respect to any Debtor without its
application or consent and shall continue unstayed and in
effect for a period of sixty (60) days.
(j) Any Debtor makes any representation or warranty herein or in any
statement or certificate at any time given in writing pursuant to,
or in connection with, this Agreement or the Obligations, which is
false or misleading in any material respect at the time when made.
(k) Any Debtor defaults under any promissory note, credit agreement,
loan agreement, conditional sales contract, guaranty, lease,
indenture, bond, debenture or other material obligation
whatsoever, and a party thereto or a holder thereof is entitled to
accelerate the obligations of any Debtor thereunder; or any Debtor
defaults in meeting any of its trade, tax or other current
obligations as they mature, unless such obligations are being
contested diligently and in good faith, and all of the above, in
the aggregate, exceed $5,000,000.
(l) Any party to any guaranty, letter of credit, subordination or
credit agreement or other undertaking, given for the benefit of
the Secured Party and obtained in connection with this Agreement
or the Obligations, breaches, fails to continue, contests, or
purports to terminate or to disclaim such guaranty, letter of
credit, subordination or credit agreement or other undertaking; or
such guaranty, letter of credit, subordination agreement or other
undertaking becomes unenforceable while any of the Obligations
remain outstanding; or a guarantor of this Agreement shall die,
cease to exist or terminate its independent operations; or any
event
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or condition set forth in subsections (c), (f), (g), (h), (i),
(j) or (k) of this Section 10 shall occur with respect to any
guarantor or to the person responsible, in whole or in part, for
the payment or performance of the Obligations.
SECTION 11. SECURED PARTY'S RIGHTS AND REMEDIES.
11.1 Upon the occurrence of an Event of Default, the Secured Party,
at its sole option, upon its declaration, and to the extent not inconsistent
with applicable law, may exercise any one or more of the following remedies.
(a) The Secured Party may, at its option, without notice or
demand, cause all of the Obligations including, without
limitation, all principal and interest due or to become due
under all Notes to become immediately due and payable and take
immediate possession of the Collateral; for that purpose, the
Secured Party may, so far as each Debtor can give authority
therefor, enter upon any premises on which any of the
Collateral is situated and remove the same therefrom or remain
on such premises and in possession of such Collateral for
purposes of conducting a sale or enforcing the rights of the
Secured Party. Each Debtor will, upon demand, assemble the
Collateral and make it available to the Secured Party at a
place and time designated by the Secured Party that is
reasonably convenient to both parties.
(b) The Secured Party may collect and receive all income and
proceeds with respect to the Collateral and exercise all
rights of any Debtor with respect thereto.
(c) The Secured Party may sell, lease or otherwise dispose of the
Collateral at a public or private sale, with or without having
the Collateral at the place of sale, and upon such terms and
in such manner as the Secured Party may determine, and the
Secured Party may purchase any Collateral at any such public
sale or such private sale to the extent permitted by law.
Unless the Collateral threatens to decline rapidly in value or
is of the type customarily sold on a recognized market, the
Secured Party shall send to each Debtor prior written notice
(which, if given within ten (10) days of any sale, shall be
deemed to be reasonable) of the time and place of any public
sale of the Collateral or of the time after which any private
sale or other disposition thereof is to be made. Each Debtor
agrees that, upon any such sale, the Collateral shall be held
by the purchaser free from all claims or rights of every kind
and nature including any equity of redemption or similar
rights, and all such equity of redemption and similar rights
are hereby expressly waived and released by each Debtor. In
the event any consent, approval or authorization of any
governmental agency is necessary to effectuate any such sale,
each Debtor shall execute all applications or other
instruments as may be required.
(d) In any jurisdiction where the enforcement of its rights
hereunder is sought, the Secured Party shall have, in addition
to all other rights and remedies, the rights and remedies of a
secured party under the Uniform Commercial Code.
11.2 IMMEDIATE ACCELERATION. Upon the occurrence of an Event of
Default described in subsection 10(g) and (h), the remedy set forth in
subsection 11.1(a) shall be deemed to have been exercised immediately and
automatically without any act or declaration of the Secured Party and all
Obligations including, without limitation, all principal and interest due or
to become due under the Notes shall be immediately due and payable.
11.3 REPAIR OF COLLATERAL. Prior to any disposition of Collateral
pursuant to this Agreement, the Secured Party may, at its option, cause any of
the Collateral to be repaired or reconditioned (but not
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upgraded unless mutually agreed) in such manner and to such extent as to make
it saleable. The costs of any such repair or reconditioning shall be deemed
to be part of the Obligations under this Agreement, so long as Lessor
determines in good faith that such repair or reconditioning will increase the
value of the Collateral.
11.4 EXPENSES; DEFICIENCY. The Secured Party shall be entitled to
retain and to apply the proceeds of any disposition of the Collateral, FIRST,
to its reasonable expenses of retaking, holding, protecting and maintaining,
and preparing for disposition and disposing of, the Collateral, including
reasonable attorneys' fees and other legal expenses incurred by it in
connection therewith; and SECOND, to the payment of the Obligations in such
order of priority as the Secured Party shall determine. Any surplus remaining
after such application shall be paid to each Debtor or to whomever may be
legally entitled thereto, provided that, in no event, shall each Debtor be
credited with any part of the proceeds of the disposition of the Collateral
until such proceeds shall have been received in cash by the Secured Party.
Each Debtor shall remain liable for any deficiency.
SECTION 12. WAIVERS. Each Debtor waives presentment, demand, notice,
protest, notice of acceptance of this Agreement, notice of any loans made,
credit or other extensions granted, Collateral received or delivered or any
other action taken in reliance hereon, and all other demands and notices of
any description, except for such demands and notices as are expressly
required to be provided to each Debtor under this Agreement or any other
document evidencing the Obligations. With respect to both the Obligations and
the Collateral, each Debtor assents to any extension or postponement of the
time of payment or any other forgiveness or indulgence, to any substitution,
exchange or release of Collateral, to the addition or release of any party or
person primarily or secondarily liable, to the acceptance of partial payment
thereon, and the settlement, compromise or adjustment of any thereof, all in
such manner and at such time or times as the Secured Party may deem
advisable. The Secured Party shall have no duty as to the collection or
protection of the Collateral or any income thereon, nor as to the
preservation of rights against prior parties or relating to the Collateral.
The Secured Party may exercise its rights with respect to the Collateral
without resorting, or regard, to other collateral or sources of reimbursement
for Obligations. The Secured Party shall not be deemed to have waived any of
its rights with respect to the Obligations or the Collateral unless such
waiver is in writing and signed by the Secured Party. No delay or omission on
the part of the Secured Party in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall
not bar or waive the exercise of any right on any future occasion. All rights
and remedies of the Secured Party in the Obligations or the Collateral,
whether evidenced hereby or by any other instrument or papers, are cumulative
and not exclusive of any remedies provided by law or any other agreement, and
may be exercised separately or concurrently.
SECTION 13. EXPENSES. Each Debtor shall, on demand, pay or reimburse
the Secured Party for all reasonable expenses (including reasonable and
documented attorneys' fees of outside counsel or allocation costs of in-house
counsel) incurred or paid by the Secured Party in connection with the
enforcement of this Agreement, up to three (3) on-site periodic examinations
of the Collateral in each calendar year, and any other amounts permitted to
be expended by the Secured Party hereunder including, without limitation,
such expenses as are incurred to preserve the value of the Collateral and the
validity, perfection, and priority of any security interest created hereby,
the collection, sale or other disposition of any of the Collateral, or the
exercise by the Secured Party of any of the rights conferred upon it under
this Agreement. The obligation to pay any such amount shall be an additional
Obligation secured by the Collateral and each such amount shall bear interest
from the time of demand at the rate per annum equal to the rate of interest
announced, from time to time, by BankBoston, N.A., or its successor and
assigns, at its head office as its Base Rate plus 6%, or 18% per annum,
whichever is less. If such rate violates applicable law, the rate shall be
the maximum rate of interest per annum allowed by such law.
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SECTION 14. NOTICES. Any demand upon or notice to each Debtor that
the Secured Party may give shall be effective when delivered by hand,
properly deposited in the mails postage prepaid, or sent by telex, answerback
received, or electronic facsimile transmission, receipt acknowledged, or
delivered to a telegraph company or a nationally recognized overnight
courier, in each case addressed to each Debtor at the address shown at the
beginning of this Agreement or as it appears on the books and records of the
Secured Party. Demands or notices addressed to any other address at which the
Secured Party customarily communicates with each Debtor also shall be
effective. Any notice by each Debtor to the Secured Party shall be given as
aforesaid, addressed to the Secured Party at the address shown at the
beginning of this Agreement or such other address as the Secured Party may
advise each Debtor in writing.
SECTION 15. SUCCESSORS AND ASSIGNS.
15.1 EACH DEBTOR SHALL NOT SELL, TRANSFER, ASSIGN, CONVEY OR PLEDGE
ANY OF ITS RIGHTS AND/OR OBLIGATIONS UNDER THIS AGREEMENT OR ANY NOTE WITHOUT
THE PRIOR WRITTEN CONSENT OF THE SECURED PARTY. Any such sale, transfer,
assignment, conveyance or pledge, whether by operation of law or otherwise,
without the prior written consent of the Secured Party, shall be void.
15.2 This Agreement shall be binding upon each Debtor, its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, the Secured Party, its successors and assigns. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING SENTENCE, THE SECURED PARTY MAY ASSIGN OR
OTHERWISE TRANSFER ANY AGREEMENT OR ANY NOTE HELD BY IT EVIDENCING, SECURING
OR OTHERWISE EXECUTED IN CONNECTION WITH THE OBLIGATIONS, OR SELL
PARTICIPATIONS IN ANY INTEREST THEREIN, TO ANY OTHER PERSON OR ENTITY, AND
SUCH OTHER PERSON OR ENTITY 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 THE SECURED PARTY UNDER
THIS AGREEMENT.
SECTION 16. GENERAL. This Agreement may not be amended or modified
except by a writing signed by each Debtor and the Secured Party, nor may any
Debtor assign any of its rights hereunder. This Agreement and the terms,
covenants and conditions hereof shall be construed in accordance with, and
governed by, the laws of The Commonwealth of Massachusetts, without giving
effect to any conflict-of-laws provisions contained therein. In the event
that any Collateral or any deposit or other sum due from or credited by the
Secured Party is held or stands in the name of each Debtor and another, or
others jointly, the Secured Party may deal with the same for all purposes as
if it belonged to, or stood in the name of, each Debtor alone.
SECTION 17. SECTION HEADINGS. Section headings are for
convenience of reference only and are not a part of this Agreement.
SECTION 18. CONSENT TO JURISDICTION. Each Debtor further agrees that
any suit based upon or arising out of this Agreement, the Notes, any related
agreements, the Collateral or the dealings or the relationship between or
among each Debtor and the Secured Party, and the successors and assigns of
the Secured Party, may be brought in the courts of The Commonwealth of
Massachusetts or any Federal court sitting therein and consents to the
non-exclusive jurisdiction of such court and to service of process in any
such suit being made upon each Debtor by mail in the manner specified in
Section 14 hereof. Each Debtor hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such
suit was brought in an inconvenient forum.
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SECTION 19. JURY WAIVER. THE SECURED PARTY (BY ITS ACCEPTANCE
HEREOF) AND EACH DEBTOR AGREE THAT NEITHER OF THEM, NOR ANY ASSIGNEE OR
SUCCESSOR, SHALL (a) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS
AGREEMENT, THE NOTES, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS
OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (b) SEEK TO CONSOLIDATE
ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS
NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED
BY THE SECURED PARTY AND EACH DEBTOR AND THESE PROVISIONS SHALL BE SUBJECT TO
NO EXCEPTIONS. NEITHER THE SECURED PARTY NOR EACH DEBTOR HAS AGREED WITH OR
REPRESENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE
FULLY ENFORCED IN ALL INSTANCES.
SECTION 20. IRREVOCABLE LIMITED POWER OF ATTORNEY. WITHOUT LIMITING
THE GENERALITY OF ANY OTHER POWER OF ATTORNEY SET FORTH HEREIN OR IN THE
RELATED DOCUMENTS, EACH DEBTOR HEREBY IRREVOCABLY APPOINTS THE SECURED PARTY,
AND ANY OTHER OFFICER OR AGENT OF THE SECURED PARTY, WITH FULL POWER OF
SUBSTITUTION, AS ITS TRUE AND LAWFUL AGENTS AND ATTORNEYS IN FACT ("ATTORNEYS
IN FACT") TO PREPARE, SIGN, DELIVER AND FILE, IN NAME, PLACE AND STEAD OF
EACH DEBTOR, ANY AND ALL FINANCING STATEMENTS IN CONNECTION HEREWITH AS SAID
ATTORNEYS IN FACT MAY DEEM APPROPRIATE. TO THE EXTENT PERMITTED BY LAW, EACH
DEBTOR HEREBY RATIFIES EACH AND EVERY ACT THAT SAID ATTORNEYS IN FACT MAY
LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF, PROVIDED THAT, AS TO THE
STATEMENTS GRANTING THE SECURITY INTEREST OR PROVIDING INITIAL NOTICE OF
SECURED PARTY'S INTEREST IN THE EQUIPMENT ONLY, AND NOT AS TO ANY
CONTINUATION OR ASSIGNMENT THEREOF, THE CONTENT OF SUCH FINANCING STATEMENTS
AND THE LOCATION OF FILING LOCATIONS HAVE BEEN PREVIOUSLY APPROVED BY DEBTOR,
WHICH APPROVAL SHALL NOT BE UNREASONABLY WITHHELD OR DELAYED. THIS POWER OF
ATTORNEY IS A POWER COUPLED WITH AN INTEREST AND IS IRREVOCABLE. THIS POWER
OF ATTORNEY IS NOT INTENDED TO CREATE AN ATTORNEY/CLIENT RELATIONSHIP BETWEEN
THE PARTIES.
SECTION 21. RULES OF INTERPRETATION. The following rules of
interpretation shall apply to this Agreement, the Notes and any related
agreement: (i) a reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented, from time to
time, in accordance with its terms; (ii) the singular includes the plural and
the plural includes the singular; (iii) a reference to any law includes any
amendment or modification to such law; (iv) a reference to any party includes
its permitted successors and permitted assigns; (v) accounting terms not
otherwise defined herein have the meanings assigned to them by generally
accepted accounting principles applied on a consistent basis by the
accounting entity to which they refer; (vi) the words "include," "includes"
and "including" are not limiting; (vii) all terms not specifically defined
herein or by generally accepted accounting principles that are defined in the
Uniform Commercial Code shall have the meanings assigned to them therein,
with the term "instrument" being that defined under Article 9 of the Uniform
Commercial Code; (viii) the words "herein," "hereof," "hereunder" and words
of like import shall refer to this Agreement as a whole and not to any
particular section or subdivision of this Agreement; and (ix) unless
otherwise expressly indicated, in the computation of periods of time from a
specified date to a later specified date, the word "from" means "from and
including," the words "to" and "until" each mean "to but excluding," and the
word "through" means "to and including."
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[LOGO]
BANKBOSTON.
BancBoston Leasing Inc.
IN WITNESS WHEREOF, each Debtor has caused this Agreement to be duly
executed as an instrument under seal as of the date first written above.
BANCBOSTON LEASING, INC. MORSE SHOE, INC.
By: /s/ Jane M. Leo By: /s/ Philip G. Rosenberg
--------------------------- ---------------------------------
Title: Assistant Vice President Title: Executive Vice President
JBI, INC.
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
THE CASUAL MALE, INC.
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
WGS CORPORATION
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
TCMB&T, INC.
By: /s/ Philip G. Rosenberg
---------------------------------
Title: Executive Vice President
<PAGE>
BANCBOSTON LEASING INC.
SECURITY AGREEMENT
This SECURITY AGREEMENT (the "Agreement") is made as of this 26th
day of August, 1999 by MORSE SHOE, INC., a Delaware corporation, with its
principal place of business at 555 Turnpike Street, Canton, MA 02021, JBI,
INC., a Massachusetts corporation, with its principal place of business at
555 Turnpike Street, Canton, MA 02021, THE CASUAL MALE, INC., a Massachusetts
corporation, with its principal place of business at 555 Turnpike Street,
Canton, MA 02021, WGS CORPORATION, a Massachusetts corporation, with its
principal place of business at 555 Turnpike Street, Canton, MA 02021, TCMB&T,
INC., a Massachusetts corporation, with its principal place of business at
555 Turnpike Street, Canton, MA 02021, (collectively, the "Debtor" or
"Debtors"), in favor of BANCBOSTON LEASING INC., a Massachusetts corporation,
with its head office at 100 Federal Street, Boston, Massachusetts 02110 (the
"Secured Party").
RECITALS
WHEREAS, each Debtor has requested and, from time to time, will
request certain credit and financial accommodations from the Secured Party in
order to acquire or finance certain capital equipment and for other purposes
as well;
WHEREAS, the obligations of each Debtor under credit and financial
accommodations are represented by that certain Master Security Agreement
dated as of August 26, 1999 ("Security Agreement") and one or more Chattel
Promissory Notes ("Note") executed by each Debtor in favor of the Secured
Party; and
WHEREAS, the Secured Party has made and will make credit and
financial accommodations available to each Debtor provided the Secured Party
is granted the rights and remedies as set forth in this Agreement;
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and the mutual
promises as hereinafter set forth, each Debtor and the Secured Party agree as
follows:
SECTION 1. DEFINITIONS. All capitalized terms used herein or in any
certificate, report or other document delivered pursuant hereto shall have
the meanings assigned to them below (unless otherwise defined).
ACCOUNTS. All accounts, including, without limitation, "accounts" as
defined in the Uniform Commercial Code as adopted in Massachusetts (the
"UCC"), and also all: accounts, accounts receivable, amounts due from Host
Stores (as such term is defined in a certain Loan and Security Agreement by
and between the Debtor and the Secured Party, as amended from time to time),
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; 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.
<PAGE>
BOOKS AND RECORDS. All books, records, and information relating to
the collateral and/or to the operation of the Debtor'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.
CHATTEL PAPER. All chattel paper, including, without limitation
"chattel paper" as defined in the UCC.
COLLATERAL. See Section 2.
CONTRACT RIGHTS. All contract rights, includes, without limitation,
"contract rights" as now or formerly defined in the UCC and also any right to
payment under a contract not yet earned by performance and not evidenced by
an instrument or Chattel Paper.
ENCUMBRANCE. Any mortgage, pledge, security interest, lien or other
charge or encumbrance of any kind or nature upon or with respect to any
property.
EQUIPMENT. "Equipment" is defined in the Security Agreement and is
subject to the terms thereof.
EVENT OF DEFAULT. See Section 7.
GENERAL INTANGIBLES. All general intangibles, includes, without
limitation, "general intangibles" as defined in the UCC; rights to payment;
goodwill; causes of action; judgments; franchises; license agreements;
computer records; rights of access to computer service bureaus; trade
secrets; copyrights and derivative works and interests; trade names,
trademarks, service marks, and all good will relating thereto; applications
for registration of the foregoing; and all other intellectual property.
INVESTMENT PROPERTY. All Investment Property (as defined in the UCC)
instruments, documents of title, documents, policies and certificates of
insurance, securities, deposits, deposit accounts, money, cash, or other
property.
OBLIGATIONS. All obligations of the Debtor to the Secured Party of
every kind and description, whether direct or indirect, absolute or contingent,
primary or secondary, joint or several, due or to become due, or now existing or
hereafter arising or acquired and whether by way of loan, discount, letter of
credit, lease, or otherwise including, without limitation, the obligations
arising under the Note, Security Agreement and this Agreement.
SECURITIES. All capital stock of JBI Apparel, Inc., TCM Holding
Company, Inc., LP Innovations, Inc., Spencer Companies, Inc., Buckmin, Inc., Elm
Equipment Corp., Isab, Inc., Jared Corporation, Morse Shoe (Canada) Ltd., Morse
Shoe International, Inc., and White Cap Footware, Inc.
UNIFORM COMMERCIAL CODE. The Uniform Commercial Code as in effect in The
Commonwealth of Massachusetts.
SECTION 2. GRANT. To secure the payment and performance of the
Obligations, the Debtor hereby assigns and pledges to the Secured Party all of
its rights, title and interest in, and grants to the Secured Party a continuing
security interest in all assets, properties and rights of the Debtor of every
kind and nature, including without limitation, all Accounts, Books and Records,
Chattel Paper, Contract
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Rights, General Intangibles, and Investment Property, (the above not to
include the items of Collateral as defined in the Security Agreement) whether
now owned or existing or hereafter arising or acquired, together with all,
instruments, documents of title, policies and certificates of insurance,
securities, deposit accounts, cash or other property owned by the Debtor or
in which the Debtor has an interest that are now or may hereafter be in the
possession, custody or control of the Secured Party or its participants or
assigns for any purpose; any and all additions, substitutions, replacements
and accessions thereto; and all proceeds and products of any of the foregoing
(collectively, the "Collateral")
SECTION 3. REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO
EACH DEBTOR. Each Debtor makes the following representations and warranties,
and agrees to the following covenants, each of which representations,
warranties and covenants shall be continuing and in force so long as any of
the Obligations remain outstanding.
3.1 NAME; DEBTOR LOCATION; CHANGES. Each Debtor represents the
following: (i) the name of each Debtor set forth in this Agreement is the
true and correct legal name of each Debtor, the list attached as Exhibit A
hereto sets forth a complete and accurate statement of any trade name used
within the past year for the Debtors set forth therein, and no Debtor has
done business under any other trade, assumed, fictitious or any other name
during such one year period; and (ii) the address of each Debtor set forth in
this Agreement is each Debtor's chief executive office and the place where
its business records are kept. Each Debtor will not (a) change its name,
identity or organizational structure or (b) change its chief executive
office, or place where its business records are kept, unless such Debtor
shall have given the Secured Party at least 30 days prior written notice and
shall have delivered to the Secured Party such new Uniform Commercial Code
financing statements or other documentation as may be necessary or required
by the Secured Party to ensure the continued perfection and priority of the
security interests granted by this Agreement.
3.2 ORGANIZATION; GOOD STANDING. Each Debtor is duly organized,
validly existing and in good standing under the laws of the state of its
organization and is duly qualified and in good standing in every other state
in which the nature of its business or properties requires such
qualification, except where the failure to so qualify would not have a
material adverse impact on the assets or operations of the affected Debtor.
3.3 AUTHORIZATION OF AGREEMENT; NO CONSENTS; NO CONFLICTS. The
execution, delivery and performance of this Agreement have been duly
authorized by all necessary action, corporate or otherwise, and do not and
will not (i) require any consent or approval of the stockholders of any
Debtor, if any, (ii) contravene the terms of the charter, by-laws or other
organizational papers of any Debtor, (iii) violate any applicable law, rule
or regulation of any governmental agency in any material respect, (iv)
contravene any provision of any agreement, instrument, order or undertaking
binding on any Debtor or by which any of its properties are bound or
affected, in any material respect, (v) other than as contemplated hereby,
result in or require the imposition of any Encumbrance on any of the
properties of any Debtor, or (vi) other than filings required by the Uniform
Commercial Code, require the approval or consent of, or filing or
registration with, any governmental or other agency or authority or any other
party, or, with respect to subsections (ii), (iii), (iv) and (v) above, to
the extent any Debtor has failed to make such filing, it does not and would
not have a material adverse impact on any Debtor.
3.4 LITIGATION; FINANCIAL CONDITIONS; Y2K PROBLEM. Each Debtor
represents and warrants that (i) there are no pending actions or proceedings
to which each Debtor is a party, and there are no threatened actions or
proceedings of which each Debtor has knowledge, before any court, arbitrator
or administrative agency which, either individually or in the aggregate,
would have a Material Adverse
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Effect on each Debtor except as set forth on Exhibit B attached hereto, (ii)
each Debtor is not in default under any obligation for borrowed money, for
the deferred purchase price of property or any Agreement which, either
individually or in the aggregate, would have a Material Adverse Effect on
each Debtor, (iii) the financial statements of each Debtor (copies of which
have been furnished to the Secured Party) have been prepared in accordance
with generally accepted accounting principles, consistently applied, and
fairly present the financial condition of each Debtor and the results of its
operations as of the date of, and for the period covered by, such statements,
and, since the date of such statements, there has been no material adverse
change in such conditions or operations, (iv) each Debtor has reviewed the
areas within its business and operations which could be adversely affected
by, and has developed or is developing a program to address on a timely
basis, the "Year 2000 Problem," that is, the risk that computer applications
used by each Debtor may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to, and any date on or
after, December 31, 1999, and have made related appropriate inquiry of
material suppliers and vendors and, based on such review and program, each
Debtor believes that the "Year 2000 Problem" will not have a Material Adverse
Effect on each Debtor, and (v) from time to time, at the request of the
Secured Party, each Debtor shall provide to the Secured Party such updated
information or documentation as is requested regarding the status of its
efforts to address the Year 2000 Problem. For purposes of this Section 3.4,
"Material Adverse Effect" shall mean (1) a materially adverse effect on the
business, condition (financial or otherwise), operations, performance or
properties of each Debtor, or (2) a material impairment of the ability of
each Debtor to perform its obligations under, or to remain in compliance
with, this Agreement.
3.5 OWNERSHIP OF COLLATERAL; ABSENCE OF LIENS AND RESTRICTIONS. Each
Debtor is, and in the case of property acquired after the date hereof, will
be, the sole legal and equitable owner of the Collateral, holding good and
marketable title to the same free and clear of all Encumbrances except for a
security interest in the Collateral in favor of BankBoston Retail Finance
Inc. ("BBRF") pursuant to a certain 1999 Loan and Security Agreement dated as
of August __, 1999 as may be amended from time to time, as such security
interest exists on the date hereof, between BancBoston and BBRF, and as
subject to an Intercreditor Agreement between BancBoston and BBRF (the "BBRF
Interest") securing certain obligations of the Debtor to the BBRF (the "BBRF
Obligations") and the security interests granted hereunder or permitted
hereby, and has good right and legal authority to assign, deliver, and create
a security interest in the Collateral in the manner herein contemplated. The
Collateral is genuine and is what it is purported to be. The Collateral is
not subject to any restriction that would prohibit or restrict the
assignment, delivery or creation of the security interests contemplated
hereunder.
3.6 SECURITY INTEREST. This Agreement, the Security Agreement and the
Note, together with the filing of Uniform Commercial Code financing
statements in the appropriate offices for the location of Collateral, create
a valid and continuing lien on and perfected security interest in the
Collateral subject only to the BBRF Interest (except for property located in
the United States in which a security interest may not be perfected by filing
under the Uniform Commercial Code), prior to all other Encumbrances except
the BBRF Interest, and is enforceable as such against creditors of the
Debtor. Other than in favor of BBRF, no financing statement under the Uniform
Commercial Code of any state or other instrument evidencing a lien on the
Collateral that names the Debtor as debtor is on file in any jurisdiction and
the Debtor has not signed any such document or any agreement authorizing the
filing of any such financing statement or instrument.
3.7 SALES AND FURTHER ENCUMBRANCES. Each Debtor agrees that it will
not sell, grant, assign or transfer any interest in, or permit to exist any
Encumbrance on, any of the Collateral other than in favor of the Secured
Party or its affiliates or the BBRF Interest except for (i) sales of
Inventory or grants of licenses and other rights in the ordinary course of
the Debtor's business for cash or on open account and
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on terms of payment ordinarily extended to its customers; (ii) so long as no
Event of Default hereunder has occurred and is continuing, sales of
Investment Property, other than Investment Properties that represent
ownership of its subsidiaries, if such sales are made on fair and reasonable
terms in arms-length transactions, or as otherwise permitted by the Secured
Party in writing. The Debtor shall defend its title to and the Secured
Party's interest in the Collateral against all claims and take any action
necessary to remove any Encumbrances other than those permitted hereunder and
defend the right, title and interest of the Secured Party in and to any of
the Debtor's rights in the Collateral.
3.8 VALIDITY OF ACCOUNTS. Each Account constituting Collateral is and
shall be a valid, legal and binding obligation of the party purported to be
obligated thereon, enforceable in accordance with its terms and free of
material setoffs, defenses or counterclaims.
3.9 INSPECTION; VERIFICATION OF ACCOUNTS. After the occurrence of an
Event of Default each debtor shall allow the Secured Party to examine,
inspect or make extracts from or copies of the Debtor's books and records,
inspect the Collateral and arrange for verification of Accounts constituting
Collateral directly with the Debtor's accountants, the account debtors or by
other methods.
3.10 ACCOUNTS: COLLECTION AND DELIVERY OF PROCEEDS. Each Debtor will
diligently collect all of its Accounts constituting Collateral until the
Secured Party exercises its rights to collect the Accounts pursuant to this
Agreement. Each Debtor shall, at the request of the Secured Party, notify
account debtors of the security interest of the Secured Party in any Account
and that payment thereof is to be made directly to the Secured Party. Upon
request of the Secured Party, any proceeds of Accounts or Inventory
constituting Collateral received by the Debtor, whether in the form of cash,
checks, notes or other instruments, shall be held in trust for the Secured
Party and each Debtor shall deliver said proceeds daily to the Secured Party,
without commingling, in the identical form received (properly endorsed or
assigned where required to enable the Secured Party to collect same). The
rights and obligations set forth in this Section 3.10 are expressly subject
to the terms and conditions of the Intercreditor Agreement and the BBRF
Interest.
3.11 INSURANCE. Where appropriate, each Debtor will keep the
Collateral insured at all times by insurance in such form and amounts as may
be satisfactory to the Secured Party, and in any event (without specific
request by the Secured Party) will insure the Collateral against physical
hazard insurance on an "all risks" basis. Such insurance shall be with
insurance companies satisfactory to the Secured Party and shall be payable to
the Secured Party as an additional insured and Debtor, as their respective
interests may appear. Such insurance shall provide for not less than 30 days'
notice of cancellation, change in form or non-renewal to the Secured Party,
and shall insure the interest of the Secured Party regardless of any breach
or violation by the Debtor or any other person of the warranties,
declarations or covenants contained in such policies. The Debtor shall insure
the Collateral in amounts sufficient to prevent the application of any
co-insurance provisions. The Debtor shall evidence its compliance with the
foregoing by delivering a certificate with respect to each policy
concurrently with the execution hereof, annually thereafter, and from time to
time upon the request of the Secured Party.
3.12 INVENTORY: MAINTENANCE AND USE, PAYMENT OF TAXES. Each Debtor
will keep the Collateral in good order and repair, will not use the same in
violation of law or any policy of insurance thereon, and will pay promptly
when due all taxes and assessments on the Collateral or on its use or
operation.
3.13 GENERAL INTANGIBLES: REGISTRATION, MAINTENANCE OF COPIES. Each
Debtor will apply for, and pursue diligently applications for, registration
of its ownership of the General Intangibles constituting Collateral and for
which registration is appropriate, and will use such other measures as are
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appropriate to preserve its rights in its other General Intangibles
constituting Collateral. Each Debtor will, at the request of the Secured
Party, retain off-site current copies of all materials created by or
furnished to the Debtor on which is recorded then-current information about
any computer programs or data bases that the Debtor has developed or
otherwise has the right to use from time to time. Such materials include,
without limitation, magnetic or other computer media on which object, source
or other code is recorded or that are documentation of those computer
programs or data bases, in the nature of listing printouts, narrative
descriptions, flow diagrams and similar things. Each Debtor will, at the
request of the Secured Party and in accordance with the terms of the
Intercreditor Agreement, deliver a set of such copies to the Secured Party
for safekeeping and retention or transfer in the event of foreclosure.
3.14 SECURITIES: VOTING, DIVIDENDS, CERTIFICATES, OPTIONS, ETC. Until
the occurrence of an Event of Default hereunder, the Debtor shall retain the
right to vote any of the Securities constituting Collateral in a manner not
inconsistent with the terms of this Agreement. If the Debtor, as registered
holder of such Securities, receives (i) any dividend or other distribution in
cash or other property in connection with the liquidation or dissolution of
the issuer of such Securities, or in connection with the redemption or
payment of such Securities, or (ii) any stock certificate, option or right,
or other distribution, whether as an addition to, in substitution of, or in
exchange for, such Securities, or otherwise, the Debtor agrees to accept same
in trust for the Secured Party and to deliver same forthwith to the Secured
Party or its designee, in the exact form received, with the Debtor's
endorsement or reassignment when necessary, to be held by the Secured Party
as Collateral.
3.15 SECURITIES: DELIVERY OR REGISTRATION. Upon request of the Secured
Party and subject to the terms of the Intercreditor Agreement, the Debtor
will (i) deliver all of its Securities constituting Collateral and
represented by certificates, including without limitation all stock of its
subsidiaries, to the Secured Party to hold pursuant to the terms of this
Agreement, and (ii) register in the name of the Secured Party or its designee
any uncertificated Security constituting Collateral or the Secured Party's
security interest therein on the books maintained by or on behalf of the
issuer thereof or the depository therefor.
3.16 FURTHER ASSURANCES. Upon the written request of the Secured
Party, and at the sole expense of the Debtor, each Debtor will promptly
execute and deliver such further instruments and documents and take such
further actions as the Secured Party may deem desirable to obtain the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, filing of any financing statement under the
Uniform Commercial Code, and, subject to the terms of the Intercreditor
Agreement, execution of assignments of General Intangibles, delivery of
appropriate stock or bond powers, transfer of Collateral (other than
Inventory, and Accounts) to the Secured Party's possession. The Debtor
authorizes the Secured Party to file any such financing statement without the
signature of the Debtor to the extent permitted by applicable law, and to
file a copy of this Agreement in lieu of a financing statement. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any promissory note or other instrument, such note or instrument
shall be immediately delivered to the Secured Party, duly endorsed in a
manner satisfactory to it.
3.17 FINANCIAL PERFORMANCE COVENANTS. Each Debtor shall observe and
comply with the following financial performance covenants, which compliance
shall be determined as if no Material Accounting Change had occurred (other
than any Material Accounting Change specifically taken into account in the
setting of such covenants). Secured Party may determine each Debtor's
compliance with such covenants based upon financial reports and statements
provided to Secured Party by each Debtor, by BankBoston, N.A. or by
BankBoston Retail Finance, Inc. (whether or not such financial reports or
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statements are required to be furnished pursuant to this Security Agreement)
as well as by reference to interim financial information provided to, or
developed by, Secured Party. For purposes hereof, any capitalized terms not
otherwise defined in this Security Agreement shall have the meanings assigned
to them in that certain Loan and Security Agreement dated as of August ____,
1999 ("Loan Agreement") among BankBoston Retail Finance Inc. as
administrative Agent and Collateral Agent, certain other financial
institutions as revolving credit lenders, Back Bay Capital Funding LLC as
term lender, and each Debtor as lead borrower for certain other borrowers, as
the Loan Agreement existed as of the date of this Security Agreement.
(i) Each Debtor shall not permit its cumulative Consolidated EBITDA,
tested quarterly on a rolling four-quarters basis (three-quarters basis for
the test as of October 31, 1999) to be less than the following:
------------------------------------------------------------------------
FISCAL QUARTERS ENDING ON OR ABOUT MINIMUM CUMULATIVE CONSOLIDATED
EBITDA
------------------------------------------------------------------------
October 31, 1999 $27,000,000
------------------------------------------------------------------------
------------------------------------------------------------------------
January 31, 2000 40,000,000
------------------------------------------------------------------------
------------------------------------------------------------------------
April 30, 2000 40,000,000
------------------------------------------------------------------------
------------------------------------------------------------------------
July 31, 2000 40,000,000
------------------------------------------------------------------------
------------------------------------------------------------------------
October 31, 2000 41,500,000
------------------------------------------------------------------------
------------------------------------------------------------------------
January 31, 2001 43,000,000
------------------------------------------------------------------------
------------------------------------------------------------------------
Thereafter 43,000,000
------------------------------------------------------------------------
(ii) Each Debtor shall maintain a Fixed Charge Ratio
equal to or greater than 1.4 tested quarterly on a rolling
four-quarters basis, commencing with the four quarters ending on or
about January 31, 2000;
(iii) Each Debtor shall maintain Overall Availability
of not less than $40 million for the period commencing December 10,
2001 and ending December 30, 2001.
SECTION 4. NOTICES AND REPORTS PERTAINING TO COLLATERAL. Each Debtor
will, with respect to the Collateral:
(a) promptly furnish to the Secured Party, from time to time upon
request, reports in form and detail satisfactory to the Secured
Party and immediately notify the Secured Party as to any action to
foreclose upon or otherwise exercise any right or remedy with
respect to the BBRF Interest;
(b) promptly notify the Secured Party of any Encumbrance asserted
against the Collateral which may have a material adverse effect
upon the Collateral, including any attachment, levy, execution or
other legal process levied against any of the Collateral, and of
any information received by the Debtor relating to the Collateral,
including the Accounts, the account debtors, or other persons
obligated in connection therewith, that may in any way adversely
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affect the value of the Collateral or the rights and remedies of
the Secured Party with respect thereto;
(c) promptly notify the Secured Party when it obtains knowledge of
actual or imminent bankruptcy or other insolvency proceeding of
any account debtor or issuer of Investment Properties, which may
have a material adverse effect upon the Debtor;
(d) after the occurrence of an Event of Default, concurrently with the
reports required to be furnished under subsection (a), and
immediately if material in amount, notify the Secured Party of any
return or adjustment, rejection, repossession, or loss or damage
of or to merchandise represented by Accounts or constituting
Inventory and of any credit, adjustment or dispute arising in
connection with the goods or services represented by Accounts or
constituting Inventory; and
(e) after the occurrence of an Even of Default, promptly after the
application by the Debtor for registration of any General
Intangibles, as contemplated in Section 3.13, notify the Secured
Party thereof.
The Debtor authorizes the Secured Party to destroy all invoices, delivery
receipts, reports and other types of documents and records submitted to the
Secured Party in connection with the transactions contemplated herein at any
time subsequent to 12 months from the time such items are delivered to the
Secured Party.
SECTION 5. SECURED PARTY'S RIGHTS WITH RESPECT TO COLLATERAL. The Secured
Party may, after the occurrence of an Event of Default which is continuing and
subject to the terms of the Intercreditor Agreement, at its option and at any
time, whether or not the Obligations are due, without notice or demand on the
Debtor, take the following actions with respect to the Collateral:
(a) with respect to any Accounts (i) notify account debtors of the
security interest of the Secured Party in such Accounts and that
payment thereof is to be made directly to the Secured Party; (ii)
demand, collect, and receipt for any amounts relating thereto, as
the Secured Party may determine; (iii) commence and prosecute any
actions in any court for the purposes of collecting any such
Accounts and enforcing any other rights in respect thereof; (iv)
defend, settle or compromise any action brought and, in connection
therewith, give such discharges or releases as the Secured Party
may deem appropriate; (v) receive, open and dispose of mail
addressed to the Debtor and endorse checks, notes, drafts,
acceptances, money orders, bills of lading, warehouse receipts or
other instruments or documents evidencing payment, shipment or
storage of the goods giving rise to such Accounts or securing or
relating to such Accounts, on behalf of and in the name of the
Debtor; and (vi) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in respect
of, any such Accounts or the goods or services which have given
rise thereto, as fully and completely as though the Secured Party
were the absolute owner thereof for all purposes;
(b) with respect to any Inventory (i) make, adjust and settle claims
under any insurance policy related thereto and place and pay for
appropriate insurance thereon; (ii) discharge taxes and other
Encumbrances at any time levied or placed thereon; (iii) make
repairs or provide maintenance with respect thereto; and (iv) pay
any necessary filing fees and any taxes arising as a consequence
of any such filing. The Secured Party shall have no obligation to
make any
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such expenditures nor shall the making thereof relieve the
Debtor of its obligation to make such expenditures; and
(c) with respect to any Securities (i) transfer them at any time to
itself, or to its nominee, and receive the income thereon and hold
the same as Collateral hereunder or apply it to any matured
Obligations; and (ii) demand, sue for, collect or make any
compromise or settlement it deems desirable.
Except as otherwise provided herein, the Secured Party shall have no duty as to
the collection or protection of the Collateral nor as to the preservation of any
rights pertaining thereto, beyond the safe custody of any Collateral in its
possession.
SECTION 7. DEFAULTS. Any Event of Default under the Security Agreement
shall constitute an "Event of Default" hereunder thereby entitling BancBoston to
exercise any and all remedies available at law or under the Security Agreement
or this Agreement, in any case, after the giving of any required notice and the
elapse of any cure period. All rights and remedies of BancBoston are cumulative
and are exclusive of any rights or remedies provided by law or in equity or by
agreement, and may be exercised separately or concurrently.
SECTION 8. SECURED PARTY'S RIGHTS AND REMEDIES.
8.1 So long as any Event of Default shall have occurred and is
continuing, and subject to the terms of the Intercreditor
Agreement:
(a) The Secured Party may, at its option, without notice or
demand, cause all of the Obligations including, without
limitation, all principal and interest due or to become due
under all Notes to become immediately due and payable and take
immediate possession of the Collateral; for that purpose, the
Secured Party may, so far as each Debtor can give authority
therefor, enter upon any premises on which any of the
Collateral is situated and remove the same therefrom or remain
on such premises and in possession of such Collateral for
purposes of conducting a sale or enforcing the rights of the
Secured Party. Each Debtor will, upon demand, assemble the
Collateral and make it available to the Secured Party at a
place and time designated by the Secured Party that is
reasonably convenient to both parties.
(b) The Secured Party may collect and receive all income and
proceeds with respect to the Collateral and exercise all
rights of any Debtor with respect thereto.
(c) The Secured Party may sell, lease or otherwise dispose of the
Collateral at a public or private sale, with or without having
the Collateral at the place of sale, and upon such terms and
in such manner as the Secured Party may determine, and the
Secured Party may purchase any Collateral at any such public
sale or such private sale to the extent permitted by law.
Unless the Collateral threatens to decline rapidly in value or
is of the type customarily sold on a recognized market, the
Secured Party shall send to each Debtor prior written notice
(which, if given within ten (10) days of any sale, shall be
deemed to be reasonable) of the time and place of any public
sale of the Collateral or of the time after which any private
sale or other disposition thereof is to be made. Each Debtor
agrees that, upon any such sale, the Collateral shall be held
by the purchaser free from all claims or rights of every kind
and nature including any equity of redemption or
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similar rights, and all such equity of redemption and similar
rights are hereby expressly waived and released by each
Debtor. In the event any consent, approval or authorization
of any governmental agency is necessary to effectuate any such
sale, each Debtor shall execute all applications or other
instruments as may be required.
(d) In any jurisdiction where the enforcement of its rights
hereunder is sought, the Secured Party shall have, in addition
to all other rights and remedies, the rights and remedies of a
secured party under the Uniform Commercial Code.
8.2 IMMEDIATE ACCELERATION. Upon the occurrence of an Event of
Default described in subsection 10(g) and (h) of the Security Agreement, the
remedy set forth in subsection 11.1(a) shall be deemed to have been exercised
immediately and automatically without any act or declaration of the Secured
Party and all Obligations including, without limitation, all principal and
interest due or to become due under the Notes shall be immediately due and
payable.
8.3 EXPENSES; DEFICIENCY. In connection with the Secured
Party's exercise of its rights upon the occurrence and continuation of an
Event of Default:
(a) The Secured Party shall be entitled to retain and to apply the
proceeds of any disposition of the Collateral, FIRST, to its reasonable
expenses of retaking, holding, protecting and maintaining, and preparing for
disposition and disposing of, the Collateral, including documented and
reasonable attorneys' fees and other legal expenses incurred by it in
connection therewith; and SECOND, to the payment of the Obligations in such
order of priority as the Secured Party shall determine. Any surplus remaining
after such application shall be paid to each Debtor or to whomever may be
legally entitled thereto, provided that, in no event, shall each Debtor be
credited with any part of the proceeds of the disposition of the Collateral
until such proceeds shall have been received in cash by the Secured Party.
Each Debtor shall remain liable for any deficiency.
(i) the Secured Party may, at its option, without notice or
demand, cause all of the Obligations to become immediately
due and payable and take immediate possession of the
Collateral, and for that purpose the Secured Party may, so
far as the Debtor can give authority therefor, enter upon
any premises on which any of the Collateral is situated and
remove the same therefrom or remain on such premises and in
possession of such Collateral for purposes of conducting a
sale or enforcing the rights of the Secured Party;
(ii) the Debtor will, upon demand, assemble the Collateral and
make it available to the Secured Party at a place and time
designated by the Secured Party that is reasonably
convenient to both parties;
(iii) the Secured Party may collect and receive all income and
proceeds in respect of the Collateral and exercise all
rights of the Debtor with respect thereto, including without
limitation the right to exercise all voting and corporate
rights at any meeting of the shareholders of the issuer of
any Securities and to exercise any and all rights of
conversion, exchange, subscription or any other rights,
privileges or options pertaining to any Securities as if the
Secured Party were the absolute owner thereof, including the
right to exchange, at its discretion, any and all of any
Securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of the issuer
thereof, all without liability except to account for
property actually received (but the
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Secured Party shall have no duty to exercise any of the
aforesaid rights, privileges or options and shall not be
responsible for any failure to do so or delay in so doing);
(iv) the Secured Party may sell, lease or otherwise dispose of
the Collateral at a public or private sale, with or without
having the Collateral at the place of sale, and upon such
terms and in such manner as the Secured Party may determine,
and the Secured Party may purchase any Collateral at any
such sale. Unless the Collateral threatens to decline
rapidly in value or is of the type customarily sold on a
recognized market, the Secured Party shall send to the
Debtor prior written notice (which, if given within five
days of any sale, shall be deemed to be reasonable) of the
time and place of any public sale of the Collateral or of
the time after which any private sale or other disposition
thereof is to be made. The Debtor agrees that upon any such
sale the Collateral shall be held by the purchaser free from
all claims or rights of every kind and nature, including any
equity of redemption or similar rights, and all such equity
of redemption and similar rights are hereby expressly waived
and released by the Debtor. In the event any consent,
approval or authorization of any governmental agency is
necessary to effectuate any such sale, the Debtor shall
execute all applications or other instruments as may be
required; and
(v) in any jurisdiction where the enforcement of its rights
hereunder is sought, the Secured Party shall have, in
addition to all other rights and remedies, the rights and
remedies of a secured party under the Uniform Commercial
Code.
(b) Prior to any disposition of Collateral pursuant to this Agreement
the Secured Party may, at its option, cause any of the Collateral
to be repaired or reconditioned (but not upgraded unless mutually
agreed) in such manner and to such extent as Secured Party in its
good faith judgement believes advisable to make it saleable.
(c) The Secured Party is hereby granted a license or other right to
use, without charge, the Debtor's labels, patents, copyrights,
rights of use of any name, trade secrets, trade names, trademarks
and advertising matter, or any property of a similar nature,
relating to the Collateral, in completing production of,
advertising for sale and selling any Collateral; and the Debtor's
rights under all licenses and all franchise agreements shall inure
to the Secured Party's benefit.
(d) The Debtor recognizes that the Secured Party may be unable to
effect a public sale of all or a part of the Securities by reason
of certain prohibitions contained in the Securities Act of 1933
(as amended from time to time, the "Securities Act") or the
securities laws of various states (the "Blue Sky Laws"), but may
be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obliged to agree, among
other things, to acquire the Securities for their own account, for
investment and not with a view to the distribution or resale
thereof. The Debtor acknowledges that private sales so made may be
at prices and upon other terms less favorable to the seller than
if the Securities were sold at public sales. The Debtor agrees
that the Secured Party has no obligation to delay sale of any of
the Securities for the period of time necessary to permit the
Securities to be registered for public sale under the Securities
Act or the Blue Sky Laws, and that private sales made under the
foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
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(e) The Secured Party shall be entitled to retain and to apply the
proceeds of any disposition of the Collateral, first, to its
reasonable expenses of retaking, holding, protecting and
maintaining, and preparing for disposition and disposing of, the
Collateral, including attorneys' fees and other legal expenses
incurred by it in connection therewith; and second, to the payment
of the Obligations in such order of priority as the Secured Party
shall determine. Any surplus remaining after such application
shall be paid to the Debtor or to whomever may be legally entitled
thereto, provided that in no event shall the Debtor be credited
with any part of the proceeds of the disposition of the Collateral
until such proceeds shall have been received in cash by the
Secured Party. The Debtor shall remain liable for any deficiency.
SECTION 9. WAIVERS. The Debtor waives presentment, demand, notice,
protest, notice of acceptance of this Agreement, notice of any loans made,
credit or other extensions granted, collateral received or delivered or any
other action taken in reliance hereon and all other demands and notices of
any description, except for such demands and notices as are expressly
required to be provided to the Debtor under this Agreement or any other
document evidencing the Obligations. With respect to both the Obligations and
the Collateral, the Debtor assents to any extension or postponement of the
time of payment or any other forgiveness or indulgence, to any substitution,
exchange or release of Collateral, to the addition or release of any party or
person primarily or secondarily liable, to the acceptance of partial payment
thereon and the settlement, compromise or adjustment of any thereof, all in
such manner and at such time or times as the Secured Party may deem
advisable. The Secured Party may exercise its rights with respect to the
Collateral without resorting, or regard, to other collateral or sources of
reimbursement for Obligations. The Secured Party shall not be deemed to have
waived any of its rights with respect to the Obligations or the Collateral
unless such waiver is in writing and signed by the Secured Party. No delay or
omission on the part of the Secured Party in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not bar or waive the exercise of any right on any future
occasion. All rights and remedies of the Secured Party in the Obligations or
the Collateral, whether evidenced hereby or by any other instrument or
papers, are cumulative and not exclusive of any remedies provided by law or
any other agreement, and may be exercised separately or concurrently.
SECTION 10. EXPENSES. Each Debtor shall, on demand, pay or reimburse
the Secured Party for all reasonable expenses (including reasonable and
documented attorneys' fees of outside counsel or allocation costs of in-house
counsel) incurred or paid by the Secured Party in connection with the
enforcement of this Agreement, up to three (3) on-site periodic examinations
of the Collateral in each calendar year, and any other amounts permitted to
be expended by the Secured Party hereunder including, without limitation,
such expenses as are incurred to preserve the value of the Collateral and the
validity, perfection, and priority of any security interest created hereby,
the collection, sale or other disposition of any of the Collateral, or the
exercise by the Secured Party of any of the rights conferred upon it under
this Agreement. The obligation to pay any such amount shall be an additional
Obligation secured by the Collateral and each such amount shall bear interest
from the time of demand at the rate per annum equal to the rate of interest
announced, from time to time, by BankBoston, N.A., or its successor and
assigns, at its head office as its Base Rate plus 6%, or 18% per annum,
whichever is less. If such rate violates applicable law, the rate shall be
the maximum rate of interest per annum allowed by such law.
SECTION 11. NOTICES. Any demand upon or notice to any Debtor that the
Secured Party may give shall be effective when delivered by hand, properly
deposited in the mails postage prepaid, or sent by telex, answerback
received, or electronic facsimile transmission, receipt acknowledged, or
delivered
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to a telegraph company or overnight courier, in each case addressed to the
Debtor at the address shown at the beginning of this Agreement or as it
appears on the books and records of the Secured Party. Demands or notices
addressed to any other address at which the Secured Party customarily
communicates with the Debtor also shall be effective. Any notice by the
Debtor to the Secured Party shall be given as aforesaid, addressed to the
Secured Party at the address shown at the beginning of this Agreement or such
other address as the Secured Party may advise the Debtor in writing.
SECTION 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon each Debtor, its successors and assigns, and shall inure to the benefit
of and be enforceable by the Secured Party and its successors and assigns.
Without limiting the generality of the foregoing sentence, the Secured Party
may assign or otherwise transfer any agreement or any note held by it
evidencing, securing or otherwise executed in connection with the
Obligations, or sell participations in any interest therein, to any other
person or entity, and such other person or entity 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
the Secured Party herein.
SECTION 13. GENERAL. This Agreement may not be amended or modified
except by a writing signed by the Debtor and the Secured Party, nor may the
Debtor assign any of its rights hereunder. This Agreement and the terms,
covenants and conditions hereof shall be construed in accordance with, and
governed by, the laws of The Commonwealth of Massachusetts (without giving
effect to any conflicts of law provisions contained therein). In the event
that any Collateral or any deposit or other sum due from or credited by the
Secured Party is held or stands in the name of the Debtor and another or
others jointly, the Secured Party may deal with the same for all purposes as
if it belonged to or stood in the name of the applicable Debtor alone.
SECTION 14. SECTION HEADINGS. Section headings are for
convenience of reference only and are not a part of this Agreement.
SECTION 15. JURY WAIVER. THE SECURED PARTY (BY ITS ACCEPTANCE HEREOF)
AND THE DEBTOR AGREE THAT NEITHER OF THEM, NOR ANY ASSIGNEE OR SUCCESSOR
SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY
OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, ANY RELATED
INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR
AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER
ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS
OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE SECURED PARTY AND THE
DEBTOR, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE
SECURED PARTY NOR THE DEBTOR HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT
THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
-13-
<PAGE>
IN WITNESS WHEREOF, each Debtor has caused this Agreement to be duly
executed as an instrument under seal as of the date first written above.
BANCBOSTON LEASING, INC. MORSE SHOE, INC.
By: /s/ Jane M. Leo By: /s/ Philip G. Rosenberg
--------------------------- -------------------------------
Title: Assistant Vice President Title: Executive Vice President
JBI, INC.
By: /s/ Philip G. Rosenberg
------------------------------
Title: Executive Vice President
THE CASUAL MALE, INC.
By: /s/ Philip G. Rosenberg
------------------------------
Title: Executive Vice President
WGS CORPORATION
By: /s/ Philip G. Rosenberg
------------------------------
Title: Executive Vice President
TCMB&T, INC.
By: /s/ Philip G. Rosenberg
------------------------------
Title: Executive Vice President
<PAGE>
EXHIBIT 11
J. BAKER, INC. AND SUBSIDIARIES
COMPUTATION OF NET EARNINGS PER COMMON SHARE*
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JULY 31, AUGUST 1, JULY 31, AUGUST 1,
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
NET EARNINGS PER COMMON SHARE;
Net earnings, basic and diluted $3,374,028 $2,594,165 $4,354,018 $3,110,508
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common
shares outstanding, basic 14,064,619 13,979,160 14,064,573 13,949,728
---------- ---------- ---------- ----------
Effect of dilutive securities:
Stock options and performance
share awards 553,323 392,586 239,119 255,839
---------- ---------- ---------- ----------
Weighted average common
shares outstanding, diluted 14,617,942 14,371,746 14,303,692 14,205,567
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings per common share, basic $0.240 $0.186 $0.310 $0.223
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net earnings per common share, diluted $0.231 $0.181 $0.304 $0.219
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
* This calculation is submitted in accordance with Item 601(b)(11) of
Regulation S-K.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF J. BAKER, INC. FOR THE QUARTER ENDED JULY 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JUL-31-1999
<CASH> 2,163,842
<SECURITIES> 0
<RECEIVABLES> 16,138,556
<ALLOWANCES> 235,000
<INVENTORY> 190,222,752
<CURRENT-ASSETS> 220,547,947
<PP&E> 130,909,693
<DEPRECIATION> 60,716,281
<TOTAL-ASSETS> 358,183,689
<CURRENT-LIABILITIES> 78,800,993
<BONDS> 191,312,740
0
0
<COMMON> 7,032,513
<OTHER-SE> 78,385,325
<TOTAL-LIABILITY-AND-EQUITY> 358,183,689
<SALES> 298,440,297
<TOTAL-REVENUES> 298,440,297
<CGS> 160,920,637
<TOTAL-COSTS> 160,920,637
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,804,817
<INCOME-PRETAX> 6,804,018
<INCOME-TAX> 2,450,000
<INCOME-CONTINUING> 4,354,018
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,354,018
<EPS-BASIC> 0.31
<EPS-DILUTED> 0.30
</TABLE>
